SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 16, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission file number 0-19649
Checkers Drive-In Restaurants, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 58-1654960
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Barnett Bank Building
600 Cleveland Street, Eighth Floor
Clearwater, FL 34615
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (813) 441-3500
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The Registrant had 60,750,058 shares of Common Stock, par value $.001
per share, outstanding as of July 15, 1997.
This document contains 75 pages. Exhibit Index appears at page 21.
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TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION PAGE
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Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
June 16, 1997 and December 30, 1996.......................... 3
Condensed Consolidated Statements of Operations
Quarter ended June 16, 1997 and June 17, 1996
and Two Quarters ended June 16, 1997 and June 17, 1996....... 5
Condensed Consolidated Statements of Cash Flows
Two Quarters ended June 16, 1997 and June 17, 1996........... 6
Notes to Consolidated Financial Statements....................... 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 12
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................................... 19
Item 6 Exhibits and Reports on Form 8-K.................................... 19
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2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
CHECKERS DRIVE-IN RESTAURANTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
June 16, December 30,
1997 1996
---------------------------------
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CURRENT ASSETS:
Cash and cash equivalents:
Restricted $ 2,566 $ 1,505
Unrestricted 1,346 1,551
Accounts receivable 2,299 1,544
Notes receivable 353 214
Inventory 2,157 2,261
Property and equipment held for sale 5,316 7,608
Income taxes receivable -- 3,514
Deferred loan costs 1,830 2,452
Prepaid expenses and other current assets 803 306
---------------------------------
Total current assets 16,670 20,955
Property and equipment, at cost, net of accumulated depreciation
and amortization 93,804 98,188
Intangibles, net of accumulated amortization 11,886 12,284
Deferred loan costs - less current portion 1,867 3,900
Deposits and other non-current assets 687 783
---------------------------------
$124,914 $136,110
=================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
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CHECKERS DRIVE-IN RESTAURANTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
June 16, December 30,
1997 1996
-----------------------------------------
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CURRENT LIABILITIES:
Short term debt $ -- $ 2,500
Current installments of long-term debt 8,221 9,589
Accounts payable 7,967 15,142
Accrued wages, salaries and benefits 2,172 2,528
Reserves for restructuring, restaurant relocations and abandoned sites 3,216 3,800
Other Accrued liabilities 10,846 13,784
Deferred income 444 337
---------------------------------
Total current liabilities 32,866 47,680
Long-term debt, less current installments 30,494 39,906
Deferred franchise fee income 466 466
Minority interests in joint ventures 1,361 1,455
Other noncurrent liabilities 6,619 6,263
---------------------------------
Total liabilities 71,806 95,770
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, authorized 2,000,000 shares, issued and
outstanding 87,719 at June 16, 1997 (none at December 30, 1996) 0 --
Common stock, $.001 par value, authorized 100,000,000 shares, issued
and outstanding 60,750,058 at June 16, 1997 and 51,768,480 at
December 30, 1996 61 52
Additional paid-in capital 109,748 90,339
Warrants 9,463 9,463
Retained earnings (65,764) (59,114)
---------------------------------
53,508 40,740
Less treasury stock, at cost, 578,904 shares 400 400
---------------------------------
Net stockholders' equity 53,108 40,340
---------------------------------
$ 124,914 $ 136,110
=================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
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CHECKERS DRIVE-IN RESTAURANTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(UNAUDITED)
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<CAPTION>
Quarter Ended Two Quarters Ended
June 16, 1997 June 17, 1996 June 16, 1997 June 17, 1996
--------------------------------------------------------------
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REVENUES:
Net restaurant sales $ 31,753 $ 36,109 $ 64,201 $ 72,318
Franchise revenues and fees 1,714 2,009 3,325 4,108
Modular restaurant packages 246 532 344 647
--------------------------------------------------------------
Total revenues 33,713 38,650 67,870 77,073
--------------------------------------------------------------
COSTS AND EXPENSES:
Restaurant food and paper costs 10,404 12,281 21,509 24,663
Restaurant labor costs 9,792 12,751 21,130 25,202
Restaurant occupancy expense 2,506 2,833 5,232 5,657
Restaurant depreciation and amortization 1,899 1,956 3,827 3,958
Advertising expense 1,596 1,245 3,240 2,107
Other restaurant operating expense 3,186 3,418 6,432 6,238
Costs of modular restaurant package revenues 213 649 289 998
Other depreciation and amortization 509 899 1,029 1,667
General and administrative expenses 3,506 4,046 6,899 7,297
--------------------------------------------------------------
Total costs and expenses 33,611 40,078 69,587 77,787
--------------------------------------------------------------
Operating (loss) income 102 (1,428) (1,717) (714)
--------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 102 339 181 495
Interest expense (1,177) (1,298) (2,519) (2,515)
Interest - loan cost amortization (485) (55) (2,655) (90)
--------------------------------------------------------------
Loss before minority interests and income
tax expense (benefit) (1,458) (2,442) (6,710) (2,824)
Minority interests 11 40 (60) 66
--------------------------------------------------------------
Loss before income tax benefit (1,469) (2,482) (6,650) (2,890)
Income tax benefit -- (934) -- (1,089)
--------------------------------------------------------------
Net loss $ (1,469) $ (1,548) $ (6,650) $ (1,801)
==============================================================
Net loss per common share $(0.02) $(0.03) $(0.11) $(0.03)
==============================================================
Weighted average number of common shares
outstanding 60,750 51,699 57,970 51,613
==============================================================
</TABLE>
5
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CHECKERS DRIVE-IN RESTAURANTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Two Quarters Ended
June 16, 1997 June 17, 1996
------------------------------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,650) $ (1,801)
Adjustments to reconcile net earnings to net cash (used in)
provided by operating activities:
Depreciation and amortization 4,856 5,678
Deferred loan cost amortization 2,655 90
Provision for bad debt 201 136
(Gain) loss on sale of property & equipment (8) 105
Minority interests in (losses) earnings (60) 66
Change in assets and liabilities:
Increase in receivables (995) (312)
Decrease in notes receivable 40 7
Decrease in inventory 165 119
Decrease in costs and earnings in excess of
billings on uncompleted contracts 213 143
Decrease in income taxes receivable 3,514 1,585
Increase in prepaid expenses and other (530) (1,462)
Increase in deferred income tax assets -- (69)
Decrease in deposits and other noncurrent assets 95 20
(Decrease), Increase in accounts payable (6,991) 2,143
Decrease in accrued liabilities (3,898) (3,358)
Increase in deferred income 107 18
-------------------------------------
Net cash (used in) provided by operating activities (7,286) 3,108
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (756) (1,745)
Proceeds from sale of assets 2,827 1,468
Increase in goodwill (70) --
-------------------------------------
Net cash provided by (used in) investing activities 2,001 (277)
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on short term debt (2,500) --
Principal payments on long-term debt (10,776) (3,443)
Net proceeds from private placement 19,450 --
Proceeds from investment by minority interests -- 285
Distributions to minority interests (33) (130)
-------------------------------------
Net cash provided by (used in) financing activities 6,141 (3,288)
-------------------------------------
Net increase in cash 856 (457)
CASH AT BEGINNING OF PERIOD 3,056 3,364
-------------------------------------
CASH AT END OF PERIOD $ 3,912 $ 2,907
=====================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Interest paid $ 3,003 $ 2,514
=====================================
</TABLE>
6
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CHECKERS DRIVE-IN RESTAURANTS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(a) BASIS OF PRESENTATION - The accompanying unaudited financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
necessary to present fairly the information set forth therein have been
included. The operating results for the quarter and the two quarters ended June
16, 1997, are not necessarily an indication of the results that may be expected
for the fiscal year ending December 29, 1997. Except as disclosed herein, there
has been no material change in the information disclosed in the notes to the
consolidated financial statements included in the Company's Annual Report on
form 10-K for the year ended December 30, 1996. Therefore, it is suggested that
the accompanying financial statements be read in conjunction with the Company's
December 30, 1996 consolidated financial statements. As of January 1, 1994, the
Company changed from a calendar reporting year ending on December 31st to a year
which will end on the Monday closest to December 31. Each quarter consists of
three 4-week periods with the exception of the fourth quarter which consists of
four 4-week periods.
(b) PURPOSE AND ORGANIZATION - The principal business of Checkers
Drive-In Restaurants, Inc. (the "Company") is the operation and franchising of
Checkers Restaurants. At June 16, 1997, there were 480 Checkers Restaurants
operating in 23 different states, the District of Columbia, and Puerto Rico. Of
those Restaurants, 233 were Company-operated (including thirteen joint ventures)
and 247 were operated by franchisees. The accounts of the joint ventures have
been included with those of the Company in these consolidated financial
statements. Champion Modular Restaurant Company, a division of the Company,
("Champion") manufactures Modular Restaurant Packages ("MRP's") primarily for
the Company and franchisees.
The consolidated financial statements also include the accounts of
all of the Company's subsidiaries. Intercompany balances and transactions have
been eliminated in consolidation and minority interests have been established
for the outside partners' interests.
(c) REVENUE RECOGNITION - Franchise fees are generated from the sale of
rights to develop, own and operate Restaurants. Such fees are based on the
number of potential Restaurants in a specific area which the franchisee agrees
to develop pursuant to the terms of the franchise agreement between the Company
and the franchisee and are recognized as income on a pro rata basis when
substantially all of the Company's obligations per location are satisfied,
generally at the opening of the Restaurant. Franchise fees are nonrefundable.
The Company receives royalty fees from franchisees based on a
percentage of each restaurant's gross revenues. Royalty fees are recognized as
earned.
Champion recognizes revenues on the percentage-of-completion method,
measured by the percentage of costs incurred to the estimated total costs of the
contract.
(d) CASH, AND CASH EQUIVALENTS - The Company considers all highly liquid
instruments purchased with an original maturity of less than three months to be
cash equivalents.
(e) RECEIVABLES - Receivables consist primarily of franchise fees,
royalties and notes due from franchisees, and receivables from the sale of
modular restaurant packages. Allowances for doubtful receivables were $1.8
million at June 16, 1997 and $2.2 million at December 30, 1996.
(f) INVENTORY - Inventories are stated at the lower of cost (first-in,
first-out (FIFO) method) or market.
(g) DEFERRED LOAN COSTS - Deferred loan costs incurred in connection
with the Company's November 22, 1996 restructure of its primary credit facility
(see Note 2) are being amortized on the effective interest method.
7
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(h) PROPERTY AND EQUIPMENT - Property and equipment (P & E) are stated
at cost except for P & E that have been impaired, for which the carrying amount
is reduced to estimated fair value. Property and equipment under capital leases
are stated at their fair value at the inception of the lease. Depreciation and
amortization are computed on straight-line method over the estimated useful
lives of the assets.
(i) IMPAIRMENT OF LONG LIVED ASSETS - During the fourth quarter of 1995,
the Company early adopted the Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of" (SFAS 121) which requires the write-down of certain
intangibles and tangible property associated with under performing sites to the
level supported by the forecasted discounted cash flow.
(j) Goodwill and Non-Compete Agreements - Goodwill and non-compete
agreements are being amortized over 20 years and 3 to 7 years, respectively, on
a straight-line basis.
(k) INCOME TAXES - The Company accounts for income taxes under the
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Under the asset or liability method of SFAS 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date (see Note 4).
(l) USE OF ESTIMATES - The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
(m) DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS - The balance
sheets as of June 16, 1997 and December 30, 1996, reflect the fair value amounts
which have been determined, using available market information and appropriate
valuation methodologies. However, considerable judgement is necessarily required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
Cash and cash equivalents, receivables, accounts payable, and
short-term debt - The carrying amounts of these items are a reasonable estimate
of their fair value.
Long-term debt - Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining maturities are
used to estimate fair value for debt issues that are not quoted on an exchange.
(n) EARNINGS PER SHARE - In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," ("SFAS 128") which is effective for reporting periods
ending after December 15, 1997. SFAS 128 replaces the presentation of primary
earnings per share and fully diluted earnings per share previously found in
Accounting Principles Board Opinion No. 15, "Earnings Per Share" ("APB 15") with
basic earnings per share and diluted earnings per share. Due to the net losses
for each of the periods ended June 16, 1997 and June 17, 1996, the inclusion of
options and warrants would result in an antidilutive per share amount.
Therefore, for all periods presented, such options and warrants are excluded
from earnings per share calculations under both APB 15 and, on a proforma basis,
SFAS 128.
(o) RECLASSIFICATIONS - Certain amounts in the 1996 financial statements
have been reclassified to conform to the 1997 presentation.
8
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NOTE 2 LONG-TERM DEBT
Long-term debt consists of the following:
(Dollars in thousands)
<TABLE>
<CAPTION>
June 16, December 30,
1997 1996
---------------------------
<S> <C> <C>
Notes payable under Loan Agreement $ 26,574 $ 35,818
Notes payable due at various dates, secured by buildings and equipment, with
interest at rates primarily ranging from 9.0% to 15.83%, payable monthly 7,610 8,963
Unsecured notes payable, bearing interest at rates ranging from prime to 18% 3,381 3,481
Other 1,150 1,233
---------------------------
Total long-term debt 38,715 49,495
Less current installments 8,221 9,589
---------------------------
Long-term debt, less current installments $ 30,494 $ 39,906
===========================
</TABLE>
On July 29, 1996, the debt under the Company's prior bank loan
agreement (the "Loan Agreement") and credit line ("Credit Line") was acquired
from a bank group by an investor group led by an affiliate of DDJ Capital
Management, LLC (collectively, "DDJ"). The Company and DDJ began negotiations
for restructuring of the debt. On November 14, 1996, and prior to consummation
of a formal debt restructuring with DDJ, the debt under the Loan Agreement and
Credit Line was acquired from DDJ by a group of entities and individuals, most
of whom are engaged in the fast food restaurant business. This investor group
(the "CKE Group") was led by CKE Restaurants, Inc., the parent of Carl Karcher
Enterprises, Inc., Casa Bonita, Inc., and Summit Family Restaurants, Inc. Also
participating were most members of the DDJ Group, as well as KCC Delaware
Company, a wholly-owned subsidiary of Giant Group, Ltd., which is a principal
shareholder of Rally's Hamburgers, Inc. Waivers of all defaults under the Loan
Agreement and Credit Line were granted through November 22, 1996, to provide a
period of time during which the Company and the CKE Group could negotiate an
agreement on debt restructuring.
On November 22, 1996, the Company and the CKE Group executed an
Amended and Restated Credit Agreement (the "Restated Credit Agreement") thereby
completing a restructuring of the debt under the Loan Agreement. The Restated
Credit Agreement consolidated all of the debt under the Loan Agreement and the
Credit Line into a single obligation. At the time of the restructuring, the
outstanding principal balance under the Loan Agreement and the Credit Line was
$35.8 million. Pursuant to the terms of the Restated Credit Agreement, the term
of the debt was extended by one (1) year until July 31, 1999, and the interest
rate on the indebtedness was reduced to a fixed rate of 13%. In addition, all
principal payments were deferred until May 19, 1997, and the CKE Group agreed to
eliminate certain financial covenants, to relax others and to eliminate
approximately $6 million in restructuring fees and charges. The Restated Credit
Agreement also provided that certain members of the CKE Group agreed to provide
to the Company a short term revolving line of credit of up to $2.5 million, also
at a fixed interest rate of 13% (the "Secondary Credit Line"). In consideration
for the restructuring, the Restated Credit Agreement required the Company to
issue to the CKE Group warrants to purchase an aggregate of 20 million shares of
the Companys' common stock at an exercise price of $.75 per share, which was the
approximate market price of the common stock prior to the announcement of the
debt transfer. As of June 16, 1997, the Company has reduced the principal
balance under the Restated Credit Agreement by $9.2 million and has repaid the
Secondary Credit Line in full. A portion of the funds utilized to make these
principal reduction payments were obtained by the Company from the sale of
certain closed restaurant sites to third parties. Additionally, the Company
utilized $10.5 million of the proceeds from the February 21, 1997, private
placement which is described later in this section for these principal reduction
payments. Pursuant to the Restated Credit Agreement, the prepayments of
principal made in 1996 and early in 1997 will relieve the Company of the
requirement to make any of the regularly scheduled principal payments under the
Restructured Credit Agreement which would have otherwise become due in fiscal
year 1997. The Amended and Restated Credit Agreement provides however, that 50%
of any future asset sales must be utilized to prepay principal.
The Company has outstanding promissory notes in the aggregate
principal amount of approximately $4.5 million (the "Notes") payable to
Rall-Folks, Inc. ("Rall-Folks"), Restaurant Development Group, Inc. ("RDG") and
Nashville Twin Drive-Through Partners, L.P. ("N.T.D.T."). The Company had agreed
to acquire the Notes issued to Rall-Folks and RDG in consideration of the
issuance of an aggregate of approximately 2.8 million shares of Common Stock and
the Note issued to NTDT in exchange for a convertible note in the same principal
amount and convertible into approximately 927,000 shares of Common Stock
pursuant to purchase agreements entered into in 1995 and subsequently amended.
9
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All three of the parties received varying degrees of protection on the purchase
price of the promissory notes. Accordingly, the actual number of shares to be
issued will be determined by the market price of the Company's stock. The
Company was not able to consummate these transactions as originally scheduled.
Pusuant to the most recent amendment, consumation of the Rall-Folks, RDG and
NTDT purchases is to occur prior to December 16, November 25, and November 15,
1997, respectively, subject to extension in certain cases. The Company does not
currently have sufficient cash available to pay one or more of these notes if
required to do so.
NOTE 3: PRIVATE PLACEMENT
On February 21, 1997, the Company completed a private placement (the
"Private Placement") of 8,771,929 shares of the Company's common stock, $.001
par value, and 87,719 shares of the Company's Series A preferred stock, $114 par
value (the "Preferred Stock"). CKE Restaurants, Inc. purchased 6,162,299 of the
Company's common stock and 61,623 of the Preferred Stock and other qualified
investors, including other members of the CKE Group of lenders under the
Restated Credit Agreement, also participated in the Private Placement. The
Company received approximately $19.5 million in net proceeds from the Private
Placement.
The Private Placement purchase agreement requires that the Company
submit to its shareholders for vote at its 1997 Annual Shareholders' Meeting the
conversion of the Preferred Stock into shares of the Company's common stock
based upon the Preferred Stock liquidation preference. If the shareholders do
not vote in favor of the conversion, the Preferred Stock will remain outstanding
with the rights and preferences set forth in the Certificate of Designation of
Series A Preferred Stock of the Company (the "Certificate", a copy of which is
an Exhibit hereto), including (i) a dividend preference, (ii) a voting
preference, (iii) a liquidation preference and (iv) a redemption requirement.
Holders of the Preferred Stock will have the right to receive cash dividends
equal to $16.53 per share per annum payable on a quarterly basis beginning
August 19, 1997. Such dividends are cumulative and must be paid in full prior to
any dividends being declared or paid with respect to the Company's common stock.
If the Company is in default with respect to any dividends on the Preferred
Stock, then no cash dividends can be declared or paid with respect to the
Company's common stock. If the Company fails to pay any two required dividends
on the Preferred Stock, then the number of seats on the Company's Board of
Directors will be increased by two and the holders of the Preferred Stock will
have the right, voting as a separate class, to elect the Directors to fill those
two new seats, which new Directors will continue in office until the holders of
the Preferred Stock have elected successors or the dividend default has been
cured. In the event of any liquidation, dissolution or winding up, but not
including any consolidation or merger of the Company, the holders of the
Preferred Stock will be entitled to receive a liquidation preference of $114 per
share plus any accrued but unpaid dividends (the "Liquidation Preference"). In
the event the stockholders do not approve the conversion of the Preferred Stock
and the Company subsequently completes a consolidation or merger and the result
is a change in control of the Company, then each share of the Preferred Stock
will be automatically redeemed for an amount equal to the Liquidation
Preference. The Company is required to redeem the Preferred Stock for an amount
equal to the Liquidation Preference on or before February 12, 1999. If the
redemption does not occur as required, the dividend rate will increase from
$16.53 per share to $20.52 per share. Additionally, if there are not then
Directors serving which were elected by the holders of the Preferred Stock, the
number of directors constituting the Company's Board of Directors will be
increased by two and the holders of the Preferred Stock voting as a class will
be entitled to elect the Directors to fill the created vacancies.
