<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
STAR BUFFET, 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] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
STAR BUFFET, INC.
440 LAWNDALE DRIVE
SALT LAKE CITY, UTAH 84115
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 1998
To the Stockholders of Star Buffet, Inc.:
The Annual Meeting of Stockholders of Star Buffet, Inc. will be held
at the Biltmore Four Seasons Resort, 1260 Channel Drive, Santa Barbara,
California, on Tuesday, June 30, 1998, at 9:30 a.m. for the following purposes:
1. To elect the following eight (8) nominees to serve as
directors until the next annual meeting of stockholders or
until their successors are elected and have qualified:
William P. Foley II Jack M. Lloyd
Robert E. Wheaton Thomas G. Schadt
C. Thomas Thompson Norman N. Habermann
Stuart W. Clifton John F. North, Jr.
2. To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on May 8, 1998,
will be entitled to notice of and to vote at the meeting or any adjournment
thereof.
By Order of the Board of Directors,
William P. Foley, II
Chairman of the Board
Salt Lake City, Utah
May 28, 1998
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, TO ASSURE THAT YOUR SHARES WILL
BE VOTED AT THE MEETING, YOU ARE REQUESTED TO SIGN THE ATTACHED PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE. NO ADDITIONAL
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING,
YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON ON EACH MATTER.
- --------------------------------------------------------------------------------
<PAGE> 3
STAR BUFFET, INC.
440 LAWNDALE DRIVE
SALT LAKE CITY, UT 84115
---------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 1998
---------------
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Star Buffet, Inc., a
Delaware corporation ("Star" or the "Company"), for use at the Annual Meeting of
Stockholders to be held at the Biltmore Four Seasons Resort, 1260 Channel Drive,
Santa Barbara, California, on Tuesday, June 30, 1998, at 9:30 a.m.
(the "Meeting").
This Proxy Statement and accompanying proxy card (the "Proxy Card")
are first being mailed to stockholders on or about May 28, 1998.
SOLICITATION OF PROXIES
At the Meeting, the stockholders of Star will be asked (1) to vote
upon the election of eight (8) nominees to serve as directors until the next
annual meeting of stockholders or until their successors are elected and have
qualified and (2) to act upon such other matters as may properly come before the
Meeting or any postponements or adjournments thereof. Star's Board of Directors
is asking for your proxy for use at the Meeting. A stockholder giving a proxy
may revoke it at any time before it is exercised. Any proxy that is not revoked
will be voted at the Meeting in accordance with the stockholder's instructions
indicated on the enclosed Proxy Card. If no instructions are marked on a
properly executed returned Proxy Card, the shares represented thereby will be
voted FOR the election of the director nominees. Although management does not
know of any other matter to be acted upon at the Meeting, shares represented by
valid proxies will be voted by the persons named on the Proxy Card in accordance
with their best judgment with respect to any other matters that may properly
come before the Meeting.
The cost of solicitation of proxies will be paid by Star. In
addition, following the mailing of the Proxy Statement, directors, officers and
regular employees of Star may solicit proxies by mail, telephone, telegraph or
personal interview. Such persons will receive no additional compensation for
such services. Brokerage houses and other nominees, fiduciaries and custodians
nominally holding shares of Star Common Stock of record will be requested to
forward proxy soliciting material to the beneficial owners of such shares and
will be reimbursed by Star for their charges and expenses in connection
therewith.
RECORD DATE AND VOTING
Holders of Star Common Stock of record at the close of business on
May 8, 1998 (the "Record Date") are entitled to notice of, and to vote at, the
Meeting. As of the Record Date, there were 5,450,000 shares of Star Common Stock
outstanding and entitled to vote at the Meeting. No shares of the Company's
preferred stock, $.001 par value, were outstanding. A majority of shares
entitled to vote represented in person or by proxy will constitute a quorum at
the Meeting. Each stockholder is entitled to one vote for each share of Common
Stock held as of the Record Date. Abstentions and broker non-votes are each
included in the determination of the number of shares present and voting for the
purpose of determining whether a quorum is present. Abstentions will be treated
as shares present and entitled to vote for purposes of any matter requiring
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<PAGE> 4
the affirmative vote of a majority or other proportion of the shares present and
entitled to vote. With respect to shares relating to any proxy as to which a
broker non-vote is indicated on a proposal, those shares will not be considered
present and entitled to vote with respect to any such proposal. Abstentions or
broker non-votes or other failures to vote will have no effect in the election
of directors, who will be elected by a plurality of the affirmative votes cast.
