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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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
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 the 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:
CHECKERS DRIVE-IN RESTAURANTS, INC.
14255 49th Street North, Building 1
Clearwater, Florida 33762
August 3, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Checkers Drive-In Restaurants, Inc. The Meeting will be held September 26,
2001 at 9:00 a.m., Eastern Daylight Savings Time, at the Tampa Westshore
Marriott, located at 1001 North Westshore Boulevard, Tampa, Florida.
The Notice of the Meeting and the Proxy Statement on the following pages
cover the formal business of the Meeting. We will also report on the progress
of the Company and comment on matters of current interest.
It is important that your shares be represented at the Meeting. We ask that
you promptly sign, date and return the enclosed proxy card in the envelope
provided, even if you plan to attend the Meeting. Returning your proxy card to
us will not prevent you from voting in person at the Meeting if you are present
and choose to do so.
If your shares are held in street name by a brokerage firm, your broker will
supply you with a proxy to be returned to the brokerage firm. It is important
that you return the form to the brokerage firm as quickly as possible so that
the brokerage firm may vote your shares. You may not vote your shares in person
at the Meeting unless you obtain a power of attorney or legal proxy from your
broker authorizing you to vote the shares, and you present this power of
attorney or proxy at the Meeting.
Your Board of Directors and management look forward to greeting you
personally at the Meeting.
Sincerely,
/s/ Brian R. Doster
Brian R. Doster
Secretary
CHECKERS DRIVE-IN RESTAURANTS, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 26, 2001
----------------
Notice is hereby given that the Annual Meeting of Stockholders of Checkers
Drive-In Restaurants, Inc., a Delaware corporation, will be held at the Tampa
Westshore Marriott located at 1001 North Westshore Boulevard, Tampa, Florida,
on September 26, 2001 at 9:00 a.m. Eastern Daylight Savings Time for the
following purposes:
1. To elect four Directors to serve until the Annual Meeting in 2004, until
their successors are elected and qualified or until their earlier
resignation, removal from office or death;
2. To ratify and approve a successor plan to the Company's 1991 Stock
Option Plan: the 2001 Stock Option Plan;
3. To ratify and approve the appointment of KPMG LLP as the Company's
independent auditors for fiscal 2001; and
4. 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 2001 Annual Report of the Company is also enclosed. Stockholders of record
at the close of business on August 23, 2001 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 Checkers
Drive-In Restaurants, Inc., at 14255 49th Street North, Clearwater, FL 33762 or
after August 24, 2001 at it's new corporate offices at 4300 West Cypress
Street, Suite 600, Tampa, Florida 33607.
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,
/s/ Brian R. Doster
BRIAN R. DOSTER
Secretary
CHECKERS DRIVE-IN RESTAURANTS, INC.
14255 49th Street North, Building 1
Clearwater, Florida 33762 *
----------------
PROXY STATEMENT
----------------
This Proxy Statement is furnished by the Board of Directors and management
of Checkers Drive-In Restaurants, Inc. (the "Company") in connection with the
solicitation of proxies to be voted at the Company's 2001 Annual Meeting of
Stockholders, which will be held on September 26, 2001 at 9:00 a.m., at the
Tampa Westshore Marriott located at 1001 North Westshore Boulevard, Tampa,
Florida (the "Meeting").
Any proxy delivered pursuant to this solicitation may be revoked, at the
option of the person executing the proxy, at any time before it is exercised by
delivering a signed revocation to the Company, by submitting a later-dated
proxy, or by attending the Meeting in person and casting a ballot. If proxies
are signed and returned without voting instructions, the shares represented by
the proxies will be voted as recommended by the Board of Directors.
The close of business on August 23, 2001, 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 June 18, 2001, 9,889,842 shares of
the Company's Common Stock, par value $.001 per share (the "Common Stock") were
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 August 23, 2001, on all matters that come before the
Meeting.
The affirmative vote of the 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 privileged 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 indicated 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. The Company does not expect to pay any
compensation for the solicitation of proxies, but may reimburse brokers and
other persons holding stock in their names, or in the names of nominees, for
their expense 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 August 24, 2001.
--------
* Corporate offices are relocating to 4300 West Cypress Street, Suite 600,
Tampa, Florida 33607 on or about August 24, 2001.
ELECTION OF DIRECTORS
There are currently nine 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 four of the
Company's Directors, Peter C. O'Hara, Daniel J. Dorsch, Terry N. Christensen
and Willie D. Davis, will expire at the Meeting. The Board of Directors
unanimously recommends that you vote "FOR" the election of Messrs. O'Hara,
Dorsch, Christensen and Davis as Directors, to hold office until the Company's
annual meeting in 2004 and until their successors shall 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 four nominees. Stockholders may not vote cumulatively in the
election of Directors.
MANAGEMENT
The following table sets forth the names and ages of the Directors and
executive officers of the Company and the positions they hold. Executive
officers serve at the pleasure of the Board of Directors.
Directors and Executive Officers
Name Age Position
---- --- --------
William P. Foley, II........... 56 Chairman of the Board of Directors (term
expiring in 2002)
Peter C. O'Hara................ 45 Vice Chairman of the Board of Directors
and Director (term expiring in 2001)
Nominee for Director with term expiring
in 2004
Daniel J. Dorsch............... 48 President, Chief Executive Officer and
Director (term expiring in 2001) Nominee
for Director with term expiring in 2004
Terry N. Christensen........... 60 Director (term expiring in 2001) Nominee
for Director with term expiring in 2004
Willie D. Davis................ 66 Director (term expiring in 2001) Nominee
for Director with term expiring in 2004
David Gotterer................. 72 Director (term expiring in 2003)
Ronald B. Maggard.............. 52 Director (term expiring in 2003)
Clarence V. McKee.............. 58 Director (term expiring in 2002)
Burt Sugarman.................. 62 Director (term expiring in 2003)
Directors
WILLIAM P. FOLEY, II has served as a director since November 1996 and as
Chairman of the Board since June 1997. Mr. Foley has been Chairman of the Board
of Santa Barbara Restaurant Group, Inc. since July 1997. He 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, since its formation in 1984. 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 of CKE Restaurants, Inc., owner, operator and franchisor of quick-
service restaurants, primarily under the Carl's Jr. and Hardee's brand names,
and is a director of Micro General Corporation, Miravant Medical Technologies
and Fresh Foods, Inc.
2
PETER C. O'HARA has served as a director since June 1998 and Vice Chairman
since September 1999. He 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.
DANIEL J. DORSCH has served as the Chief Executive Officer, President and a
director since December 1999. Mr. Dorsch is also a multi-unit franchise owner
for Papa John's Pizza, earning franchisee of the year in 1998. Since 1994, Mr.
Dorsch has also owned and operated franchises with Honda, Kawasaki, Yamaha,
Suzuki, & Seadoo.
BURT SUGARMAN has served as a director since June 1997. Mr. Sugarman has
been the Chairman of the Board, President and Chief Executive Officer of Giant
Group, Ltd. for the past five years and also currently serves as a director of
Santa Barbara Restaurant Group. Mr. Sugarman served as Chairman of the Board of
Rally's Hamburgers, Inc. from November 1994 to October 1997.
TERRY N. CHRISTENSEN has served as a director 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. and MGM Mirage. Christensen, Miller, Fink,
Jacobs, Glaser, Weil & Shapiro, LLP performed legal services for us in 1999 and
2000. Such services have related to litigation, compliance with securities laws
and other business matters.
WILLIE D. DAVIS has served as a director since August 1999. Mr. Davis has
been the President and a director of All-Pro Broadcasting, Inc., a holding
company operating several radio stations, for more than the past five years.
Mr. Davis currently also serves on the board of directors of Sara Lee
Corporation, K-Mart Corporation, Dow Chemical Company, Metro-Goldwyn-Mayer
Inc., MGM Mirage, Basset Furniture Industries, Incorporated and the Strong
Fund.
DAVID GOTTERER has served as a director since August 1999. Mr. Gotterer has
been a partner in the accounting firm of Mason & Company, LLP, New York, New
York, for more than the past five years. Mr. Gotterer is a director and Vice
Chairman of Giant Group, Ltd.
RONALD B. MAGGARD has served as a director since August 1999. For more than
the past five years, Mr. Maggard has been President of Maggard Enterprises,
Newport Beach, CA, which owns 20 franchised Long John Silver Restaurants and
President of Midstate Distributing, Lexington, Kentucky, which is a Miller
Distributing Company. Mr. Maggard is also currently a director of Santa Barbara
Restaurant Group.
CLARENCE V. McKEE has served as a director 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. He is a former chairman of the
Florida Association of Broadcasters and former director of Florida Progress
Corporation and its subsidiary Florida Power Corporation.
Executive Officers
Set forth below is a description of the business experience and the ages of
our executive officers, other than Mr. Dorsch, whose experience is described
above. Executive officers serve at the discretion of our Board of Directors.
STEVE COHEN (49) has served as our Senior Vice President of Human Resources
since December 1997. From May 1995 to December 1997, Mr. Cohen was the Field
Human Resources Manager for EZCorp in Austin, Texas.
ADAM NOYES (31) has served as Vice President of Purchasing and Operations
since August 2000. He served as Vice President of Purchasing and Quality
Assurance from October 1998 to August 2000. He was Senior Director of
Purchasing from May 1998 to September 1998. Director of Purchasing from June
1996 to
3
April 1998. Prior to this, Mr. Noyes served Checkers in the capacity of
Restaurant Support Services from April 1991 to May 1996.
KEITH SIROIS (49) has served as Vice President of Franchise Operations since
September 1999. From September 1998 to September 1999, he served as Checkers'
Director of Franchise Operations. Mr. Sirois served as a franchise business
consultant with Checkers from August 1996 to September 1998. From March 1992 to
September 1996, Mr. Sirois served as Vice President of Franchise Operations for
Heartwise Express, Inc. in Chicago, Illinois.
RICHARD SVEUM (44) has served as Vice President of Franchise Sales and
Development since September 1999. Mr. Sveum has served in various capacities
for Checkers since 1993, including: Director of Franchise Sales from July 1998
to September 1999; Senior Manager of Champion, formerly the modular restaurant
division of Checkers, and Franchise Sales from September 1997 to July 1998; and
franchise business consultant from October 1993 to September 1997.
RICHARD TURER (39) has served as Vice President of Marketing since September
1999. From July 1998 to September 1999, Mr. Turer served as Director of
Marketing for Checkers and Rally's brands. From May 1995 to July 1998, he was
self-employed and operated Mill House McCabe, a marketing and promotional
company, in Sparta, New Jersey.
BRIAN R. DOSTER (42) has served as Vice President, Corporate Counsel and
Secretary since November, 2000. He served previously as Assistant General
Counsel and Assistant Secretary of Checkers since April 1999 and September
1999, respectively. From November 1985 to April 1999, he was a corporate
attorney for Amoco Corporation in Chicago, Illinois.
No family relationships exist between any of the directors and the executive
officers of the Company. There are no arrangements or understandings between
any director and any other person concerning service or no nomination as a
director.
The Board of Directors held four meetings during 2000 and acted one time by
unanimous written consent without a meeting. In 2000, each incumbent Director
attended at least 75% of the meeting of the Board of Directors and of each
committee of which he was a member. The Chairman and other Board members
periodically communicate with one another during the year regarding Company
business in between meetings.
Committees of the Board of Directors
The Board of Directors has Executive, 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 2001 Annual
Meeting."
During 2000, the Audit Committee consisted of Ronald D. Maggard, Clarence V.
McKee, and David Gotterer who was elected to the Committee in January 2000. The
Committee held two meetings. The Audit Committee recommends the appointment of
the independent auditors of the Company, discusses and reviews the scope and
fees of the prospective annual audit and reviews the results thereof with the
independent auditors, reviews and approves non-audit services of the
independent auditors, 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
the year, the Board examined the composition of the Audit Committee in light of
the adoption by the Securities and Exchange Commission and the NASDAQ
4
Exchange of new rules governing audit committees. Based upon this examination,
the Board confirmed that all members of the Audit Committee are "independent"
within the meaning of the Exchange's new rules.
