<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
[X] Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
CKE RESTAURANT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
CKE RESTAURANTS, INC.
1200 NORTH HARBOR BOULEVARD
ANAHEIM, CALIFORNIA 92801
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 16, 1998
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 Anaheim Marriott, 700 West Convention Way,
Anaheim, California 92802, on Tuesday, June 16, 1998 at 9:30 a.m. for the
following purposes:
1. To elect three directors, each for a term of three years;
2. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only stockholders of record at the close of business on April 29, 1998 will
be entitled to notice of and to vote at the meeting or any postponement or
adjournment thereof.
By Order of the Board of Directors,
Andrew F. Puzder,
Secretary
Anaheim, California
May 14, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, TO ASSURE THAT YOUR SHARES WILL
BE VOTED AT THE MEETING, YOU ARE REQUESTED TO SIGN THE ATTACHED PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE. NO ADDITIONAL
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING,
YOU MAY 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 16, 1998
------------------------
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 Anaheim Marriott, 700 West Convention Way,
Anaheim, California 92802, on Tuesday, June 16, 1998 at 9:30 a.m. (the
"Meeting"), and at any postponements or adjournments thereof.
This Proxy Statement and accompanying proxy card are first being mailed to
stockholders on or about May 14, 1998.
SOLICITATION OF PROXIES
At the Meeting, the stockholders of CKE will be asked (1) to vote upon the
election of three directors, each for a term of three years, and (2) 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. 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 in the enclosed form 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 holders of CKE Common Stock of record at the close of business on
April 29, 1998 (the "Record Date") are entitled to notice of, and to vote at,
the Meeting. There were 46,593,670 shares of CKE Common Stock outstanding on the
Record Date. The presence at the Meeting, in person or by proxy, of the holders
of a majority of the shares of Common Stock outstanding on the Record Date will
constitute a quorum, and abstentions and broker non-votes will be included in
the calculation of the number of shares considered to be
1
<PAGE> 4
present at the Meeting. 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 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. 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. Shares that are not voted with respect
to a specific proposal will be considered as not present and entitled to vote on
such proposal, even though such shares will be considered present for purposes
of determining a quorum and voting in favor of such proposal. Abstentions on a
specific proposal will be considered as present, but not as voting in favor of
such proposal. Neither broker non-votes nor abstentions will have any effect on
the vote required to elect directors.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of CKE is divided into three classes, as nearly
equal in number as possible. Each class serves for a period of three years, with
the terms of office of the respective classes expiring in successive 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 Carl L. Karcher, Frank P. Willey and Byron
Allumbaugh.
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. The three 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, all three nominees are and will be able to
serve.
INFORMATION CONCERNING NOMINEES AND OTHER DIRECTORS
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
FIRST YEAR
BECAME
NAME AGE PRINCIPAL OCCUPATION DIRECTOR OTHER CORPORATE DIRECTORSHIPS
---- --- -------------------- ---------- -----------------------------
<S> <C> <C> <C> <C>
Carl L. Karcher... 49 President, CLK, Inc. 1992 --
Frank P. Willey... 44 President, Fidelity National 1994 Fidelity National Financial,
Financial, Inc. Inc.; Southern Pacific Funding
Corporation; Ugly Duckling
Holdings, Inc.; GB Foods
Corporation.
Byron 66 Business Consultant 1996 H. F. Ahmanson and Company;
Allumbaugh...... Automobile Club of Southern
California; El Paso Energy
Company; Ultramar Diamond
Shamrock Incorporated.
</TABLE>
2
<PAGE> 5
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., a
specialty finance company engaged in title insurance and related services, in
January 1995 and has been a director and Executive Vice President of Fidelity
National Financial, Inc. since February 1984, and was General Counsel of
Fidelity National Financial, Inc. from 1984 to January 1995. Mr. Willey also
serves on the Boards of Directors of Southern Pacific Funding Corporation, Ugly
Duckling Holdings, Inc. and GB Foods Corporation.
BYRON ALLUMBAUGH retired as Chairman of the Board of Ralphs Grocery Company
on January 31, 1997, where he held numerous management positions from 1958,
serving as Chairman of the Board and Chief Executive Officer from 1976 to 1995,
and Chairman of the Board from 1995 until his retirement. Currently a
self-employed business consultant, Mr. Allumbaugh is also a member of the Boards
of Directors of H. F. Ahmanson and Company, Automobile Club of Southern
California, El Paso Energy Company, and Ultramar Diamond Shamrock Incorporated.
