KARCHER CARL ENTERPRISES INC, PRER14A, 1994-05-04

KARCHER CARL ENTERPRISES INC
PRER14A, 1994-05-04
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CARL KARCHER ENTERPRISES, INC.
1200 NORTH HARBOR BOULEVARD
ANAHEIM, CALIFORNIA 92801

------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

JUNE 20, 1994

To the Shareholders of Carl Karcher Enterprises, Inc.:

The Annual Meeting of Shareholders of Carl Karcher Enterprises, Inc.
("Enterprises") will be held at the Anaheim Marriott Hotel, Marriott Hall North,
700 West Convention Way, Anaheim, California, on Monday, June 20, 1994 at 9:30
a.m. for the following purposes:

1. To vote upon a proposal to approve a Plan of Reorganization and
Agreement of Merger pursuant to which Enterprises will become a
wholly-owned subsidiary of a new Delaware holding company called CKE
Restaurants, Inc. (the "Company"), Enterprises' shares will be
converted into shares of the Company and certain other changes
affecting shareholders' rights will be made.

2. To elect directors.

3. To consider and act upon a proposal to approve the CKE Restaurants, Inc.
1994 Stock Incentive Plan both in their capacity as shareholders of
Enterprises and as future stockholders of the Company.

4. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.

Shareholders of record at the close of business on May 10, 1994 will be
entitled to vote at the meeting. A list of the shareholders entitled to vote at
the meeting will be maintained at the corporate headquarters in the city of
Anaheim (at the address shown above) for at least twenty days prior to the
meeting.

By Order of the Board of Directors,

Daniel W. Holden
Secretary
Anaheim, California

May 11, 1994

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 vote in person even though you have
sent in your proxy.
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PRELIMINARY COPY

CARL KARCHER ENTERPRISES, INC.

CKE RESTAURANTS, INC.

------------------------

PROXY STATEMENT AND PROSPECTUS

ANNUAL MEETING OF SHAREHOLDERS

JUNE 20, 1994

This Proxy Statement and Prospectus is being furnished in connection with
the solicitation of proxies by the Board of Directors of Carl Karcher
Enterprises, Inc., a California corporation ("Enterprises"), for use at the
Annual Meeting of Shareholders to be held on June 20, 1994 (the "Meeting"). This
Proxy Statement and Prospectus also serves as the Prospectus of CKE Restaurants,
Inc., a Delaware corporation (the "Company"), under the Securities Act of 1933
with respect to the issuance of up to 20,053,942 shares of Common Stock, $.01
par value, of the Company ("Company Common Stock"), to the shareholders of
Enterprises in connection with the proposed formation of the Company as a
Delaware holding company for Enterprises as described herein.

This Proxy Statement and Prospectus does not cover any resales of Company
Common Stock received by Enterprises shareholders upon the implementation of the
holding company structure as described herein. No person is authorized to make
any use of this Proxy Statement and Prospectus in connection with any such
resale or in connection with the offer of any other securities.

It is anticipated that the mailing of this Proxy Statement and Prospectus
and accompanying form of Proxy to shareholders will begin on or about May 12,
1994.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

------------------------

THE DATE OF THIS PROXY STATEMENT AND PROSPECTUS IS MAY 11, 1994.

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AVAILABLE INFORMATION

This Proxy Statement does not contain all of the information set forth in
the Registration Statement that the Company has filed with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933 in connection
with the proposal to establish a holding company structure described herein. The
Registration Statement, including exhibits, may be inspected or copied at
prescribed rates at the Public Reference Section of the SEC at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the SEC's
Regional Offices in New York, 7 World Trade Center, New York, New York 10048,
and Chicago, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.

Enterprises is subject to the information, reporting and proxy statement
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information with
the SEC. Reports, proxy statements and other information concerning Enterprises
can be inspected at the SEC's office at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and the SEC's Regional Offices in New
York, 7 World Trade Center, New York, New York 10048, and Chicago, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material,
can be obtained from such facilities and the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at
prescribed rates.

In connection with the reincorporation described herein, the Company will
become subject to the same information, reporting and proxy statement
requirements under the Exchange Act as currently apply to Enterprises, and
copies of materials will be available for inspection and copying at the offices
of the SEC set forth above. In addition, the Company's shares of Common Stock
have been authorized for listing on the New York Stock Exchange, and copies of
such material that are available for inspection and copying at the offices of
the SEC set forth above can also be inspected at the office of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.

DOCUMENTS INCORPORATED BY REFERENCE

Enterprises' Annual Report on Form 10-K for the fiscal year ended January
31, 1994, which has previously been filed by Enterprises with the Commission, is
incorporated herein by reference. All documents subsequently filed by
Enterprises or the Company with the Commission pursuant to Sections 13(a) and
(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the Annual
Meeting or any adjournment or postponement thereof shall be deemed to be
incorporated in this Prospectus and Proxy Statement by reference and to be part
hereof from the date of filing of such documents.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus and Proxy
Statement, shall be deemed to be modified or superseded for purposes of this
Prospectus and Proxy Statement to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus and Proxy Statement.

Enterprises hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus and Proxy Statement has been delivered, on the
written or oral request of any such person, a copy of any or all of the
documents referred to above which have been or may be incorporated in this
Prospectus and Proxy Statement by reference, other than exhibits to such
documents. Requests for such copies should be directed to the Office of the
Senior Vice President, Chief Financial Officer, Carl Karcher Enterprises, Inc.,
1200 North Harbor Boulevard, Anaheim, California 92801 (telephone number (714)
778-7109).

------------------------

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT AND PROSPECTUS AND IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROXY STATEMENT AND PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL A SECURITY, OR A SOLICITATION OF A PROXY, IN ANY JURISDICTION IN
WHICH, OR TO ANY PERSON TO WHOM, IT WOULD BE

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UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT AND PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ENTERPRISES OR OF THE COMPANY SINCE THE DATE OF THIS
PROXY STATEMENT AND PROSPECTUS.

SOLICITATION OF PROXIES

At the Meeting, the shareholders of Enterprises will be asked: (1) to
approve the principal terms of a Plan of Reorganization and Agreement of Merger
substantially in the form of Appendix A hereto (the "Merger Agreement") pursuant
to which Enterprises will become a wholly-owned subsidiary of the Company and
the outstanding shares of Common Stock of Enterprises, without par value
("Enterprises Common Stock"), will be converted into shares of Company Common
Stock (the "Reincorporation Proposal"); (2) to vote upon the election of
directors; (3) to approve the CKE Restaurants, Inc. 1994 Stock Incentive Plan
(the "1994 Plan"); and (4) to act upon such other matters as may properly come
before the Meeting. Your Board of Directors is asking for your proxy for use at
the Meeting. A shareholder 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 shareholder's instructions indicated on the proxy card. If
no instructions are marked on the proxy card, the shares represented thereby
will be voted in favor of the Reincorporation Proposal, for the election of the
Directors named thereon and for the adoption of the 1994 Plan. 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 preparing, assembling and mailing this Notice of Annual
Meeting, Proxy Statement and the enclosed proxy card (estimated to be $350,000,
of which $136,000 had been incurred by Enterprises through April 7, 1994) will
be paid by Enterprises. In addition, following the mailing of this Proxy
Statement, directors, officers and regular employees of Enterprises 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 Enterprises
Common Stock of record will be requested to forward proxy soliciting material to
the beneficial owners of such shares and will be reimbursed by Enterprises for
their charges and expenses in connection therewith. It is anticipated that the
mailing of proxy materials will begin on or about May 12, 1994.

RECORD DATE AND VOTING

Holders of Enterprises Common Stock of record at the close of business on
May 10, 1994, are entitled to notice of, and to vote at, the Meeting. There were
shares of Enterprises Common Stock outstanding at the record date. A
shareholder giving a proxy may revoke it at any time before it is voted by
filing with Enterprises' Secretary either a written notice of revocation or a
duly executed proxy bearing a later date or by appearing at the Meeting and
voting in person. Unless a proxy is revoked, shares represented by a proxy will
be voted. On matters for which no contrary voting instructions are given, shares
will be voted in accordance with the recommendations of the Board of Directors
as shown on the proxy. On a matter for which the "ABSTAIN" or "WITHHOLD VOTE"
instruction is given, shares will be voted neither "FOR" nor "AGAINST." Each
shareholder will be entitled to one vote per share on the Reincorporation
Proposal and the approval of the 1994 Plan. Approval of the Reincorporation
Proposal requires the affirmative vote of the holders of a majority of the
number of shares of Enterprises Common Stock outstanding on the Record Date. The
approval of the 1994 Plan and all other matters as may properly come before the
Meeting (other than the election of directors and the Reincorporation Proposal)
require the affirmative vote of a majority of shares of the Enterprises Common
Stock present in person or represented by proxy at the meeting and entitled to
vote on such subject matter, assuming such majority also constitutes at least a
majority of the required quorum. Other than in the event of cumulative voting,
directors will be elected by a plurality of the votes of the shares of
Enterprises Common Stock present in person or represented by proxy and entitled
to vote on the election of directors. Abstentions will be treated as the
equivalent of a negative vote for the purpose of determining

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whether a proposal has been adopted and will have no effect for the purpose of
determining whether a director has been elected. As to the Reincorporation
Proposal and the proposal to approve the 1994 Plan, the New York Stock Exchange
rules generally require when shares are registered in street or nominee name
that their member brokers receive specific instructions from the beneficial
owners in order to vote on such a proposal. If a member broker indicates on the
Proxy that such broker does not have discretionary authority as to certain
shares to vote on a particular matter, those shares will not be considered as
present and entitled to vote with respect to those matters.

If any shareholder gives notice at the meeting of his or her intention to
cumulate votes, each holder of Common Stock will be entitled to vote his or her
shares cumulatively in the election of directors. Cumulative voting means that
each share of Common Stock is entitled to a number of votes equal to the number
of directors to be elected, which votes may be cast for one nominee or
distributed among two or more nominees. If votes are cumulated at the Annual
Meeting, each share will be entitled to eight votes in connection with the
election of directors. Management does not presently intend to give notice to
cumulate votes, but they may elect to do so in the event of a contested election
or other, presently unexpected, circumstance. In the event of cumulative voting,
the accompanying proxy authorizes the proxies, in their discretion, to vote
cumulatively and to distribute in any manner the votes to which each share is
entitled in the election of directors, among the nominees for whom the authority
to vote has not been withheld in the accompanying proxy. At the Company's 1993
Annual Meeting, approximately 83% of the outstanding voting power was
represented and participated in the election of directors. In the election, all
directors received affirmative votes of approximately 81% of the outstanding
voting power.

On all other matters to come before the Annual Meeting, each holder of
Common Stock will be entitled to one vote for each share owned.

PRINCIPAL HOLDERS OF SECURITIES

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 31, 1994, by each person
who is known by the Company to beneficially own more than five percent of the
outstanding Common Stock, by each director, by each executive officer listed in
the Summary Compensation Table and by all directors and officers 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>
Cannae Limited Partnership(2)............... 4,343,752(2) 23.3%(2)
3811 W. Charleston, Suite 210
Las Vegas, Nevada 89102
Carl N. Karcher............................. 2,075,062(4) 11.1(4)
700 North Clementine
Anaheim, California 92805
</TABLE>

<TABLE>
<S> <C> <C>
Brinson Partners, Inc. ..................... 1,625,200(5) 8.7(5)
Brinson Trust Company
Brinson Holdings, Inc.
c/o Brinson Partners, Inc.
209 South LaSalle
Chicago, Illinois 60604-1295
</TABLE>

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<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
-------------------------------------------- ------------------- ----------
<S> <C> <C>
Dito-Devcar, Inc. .......................... 1,199,072(6) 6.4(6)
Dito-Devcar, LP
Pickup Charitable Unitrust #1
Pickup TMP Charitable Trust
Pickup DRP Charitable Trust
c/o Mr. Richard H. Pickup
500 Newport Center Drive,
Suite 550
Newport Beach, California 92660
William P. Foley II......................... 4,343,752(2)(3) 23.3%(2)(3)
2100 Main Street, Suite 400
Irvine, California 92714
Donald E. Doyle............................. 17,121 *
1200 North Harbor Boulevard
Anaheim, California 92801
Peter Churm................................. 11,824 *
Furon Company
29982 Ivy Glenn Drive
Laguna Niguel, California 92677
Daniel W. Holden............................ 21,966 *
Holden & Fergus
500 State College Boulevard, Suite 780
Orange, California 92668
Carl L. Karcher............................. 65,546(7) *
73-101 Highway 111, Suite 1
Palm Desert, California 92260
Daniel D. (Ron) Lane........................ 4,343,752(2)(3) 23.3%(2)(3)
Lane/Kuhn Pacific, Inc.
14 Corporate Plaza
Newport Beach, California 92660
Kenneth O. Olsen............................ 16,750 *
324 Muirfield Road
Los Angeles, California 90020
Elizabeth A. Sanders........................ 6,000 *
The Sanders Partnership
12835 Sutter Creek Road
Sutter Creek, California 95685
Loren C. Pannier............................ 284,374(8) 1.5(8)
1200 North Harbor Boulevard
Anaheim, California 92801
Rory J. Murphy.............................. 18,742(8) *
1200 North Harbor Boulevard
Anaheim, California 92801
Kerry W. Coin............................... 1,000 *
222 South Harbor Boulevard, Suite 300
Anaheim, California 92805
Richard C. Celio............................ 28,374(8) *
1200 North Harbor Boulevard
Anaheim, California 92801
All executive officers and directors
as a group (17 persons)................... 6,477,863(9) 34.0(9)
</TABLE>

- ---------------

* Less than one percent.

(1) Calculated based on 18,676,587 shares of Enterprises Common Stock
outstanding on January 31, 1994.

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(2) Based on a Schedule 13D, as restated by amendments thereto, filed by the
following persons and entities as a group, who have agreed to become Class B
Limited Partners of Cannae Limited Partners (the "Partnership"): (a) Folco
Development Corporation ("Folco"), c/o William P. Foley II, 2100 S.E. Main
Street, Suite 400, Irvine, California 92714; (b) Daniel V., Inc. and the
Daniel P. Lane Revocable Trust U/D/T July 10, 1992 (collectively, the
"Daniel Entities"), 3811 W. Charleston, Suite 210, Las Vegas, Nevada 89102;
(c) Frank P. Willey ("Willey"), 2100 S.E. Main Street, Suite 400, Irvine,
California 92714; (d) Ce Mar Las Vegas X, Inc., 1700 Lamb Boulevard, Las
Vegas, Nevada 89115; (e) Robert L. Berry and Nancy L. Berry, Trustees of the
Berry Living Trust dated November 5, 1987, 2100 S.E. Main Street, Suite 400,
Irvine, California 92714; (f) Max Hickman, 2100 S.E. Main Street, Suite 400,
Irvine, California 92714; and (g) Vince Salvatore and Anna M. Salvatore,
Trustees of the Salvatore Family Trust dated November 8, 1991, 22932 Calle
Azoria, Mission Viejo, California 92692. Such restated Schedule 13D also
states that the following persons will become Class B Limited Partners upon
completion of certain documents and the making of certain capital
contributions to the Partnership: (a) Lawrence Calida, 2100 S.E. Main
Street, Suite 400, Irvine, California 92714; (b) Wayne Diaz, 5925 Stoneridge
Drive, P.O. Box 10425, Pleasanton, California 94588; (c) Carl Strunk, 2100
S.E. Main Street, Suite 400, Irvine, California 92714; (d) Ron Maggard, 5700
Division Street, Suite 204, Riverside, California 92506 and (e) Daniel M.
Culnane, 17352 Daimler Street, Second Floor, Irvine, California 92714. The
aggregate number of shares set forth above includes: (1) 3,820,002 shares
held by the Partnership; (2) 463,750 shares held by Folco; (3) 50,000 shares
held in the aggregate by the Daniel Entities; and (4) 10,000 shares held by
Willey. The restated Schedule 13D states that the Class A Limited Partner of
the Partnership is Carl N. Karcher, as sole trustee of the Carl N. and
Margaret M. Karcher Trust (the "Trust") (see the table above and related
footnotes). In its Schedule 13D, the Trust and Mr. and Mrs. Karcher disclaim
beneficial ownership of the Partnership's shares. The General Partner of the
Partnership is Bognor Regis, Inc., a Nevada corporation. According to the
Schedule 13D, William P. Foley II is the President of Bognor Regis, Inc. and
owns and controls Folco.

(3) The restated Schedule 13D states that each of the Class B Limited Partners
described in Footnote (2) have sole voting and shared dispositive power with
respect to such shares.

(4) Based on a Schedule 13D, as restated by amendments thereto, filed by the
Trust, which states (w) that the Trust is the beneficial owner of 1,630,362
shares; (x) that the Trust has the right to make an optional prepayment of
$3,000,000 to the Partnership no later than June 10, 1994 and upon such
prepayment the Partnership will transfer back to the Trust 411,112 shares;
(y) that 33,000 shares are held of record by the Carl N. and Margaret M.
Karcher Foundation, the beneficial ownership of which the Trust, and Mr. and
Mrs. Karcher disclaim and (z) that Mr. Karcher is individually the
beneficial owner of 524 shares and Mrs. Karcher individually is the
beneficial owner of 64 shares. Mr. Karcher is described as the sole Trustee
of the Trust and as having the sole right to vote the Trust's shares and,
subject to certain limitations set forth in the Trust's governing
instruments, to dispose of the Trust's shares. Mr. Karcher and Margaret M.
Karcher, his wife, are described as the lifetime beneficiaries of the Trust.
The Trust and Mr. and Mrs. Karcher disclaim any beneficial ownership in the
3,820,002 shares owned by the Partnership.

(5) Based on a Schedule 13G and amendments thereto filed by Brinson Partners,
Inc. on behalf of the named entities and includes 746,293 shares held by
Brinson Partners, Inc. and 878,907 shares held by Brinson Trust Company.

(6) Based on a Schedule 13D, as restated by amendments thereto, filed by the
following persons and entities as a group: (a) Dito-Devcar, Inc. with
respect to 1,004,000 shares; (b) Dito-Devcar, LP with respect to 6,500
shares; (c) Pickup Charitable Unitrust #I with respect to 38,500 shares; (d)
Pickup TMP Charitable Trust with respect to 75,036 shares and (e) Pickup DRP
Charitable Trust with respect to 75,036 shares.

(7) Includes (a) 180 shares held by Carl L. Karcher and (b) 65,366 shares held
by Carl L. Karcher and Peggy L. Karcher, as trustees under a trust dated
January 31, 1983 for the benefit of Carl L. and Peggy L. Karcher.

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(8) Includes for Messrs. Pannier, Murphy and Celio: (a) 5,491, 1,402 and 494
shares held in trust for the benefit of such persons under the Investment
Plan (see "Executive Compensation -- Retirement Plans") and (b) 243,736,
17,340 and 27,880 shares subject to presently exercisable options or options
that become exercisable on or prior to April 2, 1994.

(9) Includes (a) 8,123 shares held in trust for the benefit of such persons
under the Investment Plan (see "Executive Compensation -- Retirement Plans")
and (b) 301,045 shares subject to presently exercisable options or options
that become exercisable on or prior to April 2, 1994.

RECENT DEVELOPMENTS

BOSTON CHICKEN DEVELOPMENT AGREEMENT

In January 1994, Enterprises entered into a Development Agreement with
Boston Chicken, Inc. ("BCI") that grants rights to Enterprises, as a franchisee
of BCI, to develop and operate 200 Boston Chicken Stores (with an option, at
Enterprises' election, to develop 100 more stores) in three designated areas of
California (the "Designated Markets"). The Designated Markets comprise a
specified market area around Sacramento, the County of San Diego and nine
counties in the greater Los Angeles area (including the counties of Los Angeles,
Orange, Riverside, Santa Barbara and San Bernardino). The Company plans to
achieve a rapid and cost-effective roll-out of Boston Chicken Stores by first
converting a number of Carl's Jr. Restaurants. Of the first 50 Boston Chicken
Stores, the Company anticipates that between 10 and 15 will be converted Carl's
Jr. Restaurants. By converting these selected Carl's Jr. Restaurants,
management's strategy is designed to accelerate the development of Boston
Chicken Stores in the Designated Markets, achieve a sales and profit shift to
surrounding Carl's Jr. locations and eliminate certain underperforming Carl's
Jr. restaurants. The Company does not currently anticipate converting any
additional Carl's Jr. Restaurants to Boston Chicken Stores after the initial 10
to 15 conversions are completed.

Boston Chicken Stores specialize in complete meals featuring rotisserie
roasted chicken, fresh-baked chicken pot pies, a variety of chicken sandwiches,
chicken soup and fresh vegetables, salads and other side dishes, including
mashed potatoes made from scratch, corn, stuffing and creamed spinach, as well
as beverages and desserts. Boston Chicken Stores offer meals with the
convenience and value associated with fast food, but the quality and freshness
associated with traditional home cooking. The signature menu item is chicken
that is marinated and then slow-roasted in rotisserie ovens in full view of the
customer. The Company believes that the Boston Chicken Store concept has proven
to be successful to date in other areas of the United States and is well suited
to California consumer tastes.

NEW YORK STOCK EXCHANGE LISTING

On April 25, 1994, the shares of Enterprises Common Stock were listed and
began trading on the New York Stock Exchange under the symbol "CKR."

VALUE PRICING

As a result of consumer research and as part of Enterprises' new marketing
and advertising strategy more specifically discussed in its Annual Report on
Form 10-K for the fiscal year ended January 31, 1994, Enterprises recently
introduced a more simplified menu and a new pricing structure designed to
improve consumer perceptions of quality and value. The campaign is designed to
promote the Carl's Jr. Restaurant concept as the same great food at lower
everyday prices.

ARBITRATION AWARD

In March 1994, a binding arbitration proceeding awarded to an invester
group a judgment of $3,000,000 based upon an alleged breach of contract
concerning negotiations for the purchase of several existing Carl's Jr.
Restaurants. The award, payable during fiscal 1995, was accrued in other current
liabilities as of January 31, 1994 and will have no material effect on
Enterprises' financial condition.

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SUMMARY OF REINCORPORATION PROPOSAL

The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus, and is qualified in its entirety by the
detailed information contained elsewhere herein, the Appendices hereto and the
documents referred to herein, to which reference is made for a more complete
discussion of the matters summarized below.

GENERAL

The Company is a wholly-owned subsidiary of Enterprises recently organized
under the laws of the State of Delaware. The Company has two wholly-owned
subsidiaries, Boston Pacific, Inc. ("Boston Pacific"), which was formed to
develop, own and operate Boston Chicken Stores, and a newly-formed California
subsidiary ("California Subsidiary"), organized solely for purposes of effecting
the merger (the "Merger") contemplated by the Reincorporation Proposal. As a
result of the Merger, California Subsidiary will be merged into Enterprises,
California Subsidiary will disappear, and Enterprises will be the surviving
entity and a wholly-owned subsidiary of the Company along with Boston Pacific.

Upon the consummation of the Merger, shareholders of Enterprises will
become stockholders of the Company and will receive one share of Common Stock of
the Company in exchange for each share of Common Stock of Enterprises held by
them. See "REINCORPORATION PROPOSAL."

REASONS FOR FORMATION OF HOLDING COMPANY

In January 1994, Enterprises entered into an area development agreement
with Boston Chicken, Inc. ("BCI") that grants rights to Enterprises, as a
franchisee of BCI, to develop and operate 200 Boston Chicken Stores (with an
option, at Enterprises' election, to develop 100 more stores) in three
designated areas of California. Management believes that it would be in the best
interests of the Company to conduct the operations of its Carl's Jr. Restaurants
and Boston Chicken Stores through separate subsidiaries. Upon the adoption and
implementation of the Reincorporation Proposal, the Company will be the holding
company for both Enterprises, the subsidiary through which the Company will
conduct its Carl's Jr. Restaurant operations, and Boston Pacific, the subsidiary
through which the Company will conduct its Boston Chicken Store operations. See
"REASONS FOR FORMATION OF DELAWARE HOLDING COMPANY -- Operation of Carl's Jr.
Restaurants and Boston Chicken Stores through Separate Subsidiaries."

REASONS FOR REINCORPORATION IN DELAWARE

By reincorporating in the State of Delaware, the Company will be able to
avail itself of that state's practice of developing and implementing flexible
corporation laws that are conducive to the operational needs and independence of
corporations domiciled in that state. These laws include the ability to
eliminate the liability of directors for certain breaches of their fiduciary
duty. See "REASONS FOR FORMATION OF DELAWARE HOLDING COMPANY -- Delaware
Corporation Law" and "-- Elimination of Director Liability," "SIGNIFICANT
DIFFERENCES BETWEEN THE ARTICLES OF INCORPORATION OF ENTERPRISES AND THE
CERTIFICATE OF INCORPORATION OF THE COMPANY," and "SIGNIFICANT DIFFERENCES
BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE."

REDUCED VULNERABILITY TO TAKEOVERS

If the Reincorporation Proposal is adopted and implemented, the Company's
Certificate of Incorporation and Bylaws would include various features intended
to render more difficult certain unsolicited or hostile attempts to take over
the Company. Although these features are intended to ensure that stockholders of
the Company receive a fair price for their shares by encouraging any person who
might seek to acquire control of the Company first to consult with the Company's
Board of Directors and to negotiate the terms of any tender offer or proposed
business combination, they may also discourage hostile takeover attempts or
tender offers for control of the Company that might be approved by many or even
a majority of the Company's stockholders. See "REINCORPORATION
PROPOSAL -- General," "REASONS FOR FORMATION OF DELA-

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<PAGE> 10

WARE HOLDING COMPANY -- Reduced Vulnerability to Takeovers" and "-- Possible
Disadvantages," "SIGNIFICANT DIFFERENCES BETWEEN THE ARTICLES OF INCORPORATION
OF ENTERPRISES AND THE CERTIFICATE OF INCORPORATION OF THE COMPANY," and
"SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND
DELAWARE."