During 2000, the Executive Committee consisted of William P. Foley, II, Burt
Sugarman and Daniel J. Dorsch and held one meeting. The Executive Committee has
the authority between meetings of the Board, to take all actions with respect
to the management of the Company's business that require action by the Board,
except with respect to certain specified matters that by law must be approved
by the entire Board.
During 2000, the Compensation Committee consisted of William P. Foley, II,
Willie D. Davis and Peter C. O'Hara and held one meeting. Its principal
function is to make recommendations to the Board of Directors with respect to
compensation and benefits to be paid to officers, and perform other duties
prescribed by the Board with respect to employee stock plans and benefit
programs.
During 2000, the Stock Option Committee consisted of Burt Sugarman, but took
no action during the year. Its principle function is to administer the stock
plans on behalf of the Board and make recommendations to the Board of Directors
with respect to the option plans when appropriate.
Compensation of Directors
Directors who are our employees receive no extra compensation for their
services as directors. Directors who are not employees receive a director's fee
of $2,500 per quarter. In addition, these independent directors receive $2,500
for each board meeting, $1,000 for each committee meeting they attend, plus out
of pocket expenses. 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 8,333 shares of the common stock,
with the subsequent automatic grant on the first day of each fiscal year
thereafter of a non-qualified, ten-year option to acquire an additional 1,667
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 the plan before August 6, 1997 become
exercisable on a cumulative basis on each of the first five anniversaries of
the date of the grant of the option. One-third of each annual option granted
pursuant to the plan before August 6, 1997 becomes exercisable on a cumulative
basis on each of the first three anniversaries of the date of the grant of the
option. Pursuant to a proposal approved by stockholders at the Annual Meeting
in 1999, the Chairman of the Board received an option to purchase 40,000
shares, the Vice-Chairman received an option to purchase 20,000 shares and all
other non-employee directors received options to purchase 10,000 shares of the
Company's common stock. Pursuant to a proposal approved by stockholders at the
Annual Meeting in 2000, the Chairman of the Board received an option to
purchase 125,000 shares, the Vice Chairman received an option to purchase
25,000 shares and all other non-employees directors received options to
purchase 50,000 shares of the Company's common stock. 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,
at the time of exercise, is a member of the Board of Directors, unless the
director is removed for cause.
Beginning in September 1999 the Company engaged Peter O'Hara, one of its
current Directors, to provide consulting services at a monthly fee of $10,000.
Mr. O'Hara discontinued these services in June 2000. Fees for 2000 and 1999
totaled $60,000 and $40,000, respectively.
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro LLP, a law firm in
which Mr. Christensen is a named partner, performed legal services for the
Company during 2000 and 1999 amounting to $457,000 and $803,000, respectively.
Such services were related to the defense of certain litigation, compliance
with securities laws and other business matters.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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 initial
reports of ownership and reports of changes in ownership. 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 2000.
The following table sets forth certain information as of June 18, 2001,
relating to the beneficial ownership of the common stock by (a) all persons
known by us to beneficially own more than 5% of the outstanding shares of the
common stock, (b) each director, director nominee and executive officer and,
(c) all officers and directors as a group. We had 9,889,842 shares outstanding
as of June 18, 2001.
Number of
Beneficially Shares
Address of Beneficial Owner(1)(2)(3) Owned(1) Outstanding(4)
------------------------------------ ------------ --------------
CKE Restaurants, Inc.(5).......................... 1,158,893 10.2%
3916 State Street, Suite 300, Santa Barbara, CA
93105
Giant Group, LTD(6)............................... 994,699 8.8%
9440 Santa Monica Blvd, #407, Beverly Hills, CA
90210
Calm Waters Partnership........................... 892,000 7.9%
100 Heritage Reserve, Menomonee Falls, WI 53051
William P. Foley, II(7)........................... 298,540 2.6%
Burt Sugarman(8).................................. 298,939 2.6%
Peter C. O'Hara................................... 232,084 2.0%
Daniel J. Dorsch.................................. 170,060 1.5%
Willie Davis(11).................................. 120,589 1.1%
David Gotterer(12)................................ 115,614 1.0%
Ronald B. Maggard(13)............................. 107,332 *
Terry N. Christensen(14).......................... 105,163 *
Clarence V. McKee(15)............................. 60,851 *
Steven Cohen(16).................................. 26,914 *
Wendy Beck(17).................................... 19,780 *
Adam Noyes(18).................................... 9,163 *
Keith Sirois(19).................................. 5,904 *
All officers and directors as a group (16 1,584,096 14.0%
persons)(20).....................................
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* Represents less than 1% of our outstanding common stock.
(1) Unless otherwise noted, we believe that all shares are beneficially owned
and that all persons named in the table have sole voting and investment
power with respect to all shares of common stock owned by them.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from June 18, 2001, upon the
exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from June 18, 2001 have been exercised.
(3) Unless otherwise indicated, the address of each stockholder listed is
14255 49th Street N., Clearwater, Florida 33762.
(4) Percentage calculation assumes owners' derivative securities exercisable
within 60 days from June 18, 2001 have been exercised.
(5) Includes 612,536 shares issuable upon the exercise of presently
exercisable warrants.
(6) Includes 237,416 shares issuable upon the exercise of presently
exercisable warrants held by KCC Delaware, a wholly owned subsidiary of
Giant Group, LTD.
6
(7) Includes 292,649 shares subject to options and warrants. Excludes the
1,516,893 shares and warrants to purchase shares held by CKE Restaurants,
Inc. as to which Mr. Foley disclaims, beneficial interest. Mr. Foley is
Chairman of the Board of CKE Restaurants, Inc. Also excludes 175,689
warrants held by Fidelity National Financial, Inc., as to which Mr. Foley
is Chairman of the Board and Chief Executive Officer of Fidelity National
Financial, Inc.
(8) Includes 295,601 shares subject to options and warrants. Excludes 994,699
shares and warrants held by Giant Group, Ltd., as to which Mr. Sugarman
disclaims beneficial ownership. Mr. Sugarman is Chairman of the Board and
Chief Executive Officer of Giant Group Ltd.
(9) Includes 230,001 shares issuable upon the exercise of presently
exercisable stock options.
(10) Includes 51,667 shares issuable upon the exercise of presently exercisable
stock options.
(11) Includes 120,589 shares issuable upon the exercise of presently
exercisable stock options.
(12) Includes 115,614 shares issuable upon the exercise of presently
exercisable stock options.
(13) Includes 107,332 shares issuable upon the exercise of presently
exercisable stock options.
(14) Includes 100,656 shares issuable upon the exercise of presently
exercisable stock options.
(15) Includes 46,668 shares issuable upon the exercise of presently exercisable
stock options.
(16) Includes 26,637 shares issuable upon the exercise of presently exercisable
stock options.
(17) Includes 18,113 shares issuable upon the exercise of presenting
exercisable stock options.
(18) Includes 9,163 shares issuable upon the exercise of presenting exercisable
stock options.
(19) Includes 5,833 shares issuable upon the exercise of presenting exercisable
stock options.
(20) Includes an aggregate of 1,433,286 shares issuable upon the exercise of
presently exercisable stock options and warrants held by officers and
directors of the Company.
7
EXECUTIVE COMPENSATION
The following table is a summary of the compensation earned for the last
three fiscal years for services in all capacities to each of the persons who
qualified as a "named executive officer" under item 402(b) of Regulations S-K.
All amounts shown before the Merger between the Company and Rally's Hamburgers,
Inc. in August 1999 include compensation paid by both Checkers and Rally's
pursuant to the management service agreement between companies.
Long-Term
Compensation
---------------------
Awards Payouts
---------- ----------
Annual Securities
Compensation Underlying
Name and Principal ----------------- Other Annual Options LTIP All Other
Position Year Salary Bonus ($) Compensation($) SARs(#) Payouts($) Compensation($)
------------------ ---- ------- --------- --------------- ---------- ---------- ---------------
Daniel J. Dorsch(1)..... 2000 219,998 7,000 500,000 10,245(2)
Chief Executive Officer 1999 9,315 -- 100,00
--
David Miller(3)......... 2000 132,588 -- 35,00 8,664(5)
Former Chief Operating 1999 136,442 -- -- 500(4)
Officer 1998 127,695 -- 16,316 498(4)
Steven Cohen............ 2000 134,968 7,000 15,000 243(4)
Vice President, Human 1999 134,432 -- -- 481(4)
Resources 1998 122,812 -- 43,200(6) 21,637 462(4)
Wendy Beck(7)........... 2000 122,670 7,000 15,000 222(4)
Chief Financial Officer 1999 113,587 -- -- 144(4)
1998 97,345 -- 13,113 108(4)
Adam Noyes.............. 2000 107,984 7,000 15,000 2,190(8)
Vice President, 1999 91,006 -- -- 179(4)
Purchasing and 1998 66,226 -- 7,288 6,731(9)
Operations
Keith Sirois............ 2000 110,354 7,000 15,000 6,096(10)
Vice President of 1999 84,432 -- -- 3,249(11)
Franchise Operations 1998 70,361 -- 1,666 3,865(12)
--------
(1) Mr. Dorsch was appointed as our Chief Executive Officer on December 14,
1999.
(2) Consisting of automobile allowance ($9,849) and term life insurance
premiums ($396)
(3) In September 2000, Mr. Miller resigned as Chief Operating Officer.
(4) Consisting of term life insurance premiums.
(5) Consisting of severance pay ($8,615) and term life insurance premiums
($49).
(6) Consisting of relocation expenses paid.
(7) On July 13, 2001, Ms. Beck resigned as Chief Financial Officer.
(8) Consisting of automobile allowance ($1,989) and term life insurance
premiums ($201).
(9) Consisting of automobile allowance ($6,600) and term life insurance
premiums ($131).
(10) Consisting of automobile allowance ($5,893) and term life insurance
premiums ($203).
(11) Consisting of automobile allowance ($3,090) and term life insurance
premiums ($159).
(12) Consisting of automobile allowance ($3,727) and term life insurance
premiums ($138).
Employment Agreements
Effective November 20, 2000, we entered into an employment agreement with
Daniel J. Dorsch, pursuant to which Mr. Dorsch serves as our Chief Executive
Officer and as a Director. This agreement amended the
8
1999 employment agreement that we entered into with Mr. Dorsch. Under the terms
of the November, 2000 employment agreement, we loaned $100,000 to Mr. Dorsch
towards the exercise of the 100,000 stock options granted to him pursuant to
the 1999 employment agreement at an exercise price of $1.28 per share. The
loan, which bears interest at 5%, is payable by Mr. Dorsch in three equal
principal installments, beginning on January 1, 2002. Mr. Dorsch's term of
employment is for three years, subject to renewal by us for one-year periods
thereafter, at an annual base salary of $440,000. In each successive year of
the term, the base salary shall be increased by 5% over the prior year's base
salary. Mr. Dorsch is also entitled to participate in our incentive bonus plans
whereby Mr. Dorsch may be entitled to receive a bonus of up to 50% of his base
salary, payable 50% in cash and 50% in our common stock. Mr. Dorsch is also
entitled to participate in our benefit plans. Upon execution of the November,
2000 employment agreement, Mr. Dorsch was granted an option to purchase 400,000
shares of our common stock, which shall fully vest on November 20, 2003. Mr.
Dorsch may be terminated at any time for cause. If Mr. Dorsch is terminated
without cause, he will be entitled to receive his base annual salary, and any
earned unpaid bonus, through the unexpired terms of the agreement, payable in a
lump sum or as directed by Mr. Dorsch. Cause is defined as (i) a material
default or breach under the agreement, (ii) the willful and habitual failure to
perform duties under the agreement or corporate policies, or (iii) misconduct,
dishonesty, insubordination or other act that has a direct substantial and
adverse effect on our reputation or our relationships with our customers or
employees.
