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EXHIBIT 99.1
LETTER OF INTENT
This Letter of Intent is entered into as of September 25, 1998 by and
among Rally's Hamburgers, Inc. ("Rally's"), Checkers Drive-In Restaurants, Inc.
("Checkers") and GIANT GROUP, LTD. ("GIANT") with respect to a series of
transactions pursuant to which Rally's would acquire Checkers and GIANT (the
"Merger"). While the terms and conditions of the transactions will be set forth
in definitive documentation to be negotiated among the parties, the principal
terms of the transactions are as follows:
1. Rally's, Checkers and GIANT would enter into a merger agreement
pursuant to which Checkers and GIANT would become wholly-owned
subsidiaries of Rally's in a tax-free reorganization, and Rally's
would change its corporate name to "Checkers Drive-In Restaurants,
Inc." or a variant thereof. The holders of Checkers' common stock
would receive in the Merger, for each share of Checkers' common stock
held, 0.5 shares of Rally's common stock (the "Checkers Merger
Consideration"), and the holders of GIANT's common stock would receive
in the Merger, for each share of GIANT's common stock held, 10.48
shares of Rally's common stock (the "GIANT Merger Consideration" and
collectively with the Checkers Merger Consideration, the "Merger
Consideration").
2. Outstanding options shall be treated as follows (which may require the
cancellation and re-issuance of such options):
a. Options to acquire GIANT's common stock would continue to be
exercisable in accordance with their respective terms, except
that on exercise the holder would receive the GIANT Merger
Consideration; provided however, that the holders of not less
than 90% of the GIANT options will agree that: (i) in
consideration for Rally's agreeing to a five year extension
of the options held by the consenting option holders, the
exercise price of such options will be increased to the
equivalent of $1.50 per share of Rally's common stock to be
acquired; and (ii) such options will not be exercisable
without the consent of Rally's to the extent such exercise
would cause Section 4.14 of Rally's Indenture with respect to
its 9 7/8% Senior Notes to become applicable.
b. Options to acquire Checkers' common stock would continue to
be exercisable in accordance with their respective terms,
except that: (i) on exercise the holder will receive the
Checkers Merger Consideration (i.e. 0.5 share of Rally's);
(ii) the exercise price will, where above $.75, be reduced to
$.75; and (iii) there will be a five year extension of the
options.
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c. Options to acquire Rally's common stock would remain
unchanged except that: (i) the exercise price will, where
above $1.50, be reduced to $1.50; and (ii) there will be a
five year extension of the options.
3. Warrants to acquire Checker's common stock would continue to be
exercisable in accordance with their respective term except that on
exercise the holder will receive the Checkers Merger Consideration
(i.e., 0.5 share of Rally's).
4. Immediately following the Merger: the present management of Rally's
would remain in place; the Rally's Board of Directors would consist of
the members of the present Boards of Directors of Rally's and GIANT
plus Xxxxx X. X'Xxxx; Xx. Xxxxxxxx would become Vice Chairman of the
Rally's Board and Chairman of its Executive Committee (whose other
members would consist of Xx. Xxxxx, Xxxxxx Xxxxxx and Xxxxx
Xxxxxxxxxxx); and there would be such other changes in the composition
of the Rally's Board of Directors and Executive Committee as Rally's,
Checkers and GIANT will agree. So long as the agreement referred to in
Section 6(j) remains in effect, Xx. Xxxxx would be Chairman of Rally's
Board of Directors.
5. Xx. Xxxxxxxx'x current employment agreement and perquisites with GIANT
would be assumed by Rally's on the same terms and conditions as
currently exist, except that: Xx. Xxxxxxxx'x title will be Vice
Chairman of the Board and Chairman of the Executive Committee; he
would not be responsible for day-to-day operations, but would focus on
strategic planning, acquisition opportunities and other
responsibilities customary for such positions; he would waive any
"change of control" provisions which might be activated by the Merger
(but such provisions would remain in full force and effect with
respect to any subsequent transactions); the agreement would be
extended for such period of time as the Rally's Executive Committee
and Xx. Xxxxxxxx will agree; the agreement would contain other mutual
modifications as are appropriate and mutually agreeable to reflect the
new corporate structure. Among other things, following the Merger,
Rally's will maintain the current GIANT office (on a reduced scale) in
the Los Angeles area for use by Xx. Xxxxxxxx and appropriate support
staff, with Los Angeles corporate overhead being subject to agreement
with the Executive Committee.
