UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-K/A NO. 2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 1996 Commission file number 0-19649
Checkers Drive-In Restaurants, Inc.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 58-1654960
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
600 Cleveland Street, Eighth Floor 34617-1079
---------------------------------- ----------
(Address of principal offices) (Zip Code)
Registrant's telephone number, including area code: (813) 441-3500
The purpose of this amendment is to amend Items 10, 11, 12 and 13 in their
entirety to read as set forth herein.
<PAGE>
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
The following table sets forth the names and ages of the Directors and
executive officers of the Company and the positions they hold with the Company.
Executive officers serve at the pleasure of the Board of Directors.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
C. Thomas Thompson 47 Chief Executive Officer and Vice Chairman of
the Board of Directors (term expiring in 1999)
Richard E. Fortman 47 President and Chief Operating Officer
Joseph N. Stein 36 Executive Vice President, Chief Administrative
Officer and Chief Financial Officer
James T. Holder 38 Senior Vice President, General Counsel and
Secretary
Michael T. Welch 45 Vice President, Operations, Marketing,
Restaurant Support Services and Research &
Development
David D. Miller 44 Vice President of Franchise Operations, Sales
and Development
Wendy A. Beck 32 Senior Director of Treasury & Tax, Treasurer
Frederick E. Fisher 66 Chairman of the Board of Directors (term
expiring in 1998)
Terry N. Christensen(1) 56 Director (term expiring in 1998)
William P. Foley, II (1)(2) 52 Director (term expiring in 1999)
Andrew H. Hines, Jr.(2) 74 Director (term expiring in 1997)
Clarence V. McKee(1)(2) 54 Director (term expiring in 1999)
____________
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee and the Stock Option Committee.
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<PAGE>
C. Thomas Thompson has served as a Director of the Company since November
1996 and as Chief Executive Officer and Vice Chairman of the Board of Directors
of the Company since December 1996. Mr. Thompson has been President and Chief
Operating Officer of Carl Karcher Enterprises, Inc., a wholly owned subsidiary
of CKE Restaurants, Inc. ("CKE"), since October 1994. Since 1984, Mr. Thompson
has been a partner in a partnership which owns and operates 15 restaurants under
the Carl's Jr. franchise system. Mr. Thompson is a director of Rally's
Hamburgers, Inc. ("Rally's").
Richard E. Fortman has served as President and Chief Operating Officer of
the Company since January 1997. For approximately 27 years, prior to joining the
Company, Mr. Fortman was employed by Carl Karcher Enterprises, Inc. in various
capacities. From August 1993 through December 1996, he served as Regional Vice
President, from August 1992 through August 1993, he served as Director of
Regional Operations, and from July 1984 through August 1992, he served as
Regional Director.
Joseph N. Stein has served as Executive Vice President, Chief
Administrative Officer and Chief Financial Officer of the Company since January
1997. From May 1995 through December 1996, Mr. Stein was Senior Vice President
and Chief Financial Officer for Carl Karcher Enterprises, Inc. For more than
five years prior to his employment with Carl Karcher Enterprises, Inc., Mr.
Stein was Senior Vice President, Director, National Agency Operation at Fidelity
National Title Company.
Wendy A. Beck has served as Treasurer of the Company since November 1995
and as Senior Director of Treasury & Tax since August 1995. Since joining the
Company in March 1993, Ms. Beck has served in various positions with the
Company. Prior to joining the Company, Ms. Beck served as Senior Tax Accountant
for Lincare Holdings, Inc., a national provider of home health care services,
where she was employed since October 1987.
James T. Holder has served as a Senior Vice President and General Counsel
of the Company since January 1997, as Chief Financial Officer of the Company
from May to December 1996, and as Secretary since October 1995. Mr. Holder
served as Vice President and General Counsel of the Company from September 1995
to June 1996, as senior legal counsel for the Company from December 1994 through
April 1995 and corporate counsel from November 1993 through November 1994. Mr.
Holder was engaged in the private practice of law from January 1991 to November
1993, in Tampa, Florida. From October 1989 through December 1990, he served as
General Counsel for Health Care Products, Inc., in Lutz, Florida.
David D. Miller has served as Vice President, Franchise Operations of the
Company since May 1996. Mr. Miller served as Vice President Marketing from March
1996 to April 1996, as Senior Director of Operations from October 1995 to March
1996, as Senior Director of Franchise Operations from January 1991 to October
1995 and as Franchise Business Consultant from November 1989 to January 1991.
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<PAGE>
Michael T. Welch has served as Vice President, Operations, Marketing,
Restaurant Support Services and Research & Development of the Company since
March 1995. From May 1994 to March 1995, Mr. Welch served as Regional Vice
President of Operations, responsible for all Company operations outside Florida.
From 1987 to May 1994, Mr. Welch was President and a principal of W-S
Acquisition Corporation, which owned and operated several Wendy's franchises.