NOTE 4: STOCK OPTION PLANS
In August 1991, the Company adopted a stock option plan for
employees whereby incentive stock options, nonqualified stock options, stock
appreciation rights and restrictive shares can be granted to eligible salaried
individuals. An option may vest immediately as of the date of grant and no
option will be exercisable after ten years from the date of the grant. All
options expire no later than 10 years from the date of grant. The Company has
reserved 3,500,000 shares for issuance under the plan. In 1994, the Company
adopted a 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
additional 3,000 shares of common stock. The Company has reserved 200,000 shares
for issuance under this plan. 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
10
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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. The plans
provide that shares granted come from the Company's authorized but unissued or
reacquired common stock. The price of the options granted pursuant to these
plans will not be less than 100 percent of the fair market value of the shares
on the date of the grant. In August 1994, employees granted $11.50, $11.63,
$12.33 and $19.00 options were given the opportunity to forfeit those options
and be granted an option to purchase a share at $5.13 for every two option
shares retired. As a result of this offer, options for 662,228 shares were
forfeited in return for options for 331,114 shares at $5.13 per share.
In February 1996, employees (excluding executive officers) granted
options in 1993 and 1994 with exercise prices in excess of $2.75 were offered
the opportunity to exchange for a new option grant for a lesser number of shares
at an exercise price of $1.95, which represented a 25% premium over the market
price of the Company's common stock on the date the plan was approved. Existing
options with an exercise price in excess of $11.49 could be cancelled in
exchange for new options on a four to one basis. Options with an exercise price
between $11.49 and $2.75 could be cancelled in exchange for new options on a
three for one basis. The offer to employees expired April 30, 1996 and, as a
result of this offer, options for 49,028 shares were forfeited in return for
options for 15,877 shares at the $1.95 exercise price.
During the quarter ended March 24, 1997, the Company granted 285,000
options pursuant to the terms of the 1991 Employee Stock Option Plan referenced
above and the Company granted options to purchase a total of 500,000 shares of
its common stock as part of compensation packages for two new executive
officers, which options were not granted pursuant to the terms of the 1991
Employee Stock Option Plan. During the quarter ended June 16, 1997, 12,000
options were granted pursuant to the terms of the 1994 Stock Option Plan for
Non-Employee Directors referenced above.
The Company has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plans. Had compensation cost for the Company's stock option plan
for employees been determined based on the fair value at the grant date for
awards in fiscal 1996 and each of the first two quarters of 1997 consistent with
the provisions of SFAS No. 123, the Company's net earnings and earnings per
share would have been reduced by approximately $1.4 million, $680,000 and
$43,000 respectively, on a pro forma basis. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants in 1996 and the
first two quarters of fiscal 1997, respectively: dividend yield of zero percent
for both periods; expected volatility of 64 and 81 percent, risk-free interest
rates of 6.5 and 6.0 percent, and expected lives of 3.5 and 2 years,
respectively. The compensation cost disclosed above may not be representative of
the effects on reported income in future quarters, for example, because options
vest over several years and additional awards are made each year.
NOTE 5: INCOME TAXES
The Company recorded income tax benefits of $558,000 for the quarter
ended June 16, 1997 and $934,000 for the quarter ended June 17, 1996, or 38.0%
of the losses before income taxes. The Company then recorded a valuation
allowance of $558,000 against deferred income tax assets as of June 16, 1997.
The Company's total valuation allowances of $29.3 million as of June 16, 1997,
is maintained on deferred tax assets which the Company has not determined to be
more likely than not realizable at this time. Subject to a review of the tax
assets, these valuation allowances will be reversed during periods in the future
in which the Company records pre-tax income, in amounts necessary to offset any
then recorded income tax expenses attributable to such future periods.
NOTE 6: MERGER
On March 25, 1997, the Company agreed in principle to a merger
transaction pursuant to which Rally's Hamburgers, Inc., a Delaware corporation
("Rally's"), was to become a wholly-owned subsidiary of Checkers. Under the
terms of the letter of intent executed by Checkers and Rally's, each share of
Rally's common stock would be converted into three shares of Checkers' Common
Stock upon consummation of the merger. The transaction was subject to
negotiation of definitive agreements, receipt of fairness opinions by each
party, receipt of stockholder and other required approvals and other customary
conditions and the ability to use the pooling of interests method of accounting
for the merger. On June 16, 1997, the Company announced the termination of
merger negotiations due to the inability to obtain prior approval from the
Securities and Exchange Commission for favorable accounting treatment of the
proposed merger. Certain legal, accounting and other expenses totalling $350,000
associated with the proposed transaction were included in general and
administrative expenses for the quarter ended June 16, 1997.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Company commenced operations on August 1, 1987, to operate and
franchise Checkers double drive-thru Restaurants. As of June 16, 1997, the
Company had an ownership interest in 233 Company-operated Restaurants and an
additional 247 Restaurants were operated by franchisees. The Company's ownership
interest in the Company-operated Restaurants is in one of two forms: (i) the
Company owns 100% of the Restaurant (as of June 16, 1997, there were 219 such
Restaurants) and (ii) the Company owns a 10.55% to 65.83% interest in a
partnership which owns the Restaurant (a "Joint Venture Restaurant") (as of June
16, 1997, there were 14 such Joint Venture Restaurants).
The Company has begun to see the positive effects of aggressive
programs implemented at the beginning of fiscal 1997 that are designed to
improve food, paper and labor costs. These costs totalled 69.2% and 63.6% of net
restaurant revenues in the first and second quarters of 1997, compared to 65.6%,
69.3%, 73.3% and 75.9% of net restaurant revenues in the first, second, third
and fourth quarters of fiscal 1996. These improvements in costs were achieved
despite an 11.5% decrease in Company owned same store sales in the second
quarter of 1997 as compared to the second quarter of the prior year. Although
the Company's operating margins for the first half of 1997 were better than the
annualized margins for fiscal year 1996, the Company intends to continue to
implement programs to further improve those margins.
In February 1997, the Company completed a private placement (the
"Private Placement") of 8,771,929 shares of the Company's common stock, $.001
par value, and 87,719 shares of the Company's Series A preferred stock, $.001
par value (the "Preferred Stock"). CKE Restaurants, Inc. purchased 6,162,299 of
the Company's common stock and 61,623 of the Preferred Stock and other qualified
investors, including other members of the CKE Group of lenders under the
Restated Credit Agreement, also participated in the Private Placement. The
Company received approximately $19.5 million in net proceeds from the Private
Placement. The Company used $8 million of the Private Placement proceeds to
reduce the principal balance due under the Restated Credit Agreement; $2.5
million was utilized to repay the Secondary Credit Line; $2.3 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
will reduce the Company's interest expense by more than $1.3 million annually.
In the second quarter of fiscal 1997, the Company, along with its
franchisees, experienced a net increase of three (3) operating Restaurants,
compared to a net increase of six (6) operating Restaurants in the second
quarter of fiscal 1996. Based on information obtained from the Company's
franchisees, in 1997, the franchise community expects to open approximately 30
new units. The Company does not currently expect significant further Restaurant
closures, choosing instead to focus on improving Restaurant margins. The
Company's franchisees as a whole continue to experience higher average per store
sales than Company Restaurants.
This Quarterly Report on Form 10-Q contains forward looking
statements, which are subject to known and unknown risks, uncertainties and
other factors which may cause the actual results, performance, or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; the impact of competitive products and pricing; success of operating
initiatives; advertising and promotional effort; adverse publicity;
availability, changes in business strategy or development plans; quality of
management; availability, terms and deployment of capital; the results of
financing efforts; food, labor, and employee benefit costs; changes in, or the
failure to comply with, government regulations; weather conditions; construction
schedules; and risks that any sales growth resulting from the Company's current
and future remodeling of restaurants and other operating strategies could be
sustained.
12
<PAGE>
Results of Operations
The following table sets forth the percentage relationship to total
revenues of the listed items included in the Company's Consolidated Statements
of Operations. Certain items are shown as a percentage of Restaurant sales and
Modular Restaurant Package revenue. The table also sets forth certain selected
restaurant operating data.
<TABLE>
<CAPTION>
Quarter Ended Two Quarters Ended
(Unaudited) (Unaudited)
--------------------------------------------------------------
- -
June 16, June 17, June 16, June 17,
1997 1996 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net restaurant sales 94.2% 93.4% 94.6% 93.8%
Franchise revenues and fees 5.1% 5.2% 4.9% 5.4%
Modular restaurant packages 0.7% 1.4% 0.5% 0.8%
-----------------------------------------------------------
Total revenue 100% 100% 100% 100%
Costs and Expenses:
Restaurant food and paper costs (1) 32.8% 34.0% 33.5% 34.1%
Restaurant labor costs (1) 30.8% 35.3% 32.9% 34.8%
Restaurant occupancy expense (1) 7.9% 7.8% 8.1% 7.8%
Restaurant depreciation and amortization (1) 6.0% 5.4% 6.0% 5.5%
Advertising expense (1) 5.0% 3.4% 5.0% 2.9%
Other restaurant operating expense (1) 10.0% 9.5% 10.0% 8.6%
Costs of modular restaurant package revenues(2) 86.5% 122.0% 84.0% 154.4%
Other depreciation and amortization 1.5% 2.3% 1.5% 2.2%
Selling, general and administrative expense 10.4% 10.5% 10.2% 9.5%
-----------------------------------------------------------
Operating (loss) income 0.3% (3.7%) (2.5%) (0.9%)
-----------------------------------------------------------
Other income (expense):
Interest income 0.3% 0.9% 0.3% 0.6%
Interest expense (3.5%) (3.4%) (3.7%) (3.3%)
Interest - loan cost amortization (1.4%) (0.1%) (3.9%) (0.1%)
Minority interests 0.0% 0.1% (0.1%) 0.1%
-----------------------------------------------------------
Loss before income tax benefit (4.4%) (6.4%) (9.8%) (3.7%)
Income tax expense (benefit) 0.0% (2.4%) 0.0% (1.4%)
-----------------------------------------------------------
Net loss (4.4%) (4.0%) (9.8%) (2.3%)
===========================================================
Operating data:
System-wide restaurant sales (in 000's):
Company-operated $ 31,753 $ 36,109 $ 64,201 $ 72,318
Franchised 41,255 47,182 81,259 89,297
-----------------------------------------------------------
Total $ 73,008 $ 83,291 $145,460 $ 161,615
===========================================================
1997 1996
--------------------------------
Average annual net sales per restaurant open for a full year (in 000's) (3):
Company-operated $619 $620
Franchised $762 $769
System-wide $690 $719
--------------------------------
Number of Restaurants (4)
Company-operated 233 243
Franchised 247 264
--------------------------------
Total 480 507
================================
(1) As a percent of net restaurant sales.
(2) As a percent of Modular restaurant package revenues.
(3) Includes sales of Restaurants open for entire trailing 13 period year including stores expected to be closed
in the following year.
(4) Number of Restaurants open at end of period.
</TABLE>
13
<PAGE>
COMPARISON OF HISTORICAL RESULTS - QUARTER ENDED JUNE 16, 1997 AND QUARTER ENDED
JUNE 17, 1996
REVENUES. Total revenues decreased 12.8% to $33.7 million for the
quarter ended June 16, 1997, compared to $38.7 million for the quarter ended
June 17, 1996. Company-operated net restaurant sales decreased 12.1% to $31.8
million for the quarter ended June 16, 1997, from $36.1 million for the quarter
ended June 17, 1996. Net restaurant sales for comparable Company-owned
Restaurants for the quarter ended June 16, 1997, decreased 11.5% compared to the
quarter ended June 17, 1996. Comparable Company-owned Restaurants are those
continuously open during both reporting periods. These decreases in net
restaurant sales and comparable net restaurant sales are primarily attributable
to a highly competitive environment during the second quarter of 1997 and the
Company's 1997 focus on cutting costs and developing a new advertising campaign
for the remainder of 1997.
Franchise revenues and fees decreased 14.7% to $1.7 million for the
quarter ended June 16, 1997, from $2.0 million for the quarter ended June 17,
1996. This was a result of a net reduction of 17 franchised restaurants since
June 17, 1996, and opening fewer franchised Restaurants during the quarter ended
June 16, 1997, than in the second quarter of 1996. The Company recognizes
franchise fees as revenues when the Company has substantially completed its
obligations under the franchise agreement, usually at the opening of the
franchised Restaurant.
Modular restaurant package revenues decreased 53.7% to $246,000 for
the quarter ended June 16, 1997, from $532,000 for the quarter ended June 17,
1996. Modular restaurant package revenues are recognized on the percentage of
completion method during the construction process; therefore, a substantial
portion of the modular restaurant package revenues and costs are recognized
prior to the opening of a Restaurant or shipment to a convenience store
operator.
COSTS AND EXPENSES. Restaurant food and paper costs totalled $10.4
million or 32.8% of net Restaurant sales for the quarter ended June 16, 1997,
compared to $12.3 million or 34.0% of net restaurant sales for the quarter ended
June 17, 1996. The actual decrease in food and paper costs was due primarily to
the decrease in net restaurant sales while the decrease in these costs as a
percentage of net restaurant sales was due to new purchasing contracts
negotiated in the first quarter of 1997.
Restaurant labor costs, which includes restaurant employees'
salaries, wages, benefits and related taxes, totalled $9.8 million or 30.8% of
net restaurant sales for the quarter ended June 16, 1997, compared to $12.8
million or 35.3% of net restaurant sales for the quarter ended June 17, 1996.
The decrease in restaurant labor costs as a percentage of net restaurant sales
was due primarily to new labor utilization programs implemented in the first
quarter of 1997, partially offset by the increase in the federal minimum wage
rate.
Restaurant occupancy expense, which includes rent, property taxes,
licenses and insurance, totalled $2.5 million or 7.9% of net restaurant sales
for the quarter ended June 16, 1997, compared to $2.8 million or 7.8% of net
restaurant sales for the quarter ended June 17, 1996. This increase in
restaurant occupancy costs as a percentage of net restaurant sales was due
primarily to the decline in average net restaurant sales relative to the fixed
and semi-variable nature of these expenses and the acquisition of interests in
12 Restaurants in the high cost Chicago market in the third quarter of 1996.
Restaurant depreciation and amortization decreased 2.9% to $1.9
million for the quarter ended June 16, 1997, from $2.0 million for the quarter
ended June 17, 1996, due primarily to fourth quarter 1996 impairments under the
Statement of Financial Accounting Standards No. 121 and a net decrease of 10
Company-operated restaurants from June 17, 1996, to June 16, 1997. However, as
percentage of net restaurant sales, these expenses increased to 6.0% for the
quarter ended June 16, 1997 from 5.4% for the quarter ended June 17, 1997
because of the greater relative decline in sales.
Advertising expense increased to $1.6 million or 5.0% of net
restaurant sales for the quarter ended June 16, 1997, from $1.2 million or 3.4%
of net restaurant sales for the quarter ended June 17, 1996. The increase in
this expense was due to decreased utilization of coupons in lieu of advertising
dollars in 1997 and the second quarter 1996 capitalization of television
production costs that were expensed later in 1996.
Other restaurant expenses includes all other Restaurant level
operating expenses other than food and paper costs, labor and benefits, rent and
other occupancy costs which include utilities, maintenance and other costs.
These expenses totalled $3.2 million or 10.0% of net restaurant sales for the
quarter ended June 16, 1997, compared to $3.4 million or 9.5% of net restaurant
sales for the quarter ended June 17, 1996. The increase in the quarter ended
June 16, 1997, as a percentage of net restaurant sales was primarily related to
the decline in average net restaurant sales relative to the fixed and semi-
variable nature of these expenses.
14
<PAGE>
Costs of modular restaurant package revenues totalled $213,000 or
86.5% of modular restaurant package revenues for the quarter ended June 16,
1997, compared to $649,000 or 122.0% of such revenues for the quarter ended June
17, 1996. The decrease in these expenses as a percentage of modular restaurant
package revenues was attributable to the elimination of various excess fixed
costs in the first quarter of 1997.
General and administrative expenses were $3.5 million or 10.4% of
total revenues, for the quarter ended June 16, 1997, compared to $4.0 million or
10.5% of total revenues for the quarter ended June 17, 1996. The actual decrease
in normal recurring general and administrative expenses of $890,000 was mostly
attributable to a reduction in corporate staffing early in 1997. This reduction
was partially offset by $350,000 of costs incurred as a result of terminated
merger negotiations with Rally's Hamburgers, Inc., resulting in a reported
decrease of $540,000.
INTEREST EXPENSE. Interest expense decreased to $1.2 million or 3.5%
of total revenues for the quarter ended June 16, 1997, from $1.3 million or 3.4%
of total revenues for the quarter ended June 17, 1996. This decrease was due to
a reduction in the weighted average balance of debt outstanding during the
respective periods, partially offset by an increase in the Company's effective
interest rates since the second quarter of 1996.
INCOME TAX BENEFIT. Due to the loss for the quarter, the Company
recorded an income tax benefit of $558,000 or 38.0% of the loss before income
taxes which was completely offset by a deferred income tax valuation allowance
of $558,000 for the quarter ended June 16, 1997, as compared to an income tax
benefit of $934,000 or 38.0% of earnings before income taxes for the quarter
ended June 17, 1996. The effective tax rates differ from the expected federal
tax rate of 35.0% due to state income taxes and job tax credits.
NET LOSS. The net loss for the quarter was $1.5 million or $.02 per
share. This net loss was impacted by the expensing of $485,000 in deferred loan
costs and $350,000 in terminated merger costs in the quarter ended June 16,
1997. Net loss before tax, deferred loan cost amortization and terminated merger
costs was $634,000 or $.01 per share for the quarter ended June 16, 1997, and
$1.5 million or $.03 per share for the quarter ended June 17, 1996, which
resulted primarily from an increase in the average restaurant margins, decreases
in general and administrative expenses and interest expense, partially offset by
a decrease in royalties and franchise fees.
COMPARISON OF HISTORICAL RESULTS - TWO QUARTERS ENDED JUNE 16, 1997 AND TWO
QUARTERS ENDED JUNE 17, 1996
REVENUES. Total revenues decreased 11.9% to $67.9 million for the
two quarters ended June 16, 1997, compared to $77.1 million for the two quarters
ended June 17, 1996. Company-operated net restaurant sales decreased 11.2% to
$64.2 million for the two quarters ended June 16, 1997, from $72.3 million for
the two quarters ended June 17, 1996. Net restaurant sales for comparable
Company-owned Restaurants for the two quarters ended June 16, 1997, decreased
10.1% compared to the quarters ended June 17, 1996. Comparable Company-owned
Restaurants are those continuously open during both reporting periods. These
decreases in net restaurant sales and comparable net restaurant sales are
primarily attributable to a highly competitive environment during the first two
quarters of 1997 and the Company's 1997 focus on cutting costs and developing a
new advertising campaign for the remainder of 1997.
Franchise revenues and fees decreased 19.1% to $3.3 million for the
two quarters ended June 16, 1997, from $4.1 million for the two quarters ended
June 17, 1996. This was a result of a net reduction of 17 franchised restaurants
since June 17, 1996, and opening fewer franchised Restaurants during the two
quarters ended June 16, 1997, than in the first two quarters of 1996. The
Company recognizes franchise fees as revenues when the Company has substantially
completed its obligations under the franchise agreement, usually at the opening
of the franchised Restaurant.
Modular restaurant package revenues decreased 46.9% to $344,000 for
the two quarters ended June 16, 1997, from $647,000 for the two quarters ended
June 17, 1996. Modular restaurant package revenues are recognized on the
percentage of completion method during the construction process; therefore, a
substantial portion of the modular restaurant package revenues and costs are
recognized prior to the opening of a Restaurant or shipment to a convenience
store operator.
COSTS AND EXPENSES. Restaurant food and paper costs totalled $21.5
million or 33.5% of net Restaurant sales for the two quarters ended June 16,
1997, compared to $24.7 million or 34.1% of net restaurant sales for the two
quarters ended June 17, 1996. The actual decrease in food and paper costs was
due primarily to the decrease in net restaurant sales while the decrease in
these costs as a percentage of net restaurant sales was due to new purchasing
contracts negotiated in the first two quarters of 1997.