THE BOARD OF DIRECTORS OF CKE RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL OF THE
ABOVE NOMINEES.
DIRECTORS CONTINUING TO SERVE UNTIL 1999
<TABLE>
<CAPTION>
FIRST YEAR
BECAME
NAME AGE PRINCIPAL OCCUPATION DIRECTOR OTHER CORPORATE DIRECTORSHIPS
---- --- -------------------- ---------- -----------------------------
<S> <C> <C> <C> <C>
Peter Churm............. 72 Chairman Emeritus, 1979 Furon Company; Diedrichs
Furon Company Coffee, Inc.
Daniel D. (Ron) Lane.... 63 Chairman and Chief 1993 Fidelity National Financial,
Executive Officer, Inc.; Resort Income Investors,
Lane/Kuhn Pacific, Inc. 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.
Mr. Churm is also a member of the Board of Directors of Diedrichs Coffee, Inc.
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 also serves as a
director of Resort Income Investors, Inc.
3
<PAGE> 6
DIRECTORS CONTINUING TO SERVE UNTIL 2000
<TABLE>
<CAPTION>
FIRST YEAR
BECAME
NAME AGE PRINCIPAL OCCUPATION DIRECTOR OTHER CORPORATE DIRECTORSHIPS
---- --- -------------------- ---------- -----------------------------
<S> <C> <C> <C> <C>
William P. Foley II..... 53 Chairman of the Board and 1993 Rally's Hamburgers, Inc.;
Chief Executive Officer, Checkers Drive-In
CKE; Chairman of the Board Restaurants, Inc.; Star
and Chief Executive Buffet, Inc.; GB Foods
Officer, Fidelity National Corporation; Fresh Foods,
Financial, Inc. Inc.; Micro General
Corporation; DataWorks
Corporation.
Carl N. Karcher......... 81 Chairman Emeritus, CKE 1966 --
W. Howard Lester........ 62 Chairman of the Board and 1996 Williams-Sonoma, Inc.; The
Chief Executive Officer, Good Guys, Inc.; Harold's
Williams-Sonoma, Inc. Stores, Inc.; Il Fornaio
America.
</TABLE>
WILLIAM P. FOLEY II became Chief Executive Officer of CKE in October 1994
and Chairman of the Board of Directors in March 1994. Since 1981, Mr. Foley has
been Chairman of the Board of Directors, President (until January 1995) and
Chief Executive Officer of Fidelity National Financial, Inc. Mr. Foley is also
Chairman of the Board of GB Foods Corporation, Star Buffet, Inc. and Checkers
Drive-In Restaurants, Inc. and a member of the Boards of Directors of Rally's
Hamburgers, Inc., Fresh Foods, Inc., Micro General Corporation and DataWorks
Corporation.
CARL N. KARCHER, the Company's founder, 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 and 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 appointed as a director of CKE in January 1996. Mr.
Lester became Chief Executive Officer of San Francisco based 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., Harold's Stores, Inc. and Il Fornaio America.
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. 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, Willey
(Chairman) and Allumbaugh, 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),
Willey and Lester, considers the hiring and election of corporate officers,
salary and incentive compensation policies for officers and directors, and the
granting of stock options to employees.
During fiscal 1998, the Board of Directors held five meetings, the Audit
Committee held one meeting, the Compensation Committee held one meeting and the
Executive Committee held no meetings. During fiscal 1998, no director attended
fewer than 75% of the aggregate meetings of the Board of Directors and the
committee or committees on which he served, except W. Howard Lester, who
attended three Board meetings.
4
<PAGE> 7
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 1998, each non-employee director
received a base fee of $18,000 for attendance at the quarterly Board meetings.
For attendance at each special Board meeting (meetings other than quarterly
Board meetings), each non-employee director received a fee of $1,000. For
attendance at Board Committee meetings which are held on a day other than the
date of a scheduled Board meeting, each non-employee director received a fee of
$1,000. For participation in telephonic Board meetings, each non-employee
director received a fee of $500. Each non-employee director is expected to
receive a fee of $18,000 in fiscal 1999 and $1,000 ($500 for telephonic
meetings) for each Board meeting or committee meeting other than regular
meetings attended in fiscal 1999.
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.