VOTE REQUIRED FOR APPROVAL

The affirmative vote of the holders of a majority of the number of shares
of Enterprises Common Stock outstanding on the Record Date is required to
approve the Reincorporation Proposal.

RECOMMENDATION OF BOARD OF DIRECTORS

The Board of Directors of Enterprises believes that the Reincorporation
Proposal is in the best interests of Enterprises' shareholders and recommends a
vote in favor of the proposal. See "REINCORPORATION PROPOSAL."

FEDERAL INCOME TAX CONSEQUENCES

The Merger is intended to qualify as a tax-free reorganization under
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended. Assuming such tax treatment, no gain or loss will be recognized by the
shareholders of Enterprises upon the conversion of their shares of Enterprises
Common Stock into shares of Company Common Stock, and the basis of the shares of
Company Common Stock received by such shareholder of Enterprises will be the
same as the basis of the shares of Enterprises Common Stock held by such
shareholder immediately prior to the Merger. Shareholders should consult their
own tax advisors regarding the federal, state, local and foreign tax
consequences of the Merger. See "CERTAIN FEDERAL TAX CONSIDERATIONS."

DISSENTERS' RIGHTS OF APPRAISAL

Dissenters' rights are not available to shareholders of Enterprises with
respect to the Merger.

EXCHANGE OF CERTIFICATES

After the Merger, each outstanding certificate representing a share or
shares of Enterprises Common Stock will continue to represent the same number of
shares of the Company. It will not be necessary for shareholders of Enterprises
to exchange their existing stock certificates for stock certificates of the
Company. See "REINCORPORATION PROPOSAL -- General."

REINCORPORATION PROPOSAL

General. The Board of Directors of Enterprises believes that the best
interests of Enterprises and its shareholders will be served by the merger
contemplated by the Reincorporation Proposal (the "Merger"). Enterprises has
caused the Company to be organized as a new Delaware corporation . Immediately
prior to the Merger, the Company will have no assets or liabilities except (1) a
nominal amount of cash paid in by Enterprises for shares of Common Stock of the
Company, (2) the stock of a newly-formed California subsidiary ("California
Subsidiary"), having no assets or liabilities other than a nominal amount of
cash, and (3) the stock of a recently formed California Subsidiary, Boston
Pacific, which was formed to develop, own and operate Boston Chicken Stores in
Southern California and metropolitan Sacramento.

When the Merger becomes effective (the "Effective Time"), California
Subsidiary will be merged into Enterprises, California Subsidiary will
disappear, and Enterprises will survive the Merger and become a wholly-owned
subsidiary of the Company. Each outstanding share of Enterprises Common Stock
will be converted by operation of law into one share of Company Common Stock. As
a result of the Merger, the shareholders of Enterprises will become stockholders
of the Company and their rights will become subject to

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<PAGE> 11

the Certificate of Incorporation and Bylaws of the Company, which will be
substantially in the forms of Appendices B and C hereto. Following the Merger,
the Company will be the holding company for Enterprises, the subsidiary through
which the Company will conduct its Carl's Jr. Restaurant operations, and Boston
Pacific, the subsidiary through which the Company will conduct its Boston
Chicken Store operations. By establishing this holding company structure, the
Company believes that the management of these two chains will be facilitated,
the operations of the two businesses will be kept distinct, and, consequently,
the Company will be able to more effectively develop the growth of both.

The Certificate of Incorporation and Bylaws of the Company include various
features (the "Antitakeover Provisions") intended to render more difficult
certain unsolicited or hostile attempts to take over the Company. The Board
believes that such attempts would disrupt the Company, divert the attention of
the Company's directors, officers and employees and adversely affect the
Company's operations. These features include, among other things, the
establishment of a classified Board of Directors with staggered terms of office,
the requirement of a supermajority vote of stockholders to approve certain
business combinations, the continuation of cumulative voting of shares for
directors and the elimination of the right of stockholders to call special
stockholders' meetings or to act by written consent. These matters are described
more fully below and in Appendices B and C hereto.

Approval of the Reincorporation Proposal would also afford the directors of
Enterprises, all of whom would become directors of the Company, protection
against certain liability for monetary damages arising out of certain breaches
of their fiduciary duties as directors, as described more fully below and in
Appendices B and C. The Certificate of Incorporation contains an authorized
capital of 50,000,000 shares of Common Stock, $.01 par value, and 5,000,000
shares of Preferred Stock, $.01 par value, which is substantially more
authorized shares than Enterprises currently has. After approval of the
Reincorporation Proposal, the Board of Directors, without further stockholder
approval, would have the authority to issue the additional authorized shares of
Common Stock, from time to time, at prices the Board deems appropriate. The
Board would also be authorized to issue such series and classes of Preferred
Stock with such terms (including dividend and interest rates, conversion prices,
voting rights, redemption prices, maturity dates and similar matters) as the
Board deems appropriate. Such provisions will allow the Company the flexibility
to sell Common Stock, securities convertible into Common Stock and Preferred
Stock to finance operations and future expansion. See "SIGNIFICANT DIFFERENCES
BETWEEN THE ARTICLES OF INCORPORATION OF ENTERPRISES AND THE CERTIFICATE OF
INCORPORATION OF THE COMPANY -- Authorized Shares of Stock." The provision of
the Company's Certificate of Incorporation relating to the limitation of
director liability, and the increase in authorized capitalization, together with
the Antitakeover Provisions are hereinafter referred to as the "Charter
Provisions." THE REINCORPORATION PROPOSAL, THE PROPOSED ANTITAKEOVER PROVISIONS,
THE INCREASED AUTHORIZED CAPITALIZATION AND THE LIMITATION ON DIRECTOR LIABILITY
CONSTITUTE ONE PROPOSAL FOR SHAREHOLDER APPROVAL. A VOTE FOR THE REINCORPORATION
PROPOSAL WILL THEREFORE ALSO CONSTITUTE A VOTE FOR THE MERGER AGREEMENT AND ALL
OF THE CHARTER PROVISIONS.

After the Merger, each outstanding certificate representing a share or
shares of Enterprises Common Stock will continue to represent the same number of
shares of the Company. THUS, IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF
ENTERPRISES TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES
OF THE COMPANY. A par value of $.01 has been established for shares of the
Company Common Stock for the purpose of reducing certain filing fees in the
State of Delaware. The proposed Antitakeover Provisions are permitted under
Delaware law.

It is possible, of course, that the reincorporation transaction and the
adoption of the Antitakeover Provisions will discourage hostile takeover
attempts or tender offers for control of the Company that might be approved by
many, or indeed by a majority, of the Company's stockholders. See "REASONS FOR
FORMATION OF DELAWARE HOLDING COMPANY -- Possible Disadvantages," below. More
specifically, the beneficial ownership of the Company Common Stock by the
stockholders named under "PRINCIPAL HOLDERS OF SECURITIES," coupled with the
Supermajority Vote Requirements set forth in Article XI of the Certificate of
Incorporation of the Company and described below under

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<PAGE> 12

"SIGNIFICANT DIFFERENCES BETWEEN THE ARTICLES OF INCORPORATION OF
ENTERPRISES AND THE CERTIFICATE OF INCORPORATION OF THE COMPANY -- Increased
Shareholders Vote Required in Certain Business Combinations and Other
Transactions," will effectively enable such stockholders to veto certain
proposed transactions that many stockholders of the Company might desire or
believe to be beneficial.

It is also possible that the provisions of the Company's Certificate of
Incorporation with respect to the limitation of liability of directors could
result in one or more directors avoiding liability for monetary damages under
circumstances where many stockholders believe liability should be imposed.

In accordance with California law, the affirmative vote of the holders of
at least a majority of the outstanding shares of Enterprises' Common Stock is
required for approval of the Reincorporation Proposal, including approval of the
principal terms of the Merger Agreement, the Charter Provisions and the other
terms of the proposed Merger. The proposed reincorporation transaction and the
adoption of the Charter Provisions were unanimously approved by Enterprises'
Board of Directors at its meeting held on February 22, 1994.

ACCORDINGLY, THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE REINCORPORATION
PROPOSAL.

The discussion contained herein is qualified in its entirety by, and should
be read in conjunction with, the Merger Agreement, the Certificate of
Incorporation and the Bylaws of the Company, copies of which are attached hereto
as Appendices A, B and C, respectively.

No Change in the Business or Physical Location of Enterprises. The
establishment of a Delaware holding company will cause the shareholders of
Enterprises to be stockholders of a company with a different legal domicile and
will effect certain other changes of a legal nature, the most significant of
which are described in this Proxy Statement. However, the proposed establishment
of a holding company will not result in any change in the business, management,
location of the principal executive offices, assets, liabilities or net worth of
the Company (other than due to the costs of the transaction). Although the
Certificate of Incorporation of the Company will permit the Board of Directors
to change the authorized number of directors from time to time, initially the
authorized number of directors will remain at eight and the composition of the
Board of the Company will remain composed of those persons elected as directors
of Enterprises at the Annual Meeting. If the Reincorporation Proposal is
approved, however, such directors will be assigned to one of three classes and
will serve initial terms of either one, two or three years, depending on their
class as set forth under Election of Directors, herein.

Right of Dissenting Shareholders. Dissenters' rights are not available to
shareholders of Enterprises with respect to the proposed Merger.

Federal Income Tax Consequences of the Merger. Enterprises has been advised
by legal counsel that the Merger should qualify as a tax-free reorganization.
See "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS."

REASONS FOR FORMATION OF DELAWARE HOLDING COMPANY

OPERATION OF CARL'S JR. RESTAURANTS AND BOSTON CHICKEN STORES THROUGH SEPARATE
SUBSIDIARIES

After entering into this development agreement, management determined that
it would be in the best interests of the Company to conduct the operations of
its Carl's Jr. Restaurants and Boston Chicken Stores through separate
subsidiaries. Following the Merger, the Company will be the holding company for

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<PAGE> 13

Enterprises, the subsidiary through which the Company will conduct its Carl's
Jr. Restaurant operations, and Boston Pacific, the subsidiary through which the
Company will conduct its Boston Chicken Store operations. Both Enterprises and
Boston Pacific will have separate management teams overseeing their operations.
These management teams will report directly to the executive officers of the
Company. See "MANAGEMENT." Management believes that the establishment of two
separate management teams in two separate subsidiaries, with the holding
company's executive officers supervising both, will promote the development of
both operations. The Company will be able to more easily keep the operations of
the two entities distinct. This structure will also facilitate the financing of
one of the two entities when the other does not have any financing requirements
at the time. In addition, the Company expects to be able to more efficiently
monitor and manage the revenues and costs associated with each operation, as
well as corporate overhead, through the establishment of the holding company
structure. The Company also anticipates that the establishment of the holding
company may help insulate the holding company and each subsidiary from the
liabilities of the other entities. The operational advantages that the Company
is seeking through the establishment of a holding company structure could be
achieved without the adoption of the Antitakeover Provisions also being proposed
for shareholder approval concurrently herewith. See "Reduced Vulnerability to
Takeovers" below.

DELAWARE CORPORATION LAW

The State of Delaware has long been the leader in adopting, construing and
implementing comprehensive, flexible corporation laws that are conducive to the
operational needs and independence of corporations domiciled in that state. The
corporation law of Delaware is widely regarded as the most extensive and well-
defined body of corporate law in the United States. Both the legislature and the
courts in Delaware have demonstrated an ability and a willingness to act quickly
and effectively to meet changing business needs. The Delaware judiciary has
acquired considerable expertise in dealing with complex corporate issues.
Moreover, the Delaware courts have repeatedly shown their willingness to
accelerate the resolution of such complex corporate legal issues within the very
limited time available to meet the needs of parties engaged in corporate
litigation. It is anticipated that the Delaware General Corporation Law will
continue to be interpreted and construed in significant court decisions, thus
lending predictability to the Company's corporate legal affairs.

Furthermore, many of the Charter Provisions, including the institution of a
classified Board of Directors, the elimination of the right of stockholders to
call special meetings of stockholders, the granting of authority to the Board of
Directors, without stockholder approval, to establish and change the authorized
number of directors and the limitation of director liability for certain
breaches of fiduciary duty are permitted under Delaware law, but are not
permitted under California law. See "SIGNIFICANT DIFFERENCES BETWEEN THE
CORPORATION LAWS OF CALIFORNIA AND DELAWARE."

ELIMINATION OF DIRECTOR LIABILITY

In 1986, Delaware adopted new legislation permitting corporations
incorporated under its laws to adopt provisions in their certificates of
incorporation limiting or eliminating the liability of directors for certain
breaches of their fiduciary duty. The Board of Directors believes that such a
limitation on director liability, which is not presently permitted under
Enterprises' Articles of Incorporation, is extremely important in attracting and
retaining qualified directors, especially in the present climate of limited
availability of insurance for officers and directors against such liability.

REDUCED VULNERABILITY TO TAKEOVERS

The Reincorporation Proposal, including the Antitakeover Provisions, is
intended to reduce the Company's vulnerability to unsolicited or hostile
attempts to obtain control of the Company and to increase the likelihood that
stockholders will receive a fair price for their shares in transactions relating
to such attempts. The Board of Directors does not know of any pending or
contemplated attempt by any outsider to acquire control of Enterprises, but is
aware that other companies and their shareholders have been subjected to various
tactics that would be contrary to the best interests of Enterprises and its
shareholders. For example, outsiders frequently accumulate substantial stock
positions in public corporations in order to force a merger or other business
combination in which certain of the corporation's shareholders receive less
valuable consideration for their shares than other shareholders or to force the
corporation itself to repurchase the outsider's block at a

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<PAGE> 14

premium. Such a premium is often obtained through express or implied threats of
disruptive tactics. In some instances, the accumulation of stock is a prelude to
a proposal to restructure the corporation or to sell all or a portion of its
assets to repay debt incurred by the outsider to purchase the shares. In many
cases, such persons have sought representation on the corporation's board of
directors in order to increase the likelihood that their proposals will be
implemented. If the corporation resists these efforts to obtain representation
or declines to repurchase their stock at a premium, such persons may commence
proxy contests to try to elect themselves or their nominees to the board of
directors to replace directors elected by other shareholders or even to replace
the entire board.

The suddenness of a tender or exchange offer or other hostile attempt to
acquire control of Enterprises may often deprive the shareholders of an adequate
opportunity to evaluate the merits of the proposed transaction. Shareholders may
be tempted or encouraged to act hastily without adequate evaluation of available
alternatives that may maximize the value of their investments. Forming a
considered judgment with respect to such a proposal requires, among other
things, an assessment of its fairness, an analysis of its tax implications for
shareholders and the corporation, and consideration of the impact of the
transaction on the corporation, its shareholders, employees and others. Takeover
bids that have not been approved by the Board of Directors may be timed to take
advantage of temporarily depressed stock prices or designed to foreclose or
minimize the possibility of more favorable competing bids. In addition, such
bids may involve the acquisition of only a controlling interest in the
corporation's stock without affording all shareholders the opportunity to sell
on the same terms. If the buyer does not acquire all outstanding shares through
the initial transaction, the remaining shareholders may find the value of their
investment reduced by the adoption of corporate policies and practices
significantly different from those upon which they based their investment
decision. There is no guarantee that in any subsequent transaction the remaining
shareholders will receive a fair price for their shares or a price that is equal
to the price paid to obtain control. It must be noted, of course, that
shareholders could still be subject to similar problems, uncertainties and time
pressures with respect to such a proposal approved by the Board of Directors,
but the Board believes such problems are more likely to be alleviated if such a
proposal is first reviewed and evaluated by the Board of Directors.

The Antitakeover Provisions are designed to encourage any person who might
seek to acquire control of the Company first to consult with the Company's Board
of Directors and to negotiate the terms of any tender offer or proposed business
combination. The Board believes that, for the protection of the Company's
stockholders, any proposed acquisition of control of the Company, and any
proposed business combination in which the Company might be involved, should be
thoroughly studied by the Company's Board of Directors to assure that such
transaction would be in the best interests of the Company and its stockholders
and that all of the Company's stockholders be treated fairly. In general, the
proposed Antitakeover Provisions require stockholder approval by at least
66 2/3% of the voting power of outstanding shares for certain corporate actions
(for example, approval of Business Combinations (as defined below) involving an
Interested Stockholder (as defined below) or the amendment of certain charter or
bylaw provisions), but in most instances dispense with such supermajority
requirement if the proposal is approved by 66 2/3% of the directors. Thus, in
determining the advisability of the Antitakeover Provisions, shareholders should
consider that the Antitakeover Provisions will, in certain circumstances
described below, frustrate the ability of holders of a majority of the
outstanding shares of Company Common Stock to effect certain corporate
transactions. See "SIGNIFICANT DIFFERENCES BETWEEN THE ARTICLES OF INCORPORATION
OF ENTERPRISES AND THE CERTIFICATE OF INCORPORATION OF THE COMPANY."

As noted above, the Reincorporation Proposal, including the adoption of the
Antitakeover Provisions, is not being proposed in response to any present
attempt known to the Board of Directors to acquire control of Enterprises, to
obtain representation on Enterprises' Board of Directors or to take significant
corporate action. Rather, the Board of Directors believes that the
Reincorporation Proposal and the Antitakeover Provisions are prudent and in the
best interests of Enterprises and its shareholders and should be adopted for
their protection. The Board further believes that it is appropriate to adopt the
proposed Antitakeover Provisions at a time when no such transaction is pending
or known by the Board to be contemplated, since their existence would reduce the
likelihood of an unsolicited or hostile attempt to acquire control of the
Company in an unfair or inequitable manner and thus reduce the likelihood that
the Company would be required to incur significant expense and

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<PAGE> 15

be subject to substantial disruption in connection with such an attempt. Certain
additional benefits and detriments of the Antitakeover Provisions are discussed
below under "Possible Disadvantages" and "SIGNIFICANT DIFFERENCES BETWEEN THE
ARTICLES OF INCORPORATION OF ENTERPRISES AND THE CERTIFICATE OF INCORPORATION OF
THE COMPANY" below.

The Board of Directors does not have any current plans to propose
amendments to the Company's charter documents that may have "antitakeover"
implications, other than as described in this Proxy Statement. The Articles of
Incorporation and Bylaws of Enterprises do not currently contain provisions
intended by the Company to have "antitakeover" effects.

POSSIBLE DISADVANTAGES

The significant limitations on director liability resulting from approval
of the Reincorporation Proposal could have the effect of excusing one or more
directors from personal monetary liability for damages under circumstances where
a shareholder believes that such liability is warranted. The Board of Directors
believes, however, that this possibility is outweighed by the importance of
being able to attract and retain qualified directors who might otherwise be
unwilling to serve because of the risks of liability involved.

To the extent the Reincorporation Proposal is effective in discouraging any
takeover attempts, it will be to the advantage of stockholders only to the
extent any enhanced power of the Board of Directors is utilized wisely and for
the benefit of all stockholders. Also, approval of the Antitakeover Provisions
could discourage or frustrate future attempts (for example, by means of tender
offers for, or open market purchases of, Company Common Stock) to acquire
control of the Company that are not approved by a majority of the Independent
Directors (as defined below), but which the holders of a majority of outstanding
shares may believe to be in their best interests. For example, the Antitakeover
Provisions under certain circumstances described more fully below require the
approval of 66 2/3% of the Company's stockholders for certain significant
transactions involving the Company. See "SIGNIFICANT DIFFERENCES BETWEEN THE
ARTICLES OF INCORPORATION OF ENTERPRISES AND THE CERTIFICATE OF INCORPORATION OF
THE COMPANY -- Increased Shareholder Vote Required in Certain Business
Combinations and Other Transactions." As a result of the adoption of the
Antitakeover Provisions, a small group of the current shareholders could
effectively prevent approval of such transactions. See "PRINCIPAL HOLDERS OF
SECURITIES."

In addition, because tender offers are often made at a substantial premium
above market price, and as large purchases made in the open market often result
in temporary increases in the market price of such shares, stockholders might
not be afforded the opportunity to sell their shares at such premium prices if
the proposed Antitakeover Provisions should discourage such tender offers or
open market purchases. The proposed Antitakeover Provisions could also delay or
frustrate the assumption of control by a holder of a large block of the
Company's shares or a change in the composition of the incumbent Board of
Directors, even if many stockholders considered such actions to be beneficial.
Furthermore, adoption of the Antitakeover Provisions will not necessarily ensure
or guarantee that stockholders will receive a price for their shares in
connection with an acquisition of control of the Company that reflects the value
of such shares, or that the price received will be fair or equitable, although
in the opinion of the Board of Directors the likelihood that the price will
reflect such value and be fair and equitable will be increased by adoption of
the Antitakeover Provisions.

The institution of a classified Board of Directors makes it more difficult
for stockholders who do not approve of the policies of the Board to elect a
majority of the members. In addition, the three-year term for incumbent
directors may make directors less responsive to the desires of individual
stockholders.

CERTAIN DEFINITIONS

The Certificate of Incorporation of the Company includes definitions of the
following terms, which are summarized below:

"Affiliate" means a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
another person.

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<PAGE> 16

"Associate," when used to indicate a relationship with any person, means
(i) any corporation or organization of which such person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock, (ii) any trust or other estate in which such person has at
least a 20% beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, and (iii) any relative or spouse of such
person, or any relative of such spouse, who has the same residence as such
person.

"Beneficially Owns" generally means, with respect to any security, the sole
or shared power, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, to vote or dispose of such security,
as more specifically defined in Rule 13d-3 under the Exchange Act.

"Business Combination," when used in reference to the Company and any
Interested Stockholder of the Company, means:

(i) any merger or consolidation of the Company or any direct or
indirect majority-owned subsidiary of the Company with (A) the Interested
Stockholder, or (B) with any other corporation if the merger or
consolidation is caused by the Interested Stockholder;

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), except
proportionately as a stockholder of the Company, to or with the Interested
Stockholder, whether as part of a dissolution or otherwise, of assets of
the Company, or of any direct or indirect majority-owned subsidiary of the
Company, which assets have an aggregate market value equal to 10% or more
of either the aggregate market value of all of the assets of the Company
determined on a consolidated basis or the aggregate market value of all the
outstanding stock of the Company;

(iii) any transaction that results in the issuance or transfer by the
Company or by any direct or indirect majority-owned subsidiary of the
Company of any stock of the Company or of such subsidiary to the Interested
Stockholder, except (A) pursuant to the exercise, exchange or conversion of
securities exercisable for, exchangeable for or convertible into stock of
the Company or any such subsidiary which securities were outstanding prior
to the time that the Interested Stockholder became such, (B) pursuant to a
dividend or distribution paid or made or the exercise, exchange or
conversion of securities exercisable for, exchangeable for or convertible
into stock of the Company or any such subsidiary which security is
distributed, pro rata to all holders of a class or series of stock of the
Company subsequent to the time the Interested Stockholder became such, (C)
pursuant to an exchange offer by the Company to purchase stock made on the
same terms to all holders of said stock, or (D) any issuance or transfer of
stock by the Company; provided, however, that in no case under clauses (B)
through (D) above shall there be an increase in the Interested
Stockholder's proportionate share of the stock of any class or series of
the Company or of the voting stock of the Company;

(iv) any transaction involving the Company or any direct or indirect
majority-owed subsidiary of the Company that has the effect, directly or
indirectly, of increasing the proportionate share of the stock of any class
or series, or securities convertible into the stock of any class or series,
of the Company or of any such subsidiary that is owned by the Interested
Stockholder, except as a result of immaterial changes due to fractional
share adjustments or as a result of any purchase or redemption of any
shares of stock not caused, directly or indirectly, by the Interested
Stockholder; or

(v) any receipt by the Interested Stockholder of the benefit, directly
or indirectly (except proportionately as a stockholder of the Company), of
any loans, advances, guarantees, pledges or other financial benefits (other
than those expressly permitted in subparagraphs (i)-(iv) above) provided by
or through the Company or any direct or indirect majority-owned subsidiary.

"Interested Stockholder" means any Person (other than the Company and any
direct or indirect majority-owned subsidiary of the Company) that (1)
Beneficially Owns 5% or more of the outstanding Voting Stock, (2) is an
Affiliate or Associate of the Company and Beneficially Owned 5% or more of the
outstanding Voting Stock at any time within the three-year period immediately
prior to the date on which it is sought to be determined whether such Person is
an Interested Stockholder, or (3) is an Affiliate or Associate of a Person
described in (1) or (2) preceding; provided, however, that the term "Interested
Stockholder" shall not include (i) any Person who (a) Beneficially Owned shares
in excess of the 5% limitation set forth herein as of the first

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<PAGE> 17

date upon which shares of Voting Stock of the Company are held of record or
beneficially by more than one hundred (100) stockholders and continued to
Beneficially Own shares in excess of such 5% limitation or would have
Beneficially Owned such shares but for action by the Company or (b) acquired
such shares from a Person described in (a) above by gift, inheritance or in a
transaction in which no consideration was exchanged; or (ii) any person whose
ownership of shares in excess of the 5% limitation set forth herein is the
result of action taken solely by the Company; provided, however, that such
person shall be an Interested Stockholder if thereafter such person acquires
additional shares of Voting Stock except as a result of further corporation
action not caused, directly or indirectly, by such Person. For the purpose of
determining whether a person is an Interested Stockholder, (1) the Voting stock
deemed to be outstanding shall include stock deemed to be owned by the person
through application of Section 2.03(c)(8) of the Delaware General Corporation
Law, except that the Voting Stock deemed to be outstanding shall not include any
other unissued stock of the Company that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise, and (2) a person engaged in business as an
underwriter of securities shall not be deemed to own any Voting Stock acquired
through such person's participation in good faith in a firm commitment
underwriting until the expiration of 40 days after the date of such acquisition.