Frederick E. Fisher has served as a Director of the Company since February
1995. Mr. Fisher is a private investor. Mr. Fisher was Chairman and Chief
Executive Officer of U.S. Capital Corporation, a resort development company,
from 1982 until his retirement in 1983. Mr. Fisher served as the Vice Chairman
and Chief Financial Officer of U.S. Home Corporation from 1969 to 1981, during
which time it grew from a local building company to the nation's largest home
builder. He was elected to the Tampa Bay Business Hall of Fame in 1996.
Terry N. Christensen has served as a Director of the Company since
November 1996. Mr. Christensen has been a partner in the law firm of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, since May 1988.
Mr. Christensen is a director of GIANT GROUP, LTD. ("GIANT"), Rally's and MGM
Grand, Inc.
William P. Foley, II has served as a Director of the Company since
November 1996. Mr. Foley has been the Chairman of the Board and Chief Executive
Officer of Fidelity National Financial, Inc., which through its subsidiaries is
a title insurance underwriting company ("Fidelity"), since its formation in
1984. Mr. Foley was also President of Fidelity from 1984 until December 31,
1994. He has been Chairman of the Board and Chief Executive Officer of Fidelity
National Title Insurance Company since April 1981. Mr. Foley is also currently
serving as Chairman of the Board of Directors and Chief Executive Officer of CKE
and is a director of Micro General Corporation, Rally's and Data Works
Corporation.
Andrew H. Hines, Jr., has served as a Director of the Company since June
1994. Mr. Hines was the Chairman of the Board and Chief Executive Officer of
Florida Progress Corporation, the holding company parent of Florida Power
Corporation, and a Director of Florida Power Corporation, until his retirement
from both companies in 1990, continuing as a Director until 1991. Mr. Hines is
currently engaged in operating his own consulting business, Triangle Consulting
Group, in St. Petersburg, Florida. Mr. Hines is Chairman of the Pinellas County
Reuse Organization, on the Board of Directors of the Tampa Bay Research
Institute and the Florida Council on Economic Education and a director of 24
Templeton mutual fund companies.
Clarence V. McKee has served as a Director of the Company since June 1996. Mr.
McKee has been the President and Chief Executive Officer of McKee
Communications, Inc., a Tampa, Florida based company engaged in the acquisition
and management of communications companies, since October 1992. From 1987 to
October 1992, Mr. McKee was the co-owner, Chairman and Chief Executive Officer
of WTVT-Inc., the licensee of television channel 13 in Tampa, Florida. Mr. McKee
is a member of the Boards of Directors of the Florida Progress Corporation and
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<PAGE>
its subsidiary, Florida Power Corporation, and Barnett Banks, Inc. He is a
former chairman of the Florida Association of Broadcasters.
No family relationships exist between any of the Directors of the Company,
the persons listed as nominees for election as Directors at the Meeting and the
executive officers of the Company. There are no arrangements or understandings
between any Director or nominee and any other person concerning service or
nomination as a Director.
The Board of Directors has Audit, Compensation and Stock Option
Committees; it does not have a Nominating Committee. The entire Board of
Directors functions as a Nominating Committee, and the Board will consider
written recommendations from stockholders for nominations to the Board of
Directors in accordance with the procedures set forth in the By-Laws of the
Company.
The Board of Directors held 29 meetings during 1996 and acted seven times
by unanimous written consent without a meeting.
During 1996, the Audit Committee consisted of Frederick E. Fisher,
Chairman, Andrew H. Hines, Jr. and Clarence V. McKee and held two meetings. The
Audit Committee recommends the appointment of the independent public accountants
of the Company, discusses and reviews the scope and fees of the prospective
annual audit and reviews the results thereof with the independent public
accountants, reviews and approves non-audit services of the independent public
accountants, reviews compliance with existing major accounting and financial
policies of the Company, reviews the adequacy of the financial organization of
the Company, reviews management's procedures and policies relative to the
adequacy of the Company's internal accounting controls and compliance with
federal and state laws relating to accounting practices, and reviews and
approves (with the concurrence of the majority of the disinterested Directors of
the Company) transactions, if any, with affiliated parties.
During 1996, the Compensation Committee consisted of Frederick E. Fisher,
Chairman, and Andrew H. Hines, Jr. and held two meetings. Its principal function
is to make recommendations to the Board of Directors with respect to the
compensation and benefits to be paid to officers, and it performs other duties
prescribed by the Board with respect to employee stock plans and benefit
programs.
During 1996, the Stock Option Committee consisted of Frederick E. Fisher,
Chairman and Andrew H. Hines, Jr. and acted two times by unanimous written
consent without a meeting. Its principal function is to make recommendations to
the Board of Directors with respect to the Company's 1991 Stock Option Plan and
other duties prescribed by the Board.