5
<PAGE> 8
OWNERSHIP OF THE COMPANY'S SECURITIES
The following table sets forth certain information regarding beneficial
ownership of CKE's Common Stock as of March 31, 1998, 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.......................... 4,866,845(2) 10.4%
500 N. Rainbow Boulevard, #100
Las Vegas, Nevada 89107
Carl N. Karcher..................................... 2,396,414(3) 5.1%
1200 North Harbor Boulevard
Anaheim, California 92801
William P. Foley II................................. 892,163(4) 1.9%
Daniel D. (Ron) Lane................................ 483,625(5) 1.0%
Frank P. Willey..................................... 17,875(6) *
Peter Churm......................................... 40,684(7) *
Carl L. Karcher..................................... 135,566(8) *
W. Howard Lester.................................... 11,000(9) *
Byron Allumbaugh.................................... 2,200 *
C. Thomas Thompson.................................. 277,945(10) *
Rory J. Murphy...................................... 309,144(10) *
Robert E. Wheaton................................... 52,250(10) *
Robert W. Wisely.................................... 33,552(10) *
All executive officers and directors as a group (16
persons).......................................... 5,168,034(11) 10.7%
</TABLE>
- ---------------
* Less than one percent.
(1) Calculated based on 46,588,921 shares of CKE Common Stock outstanding on
March 31, 1998.
(2) Based on a Schedule 13D, as amended, filed by Cannae Limited Partnership
(the "Partnership"), Folco Development Corporation ("Folco"), and the
Daniel P. Lane Revocable Trust U/D/T July 10, 1992 (the "Lane Trust"),
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: (a) 4,382,157 shares held directly by the Partnership; (b)
435,188 shares held directly by Folco; and (c) 49,500 shares held directly
by the Lane Trust. The 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 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 shares of Common Stock
beneficially owned by the Partnership. 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) 2,151,474 shares beneficially held by the Trust; (b) 103
shares held by Mrs. Karcher; and (c) 242,000 shares subject to presently
exercisable options or options that become exercisable on or prior to May
30, 1998. Excludes 28,710 shares held by the Carl N. and Margaret M.
Karcher Foundation, the beneficial ownership of which the Trust and Mr. and
Mrs. Karcher disclaim. The Trust and Mr. and Mrs. Karcher disclaim any
beneficial ownership of the 4,382,157 shares held directly by the
Partnership.
6
<PAGE> 9
(4) Includes 435,188 shares held directly by Folco and 452,875 shares subject
to presently exercisable options or options that become exercisable on or
prior to May 30, 1998. Excludes (a) an aggregate of 4,431,657 of the shares
described in footnote (1) above which are held directly by the Partnership
and the Lane Trust, and (b) 820,050 shares held by Fidelity National
Financial, Inc. ("Fidelity"), of which Mr. Foley is a director and an
executive officer.
(5) Includes 49,500 shares held directly by the Lane Trust and 137,500 shares
subject to presently exercisable options or options that become exercisable
on or prior to May 30, 1998. Excludes (a) an aggregate of 4,817,345 of the
shares described in footnote (1) above which are held directly by the
Partnership and Folco, and (b) 820,050 shares held by Fidelity, of which
Mr. Lane is a director.
(6) Includes 17,875 shares subject to presently exercisable options or options
that become exercisable on or prior to May 30, 1998. Excludes (a) an
aggregate of 4,866,845 of the shares described in footnote (1) above which
are held directly by the Partnership, Folco and the Lane Trust, and (b)
820,050 shares held by Fidelity, of which Mr. Willey is a director and an
executive officer.
(7) Includes 21,175 shares subject to presently exercisable options or options
that become exercisable on or prior to May 30, 1998.
(8) Includes (a) 107,854 shares held by Carl L. Karcher and Peggy L. Karcher,
as trustees under a trust for the benefit of Carl L. and Peggy L. Karcher,
(b) 21,175 shares subject to presently exercisable options or options that
become exercisable on or prior to May 30, 1998, and (c) 6,240 shares owned
by Carl L. Karcher's minor children.
(9) Includes 11,000 shares subject to presently exercisable options or options
that become exercisable on or prior to May 30, 1998.
(10) Includes for Messrs. Thompson, Murphy, Wheaton and Wisely, 261,667 shares,
304,508 shares, 52,250 shares, and 28,875 shares, respectively, subject to
presently exercisable options or options that become exercisable on or
prior to May 30, 1998. Also includes for Mr. Thompson 165 shares owned by
his minor children and for Mr. Murphy 1,657 shares held for his benefit
under CKE's voluntary contributory profit sharing and savings investment
plan.