With respect to any matter brought before the Annual Meeting requiring the
affirmative vote of a majority or other proportion of the outstanding shares, an
abstention or broker non-vote will have the same effect as a vote against the
matter being voted upon.
PROPOSAL 1
ELECTION OF DIRECTORS
Currently, there are eight (8) members of the Board of Directors.
Directors are elected at each annual stockholders' meeting to hold office until
the next annual meeting or until their successors are elected and have
qualified. Unless otherwise instructed, the persons named in the accompanying
Proxy Card will vote the proxies received by them for the eight (8) nominees
named below. All of the nominees presently are directors of the Company.
If any nominee becomes unavailable for any reason before the
election, the persons named in the accompanying Proxy Card will have
discretionary authority to vote for the election of such substitute nominee or
nominees, if any, as shall be designated by the Board of Directors. The Board of
Directors has no reason to believe that any of the nominees will be unavailable
to serve.
DIRECTORS
The names and certain information concerning the eight (8) nominees
for election as directors are set forth below. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
The director nominees of Star are as follows:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
William P. Foley II 53 Chairman of the Board
Robert E. Wheaton 45 Chief Executive Officer,
President and Director
C. Thomas Thompson 48 Director
Stuart W. Clifton 53 Director
Jack M. Lloyd 48 Director
Thomas G. Schadt 56 Director
Norman N. Habermann 65 Director
John F. North, Jr. 49 Director
</TABLE>
William P. Foley II has served as the Chairman of the Board of the
Company since its formation in July 1997. Mr. Foley has been the Chief Executive
Officer of CKE Restaurants, Inc. ("CKE") since October 1994, the Chairman of the
Board of Directors of CKE since March 1994, and has served as a director of CKE
since December 1993. Since 1981, Mr. Foley has been Chairman of the Board,
President (until January 1995) and Chief Executive Officer of Fidelity National
Financial, Inc., a specialty finance company performing specialty finance
functions and providing loans in the small ticket leasing industry, and is also
engaged in the business of issuing title insurance and providing title related
services. Mr. Foley is also the Chairman of the Board of Checkers Drive-In
Restaurants, Inc., Rally's Hamburgers, Inc., and a member of the Boards of
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<PAGE> 5
Directors of DataWorks Corporation, Micro General Corporation, GB Foods
Corporation and Fresh Foods, Inc.
Robert E. Wheaton has served as the Chief Executive Officer and
President and as a director of the Company since its formation in July 1997. Mr.
Wheaton also served as the interim Chief Executive Officer and as a director of
Stacey's Buffet, Inc. from October 31, 1997 to February 13, 1998. Mr. Wheaton
also has served as an Executive Vice President of CKE since January 1996. From
April 1995 to January 1996, he served as Vice President and Chief Financial
Officer of Denny's Inc., a subsidiary of Flagstar Corporation. From 1991 to
1995, Mr. Wheaton served as President and Chief Executive Officer and, from 1989
to 1991, as Vice President and Chief Financial Officer of The Bekins Company.
C. Thomas Thompson has served as a director of the Company since its
formation in July 1997. Mr. Thompson has served as the President and Chief
Operating Officer of CKE since October 1994. Mr. Thompson has been a franchisee
of CKE since 1984, and currently operates 15 Carl's Jr. Restaurants in the San
Francisco Bay Area. Mr. Thompson also currently serves as Vice Chairman of the
Board of Checkers Drive-In Restaurants, Inc. and a member of the Board of
Directors of Rally's Hamburgers, Inc. Mr. Thompson has more than 20 years of
experience in the restaurant industry. He previously held positions with
Jack-in-the-Box and Pacific Fresh Restaurants, a full-service restaurant chain
in the Bay Area.
