<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
CKE RESTAURANTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CKE RESTAURANTS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
CKE RESTAURANTS, INC.
1200 NORTH HARBOR BOULEVARD
ANAHEIM, CALIFORNIA 92801
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 19, 1996
To the Stockholders of CKE Restaurants, Inc.:
The Annual Meeting of Stockholders of CKE Restaurants, Inc. ("CKE" or the
"Company") will be held at the Irvine Marriott Hotel, 18000 Von Karman Avenue,
Irvine, California, on Wednesday, June 19, 1996 at 9:30 a.m. for the following
purposes:
1. To elect two directors, each for a term of three years;
2. To consider and vote upon a proposal to amend CKE's 1994 Employee Stock
Purchase Plan, as described in the accompanying Proxy Statement;
3. To consider and vote upon a proposal to amend CKE's 1994 Stock Incentive
Plan, as described in the accompanying Proxy Statement; and
4. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only stockholders of record at the close of business on May 6, 1996 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
Robert A. Wilson
Secretary
Anaheim, California
May 20, 1996
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, TO ASSURE THAT YOUR SHARES WILL
BE VOTED AT THE MEETING, YOU ARE REQUESTED TO SIGN THE ATTACHED PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE. NO ADDITIONAL
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING,
YOU MAY VOTE IN PERSON EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
- --------------------------------------------------------------------------------
<PAGE> 3
CKE RESTAURANTS, INC.
1200 N. HARBOR BOULEVARD
ANAHEIM, CALIFORNIA 92801
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 19, 1996
------------------------
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of CKE Restaurants, Inc., a Delaware
corporation, ("CKE" or the "Company"), for use at the Annual Meeting of
Stockholders to be held at the Irvine Marriott Hotel, 18000 Von Karman Avenue,
Irvine, California, on Wednesday, June 19, 1996 at 9:30 a.m. (the "Meeting").
This Proxy Statement and accompanying Proxy Card are first being mailed to
stockholders on or about May 20, 1996.
SOLICITATION OF PROXIES
At the Meeting, the stockholders of CKE will be asked: (1) to vote upon the
election of two directors, each for a term of three years; (2) to approve
certain amendments to CKE's 1994 Employee Stock Purchase Plan, as described in
this Proxy Statement; (3) to approve certain amendments to CKE's 1994 Stock
Incentive Plan, as described in this Proxy Statement; and (4) to act upon such
other matters as may properly come before the Meeting or any postponements or
adjournments thereof. CKE's Board of Directors is asking for your proxy for use
at the Meeting. All shares of CKE Common Stock represented by any properly
executed proxy that is not revoked will be voted at the Meeting in accordance
with the instructions indicated in such proxy. If no instructions are marked on
a properly executed returned proxy, the shares represented thereby will be voted
FOR the election of the director nominees listed below, FOR the proposed
amendments to CKE's 1994 Employee Stock Purchase Plan and FOR the proposed
amendments to CKE's 1994 Stock Incentive Plan. A properly executed proxy marked
"ABSTAIN", although counted for purposes of determining whether a quorum is
present at the Meeting, will not be voted. 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. A stockholder giving a proxy may revoke it at any time
before it is exercised by filing with CKE's Secretary either a written notice of
revocation or a duly executed proxy bearing a later date or by attending the
Meeting and voting in person. Attendance at the Meeting will not, in itself,
constitute revocation of a previously granted proxy.
The cost of solicitation of proxies will be paid by CKE. In addition,
following the mailing of this Proxy Statement, directors, officers and regular
employees of CKE 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 CKE Common Stock of record will be requested to
forward proxy soliciting material to the beneficial owners of such shares and
will be reimbursed by CKE for their charges and expenses in connection
therewith. In addition CKE may use the services of individuals or companies it
does not regularly employ in connection with the solicitation of proxies, if
management determines that it is advisable to do so, at an estimated cost of
$5,000, plus out-of-pocket expenses.
RECORD DATE AND VOTING
Only the holders of CKE Common Stock of record at the close of business on
May 6, 1996 (the "Record Date"), are entitled to notice of, and to vote at, the
Meeting. There were 18,619,565 shares of CKE Common Stock outstanding and
entitled to vote at the Meeting on such Record Date. On all matters to come
before the Meeting, each holder of Common Stock will be entitled to one vote per
share, except that voting for directors may be cumulative. In the election of
directors, holders of Common Stock are entitled to as many votes as shall equal
the number of votes that he or she would be entitled to cast (but for the
cumulative voting provision) multiplied by the number of directors to be
elected, and may cast all of such votes for a single
<PAGE> 4
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.
Election of directors will be determined by the vote of the holders of a
plurality of the shares voting on such election. Approval of Proposals 2 and 3
will require the affirmative vote of the majority of shares represented in
person or by proxy at the Meeting and entitled to vote on such matters. A proxy
may indicate that all or a portion of the shares represented by such proxy are
not being voted with respect to a specific proposal. This could occur, for
example, when a broker is not permitted to vote shares held in street name on a
proposal in the absence of instructions from the beneficial owner. Neither
broker non-votes nor abstentions will have any effect on the outcome of the
election of directors. With respect to Proposals 2 and 3, abstentions will be
treated as shares that are present and entitled to vote for purposes of
determining a quorum, and will have the effect of a vote against these
proposals. Broker non-votes will be considered as present for quorum purposes,
but not as shares entitled to vote with respect to Proposals 2 and 3.
Accordingly broker non-votes will have no effect on such matters.
PROPOSAL 1
ELECTION OF DIRECTORS
The Bylaws of CKE provide for the division of the Board of Directors into
three classes, each class serving for a period of three years. The foregoing
notwithstanding, directors serve until their successors have been duly elected
and qualified or until they resign, become disqualified or disabled, or are
otherwise removed. The class of directors whose term expires as of the date of
the Meeting consists of Peter Churm and Daniel D. (Ron) Lane.
The proxies solicited hereby are intended to be voted for the nominees
whose names are listed below. Discretionary authority to cumulate votes
represented by proxies is solicited by the Board of Directors because, in the
event nominations are made in opposition to the nominees of the Board of
Directors, it is the intention of the persons named in the accompanying Proxy
Card to cumulate votes represented by proxies for individual nominees in
accordance with their best judgment in order to assure the election of as many
of the Board's nominees as possible. Both nominees are presently directors and
have indicated their willingness to continue to serve as directors, if elected.
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 CKE, both nominees are and will be able to serve.
INFORMATION CONCERNING NOMINEES AND OTHER DIRECTORS
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
FIRST YEAR
BECAME OTHER CORPORATE
NAME AGE PRINCIPAL OCCUPATION DIRECTOR DIRECTORSHIPS
- ---------------------- --- ------------------------------------ ---------- ------------------
<S> <C> <C> <C> <C>
Peter Churm 70 Chairman Emeritus, Furon Company 1979 Furon Company
Daniel D. (Ron) Lane 61 Chairman and Chief Executive 1993 Fidelity National
Officer, Lane/Kuhn Pacific, Inc. Financial, Inc.,
Resort Income
Investors, Inc.
</TABLE>
PETER CHURM was Chairman of the Board of Furon Company, a publicly held
diversified manufacturing company, from May 1980 through February 1992 and was
President of that company for more than 16 years. Since February 1992, he has
been Chairman Emeritus and a member of the Board of Directors of Furon Company.
DANIEL D. (RON) LANE became Vice Chairman of the Board of CKE in October
1994. Since February 1983, he has been a principal, Chairman and Chief Executive
Officer of Lane/Kuhn Pacific, Inc., a real estate development company. Mr. Lane
is a director of Fidelity National Financial, Inc., and a director of Resort
Income Investors, Inc.
2
<PAGE> 5
THE BOARD OF DIRECTORS OF CKE RECOMMENDS A VOTE "FOR" THE ELECTION OF BOTH
OF THE ABOVE NOMINEES.
DIRECTORS CONTINUING TO SERVE UNTIL 1997
<TABLE>
<CAPTION>
FIRST
YEAR
BECAME OTHER CORPORATE
NAME AGE PRINCIPAL OCCUPATION DIRECTOR DIRECTORSHIPS
- --------------------- --- ------------------------------------ -------- -----------------------
<S> <C> <C> <C> <C>
William P. Foley II 51 Chairman of the Board and Chief 1993 Fidelity National
Executive Officer, CKE; Chairman of Financial, Inc., Micro
the Board and Chief Executive General Corporation,
Officer, Fidelity National Rally's Hamburgers,
Financial, Inc. Inc.
Carl N. Karcher 79 Chairman Emeritus, CKE 1966 --
W. Howard Lester 60 Chairman of the Board and Chief 1996 The Good Guys, Inc.,
Executive Officer, Williams-Sonoma, Harold's Stores, Inc.
Inc.
</TABLE>
WILLIAM P. FOLEY II became Chief Executive Officer of CKE in October 1994
and Chairman of the CKE Board in March 1994. Since 1981, Mr. Foley has been
Chairman of the Board, President (until January 1995) and Chief Executive
Officer of Fidelity National Financial, Inc., a company engaged in title
insurance and related services. Mr. Foley is also a member of the Board of
Directors of Micro General Corporation and Rally's Hamburgers, Inc.
CARL N. KARCHER, the founder of CKE, purchased his first hot dog stand on
July 17, 1941 and has been developing CKE's concepts since that time. He first
became a director of CKE in 1966. He has served as Chairman Emeritus since
January 1994. He was Chairman of the Board of CKE until October 1993, and served
as Chief Executive Officer until December 1992. Prior to 1980, he was President
of CKE. Carl N. Karcher is Carl L. Karcher's father.
W. HOWARD LESTER was elected as a director of CKE in January 1996. Mr.
Lester became Chief Executive Officer of Williams-Sonoma, Inc., a retailer of
kitchen and cooking supplies and equipment, in 1978 and Chairman of its Board in
1986. Mr. Lester also serves as a director of The Good Guys, Inc. and Harold's
Stores, Inc.
DIRECTORS CONTINUING TO SERVE UNTIL 1998
<TABLE>
<CAPTION>
FIRST
YEAR
BECAME OTHER CORPORATE
NAME AGE PRINCIPAL OCCUPATION DIRECTOR DIRECTORSHIPS
- --------------------- --- ------------------------------------ -------- -----------------------
<S> <C> <C> <C> <C>
Carl L. Karcher 47 President, CLK, Inc., a franchisee 1992 --
of CKE
Frank P. Willey 42 President, Fidelity National 1994 Fidelity National
Financial, Inc. Financial, Inc.,
Southern Pacific
Funding
Corporation
</TABLE>
CARL L. KARCHER is the President of CLK, Inc., a franchisee of CKE. Mr.
Karcher has been a franchisee of CKE since May 1985. For more than 17 years
prior to that time, Mr. Karcher was employed by CKE in several capacities,
including Vice President, Manufacturing and Distribution. Mr. Karcher first
became a director in May 1992. Carl L. Karcher is Carl N. Karcher's son.
FRANK P. WILLEY became President of Fidelity National Financial, Inc. in
January 1995 and has been a director and Executive Vice President of Fidelity
National Financial, Inc. since February 1984. Mr. Willey was General Counsel of
Fidelity National Financial, Inc. from 1984 to January 1995, and also serves on
the Board of Directors of Southern Pacific Funding Corporation.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Executive Committee of the Board of Directors, comprised of Messrs.
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.
3
<PAGE> 6
In addition to the Executive Committee, the Board of Directors has two
standing committees: the Audit Committee and the Compensation Committee. The
Board does not have a nominating committee or other committee performing similar
functions. The Audit Committee, whose current members are Messrs. Churm and
Willey (Chairman), monitors CKE's basic accounting policies and their related
system of internal control, reviews CKE's audit and management reports and makes
recommendations regarding the appointment of independent auditors. The
Compensation Committee, whose current members are Messrs. Churm (Chairman) and
Willey, 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 1996, the Board of Directors held eight meetings, the Audit
Committee held one meeting, the Compensation Committee held one meeting and the
Executive Committee held three meetings. During fiscal 1996, no director
attended fewer than 75% of the aggregate meetings of the Board of Directors and
the committee or committees on which he served.
STOCKHOLDER NOMINATIONS
The Bylaws of CKE provide that any stockholder entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if timely written notice of such stockholder's intent to make
such nomination is given, either by personal delivery or United States mail,
postage prepaid, to the Secretary, CKE Restaurants, Inc., P.O. Box 4349,
Anaheim, California 92803-4349. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the address provided 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. A stockholder's notice to
the Secretary must 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 CKE's Common
Stock 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 relating to the person that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to the Securities Exchange Act of 1934, as amended, and (v) the consent
of each nominee to serve as a director of CKE if so elected. CKE may require the
stockholders making such nomination to furnish such other information as may be
reasonably requested by CKE.