(11) Includes shares described in footnotes (2) through (9) above and 196,951
shares subject to presently exercisable options or options that become
exercisable on or prior to May 30, 1998 which are held by executive
officers not listed in the above table. Excludes 4,382,157 shares described
in footnote (1) above which are held directly by the Partnership, and
820,050 shares which are held directly by Fidelity.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR THE FISCAL YEAR
ENDED JANUARY 26, 1998
The Committee, comprised of three non-employee directors, is responsible
for administering the executive compensation policies, administering the various
management incentive programs (including option plans), and making
recommendations to the Board of Directors with respect to these policies and
programs. In addition, the Committee makes annual recommendations to the Board
of Directors concerning the compensation paid to the Chief Executive Officer and
to each of the other executive officers of 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 1998 as they affected
(i) William P. Foley II, the Chief Executive Officer of CKE, and (ii) the other
Executive Officers.
Compensation Policies Toward 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
7
<PAGE> 10
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.
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 1998 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 "Stockholder
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 1997, 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.
The Committee assesses CKE and individual performance against the
established targets and provides for bonuses based on the targeted
performance levels actually achieved. Because CKE achieved the targeted
levels of pre-tax income for fiscal 1998, the Committee approved bonuses
for CKE's Executive Officers in the total amount of $3,035,109, of which
$2,831,779 was paid subsequent to the fiscal 1998 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 shares of Common Stock 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
8
<PAGE> 11
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 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. Mr. Foley was
paid $330,817 in salary for fiscal 1998. In June 1997, Mr. Foley's base
compensation was increased to $500,000 by the Compensation Committee of the
Board of Directors. In fiscal 1998, Mr. Foley received a bonus pursuant to his
bonus program. Mr. Foley's compensation under that bonus program was
substantially related to the Company's performance because it provided for a
bonus, determined pursuant to a specific formula based on the achievement of
certain financial goals of the Company.
Corporate Deduction for Compensation. Section 162(m) of the Internal
Revenue Code generally limits to $1.0 million the corporate deduction for
compensation paid to certain executive officers, unless certain requirements are
met. At this time, CKE's deduction for officer compensation is not limited by
the provisions of Section 162(m). The Committee intends to monitor regulations
issued pursuant to Section 162(m) and to take such actions with respect to the
executive compensation program as are reasonably necessary to preserve the
corporate tax deduction for executive compensation paid.
Peter Churm (Chairman)
Frank P. Willey
W. Howard Lester
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.
9
<PAGE> 12
STOCKHOLDER PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL STOCKHOLDER RETURN
AMONG CKE RESTAURANTS, INC., S&P 500 INDEX,
RUSSELL 2000 INDEX AND SELECTED RESTAURANT PEER GROUP INDEX(1)
This graph compares the Company's cumulative total return to stockholders
during the past five years with that of the S&P 500 Index, the Russell 2000
Index and a Selected Restaurant Peer Group Index. In the past years, such
comparison has been made with the Russell 2000 Index and a Selected Restaurant
Peer Group Index. In the future, the S&P 500 Index will replace the Russell 2000
Index, as the Company's significant growth as a result of its acquisitions in
fiscal 1997 and 1998 makes the S&P 500 Index the more relevant index for
comparison purposes.
<TABLE>
<CAPTION>
'CKE
Measurement Period Restaurants, S & P 500 RUSSELL RESTAURANT
(Fiscal Year Covered) Inc.' INDEX 2000 INDEX PEER GROUP
<S> <C> <C> <C> <C>
Jan-93 100 100 100 100
Jan-94 159 113 116 107
Jan-95 81 113 108 79
Jan-96 198 157 136 66
Jan-97 379 199 137 69
Jan-98 886 252 159 84
</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.
