<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CHECKERS DRIVE-IN RESTAURANTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
CHECKERS DRIVE-IN RESTAURANTS, INC.
600 CLEVELAND STREET, EIGHTH FLOOR
CLEARWATER, FLORIDA 34615
May 15, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Checkers Drive-In Restaurants, Inc. The Meeting will be held
Thursday, June 11, 1998 at 1:30 p.m., Pacific Time, at Fess Parker's
Doubletree Resort, located at 633 East Cabrillo Boulevard, Santa Barbara,
California.
The Notice of the Meeting and the Proxy Statement on the following
pages cover the formal business of the Meeting. We will also report on the
progress of the Company and comment on matters of current interest.
It is important that your shares be represented at the Meeting. We
ask that you promptly sign, date and return the enclosed proxy card in the
envelope provided, even if you plan to attend the Meeting. Returning your
proxy card to us will not prevent you from voting in person at the Meeting if
you are present and choose to do so.
If your shares are held in street name by a brokerage firm, your
broker will supply you with a proxy to be returned to the brokerage firm. It
is important that you return the form to the brokerage firm as quickly as
possible so that the brokerage firm may vote your shares. You may not vote
your shares in person at the Meeting unless you obtain a power of attorney or
legal proxy from your broker authorizing you to vote the shares, and you
present this power of attorney or proxy at the Meeting.
Your Board of Directors and management look forward to greeting you
personally at the Meeting.
Sincerely,
James T. Holder
Secretary
<PAGE> 3
CHECKERS DRIVE-IN RESTAURANTS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 11, 1998
Notice is hereby given that the Annual Meeting of Stockholders of
Checkers Drive-In Restaurants, Inc., a Delaware corporation, will be held at
Fess Parker's Doubletree Resort, located at 633 East Cabrillo Boulevard, Santa
Barbara, California, on Thursday, June 11, 1998, at 1:30 p.m., Pacific Time,
for the following purposes:
1. To elect three Directors to serve until the Annual
Meeting in 2001 and until their successors are elected and qualified
or until their earlier resignation, removal from office or death;
2. To ratify and approve the grant of options to the
Non-Employee Directors;
3. To ratify and approve an amendment to the Company's
1991 Stock Option Plan;
4. To ratify and approve the appointment of KPMG Peat
Marwick LLP as the Company's independent auditors for fiscal 1998; and
5. To transact such other business as may properly come
before the Meeting or any adjournment thereof.
Your attention is directed to the Proxy Statement accompanying this
Notice for a more complete description of the matters to be acted upon at the
Meeting. The 1997 Annual Report of the Company is also enclosed. Stockholders
of record at the close of business on May 11, 1998 are entitled to receive
notice of and to vote at the Meeting and any adjournment thereof. A list of
such stockholders will be available for examination by any stockholder, for any
purpose germane to the Meeting, during ordinary business hours, at 3938 State
Street, Suite 200, Santa Barbara, California 93105, for a period of ten days
prior to the Meeting date.
All stockholders are cordially invited to attend the Meeting. Whether
or not you expect to attend, please sign and return the enclosed Proxy promptly
in the envelope provided to assure the presence of a quorum. You may revoke
your Proxy and vote in person at the Meeting if you desire. If your shares are
held in street name by a brokerage firm, your broker will supply you with a
proxy to be returned to the brokerage firm. It is important that you return
the form to the brokerage firm as quickly as possible so that the brokerage
firm may vote your shares. You may not vote your shares in person at the
Meeting unless you obtain a power of attorney or legal proxy from your broker
authorizing you to vote the shares, and you present this power of attorney or
proxy at the Meeting.
By order of the Board of Directors,
JAMES T. HOLDER
Secretary
Clearwater, Florida
May 15, 1998
<PAGE> 4
CHECKERS DRIVE-IN RESTAURANTS, INC.
600 CLEVELAND STREET, EIGHTH FLOOR
CLEARWATER, FLORIDA 34615
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors and
management of Checkers Drive-In Restaurants, Inc. (the "Company" or "Checkers")
in connection with the solicitation of proxies to be voted at the Company's
1998 Annual Meeting of Stockholders, which will be held at 1:30 p.m., Pacific
Time, on Thursday, June 11, 1998, at Fess Parker's Doubletree Resort, 633 East
Cabrillo Boulevard, Santa Barbara, California (the "Meeting").
Any proxy delivered pursuant to this solicitation may be revoked, at
the option of the person executing the proxy, at any time before it is
exercised by delivering a signed revocation to the Company, by submitting a
later-dated proxy or by attending the Meeting in person and casting a ballot.
If proxies are signed and returned without voting instructions, the shares
represented by the proxies will be voted as recommended by the Board of
Directors.
The close of business on May 11, 1998, has been designated as the
record date for the determination of stockholders entitled to receive notice of
and to vote at the Meeting ("Stockholders"). As of May 11, 1998, 73,411,112
shares of the Company's Common Stock, par value $.001 per share (the "Common
Stock"), were issued and outstanding. Each Stockholder will be entitled to one
vote for each share of Common Stock registered in his or her name on the books
of the Company as of the close of business on May 11, 1998 on all matters that
come before the Meeting.
The affirmative vote of a majority of the votes cast at the Meeting
will be required for the election of Directors. A properly executed proxy
marked "WITHHOLD AUTHORITY" with respect to the election of one or more
Directors will not be treated as voted with respect to the Directors indicated,
although it will be counted for purposes of determining whether there is a
quorum. For each other item to be acted upon at the Meeting, the affirmative
vote of the holders of a majority of the shares of Common Stock represented in
person or by proxy at the meeting and entitled to vote on the item will be
required for approval. A properly executed proxy marked "ABSTAIN," although
counted for purposes of determining whether there is a quorum, will not be
voted. Accordingly, an abstention will have the same effect as a vote cast
against such other matters.
In accordance with the rules of the NASDAQ National Market, brokers
and nominees may be precluded from exercising their voting discretion with
respect to certain matters to be acted upon (e.g., any proposal which would
substantially affect the rights or privileges of the Common Stock) and thus, in
the absence of specific instructions from the beneficial owner of shares, will
not be empowered to vote the shares on such matters. If a broker indicates
that it does not have discretionary authority as to certain shares to vote on a
particular matter, such shares will not be considered as present and entitled
to vote with respect to that matter. Shares represented by such broker
non-votes will, however, be counted for purposes of determining whether there
is a quorum.
The cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone by regular employees of the Company, without additional compensation.
The Company will reimburse brokers and other persons holding stock in their
names, or in the names of nominees, for their expenses in sending proxy
materials to their principals and obtaining their proxies. The approximate
date on which this Proxy Statement and enclosed form of proxy has been first
mailed to Stockholders is May 15, 1998.