COMPENSATION OF DIRECTORS
For their services as directors in fiscal 1996, each non-employee director
received a base fee of $18,000 for their attendance at quarterly Board meetings.
For their attendance at special Board meetings (meetings other than quarterly
Board meetings), each non-employee director receives $1,000. For their
attendance at Board Committee meetings which are held on a day other than the
date of a scheduled Board meeting, each non-employee director receives $1,000.
For their participation in telephonic Board meetings, each non-employee director
receives $500. Each non-employee director is expected to receive a fee of
$18,000 in fiscal 1997 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 1997. In addition, directors who
are also employees may participate in CKE's 1994 Employee Stock Purchase Plan
(See Proposal 2 below), and all directors are entitled to participate in CKE's
1994 Stock Incentive Plan (See Proposal 3 below).
4
<PAGE> 7
PROPOSAL 2
AMENDMENTS TO 1994 EMPLOYEE STOCK PURCHASE PLAN
The CKE Restaurants, Inc. 1994 Employee Stock Purchase Plan ("ESPP") was
adopted by the Board of Directors of CKE on September 27, 1994, and approved by
stockholders of CKE on June 21, 1995. The Board of Directors believes that the
ESPP provides a significant incentive for employees both to work toward and
invest in the growth of CKE and allows CKE to attract and retain quality
personnel.
The following summary description of the ESPP and the proposed amendments
to the ESPP is qualified in its entirety by reference to the full text of the
ESPP, a restated copy of which is attached hereto as Appendix A.
Under the ESPP, shares of CKE Common Stock are purchased, generally in the
open market, on behalf of participating employees once per fiscal quarter based
upon the amount contributed to the ESPP by the employee and CKE's matching
contribution, if any. Employee contributions to the ESPP are made through
payroll deductions, which are held in an account until used to purchase Common
Stock. Pursuant to the ESPP, as originally adopted, CKE's employees may
contribute an amount between 3% and 10% of their Base Earnings, as defined in
the ESPP. CKE's matching contributions are made one year after each purchase
date to each Participant who is still an employee. Such matching contributions
are equal to one-third of the amount contributed for most employees, and
one-half of the amount contributed for members of the Board of Directors who are
employees and certain officers of CKE or its subsidiaries. Merrill Lynch is the
Broker and Administrator under the ESPP, and makes purchases of Common Stock in
the open market during each fiscal quarter. Such purchases are held in a general
Company account until distribution is made to each Participant's individual
account.
During fiscal 1996, Messrs. Thompson, Pannier, Murphy, and Celio purchased
601, 0, 209 and 13 shares, respectively, under the ESPP. As a group, the
employees of CKE, excluding these executive officers, purchased a total of
24,959 shares under the ESPP. Through fiscal year end, a total of 26,242 shares
have been purchased by both CKE and employees since the adoption of the ESPP.
Approximately 214 employees participated in the ESPP as of January 29, 1996.
As of May 2, 1996, the CKE Board of Directors adopted, subject to approval
by the stockholders of CKE, amendments to the ESPP to: (i) change the payroll
deduction election percentage, (ii) modify the definition of "Director" for
purposes of matching contributions by CKE, and (iii) allow participants to
contribute a percentage of their Incentive Compensation as well as, or instead
of, contributions from Base Earnings. The proposed amendments, if approved by
stockholders, would change the payroll deduction election percentage from
between 3% and 10% to between 3% and 15%; modify the definition of "Director" to
include employees of CKE and its subsidiaries who hold the title of Director
(which would effectively increase to 50% from 33 1/3% the matching contributions
by CKE to their accounts under the ESPP); add a new definition entitled
Incentive Compensation, defined as compensation received by any Employee of CKE,
or its subsidiaries, as a bonus or performance-based award, which is in addition
to such Employee's regular salary; and, finally, allow Participants to
contribute to the ESPP an amount between 3% to 15% of their Incentive
Compensation.
Tax Consequences. The ESPP is not intended to qualify as an employee stock
purchase plan under Section 423 of the Internal Revenue Code of 1986 as amended
(the "Code"). To the extent a participant receives shares of the Common Stock
for a price less than its fair market value, the participant will recognize
income equal to such difference. The ESPP provides for the purchase of shares to
be made at fair market value; accordingly, there should be no income to the
participant upon the purchase of shares of the Common Stock.
BOARD RECOMMENDATION
The Board of Directors believes that it is in the best interests of CKE and
its stockholders to approve the Amendments to the ESPP in order to attract,
retain and motivate qualified employees.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF
THE AMENDMENTS TO CKE'S 1994 EMPLOYEE STOCK PURCHASE PLAN.
5
<PAGE> 8
PROPOSAL 3
AMENDMENTS TO 1994 STOCK INCENTIVE PLAN
The Board of Directors is also recommending stockholder approval of certain
amendments to CKE's 1994 Stock Incentive Plan (the "1994 Plan"), to: (a)
increase the number of shares of Common Stock which may be granted under the
1994 Plan from 1,750,000 to 3,500,000; (b) provide for a one-time, January 10,
1996, automatic grant to each of the non-employee members of the Board of
Directors of a stock option to purchase 15,000 shares of Common Stock; and (c)
increase the number of shares of Common Stock included in the annual automatic
stock option grants to: (i) from 2,500 to 5,000 shares for each non-employee
member of the Board of Directors; (ii) from 5,000 to 10,000 additional shares
for each non-employee member of the Board of Directors who is, at such time, a
member of the Executive Committee of the Board of Directors; and (iii) from
20,000 to 40,000 additional shares for the non-employee Chairman of the Board of
Directors.
The above-described amendments to the 1994 Plan were adopted by the Board
of Directors on January 10, 1996, subject to stockholder approval at the
Meeting. The 1994 Plan was adopted by the Board of Directors in May 1994, and
approved by CKE's stockholders on June 20, 1994.
As of May 6, 1996, approximately 41,118 shares of Common Stock had been
issued upon the exercise of options granted under the 1994 Plan, 861,400 shares
of Common Stock were subject to outstanding options under the 1994 Plan, and,
assuming approval of this Proposal 3, there would be available for issuance
under future awards 2,537,482 shares of Common Stock.
It is not possible to determine the amount of stock options that will be
received under the 1994 Plan by executive officers or directors, since the grant
of options (other than certain grants of options to non-employee directors)
under the 1994 Plan is within the discretion of the Compensation Committee.
Similarly, the dollar value of options granted or to be granted under the 1994
Plan cannot be accurately ascertained due to the vesting provisions thereof and
the potential fluctuation in the CKE Common Stock price over the terms of the
options. For certain information regarding options granted under the 1994 Plan
to CKE's Chief Executive Officer and certain executive officers, see "Executive
Compensation - Stock Options." During fiscal 1996, options to purchase an
aggregate of 531,000 shares of CKE Common Stock were granted under the 1994 Plan
to executive officers as a group, at a weighted average exercise price of
$12.19, and options to purchase an aggregate of 167,735 shares of CKE Common
Stock were granted under the 1994 Plan to certain employees, including current
officers who are not executive officers, at a weighted average exercise price of
$8.88. The closing sale price of CKE's Common Stock on the New York Stock
Exchange on May 6, 1996 was $20.13. If the proposed amendments to the 1994 Plan
are approved at the Meeting, each non-employee director of CKE will be entitled
to receive an annual automatic grant of options to purchase 5,000 shares, in
addition to a one-time grant of options to purchase 15,000 shares made on
January 10, 1996. See "Non-Employee Director Options."
The following summary description of the 1994 Plan and the proposed
amendments to the 1994 Plan is qualified in its entirety by reference to the
full text of the 1994 Plan, a restated copy of which is attached hereto as
Appendix B.
GENERAL
The purpose of the 1994 Plan is to enable CKE and its subsidiaries to
attract, retain and motivate their employees by providing for or increasing the
proprietary interests of such employees in CKE. Every employee of CKE, or 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, assuming stockholder approval of
this Proposal 3, would be 3,500,000, 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 1994 Plan is administered by CKE's Compensation Committee (the
"Committee"). Subject to the provisions of the 1994 Plan, the Committee has 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.
6
<PAGE> 9
AWARDS
The 1994 Plan authorizes the Committee to enter into any type of
arrangement with an eligible employee that, by its terms, involves or may
involve the issuance of (i) Common Stock, or (ii) 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 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.
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 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 CKE, an acquisition of a specified percentage of the
voting power of CKE or a dissolution, liquidation, merger, reclassification,
sale of substantially all of the property and assets of CKE or other significant
corporate transaction.
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 recipient's tax withholding obligations with
respect to such issuance, by delivering cash, by delivering previously owned
shares of Common Stock of CKE 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 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
Assuming stockholder approval of Proposal 3, the 1994 Plan would provide
for: (a) a one-time automatic grant to each of the non-employee directors as of
January 10, 1996, of a stock option to purchase 15,000 shares of Common Stock
(the "1996 Automatic Grant"); and (b) 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 Meeting of stockholders of CKE, the non-employee directors
will automatically be granted options (together with the 1996 Automatic Grant,
the "Non-Employee Director Options") to purchase the number of shares of Common
Stock as follows: each non-employee director shall receive an option to purchase
5,000 shares; each non-employee director member of the Executive Committee shall
receive an option to purchase an additional 10,000 shares; and the non-employee
Chairman of the Board of Directors shall receive an option to purchase an
additional 40,000 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 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
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
CKE 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 CKE;
7
<PAGE> 10
(2) the first date upon which the directors of CKE who were nominated by
the Board of Directors for election cease to constitute a majority
of the authorized number of directors of CKE;
(3) the dissolution or liquidation of CKE;
(4) the sale of substantially all of the property and assets of CKE; or
(5) the date of dissemination to the stockholders of a proxy statement
disclosing a change in control of CKE.
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 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 disability;
or
(3) the fifth anniversary of the date of grant of such option.
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 such recipient's rights thereunder or with respect thereto
without such recipient's 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.
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 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.
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
to such amount. See "Special Rules for Awards Granted to Insiders including
Non-Employee Directors," below.
8
<PAGE> 11
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 1994 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.
Section 162(m) of the Code generally limits to $1.0 million the corporate
deduction for compensation paid to certain executive officers, unless such
excess compensation is considered "performance-based" under Section 162(m). The
conditions for a performance-based compensation plan include, among others, a
requirement that stockholders approve the material terms of the plan. The 1994
Plan is structured so that any compensation deemed paid to an executive officer
upon exercise of an option, with an exercise price equal to
9
<PAGE> 12
the fair market value of the underlying shares on the grant date, is intended to
qualify as performance-based compensation that will not be limited by Section
162(m). The Committee intends to monitor regulations issued pursuant to Section
162(m) and to take such actions with respect to the executive compensation
program as are reasonably necessary to preserve the corporate tax deduction for
executive compensation paid.
BOARD RECOMMENDATION
The Board of Directors believes that it is in the best interest of CKE and
its stockholders to approve the amendments to the 1994 Plan in order to attract,
retain and motivate qualified employees and non-employee directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE APPROVAL OF THE AMENDMENTS TO THE 1994 STOCK INCENTIVE PLAN.
OTHER BUSINESS
Presented by Management. 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.
Presented by Stockholders. Pursuant to CKE's Bylaws, only such business
shall be conducted at an annual meeting of stockholders as is properly brought
before the meeting. For business to be properly brought before an annual meeting
by a stockholder, in addition to any other applicable requirements, timely
notice of the matter must be first given to the Secretary of CKE. To be timely,
written notice must be received by the Secretary 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. Any notice to the Secretary must
include as to each matter the stockholder proposes to bring before the meeting:
(a) a brief description of the business desired to be brought before the meeting
and the reason for conducting such business at the annual meeting; (b) the name
and record address of the stockholder proposing such business; (c) the class and
number of shares of CKE which are beneficially owned by the stockholder; and (d)
any material interest of the stockholder in such business. In addition, the
stockholders making such proposal shall promptly provide any other information
reasonably requested by CKE.