Option Grants in Fiscal Year 2000
The following table sets forth information regarding options granted to the
named executive officers during fiscal year 2000 pursuant to our stock option
plans:
Individual Grants
---------------------------------------------- Potential
% of Total Realizable Rates
Number of Options of Stock Price
Securities Granted to Exercise Appreciation for
Underlying Employees or Base Option Term(1)
Options in Price Expiration -----------------
Name Granted(#) Fiscal Year ($/Share) Date 5%($) 10%($)
---- ---------- ----------- --------- ------------- ------- ---------
Daniel J. Dorsch........ 25,000 16.7% 1.9375 04/10/2010(2) 114,452 210,937
75,000 5.00% 2.125 06/01/2010(3) 100,230 254,663
200,000 13.34% 5.00 11/20/2010(4) 303,116 1,074,994
200,000 13.34% 6.00 11/20/2010(4) 103,116 874,994
David Miller............ 35,000 2.30% 2.125 06/01/2010(5) 46,774 118,535
Steven Cohen............ 15,000 1.00% 2.125 06/01/2010(3) 20,046 50,801
Wendy Beck.............. 15,000 1.00% 2.125 06/01/2010(3) 20,046 50,801
Adam Noyes.............. 15,000 1.00% 2.125 06/01/2010(3) 20,046 50,801
Keith Sirois............ 15,000 1.00% 2.125 06/01/2010(3) 20,046 50,801
--------
(1) The 5% and 10% assumed annual rates of stock price appreciated are provided
in compliance with Regulation S-K under the Exchange Act. We do not
necessarily believe that these appreciation calculations are indications of
annual future stock option values or that the price of our common stock
will appreciate at such rates.
(2) These options vested on April 10, 2000.
(3) One third of these options will vest on June 1, 2001, 2002 and 2003,
respectively.
(4) These options will vest on November 20, 2003.
(5) None of these options vested prior to the termination of Mr. Miller's
employment.
9
Aggregated Option Exercises in Fiscal Year 2000 and Fiscal Year End Option
Values
Set forth below is information with respect to our common stock options
exercised by the named executive officers during fiscal year 2000 and the
number and value of unexercised stock options held by such executives at the
end of the fiscal year.
Value of Unexercised In-
Number of Unexercised the Money Options at FY-
Shares Options at FY-End(#) End($)(1)
Acquired on Value ------------------------- -------------------------
Name Exercise(#) Realized(2) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ----------- ------------------------- -------------------------
Daniel J. Dorsch........ 100,000 290,630 25,000/475,000 $43,750/117,180
David Miller............ -- -- 0/0 $0/0
Steven Cohen............ -- -- 14,424/22,213 $1,880/24,378
Wendy Beck.............. -- -- 10,425/17,661 $1,128/24,002
Adam Noyes.............. -- -- 3,121/16,042 $0/23,438
Keith Sirois............ -- -- 555/15,278 $0/23,438
--------
(1) Based upon the difference between the exercise price and closing price of
our common stock as reported on the NASDAQ National Market on January 1,
2001 of $3.6875.
(2) Based upon the difference between the exercise price and the closing price
of our common stock as reported on the NASDAQ National Market on the date
exercised of $4.1875.
10
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically
incorporates this Report by reference therein.
During fiscal year 2000, the Audit Committee of the Board of Directors
updated its charter for the Committee, which was approved by the full Board.
The complete text of the new charter, which reflects standards set forth in the
new SEC regulations and NASDAQ Exchange rules, it reproduced in the appendix to
this proxy statement as Appendix A.
As set forth in more detail in the charter, the Audit Committee's primary
responsibilities fall into three (3) broad categories:
first, the Committee is charged with monitoring the preparation of
quarterly and annual financial reports by the Company's management,
including discussions with management and the Company's independent
auditors about its annual financial statements and key accounting and
reporting matters;
second, the Committee is responsible for matters concerning the
relationship between the Company and its independent auditors, including
recommending their appointment or removal; reviewing the scope of their
audit services and related fees, as well as any other services being
provided to the Company; and determining whether the independent auditors
are independent (based in part on the annual letter provided to the Company
pursuant to Independence Standards Board Standard No. 1); and
third, the Committee oversees management's implementation of effective
systems of internal controls, including review of policies relating to
legal and regulatory compliance, ethics and conflicts of interests; and
review of the activities and recommendations of the Company's internal
auditing program.
The Committee has implemented procedures to ensure that during the course of
each fiscal year it devotes the attention that it deems necessary or
appropriate to each of the matters assigned to it under the Committee's
charter. To carry out its responsibilities, the Committee met twice during
fiscal year 2000.
In overseeing the preparation of the Company's financial statements, the
Committee met with both management and the Company's independent auditors to
review and discuss the financial statements prior to their issuance and to
discuss significant accounting and reporting matters. Management advised the
Committee that the financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee discussed the
statements with both management and the independent auditors. The Committee's
review included discussion with the independent auditors of matters required to
be discussed pursuant to Statement on Auditing Standards No. 61 (Communication
With Audit Committees), as amended.
With respect to the Company's independent auditors, the Committee, among
other things, discussed with KPMG LLP matters relating to its independence,
including the disclosures made to the Committee as required by the Independence
Standards Board Standard No. 1 (Independence Discussions With Audit
Committees).
On the basis of these reviews and discussions, the Committee recommended to
the Board of Directors that the Board approve the inclusion of the Company's
audited consolidated financial statements in the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 2001, for filing with the
Securities and Exchange Commission.
Members of the Audit Committee
/s/ David Gotterer, Chairman
/s/ Ronald Maggard
/s/ Clarence V. McKee
11
REPORT OF THE COMPENSATION COMMITTEE
The following Report was prepared by the members of our compensation
committee at the end of fiscal year 2000.
Annual compensation for all of our executive officers is determined by the
compensation committee of our Board of Directors, subject to the terms of any
applicable employment agreement negotiated between us and an executive officer.
During fiscal year 2000, annual compensation was set with the intent of
reasonably compensating the executive officers including the Chief Executive
Officer, in line with industry norms, based upon the committee members'
subjective evaluation of each officer and his respective assigned
responsibilities and individual performance. The committee also considered
growth of the company, earnings of the company and increases in the cost of
living.
During fiscal year 2000, awards of stock options under our 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 committee (although options granted to the Chief Executive Officer were
approved by the full Board) pursuant to the terms of the plan. In determining
awards under the plan, the committee makes a subjective evaluation of
individual responsibilities, past and anticipated potential individual
productivity and performance and past and anticipated contributions to the
profitability of the company, both direct and indirect. The committee does 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 include
vesting periods which the committee believed would encourage the employee to
remain with the company. The benefits derived from each stock option granted
under the plan is directly attributable to a future increase in the value of
the company's common stock.
Effective December 14, 1999, Daniel J. Dorsch became our President and Chief
Executive Officer. In addition, Mr. Dorsch was elected as a director in
December 1999. Under the terms of Mr. Dorsch's 1999 employment agreement, Mr.
Dorsch received a base salary of $200,000 per year. This agreement was
terminated upon the execution of a new employment agreement with Mr. Dorsch,
effective November 20, 2000, pursuant to which Mr. Dorsch receives a base
salary of $440,000 per year. Mr. Dorsch is also eligible to participate in the
same executive compensation plans available to our other senior executives. In
determining Mr. Dorsch's compensation, the compensation committee applied the
policies described above and considered other factors as well, such as Mr.
Dorsch's previous work experience and position of responsibility and authority.
The committee also determined to grant him options to purchase 400,000 shares
of the Company's common stock.
We are required to disclose our policy regarding qualifying executive
compensation deductibility under Section 162(m) of the Internal Revenue Code of
1986, as amended, which provides that, for the purposes of the regular income
tax and the alternative minimum tax, the otherwise allowable deduction for
compensation paid or accrued with respect to a covered employee of a public
corporation is limited to no more than $1 million per year. It is not expected
that the compensation to be paid to our executive officers for fiscal year 2000
will exceed the $1 million limit per officer. Our 1991 Stock Option Plan is
structured so that any compensation deemed paid to an executive officer when he
exercises an outstanding option under the plan with an exercise price equal to
the fair market value of the option shares on the grant date, will qualify as
performance-based compensation that will not be subject to the $1 million
limitation.
COMPENSATION COMMITTEE MEMBERS
/s/ William P. Foley, II
/s/ Willie D. Davis
/s/ Peter C. O'Hara
12
[PERFORMANCE GRAPH]
1995 1996 1997 1998 1999 2000
------- ------ ------ ------ ------ ------
Checkers Drive In Restaurants, Inc...$100.00 145.45 81.82 30.30 17.17 29.80
S&P 500 Index........................ 100.00 123.25 164.38 211.07 253.87 225.81
Peer Group........................... 100.00 97.20 82.50 73.70 59.10 86.80
--------
(1) The foregoing graph assumes $100 invested on December 29, 1995, in the
Company, the S&P 500 Index and U.S. companies listed on the NASDAQ with
standard industry classification (SIC) codes 5800-5899 (Eating and drinking
places).
(2) Total return is adjusted for a one-for-12 reverse stock split of the
Company's common stock in August 1999, and assumes reinvestment of any
dividends for all companies.
(3) The peer group consists of U.S. companies listed on the NASDAQ with
standard industry classification (SIC) codes 5800-5899 (Eating and drinking
places).
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors is responsible for
executive compensation decisions. During fiscal year 2000, the committee was
comprised of Messrs. Foley, Davis and O'Hara. Mr. Foley is chairman of the
Board and Chief Executive Officer of Fidelity National Financial, Inc. and
Chairman of the Board of both Santa Barbara Restaurant Group, Inc. and CKE
Restaurants, Inc. which, as of March 26, 2001, beneficially owned approximately
1.6%, 0.0%, and 13.6%, respectively, of the outstanding shares, or warrants to
purchase shares, of our common stock.
On July 1, 1996, the Company entered into a ten-year operating agreement
with Carl Karcher Enterprises, Inc., the subsidiary of CKE that operates the
Carl's Jr. restaurant chain. Pursuant to the agreement, CKE began operating 29
Rally's owned restaurants located in California and Arizona, two of which were
converted to a Carl's Jr. format. Including closures from prior periods, there
are 23 remaining restaurants as of January 1,
13
2001 operating under the agreement. Such agreement is cancelable after an
initial five-year period, or July 1, 2001, at the discretion of CKE. A portion
of these restaurants, at the discretion of CKE, will be converted to the Carl's
Jr. format. The agreement was approved by a majority of the independent
Directors of the Company. Prior to the agreement, the Company's independent
Directors had received an opinion as to the fairness of the agreement, from a
financial point of view, from an investment banking firm of national standing.
Under the terms of the operating agreement, CKE is responsible for any
conversion costs associated with transforming restaurants to the Carl's Jr.
format, as well as, the operating expenses of all the restaurants. The Company
retains ownership of all the restaurants, two of which are Carl's Jrs. and is
entitled to receive a percentage of gross revenues generated by each
restaurant. In the event of a sale, by the Company, of any of the restaurants,
the Company and CKE would share in the proceeds based upon the relative value
of their respective capital investments in such restaurant.
On July 2, 2001, we repossessed and began operating eighteen Rally's
restaurants in California and three Rally's restaurants in Arizona. These
restaurants were previously operated by CKE Restaurants, Inc.
On November 22, 1996, we entered into an Amended and Restated Credit
Agreement with CKE as agent for CKE Restaurants, Inc., Fidelity National
Financial, Inc., C. Thomas Thompson, William P. Foley, II, Burt Sugarman and
KCC Delaware Company, a wholly owned subsidiary of Giant Group, Ltd. Pursuant
to the Restated Credit Agreement, our primary debt aggregating approximately
$35.8 million principal amount, which had been acquired by these lenders on
November 14, 1996, was restructured by, among other things, extending its
maturity by one year to July 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, we issued warrants to the
Lenders 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 our common
stock on the day prior to the announcement of the acquisition of our 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.