In 1996, each incumbent Director attended at least 75% of the meetings of
the Board of Directors and of each committee of which he was a member.
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<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act,") requires the Company's directors, officers and holders of more
than 10% of the Company's Common Stock to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and any other equity securities of the Company. To the
Company's knowledge, based solely upon a review of the forms, reports and
certificates filed with the Company by such persons, all such Section 16(a)
filing requirements were complied with by such persons in 1996, except as
follows:
Herbert G. Brown, a former director of the Company, failed to file two
Forms 4 with respect to two transactions and filed Forms 5 with respect thereto
late; Robert G. Brown, a former director, filed one report late with respect to
two transactions; George W. Cook, a former director, filed two reports late with
respect to 19 transactions; Terry N. Christensen, a director, filed a Form 3
late and one report with respect to one transaction late; and Andrew J. Hines,
Jr., a director, filed one report late with respect to one transaction.
ITEM 11. EXECUTIVE COMPENSATION
The following table is a summary of the compensation paid or accrued by
the Company for the last three fiscal years for services in all capacities to
each of the persons who qualified as a "named executive officer" (as defined in
Item 402(a)(3) of Regulation S-K under the Exchange Act) during the fiscal year
ended December 30, 1996 ("Named Executive Officers").
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compen-
sation
Annual Compensation Awards
----------------------------- ---------
Other
Year Annual Securities All Other
Ended Compen- Underlying Compen-
Name and Principal December Salary Bonus sation Options sation
Position 31, 1996 ($) ($) ($) (1) (#) (2) ---------
-------- -------- --- --- ------- -------
<S> <C> <C> <C> <C> <C> <C>
C. Thomas Thompson (3) 1996 $ -- $ -- $ -- -- --
Vice Chairman/CEO
James T. Holder 1996 $140,350 $23,077 $ 120(4) 90,500
Senior Vice President, 1995 80,617 _ 3,112(5) -
General Counsel and 1994 70,923 -- -- 8,500
Secretary
Michael T. Welch(6) 1996 $125,390 $2,467 $ 372(4) 80,000 --
Vice President, 1995 99,773 15,200 13,261(8) --
Operations Services and
Research & Development
Albert J. DiMarco(7) 1996 $275,000 -- $5,691(5) 100,000 --
President and CEO 1995 100,769 475 200,000
Anthony L. Austin (6) 1996 $109,645 -- $131,628 -- --
Vice President, Human 1995 133,249 -- 27,069 35,000
Resources, Training and
Urban Affairs
____________________________
(1) Certain perquisites were provided to certain of the Named Executive Officers,
but in no event did the value of the perquisites provided in any year exceed
10% of the amount of the executive's salary for that year.
(2) The Options listed were granted pursuant to the Company's 1991 Stock Option
Plan or 1994 Stock Option Plan for Non-Employee Directors.
(3) Mr. Thompson was appointed Chief Executive Officer and Vice Chairman of the
Company in December 1996.
(4) Consists of life insurance premiums.
(5) Consists of automobile allowance.
(6) Messrs. Welch and Austin became executive officers of the Company in March 1995
and January 1995, respectively. Mr. Austin relinquished his position with the
Company in July 1996.
(7) Mr. DiMarco became President, Chief Executive Officer and a Director of the
Company in July 1995 and relinquished such positions in December 1996.
(8) Includes moving expenses ($8,815) and automobile allowances ($4,446).
</TABLE>
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<PAGE>
EMPLOYMENT AGREEMENTS
ALBERT J. DIMARCO - On July 28, 1995, the Company entered into an
employment agreement with Albert J. DiMarco with respect to his employment as
President and Chief Executive Officer of the Company and its subsidiaries and
his service as a Director of the Company. The employment agreement provided for
a term of employment ending on December 31, 1997, a compensation package
consisting of an initial base annual salary in the amount of $250,000 through
December 31, 1995 and a minimum of $275,000 thereafter (subject to annual
increases at the discretion of the Board), as well as other miscellaneous
benefits (including moving expense, expense allowances, health insurance and
potential cash bonuses) and the grant, at the commencement of Mr. DiMarco's
employment agreement, of a non-qualified option to acquire 200,000 shares of
Common Stock, at an exercise price of $2.28. Pursuant to a Severance, Release
and Indemnity Agreement dated January 27, 1997 entered into by Mr. DiMarco and
the Company, Mr. DiMarco's employment agreement was terminated, and Mr. DiMarco
received a note of the Company in the principal amount of $360,000 payable, in
cash or by certified check or wire transfer, through March 31, 1997 in
installments equal to his regular salary with the balance payable upon the
earlier to occur of (a) the Company obtaining new equity through a rights
offering and/or private placement or (b) March 31, 1997. In addition, pursuant
to such agreement options to purchase up to 300,000 shares of Common Stock held
by Mr. DiMarco became fully vested and are exercisable until January 27, 1999,
and the Indemnity Agreement dated July 28, 1995 between the Company and Mr.