10
<PAGE> 13
OWNERSHIP OF THE COMPANY'S SECURITIES
The following table sets forth certain information regarding beneficial
ownership of CKE's Common Stock as of the Record Date, by (i) each person who is
known by CKE to beneficially own more than five percent of the outstanding CKE
Common Stock, (ii) each director of CKE, (iii) each Named Executive Officer of
CKE and (iv) all directors and executive officers of CKE 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).................. 3,722,252(2) 20.0
3811 W. Charleston, Suite 210
Las Vegas, Nevada 89102
Carl N. Karcher................................ 1,442,007(3) 7.7
1200 North Harbor Boulevard
Anaheim, California 92801
William P. Foley II............................ 307,083(4) 1.6
Daniel D. (Ron) Lane........................... 67,500(5) *
Frank P. Willey................................ 2,500(6) *
Peter Churm.................................... 16,325(7) *
Carl L. Karcher................................ 73,829(8) *
W. Howard Lester............................... 0 *
C. Thomas Thompson............................. 12,963(9) *
Loren C. Pannier............................... 251,160(9) 1.3
Rory J. Murphy................................. 103,395(9) *
Richard C. Celio............................... 96,029(9) *
All executive officers and directors
as a group (16 persons)...................... 2,400,530(10) 12.5%
</TABLE>
- ---------------
* Less than one percent.
(1) Calculated based on 18,619,565 shares of CKE Common Stock outstanding on
May 6, 1996.
(2) Based on a Schedule 13D, as restated by amendments thereto, filed by Cannae
Limited Partnership (the "Partnership"), Folco Development Corporation
("Folco"), Daniel V., Inc. and the Daniel P. Lane Revocable Trust U/D/T
July 10, 1992 (collectively, the "Daniel Entities"), Frank P. Willey and
other persons and entities who are Class B Limited Partners of the
Partnership. The aggregate number of shares set forth above includes: (1)
3,408,502 shares held directly by the Partnership; (2) 263,750 shares held
directly by Folco; and (3) 50,000 shares held directly in the aggregate by
the Daniel Entities. The restated Schedule 13D states that each of the
foregoing persons and entities has sole voting and dispositive power with
respect to the shares directly held by him or it. 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 a director of Bognor Regis, Inc. and owns and controls
Folco.
(3) Includes: (a) 1,313,924 shares beneficially held by the Trust; (b) 27,400
shares held by the Carl N. and Margaret M. Karcher Foundation, the
beneficial ownership of which the Trust and Mr. and Mrs. Karcher disclaim;
(c) 620 shares held directly by Mr. Karcher; (d) 63 shares held by Mrs.
Karcher; and (e) 100,000 shares subject to presently exercisable options or
options that become exercisable on or prior to June 30, 1996. Mr. Karcher
is the sole Trustee of the Trust and has 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 the lifetime beneficiaries of the Trust.
The Trust and Mr. and Mrs. Karcher disclaim any beneficial ownership in the
3,408,502 shares owned by the Partnership.
11
<PAGE> 14
(4) Includes 263,750 shares held directly by Folco and 43,333 shares subject to
presently exercisable options or options that become exercisable on or
prior to June 30, 1996. Excludes (a) an aggregate of 3,458,502 of the
shares described in footnote (2) above which are held directly by the
Partnership and the Daniel Entities, and (b) 497,000 shares held by
Fidelity National Financial, Inc. ("Fidelity"), of which Mr. Foley is a
director and an executive officer.
(5) Includes 50,000 shares held directly by the Daniel Entities and 17,500
shares subject to presently exercisable options or options that become
exercisable on or prior to June 30, 1996. Excludes (a) an aggregate of
3,672,252 of the shares described in footnote (2) above which are held
directly by the Partnership and Folco, and (b) 497,000 shares held by
Fidelity, of which Mr. Lane is a director.
(6) Includes 2,500 shares subject to presently exercisable options or options
that become exercisable on or prior to June 30, 1996. Excludes (a) an
aggregate of 3,722,252 of the shares described in footnote (2) above which
are held directly by the Partnership, Folco and the Daniel Entities, and
(b) 497,000 shares held by Fidelity, of which Mr. Willey is a director and
an executive officer.
(7) Includes 4,501 shares subject to presently exercisable options or options
that become exercisable on or prior to June 30, 1996.
(8) Includes (a) 180 shares held by Carl L. Karcher; (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; (c) 4,501
shares subject to presently exercisable options or options that become
exercisable on or prior to June 30, 1996; and (d) 3,782 shares owned by
Carl L. Karcher's minor children.
(9) Includes for Messrs. Thompson, Pannier, Murphy and Celio (a) no shares,
5,675 shares, 1,495 shares and 539 shares, respectively, held in trust for
the benefit of such persons under CKE's voluntary contributory profit
sharing and savings investment plan; and (b) 8,333 shares, 183,628 shares,
101,559 shares and 95,410 shares, respectively, subject to presently
exercisable options or options that become exercisable on or prior to June
30, 1996. Also includes for Mr. Thompson 100 shares owned by his minor
children.
(10) Includes 27,739 shares subject to presently exercisable options or options
that become exercisable on or prior to June 30, 1996 which are held by
executive officers not listed in the above table. Excludes the 3,408,502
shares described in footnote (2) above which are held directly by the
Partnership and 497,000 shares which are held directly by Fidelity.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR THE FISCAL YEAR
ENDED JANUARY 29, 1996.
The Committee, comprised of two 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 CKE (each, an "Executive Officer"),
including the Named Executive Officers. Set forth below is a report submitted by
the Committee addressing compensation policies for fiscal 1996 as they affected
(i) William P. Foley II, the Chief Executive Officer of CKE, and (ii) 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 stockholder value. In this regard, the
Committee believes executive compensation should be comprised of cash as well as
equity-based programs. Base salaries are generally set at market levels in order
to attract and retain qualified and experienced executives. With respect to
equity-based compensation, the Committee believes that an integral part of CKE's
compensation program is the ownership and retention of CKE's Common Stock by its
Executive Officers. By providing Executive Officers with a meaningful stake in
CKE, the value of which is dependent on CKE's long-term success, a commonality
of interests between CKE's Executive Officers and its stockholders is fostered.
12
<PAGE> 15
Relationship of Performance to Compensation. Compensation that may be
earned by the Executive Officers in any fiscal year consists primarily of base
salary, cash bonus and stock options. The significant factors that were
considered in establishing the components of each Executive Officer's
compensation package for fiscal 1996 are summarized below. The Committee, in its
discretion, may apply entirely different factors, particularly different
measures of financial performance, in setting executive compensation for future
fiscal years, but all compensation decisions will be designed to further the
general compensation policies indicated above.
-- Base Salary. The base salary for each Executive Officer is set on the
basis of personal performance, the salary levels in effect for comparable
positions with CKE's principal competitors (including, but not limited to,
CKE's self-determined peer group set forth in the "Stock Performance
Graph"), and CKE's financial performance relative to such competitors.
Factors relating to individual performance that are assessed in setting
base compensation are based on the particular duties and areas of
responsibility of the individual Executive Officer. Factors relating to
CKE's financial performance that may be related to increasing or decreasing
base salary include revenues and earnings. The establishment of base
compensation involves a subjective assessment and weighing of the foregoing
criteria and is not based on any specific formula. After reviewing the
major events and changes that occurred in fiscal 1995, the Committee
approved increases in some base salaries to remain competitive with market
base salaries and to reflect new responsibilities for some Executive
Officers.
-- Cash Bonus. Annual bonuses are earned by each Executive Officer on the
basis of CKE's achievement of pre-tax income targets established at the
start of the fiscal year and on the basis of the particular Executive
Officer's duties and areas of responsibility. Bonus amounts are established
based on various levels of performance against such targets. Following the
completion of the fiscal year, the Committee assesses CKE and individual
performance against the established targets and provides for annual bonuses
based on the targeted performance of levels actually achieved. Because CKE
achieved the targeted levels of pre-tax income for fiscal 1996, the
Committee approved bonuses for CKE's Executive Officers in the total amount
of $424,782, all of which was paid subsequent to the fiscal 1996 year end.
-- Stock Options. Stock option grants motivate Executive Officers to manage
the business to improve long-term CKE performance, and align the interests
of Executive Officers with stockholder value. Customarily, option grants
are made with exercise prices equal to the fair market value of the shares
on the grant date and will be of no value unless the market price of CKE's
outstanding shares appreciates, thereby aligning a substantial part of the
Executive Officer's compensation package with the return realized by the
stockholders. Options generally vest in equal installments over a period of
time, contingent upon the Executive Officer's continued employment with
CKE. Accordingly, an option will provide a return to the Executive Officer
only if the Executive Officer remains employed by CKE and the market price
of the underlying shares appreciates over the option term. The size of an
option grant is designed to create a meaningful opportunity for stock
ownership and is based upon the individual's current position with CKE,
internal comparability with option grants made to other CKE executives and
the individual's potential for future responsibility and promotion over the
option term. The Committee has established an award program which takes
into account the level of responsibility in the organization, and total
compensation compared to comparable companies, in making option grants to
the Executive Officers in an attempt to target a fixed number of unvested
option shares based upon the individual's position with CKE and the
Executive Officer's existing holdings of unvested options. As such, the
award of stock options requires subjective judgment as to the amount of the
option. However, the Committee does not adhere strictly to these guidelines
and will occasionally vary the size of the option grant, if any, made to
each Executive Officer as circumstances warrant.
Chief Executive Officer Compensation. William P. Foley II became CKE's
Chief Executive Officer in October 1994. Mr. Foley did not receive any
compensation during fiscal 1995 for such position. In March 1995, Mr. Foley's
base compensation was established at $200,000 for fiscal 1996, based on
information provided by Kieckhafer, Kraus & Company ("Kieckhafer"). While
certain of the companies taken into
13
<PAGE> 16
account by Kieckhafer were the same as those considered in setting Mr. Foley's
compensation level for fiscal 1996, the Kieckhafer information also included a
number of other companies.
Corporate Deduction for Compensation. Section 162(m) of the Code generally
limits to $1.0 million the corporate deduction for compensation paid to certain
executive officers, unless certain requirements are met. CKE's 1994 Stock
Incentive Plan is structured so that any compensation deemed paid to an
executive officer upon exercise of an option, with an exercise price equal to
the fair market value of the underlying shares on the grant date, will qualify
as performance-based compensation that will not be limited by Section 162(m).
The Committee intends to monitor regulations issued pursuant to Section 162(m)
and to take such actions with respect to the executive compensation program as
are reasonably necessary to preserve the corporate tax deduction for executive
compensation paid.
Peter Churm (Chairman)
Frank P. Willey
The report of the Compensation Committee of the Board of Directors shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that CKE
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
14
<PAGE> 17
STOCKHOLDER PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN AMONG CKE,
RUSSELL 2000 INDEX AND SELECTED RESTAURANT PEER GROUP INDEX(1)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD CKE RESTAU- RESTAURANT
(FISCAL YEAR COVERED) RANTS, INC. RUSSELL 2000 PEER GROUP
<S> <C> <C> <C>
1/28/91 100 100 100
1/27/92 128 151 156
1/25/93 133 172 165
1/31/94 212 203 170
1/30/95 108 191 141
1/29/96 260 245 111
</TABLE>
(1) Restaurant Peer Group 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.
The Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that CKE specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
15
<PAGE> 18
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth, for the years indicated, the compensation
awarded to, earned by or paid to (i) the Chief Executive Officer of CKE and (ii)
each of the four other most highly compensated executive officers (collectively
with the Chief Executive Officer, the "Named Executive Officers") of CKE who
were so employed by CKE as of January 29, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
-------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND TITLE YEAR ($) ($) ($)(1) ($) (#) ($)(2)
- --------------------------------- ------ ------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William P. Foley II.............. 1996 194,904 -- -- 225,000 --
Chairman, Chief 1995 -- -- -- 27,500 --
Executive Officer 1994 -- -- -- -- --
C. Thomas Thompson............... 1996 250,000 152,000 5,055 125,000 --
President and Chief 1995 46,535 -- -- -- --
Operating Officer 1994 -- -- -- -- --
Loren C. Pannier................. 1996 190,184 30,000 14,469 22,500 --
Senior Vice President, 1995 193,842 -- 14,890 10,000 3,224
Purchasing/Distribution 1994 189,139 33,282 12,058 23,408 2,912
Rory J. Murphy................... 1996 187,200 77,380 14,635 45,000 --
Senior Vice President, 1995 182,192 -- 12,284 15,000 2,849
Restaurant Operations 1994 165,654 40,000 11,841 61,200 2,477
Richard C. Celio................. 1996 157,115 56,000 13,949 30,000 --
Senior Vice President, 1995 146,750 -- 14,668 10,000 2,175
Development 1994 133,049 28,000 13,982 50,108 1,435
</TABLE>
- ---------------
(1) "Other Annual Compensation" includes the following amounts for Messrs.