Beginning in September 1999 the Company engaged Peter O'Hara, one of its
current Directors, to provide consulting services at a monthly fee of $10,000.
Mr. O'Hara discontinued these services in June 2000. Fees for 2000 and 1999
totaled $60,000 and $40,000, respectively.
We shared certain officers and directors with Santa Barbara Restaurant
Group, Inc. (Santa Barbara) beginning in 1999 through September 2000. We paid
$274,338 and $104,408 to Santa Barbara for salary payments to shared officers
made on our behalf. During 2000, Mr. Foley was the chairman of the Board of
Directors for both Santa Barbara and Checkers Drive-In restaurants, Inc.
14
INDEPENDENT AUDITORS
The Company has engaged KPMG LLP as its independent auditors since becoming
a publicly traded company. KPMG LLP reported on the consolidated financial
statements of the Company for the fiscal year ended January 1, 2001 and it is
currently anticipated that KPMG LLP will be selected by the Board of Directors
to audit and report on the financial statements of the Company for the year
ending December 31, 2001.
Audit Fees. The aggregate fees billed by KPMG LLP for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended January 1, 2001 (the "2000 fiscal year") and the reviews of
the financial statements included in the Company's Form 10-Q's for the 2000
fiscal year totaled $240,000.
Financial Information Systems Design and Implementation Fees. There were no
fees billed for professional services related to financial information systems
design and implementation by KPMG LLP for the 2000 fiscal year.
All Other Fees. The aggregate fees billed for services rendered by KPMG LLP,
other than for audit and information technology services, described in the
preceding two paragraphs, totaled $37,480 for fiscal 2000. These other fees
were primarily for statutory audits and other regulatory compliance reporting.
PROPOSAL NO. 2
APPROVAL OF THE COMPANY'S 2001 STOCK OPTION PLAN
GENERAL
The Company's shareholders are being asked to approve the adoption of the
Company's 2001 Stock Option Plan which will replace the Company's 1991 Stock
Option Plan (the "1991 Plan"). The Company's proposed 2001 Stock Option Plan
(the "2001 Plan") would act as a successor to the 1991 Plan. Capitalized terms
used in this Proposal No. 2 shall have the same meaning as in the 2001 Plan
unless otherwise indicated. A complete copy of the 2001 Plan is included in the
appendix as Appendix B.
The Company's shareholders previously approved the issuance of up to
1,500,000 shares under the 1991 Plan. As of the date of this Proxy Statement, a
total of 301,087 options have been granted under the 1991 Plan. Under the terms
of the 1991 Plan, no awards may be made after September 2001. A total of
1,500,000 shares will be available for future awards under the Company's 2001
Plan if approved by the shareholders. The Board of Directors recommends a vote
for the adoption of the 2001 Plan.
DESCRIPTION OF THE 2001 OPTION PLAN
General. The purposes of the 2001 Plan are to attract and retain the best
available individuals for positions of substantial responsibility, to provide
additional incentives to such individuals and to promote the success of the
Company's business by aligning the financial interests of those individuals
that receive awards under the Plan with long term shareholder value. Under the
terms of the 2001 Plan, the Company will be authorized to grant stock options,
stock awards and stock appreciation rights. Options granted under the 2001 Plan
may be either "incentive stock options", as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or non-statutory stock
options.
Administration. The 2001 Plan will be administered by the Board of
Directors, unless the Board appoints a committee to administer the Plan. In the
event that the Board appoints a committee to administer the 2001 Plan, the
committee will consist of at least two members that serve on the Compensation
Committee of the
15
Board. The Committee shall be constituted in such a manner to satisfy
applicable laws that govern the issuance of grants to officers and employee
directors of the Company, including Rule 16b-3 promulgated under the Exchange
Act and Section 162(m) of the Code.
New Plan Benefits. The 2001 Plan will serve as a successor to the 1991 Plan
and authorizes a maximum of 1,500,000 shares to be granted as options under the
2001 Plan. The 1991 Plan also authorized a maximum of 1,500,000 shares to be
issued. Because no additional awards may be made under the 1991 Plan after
September 2001, the 2001 Plan will contain the same maximum share limitation
set forth in the 1991 Plan. Future benefits granted under the 2001 Plan will
depend upon the Board's actions and fair market value of the Company's common
stock at various future dates. As a result, it is not possible to determine the
benefits that will be received by Company officers and other employees if the
2001 Plan is approved by the shareholders.
The Board has full power and authority to interpret the Plan, select the
recipients of options, restricted stock grants and stock appreciation rights,
determine and authorize the type, terms and conditions of, including vesting
provisions, grants under the Plan and to adopt, amend and rescind rules
relating to the Plan.
Eligibility. Incentive stock options may be granted only to employees of the
Company or its subsidiaries. The Board will have sole discretion to determine
which employees will receive options under the 2001 Plan and the timing and
amount of any options granted. The Board may grant options pursuant to the 2001
Plan which are intended to meet the requirements of incentive stock options
("ISOs"), as defined in Section 422 of the Code, or options not intended to be
ISOs ("Non-Qualified Options"). In addition, the Company may issue stock
appreciation rights ("SARs") pursuant to the 2001 Plan. SARs are issued in
tandem with options and once exercised require payment by the Company of an
amount equal to excess of the Fair Market Value of the Company's Common Stock
on the date of exercise over the exercise price of the option that was granted
in tandem with the SAR. Payment can be made by the Company in either cash or
stock, or partly in cash or stock. The Board, in its discretion, will select
the individuals to whom options, stock awards and stock appreciation rights
will be granted, the time or times at which such awards are granted, and the
number of shares subject to each grant.
Shares Subject to the Stock Plan. The maximum number of shares of the
Company's Common Stock which may be awarded and issued under the 2001 Plan
shall not exceed 1,500,000 shares. The maximum aggregate number of shares of
the Company's Common Stock which may be issued under the 2001 Plan include
shares which are issued upon exercise of SARs and which may be granted as
Restricted Shares. The shares available under the 2001 Plan also include issued
shares of the Company's Common Stock which may be reacquired by the Company
from time to time. If any option expires or terminates for any reason without
having been exercised in full, the unexercised shares subject to the option
will again become available for issuance under the 2001 Plan. In addition, any
Restricted Shares which are forfeited will also become available for future
issuance under the Plan.
Limitations. 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 Code limits the maximum aggregate value of the
Company's common stock for which ISOs may become exercisable in any one
calendar year to $100,000 for any employee. With respect to SARs, the number of
SARs which may be exercised for cash, or partly for cash and partly for shares
of Common Stock may not exceed 20% of the aggregate number of shares of Common
Stock originally subject to the related tandem option, unless the Board
determines otherwise.
Terms and Conditions of Awards. Each award that is granted by the Board
under the 2001 Plan will be evidenced by an award or grant agreement between
the Company and the individual awardee and is subject to the following terms
and conditions:
Term of Options. The term of an option is determined by the Board, but may
not exceed ten years from the date of grant if the Company grants an ISO. An
ISO must be exercised by the awardee either during employment or within three
months of termination of employment.
16
Exercise Price. The Board has the discretion to determine the exercise
price of any option granted under the 2001 Plan, although in the case of an
ISO the price may not be less than 100% of the fair market value of the
Company's Common Stock at the time of grant, as determined by the closing
price of the Company's Common Stock on the NASDAQ National Market on such
date. No ISO may be granted under the 2001 Plan to any individual that owns
stock representing more than 10% of the combined voting power of the Company
or any subsidiary, unless the term of the option does not exceed five years
and the exercise price of the option is not less than 110% of the fair market
value of the Company's Common Stock on the date the option is granted.
Other Provisions. An award agreement may contain other terms, provisions,
and conditions not inconsistent with the 2001 Plan, as may be determined by
the Board.
Stock Awards. The Board may grant Restricted Shares or SARs in tandem with
other awards under the 2001 Plan. Unless the Board determines otherwise, any
Restricted Shares will provide that any non-vested stock is forfeited back to
the Company upon the awardee's termination of employment for any reason. The
forfeiture provisions for the non-vested Restricted Shares will lapse at a
rate determined by the Board in each individual Restricted Shares Agreement.
Stock Appreciation Rights. Stock appreciation rights may be granted only in
tandem with other awards under the 2001 Plan. Each SAR shall be exercisable
only at the same time and to the same extent that the related option is
exercisable, and in no event may be exercised after termination or exercise of
the related option. No SAR may be exercised within a period of 6 months after
the date of grant of the SAR. Upon exercise of the SAR, the awardee will be
entitled to receive from the Company consideration equal in value to the
excess of the fair market value of the Company's Common Stock as of the date
of exercise of the SAR with respect to which such SAR has been exercised over
the option price per share of the Company's Common Stock subject to the
related option. Upon exercise of an SAR, the awardee may specify the form of
consideration to be received which shall be paid in the form of shares of the
Company's Common Stock valued at the fair market value of such stock on the
date of exercise of the SAR, or in cash, or partly in cash and partly in
shares of the Company's Common Stock. Under the terms of the 2001 Plan, the
Board reserves the sole right to disapprove the form of payment requested by
the awardee of a SAR and instead authorize payment in the form of the
Company's Common Stock, or in cash, or partly in cash and partly in shares of
the Company's Common Stock.
Adjustments upon Changes in Capitalization, Merger or Sale of Assets. In
the event that the Company's Common Stock changes by reason of any stock
split, dividend, combination, reclassification or other similar change in the
Company's capital structure effected without the receipt of consideration,
appropriate adjustment shall be made in the number and class of shares of
stock subject to the 2001 Plan, the number and class of shares of stock
subject to any award outstanding under the 2001 Plan, and the exercise price
for shares subject to any outstanding award.
Amendment and Termination of the 2001 Plan. The Board may at anytime amend,
suspend or terminate the 2001 Plan. To the extent necessary to comply with
applicable provisions of federal securities laws, state corporate and
securities laws, the Code, the rules of any applicable stock exchange or
national market system, and the rules of any foreign jurisdiction applicable
to awards granted to residents therein, the Company shall obtain shareholder
approval of any such amendment to the 2001 Plan in such manner and to such a
degree as required. In addition, shareholder approval is required for any
amendment to the 2001 Plan that would do any of the following:
(i) increase the number of shares subject to the 2001 Plan (excluding
increases due to changes in capitalization of the Company);
(ii) materially modify the requirements as to eligibility for
participation in the 2001 Plan;
(iii) materially increase the benefits accruing to participants under
the 2001 Plan;
17
(iv) increase the number of shares with respect to which options may be
granted to any awardee (excluding increases due to changes in
capitalization of the Company); or
(v) allow the creation of additional types of awards, permit decreasing
the exercise price of any option outstanding under the 2001 Plan, or
change any of the provisions of the section of the 2001 Plan relating
to amending the 2001 Plan.
CERTAIN FEDERAL TAX CONSEQUENCES
The following summarizes only the federal income tax consequences of
options, Restricted Shares and SARs granted under the 2001 Plan. Federal income
tax consequences to the Company and its employees of awards under the 2001 Plan
are complex and subject to change. In addition, state and local tax
consequences may differ for each individual that receives an award under the
2001 Plan. Recipients of awards under the 2001 Plan should consult their own
tax advisors to determine the specific tax consequences which will affect the
option or award that has been granted by the Company.