Stuart W. Clifton has served as a director of the Company since the
completion of the Company's initial public offering in September 1997. Since
1987, Mr. Clifton has been the Chief Executive Officer and President and a
member of the Board of Directors of DataWorks Corporation, a supplier of
information systems to manufacturing companies.
Thomas G. Schadt has served as a director of the Company since the
completion of the Company's initial public offering in September 1997. Mr.
Schadt has been the Chief Executive Officer of a privately-held beverage
distribution company, Bear Creek, L.L.C., since 1995. From 1976 to 1994, he held
several positions with Pepsico, Inc., including, most recently, Vice President
of Food Service.
Norman N. Habermann has served as a director of the Company since the
completion of the Company's initial public offering in September 1997. Since
February 1994, Mr. Habermann has been the President of Scobrett Associates,
Inc., which is involved in venture capital and consulting activities. From
December 1986 to January 1994, Mr. Habermann was President and Chief Executive
Officer of the Restaurant Enterprises Group, Inc. and its predecessors. From
November 1994 until its acquisition by CKE in July 1996, Mr. Habermann was a
director of Summit Family Restaurants Inc.
Jack M. Lloyd has served as a director of the Company since the
completion of the Company's initial public offering in September 1997. Mr. Lloyd
has served as Chairman of the Board of DenAmerica Corp. since July 9, 1996 and
as President, Chief Executive Officer and a director of DenAmerica Corp. since
March 29, 1996. Mr. Lloyd served as Chairman of the Board and Chief Executive
Officer of Denwest Restaurant Corp. ("DRC") from 1987 until the March 1996
merger of DRC and DenAmerica and served as President of DRC from 1987 until
November 1994. Mr. Lloyd engaged in commercial and residential real estate
development and property management as President of First Federated Investment
Corporation during the early and mid-1980's. Mr. Lloyd also currently serves as
a director of Action Performance Companies, Inc.
John F. North, Jr. has served as a director of the Company since the
completion of the Company's initial public offering in September 1997. Mr. North
is the co-founder of JJ North's Grand Buffet and, since 1978, has served as the
President and Co-Chairman of the Board of Directors of North's Restaurants, Inc.
4
<PAGE> 6
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Executive Committee of the Board of Directors, comprised of
Messrs. Foley, Thompson and Wheaton, is empowered by the Board of Directors to
take all actions that may otherwise be taken by the Board of Directors, to the
extent permitted by law.
In addition to the Executive Committee, the Board of Directors has
two standing committees: the Audit Committee and the Compensation Committee. The
Board does not have a nominating committee or other committee performing similar
functions. Instead, the Board of Directors, as a whole, identifies and screens
candidates for membership on the Company's Board of Directors. The Audit
Committee, whose current members are Messrs. Clifton, Lloyd and Habermann
(Chairman), monitors Star's basic accounting policies and their related system
of internal control, reviews Star's audit and management reports and makes
recommendations regarding the appointment of independent auditors. The
Compensation Committee, whose current members are Messrs. Foley (Chairman),
Habermann and Schadt, considers the hiring and election of corporate officers,
salary and incentive compensation policies for officers and directors, and the
granting of stock options to employees.
During fiscal 1998, the Board of Directors held one meeting and the
Executive Committee held two meetings. The Compensation Committee and the Audit
Committee did not meet during fiscal 1998. During fiscal 1998, no director
attended fewer than 75% of the aggregate meetings of the Board of Directors and
the committee or committees on which he served.
COMPENSATION OF DIRECTORS
For their services as directors in fiscal 1998, each non-employee
director received $2,000 per meeting of the Board of Directors and $500 per
committee meeting. In addition, all directors are entitled to participate in
Star's 1997 Stock Incentive Plan.
OTHER MATTERS
Management does not know of any matter to be acted upon at the
Meeting other than the matters described above, but if any other matter properly
comes before the Meeting, the persons named on the enclosed Proxy Card will vote
thereon in accordance with their best judgment.
5
<PAGE> 7
OWNERSHIP OF THE COMPANY'S SECURITIES
The following table sets forth certain information regarding
beneficial ownership of Star's Common Stock as of the Record Date, by (i) each
person who is known by Star to beneficially own more than five percent of the
outstanding Star Common Stock, (ii) each director of Star, (iii) each Named
Executive Officer of Star identified in the Summary Compensation Table and (iv)
all current directors and executive officers of Star as a group. Except as
otherwise indicated, beneficial ownership includes both voting and investment
power.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS (%)(1)
------------------------------------ ------------------ ------------
<S> <C> <C>
CKE Restaurants, Inc.