Restaurant labor costs, which includes restaurant employees'
salaries, wages, benefits and related taxes, totalled $21.1 million or 32.9% of
net restaurant sales for the two quarters ended June 16, 1997, compared to $25.2
15
<PAGE>
million or 34.8% of net restaurant sales for the two quarters ended June 17,
1996. The decrease in restaurant labor costs as a percentage of net restaurant
sales was due primarily to new labor utilization programs implemented in the
first quarter of 1997, partially offset by the increase in the federal minimum
wage rate.
Restaurant occupancy expense, which includes rent, property taxes,
licenses and insurance, totalled $5.2 million or 8.1% of net restaurant sales
for the two quarters ended June 16, 1997, compared to $5.7 million or 7.8% of
net restaurant sales for the two quarters ended June 17, 1996. This increase in
restaurant occupancy costs as a percentage of net restaurant sales was due
primarily to the decline in average net restaurant sales relative to the fixed
and semi-variable nature of these expenses and the acquisition of interests in
12 Restaurants in the high cost Chicago market in the third quarter of 1996.
Restaurant depreciation and amortization decreased 3.3% to $3.8
million for the two quarters ended June 16, 1997, from $4.0 million for the two
quarters ended June 17, 1996, due primarily to fourth quarter 1996 impairments
under the Statement of Financial Accounting Standards No. 121 and a net decrease
of 10 Company-operated restaurants from June 17, 1996, to June 16, 1997.
However, as percentage of net restaurant sales, these expenses increased to 6.0%
for the quarter ended June 16, 1997 from 5.5% for the quarter ended June 17,
1997 because of the greater relative decline in sales.
Advertising expense increased to $3.2 million or 5.0% of net
restaurant sales for the two quarters ended June 16, 1997, from $2.1 million or
2.9% of net restaurant sales for the two quarters ended June 17, 1996. The
increase in this expense was due to decreased utilization of coupons in lieu of
advertising dollars in 1997 and the first and second quarter 1996 capitalization
of television production costs that were expensed later in 1996.
Other restaurant expenses includes all other Restaurant level
operating expenses other than food and paper costs, labor and benefits, rent and
other occupancy costs which include utilities, maintenance and other costs.
These expenses totalled $6.4 million or 10.0% of net restaurant sales for the
two quarters ended June 16, 1997, compared to $6.2 million or 8.6% of net
restaurant sales for the quarters ended June 17, 1996. The increase in the two
quarters ended June 16, 1997, as a percentage of net restaurant sales was
primarily related to the decline in average net restaurant sales relative to the
fixed and semi-variable nature of these expenses. The increase in the actual
expense by 3.1% was due to certain one-time credits recorded in the first
quarter of 1996.
Costs of modular restaurant package revenues totalled $289,000 or
84.0% of modular restaurant package revenues for the two quarters ended June 16,
1997, compared to $998,000 or 154.4% of such revenues for the two quarters ended
June 17, 1996. The decrease in these expenses as a percentage of modular
restaurant package revenues was attributable to the elimination of various
excess fixed costs in the first quarter of 1997.
General and administrative expenses were $6.9 million or 10.2% of
total revenues, for the two quarters ended June 16, 1997, compared to $7.3
million or 9.5% of total revenues for the two quarters ended June 17, 1996. The
actual decrease in normal recurring general and administrative expenses of
$747,000 was mostly attributable to a reduction in corporate staffing early in
1997. This reduction was partially offset by $350,000 of costs incurred as a
result of terminated merger negotiations with Rally's Hamburgers, Inc.,
resulting in a reported decrease of $397,000.
INTEREST EXPENSE. Interest expense was $2.5 million or 3.7% of total
revenues for the two quarters ended June 16, 1997, and $2.5 million or 3.3% of
total revenues for the two quarters ended June 17, 1996. This consistency was
due to a reduction in the weighted average balance of debt outstanding during
the respective periods, offset by an increase in the Company's effective
interest rates since the second quarter of 1996.
INCOME TAX BENEFIT. Due to the loss for the two quarters, the
Company recorded an income tax benefit of $2.5 million or 38.0% of the loss
before income taxes which was completely offset by a deferred income tax
valuation allowance of $2.5 million for the two quarters ended June 16, 1997, as
compared to an income tax benefit of $1.1 million or 38.0% of earnings before
income taxes for the two quarters ended June 17, 1996. The effective tax rates
differ from the expected federal tax rate of 35.0% due to state income taxes and
job tax credits.
NET LOSS. The net loss for the two quarters was $6.7 million or $.11
per share. This net loss was significantly impacted by the expensing of $2.7
million in deferred loan costs and $350,000 in terminated merger costs in the
two quarters ended June 16, 1997. Net loss before tax, deferred loan cost
amortization and terminated merger costs was $3.6 million or $.06 per share for
the two quarters ended June 16, 1997, and $1.5 million or $.03 per share for the
two quarters ended June 17, 1996. This increased net loss was primarily
attributable to lower levels of net restaurant sales and a decrease in royalties
and franchise fees, partially offset by an increase in average net margins and a
decline in general and administrative expenses.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On July 29, 1996, the debt under the Company's prior bank loan
agreement (the "Loan Agreement") and credit line ("Credit Line") was acquired
from a Bank Group by an investor group led by an affiliate of DDJ Capital
Management, LLC (collectively, "DDJ"). On November 14, 1996, the debt under the
Loan Agreement and Credit Line was acquired from DDJ by a group of entities and
individuals, most of whom are engaged in the fast food restaurant business. This
investor group (the "CKE Group") was led by CKE Restaurants, Inc., the parent of
Carl Karcher Enterprises, Inc., Casa Bonita, Inc., and Summit Family
Restaurants, Inc. Also participating were most members of the DDJ Group, as well
as KCC Delaware Company, a wholly-owned subsidiary of GIANT GROUP, LTD., which
is a controlling shareholder of Rally's Hamburgers, Inc.
On November 22, 1996, the Company and the CKE Group executed an
Amended and Restated Credit Agreement (the "Restated Credit Agreement") thereby
completing a restructuring of the debt under the Loan Agreement. The Restated
Credit Agreement consolidated all of the debt under the Loan Agreement and the
Credit Line into a single obligation. At the time of the restructuring, the
outstanding principal balance under the Loan Agreement and the Credit Line was
$35.8 million. Pursuant to the terms of the Restated Credit Agreement, the term
of the debt was extended by one (1) year until July 31, 1999, and the interest
rate on the indebtedness was reduced to a fixed rate of 13%. In addition, all
principal payments were deferred until May 19, 1997, and the CKE Group agreed to
eliminate certain financial covenants, to relax others and to eliminate
approximately $6 million in restructuring fees and charges. The Restated Credit
Agreement also provided that certain members of the CKE Group agreed to provide
to the Company a short term revolving line of credit of up to $2.5 million, also
at a fixed interest rate of 13% (the "Secondary Credit Line"). In consideration
for the restructuring, the Restated Credit Agreement required the Company to
issue to the members of the CKE Group warrants to purchase an aggregate of 20
million shares of the Companys' common stock at an exercise price of $.75 per
share, which was the approximate market price of the common stock prior to the
announcement of the debt transfer. As of June 16, 1997, the Company has reduced
the principal balance under the Restated Credit Agreement by $9.2 million and
has repaid the Secondary Credit Line in full. A portion of the funds utilized to
make these principal reduction payments were obtained by the Company from the
sale of certain closed restaurant sites to third parties. Additionally, the
Company utilized $10.5 million of the proceeds from the February 21, 1997,
private placement which is described later in this section. Pursuant to the
Restated Credit Agreement, the prepayments of principal made in 1996 and early
in 1997 will relieve the Company of the requirement to make any of the regularly
scheduled principal payments under the Restructured Credit Agreement which would
have otherwise become due in fiscal year 1997. The Amended and Restated Credit
Agreement provides however, that 50% of any future asset sales must be utilized
to prepay principal.
The Company has outstanding promissory notes in the aggregate
principal amount of approximately $4.5 million (the "Notes") payable to
Rall-Folks, Inc. ("Rall-Folks"), Restaurant Development Group, Inc. ("RDG") and
Nashville Twin Drive-Through Partners, L.P. ("N.T.D.T."). The Company had agreed
to acquire the Notes issued to Rall-Folks and RDG in consideration of the
issuance of an aggregate of approximately 2.8 million shares of Common Stock and
the Note issued to NTDT in exchange for a convertible note in the same principal
amount and convertible into approximately 927,000 shares of Common Stock
pursuant to purchase agreements entered into in 1995 and subsequently amended.
All three of the parties received varying degrees of protection on the purchase
price of the promissory notes. Accordingly, the actual number of shares to be
issued will be determined by the market price of the Company's stock. The
Company was not able to consummate these transactions as originally scheduled.
Pusuant to the most recent amendment, consumation of the Rall-Folks, RDG and
NTDT purchases is to occur prior to December 16, November 25, and November 15,
1997, respectively, subject to extension in certain cases. The Company does not
currently have sufficient cash available to pay one or more of these notes if
required to do so.
On February 21, 1997, the Company completed a private placement (the
"Private Placement") of 8,771,929 shares of the Company's common stock, $.001
par value, and 87,719 shares of the Company's Series A preferred stock, $.001
par value (the "Preferred Stock"). CKE Restaurants, Inc. purchased 6,162,299 of
the Company's common stock and 61,623 of the Preferred Stock and other qualified
investors, including other members of the CKE Group of lenders under the
Restated Credit Agreement, also participated in the Private Placement. The
Company received approximately $19.5 million in net proceeds from the Private
Placement. The Company used $8 million of the Private Placement proceeds to
reduce the principal balance due under the Restated Credit Agreement; $2.5
million was utilized to repay the Secondary Credit Line; $2.3 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
will reduce the Company's interest expense by more than $1.3 million annually.
17
<PAGE>
The Private Placement purchase agreement requires that the Company
submit to its shareholders for vote at its 1997 Annual Shareholders' Meeting the
conversion of the Preferred Stock into shares of the Company's common stock
based upon the Preferred Stock liquidation preference. If the shareholders do
not vote in favor of the conversion, the Preferred Stock will remain outstanding
with the rights and preferences set forth in the Certificate of Designation of
Series A Preferred Stock of the Company (the "Certificate", a copy of which is
an Exhibit hereto), including (i) a dividend preference, (ii) a voting
preference, (iii) a liquidation preference and (iv) a redemption requirement.
Holders of the Preferred Stock will have the right to receive cash dividends
equal to $16.53 per share per annum payable on a quarterly basis beginning
August 19, 1997. Such dividends are cumulative and must be paid in full prior to
any dividends being declared or paid with respect to the Company's common stock.
If the Company is in default with respect to any dividends on the Preferred
Stock, then no cash dividends can be declared or paid with respect to the
Company's common stock. If the Company fails to pay any two required dividends
on the Preferred Stock, then the number of seats on the Company's Board of
Directors will be increased by two and the holders of the Preferred Stock will
have the right, voting as a separate class, to elect the Directors to fill those
two new seats, which new Directors will continue in office until the holders of
the Preferred Stock have elected successors or the dividend default has been
cured. In the event of any liquidation, dissolution or winding up, but not
including any consolidation or merger of the Company, the holders of the
Preferred Stock will be entitled to receive a liquidation preference of $114 per
share plus any accrued but unpaid dividends (the "Liquidation Preference"). In
the event the stockholders do not approve the conversion of the Preferred Stock
and the Company subsequently completes a consolidation or merger and the result
is a change in control of the Company, then each share of the Preferred Stock
will be automatically redeemed for an amount equal to the Liquidation
Preference. The Company is required to redeem the Preferred Stock for an amount
equal to the Liquidation Preference on or before February 12, 1999. If the
redemption does not occur as required, the dividend rate will increase from
$16.53 per share to $20.52 per share. Additionally, if there are not then
Directors serving which were elected by the holders of the Preferred Stock, the
number of directors constituting the Company's Board of Directors will be
increased by two and the holders of the Preferred Stock voting as a class will
be entitled to elect the Directors to fill the created vacancies.
In the fiscal year ended December 30, 1996, the Company raised
approximately $1.8 million from the sale of various of its assets to third
parties, including both personal and excess real property from closed or
undeveloped Restaurant locations. Under the terms of the Loan Agreement and the
Restated Credit Agreement, approximately 50% of those sales proceeds were
utilized to reduce outstanding principal. The Company also received $3.5 million
in connection with the reduction of a note receivable which funds were generally
used to supplement working capital. During the first half of 1997, the Company
sold eight parcels of excess real property and eight MRP's resulting in net
proceeds to the Company of $2.8 million. As of June 16, 1997 the Company owns or
leases approximately 42 parcels of excess real property which it intends to
continue to aggressively market to third parties, and has an inventory of
approximately 28 used MRP's which it intends to continue to aggressively market
to franchisees and third parties. There can be no assurance that the Company
will be successful in disposing of these assets, and 50% of the proceeds from
the sale of excess real property must be used to reduce the principal balance
under the Restated Credit Agreement.
The Company has negative working capital of $16.2 million at June
16, 1997 (determined by subtracting current liabilities from current assets). It
is anticipated that the Company will continue to have negative working capital
since approximately 86.7% of the Company's assets are long-term (property,
equipment, and intangibles), and since all operating trade payables, accrued
expenses, and property and equipment payables are current liabilities of the
Company. The Company has not reported a profit for any quarter since September
1994.
The Company currently does not have significant development plans
for additional Company Restaurants during fiscal 1997.
The Company implemented aggressive programs at the beginning of
fiscal year 1997 designed to improve food, paper and labor costs in the
Restaurants. These costs totalled 63.6% of net restaurant revenues in the second
quarter of 1997, compared to 72.1% of net restaurant revenues in fiscal 1996,
despite an 11.5% decrease in Company owned same store sales in the second
quarter of 1997 as compared to the first quarter of the prior year. The Company
also reduced the corporate and regional staff by 32 employees in the beginning
of fiscal year 1997. Overall, the Company believes fundamental steps have been
taken to improve the Company's profitability, but there can be no assurance that
it will be able to do so. Management believes that cash flows generated from
operations and the Private Placement should allow the Company to meet its
financial obligations and to pay operating expenses in fiscal year 1997. The
Company must, however, also successfully consummate the purchase of the
Rall-Folks Notes, the RDG Note and the NTDT Note for Common Stock. If the
Company is unable to consummate one or more of those transactions, and if the
Company is thereafter unable to reach some other arrangements with Rall Folks,
RDG or NTDT, the Company may default under the terms of the Restated Credit
Agreement.
18
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The Company's prior operating results are not necessarily indicative
of future results. The Company's future operating results may be affected by a
number of factors, including: uncertainties related to the general economy;
competition; costs of food and labor; the Company's ability to obtain adequate
capital and to continue to lease or buy successful sites and construct new
Restaurants; and the Company's ability to locate capable franchisees. The price
of the Company's common stock can be affected by the above. Additionally, any
shortfall in revenue or earnings from levels expected by securities analysts
could have an immediate and significant adverse effect on the trading price of
the Company's common stock in a given period.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None, except as previously reported in the Company's Form 10-Q for
the quarter ended March 24, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
10.39 Amended and Restated Purchase Agreement dated May 14,
1997 between the Company and Rall-Folks, Inc.
10.40 Amendment No. 3 to Purchase Agreement dated June 2, 1997
between the Company and Restaurant Development Group,
Inc.
10.41 Amended and Restated Note Repayment Agreement dated July
17, 1997 between the Company and Nashville Twin
Drive-Thru Partners, L.P., et.al.
27 Financial Data Schedule (included in electronic filing
only).
(B) REPORTS ON 8-K:
There were no reports on Form 8-K filed during the quarter covered
by this report.
19
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SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Checkers Drive-In Restaurants, Inc.
-----------------------------------
(Registrant)
Date: July 24, 1997
By: /s/ Joseph N. Stein
-----------------------------------------
Joseph N. Stein
Executive Vice President, Chief Financial
Officer and Chief Accounting Officer
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June 16, 1997 FORM 10-Q
CHECKERS DRIVE-IN RESTAURANTS, INC.
EXHIBIT INDEX
Exhibit # Exhibit Description
--------- -------------------
10.39 Amended and Restated Purchase Agreement dated May 14, 1997
between the Company and Rall-Folks, Inc.
10.40 Amendment No. 3 to Purchase Agreement dated June 2, 1997
between the Company and Restaurant Development Group, Inc.
10.41 Amended and Restated Note Repayment Agreement dated July 17,
1997 between the Company and Nashville Twin Drive-Thru
Partners, L.P., et.al.
27 Financial Data Schedule (included in electronic filing only).
21
AMENDED AND RESTATED PURCHASE AGREEMENT
---------------------------------------
This Amended and Restated Purchase Agreement (the "Agreement") is
made and entered into as of this 14th day of May 1997, by and between Rall-
Folks, Inc., a Georgia corporation ("Rall-Folks"), and Checkers Drive-In
Restaurants, Inc., a Delaware corporation ("Checkers"), and amends and restates
in its entirety that certain Purchase Agreement between Rall-Folks and Checkers,
dated as of August 2, 1995, as amended by Amendment No. 1 to Purchase Agreement,
dated as of October 20, 1995, Amendment No. 2 to Purchase Agreement, dated as of
April 11, 1996, and Amendment No. 3 to Purchase Agreement, dated as of June 12,
1996.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Rall-Folks holds three promissory notes of Checkers, each
dated May 4, 1994, in the original principal amounts of $1,793,891, $71,036 and
30,536 (the "Notes"); and
WHEREAS, Checkers desires to acquire the Notes and Rall- Folks
desires to sell the Notes to Checkers, upon the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, covenants and agreements hereinafter contained, and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound, the parties agree as
follows:
ARTICLE I.
----------
PURCHASE AND SALE
-----------------
1.01 PURCHASE AND SALE OF THE NOTES. Subject to and upon the terms
and conditions hereinafter set forth and the representations and warranties
contained herein, Checkers agrees to purchase from Rall-Folks, and Rall-Folks
agrees to sell, assign, transfer and deliver to Checkers, free and clear of any
and all liens, encumbrances, liabilities, claims, charges and restrictions of
any kind or nature whatsoever, all of Rall-Folks's right, title and interest
(which will be good, valid and complete) in and to the Notes.
1.02 NON-ASSUMPTION OF LIABILITIES. None of the provisions of this
Agreement will be deemed to create any obligation or liability of Checkers to
any person or entity that is not a party to this Agreement, whether under a
third-party beneficiary theory, successor liability theory or otherwise.
<PAGE>
ARTICLE II
PURCHASE PRICE
2.01 PURCHASE PRICE. The aggregate purchase price (the "Purchase
Price") payable to Rall-Folks for the Notes will be equal to the outstanding
balance (principal and accrued interest) due under the Notes on the Closing Date
(as hereinafter defined) payable in shares of the common stock of Checkers, par
value $.001 per share ("Common Stock"). The number of shares to be issued (the
"Stock Payment") shall be equal to the amount determined by dividing the
Purchase Price by the arithmetic average (rounded to the nearest penny) of the
closing sale price per share of the Common Stock as reported on the Nasdaq Stock
Market's National Market for the five full trading days ending on the third
business day immediately preceding the Closing Date, as reported in The Wall
Street Journal.
2.02 DELIVERY OF SHARES. On the Closing Date, Checkers will deliver
one or more certificates in the name of Rall-Folks representing the shares of
Common Stock constituting the Stock Payment.
2.03 NO FRACTIONAL SHARES. Notwithstanding anything contained in this
Agreement to the contrary, neither certificates nor scrip for fractional shares
of the Common Stock shall be issued as part of the Stock Payment. In the event
that the number of shares of Common Stock constituting the Stock Payment
includes a fractional share, the number of shares shall be rounded up or down to
the nearest whole number of shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RALL-FOLKS
Rall-Folks represents and warrants to Checkers (each of which shall
be deemed material and independently relied upon by Checkers) as follows:
3.01 ORGANIZATION AND STANDING. Rall-Folks is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia with full power and authority to own its properties and assets.
Rall-Folks is in good standing and duly qualified to conduct business as a
foreign corporation in each of the jurisdictions in which the nature of its
business or the ownership of its properties requires such qualification and in
which failure to be so qualified would have a material adverse effect on the
business, operations, assets, financial position or prospects of Rall-Folks.
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<PAGE>
3.02 CORPORATE AUTHORITY. Subject to receipt of the approval and
consent of the stockholders of Rall-Folks and the consent of First Citizens
Bank, Newnan, Georgia ("First Citizens Bank"), Rall-Folks has the full power and
authority to enter into and perform this Agreement and to consummate the
transactions contemplated herein in accordance with the terms of this Agreement.