Thompson, Pannier, Murphy and Celio for fiscal 1996: (a) auto allowance
payments of $787, $9,960, $9,960, and $9,960, respectively, (b)
reimbursements by CKE for medical and dental costs of $2,702, $2,597, $3,556
and $3,407, respectively, and (c) payments of life insurance premiums by CKE
of $1,566, $1,912, $1,119, and $582, respectively.
(2) "All Other Compensation" includes matching and voluntary contributions by
CKE to CKE's voluntary contributory profit sharing and 401(k) savings plan
for Messrs. Pannier, Murphy, and Celio. As of January 1995, CKE no longer
matches contributions to the CKE 401(k) savings plan. In fiscal 1996, there
were no voluntary contributions by CKE to CKE's voluntary contributory
profit sharing plan or 401(k) savings plan.
16
<PAGE> 19
STOCK OPTIONS
The following table sets forth certain information with respect to the
stock options granted during fiscal 1996 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- --------------------------------------------------------------------------------------- VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OR OPTION TERM(4)
OPTIONS FISCAL BASE PRICE EXPIRATION -------------------------
NAME GRANTED(#) YEAR(1) ($/SHARE)(2) DATE(3) 5%($) 10%($)
- ------------------------- ---------- ------------- ------------ ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William P. Foley II...... 75,000 $ 6.88 April 18, 2005 $ 325,080 $ 820,440
150,000 $14.75 January 9, 2006 $1,393,875 $3,517,875
---------- ------
225,000 25.1%
C. Thomas Thompson....... 25,000 $ 6.75 February 5, 2005 $ 106,313 $ 268,313
100,000 $14.75 January 9, 2006 $ 929,250 $2,345,250
---------- ------
125,000 13.9%
Loren C. Pannier......... 12,500 $ 6.88 April 18, 2005 $ 54,180 $ 136,740
10,000 $14.75 January 9, 2006 $ 92,925 $ 234,525
---------- ------
22,500 2.5%
Rory J. Murphy........... 20,000 $ 6.88 April 18, 2005 $ 86,688 $ 218,784
25,000 $14.75 January 9, 2006 $ 232,313 $ 586,313
---------- ------
45,000 5.0%
Richard C. Celio......... 20,000 $ 6.88 April 18, 2005 $ 86,688 $ 218,784
10,000 $14.75 January 9, 2006 $ 92,925 $ 234,525
---------- ------
30,000 3.3%
</TABLE>
- ---------------
(1) Based on the number of shares being subject to options granted to all
employees aggregating 896,406 in fiscal 1996.
(2) The fair market value of CKE's 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.
(4) Calculated over a ten-year period, representing the terms of the options.
These are assumed rates of appreciation, and are not intended to forecast
future appreciation of the CKE Common Stock.
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to stock
options exercised during fiscal 1996 and year-end stock option values.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
(#) ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) VALUE REALIZED($) UNEXERCISABLE UNEXERCISABLE
- -------------------------- --------------- ----------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
William P. Foley II....... -- -- 9,167/243,333 $ 82,503/$2,893,499
C. Thomas Thompson........ -- -- --/125,000 $ --/$1,643,750
Loren C. Pannier.......... 33,240 $ 250,021 207,896/ 36,968 $1,571,734/$ 372,789
Rory J. Murphy............ -- -- 69,492/ 75,400 $ 583,912/$ 784,702
Richard C. Celio.......... -- -- 68,707/ 53,369 $ 636,229/$ 495,671
</TABLE>
17
<PAGE> 20
EMPLOYMENT AGREEMENTS.
In November 1994, CKE entered into a two-year employment agreement with C.
Thomas Thompson. Mr. Thompson's annual base salary payable under this agreement
is $250,000. Mr. Thompson's employment agreement provides for cash bonuses
during his employment term. For the first year of his employment term, Mr.
Thompson's bonus, which may not exceed $200,000, will be based on certain
percentage cost savings, if any, realized by CKE. For the second year of his
employment term, Mr. Thompson's bonus, which may not exceed $250,000, will be
based upon the increase in market value, if any, of CKE's Common Stock. The
employment agreement entitles Mr. Thompson to participate in CKE's stock
incentive plan, and granted Mr. Thompson an option to purchase 25,000 shares
under CKE's 1994 Stock Incentive Plan at the market price on the date of grant,
for a term of 10 years, vesting 33 1/3% on each of the first three anniversaries
of the grant date. In the event CKE terminates Mr. Thompson's employment without
cause, CKE will be obligated to pay a lump sum equal to the lesser of six
month's compensation or the balance of compensation due for the remainder of the
employment agreement, plus any accrued and unpaid compensation. In addition, the
employment agreement provides for certain payments in the event CKE is acquired
by or merged with another entity, or another entity acquires all or
substantially all of CKE's assets, resulting in such other entity gaining
direction or control of CKE and Mr. Thompson is terminated for other than cause.
In such event, Mr. Thompson's agreement requires CKE to pay, in a lump sum, Mr.
Thompson's base salary for the balance of the employment term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
During fiscal 1996, the members of the Compensation Committee of CKE's
Board of Directors were Messrs. Churm and Willey, neither of whom was an
officer, former officer or employee of CKE during fiscal 1996. During fiscal
1996, Mr. Foley served as Chairman of the Board and Chief Executive Officer of
Fidelity National Financial, Inc., Mr. Lane served as a director of Fidelity
National Financial, Inc., and Mr. Willey served as President and a director of
Fidelity National Financial, Inc.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934 requires CKE's
executive officers and directors, and persons who own more than 10% of a
registered class of CKE's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors and greater than 10% stockholders are required by
SEC regulations to furnish CKE with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, CKE believes that, during fiscal 1996, all filing
requirements applicable to its executive officers, directors and greater than
10% stockholders were satisfied, except that the Form 4 required to be filed in
October 1995 by C. Thomas Thompson reflecting the indirect ownership of shares
of CKE's Common Stock purchased by his minor son, was approximately one month
late, and the Form 4 required to be filed in October 1995 by C. Thomas Thompson
reflecting the direct ownership of shares of CKE's Common Stock purchased by Mr.
Thompson pursuant to the ESPP, was approximately three months late, the Form 4
required to be filed in October 1995 by Rory J. Murphy reflecting the direct
ownership of shares of CKE's Common Stock purchased by Mr. Murphy pursuant to
the ESPP, was approximately three months late, and the Form 3, Initial Statement
of Beneficial Ownership of securities, filed in January 1996 by W. Howard
Lester, was approximately one month late.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
CKE leases the land and buildings, which include the headquarters of CKE,
its distribution center and one restaurant location in Carl Karcher Plaza,
located at 1200 North Harbor Boulevard, Anaheim, California from Carl N.
Karcher, as sole trustee of the Carl N. and Margaret M. Karcher Trust (the
"Trust"). The original term of the lease expires in April 2003, and CKE has the
option to renew the lease for two additional five-year terms. The current rent
under the lease is $89,276 per month, subject to adjustment every five years.
18
<PAGE> 21
CKE also leases two adjacent parcels of land in Carl Karcher Plaza from the
Trust. One parcel is being utilized by CKE 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 CKE has the option to renew each of these leases for
two additional five-year terms. The aggregate rentals paid by CKE to the Trust
for the corporate offices and adjacent facilities during fiscal 1996 were
$1,211,625.
CKE 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 the greater of $5,735 and $6,799,
respectively, or 5.5% of annual gross sales. The terms of the third lease
require a 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 by CKE to the Trust for these restaurant properties during fiscal
1996 were $298,461.
In January 1994, CKE entered into an Employment Agreement with Carl N.
Karcher which expires in 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 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 Committee. The agreement entitles Mr.
Karcher to participate in CKE's stock option program and provided for an initial
grant of an option to purchase 100,000 shares with an exercise price equal to
the then fair market value of CKE's Common Stock on the date of grant, which was
$13.38. The agreement provides that if Mr. Karcher is terminated by CKE without
cause or, if after a change in control of CKE 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 provides for
a retirement benefit for Mr. Karcher in the amount of $200,000 per year for life
after the end of the employment term.
During fiscal 1995, CKE made two advances to Carl N. Karcher aggregating
$714,756. CKE accepted a promissory note in payment of the first, which totaled
$250,000. The note bears interest at 7% and matures in December 1998. The second
advance, which totaled $464,756, is noninterest-bearing, is currently being
repaid through biweekly payroll deductions, and will be paid in full in December
1998. During fiscal 1996, the largest amount outstanding under these advances
was $668,602, of which $594,692 remained outstanding at the end of fiscal 1996.
CKE leases a restaurant property from Loren C. Pannier, an executive
officer of CKE, and his wife. This lease expires in July 2004 and provides for 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. CKE leases two additional
restaurant properties in which Mr. Pannier has a 56% and a 33% undivided
interest. These leases expire between January 2001 and April 2002 and provide
for minimum monthly rentals equal to (a) the greater of $3,290 or 5.5% of annual
gross sales of the Carl's Jr. restaurant at one location and (b) the greater of
$3,440 or 6% of annual gross sales of the Carl's Jr. restaurant at the other
location. The aggregate rentals paid by CKE to Mr. Pannier under all three
leases during fiscal 1996 were $134,291.
CLK, Inc. ("CLK") is a franchisee of CKE and currently operates 23 Carl's
Jr. restaurants. Carl L. Karcher, a director of CKE, is an affiliate of CLK. CLK
is obligated, pursuant to two Development Agreements with CKE, to develop and
become a franchisee with respect to four additional Carl's Jr. restaurants at
varying times between 1996 and 2001. In connection with the operation of its 23
franchised restaurants, CLK regularly purchases food and other products from CKE
on the same terms and conditions as other franchisees. During fiscal 1996, these
purchases totaled approximately $6,054,411. CLK 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 CKE for its regional and national advertising efforts on behalf of all
franchisees. During fiscal 1996, CLK paid royalty fees of $711,021 and
advertising and promotional fees of $633,759 for all 23 restaurants combined.
CLK is also a lessee or sublessee
19
<PAGE> 22
of CKE with respect to 15 restaurant locations. Rental payments equal the
greater of a percentage of the annual gross sales, ranging from 5% to 10%, of
the restaurant or minimum monthly rentals ranging from $4,157 to $8,750. The
leases expire between November 1999 and June 2011. The rentals paid under these
leases during fiscal 1996 aggregated $1,120,162. CLK was also indebted to CKE in
fiscal 1996 under interest bearing promissory notes. The largest aggregate
amount outstanding under these notes during fiscal 1996 was $376,546, none of
which remained payable to CKE at the end of fiscal 1996. During fiscal 1996, CKE
sold certain restaurant equipment to CLK for an aggregate purchase price of
$159,608, which amount was paid by CLK in the form of a promissory note bearing
interest at 7% and maturing in August 1997. During fiscal 1996, the largest
aggregate amount outstanding under this note was $154,816, of which $143,061
remained outstanding at the end of fiscal 1996.
JCK, Inc. ("JCK") is a franchisee of CKE and currently operates seven
Carl's Jr. restaurants. Joseph C. Karcher is the son of Carl N. Karcher and an
affiliate of JCK. JCK is obligated pursuant to two Development Agreements with
CKE to develop and become a franchisee with respect to three additional Carl's
Jr. restaurants at varying times between November 1996 and September 1998. In
connection with the operation of its seven franchised restaurants, JCK regularly
purchases food and other products from CKE on the same terms and conditions as
other franchisees. During fiscal 1996, these purchases totaled approximately
$1,408,560. JCK is also obligated to pay a percentage of such restaurants'
annual gross sales ranging from zero to 4% as royalty fees and an additional
1.5% to 3.5% as advertising and promotional fees to reimburse CKE for its
regional and national advertising efforts on behalf of all franchisees. During
fiscal 1996, JCK was not obligated to pay royalty fees, but paid advertising and
promotional fees of $139,625. In December 1994, CKE loaned the amount of
$324,168 to JCK pursuant to the terms of a loan agreement. The loan amount
represents past due sums owed to CKE through December 1994 for initial franchise
fees, royalty fees and advertising fees. The loan does not bear interest, is
being repaid in monthly installments, and matures in July 2004. In addition, the
loan agreement amended JCK's royalty obligations under its franchise agreements
to a sliding scale based upon a percentage of gross sales from zero commencing
in December 1994 to 4% in the year 2000 and thereafter. During fiscal 1996 the
largest aggregate amount outstanding under the loan agreement was $345,118, of
which $305,118 remained outstanding at the end of fiscal 1996.