"Person" or "person" means any individual, corporation, partnership,
unincorporated association or other entity.

"Voting Stock" means stock of the Company of any class or series entitled
to vote generally in the election of directors of the Company.

SIGNIFICANT DIFFERENCES BETWEEN THE ARTICLES OF INCORPORATION OF
ENTERPRISES AND THE CERTIFICATE OF INCORPORATION OF THE COMPANY

The Certificate of Incorporation of the Company will differ from the
Articles of Incorporation of Enterprises in the principal respects described
below.

CLASSIFIED BOARD OF DIRECTORS, REMOVAL OF DIRECTORS AND RELATED MATTERS

At present, all directors of Enterprises are elected annually to one-year
terms. Upon the effectiveness of the Merger, the directors of Enterprises will
be the directors of the Company to serve as such as classified herein until
their terms have expired and successors have been elected. Article X of the
Certificate of Incorporation of the Company provides that the Board of Directors
will be divided into three classes, each class to consist as nearly as possible
of one-third of the directors. The term of office of the Class I directors will
expire at the 1995 annual meeting of stockholders, the term of the Class II
directors will expire at the 1996 annual meeting, and the term of the Class III
directors will expire at the 1997 annual meeting. At each annual meeting
beginning with the 1995 annual meeting, only one class of directors will be
elected, and they will serve for a three-year term and until their successors
are elected. Thus, the regular term of only one class of directors will expire
each year and each director will stand for election only once in each three-year
period. If the Reincorporation Proposal is approved, the nominees for election
as directors of Enterprises at the Annual Meeting will be assigned to one of the
three classes of directors of the Company as set forth herein under election of
directors.

Article X of the Certificate of Incorporation also provides that directors
of the Company may be removed only for cause and only by the affirmative vote of
holders of a majority of the Company's Voting Stock. Thus, a third party seeking
to gain control of the Board of Directors may be forced to await the expiration
of the respective terms of incumbent directors, unless there were cause and
sufficient voting strength to remove a particular director or directors. The
Board of Directors believes that once a person is elected to the Board of
Directors for a specific, fixed term, that director should not be subject to
arbitrary or capricious removal, especially at the whim of an outsider who
acquires shares for the purpose and with the intent of ousting incumbent
directors who oppose the outsider's policies and practices with respect to the
Company. It must be noted, of course, that this provision would also prevent the
removal of a director in mid-term by other stockholders unless cause exists and
the removal is approved by the holders of a majority of the Voting Stock of the
Company. This provision is expected to enable and encourage qualified persons to
serve as directors

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without concern for possible arbitrary removal without cause. Directors of
Enterprises can be removed without cause by a shareholder vote, but only if the
number of shares voted against removal or not voted would be insufficient to
elect the director with cumulative voting. Directors of Enterprises may be
removed for cause only (i) by order of a court sought by shareholders holding at
least 10% of the outstanding shares of any class, if the court finds that the
director engaged in fraudulent or dishonest acts or gross abuse of authority or
discretion or (ii) by the Board, upon declaration of the vacancy of the office
of a director declared of unsound mind by an order of court or convicted of a
felony. "Cause" is not defined in the Delaware statute.

Article X gives the Company's Board of Directors a greater likelihood of
continuity and experience, since, except in the case of vacancies filled by the
Board of Directors, at any one time approximately one-third of the directors
will have served for at least two years, approximately one-third will have
served for at least one year and removal of a director will be more difficult.
Although the Board of Directors is not aware of any problems experienced by
Enterprises in the past with respect to continuity and stability, the Board
believes that a classified Board of Directors will decrease the likelihood that
problems of continuity and stability might arise in the future. The Board of
Directors is aware that in recent years there have been a number of disruptive
attempts to obtain control of corporations through the acquisition of a
significant minority position and the election of a new slate of directors. A
classified Board will serve as an obstacle to any such attempts, and, at a
minimum, two successive annual meetings of stockholders will normally be
required in order to elect a majority of the Board.

Instituting a classified Board of Directors may, however, deter certain
mergers, tender offers, proxy contests or other future attempts to acquire
control of the Company that some or a majority of stockholders may deem to be in
their best interests. In addition, stockholders who do not approve of the
policies of the Board of Directors will be unable to elect a majority of the
members of the Board for a minimum period encompassing two annual meetings of
stockholders, unless such stockholders are able to obtain the removal of
incumbent directors for cause. The three-year term for incumbent directors may
also make directors less responsive to desires of individual stockholders.

Enterprises' Articles of Incorporation provide that the number of directors
will be not less than six nor more than nine, with the exact number of
authorized directors to be fixed in the Bylaws of Enterprises within that range,
from time to time, by the shareholders or Board of Directors. Under California
law, the range of authorized directors of Enterprises can only be changed with
shareholder approval, while Article VIII of the Certificate of Incorporation of
the Company provides that the number of directors that shall constitute the
whole Board shall be as specified in the Bylaws of the Company. Article XIII of
the Certificate of Incorporation authorizes the Board of Directors to make,
alter, amend, repeal or rescind the Company's Bylaws. Consequently, the Board of
Directors, subject to limited exceptions and restrictions, has the power to
change the authorized number of directors of the Company. The Bylaws of the
Company provide that the number of directors of the Company shall be nine, the
same as the number currently fixed under Enterprises' Bylaws.

Section 3.5 of the Bylaws of the Company provides that a vacancy on the
Board of Directors, whether such vacancy results from death, resignation,
disqualification, an increase in the number of directors or any other cause, may
be filled by vote of the majority of the remaining directors, even though less
than a quorum, or by a sole remaining director; provided, however, that whenever
the holders of any class or series of shares are entitled to elect one or more
directors, any vacancy or newly created directorship of such class or series may
be filled by a majority of the directors elected by such class or series then in
office, or by a sole remaining director so elected.

Under the provisions of California law applicable to Enterprises, vacancies
on the Board can be filled by a majority vote of directors present at a meeting,
provided that at least a majority of the authorized number of directors is
present or, if the number of directors then in office is less than a majority,
by a majority of the directors then in office. If, however, the vacancy is
created by removal of a director of Enterprises, the vacancy can only be filled
by the shareholders, unless the Articles of Incorporation or Bylaws of
Enterprises are amended to allow the directors to do so. Under both California
and Delaware law, vacancies may also be filled by the shareholders.

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INCREASED SHAREHOLDER VOTE REQUIRED IN CERTAIN BUSINESS COMBINATIONS AND OTHER
TRANSACTIONS

Under California law mergers, certain reorganizations, sales of all or
substantially all of the assets of the Company, the adoption of a plan of
voluntary liquidation of the Company and recapitalizations of the Company
involving amendments to its Articles of Incorporation must all be approved by
the affirmative vote of the holders of a majority of Enterprises' outstanding
Voting Stock. Certain other transactions, including sales of less than
substantially all of the assets of Enterprises, do not require shareholder
approval under California law. Article XI of the Certificate of Incorporation of
the Company provides that, in addition to any affirmative vote required by
applicable law, the approval or authorization of any Business Combination that
has not been approved in advance by at least 66 2/3% of the directors shall
require the affirmative vote of the holders of not less than 66 2/3% of the
Voting Stock then outstanding (the "Supermajority Vote Requirement").

Although the purpose of the Supermajority Vote Requirement and the
exceptions described below is to protect the Company, its stockholders and
employees and others from unfavorable Business Combinations initiated by an
Interested Stockholder, to the extent that the Supermajority Vote Requirement
discourages attempts to acquire control of the Company, stockholders who might
wish to participate in a tender offer may not be afforded the opportunity to do
so. Similarly, the Supermajority Vote Requirement could, under certain
circumstances, permit the Board of Directors or minority stockholders to
frustrate consummation of a Business Combination that the holders of a majority
of the Voting Stock of the Company may believe to be in their best interests.
See "PRINCIPAL HOLDERS OF SECURITIES."

The Supermajority Vote Requirement will not apply to any proposed Business
Combination that has been approved by at least 66 2/3% of the directors of the
Company. This provision is designed to provide an incentive for an Interested
Stockholder to negotiate a proposed Business Combination with the Company's
Board of Directors instead of initiating such a transaction on a non-negotiated
or hostile basis. The Supermajority Vote Requirement is intended to discourage,
but would not prevent, the initiation of hostile tender offers for the capital
stock of the Company and the initiation of other forms of Business Combinations
without the prior approval of at least 66 2/3% of the directors.

To the extent that the Supermajority Vote Requirement (in the absence of
approval by 66 2/3% of the directors) would discourage corporate transactions
that would result in a change in the Company's management, such management
changes may be less likely to occur once the Delaware holding company structure
has been implemented. Since the Supermajority Vote Requirement effectively gives
management more bargaining power in negotiations with an Interested Stockholder
proposing a Business Combination, they could result in management using such
bargaining power not only to try to negotiate a favorable price for an
acquisition of the Company, but also to retain their positions and negotiate
more favorable terms for management.

Article XIV of the Certificate of Incorporation of the Company provides
that the stockholders of the Company shall be entitled to the statutory
appraisal rights provided by Delaware law (See "SIGNIFICANT DIFFERENCES BETWEEN
THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE -- Dissenter's Rights") with
respect to any Business Combination that requires the affirmative vote of the
holders of not less than 66 2/3% of the Voting Stock then outstanding. The
provisions of Article XIV are designed to encourage any Interested Stockholder
to provide fair value to the stockholders of the Company, by providing
stockholders of the Company with the opportunity to exercise dissenter's rights
in connection with any Business Combination that has not been approved in
advance by 66 2/3% of the directors.

ELIMINATION OF SHAREHOLDERS' POWER TO CALL SPECIAL SHAREHOLDERS MEETINGS AND
RIGHT TO ACT WITHOUT A MEETING

Under California law and the Bylaws of Enterprises, a special meeting of
shareholders may be called by the holders of 10% or more of the Voting Stock of
Enterprises and this right may not be removed by the Articles of Incorporation
or the Bylaws. Under Delaware law, a special meeting of stockholders may be
called only by the board of directors or by any other person authorized to do so
in the company's certificate of incorporation or bylaws. Article VII of the
Certificate of Incorporation of the Company provides that a special

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<PAGE> 20

meeting of stockholders may be called only by a majority of the members of the
Board of Directors or by a committee of the Board of Directors that has been
duly designated by the Board of Directors and whose power and authority, as
provided in a resolution adopted by the Board of Directors or in the Bylaws of
the Company, includes the power to call such meetings. The principal effect of
Article VII would be to prevent stockholders, including majority stockholders,
from forcing a special meeting to consider a proposal opposed by the Board of
Directors or a proposal by an Interested Stockholder opposed by the Independent
Directors.

Article IX of the Certificate of Incorporation of the Company provides that
any action taken by the stockholders of the Company must be effected at an
annual or special meeting of stockholders and may not be taken by written
consent.

Thus, by operation of Articles VII and IX of the Certificate of
Incorporation of the Company, proposals that currently could be brought before
Enterprises' shareholders at a special meeting called by the holders of 10% or
more of Enterprises Common Stock, or that currently could be acted upon by the
written consent of shareholders, could only be considered by the stockholders of
the Company at the next annual stockholders' meeting (or at a special meeting of
stockholders called by the Board of Directors) and then only if certain
procedural requirements mandated by law and by the Certificate of Incorporation
(as described below) are fulfilled.

It is possible that Articles VII and IX could delay stockholder action or
acquisition attempts favored by the holders of a majority of the outstanding
shares. The Board of Directors proposes the elimination of shareholder action by
written consent, however, because it believes that all shareholders of a
publicly-owned company should have an opportunity to participate in any action
requiring shareholder approval. The Board also believes that it is inappropriate
for a majority shareholder to take significant action affecting the Company
without giving advance notice of such action to the minority shareholders, even
where such a procedure is permissible under applicable law.

PROCEDURES FOR SHAREHOLDER NOMINATIONS AND PROPOSALS

Section 2.9 of the Bylaws of the Company sets forth the procedures that a
stockholder must follow in order to nominate any person for election to the
Board of Directors or to bring any business before an annual meeting of
stockholders. No such procedural requirements exist for shareholders of
Enterprises.

Section 2.9 of the Bylaws of the Company provides that, for business to be
properly brought before any meeting of the stockholders by a stockholder, the
stockholder must have given notice thereof in writing to the Secretary of the
Company not less than ninety (90) days in advance of such meeting or, if later,
the seventh day following the first public announcement of the date of such
meeting. Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote in the election of directors;
provided, however, that a stockholder may nominate a person for election as a
director at a meeting only if written notice of such stockholder's intent to
make such nomination has been given to the Secretary of the Company not less
than ninety (90) days in advance of such meeting or, if later, the seventh day
following the first public announcement of the date of such meeting. Section
2.9(B) of the Bylaws of the Company provide that a stockholder's notice with
respect to the nomination of candidates for election to the Board of Directors
must set forth (a) the name and address of the stockholder who intends to make
the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting and nominate the person or persons specified in the notice;
(c) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding such nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, by the Board of Directors
of the Company; and (e) the consent of each nominee to serve as a director of
the Company if so elected. The stockholder making such nomination would also be
required to promptly provide any other information reasonably requested by the
Company.

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<PAGE> 21

The procedures set forth in Section 2.9 of the Bylaws prohibit last-minute
attempts by any stockholder to nominate a director or present a business
proposal at an annual stockholders' meeting, even if such a nomination or
proposal might be desired by a majority of the stockholders. These procedures
will enable the Board of Directors of the Company to be informed in advance of
nominations or proposals (including any that may be made by a person seeking to
acquire the Company) to be presented at meetings of stockholders in order to
prepare informed and reasoned positions with respect to such nominations and
proposals. These procedures would also eliminate the element of surprise that a
person seeking to acquire the Company might otherwise use to advantage in making
a stockholder proposal. Section 2.9 of the Bylaws does not require the inclusion
of any information about any such nominee or proposal in any proxy statement
distributed by, at the direction of, or on behalf of the Board of Directors,
except as required to be included pursuant to federal securities laws.

ELIMINATION OF CERTAIN DIRECTOR LIABILITY

Article XII of the Certificate of Incorporation of the Company provides
that, to the fullest extent permitted by Delaware law, a director of the Company
shall not be liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director. Article XII also provides that the
Company shall indemnify, in the manner and to the fullest extent permitted by
Delaware law, any person (or the estate of any person) who is or was a party to,
or is threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of the Company,
and whether civil, criminal, administrative, investigative or otherwise, by
reason of the fact that such person is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director or
officers of another corporation, partnership, joint venture, trust or other
enterprise. Article XII permits the Company to indemnify employees and agents in
a similar manner. Article XII also permits the Company, to the fullest extent
permitted by Delaware law, to purchase and maintain insurance on behalf of any
such director, officer, employee or agent against any liability that may be
asserted against such person.

Traditional directors' and officers' insurance policies, which have been
important protection for directors of corporations, have become increasingly
expensive, subject to additional exclusions, and in some cases unavailable.
Although Enterprises has to date been able to obtain directors' and officers'
insurance for directors and officers on a basis that it believes acceptable (and
currently has a policy in the amount of $20,000,000 for such purpose), it is
exposed to yearly changes in premiums and coverage, as well as cancellation. The
premium for fiscal year 1995 increased by $225,000. While this situation has not
yet had any material effect on Enterprises' ability to recruit and retain
qualified directors, the Board believes that the Company's Certificate of
Incorporation should take advantage of the provisions in Delaware law so that it
can continue to recruit and retain the best possible directors. Although
California law does permit a corporation to limit director liability in a manner
similar to that accomplished by Article XII of the Company's Certificate of
Incorporation, the Articles of Incorporation of Enterprises contain no similar
provisions.

The effect of Article XII is to eliminate directors' personal liability to
the stockholders of the Company for monetary damages arising out of the
directors' breach of their fiduciary duty of care, but not the duty of loyalty.
The duty of care refers to the fiduciary duty of directors to be sufficiently
diligent and careful in considering a transaction or taking or refusing to take
some corporate action. The duty of loyalty refers to the duty that directors owe
the corporation and its stockholders, requiring that the directors act in good
faith and in the honest belief that a business decision under consideration is
in the best interest of the corporation and that the directors not engage in
self-dealing. In the absence of Article XII, a breach of the duty of care by a
director could give rise to liability for monetary damage caused to the Company
or the stockholders. Article XII does not eliminate the duty of care; it only
eliminates monetary damage awards occasioned by a breach of that duty. Thus, a
breach of the duty of care would remain a valid basis for a suit seeking to stop
a proposed transaction from occurring. After the transaction has occurred,
however, the stockholders would no longer have a claim for money damages based
on a breach of the duty of care even if that breach involved gross negligence on
the part of the directors in connection with, among other things, acquisition
proposals by or for the Company. However, the directors' duty of care itself
would remain unaffected, and stockholders of

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<PAGE> 22

the Company would retain the right to pursue equitable remedies, such as
injunctions and rescission of contracts. Article XII does not limit liability to
persons other than the Company or its stockholders.

Article XII does not limit or eliminate directors' liability for: (1)
breaches of their duty of loyalty to the Company, (2) acts and omissions not in
good faith, (3) intentional misconduct in office, (4) knowing violations of law,
(5) improper personal benefit, and (6) payment of dividends or stock redemptions
or repurchases, whether negligent or willful, in violation of the Delaware law.
In addition Article XII may not eliminate directors' liability for violation of
federal securities laws.

The limitation of liability provided in Article XII would only apply to
conduct occurring after the Effective Time of the Merger, except to the extent
that prior to that date the directors are acting in their capacity as directors
of the Company rather than Enterprises. In addition, Article XII will protect
directors to the extent provided in any future changes in Delaware law without
additional stockholder approval. It does not limit liability for conduct
predating the Merger to the extent the directors are acting in their capacity as
directors of Enterprises. The Company is not aware of any pending or threatened
claims that would be covered by Article XII's limitation of liability or of any
past successful claim that could not have been asserted had Article XII then
been in effect.

While it is acknowledged that the directors have a direct personal interest
in approval of this proposal, the Board firmly believes that Article XII is in
the best interests of the stockholders and the Company. Article XII will assist
the Company in attracting and retaining qualified individuals to serve as
directors by assuring directors (and potential directors) that their good faith
decisions will not be second-guessed by a court evaluating decisions with the
benefit of hindsight. However, it should be recognized that Article XII will
limit the remedies available to a stockholder dissatisfied with a board decision
that is protected by Article XII. A dissatisfied stockholder's only remedy in
such a circumstance would be to sue for equitable relief, such as stopping the
completion of the Board's action. In many situations this remedy may not be
effective. Stockholders, for example, may not be aware of a transaction or an
event until it is too late to prevent it. In these cases, the stockholders and
the Company could be injured by a board decision and yet have no effective
remedy.

The Board believes that the diligence exercised by directors stems
primarily from their desire to act in the best interests of the Company and not
from a fear of monetary damage awards. Consequently, the Board believes that the
level of scrutiny and care exercised by directors will not be lessened by the
provisions of Article XII limiting their liability.

AMENDMENT OF CERTAIN CHARTER AND BYLAW PROVISIONS

The Articles of Incorporation of Enterprises may be amended with the
approval of a majority of the directors present at a meeting at which a quorum
is present and by the affirmative vote of the holders of a majority of
Enterprises Common Stock. However, Article XIII of the Certificate of
Incorporation of the Company provides that any alteration, amendment, repeal or
rescission (any "Change") of any provision contained in the Certificate of
Incorporation must be approved by a majority of the directors of the Company
then in office and by the affirmative vote of the holders of a majority of the
outstanding Voting Stock then outstanding; provided, however, that if the
proposed Change: (a) relates to Article II (which sets forth definitions in the
Certificate of Incorporation), Article IV (which sets forth the purpose of the
Company), Article VII (which sets forth the procedural requirements for the
calling of special meetings of stockholders), Article IX (which eliminates
stockholder action by written consent), Article X (which sets forth the
classification of the Board of Directors and procedures for election or removal
of directors), Article XI (which sets forth the Supermajority Vote Requirement),
Article XIII itself, and Article XIV (which sets forth appraisal rights of
stockholders of the Company in connection with certain Business Combinations),
such Change must also be approved by the affirmative vote of the holders of not
less than 66 2/3% of the shares of Voting Stock then outstanding.

The Bylaws of Enterprises may be adopted, amended or repealed either by its
Board of Directors or the holders of a majority of the outstanding shares of
Enterprises Common Stock. Any Change of any provision of the Bylaws of the
Company must be approved by a majority of the authorized number of directors.

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CUMULATIVE VOTING

Section 2 of Article VIII of the Certificate of Incorporation of the
Company mandates that cumulative voting be applied in connection with the
election of directors. Cumulative voting rights in the election of directors
entitle a stockholder to give one nominee as many votes as is equal to the
number of directors to be elected multiplied by the number of shares owned by
the stockholder, or to distribute such votes on the same principal among two or
more nominees, as the stockholder sees fit. California law requires cumulative
voting in the election of directors upon notice given by a shareholder at a
shareholders meeting. The Certificate of Incorporation of the Company expressly
mandates that cumulative voting apply in connection with the election of
directors. Cumulative voting for directors may enable the holders of a
significant number of the outstanding shares, but less than a majority, to elect
one or more directors at any election. Cumulative voting, when combined with the
Company's classified Board of Directors, may delay the attainment of control of
the Board of Directors of the Company in the event of a hostile takeover
attempt.

AUTHORIZED SHARES OF STOCK

Section 1 of Article V of the Certificate of Incorporation will authorize
the Company to issue 50,000,000 shares of Common Stock, $.01 par value, and
5,000,000 shares of Preferred Stock, $.01 par value. The Articles of
Incorporation of Enterprises authorize Enterprises to issue 22,500,000 shares of
Common Stock, no par value, and 2,000,000 shares of Preferred Stock, no par
value. The Board of Directors believes it is desirable to increase the
authorized shares for future acquisitions, financings, stock dividends and other
corporate purposes. The Board of Directors is not proposing the increased
capitalization as a means of discouraging tender offers or takeover attempts.
However, in the event of an unsolicited tender offer or takeover proposal, the
increased number of shares could be issued to persons who are friendly to
management. Said shares might also be available to make acquisitions or enter
into other transactions that might frustrate potential offerors.

The Articles of Incorporation of Enterprises authorize the issuance of
2,000,000 shares of Preferred Stock and the Certificate of Incorporation of the
Company authorizes the Board of Directors, from time to time, to issue 5,000,000
shares of Preferred Stock in one or more series and to determine the rights,
preferences and privileges of each series without stockholder approval. The
issuance and sale of such Preferred Stock could occur in connection with a
hostile attempt to acquire control of the Company and the issuance of such
Preferred Stock may have the effect of impeding the acquisition of control of
the Company.

EMPLOYEE BENEFIT PLANS

At the close of business on January 31, 1994, 18,676,587 shares of
Enterprises' Common Stock were outstanding. In addition, as of that date,
1,372,634 of Enterprises' Common Stock were reserved for issuance under
Enterprises' stock option plans (the "Plans"). The Company's Board of Directors
has adopted a new plan that is similar to Enterprises' 1993 Employee Stock
Incentive Plan but expanded to include employees of Enterprises, Boston Pacific
and some or all of any other subsidiaries that may be formed by the Company.
This new plan is being submitted for stockholder approval at this Annual Meeting
of Stockholders.

As a result of the Merger, each option or other right to purchase or
otherwise acquire shares of Common Stock under each Plan or other employee
benefit plan of Enterprises, will be converted into an option or right to
purchase or acquire the same number of shares of the Company's Common Stock on
the same terms and conditions in effect immediately prior to the Merger. Each
share of Enterprises Common Stock currently held under any such plan, or
underlying such option or right, will be converted into one share of the
Company's Common Stock. The Company will deliver the same number of shares of
its Common Stock at the same price per share, and upon the same terms and
subject to the same conditions, as set forth in each of the Plans and other
employee benefit plans in effect immediately prior to the Merger.

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SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF
CALIFORNIA AND DELAWARE

The corporation laws of California and Delaware differ in a number of
respects, some of which are discussed above. See "SIGNIFICANT DIFFERENCES
BETWEEN THE ARTICLES OF INCORPORATION OF ENTERPRISES AND THE CERTIFICATE OF
INCORPORATION OF THE COMPANY." It is impractical to summarize all of the
differences in this Proxy Statement, but significant differences, not elsewhere
discussed, between the corporation laws of California and Delaware that could
materially affect the rights of shareholders of Enterprises, as compared to such
persons as stockholders of the Company, are as follows:

1. Removal of Directors. Under California law, a director may be removed
without cause by shareholder vote, provided that the shares voted against such
removal would not be sufficient to elect the director under cumulative voting
rules. Under Delaware law, a director of a corporation that does not have a
classified board of directors may be removed with or without cause by
stockholder vote, provided that, in the case of a corporation having cumulative
voting, if less than the entire board is to be removed, the shares voted against
such removal would not be sufficient to elect the director under cumulative
voting rules at an election of the Board of Directors. Under California law, a
director may be removed for cause only (i) by order of a court, sought by
shareholders holding at least 10% of the outstanding shares of any class, if a
director commits fraudulent or dishonest acts or gross abuse of authority or
discretion or (ii) by the Board, if a director has been declared of unsound mind
by order of court or has been convicted of a felony. Under Delaware law, a
director of a corporation with a classified board of directors can be removed
only for cause unless the certificate of incorporation otherwise provides. Since
there is no controlling definition of "cause" under Delaware law, the resolution
of any dispute as to what constitutes "cause" may become a matter for
determination by the courts. Article VIII of the Certificate of Incorporation of
the Company provides that a director may be removed only for cause and only with
the affirmative vote of holders of a majority of the Voting Stock. See
"SIGNIFICANT DIFFERENCES BETWEEN THE ARTICLES OF INCORPORATION OF ENTERPRISES
AND THE CERTIFICATE OF INCORPORATION OF THE COMPANY -- Classified Board of
Directors, Removal of Directors and Related Matters."