Compliance with the terms and conditions hereof will not (i) violate or conflict
with any provision of the Rall-Folks Articles of Incorporation or Rall-Folks
By-laws or any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restrictions of any government,
governmental agency or court to which Rall-Folks is subject, or (ii) subject to
the consent of First Citizens Bank, result in the breach or termination of any
provision of, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, require any notice or constitute a
breach or default under any note, bond, indenture, lease, agreement or other
instrument or obligation to which Rall-Folks is a party or by which any of the
properties or assets of Rall-Folks may be subject, bound or affected. No
authorization, consent or approval of any public body or authority is necessary
to the validity of the transactions contemplated by this Agreement except for
the consent of the stockholders of Rall-Folks. Rall-Folks is not otherwise a
party to any contract or subject to any other legal restriction that would
prevent or restrict complete fulfillment by Rall-Folks of all of the terms and
conditions of this Agreement or compliance with any of the obligations under it.
3.03 CORPORATE AUTHORIZATION. Other than obtaining the consent of the
stockholders of Rall-Folks, Rall-Folks has taken all necessary corporate actions
to authorize and approve the execution, delivery and performance of this
Agreement and the transactions contemplated hereby (including approval by the
Board of Directors of Rall-Folks). This Agreement constitutes a legal, valid and
binding obligation of Rall-Folks, enforceable against Rall-Folks in accordance
with its terms.
3.04 TITLE TO THE NOTES. Rall-Folks has good, valid and complete
title to the Notes, subject to the rights of First Citizens Bank, as pledgee of
the Notes.
3.05 LITIGATION AND DISPUTES. There is no claim, litigation or
proceeding pending or, to the knowledge of Rall- Folks, threatened, against or
with respect to Rall-Folks, and there exists no basis or grounds for any such
suit, action, proceeding, claim or investigation, which affects the title or
interest of Rall-Folks to or in the Notes or which would prevent or affect the
consummation of the transactions contemplated by this Agreement by Rall-Folks.
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<PAGE>
3.06 REGISTRATION STATEMENT. None of the information regarding
Rall-Folks supplied or to be supplied by Rall-Folks for inclusion (i) in the
Registration Statement (as hereinafter defined) or any Resale Registration
Statement (as hereinafter defined) to be filed by Checkers with the Securities
and Exchange Commission ("SEC") in connection with the registration of the
Common Stock issued hereunder, or (ii) in any other documents to be filed with
the SEC or any other regulatory authority in connection with the transactions
contemplated in this Agreement, as the same may be updated by written notice
from Rall-Folks to Checkers from time to time, will at the respective time such
documents are filed and, in the case of the Registration Statement or any Resale
Registration Statement, when it becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein not misleading.
ARTICLE IV
[INTENTIONALLY DELETED]
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CHECKERS
Checkers represents and warrants to Rall-Folks (each of which shall
be deemed material and independently relied upon by Rall-Folks) as follows:
5.01 ORGANIZATION AND STANDING. Checkers is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full power and authority to own its properties and assets and to
conduct its business as now conducted or proposed to be conducted. Checkers is
in good standing and duly qualified to conduct business as a foreign corporation
in each of the jurisdictions in which the nature of its business or the
ownership of its properties requires such qualification and in which failure to
be so qualified would have a material adverse effect on the business,
operations, assets, financial position or prospects of Checkers.
5.02 CORPORATE AUTHORITY. Checkers has the full power and authority
to enter into and perform this Agreement and to consummate the transactions
contemplated herein in accordance with the terms of this Agreement. Compliance
with the terms and conditions hereof will not violate or conflict with any
provision of Checkers' Restated Certificate of Incorporation or By-laws or any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
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<PAGE>
ruling, charge or other restrictions of any government, governmental agency or
court to which Checkers is subject or result in the breach or termination of any
provision of, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, require any notice or constitute a
breach or default under any note, bond, indenture, lease, agreement or other
instrument or obligation to which Checkers is a party or by which any of the
properties or assets of Checkers may be subject, bound or affected. All
necessary approvals of the parties under any contracts, commitments or
understandings to which Checkers is a party or any other person required to
permit the consummation on the part of Checkers of the transactions contemplated
in this Agreement (other than the approval of the SEC to the effectiveness of
the Registration Statement) have been obtained by Checkers. Checkers is not
otherwise a party to any contract or subject to any other legal restriction that
would prevent or restrict complete fulfillment by Checkers of all of the terms
and conditions of this Agreement or compliance with any of the obligations under
it.
5.03 CORPORATE AUTHORIZATION. Checkers has taken all necessary
corporate actions to authorize and approve the execution, delivery and
performance of this Agreement and the transactions contemplated hereby
(including approval by the Board of Directors of Checkers). This Agreement
constitutes a legal, valid and binding obligation of Checkers, enforceable
against Checkers in accordance with its terms.
5.04 CAPITALIZATION. As of May 1, 1997, the authorized capital stock
of Checkers consisted of (i) 100,000,000 shares of Common Stock, of which
60,540,409 shares were issued and outstanding, and (ii) 2,000,000 shares of
preferred stock, $.001 par value per share, of which 87,719 shares were issued
and outstanding. All of the issued and outstanding shares of Common Stock are,
and all of the shares of Common Stock to be issued hereunder will be, validly
issued, fully paid, nonassessable and outstanding and not issued in violation of
the preemptive rights of any stockholder.
5.05 REQUIRED CONSENTS. Except for the registration of the shares of
Common Stock to be issued hereunder with the SEC and under any applicable state
blue sky laws, no consents or approvals of any public body or authority and no
consents or waivers from any other parties to any agreements or other
instruments are required for the lawful consummation on the part of Checkers of
the transactions contemplated by this Agreement.
5.06 REGISTRATION STATEMENT. None of the information included (i) in
the Registration Statement or any Resale Registration Statement and (ii) in any
other documents to be filed with the SEC or any regulatory authority in
connection with the transactions contemplated in this Agreement will at the
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<PAGE>
respective time such documents are filed and, in the case of the Registration
Statement or any Resale Registration Statement, when it becomes effective, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading,
except that no representation or warranty is being made with respect to
information supplied by Rall-Folks to Checkers for inclusion therein. All
documents which Checkers is responsible for filing with the SEC and any
regulatory authority in connection with the Registration Statement or any Resale
Registration Statement will comply as to form in all material respects with the
provisions of applicable law.
ARTICLE VI
COVENANTS OF CHECKERS
Checkers covenants to Rall-Folks as follows:
6.01 REGISTERED SHARES. The shares of Common Stock to be issued to
Rall-Folks pursuant to Section 2.01 of this Agreement shall be issued in
accordance with the registration requirements of the Securities Act of 1933, as
amended (the "1933 Act") and listed on the Nasdaq Stock Market's National
Market. Checkers shall remain in compliance with SEC Rule 144(c).
6.02 PREPARATION OF THE REGISTRATION STATEMENT. On or before April
22, 1996, Checkers shall prepare and file with the SEC a registration statement
on Form S-4 (including the related prospectus), and required amendments thereto
or supplements to any prospectus contained therein (the "Registration
Statement"), relating to the issuance of the shares of Common Stock contemplated
to be issued under Section 2.01 of this Agreement, and shall use its
commercially reasonable best efforts to have the same declared effective by the
SEC as expeditiously as practicable; provided, however, that Checkers shall have
the right (i) to defer the initial filing or request for acceleration of
effectiveness or (ii) after effectiveness, to suspend effectiveness of any such
registration statement, if, in the good faith judgment of the board of directors
of Checkers and upon the advice of counsel to Checkers, such delay in filing or
requesting acceleration of effectiveness or such suspension of effectiveness is
necessary in light of the existence of material non-public information
(financial or otherwise) concerning Checkers, disclosure of which at the time is
not, in the opinion of the board of directors of Checkers upon the advice of
counsel, (a) otherwise required, and (b) in the best interests of Checkers.
Checkers shall also take any action required to be taken under any applicable
state blue sky laws in connection with the issuance of shares of Common Stock
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<PAGE>
hereunder. No material information about Checkers will be contained in the
Registration Statement that is not contained in Checkers previously filed SEC
reports, other than information concerning Rall-Folks and the transactions
contemplated by this Agreement. The Registration Statement will not cover
resales of the Common Stock. When the Registration Statement is declared
effective by the SEC, Checkers shall give Rall-Folks prompt notice of such fact
and shall supply Rall-Folks with sufficient copies of the Registration Statement
to enable Rall-Folks to send copies to each of its stockholders in connection
with calling of a meeting of such stockholders for the purpose of voting on this
Agreement and the transactions contemplated herein. Notwithstanding the
foregoing, in the event that on the date of this Agreement Checkers is
negotiating with Rally's Hamburgers, Inc. ("Rally's") to acquire all of the
outstanding stock of Rally's through a merger of Rally's with a subsidiary of
Checkers or otherwise, then Checkers' obligation to have the Registration
Statement declared effective by the SEC as expeditiously as practicable shall be
suspended until the closing of the transaction with Rally's or the termination
of such negotiations or the termination of any definitive agreement relating to
such transaction.
6.03 GUARANTEE OF PROCEEDS FROM THE SALE OF THE COMMON STOCK. In the
event that Rall-Folks proceeds in good faith to sell all of the Common Stock
constituting the Stock Payment in a reasonably prompt but orderly manner
(subject to the limitations set forth in Section 7.07), if the aggregate net
proceeds (gross proceeds less brokers' commissions and discounts) from the sale
of such stock is less than the Purchase Price, Checkers shall issue to
Rall-Folks, at Rall-Folks option, either (i) a promissory note in the amount of
the difference between the Purchase Price and the aggregate net proceeds
received from the sale of the Common Stock constituting the Stock Payment (such
difference is hereinafter referred to as the "Initial Price Differential") or
(ii) additional shares of Common Stock with a value equal to the Initial Price
Differential. The parties agree that Rall-Folks will be deemed to be proceeding
in good faith to sell all of the Common Stock in a reasonably prompt but orderly
manner if it sells in each three-month period commencing with the three month
period beginning on the day after the Closing Date and continuing in each
consecutive three-month period thereafter at least 90% of the lesser of (i) the
maximum number of shares permitted to be sold during such period under Rule 144
promulgated under the Securities Act of 1933 or (ii) the maximum number of
shares permitted to be sold during such period under Section 7.07 without regard
to any upticks (as defined therein). Rall-Folks shall provide Checkers with
satisfactory evidence of the fact that the aggregate net proceeds from the sale
of such shares was less than the Purchase Price (i.e., broker confirmation
slips). Checkers shall deliver the note or issue instructions to its transfer
agent to issue the additional Common Stock within two business days after the
later of (1) the date Rall-Folks has provided to Checkers satisfactory evidence
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<PAGE>
from which to determine the number of additional shares of Common Stock to be
issued (broker confirmation slips), and (2) the date Rall- Folks notifies
Checkers in writing of its choice between a note and additional shares of Common
Stock. If Rall-Folks determines that a promissory note should be issued, the
note shall bear interest at 11%, be for a term of six months, with all principal
and accrued interest due at maturity, and be subordinated to Checkers bank debt
pursuant to the same subordination provisions contained in the Notes. If
Rall-Folks determines that additional Common Stock should be issued, the number
of shares to be issued (the "Second Stock Payment") shall be equal to the amount
determined by dividing the Initial Price Differential by the arithmetic average
(rounded to the nearest penny) of the closing sale price per share of the Common
Stock as reported on the NASDAQ Stock Market's National Market (as reported in
The Wall Street Journal) for the three (3) full trading days immediately
preceding the date on which Checkers issues instructions to its transfer agent
to issue such additional shares (such average closing sale price being referred
to hereinafter as the "Resale Price" for such shares). Checkers shall promptly
prepare and file a registration statement and all necessary or appropriate
related state securities law or blue sky filings under which Checkers shall
register the Common Stock representing the Second Stock Payment, and Rall-Folks
may sell the shares representing the Second Stock Payment, upon the terms and
conditions provided in Section 6.04 below. In the event that the aggregate net
proceeds from the sale of such shares is less than the Initial Price
Differential, Rall-Folks may again determine to have Checkers either issue (A) a
promissory note in the amount of the difference between the Purchase Price and
the aggregate net proceeds received from the sale of the Common Stock
constituting the Stock Payment and the Second Stock Payment (such difference is
hereinafter referred to as the "Second Price Differential") or (B) additional
shares of Common Stock with a value equal to the Second Price Differential, as
provided above with respect to the Initial Price Differential. If Rall-Folks
determines that additional Common Stock should be issued, Checkers shall
register the same and Rall-Folks may sell the same as provided in Section 6.04
below with respect to the Second Stock Payment. Checkers and Rall-Folks will
continue this process until such time as there is no Price Differential realized
by Rall-Folks on the sale of any batch of Common Stock issued in payment of a
Price Differential on a previous batch of Common Stock. All additional Common
Stock issued under this Section 6.03 shall be listed on the Nasdaq Stock
Market's National Market. The foregoing notwithstanding, Checkers shall have the
option at any time to deliver cash to Rall-Folks in lieu of a note or additional
shares in order to pay any Price Differential. Checkers shall have the right to
require Rall-Folks at any time to either, at the option of Rall-Folks, sell to
Checkers any shares held by Rall-Folks representing part of a Stock Payment at a
price per share equal to the Resale Price thereof or terminate any future price
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protection for such shares pursuant to this Section 6.03. In the event that
Checkers exercises the right described in the preceding sentence, Rall-Folks
may, in its discretion, sell to Checkers a portion of the shares then held by it
and retain the remainder, which remaining shares shall not be subject to the
future price protection provisions of this Section 6.03.
6.04 REGISTRATION OF COMMON STOCK CONSTITUTING THE SECOND STOCK
PAYMENT. As soon as practicable after the issuance of the Common Stock
constituting the Second Stock Payment, if any, Checkers shall prepare and file a
registration statement on Form S-3 (if it is eligible to use such form), or such
other form as it deems suitable (together with all amendments and supplements
thereto, the "Resale Registration Statement"), and all necessary or appropriate
related state securities law or blue sky filings (together with all amendments
and supplements thereto, the "Blue Sky Filings"), under which Checkers shall
register the shares of Common Stock issued hereunder as the Second Stock
Payment; provided, however, that in any event such Resale Registration Statement
shall be filed within 10 business days after issuance if Checkers utilizes a
Form S-3, or 20 business days if it utilizes a Form S-4 or S-1. Checkers shall
also use its commercially reasonable best efforts to have the Resale
Registration Statement declared effective by the SEC as expeditiously as
practicable, and shall keep such Resale Registration Statement and Blue Sky
Filings current for such period of time as is required for Rall-Folks to
complete the sale of all shares of Common Stock registered therein, so long as
Rall-Folks proceeds in good faith to sell such shares in a prompt but orderly
manner; provided, however, that Checkers shall have the right (i) to defer the
initial filing or request for acceleration of effectiveness, or (ii) after
effectiveness, to suspend effectiveness of the Resale Registration Statement (to
be later recontinued) if, in the good faith judgment of the board of directors
of Checkers and upon the advice of counsel to Checkers, such delay in filing or
requesting acceleration of effectiveness or such suspension of effectiveness is
necessary in light of the existence of material non-public information
(financial or otherwise) concerning Checkers, disclosure of which at the time is
not, in the opinion of the board of directors of Checkers upon the advice of
counsel, (a) otherwise required, and (b) in the best interests of Checkers.
Checkers shall not voluntarily take any action that would cause more than a
90-day delay in filing or requesting acceleration of effectiveness or a 90-day
suspension of effectiveness. Checkers shall give Rall-Folks notice of
effectiveness and any suspensions and recontinuations of the effectiveness of
the Resale Registration Statement. Subject to the foregoing, Checkers shall file
all such post effective amendments and supplements to the Resale Registration
Statement and Blue Sky Filings as may be necessary, in its judgment, to keep
such Resale Registration Statement and Blue Sky Filings current. Rall-Folks may
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proceed to sell the shares representing the Second Stock Payment beginning on
the date the Resale Registration Statement is declared effective by the SEC (the
"Effective Date"). Checkers shall pay all expenses related to such registration,
except that Rall-Folks shall bear the expenses of commissions or discounts and
any fees of Rall-Folks' advisors, including legal counsel. Notwithstanding the
foregoing, Checkers shall not be obligated to register shares for sale in the
states of Arizona or Nevada, unless the costs of registration in such states,
including filing fees and reasonable attorneys' fees, are paid by Rall-Folks.
The provisions of this Section 6.04 shall similarly apply to any subsequent
stock payments made pursuant to Section 6.03 with respect to any succeeding
Price Differential.
6.05 ISSUANCE OF COMMON STOCK FOR NEW NOTES. If Rall- Folks
determines that a promissory note should be issued in payment of any Price
Differential, and if it is permissible under the rules and regulations of the
SEC to do so, Checkers will, at the request of Rall-Folks, promptly thereafter
enter into an agreement with Rall-Folks substantially identical to this
Agreement pursuant to which Checkers will agree to issue to Rall-Folks, upon the
same terms and conditions contained herein, additional shares of Common Stock in
payment of such note which Common Stock will be registered by Checkers in a
registration statement on Form S-4 prior to the issuance such Common Stock.
6.06 PAYMENT OF INTEREST ON VALUE OF UNSOLD SHARES. Beginning on the
Closing Date, and on the same day of each third month thereafter, Checkers shall
pay to Rall-Folks in cash an amount equal to 2.5% of the value of the shares of
Common Stock received by Rall-Folks as part of the Stock Payment and held by
Rall-Folks on such date. The value of such shares shall be deemed to be the
Purchase Price less the net sales proceeds from previously sold shares of Common
Stock constituting part of the Stock Payment. In the event the shares
representing the Stock Payment are sold for an amount less than the Purchase
Price, giving rise to an obligation on Checkers' part to issue additional shares
constituting the Second Stock Payment pursuant to Section 6.03 hereof, Checkers
shall continue to pay to Rall-Folks in cash an amount equal to 2.5% of the value
of the shares of Common Stock received by Rall-Folks as part of the Second Stock
Payment and held by Rall-Folks on each third monthly anniversary of the Closing
Date. The value of such shares shall be deemed to be the Initial Price
Differential less the net sales proceeds from previously sold shares of Common
Stock constituting part of the Second Stock Payment. In the event the shares
representing the Second Stock Payment (or any subsequent stock payment) are sold
for an amount less than the Initial Price Differential (or any subsequent price
differential), giving rise to an obligation on Checkers' part to issue
additional shares constituting a subsequent stock payment pursuant to Section
6.03 hereof, Checkers shall continue to pay to Rall-Folks in cash an amount
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equal to 2.5% of the value of the shares of Common Stock received by Rall-Folks
as part of the subsequent stock payment and held by Rall-Folks on each third
monthly anniversary of the Closing Date. The value of such shares shall be
deemed to be the applicable price differential less the net sales proceeds from
previously sold shares of Common Stock constituting part of the applicable stock
payment.
6.07 ACTIONS PRIOR TO CLOSING. From and after the date of execution
of this Agreement and until the Closing Date, or until this Agreement shall be
terminated as herein provided, Checkers shall not engage in any activity, enter
into any transaction or fail to take any action which would be inconsistent with
any of the representations and warranties as set forth in Article V of this
Agreement as if such representations and warranties were made at a time
subsequent to such activity or transaction and all references to the date of
this Agreement were deemed to be such later time.
6.08 PAYMENT OF CURRENT INTEREST. Beginning on November 1, 1995, and
on the first day of each month thereafter, Checkers shall pay to Rall-Folks an
amount equal to the interest due under the Notes for the preceding month.
6.09 ADDITIONAL PAYMENTS. In the event that Checkers has not filed
the Registration Statement pursuant to Section 6.02 on or before November 30,
1995, Checkers shall pay to Rall-Folks (i) on November 30, 1995, the amount of
$100,000 in cash, to be applied first against any accrued interest due under the
Notes, with the remainder, if any, to be applied against the principal due under
the Notes and (ii) on February 1, 1996, the amount of $100,000 in cash, to be
applied first against any accrued interest due under the Notes, with the
remainder, if any, to be applied against the principal due under the Notes.