DiMarco is to remain in effect.
ANTHONY L. AUSTIN - On January 4, 1995, the Company entered into an
employment agreement with Anthony L. Austin with respect to his employment as
Vice President, Human Resources, Training and Urban Affairs. The employment
agreement provided for a term of employment ending on December 31, 1996, a
compensation package consisting of an initial base annual salary in the amount
of $132,500, as well as other miscellaneous benefits (including moving expense,
expense allowances, health insurance and potential cash bonuses) and the grant
at the commencement of Mr. Austin's employment agreement of a non-qualified
option to acquire 35,000 shares of Common Stock, at an exercise price of $2.19.
The option for 35,000 shares was terminated upon termination of Mr. Austin's
employment by the Company.
DIRECTOR COMPENSATION
Directors who are not employees are compensated on the basis of $1,000
plus out-of-pocket expenses for each Board and committee meeting attended.
Non-employee Directors also participate in the 1994 Stock Option Plan For
Non-Employee Directors, which provides for the automatic grant to each
non-employee Director upon election to the Board of Directors of a
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<PAGE>
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. All such options have an exercise price equal to the closing sale price
of the Common Stock on the date of grant. One-fifth of the shares of Common
Stock subject to each initial option grant become exercisable on a cumulative
basis on each of the first five anniversaries of the date of the grant of such
option. One-third of the shares of Common Stock subject to each subsequent
option grant become exercisable on a cumulative basis on each of the first three
anniversaries of the date of the grant of such option. Directors who are
employees of the Company receive no extra compensation for their services as
Directors.
STOCK OPTION GRANTS
The following table details individual grants of stock options made in
fiscal year ended December 30, 1996 to any of the Named Executive Officers. No
grants of stock appreciation rights (SARS) were made in fiscal year ended
December 30, 1996. The table also indicates the potential realizable value of
each grant of options assuming that the market price of the underlying security
appreciates in value from the date of the grant to the end of the option term at
the specified annualized rates.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants (1) for Option Term (2)
% of Total
Number of Options
Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted (#) Year ($/Sh) Date 5% ($) 10% ($)
---- ----------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
C. Thomas Thompson - 0 - - 0 - -- --
James T. Holder 90,500 9.3% $1.53 7/12/06 87,080 220,678
Michael T. Welch 80,000 8.2% 1.53 7/12/06 76,977 195,074
Albert J. DiMarco 100,000 10.2% 1.53 7/12/06 96,221 243,843
Anthony L. Austin - 0 - - 0 - -- --
____________
(1) All options were granted pursuant to the 1991 Stock Option Plan.
(2) The 5% and 10% assumed annual rates of stock price appreciation are provided in
compliance with Regulation S-K under the Exchange Act. The Company does not
necessarily believe that these appreciation calculations are indicative of
actual future stock option values or that the price of the Common Stock will
appreciate at such rates.
</TABLE>
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<PAGE>
STOCK OPTION EXERCISES AND YEAR END OPTION VALUES
No stock options were exercised by any of the Named Executive Officers
during fiscal year ended December 30, 1996. The following table details the
fiscal year-end value of unexercised options on an aggregated basis for all
Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($) (1)
Shares Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
---- ------------ ----- ------------- -------------
<S> <C> <C> <C> <C>
C. Thomas Thompson -0- -0- -0-/-0- - 0 -/-0-
Albert J. DiMarco -0- -0- 300,000/-0- $25,125/-0-
Anthony L. Austin -0- -0- - 0 - - 0 -
James T. Holder -0- -0- 23,291/ $5,685/-0-
76,709
David D. Miller -0- -0- 43,062/ $3,722/-0-
56,938
____________
(1) Calculation of the value of unexercised in-the-money options is based
upon unexercised options at fiscal year end which have an exercise price
below $1.78, the closing price of the Common Stock on March 21, 1997.
</TABLE>
ITEM 12. STOCK OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth, as of April 11, 1997, information as to:
(a) the beneficial ownership of the Company's Common Stock and Series A
Preferred Stock by (i) each person serving the Company as a Director on such
date and each nominee for Director, (ii) each person who qualifies as a "named
executive officer" as defined in Item 402(a)(3) of Regulation S-K under the
Exchange Act, and (iii) all of the Directors and executive officers of the
Company as a group; and (b) the beneficial ownership of the Company's Common
Stock by each person known to the Company as having beneficial ownership of more
than 5% of the Company's Common Stock.