Non-Qualified Stock Options. The grant of a Non-Qualified Stock Option under
the 2001 Plan will not result in any federal income tax consequences to the
awardee or to the Company. Upon exercise of a Non-Qualified Stock Option, the
grantee is subject to income taxes at the rate applicable to ordinary
compensation income on the difference between the option price and the fair
market value of the Company's Common Stock on the date of exercise. This income
is subject to withholding for federal income and employment tax purposes. The
Company is entitled to an income tax deduction equal to the amount of the
income recognized by the awardee. Any gain or loss on the awardee's subsequent
disposition of the Company's Common Stock will receive long or short term
capital gain or loss treatment, depending on whether the Common Stock has been
held for more than one year following exercise. The Company does not receive a
tax deduction for any such gain. The awardee's basis for determining gain or
loss upon the subsequent disposition of the Company "s Common Stock acquired
upon the exercise of a Non-Qualified Stock Option will be the amount paid for
such shares plus any ordinary income recognized as a result of the exercise of
such option.
Incentive Stock Options. The grant of a ISO under the 2001 Plan will not
result in any federal income tax consequences to the awardee or to the Company.
An awardee recognizes no federal taxable income upon exercising an ISO (subject
to the alternative minimum tax rules discussed below), and the Company receives
no deduction at the time of exercise. In the event of a disposition of the
Company's Common Stock acquired upon exercise of an ISO, the tax consequences
will depend upon how long the awardee has held the Company's Common Stock. If
the awardee does not dispose of the Common Stock within two years after the
date that the ISO was granted, nor within one year after the ISO was exercised
and Common Stock purchased, the awardee will recognize long term capital gain
(or loss) equal to the difference between the sale price of the Common Stock
and the exercise price of such option. If the awardee complies with these
holding periods, the Company will not be entitled to any tax deduction.
If the awardee fails to satisfy either of the foregoing holding periods, he
or she must recognize ordinary income in the year of the disposition of the
Common Stock (a "Disqualifying Disposition"). The amount of such ordinary
income generally is equal to the lesser of (i) the difference between the
amount realized on disposition of the Common Stock and the exercise price, or
(ii) the difference between the fair market value of the Common Stock on the
exercise date and the exercise price. Any gain in excess of the amount taxed as
ordinary income will be treated as long or short term capital gain, depending
on whether the Common Stock was held for more than one year. The Company, in
the year of the Disqualifying Disposition, is entitled to a deduction equal to
the amount of ordinary income recognized by the awardee. In the event of a
Disqualifying Disposition, the Company may withhold income taxes from the
awardee's compensation with respect to the ordinary income realized by the
awardee as a result of the Disqualifying Disposition.
The exercise of an ISO may subject the awardee to alternative minimum tax
liability. The excess of the fair market value of the Common Stock at the time
an ISO is exercised over the purchase price of the Common
18
Stock is included in income for purposes of the alternative minimum tax
calculation even though it is not included in taxable income for purposes of
determining the regular tax liability of the employee. As a result, the awardee
may be obligated to pay alternative minimum tax in the year that he or she
exercises an ISO.
In general, there will be no federal income tax deduction allowed to the
Company upon the grant, exercise, or termination of an ISO. In the event the
awardee sells or otherwise disposes of Common Stock received on the exercise of
an ISO in a Disqualifying Disposition, the Company will be entitled to a
deduction for federal income tax purposes in an amount equal to the ordinary
income, if any, recognized by the awardee upon disposition of the Common Stock,
provided that the deduction is not otherwise disallowed under the Code.
Restricted Shares. Any grant of Restricted Shares under the 2001 Plan will
subject the awardee to ordinary compensation income on the difference between
the amount paid for such Restricted Shares and the fair market value of the
shares on the date that the restrictions lapse. This income is subject to
withholding for federal income and employment tax purposes. The Company is
entitled to an income deduction equal to the amount of the income recognized by
the awardee. Any gain or loss on the awardee's subsequent disposition of the
Common Stock will receive long or short term capital gain or loss treatment
depending on whether the Common Stock is held for more than one year and
depending on how long the shares have been held since the restrictions lapsed.
The Company does not receive a tax deduction for any such gain.
The recipient of a Restricted Shares grant may make an election under the
Code to recognize as ordinary compensation income in the year that the
Restricted Shares are granted an amount equal to the spread between the amount
paid for such Restricted Shares and the fair market value on the date of the
issuance of such shares. If such an election is made, the recipient of the
Restricted Share grant recognizes no further amounts of ordinary compensation
income upon the lapse of any restrictions and any gain or loss on subsequent
disposition will be long or short term capital gain. This Section 83(b)
election must be made within thirty days from the date that the Restricted
Shares are issued. If the Restricted Shares are non-vested when they are
received under the 2001 Plan, the awardee will generally not recognize income
until the shares become vested. The awardee's basis for determining gain or
loss upon subsequent disposition of any Common Stock acquired will be the
amount paid for such shares plus any ordinary income recognized when the
Restricted Shares are received or when such shares become vested.
In the year that the awardee of Restricted Shares recognizes ordinary
taxable income because of such award, the Company will be entitled to a
deduction for federal income tax purposes equal to the amount of ordinary
income that the awardee is required to recognize, provided that the deduction
is not otherwise disallowed under the Code.
Stock Appreciation Rights. As discussed above, the Company may grant tandem
SARs under the 2001 Plan. With respect to a tandem SAR, if the awardee elects
to surrender the underlying option exchange of cash or stock equal to the
appreciation inherent in the underlying option, the employee will recognize
ordinary compensation income equal to the excess of the fair market value of
the Common Stock on the day it is received over any amounts paid by the awardee
for the Common Stock. If the employee elects to exercise the underlying option,
the holder will be taxed at the time of exercise as if he or she had exercised
a non-qualified stock option. As a result, the employee will recognize ordinary
income for federal tax purposes measured by the excess of the then fair market
value of the shares over the exercise price of the option.
In general, there will be no federal income tax deduction allowed to the
Company upon the grant or termination of a SAR. Upon the exercise of an SAR,
the Company will be entitled to a deduction for federal income tax purposes
equal to the amount of ordinary income that the awardee is required to
recognize as a result of the exercise, provided that the deduction is not
otherwise disallowed under the Code.
19
PROPOSAL NO. 3
RATIFICATION AND APPROVAL OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company has engaged the firm of KPMG 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 LLP to report upon its financial
statements for the fiscal year ending December 31, 2001, 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 2002 ANNUAL MEETING
The Board of Directors requests that any stockholder proposals intended for
presentation at the 2002 Annual Meeting be submitted to Brian Doster,
Secretary, in writing no later than April 10, 2002, 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 us given or made to the stockholders, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth day following the day on which such notice of the date of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever first occurs.
A stockholder's notice with respect to a director nomination must set forth
(i) certain information about the nominee, (ii) the consent of the nominee to
serve as a director if elected, (iii) the name and record address of the
nominating stockholder, iv) the class or series and number of shares of the
Company which are beneficially owned by such stockholder, (v) a description of
all arrangements or understandings between such stockholder and each proposed
nominee and any other person pursuant to which the nominations are to be made,
(vi) a representation that such stockholder 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.
20
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 JANUARY 1, 2001,
AS AMENDED, INCLUDING THE FINANCIAL STATEMENTS AND THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 26, 2001. WRITTEN
REQUESTS, ACCOMPANIED BY A GOOD FAITH REPRESENTATION THAT, AS OF AUGUST 23,
2001, THE PERSON MAKING THE REQUEST WAS THE BENEFICIAL OWNER OF COMMON STOCK,
SHOULD BE DIRECTED TO CHECKERS DRIVE-IN RESTAURANTS, INC., 14255 49th STREET
NORTH, BUILDING 1, CLEARWATER, FL 33762, ATTENTION: CORPORATE SECRETARY (after
August 24, 2001, such request should be addressed to 4300 West Cypress Street,
Suite 600, Tampa, Florida 33607).
By Order of the Board of Directors,
/s/ Brian R. Doster
BRIAN R. DOSTER
Secretary
Dated: August 3, 2001
21
APPENDIX A
CHARTER
CHECKERS DRIVE-IN RESTAURANTS, INC. AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
RESOLVED, that the Committee, know as the Audit Committee, established by
the Board of Directors on September 1, 1991, shall henceforth consist of no
less than three, nor more than seven members of the Board of Directors. The
members shall not be officers or employees of the Company or of any of its
subsidiaries. They will be independent of management and free from material
business relationships that might interfere with the exercise of independent
judgement as committee members. The members of the Audit Committee shall be
appointed by the Chairman of the Board subject to ratification by the Board of
Directors.
Acting as a Committee of the Board of Directors, and meeting at least
quarterly, the broad functions of the Audit Committee are:
1. To ensure the Company's internal controls, audits, and the overall
control environment are sufficient to protect the stockholder's resources.
To oversee the quality, integrity, objectivity, accuracy, and security of
the Company's financial reporting and data processing.
2. To serve as an informed voice on the Board of Directors in support of
the accounting and auditing groups of the company in their responsibilities
for the control and reporting of all financial transactions.
3. To provide a direct channel of communication to the Board for the
independent auditors, internal auditors, Senior Vice President, Chief
Financial Officer and other concerned individuals.
Specific duties of the Audit Committee include:
1. To recommend the independent auditors for the annual audit of the
Company. Nomination of the independent auditors shall be by the Board of
Directors and approved by the stockholders at the annual meeting. To review
and approve management plans for any significant engagements of the
independent auditors for management consulting services.
2. To review with independent auditors and the internal auditors the
scope of their respective audits. The Committee may request supplemental
review or other audit procedures as the Committee deems necessary.
3. To review the Company's standards for business conduct, internal
controls, internal audit procedures, the process of assessing risk of
fraudulent financial reporting, detection of major control weaknesses, and
related corrective actions with senior management and when necessary, with
the Board of Directors.
4. To review scope, coverage and results of pension plan audits with
senior management. Pension plan controls will be reviewed to ensure any
weaknesses receive appropriate follow-up and corrective actions.
5. To meet at least annually, without management present, with the
Company's independent auditors to discuss the Company's cooperation with
the independent auditors and other matters as deemed appropriate.
6. To approve any proposed significant changes in accounting methods to
be used by the Company.
7. To review the amounts of goodwill and other intangibles to be carried
on the Company's financial statements and make appropriate recommendations
to the Board of Directors.
8. To review the expenses and perquisites of Company officers and
directors who constitute the insider group for SEC reporting.
A-1
9. To review, in conjunction with the full Board, the financial
statements, footnotes and statistics of the Annual Report.
10. To periodically review the quality and depth of staffing in the
Company's auditing, accounting, information services, and financial
departments.
11. To review the fees charged for services performed by the independent
auditors.
12. To issue reports, at least annually, covering the findings and
recommendations of the Committee to the Board of Directors and to the
stockholders.
13. To review summaries of the independent auditors' management letters.
14. To carry out any specific assignments or investigation designated by
the Board of Directors or the Chief Executive Officer.
A-2
APPENDIX B
CHECKERS DRIVE-IN RESTAURANTS, INC.
2001 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. Checkers Drive-In Restaurants, Inc., a Delaware
corporation ("Company"), hereby adopts this 1991 Stock Option Plan ("Plan")
providing for the granting of stock options, stock appreciation rights and
restricted shares to salaried employees (including officers) of the Company and
any Subsidiaries (as hereinafter defined). The general purpose of the Plan is
to promote the interests of the Company and its stockholders by providing to
employees of the Company and any subsidiaries additional incentives to continue
and to increase their efforts with respect to, and to remain in the employ of,
the Company or any Subsidiaries.
2. CERTAIN DEFINITIONS. In addition to the words and terms elsewhere defined
in this Plan, certain capitalized words and terms used in this Plan shall have
the meanings given to them by the definitions and descriptions in this Section
2. Unless the context or use indicates another or different meaning or intent,
then such definition shall be equally applicable to both the singular and
plural forms of any of the capitalized words and terms herein defined. The
following words and terms are defined terms under this Plan:
2.1 Amendment Approval means the approval of holders of the Common Stock
in the Company's Proxy Statement dated July 31, 2001.