-1-
<PAGE> 5
ELECTION OF DIRECTORS
There are currently eight seats on the Board of Directors of the
Company, with no vacancies. The Board is divided into three classes of
Directors serving staggered three-year terms. Directors hold their positions
until the annual meeting of stockholders in the year in which their term
expires and until their respective successors are elected and qualified or
until their earlier resignation, removal from office or death. The term of
office of three of the Company's Directors, Terry N. Christensen, Frederick E.
Fisher and James J. Gillespie, will expire at the Meeting. Mr. Fisher will
not stand for re-election as a Director, and the Board has nominated Peter C.
O'Hara to fill such vacancy. The Board of Directors unanimously recommends
that you vote "FOR" the election of Messrs. Christensen, Gillespie and O'Hara
as Directors, to hold office until the Company's annual meeting in 2001 and
until their successors shall be duly elected and qualified or until their
earlier resignation, removal from office or death. See "Management - Directors
and Executive Officers" and " - Security Ownership of Management and Others"
for further information on such nominees. Stockholders may vote for up to
three nominees. Stockholders may not vote cumulatively in the election of
Directors. In the event any of the nominees should be unable to serve, which
is not anticipated, the proxy committee, which consists of Messrs. James J.
Gillespie, Joseph N. Stein and James T. Holder, will vote for such other person
or persons for the office of Director as the Board of Directors may recommend.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the Directors,
nominee for Director and executive officers of the Company and the positions
they hold. Executive officers serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William P. Foley, II 53 Chairman of the Board of Directors (term expiring in 1999)
James J. Gillespie 47 President, Chief Executive Officer and Director (term expiring in
1998); Nominee for Director with term expiring in 2001
Harvey Fattig 57 Executive Vice President and Chief Operating Officer
Joseph N. Stein 37 Executive Vice President and Chief Administrative Officer
Richard A. Peabody 37 Vice President and Chief Financial Officer
James T. Holder 39 Senior Vice President, General Counsel and
Secretary
Terry N. Christensen 57 Director (term expiring in 1998); Nominee for Director with term
expiring in 2001
</TABLE>
-2-
<PAGE> 6
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Frederick E. Fisher 67 Director (term expiring in 1998)
Clarence V. McKee 55 Director (term expiring in 1999)
Burt Sugarman 58 Director (term expiring in 2000)
C. Thomas Thompson 48 Director (term expiring in 1999)
Jean Giles Wittner 63 Director (term expiring in 2000)
Peter C. O'Hara 42 Nominee for Director with term expiring in 2001
</TABLE>
William P. Foley, II has served as a Director of the Company since
November 1996 and as Chairman of the Board since June 1997. Mr. Foley has been
the Chairman of the Board and Chief Executive Officer of Fidelity National
Financial, Inc., which through its subsidiaries is a title insurance
underwriting company ("Fidelity"), since its formation in 1984. Mr. Foley was
also President of Fidelity from 1984 until December 31, 1994. He has been
Chairman of the Board and Chief Executive Officer of Fidelity National Title
Insurance Company since April 1981. Mr. Foley is also currently serving as
Chairman of the Board of Directors and Chief Executive Officer of CKE
Restaurants, Inc., owner, operator and franchisor of quick-service restaurants,
primarily under the Carl's Jr. and Hardee's brand names ("CKE"), and as Chairman
of the Board of Rally's Hamburgers, Inc., developer, owner, operator and
franchisor of quick-service "double drive-thru" restaurants under the name
"Rally's" and is a director of Micro General Corporation, DataWorks Corporation
and Fresh Foods, Inc.
James J. Gillespie has served as Chief Executive Officer of the
Company, and as President and Chief Executive Officer of Rally's, since
November 1997 and as a Director of the Company and Rally's since December
1997. Mr. Gillespie has served as President of the Company since February
1998. He served as President of the Applebee's Division of Apple South, Inc.,
franchisee of 254 Applebee restaurants from January to October 1997. Prior
thereto, Mr. Gillespie served since 1976 in various capacities with Long John
Silver's, Inc., operator and franchisor of Long John Silver's restaurants,
including as Senior Vice President-Franchise Operations and, prior to that
position, as Divisional Vice President, Southwest Division. The Company and
Rally's share the costs related to the employment of Mr. Gillespie and other
shared executive officers. See "Management-Compensation of Executive Officers"
and "Compensation Committee Interlocks and Insider Participation."
Harvey Fattig has served as Chief Operating Officer of the Company and
Rally's since March 1998. Mr. Fattig served as Regional Vice President of Long
John Silver's, Inc. from March 1990 through February 1998.
Joseph N. Stein has served as Executive Vice President and Chief
Administrative Officer of the Company since January 1997 and as Executive Vice
President and Chief Financial Officer of Rally's since December 1997. He
served as Chief Financial Officer of the Company from January 1997 to February
1998. From May 1995 through December 1996, Mr. Stein was Senior Vice
President and Chief Financial Officer for Carl Karcher Enterprises, Inc. For
more than five years prior to his employment with Carl Karcher Enterprises,
Inc., Mr. Stein was Senior Vice President, Director, National Agency Operation
at Fidelity National Title Company.
Richard A. Peabody has served as Vice President and Chief Financial
Officer of the Company since January, 1998. From December 1996 to December
1997, Mr. Peabody was Chief Administrative
-3-
<PAGE> 7
Officer of Taco Bueno Restaurants, Inc., a subsidiary of CKE. For more than
five years prior to his employment with Taco Bueno Restaurants, Inc., Mr.
Peabody was Division Controller at Black-eyed Pea Management Corp.
James T. Holder has served as a Senior Vice President and General
Counsel of the Company since January 1997 and as Senior Vice President,
Assistant General Counsel and Secretary of Rally's since December 1997. He
served as Chief Financial Officer of the Company from May to December 1996 and
has served as Secretary of the Company 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.
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. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP has
performed legal services for the Company during 1997 and will perform legal
services for the Company in 1998. Such services have related to compliance
with securities laws and other business matters.
Frederick E. Fisher has served as a Director of the Company since
February 1995 and as Chairman of the Board from November 1996 to June 1997.
Mr. Fisher is a private investor and has been a leader in many community and
state charitable organizations since his retirement in 1983. He is a founder
and director of Peoples Bank of Palm Harbor, Florida. Mr. Fisher was Chairman
and Chief Executive Officer of U.S. Capital Corporation, a resort development
company, 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.
Clarence V. McKee has served as a Director of the Company since June
1996. Mr. McKee has been the President and Chief Executive Officer of McKee
Communications, Inc., a Tampa, Florida based company engaged in the acquisition
and management of communications companies, since October 1992. From 1987 to
October 1992, Mr. McKee was the co-owner, Chairman and Chief Executive Officer
of WTVT-Inc., the licensee of television channel 13 in Tampa, Florida. Mr.
McKee is a member of the Boards of Directors of the Florida Progress
Corporation and its subsidiary, Florida Power Corporation, and Barnett Banks,
Inc. He is a former chairman of the Florida Association of Broadcasters.