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<PAGE>
Common Stock Series A Preferred Stock
------------- -------------------------
Number of Percent of Number of Percent of
Name Shares(1) Class (2) Shares(1) Class(3)
---- --------- --------- --------- --------
C. Thomas Thompson 210,419(4) * 219 *
James T. Holder 123,291(5) * - -
Michael T. Welch 23,333(6) * - -
Albert J. DiMarco 300,000(7) * - -
Anthony L. Austin - 0 - - - -
Terry N. Christensen 21,929 * 219 *
Frederick E. Fisher 5,800(8) * - -
William P. Foley, II 1,073,998(9) 1.7% 2,192(12) 2.5%
Andrew H. Hines, Jr. 10,800(10) * - -
Clarence V. McKee 3,400 * - -
All Directors and
executive officers
as a group
(12 persons) 2,342,631(13) 3.7%
Name and Address of
- -------------------
5% Beneficial Owner
- -------------------
CKE Restaurants, Inc.
1700 N. Harbor Blvd.
Anaheim, California
92801 13,512,727(11)
____________
* Less than 1%
(1) Based upon information furnished to the Company by the named persons and
information contained in filings with the SEC. Under the rules of the SEC,
a person is deemed to beneficially own shares over which the person has or
shares voting or investment power or which the person has the right to
acquire beneficial ownership within 60 days. Unless otherwise indicated,
the named persons have sole voting and investment power with respect to
their respective shares.
(2) Based on 60,749,933 shares of Common Stock outstanding as of April 11,
1997. Shares of Common Stock subject to options or warrants exercisable
within 60 days are deemed outstanding for computing the percentage of class
of the persons holding such options or warrants but are not deemed
outstanding for computing the percentage of class for any other person.
(3) Based on 87,719 shares of Series A Preferred Stock outstanding as of April
11, 1997.
(4) Includes 160,000 shares subject to options and 28,490 shares subject to
warrants exercisable on or prior to June 10, 1997.
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<PAGE>
(5) Shares subject to stock options exercisable on or prior to June 10, 1997
(6) Shares subject to stock options exercisable on or prior to June 10, 1997
(7) Shares subject to stock options exercisable on or prior to June 10, 1997
(8) Shares subject to stock options exercisable on or prior to June 10, 1997
(9) Includes 854,700 Shares subject to warrants exercisable prior to June 10,
1997; but excludes 438,596 shares held by Fidelity and 2,108,262 shares
subject to exercisable warrants held by Fidelity and 6,162,299 shares held
by CKE and 7,350,428 shares subject to warrants exercisable prior to June
10, 1997 held by CKE, all as to which Mr. Foley disclaims beneficial
ownership. Mr. Foley is the Chairman of the Board and Chief Executive
Officer of Fidelity and CKE, and he owns 20.3% of the outstanding common
stock of Fidelity. A limited partnership whose general partner is
controlled by Mr. Foley owns 15.8% of the outstanding common stock of CKE,
and Fidelity owns 2.2% of the outstanding common stock of CKE. Mr. Foley
may be deemed to be a controlling person of CKE and Fidelity.
(10) Includes 7,800 shares subject to stock options exercisable on or prior to
June 10, 1997
(11) Includes 7,350,428 shares subject to warrants exercisable on or prior to
June 10, 1997
(12) Excludes 4,385 shares held by Fidelity National Financial, Inc. and 61,636
shares held by CKE Restaurants, Inc., all as to which Mr. Foley disclaims
beneficial ownership. (See Note 9).
(13) Includes 548,561 shares subject to stock options exercisable on or prior to
June 10, 1997, for other executive officers not listed above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth herein briefly describes certain transactions
between the Company and certain affiliated parties and/or certain of their
relatives. Management of the Company believes that such transactions have been
on terms no less favorable to the Company than those that could have been
obtained from unaffiliated parties. Any such transactions since November 15,
1991 have been approved by a majority of the Company's disinterested Directors.
TRANSACTIONS IN WHICH CURRENT AFFILIATED PARTIES MAY HAVE AN INTEREST
On November 22, 1996, the Company entered into an Amended and Restated
Credit Agreement (the "Restated Credit Agreement") with CKE, as agent of the
various lenders named therein (the "Lenders"). The Lenders include CKE,
Fidelity, C. Thomas Thompson, William P. Foley, II and KCC Delaware Company
("KCC"), a wholly owned subsidiary of GIANT. Pursuant to the Restated Credit
Agreement, the Company's primary debt aggregat- ing approximately $35.8 million
principal amount, which had been acquired by the Lenders on November 14, 1996,
was restructured by, among other things, extending its maturity by one year to
July 31, 1999, fixing the interest rate at 13.0% per annum, eliminating or
relaxing certain covenants, delaying scheduled principal payments until May 19,
1997 and eliminating $4.0 million in restructuring fees and charges. In
connection with the restructuring, the Company issued to the Lenders warrants to
purchase an aggregate of 20 million shares of Common Stock at an exercise price
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<PAGE>
of $0.75 per share, the approximate market price of the Common Stock on the day
prior to the announcement of the acquisition of the Company's debt by the
Lenders. The Lenders specified above received warrants in the following amounts:
CKE, 7,350,428; Fidelity, 2,108,262; C. Thomas Thompson, 28,490; William P.