Wiles Restaurants, Inc. ("Wiles") is a franchisee of CKE and currently
operates eight Carl's Jr. restaurants. Anne M. Wiles is the daughter of Carl N.
Karcher and an affiliate of Wiles. In connection with the operation of its eight
franchised restaurants, Wiles regularly purchases food and other products from
CKE on the same terms and conditions as other franchisees. During fiscal 1996,
these purchases totaled approximately $2,198,897. Wiles is 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 CKE for its regional
and national advertising efforts on behalf of all franchisees. During fiscal
1996, Wiles paid royalty fees of $279,268 and advertising and promotional fees
of $230,283 for all eight restaurants combined. Wiles is also a lessee of CKE
with respect to one restaurant location. Rental payments equal the greater of 8%
of the annual gross sales of the restaurant or a minimum monthly rental equal to
$8,768. The rentals paid under this lease during fiscal 1996 aggregated
$105,222. Wiles was also indebted to CKE in fiscal 1996 under interest bearing
promissory notes. The largest aggregate amount outstanding under these notes
during fiscal 1996 was $296,605, none of which remained payable to CKE at the
end of fiscal 1996.
Bernard Karcher Investments, Inc. ("BKI") is a franchisee of CKE and
currently operates 12 Carl's Jr. restaurants. Bernard W. Karcher is the brother
of Carl N. Karcher and an affiliate of BKI. In connection with the operation of
its 12 franchised restaurants, BKI regularly purchases food and other products
from CKE on the same terms and conditions as other franchisees. During fiscal
1996, these purchases totaled approximately $3,728,314. BKI 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 CKE for its regional and
national advertising efforts on behalf of all franchisees. During fiscal 1996,
BKI paid royalty fees of $475,591 and advertising and promotional fees of
$415,982 for all 12 restaurants combined. BKI is also a lessee of CKE with
respect to two restaurant locations. Rental payments equal a percentage of
annual gross sales for one of the restaurants and the greater of a percentage of
the annual gross sales of the restaurant or a minimum monthly rental equal to
$16,944 for the other. The percentage of annual gross sales ranges between 7.5%
and 10%. The leases expire in
20
<PAGE> 23
January 2006 and September 2012. The rentals paid under these leases during
fiscal 1996 aggregated $207,166.
R.W.W., Inc. ("RWW") is a franchisee of CKE and currently operates seven
Carl's Jr. restaurants. Robert W. Wisely, an executive officer of CKE, is an
affiliate of RWW. In connection with the operation of its seven restaurants, RWW
regularly purchases food and other products from CKE on the same terms and
conditions as other franchisees. During fiscal 1996, these purchases totaled
approximately $1,800,186. RWW is also obligated to pay a percentage of such
restaurants' annual gross sales ranging from zero to 4% as royalty fees and an
additional 4.5% as advertising and promotional fees to reimburse CKE for its
regional and national advertising efforts on behalf of all franchisees. During
fiscal 1996, RWW paid royalty fees of $119,232 and advertising and promotional
fees of $259,481. RWW is also a sublessee of CKE with respect to six restaurant
locations. Rental payments equal a percentage of the annual gross sales of the
restaurant ranging from 4% to 12.5%, or minimum monthly rentals ranging from
$9,166 to $9,473. The leases expire between August 1999 and July 2006. Total
rents paid under these six leases during fiscal 1996 aggregated $410,886. RWW
was also indebted to CKE in fiscal 1996 under interest bearing promissory notes.
The largest aggregate amount outstanding under these notes during fiscal 1996
was $886,443, none of which remained payable to CKE at the end of fiscal 1996.
TWM Industries ("TWM") is a franchisee of CKE and currently operates 15
Carl's Jr. restaurants. C. Thomas Thompson, an executive officer of CKE, is an
affiliate of TWM. In connection with the operation of its 15 franchised
restaurants, TWM regularly purchases food and other products from CKE on the
same terms and conditions as other franchisees. During fiscal 1996, these
purchases totaled approximately $3,151,279. TWM is also obligated to pay a
percentage of such restaurants' annual gross sales ranging from 1.5% to 4% as
royalty fees and an additional 4.5% as advertising and promotional fees to
reimburse CKE for its regional and national advertising efforts on behalf of all
franchisees. During fiscal 1996, TWM paid royalty fees of $355,186 and
advertising and promotional fees of $525,738. TWM was also a lessee or sublessee
of CKE with respect to 13 restaurant locations during fiscal 1996, one of which
leases was terminated in March 1996. Rental payments equal a percentage of the
annual gross sales of the restaurant ranging from 3.5% to 8% or a minimum
monthly rental ranging from $4,266 to $20,386. The leases expire between May
1996 and January 2012. Total rents paid under these thirteen leases during
fiscal 1996 aggregated $872,333.
In December 1995, CKE sold certain of its franchise notes receivable, with
recourse, to an independent third party. Included in the franchise notes
receivable sold were notes in the aggregate principal amount of $1,379,689
payable to CKE from CLK, Wiles and RWW. In connection with this transaction, CKE
also agreed to guarantee the payment obligations of CLK, Wiles and RWW under
these notes in fiscal 1997 up to a maximum amount of $816,983.
Restaurants leased from related parties generally were constructed by CKE
on land acquired by CKE. The properties were then sold to these parties and
leased back by CKE. CKE believes that these sale and leaseback arrangements are
at rental rates generally similar to those with unaffiliated third parties.
Except as noted above, CKE presently does not intend to enter into leases for
new restaurants with related parties. Except as described above, all of the
foregoing franchise and lease arrangements are on terms generally similar to
those with unaffiliated parties.
INDEPENDENT AUDITORS
Selection of an independent auditor is made by the Board of Directors upon
consultation with the Audit Committee. CKE's independent auditor for the fiscal
year ended January 29, 1996 was KPMG Peat Marwick LLP. The Board of Directors
will vote upon the selection of an auditor for the current fiscal year at a
future Board meeting.
Representatives of KPMG Peat Marwick LLP are expected to attend the Meeting
and be available to respond to appropriate questions. The representatives of
KPMG Peat Marwick LLP also will have an opportunity to make a formal statement,
if they so desire.
21
<PAGE> 24
STOCKHOLDERS' PROPOSALS FOR 1997 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 CKE's Annual Meeting of Stockholders in 1997 must be received by CKE by
January 21, 1997 in order to be considered for inclusion in CKE's proxy
materials. The Board of Directors of CKE will determine whether any such
proposal will be included in its 1997 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 1997 Annual
Meeting and has held such securities for at least one year, and who shall
continue to own such securities through the date on which the meeting is held.
ANNUAL REPORT
CKE's 1996 Annual Report, including consolidated financial statements for
fiscal 1996, accompanies this Proxy Statement. The Annual Report is not to be
regarded as proxy solicitation material.
Stockholders are urged to sign and return their proxies without delay.
For the Board of Directors
WILLIAM P. FOLEY II,
Chairman of the Board
May 20, 1996
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
JANUARY 29, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO INVESTOR
RELATIONS, CKE RESTAURANTS, INC., P.O. BOX 4349, ANAHEIM, CALIFORNIA 92803.
22
<PAGE> 25
APPENDIX A
CKE RESTAURANTS, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN*
1. Purpose of Plan. The purpose of this 1994 Employee Stock Purchase Plan
(the "Plan") is to encourage a sense of proprietorship on the part of employees
of CKE Restaurants, Inc., a Delaware corporation (the "Company"), and its
subsidiary corporations (as defined below) by assisting them in making regular
purchases of shares of the Company, and thus to benefit the Company by
increasing such employees' interest in the growth of the Company and subsidiary
corporations and in such entities' financial success. Participation in the Plan
is entirely voluntary, and the Company makes no recommendations to its employees
as to whether they should participate.
2. Definitions.
2.1 "Base Earnings" shall mean the Employee's regular salary rate
before deductions required by law and deductions authorized by the Employee.
Base Earnings do not include: pay for overtime, extended workweek schedules, or
any other form of extra compensation; payments by the Company or subsidiary
corporations, as applicable, of social security, worker's compensation,
unemployment compensation, any disability payments or other payments required by
statute; or contributions by the Company or subsidiary corporations, as
applicable, for insurance, annuity, or other employee benefit plans.
2.2 "Board" shall mean the Board of Directors of the Company.
2.3 "Broker" shall mean the financial institution designated to act as
Broker under the Plan pursuant to Paragraph 17 hereof.
2.4 "Brokerage Account" shall mean an account established on behalf of
each Participant pursuant to Paragraph 9.1 hereof.
2.5 "Committee" shall mean a Stock Purchase Committee appointed by the
Board.
2.6 "Common Stock" shall mean the Common Stock of the Company.
2.7 "Company" shall mean the Company Restaurants, Inc., a Delaware
corporation, or any successor.
2.8 "Company Account" shall mean the account established in the name of
the Company pursuant to Paragraph 7.2 hereof.
2.9 "Employee" shall mean any person who has reached the age of
majority and who is currently employed by the Company or one of its subsidiary
corporations (i) on an hourly basis as a restaurant employee for at least 30
hours per week and has been so employed continuously during the preceding one
(1) year (provided that the Board or the Committee may in its discretion waive
such one (1) year requirement), excluding non-employees and persons on leave of
absence; (ii) on an hourly basis as a non-restaurant employee for at least 30
hours per week and has been so employed continuously during the preceding 90
days (provided that the Board or the Committee may in its discretion waive such
90-day requirement), excluding non-employees and persons on leave of absence or
(iii) is exempt from the overtime and minimum wage requirements under federal
and state laws and has been so employed continuously during the preceding 90
days (provided that the Board or the Committee may in its discretion waive such
90-day requirement), excluding non-employees and persons on leave of absence. An
Employee may also be referred to herein as a Participant.
2.10 "Enrollment Form" shall mean the Employee Stock Purchase Plan
Enrollment Form.
- ---------------
* As amended, subject to stockholder approval, by resolution of the Board of
Directors as of May 2, 1996.
A-1
<PAGE> 26
2.11 "Incentive Compensation" shall mean compensation received by any
Employee of the Company, or its subsidiaries, as a bonus or performance-based
award, which is in addition to such Employee's regular salary.
2.12 "Interested Party" shall mean the persons described in Paragraph
16 hereof.
2.13 "Plan" shall mean this 1994 Employee Stock Purchase Plan.
2.14 "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
subsidiary corporation, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a subsidiary corporation.
3. Administration. The Plan shall be administered by the Board or, in the
discretion of the Board, by the Committee which shall consist of not less than
two persons to be appointed by, and to serve at the pleasure of, the Board. No
member of the Board or Committee who is not an Employee shall be eligible to
participate in the Plan. An aggregate of 500,000 shares of Common Stock shall be
subject to the Plan, provided that such number shall be automatically adjusted
to reflect any stock split, reverse stock split, stock dividend,
recapitalization, merger, consolidation, combination, reclassification or
similar corporate change. The Board or the Committee shall have full authority
to construe, interpret, apply and administer the Plan and to establish and amend
such rules and procedures as it deems necessary or appropriate from time to time
for the proper administration of the Plan. In addition, the Board or the
Committee may engage or hire such persons, including without limitation, the
Broker, to provide administrative, recordkeeping and other similar services in
connection with its administration of the Plan, as it may deem necessary or
appropriate from time to time. The members of the Board and the Committee and
the officers of the Company shall be entitled to rely upon all certificates and
reports made by such persons, including the Broker, and upon all opinions given
by any legal counsel or investment adviser selected or approved by the Board or
the Committee. The members of the Board and the Committee and the officers of
the Company shall be fully protected in respect of any action taken or suffered
to be taken by them in good faith in reliance upon any such certificates,
reports, opinions or other advice of any such person, and all action so taken or
suffered shall be conclusive upon each of them and upon all Participants. The
Company shall indemnify each member of the Board and the Committee and any other
officer or employee of the Company who is designated to carry out any
responsibilities under the Plan for any liability arising out of or connected
with his or her duties hereunder, except such liability as may arise from such
person's gross negligence or willful misconduct.