10
<PAGE> 13
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 the Chief Executive Officer of CKE and 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 26, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY COMPENSATION OPTIONS COMPENSATION
NAME AND TITLE YEAR ($) BONUS ($) ($)(1) (#)(2) ($)(3)
-------------- ------ ------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William P. Foley II.......... 1998 330,817 1,121,000 -- 220,000 10,577
Chairman, 1997 200,000 150,000 -- 206,250 --
Chief Executive Officer 1996 194,904 -- -- 371,250 --
C. Thomas Thompson........... 1998 462,830 1,402,000 24,078 220,000 38,040
President and 1997 280,077 550,000 6,331 206,250 4,012
Chief Operating Officer 1996 250,000 152,000 5,055 206,250 --
Rory J. Murphy............... 1998 308,510 123,730 26,272 220,000 7,677
President, 1997 200,085 229,141 16,154 66,000 1,087
Hardee's Food Systems, Inc. 1996 187,200 77,380 14,635 74,250 --
Robert E. Wheaton............ 1998 160,721(4) 80,354 8,820(4) 16,500 --
Executive Vice President 1997 200,000 70,000 9,344 33,000 --
1996 3,365 -- -- 41,250 --
Robert W. Wisely............. 1998 195,641 132,755 32,212 11,000 15,830
Executive Vice President, 1997 170,465 173,520 8,604 33,000 --
Marketing 1996 155,923 41,502 3,266 37,125 --
</TABLE>
- ---------------
(1) "Other Annual Compensation" for fiscal 1998 includes the following amounts
for Messrs. Thompson, Murphy, Wheaton and Wisely: (a) auto related payments
of $0, $9,960, $7,937, and $9,960 respectively, (b) reimbursements for
medical and dental costs of $7,248, $2,261, $0 and $5,065, respectively, (c)
housing allowances of $13,817, $10,833, $0 and $15,260, respectively, and
(d) payments of life insurance premiums of $3,013, $3,218, $883 and $1,927,
respectively.
(2) The number of securities underlying options has been adjusted to reflect
CKE's 10% stock dividend in February 1998 and its three-for-two stock split
in January 1997.
(3) "All Other Compensation" includes matching and voluntary contributions by
CKE to CKE's employee stock purchase plan for Messrs. Foley, Thompson,
Murphy and Wisely. For fiscal 1998, the amounts matched by CKE in the
employee stock purchase plan were $10,577, $38,040, $7,677 and $15,830,
respectively.
(4) In September 1997, Mr. Wheaton's employment contract was modified whereby
CKE pays 25% of his base salary and Star Buffet, Inc. pays the remaining
75%.
11
<PAGE> 14
STOCK OPTIONS
The following table sets forth certain information with respect to the
stock options granted during fiscal 1998 to the Named Executive Officers and the
potential realizable value of such stock options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENTAGE STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE)(1) DATE 5%($) 10%($)
---- ---------- ------------- ------------ ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William P. Foley II.... 220,000 12.5% $26.02 June 18, 2007(3) $3,606,746 $9,102,740
C. Thomas Thompson..... 220,000 12.5% $26.02 June 18, 2007(3) $3,606,746 $9,102,740
Rory J. Murphy......... 220,000 12.5% $26.02 June 18, 2007(4) $3,606,746 $9,102,740
Robert E. Wheaton...... 16,500 0.9% $26.02 June 18, 2007(3) $ 270,506 $ 682,706
Robert W. Wisely....... 11,000 0.6% $26.02 June 18, 2007(3) $ 180,337 $ 455,137
</TABLE>
- ---------------
(1) The fair market value of the Company's Common Stock on the date of grant.
(2) 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.
(3) 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) The options vest 33 1/3% on the date of grant, 33 1/3% on the first
anniversary of the date of grant and 33 1/3% on the second anniversary of
the date of grant.
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to stock
options exercised during fiscal 1998 and year-end stock option values for each
of the Named Executive Officers.
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 (#) ($)
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(1)
---- --------------- -------------- ------------------- -----------------------
<S> <C> <C> <C> <C>
William P. Foley II........ -- -- 361,625/481,250 $11,056,627/$10,006,899
C. Thomas Thompson......... -- -- 206,250/426,250 $ 5,860,558/$8,185,526
Rory J. Murphy............. 16,500 $569,249 268,508/215,416 $ 7,349,326/$3,777,254
Robert E. Wheaton.......... -- -- 52,250/38,500 $ 1,476,988/$705,254
Robert W. Wisely........... 13,750 $485,069 22,000/45,375 $ 578,125/$1,041,334
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
values are calculated by subtracting the exercise price from the fair market
value of the underlying Common Stock. For purposes of this table, the fair
market value is deemed to be $39.69, the closing price of the Common Stock
of CKE reported by the New York Stock Exchange on January 26, 1998.