6.10 PAYMENT OF PRINCIPAL. Beginning on July 15, 1997, and on the
15th day of each month thereafter through November 15, 1997, in the event that
the Registration Statement has not yet been declared effective by the SEC,
Checkers shall pay to Rall-Folks in cash the amount of One Hundred Thousand
Dollars ($100,000.00), to be applied against the principal balance due under the
Notes. Notwithstanding any other provision contained in this Agreement or the
Notes, if the exchange of Common Stock for the Notes contemplated herein has not
occurred prior to December 15, 1997, all remaining principal due under the Notes
and any accrued but unpaid interest thereon shall be due and payable on such
date, unless the failure to complete the exchange is due to the failure of
Rall-Folks or its stockholders to perform their obligations hereunder.
6.11 PAYMENT OF LEGAL EXPENSES. No later than one business day after
the execution hereof by Rall-Folks, Checkers shall pay to Rall-Folks Ten
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Thousand Dollars ($10,000.00) as partial reimbursement for legal fees incurred
by Rall-Folks in connection with this Agreement and related matters.
ARTICLE VII
COVENANTS OF RALL-FOLKS
Rall-Folks covenants to Checkers as follows:
7.01 ACTIONS PRIOR TO CLOSING. From and after the date of execution
of this Agreement and until the Closing Date, or until this Agreement shall be
terminated as herein provided, Rall-Folks shall not (i) sell the Notes to any
other corporation or person, (ii) pledge the Notes to any person or otherwise
subject the Notes to a lien or encumbrance, (iii) engage in any activity, enter
into any transaction or fail to take any action which would be inconsistent with
any of the representations and warranties as set forth in Article III of this
Agreement as if such representations and warranties were made at a time
subsequent to such activity or transaction and all references to the date of
this Agreement were deemed to be such later time.
7.02 EXTENSION OF THE TERM OF THE NOTES; ACTION ON THE NOTES. The
term of the Notes shall be extended until and the Notes shall be payable on the
earlier of (i) the Closing Date or (ii) 20 days after the termination of this
Agreement in accordance with the terms hereof; provided however, that in the
event the Registration Statement is declared effective by the SEC prior to the
termination of this Agreement and the stockholders of Rall-Folks fail to approve
this Agreement and the transactions contemplated herein within 30 days after
Rall-Folks receives actual notice that the Registration Statement has been
declared effective by the SEC, the term of the Notes shall be extended
automatically until December 31, 1996. Rall-Folks shall not take any action to
collect any amounts due under the Notes, notwithstanding their maturity on
August 4, 1995, during the term of the Notes as extended by the preceding
sentence.
7.03 REGISTRATION STATEMENT INFORMATION. On request of Checkers,
Rall-Folks will furnish to Checkers all information concerning Rall-Folks as is
required to be set forth in (i) the Registration Statement and any Resale
Registration Statement and (ii) any application or statement made by Checkers to
any governmental agency or authority in connection with the transactions
contemplated by this Agreement.
7.04 APPROVAL BY STOCKHOLDERS. Promptly after the date on which
Rall-Folks receives actual notice that the Registration Statement has been
declared effective by the SEC, Rall-Folks shall call a meeting of the
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stockholders of Rall-Folks, to be held within 30 days after Rall-Folks' receipt
of such notice, for the purpose of obtaining the approval of the stockholders of
Rall-Folks of this Agreement and the transactions contemplated herein.
Rall-Folks shall distribute a copy of the Registration Statement to each
stockholder of Rall-Folks along with the notice of such meeting.
7.05 RELEASE BY FIRST CITIZENS BANK. Rall-Folks shall use its
commercially reasonable efforts to cause First Citizens Bank to release the
Notes from the pledge of Rall-Folks.
7.06 DISSOLUTION OF RALL-FOLKS OR DISTRIBUTION OF COMMON STOCK TO
STOCKHOLDERS. Within one year after the Closing, Rall- Folks shall either (i)
dissolve and wind up its affairs pursuant to Georgia law or (ii) distribute the
shares of Common Stock issued to Rall-Folks pursuant to the terms of this
Agreement to the stockholders of Rall-Folks, pro rata in accordance with their
proportionate ownership of the stock of Rall-Folks.
7.07 TRANSFERS OF COMMON STOCK. Rall-Folks shall not sell, pledge,
transfer or otherwise dispose of the shares of Common Stock to be received by it
except in compliance with the applicable provisions of the 1933 Act and the
rules and regulations promulgated thereunder, including Rule 145. In order to
assure that any sales of the shares of Common Stock issued hereunder will be
made in an orderly manner so as not to adversely affect the market for the
Common Stock, for a period of two years after the Closing Date, Rall-Folks shall
not, without the prior consent of Checkers, (i) sell in excess of 50,000 shares
of Common Stock during any calendar week and (ii) sell in excess of 25,000
shares in any one day; provided however, that additional sales in excess of such
limits may be made provided the same are made at a price higher than the lowest
then current bid price for the Common Stock (on an "uptick"). Checkers may
refuse to register or give effect to any sales in excess of such limitation
(Rall-Folks shall provide Checkers with evidence that all sales in excess of
such limit were made on an uptick). Rall-Folks shall, upon the distribution of
any of the Common Stock to any stockholder of Rall-Folks, cause such person to
deliver an Agreement to Checkers as a condition of such distribution and the
transfer of the ownership of such shares upon the stock register of Checkers,
which agreement shall contain the covenants set forth in this Section 7.07 and a
proportionate limitation on sales. In the event that Checkers acquires all of
the outstanding stock of Rally's through a merger of Rally's with a subsidiary
of Checkers or otherwise, then the 25,000 share per day and 50,000 share per
week volume limitations set forth above shall be increased to 37,500 shares per
day and 75,000 shares per week.
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ARTICLE VIII
MUTUAL COVENANTS OF CHECKERS AND RALL-FOLKS
Each of Checkers and Rall-Folks covenants with the other as follows:
8.01 CONFIDENTIALITY. All information furnished by one party to the
other in connection with this Agreement or the transactions contemplated hereby
shall be kept confidential by such other party (and shall be used by it and its
officers, attorneys, accountants and representatives (including brokers) only in
connection with this Agreement and the transactions contemplated hereby) except
to the extent that such information (i) already is known to such other party
when received, (ii) thereafter becomes lawfully obtainable from other sources,
(iii) is required to be disclosed in any document filed with the SEC or any
other agency of any government, or (iv) as otherwise required to be disclosed
pursuant to any federal or state law, rule or regulation or by any applicable
judgment, order or decree of any court or by any governmental body or agency
having jurisdiction in the premises after such other party has given reasonable
prior written notice to the other parties to this Agreement of the pending
disclosure of any such information. In the event that the transactions
contemplated by this Agreement shall fail to be consummated, it shall promptly
cause all copies of documents or extracts thereof containing information and
data as to the other party hereto to be returned to such other party.
8.02 PREPARATION OF REGISTRATION STATEMENTS. Each party shall
cooperate and consult with the other party hereto in the preparation of the
Registration Statement and any Resale Registration Statement to be filed by
Checkers with the SEC registering the shares of Common Stock to be issued
hereunder. When the Registration Statement, any Resale Registration Statement or
any Post-Effective Amendment thereto shall become effective, the information
prepared by each party for inclusion therein (i) will comply in all material
respects with the applicable provisions of the 1933 Act and the Rules and
Regulations promulgated thereunder and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein are necessary to make the statements contained therein not
misleading. In no event shall any party hereto be liable to any other party
hereto for any untrue statement of a material fact or omission to state a
material fact in any registration statement, or any amendment or supplement
thereto, or in any report made in reliance upon, and in conformity with, written
information concerning the other party hereto furnished by such other party
specifically for use in such registration statement or report. Each party hereto
shall advise the other party hereto promptly of the happening of any event which
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makes untrue any statement of a material fact contained in the Registration
Statement or any Resale Registration Statement or any amendment or supplement
thereto or that requires the making of a change in the registration statement or
any amendment or supplement thereto in order to make any material statement
therein not misleading.
8.03 MISCELLANEOUS AGREEMENTS. Subject to the terms and conditions
herein provided, each party shall use its best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary,
appropriate or desirable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement.
8.04 THE CLOSING. The Closing (the "Closing") of the transactions
contemplated herein shall take place at the offices of Shumaker, Loop &
Kendrick, 101 East Kennedy Boulevard, Suite 2500, Barnett Plaza, Tampa, Florida
33602, at 10:00 a.m., local time on the third business day following the date on
which the stockholders of Rall-Folks approve this Agreement and the transactions
contemplated herein, or at such other time and place as Checkers and Rall-Folks
shall agree (the "Closing Date"). The obligations of Checkers and Rall-Folks to
close or effect the transactions contemplated in this Agreement shall be subject
to satisfaction, unless duly waived, of the applicable conditions set forth in
this Agreement.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
CHECKERS AND RALL-FOLKS
The respective obligations of each party to effect the transactions
contemplated herein shall be subject to the fulfillment or waiver at or prior to
the Closing Date of the following conditions:
9.01 LITIGATION. Neither Checkers nor Rall-Folks shall be subject to
any order, decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits the consummation of the transactions contemplated
herein.
9.02 RALL-FOLKS STOCKHOLDER APPROVAL. This Agreement and the
transactions contemplated herein shall have been approved by the affirmative
vote of the holders of a majority of the outstanding shares of the common stock
of Rall-Folks.
9.03 REGISTRATION STATEMENT EFFECTIVE. The Registration Statement
shall have been declared effective by the SEC and the state securities
commission in each jurisdiction in which the Common Stock to be issued hereunder
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is required to be registered, and shall not be subject to a stop order or any
threatened stop order.
9.04 CLOSING DATE. The Closing Date shall be on the third business
day following the date on which the stockholders of Rall-Folks approve this
Agreement and the transactions contemplated herein after the SEC declares the
Registration Statement effective, but in no event shall the Closing Date be
extended past December 15, 1997, without the written consent of Rall-Folks.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF RALL-FOLKS
The obligations of Rall-Folks to effect the transactions
contemplated herein shall be subject to the fulfillment or waiver at or prior to
the Closing Date of the following conditions:
10.01 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Checkers set forth in Article V of this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date (as though made on and as of the Closing Date) except (i) to
the extent such representations and warranties are by their expressed provisions
made as of a specified date and (ii) for the effect of transactions contemplated
by this Agreement.
10.02 PERFORMANCE OF OBLIGATIONS. Checkers shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
10.03 NO MATERIAL ADVERSE CHANGE. Since January 2, 1996, there shall
have been no material adverse change in the financial condition, results of
operations, business or prospects of Checkers and its subsidiaries taken as a
whole.
10.04 OFFICERS' CERTIFICATE. Checkers shall have furnished to
Rall-Folks a certificate dated the Closing Date, signed on behalf of Checkers by
its Chief Executive Officer, President, Chief Operating Officer or Chief
Financial Officer, to the effect that, to his knowledge and belief, the
conditions set forth in Sections 10.01, 10.02 and 10.03 have been satisfied.
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ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF CHECKERS
The obligations of Checkers to effect the transactions contemplated
herein shall be subject to fulfillment at or prior to the Closing Date of the
following conditions:
11.01 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Rall-Folks set forth in Article III of this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date (as though made on and as of the Closing Date) except (i)
to the extent such representations and warranties are by their expressed
provisions made as of a specified date and (ii) for the effect of transactions
contemplated by this Agreement.
11.02 PERFORMANCE OF OBLIGATIONS. Rall-Folks shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
11.03 OFFICERS' CERTIFICATE. Rall-Folks shall have furnished to
Checkers a certificate dated the Closing Date, signed on behalf of Rall-Folks by
its President and chief financial officer, to the effect that, to the knowledge
and belief of each of them, the conditions set forth in Sections 11.01 and 11.02
have been satisfied.
11.04 RELEASE BY FIRST CITIZENS BANK. First Citizens Bank shall have
delivered its release of the Notes from the pledge of Rall-Folks.
ARTICLE XII
DOCUMENTS TO BE DELIVERED AT THE CLOSING BY RALL-FOLKS
Rall-Folks shall deliver to Checkers the following documents at the
Closing:
12.01 OFFICER'S CERTIFICATE. The certificate referred to in Section
11.03 of this Agreement.
12.02 CERTIFICATE OF SECRETARIAL OFFICER. Certificates of the
Secretary or an Assistant Secretary of Rall-Folks, dated the Closing Date, with
respect to the incumbency of corporate officers and their signatures, corporate
good standing, and the corporate director and stockholder resolutions of
Rall-Folks approving this Agreement and the transactions contemplated by this
Agreement.
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12.03 THE NOTES. The Notes, marked "Paid in Full" over the signature
of a duly authorized officer of Rall-Folks.
12.04 OTHER DOCUMENTS. Such other documents as shall be reasonably
requested by Checkers and its counsel or required to be delivered pursuant to
this Agreement.
ARTICLE XIII
DOCUMENTS TO BE DELIVERED AT THE CLOSING BY CHECKERS
Checkers shall deliver to Rall-Folks the following documents at the
Closing:
13.01 OFFICER'S CERTIFICATE. The certificate referred to in Section
10.04 of this Agreement.
13.02 CERTIFICATE OF SECRETARIAL OFFICER. The certificate of the
Secretary or Assistant Secretary of Checkers, dated the Closing Date, with
respect to the incumbency of corporate officers and their signatures, corporate
good standing and the corporate director resolutions authorizing the
transactions contemplated by this Agreement.
13.03 STOCK CERTIFICATES. The stock certificates representing the
Stock Payment.
13.04 OTHER DOCUMENTS. Such other documents as shall be reasonably
requested by Rall-Folks or required to be delivered pursuant to this Agreement.
ARTICLE XIV
TERMINATION AND ABANDONMENT
14.01 EVENTS OF TERMINATION. This Agreement may be terminated at any
time before the Closing Date: (i) by mutual consent of the Boards of Directors
of Checkers and Rall-Folks, or the respective Presidents thereof, pursuant to
duly delegated authority; (ii) by the Board of Directors of Rall-Folks if any of
the conditions precedent found in Articles IX or X of this Agreement have not
been met and have not been waived in writing by Rall-Folks; (iii) by the Board
of Directors of Checkers if any of the conditions precedent found in Articles IX
or XI of this Agreement have not been met and have not been waived in writing by
Checkers; (iv) by the Board of Directors of Rall-Folks if there is a breach of
or failure by Checkers to perform in any material respect any of the
representations, warranties, commitments, covenants or conditions under this
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Agreement, which breach or failure is not cured within five days after written
notice thereof is given to Checkers; (v) by the Board of Directors of Checkers
if there is a breach of or failure by Rall-Folks to perform in any material
respect any of the representations, warranties, commitments, covenants or
conditions under this Agreement, which breach or failure is not cured within
five days after written notice thereof is given to the party committing such
breach; or (vi) by the Board of Directors of Rall-Folks or by the Board of
Directors of Checkers at any time on or after December 16, 1997, if the Closing
shall not theretofore have been consummated and completed. In the event of
termination and abandonment by any party as above provided in clauses (ii),
(iii), (iv), (v) or (vi) of this Section, written notice shall forthwith be
given to the other party, which notice shall clearly specify the reason of such
party for terminating this Agreement. Termination by either party hereto
pursuant to this Section 14.01 shall not restrict or limit in any manner the
remedies which the parties might have at law or in equity for any breach of the
covenants, representations, or warranties contained in this Agreement.
14.02 SURVIVAL. The provisions in Sections 8.01 and 16.13 of this
Agreement shall survive the termination of this Agreement.
ARTICLE XV
INDEMNIFICATION
15.01 SURVIVAL. All representations, warranties, covenants and
agreements of each of the parties hereto set forth in this Agreement or in any
other instrument or document delivered by any of the parties hereto pursuant to
this Agreement shall survive the Closing and shall remain operative and in full
force and effect regardless of any investigations at any time made by or on
behalf of any party hereto and shall not be deemed merged in any document or
instrument executed or delivered at or after the Closing.
15.02 INDEMNIFICATION BY RALL-FOLKS. From and after the Closing,
Rall-Folks shall indemnify, defend and hold harmless Checkers' Group (as
hereinafter defined) from, against and with respect to any claim, liability,
obligation, loss, damage, assessment, judgment, cost and expense (including,
without limitation, reasonable attorney's and accountant's fees and costs and
expenses reasonably incurred in investigating, preparing, defending against or
prosecuting any litigation or claim, action, suit, proceeding or demand), of any
kind or character arising out of or in any manner incident, relating or
attributable to (i) the inaccuracy in any representation or breach of warranty
of Rall- Folks contained in this Agreement or otherwise made or given in writing
in connection with this Agreement, (ii) any failure by Rall-Folks to perform or
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observe any covenant, agreement or condition to be performed or observed by it
under this Agreement or under any certificates or other documents or agreements
executed by it in connection with this Agreement, and (iii) any claims arising
out of or based upon any untrue statement of a material fact contained in the
Registration Statement or any Resale Registration Statement or any prospectus
included therein or arising out of or based upon any omission to state therein a
material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading, insofar as such claims
arise out of or are based upon information furnished to Checkers in writing by
Rall-Folks for use therein. Rall-Folks shall be liable to and shall reimburse
Checkers' Group for any payment made by Checkers' Group at any time after the
Closing in respect of any liability, obligation or claim to which the foregoing
indemnity relates within five (5) days of the date of receipt by Rall-Folks of
written demand for payment thereof by Checkers' Group. If any claim covered by
the foregoing indemnity be asserted against Checkers' Group, Checkers shall
notify Rall-Folks promptly and give it an opportunity to defend the same, and
Checkers shall extend reasonable cooperation to Rall-Folks in connection with
such defense. In the event that Rall-Folks fails to defend the same within a
reasonable time, Checkers shall be entitled to assume the defense thereof and
Rall-Folks shall be liable to repay Checkers for all of its expenses reasonably
incurred in connection with such defense (including reasonable attorney's fees
and settlement payments). For purposes of this Agreement, the term "Checkers'
Group" shall mean Checkers and its subsidiaries, parents, officers, directors,
employees, agents, representatives, predecessors, successors, attorneys and
accountants.
15.03 INDEMNIFICATION BY CHECKERS. From and after the Closing,
Checkers shall indemnify, defend and hold harmless Rall- Folks' Group (as
hereinafter defined) from, against and with respect to any claim, liability,
obligation, loss, damage, assessment, judgment, cost and expense (including,
without limitation, reasonable attorney's and accountant's fees and costs and
expenses reasonably incurred in investigating, preparing, defending against or
prosecuting any litigation or claim, action, suit, proceeding or demand), of any
kind or character arising out of or in any manner incident, relating or
attributable to (i) the inaccuracy in any representation or breach of warranty
of Checkers contained in this Agreement or otherwise made or given in writing in
connection with this Agreement, (ii) any failure by any Checkers to perform or
observe any covenant, agreement or condition to be performed or observed by it
under this Agreement or under any certificates or other documents or agreements
executed by it in connection with this Agreement, (iii) any failure by Checkers
to comply with the provisions of the 1933 Act or any applicable state securities
law in connection with the registration of any of the Common Stock issued
hereunder, and (iv) any claims arising out of or based upon any untrue statement
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of a material fact contained in the Registration Statement or any Resale
Registration Statement or any prospectus included therein or arising out of or
based upon any omission to state therein a material fact necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading, other than claims which arise out of or are based upon information
furnished by Rall-Folks to Checkers in writing for use therein. Checkers shall
be liable to and shall reimburse Rall-Folks' Group for any payment made by
Rall-Folks' Group at any time after the Closing in respect of any liability,
obligation or claim to which the foregoing indemnity relates within five (5)
days of the date of receipt by Checkers of written demand for payment thereof by
Rall-Folks' Group. If any claim covered by the foregoing indemnity be asserted
against Rall-Folks' Group, Rall-Folks' shall notify Checkers promptly and give
it an opportunity to defend the same, and Rall-Folks' Group shall extend
reasonable cooperation to Checkers in connection with such defense. In the event
that Checkers fails to defend the same within a reasonable time, Rall-Folks'
Group shall be entitled to assume the defense thereof and Checkers shall be
liable to repay Rall-Folks' Group for all of its expenses reasonably incurred in
connection with such defense (including reasonable attorney's fees and
settlement payments). For purposes of this Agreement, the term "Rall-Folks'
Group" shall mean Rall-Folks and its subsidiaries, parents, officers, directors,
employees, agents, representatives, predecessors, successors, attorneys and
accountants.