Burt Sugarman has served as a Director of the Company since June 1997.
Mr. Sugarman has been the Chairman of the Board, President and Chief Executive
Officer of GIANT for more than the past five years and served as the Chief
Executive Officer of Rally's from 1990 and as the Chairman of the Board of
Directors of Rally's from 1991, resigning from these offices in February 1994.
Mr. Sugarman resumed the position of Chairman of the Board of Directors of
Rally's in November 1994 and resigned such office in October 1997. Mr.
Sugarman is a Director of GIANT and Rally's.
C. Thomas Thompson has served as a Director of the Company since
November 1996 and as Vice Chairman of the Board of Directors since December
1996. He also served as Chief Executive Officer of the Company from December
1996 to November 1997. Mr. Thompson has been President and Chief Operating
Officer of Carl Karcher Enterprises, Inc., a wholly owned subsidiary of CKE,
since October 1994 and as President of CKE since December 1984. Since 1984,
Mr. Thompson has been a partner in a partnership which owns and operates 15
restaurants under the Carl's Jr. franchise system. Mr. Thompson is a director
of Rally's.
-4-
<PAGE> 8
Jean Giles Wittner has served as a Director of the Company since
August 1996. She has served as President of Wittner & Company, a diversified
company specializing in life insurance brokerage, employee benefit consulting,
benefit administration and commercial property management, from 1988 to the
present. She is a director or First Progress Corporation, Raymond James Bank
and the Pinellas County Education Foundation and a trustee of Florida Progress
Foundation, Eckerd College and Menorah Manor. She also serves on the Pinellas
Work Force Development Board.
Peter C. O'Hara has served as president of Capital Management of L.
I., N.Y., Inc., a Checkers franchise area developer for Long Island, New York,
since March 1994. Prior thereto, from June 1990 to April 1994, Mr. O'Hara
served as Chief Operating Officer and a director of Pudgie's Famous Chicken,
Ltd., owner, operator and franchisor, primarily in New York state, of quick
service restaurants featuring skinless fried chicken.
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 held seven meetings during 1997 and acted five
times by unanimous written consent without a meeting. In 1997, 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has Audit, Compensation and Stock Option
Committees; it does not have a Nominating Committee. The entire Board of
Directors functions as a Nominating Committee, and the Board will consider
written recommendations from stockholders for nominations to the Board of
Directors in accordance with the procedures set forth in the By-Laws of the
Company. See "Stockholder Proposals for Presentation at the 1999 Annual
Meeting."
During 1997, the Audit Committee consisted of William P. Foley, II,
Chairman, Terry N. Christensen and Clarence V. McKee and held one meeting.
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 1997, the Compensation Committee consisted of William P. Foley,
II, Chairman, and Clarence V. McKee 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 1997, the Stock Option Committee consisted of William P. Foley,
II, Chairman and Clarence V. McKee and acted one time by unanimous written
consent without a meeting. Its principal
-5-
<PAGE> 9
function is to make recommendations to the Board of Directors with respect to
the Company's stock option plans and other duties prescribed by the Board.
COMPENSATION OF DIRECTORS
Directors who are not employees are compensated on the basis of
$1,000 plus out-of-pocket expenses for each Board and committee meeting
attended. Non-employee Directors also participate in the 1994 Stock Option
Plan For Non-Employee Directors, which provides for the automatic grant to
each non-employee Director, upon election to the Board of Directors, of a
non-qualified, ten-year option to acquire 100,000 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 20,000
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
each initial option granted pursuant to such Plan prior to August 6, 1997
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 each
annual option granted pursuant to such Plan prior to August 6, 1997 becomes
exercisable on a cumulative basis on each of the first three anniversaries of
the date of the grant of such option. All options granted pursuant to this
Plan on or after August 6, 1997 are exercisable immediately upon grant.
Options are exercisable whether or not the Non-Employee Director is, at the
time of exercise, an eligible member of the Board of Directors, unless the
Director is removed for cause. Directors who are employees of the Company
receive no extra compensation for their services as Directors.
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 1997, except as
follows:
Messrs. Stein and Fortman and Ms. Wittner each filed their Form 3
late. Messrs. Christensen, Fisher, Foley, Sugarman and Holder each filed one
Form 5 late, each of which related to one option grant. Mr. McKee filed one
Form 5 late relating to two option grants.
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<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of April 23, 1998, information as
to the beneficial ownership of the Company's Common 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 (the "Named Executive
Officers"); (iii) all of the current Directors and executive officers of the
Company as a group; and (iv) each person known to the Company as having
beneficial ownership of more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED(1) CLASS
---- ------------------ -----
<S> <C> <C>
William P. Foley, II 1,378,100 (3) 1.8%
James J. Gillespie --
Joseph N. Stein 270,000 (4) *
Richard Fortman 250,000 (5) *
James T. Holder 149,083 (6) *
Michael T. Welch 53,334 (7) *
Terry N. Christensen 523,400 (8) *
Frederick E. Fisher 530,200 (9) *
Clarence V. McKee 526,800 (10) *
Burt Sugarman 1,234,651 (11) 1.7%
C. Thomas Thompson 382,400 (12) *
Jean Giles Wittner 320,000 (13) *
Peter O'Hara 25,000 (14) *
All current Directors and 5,617,968 (15) 7.1%
executive officers as a group (12
persons)
NAME AND ADDRESS OF 5%
BENEFICIAL OWNER
----------------
Rally's Hamburgers, Inc. 19,130,930 26.1%
600 Cleveland Street, Eighth Floor
Clearwater, Florida 34615
CKE Restaurants, Inc. 7,350,428(16) 9.1%
1700 N. Harbor Blvd.
Anaheim, CA 92801
- -----------------
</TABLE>
* Less than 1%(footnotes on following page)
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<PAGE> 11
(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 ("Exercisable
Securities"). Unless otherwise indicated, the named persons have sole
voting and investment power with respect to their respective shares.
(2) Based on 73,395,983 shares of Common Stock outstanding as of April 23,
1998. 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) Includes 1,378,100 shares subject to Exercisable Securities. Excludes
2,108,262 shares subject to Exercisable Securities held by Fidelity and
7,350,428 shares subject to Exercisable Securities held by CKE, as to
which Mr. Foley disclaims beneficial ownership. Mr. Foley is the
Chairman of the Board and Chief Executive Officer of Fidelity and CKE.
Mr. Foley may be deemed to be a controlling person of CKE and Fidelity.
(4) Includes 250,000 shares subject to Exercisable Securities.
(5) Includes 250,000 shares subject to Exercisable Securities.
(6) Includes 149,083 shares subject to Exercisable Securities.
(7) Includes 53,334 shares subject to Exercisable Securities.
(8) Includes 523,400 shares subject to Exercisable Securities.
(9) Includes 530,200 shares subject to Exercisable Securities.