12
<PAGE> 15
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
was $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 could not exceed $200,000, was based on certain
percentage cost savings, if any, realized by CKE. For the second year of his
employment term, Mr. Thompson's bonus, which could not exceed $250,000, was
based upon the increase in market value, if any, of CKE's Common Stock. The
employment agreement entitled Mr. Thompson to participate in CKE's stock
incentive plan, and granted Mr. Thompson an option to purchase 25,000 (later
adjusted by stock dividends and stock splits) 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. In March 1996, Mr. Thompson's employment
agreement was amended to extend the employment term to March 31, 1999. The
amendment provided for an increase in annual base salary to $285,000, commencing
April 1, 1996, and increased base salary to $325,000 for the fiscal year ending
January 26, 1998 if Mr. Thompson earned a bonus of $150,000 or greater for the
fiscal year ending January 27, 1997, and $350,000 for the fiscal year ending
January 25, 1999 if Mr. Thompson earned a bonus of $150,000 or greater for the
fiscal year ending January 26, 1998. In June 1997, Mr. Thompson's base
compensation was increased by the Compensation Committee of the Board of
Directors to $650,000. The amendment also provides for a one time cash bonus
based on performance criteria specified by CKE's Compensation Committee in
addition to the current bonus for the second year provided for under the
agreement, and an annual bonus during the extended term based upon performance
criteria specified by the CKE's Compensation Committee. The amendment also
provides for a $2,000 per month temporary housing allowance. This allowance will
be added to Mr. Thompson's base salary in the event he relocates his primary
residence to Southern California.
Effective in January 1996, CKE entered into a two-year employment agreement
with Robert E. Wheaton. Mr. Wheaton's annual base salary payable under this
agreement is $200,000. Mr. Wheaton's employment agreement provided for an annual
bonus based upon performance criteria specified by the Compensation Committee.
In September 1997, Mr. Wheaton's employment agreement was amended to modify the
annual base salary payable under the agreement to $250,000, of which CKE will
pay $63,000 and the remainder will be paid by Star Buffet, Inc. The employment
agreement provided for a grant of 25,000 shares (later adjusted by stock
dividends and stock splits) of CKE's common stock pursuant to CKE's 1994 Stock
Incentive Plan (the "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 July 1997, CKE entered into a two-year employment agreement with Rory J.
Murphy which provides for an annual base salary as President and Chief Operating
Officer of Hardee's Food Systems, Inc. of $425,000 for the first year and
$450,000 for the second year. Mr. Murphy's employment agreement provides for an
annual bonus based upon performance criteria specified in the employment
agreement. The agreement entitles Mr. Murphy to participate in CKE's incentive
stock option program and provided for an initial grant of 200,000 shares (later
adjusted by stock dividends) with an exercise price equal to the fair market
value of CKE's common stock on the date of grant. In the event CKE terminates
Mr. Murphy'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 or Hardee's is acquired by or merged with another
entity, or another entity acquires all or substantially all of
13
<PAGE> 16
CKE's assets, resulting in such other entity gaining direction or control of CKE
or Hardee's and Mr. Murphy being terminated for reasons other than cause. In
such event, Mr. Murphy's agreement requires CKE to pay, in a lump sum, Mr.
Murphy's base salary for the balance of the employment term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, the members of the Compensation Committee of CKE's
Board of Directors were Messrs. Churm, Willey and Lester. Neither Messrs. Churm,
Willey or Lester was an officer, former officer or employee of CKE during fiscal
1998. During fiscal 1998, 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1998, all filing
requirements applicable to its executive officers, directors and greater than
10% stockholders were satisfied, except that the Forms 4 required to be filed in
January 1998 by Loren C. Pannier and Robert W. Wisely, reflecting the sale of
shares of CKE's Common Stock owned directly by each of them, were approximately
one week 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
exercised its option to extend the lease until June 1, 2008. CKE has the option
to renew the lease for an additional five year term. The current rent under this
lease is $89,276 per month, subject to adjustment every five years. 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 rents paid by CKE to the Trust for the
corporate offices and adjacent facilities during fiscal 1998 were $1,211,625.
CKE presently has two leases with the Trust with respect to restaurant
properties. The terms of these leases range from 20 to 35 years. The minimum
monthly rental is the greater of $6,799 or 5.5% of annual gross sales in one of
the leases, and 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 in the
other lease. The leases expire in May 1999 and May 2010. The aggregate rents
paid by CKE to the Trust for these restaurant properties during fiscal 1998 were
$238,643.
In January 1994, CKE entered into an Employment Agreement with Carl N.