1200 North Harbor Boulevard
Anaheim, CA 92801................................. 2,000,000 36.6%
Robert E. Wheaton.................................. 117,746 (2) *
William P. Foley II................................ 72,848 (3) *
C. Thomas Thompson................................. 31,899 (4) *
John F. North, Jr.................................. 60,583 (5) *
Theodore Abajian................................... 7,000 (6) *
Stuart W. Clifton.................................. 7,500 (7) *
Norman N. Habermann................................ 7,500 (7) *
Jack M. Lloyd...................................... 7,500 (7) *
Thomas G. Schadt................................... 7,500 (7) *
All executive officers and directors
as a group (9 persons)........................... 320,076 (8) 5.6%
</TABLE>
- ----------
* Less than one percent.
(1) Calculated based on 5,450,000 shares of Star Common Stock outstanding
May 8, 1998.
(2) Includes 79,746 shares subject to presently exercisable options or
options that become exerciseable within 60 days of May 8, 1998.
(3) Includes 47,848 shares subject to presently exercisable options or
options that become exerciseable within 60 days of May 8, 1998.
(4) Includes 31,899 shares subject to presently exercisable options or
options that become exerciseable within 60 days of May 8, 1998.
6
<PAGE> 8
(5) Includes 60,583 shares subject to presently exercisable options or
options that become exerciseable within 60 days of May 8, 1998.
(6) Includes 5,000 shares subject to presently exercisable options or
options that become exerciseable within 60 days of May 8, 1998.
(7) Includes 7,500 shares subject to presently exercisable options or
options that become exerciseable within 60 days of May 8, 1998.
(8) Includes 233,993 shares subject to presently exercisable options or
options that become exerciseable within 60 days of May 8, 1998.
7
<PAGE> 9
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR THE
FISCAL YEAR ENDED JANUARY 26, 1998.
The Compensation Committee (the "Committee"), comprised of three
non-employee directors, is responsible for administering the executive
compensation policies, administering the various management incentive programs
(including option plans), and making recommendations to the Board of Directors
with respect to these policies and programs. In addition, the Committee makes
annual recommendations to the Board of Directors concerning the compensation
paid to the Chief Executive Officer and to each of the other executive officers
of Star (each, an "Executive Officer"). As discussed below, the Company began
its independent corporate existence on July 28, 1997 through the reorganization
of direct or indirect wholly-owned subsidiaries of CKE. The Committee was not
formed until after the first meeting of the Board following the formation of the
Company. Since there was no Committee at the time of the first Board meeting, it
was necessary for the non-employee directors of the Board to decide all
compensation issues at that meeting. In addition, certain compensation
arrangements were established by the Compensation Committee of the Board of
Directors of CKE while the Company was a wholly-owned subsidiary of CKE.
The following is a summary of the policies which the Board of
Directors analyzed in determining the compensation for the Executive Officers of
the Company. The Committee intends to follow the same general policies in
determining the compensation for the Executive Officers of the Company in fiscal
1999, but may, in its discretion, alter such policies to take into consideration
the applicable circumstances at the time.
Compensation Policies Towards Executive Officers. The Committee
believes that the most effective executive compensation program is one that
provides incentives to achieve both current and long-term strategic management
goals, with the ultimate objective of enhancing stockholder value. In this
regard, the Committee believes executive compensation should be comprised of
cash as well as equity-based programs. Base salaries are generally set at market
levels in order to attract and retain qualified executives. With respect to
equity-based compensation, the Committee believes that an integral part of
Star's compensation program is the ownership and retention of Star's Common
Stock by its Executive Officers. By providing Executive Officers with a
meaningful stake in Star, the value of which is dependent on Star's long-term
success, a commonality of interests between Star's Executive Officers and its
stockholders is fostered.