(10) Includes 525,800 shares subject to Exercisable Securities.
(11) Includes 1,234,651 shares subject to Exercisable Securities. Excludes
2,849,002 shares subject to Exercisable Securities held by KCC Delaware
Company, a wholly owned subsidiary of GIANT, of which Mr. Sugarman is
Chairman of the Board, President and Chief Executive Officer, as to
which Mr. Sugarman disclaims beneficial ownership.
(12) Includes 382,400 shares subject to Exercisable Securities.
(13) Includes 320,000 shares subject to Exercisable Securities.
(14) Excludes 2,000 shares held by Mr. O'Hara's mother, as to which he
disclaims beneficial ownership.
(15) Includes 5,596,968 shares subject to Exercisable Securities.
(16) Includes 7,350,428 shares subject to Exercisable Securities.
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<PAGE> 12
COMPENSATION OF EXECUTIVE OFFICERS
The following table is a summary of the compensation paid or accrued by
the Company for the last three fiscal years for services in all capacities to
each of the persons who qualified as a "Named Executive Officer."
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND SALARY BONUS COMPENSATION OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR ($) ($) $ (1) (#) (2) COMPENSATION
------------------ ---- --- --- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
James J. Gillespie(3) 1997 $ 22,534 $ 25,000 $ 3,818(4) -- --
Chief Executive
Officer
Joseph N. Stein(5) 1997 $189,230 $ -- $ 108,441(6) 250,000 --
Executive Vice
President and Chief
Administrative Officer
Richard E. Fortman(7) 1997 $189,230 $ -- $ 508(8) 250,000 $ --
President and Chief
Operating Officer
James T. Holder 1997 $179,231 $ -- $ 287(8) 100,000 $ --
Senior Vice President, 1996 140,350 23,077 120(8) 90,500 --
General Counsel and 1995 80,617 -- 3,112(9) -- --
Secretary
Michael T. Welch(10) 1997 $137,837 $ 22,000 $ 543(8) -- $ --
Vice President, 1996 125,390 2,467 372(8) 80,000 --
Operations Services 1995 99,773 15,200 13,261(11) -- --
and Research and
Development
C. Thomas Thompson(12) 1997 $ -- $ -- $ -- 160,000 --
Vice Chairman 1996 -- -- -- -- --
</TABLE>
- ------------------
(1) Certain perquisites were provided to certain of the Named Executive
Officers, but in no event did the value of the perquisites provided in
any year exceed 10% of the amount of the executive's salary for that
year.
(2) With the exception of Messrs. Stein and Fortman, the Options listed
were granted pursuant to the Company's 1991 Stock Option Plan.
(3) Mr. Gillespie was appointed Chief Executive Officer of the Company in
November 1997.
(4) Includes relocation expenses ($3,708) and life insurance premiums
($109).
(5) Mr. Stein was appointed Executive Vice President and Chief
Administrative Officer in January 1997 and subsequently assumed the
Chief Financial Officer position. He relinquished his position as
Chief Financial Officer in January 1998.
-9-
<PAGE> 13
(6) Consists of relocation expenses ($108,221) and life insurance premiums
($220).
(7) Mr. Fortman was appointed President and Chief Operating Officer in
January 1997. He relinquished his position as President and Chief
Operating Officer of the Company in February 1998.
(8) Consists of life insurance premiums.
(9) Consists of automobile allowance.
(10) Mr. Welch became an executive officer of the Company in March 1995,
and relinquished his position with the Company in March 1998.
(11) Consists of relocation expenses ($8,815) and automobile allowance
($4,446).
(12) Mr. Thompson was appointed Chief Executive Officer and Vice Chairman
of the Company in December 1996. He relinquished his position as
Chief Executive Officer in November 1997.
EMPLOYMENT AGREEMENTS
Effective November 10, 1997, the Company, Rally's and James J. Gillespie
entered into an employment agreement, pursuant to which Mr. Gillespie serves as
the Chief Executive Officer and a Director of the Company and President, Chief
Executive Officer and a Director of Rally's. The term of employment is for
two years, subject to automatic renewal by the Company and Rally's for one-year
periods thereafter, at an annual base salary of $282,500. Mr. Gillespie is
also entitled to participate in the incentive bonus plans of the Company and
Rally's. Upon execution of the employment agreement, Mr. Gillespie was granted
an option to purchase 300,000 shares of Rally's common stock, $.10 per value
per share ("Rally's Common Stock"), and became entitled to receive a signing
bonus of $50,000. The option vests in three equal annual installments
commencing on November 10, 1998; provided, that if the term of the agreement is
not extended to November 10, 2000, the option becomes fully vested on November
10, 1999. Mr. Gillespie is entitled to choose to participate in either the
Company's or Rally's employee benefit plans and programs and is entitled to
reimbursement of his reasonable moving expenses and a relocation fee of
$5,000. The agreement may be terminated at any time for cause. If Mr.
Gillespie is terminated without cause, he will be entitled to receive his base
annual salary, and any earned unpaid bonus, through the unexpired term of the
agreement, payable in a lump sum or as directed by Mr. Gillespie. Cause is
defined as (i) a material default or breach under the agreement, (ii) the
willful and habitual failure to perform duties under the agreement or corporate
policies, or (iii) misconduct, dishonesty, insubordination or other act that
has a direct substantial and adverse effect on the reputation of the Company or
Rally's or their relationships with their customers or employees. Mr.
Gillespie has agreed to keep confidential all nonpublic information about the
Company and Rally's during the term of his employment and for a two-year period
thereafter. In addition, Mr. Gillespie has agreed that he will not during his
employment, engage in, any business which is competitive with either the
Company or Rally's. The Company and Rally's intend to share the costs
associated with this agreement. See "Compensation Committee Interlocks and
Insider Participation."
In February 1998, the Company, Rally's and Harvey Fattig entered into a
letter agreement pursuant to which Mr. Fattig is employed. Pursuant to the
agreement, Mr. Fattig serves as Executive Vice President and Chief Operating
Officer of the Company and Rally's and is paid by Checkers at an annual rate of
$175,000. Mr. Fattig is entitled to be considered for an annual bonus and
received options to purchase 108,000 shares of the Company's Common Stock and
42,000 shares of Rally's Common Stock. The
-10-
<PAGE> 14
options vest in equal annual installments over a three-year period. Mr. Fattig
is entitled to reimbursement of his relocation expenses and to six months'
severance pay if terminated without cause prior to the third anniversary of his
employment.