Foley, II, 854,700 and KCC Delaware Company, 2,849,002. The Lenders also
received certain piggyback and demand registration rights with respect to the
shares of Common Stock underlying their warrants.
On February 19, 1997, the Company received $20 million in consideration
for issuing an aggregate of 8,771,929 shares of Common Stock and 87,719 shares
of Series A Preferred in a private placement. The per share purchase price for
the Common Stock was $1.14, based upon the closing price ($1.34) of the Common
Stock on December 16, 1996, the day prior to the approval of the transaction by
the Board of Directors, less a discount for the fact that such shares are not
freely transferable for a one-year period. The purchasers in the private
placement included: CKE (6,162,299 shares of Common Stock and 61,636 shares of
Series A Preferred Stock); Fidelity (438,596 shares of Common Stock and 4,385
shares of Series A Preferred Stock); C. Thomas Thompson (21,929 shares of Common
Stock and 219 shares of Series A Preferred Stock); Terry N. Christensen (21,929
shares of Common Stock and 219 shares of Series A Preferred Stock); and William
P. Foley, II (219,298 shares of Common Stock and 2,192 shares of Series A
Preferred Stock). The purchasers in the private placement also received certain
piggyback and demand registration rights and agreed not to sell any shares of
Common Stock received in the private placement in the open market for a one-year
period. The Series A Preferred Stock will be converted into an aggregate of
8,771,929 shares of Common Stock if the Company's stockholders approve such
conversion at the Meeting.
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, a law firm
of which Terry N. Christensen is a partner, has performed legal services for the
Company. Such services have related to compliance with securities laws and other
business matters.
TRANSACTIONS IN WHICH FORMER AFFILIATED PARTIES MAY HAVE AN INTEREST
In January 1996, the Company entered into an Agreement for Lease with
Option for Asset Purchase with George W. Cook, a Director of the Company until
June 1996, in which the Company was granted certain rights for three years in
and to a restaurant in Clearwater, Florida. Checkers (a) entered into a sublease
for the real property and an equipment lease for the fixed assets at a combined
monthly rental of $3,000, and (b) agreed to purchase the inventory located at
the Restaurant.
On December 5, 1995, C of A took possession of three under performing
Company restaurants pursuant to a verbal agreement, and entered into unit
franchise agreements which provided for waiver of the initial franchise fee but
required the payment to the Company of the standard royalty fee. On January 1,
1996, C of A entered into leases for these restaurants for a term of three years
for the land, building and equipment at a monthly rental of: (i) 4% of gross
sales during the first year, 6% of gross sales the second year, and a direct
pass through of land rent during the third year, (ii) 1% of gross sales payable
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from and after the fourth month of the lease; and (iii) 3% of gross sales,
respectively. Mr. Cook executed a continuing guaranty, which provides for the
personal guaranty of all of the obligations of the franchisee under the
franchise agreements. Pursuant to Options for Asset Purchase dated January 1,
1996, C of A was granted the option to purchase these restaurants for the
greater of (a) 50% of its sales for the prior year, or (b) $350,000 each.
On July 17, 1995, C of R took possession of two under performing Company
restaurants pursuant to a verbal agreement and entered into franchise agreements
which provided for waiver of the initial franchise fee but required the payment
to the Company of a royalty fee of 1%, 2% and 3% during the first, second and
third years, respectively, and 4% thereafter. On January 1, 1996, C of A entered
into leases for these restaurants for a term of three years for (i) the building
and equipment at a monthly rental of 1.5%, 3% and 4.5% of gross sales during the
first, second and third years respectively, and (ii) the land at a monthly
rental of 3% of gross sales for the first year and 4% of gross sales thereafter.
Total sums received by the Company in fiscal year ended December 30, 1996 for
these restaurant were: (a) $6,351 in royalty fees pursuant to the unit franchise
agreement, and (b) $17,500 in rent. Mr. Cook executed a continuing guaranty,
which provides for the personal guaranty of all of the obligations of the
franchisee under the franchise agreements. Pursuant to Options for Asset
Purchase dated January 1, 1996, C of R was granted the option to purchase these
restaurants for the greater of (a) 50% of its sales for the prior year, or (b)
$350,000 each.
Effective as of July 28, 1995, the Company, InnerCityFoods ("ICF"), a
joint venture 75% owned by a subsidiary of the Company and 27% owned by La-Van
Hawkins, who ceased being a director of the Company January 1996, InnerCityFoods
Leasing Company and InnerCityFoods Joint Venture Company (collectively, the
"Checkers Parties") and La-Van Hawkins Group, Inc. ("Hawkins Group"), Mr.