Karcher which expires in January 1999. In November, 1997, the Employment
Agreement was amended, extending the employment term to December 31, 2003;
providing Mr. Karcher eligibility to participate in any management incentive
compensation bonus pool plans; granting 100,000 fully vested stock options on
January 1, 1999 at the then fair market value of CKE's common stock; and
modifying his death benefits to include payment of any
14
<PAGE> 17
compensation due Mr. Karcher for services rendered prior to the date of
termination as a result of his death to his estate and payment of Mr. Karcher's
base salary for one full year following his death to Mrs. Karcher. The agreement
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 at a base
salary of $400,000. 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, totaling
$250,000, which was paid in full in fiscal 1997. The second advance, which
totaled $464,756, is noninterest-bearing, is currently being repaid through
biweekly payroll deductions, and is expected to be paid in full in December
1998. During fiscal 1998, the largest amount outstanding under these advances
was $222,354, of which $115,651 remained outstanding at the end of fiscal 1998.
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 rents paid by CKE to Mr. Pannier under all three leases
during fiscal 1998 were $140,008.
CLK, Inc. ("CLK") is a franchisee of CKE and currently operates 23 Carl's
Jr. restaurants. Carl L. Karcher is a son of Carl N. Karcher, a director of CKE,
and an affiliate of CLK. 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 1998, these
purchases totaled approximately $6,147,160. During fiscal 1998, CLK paid royalty
fees of $819,507 and advertising and promotional fees of $835,218 for all 23
restaurants combined. CLK is also a lessee or sublessee of CKE with respect to
15 restaurant locations. Rental payments equal the greater of a percentage of
the annual gross sales, ranging from 6.5% to 10%, of the restaurant and/or
minimum monthly rentals ranging from $4,157 to $8,750. The leases expire between
November 1999 and June 2011. The rents paid under these leases during fiscal
1998 aggregated $1,180,308. CLK also licenses one restaurant from CKE under
which CLK is obligated to remit 50% of the restaurant's net profit to CKE.
During fiscal 1998, CLK paid $85,507 under this license agreement.
JCK, Inc. ("JCK") is a franchisee of CKE and currently operates seven
Carl's Jr. restaurants. Joseph C. Karcher is a son of Carl N. Karcher and an
affiliate of JCK. 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 1998, these
purchases totaled approximately $1,322,883. During fiscal 1998, JCK paid royalty
fees of $49,362 and advertising and promotional fees of $208,224.
Wiles Restaurants, Inc. ("Wiles") is a franchisee of CKE and currently
operates nine Carl's Jr. restaurants. Anne M. Wiles is a daughter of Carl N.
Karcher and an affiliate of Wiles. In connection with the operation of its nine
franchised restaurants, Wiles regularly purchases food and other products from
CKE on the same terms and conditions as other franchisees. During fiscal 1998,
these purchases totaled approximately $2,430,918. During fiscal 1998, Wiles paid
royalty fees of $302,815 and advertising and promotional fees of $280,626 for
all nine 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 $10,270. The lease
expires in August 2011. The rents paid under this lease during fiscal 1998
aggregated $123,240.
15
<PAGE> 18
Bernard Karcher Investments, Inc. ("BKI") is a franchisee of CKE and
currently operates 13 Carl's Jr. restaurants. Bernard W. Karcher is a brother of
Carl N. Karcher and an affiliate of BKI. In connection with the operation of its
13 franchised restaurants, BKI regularly purchases food and other products from
CKE on the same terms and conditions as other franchisees. During fiscal 1998,
these purchases totaled approximately $4,145,838. During fiscal 1998, BKI paid
royalty fees of $516,601 and advertising and promotional fees of $528,819 for
all 13 restaurants combined. BKI is also a lessee of CKE with respect to two
restaurant locations. Rental payments equal a percentage of annual gross sales
of 8% on one lease, and a minimum monthly rental of $9,600 on the other. The
leases expire in January 2006 and September 2012, respectively. The rentals paid
under these two leases during fiscal 1998 aggregated $171,558.
R.W.W., Inc. ("RWW") is a franchisee of CKE and currently operates eight
Carl's Jr. restaurants. Robert W. Wisely, an executive officer of CKE, is an
affiliate of RWW. In connection with the operation of its eight restaurants, RWW
regularly purchases food and other products from CKE on the same terms and
conditions as other franchisees. During fiscal 1998, these purchases totaled
approximately $2,146,384. During fiscal 1998, RWW paid royalty fees of $201,529
and advertising and promotional fees of $346,578. 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 5% to 12%, or minimum
monthly rentals ranging from $10,084 to $10,382. The leases expire between
August 1999 and July 2006. Total rents paid under these six leases during fiscal
1998 aggregated $527,743.