Effective November 22, 1996, the Company and James T. Holder entered into
an employment agreement, pursuant to which Mr. Holder was employed for a term
expiring on December 31, 1998, subject to automatic renewal by the Company
(with Mr. Holder's consent) for one-year periods until December 31, 2000, at an
annual base salary of $180,000. Mr. Holder is also eligible to receive an
annual cash bonus on terms no less favorable than those afforded to other
executives of the Company whose annual base salary exceeds $100,000. The
agreement may be terminated by the Company at any time or by Mr. Holder for
good reason. If Mr. Holder's employment is terminated by the Company without
cause or by Mr. Holder for good reason, he will be entitled to receive his base
annual salary, and any earned unpaid bonus, through the unexpired term of the
agreement. Cause is defined as (i) a material breach of the terms of the
agreement, (ii) failure to substantially perform his duties under the agreement
after written demand, or (iii) engaging in conduct the consequences of which
are materially adverse to the Company, monetarily or otherwise (hereinafter
"Cause"). Good reason is defined as the occurrence of any of the following
without Mr. Holder's written consent: (i) any material change in his status,
title, authorities or responsibilities which represents a demotion of removal;
(ii) failure by the Company to continue in effect any incentive, bonus or other
compensation plan or any employee benefit plan in which Mr. Holder
participates; (iii) any material breach by the Company of any provision of the
agreement; (iv) failure by the Company to obtain satisfactory agreement from
any successor to assume the agreement; (v) any purported termination not
effected pursuant to the agreement; or (vi) any change of control (hereinafter
"Good Reason"). Mr. Holder has agreed to keep confidential all nonpublic
information about the Company obtained by him during his employment. In
addition, Mr. Holder has agreed that he will not, during his employment or for
up to a one-year period thereafter, engage in, any business which is
competitive with the Company. See "Compensation Committee Interlocks and
Insider Participation."
Effective July 26, 1996, the Company and Michael T. Welch entered into an
employment agreement, pursuant to which Mr. Welch was employed for a term
expiring on December 31, 1998, subject to automatic renewal by the Company for
one-year periods, at an annual base salary of $128,260. Mr. Welch was also
eligible to receive an annual cash bonus pursuant to any cash bonus plan
adopted by the Company for employees of similar position. The agreement was
terminable by the Company at any time or by Mr. Welch for Good Reason. If Mr.
Welch's employment is terminated as a result of the Company's failure to renew
the term of the agreement, by the Company without Cause, by Mr. Welch for Good
Reason or as a result of his death or disability, Mr. Welch (or his estate) was
entitled to receive his base annual salary, and any earned unpaid bonus, for a
six-month period. Mr. Welch agreed to keep confidential all nonpublic
information about the Company obtained by him during his employment. In
addition, Mr. Welch has agreed that he will not, during his employment or for a
six-month period thereafter, engage in, any business which is competitive with
the Company. See "Compensation Committee Interlocks and Insider
Participation."
-11-
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding options granted to
the Named Executive Officers during fiscal 1997 pursuant to the Company's 1991
Stock Option Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES OR BASE TERM (2)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------------
NAME GRANTED(#) YEAR ($/SHARE) DATE 5%($) 10%($)
---- --------- ---- -------- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
James J. Gillespie -0- -0- -- -- -- --
C. Thomas Thompson 160,000 19.1% $1.77 1/6/07 $178,103 $451,348
James T. Holder 100,000 11.9% 1.77 1/6/07 111,314 282,092
Joseph N. Stein 250,000 29.9% 1.77 1/6/07 278,286 705,231
Richard E. Fortman 250,000 29.9% 1.77 1/6/07 278,286 705,231
Michael T. Welch -0- -0- -- -- -- --
</TABLE>
- ----------
(1) With the exception of Messrs. Stein and Fortman, all options were
granted pursuant to the 1991 Stock Option Plan.
(2) The 5% and 10% assumed annual rates of stock price appreciation are
provided in compliance with Regulation S-K under the Exchange Act.
The Company does not necessarily believe that these appreciation
calculations are indicative of actual future stock option values or
that the price of the Common Stock will appreciate at such rates.
-12-
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
Set forth below is information with respect to options exercised by the
Named Executive Officers during fiscal 1997 and the number and value of
unexercised stock options held by the Named Executive Officers at the end of
the fiscal year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES VALUE NUMBER OF UNEXERCISED IN-THE-MONEY
ACQUIRED ON REALIZED OPTIONS AT FY-END (#) OPTIONS AT FY-END($) (1)
NAME EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
James J. Gillespie -0- -0- -0-/-0- -0-/-0-
C. Thomas Thompson -0- -0- 160,000/-0- -0-/-0-
James T. Holder -0- -0- 149,083/50,917 -0-/-0-
Joseph N. Stein -0- -0- 250,000/-0- -0-/-0-
Richard E. Fortman -0- -0- 250,000/-0- -0-/-0-
Michael T. Welch -0- -0- 50,001/59,999 -0-/-0-
</TABLE>
- -------------
(1) Based upon the difference between the exercise price and the closing
price of the Common Stock ($0.813) as reported on the NASDAQ National
Market on December 29, 1997.
The information contained in this section, the following section and the
section entitled "Performance Graph" are not deemed to be "soliciting material"
or to be "filed" with the Commission or subject to Regulation A under the
Securities Act of 1933, as amended (the "Securities Act"), or to the
liabilities of Section 18 of the Exchange Act.
REPORT OF THE COMPENSATION COMMITTEE
The following report was prepared by the members of the Company's
Compensation Committee at the end of fiscal year ended December 29, 1997.
Annual compensation for all the executive officers of the Company is
determined by the Compensation Committee of the Company, subject to the terms
of any applicable employment agreement negotiated between an officer and the
Company. During fiscal year 1997, annual compensation was set with the intent
of reasonably compensating the executive officers of the Company, including the
Chief Executive Officer, in line with industry norms, based upon the Committee
members' subjective evaluation of each officer based upon assigned
responsibilities, individual performance, growth of the Company, earnings of
the Company and increases in the cost of living. C. Thomas Thompson served as
Chief Executive Officer from December 17, 1996 to November 9, 1997 and received
no compensation for his duties as an officer of the Company during fiscal year
1997, except for stock options granted to Mr. Thompson in fiscal year 1997 as
reported in the table set forth under "Option Grants in Last Fiscal Year."
-13-
<PAGE> 17
During fiscal 1997, awards of stock options under the Company's 1991
Stock Option Plan to all executive officers, including the Chief Executive
Officer, and other employees of the Company were made at the discretion of the
members of the Stock Option Committee (which consisted of all of the members of
the Compensation Committee in fiscal year 1997) pursuant to the terms of the
Plan. In determining awards under the Plan, the Stock Option Committee made a
subjective evaluation of individual responsibilities, past and anticipated
potential individual productivity and performance, past and anticipated
potential contributions to the profitability of the Company, both direct and
indirect. The Stock Option Committee did not give particular weight to a
specific factor or use a formula in determining awards under the Plan. While
not required under the terms of the Plan, all existing stock options were
granted with an exercise price at least equal to the market value of the stock
at the time of the grant and generally included vesting periods which the Stock
Option Committee believed would encourage the employee to remain with the
Company. The benefits derived from each stock option granted under the Plan is
directly attributable to a future increase in the value of the Company's Common
Stock.