Relationship of Performance to Compensation. Compensation that may be
earned by the Executive Officers in any fiscal year consists primarily of base
salary, cash bonus and stock options. The significant factors that were
considered in establishing the components of each Executive Officer's
compensation package for the fiscal year ended January 26, 1998 are summarized
below. The Committee, in its discretion, may apply different factors,
particularly different measures of financial performance, in setting executive
compensation for future fiscal years, but all compensation decisions will be
designed to further the general compensation policies indicated above.
Base Salary. The base salary for each Executive Officer is
set on the basis of personal performance, the salary levels in effect for
comparable positions with Star's principal competitors (including, but not
limited to, Star's self-determined peer group set forth in the "Stock
Performance Graph"), and Star's financial performance relative to such
competitors. Factors relating to individual performance that are assessed in
setting base compensation are based on the particular duties and areas of
responsibility of the individual Executive Officer. Factors relating to Star's
financial performance that may be related to increasing or decreasing base
salary include revenues and earnings. The establishment of base compensation
involves a subjective assessment and weighing of the foregoing criteria and is
not based on any specific formula.
Cash Bonus. Annual bonuses are earned by each Executive
Officer on the basis of Star's achievement of pre-tax income targets established
at the start of the fiscal year and on the basis of the particular Executive
Officer's duties and areas of responsibility. Bonus amounts are established
based on various levels of performance against such targets. Following the
completion of the fiscal year, the Committee
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<PAGE> 10
assesses Star and individual performance against the established targets and
provides for annual bonuses based on the targeted performance of levels actually
achieved.
Stock Options. Stock option grants motivate Executive
Officers to manage the business to improve long-term Star performance, and align
the interests of Executive Officers with stockholder value. Customarily, option
grants are made with exercise prices equal to the fair market value of the
shares on the grant date and will be of no value unless the market price of
Star's outstanding shares appreciates, thereby aligning a substantial part of
the Executive Officer's compensation package with the return realized by the
stockholders. Options generally vest in equal installments over a period of
time, contingent upon the Executive Officer's continued employment with Star.
Accordingly, an option will provide a return to the Executive Officer only if
the Executive Officer remains employed by Star and the market price of the
underlying shares appreciates over the option term. The size of an option grant
is designed to create a meaningful opportunity for stock ownership and is based
upon the individual's current position with Star, internal comparability with
option grants made to other Star executives and the individual's potential for
future responsibility and promotion over the option term. The Committee has
established an award program which takes into account the level of
responsibility in the organization, and total compensation compared to
comparable companies, in making option grants to the Executive Officers in an
attempt to target a fixed number of unvested option shares based upon the
individual's position with Star and the Executive Officer's existing holdings of
unvested options. As such, the award of stock options requires subjective
judgment as to the amount of the option. However, the Committee does not adhere
strictly to these guidelines and will occasionally vary the size of the option
grant, if any, made to each Executive Officer as circumstances warrant.
Chief Executive Officer Compensation. Robert E. Wheaton became Star's
Chief Executive Officer upon the Company's formation in July 1997. Prior to the
Company's initial public offering in September 1997, Mr. Wheaton's annual base
compensation was established at $187,000 for the fiscal year ended January 26,
1998, based on the philosophy described above.
Corporate Deduction for Compensation. Section 162(m) of the Code
generally limits to $1.0 million the corporate deduction for compensation paid
to certain executive officers, unless certain requirements are met. Star's 1997
Stock Incentive Plan is structured so that any compensation deemed paid to an
executive officer upon exercise of an option, with an exercise price equal to
the fair market value of the underlying shares on the grant date, will qualify
as performance-based compensation that will not be limited by Section 162(m).
The Committee intends to monitor regulations issued pursuant to Section 162(m)
and to take such actions with respect to the executive compensation program as
are reasonably necessary to preserve the corporate tax deduction for executive
compensation paid.