Hawkins and La-Van Hawkins InnerCityFoods, LLC (collectively, the "Hawkins
Parties"), entered into an Asset Purchase Agreement (the "Agreement") providing
for the purchase of the interest of the Hawkins Parties in ICF, the sale by ICF
of its three restaurants in Baltimore, Maryland to the Hawkins Parties, the
grant of certain development rights to the Hawkins Parties, and the termination
of all of the agreements between the Checkers Parties and the Hawkins Parties
relating to the operation of ICF.
The transactions contemplated by the Agreement were consummated on August
15, 1995. On that date, the Company purchased all of the rights, title and
interest of Hawkins Group in and to ICF. The component of the purchase price
based upon the Net After Tax Earnings of ICF was zero, and the amounts owed by
the Hawkins Parties to the Checkers Parties was in excess of the remaining
$1,250,000 purchase price. Accordingly, there was no net purchase price payable
to the Hawkins Parties by the Company for Hawkins Group's interest in ICF. The
Checkers Parties also sold all of their respective rights, titles and interests
in the three Baltimore Restaurants to the Hawkins Parties for a purchase price
of $4,800,000. The purchase price was paid by the delivery of a promissory note
in the amount of $4,982,355, which amount includes the purchase price for the
three restaurants, the approximately $107,355 owed by the Hawkins Parties to the
Checkers Parties in connection with the operation of ICF that was not offset by
the $1,250,000 purchase price for Hawkins Group's interest in ICF, and an
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advance of $75,000 to the Hawkins Parties which was used primarily to pay
closing costs related to the transaction. The note bears interest at a floating
rate which is the lesser of 10.5% or .25% above the current borrowing rate of
the Company under its primary credit facility. Interest only is payable for the
first six months with principal and interest being payable thereafter based on a
15 year amortization rate with the final payment of principal and interest due
on August 15, 2002. The note is secured by a pledge of all the assets sold.
Royalty fees for the three restaurants are at standard rates provided that the
Company will receive an additional royalty fee of 4% on all sales in excess of
$1,800,000 per Restaurant.
The Hawkins Parties were granted development rights for restaurants in
certain defined areas of Baltimore, Maryland, Washington, D.C., Bronx, New York,
and Harlem, New York, as well as a right of first refusal for certain
territories in California and Virginia. Franchise fees and royalty rates for all
restaurants developed under such development rights will be at standard rates
provided that the Company will receive an additional royalty fee of 4% on all
sales in excess of $1,800,000 per Restaurant.
In February 1995, the Company entered into two separate unit franchise
agreements for the operation of two restaurants in North Carolina, with GNB,
Inc., a corporation owned by George W. Cook, Norma Cook and Michael Perez, his
wife and her son, which agreements provided for payment to the Company of the
standard royalty fee. The restaurants were existing restaurants purchased by Mr.
Cook from the prior franchisee, and the agreements provide for the franchise fee
to be waived. In connection with the transaction, Mr. Cook executed a continuing
guaranty, which guaranty provides for the personal guaranty of Mr. Cook of all
obligations of the franchisee under the franchise agreement. Total royalty fees
received by the Company in fiscal years ended January 1, 1996 and December 31,
1996 pursuant these agreements were $37,295 and $47,965, respectively.
The Company incurred approximately $105,000 and $334,000, respectively, of
expenses for services provided by the law firm of MacFarlane Ausley Ferguson &
McMullen in 1995 and 1994, respectively. The firm continues to provide legal
services to the Company. Harry S. Cline, a Director of the Company from 1991
until June 1996, is a partner in the firm.
In July 1993, the Company entered into an Area Development Agreement with
New Iberia Drive-In, Inc. ("New Iberia"), a corporation in which the cousin of
Herbert G. Brown, a Director of the Company until April 1996, was the sole
shareholder. The Agreement was transferred in November 1993 from New Iberia to
Walker-LA Louisiana Partnership, a Louisiana general partnership in which that
cousin and Mr. Brown's son-in-law each hold a 50% ownership interest. The
Agreement provides for the payment to the Company of the standard development
fee, a standard franchise fee per Restaurant and payment of standard royalty
fees. Six unit franchise agreements have been granted pursuant to the Agreement
in the names of various entities in which the cousin and son-in-law each hold a
50% ownership interest. Total royalty fees received by the Company in fiscal
years ended January 1, 1996 and December 30, 1996 pursuant to these unit
franchises agreements were $193,582 and $187,165, respectively.
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In December 1993, the Company sold one of its restaurants in Ft.