ARTICLE XVI
MISCELLANEOUS
16.01 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the corporate parties hereto and their respective
successors and permitted assigns, and of the individual parties hereto and their
respective heirs, personal representatives and permitted assigns.
16.02 PUBLICITY. Subject to the other provisions of this Agreement,
press releases and other publicity materials relating to the transactions
contemplated by this Agreement shall be released by the parties hereto only
after review and with the consent of each of Checkers and Rall-Folks; PROVIDED,
HOWEVER, Checkers shall have the right, after consulting with Rall-Folks, to
make a public announcement of the execution of this Agreement and a disclosure
of the basic terms and conditions of this Agreement if advised to do so by its
legal counsel in connection with the reporting and disclosure obligations of
Checkers under the federal securities laws and/or the NASDAQ National Market
System.
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16.03 HEADINGS. The headings in this Agreement have been inserted
solely for ease of reference and shall not be considered in the interpretation
or construction of this Agreement.
16.04 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.
16.05 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Georgia without regard to any applicable conflicts
of law.
16.06 EXPENSES. Except as otherwise herein provided, each of the
parties hereto shall pay its respective costs and expenses incurred or to be
incurred by it in connection with the negotiations respecting this Agreement and
the transactions contemplated by this Agreement, including preparation of
documents, obtaining any necessary regulatory approvals and the consummation of
the other transactions contemplated in this Agreement. Except as expressly
stated otherwise herein, the costs related to the preparation and filing of the
Registration Statement, any Resale Registration Statement, and all Nasdaq and
state securities law filings shall be paid by Checkers.
16.07 NON-ASSIGNMENT. This Agreement shall not be assignable by any
party without the written consent of the others.
16.08 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein
and supersedes all other prior agreements, understandings and letters related
hereto.
16.09 SINGULAR AND PLURAL. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular and
the singular includes the plural. Wherever the context so requires, the
masculine shall refer to the feminine, the neuter shall refer to the masculine
or the feminine, the singular shall refer to the plural, and vice versa.
16.10 KNOWLEDGE OF RALL-FOLKS. Wherever any representation, warranty
or other statement made in this Agreement is qualified as to the knowledge of
Rall-Folks, such qualification shall mean the actual knowledge of Rall-Folks and
each of the directors and executive officers of Rall-Folks.
16.11 NOTICES. Any notice or other communications required or
permitted by this Agreement shall be in writing and shall be deemed to have been
duly given (i) on the date sent if delivered personally or by cable, telecopy,
telegram or telex (which is confirmed) or (ii) on the date received if mailed by
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<PAGE>
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Checkers, to:
Checkers Drive-In Restaurants, Inc.
600 Cleveland Street, Suite 1050
Clearwater, Florida 34615
Attention: General Counsel
Telecopy No.: (813) 448-0009
with a copy to:
Paul R. Lynch, Esquire
Shumaker, Loop & Kendrick
101 East Kennedy Boulevard
Suite 2800
Tampa, Florida 33602
Telecopy No.: (813) 229-1660
and,
(b) if to Rall-Folks, to:
Rall-Folks, Inc.
Attention: President
6131 Peachtree Parkway
Norcross, Georgia 30092
Telecopy No.: (404) 446-6272
with a copy to:
Mark D. Kaufman, Esquire
Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Atlanta, GA 30309-3996
Telecopy No.: (404) 853-8806
16.12 RIGHTS OF THIRD PARTIES. This Agreement shall not create any
legal rights in any person or entity other than the parties to this Agreement,
except for Checkers' Group under Section 15.02 and Rall-Folks' Group under
Section 15.03 of this Agreement.
16.13 REMEDIES. Nothing contained in this Agreement shall be
construed to restrict or limit in any manner the remedies which the parties
might have at law or in equity for any breach of the covenants, representations,
or warranties contained in this Agreement.
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<PAGE>
16.14 AMENDMENT. This Agreement may be amended or supplemented by the
parties hereto. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
16.15 WAIVER. Any party hereto may, by written notice to the other
parties hereto, (i) extend the time for the performance of any of the
obligations or other actions of such other party under this Agreement, (ii)
waive any inaccuracies in the representations or warranties of such other party
contained in this Agreement or in any document delivered pursuant to this
Agreement, or (iii) waive compliance with any of the conditions or covenants of
such other party contained in this Agreement, or (iv) waive or modify
performance of any of the obligations of such other party under this Agreement.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any of the representations, warranties, covenants,
conditions, or agreements contained in the Agreement. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach. If, prior to the Closing, any
party provides all of the other parties with written notice, which refers
specifically to this Section 16.15, that a representation or warranty made by
such party in or pursuant to this Agreement is not true, correct and complete
and the Closing is consummated notwithstanding such disclosure, such other
parties shall be deemed to have waived any claims for indemnification under this
Agreement as a result of the inaccuracy of such representation or warranty.
16.16 EFFECTIVENESS. This Amended and Restated Purchase Agreement
shall become effective upon execution by all of the parties hereto and the
payment by Checkers to Rall-Folks in cash of the amount of One Hundred Thousand
Dollars ($100,000.00), to be applied against the principal balance due under the
Notes. Such amount shall be paid within three business days following the
execution and delivery of this Agreement by both parties hereto.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer as of the day and year
first above written.
CHECKERS DRIVE-IN RESTAURANTS, INC.
By /s/ Joseph N. Stein
------------------------------------------
Name: Joseph N. Stein
Title: Executive Vice President
RALL-FOLKS, INC.
By /s/ Richard J. Pratt
------------------------------------------
Name: Richard J. Pratt
Title: President
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AMENDMENT NO. 3
TO
PURCHASE AGREEMENT
THIS AMENDMENT NO. 3, dated as of June 2, 1997, to that certain Purchase
Agreement, dated as of August 3, 1995, as amended by Amendment No. 1 to Purchase
Agreement, dated as of October 20, 1995, and by Amendment No. 2 to Purchase
Agreement, dated as of April 11, 1996 (as amended, the "Agreement"), by and
among Restaurant Development Group, Inc., a Delaware corporation ("RDG"), and
Checkers Drive-In Restaurants, Inc., a Delaware corporation ("Checkers").
WHEREAS, RDG holds a promissory note of Checkers, dated May 4, 1994, in
the principal amount of $1,693,225.27 (the "Note"); and
WHEREAS, Checkers and RDG have entered into the Agreement, pursuant to
which Checkers has agreed to acquire and RDG has agreed to sell the Note of
Checkers held by RDG; and
WHEREAS, Checkers has entered into a letter of intent with Rally's
Hamburgers, Inc. pursuant to which it is contemplated that Checkers will acquire
all of the outstanding stock of Rally's pursuant to a merger of Rally's with a
subsidiary of Checkers, in which Rally's stockholders will receive shares of
Checkers common stock in exchange for their Rally's common stock; and
WHEREAS, Checkers and RDG agree that the closing of this Agreement will be
delayed until after the closing of the Rally's transaction and desire to make
certain changes in the terms of the Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 6.02 of the Agreement is hereby amended by adding the
following sentence to the end thereof:
Notwithstanding the foregoing, in the event that Checkers is negotiating
with Rally's Hamburgers, Inc. ("Rally's") to acquire all of the
outstanding stock of Rally's through a merger of Rally's with a subsidiary
of Checkers or otherwise, then Checkers' obligation to have the
Registration Statement declared effective by the SEC as expeditiously as
practicable shall be suspended, pending the closing of the transaction
with Rally's.
2. Article VI of the Agreement is hereby amended by adding the
following Section 6.09:
6.09 PAYMENT OF PRINCIPAL. Beginning on July 15, 1997, and on
the 15th day of each month thereafter through October 15, 1997, in the
event that the Registration Statement has not yet been declared effective
<PAGE>
by the SEC, Checkers shall pay to RDG in cash the amount of One Hundred
Thousand Dollars ($100,000.00), to be applied against the principal
balance due under the Note. Notwithstanding any other provision contained
in this Agreement, all remaining principal due under the Note and any
accrued but unpaid interest thereon shall be payable on November 15, 1997,
if the Registration Statement is not declared effective by the SEC before
such date.
3. Section 7.07 of the Agreement is hereby amended by adding the
following sentence to the end thereof:
In the event that Checkers acquires all of the outstanding stock of
Rally's Hamburgers, Inc. ("Rally's") through a merger of Rally's with a
subsidiary of Checkers or otherwise, then the 50,000 share volume
limitation set forth above shall be increased to 75,000 shares.
4. Section 10.03 of the Agreement is deleted in its entirety.
5. Section 14.01 of the Agreement is hereby amended by changing the
date in clause (vi) thereof from "May 31, 1996" to November 25, 1997" each time
that it appears.
6. Except as otherwise provided herein, the Agreement shall remain in
full force and effect.
7. This Amendment No. 3 may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
8. This Amendment No. 3 shall become effective upon execution by all of
the parties hereto and the payment by Checkers to RDG in cash the amount of One
Hundred Thousand Dollars ($100,000.00), to be applied against the principal
balance due under the Note, and thereafter any reference to the Agreement shall
be deemed to be a reference to the Agreement as amended hereby.
[Remainder of page intentionally left blank.
Signatures appear on the next page.]
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<PAGE>
IN WITNESS WHEREOF, each of the corporate parties hereto have caused
this Amendment to the Agreement to be executed by their respective duly
authorized officer or officers as of the day and year first above written.
CHECKERS DRIVE-IN RESTAURANTS, INC.
By /s/ Joseph N. Stein
------------------------------------------
Name Joseph N. Stein
Title Executive Vice President
RESTAURANT DEVELOPMENT GROUP, INC.
By /s/ Nolan Lehmann
------------------------------------------
Name Nolan Lehmann
Title Vice President
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AMENDED AND RESTATED NOTE REPAYMENT AGREEMENT
THIS AMENDED AND RESTATED NOTE REPAYMENT AGREEMENT (the "Agreement") is
made and entered into as of this 17th day of July, 1997, and amends and restates
in its entirety that certain Note Repayment Agreement, dated as of April 11,
1996 (as amended and restated hereby, the "Agreement"), by and among CHECKERS
DRIVE-IN RESTAURANTS, INC., a Delaware corporation ("Checkers"), NASHVILLE TWIN
DRIVE-THRU PARTNERS, L.P., a Tennessee limited partnership ("NTDT"), JONES &
JONES TWIN DRIVE-THRU, INC., a Tennessee corporation and a general partner of
NTDT ("Jones & Jones"), NTD ENTERPRISES, INC., a Tennessee corporation and a
general partner of NTDT ("NTD"), and ROLAND L. JONES, an individual ("Jones")
(NTDT, Jones & Jones, NTD and Jones are collectively referred to herein as the
"NTDT Parties").
WHEREAS, NTDT holds a promissory note of Checkers, dated March 31, 1995,
in the original principal amount of $1,354,287.00 (the "Note"); and
WHEREAS, Checkers and the NTDT Parties have entered into the Note
Repayment Agreement, pursuant to which Checkers was granted the right to repay
the Note by delivering to NTDT shares of the common stock of Checkers ("Common
Stock"); and
WHEREAS, Checkers and NTDT desire to amend and restate the Agreement to
provide for an exchange of the Note for a series of subordinated promissory
notes, with an aggregate principal amount equal to the outstanding balance due
under the Note, which new notes will be convertible by NTDT into shares of
Common Stock pursuant to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, covenants and agreements hereinafter contained, and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.01 PURCHASE AND SALE OF THE NOTE. Subject to and upon the terms
and conditions hereinafter set forth and the representations and warranties
contained herein, Checkers agrees to purchase from NTDT, and NTDT agrees to
sell, assign, transfer and deliver to Checkers, free and clear of any and all
liens, encumbrances, liabilities, claims, charges and restrictions of any kind
or nature whatsoever, all of NTDT's right, title and interest (which will be
good, valid and complete) in and to the Note.
1.02 NON-ASSUMPTION OF LIABILITIES. None of the provisions of this
Agreement will be deemed to create any obligation or liability of Checkers to
<PAGE>
any person or entity other than NTDT, whether under a third-party beneficiary
theory, successor liability theory or otherwise.
ARTICLE II
PURCHASE PRICE
The aggregate purchase price (the "Purchase Price") payable to NTDT for
the Note will be equal to the outstanding balance (principal and accrued
interest) due under the Note on the Closing Date (as hereinafter defined). The
Purchase Price shall be payable by delivery at Closing (as hereinafter defined)
of promissory notes issued by Checkers to NTDT (the "New Notes") with an
aggregate principal balance equal to the Purchase Price. Each of the New Notes
shall be issued with an original principal amount of $100,000, except for one
New Note which shall be issued in a principal amount equal to the remainder
resulting from dividing the Purchase Price by $100,000. The New Notes shall be
subordinated to Checkers' primary debt facility, pursuant to the same terms as
the Note. The New Notes shall be convertible into shares of the common stock of
Checkers, par value $.001 per share ("Common Stock"), as provided in Article III
hereof. The New Notes shall be issued in the form attached hereto as Exhibit A.
ARTICLE III
CONVERSION OF NEW NOTES
3.01 CONVERSION PRIVILEGE AND CONVERSION PRICE. Subject to and upon
compliance with the provisions of this Article, at the option of NTDT, each of
the New Notes may be converted from time to time (so long as NTDT has not been
notified by Checkers that the effectiveness of the Registration Statement (as
defined in Section 6.01 hereof) is suspended) at the principal amount thereof
into fully paid and nonassessable shares of Common Stock at the Conversion
Price, determined as hereinafter provided, in effect at the time of conversion.
Checkers shall have the option of paying in cash the balance due under any New
Note in lieu of issuing shares of Common Stock upon the exercise by NTDT of its
right of conversion with respect to any New Note. If Checkers elects to repay
such New Note in cash (including principal and accrued interest), such payment
shall be delivered to NTDT within 15 business days after delivery to Checkers of
NTDT's notice (delivered pursuant to Section 3.02 hereof) of its intention to
convert the New Note.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be the arithmetic
average (rounded to the nearest penny) of the closing sale price per share of
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<PAGE>
the Common Stock as reported on the Nasdaq Stock Market's National Market (as
reported in The Wall Street Journal) for the three full trading days ending on
the business day immediately preceding the date on which NTDT delivers to
Checkers notice of its intent to convert as provided in Section 3.02 hereof.
3.02 EXERCISE OF CONVERSION PRIVILEGE. In order to exercise the
conversion privilege, NTDT shall surrender the New Note to be converted, duly
endorsed or assigned to Checkers or in blank, at its office at 600 Cleveland
Street, Eighth Floor, Clearwater, Florida 34615, accompanied by written notice
to Checkers at such office that NTDT has elected to convert such New Note into
shares of Common Stock.
Provided that NTDT has not been notified by Checkers that the
effectiveness of the Registration Statement (as defined in Section 6.01 hereof)
is suspended, a New Note shall be deemed to have been converted immediately
prior to the close of business on the day of surrender of such New Note for
conversion in accordance with the foregoing provisions (the "Conversion Date"),
and at such time the rights of NTDT as the holder of such New Note shall cease
and NTDT shall be treated for all purposes as the record holder of the Common
Stock into which such New Note is convertible at such time. If NTDT shall
surrender a New Note along with notice of its election to convert such New Note
at a time when the effectiveness of the Registration Statement is suspended,
then (i) Checkers shall hold the New Note in trust for the benefit of NTDT until
the effectiveness of the Registration Statement is recontinued and (ii) the
Conversion Date shall be the day that Checkers gives notice to NTDT that the
effectiveness of the Registration Statement is recontinued and the New Note
shall be deemed to have been converted immediately prior to the close of
business on such date, and at such time the rights of NTDT as the holder of such
New Note shall cease and NTDT shall be treated for all purposes as the record
holder of the Common Stock into which such New Note is convertible at such time.
3.03 DELIVERY OF SHARES. Within seven business days after any
Conversion Date, Checkers shall cause to be delivered to NTDT one or more
certificates in the name of NTDT representing the shares of Common Stock
issuable upon conversion of the related New Note.
Checkers' delivery to NTDT of the fixed number of shares of the Common
Stock into which the New Note is convertible shall be deemed to satisfy
Checkers' obligation to pay the principal amount of the New Note subject to
Checker's obligations set forth in Section 6.02 hereof. Checkers shall also
deliver to NTDT with the certificates representing the Common Stock a check in
payment of all interest accrued on the converted New Note from the end of the
prior interest period through the Conversion Date.
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<PAGE>
3.04 FRACTIONS OF SHARES. No fractional shares of Common Stock shall
be issued upon conversion of a New Note. If more than one New Note shall be
surrendered for conversion at one time, the number of full shares which shall be
issuable upon conversion thereof shall be computed on the basis of the aggregate
principal amount of the New Notes so surrendered. In the event that the number
of shares of Common Stock to be issued includes a fractional share, the number
of shares shall be rounded up or down to the nearest whole number of shares.
3.05 COMPANY TO RESERVE COMMON STOCK. Checkers shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock, for the purpose of effecting the conversion of the
New Notes, the full number of shares of Common Stock then issuable upon the
conversion of all outstanding New Notes.
3.06 TAXES ON CONVERSIONS. Checkers will pay any and all taxes that
may be payable in respect of the issue or delivery of shares of Common Stock on
conversion of New Notes pursuant hereto. Checkers shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares of Common Stock in a name other than that of
NTDT, and no such issue or delivery shall be made unless and until NTDT has paid
to Checkers the amount of any such tax, or has established to the satisfaction
of Checkers that such tax has been paid.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NTDT
NTDT represents and warrants to Checkers (each of which shall be
deemed material and independently relied upon by Checkers) as follows:
4.01 ORGANIZATION AND STANDING. NTDT is a partnership duly
organized, validly existing and in good standing under the laws of the State of
Tennessee with full power and authority to own its properties and assets.
4.02 AUTHORITY. Subject to receipt of the approval and consent of
the partners of NTDT, NTDT has the full power and authority to enter into and
perform this Agreement and to consummate the transactions contemplated herein in
accordance with the terms of this Agreement.
4.03 AUTHORIZATION. Other than obtaining the consent of the partners
of NTDT, NTDT has taken all necessary actions to authorize and approve the
execution, delivery and performance of this Agreement and the transactions
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<PAGE>
contemplated hereby. This Agreement constitutes a legal, valid and binding
obligation of NTDT, enforceable against NTDT in accordance with its terms.
4.04 TITLE TO THE NOTE. NTDT has good, valid and complete title to
the Note.
4.05 LITIGATION AND DISPUTES. There is no claim, litigation or
proceeding pending or, to the knowledge of NTDT, threatened, against or with
respect to NTDT, and there exists no basis or grounds for any such suit, action,
proceeding, claim or investigation, which affects the title or interest of NTDT
to or in the Note or which would prevent or affect the consummation of the
transactions contemplated by this Agreement by NTDT.
4.06 REGISTRATION STATEMENT. None of the information regarding NTDT
supplied or to be supplied by NTDT for inclusion (i) in the Registration
Statement (as hereinafter defined) or any Resale Registration Statement (as
hereinafter defined) to be filed by Checkers with the Securities and Exchange
Commission ("SEC") in connection with the registration of the Common Stock
issued hereunder, or (ii) in any other documents to be filed with the SEC or any
other regulatory authority in connection with the transactions contemplated in
this Agreement, as the same may be updated by written notice from NTDT to
Checkers from time to time, will at the respective time such documents are filed
and, in the case of the Registration Statement or any Resale Registration
Statement, when it becomes effective, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CHECKERS
Checkers represents and warrants to NTDT (each of which shall be
deemed material and independently relied upon by NTDT) as follows:
5.01 ORGANIZATION AND STANDING. Checkers is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full power and authority to own its properties and assets and to
conduct its business as now conducted or proposed to be conducted. Checkers is
in good standing and duly qualified to conduct business as a foreign corporation
in each of the jurisdictions in which the nature of its business or the
ownership of its properties requires such qualification and in which failure to
be so qualified would have a material adverse effect on the business,
operations, assets, financial position or prospects of Checkers.
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<PAGE>
5.02 CORPORATE AUTHORITY. Checkers has the full power and authority
to enter into and perform this Agreement and to consummate the transactions
contemplated herein in accordance with the terms of this Agreement.