William P. Foley (Chairman)
Norman N. Habermann
Thomas G. Schadt
The report of the Compensation Committee of the Board of Directors
shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that Star specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
9
<PAGE> 11
STOCKHOLDER PERFORMANCE GRAPH
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
9/97 10/97 11/97 12/97 1/98
------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
STAR BUFFET INC STRZ 100.00 119.27 108.85 95.83 102.08
NASDAQ STOCK MARKET (U.S.) INAS 100.00 94.82 95.30 93.80 96.78
DOW JONES RESTAURANTS IRES 100.00 93.68 100.92 99.51 97.74
</TABLE>
- ----------
The Stock Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that Star specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
10
<PAGE> 12
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The Company was incorporated on July 28, 1997, through the
reorganization of direct or indirect wholly-owned subsidiaries of CKE. Prior to
the Company's incorporation, the Company's Executive Officers have been employed
by CKE or its subsidiaries, and all or substantially all of their compensation
paid prior to July 28, 1997 was paid by CKE or its subsidiaries primarily for
services rendered to CKE or its subsidiaries. In connection with the
organization of the Company, the Company and CKE established an allocated annual
base salary of $187,000 for Robert E. Wheaton, the Chief Executive Officer and
President of the Company, and an allocated annual base salary of $95,000 for
Theodore Abajian, the Chief Financial Officer of the Company. The following
table sets forth the compensation awarded to, earned by or paid to the Company's
executive officers for each of the two fiscal years ended January 27, 1997 and
January 26, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------------
---------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS
NAME AND TITLE YEAR ($) ($) ($)(5) ($) (#)(6)
- ------------------------------ ------- ------------ ---------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Wheaton............. 1998(1) 61,298 -- -- 239,237
President and Chief 1997(2) 200,000 70,000 9,344 30,000
Executive Officer
Ted Abajian (7)............... 1998(3) 23,293 -- 3,925 15,000
Vice President and 1997(4) 78,092 3,000 1,846 1,500
Chief Financial Officer
</TABLE>
- ----------
(1) Excludes the following amounts earned by Mr. Wheaton from CKE during
fiscal 1998: (i) salary in the amount of $160,721, (ii) bonus in the
amount of $80,354, (iii) other annual compensation in the amount of
$8,820 and (iv) 16,500 options to purchase CKE's common stock. In
September 1997, Mr. Wheaton's employment agreement with CKE was
modified to provide that CKE pays 25% of his base salary and Star
pays the remaining 75%.
(2) Represents compensation paid by CKE or its subsidiaries to Mr.
Wheaton in his capacity as Executive Vice President of CKE.
(3) Excludes the following amounts earned by Mr. Abajian from CKE or its
subsidiaries during fiscal 1998: (i) salary in the amount of $63,689,
(ii) bonus in the amount of $14,707, and (iii) other annual
compensation in the amount of $3,806.
(4) Represents compensation paid by CKE or its subsidiaries to Mr.
Abajian.
(5) "Other Annual Compensation" represents primarily auto related
payments to Messrs. Wheaton and Abajian.
(6) Represents options to purchase shares of CKE's common stock for
fiscal 1997, and represents options
11
<PAGE> 13
to purchase shares of Star's common stock for fiscal 1998.
(7) On April 27, 1998, Theodore Abajian resigned as the Chief Financial
Officer of the Company.
STOCK OPTIONS
The following table sets forth certain information with respect to
the stock options granted during the fiscal year ended January 26, 1998 to the
Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- --------------------------------------------------------------------------------------------- VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OF OPTION TERM
OPTIONS FISCAL BASE PRICE EXPIRATION --------------------------
NAME GRANTED (#) YEAR(1) ($/SHARE)(2) DATE(3) 5%($) 10%($)
- ----------------------- ------------ -------------- ------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Wheaton 239,237 39.3% $12.00 Sept. 24, 2008 1,808,632 4,564,642
Theodore Abajian 15,000 2.5% $12.00 Sept. 24, 2008 113,400 286,200
</TABLE>
- ----------
(1) Based on the number of shares being subject to options granted to all
employees aggregating 608,308 for the fiscal year ended January 26,
1998.
(2) The fair market value of Star's Common Stock on the date of grant.
(3) All the options vest 33 1/3% upon the date of grant, 33 1/3% on the
first anniversary of the date of grant and 33 1/3% on the second
anniversary of the date of grant.
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<PAGE> 14
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to
stock options exercised during the fiscal year ended January 26, 1998 and
year-end stock option values.