4. Eligibility. Any Employee as defined in Paragraph 2.9 shall be eligible
to participate in the Plan. Any Employee participating in the Plan who, after
the commencement of a particular Offering Period, as defined in Paragraph 5,
shall for any reason fail to meet the standards of eligibility shall be
considered to have withdrawn from the Plan, effective as of the date upon which
the Participant shall have become ineligible. Any reference in this Plan to
withdrawal by a Participant from the Plan shall include ineligibility as
described in this Paragraph.
5. Offering Periods. Shares shall be offered pursuant to this Plan in
periods which coincide with the Company's fiscal quarters ("Offering Periods"),
commencing on the effective date of the Plan pursuant to Paragraph 22 and
continuing thereafter until terminated in accordance with Paragraph 15. The
Board shall have the power to change the duration of Offering Periods if such
change is announced at least 10 days prior to the scheduled beginning of the
first Offering Period to be affected.
6. Participation. Participation in the Plan is voluntary. An eligible
Employee may apply to participate in the Plan by submitting to the Company's
Benefits Department an Enrollment Form authorizing a payroll deduction and
purchase of shares. The Enrollment Form shall be on a form provided by the
Company and may be submitted to the Company at any time. Participation shall not
be effective until the Enrollment Form is reviewed and accepted by the Company
by written notice to the Employee. Once the Enrollment Form has been reviewed
and accepted by the Company, participation in the Plan shall commence
immediately.
A-2
<PAGE> 27
7. Payroll Deductions.
7.1 Election. At the time a Participant submits an Enrollment Form, the
Participant shall elect to have payroll deductions made on each payday during
the Offering Period at a whole percentage from 3% to 15% of the Base Earnings
which the Participant is to receive on such payday. In addition to the deduction
from Base Earnings, or in lieu of the deduction from Base Earnings, a
Participant may elect, upon submission of an Enrollment Form, to have payroll
deductions made at a whole percentage from 3% to 15% of the Incentive
Compensation which the Participant is to receive.
7.2 Holding of Funds. All payroll deductions authorized by each
Participant shall be held in a non-interest account in the name of the Company
Restaurants, Inc. Employee Stock Purchase Plan (the "Company Account") until
used to purchase Common Stock and shall not be used for any other purpose. The
Company shall maintain records reflecting the amount in the Company Account of
each Participant. All withholding taxes in connection with a Participant's
payroll deduction shall be deducted from the remainder of the Base Earnings
and/or Incentive Compensation paid to the Participant and not from the amount to
be placed in the Company Account. A Participant may not make any additional
payments into the Company Account except as provided in Paragraph 18. All
amounts in the Company Account derived from payroll deductions shall be referred
to as the "Participant Contribution."
7.3 Changes in Election. Participation in the Plan will continue until
the Participant withdraws from the Plan, is no longer eligible to participate or
the Plan is terminated. Such participation shall be on the basis of the payroll
deduction election submitted by such Employee to the Company and then currently
in effect. Each such election shall remain in effect until the effective date of
any change in the amount of payroll deduction as requested by the Participant
and accepted by the Company. To be effective in any Offering Period, a change in
the amount of payroll deduction must be requested in writing and submitted to
the Company. A Participant may change his withholding percentage at any time
during an Offering Period, but only one time during any Offering Period. If a
Participant's Base Earnings change during an Offering Period, the amount of the
payroll deduction will be changed to the figure reflecting the Participant's
previously elected deduction percentage applied to his or her new Base Earnings
(but will not in any event be in excess of 15% of the Participant's Base
Earnings).
8. Contribution by the Company or a Subsidiary. The Company or a Subsidiary
shall make matching contributions (the "Matching Contribution") as follows:
8.1 Officers and Directors as Participants. For each officer or director
of the Company or a Subsidiary who participates in the Plan and remains an
Employee of the Company or a Subsidiary for at least one year after the
termination of a particular Offering Period, the Company or Subsidiary shall
make upon the one year anniversary date after such Offering Period a Matching
Contribution equal to either one-half of the number of shares purchased on
behalf of such Participant or equal to one-half of the dollar amount contributed
by such Participant during such one year earlier Offering Period subject to
Paragraph 8.3, at the sole discretion of the Company, less all withholding taxes
in connection with such Matching Contribution. "Officer" shall mean those
individuals elected as Officers by the Board of Directors of the Company and its
Subsidiaries, and shall be determined as of the end of an Offering Period.
"Director" shall mean an employee and a member of the Board of Directors of the
Company and its subsidiaries. "Director" shall also mean employees of the
Company and its subsidiaries who hold the title Director. Withholding taxes as
and when required in connection with such Matching Contribution shall be
withheld based upon the person's existing withholding percentages or as
otherwise required by law from the Participant's base earnings.
8.2 Other Participants. For each Participant in the Plan (other than an
officer or director) who remains an Employee of the Company or a Subsidiary for
at least one year after the termination of a particular Offering Period, the
Company or Subsidiary shall make upon the one year anniversary date after such
Offering Period a Matching Contribution equal to either one-third of the number
of shares purchased on behalf of such Participant or equal to one-third of the
dollar amount contributed by such Participant during such one year earlier
Offering Period subject to Paragraph 8.3, at the sole discretion of the Company.
Withholding taxes as and when required in connection with such Matching
Contribution shall be withheld based upon the person's existing withholding
percentages or as otherwise required by law from the Participant's base
earnings.
8.3 Intentionally Omitted.
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8.4 Timing of Withholding. The Company shall withhold taxes in two
subsequent pay periods or as otherwise required by law.
9. Purchase of Shares Regarding Participant's Contribution.
9.1 Brokerage Account. Following the acceptance by the Company of a
Participant's Enrollment Form, the Company shall direct the Broker to open and
maintain an account (the "Brokerage Account") in the name of such Participant
and to purchase shares of Common Stock on behalf of such Participant as
permitted under this Plan.
9.2 Delivery of Funds to Broker from Company. The Company, from time to
time during an Offering Period, shall deliver to the Broker an amount equal to
the total of all Participant Contributions together with a list of the amount of
such Contributions from each Participant.
9.3 Broker's Purchase of Shares. From time to time, the Broker, as
agent for the Participants, shall purchase as many full shares or fractional
shares of Common Stock as such Contributions will permit. The shares to be
purchased shall be purchased at the then current fair market value and may, at
the election of the Company, be either treasury shares, shares authorized but
unissued, or shares purchased on the open market. The amount of Common Stock
purchased by the Broker pursuant to this Paragraph 9.3 shall be allocated to the
respective Brokerage Account of each Participant on the basis of the average
cost of the Common Stock so purchased, in proportion to the amount allocable to
each Participant. At the end of each Offering Period under the Plan, each
Participant shall acquire full ownership of all full shares and fractional
shares of Common Stock purchased for his Brokerage Account. Unless otherwise
requested by the Participant, all such full shares and fractional shares so
purchased shall be registered in the name of the Broker and will remain so
registered until delivery is requested in accordance with Paragraph 9.5.
9.4 Fees and Commissions. The Company shall pay the Broker's
administrative charges for opening and maintaining the Brokerage Accounts for
active Participants and the brokerage commissions on purchases made for such
Brokerage Accounts which are attributable to Participant Contributions and
Matching Contributions under the Plan. Such Brokerage Accounts may be utilized
for other transactions as described in Paragraph 9.5 below, but any fees,
commissions or other charges by the Broker in connection with such other
transactions shall, in certain circumstances described in Paragraph 9.5, be
payable directly to the Broker by the Participant.
9.5 Participant Accounts with Broker. Each Participant's Brokerage
Account shall be credited with all cash dividends paid with respect to full
shares and fractional shares of Common Stock purchased pursuant to Paragraphs
9.3 and 10 unless such shares are registered in the Participant's name. Unless
otherwise instructed by the Participant, dividends on such Common Stock shall
automatically be reinvested in Common Stock as soon as practicable following
receipt of such dividends by the Broker. Applicable fees and brokerage
commissions on the reinvestment of such dividends will be payable by the
Participant. Any stock dividends or stock splits which are made with respect to
shares of Common Stock purchased pursuant to Paragraphs 9.3 and 10 shall be
credited to the Participant's Brokerage Account without charge. Any Participant
may request that a certificate for any or all of the full shares of Common Stock
credited to his or her Brokerage Account be delivered to him at any time;
provided, however, the Participant shall be charged by the Broker for any fees
applicable to such requests. A Participant may request the Broker at any time to
sell any or all of the full shares or fractional shares of Common Stock credited
to his Brokerage Account. Unless otherwise instructed by the Participant, upon
such sale the Broker will mail to the Participant a check for the proceeds, less
any applicable fees and brokerage commissions and any transfer taxes,
registration fees or other normal charges which shall be payable by the
Participant. Except as provided in Paragraph 13, a request by the Participant to
the Broker to sell shares of Common Stock or for delivery of certificates shall
not affect an Employee's status as a Participant. A Participant who has a
Brokerage Account with the Broker may purchase additional shares of Common Stock
of the Company for his Brokerage Account at any time by separate purchases
arranged through the Broker. When any such purchases are made, the Participant
will be charged by the Broker for any and all fees and brokerage commissions
applicable to such transactions. In addition, any subsequent transactions with
respect to such shares acquired including, but not limited to, purchases, sales,
reinvestment of dividends, requests for certificates, and crediting of stock
dividends or stock splits, shall be at
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the expense of the Participant and the Broker shall charge the
Participant directly for any and all fees and brokerage commissions applicable
to such transactions.
10. Issuance of Shares Regarding Matching Contribution. Subject to
Paragraph 20, on the 10th day after the first anniversary of an Offering Period,
each Participant's direct employer shall make the Matching Contribution for each
qualified Participant in an amount described in Paragraph 8 by delivering to the
Broker an amount equal to the total funds necessary to make the Matching
Contributions described in Paragraph 8 together with a list of the number of
shares allocable to the Brokerage Account of each Participant. As soon as
practicable thereafter, the Broker shall purchase the number of shares of Common
Stock required in order to make the Matching Contributions. The shares to be
purchased shall be purchased at the then current fair market value and allocated
to participant accounts on the settlement date. The shares may, at the election
of the Company, be either treasury shares, shares authorized but unissued, or
shares purchased on the open market. At the time of such allocation, each
Participant shall immediately acquire full ownership of all full and fractional
shares of Common Stock purchased. Unless otherwise requested by the Participant,
all such shares so purchased shall be registered in the name of the Broker and
will remain so registered until delivery is requested in accordance with
Paragraph 9.5.
11. Voting and Shares. All voting rights with respect to the full and
fractional shares of Common Stock held in the Brokerage Account of each
Participant may be exercised by each Participant and the Broker shall exercise
such voting rights in accordance with the Participant's signed proxy instruction
duly delivered to the Broker.
12. Statement of Account. As soon as practicable after the end of each
Offering Period, the Broker shall deliver to each Participant a statement
regarding all activity in his or her Brokerage Account, including his or her
participation in the Plan for such Offering Period. Such statement will show the
number of shares acquired or sold, the price per share, the transaction date,
stock splits, dividends paid, dividends reinvested and the total number of
shares held in the Brokerage Account. The Broker shall also deliver to each
Participant as promptly as practicable, by mail or otherwise, all notices of
meetings, proxy statements and other material distributed by the Company to its
stockholders, including the Company's annual report to its stockholders
containing audited financial statements.
13. Withdrawal from the Plan. A Participant may withdraw from the Plan,
effective as of the end of any Offering Period, by giving written notice to the
Company not later than the 15th day prior to the end of such Offering Period.
Upon any such withdrawal, the Participant shall be entitled to receive as
promptly as possible from the Company all of the Participant's payroll
deductions credited to the Company Account in his or her name during the
applicable Offering period, but shall not be entitled to the benefit of any
Matching Contributions. In the event a Participant withdraws from the Plan
pursuant to this Paragraph 13, the Company shall notify the Broker as soon as
practicable and the broker shall maintain or close the Participant's Brokerage
Account in accordance with the procedures set forth in Paragraph 16. A
Participant who withdraws from the Plan may not reenter the Plan except by
execution and delivery of a new Enrollment Form and payroll deduction election,
and his or her participation shall be effective upon acceptance of the
Enrollment Form by the Company by written notice to the Employee not sooner than
30 days after receipt of the Enrollment Form, provided that the Company may in
its discretion accept an Enrollment Form prior to the expiration of such 30
days.