2. Shareholder Voting in Certain Transactions. Both California and Delaware
law generally require that a majority of the shareholders of both acquiring and
target corporations approve statutory mergers. Delaware law does not require a
stockholder vote of the surviving corporation in a merger (unless the
corporation provides otherwise in its certificate of incorporation) if (a) the
merger agreement does not amend the existing certificate of incorporation, (b)
each share of the surviving corporation outstanding before the merger is an
identical outstanding or treasury share after the merger, and (c) the number of
shares to be issued by the surviving corporation in the merger does not exceed
20% of the shares outstanding immediately prior to the merger. California law
contains a similar exception to its voting requirements for reorganizations
where shareholders or the corporation itself, or both, immediately prior to the
reorganization will own immediately after the reorganization equity securities
constituting more than five-sixths of the voting power of the surviving or
acquiring corporation or its parent entity.

Both California and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the voting shares of the corporation transferring such assets unless such a sale
is in the ordinary course of business.

With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. In contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares. Should the Company authorize and issue
shares of a new class of capital stock, the holders thereof would vote with the
holders of Company Common Stock on proposals not adversely affecting Company
Common Stock. In such event the holders of Company Common Stock, if in the
minority, would be unable to control the outcome of a vote, and, if in the
majority, would be able to control the outcome of such a vote.

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California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than 50% but less than 90% of such common stock or its affiliate
unless all of the holders of such common stock consent to the transaction. This
provision of California law may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish.

California law also provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally a controlling or managing party of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to shareholders.
This fairness opinion requirement does not apply to a corporation which does not
have shares held of record by at least 100 persons, or to a transaction which
has been qualified under California state securities laws. Furthermore, if a
tender of shares or vote is sought pursuant to an interested party's proposal
and a later proposal is made by another party at least ten days prior to the
date of acceptance of the interested party proposal, the shareholders must be
informed of the later offer and be afforded a reasonable opportunity to withdraw
any vote, consent or proxy, or to withdraw any tendered shares. Delaware law has
no comparable provision, and the stockholders of the Company might, therefore,
be deprived of an opportunity to consider such other proposal.

3. Dissenters' Rights. Under both California and Delaware law, a
shareholder of a corporation participating in certain major corporate
transactions may, under varying circumstances, be entitled to receive cash equal
to the fair market value of the shares held by such shareholder (as determined
by a court of competent jurisdiction or by agreement of the shareholder and the
corporation) in lieu of the consideration such shareholder would otherwise
receive in the transaction. The laws of California and Delaware differ with
respect to the circumstances under which dissenters' rights of appraisal are
available. Delaware law does not require dissenters' rights with respect to (a)
a sale-of-assets, (b) a merger by a corporation, if the shares of which are
either listed on a national securities exchange or widely-held (by more than
2,000 shareholders of record) or if stockholders receive shares of the surviving
corporation or of a listed or widely-held corporation, or (c) a merger in which
the corporation is the surviving corporation, provided that no vote of its
stockholders is required to approve the merger. (For a discussion of the
circumstances in which a vote of stockholders is not required, see "Shareholder
Vote for Mergers.") The Company's Certificate of Incorporation, as permitted by
Delaware law, expands the circumstances to which its stockholders will be
afforded dissenter's rights to any Business Combination that requires the
affirmative vote of the holders of not less than 66 2/3% of the Disinterested
Shares then outstanding. See "SIGNIFICANT DIFFERENCES BETWEEN THE ARTICLES OF
INCORPORATION OF ENTERPRISES AND THE CERTIFICATE OF INCORPORATION OF THE
COMPANY -- Increased Shareholder Vote Required in Certain Business Combinations
and Other Transactions."

California law does, in general, afford dissenters' rights in a
sale-of-assets reorganization, and the exclusions from dissenters' rights in
mergers are somewhat different from those in Delaware. For example, in the case
of a corporation whose shares are listed on a national securities exchange,
dissenters' rights would nevertheless be available in certain transactions for
any shares with respect to which there are certain restrictions on transfer and
for any class with respect to which 5% or more of such class claims dissenters'
rights. Also, under California law, shareholders of a corporation involved in a
reorganization are not entitled to dissenters' rights if the corporation, or its
shareholders immediately before the reorganization, or both, will own more than
five-sixths of the voting power of the surviving or acquiring corporation or its
parent entity. Shareholders of Enterprises will not be entitled to dissenters'
rights in connection with the Reincorporation Proposal.

4. Loans to Officers. Under Delaware law, a corporation may make loans to,
guarantee the obligations of, or otherwise assist, its officers or other
employees and those of its subsidiaries when such action, in the judgment of the
corporation's board of directors, may reasonably be expected to benefit the
corporation. Under California law, a corporation may only make such a loan to,
or guarantee for the benefit of, officers if such loan or guarantee is approved
by a majority of the corporation's shareholders or, for a corporation with 100
or more shareholders of record, by its board of directors pursuant to a
shareholder-approved bylaw. Enterprises currently does not have such a bylaw.

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<PAGE> 26

5. Indemnification of Officers and Directors. Both California and Delaware
law state expressly that the indemnification provided for therein shall not be
deemed exclusive of any other rights under any other bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise and provide that expenses
may be advanced to officers and directors in a specific case upon receipt of an
undertaking to repay such amount if it is ultimately determined that such
indemnified party is not entitled to be indemnified. In addition, California and
Delaware permit the determination as to whether an officer or director has met
the applicable standard of conduct to be made in certain circumstances by
independent legal counsel.

California law was recently amended to permit indemnification of officers
and directors to an extent which is generally coextensive with that permitted
under the Delaware law. Prior to the recent amendment, the California law did
not permit indemnification in any manner inconsistent with the statutory
indemnification provisions.

In the event the Reincorporation Proposal is approved, the Company will be
required to indemnify any director or officer to the full extent authorized or
permitted by the Delaware law (as now or hereafter in effect) and may indemnify
any employee or agent in a similar manner. Enterprises' Bylaws currently provide
that Enterprises may indemnify any person who is or was an agent of Enterprises
to the full extent permitted by law, although such indemnification is not
obligatory.

6. Personal Liability of Directors. Over the past few years, it has become
increasingly more costly and difficult for many corporations, including
Enterprises, to obtain meaningful liability insurance for directors and
officers. See "SIGNIFICANT DIFFERENCES BETWEEN THE ARTICLES OF INCORPORATION OF
ENTERPRISES AND THE CERTIFICATE OF INCORPORATION OF THE COMPANY -- Elimination
of Certain Director Liability."

The reduced availability of directors and officers liability insurance, as
well as the expansion of exclusions and increases in premiums where coverage is
available, have created what many believe is a crisis in the director and
officer liability insurance market. This crisis has been stimulated by an
increased frequency of litigation against directors and officers, and increases
in the cost of defending such litigation. The Board of Directors believes that
this situation has created an atmosphere of substantial uncertainty about the
level of protection that can be afforded to directors who seek to act in good
faith to carry out their duties to the Company. In turn, this situation impairs
the Company's ability to attract and retain qualified directors. The potential
exposure of these individuals to the costs and risks of claims of personal
liability may exceed any benefit to them from being a director of a public
company. This fact is especially a concern of individuals who are not employees
of the Company and whose objectivity is therefore of great value. In response to
this situation, many companies have adopted amendments to their charter and/or
bylaws to increase the level of protection for their directors.

In 1986, the Delaware legislature enacted amendments to the Delaware law to
permit Delaware corporations to provide directors additional protection from
personal liability. To implement such added protection, shareholders must
approve the Reincorporation Proposal, which will also constitute approval of the
Company's Certificate of Incorporation.

Article XII of the Company's Certificate of Incorporation gives effect to
the amendments to Delaware law and is intended to give to the Company's
directors the full protection against personal liability that is permitted under
the amended law. See "SIGNIFICANT DIFFERENCES BETWEEN THE ARTICLES OF
INCORPORATION OF ENTERPRISES AND THE CERTIFICATE OF INCORPORATION OF THE
COMPANY -- Elimination of Certain Director Liability."

Delaware law provides that the Board of Directors has the ultimate
responsibility for managing the business and affairs of a corporation. In
discharging this function, the law holds directors to fiduciary duties of care
and loyalty to the corporation and its stockholders. The Delaware Supreme Court
has held that the duty of care requires the exercise of an informed business
judgment. An informed business judgment means that directors have informed
themselves of all material information reasonably available to them. Having
become so informed, they then must act with requisite care in the discharge of
their duties. Liability of directors of a Delaware corporation to the
corporation or its stockholders for breach of the duty of care in some

25
<PAGE> 27

circumstances requires a finding by a court that the directors were grossly
negligent. Adoption of the Company's Certificate of Incorporation would not
change the standard of care required of directors. However, as authorized by
statute, the Company's Certificate of Incorporation would eliminate the monetary
liability of each director of the Company for breach of his or her fiduciary
duties, subject to the exceptions set forth in Delaware law. If the
Reincorporation Proposal is adopted, a stockholder will be able to prosecute an
action against a director for monetary damages only if he or she can show a
breach of the duty of loyalty, a failure to act in good faith, intentional
misconduct, a knowing violation of law, an improper personal benefit, or an
illegal dividend or stock repurchase. Stockholders will surrender any cause of
action for "negligence" or "gross negligence" in satisfying the duty of care,
including negligence or gross negligent conduct in the context of a takeover
proposal of the Company. However, because the Delaware statute regarding
directors' liability was only recently adopted by the State of Delaware, the
potential outcome of any litigation arising out of interpretations of the
statute cannot be ascertained at this time.

Directors also have a duty of loyalty to the corporation and its
stockholders. The duty of loyalty requires that, in making a business decision,
directors act in good faith and in the honest belief that the action taken was
in the best interests of the corporation. The Company's Certificate of
Incorporation would not insulate directors of the Company from liability for
breach of their duty of loyalty, nor would it limit the liability of directors
for claims arising under the federal securities laws. The Company's Certificate
of Incorporation would not limit or eliminate the right of the Company or any
stockholder to seek an injunction or other non-monetary relief in the event of a
breach of a director's duty of care, although, in certain situations equitable
remedies may not be as effective as monetary damages, and third parties, such as
creditors of the Company, will not be precluded by such provision from pursuing
any claims they might have. Furthermore, the Company's Certificate of
Incorporation would have no effect on currently pending or prior litigation
involving Enterprises and its directors or on any liability by virtue of any act
or omission by a director that occurred prior to the Effective Time of the
Merger. Enterprises is not aware of any prior or pending litigation that would
have been or would be impacted by Article XII of the Company's Certificate of
Incorporation.

Enterprises' Bylaws currently permit indemnification of agents of
Enterprises, including directors and officers, to the fullest extent permitted
by California law. Enterprises' Bylaws (which were adopted prior to the recently
enacted legislation) do not require indemnification for directors of amounts
paid in settling or otherwise disposing of threatened or pending actions by or
in the right of Enterprises (including shareholder derivative suits) or of
expenses incurred in defending threatened or pending actions that are settled or
otherwise disposed of, whether or not such indemnification is approved by a
court. If the Reincorporation Proposal is adopted, directors would in effect be
relieved of liability with respect to the foregoing actions to the extent such
actions were based on breach of their fiduciary duty of care. Consequently,
adoption of the Company's Certificate of Incorporation may reduce the likelihood
of derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for
breaches of their fiduciary duties, even though such action, if successful,
might otherwise have benefited the Company and its stockholders.

Enterprises' primary purpose for eliminating liability of directors for
certain breaches of fiduciary duty is to provide directors with the greatest
protection possible for personal liability while still insuring that directors'
actions are taken in the best interests of the Company and its stockholders. The
Board agrees with the Delaware legislature that a proper balance is achieved by
preserving only the bases for directors' liability discussed above, including
the directors' fiduciary duty of loyalty to the Company. This balance allows
directors to act in the best interests of the Company without undue fear of
financial penalties wholly disproportionate to their remuneration for services
as directors, while still preserving proper disincentives for actions not taken
in the best interests of the Company and its stockholders. In considering the
recommendation of the Board of Directors that Article XII be included in the
Company's Certificate of Incorporation as part of the Reincorporation Proposal,
it should be noted that because the directors of the Company have a personal
interest in seeing the adoption of Article XII at the potential expense of
stockholders, there may be an inherent conflict of interest in the Board's
recommendation in favor of the Reincorporation Proposal.

7. Inspection of Shareholders' List. California law provides for an
absolute right of inspection of a shareholders' list for persons holding 5% or
more of the corporation's voting shares or persons holding 1% or

26
<PAGE> 28

more of such shares who have filed a Schedule 14B with the Securities and
Exchange Commission relating to the election of directors. (Generally, a
Schedule 14B must be filed by any shareholder engaged in the solicitation of
proxies, as such terms are defined in the federal securities laws, in connection
with a contested election of directors.) Delaware law gives any stockholder of
record the right to inspect the stockholders' list for a purpose reasonably
related to such person's interest as a stockholder and, during the ten days
preceding a stockholders' meeting, for any purpose germane to that meeting.
Delaware law contains no provision comparable to the absolute right of
inspection provided by California law to certain shareholders. Importantly,
under California law, California rules with respect to the inspection of
shareholders' lists apply to any corporation such as the Company that, although
incorporated outside California, has its principal executive offices in
California or customarily holds meetings of its Board of Directors in
California.

8. Payment of Dividends. Delaware law permits the payment of dividends out
of surplus or, if there is no surplus, out of net profits for the current and
preceding fiscal years (provided that the amount of capital of the corporation
is not less than the aggregate amount of the capital represented by the issued
and outstanding stock of all classes having a preference upon the distribution
of assets). In addition, Delaware law generally provides that a corporation may
redeem or repurchase its shares only if such redemption or repurchase would not
impair the capital of the corporation. The ability of a Delaware corporation to
pay dividends on, or to make repurchases or redemptions of, its shares is
dependent on the financial status of the corporation standing alone and not on a
consolidated basis. In determining the amount of surplus of a Delaware
corporation, the assets of the corporation, including stock of subsidiaries
owned by the corporation, must be valued at their fair market value as
determined by the board of directors, without regard to their historical book
value.

Under California law, any distributions (including dividends and
repurchases of shares) generally are limited either to retained earnings or to
an amount that would leave the corporation with tangible assets in an amount
equal to at least 125% of its tangible liabilities and with current assets in an
amount at least equal to its current liabilities (or 125% of its current
liabilities if the average pre-tax and pre-interest earnings for the preceding
two fiscal years were less than the average interest expenses for such years).
Such limitations are applied on a consolidated basis and are based upon the book
value of assets determined in accordance with generally accepted accounting
principles then applicable.

Enterprises has historically paid cash dividends aggregating $.08 per share
each year, and the Company intends to continue this practice for the foreseeable
future.

9. Interested Director Transactions. Under both California and Delaware
law, certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain exceptions, the conditions are similar under California and Delaware
law. Under California and Delaware law, (a) either the shareholders or the board
of directors must approve any such contract or transaction in good faith after
full disclosure of the material facts, and in the case of board approval the
contract or transaction must also be "just and reasonable" (in California) or
"fair" (in Delaware) to the corporation, or (b) the contract or transaction must
have been just and reasonable or fair as to the corporation at the time it was
approved. In the latter case, California law explicitly places the burden of
proof on the interested director. Under California law, if shareholder approval
is sought, the interested director is not entitled to vote his shares at a
shareholder meeting with respect to any action regarding such contract or
transaction. If board approval is sought, the contract or transaction must be
approved by a majority vote of a quorum of the directors, without counting the
vote of any interested directors (except that interested directors may be
counted for purposes of establishing a quorum). Under Delaware law, if board
approval is sought, the contract or transaction must be approved by a majority
of the disinterested directors (even though less than a majority of a quorum).
Therefore, certain transactions that the Board of Directors of Enterprises might
not be able to approve because of the number of interested directors, could be
approved by a majority of the disinterested directors of the Company, although
less than a majority of a quorum. The Company is not aware of any plans to
propose any transaction involving directors of the Company that could not be so
approved under California law but could be so approved under Delaware law.

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<PAGE> 29

10. Shareholder Derivative Suits. California law provides that a
shareholder bringing a derivative action on behalf of a corporation need not
have been a shareholder at the time of the transaction in question, provided
that certain tests are met. Under Delaware law, a stockholder may only bring a
derivative action on behalf of the corporation if the stockholder was a
stockholder of the corporation at the time of the transaction in question or his
or her stock thereafter devolved upon him or her by operation of law. California
law also provides that the corporation or the defendant in a derivative suit may
make a motion to the court for an order requiring the plaintiff shareholder to
furnish a security bond. Delaware does not have a similar bonding requirement.

11. Dissolution. Under California law, shareholders holding 50% or more of
the total voting power may authorize a corporation's dissolution, with or
without the approval of the corporation's board of directors, and this right may
not be modified by the articles of incorporation. Under Delaware law, unless the
board of directors approves the proposal to dissolve, the dissolution must be
approved by stockholders holding 100% of the total voting power of the
corporation. Only if the dissolution is initiated by the board of directors may
it be approved by a simple majority of the corporation's stockholders. In the
event of such a board-initiated dissolution, Delaware law allows a Delaware
corporation to include in its certificate of incorporation a supermajority
voting requirement in connection with dissolutions. The Company's Certificate of
Incorporation contains no such supermajority voting requirement, however, and a
majority of shares voting at a meeting at which a quorum is present would be
sufficient to approve a dissolution of the Company that had previously been
approved by its Board of Directors.

APPLICATION OF THE GENERAL CORPORATION LAW OF CALIFORNIA TO DELAWARE
CORPORATIONS

Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under California law) are
placed in a special category if they have characteristics of ownership and
operation which indicate that they have significant contacts with California. So
long as a Delaware or other foreign corporation is in this special category, and
it does not qualify for one of the statutory exemptions, it is subject to a
number of key provisions of the California General Corporation Law applicable to
corporations incorporated in California. Among the more important provisions are
those relating to the election and removal of directors, cumulative voting,
classified boards of directors, standards of liability and indemnification of
directors, distributions, dividends and repurchases of shares, shareholder
meetings, approval of certain corporation transactions, dissenters and appraisal
rights and inspection of corporate records.

Exemptions from Section 2115 are provided for corporations whose shares are
approved for listing on the New York Stock Exchange if such corporations have
800 or more shareholders of record. The Company will be exempt from Section 2115
following the Merger because the Common Stock of the Company will be so approved
for listing and will be owned by more than 800 holders.

LEGAL OPINION

The validity of the Company's Common Stock to be issued upon consummation
of the Reincorporation Proposal has been passed upon by Gibson, Dunn & Crutcher,
Los Angeles, California.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

In the opinion of Gibson, Dunn & Crutcher, counsel to Enterprises, the
following discussion accurately summarizes the material United States federal
income tax consequences of the Merger to the holders of Enterprises Common
Stock, Enterprises, the Company and California Subsidiary. This opinion is based
on the current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury Regulations, judicial authority and administrative
rulings and practice. In addition, this opinion is based upon information
contained in this Proxy Statement -- Prospectus. No ruling from the IRS has been
or will be sought with respect to any aspect of the Merger. Therefore, there can
be no assurance that the IRS will not take a contrary view as to the tax
consequences described herein. Furthermore, legislative, judicial or

28
<PAGE> 30

administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conclusions set forth herein.

The following does not consider the tax consequences of the Merger under
state, local and foreign law. Moreover, special considerations not described
herein may apply to certain taxpayers, such as financial institutions,
broker-dealers, insurance companies, tax-exempt organizations, investment
companies and persons who are neither citizens nor residents of the United
States, or who are foreign corporations, foreign partnerships or foreign estates
or trusts as to the United States.

EACH HOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER.

FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

Subject to the qualifications set forth above, the Merger should qualify as
a tax-free reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) of the
Code, with the following results:

(i) No gain or loss will be recognized by the shareholders of
Enterprises upon the conversion of their shares of Enterprises Common Stock
into shares of Company Common Stock.

(ii) The basis of the shares of Company Common Stock received by each
shareholder of Enterprises will be the same as the basis of the shares of
Enterprises Common Stock held by such shareholder immediately prior to the
Merger.

(iii) The holding period of the shares of Company Common Stock
received by each shareholder of Enterprises will include the holding period
of the shares of Enterprises' Common Stock held by such shareholder
immediately prior to the Merger, provided that such shareholder held such
shares of Enterprises' Common Stock as a capital asset on the date of the
Merger.

(iv) No gain or loss will be recognized by Enterprises, the Company or
California Subsidiary in connection with the Merger.

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<PAGE> 31

ELECTION OF DIRECTORS

Eight directors are to be elected at the Annual Meeting, each to serve for
a term of one year and until his or her successor is elected. The proxies
solicited hereby are intended to be voted for the nominees whose names are
listed below. All of the nominees except Frank P. Willey are presently
directors. Messrs. William P. Foley II and Daniel D. (Ron) Lane were elected
directors in December 1993, and the remaining nominees were elected by the
shareholders at the 1993 Annual Meeting. The persons named in the proxy will
have discretionary authority to vote for others if any nominee becomes unable or
unwilling to serve prior to the meeting. To the knowledge of Enterprises, all
nominees are and will be able to serve.

INFORMATION CONCERNING NOMINEES

<TABLE>
<CAPTION>
FIRST
YEAR
BECAME OTHER CORPORATE
NAME AGE PRINCIPAL OCCUPATION DIRECTOR DIRECTORSHIPS
- ---------------------- --- -------------------- -------- --------------------
<S> <C> <C> <C> <C>
William P. Foley II 48 Chairman of the 1993 Fidelity National
Board, President and Financial, Inc.
Chief Executive
Officer, Fidelity
National Financial,
Inc.
Donald E. Doyle 47 President and Chief 1992 --
Executive Officer,
Enterprises
Carl N. Karcher 77 Chairman of the 1966 --
Board, Emeritus,
Enterprises
Peter Churm 68 Chairman Emeritus, 1979 --
Furon Company
Carl L. Karcher 45 President, CLK, 1992 --
Inc., a franchisee
of the Company
Daniel D. (Ron) Lane 59 Chairman and Chief 1993 Fidelity National
Executive Officer, Financial, Inc.,
Lane/Kahn Pacific, Hawaiian Airlines,
Inc. Inc., Resort Income
Investors, Inc.
Elizabeth A. Sanders 48 Independent 1983 H.F. Ahmanson, The
Management Vons Company, Inc.,
Consultant Sport Chalet, Inc.,
Wal-Mart Stores,
Inc.
Frank P. Willey 40 Executive Vice -- Fidelity National
President and Financial, Inc.
General Counsel,
Fidelity National
Financial, Inc.
</TABLE>

William P. Foley II has been a director of Enterprises since December 1993
and became Chairman of the Board of Enterprises in March 1994. Since 1981, Mr.
Foley has been Chairman of the Board, President and Chief Executive Officer of
Fidelity National Financial, Inc., a holding company engaged in title insurance
and related services.

Donald E. Doyle became a director, President and Chief Executive Officer of
Enterprises in December 1992. Prior to that time, he served as President and
Chief Executive Officer of the Greater Louisville Economic Development
Partnership. Mr. Doyle was employed by Kentucky Fried Chicken Corporation from
1973 until 1988 in several capacities, including, between 1984 and 1988,
President of KFC-USA, the principal operating company for Kentucky Fried Chicken
company-owned and franchised restaurants.

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<PAGE> 32

Carl N. Karcher, the founder of Enterprises, purchased his first hot dog
stand on July 17, 1941 and has been developing Enterprises' concepts since that
time. He first became a director of Enterprises in 1966. He has served as
Chairman of the Board Emeritus since January 1, 1994. He was Chairman of the
Board of Enterprises until October 1, 1993. Until Mr. Doyle's appointment as
Chief Executive Officer in December 1992, Mr. Karcher served in such capacity.
Prior to 1980, he was President of Enterprises. In September 1989, Mr. Karcher
and the Securities and Exchange Commission entered into a settlement agreement
with respect to a previously filed action pursuant to which Mr. Karcher, without
admitting or denying any wrongdoing, consented to the entry of a permanent
injunction enjoining him from further violations of certain federal securities
laws. In addition, Mr. Karcher agreed to pay a penalty pursuant to the Insider
Trading Sanctions Act of 1984.

Peter Churm became a member of the Board of Directors of Enterprises in
1979. He was Chairman of the Board of Furon Company, a publicly-held diversified
manufacturing company headquartered in Laguna Niguel, California, from May 1980
through February 1992 and was President of that company for more than the 16
years prior to that time. He remains a member of the Board of Directors of Furon
Company.

Carl L. Karcher has been a franchisee of Enterprises since May 1985. For
more than 17 years prior to that time, Mr. Karcher was employed by Enterprises
in several capacities, including Vice President, Manufacturing and Distribution.
Mr. Karcher first became a director in May 1992. In November 1988, the
Securities and Exchange Commission obtained a summary judgment in a civil action
brought against Mr. Karcher under certain federal securities laws, which
required Mr. Karcher to pay disgorgement of $10,500 which represented losses Mr.
Karcher avoided in the sale of certain of Enterprises' 9 1/2% Convertible
Debentures. In addition, a permanent injunction was entered against Mr. Karcher
enjoining him from future violations under certain federal securities laws.