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 1998, these
purchases totaled approximately $3,665,789. During fiscal 1998, TWM paid royalty
fees of $462,404 and advertising and promotional fees of $648,357. TWM was also
a lessee or sublessee of CKE with respect to 11 restaurant locations during
fiscal 1998. Rental payments equal a percentage of the annual gross sales of the
restaurants ranging from 4% to 8% or a minimum monthly rental ranging from
$3,000 to $10,720. The leases expire between September 1998 and January 2012.
Total rents paid under these 11 leases during fiscal 1998 aggregated $673,017.
KWK Foods, L.L.C. ("KWK") is a franchisee of CKE and currently operates six
Carl's Jr. restaurants. Carl L. Karcher is the son of Carl N. Karcher, a
Director of CKE and an affiliate of KWK. Joseph C. Karcher is the son of Carl N.
Karcher and an affiliate of KWK. Gary Wiles is a son-in-law of Carl N. Karcher
and an affiliate of KWK. KWK is obligated, pursuant to a Development Agreement
with CKE, to develop and become a franchisee with respect to seven additional
Carl's Jr. restaurants at varying times between 1999 and 2004. In connection
with the operation of its six franchised restaurants, KWK regularly purchases
food and other products from CKE on the same terms and conditions as other
franchisees. During fiscal 1998, these purchases totaled approximately
$1,107,149. During fiscal 1998, KWK paid royalty fees of $60,914 and advertising
and promotional fees of $177,115. KWK was also a sublessee of CKE with respect
to two restaurant locations during fiscal 1998. Rental payments equal a
percentage of annual gross sales of the restaurants ranging from 1% and/or fixed
monthly rentals ranging from $4,583 to $8,183. The leases expire between
September 2015 and February 2017. Total rents paid under these leases during
fiscal 1998 aggregated $159,319.
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 1998 up to a maximum amount of $467,806. In addition, CKE
entered into two limited term guarantees with independent third parties on
behalf of certain of its Carl's Jr. franchisees. CKE agreed to guarantee the
payment obligations of RWW, Wiles, BKI, JCK and KWK under these arrangements in
fiscal 1998 up to a maximum amount of $704,917.
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
16
<PAGE> 19
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 26, 1998 was KPMG Peat Marwick LLP. The Board of Directors
will vote upon the selection of an auditor for the current fiscal year at a
future Board meeting.
Representatives of KPMG Peat Marwick LLP are expected to attend the Meeting
and be available to respond to appropriate questions. The representatives of
KPMG Peat Marwick LLP also will have an opportunity to make a formal statement,
if they so desire.
STOCKHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING
Pursuant to the rules of the Securities and Exchange Commission, proposals
by eligible stockholders (as defined below) which are intended to be presented
at CKE's Annual Meeting of Stockholders in 1999 must be received by CKE by
January 13, 1999 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 1999 proxy solicitation materials. An eligible
stockholder is one who is the record or beneficial owner of at least 1% or
$1,000 in market value of securities entitled to be voted at the 1999 Annual
Meeting and has held such securities for at least one year, and who shall
continue to own such securities through the date on which the meeting is held.
ANNUAL REPORT
CKE's 1998 Annual Report, including consolidated financial statements for
fiscal 1998, 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.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
JANUARY 26, 1998, 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.
17
<PAGE> 20
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 Carl A. Strunk,
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 on April 29, 1998, at the Annual Meeting of Stockholders to
be held on June 16, 1998 and any postponements or adjournments thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
<PAGE> 21
Please mark
your votes as [X]
indicated in
this example.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Election of Directors:
(Instruction: To withhold authority FOR WITHHOLD 2. In their discretion, the Proxies are
to vote for any individual nominee all of the nominees AUTHORITY authorized to vote upon such other
strike a line through the nominee's listed below (except to vote for all business as may properly come before
name in the list below.) as withheld to the nominees such meeting or any and all
contrary below) listed below postponements or adjournments thereof.
[ ] [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO
Carl L. Karcher -- Frank P. Willey -- DIRECTION IN GIVEN, THE PROXIES WILL VOTE
Byron Allumbaugh FOR THE NOMINEES LISTED ABOVE, AND IN
THEIR DISCRETION ON MATTERS DESCRIBED IN
ITEM 2.
DO YOU PLAN TO ATTEND YES NO
THE MEETING? [ ] [ ]
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
</TABLE>
Signature_______________Signature it held jointly_____________Dated:______, 1998
Please sign exactly as the name appears below. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give your full title as such. If a corporation,
please sign in full corporate name by the President or other authorized officer.
If a partnership, please sign in the partnership name by an authorized person.
-FOLD AND DETACH HERE-