14. Termination of Employment. In the event of the termination of a
Participant's employment with the Company or a Subsidiary for any reason during
an Offering Period, including, but not limited to, the death of a Participant,
participation in the Plan shall terminate as well as any rights to future
Matching Contributions. The Participant or the personal representative of the
Participant shall be entitled to receive an amount of cash determined in the
same manner and payable at the same time as if the Participant had withdrawn
from the Plan by giving notice of withdrawal effective as of the date such
termination occurs. Notwithstanding the foregoing, termination of employment by
one employer for the purpose of being re-employed immediately by the Company or
one of its Subsidiaries shall not be considered termination under this Paragraph
14. Any reference in this Plan to withdrawal by a Participant from the Plan
shall include termination as described in this Paragraph 14. In the event of the
termination of a Participant's employment
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pursuant to this Paragraph 14, the Company shall notify the broker as soon as
practicable and the Broker shall maintain or close the Participant's Brokerage
Account in accordance with the procedures set forth in Paragraph 16.
15. Amendment, Suspension and Termination of Plan. This Plan may be amended
or terminated by the Board at any time and such amendment or termination shall
be communicated in writing to all Participants as soon as practicable after the
date of such Board action. If the Plan is terminated, each Participant shall be
entitled to receive as promptly as possible from the Company all payroll
deductions attributable to him or her which have not been used for purchase of
Common Stock pursuant to Paragraph 9, ("Account Balance"), but he or she shall
not be entitled to the benefit of any future Matching Contributions with respect
to such deductions or interest or otherwise for any past Offering Periods. In
any event, this Plan shall terminate 20 years from the date the Plan is adopted
or the date the Plan is approved by the stockholders, whichever is earlier. In
the event that the Company terminates the Plan pursuant to this Paragraph 15,
the Broker shall maintain or close the Participant's Brokerage Accounts in
accordance with the procedures set forth in Paragraph 16. Notwithstanding any
other provision to the contrary, any provision of this Plan may be amended by
the Board or the Committee as required to obtain necessary approvals of
governmental agencies if such change does not materially alter the rights and
interests of stockholders of the Company. If there are any changes in the
capitalization of the Company, such as through mergers, consolidations,
reorganizations, recapitalizations, stock splits or stock dividends, appropriate
adjustments will be made by the Company in the number of shares of its Common
stock subject to purchase under the Plan.
16. Disposition of Brokerage Account Following Withdrawal, Death,
Termination of Employment or Termination of Plan. As soon as practicable
following the notification of the withdrawal of a Participant from the Plan, the
notification of the termination of a Participant's employment with the Company
or a Subsidiary (which includes the death of the Participant) or of the
notification that the Plan is terminated pursuant to Paragraph 15 hereof, the
Broker shall notify the former Participant, or in the event of his death, his
designated beneficiary, if any, or if no designated beneficiary the estate of
the deceased Participant (collectively, an "Interested Party), regarding the
disposition of the former Participant's or deceased Participant's Brokerage
Account. As soon as practicable following receipt of the notification set forth
in the preceding sentence, the Interested Party may request the Broker to
dispose of the former Participant's or deceased Participant's Brokerage Account,
at the Interested Party's expense, by any one of the following means:
(a) The Interested Party may request the Broker to maintain the former
Participant's or deceased Participant's Brokerage Account for the benefit
of the Interested Party or any other person. The Interested Person shall be
charged by the Broker for all maintenance fees and any and all other fees
in connection with the Brokerage Account.
(b) The Interested Party may request the Broker to sell all of the
full shares and fractional shares of Common Stock, if any, held in the
former Participant's or deceased Participant's Brokerage Account. Upon such
sale, the Broker will mail to the Interested Party a check for the
proceeds, less any applicable fees and brokerage commissions and any
transfer taxes, registration fees or other charges which shall be payable
by the Interested Party.
(c) The Interested Party may request the Broker to provide a
certificate for all of the full shares of Common Stock, if any, together
with a check in an amount equal to the proceeds of the sale any fractional
shares of Common Stock held in the former Participant's or deceased
Participant's Brokerage Account, less any applicable fees and brokerage
commissions and any transfer taxes, registration fees or other charges
which are payable by the Participant.
17. Broker. The Broker shall be Merrill Lynch, Pierce, Fenner & Smith
Incorporated which has agreed to act as Broker for such period as is determined
by the Company. Either the Company or the Broker may terminate such designation
at any time upon 30 days' written notice. In the event of such termination of
the Broker, the Company may administer the Plan without the use of a Broker or
may appoint a successor Broker. Any successor Broker shall be vested with all
the powers, rights, duties and immunities of the Broker hereunder to the same
extent as if originally named as the Broker hereunder. The relationship between
the
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Broker and the Participant will be the normal relationship of a broker and its
client, and the Company assumes no responsibility in this respect.
18. Initial Contribution. Any Participant who files a Enrollment Form prior
to the first Offering Period may elect to make an initial contribution ("Initial
Contribution") to be allocated to him or her in the Company Account, by check
payable to the Company, in any amount up to 10% of his or her Base Earnings for
the period between August 16, 1994, and the commencement of the first Offering
Period. The amount of the Initial Contribution shall be matched as provided in
Paragraph 8, and withholding taxes in connection with such Matching
Contributions shall be deducted in the same manner as provided in Paragraph 8.
18.1 Lump Sum Contribution. The Board and/or Committee may from time to
time in its discretion allow any Participant in the Plan to make a lump sum
contribution ("Lump Sum Contribution") to be credited to him or her in the
Company Account, by check payable to the Company, in any amount up to 15% of his
or her Base Earnings, for a period prescribed by the Board and/or Committee. The
amount of the Lump Sum Contribution shall be matched as provided in Paragraph 8,
and withholding taxes in connection with such Matching Contributions shall be
deducted in the same manner as provided in Paragraph 8.
19. Conditions to Issuance of Shares. Shares shall not be issued under the
Plan unless issuance and delivery of such shares pursuant to the Plan shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended; the Securities
Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, the securities laws of the state in which any Employee resides, NASD
requirements and the requirements of any stock exchange upon which the Common
Stock may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance. By execution of the
Enrollment Form, the Participant covenants and agrees that all shares are being
purchased only for investment and without any present intention to sell or
distribute such shares.
20. Notices.
20.1 To Company or Subsidiaries. Any notice hereunder to the Company or
to its Subsidiaries shall be in writing and such notice shall be deemed made
only when delivered or three days after being mailed by certified mail, return
receipt requested, to the Company's principal office at 1200 North Harbor
Boulevard, Anaheim, California 92801 or to such other address as the Company may
designate by notice to the Participants.
20.2 To Participant. Any notice to a Participant hereunder shall be in
writing and any such communication and any delivery to a Participant shall be
deemed made if mailed or delivered to the Participant at such address as the
Participant may have on file with the Company and with the Broker.
21. Miscellaneous.
21.1 No Limitation on Termination of Employment. Nothing in the Plan
shall in any manner be construed to limit in any way the right of the Company or
any of its Subsidiaries to terminate an Employee's employment at any time,
without regard to the effect of such termination on any right such Employee
would otherwise have under the Plan, or give any right to an Employee to remain
employed by the Company in any particular position or at any particular rate of
remuneration.
21.2 Liability. The Company, its Subsidiaries, any member of the Board
or Committee and any other person participating in any determination of any
question under the Plan, or in the interpretation, administration or application
of the Plan, shall have no liability to any party for any action taken or not
taken in good faith under the Plan, or based on or arising out of a
determination of any question under the Plan or an interpretation,
administration or application of the Plan made in good faith.
21.3 Captions. The captions of the paragraphs of this Plan are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
21.4 Assignment. Any rights of Employees hereunder shall be
nonforfeitable, and no Account Balance or contribution made by any employer may
revert or inure to the benefit of the Company or any
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Subsidiary, provided that no Participant shall be entitled to sell, assign,
pledge or hypothecate any right or interest in his or her Account Balance.
21.5 Governing Law. Delaware law governs this Plan.
21.6 Severability. In case any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed and enforced
as if such illegal and invalid provision had never been inserted herein.
21.7 Successors. The provisions of this Plan shall bind and inure to
the benefit of the Company and its successors and assigns. The term "successors"
as used herein shall include any corporate or other business entity which shall
by merger, consolidation, purchase or otherwise acquire all or substantially all
of the business and assets of the Company, and successors of any such
corporation or other business entity.
22. Effective Date of Plan. The Plan shall become effective upon the first
day of the next fiscal quarter after which the Board approves the Plan, subject
to ratification by the stockholders of the Company, and all necessary approvals
of governmental agencies have been received.
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APPENDIX B
CKE RESTAURANTS, INC.
1994 STOCK INCENTIVE PLAN*
SECTION 1. PURPOSE OF PLAN
The purpose of this 1994 Stock Incentive Plan ("Plan") of CKE Restaurants,
Inc., a Delaware corporation (the "Company"), is to enable the Company to
attract, retain and motivate its employees by providing for or increasing the
proprietary interests of such employees in the Company, and to enable the
Company to attract, retain and motivate its non-employee directors and further
align their interest with those of the shareholders of the Company by providing
for or increasing the proprietary interest of such directors in the Company.
SECTION 2. PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an employee of
the Company or any of its subsidiaries (an "Employee") shall be eligible to be
considered for the grant of Awards (as hereinafter defined) hereunder. Any
director of the Company who is not an employee (a "Non-employee Director") shall
automatically receive Non-employee Director Options (as hereinafter defined)
pursuant to Section 4 hereof, but shall not otherwise participate in this Plan.
SECTION 3. AWARDS
(a) The Committee (as hereinafter defined), on behalf of the Company, is
authorized under this Plan to enter into any type of arrangement with an
Employee that is not inconsistent with the provisions of this Plan and that, by
its terms, involves or might involve the issuance of (i) shares of Common Stock
of the Company ("Common Shares") or (ii) a Derivative Security (as such term is
defined in Rule 16a-l promulgated under the Securities Exchange Act of 1934 as
amended (the "Exchange Act"), as such Rule may be amended from time to time)
with an exercise or conversion privilege at a price related to the Common Shares
or with a value derived from the value of the Common Shares. The entering into
of any such arrangement is referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or structure and may
include, without limitation, sales or 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, and an Award may consist of one such
security or benefit, or two or more of them in tandem or in the alternative.
(c) Awards may be issued, and Common Shares may be issued pursuant to an
Award, for any lawful consideration as determined by the Committee, including,
without limitation, services rendered by the recipient of such Award.
(d) Subject to the provisions of this Plan, the Committee, in its sole and
absolute discretion, shall determine all of the terms and conditions of each
Award granted under this Plan, which terms and conditions may include, among
other things:
(i) a provision permitting the recipient of such Award, including any
recipient who is a director or officer of the Company, to pay the purchase
price of the Common Stock or other property issuable pursuant to such
Award, or such recipient's tax withholding obligation with respect to such
issuance, in whole or in part by any one or more of the following:
(A) the delivery of cash;
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* As amended, subject to the approval of the stockholders, by resolution of the
Board of Directors on January 10, 1996.
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(B) the delivery of other property deemed acceptable by the
Committee;
(C) the delivery of previously owned shares of capital stock of the
Company (including "pyramiding") or other property;
(D) a reduction in the amount of Common Shares or other property
otherwise issuable pursuant to such Award; or
(E) the delivery of a promissory note, the terms and conditions of
which shall be determined by the Committee.
(ii) a provision conditioning or accelerating the receipt of benefits
pursuant to such Award, either automatically or in the discretion of the
Committee, upon the occurrence of specified events, including, without
limitation, a change of control of the Company, an acquisition of a
specified percentage of the voting power of the Company, the dissolution or
liquidation of the Company, a sale of substantially all of the property and
assets of the Company or an event of the type described in Section 8
hereof; or
(iii) a provision required in order for such Award to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code (an
"Incentive Stock Option").
(e) Notwithstanding Section 3(b), in the event any Award is made while this
Plan is subject to Rule 16b-3 as in effect on April 30, 1991 and under which
Common Shares are or may in the future be issued for any type of consideration
other than as a bonus without the payment of any consideration, the amount of
such consideration shall be equal to (i) the amount (such as par value) required
to be received by the Company in order to assure compliance with applicable
state law, or (ii) an amount equal to or greater than 50% of the fair market
value of such shares on the date of grant of such Award.