Daniel D. (Ron) Lane became a director of Enterprises in December 1993. Mr.
Lane has been a Director of Fidelity National Financial, Inc. since September
1989. Since February 1983, he has been a principal, Chairman and Chief Executive
Officer of Lane/Kuhn Pacific, Inc., a corporation that consists of several
community development and home building partnerships, all of which are
headquartered in Newport Beach, California. Mr. Lane also serves as a director
of Hawaiian Airlines, Inc. and Resort Income Investors, Inc.

Elizabeth A. Sanders served as Chairman of the Board of Enterprises from
October 1, 1993 until February 22, 1994 and has been a director since 1983. She
is an independent management consultant to various businesses. She was employed
by Nordstrom, Inc., which owns a chain of department stores, in several
capacities between 1971 and 1990 (including Vice President-General Manager
between 1980 and 1990). Mrs. Sanders is a member of the Board of Directors of
H.F. Ahmanson, The Vons Companies, Inc., Sport Chalet, Inc. and Wal-Mart Stores,
Inc.

Frank P. Willey has been a Director, Executive Vice President and General
Counsel of Fidelity National Financial, Inc. since February 1986.

Carl L. Karcher is Carl N. Karcher's son.

The Executive Committee of the Board of Directors of Enterprises, comprised
of Ms. Sanders and Messrs. Doyle, Foley and Lane, 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. The Company's Board of Directors
intends to form an Executive Committee with the same authority and composed of
the same individuals following the Merger.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION
OF ALL OF THE ABOVE NOMINEES.

CLASSIFICATION OF DIRECTORS

If the Reincorporation Proposal is approved by the shareholders, the
directors elected at the Annual Meeting will serve as directors of the Company.
Enterprises will cause Messrs. Willey and Carl L. Karcher to

31
<PAGE> 33

be elected as Class I directors of the Company whose terms would continue until
the Annual Meeting of Stockholders of the Company to be held in 1995, Messrs.
Churm, Doyle and Lane to be elected as Class II directors, whose terms would
continue until the Annual Meeting of Stockholders of the Company to be held in
1996, and Messrs. Foley and Carl N. Karcher and Mrs. Sanders as Class III
directors, whose terms would continue until the Annual Meeting in 1997.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

In addition to the Executive Committee, the Board of Directors has two
standing committees: the Audit Committee and the Compensation and Stock Option
Committee. The Board does not have a nominating committee or other committee
performing similar functions. The Audit Committee, whose current members are
Kenneth Olsen (Chairman), Peter Churm, Daniel W. Holden and Elizabeth A.
Sanders, monitors Enterprises' basic accounting policies and their related
system of internal control, reviews its audit and management reports and makes
recommendations regarding the appointment of independent auditors. The
Compensation and Stock Option Committee, whose current members are Peter Churm
(Chairman), Daniel W. Holden, Kenneth Olsen, Elizabeth A. Sanders and Carl L.
Karcher, 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 1994, the Board of Directors held 12 meetings, the Audit
Committee held three meetings, the Compensation and Stock Option Committee held
four meetings and the Executive Committee held one meeting. During fiscal 1994,
no director attended fewer than 75% of the aggregate meetings of the Board of
Directors and the committee or committees on which he or she served.

COMPENSATION OF DIRECTORS

For their services as directors in fiscal 1994, Messrs. Churm, Holden,
Olsen, Carl L. Karcher and Mrs. Sanders received a base fee of $18,000. For
their attendance at Board meetings (including telephonic meetings), other than
regular Board meetings, Messrs. Churm, Holden, Olsen, Carl L. Karcher and Mrs.
Sanders received $17,000, $16,000, $17,000, $7,500 and $17,000, respectively.
Commencing October 1993 through the end of fiscal 1994, for her services as
Chairman, Mrs. Sanders received a pro-rata portion of Chairman's fees of $90,000
per annum, totaling $22,500. Mrs. Sanders also received reimbursement of
expenses incurred attending Board meetings totaling $5,373 in fiscal 1994. Each
director, with the exception of Mrs. Sanders, is expected to receive a fee of
$18,000 in fiscal 1995 for their services and $1,000 ($500 for telephonic
meetings) for each Board meeting or committee meeting other than regular
meetings attended by that director in fiscal 1995. Mrs. Sanders will receive
such fees in addition to the pro-rata portion of Chairman's fees she received
prior to the naming of Mr. Foley as Chairman in March 1994.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

As of the date of this Proxy Statement, the members of the Compensation and
Stock Option Committee of the Board of Directors were Peter Churm, Daniel H.
Holden, Kenneth Olsen, Elizabeth Sanders and Carl L. Karcher, none of whom was
an officer or employee of the Company during fiscal 1994. With the exception of
Carl L. Karcher, who was the Vice President -- Manufacturing/Distribution of
Enterprises from January 1981 to June 1985, none of the members are former
officers of the Company.

EXECUTIVE COMPENSATION

The following table sets forth, for the years indicated, the compensation
awarded to, earned by or paid to each of the Chief Executive Officer and the
four other most highly compensated executive officers (collectively with the
Chief Executive Officer, the "Named Executive Officers") of Enterprises who were
so employed by Enterprises as of January 31, 1994.

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<PAGE> 34

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------
--------------------------------- RESTRICTED
OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARDS SARS COMPENSATION
NAME AND TITLE YEAR ($)(8) ($) ($)(1)(2) ($) (#) ($)(1)(3)
- ----------------------------- ------ -------- ------- ------------ --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald E. Doyle.............. 1994 $289,038 $75,000 $238,046 -- 162,769(5) $ --
President and 1993 23,654 -- -- $100,000 (4) -- --
Chief Executive Officer(6) 1992 -- -- -- -- -- --
Loren C. Pannier............. 1994 189,139 33,282 12,058 -- 23,408 2,912
Senior Vice President, 1993 180,461 -- 14,152 -- 13,560 5,728
Chief Financial Officer 1992 172,500 25,968 -- -- -- --
Rory J. Murphy............... 1994 165,654 40,000 11,841 -- 61,200 2,477
Senior Vice President, 1993 128,428 -- 4,215 -- 8,470 3,265
Operations 1992 90,192 13,118 -- -- -- --
Kerry W. Coin................ 1994 148,292 29,400 153,434 -- 30,000 --
Senior Vice President 1993 -- -- -- -- -- --
and General Manager, 1992 -- -- -- -- -- --
Boston Pacific, Inc.(7)
Richard C. Celio............. 1994 133,049 28,000 13,982 -- 50,108 1,435
Vice President, 1993 109,860 -- 12,664 -- 5,450 2,958
General Counsel 1992 101,923 13,172 -- -- -- --
</TABLE>

- ---------------

(1) In accordance with the transition provisions covering disclosure of
executive compensation adopted by the Securities and Exchange Commission,
amounts for "Other Annual Compensation" and "All Other Compensation" are
excluded for fiscal 1992.

(2) "Other Annual Compensation" includes the following amounts for Messrs.
Doyle, Pannier, Murphy, Coin and Celio: (a) auto allowance payments of
$9,960, $9,960, $9,960, $9,130 and $9,960 and (b) reimbursements by
Enterprises for medical and dental costs of $1,414, $2,098, $1,881, $830 and
$4,022. In fiscal 1994, Messrs. Doyle and Coin received reimbursements for
relocation costs totaling $174,172 and $143,474. In fiscal 1994, Mr. Doyle
received a housing allowance in the amount of $52,500.

(3) "All Other Compensation" includes matching and voluntary contributions by
Enterprises to Enterprises' voluntary contributory profit sharing and 401(k)
savings plan for Messrs. Pannier, Murphy and Celio in the amounts of (i)
$394, $251 and $242 for the profit sharing plan and (ii) $2,518, $2,226 and
$1,193 for the 401(k) savings plan.

(4) Mr. Doyle was awarded 12,121 shares of restricted stock pursuant to his
employment agreement on January 6, 1993. The award has been valued based on
the market value of Enterprises' Common Stock on the date of issuance, which
was $8.25 per share. See "Employment Agreements."

(5) As part of Enterprises' offer to Mr. Doyle in December 1992 to become
President and Chief Executive Officer, Enterprises agreed to grant Mr. Doyle
an option to purchase 100,000 shares of Common Stock subject to shareholder
ratification of the 1993 Employee Stock Incentive Plan. This option was
subsequently granted to Mr. Doyle in April 1993 upon the adoption by
Enterprises' Board of Directors of the 1993 Employee Stock Incentive Plan.

(6) Mr. Doyle was appointed President and Chief Executive Officer in December
1992.

(7) Mr. Coin was appointed Vice President, Strategic Development in February
1993, and was appointed Senior Vice President and General Manager of Boston
Pacific, Inc. in February 1994.

(8) In fiscal 1994, base salaries for Messrs. Doyle, Pannier, Murphy, Coin and
Celio were $300,000, $190,184, $169,000, $168,000 and $136,000.

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<PAGE> 35

The following table sets forth certain information with respect to the
stock options granted during fiscal 1994 to the Named Executive Officers.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
------------------------------------------------------------- RATES
PERCENTAGE OF OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL 1994(1) ($/SHARE)(2) DATE(3) 5%($) 10%($)
- ----------------------- ----------- -------------- ------------ --------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Donald E. Doyle........ 100,000 17.2% $ 8.00 April 19, 2003 $504,000 $1,272,000
62,769 10.8% 8.13 June 10, 2003 321,497 811,396
Loren C. Pannier....... 23,408 4.0% 8.13 June 10, 2003 119,893 302,588
Rory J. Murphy......... 30,000 5.2% 8.00 April 19, 2003 151,200 381,600
31,200 5.4% 8.13 June 10, 2003 159,803 403,313
Kerry W. Coin.......... 30,000 5.2% 8.00 April 19, 2003 151,200 381,600
Richard C. Celio....... 25,000 4.3% 8.00 April 19, 2003 126,000 318,000
25,108 4.3% 8.13 June 10, 2003 128,601 324,564
</TABLE>

- ---------------

(1) Based on the number of shares being subject to options granted to all
employees in fiscal 1994, which aggregated 579,812.

(2) The fair market value of Enterprises' Common Stock on the date of grant.

(3) All the options vest 33 1/3% on the first anniversary of the date of grant,
33 1/3% on the second anniversary of the date of grant and 33 1/3% on the
third anniversary of the date of grant.

The following table sets forth certain information with respect to stock
options exercised during fiscal 1994 by the Named Executive Officers aggregate
fiscal 1994 year end stock option values.

AGGREGATE OPTION EXERCISES IN FISCAL 1994

AND FISCAL 1994 YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL 1994 OPTIONS AT FISCAL 1994
SHARES ACQUIRED YEAR END (#) YEAR END ($)
ON EXERCISE VALUE ------------------------- -------------------------
NAME (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------- --------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Donald E. Doyle............ -- -- --/162,769 --/$866,723
Loren C. Pannier........... -- -- 243,736/ 33,578 $1,586,367/ 179,981
Rory J. Murphy............. -- -- 17,340/ 67,552 83,243/ 360,624
Kerry W. Coin.............. -- -- --/ 30,000 --/ 161,250
Richard C. Celio........... -- -- 27,880/ 54,196 75,705/ 289,061
</TABLE>

EMPLOYMENT AGREEMENTS

In January 1993, Enterprises entered into employment agreements with Donald
E. Doyle, the President and Chief Executive Officer, Loren C. Pannier, Senior
Vice President and Chief Financial Officer, Rory J. Murphy, Senior Vice
President, Operations, Richard C. Celio, Vice President, General Counsel, and
Roger D. Shively, Vice President, Human Resources. Each such employment
agreement expires in January 1996. In February 1993, Enterprises entered into an
employment agreement with Kerry W. Coin, Senior Vice President and General
Manager of Boston Pacific, Inc., which expires in February 1996. In April 1993,
Enterprises entered into an employment agreement with Karen B. Eadon, Vice
President, Marketing, which expires in April 1996.

Base Salaries. The base salaries payable under these agreements are subject
to increase from time to time at the discretion of the Board of Directors. The
employment agreement with Mr. Doyle provides for an initial annual base salary
of $300,000. In March 1994, Mr. Doyle's annual base salary was increased to

34
<PAGE> 36

$315,000. In addition, in March 1993, Enterprises and Mr. Doyle executed an
addendum to his employment agreement providing for a housing cost differential
payment of $4,375 per month to be paid to Mr. Doyle through December 1997 in
consideration of the markedly higher housing costs in Southern California
compared to those in Louisville, Kentucky, Mr. Doyle's former residence.

Bonuses. The employment agreements provide for a management incentive
compensation plan to be established by the Board of Directors for the payment of
cash bonuses to the executive officers and management of Enterprises. Such
bonuses will be paid if certain performance targets are met. The Board of
Directors has established the terms of such management incentive compensation
plan. See "Incentive Compensation Plan."

Stock Options and Grants. Each employment agreement entitles the executive
officer to participate in the Company's stock incentive plan. Certain grants
were made to the Named Executive Officers pursuant to their employment
agreements, as set forth in the table above.

Termination of Employment; Change of Control. Each employment agreement
provides that if Enterprises terminates an executive officer's employment for
good and valid cause (as defined therein), Enterprises will not be required to
pay any severance pay or pro-rata payment that may otherwise be due such
executive officer. However, if an executive officer is terminated by Enterprises
without cause, Enterprises will be obligated to pay a lump sum equal to the
greater of one year's compensation (two years' compensation in the case of Mr.
Doyle) or the balance of compensation due for the remainder of the employment
agreement, plus any accrued and unpaid compensation. In addition, in the event
Enterprises terminates Mr. Doyle's employment without cause, the addendum to Mr.
Doyle's employment agreement requires that the housing cost differential
payments thereunder be made to him for the longer of two years or the balance of
the agreement. In addition, the employment agreements provide for certain
payments in the event Enterprises is acquired by or merged with another entity,
or another entity acquires all or substantially all of Enterprises' assets,
resulting in such other entity gaining direction or control of Enterprises (a
"Change in Control") and thereafter either (i) an executive officer is
terminated or (ii) an executive officer exercises his right upon a Change in
Control to terminate his employment agreement. In either case, such executive
officer's employment agreement requires Enterprises to pay such executive
officer's base salary for the longer of one year (two years in the case of Mr.
Doyle) or the balance of such agreement's term. Mr. Pannier is also party to a
Change in Control Agreement executed in 1988 that provides that if Mr. Pannier
loses his position or a substantially equivalent position with Enterprises as a
result of and prior to two years after a Change in Control, Mr. Pannier is
entitled to an amount equal to the product of (i) the sum of his annual base
salary at the highest annual rate in effect at any time within the prior two
years plus the highest amount awarded to such executive under the annual bonus
plan or any successor bonus plan during the prior three years multiplied by (ii)
2.99 (subject to adjustment, if Mr. Pannier retires within three years from that
date or as necessary to make payment under the agreement not constitute
"parachute payments"). It also provides that all outstanding options held by Mr.
Pannier become fully vested and exercisable, and employee benefit plans and
programs in which he participates at such time will continue in full force and
effect for a specified period.

INCENTIVE COMPENSATION PLAN

In 1993, Enterprises adopted the Carl Karcher Enterprises, Inc. Incentive
Compensation Plan (the "Incentive Plan") to help Enterprises attract and retain
qualified employees in managerial and other key positions and to provide
incentives to those individuals to contribute to the success of Enterprises. The
Incentive Plan is administered by the Compensation and Stock Option Committee of
the Board of Directors (the "Committee") and the Vice President of Human
Resources of the Company. The Incentive Plan provides for cash bonus awards, the
amounts of which are directly dependent upon increases in operating income over
the prior fiscal year.

Participants in the Incentive Plan must be employees of Enterprises
nominated by the President and Chief Executive Officer and approved by the
Committee. Each participant in the Incentive Plan is assigned a level of
participation based on such participant's responsibilities. Participation levels
are established and approved by the Committee following recommendations by the
President and Chief Executive Officer, and the Vice President of Human
Resources. Cash awards under the Incentive Plan for each participant are

35
<PAGE> 37

determined by multiplying the participant's base salary in effect on the last
day of the applicable plan year by the applicable assigned percentage, which
will be increased or decreased based on whether various levels of operating
income are achieved.

Participants in the Incentive Plan who terminate employment with
Enterprises on or after the last day of the plan year vest with respect to any
award under the Incentive Plan for that plan year. Participants who terminate
employment with Enterprises prior to the end of a plan year will receive such
awards as the Committee shall determine as appropriate, if any. Employees hired
or promoted during a plan year will be eligible to receive pro-rata awards for
such plan year as the Committee shall determine, provided that the minimum
pro-rata amount is one-fourth of a full award.

If a participant in the Incentive Plan dies before the last day of the plan
year, Enterprises will pay a pro-rata share of an award in an amount authorized
by the Committee. If a participant in the Incentive Plan dies on or after the
last day of a plan year, Enterprises will pay the full amount of any award under
the Incentive Plan for that plan year.

The Committee has the right to cancel, modify or amend the Incentive Plan
in its sole discretion, provided that no cancellation, modification or amendment
may occur retroactively for a plan year that has ended, and no amendment may
modify any award that has previously been paid.

RETIREMENT PLANS

Enterprises has a voluntary contributory profit sharing and savings
investment plan (the "Investment Plan") for all eligible employees, excluding
hourly operations employees. The annual contribution of Enterprises under the
profit sharing portion of the Investment Plan is determined at the discretion of
the Board of Directors. Every employee earns credit toward vesting from his or
her initial date of employment; amounts accrued for the account of an eligible
employee become vested in increasing percentages beginning during the employee's
third year of continuous service and become fully vested after the fifth year.
Benefits are realizable upon termination, retirement, total disability or death.
Total contributions to the plan for fiscal 1994 were $435,000.

The savings investment portion of the Investment Plan is administered in
accordance with the provisions of Section 401(k) of the Internal Revenue Code.
Employees who are participants in the profit sharing plan may elect to reduce
their annual salary by up to 15% and have this amount contributed to the plan.
Up to 4% of the employees' contributions are matched by Enterprises and may be
used to purchase the Enterprises' Common Stock. Total contributions to the plan
for all participants for fiscal 1994 were $378,000.

Enterprises has a defined benefit pension plan for all eligible hourly
operations employees. Each eligible employee earns credit toward vesting from
his or her initial date of employment. Employees are fully vested upon the
completion of five years of service. The plan provides a benefit of $10 per
month for each year of service since February 1, 1985, with a maximum benefit of
$200 per month. Benefits are realizable upon termination, retirement, total
disability or death. Total contributions to the plan for all participants for
fiscal 1994 were $442,000.

KEY EMPLOYEE STOCK OPTION PLAN

Enterprises' Key Employee Stock Option Plan (the "Plan") was adopted by the
Board of Directors on September 15, 1982, and was approved by the shareholders
of Enterprises on June 8, 1983. The Plan expired by its terms in September 1992.
The Plan provided for options that qualify as incentive stock options under
former Section 422A (now Section 422) of the Internal Revenue Code (the "Code"),
as well as options that do not so qualify. The Plan was designed to enable
Enterprises to attract, retain and motivate eligible employees, consultants and
directors by providing for or increasing their proprietary interest in
Enterprises. Persons employed on a salaried basis by Enterprises or its parent
or subsidiaries were eligible to receive incentive options. Such persons, as
well as consultants to and directors of Enterprises, were eligible to receive
nonqualified options. The Plan was administered by the Compensation and Stock
Option Committee of the Board of Directors.

36
<PAGE> 38

Although Enterprises reserved 3,000,000 shares of its Common Stock for
issuance under the Plan, the Plan expired in September 1992. As of April 25,
1994, Enterprises had outstanding incentive options to purchase an aggregate of
90,060 shares of Common Stock pursuant to the Plan to seven employees, with
exercise prices ranging from $5.21 to $10.58 with an average exercise price of
$5.53 per share. As of April 25, 1994, Enterprises had outstanding nonqualified
options to purchase an aggregate of 606,777 shares of Common Stock pursuant to
the Plan to 31 employees, with exercise prices ranging from $5.21 to $13.38 with
an average exercise price of $8.31 per share.

1993 EMPLOYEE STOCK INCENTIVE PLAN

Enterprises' 1993 Employee Stock Incentive Plan (the "1993 Plan") was
adopted by the Board of Directors of Enterprises on April 20, 1993, and was
approved by Enterprises' shareholders on June 16, 1993. After the Merger, no
further options will be available for grant under the 1993 Plan in as much as
Enterprises will no longer be a publicly held company. The 1993 Plan is
substantially similar to the 1994 Plan of the Company which will replace it. As
of April 25, 1994, Enterprises had outstanding nonqualified options to purchase
an aggregate of 860,114 shares of Common Stock pursuant to the 1993 Plan to 42
employees with exercise prices ranging from $7.13 to $13.38 with an average
exercise price of $9.40 per share.

TRANSACTIONS WITH OFFICERS, DIRECTORS AND RELATED PARTIES

Enterprises leases the land and buildings, which include the headquarters
of Enterprises and its distribution center, in Carl Karcher Plaza located in
1200 North Harbor Boulevard, Anaheim, California from the Trust. The original
term of the lease expires in April 2003, and Enterprises has the option to renew
the lease for two additional five-year terms. The current rent under the lease
is $89,275 per month, subject to adjustment every five years.

Enterprises also leases two adjacent parcels of land in Carl Karcher Plaza
from the Karcher Trust. One parcel is being utilized by Enterprises for its
training facilities and parking. The rent is $5,443 per month, subject to
adjustment every five years. The other parcel is being utilized, in part, for
the distribution center parking and storage. The unused portion of this parcel
has been subleased to various small commercial tenants. The rent for this second
parcel is $6,250 per month, also subject to adjustment every five years. The
lease term for both parcels expires in April 2003, and Enterprises has the
option to renew each of these leases for two additional five-year terms.

Enterprises presently has three leases with the Trust with respect to
restaurant properties. The terms of these leases range from 20 to 35 years. In
two of the leases, the minimum monthly rentals are $5,735 and $6,799 or 5 1/2%
of annual gross sales. The terms of the third lease require minimum monthly
rental for improvements of $2,871 or 4% of annual gross sales and a fixed
monthly rental of $5,699 for the land. The aggregate rentals paid for the
restaurant properties leased during fiscal 1994 were $474,275.

In November 1993, Enterprises purchased two restaurants from the Trust for
an aggregate purchase price of $848,000. A third restaurant site is in escrow,
for which Enterprises has paid a $250,000 deposit.

During the second quarter of fiscal 1994, Enterprises purchased a total of
59,750 shares of Common Stock from Carl N. Karcher for an aggregate purchase
price of $422,000. All shares purchased were canceled and retired.

In January 1994 Enterprises entered into an Employment Agreement with Carl
N. Karcher which expires January 1999. The contract provides that Mr. Karcher
will be employed as the Chairman Emeritus of the Board as a non-executive
officer reporting to the President and Chief Executive Officer. It provides for
a base salary of $400,000 with bonuses to be paid in the sole and absolute
discretion of the Chairman of the Board and the Compensation and Stock Option
Committee. The agreement entitles Mr. Karcher to participate in the Company's
stock option program and provides for an initial, one time grant of an option to
purchase 100,000 shares with an exercise price equal to the fair market value of
Enterprises' Common Stock on the date of grant. Future grants will be made in
the discretion of Enterprises' Compensation and Stock Option Committee. The
agreement provides that if Mr. Karcher is terminated by Enterprises without
cause

37
<PAGE> 39

or, if after a change in control of the Company following a merger, sale of
assets or acquisition, Mr. Karcher is terminated or exercises his right to
terminate employment following a change in control, Mr. Karcher becomes entitled
to payments due under the agreement as they become due for the remainder of the
term without the obligation of further services. The agreement also confirms the
previously announced retirement benefit of Mr. Karcher in the amount of $200,000
per year for life after the end of the employment term.

Enterprises has one lease with Loren C. Pannier and Suzanne Pannier. This
lease is for 25 years with a minimum monthly rental equal to the greater of
$4,910 or 5% of annual gross sales of the Carl's Jr. Restaurant at that
location. Enterprises also has two leases in which Loren C. Pannier has a 12%
and a 33% undivided interest. These leases have an initial term of 25 years and
provide for a minimum monthly rental equal to (a) the greater of $3,290 or
5 1/2% of annual gross sales of the Carl's Jr. Restaurant at that location and
(b) the greater of $3,440 or 6% of annual gross sales of the Carl's Jr.
Restaurant at that location. The aggregate rentals paid under all three leases
during fiscal 1994 was $86,642.

Restaurants leased from related parties generally were constructed by
Enterprises on land acquired by Enterprises. The properties were then sold to
these parties and leased back by Enterprises. Enterprises believes that these
sale and leaseback arrangements are at rental rates generally similar to those
with unaffiliated third parties. Except as noted above, Enterprises presently
does not intend to enter into leases for new restaurants with related parties.

In a series of transactions between May 1985 and December 1991, Enterprises
franchised and sold 15 restaurants to Carl L. Karcher for an aggregate purchase
price of $4,533,533 (which includes franchise fees of $447,482 and sales tax of
$60,163). Cash down payments aggregating $941,425 were made by Mr. Karcher with
the balance paid in the form of interest-bearing promissory notes. In January
1992, Mr. Karcher paid $2,234,798 of the remaining $2,691,163 owing as of that
time on those notes. During fiscal 1994, the largest aggregate amount
outstanding under the remaining note was $434,989. As of March 28, 1994,
$402,674 was still owed to Enterprises on this note. The note bears interest at
12 1/2% per annum and is due in January 2002.