6. The Merger would be subject to a number of conditions, including the
following:
a. preparation and execution of a definitive merger agreement and
other necessary documentation to implement the transactions;
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b. approval of the Merger by the respective shareholders and
Boards of Directors of each of GIANT, Checkers and Rally's,
which would entail the preparation, filing and effectiveness
of a Joint Proxy Statement/Prospectus with respect to the
Merger and the issuance of the Merger Consideration;
c. receipt by each of Rally's, Checkers and GIANT of an opinion
from an investment banking firm of its selection, in form and
substance satisfactory to Rally's, Checkers and GIANT, as
applicable, to the effect that the Merger and related
transactions are fair to its shareholders from a financial
point of view as of the time of execution of this Letter of
Intent;
d. Rally's, Checkers and GIANT completing to their respective
satisfaction due diligence investigations with respect to the
others' business, financial condition and other matters,
including confirming to their mutual satisfaction, that the
Merger will not constitute a change of control for purposes
of Rally's 9-7/8% Senior Notes;
e. compliance with the requirements of the Xxxx-Xxxxx-Xxxxxx Act;
f. obtaining such third party consents as are required and are
material to the operations of Rally's and its subsidiaries
following the Merger;
g. legal opinions customary for such transactions;
h. customary representations and warranties, which would
terminate at the closing of the Merger;
i. redemption or waiver prior to the closing of the Merger of
all outstanding Rights under GIANT's Stockholders Rights
Plan;
j. execution of an agreement among CKE Restaurants, Inc.
("CKE"), Fidelity National Financial, Inc. ("FNF"), Xx.
Xxxxxxxx and Rally's pursuant to which: (i) for a three year
period following the consummation of the Merger, CKE and FNF
(collectively "CKE-FNF"), on the one hand, and Xx. Xxxxxxxx,
on the other hand, each will agree not to dispose of their
Rally's shares, without the consent of Rally's, except for
dispositions of shares of Rally's common stock (x) in
transactions pursuant to Rule
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144, (y) in a tender offer, exchange offer or similar
transaction that has been approved by Rally's, or (z) other
dispositions not to exceed an aggregate of 1,000,000 shares
by Xx. Xxxxxxxx or CKE-FNF, as applicable, in any three month
period, provided that in such event, CKE-FNF and Xx.
Xxxxxxxx, as applicable, will have a right of first refusal
on customary terms (including window periods during which the
right may be exercised) to acquire any shares of Rally's
proposed to be sold by the other; and (ii) the parties will
agree to customary registration, "tag along" and "drag along"
rights;
k. execution of the amended employment agreement with Xx.
Xxxxxxxx described in Section 5 above; and
l. the satisfaction of such other conditions as are customary
for such transactions.
7. Concurrently with the execution of the Merger Agreement:
a. Xx. Xxxxxxxx will deliver to Rally's an agreement and/or
irrevocable proxy obligating him to vote all shares of
GIANT's common stock over which he has voting rights in favor
of the Merger.
b. CKE, FNF and Xx. Xxxxx will deliver to GIANT an agreement
and/or irrevocable proxies obligating them to vote all shares
of Rally's common stock over which they have voting rights in
favor of the Merger.
c. Rally's will deliver to Checkers an agreement and/or
irrevocable proxy obligating it to vote all shares of
Checkers' common stock over which it has voting rights in
favor of the Merger.
d. CKE and Rally's will execute an agreement providing for joint
purchasing by Rally's (for its Rally's and Checkers
restaurant operations) and CKE (for its Carl's, Jr., Hardee's
and other restaurant operations) of all items presently being
jointly purchased and such additional items as may reasonably
be added in the future, including food, paper, beverage,
signs, building materials, kitchen equipment, construction
services, etc. CKE may terminate such agreement if Xx. Xxxxx
or CKE's designee is not offered the position of Chairman of
the Board of Rally's.
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8. The merger agreement will provide that if the Merger is terminated by
reason of any party to the Merger exercising a "fiduciary out", the
terminating party will reimburse the non-terminating parties for
their reasonable and documented transaction costs.