2.2 Award means grants of an Option, SAR and/or Restricted Shares under
this Plan.
2.3 Board means the Board of Directors of the Company.
2.4 Cash Award means the amount of cash, if any, to be paid to an
employee pursuant to Section 7.4 hereof.
2.5 Code means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute thereto.
2.6 Committee means the Committee of the Board appointed pursuant to
Section 4 hereof.
2.7 Common Stock means the Common Stock, par value $.001 per share, of
the Company.
2.8 Company means Checkers Drive-In Restaurants, Inc., a Delaware
corporation.
2.9 Exchange Act means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute or statutes thereto.
2.10 Exercise Periods shall have the meaning ascribed thereto in Section
6.5 hereof.
2.11 Fair Market Value of a share of Common Stock shall mean the average
of the reported closing bid and asked prices of a share of Common Stock as
reported on a national securities exchange or the National Market System of
the National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ"), or the over-the-counter market as reported by NASDAQ or
as furnished by a broker-dealer regularly making a market in the Common
Stock as selected by the Board, as the case may be; provided that the Fair
Market Value of a share of Common Stock under the Exchange Act shall be
deemed to be no greater than the price to the public as indicated on the
cover page of the final prospectus relating to the initial public offering
of shares of Common Stock.
2.12 Holder means an employee of the Company or a Subsidiary who has
received an Award under this Plan.
2.13 ISO means an incentive stock option within the meaning of Section
422A(b), or any successor section, of the Code.
B-1
2.14 Maturity Value means, unless the Board shall determine otherwise,
the average of the Fair Market Value of a share of Common Stock for a
period of 60 consecutive trading days ending on the Valuation Date with
respect to each award of Restricted Shares, or if the Valuation Date is not
a trading day, the 60 consecutive trading days prior thereto.
2.15 Nonqualified Stock Option means a stock option that does not
qualify as an ISO.
2.16 Option means any option granted under this Plan.
2.17 Plan means this 2001 Stock Option Plan of the Company.
2.18 Restricted Shares means shares of Common Stock awarded to an
employee of the Company or a Subsidiary pursuant to Section 7 hereof.
2.19 Restricted Share Agreement means the agreement specified in Section
12 hereof.
2.20 Restricted Period means a period of time beginning on the date of
each award of Restricted Shares and ending on the Valuation Date with
respect to each such award.
2.21 Retained Distribution means distributions with respect to
Restricted Shares that are retained by the Company pursuant to Section 7.3
hereof.
2.22 SARs shall mean stock appreciation rights as defined in Section 6.5
hereof.
2.23 SEC means the Securities and Exchange Commission.
2.24 Stock Option Agreement means the agreement specified in Section 12
hereof.
2.25 Subsidiary means any present or future subsidiary of the Company as
such term is defined in Section 425, or any successor section, of the Code.
2.26 Total Disability means a permanent and total disability as defined
in Section 22(e)(3) of the Code.
2.27 Valuation Date with respect to any Restricted Shares awarded
hereunder means the date designated in the Restricted Shares Agreement with
respect to each award of Restricted Shares pursuant to Section 7.1 hereof.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 hereof
and this Section 3, the maximum aggregate number of shares of Common Stock
which may be issued upon exercise of Options and SARs and which may be granted
as Restricted Shares under the Plan shall be 1,500,000. Such shares may be, in
whole or in part, authorized and unissued shares of Common Stock or issued
shares of Common Stock which shall have been reacquired by the Company. If any
Option shall expire or terminate for any reason without having been exercised
(or without having been considered to have been exercised as provided in
Sections 6.5 and 6.6 hereof) in full, the unexercised shares subject thereto
shall again be available for purposes of the Plan. In addition, any Restricted
Shares which are forfeited by the terms of the Plan or any Restricted Shares
Agreement shall again become available for purposes of the Plan.
4. ADMINISTRATION.
4.1 Powers. The Plan shall be administered by the Board. Subject to the
express provisions of the Plan, the Board shall have plenary authority, in
its discretion, to grant Options and award Restricted Shares under the Plan
and to determine the terms and conditions (which need not be identical), of
all Options and Restricted Shares granted or awarded under the Plan,
including, without limitation, (i) the purchase price, if any, of each
Restricted Share and of each share of Common Stock under an Option,
(ii) the individuals to whom, and the time or times at which, Options and
Restricted Shares shall be granted or awarded, (iii) subject to the
provisions of Section 6.7, the number of shares to be subject to each
Option or award of Restricted Shares, (iv) whether an Option shall be an
ISO or a Nonqualified Stock Option, (v) when an Option can be exercised and
whether in whole or in installments, (vi) the time
B-2
or times and the conditions subject to which Restricted Shares shall become
vested and any Cash Awards shall become payable, and (vii) the form, terms
and provisions of any Stock Option Agreement and Restricted Shares
Agreement evidencing a grant of Options or Awards of Restricted Shares
hereunder (which terms may be amended, subject to Section 15 hereof). In
making such determinations, the Board may take into account the nature of
the services rendered by the respective employees, their present and
potential contributions to the success of the Company and its Subsidiaries
and such other factors as the Board in its discretion shall deem relevant.
Subject to the express provisions of the Plan, the Board shall have plenary
authority to interpret the Plan, to prescribe, amend and rescind the rules
and regulations relating to it and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The
determination of the Board on the matters referred to in this Section 4
shall be conclusive.
4.2 Delegation to Committee. Notwithstanding anything to the contrary
contained herein, the Board may at any time, or from time to time, appoint
a Committee of at least two members, who shall be members of the
Compensation Committee of the Board (or such other persons as the Board may
designate), each of whom shall be a "disinterested person" within the
meaning set forth in Rule 16b-3 as promulgated by the SEC under the
Exchange Act, or any successor definition adopted by the SEC, and delegate
to the Committee the authority of the Board to administer the Plan. Upon
such appointment and delegation, the Committee shall have all the powers,
privileges and duties of the Board, and shall be substituted for the Board,
in the administration of the Plan, except the power to appoint members of
the Committee and to terminate, modify or amend the Plan. The Board may
from time to time appoint members of the Committee in substitution for or
in addition to members previously appointed, may fill vacancies in the
Committee and may discharge the Committee. The Committee shall select one
of its members as its chairman and shall hold its meetings at such times
and places as it shall deem advisable. A majority of its members shall
constitute a quorum and all determinations shall be made by a majority of
such quorum. Any determination reduced to writing and signed by a majority
of the members shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held.
5. ELIGIBILITY. Options and Restricted Shares may be awarded only to
salaried employees (including officers), whether or not employed on a full-time
basis, of the Company and its Subsidiaries. A director of the Company or of a
Subsidiary who is not also an officer or employee of the Company or of one of
its Subsidiaries will not be eligible to receive any Awards under the Plan. No
ISO shall be granted to any employee who, at the time the ISO is granted, owns
(or is considered as owning within the meaning of Section 425(d), or any
successor section, of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any
Subsidiary, unless at the time the ISO is granted the option price is at least
110% of the Fair Market Value of the Common Stock subject to the ISO and the
ISO by its terms is not exercisable after the expiration of five years from the
date it is granted. Awards may be made to employees who hold or have held
Options and/or Restricted Shares under this Plan or any other plans of the
Company. An employee who has received Awards under this Plan may be granted
additional Options and Restricted Shares under this Plan or any other Plan.
6. OPTIONS.
6.1 Option Prices. Except as otherwise specifically provided in Section
5 hereof, the purchase price of the Common Stock under each Option shall be
determined by the Board, but shall not be less than 100% of the Fair Market
Value of the Common Stock at the time of the granting of such Option in the
case of each ISO.
6.2 Term of Options. The term of each Option shall be for such period as
the Board shall determine, but not more than ten years from the date of
grant in the case of each ISO, and, except as set forth in Section 9
hereof, shall expire upon termination of employment with the Company or any
Subsidiary.
6.3 Exercise of Options. Unless otherwise provided in the Stock Option
Agreement, an Option granted under the Plan shall be exercisable in whole,
or in part, at any time during the term of the Option.
B-3
Payment shall be made in cash or, unless otherwise provided in the Stock
Option Agreement, in whole shares of Common Stock already owned by the
Holder of the Option or, unless otherwise provided in the Stock Option
Agreement, partly in cash and partly in such Common Stock. Such notice
shall state that the Holder of the Option elects to exercise the Option,
the number of shares in respect of which it is being exercised and the
manner of payment for such shares, and shall either (i) be accompanied by
payment of the full purchase price of such shares or (ii) fix a date (not
more than 10 business days from the date of exercise) for the payment of
the full purchase price of such shares. Cash payments shall be made by wire
transfer, certified or bank check or personal check, in each case payable
to the order of the Company; provided, however, that the Company shall not
be required to deliver certificates for shares with respect to which an
Option is exercised until the Company has confirmed the receipt of good and
available funds in payment of the purchase price thereof. Common Stock
payments (valued at the Fair Market Value of a share of Common Stock on the
date of exercise) shall be made by delivery of stock certificates in
negotiable form. If certificates representing Common Stock are used to pay
all or part of the purchase price of an Option, separate certificates shall
be delivered by the Company representing the same number of shares as each
certificate so used, and an additional certificate shall be delivered
representing any additional shares to which the Holder of the Options is
entitled as a result of the exercise of the Option. Except as provided in
Section 9 hereof, no Option may be exercised at any time unless the Holder
thereof is then an employee of the Company or of a Subsidiary. The Holder
of an Option shall have none of the rights of a stockholder with respect to
the shares subject to the Option until such shares shall be transferred to
the Holder upon the exercise of the Option.
6.4 ISOs. Notwithstanding anything to the contrary contained herein, but
subject to Section 8 hereof, in the case of ISOs, the aggregate Fair Market
Value (determined at the time the Option is granted) of the shares of
Common Stock covered by ISOs which first become exercisable in any calendar
year under the Plan by any individual employee (and under all other plans
of the Company or any Subsidiary which provide for the granting of ISOs)
shall not exceed $100,000.
6.5 SARs. The Board may (but shall not be obligated to) grant SARs
pursuant to the provisions of this Section 6.5 to the Holder of any Option
granted under the Plan (hereinafter in this Section 6.5 called a related
Option) with respect to all or a portion of the shares subject to the
related Option. A SAR may only be granted concurrently with the grant of
the related Option. Subject to the terms and provisions of this Section
6.5, each SAR shall be exercisable only at the same time and to the same
extent the related Option is exercisable, and in no event after the
termination or exercise of the related Option. Notwithstanding the
foregoing, no SAR may be exercised within a period of six months after the
date of grant of the SAR. SARs granted under the Plan shall be exercisable
in whole or in part by notice to the Company. Such notice shall state that
the Holder of the SARs elects to exercise the SARs, the number of shares in
respect of which the SARs are being exercised and the form of payment the
Holder requests.