AGGREGATE OPTION EXERCISES IN FISCAL 1998
AND FISCAL 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
(#) ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ----------------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Robert E. Wheaton -- -- 79,746/159,491 --
--
Theodore Abajian -- -- 5,000/10,000
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
During the fiscal year ended January 26, 1998, no executive officer
of the Company, except for Mr. Foley, who is Chairman of the Board of the
Company and serves as a member of the Compensation Committee thereof, served as
a member of the compensation committee or as a director of any other entity, one
of whose executive officers serves on the Compensation Committee or is a
director of the Company. Mr. Foley is the Chairman of the Board and Chief
Executive Officer of CKE.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934 requires Star's
executive officers and directors, and persons who own more than 10% of a
registered class of star's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors and greater than 10% stockholders are required by
SEC regulations to furnish Star with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by
it, or written representations from certain reporting persons that no Forms 5
were required for those persons, Star believes that, during fiscal 1998, all
filing requirements applicable to its executive officers, directors and greater
than 10% stockholders were satisfied.
13
<PAGE> 15
CERTAIN TRANSACTIONS
The Company and CKE are parties to a three-year Service Agreement,
pursuant to which CKE provides the Company with certain multi-unit
infrastructure support, including accounting and administration, purchasing
services, financial services and real estate services, in exchange for which CKE
receives an annual management fee in the amount of $350,000, which may be
increased up to 10% per year by CKE based upon increases in CKE's cost of
providing such services. Commencing February 24, 1998, the annual management fee
was increased to $375,000.
Prior to the Company's initial public offering, the Company declared
a cash dividend payable to CKE in an aggregate amount equal to approximately
$7.9 million. The Company paid the dividend in September 1997 with a portion of
the net proceeds from the Company's initial public offering.
The Company was incorporated as a Delaware corporation on July 28,
1997. Prior to the completion of the Company's initial public offering, CKE
contributed to the Company all of the issued and outstanding shares of capital
stock of Summit Family Restaurants Inc. ("Summit") in exchange for 2,600,000
shares of Common Stock of the Company (the "Summit Exchange"). Summit is the
parent corporation of HTB Restaurants, Inc. ("HTB"), which operates 16 HomeTown
Buffet restaurants as a franchisee of HomeTown Buffet, Inc. (the "HomeTown
Franchisor"). Summit was acquired by CKE in July 1996, at which time it was the
owner, operator and franchisor of 101 JB's Restaurants and the owner and
operator of six Galaxy Diner restaurants. Prior to the Summit Exchange, Summit
transferred substantially all of its net assets, including its JB's Restaurant
system and Galaxy Diner restaurants, but excluding the shares of capital stock
of HTB owned by Summit, to JB's Restaurants, Inc., a newly formed subsidiary of
CKE ("JB's"), in exchange for a promissory note (the "JB's Note") with a
principal amount equal to CKE's book value of those net assets as of the date of
transfer, determined in accordance with generally accepted accounting principles
("GAAP"). JB's continued to operate the JB's Restaurants and related franchise
systems and the Galaxy Diner restaurants and assume all of Summit's liabilities,
other than liabilities incurred which specifically relate to the restaurant
operations of HTB. Immediately following completion of such transfer, and prior
to the Summit Exchange, Summit assigned the JB's Note and its rights to payment
thereunder to CKE as a dividend. In addition, prior to the Summit Exchange, Taco
Bueno Restaurants, Inc., an indirect wholly-owned subsidiary of CKE formerly
known as Casa Bonita Incorporated ("Taco Bueno"), transferred substantially all
of the net assets relating to its two Casa Bonita restaurants to Summit in
exchange for a promissory note (the "Casa Bonita Note") with a principal amount
equal to CKE's book value of those net assets (which was estimated at $495,000
as of August 11, 1997) as of the date of transfer, determined in accordance with
GAAP. Summit continued to operate the Casa Bonita restaurants and assume
substantially all of Taco Bueno's liabilities relating to those restaurant
operations. Prior to the completion of the Company's initial public offering,
all of the parties to the foregoing transactions were direct or indirect
wholly-owned subsidiaries of CKE.