5.03 CORPORATE AUTHORIZATION. Checkers has taken all necessary
corporate actions to authorize and approve the execution, delivery and
performance of this Agreement and the transactions contemplated hereby. This
Agreement constitutes a legal, valid and binding obligation of Checkers,
enforceable against Checkers in accordance with its terms.
5.04 CAPITALIZATION. As of May 1, 1997, the authorized capital stock
of Checkers consisted of (i) 100,000,000 shares of Common Stock, of which
60,540,409 shares were issued and outstanding, and (ii) 2,000,000 shares of
preferred stock, $.001 par value per share, of which 87,719 shares were issued
and outstanding. All of the issued and outstanding shares of Common Stock are
validly issued, fully paid, nonassessable and outstanding and not issued in
violation of the preemptive rights of any stockholder.
5.05 REQUIRED CONSENTS. Except for the registration of the New Notes
and the shares of Common Stock to be issued hereunder with the SEC and under the
blue sky laws of the State of Tennessee, no consents or approvals of any public
body or authority and no consents or waivers from any other parties to any
agreements or other instruments are required for the lawful consummation on the
part of Checkers of the transactions contemplated by this Agreement.
5.06 REGISTRATION STATEMENT. None of the information included (i) in
the Registration Statement or any Resale Registration Statement and (ii) in any
other documents to be filed with the SEC or any regulatory authority in
connection with the transactions contemplated in this Agreement will at the
respective time such documents are filed and, in the case of the Registration
Statement or any Resale Registration Statement, when it becomes effective, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading,
except that no representation or warranty is being made with respect to
information supplied by NTDT to Checkers for inclusion therein. All documents
which Checkers is responsible for filing with the SEC and any regulatory
authority in connection with the Registration Statement or any Resale
Registration Statement will comply as to form in all material respects with the
provisions of applicable law.
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<PAGE>
ARTICLE VI
COVENANTS OF CHECKERS
Checkers covenants to NTDT as follows:
6.01 PREPARATION OF THE REGISTRATION STATEMENT. Checkers shall
prepare and file with the SEC a registration statement on Form S-4 (including
the related prospectus), and required amendments thereto or supplements to any
prospectus contained therein (the "Registration Statement"), and all necessary
or appropriate related securities law or blue sky filings required in the State
of Tennessee (together with all amendments and supplements thereto, the "Blue
Sky Filings"), relating to the issuance of the New Notes and the shares of
Common Stock issuable upon conversion of the New Notes, and shall use its
commercially reasonable best efforts to have the same declared effective by the
SEC as expeditiously as practicable, and shall use its commercially reasonable
best efforts to keep such Registration Statement and Blue Sky Filings current
for such period of time as is required for NTDT to complete the conversion of
all of the New Notes into shares of Common Stock, so long as NTDT proceeds in
good faith to convert such New Notes and sell the shares of Common Stock
received upon conversion in a prompt but orderly manner as described in Section
6.03 hereof; provided, however, that Checkers shall have the right (i) to defer
the initial filing or request for acceleration of effectiveness or (ii) after
effectiveness, to suspend effectiveness of any such registration statement, if,
in the good faith judgment of the board of directors of Checkers and upon the
advice of counsel to Checkers, such delay in filing or requesting acceleration
of effectiveness or such suspension of effectiveness is necessary in light of
the existence of material non-public information (financial or otherwise)
concerning Checkers, disclosure of which at the time is not, in the opinion of
the board of directors of Checkers upon the advice of counsel, (a) otherwise
required, and (b) in the best interests of Checkers. Checkers shall not
voluntarily take any action that would cause more than a 90-day delay in filing
or requesting acceleration of effectiveness or a 90-day suspension of
effectiveness. The Registration Statement will not cover resales of the Common
Stock. When the Registration Statement is declared effective by the SEC,
Checkers shall give NTDT prompt notice of such fact and shall supply NTDT with
sufficient copies of the prospectus contained in such Registration Statement to
enable NTDT to send copies to each of its partners in connection with calling of
a meeting of such partners for the purpose of voting on this Agreement and the
transactions contemplated herein. Checkers shall give NTDT notice of any
suspensions and recontinuations of the effectiveness of the Registration
Statement. Subject to the foregoing, Checkers shall file all such post effective
amendments and supplements to the Registration Statement and Blue Sky Filings as
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<PAGE>
may be necessary, in its judgment, to keep such Registration Statement and Blue
Sky Filings current.
6.02 GUARANTEE OF PROCEEDS FROM THE SALE OF THE COMMON STOCK. The
parties acknowledge that the intent of this Section is to provide a mechanism
under which NTDT will receive cash from (i) the sale of Common Stock issued upon
the conversion of the New Notes, (ii) the sale of Common Stock issued pursuant
to the terms of this Section 6.02 in payment of a Price Differential (as defined
herein), and (iii) the repayment of any New Note or the repurchase of any shares
of Common Stock as provided in this Section 6.02, which cash will be equal in
the aggregate to, but not in excess of, the Purchase Price. In order to
effectuate the foregoing, and provided that NTDT proceeds in good faith (as
described in Section 6.03) to convert the New Notes and sell all of the Common
Stock received upon the conversion of the New Notes in a reasonably prompt but
orderly manner (subject to the limitations set forth in Section 7.06), if the
aggregate Net Proceeds (gross proceeds less brokers' commissions and discounts)
from the sale of such stock is less than the Purchase Price, Checkers shall
issue to NTDT additional shares of Common Stock with a value equal to the
difference between the Purchase Price and the aggregate Net Proceeds received
from the sale of the Common Stock (such difference is hereinafter referred to as
the "Initial Price Differential"). Checkers shall issue instructions to its
transfer agent to issue to NTDT the additional shares of Common Stock within
five business days after the delivery to Checkers of the last confirmation slip
relating to the final sale of the Common Stock issued upon the conversion of all
of the New Notes. NTDT shall instruct all brokers selling the Common Stock on
its behalf to furnish to Checkers and its counsel a copy of the confirmation
slip relating to each sale of Common Stock at the same time as such confirmation
slip is provided to NTDT. The number of shares to be issued (the "Stock
Payment") shall be equal to the amount determined by dividing the Initial Price
Differential by the arithmetic average (rounded to the nearest penny) of the
closing sale price per share of the Common Stock as reported on the Nasdaq Stock
Market's National Market (as reported in The Wall Street Journal) for the three
full trading days immediately preceding the date on which Checkers issues
instructions to its transfer agent to issue such additional shares (such average
closing sale price being referred to hereinafter as the "Resale Price" for such
shares).
Checkers shall promptly prepare and file a registration statement and all
necessary or appropriate related state securities law or blue sky filings under
which Checkers shall register the Common Stock representing the Stock Payment
and NTDT may sell the shares representing the Stock Payment upon the terms and
conditions provided in Section 6.04 below. In the event that the aggregate Net
Proceeds from the sale of such shares is less than the Initial Price
Differential, Checkers shall issue additional shares of Common Stock with a
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<PAGE>
value equal to the difference between the Purchase Price and the aggregate Net
Proceeds received from the sale of (a) the Common Stock issued to NTDT upon the
conversion of the New Notes and (b) the Common Stock constituting the Stock
Payment (such difference is hereinafter referred to as the "Second Price
Differential"), as provided above with respect to the Initial Price
Differential. Checkers shall register the same and NTDT may sell the same as
provided in Section 6.04 below with respect to the Stock Payment. Checkers and
NTDT will continue this process until such time as there is no Price
Differential realized by NTDT on the sale of any batch of Common Stock issued in
payment of a Price Differential on a previous batch of Common Stock.
Notwithstanding any other provision of this Agreement, Checkers shall have
the option at any time to deliver cash to NTDT in lieu of additional shares of
Common Stock in order to pay any Price Differential. Checkers also shall have
the right to require NTDT at any time to sell to Checkers any shares held by
NTDT which were acquired upon conversion of a New Note or which represent part
of a Stock Payment at a price per share equal to the applicable Conversion Price
or Resale Price thereof. In the event that NTDT should receive aggregate Net
Proceeds from the sale of Common Stock issued upon the conversion of the New
Notes and/or pursuant to the terms of this Section 6.02 in excess of the
Purchase Price, or in the event that once NTDT has received Net Proceeds equal
to the Purchase Price it still holds any New Notes or shares of Common Stock
delivered by Checkers upon the conversion of a New Note or pursuant to this
Section 6.02, then NTDT shall promptly deliver to Checkers such excess Net
Proceeds, the remaining New Notes and the excess shares of Common Stock.
6.03 PROCEEDING IN GOOD FAITH TO CONVERT THE NEW NOTES AND SELL THE
SHARES OF COMMON STOCK. The parties agree that NTDT will be deemed to be
proceeding in good faith to convert the New Notes and sell the Common Stock in a
reasonably prompt but orderly manner if it sells in each three-month period
commencing with the three month period beginning on the day after the Closing
Date and continuing in each consecutive three-month period thereafter at least
90% of the lesser of (i) the maximum number of shares of Common Stock permitted
to be sold during such period under Rule 144 promulgated under the Securities
Act of 1933 or (ii) the maximum number of shares permitted to be sold during
such period under Section 7.06 hereof without regard to sales on upticks (as
defined therein). NTDT may convert the New Notes one or more at a time, in its
discretion, with one New Note being converted immediately after the sale of all
of the shares of Common Stock received upon the conversion of the previously
converted New Note.
6.04 REGISTRATION OF COMMON STOCK CONSTITUTING THE STOCK PAYMENTS.
As soon as practicable after the issuance of the Common Stock constituting the
Stock Payment and any subsequent Stock Payments, if any, Checkers shall prepare
and file a registration statement on Form S-3 (if it is eligible to use such
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form), or such other form as it deems suitable (together with all amendments and
supplements thereto, the "Resale Registration Statement"), and all necessary or
appropriate related Blue Sky Filings (together with all amendments and
supplements thereto), under which Checkers shall register the shares of Common
Stock issued in payment of a Price Differential pursuant to Section 6.02.
Checkers shall also use its commercially reasonable best efforts to have the
Resale Registration Statement declared effective by the SEC as expeditiously as
practicable, and shall keep such Resale Registration Statement and Blue Sky
Filings current for such period of time as is required for NTDT to complete the
sale of all shares of Common Stock registered therein, so long as NTDT proceeds
in good faith to sell such shares in a prompt but orderly manner, as provided in
Section 6.03; provided, however, that Checkers shall have the right (i) to defer
the initial filing or request for acceleration of effectiveness, or (ii) after
effectiveness, to suspend effectiveness of the Resale Registration Statement (to
be later recontinued) if, in the good faith judgment of the board of directors
of Checkers and upon the advice of counsel to Checkers, such delay in filing or
requesting acceleration of effectiveness or such suspension of effectiveness is
necessary in light of the existence of material non-public information
(financial or otherwise) concerning Checkers, disclosure of which at the time is
not, in the opinion of the board of directors of Checkers upon the advice of
counsel, (a) otherwise required, and (b) in the best interests of Checkers.
Checkers shall not voluntarily take any action that would cause more than a
90-day delay in filing or requesting acceleration of effectiveness or a 90-day
suspension of effectiveness. Checkers shall give NTDT notice of effectiveness
and any suspensions and recontinuations of the effectiveness of the Resale
Registration Statement. Subject to the foregoing, Checkers shall file all such
post effective amendments and supplements to the Resale Registration Statement
and Blue Sky Filings as may be necessary, in its judgment, to keep such Resale
Registration Statement and Blue Sky Filings current. NTDT may proceed to sell
the shares registered in the Resale Registration Statement beginning on the date
the Resale Registration Statement is declared effective by the SEC.
Notwithstanding the foregoing, Checkers shall not be obligated to register
shares for sale in the states of Arizona or Nevada, unless the costs of
registration in such states, including filing fees and reasonable attorneys'
fees, are paid by NTDT.
6.05 PAYMENT OF CURRENT INTEREST. Checkers acknowledges that the
annual interest rate on the Note is currently 18%, and agrees that the Note
shall continue to bear interest at an annual rate of 18% until the Closing Date.
Until the Closing Date, Checkers shall continue to pay to NTDT on the first day
of each month an amount in cash equal to the interest due under the Note for the
preceding month. On the Closing Date, Checkers shall pay in cash the interest
accrued through the Closing Date on the Note. Following the Closing Date, the
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New Notes shall bear interest at an annual rate of 18% until their conversion
into Common Stock. Checkers shall pay to NTDT on the first day of each month an
amount in cash equal to the interest due under the New Notes for the preceding
month.
6.06 PAYMENT OF INTEREST ON VALUE OF UNSOLD SHARES. Beginning on the
first day of the month following the Conversion Date with respect to a converted
New Note, and on the first day of each month thereafter until all of the shares
of Common Stock received upon the conversion of such New Note are sold, Checkers
shall pay to NTDT in cash an amount equal to .00049315% (representing an annual
rate of 18%) of the value of each such share of Common Stock for each day during
such month that the share was held by NTDT. The value of each such share shall
be deemed to be the applicable Conversion Price for such share of Common Stock.
Similarly, if additional shares of Common Stock are issued by Checkers to NTDT
pursuant to the terms of Section 6.02, then beginning on the first day of the
month following the issuance of such additional shares and on the first day of
each month thereafter until all of the shares of Common Stock issued under
Section 6.02 are sold, Checkers shall pay to NTDT in cash an amount equal to
.00049315% (representing an annual rate of 18%) of the value of each such share
of Common Stock for each day during such month that the share was held by NTDT.
The value of each such share shall be deemed to be the applicable Resale Price
for such share of Common Stock.
6.07 ADDITIONAL PAYMENTS. Upon the execution hereof by NTDT,
Checkers shall pay to NTDT in cash the amount of One Hundred Thousand Dollars
($100,000.00), to be applied against the principal balance due under the Note.
Beginning on August 15, 1997, and on the 15th day of each month thereafter
through October 15, 1997, in the event that the Registration Statement has not
been declared effective by the SEC prior to such date, Checkers shall pay to
NTDT in cash the amount of One Hundred Thousand Dollars ($100,000.00), to be
applied against the principal balance due under the Note. Notwithstanding any
other provision contained in this Agreement, all remaining principal due under
the Note and any accrued but unpaid interest thereon shall be payable on
November 15, 1997, if the Registration Statement is not declared effective by
the SEC before such date.
6.08 PAYMENT OF LEGAL EXPENSES. Upon the execution hereof by NTDT,
Checkers shall pay to NTDT Ten Thousand Dollars ($10,000.00) as partial
reimbursement for legal fees incurred by NTDT in connection with this Agreement
and related matters.
6.09 COVENANT AS TO COMMON STOCK. Checkers covenants that all shares
of Common Stock which may be issued upon conversion of the New Notes or pursuant
to the terms of Section 6.02 hereof will upon issue be fully paid and
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nonassessable and, except as provided in Section 3.06, Checkers will pay all
taxes, liens and charges with respect to the issue thereof.
Checkers will list or cause to have quoted the shares of Common Stock
issued upon conversion of the New Notes or pursuant to the terms of Section 6.02
hereof on each national securities exchange or in the over-the-counter market or
such other market on which the Common Stock is then listed or quoted.
6.10 EQUAL TREATMENT. Checkers shall not enter into any agreement
with any other creditor whose debt is subordinated to Checkers' primary debt
facility that provides for the repayment of such creditor's debt under terms
more favorable than those contained in this Agreement.
ARTICLE VII
COVENANTS OF NTDT
NTDT covenants to Checkers as follows:
7.01 ACTIONS PRIOR TO CLOSING. From and after the date of execution
of this Agreement and until the Closing Date, or until this Agreement shall be
terminated as herein provided, NTDT shall not (i) sell the Note to any other
corporation or person, (ii) pledge the Note to any person or otherwise subject
the Note to a lien or encumbrance, (iii) engage in any activity, enter into any
transaction or fail to take any action which would be inconsistent with any of
the representations and warranties as set forth in Article III of this Agreement
as if such representations and warranties were made at a time subsequent to such
activity or transaction and all references to the date of this Agreement were
deemed to be such later time.
7.02 EXTENSION OF THE TERM OF THE NOTE; MODIFICATION OF INTEREST
RATE. Upon the execution hereof by NTDT, the term of the Note shall be extended
until and the Note shall be payable on the earlier of (i) the Closing Date or
(ii) November 16, 1997; provided however, that in the event the Registration
Statement is declared effective by the SEC prior to November 16, 1997, and the
partners of NTDT fail to approve this Agreement and the transactions
contemplated herein within 30 days after NTDT receives actual notice that the
Registration Statement has been declared effective by the SEC, the term of the
Note shall be extended automatically until December 31, 1998 and the interest
rate shall be reduced to an annual rate of 12%. Similarly, after the Closing
Date, if NTDT does not proceed in good faith (as described in Section 6.03
hereof) to convert the New Notes and sell the Common Stock, the term of the Note
shall be extended automatically until December 31, 1998 and the interest rate
shall be reduced to an annual rate of 12%.
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7.03 REGISTRATION STATEMENT INFORMATION. On request of Checkers,
NTDT will furnish to Checkers all information concerning NTDT as is required to
be set forth in (i) the Registration Statement and any Resale Registration
Statement and (ii) any application or statement made by Checkers to any
governmental agency or authority in connection with the transactions
contemplated by this Agreement.
7.04 APPROVAL BY PARTNERS. Promptly after the date on which NTDT
receives actual notice that the Registration Statement has been declared
effective by the SEC, NTDT shall call a meeting of the partners of NTDT, to be
held within 30 days after NTDT's receipt of such notice, for the purpose of
obtaining the approval of the partners of NTDT of this Agreement and the
transactions contemplated herein. NTDT shall distribute a copy of the
Registration Statement to each partner of NTDT along with the notice of such
meeting.
7.05 DISSOLUTION OF NTDT OR DISTRIBUTION OF COMMON STOCK TO THE
PARTNERS. Within one year after the Closing, NTDT shall either (i) dissolve and
wind up its affairs pursuant to Tennessee law or (ii) distribute the shares of
Common Stock issued to NTDT pursuant to the terms of this Agreement to the
partners of NTDT, pro rata in accordance with their proportionate ownership
interest in NTDT.
7.06 TRANSFERS OF THE NEW NOTES AND THE COMMON STOCK. Except as
permitted herein, NTDT shall not sell, pledge, transfer or otherwise dispose of
the New Notes to be received by it hereunder. NTDT shall not sell, pledge,
transfer or otherwise dispose of the shares of Common Stock to be received by it
upon the conversion of the New Notes except in compliance with the applicable
provisions of the 1933 Act and the rules and regulations promulgated thereunder,
including Rule 145. In order to assure that any sales of the shares of Common
Stock issued hereunder will be made in an orderly manner so as not to adversely
affect the market for the Common Stock, for a period of two years after the
Closing Date, NTDT shall not, without the prior consent of Checkers, (i) sell in
excess of 50,000 shares of Common Stock during any calendar week and (ii) sell
in excess of 25,000 shares in any one day; provided however, that additional
sales in excess of such limits may be made provided the same are made at a price
higher than the lowest then current bid price for the Common Stock (on an
"uptick"). Checkers may refuse to register or give effect to any sales in excess
of such limitations (NTDT shall provide Checkers with satisfactory evidence that
all sales in excess of such limits were made on an uptick). NTDT shall not sell
any shares of Common Stock issued hereunder for consideration other than cash.
NTDT agrees that it will comply with all of its obligations under Section 6.02
hereof. NTDT shall, upon the distribution of any of the Common Stock to any
partner of NTDT, cause such person to deliver an Agreement to Checkers as a
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condition of such distribution and the transfer of the ownership of such shares
upon the stock register of Checkers, which agreement shall contain covenants of
such person identical to the covenants of NTDT set forth in this Section 7.06
and a proportionate limitation on sales.
ARTICLE VIII
MUTUAL COVENANTS OF CHECKERS AND NTDT
Each of Checkers and NTDT covenants with the other as follows:
8.01 CONFIDENTIALITY. All information furnished by one party to the
other in connection with this Agreement or the transactions contemplated hereby
shall be kept confidential by such other party (and shall be used by it and its
officers, attorneys, accountants and representatives (including brokers) only in
connection with this Agreement and the transactions contemplated hereby) except
to the extent that such information (i) already is known to such other party
when received, (ii) thereafter becomes lawfully obtainable from other sources,
(iii) is required to be disclosed in any document filed with the SEC or any
other agency of any government, or (iv) as otherwise required to be disclosed
pursuant to any federal or state law, rule or regulation or by any applicable
judgment, order or decree of any court or by any governmental body or agency
having jurisdiction in the premises after such other party has given reasonable
prior written notice to the other parties to this Agreement of the pending
disclosure of any such information. In the event that the transactions
contemplated by this Agreement shall fail to be consummated, it shall promptly
cause all copies of documents or extracts thereof containing information and
data as to the other party hereto to be returned to such other party.