SECTION 4. NON-EMPL0YEE DIRECTOR OPTIONS
(a) Each Non-employee Director who is a Non-employee Director on January
10, 1996, shall automatically be granted an option (a "Non-employee Director
Option") to purchase 15,000 Common Shares. In Addition, each year, on the first
business day following the date of the annual meeting of stockholders of the
Company, or any adjournment thereof, at which directors of the Company are
elected (the "Date of Grant"), each Non-employee Director shall be granted a
Non-employee Director Option Non-employee to purchase the number of Common
Shares as follows: each Non-employee Director shall receive an option to
purchase 5,000 shares; each Non-employee Director member of the Executive
Committee shall receive an option to purchase an additional 10,000 shares; and
the Non-employee Chairman of the Board of Directors shall receive an option to
purchase an additional 40,000 shares.
(b) If, on any date upon which Non-employee Director Options are to be
automatically granted pursuant to this Section 4, the number of Common Shares
remaining available for options under this Plan is insufficient for the grant to
each Non-employee Director of a Non-employee Director Option to purchase the
entire number of Common Shares specified in this Section 4, then a Non-employee
Director Option to purchase a proportionate amount of such available number of
Common Shares (rounded to the nearest whole share) shall be granted to each
Non-employee Director on such date.
(c) Each Non-employee Director option granted under this Plan shall become
exercisable for the first time to purchase 33 1/3% of the Common Shares subject
thereto (rounded to the nearest whole share) on each of the first, second and
third anniversaries of the Date of Grant of such Non-employee Director Option;
provided that such 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.
(d) Each Non-employee Director Option granted under this Plan shall expire
upon the first to occur of the following:
(i) The first anniversary of the date upon which the optionee shall
cease to be a Non-employee Director as a result of death or total
disability;
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(ii) The 90th day after the date upon which the optionee shall
cease to be a Non-employee Director for any reason other than death or
total disability as defined in Section 22(e) (3) Internal Revenue Code;
(iii) The fifth anniversary of the Date of Grant of each
Non-employee Director Option.
(e) Each Non-employee Director Option shall have an exercise price equal to
the greater of (i) the aggregate Fair Market Value on the Date of Grant of such
option of the Common Shares subject thereto, or (ii) the aggregate par value of
such Common Shares on such date.
(f) Payment of the exercise price of any Non-employee Director Option
granted under this Plan shall be made in full in cash concurrently with the
exercise of such Non-employee Director Option; provided, however, that, in the
discretion of the Board of Directors of the Company (the "Board"), the payment
of such exercise price may instead be made:
(i) in whole or in part, with Common Shares delivered concurrently
with such exercise (such shares to be valued on the basis of the Fair
Market Value of such shares on the date of such exercise), provided that
the Company is not then prohibited from purchasing or acquiring Common
Shares; and/or
(ii) in whole or in part, by the delivery, concurrently with such
exercise and in accordance with Section 220.3(e) (4) of Regulation T
promulgated under the Exchange Act, of a properly executed exercise notice
for such Non-employee Director Option and irrevocable instructions to a
broker promptly to deliver to the Company a specified dollar amount of the
proceeds of a sale of or a loan secured by the Common Shares issuable upon
exercise of such Non-employee Director Option.
(g) For purposes of this Section 4, the "Fair Market Value" of a Common
Share or other security on any date (the "Determination Date") shall be equal to
the closing price per Common Share or unit of such other security on the
business day immediately preceding the Determination Date, as reported in The
Wall Street Journal, Western Edition, or, if no closing price was so reported
for such immediately preceding business day, the closing price for the next
preceding business day for which a closing price was so reported, or, if no
closing price was so reported for any of the 30 business days immediately
preceding the Determination Date, the average of the high bid and low asked
prices per Common Share or unit of such other security on the business day
immediately preceding the Determination Date on the New York Stock Exchange, or,
if the Common Shares or such other security were not traded on the New York
Stock Exchange or quoted by the National Association of Securities Dealers, Inc.
Automated Quotation system or such other system then in use on such immediately
preceding business day, the average of the closing bid and asked price on such
day as furnished by a professional market maker making a market in the Common
Shares or such other security selected by the Board.
(h) All outstanding Non-employee Director Options theretofore granted under
this Plan shall become fully exercisable upon the first to occur of the
following:
(i) the date of shareholder approval of a reorganization, merger or
consolidation of the Company as a result of which the outstanding
securities of the class then subject to this Plan are exchanged for or
converted into cash, property and/or securities not issued by the Company;
(ii) the first date upon which the directors of the Company who were
nominated by the Board for election as directors shall cease to constitute
a majority of the authorized number of directors of the Company;
(iii) the dissolution or liquidation of the Company;
(iv) the sale of substantially all of the property and assets of the
Company; or
(v) the date of dissemination to the stockholders of the Company of a
proxy statement disclosing a change of control of the Company.
B-3
<PAGE> 36
(i) Each Non-employee Director Option shall be nontransferable by the
optionee other than by will or the laws of descent and distribution, and shall
be exercisable during the optionee's lifetime only by the optionee or the
optionee's guardian or legal representative.
(j) Non-employee Director Options are not intended to qualify as Incentive
Stock Options.
Section 5. STOCK SUBJECT TO PLAN
(a) Subject to adjustment as provided in Section 8 hereof, the aggregate
number of Common Shares issued and issuable pursuant to all Incentive Stock
Options granted under this Plan shall not exceed 3,500,000. Such maximum number
does not include the number of Common Shares subject to the unexercised portion
of any Incentive stock Option granted under this Plan that expires or is
terminated.
(b) The aggregate number of Common Shares subject to Awards granted during
any calendar year to any one Employee (including the number of shares involved
in Awards having a value derived from the value of Common Shares) shall not
exceed 200,000, provided, however, that the limitation set forth in this section
5(b) shall not apply if such provision is not required in order for Awards to
qualify as performance based compensation under section 162(m) of the Internal
Revenue Code. Further, such aggregate number of shares shall be subject to
adjustment under section 8 only to the extent permitted by Section 162(u) of the
Internal Revenue Code.
(c) Subject to adjustment as provided in Section 8 (b) hereof, at any time
the aggregate number of Common Shares issued and issuable pursuant to all Awards
(including all Incentive Stock Options) granted under this Plan shall not exceed
3,500,000.
(d) For purposes of Section 5(c) hereof, the aggregate number of Common
Shares issued and issuable pursuant to Awards granted under this Plan shall at
any time be deemed to be equal to the sum of the following:
(i) the number of Common Shares that were issued prior to such time
pursuant to Awards granted under this Plan, other than Common Shares that
were subsequently reacquired by the Company pursuant to the terms and
conditions of such Awards and with respect to which the holder thereof
received no benefits of ownership such an dividends; plus
(ii) the number of Common Shares that were otherwise issuable prior to
such time pursuant to Awards granted under this Plan, but that were
withheld by the Company as payment of the purchase price of the Common
Shares issued pursuant to such Awards or as payment of the recipient's tax
withholding obligation with respect to such issuance; plus
(iii) the maximum number of Common Shares that are or may be issuable
at or after such time pursuant to Awards granted under this Plan prior to
such time.
Section 6. DURATION OF PLAN
No Awards shall be made under this Plan after April 30, 1999. Although
Common Shares may be issued after April 30, 1999 pursuant to Awards made prior
to such date, no Common Shares shall be issued under this Plan after April 30,
2009.
Section 7. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by a committee (the "Committee") of the
Board of Directors of the Company (the "Board") consisting of two or more
directors, each of whom: (i) is a "disinterested person" (as such term is
defined in Rule 16b-3 promulgated under the Exchange Act, as such Rule may be
amended from time to time) and (ii) is an "outside director" (as such term is
defined under Section 162(m) of the Internal Revenue Code).
B-4
<PAGE> 37
(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan, including, without limitation, the
following:
(i) adopt, amend and rescind rules and regulations relating to this
Plan;
(ii) determine which persons are employees and to which of such
employees, if any, Awards shall be granted hereunder;
(iii) grant Awards to Employees and determine the terms and conditions
thereof, including the number of Common Shares issuable pursuant thereto;
(iv) determine the terms and conditions of the Non-employee Director
Options that are automatically granted hereunder, other than the terms and
conditions specified in Section 4 hereof;
(v) determine whether, and the extent to which, adjustments are
required pursuant to Section 8 hereof; and
(vi) interpret and construe this Plan and the terms and conditions of
any Award granted hereunder.
Section 8. ADJUSTMENTS
(a) If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged for or converted into a different number
or kind of shares or securities as a result of a reorganization, merger,
consolidation, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, spin-off or the like, then, unless the terms of such
transaction shall provide otherwise, the Committee shall make appropriate and
proportionate adjustments in (a) the number and type of shares or other
securities that may be acquired pursuant to Incentive Stock Options and the
exercise price thereof theretofore granted under this Plan, and (b) the maximum
number and type of shares or other securities that may be issued pursuant to
Incentive Stock Options thereafter granted under this Plan.
(b) If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in (a) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Awards other than Incentive
Stock Options theretofore granted under this Plan, and (b) the maximum number
and type of shares or other securities that may be issued pursuant to such
Awards thereafter granted under this Plan.
Section 9. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and in any manner;
provided, however, that no such amendment or termination shall deprive the
recipient of any Award theretofore granted under this Plan, without the consent
of such recipient, of any of his or her rights thereunder or with respect
thereto provided, further, that if an amendment to the Plan would: (a) increase
the maximum number of Common Shares that may be issued pursuant to all Incentive
Stock Options granted under this Plan, and other Awards granted during any
calendar year to any one Employee, (b) change the class of persons eligible to
receive Awards under the Plan, (c) otherwise materially increase the benefits
accruing to participants who are subject to Section 16 of the Exchange Act in a
manner not specifically contemplated herein, or (d) affect the Plan's compliance
with Rule 16b-3 under the Exchange Act or applicable provisions of the Internal
Revenue Code. The amendment shall be approved by the Company's stockholders to
the extent required to comply with Rule 16b-3 under the Exchange Act, sections
422 and 162(m) of the Internal Revenue Code, or other applicable provisions of
or rules under the Internal Revenue Code.
B-5
<PAGE> 38
Section 10. EFFECTIVE DATE OF PLAN
(a) This Plan shall be effective as of the date upon which it was approved
by the Board; provided, however, that no Common Shares may be issued under this
Plan until it has been approved, directly or indirectly, by the affirmative
votes of the holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting duly held in accordance with the
laws of the State of Delaware.
(b) Notwithstanding the foregoing, Section 4 of this Plan shall not be
effective until the close of business on the date of the 1994 Annual Meeting of
the stockholders of the Company, or any adjournment thereof, at which directors
of the Company are elected.
B-6
<PAGE> 39
PROXY
CKE RESTAURANTS, INC.
1200 North Harbor Boulevard
Anaheim, California 92801
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CKE
RESTAURANTS, INC.
The undersigned hereby appoints William P. Foley II and Joseph N. Stein, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote as designated below, all
the shares of Common Stock of CKE Restaurants, Inc. held of record by the
undersigned which are entitled to vote, at the Annual Meeting of Stockholders to
be held on June 19, 1996 and any postponements or adjournments thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
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<PAGE> 40
Please mark
your votes as /X/
indicated in
this example.
1. ELECTION OF DIRECTORS:
INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the list below.
Nominees: PETER CHURM DANIEL D. (RON) LANE
FOR WITHHOLD
both of the nominees AUTHORITY
listed below (except as to vote for all nominees
marked to the contrary below) listed below
/ / / /
2. TO APPROVE THE AMENDMENTS TO CKE'S 1994 EMPLOYEE STOCK PURCHASE PLAN.
FOR AGAINST ABSTAIN
/ / / / / /
3. TO APPROVE THE AMENDMENTS TO CKE'S 1994 STOCK INCENTIVE PLAN.
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion, the Proxies are authorized to vote with respect to
matters incident to the conduct of the Meeting and upon such other business
as may properly come before such meeting or any and all postponements or
adjournments thereof.
YES NO
Do You Plan to Attend the Meeting? / / / /
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THE PROXIES WILL VOTE
FOR THE NOMINEES LISTED ABOVE, FOR APPROVAL OF THE AMENDMENTS TO CKE'S 1994
EMPLOYEE STOCK PURCHASE PLAN, FOR APPROVAL OF THE AMENDMENTS TO CKE'S 1994 STOCK
INCENTIVE PLAN, AND IN THEIR DISCRETION ON MATTERS DESCRIBED IN ITEM 4.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature(s)_______________________________________________ Dated:________, 1996
Please sign exactly as the name appears below. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give your full title as such. If a corporation,
please sign in full corporate name by the President or other authorized officer.
If a partnership, please sign in the partnership name by an authorized person.
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