Carl L. Karcher has also entered into franchise agreements for four
restaurants which he developed independently between August 1985 and November
1991. Enterprises acted as general contractor in the development of all four
restaurants developed independently by Mr. Karcher, and Mr. Karcher paid the
costs of such construction to Enterprises. In addition, pursuant to three
Development Agreements dated May 17, 1985, March 22, 1991 and December 16, 1991,
between Mr. Karcher and Enterprises, Mr. Karcher is obligated to develop an
aggregate of nine additional restaurants and become a franchisee with respect to
those restaurants. Mr. Karcher has developed four of these restaurants.
Enterprises acted as general contractor in the development of two of the three
restaurants developed by Mr. Karcher pursuant to the Development Agreements and
Mr. Karcher paid the costs of such construction to Enterprises. Mr. Karcher is
obligated to develop the remaining five restaurants at varying times between
1995 and 2001. Mr. Karcher was obligated to pay an aggregate of $90,000 to
Enterprises under these Development Agreements, $30,000 of which was paid in
cash, $50,000 of which was paid by delivery of a promissory note that did not
bear interest and was paid in full in fiscal 1993 and the other $10,000 of which
was waived.

In connection with Carl L. Karcher's operation of the 23 franchised
restaurants, he regularly purchases food and other products from Enterprises on
the same terms and conditions as other franchisees. During fiscal 1994, these
purchases totaled approximately $6,682,000. Mr. Karcher is also obligated to pay
a percentage of such restaurants' annual gross sales ranging from zero to 4% as
royalty fees and an additional zero to 4% as advertising and promotional fees to
reimburse Enterprises for its regional and national advertising efforts on
behalf of all franchisees. During fiscal 1994, Mr. Karcher paid royalty fees of
$735,687 and advertising and promotional fees of $682,840 for all 23 restaurants
combined.

Carl L. Karcher is a lessee or sublessee of Enterprises with respect to 15
restaurant locations. Rental payments equal the greater of a percentage of the
annual gross sales of the restaurant or a minimum monthly rental. The fifteen
leases expire between March 2000 and June 2011. The minimum monthly rentals
range from $4,157 to $8,750. The percentage of annual gross sales ranges from 5%
to 8%. The rentals paid under these 15 leases during fiscal 1994 aggregated
$1,171,939.

38
<PAGE> 40

In June 1990, Enterprises entered into a Business Facilities Lease Purchase
Agreement (the "Facilities Agreement") with Franklin J. and Lucille J. Karcher
pursuant to which Mr. and Mrs. Karcher agreed to purchase the leasehold
interests and related assets of up to six Carl's Jr. Restaurants located in
Tucson, Arizona, two of which were to be purchased by June 19, 1993, two of
which are to be purchased by June 19, 1994 and one of which is to be purchased
by June 19, 1995. Mr. and Mrs. Karcher have the option to purchase the sixth
restaurant on or prior to June 19, 1995. The purchase of the six restaurants was
to be financed in full by Enterprises, represented by a promissory note executed
by Mr. and Mrs. Karcher in favor of Enterprises, due and payable 10 years
following the date of execution and bearing interest at a rate of 12 1/2% per
annum. As of March 28, 1994, no amounts were yet outstanding under this note
because Mr. and Mrs. Karcher's obligations to purchase the restaurants are
subject to ongoing negotiations. Concurrently with the execution of the
Facilities Agreement, Enterprises and Mr. and Mrs. Karcher entered into a
purchase agreement whereby Mr. and Mrs. Karcher purchased six additional Carl's
Jr. Restaurants located in Tucson, Arizona for a total purchase price of
$1,591,781. Mr. and Mrs. Karcher financed this purchase by paying Enterprises
$25,000 in cash and executed promissory notes in principal amounts of $125,000
and $1,441,781, which bear interest at an annual rate of zero percent and
12 1/2%, respectively. The principal amount due under the first note was due and
paid in full on January 15, 1991. The principal amount under the second note is
due on June 19, 2000 and had $1,334,077 outstanding as of March 28, 1994. The
maximum amount outstanding under such note during fiscal 1994 was $1,384,296. In
connection with the six Tucson, Arizona restaurants, Enterprises advanced
$89,169 for working capital purposes. Such note bears interest at 12 1/2% per
annum, is due on February 1, 1995 and had an outstanding balance of $28,190 at
March 28, 1994. Franklin J. Karcher is the brother of Carl N. Karcher and was
Enterprises' Vice President -- Franchising until 1990.

Joseph C. Karcher entered into franchise agreements for seven restaurants
between March 1990 and October 1992. Six of these restaurants were developed
pursuant to two Development Agreements dated July 24, 1989 and July 8, 1992.
Under these Development Agreements, Mr. Karcher is obligated to develop three
additional restaurants at varying times between November 1996 and September
1998, and become a franchisee of Enterprises with respect to such restaurants.
In connection with the operation of his restaurants, Mr. Karcher regularly
purchases food and other products from Enterprises on the same terms and
conditions as other franchisees. During fiscal 1994, these purchases totaled
approximately $1,323,000. Mr. Karcher is also obligated to pay a percentage of
such restaurants' annual gross sales ranging from 2% to 4% as royalty fees and
an additional 1.5% to 3.5% as advertising and promotional fees to reimburse
Enterprises for its regional and national advertising efforts on behalf of all
franchisees. During fiscal 1994, Mr. Karcher was charged royalty fees of
$103,335 and advertising and promotional fees of $124,238. Joseph C. Karcher is
the son of Carl N. Karcher.

In a series of transactions between May 1984 and December 1985, Enterprises
franchised and sold three restaurants to Gary L. and Anne M. Wiles for an
aggregate purchase price of $792,000. Cash down payments aggregating $92,000
were made by Mr. and Mrs. Wiles with the balance paid in the form of
interest-bearing promissory notes. During fiscal 1994, the largest aggregate
amount outstanding under the notes was $428,798. As of March 28, 1994, $363,713
was still owed to Enterprises on these notes. The notes bear interest at 12% and
12 1/2% per annum and are due in December 1995 and June 1999. Mr. and Mrs. Wiles
are lessees of Enterprises with respect to one restaruant location. The initial
lease term is for 19 years with a minimum monthly rental equal to $8,768. Mr.
and Mrs. Wiles have also entered into franchise agreements for four restaurants
which they developed independently between December 1990 and May 1992. In
connection with Mr. and Mrs. Wiles' operation of the eight franchised
restaurants, they regularly purchase food and other products from Enterprises on
the same terms and conditions as other franchisees. During fiscal 1994, these
purchases totaled approximately $2,306,000. Mr. and Mrs. Wiles were also
obligated to pay 4% of such restaurants' annual gross sales as royalty fees and
an additional 1% to 3.5% as advertising and promotional fees to reimburse
Enterprises for its regional and national advertising efforts on behalf of all
franchisees. During fiscal 1994, Mr. and Mrs. Wiles paid royalty fees of
$249,907 and advertising and promotional fees of $237,187 for all eight
restaurants combined. Anne M. Wiles is the daughter of Carl N. Karcher.

39
<PAGE> 41

In May 1984, Enterprises franchised and sold two restaurants to Bernard W.
Karcher for an aggregate purchase price of $700,000. A cash down payment of
$70,000 was made by Mr. Karcher with the balance paid in the form of a 12%
interest-bearing promissory note. During fiscal 1994 the note was paid in full,
with the largest aggregate amount outstanding totaling $401,155. Bernard W.
Karcher has also entered into franchise agreements for nine restaurants which
were developed independently between October 1985 and February 1993. Pursuant to
two Development Agreements dated September 7, 1988 and October 15, 1989 between
Mr. Karcher and Enterprises, Mr. Karcher is obligated to develop five additional
restaurants at varying times until August 1995, and become a franchisee of
Enterprises with respect to such restaurants. In connection with Mr. Karcher's
operation of the eleven franchised restaurants, he regularly purchases food and
other products from Enterprises on the same terms and conditions as other
franchisees. During fiscal 1994, these purchases totaled approximately
$3,563,000. Mr. Karcher is also obligated to pay 4% of such restaurants' annual
gross sales as royalty fees and an additional 3.5% as advertising and
promotional fees to reimburse Enterprises for its regional and national
advertising efforts on behalf of all franchisees. During fiscal 1994, Mr.
Karcher paid royalty fees of $457,877 and advertising and promotional fees of
$391,903 for all eleven restaurants combined. Bernard W. Karcher is the brother
of Carl N. Karcher.

All of the franchise arrangements described above are on terms generally
similar to those with unaffiliated parties.

40
<PAGE> 42

CKE RESTAURANTS, INC.

1994 STOCK INCENTIVE PLAN

The following description of the Company's 1994 Stock Incentive Plan (the
"1994 Plan") is qualified in its entirety by reference to the full text of such
plan.

GENERAL

As a result of the merger contemplated by the Reincorporation Proposal, no
further options may be granted under the 1993 Plan. The Company has therefore
adopted a substantially similar plan to continue the option program for
employees and non-employee directors. The vote for the approval of the 1994 Plan
will be by Enterprises shareholders in that capacity as well as future
stockholders of the Company. The purpose of the 1994 Plan is to enable the
Company and its subsidiaries to attract, retain and motivate their employees by
providing for or increasing the proprietary interests of such employees in the
Company. Every employee of the Company or any of its subsidiaries is eligible to
be considered for the grant of awards under the 1994 Plan. The maximum number of
shares of Common Stock that may be issued pursuant to awards granted under the
1994 Plan is 1,750,000, subject to certain adjustments to prevent dilution. The
maximum number of shares of Common Stock that may be issued to any one employee
during any calendar year is 200,000. The closing sale price of Enterprises'
Common Stock on the New York Stock Exchange on April 29, 1994 was $12.00.

The 1994 Plan will be administered by the Company's Compensation and Stock
Option Committee (the "Committee"). Subject to the provisions of the 1994 Plan,
the Committee will have full and final authority to select the participants to
whom awards will be granted thereunder, to grant such awards, and to determine
the terms and conditions of such awards and the number of shares to be issued
pursuant thereto.

AWARDS

The 1994 Plan authorizes the Committee to enter into any type of
arrangement with an eligible employee that, by its terms, involves or might
involve the issuance of (1) Common Stock, or (2) a Derivative Security (as such
term is defined in Rule 16a-1 promulgated under the Securities and Exchange Act
of 1934) with an exercise or conversion privilege at a price either above, equal
to, or below the fair market value of the Common Stock on the date of grant or
with a value derived from the value of the Common Stock.

Awards under the 1994 Plan are not restricted to any specified form or
structure and may include arrangements such as sales and bonuses of stock,
restricted stock, stock options, reload stock options, stock purchase warrants,
other rights to acquire stock, securities convertible into or redeemable for
stock, stock appreciation rights, limited stock appreciation rights, phantom
stock, dividend equivalents, performance units or performance shares. An award
may consist of one such arrangement or two or more such arrangements in tandem
or in the alternative.

An award granted under the 1994 Plan to an employee may include a provision
conditioning or accelerating the receipt of benefits, either automatically or in
the discretion of the Committee, upon the occurrence of specified events, such
as a change of control of the Company, an acquisition of a specified percentage
of the voting power of the Company or a dissolution, liquidation, merger,
reclassification, sale of substantially all of the property and assets of the
Company or other significant corporate transaction. Any stock option granted to
an employee may be a tax-benefited incentive stock option or a non qualified
stock option that is not tax-benefited.

An award under the 1994 Plan may permit the recipient to pay all or part of
the purchase price of the shares or other property issuable pursuant thereto,
and/or to pay all or part of such recipients' tax withholding obligations with
respect to such issuance, by delivering cash, by delivering previously owned
shares of capital stock of the Company or other property deemed acceptable by
the Committee, by reducing the amount of shares or other property otherwise
issuable pursuant to the award, or by delivering a promissory note, the terms
and conditions of which shall be determined by the Committee. If an option
granted under the 1994 Plan permitted the recipient to pay for the shares
issuable pursuant thereto with previously owned shares, the

41
<PAGE> 43

recipient would be able to exercise the option in successive transactions,
starting with a relatively small number of shares and, by a series of exercises
using shares acquired from each such transaction to pay the purchase price of
the shares acquired in the following transaction, to exercise an option for a
larger number of shares with no more investment than the original share or
shares delivered.

NON-EMPLOYEE DIRECTOR OPTIONS

The 1994 Plan provides for the automatic grant of stock options to
non-employee directors, pursuant to which, each year, on the first business day
after the date of the annual meeting of shareholders of the Company, the
non-employee directors will automatically be granted options ("Non-Employee
Director Options") to purchase the number of shares of Common Stock as follows:
each nonemployee director shall receive an option to purchase 2,500 shares; each
nonemployee director member of the Executive Committee shall receive an option
to purchase an additional 5,000 shares; and the nonemployee Chairman of the
Board of Directors shall receive an option to purchase an additional 20,000
shares. The exercise price for each option is the Fair Market Value (as defined
in the 1994 Plan) of the shares on the date of the grant.

Each Non-Employee Director Option will become exercisable for the first
time to purchase 33 1/3% of Common Stock subject thereto on each of the first,
second and third anniversaries of the date of grant, provided, however, that a
Non-Employee Director Option shall become fully exercisable on the date upon
which the optionee shall cease to be a non-employee director as a result of
death or total disability. In addition, all outstanding Non-Employee Director
Options will become exercisable in full on the first to occur of the following:

(1) the date of approval of a reorganization, merger or consolidation
of the Company as a result of which the outstanding securities of the class
then subject to the 1994 Plan are exchanged for or converted into cash,
property and/or securities not issued by the Company;

(2) the first date upon which the directors of the Company who were
nominated by the Board of Directors for election cease to constitute a
majority of the authorized number of directors of the Company;

(3) the dissolution or liquidation of the Company;

(4) the sale of substantially all of the property and assets of the
Company; or

(5) the date of dissemination to the stockholders of a proxy statement
disclosing a change in control of the Company.

Each Non-Employee Director Option granted under the 1994 Plan will expire
upon the first to occur of the following:

(1) the first anniversary of the date upon which the optionee ceases
to be a non-employee director as a result of death or total disability;

(2) the 90th day after the date upon which the optionee ceases to be a
non-employee director for any reason other than death or total disability;
or

(3) the fifth anniversary of the date of grant of such option.

PLAN DURATION

The 1994 Plan became effective upon its adoption by the Board of Directors
in May 1994, but no shares of Common Stock may be issued or sold under the 1994
Plan until it has been approved by the Company's stockholders. Awards may not be
granted under the 1994 Plan after April 30, 1999. Although any award that was
duly granted on or prior to such date may thereafter be exercised or settled in
accordance with its terms, no shares of Common Stock may be issued pursuant to
any award after April 30, 2009.

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<PAGE> 44

AMENDMENTS

The Board of Directors may amend or terminate the 1994 Plan at any time and
in any manner, subject to the following:

(1) the recipient of any award may not be deprived of such award or
any of his or her rights thereunder or with respect thereto without his or
her consent as a result of any such amendment or termination; and

(2) the terms and conditions relating to the Non-Employee Director
Options may not be amended more than every six months other than to comport
with changes in the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules and regulations thereunder.

SECTION 16(B) OF THE EXCHANGE ACT

The acquisition and disposition of shares of Common Stock by officers,
directors and more than 10% stockholders of the Company ("Insiders") pursuant to
awards granted to them under the 1994 Plan may be subject to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), under
which a purchase of shares of Common Stock within six months before or after a
sale of Common Stock could result in recovery by the Company of all or a portion
of any amount by which the sale proceeds exceed the purchase price. Insiders are
required to file reports of changes in beneficial ownership under Section 16(a)
of the Exchange Act upon acquisitions and dispositions of shares. Rule 16b-3
provides an exemption from Section 16(b) liability for certain transactions
pursuant to employee benefit plans.

FEDERAL INCOME TAX TREATMENT

The following is a brief description of the federal income tax treatment
which will generally apply to awards made under the 1994 Plan, based on federal
income tax laws in effect on the date hereof. The exact federal income tax
treatment of awards will depend on the specific nature of the award. Such an
award may, depending on the conditions applicable to the award, be taxable as an
option, as restricted or unrestricted stock, as a cash payment, or otherwise.

Incentive Options. Pursuant to the 1994 Plan, employees may be granted
options which are intended to qualify as incentive stock options ("Incentive
Options") under the provisions of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Non-Employee Director Options are not intended to
qualify as Incentive Options. Generally, the optionee is not taxed and the
Company is not entitled to a deduction on the grant or the exercise of an
Incentive Option. However, if the optionee sells the shares acquired upon the
exercise of an Incentive Option at any time within (a) one year after the date
of transfer of shares to the optionee pursuant to the exercise of such Incentive
Option or (b) two years after the date of grant of such Incentive Option, then
the optionee will recognize ordinary income in an amount equal to the excess, if
any, of the lesser of the sale price of the shares of Common Stock or the fair
market value of the shares of Common Stock on the date of exercise over the
exercise price of such Incentive Option. In such case, the Company will
generally be entitled to a tax deduction in an amount equal to the amount of
ordinary income recognized by such optionee.

The amount by which the fair market value of the shares of Common Stock
received upon exercise of an Incentive Option exceeds the exercise price will be
included as a positive adjustment in the calculation of an optionee's
"alternative minimum taxable income" ("AMTI") in the year of exercise. The
"alternative minimum tax" imposed on individual taxpayers is generally equal to
26% of the individual's AMTI (reduced by certain exemption amounts) up to
$175,000 and 28% of the AMTI in excess of $175,000.

Nonqualified Options. The grant of an option or other similar right to
acquire stock which does not qualify for treatment as an Incentive Option (a
"Nonqualified Option"), is generally not a taxable event for the optionee. Upon
exercise of the option, the optionee will generally recognize ordinary income in
an amount equal to the excess of the fair market value of the stock acquired
upon exercise (determined as of the date of the exercise) over the exercise
price of such option, and the Company will be entitled to a tax deduction equal

43
<PAGE> 45

to such amount. See "Special Rules for Awards Granted to Insiders including
Non-Employee Directors," below.

Special Rules for Awards Granted to Insiders including Non-Employee
Directors. If an optionee is a director, officer or shareholder subject to
Section 16 of the Exchange Act (an "Insider") and exercises an option within six
months of the date of grant, the timing of the recognition of any ordinary
income generally should be deferred until (and the amount of ordinary income
should be determined based on the fair market value (or sales price in the case
of a disposition) of the shares of Common Stock upon) the earlier of the
following two dates (the "16(b) Date"): (i) six months after the date of grant
or (ii) a disposition of the shares of Common Stock, unless the Insider makes an
election under Section 83(b) of the Code (an "83(b) Election") within 30 days
after exercise to recognize ordinary income based on the value of the Common
Stock on the date of exercise. In addition, special rules apply to an Insider
who exercises an option having an exercise price greater than the fair market
value of the underlying shares on the date of exercise.

Restricted Stock. Awards under the 1994 Plan may also include stock sales,
stock bonuses or other grants of stock. Unless the recipient makes an 83(b)
Election as discussed above within 30 days after the receipt of the restricted
shares, the recipient generally will not be taxed on the receipt of restricted
shares until the restrictions on such shares expire or are removed. When the
restrictions expire or are removed, the recipient will recognize ordinary income
(and the Company will be entitled to a deduction) in an amount equal to the
excess of the fair market value of the shares at that time over the purchase
price. However, if the recipient makes an 83(b) Election with 30 days of the
receipt of restricted shares, he or she will recognize ordinary income (and the
Company will be entitled to a deduction) equal to the excess of the fair market
value of the shares on the date of receipt over the purchase price. In the case
of an Insider (as defined above), the timing of income recognition (including
the date used to compute the fair market of shares) with respect to restricted
shares may be deferred until the 16(b) Date, as described above in "Special
Rules for Awards Granted to Insiders including Non-Employee Directors" above,
unless the Insider makes a valid 83(b) Election.

Miscellaneous Tax Issues. Awards may be granted under the 1994 Plan which
do not fall clearly into the categories described above. The federal income tax
treatment of these awards will depend upon the specific terms of such awards.
Generally, the Company will be required to make arrangements for withholding
applicable taxes with respect to any ordinary income recognized by a participant
in connection with awards made under the 1993 Plan.

With certain exceptions, an individual may not deduct investment-related
interest to the extent such interest exceeds the individual's net investment
income for the year. Investment interest generally includes interest paid on
indebtedness incurred to purchase shares of Common Stock. Interest disallowed
under this rule may be carried forward to and deducted in later years, subject
to the same limitations.

Special rules will apply in cases where a recipient of an award pays the
exercise or purchase price of the award or applicable withholding tax
obligations under the 1994 Plan by delivering previously owned shares of Common
Stock or by reducing the amount of shares otherwise issuable pursuant to the
award. The surrender or withholding of such shares will in certain circumstances
result in the recognition of income with respect to such shares.

The terms of the agreements pursuant to which specific awards are made to
employees under the 1993 Plan may provide for accelerated vesting or payment of
an award in connection with a change in ownership or control of the Company. In
that event and depending upon the individual circumstances of the recipient,
certain amounts with respect to such awards may constitute "excess parachute
payments" under the "golden parachute" provisions of the Code. Pursuant to these
provisions, a recipient will be subject to a 20% excise tax on any "excess
parachute payments" and the Company will be denied any deduction with respect to
such payment. Recipients of awards should consult their tax advisors as to
whether accelerated vesting of an award in connection with a change of ownership
or control of the Company would give rise to an excess parachute payment.

44
<PAGE> 46

Section 162(m)of the Code limits to $1 million the deductibility of
compensation received in a year by the Company's chief executive officer and the
other four most highly compensated executive officers, unless such compensation
qualifies as "performance-based" or falls within other exceptions under Section
162(m). This provision is effective only with respect to compensation paid on or
after January 1, 1994. The 1994 Plan is designed to comply with the requirements
of the proposed Treasury Regulations under Section 162(m) so that Awards under
the 1994 Plan may qualify as "performance-based compensation." If the Awards so
qualify, Section 162(m) would not limit any deduction that the Company would
otherwise be entitled to. However, final Treasury Regulations have not been
issued and therefore there is no assurance that the Awards would qualify as
"performance based."

BOARD RECOMMENDATION

The shareholders of Enterprises are being asked to approve the 1994 Plan
both in their capacity as current shareholders of Enterprises and as future
stockholders of the Company. This step will eliminate additional expenses of a
separate meeting and proxy solicitation for the Company's stockholders after the
Merger contemplated by the Reincorporation Proposal has been consummated. The
Board of Directors believes that it is in the best interests of the Company and
its stockholders to adopt the 1994 Plan in order to attract, retain and motivate
qualified employees. A majority of the votes cast at the Annual Meeting is
necessary for the approval of this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE APPROVAL OF THE 1994 EMPLOYEE STOCK INCENTIVE PLAN.

COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE

COMPENSATION FOR THE FISCAL YEAR ENDED JANUARY 31, 1994

The Committee, comprised of five 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 Enterprises (each, an "Executive
Officer"), including the Named Executive Officers. Set forth below is a report
submitted by the Committee addressing compensation policies for fiscal 1994 as
they affected Donald E. Doyle, the President and Chief Executive Officer of
Enterprises at year end, and the other Executive Officers.

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 shareholder
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 and experienced
executives. With respect to equity-based compensation, the Committee believes
that an integral part of Enterprises' compensation program is the ownership and
retention of Enterprises' Common Stock by its Executive Officers. By providing
Executive Officers with a meaningful stake in Enterprises, the value of which is
dependent on Enterprises' long-term success, a commonality of interests between
Enterprises' Executive Officers and its shareholders 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.

Base Salaries. Base salaries are set forth in the Executive Officers'
employment agreements and are subject to increase annually at the discretion of
the Committee. After reviewing the major events and changes

45
<PAGE> 47

that occurred in fiscal 1994, the Committee approved increases to some base
salaries to remain competitive with market base salaries and to reflect new
responsibilities for some Executive Officers.

Annual Cash Bonuses. Although Enterprises did not achieve the targeted
levels of pre-tax income for 1994 that were set, based upon Enterprises 1993
incentive compensation plan, the Committee believed that great progress had been
made in controlling costs in targeted areas. To reflect and reward this
achievement, the Committee approved bonuses equal to one-half the amount that
would have been paid had the targeted pre-tax income levels been met.

Stock Options. Enterprises' stock option program presents the opportunity
for variable compensation based on the market appreciation of Enterprises'
Common Stock and is designed to increase employee ownership in Enterprises.
Previously adopted guidelines based upon salary and the price of Enterprises'
stock were replaced this year by an award program which takes into account the
level of responsibility in the organization, and total compensation compared to
comparable companies. As such, the award of stock options require subjective
judgment as to the amount of the option. Stock options encourage executives to
become owners of Enterprises which further aligns their interests with the
shareholders. Options have no value unless the price of Enterprises' stock
increases.

CHIEF EXECUTIVE OFFICER COMPENSATION

Donald E. Doyle became Enterprises' Chief Executive Officer and President
on December 22, 1992 when his base salary was set at $300,000. It remained at
that level through fiscal 1994. As a merit increase, the Committee granted Mr.
Doyle a 5% increase in base compensation to $315,000 for the fiscal 1995 year.
The balance of Mr. Doyle's compensation is determined in accordance with the
same principles discussed above consisting of a bonus element and a stock option
award. Mr. Doyle received a bonus equal to $75,000 (one-half the targeted
amount) and stock options to purchase 62,769 shares at an exercise price of
$8.13. As part of the original contract entered into in December 1992,
Enterprises agreed to grant Mr. Doyle an option to purchase 100,000 shares. This
option was granted to Mr. Doyle in April 1993 upon adoption of the 1993 Plan,
subject to approval of Enterprises' shareholders.