Lauderdale, Florida, to Dania-Auger, Inc., a Florida corporation in which the
father-in-law of Jared D. Brown, formerly a beneficial owner of more than 5% of
the Common Stock and a Director of the Company until June 1996, is the principal
officer and stockholder. The sales price was $905,000 and the Company received
$705,000 in cash and a promissory note for $200,000. A gain of approximately
$470,000 was recognized by the Company. The term of the promissory note was for
two years bearing interest at prime + 2% with interest only payments due
quarterly and one balloon principal payment due on or before December 31, 1995.
Dania-Auger is currently negotiating for the sale of the Restaurant to another
franchisee. The Company agreed to extend the term of the note to the earlier of
May 31, 1996 or the date the restaurant is sold. The note, which remains
outstanding, is secured by property in Broward County, Florida. Total royalty
fees received by the Company in fiscal years ended January 1, 1996 and December
30, 1996 pursuant to the unit franchise agreement for the Restaurant were
$31,378 and $24,652, respectively.
In January 1992, the Company entered into a unit franchise agreement for
the operation of a single Restaurant in the Clearwater, Florida area with George
W. Cook, Norma Cook and Michael Perez, his wife and her son, which agreement
provided for payment to the Company of a standard $25,000 franchise fee and a
standard royalty fee of 4% of sales. In connection with the transaction, Mr.
Cook and Mr. Perez executed a continuing guaranty, which guaranty provides for
the personal guaranty of each of the individuals of all obligations of the
franchisee under the franchise agreement. Total sums received in royalty fees by
the Company in fiscal years ended January 1, 1996 and December 30, 1996 pursuant
to the unit franchise agreement were $37,461 and $23,674, respectively.
In September 1991, the Company entered into a unit franchise agreement for
the operation of a single Restaurant in Dania, Florida, with Dania-Auger, Inc.,
a Florida corporation in which Paul Auger is the principal officer and
stockholder, the father-in-law of Jared D. Brown. The unit franchise agreement
provided for payment to the Company of a standard $25,000 franchise fee and a
standard royalty fee of 4% of sales. In connection with the transaction, Mr.
Auger and his wife, Donna Auger, executed a continuing guaranty, which guaranty
provides for the personal guaranty of both of the individuals of all obligations
of the franchisee under the franchise agreement. Total sums received in royalty
fees by the Company in fiscal years ended January 1, 1996 and December 30, 1996
pursuant to the unit franchise agreement were $31,286 and $26,584, respectively.
In March 1990, a general partnership was formed between the Company (50%
interest) and GNC Investments, Inc. (50% interest), a Florida corporation
("GNC") in which George W. Cook is the principal officer and stockholder, for
the purpose of owning and operating a joint venture Restaurant in Clearwater,
Florida. The term of the partnership agreement was for 30 years unless sooner
terminated by the affirmative vote of a majority of the partners. The Company
was required to operate the Restaurant and was entitled to receive a royalty fee
of 2% of sales. In the event of the death of George W. Cook, the partnership was
required to pay the Company a management fee of 2.5% and a royalty fee of 4%,
respectively, of sales. On December 31, 1993, the Company sold its 50%
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partnership interest to GNC for $422,000 and recognized a gain of $200,218. GNC
assumed all liabilities of the Company for any partnership obligations, and
entered into a standard form unit franchise agreement with the Company. A
Management Agreement was signed on December 31, 1993, between the Company and
GNC whereby the Company agreed to manage the operations of the Restaurant until
the earlier of such date that GNC has hired a management team for such
Restaurant or April 30, 1994. GNC reimbursed the Company for all of its
out-of-pocket expenses in managing and operating the Restaurant during such
period. On January 1, 1996, the Company leased the Restaurant and subleased the
underlying real property from GNC for a combined monthly rental of $3,000. Total
sums received by the Company in fiscal years ended January 1, 1996 and December
30, 1996 pursuant to the unit franchise agreement were $14,082 and $2,285 in
royalty fees, respectively.
In May 1989 and March 1990, the Company entered into joint ventures (50%
interest) and a Florida corporation (50% interest) owned 100% and equally by
Donna M. Brown- McMullen and her husband Thomas W. McMullen. The joint ventures
own and operate Checkers Drive-In Restaurants (hereinafter "Restaurants") in
Clearwater, Florida. The term of each agreement is for 30 years unless sooner
terminated by the affirmative vote of a majority of the partners. The Company is
required to operate the Restaurants and is entitled to receive royalty fees of
2% and 4% and a management fee of 2.5% and 0% of sales, respectively. The
partnership agreement contains certain restrictions on transfer of partnership
interests and rights of first refusal in favor of each of the partners. Total
fees received by the Company from the partnership in fiscal years ended January
1, 1996 and December 30, 1996 were $102,835 and $43,882, respectively. Donna M.
Brown-McMullen is the daughter of Herbert G. Brown.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: June 12, 1997 CHECKERS DRIVE-IN
RESTAURANTS, INC.
By: /s/ Joseph N. Stein
--------------------------------
Joseph N. Stein
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
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