9. In order to facilitate the Merger, from and after the date hereof
through and including the date the transactions are consummated or
abandoned, each of GIANT, Checkers and Rally's (the "Constituent
Corporations") shall afford the others and their respective
representatives with full access to its books, records and personnel
for the purpose of conducting due diligence. The Constituent
Corporations acknowledge that in the course of such due diligence,
each will be providing the others and their representatives with
information which is proprietary and confidential. The Constituent
Corporations, each on behalf of itself and its representatives, agrees
that it will treat as confidential all information provided to it by
the others which the others designate as such in writing
("Confidential Information), and that it will use such Confidential
Information solely in connection with the transactions. In the event
the transactions are abandoned, the Constituent Corporations, as
applicable, will return and/or destroy without retaining any copies
thereof, as requested by the party which provided the Confidential
Information to it, all such Confidential Information. The foregoing
restrictions shall not apply to any information which: (a) has not
been designated as Confidential Information; (b) which the recipient
has obtained from sources other than the Constituent Corporations,
which sources, to the best of the recipient's knowledge and belief,
are not subject to any confidentiality undertaking and did not acquire
such information from sources which are subject to such an
undertaking; or (c) has become known to the public other than through
a violation of this Section 9. The parties acknowledge that the
foregoing provisions shall not apply to information received by
directors of any Constituent Corporation who are also directors of any
other Constituent Corporation received by them in their capacities as
directors of a Constituent Corporation, all of which information is
subject to customary standards of confidentiality.
10. Subject to their respective Board of Directors complying with their
fiduciary obligations under applicable law on advice of counsel, in
order to induce the others to proceed with their due diligence and
negotiation of the definitive agreements necessary to implement the
transactions, without consent of the other Constituent Corporations,
each Constituent Corporation agrees not to solicit or negotiate with
any party other than the other Constituent Corporations and their
respective representatives with respect to a merger or business
combination for a thirty (30) day period from and after the date
hereof (the "Exclusivity Period"). Upon termination of this letter of
intent during the Exclusivity Period by reason of application of the
introductory clause of the prior sentence, the terminating party will
reimburse the non-terminating parties for their reasonable and
documented transaction costs. Upon termination of the Exclusivity
Period, any party may, on written notice to the other, terminate this
letter of intent.
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11. Rally's, Checkers and GIANT agree to issue a joint press release
concurrently with the execution of this letter of intent, and
thereafter to cooperate with each other with respect to such further
public disclosure as may be required or appropriate in connection with
applicable securities laws. Unless required in order to comply with
applicable law, neither GIANT, Checkers nor Rally's will make any
public announcements concerning the Merger and related transactions
without the consent of the other, not to be unreasonably withheld.
12. Except for their respective financial advisors to be engaged in
connection with the fairness opinions contemplated by this Letter of
Intent, each of GIANT, Checkers and Rally's represents and warrants
that it has not engaged any finders or brokers in connection with the
transactions described herein.
13. GIANT, Checkers and Rally's each agree to conduct their respective
businesses only in the ordinary course consistent with past practice
until earlier of the execution of a definitive merger agreement or the
termination of this Letter of Intent.
14. Subject to Sections 8 and 10, GIANT, Checkers and Rally's will bear
their own expenses in connection with the transactions described in
this Letter of Intent.
15. This Letter of Intent shall be governed by the laws of the state of
Delaware.
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The foregoing is an expression of mutual intent only, and except for
Sections 9, 10, 11, 12, 13, 14 and 15, does not constitute a binding agreement
among the parties. Upon execution of this letter of intent by Rally's, Checkers
and GIANT, each party shall work diligently and in good faith to complete the
due diligence and negotiate the definitive agreements necessary and appropriate
to implement the transactions as promptly as is practicable.
RALLY'S HAMBURGERS, INC.
By /s/ XXXXXXX X. XXXXX, XX
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Chairman
CHECKERS DRIVE-IN RESTAURANTS, INC.
By /s/ XXXXXXX X. XXXXX, XX
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Chairman
GIANT GROUP, LTD.
By /s/ XXXX XXXXXXXX
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By their respective signatures below:
a. Fidelity National Financial, Inc. and CKE Restaurants, Inc.
each acknowledge its intent to enter into the agreements
referred to in Sections 6 and 7 above; and
b. Xxxx Xxxxxxxx acknowledges his consent to the changes in his
GIANT options, as described in Section 2(a) above and his
intent to enter into the agreements referred to in Sections 6
and 7 above.
c. Xxxxxxx X. Xxxxx, XX, acknowledges his intent to enter into
the agreements referred to in Section 7 above.
CKE RESTAURANTS, INC.
By /s/ Xxxxxx X. Xxxxxx
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FIDELITY NATIONAL FINANCIAL, INC.
By /s/ Xxxxxx X. Xxxxxx
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/s/ Xxxxxxx X. Xxxxx, XX
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XXXXXXX X. XXXXX, XX
/s/ Xxxx Xxxxxxxx
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XXXX XXXXXXXX
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