Subject to the terms and provisions of this Section 6.5, upon the
exercise of SARs, the Holder thereof shall be entitled to receive from the
Company consideration (in the form hereinafter provided) equal in value to
the excess of the Fair Market Value as of the date of exercise of the SARs
of each share of Common Stock with respect to which such SARs have been
exercised over the option price per share of Common Stock subject to the
related Option. Upon the exercise of an SAR, the Holder may specify the
form of consideration to be received by such Holder, which shall be in
shares of Common Stock (valued at Fair Market Value on the date of exercise
of the SAR), or in cash, or partly in cash and partly in shares of Common
Stock as the Holder shall request; provided, however, that the Board in its
sole discretion may disapprove the form of consideration requested and
instead authorize the payment of such consideration in shares of Common
Stock (valued as aforesaid), or in cash, or partly in cash and partly in
shares of Common Stock. Any election by the Holder of an SAR to receive
cash in full or partial settlement of the SAR, as well as any exercise of
an SAR for such cash, shall be made only during the period beginning on the
third business day following the date of release of the financial data
specified in paragraph (e)(1)(ii) of Rule 16b-3, or any successor thereto,
under the Exchange Act and ending on the twelfth business day following
such date ("Exercise Period"). Unless the Board determines otherwise, the
number of SARs
B-4
which may be exercised for cash, or partly for cash and partly for shares
of Common Stock, during any Exercise Period may not exceed twenty percent
of the aggregate number of shares of Common Stock originally subject to the
related Option (as such original number, without giving effect to the
exercise of any portion of the related Option, shall have been
retroactively adjusted by application of the adjustment(s), if any,
determined in accordance with Section 13 hereof or the corresponding
provisions of any outstanding Stock Option Agreement), but such SARs shall
be exercisable only to the extent the related Option is exercisable. For
purposes of this Section 6.5, the date of exercise of an SAR shall mean the
date on which the Company shall have received notice from the Holder of the
SAR of the exercise of such SAR, except that, upon exercise during the
Exercise Period of an SAR granted in tandem with a Nonqualified Stock
Option, the date of exercise of such SAR shall be deemed to be the date
during the Exercise Period on which the highest reported closing sales
price of share of Common Stock as reported on the Composite Tape occurred
and the Fair Market Value of such shares shall be deemed to be such highest
report closing sales price.
Upon the exercise of SARs, the related Option shall be considered to
have been exercised to the extent of the number of shares of Common Stock
with respect to which such SARs are exercised, and shall be considered to
have been exercised to that extent for purposes of determining the number
of shares of Common Stock available for the grant of Options under the
Plan. Upon the exercise or termination of the related Option, the SARs with
respect to such related Option shall be considered to have been exercised
or terminated to the extent of the number of shares of Common Stock with
respect to which the related Option was so exercised or terminated.
The provisions of Sections 4, 6.2 and 9 through 22 of the Plan (to the
extent that such provisions are applicable to Options) shall also be
applicable to SARs unless the context otherwise requires. The effective
date of the grant of a SAR shall be the date on which the Board approves
the grant of such SAR. Each grantee of a SAR shall be notified promptly of
the grant of a SAR.
Notwithstanding anything to the contrary contained in this Section 6.5,
SARs shall not be exercisable unless at the time of the exercise of an SAR
the Holder of the related Option shall then be, directly or indirectly,
subject to Section 16(b), or any successor thereto, of the Exchange Act.
6.6 Nontransferability of Options. No Option shall be transferable
otherwise than by will or the laws of descent and distribution, and an
Option may be exercised during the lifetime of the Holder thereof only by
such Holder. A breach by the Holder of any of the restrictions, terms or
conditions provided in the Plan or in the Holder's Stock Option Agreement
will cause the Options covered thereby to be terminated.
6.7 Number of Shares. The number of shares of Common Stock subject to
each Option granted under this Plan shall be as determined by the Board.
Notwithstanding the preceding sentence, the total number of shares with
respect to which Options (or SARs) may be granted to any employee during
any one fiscal year of the Company beginning on or after January 1, 2001,
may not exceed 300,000 shares (or such adjusted annual limitation as may be
approved by the Board pursuant to Section 13 hereof).
7. RESTRICTED SHARES.
7.1 Valuation Date and Price. The Board shall designate a Valuation Date
with respect to each award of Restricted Shares and may prescribe
restrictions, terms and conditions applicable to the vesting of such
Restricted Shares in addition to those provided in this Plan. The Board
shall determine the price, if any, to be paid by the Holder for the
Restricted Shares.
7.2 Issuance of Restricted Shares. Restricted Shares, when issued, will
be represented by a stock certificate or certificates registered in the
name of the Holder to whom such Restricted Shares shall have been awarded.
During the Restriction Period, certificates representing the Restricted
Shares and any securities constituting Retained Distributions shall bear a
restrictive legend to the effect that ownership of the Restricted Shares
(and such Retained Distributions), and the enjoyment of all rights
appurtenant thereto, are subject to the restrictions, terms and conditions
provided in the Plan and the applicable
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Restricted Shares Agreement. Such certificates shall be deposited by such
Holder with the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit transfer to the
Company of all or any portion of the Restricted Shares and any securities
constituting Retained Distributions that shall be forfeited or that shall
not become vested in accordance with the Plan and the applicable Restricted
Shares Agreement.
7.3 Restrictions. Restricted Shares shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. The Holder
will have the right to vote such Restricted Shares, to receive and retain
all regular cash dividends, and such other distributions as the Board may
in its sole discretion designate, paid or distributed on such Restricted
Shares and to exercise all other rights, powers and privileges of a Holder
of Common Stock with respect to such Restricted Shares, with the exception
that (i) the Holder will not be entitled to delivery of the stock
certificate or certificates representing such Restricted Shares until the
Restriction Period shall have expired and unless all other vesting
requirements with respect thereto shall have been fulfilled; (ii) the
Company will retain custody of the stock certificate or certificates
representing the Restricted Shares during the Restriction Period; (iii)
other than regular cash dividends and such other distributions as the Board
may in its sole discretion designate, the Company will retain custody of
all distributions ("Retained Distributions") made or declared with respect
to the Restricted Shares (and such Retained Distributions will be subject
to the same restrictions, terms and conditions as are applicable to the
Restricted Shares) until such time, if ever, as the Restricted Shares with
respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall
not bear interest or be segregated in separate accounts; (iv) the Holder
may not sell, assign, transfer, pledge, exchange, encumber or dispose of
the Restricted Shares of any Retained Distributions during the Restrictions
Period; and (v) a breach of any restrictions, terms or conditions provided
in the Plan or established by the Board with respect to any Restricted
Shares or Retained Distributions will cause a forfeiture of such Restricted
Shares and any Retained Distributions with respect thereto.
7.4 Cash Awards. In connection with any award of Restricted Shares, the
Board may authorize the payment of a cash amount to the Holder of such
Restricted Shares at any time after such Restricted Shares shall have
become vested; provided, however, that the amount of the cash payment, if
any, that a Holder shall be entitled to receive shall not exceed 100% of
the aggregate Maturity Value of the Restricted Shares awarded to such
Holder hereunder. Such Cash Awards shall be payable in accordance with such
additional restrictions, terms and conditions as shall be prescribed by the
Board and shall be in addition to any other salary, incentive, bonus or
other compensation payments which Holder shall be otherwise entitled or
eligible to receive from the Company.
7.5 Completion of Restriction Period. On the Valuation Date with respect
to each award of Restricted Shares, and the satisfaction of any other
applicable restrictions, terms and conditions (i) all or part of such
Restricted Shares shall become vested, (ii) any Retained Distributions with
respect to such Restricted Shares shall become vested to the extent that
the Restricted Shares related thereto shall have become vested, and (iii)
any Cash Award to be received by the Holder with respect to such Restricted
Shares shall become payable, all in accordance with the terms of the
applicable Restricted Shares Agreement. Any such Restricted Shares and
Retained Distributions that shall not have become vested shall be forfeited
to the Company and the Holder shall not thereafter have any rights
(including dividend and voting rights) with respect to such Restricted
Shares and Retained Distributions that shall have been so forfeited.
8. ACCELERATION OF OPTIONS AND RESTRICTED SHARES. Notwithstanding any
contrary waiting period or installment period in any Stock Option Agreement or
any Restriction Period in any Restricted Shares Agreement or in the Plan, each
outstanding Option granted under the Plan shall, except as otherwise provided
in the Stock Option Agreement, become exercisable in full for the aggregate
number of shares covered thereby, and each Restricted Share, except as
otherwise provided in the Restricted Shares Agreement, shall vest
unconditionally, in the event (i) the Board (or, if approval of the Board is
not required as a matter of law, the stockholders of the Company, shall approve
(a) any consolidation or merger of the Company in which
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the Company is not the continuing or surviving corporation or pursuant to which
shares of Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the Holders of Common
Stock immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger, or (b)
any sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, or (c) the adoption of any plan or proposal for the liquidation or
dissolution of the Company, or (ii) any person (as such term is defined in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other
entity (other than the Company or any employee benefit plan sponsored by the
Company or any Subsidiary) (a) shall purchase any Common Stock of the Company
(or securities convertible into the Company's Common Stock) for cash,
securities or any other consideration pursuant to a tender offer or exchange
offer, without the prior consent of the Board, and (b) shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 20
percent or more of the combined voting power of the then outstanding securities
of the Company ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors
(calculated as provided in paragraph (d) of such Rule 13d-3 in the case of
rights to acquire the Company's securities), or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board shall cease for any reason to constitute a majority thereof
unless the election, or the nomination for election by the Company's
stockholders of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of
the period. Any transaction referred to in the foregoing clause (i) is herein
called an Approved Transaction, any purchase pursuant to a tender offer or
exchange offer or otherwise as described in the foregoing clause (ii) is herein
called a Control Purchase and the cessation of individuals constituting a
majority of the Board as described in the foregoing clause (iii) is herein
called a Board Change. The Stock Option Agreement and Restricted Shares
Agreement evidencing Options or Restricted shares granted under the Plan may
contain such provisions limiting the acceleration of the exercise of Options
and the acceleration of the vesting of Restricted Shares as provided in this
Section 8 as the Board deems appropriate to ensure that the penalty provisions
of Section 4999 of the Code, or any successor thereto in effect at the time of
such acceleration, will not apply to any stock or cash received by the Holder
from the Company.
9. TERMINATION OF EMPLOYMENT.
9.1 Death of Holder. If a Holder shall die during the Restriction Period
with respect to any Restricted Shares or prior to the exercise of any
Option, then:
(a) unless otherwise provided in a Restricted Shares Agreement, the
Restriction Period applicable to each award of Restricted Shares shall
be deemed to have expired and all such Restricted Shares and Retained
Distributions shall become vested and any Cash Award payable pursuant
to the applicable Restricted Shares Agreement shall be adjusted in such
manner as provided in the Restricted Shares Agreement;
(b) unless otherwise provided in a Stock Option Agreement, the
waiting period or installment period in any Stock Option Agreement
shall be deemed to have expired and each outstanding Option granted
under the Plan shall become exercisable in full for the aggregate
number of shares covered thereby;
(c) in the case of either an ISO or a Nonqualified Stock Option, if
the Holder dies while employed by the Company or a Subsidiary, then
such Option (subject to clause (g) below) may be exercised by the
legatee(s) or personal representative(s) of such Holder at any time
within three years after such Holder's death;
(d) in the case of either an ISO or Nonqualified Stock Option, if
the Holder's employment with the Company or any Subsidiary was
terminated due to Total Disability and such Holder dies within one year
after termination of employment, then such Option (subject to clause
(g) below) may be exercised by the legatee(s) or personal
representative(s) of such Holder at any time during the
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remainder of the period during which such Holder would have been able
to exercise such Option had the Holder not died;
(e) in the case of either an ISO or a Nonqualified Stock Option, if
the Holder retires pursuant to any retirement plan of the Company or a
Subsidiary or in the absence of a retirement plan a Holder retires and
the Committee determines that such Holder should have the benefit of
this clause (e) and such Holder dies during the period after retirement
when such Option was still exercisable by such Holder, then such Option
(subject to clause (g) below) may be exercised by the legatee(s) or
personal representative(s) during the remainder of the period during
which such Holder would have been able to exercise such Option had the
Holder not died;
(f) in the case of either an ISO or a Nonqualified Stock Option, if
the Holder dies within three months after termination of employment and
clauses (d) and (e) are not applicable, then such Option (subject to
clause (g) below) may be exercised by the legatee(s) or personal
representative(s) of such Holder at any time within one year after such
Holder's death; and
(g) the exercise of Options after the termination of employment of
the Holder for any reason is subject to the following: (i) no Option
may be exercised after the expiration date of such Option; (ii) only
Options exercisable by the Holder at the time of such termination
(after taking into account the provisions of clause (b) above) may be
exercised after such termination; and (iii) any Stock Option Agreement
may provide a shorter period of time for the exercise of Options than
provided in clauses (c) through (f) above.