James J. Gillespie has served as the Chief Executive Officer of the
Company and Rally's since November 1997. In reviewing the terms of Mr.
Gillespie's employment agreement and determining the compensation to be paid to
him in 1997, the Compensation Committee applied the policies described above.
Pursuant to his employment agreement, Mr. Gillespie is paid by the Company at
the annual rate of $282,500 and received a signing bonus of $50,000. Rally's
reimbursed the Company for its share of Mr. Gillespie's compensation. In
addition, pursuant to his employment agreement, Mr. Gillespie was granted an
option to purchase 300,000 shares of Rally's Common Stock, which vests in three
annual installments subject to acceleration in certain circumstances. See
"Management-Employment Agreements."
William P. Foley, II (Chairman)
Clarence V. McKee
-14-
<PAGE> 18
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG CHECKERS DRIVE-IN RESTAURANTS, INC.,
S&P 500 INDEX AND S&P RESTAURANT INDEX**
[GRAPH]
<TABLE>
<CAPTION>
12/31/92 12/30/93 12/31/94 12/29/95 12/30/96 12/28/97
<S> <C> <C> <C> <C> <C> <C>
Checkers 100 88 17 8 11 6
S&P 500 100 108 105 141 173 219
S&P Rest 100 116 114 170 167 178
</TABLE>
* Total return assumes reinvestment of any dividends for all companies
considered within the comparison and is adjusted for a 3 for 2 stock split of
the Company's Common Stock in June 1993.
** The Standard and Poor's Restaurant Index includes McDonald's
Corporation and Wendy's International, Inc. among others.
The foregoing graph assumes $100 invested on December 31, 1992, in the
Company, the S&P 500 Index and the S&P Restaurant Index.
Note: The stock price performance shown on the graph above is not
necessarily indicative of future price performance. Additionally, the
Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the
Exchange Act except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be
deemed filed under such Acts.
-15-
<PAGE> 19
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is responsible for
executive compensation decisions as described above. The Committee has been
comprised of Messrs. Foley and McKee during 1997. Mr. Foley is Chairman of the
Board and Chief Executive Officer of Fidelity and CKE, which, as of April 23,
1998, beneficially owned approximately 30.9% and 12.2% respectively, of the
outstanding shares of Rally's Common Stock. Rally's holds approximately
26.03% of the outstanding Checkers Common Stock.
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, among
others, CKE, Fidelity, C. Thomas Thompson, William P. Foley, II, Burt Sugarman
and KCC Delaware Company, a wholly owned subsidiary of GIANT. Pursuant to the
Restated Credit Agreement, the Company's primary debt aggregating approximately
$35.8 million principal amount, which had been acquired by the Lenders on
November 14, 1996, was restructured by, among other things, extending its
maturity by one year to July 31, 1999, fixing the interest rate at 13.0% per
annum, eliminating or relaxing certain covenants, delaying scheduled principal
payments until May 19, 1997 and eliminating $6.0 million in restructuring fees
and charges. In connection with the restructuring, the Company issued to the
Lenders warrants to purchase an aggregate of 20 million shares of Common Stock
at an exercise price of $0.75 per share, the approximate market price of the
Common Stock on the day prior to the announcement of the acquisition of the
Company's debt by the Lenders. The Lenders specified above received warrants
in the following amounts: CKE, 7,350,428; Fidelity, 2,108,262; C. Thomas
Thompson, 28,490; William P. Foley, II, 854,700; Burt Sugarman, 712,250; and KCC
Delaware Company, 2,849,002. The Lenders also received certain piggyback and
demand registration rights with respect to the shares of Common Stock underlying
their warrants.
On February 20, 1997, the Company received $19.5 million in consideration
for issuing an aggregate of 8,771,929 shares of Common Stock and 87,719 shares
of the Company's 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 (438,5965 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); William P.
Foley, II (219,298 shares of Common Stock and 2,192 shares of Series A.
Preferred Stock); and Burt Sugarman (54,824 shares of Common Stock and 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 was converted
into an aggregate of 9,383,118 shares of Common Stock upon approval of such
conversion by the Company's stockholders on August 6, 1997.
Effective November 30, 1997, the Company and Rally's entered into a
management services agreement (the "Management Services Agreement") pursuant to
which the Company is providing key services to Rally's, including executive
management, financial planning and accounting, franchise, purchasing and human
resources. In addition, the Company and Rally's share certain of their
executive officers, including the Chief Executive Officer and the Chief
Operating Officer. Management believes that entering into the Management
Services Agreement and sharing certain executive officers will enable the
Company and Rally's to take advantage of cost savings opportunities by
facilitating the combination of administrative and operational functions. The
total cost of the services provided by the Company in 1997 was $95,000.
-16-
<PAGE> 20
PROPOSAL NO. 2
RATIFICATION AND APPROVAL OF THE
GRANT OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS
On February 12, 1998, pursuant to the recommendation of the Stock Option
Committee, the Board of Directors approved the grant of options (collectively,
the "Options" and individually, an "Option") to purchase 200,000 shares of
Common Stock to each of the Company's Non-Employee Directors, as set forth in
the following table.
<TABLE>
<CAPTION>
OPTION GRANTS TO
NON-EMPLOYEE DIRECTORS
NAME DOLLAR VALUE ($)(1) NUMBER OF OPTIONS
- ---- -------------------- -----------------
<S> <C> <C>
William P. Foley, II $ 56,150 200,000
Terry N. Christensen 56,150 200,000
Frederick E. Fisher 56,150 200,000
Clarence V. McKee 56,150 200,000
Burt Sugarman 56,150 200,000
C. Thomas Thompson 56,150 200,000
Jean Giles Wittner 56,150 200,000
</TABLE>
- ---------
(1) Based on the difference between the exercise price and the closing price
of the Common Stock of $1.21875 as reported on the NASDAQ National
Market on May 6, 1998.
The Stock Option Committee and the Board of Directors believe that the
grant of the Options to Non-Employee Directors helps the Company compete for,
motivate and retain high caliber directors, and that it is in the best
interests of the Company and its stockholders to grant these Options. Any
increase in the value of the Options is dependent on appreciation in the
market value of the Common Stock, and indirectly upon improved performance by
the Company. Any such appreciation or improvement will benefit all
stockholders of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE GRANT OF OPTIONS TO THE
COMPANY'S NON-EMPLOYEE DIRECTORS.
The Options, which are not transferable have a ten-year term and may be
exercised at any time during such term, whether or not the holder remains a
Director. The exercise price is $.938 per share, the closing price of the
Common Stock on the NASDAQ National Market on the date of grant.