CORPORATE DEDUCTION FOR COMPENSATION

Recently enacted Section 162(m) of the Internal Revenue Code generally
limits to $1 million the corporate deduction for compensation paid to the Named
Executive Officers, unless certain requirements are met. At this time,
Enterprises deduction for officer compensation is not limited by the provisions
of 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.

Peter Churm (Chairman)

Daniel W. Holden

Kenneth Olsen

Elizabeth A. Sanders

Carl Leo Karcher

The report of the Compensation and Stock Option 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 Enterprises specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such acts.

46
<PAGE> 48

STOCKHOLDER RETURN PERFORMANCE PRESENTATION

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG CARL KARCHER
ENTERPRISES, RUSSELL 2000 INDEX, AND SELECTED RESTAURANT PEER GROUP INDEX

<TABLE>
<CAPTION>
MEASUREMENT PERIOD CARL KARCHER RESTAURANT
(FISCAL YEAR COVERED) ENTERPRISES RUSSELL 2000 PEER GROUP
<S> <C> <C> <C>
1/30/89 100 100 100
1/29/90 81.8 103.2 102.6
1/28/91 58.2 94.0 103.5
1/27/92 69.5 142.2 146.3
1/25/93 73.4 161.8 156.9
1/31/94 116.6 191.1 175.1
</TABLE>

Restaurant Index is comprised of the following companies: Bob Evans Farms, Inc.;
Foodmaker, Inc.; Ground Round Restaurants, Inc.; Hanover Direct, Inc.*; IHOP
Corporation; Luby's Cafeterias, Inc.; Morrison, Inc.; Piccadilly Cafeterias,
Inc.; Ryan's Family Steak Houses, Inc.; Shoney's Inc.; Sizzler International,
Inc.; and VICORP Restaurants, Inc.

* On 4/15/93 Horn & Hardart Co. merged with and into Hanover Direct, Inc.

INDEPENDENT AUDITORS

Selection of the independent auditors is made by the Board of Directors
upon consultation with the Audit Committee. Enterprises' independent auditors
for the fiscal year ended January 31, 1994 were KPMG Peat Marwick. The Board of
Directors will vote upon the selection of auditors for the current fiscal year
at a future Board meeting.

Representatives of KPMG Peat Marwick are expected to attend the Annual
Meeting and be available to respond to appropriate questions. The
representatives of KPMG Peat Marwick also will have an opportunity to make a
formal statement, if they so desire.

FINANCIAL STATEMENTS

Enterprises' 1994 Annual Report, including financial statements for fiscal
1994, accompanies this proxy statement. SHAREHOLDERS MAY OBTAIN A COPY OF
ENTERPRISES' ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION FREE OF CHARGE BY WRITING TO THE SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER, P.O. BOX 4349, ANAHEIM, CALIFORNIA 92803.

47
<PAGE> 49

SHAREHOLDERS' PROPOSALS FOR 1995 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 the Company's Annual Meeting of stockholders in 1995 must be received by the
Company by January 13, 1995 in order to be considered for inclusion in the
Company's proxy materials. The Board of Directors of the Company will determine
whether any such proposal will be included in its 1995 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 1995 Annual Meeting and who shall continue to own such securities through
the date on which the meeting is held.

OTHER BUSINESS

Other Business. 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.

Shareholders are urged to sign and return their proxies without delay.

For the Board of Directors

WILLIAM P. FOLEY II, Chairman of the
Board

May 11, 1994

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<PAGE> 50

CKE RESTAURANTS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CARL KARCHER ENTERPRISES, INC.)

INDEX TO BALANCE SHEET

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report.......................................................... F-1
Balance Sheet at March 3, 1994........................................................ F-2
Note to Balance Sheet................................................................. F-3
</TABLE>
<PAGE> 51

INDEPENDENT AUDITORS' REPORT

The Board of Directors
CKE Restaurants, Inc.:

We have audited the accompanying balance sheet of CKE Restaurants, Inc. (a
wholly-owned subsidiary of Carl Karcher Enterprises, Inc.) as of March 3, 1994.
This balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in that balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit provides a reasonable
basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of CKE Restaurants, Inc. at March 3,
1994, in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK

Orange County, California
March 3, 1994

F-1
<PAGE> 52

CKE RESTAURANTS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CARL KARCHER ENTERPRISES, INC.)

BALANCE SHEET

MARCH 3, 1994

ASSETS

<TABLE>
<S> <C>
Total assets...................................................................... $ --
--------
--------
LIABILITIES AND STOCKHOLDER'S EQUITY
Stockholder's Equity
Preferred Stock, $0.01 par value; authorized 5,000,000 shares; no shares issued
or outstanding............................................................... --
Common Stock, $0.01 par value; authorized 50,000,000 shares; no shares issued or
outstanding.................................................................. --
Additional paid-in capital...................................................... --
Common stock subscribed (one share)............................................. $ 25,000
Less: stock subscriptions receivable............................................ (25,000)
--------
Total liabilities and stockholder's equity........................................ $ --
--------
--------
</TABLE>

See accompanying note to Balance Sheet

F-2
<PAGE> 53

CKE RESTAURANTS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CARL KARCHER ENTERPRISES, INC.)

NOTE TO BALANCE SHEET

MARCH 3, 1994

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

CKE Restaurants, Inc. (the "Company") was incorporated in the State of
Delaware on March 1, 1994 as a wholly-owned subsidiary of Carl Karcher
Enterprises, Inc. Ultimately, the shareholders of Carl Karcher Enterprises, Inc.
("Enterprises"), will vote upon approval of a merger whereby Enterprises will
become a wholly-owned subsidiary of the Company and the Company will become the
successor to Enterprises as a Delaware holding company (the "Merger").

Upon the completion of the Merger, the Company will develop, operate,
franchise and license a quick-service restaurant chain, under the "Carl's Jr."
name, with more than 640 restaurants in California, Nevada, Oregon, Arizona and
Mexico and have the exclusive rights from Boston Chicken Inc., to franchise
"Boston Chicken" stores in the areas of Los Angeles, Sacramento and San Diego,
California.

The Company is in the process of filing a registration statement with the
Securities and Exchange Commission to issue and sell up to $75 million of
unsecured debt securities and/or shares of its preferred stock.

Fiscal Year

The Company will utilize a 52 or 53 week accounting period which ends on
the last Monday of January each year.

Income Taxes

Income Taxes will be provided based on the liability method of accounting
in accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". Under this method, income tax assets and
liabilities are recognized using enacted tax rates for the expected future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. A change in tax rates is recognized in income in the
period that includes the enactment date.

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APPENDIX A

PLAN OF REORGANIZATION AND AGREEMENT OF MERGER

This Plan of Reorganization and Agreement of Merger (the "Merger
Agreement") is made as of March , 1994, by and among Carl Karcher Enterprises,
Inc. a California corporation ("Surviving Company"), CKE Food Services, Inc. a
California corporation ("CKE Subsidiary"), and CKE Restaurants, Inc. a Delaware
corporation ("Holding Company"). Surviving Company and CKE Subsidiary together
are hereinafter sometimes referred to as "Constituent Corporations."

WHEREAS, Surviving Company has an authorized capital stock consisting of
22,500,000 shares of Common Stock, without par value, of which are
issued and outstanding;

WHEREAS, CKE Subsidiary has an authorized capital stock consisting of
10,000 shares of Common Stock, without par value, of which 1,000 shares are
issued and outstanding, all of which are owned by Holding Company;

WHEREAS, Holding Company has an authorized capital stock consisting of
55,000,000 shares, of which 50,000,000 shares consist of Common Stock, par value
$.01 per share, of which one share is issued and outstanding, all of which are
owned by Surviving Company, and 5,000,000 shares consist of Preferred Stock, par
value $.01 per share, none of which are issued and outstanding;

WHEREAS, the respective Boards of Directors of Surviving Company, CKE
Subsidiary and Holding Company deem it advisable that CKE Subsidiary merge into
Surviving Company upon terms and conditions herein provided (the "Merger") and
have each approved this Merger Agreement.

NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereto agree that
in accordance with the California General Corporation Law, CKE Subsidiary shall
be merged with and into Surviving Company in accordance with the following terms
and conditions:

1. Merger. Effective upon the filing of this Merger Agreement under
the California General Corporation Law (the "Effective Date"), CKE
Subsidiary and Surviving Company shall be merged with and into a single
corporation, which shall be Surviving Company as the surviving corporation.
The separate corporate existence of CKE Subsidiary shall cease on the
Effective Date.

2. Articles of Incorporation and Bylaws. The Articles of Incorporation
of CKE Subsidiary, as amended and in effect on the Effective Date, shall be
the Articles of Incorporation of Surviving Company without change or
amendment until further amended in accordance with the provisions thereof
and applicable law. The Bylaws of CKE Subsidiary, as amended and in effect
on the Effective Date, shall be the Bylaws of Surviving Company, without
change or amendment until further amended in accordance with the provisions
thereof and applicable law.

3. Directors and Officers. The directors and officers of Surviving
Company immediately prior to the Merger shall continue as the directors and
officers, respectively, of the Surviving Company after the Effective Date
to hold office until the expiration of their current terms, or their prior
resignation, removal or death.

4. Succession. On the Effective Date, Surviving Company shall succeed
to CKE Subsidiary in the manner, of and as more fully set forth, in Section
1107 of the California General Corporation Law.

5. Further Assurances. From time to time, as and when required by
Surviving Company or by its successors and assigns, there shall be executed
and delivered on behalf of CKE Subsidiary such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
action, as shall be appropriate or necessary in order to vest or perfect in
or to confirm of record or otherwise in Surviving Company the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of CKE Subsidiary, and
otherwise to carry out the purposes of this Merger Agreement, and the
officers and directors of Surviving Company are fully authorized in

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the name and on behalf of CKE Subsidiary or otherwise to take any and all
such action and to execute and deliver any and all such deeds and other
instruments.

6. Capital Stock of Surviving Company. On the Effective Date, by
virtue of the Merger and without any action on the part of any holder
thereof, each share of the Common Stock, without par value, of Surviving
Company outstanding immediately prior thereto shall be changed and
converted into one fully paid and nonassessable share of the Common Stock,
par value $.01 per share, of Holding Company.

7. Common Stock of CKE Subsidiary. On the Effective Date, by virtue of
the Merger and without any action on the part of the holder thereof, each
share of the Common Stock, without par value, of CKE Subsidiary outstanding
immediately prior thereto shall be changed and converted into one fully
paid and nonassessable share of the Common Stock, without par value, of
Surviving Company.

8. Common Stock of Holding Company Owned by Surviving Company. On the
Effective Date, by virtue of the Merger and without any action on the part
of the holder thereof, each share of Common Stock of Holding Company
outstanding immediately prior thereto and owned by Surviving Company shall
remain issued and outstanding.

9. Stock Certificates. On and after the Effective Date, all of the
outstanding certificates that prior to that time represented shares of the
Common Stock of Surviving Company shall be deemed for all purposes to
evidence the same number of shares of Common Stock of Holding Company. The
registered owner on the books and records of Holding Company or its
transfer agents of any such stock certificate shall, until such certificate
shall have been surrendered for transfer or conversion or otherwise
accounted for to Holding Company or its transfer agents, have and be
entitled to exercise any voting and other rights with respect to, and to
receive any dividend and other distributions upon, the shares of Holding
Company to which such person is entitled.

10. Options. Upon the Effective Date, all outstanding and unexercised
portions of all options to buy Common Stock of Surviving Company under the
Carl Karcher Enterprises, Inc. Key Employee Incentive Stock Option Plan and
Carl Karcher Enterprises, Inc. 1993 Employee Stock Incentive Plan shall
become options for the same number of shares of Common Stock of Holding
Company and, effective upon the Effective Date, Holding Company hereby
expressly adopts and assumes all outstanding and unexercised portions of
such options and all obligations of CKE Subsidiary with respect thereto.

11. Abandonment. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned at the election
of the Board of Directors of Surviving Company, whether before or after
approval of this Merger Agreement by the shareholders of Surviving Company,
if the Board of Directors shall have determined that the Merger is not in
the best interest of Surviving Company or its shareholders.

12. Counterparts. This Merger Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and such
counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Boards of Directors and shareholders of Surviving Company, CKE Subsidiary
and Holding Company, is hereby executed on behalf of each of said corporations
by their respective officers hereunto duly authorized.

CARL KARCHER ENTERPRISES, INC.,
a California corporation
By:
President

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ATTEST:

Secretary

CKE RESTAURANTS, INC.,
a Delaware corporation
By:
President

ATTEST:

Secretary

CKE FOOD SERVICES, INC.,
a California corporation
By:
President

ATTEST:

Secretary

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APPENDIX B

CERTIFICATE OF INCORPORATION
OF
CKE RESTAURANTS, INC.

ARTICLE I: NAME

The name of the Corporation is CKE Restaurants, Inc.

ARTICLE II: DEFINITIONS

For purposes of this Certificate of Incorporation, the following terms
shall have the meanings indicated, and all capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to such terms in Section
203(c) of the Delaware General Corporation Law, as in effect on the date hereof:

(A) "Beneficially Owns" has the meaning set forth in Rule 13d-3 under
the Securities Exchange Act of 1934 as in effect on January 1, 1994.

(B) "Board" means the Board of Directors of the Corporation.

(C) "Business Combination" shall have the meaning ascribed to it in
Section 203(c)(3) of the Delaware General Corporation Law; provided,
however, that for purposes hereof the term "interested stockholder"
appearing therein shall have the meaning ascribed to it in Article II(E)
hereof.

(D) "Interested Stockholder" means any Person (other than the
Corporation and any direct or indirect majority-owned subsidiary of the
Corporation) that (1) Beneficially Owns 5% or more of the outstanding
Voting Stock, or (2) is an Affiliate or Associate of the Corporation and
Beneficially Owned 5% or more of the outstanding Voting Stock at any time
within the three-year period immediately prior to the date on which it is
sought to be determined whether such Person is an Interested Stockholder,
or (3) is an Affiliate or Associate of a Person described in (1) or (2)
preceding; provided, however, that the term "interested Stockholder" shall
not include (i) any Person who (a) Beneficially Owned shares in excess of
the 5% limitation set forth herein as of the first date upon which shares
of Voting Stock of the Corporation are held of record or beneficially by
more than one hundred (100) stockholders and continued to Beneficially Own
shares in excess of such 5% limitation or would have Beneficially Owned
such shares but for action by the Corporation or (b) acquired such shares
from a Person described in (a) above by gift, inheritance or in a
transaction in which no consideration was exchanged; or (ii) any Person
whose ownership of shares in excess of the 5% limitation set forth herein
is the result of action taken solely by the Corporation, provided that such
Person shall be an Interested Stockholder if thereafter such Person
acquires additional shares of Voting Stock except as a result of further
corporate action not caused, directly or indirectly, by such Person. For
the purpose of determining whether a Person is an Interested Stockholder,
(1) the Voting Stock deemed to be outstanding shall include stock deemed to
be owned by the Person through application of Section 203(c)(8) of the
Delaware General Corporation Law, except that the Voting Stock deemed to be
outstanding shall not include any other unissued stock of the Corporation
that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options,
or otherwise, and (2) a Person engaged in business as an underwriter of
securities shall not be deemed to own any Voting Stock acquired through
such Person's participation in good faith in a firm commitment underwriting
until the expiration of 40 days after the date of such acquisition.

(E) "Voting Stock" means stock of the Corporation of any class or
series entitled to vote generally in the election of directors of the
Corporation, and each reference herein to a percentage or portion of shares
of Voting Stock shall refer to such percentage or portion of the votes
entitled to be cast by the holders of such shares.

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ARTICLE III: REGISTERED OFFICE

The address of the registered office of the Corporation in the State of
Delaware is Corporation Service Company, 1013 Centre Road, City of Wilmington,
County of New Castle and the name of its registered agent at that address is
Corporation Service Company.

ARTICLE IV: PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.

ARTICLE V: AUTHORIZED CAPITAL STOCK

SECTION 1. Number of Authorized Shares. The Corporation shall be authorized
to issue two classes of shares of stock to be designated, respectively, "Common
Stock" and "Preferred Stock"; the total number of shares of all classes of stock
that the Corporation shall have authority to issue is Fifty-Five Million
(55,000,000) shares, consisting of Fifty Million (50,000,000) shares of Common
Stock par value $.01 per share, and Five Million (5,000,000) shares of Preferred
Stock, par value $.01 per share.

SECTION 2. Preferred Stock. Shares of Preferred Stock may be issued from
time to time in one or more series. Shares of Preferred Stock that are redeemed,
purchased or otherwise acquired by the Corporation may be reissued except as
otherwise provided by law. The Board is hereby authorized to fix or alter the
designations, powers and preferences, and relative, participating, optional or
other rights, if any, and qualifications, limitations or restrictions thereof,
including, without limitation, dividend rights (and whether dividends are
cumulative), conversion rights, if any, voting rights (including the number of
votes, if any, per share, as well as the number of members, if any, of the Board
or the percentage of members, if any, of the Board each class or series of
Preferred Stock may be entitled to elect), rights and terms of redemption
(including sinking fund provisions, if any), redemption price and liquidation
preferences of any wholly unissued series of Preferred Stock, and the number of
shares constituting any such series and the designation thereof, and to increase
or decrease the number of shares of any such series subsequent to the issuance
of shares of such series, but not below the number of shares of such series then
outstanding. Notwithstanding the foregoing, the Board shall have no power to
alter the rights of any shares of Preferred Stock then outstanding.

SECTION 3. Distributions Upon Liquidation. In the event of any dissolution,
liquidation or winding up of the affairs of the Corporation, whether voluntary
or involuntary, after payment of provision for payment of the debts and other
liabilities of the Corporation, the holders of each series of Preferred Stock
shall be entitled to receive, out of the net assets of the Corporation, an
amount for each share of such series of Preferred Stock equal to the amount
fixed and determined by the Board in the resolution or resolutions creating such
series and providing for the issuance of such shares, and no more, before any of
the assets of the Corporation shall be divided among and paid to the holders of
shares of Common Stock. If, upon such dissolution, liquidation or winding up,
the assets of the Corporation distributable as aforesaid among the holders of
Preferred Stock of all series shall be insufficient to permit full payment to
them of said preferential amounts, then such assets shall be distributed ratably
among such holders of Preferred Stock in proportion to the respective total
amounts which they shall be entitled to receive as provided in this Section 3.

ARTICLE VI: ANNUAL MEETINGS OF STOCKHOLDERS

The annual meeting of stockholders shall be held at such time, on such date
and at such place (within or without the State of Delaware) as provided in the
Bylaws of the Corporation. Subject to any requirement of applicable law, the
books of the Corporation may be kept outside the State of Delaware at such place
or places as may be designated from time to time by the Board or in the Bylaws
of the Corporation. Elections of directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide.

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ARTICLE VII: CALL OF SPECIAL MEETINGS OF STOCKHOLDERS

Special meetings of stockholders of the Corporation for any purpose or
purposes may be called at any time by a majority of the members of the Board of
Directors or by a committee of the Board of Directors that has been duly
designated by the Board of Directors and whose power and authority, as provided
in a resolution adopted by the Board of Directors or in the Bylaws of the
Corporation, includes the power to call such meetings, but such special meetings
of stockholders of the Corporation may not be called by any other Person or
Persons or in any other manner; provided, however, that if and to the extent
that any special meeting of stockholders may be called by any other Person or
Persons specified in any certificate of designations filed under Section 151(g)
of the Delaware General Corporation Law (or its successor statute as in effect
from time to time), then such special meeting may also be called by the Person
or Persons, in the manner, at the times and for the purposes so specified.

ARTICLE VIII: NUMBER OF DIRECTORS

SECTION 1. Number of Directors. The number of directors that shall
constitute the whole Board shall be as specified in the Bylaws of the
Corporation, as the same may be amended from time to time. Notwithstanding the
foregoing, during any period in which the holders of any one or more series of
Preferred Stock, voting as a class, shall be entitled to elect a specific number
of directors by reason of dividend arrearages or other contingencies giving them
the right to do so, then and during such time as such right continues, (A) the
then otherwise authorized number of directors shall be increased by such
specified number of directors and the holders of shares of such series of
Preferred Stock, voting as a class, shall be entitled to elect such specified
number of directors in accordance with the procedure set forth in the resolution
or resolutions of the Board creating such series and providing for the issuance
of such shares and (B) each such additional director shall serve until his or
her successor shall be elected and shall qualify, or until his or her right to
hold such office terminates pursuant to the resolution or resolutions of the
Board creating such series of Preferred Stock and providing for the issuance of
shares of such series, whichever occurs earlier. Whenever the holders of shares
of such series of Preferred Stock are divested of such right to elect directors
pursuant to the resolution or resolutions of the Board creating such series and
providing for the issuance of such shares, the terms of office of all directors
elected by the holders of such series of Preferred Stock pursuant to such
rights, or elected to fill any vacancies resulting from the death, resignation
or removal of directors so elected by the holders of such series, shall
forthwith terminate and the authorized number of directors shall be reduced
accordingly.

SECTION 2. Cumulative Voting. Except as otherwise provided in this
Certificate of Incorporation, all rights to vote and all voting power shall be
exclusively vested in the Common Stock of the Corporation, and the holders
thereof shall be entitled at all elections of directors to as many votes as
shall equal the number of votes that (except for this provision as to cumulative
voting) he or she would be entitled to cast for the election of directors with
respect to his or her shares of stock multiplied by the number of directors to
be elected, and such holder may cast all of such votes for a single director or
may distribute them among the number to be voted for, or for any two or more of
them as he or she may see fit, and to one vote for each share upon all other
matters.

ARTICLE IX: STOCKHOLDER ACTION BY WRITTEN CONSENT

Any election of directors or other action by the stockholders of the
Corporation may be effected at an annual or special meeting of stockholders and
may not be effected by written consent without a meeting.

ARTICLE X: ELECTION OF DIRECTORS

SECTION 1. Classified Board. Except to the extent otherwise provided in any
certificate of designations filed under Section 151(g) of the Delaware General
Corporation Law (or its successor statute as in effect from time to time), the
Board of Directors shall be and is divided into three classes, Class I, Class II
and Class III. Such classes shall be as nearly equal in number of directors as
reasonably possible. Each director shall serve for a term ending on the third
annual meeting following the annual meeting at which such director was elected,
provided, however, that the directors first elected to Class I shall serve for a
term ending on the annual meeting date next following the end of calendar year
1994, the directors first elected to Class II shall

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serve for a term ending on the second annual meeting date next following the end
of calendar year 1994, and the directors first elected to Class III shall serve
for a term ending on the third annual meeting date next following the end of
calendar year 1994. The foregoing notwithstanding, each director shall serve
until his successor shall have been duly elected and qualified unless he shall
resign, become disqualified or shall otherwise be removed.

At each annual election, the directors chosen to succeed those terms then
expiring shall be of the same class of the directors they succeed unless, by
reason of any intervening changes in the authorized number of directors, the
designated board shall designate one or more directorships whose term then
expires as directorships of another class in order more nearly to achieve
equality of number of directors among the classes. If a director dies, resigns
or is removed, the director chosen to fill the vacant directorship shall be of
the same class as the director he succeeds, unless, by reason of any previous
changes in the authorized number of directors, the Board shall designate such
vacant directorship as a directorship of another class in order more nearly to
achieve equality in the number of directors among the classes.

Notwithstanding the rule that the three classes shall be as nearly equal in
number of directors as reasonably possible, in the event of any change in the
authorized number of directors, each director then continuing to serve as such
shall nevertheless continue as a director of the class of which he is a member
until the expiration of his current term or his prior death, resignation or
removal. If any newly created directorship may, consistently with the rule that
the three classes shall be as nearly equal in number of directors as reasonably
possible, be allocated to one of two or more classes, the Board shall allocate
it to that of the available classes whose term of office is due to expire at the
earliest date following such allocation.

Vacancies and newly created directorships resulting from any increase in
the authorized number of directors may, unless the Board of Directors determines
otherwise, only be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director; provided, however,
that if the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors, vacancies and newly created
directorships of such class or classes or series may only be filled by a
majority of the directors elected by such class or classes or series thereof
then in office, or by a sole remaining director so elected.

SECTION 2. Stockholder Nominees. Nominations by stockholders of persons for
election to the Board shall be made only in accordance with the procedures set
forth in the Bylaws of the Corporation.

SECTION 3. Removal. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire Board, may be
removed from office only for cause at any time, and only by the affirmative vote
of the holders of a majority of the shares of Voting Stock then outstanding.

ARTICLE XI: BUSINESS COMBINATIONS

SECTION 1. Vote Required for Certain Business Combinations. In addition to
any affirmative vote required by applicable law or any other provision of this
Certificate of Incorporation or specified in any agreement, and in addition to
any voting rights granted to or held by the holders of Common Stock or Preferred
Stock, the approval or authorization of any Business Combination that has not
been approved in advance by at least 66 2/3% of the Directors shall require the
affirmative vote of the holders of not less than 66 2/3% of the Voting Stock
then outstanding.

SECTION 2. Express Election Not to be Governed by Section 203. The
Corporation hereby expressly elects not to be governed by the provisions of
Section 203 of the Delaware General Corporation Law; provided, however, that
nothing set forth herein shall affect the application of the definitions in
clause (c) thereof, to the extent provided in Article II hereof.