9.2 Total Disability. If a Holder's employment with the Company or any
Subsidiary shall terminate during the Restriction Period with respect to
any Restricted Shares or prior to the exercise of any Option as a result of
Total Disability; then:
(a) in the case of Restricted Shares, Section 9.1(a) above shall
apply; and
(b) in the case of either an ISO or a Nonqualified Stock Option,
such Option (subject to Section 9.1(g) above) may be exercised by such
Holder (or his or her personal representative(s)) at any time within
one year after such termination of employment; provided, however, that
unless otherwise provided in a Stock Option Agreement the waiting
period or installment period of any Stock Option Agreement shall be
deemed to have expired and each outstanding Option granted under the
Plan shall become exercisable in full for the aggregate number of
shares covered thereby from and after the date of such termination of
employment.
9.3 Retirement. If a Holder's employment with the Company or any
Subsidiary shall terminate during the Restriction Period with respect to
any Restricted Shares or prior to the exercise of any option as a result of
retirement pursuant to any retirement plan of the Company or any Subsidiary
or in the absence of a retirement plan upon such Holder's retirement the
Committee determines that such Holder should have the benefit of this
Section 9.3, then:
(a) unless the Board determines otherwise, in the case of Restricted
Shares, all Restricted Shares, Retained Distributions and rights to any
Cash Awards will be forfeited;
(b) in the case of an ISO, such ISO (subject to Section 9.1(g)
above) may be exercised at any time within three months after such
Holder's termination of employment; and
(c) in the case of a Nonqualified Stock Option, such Option (subject
to Section 9.1(g) above) may be exercised at any time within three
years after such Holder's termination of employment.
9.4 Termination by Company for Cause. If a Holder's employment within
the Company or any Subsidiary shall be terminated by the Company or such
Subsidiary during the Restriction Period, with respect to any Restricted
Shares or prior to the exercise of any Option for cause (for these
purposes, cause shall have the meaning ascribed thereto in any employment
agreement to which such Holder is a party or, in the absence thereof, shall
include but not be limited to, insubordination, dishonesty, incompetence,
B-8
moral turpitude, other misconduct of any kind and the refusal to perform
his or her duties and responsibilities for any reason other than illness or
incapacity; provided, however, that if such termination occurs within 12
months after an Approved Transaction, Control Purchase or Board Change,
termination for cause shall only mean a felony conviction for fraud,
misappropriation or embezzlement), then:
(a) all Options held by such Holder shall immediately terminate; and
(b) such Holder's rights to all Restricted Shares, Retained
Distributions and any Cash Awards shall be forfeited immediately.
9.5 Termination by Company without Cause. If during the Restriction
Period with respect to any Restricted Shares or prior to the exercise of
any Option, a Holder's employment with the Company or any Subsidiary shall
be terminated by the Company or Subsidiary without cause as the same may be
defined in any employment agreement to which the Holder is a party or in
the absence thereof, as determined by the Board, then:
(a) in the case of Restricted Shares, the provisions of Section
9.1(a) above shall apply; and
(b) in the case of either an ISO or a Nonqualified Stock Option,
such Option (subject to Section 9.1(g) above) held by such Holder may
be exercised at any time within three months after such Holder's
termination of employment.
9.6 Termination for Other Reason. If during the Restriction Period with
respect to any Restricted Shares or prior to the exercise of any Option, a
Holder's employment with the Company or any Subsidiary shall be terminated
for any reason other than as set forth in Sections 9.1 through 9.5 above,
then:
(a) all such Holder's Rights to Restricted Shares, Retained
Distributions and any Cash Awards shall be forfeited immediately; and
(b) in the case of either an ISO or a Nonqualified Stock Option, the
provisions of Section 9.5(b) above shall apply.
9.7 General. A leave of absence, unless otherwise determined by the
Board prior to the commencement thereof, shall not be considered a
termination of employment. Awards made under this Plan shall not be
affected by any change of employment so long as the Holder continues to be
an employee of the Company or a Subsidiary.
10. RIGHT OF COMPANY TO TERMINATE EMPLOYMENT. Nothing contained in the Plan
or in any Award shall confer on any Holder any right to continue in the employ
of the Company or any of its Subsidiaries or interfere in any way with the
right of the Company or a Subsidiary to terminate the employment of the Holder
at any time, with or without cause.
11. NONALIENATION OF BENEFITS. No right or benefit under the Plan shall be
subject to anticipation, alienation, sale, assignment, hypothecation, pledge,
exchange, transfer, encumbrance or charge, and any attempt to anticipate, sell,
assign, hypothecate, pledge, exchange, transfer, encumber or charge the same
shall be void. No right or benefit hereunder shall in any manner be liable for
or subject to the debts, contracts, liabilities or torts of the person entitled
to such benefit.
12. WRITTEN AGREEMENT. Each award of Restricted Shares and any right to a
Cash Award hereunder shall be evidenced by a Restricted Shares Agreement and
each grant of an Option shall be evidenced by a Stock Option Agreement, each in
such form and containing such terms and provisions not inconsistent with the
provisions of the Plan as the Board from time to time shall approve. The
effective date of the granting of an Option shall be the date on which the
Board approves the granting of such Option. Each grantee of an Option or
Restricted Shares shall be notified promptly of such grant and a written Stock
Option Agreement and/or Restricted Shares Agreement shall be promptly executed
and delivered by the Company and the grantee, provided that such grant Options
or Restricted Shares shall terminate if such written agreement is not signed by
B-9
such grantee (or his or her attorney) and delivered to the Company within 60
days after the date the Board approved such grant. Any such written agreement
may contain provisions as the Board deems appropriate to ensure that the
penalty provisions of Section 4999 of the Code, or any successor thereto, will
not apply to any stock or cash received by the Holder from the Company.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The Stock Option Agreements
and Restricted Shares Agreements evidencing awards may contain such provisions
as the Board shall determine to be appropriate for the adjustment of the number
and class of all Restricted Shares and the terms applicable to any Cash Awards
and the number and class of shares subject to each outstanding Option and the
option prices thereof in the event of changes in the outstanding Common Stock
of the Company by reason of any stock dividend, distribution, split-up,
recapitalization, combination or exchange of shares, merger, consolidation or
liquidation and the like, and, in the event of any such change in the
outstanding Common Stock of the Company, the aggregate number and class of
shares available under the Plan shall be appropriately adjusted by the Board,
whose determination shall be conclusive.
14. RIGHT OF FIRST REFUSAL. The Stock Option Agreements and Restricted
Shares Agreements may contain such provisions as the Board shall determine to
the effect that if a Holder elects to sell al or any shares of Common Stock
that such Holder acquired upon the exercise of an Option or upon the vesting of
Restricted Shares awarded under the Plan, then such Holder shall not sell such
shares unless such Holder shall have first offered in writing to sell such
shares to the Company at Fair Market Value on a date specified in such offer
(which date shall be at least three business days and not more than ten
business days following the date of such offer). In any such event,
certificates representing shares issued upon exercise of Options and the
vesting of Restricted Shares shall bear a restrictive legend to the effect that
transferability of such shares are subject to the restrictions contained in the
Plan and the applicable Stock Option Agreement or Restricted Shares Agreement
and the Company may cause the registrar of its Common Stock to place a stop
transfer order with respect to such shares.
15. TERMINATION AND AMENDMENT. Unless the Plan shall theretofore have been
terminated as hereinafter provided, no Awards may be made under the Plan after
September, 2011. The Board may at any time prior to September, 2011 terminate
the Plan, and the Board may at any time also modify or amend the Plan in such
respects as it shall deem advisable; provided, however, that the Board may not,
without the approval of the Holders of a majority of the voting securities of
the Company present, either in person or by proxy, and entitled to vote at a
meeting (i) materially increase (except as provided in Section 13 hereof) the
maximum number of shares which may be issued under the Plan, (ii) materially
modify the requirements as to eligibility for participation in the Plan, or
(iii) materially increase the benefits accruing to participants under the Plan.
No termination, modification or amendment of the Plan or any outstanding
Restricted Shares Agreement or Stock Option Agreement may, without the consent
of the employee to whom any Award shall theretofore have been granted,
adversely affect the rights of such employee with respect to such Award.
16. EFFECTIVENESS OF THE PLAN. The Plan shall become effective upon the
unanimous written consent of the stockholders of the Company entitled to vote
thereon.
17. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company with
respect to Awards shall be subject to (i) all applicable laws, rules and
regulations and such approvals by any governmental agencies as may be required,
including, without limitation, the effectiveness of a registration statement
under the Securities Act of 1933, as amended, and (ii) the rules and
regulations of any securities exchange on which the Common Stock may be listed.
18. WITHHOLDING. The Company's obligation to deliver shares of Common Stock
or to pay cash upon the exercise of any Nonqualified Stock Option or any SAR
granted under the Plan and to deliver stock certificates or to pay cash upon
the vesting of Restricted Shares or Cash Awards shall be subject to applicable
Federal, state and local tax withholding requirements. Federal, state and local
withholding tax due upon the exercise of any Nonqualified Stock Option and upon
the vesting of Restricted Shares may be paid in shares of
B-10
Common Stock upon such terms and conditions as the Board shall determine;
provided, however, that the Board in its sole discretion may disapprove such
payment and require that such taxes be paid in cash.
19. SEPARABILITY. If any of the terms or provisions of this Plan conflict
with the requirements of Rule 16b-3 under the Exchange Act (as the same shall
be amended from time to time) and/or Section 422A of the Code (as the same
shall be amended from time to time), then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of said
Rule 16b-3, and/or with respect to ISOs, Section 422A of the Code.
With respect to ISOs, if this Plan does not contain any provision required
to be included herein under Section 422A of the Code (as the same shall be
amended from time to time), such provision shall be deemed to be incorporated
herein with the same force and effect as if such provision had been set out at
length herein.
20. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options and the awarding
of stock and cash otherwise than under the Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
21. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION. By acceptance of
an Award, each Holder shall be deemed to have agreed that the award of
Restricted Shares and any right to a Cash Award and the grant of any Option and
the exercise thereof or any SAR are special incentive compensation and that
they will not be taken into account as "salary" or "compensation" or "bonus" in
determining the amount of any payment under any pension, retirement or other
qualified employee benefit plan of the Company or any Subsidiary. In addition,
each beneficiary of a deceased Holder shall be deemed to have agreed that such
Award will not affect the amount of any life insurance coverage provided by the
Company on the life of the Holder which is payable to such beneficiary under
any life insurance plan covering employees of the Company or any Subsidiary.
22. GOVERNING LAW. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
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PROXY
CHECKERS DRIVE-IN RESTAURANTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS--SEPTEMBER 26, 2001
The undersigned hereby appoints William P. Foley, II, Peter C. O'Hara and
Daniel J. Dorsch, 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 2001 Annual
Meeting of Stockholders to be held on September 26, 2001 (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-K.
--------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
ADMISSION TICKET
ANNUAL MEETING OF STOCKHOLDERS
OF
CHECKERS DRIVE-IN RESTAURANTS, INC.
SEPTEMBER 26, 2001 @ 9:00 A.M, EASTERN DAYLIGHT SAVINGS TIME
---------------------
TAMPA, FLORIDA
(Continued from other side)
PROXY
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
Please mark your vote as indicated in this example [X]
1. Election of Directors Below.
Nominees:
Peter C. O'Hara, Terry N. Christensen, Willie D.
Davis, and Daniel J. Dorsch
For, except vote withheld from the following nominee(s):
-----------------------------------------------------------------------------
FOR WITHHELD ABSTAIN
2. Ratify and approve the Company's 2001 Employee [_] [_] [_]
Stock Option Plan
Ratify and approve the appointment of KPMG LLP as
3. independent auditors [_] [_] [_]
THIS PROXY WILL BE VOTED AS DIRECTOR 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.