On February 24, 1998, pursuant to the terms of an Asset Purchase
Agreement dated February 10, 1998 (the "Purchase Agreement"), the Company,
through its wholly-owned subsidiary Summit, acquired substantially all of the
assets of twelve JB's Restaurants for $4,265,000 in cash from JB's. In
connection with the Purchase Agreement, Summit and JB's entered into franchise
agreements for each of the purchased restaurants pursuant to which JB's granted
to Summit the right to use the intangible property rights of JB's. Summit paid
to JB's cash in the amount of $485,000 to satisfy all royalty payments due under
all of the franchise agreements through the first anniversary of the closing of
the transaction.
CKE has also agreed to indemnify and hold the Company harmless from
any income tax liability attributable to periods ending on or before the
consummation of the Company's initial public offering. For periods ending after
the consummation of the initial public offering, the Company will pay its income
tax liability directly to the appropriate taxing authorities. CKE generally
controls any audits and administrative and judicial proceedings with respect to
periods ending on or before the consummation of the initial public offering,
although CKE cannot compromise or settle any issue that increases the Company's
liability without
14
<PAGE> 16
the Company's prior written consent. The Company generally will control all
other audits and administrative and judicial proceedings.
INDEPENDENT AUDITORS
Selection of an independent auditor is made by the Board of Directors
upon consultation with the Audit Committee. Star's independent auditor for the
fiscal year ended January 26, 1998, was KPMG Peat Marwick LLP. The Board of
Directors will vote upon the selection of an auditor for the current fiscal year
at a future Board meeting.
Representatives of KPMG Peat Marwick LLP are expected to attend the
Meeting and be available to respond to appropriate questions. The
representatives of KPMG Peat Marwick LLP also will have an opportunity to make a
formal statement, if they so desire.
STOCKHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING
Pursuant to the rules of the Securities and Exchange Commission,
proposals by eligible stockholders (as defined below) which are intended to be
presented at Star's Annual Meeting of Stockholders in 1999 must be received by
Star by January 26, 1999 in order to be considered for inclusion in Star's proxy
materials. The Board of Directors of Star will determine whether any such
proposal will be included in its 1999 proxy solicitation materials. An eligible
stockholder is one who is the record or beneficial owner of at least 1% or
$1,000 in market value of securities entitled to be voted at the 1999 Annual
Meeting and has held such securities for at least one year, and who shall
continue to own such securities through the date on which the meeting is held.
Stockholders are urged to sign and return their proxies without
delay.
For the Board of Directors
WILLIAM P. FOLEY II,
Chairman of the Board
May 28, 1998
The Annual Report to Stockholders of the Company for the fiscal year
ended January 26, 1998 is the Company's Annual Report on Form 10-K which was
filed with the Securities and Exchange Commission on April 27, 1998 and which is
being mailed concurrently with this Proxy Statement to all stockholders of
record as of May 8, 1998. The Annual Report is not to be regarded as proxy
soliciting material or as a communication by means of which any solicitation is
to be made.
15
<PAGE> 17
PROXY
STAR BUFFET, INC.
440 LAWNDALE DRIVE
SALT LAKE CITY, UT 84115
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF STAR BUFFET,
INC. The undersigned hereby appoints William P. Foley II and Robert R. Wheaton,
and each of them, as Proxies, each with the power to appoint his substitute,
and hereby authorizes each of them to represent and to vote as designated
below, all the shares of Common Stock of Star Buffet, Inc. held of record by
the undersigned on May 8, 1998, at the Annual Meeting of Stockholders to be
held on June 30, 1998, and any postponements or adjournments thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark /X/
your votes as
indicated in
this example.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: FOR all of the nominees WITHHOLD AUTHORITY to vote for
listed below (except all nominees listed below / /
as marked to the
contrary below) / /
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list below.
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before such meeting or any and all
postponements or adjournments thereof.
DO YOU PLAN TO ATTEND THE MEETING? YES / / NO / /
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder IF NO DIRECTION IS GIVEN, THE PROXIES WILL VOTE
FOR THE NOMINEES LISTED ABOVE, AND IN THEIR DISCRETION ON MATTERS DESCRIBED IN
ITEM 2.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature_____________________ Signature if held jointly________________________
Dated:_____________________, 1998
Please sign exactly as the name appears below. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give your full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in the partnership name by an
authorized person.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