ARTICLE XII: LIABILITY AND INDEMNIFICATION

To the fullest extent permitted by the Delaware General Corporation Law, as
the same exists or may hereafter be amended (the "Delaware Law"), a director of
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. The Corporation
shall indemnify, in the manner and to the fullest extent permitted by the
Delaware Law, any

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person (or the estate of any person) who is or was a party to, or is threatened
to be made a party to, any threatened, pending or completed action, suit or
proceeding, whether or not by or in the right of the Corporation, and whether
civil, criminal, administrative, investigative or otherwise, by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise. The
Corporation may indemnify, in the manner and to the fullest extent permitted by
the Delaware Law, any person (or the estate of any person) who is or was a party
to, or is threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of the
Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was an employee or agent
of the Corporation, or is or was serving at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise. The Corporation may, to the fullest extent permitted by the
Delaware Law, purchase and maintain insurance on behalf of any such director,
officer, employee or agent against any liability which may be asserted against
such person. To the fullest extent permitted by the Delaware Law, the
indemnification provided herein shall include expenses (including Attorneys'
fees), judgments, fines and amounts paid in settlement and, in the manner
provided by the Delaware Law, any such expenses may be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding. The
indemnification provided herein shall not be deemed to limit the right of the
Corporation to indemnify any other person for any such expenses to the fullest
extent permitted by the Delaware Law, nor shall it be deemed exclusive of any
other rights to which any person seeking indemnification from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in such person's official capacity
and as to action in another capacity while holding such office.

No repeal or modification of the foregoing paragraph shall adversely affect
any right or protection of a director of the Corporation existing by virtue of
the foregoing paragraph at the time of such repeal or modification.

ARTICLE XIII: AMENDMENT OF CORPORATE DOCUMENTS

SECTION 1. Certificate of Incorporation. In addition to any affirmative
vote required by applicable law or any other provision of this Certificate of
Incorporation or specified in any agreement, and in addition to any voting
rights granted to or held by the holders of Common Stock or Preferred Stock, any
alteration, amendment, repeal or rescission (any "Change") of any provision of
this Certificate of Incorporation must be approved by a majority of the
directors of the Corporation then in office and by the affirmative vote of the
holders of a majority of the Voting Stock then outstanding; provided, however,
that if any such Change relates to Articles II, VII, IX, X, XI and XIV hereof or
this Article XIII, such Change must also be approved by the affirmative vote of
the holders of not less than 66 2/3% of the shares of Voting Stock then
outstanding. Subject to the foregoing, the Corporation reserves the right to
alter, amend, repeal or rescind any provision contained in this Certificate of
Incorporation in any manner now or hereafter prescribed by law.

SECTION 2. Bylaws. The Board shall have the power to make, alter, amend,
repeal or rescind the Bylaws of the Corporation.

ARTICLE XIV: APPRAISAL RIGHTS

To the maximum extent permissible under Section 262 of the Delaware General
Corporation Law, the stockholders of the Corporation shall be entitled to the
statutory appraisal rights provided therein, notwithstanding any exception
otherwise provided therein, with respect to any transaction described in Article
XI involving the Corporation that requires the affirmative vote of the holders
of not less than 66 2/3% of the Voting Stock then outstanding.

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ARTICLE XV: INCORPORATOR

The name and mailing address of the incorporator of the Corporation is:

Jacqueline N. Casper
c/o Corporation Service Company
1013 Center Road
Wilmington, Delaware 19805

The undersigned, being the incorporator hereinbefore named, for the purpose
of forming a corporation to do business both within and without the State of
Delaware, and in pursuance of the Delaware General Corporation Law, does make
the file this Certificate.

/s/ JACQUELINE N. CASPER

--------------------------------------
Jacqueline N. Casper
Incorporator

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APPENDIX C

CKE RESTAURANTS, INC.
A DELAWARE CORPORATION

BYLAWS

ARTICLE I: OFFICES

SECTION 1.1 Registered Office. The registered office of CKE Restaurants,
Inc. (the "Corporation") shall be at Corporation Service Company, 1013 Centre
Road, City of Wilmington, County of New Castle, State of Delaware, and the name
of the registered agent in charge thereof shall be Corporation Service Company.

SECTION 1.2 Principal Office. The principal office for the transaction of
the business of the Corporation shall be at 1200 North Harbor Boulevard,
Anaheim, California 92801. The Board of Directors of the Corporation (the
"Board") is hereby granted full power and authority to change said principal
office from one location to another.

SECTION 1.3 Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.

ARTICLE II: MEETINGS OF STOCKHOLDERS

SECTION 2.1 Place of Meetings. All annual meetings of stockholders and all
other meetings of stockholders shall be held either at the principal office of
the Corporation or at any other place within or without the State of Delaware
that may be designated by the Board pursuant to authority hereinafter granted to
the Board.

SECTION 2.2 Annual Meetings. Annual meetings of stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time and place and on such date as the Board shall determine by resolution.

SECTION 2.3 Special Meetings. Special meetings of stockholders of the
Corporation for any purpose or purposes may only be called in accordance with
the provisions of the Certificate of Incorporation.

SECTION 2.4 Notice of Meetings. Except as otherwise required by law,
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 days nor more than 60 days before the date of the meeting
to each stockholder of record entitled to vote at such meeting by delivering a
typewritten or printed notice thereof to such stockholder personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to such stockholder at such stockholder's post office address furnished
by such stockholder to the Secretary of the Corporation for such purpose, or, if
such stockholder shall not have furnished an address to the Secretary for such
purpose, then at such stockholder's post office address last known to the
Secretary, or by transmitting a notice thereof to such stockholder at such
address by telegraph, cable, wireless or fax. Except as otherwise expressly
required by law, no publication of any notice of a meeting of stockholders shall
be required. Every notice of a meeting of stockholders shall state the place,
date and hour of the meeting and, in the case of a special meeting, shall also
state the purpose for which the meeting is called. Notice of any meeting of
stockholders shall not be required to be given to any stockholder to whom notice
may be omitted pursuant to applicable Delaware law or who shall have waived such
notice, and such notice shall be deemed waived by any stockholder who shall
attend such meeting in person or by proxy, except a stockholder who shall attend
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Except as otherwise expressly required by law, notice of any
adjourned meeting of stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken.

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SECTION 2.5 Quorum. Except as otherwise required by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of
stockholders of the Corporation or any adjournment thereof. Subject to the
requirement of a larger percentage vote contained in the Certificate of
Incorporation, these Bylaws or by statute, the stockholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding any withdrawal of stockholders that may leave
less than a quorum remaining, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
In the absence of a quorum at any meeting or any adjournment thereof, a majority
in voting interest of the stockholders present in person or by proxy and
entitled to vote thereat or, in the absence therefrom of all the stockholders,
any officer entitled to preside at, or to act as secretary of, such meeting may
adjourn such meeting from time to time. At any such adjourned meeting at which a
quorum is present, any business may be transacted that might have been
transacted at the meeting as originally called.

SECTION 2.6 Voting.

(A) Each stockholder shall, at each meeting of stockholders, be entitled to
vote in person or by proxy each share of the stock of the Corporation that has
voting rights on the matter in question and that shall have been held by such
stockholder and registered in such stockholder's name on the books of the
Corporation:

(i) on the date fixed pursuant to Section 6.5 of these Bylaws as the
record date for the determination of stockholders entitled to notice of and
to vote at such meeting; or

(ii) if no such record date shall have been so fixed, then (a) at the
close of business on the day next preceding the day upon which notice of
the meeting shall be given or (b) if notice of the meeting shall be waived,
at the close of business on the day next preceding the day upon which the
meeting shall be held.

(B) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
the pledgor shall have expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or the pledgee's proxy, may represent such stock and vote
thereon. Stock having voting power standing of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety or otherwise, or with respect to
which two or more persons have the same fiduciary relationship, shall be voted
in accordance with the provisions of the Delaware General Corporation Law.

(C) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by such stockholder as proxy appointed by an instrument in
writing, subscribed by such stockholder or by such stockholder's attorney
thereunto authorized and delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted or acted upon after three years from its
date unless said proxy shall provide for a longer period. The attendance at any
meeting of a stockholder who may theretofore have given a proxy shall not have
the effect of revoking the same unless such stockholder shall in writing so
notify the secretary of the meeting prior to the voting of the proxy. At any
meeting of stockholders, all matters, except as otherwise provided in the
Certificate of Incorporation, in these Bylaws or by law, shall be decided by the
vote of a majority in voting interest of the stockholders present in person or
by proxy and entitled to vote thereat and thereon, a quorum being present. The
vote at any meeting of stockholders on any question need not be by ballot,
unless so directed by the chairman of the meeting. On a vote by ballot, each
ballot shall be signed by the stockholder voting, or by such stockholder's
proxy, if there be such proxy, and it shall state the number of shares voted.

SECTION 2.7 List of Stockholders. The Secretary of the Corporation shall
prepare and make, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of such stockholder. Such list shall be open to
the examination of any stockholder, for

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any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.

SECTION 2.8 Judges. If at any meeting of stockholders a vote by written
ballot shall be taken on any question, the chairman of such meeting may appoint
a judge or judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of a judge at
such meeting with strict impartiality and according to the best of such judge's
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be stockholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a proposal in
which such officer shall have a material interest.

SECTION 2.9 Advance Notice of Stockholder Proposals and Stockholder
Nominations.

(A) At any meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) by or at the
direction of the Board or (ii) by any stockholder of the Corporation who
complies with the notice procedures set forth in this Section 2.9(A). For
business to be properly brought before any meeting of the stockholders by a
stockholder, the stockholder must have given notice thereof in writing to the
Secretary of the Corporation not less than 90 days in advance of such meeting
or, if later, the seventh day following the first public announcement of the
date of such meeting. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the meeting (1) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (2) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business, (3) the class and number of shares of the Corporation that are
beneficially owned by the stockholder, and (4) any material interest of the
stockholder in such business. In addition, the stockholder making such proposal
shall promptly provide any other information reasonably requested by the
Corporation. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any meeting of the stockholders except in
accordance with the procedures set forth in this Section 2.9. The Chairman of
any such meeting shall direct that any business not properly brought before the
meeting shall not be considered.

(B) Nominations for the election of directors may be made by the Board or
by any stockholder entitled to vote in the election of directors; provided,
however, that a stockholder may nominate a person for election as a director at
a meeting only if written notice of such stockholder's intent to make such
nomination has been given to the Secretary of the Corporation not later than 90
days in advance of such meeting or, if later, the seventh day following the
first public announcement of the date of such meeting. Each such notice shall
set forth: (i) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (ii) a representation
that the stockholder is a holder of record of stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting and nominate the person or persons specified in the notice; (iii) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (iv) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the United States Securities and Exchange
Commission had the nominee been nominated, or intended to be nominated, by the
Board; and (v) the consent of each nominee to serve as a director of the
Corporation if so elected. In addition, the stockholder making such nomination
shall promptly provide any other information reasonably requested by the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 2.9(B). The Chairman of any meeting of stockholders shall direct that
any nomination not made in accordance with these procedures be disregarded.

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ARTICLE III: BOARD OF DIRECTORS

SECTION 3.1 General Powers. Subject to any requirements in the Certificate
of Incorporation, these Bylaws, and of the Delaware General Corporation Law as
to action which must be authorized or approved by the stockholders, any and all
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation shall be under the direction of, the
Board to the fullest extent permitted by law. Without limiting the generality of
the foregoing, it is hereby expressly declared that the Board shall have the
following powers, to wit:

(A) to select and remove all the officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, the Certificate of Incorporation or these Bylaws,
fix their compensation, and require from them security for faithful
service;

(B) to conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not
inconsistent with law, the Certificate of Incorporation or these Bylaws (as
the same may be amended from time to time), as it may deem best;

(C) to change the location of the registered office of the Corporation
in Section 1.1 hereof; to change the principal office and the principal
office for the transaction of the business of the Corporation from one
location to another as provided in Section 1.2 hereof; to fix and locate
from time to time one or more subsidiary offices of the Corporation within
or without the State of Delaware as provided in Section 1.3 hereof; to
designate any place within or without the State of Delaware for the holding
of any meeting or meetings of stockholders; and to adopt, make and use a
corporate seal, and to prescribe the forms of certificates of stock, and to
alter the form of such seal and of such certificates from time to time, and
in its judgment as it may deem best, provided such seal and such
certificate shall at all times comply with the provisions of law;

(D) to authorize the issue of shares of stock of the Corporation from
time to time, upon such terms and for such considerations as may be lawful;

(E) to borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust and
securities therefor; and

(F) by resolution adopted by a majority of the authorized number of
directors, to designate an executive and other committees of the Board,
each consisting of one or more directors, to serve at the pleasure of the
Board, and to prescribe the manner in which proceedings of such committee
or committees shall be conducted.

SECTION 3.2 Number and Term of Office. The authorized number of directors
of the Corporation shall be nine (9) until this Section 3.2 is amended by a
resolution duly adopted by the Board. Directors need not be stockholders. With
the exception of Carl N. Karcher, no person who has attained the age of 70 shall
be eligible for election to the Board. Each of the directors of the Corporation
shall hold office until such director's successor shall have been duly elected
and shall qualify or until such director shall resign or shall have been removed
in the manner provided in these Bylaws.

SECTION 3.3 Election of Directors. The directors shall be elected by the
stockholders of the Corporation, and at each election the persons receiving the
greater number of votes, up to the number of directors then to be elected, shall
be the persons then elected. The election of directors is subject to any
provisions contained in the Certificate of Incorporation relating thereto,
including any provisions for a classified Board.

SECTION 3.4 Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.

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SECTION 3.5 Vacancies. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors or any other cause, may
be filled by vote of the majority of the remaining directors, even though less
than a quorum, or by a sole remaining director; provided, however, that whenever
the holders of any class or series of shares are entitled to elect one or more
directors, any vacancy or newly created directorship of such class or series may
be filled by a majority of the directors elected by such class or series then in
office, or by a sole remaining director so elected. Each director so chosen to
fill a vacancy shall hold office until such director's successor shall have been
elected and shall qualify or until such director shall resign or shall have been
removed. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.

SECTION 3.6 Place of Meeting. The Board or any committee thereof may hold
any of its meetings at such place or places within or without the State of
Delaware as the Board or such committee may from time to time by resolution
designate or as shall be designated by the person or persons calling the meeting
or in the notice or a waiver of notice of any such meeting. Directors may
participate in any regular or special meeting of the Board or any committee
thereof by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board or such
committee can hear each other, and such participation shall constitute presence
in person at such meeting.

SECTION 3.7 Regular Meetings. Regular meetings of the Board may be held at
such times as the Board shall from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.

SECTION 3.8 Special Meetings. Special meetings of the Board for any
purpose or purposes shall be called at any time by the Chairman of the Board or,
if the Chairman of the Board is absent or unable or refuses to act, by the Chief
Executive Officer or the President. Except as otherwise provided by law or by
these Bylaws, written notice of the time and place of special meetings shall be
delivered personally or by facsimile transmission to each director, or sent to
each director by mail or by other form of written communication, charges
prepaid, addressed to such director at such director's address, or in the case
of facsimile transmission at the facsimile number, as it is shown upon the
records of the Corporation, or, if it is not so shown on such records and is not
readily ascertainable, at the place in which the meetings of the directors are
regularly held. In case such notice is mailed or telegraphed, it shall be
deposited in the United States mail or delivered to the telegraph company in the
County in which the principal office for the transaction of the business of the
Corporation is located at least 48 hours prior to the time of the holding of the
meeting. In case such notice is delivered personally or by facsimile
transmission as above provided, it shall be delivered at least 24 hours prior to
the time of the holding of the meeting. Such mailing, telegraphing, delivery or
facsimile transmission as above provided shall be due, legal and personal notice
to such director. Except where otherwise required by law or by these Bylaws,
notice of the purpose of a special meeting need not be given. Notice of any
meeting of the Board shall not be required to be given to any director who is
present at such meeting, except a director who shall attend such meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.

SECTION 3.9 Quorum and Manner of Acting. Except as otherwise provided in
these Bylaws, the Certificate of Incorporation or by applicable law, the
presence of a majority of the authorized number of directors shall be required
to constitute a quorum for the transaction of business at any meeting of the
Board, and all matters shall be decided at any such meeting, a quorum being
present, by the affirmative vote of a majority of the directors present. A
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, provided any action taken is
approved by at least a majority of the required quorum for such meeting. In the
absence of a quorum, a majority of directors present at any meeting may adjourn
the same from time to time until a quorum shall be present. Notice of any
adjourned meeting need not be given. The directors shall act only as a Board,
and the individual directors shall have no power as such.

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SECTION 3.10 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if consent in writing is given thereto by all members of the
Board or of such committee, as the case may be, and such consent is filed with
the minutes of proceedings of the Board or of such committee.

SECTION 3.11 Compensation. Directors who are not employees of the
Corporation or any of its subsidiaries may receive an annual fee for their
services as directors in an amount fixed by resolution of the Board, and, in
addition, a fixed fee, with or without expenses of attendance, may be allowed by
resolution of the Board for attendance at each meeting, including for attendance
at each meeting of a committee of the Board. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent, employee, or otherwise, and receiving
compensation therefor.

SECTION 3.12 Committees. By resolution adopted by a majority of the
authorized number of directors, the Board may designate an audit committee and a
compensation committee and such other committees as it shall determine. Each
committee shall consist of two or more of the members of the Board and shall
serve at the pleasure of the Board. Each such committee shall be governed by a
charter adopted by a majority of the authorized number of directors. To the
extent provided in any such charter and subject to any restrictions or
limitations on the delegation of power and authority imposed by applicable law,
any such committee shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. Unless
the Board or these Bylaws shall otherwise prescribe the manner of proceedings of
any such committee, meetings of such committee may be regularly scheduled in
advance and may be called at any time by the chairman of the committee or by any
two members thereof; otherwise, the provisions of these Bylaws with respect to
notice and conduct of meetings of the Board shall govern committees of the Board
and actions by such committees.

ARTICLE IV: OFFICERS

SECTION 4.1 Officers. The officers of the Corporation shall be a Chief
Executive Officer, a President, one or more Vice Presidents (the number thereof
and their respective titles to be determined by the Board), a Secretary, and
such other officers as may be appointed at the discretion of the Board in
accordance with the provisions of Section 4.3 hereof. The Board may appoint a
Chairman of the Board and, if the Board so designates, the Chairman of the Board
may be an officer of the Corporation. Any number of offices may be held by the
same person.

SECTION 4.2 Election. The officers of the Corporation, except such
officers as may be appointed or elected in accordance with the provisions of
Sections 4.3 or 4.5 hereof, shall be chosen annually by the Board at the first
meeting thereof held after the annual meeting of stockholders, and each officer
shall hold office until such officer shall resign or shall be removed or
otherwise disqualified to serve, or until such officer's successor shall be
elected and qualified.

SECTION 4.3 Other Officers. In addition to the officers chosen annually by
the Board at its first meeting, the Board also may appoint or elect such other
officers as the business of the Corporation may require, each of whom shall have
such authority and perform such duties as are provided in these Bylaws or as the
Board may from time to time specify and each of whom shall hold office until
such officer shall resign or shall be removed or otherwise disqualified to
serve, or until such officer's successor shall be elected and qualified.

SECTION 4.4 Removal and Resignation. Any officer may be removed, either
with or without cause, by resolution of the Board passed by a majority of the
directors at the time in office, at any regular or special meeting of the Board,
or, except in case of an officer chosen by the Board, by any officer upon whom
such power of removal may be conferred by the Board.

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SECTION 4.5 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular appointments to such office.

ARTICLE V: CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

SECTION 5.1 Execution of Contracts. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, or agent or agents,
to enter into any contract or execute any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.

SECTION 5.2 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.

SECTION 5.3 Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President or the Treasurer (or
any other officer or officers, assistant or assistants, agent or agents, or
attorney or attorneys of the Corporation who shall from time to time be
determined by the Board) may endorse, assign and deliver checks, drafts and
other orders for the payment of money which are payable to the order of the
Corporation.

SECTION 5.4 General and Special Bank Accounts. The Board may from time to
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.

ARTICLE VI: SHARES AND THEIR TRANSFER

SECTION 6.1 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class or
series of shares of the stock of the Corporation owned by such owner. The
certificates representing shares of such stock shall be numbered in the order in
which they shall be issued and shall be signed in the name of the Corporation by
the Chairman of the Board, the Chief Executive Officer, the President or any
Vice President, and by the Secretary or the Treasurer. Any or all of the
signatures on the certificates may be a facsimile. In case any officer, transfer
agent or registrar who has signed, or whose facsimile signature has been placed
upon, any such certificate, shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, such certificate may
nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue. A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class or series of shares represented by such certificates, respectively, and
the respective dates thereof, and in case of cancellation, the respective dates
of cancellation. Every certificate surrendered to the Corporation for exchange
or transfer shall be canceled, and no new certificate or certificates shall be
issued in exchange for any

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existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 6.4 hereof.

SECTION 6.2 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by such holder's attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a transfer clerk or
a transfer agent appointed as provided in Section 6.3 hereof, and upon surrender
of the certificate or certificates for such shares properly endorsed and the
payment of all taxes thereon. The person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof for all purposes
as regards the Corporation. Whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact shall be so expressed in the
entry of transfer if, when the certificate or certificates shall be presented to
the Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.

SECTION 6.3 Regulations. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.

SECTION 6.4 Lost, Stolen, Destroyed, and Mutilated Certificates. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.

SECTION 6.5 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders the Board shall not fix such a record date, then the record date
for determining stockholders for such purpose shall be the close of business on
the day on which the Board shall adopt the resolution relating thereto. A
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.

ARTICLE VII: INDEMNIFICATION

SECTION 7.1 Scope of Indemnification. The Corporation shall indemnify, in
the manner and to the fullest extent permitted by the Delaware General
Corporation Law, as the same exists or may hereinafter be amended (the "Delaware
Law"), and by the Certificate of Incorporation, any person (or the estate of any
person) who is or was a party, or is threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether or not by
or in the right of the Corporation, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise. The indemnification provided herein
shall not be deemed to limit the right of the Corporation to indemnify any other
person to the fullest extent permitted by the Delaware Law, nor shall it be
deemed exclusive of any other rights to which any person seeking indemnification
from the Corporation may be entitled under any agreement, vote of stockholders
or disinterested directors, or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office. The Corporation may enter into indemnification agreements with any one
or more of its directors, officers, employees and agents upon resolution duly
adopted by the Board of Directors. Such agreements may indemnify such persons to
the fullest extent permissible under law.

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ARTICLE VIII: MISCELLANEOUS

SECTION 8.1 Seal. The Board shall adopt a corporate seal, which shall be
in the form of a circle and shall bear the name of the Corporation and words
showing that the Corporation was incorporated in the State of Delaware.

SECTION 8.2 Waiver of Notices. Whenever notice is required to be given by
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.

SECTION 8.3 Amendments. Except as otherwise provided herein or in the
Certificate of Incorporation, these Bylaws or any of them may be altered,
amended, repealed or rescinded and new Bylaws may be adopted by the Board, or by
the stockholders at any annual or special meeting of stockholders provided that
notice of such proposed alteration, amendment, repeal, rescission or adoption is
given in the notice of such meeting.

SECTION 8.4 Representation of Other Corporations. The Chairman of the
Board, the Chief Executive Officer, the President or the Secretary or any Vice
President of the Corporation is authorized to vote, represent and exercise on
behalf of the Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the Corporation. The
authority herein granted to said officers to vote or represent on behalf of the
Corporation any and all shares held by the Corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
person authorized so to do by proxy or power of attorney duly executed by such
officers.

SECTION 8.5 Jurisdiction for Stockholder Suits. Any action brought by any
stockholder against the Corporation or against any officer, director, employee,
agent or advisor of the Corporation, including without limitation any such
action brought on behalf of the Corporation, shall be brought solely in a court
of competent jurisdiction located in the State of Delaware.

C-9
<PAGE> 72

CARL KARCHER ENTERPRISES, INC.

PROXY FOR ANNUAL MEETING OF SHAREHOLDERS

JUNE 20, 1994

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated May 11, 1994, and hereby appoints
Donald E. Doyle and Loren C. Pannier as Proxies (each with full power to act in
the absence of the others, the act of a majority of those present to be
controlling, each with full power of substitution), to represent and to vote, as
designated below, all the shares of common stock of Carl Karcher Enterprises,
Inc. held of record by the undersigned on May 10, 1994, at the Annual Meeting of
Shareholders to be held on June 20, 1994, or any adjournment or postponement
thereof.

1. REINCORPORATION PROPOSAL. FOR / / AGAINST / / ABSTAIN / /

<TABLE>
<S> <C> <C>
2. ELECTION OF DIRECTORS: FOR all nominees listed below (except WITHHOLD AUTHORITY to vote for all
as marked to the contrary below) / / nominees listed below / /
</TABLE>

INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.

William P. Foley II, Donald E. Doyle, Carl N. Karcher, Peter
Charm, Carl L. Karcher,

Daniel D. (Ron) Lane, Elizabeth A. Sanders, Frank A. Willey.

3. PROPOSAL TO APPROVE THE CKE RESTAURANTS, INC. 1994 STOCK INCENTIVE PLAN.

FOR / / AGAINST / / ABSTAIN / /

4. In their discretion, the Proxies are authorized to vote upon such other
business as may be properly come before the meeting.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE REINCORPORATION PROPOSAL FOR THE ELECTION OF EACH OF THE ABOVE
NAMED DIRECTORS, FOR APPROVAL OF THE CKE RESTAURANTS, INC. 1994 STOCK INCENTIVE
PLAN, AND IN THE DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS.

Please sign exactly as the name appears below. When shares are held by joing
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. if a
partnership, please sign in partnership name by authorized person.
Dated: , 1994

--------------------------
Signature

--------------------------
Signature if held jointly

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.