An optionee will not recognize any taxable income at the grant of the
Option, but will generally realize ordinary income for federal income tax
purposes at the time of exercise of such Options equal to the difference
between the fair market value of the Common Stock on the date of exercise and
the exercise price. Any taxable income recognized in connection with an Option
exercised by an optionee who at the time of exercise is an Employee of the
Company will be subject to tax withholding. Upon resale of such shares by the
optionee, any difference between the sale price and the optionee's exercise
price, to the extent not recognized as taxable income as described above, will
be treated as long-term, mid-term or short-term capital gain or loss,
depending upon the holding period. The Company will be
-17-
<PAGE> 21
entitled to a tax deduction in the same amount as the ordinary income recognized
by the optionee with respect to shares acquired upon exercise of an Option.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT OF THE COMPANY'S 1991 STOCK OPTION PLAN
DESCRIPTION OF THE AMENDMENT
Subject to the approval of the stockholders, the Board of Directors, on
the recommendation of the Compensation Committee, has amended the Company's
1991 Stock Option Plan (the "1991 Option Plan") to increase the number of
shares of Common Stock subject to the plan by 4,500,000. The Board of
Directors is of the opinion that the 1991 Option Plan has helped the Company
compete for, motivate and retain high caliber executive, administrative and
professional employees and that it is in the best interests of the Company and
its stockholders to amend the 1991 Option Plan as proposed. Consistent with
the Company's compensation objectives, awards under the 1991 Option Plan are
dependent on those factors which directly benefit the Company's stockholders
and on appreciation in the market value of the Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE 1991
OPTION PLAN.
DESCRIPTION OF THE 1991 OPTION PLAN
The 1991 Option Plan, as amended, will cover up to an aggregate of
9,500,000 shares of Common Stock. The 1991 Option Plan is administered by the
Board or, at its option, a committee whose members are appointed by the Board
of Directors (the "Committee"). All salaried employees of the Company and its
subsidiaries are eligible to receive options. As of May 6, 1998, there were
approximately 410 employees currently eligible to participate in the 1991
Option Plan and approximately 350 employees holding outstanding options under
the 1991 Option Plan.
The Committee has sole discretion to determine the employees to receive
options under the 1991 Option Plan and the timing and amount of options granted
under the 1991 Option Plan. The Committee may grant options pursuant to the
1991 Option Plan which are intended to meet the requirements of incentive stock
options ("ISOs") as defined in Section 422 of the Internal Revenue Code of
1986, as amended ("Internal Revenue Code"), or options not intended to be ISOs
("Non-Qualified Options"). In addition, the Company may issue stock
appreciation rights ("SARs") pursuant to the 1991 Option Plan. SARs are issued
in tandem with options and require the payment upon exercise of an amount equal
to the strike price of the option and the fair market value of the stock on the
date of exercise. Such payment can be made by the Company in either cash or
stock. The committee has the discretion to determine the exercise price of any
option, although in the case of an ISO the price may not be less than 100% of
the fair market value of the Common Stock at the time of grant, as determined
by the closing price of the Common Stock on the NASDAQ National Market on such
date. Shares subject to, but not delivered under an option terminating or
expiring for any reason prior to its exercise in full are available for the
grant of future options under the 1991 Option Plan.
The total number of shares with respect to which options may be granted to
any employee during any one fiscal year may not exceed 300,000 shares. As to
ISOs, the IRC limits the maximum aggregate value
-18-
<PAGE> 22
of the Common Stock for which ISOs may become exercisable in any one year to
$100,000. The term of an ISO is determined by the Committee, but may not exceed
ten years from the date of grant. An ISO must be exercised by an employee
either during employment or within three months of termination of
employment. No ISO may be granted to any employee who immediately after the
granting of such ISO would own more than 10% of the issued and outstanding
Common Stock ("10% Stockholder"), unless the exercise price of the ISO is at
least 110% of the fair market value of the Common Stock at the time of such
grant and the ISO is not exercisable after five years from the date of such
grant.
In the event any change is made in the Company's capitalization that
results from a stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares or any similar
change affecting the Common Stock, appropriate adjustment, as determined by the
Committee, will be made in the exercise price and in the number and class of
shares subject to the option.
The Board of Directors may amend or terminate the 1991 Option Plan from
time to time in such respects as the Board may deem advisable; provided that
the Board may not: (i) increase the number of shares subject to the 1991
Option Plan without stockholder approval; (ii) materially modify the
requirements as to eligibility for participation; or (iii) materially increase
the benefits accruing to participants under the 1991 Option Plan.
An optionee who is granted an ISO generally will not recognize taxable
income either upon the grant or the exercise of an ISO, although the exercise
may be subject to the alternative minimum tax as the difference between the
fair market value of the Common Stock at the time of exercise and the exercise
price is a tax preference item. No deduction will ordinarily be available to
the Company as a result of the grant or exercise of ISOs. Upon the sale or
exchange of the shares underlying an ISO more than two years after the date of
grant and one year after the date of exercise, the optionee will recognize
capital gain (or loss) in the amount by which the sale price exceeds (or is
less than) the adjusted basis of the shares. Such gain (or loss) will be
mid-term gain (or loss) if the shares are held for more than one year from the
date of exercise and will be long-term gain (or loss) if the shares are held
for more than 18 months from the date of exercise. If the shares are sold
prior to the end of the holding periods discussed above, the optionee will
recognize ordinary income at the time of sale or exchange equal to the
difference between the exercise price and the lower of (i) the fair market
value of the shares on the date of exercise or (ii) the sale price of the
shares.
An optionee granted Non-Qualified Options is not subject to many of the
restrictions involving ISOs. An optionee will not recognize any taxable income
at the grant of the Non-Qualified Option, but will generally realize ordinary
income for federal income tax purposes at the time of exercise of such option
equal to the difference between the fair market value of the Common Stock on
the date of exercise and the exercise price. Any taxable income recognized in
connection with a Non-Qualified Option exercised by an optionee who is an
employee of the Company will be subject to tax withholding. Upon resale of
such shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable income as
described above, will be treated as long-term, mid-term or short-term capital
gain or loss, depending upon the holding period. The Company will be entitled
to a tax deduction in the same amount as the ordinary income recognized by the
optionee with respect to shares acquired upon exercise of a Non-Qualified
Option.
The foregoing is only a summary of certain effects of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the 1991 Option Plan, does not purport to be complete
and does not discuss the tax consequences of the optionee's death or the income
tax laws of any local, state or foreign jurisdiction in which any optionee may
reside.
AMENDED PLAN BENEFITS
The following table sets forth certain information with respect to stock
options granted pursuant to the 1991 Option Plan during the fiscal year 1997
to: (i) the Named Executive Officers; (ii) all current executive officers as a
group; (iii) all current Directors who are not Executive Officers as a group;
and (iv) all non-Executive Officer employees as a group. The options shown
below are not necessarily indicative of the number of options that may be
granted in the future.