8.02 PREPARATION OF REGISTRATION STATEMENTS. Each party shall
cooperate and consult with the other party hereto in the preparation of the
Registration Statement and any Resale Registration Statement to be filed by
Checkers with the SEC registering the shares of Common Stock to be issued
hereunder. When the Registration Statement, any Resale Registration Statement or
any Post-Effective Amendment thereto shall become effective, the information
prepared by each party for inclusion therein (i) will comply in all material
respects with the applicable provisions of the 1933 Act and the Rules and
Regulations promulgated thereunder and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein are necessary to make the statements contained therein not
misleading. In no event shall any party hereto be liable to any other party
hereto for any untrue statement of a material fact or omission to state a
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material fact in any registration statement, or any amendment or supplement
thereto, or in any report made in reliance upon, and in conformity with, written
information concerning the other party hereto furnished by such other party
specifically for use in such registration statement or report. Each party hereto
shall advise the other party hereto promptly of the happening of any event which
makes untrue any statement of a material fact contained in the Registration
Statement or any Resale Registration Statement or any amendment or supplement
thereto or that requires the making of a change in the registration statement or
any amendment or supplement thereto in order to make any material statement
therein not misleading.
8.03 MISCELLANEOUS AGREEMENTS. Subject to the terms and conditions
herein provided, each party shall use its best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary,
appropriate or desirable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement.
8.04 THE CLOSING. The Closing (the "Closing") of the transactions
contemplated herein shall take place at the offices of [JONES & SHOCKLEY, 1319
FIFTH AVENUE NO., NASHVILLE, TENNESSEE], at 10:00 a.m., local time on the third
business day following the date on which the partners of NTDT approve this
Agreement and the transactions contemplated herein, or at such other time and
place as Checkers and NTDT shall agree (the "Closing Date"). The obligations of
Checkers and NTDT to close or effect the transactions contemplated in this
Agreement shall be subject to satisfaction, unless duly waived, of the
applicable conditions set forth in this Agreement.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
CHECKERS AND NTDT
The respective obligations of each party to effect the transactions
contemplated herein shall be subject to the fulfillment or waiver at or prior to
the Closing Date of the following conditions:
9.01 LITIGATION. Neither Checkers nor NTDT shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the transactions contemplated herein.
9.02 NTDT PARTNER APPROVAL. This Agreement and the transactions
contemplated herein shall have been approved by the partners in NTDT pursuant to
the provisions of the partnership agreement of NTDT.
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9.03 REGISTRATION STATEMENT EFFECTIVE. The Registration Statement
shall have been declared effective by the SEC and the state securities
commission in each jurisdiction in which the New Notes to be issued hereunder is
required to be registered, and shall not be subject to a stop order or any
threatened stop order.
9.04 CLOSING DATE. The Closing Date shall be on the third business
day following the date on which the partners of NTDT approve this Agreement and
the transactions contemplated herein after the SEC declares the Registration
Statement effective.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF NTDT
The obligations of NTDT to effect the transactions contemplated
herein shall be subject to the fulfillment or waiver at or prior to the Closing
Date of the following conditions:
10.01 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Checkers set forth in Article V of this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date (as though made on and as of the Closing Date) except (i) to
the extent such representations and warranties are by their expressed provisions
made as of a specified date and (ii) for the effect of transactions contemplated
by this Agreement.
10.02 PERFORMANCE OF OBLIGATIONS. Checkers shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
10.03 OFFICERS' CERTIFICATE. Checkers shall have furnished to NTDT a
certificate dated the Closing Date, signed on behalf of Checkers by its Chief
Executive Officer, President, Chief Operating Officer or Chief Financial
Officer, to the effect that, to his knowledge and belief, the conditions set
forth in Sections 10.01 and 10.02 have been satisfied.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF CHECKERS
The obligations of Checkers to effect the transactions contemplated
herein shall be subject to fulfillment at or prior to the Closing Date of the
following conditions:
11.01 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of NTDT set forth in Article IV of this Agreement shall be true and
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correct in all material respects as of the date of this Agreement and as of the
Closing Date (as though made on and as of the Closing Date) except (i) to the
extent such representations and warranties are by their expressed provisions
made as of a specified date and (ii) for the effect of transactions contemplated
by this Agreement.
11.02 PERFORMANCE OF OBLIGATIONS. NTDT shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
11.03 CERTIFICATE OF MANAGING GENERAL PARTNER. NTDT shall have
furnished to Checkers a certificate dated the Closing Date, signed on behalf of
NTDT by its managing general partner, to the effect that, to his knowledge and
belief, the conditions set forth in Sections 11.01 and 11.02 have been
satisfied.
ARTICLE XII
DOCUMENTS TO BE DELIVERED AT THE CLOSING BY NTDT
NTDT shall deliver to Checkers the following documents at the
Closing:
12.01 CERTIFICATE OF MANAGING GENERAL PARTNER. A certificate of the
managing general partner of NTDT, dated the Closing Date, with respect to the
matters set forth in Section 11.03 of this Agreement, as well as the incumbency
of the corporate officers of the managing general partner and their signatures,
good standing, and the partner resolutions of NTDT approving this Agreement and
the transactions contemplated by this Agreement.
12.02 THE NOTE. The Note, marked "Paid in Full" over the signature
of a duly authorized officer of NTDT.
12.03 OTHER DOCUMENTS. Such other documents as shall be reasonably
requested by Checkers and its counsel or required to be delivered pursuant to
this Agreement.
ARTICLE XIII
DOCUMENTS TO BE DELIVERED AT THE CLOSING BY CHECKERS
Checkers shall deliver to NTDT the following documents at the
Closing:
13.01 OFFICER'S CERTIFICATE. The certificate referred to in Section
10.03 of this Agreement.
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13.02 CERTIFICATE OF SECRETARIAL OFFICER. The certificate of the
Secretary or Assistant Secretary of Checkers, dated the Closing Date, with
respect to the incumbency of corporate officers and their signatures, corporate
good standing and the corporate director resolutions authorizing the
transactions contemplated by this Agreement.
13.03 NEW NOTES. The New Notes executed on behalf of Checkers.
13.04 OTHER DOCUMENTS. Such other documents as shall be reasonably
requested by NTDT or its counsel or required to be delivered pursuant to this
Agreement.
ARTICLE XIV
TERMINATION AND ABANDONMENT
14.01 EVENTS OF TERMINATION. This Agreement may be terminated at any
time before the Closing Date: (i) by mutual consent of Checkers and NTDT; (ii)
by NTDT if any of the conditions precedent found in Articles IX or X of this
Agreement have not been met and have not been waived in writing by NTDT; (iii)
by Checkers if any of the conditions precedent found in Articles IX or XI of
this Agreement have not been met and have not been waived in writing by
Checkers; (iv) by NTDT if there is a breach of or failure by Checkers to perform
in any material respect any of the representations, warranties, commitments,
covenants or conditions under this Agreement, which breach or failure is not
cured within five days after written notice thereof is given to Checkers; or (v)
by Checkers if there is a breach of or failure by NTDT to perform in any
material respect any of the representations, warranties, commitments, covenants
or conditions under this Agreement, which breach or failure is not cured within
five days after written notice thereof is given to NTDT. In the event of
termination and abandonment by any party as above provided in clauses (ii),
(iii), (iv) or (v) of this Section, written notice shall forthwith be given to
the other party, which notice shall clearly specify the reason of such party for
terminating this Agreement. Termination by either party hereto pursuant to this
Section 14.01 shall not restrict or limit in any manner the remedies which the
parties might have at law or in equity for any breach of the covenants,
representations, or warranties contained in this Agreement.
14.02 SURVIVAL. The provisions in Sections 8.01 and 16.13 of this
Agreement shall survive the termination of this Agreement.
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ARTICLE XV
INDEMNIFICATION
15.01 SURVIVAL. All representations, warranties, covenants and
agreements of each of the parties hereto set forth in this Agreement or in any
other instrument or document delivered by any of the parties hereto pursuant to
this Agreement shall survive the Closing and shall remain operative and in full
force and effect regardless of any investigations at any time made by or on
behalf of any party hereto and shall not be deemed merged in any document or
instrument executed or delivered at or after the Closing.
15.02 INDEMNIFICATION BY NTDT. From and after the Closing, NTDT
shall indemnify, defend and hold harmless Checkers' Group (as hereinafter
defined) from, against and with respect to any claim, liability, obligation,
loss, damage, assessment, judgment, cost and expense (including, without
limitation, reasonable attorney's and accountant's fees and costs and expenses
reasonably incurred in investigating, preparing, defending against or
prosecuting any litigation or claim, action, suit, proceeding or demand), of any
kind or character arising out of or in any manner incident, relating or
attributable to (i) the inaccuracy in any representation or breach of warranty
of NTDT contained in this Agreement or otherwise made or given in writing in
connection with this Agreement, (ii) any failure by NTDT to perform or observe
any covenant, agreement or condition to be performed or observed by it under
this Agreement or under any certificates or other documents or agreements
executed by it in connection with this Agreement, and (iii) any claims arising
out of or based upon any untrue statement of a material fact contained in the
Registration Statement or any Resale Registration Statement or any prospectus
included therein or arising out of or based upon any omission to state therein a
material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading, insofar as such claims
arise out of or are based upon information furnished to Checkers in writing by
NTDT for use therein. NTDT shall be liable to and shall reimburse Checkers'
Group for any payment made by Checkers' Group at any time after the Closing in
respect of any liability, obligation or claim to which the foregoing indemnity
relates within five (5) days of the date of receipt by NTDT of written demand
for payment thereof by Checkers' Group. If any claim covered by the foregoing
indemnity be asserted against Checkers' Group, Checkers shall notify NTDT
promptly and give it an opportunity to defend the same, and Checkers shall
extend reasonable cooperation to NTDT in connection with such defense. In the
event that NTDT fails to defend the same within a reasonable time, Checkers
shall be entitled to assume the defense thereof and NTDT shall be liable to
repay Checkers for all of its expenses reasonably incurred in connection with
such defense (including reasonable attorney's fees and settlement payments). For
purposes of this Agreement, the term "Checkers' Group" shall
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mean Checkers and its subsidiaries, parents, officers, directors, employees,
agents, representatives, predecessors, successors, attorneys and accountants.
15.03 INDEMNIFICATION BY CHECKERS. From and after the Closing,
Checkers shall indemnify, defend and hold harmless NTDT's Group (as hereinafter
defined) from, against and with respect to any claim, liability, obligation,
loss, damage, assessment, judgment, cost and expense (including, without
limitation, reasonable attorney's and accountant's fees and costs and expenses
reasonably incurred in investigating, preparing, defending against or
prosecuting any litigation or claim, action, suit, proceeding or demand), of any
kind or character arising out of or in any manner incident, relating or
attributable to (i) the inaccuracy in any representation or breach of warranty
of Checkers contained in this Agreement or otherwise made or given in writing in
connection with this Agreement, (ii) any failure by any Checkers to perform or
observe any covenant, agreement or condition to be performed or observed by it
under this Agreement or under any certificates or other documents or agreements
executed by it in connection with this Agreement, (iii) any failure by Checkers
to comply with the provisions of the 1933 Act or any applicable state securities
law in connection with the registration of any of the Common Stock issued
hereunder, and (iv) any claims arising out of or based upon any untrue statement
of a material fact contained in the Registration Statement or any Resale
Registration Statement or any prospectus included therein or arising out of or
based upon any omission to state therein a material fact necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading, other than claims which arise out of or are based upon information
furnished by NTDT to Checkers in writing for use therein. Checkers shall be
liable to and shall reimburse NTDT's Group for any payment made by NTDT's Group
at any time after the Closing in respect of any liability, obligation or claim
to which the foregoing indemnity relates within five (5) days of the date of
receipt by Checkers of written demand for payment thereof by NTDT's Group. If
any claim covered by the foregoing indemnity be asserted against NTDT's Group,
NTDT shall notify Checkers promptly and give it an opportunity to defend the
same, and NTDT's Group shall extend reasonable cooperation to Checkers in
connection with such defense. In the event that Checkers fails to defend the
same within a reasonable time, NTDT's Group shall be entitled to assume the
defense thereof and Checkers shall be liable to repay NTDT's Group for all of
its expenses reasonably incurred in connection with such defense (including
reasonable attorney's fees and settlement payments). For purposes of this
Agreement, the term "NTDT's Group" shall mean NTDT and its subsidiaries,
parents, officers, directors, employees, agents, representatives, predecessors,
successors, attorneys and accountants.
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ARTICLE XVI
MISCELLANEOUS
16.01 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the corporate parties hereto and their respective
successors and permitted assigns, and of the individual parties hereto and their
respective heirs, personal representatives and permitted assigns.
16.02 PUBLICITY. Subject to the other provisions of this Agreement,
press releases and other publicity materials relating to the transactions
contemplated by this Agreement shall be released by the parties hereto only
after review and with the consent of each of Checkers and NTDT; PROVIDED,
HOWEVER, Checkers shall have the right, after consulting with NTDT, to make a
public announcement of the execution of this Agreement and a disclosure of the
basic terms and conditions of this Agreement if advised to do so by its legal
counsel in connection with the reporting and disclosure obligations of Checkers
under the federal securities laws and/or the Nasdaq Stock Market.
16.03 HEADINGS. The headings in this Agreement have been inserted
solely for ease of reference and shall not be considered in the interpretation
or construction of this Agreement.
16.04 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.
16.05 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Florida without regard to any applicable conflicts
of law.
16.06 EXPENSES. Except as otherwise herein provided, each of the
parties hereto shall pay its respective costs and expenses incurred or to be
incurred by it in connection with the negotiations respecting this Agreement and
the transactions contemplated by this Agreement, including preparation of
documents, obtaining any necessary regulatory approvals and the consummation of
the other transactions contemplated in this Agreement. Except as expressly
stated otherwise herein, the costs related to the preparation and filing of the
Registration Statement, any Resale Registration Statement, and all Nasdaq and
state securities law filings shall be paid by Checkers, except that NTDT shall
bear the expenses of any fees of NTDT's advisors, including legal counsel.
16.07 NON-ASSIGNMENT. This Agreement shall not be assignable by any
party without the written consent of the others.
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<PAGE>
16.08 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein
and supersedes all other prior agreements, understandings and letters related
hereto.
16.09 SINGULAR AND PLURAL. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular and
the singular includes the plural. Wherever the context so requires, the
masculine shall refer to the feminine, the neuter shall refer to the masculine
or the feminine, the singular shall refer to the plural, and vice versa.
16.10 KNOWLEDGE OF NTDT. Wherever any representation, warranty or
other statement made in this Agreement is qualified as to the knowledge of NTDT,
such qualification shall mean the actual knowledge of NTDT and each of the
directors and executive officers of NTDT.
16.11 NOTICES. Any notice or other communications required or
permitted by this Agreement shall be in writing and shall be deemed to have been
duly given (i) on the date sent if delivered personally or by cable, telecopy,
telegram or telex (which is confirmed) or (ii) on the date received if mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Checkers, to:
Checkers Drive-In Restaurants, Inc.
600 Cleveland Street, Eighth Floor
Clearwater, Florida 34615
Attention: General Counsel
Telecopy No.: (813) 298-2125
with a copy to:
Paul R. Lynch, Esquire
Shumaker, Loop & Kendrick
101 East Kennedy Boulevard
Suite 2800
Tampa, Florida 33602
Telecopy No.: (813) 229-1660
and,
(b) if to NTDT, to:
Nashville Twin Drive-Thru Partners, L.P.
1314 5th Avenue North, Suite 100
Nashville, Tennessee 37208
Attention: Roland Jones
-22-
<PAGE>
Telecopy No.:
with a copy to:
Susan Short Jones, Esquire
Jones & Shockley
1319 Fifth Avenue No.
Nashville, Tennessee 37208
Telecopy No.:
16.12 RIGHTS OF THIRD PARTIES. This Agreement shall not create any
legal rights in any person or entity other than the parties to this Agreement,
except for Checkers' Group under Section 15.02 and NTDT's Group under Section
15.03 of this Agreement.
16.13 REMEDIES. Nothing contained in this Agreement shall be construed
to restrict or limit in any manner the remedies which the parties might have at
law or in equity for any breach of the covenants, representations, or warranties
contained in this Agreement.
16.14 AMENDMENT. This Agreement may be amended or supplemented by the
parties hereto. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
16.15 WAIVER. Any party hereto may, by written notice to the other
parties hereto, (i) extend the time for the performance of any of the
obligations or other actions of such other party under this Agreement, (ii)
waive any inaccuracies in the representations or warranties of such other party
contained in this Agreement or in any document delivered pursuant to this
Agreement, or (iii) waive compliance with any of the conditions or covenants of
such other party contained in this Agreement, or (iv) waive or modify
performance of any of the obligations of such other party under this Agreement.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any of the representations, warranties, covenants,
conditions, or agreements contained in the Agreement. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach. If, prior to the Closing, any
party provides all of the other parties with written notice, which refers
specifically to this Section 16.15, that a representation or warranty made by
such party in or pursuant to this Agreement is not true, correct and complete
and the Closing is consummated notwithstanding such disclosure, such other
parties shall be deemed to have waived any claims for indemnification under this
Agreement as a result of the inaccuracy of such representation or warranty.
-23-
<PAGE>
16.16 EFFECTIVENESS. This Amended and Restated Purchase Agreement
shall become effective upon execution by all of the parties hereto and the
payment by Checkers to NTDT in cash of the amount of One Hundred Ten Thousand
Dollars ($110,000.00), One Hundred Thousand Dollars ($100,000.00) of which is to
be applied against the principal balance due under the Note, as required under
Section 6.07 hereof, and Ten Thousand Dollars ($10,000.00) of which is to
reimburse NTDT for legal expenses as required under Section 6.08.
[Remainder of page intentionally left blank.
Next page is signature page.]
-24-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
CHECKERS DRIVE-IN RESTAURANTS, INC.
By: s/s Joseph N. Stein
-----------------------------------------------
Name: Joseph N. Stein
Title: Executive Vice President
NASHVILLE TWIN DRIVE-THRU PARTNERS, L.P.
By: Jones & Jones Twin Drive-Thru, Inc.,
General Partner
By: /s/ Roland L. Jones
-----------------------------------------
Roland L. Jones, President
By: NTD Enterprises, Inc.,
General Partner
By: /s/ David M. Wilds
-----------------------------------------
David M. Wilds, President
JONES & JONES TWIN DRIVE-THRU, INC.
By: /s/ Roland L. Jones
-----------------------------------------------
Roland L. Jones, President
NTD ENTERPRISES, INC.,
By: /s/ David M. Wilds
-----------------------------------------------
David M. Wilds, President
/s/ Roland L. Jones
---------------------------------------------------
ROLAND L. JONES, Individually
-25-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Checkers Drive-in Restaurants, Inc., for the quarterly
period ended June 16, 1997, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-29-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> JUN-16-1997
<CASH> 3,912
<SECURITIES> 0
<RECEIVABLES> 2,652
<ALLOWANCES> 0
<INVENTORY> 2,157
<CURRENT-ASSETS> 16,670
<PP&E> 132,039
<DEPRECIATION> 38,235
<TOTAL-ASSETS> 124,914
<CURRENT-LIABILITIES> 32,866
<BONDS> 38,715
0
0
<COMMON> 61
<OTHER-SE> 53,447
<TOTAL-LIABILITY-AND-EQUITY> 124,914
<SALES> 64,695
<TOTAL-REVENUES> 67,870
<CGS> 61,659
<TOTAL-COSTS> 69,587
<OTHER-EXPENSES> 241
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,174
<INCOME-PRETAX> (6,650)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,650)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,650)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> .00
<FN>
Footnote (1):
Receivables consist of --
Accounts Receivable - net $2,299
Notes Receivable 353
---------
$2,652
=========
75
</FN>
</TABLE>