<TABLE>
<CAPTION>
NAME & POSITION DOLLAR VALUE(1) NUMBER OF OPTIONS
- --------------- --------------- -----------------
<S> <C> <C>
James J. Gillespie -- -0-
Chief Executive Officer
C. Thomas Thompson $ -0- 160,000
Vice Chairman
James T. Holder -0- 100,000
Senior Vice President,
General Counsel and Secretary
Joseph N. Stein (2) -- -0-
Executive Vice President and
Chief Administrative Officer
Richard E. Fortman (2) -- -0-
President and Chief Operating Officer
Michael T. Welch -- -0-
Vice President, Operations Services
and Research and Development
All Current Executive Officers as -0- 260,000
a group (5 persons)
All Current Non-Executive Officer -- -0-
Directors as a group (7 persons)
All Non-Executive Officer $2,500 65,000
Employees as a group (2 persons)
</TABLE>
- ---------------
(1) Based upon the difference between the exercise price and the closing
price of the Common Stock of $1.25 as reported on the NASDAQ National
Market on May 5, 1998.
(2) Messrs. Stein and Fortman were each granted options to purchase 250,000
shares of Common Stock outside of the 1991 Option Plan.
-19-
<PAGE> 23
PROPOSAL NO. 4
RATIFICATION AND APPROVAL OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company has engaged the firm of KPMG Peat Marwick LLP, independent
certified public accountants, to report upon the financial statements included
in the Annual Report submitted herewith. A representative from said firm will
be in attendance at the Meeting, will have the opportunity to make a statement
if desired, and will be available to respond to any questions from those in
attendance. The Company has appointed KPMG Peat Marwick LLP to report upon its
financial statements for the fiscal year ending December 28, 1998, subject to
ratification of such appointment by the stockholders at the Meeting.
Stockholder ratification of the Company's independent certified public
accountants is not required by the Company's By-Laws or otherwise. The Board
of Directors has elected to seek such ratification as a matter of good
corporate practice and unanimously recommends that you vote "FOR" such
ratification. If the stockholders do not ratify this appointment, other
certified public accountants will be considered by the Board of Directors upon
recommendation of the Audit Committee.
OTHER BUSINESS
Management of the Company does not know of any other business that may be
presented at the Meeting. If any matter not described herein should be
presented for stockholder action at the Meeting, the persons named in the
enclosed Proxy will vote the shares represented thereby in accordance with
their best judgment.
STOCKHOLDER PROPOSALS FOR
PRESENTATION AT THE 1999 ANNUAL MEETING
The Board of Directors requests that any stockholder proposals intended
for presentation at the 1999 Annual Meeting be submitted to James T. Holder,
Secretary, in writing no later than January 15, 1999, for consideration for
inclusion in the Company's proxy materials for such meeting.
The Company's By-Laws require certain advance notice to the Company of any
nominations by stockholders of persons to stand for election as directors at
stockholders' meetings. Notice of director nominations must be timely given in
writing to the Secretary of the Company prior to the meeting at which the
directors are to be elected. To be timely, notice must be received at the
principal executive offices of the Company not less than 60 nor more than 90
days prior to the meeting of stockholders; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to the stockholders, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth day following the day on which such notice of the date of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever first occurs.
A stockholder's notice with respect to a director nomination must set
forth (i) certain information about the nominee, (ii) the consent of the
nominee to serve as a director if elected, (iii) the name and record address of
the nominating stockholder, (iv) the class or series and number of shares of
the Company which are beneficially owned by such stockholder, (v) a description
of all arrangements or understandings between such stockholder and each
proposed nominee and any other person pursuant to which the
-20-
<PAGE> 24
nominations are to be made, (vi) a representation that such stockholder intends
to appear in person or by proxy at the meeting to nominate the persons named,
and (vii) certain other information.
The complete By-Law provisions governing these requirements are available
to any stockholder without charge upon request from the Secretary of the
Company.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 29,
1997, AS AMENDED, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL
STATEMENT SCHEDULES, AND THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED MARCH 23, 1998. WRITTEN REQUESTS, ACCOMPANIED BY A GOOD
FAITH REPRESENTATION THAT, AS OF MAY 11, 1998, THE PERSON MAKING THE REQUEST
WAS THE BENEFICIAL OWNER OF COMMON STOCK, SHOULD BE DIRECTED TO CHECKERS
DRIVE-IN RESTAURANTS, INC., 600 CLEVELAND STREET, 8TH FLOOR, CLEARWATER,
FLORIDA 34615, ATTENTION: CORPORATE SECRETARY.
By Order of the Board of Directors,
JAMES T. HOLDER
Secretary
Dated: May 15, 1998
-21-
<PAGE> 25
APPENDIX
PROXY
CHECKERS DRIVE-IN RESTAURANTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 11, 1998
The undersigned hereby appoints James J. Gillespie, Joseph N. Stein
and James T. Holder, and each of them, proxies with full power of substitution,
for and in the name of the undersigned to vote all shares of Common Stock of
Checkers Drive-In Restaurants, Inc., a Delaware corporation (the "Company"),
that the undersigned would be entitled to vote at the Company's 1998 Annual
Meeting of Stockholders to be held on June 11, 1998 (the "Meeting"), and at any
adjournments thereof, upon the matters set forth in the Notice of the Meeting
as stated hereon, hereby revoking any proxy heretofore given. In their
discretion, the proxies are further authorized to vote upon such other business
as may properly come before the Meeting or any adjournments thereof.
The undersigned acknowledges receipt of the Notice of the Meeting and
the accompanying Proxy Statement, Annual Report and Form 10-Q.
(Continued and to be SIGNED on the other side)
- -------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
ADMISSION TICKET
ANNUAL MEETING OF STOCKHOLDERS
OF
CHECKERS DRIVE-IN RESTAURANTS, INC.
THURSDAY, JUNE 11, 1998, 1:30 PM (LOCAL TIME)
FESS PARKER'S DOUBLETREE RESORT
633 EAST CABRILLO BOULEVARD
SANTA BARBARA, CALIFORNIA
<PAGE> 26
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3, 4 AND 5.
Please mark your vote as indicated in this example: [X]
1. Election of Directors Below.
Nominees:
Terry N. Christensen, James J. Gillespie and Peter C. O'Hara
For, except vote withheld from the following nominee(s):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
FOR WITHHELD ABSTAIN
<S> <C> <C> <C> <C>
2. Ratify and approve the grant of [ ] [ ] [ ]
options to the Company's Non-Employee
Directors.
3. Ratifiy and approve an amendment to [ ] [ ] [ ]
the Company's 1991 Stock Option
Plan.
4. Ratify and approve the appointment [ ] [ ] [ ]
of KPMG Peat Marwick LLP as indepen-
dent auditors.
</TABLE>
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS LISTED ABOVE, FOR
APPROVAL OF THE PROPOSALS SET FORTH ABOVE AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
SIGNATURE ___________________ SIGNATURE ___________________
Date: _____________ Date: _____________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
