<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934.
For the quarterly period ended May 17, 1999
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934.
for the transition period from __________ to __________
Commission file number 1-13192
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CKE RESTAURANTS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 33-0602639
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
401 W. Carl Karcher Way, Anaheim, CA 92801
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (714) 774-5796
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1200 N. Harbor Boulevard, Anaheim, CA 92801
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Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
52,020,861 shares of Common Stock, par value $.01 per share,
as of June 18, 1999
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CKE RESTAURANTS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of May 17, 1999 and January 25, 1999......... 3
Consolidated Statements of Income for the sixteen weeks ended
May 17, 1999 and May 18, 1998.......................................... 4
Consolidated Statements of Cash Flows for the sixteen weeks ended
May 17, 1999 and May 18, 1998.......................................... 5
Notes to Consolidated Financial Statements.................................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk............... 15
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................................ 16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
May 17, January 25,
1999 1999
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 45,529 $ 46,297
Accounts receivable, net 38,720 46,820
Related party receivables 1,225 1,474
Inventories 25,068 22,507
Prepaid expenses 17,710 12,349
Other current assets 3,154 4,845
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Total current assets 131,406 134,292
Property and equipment, net 981,723 940,178
Property under capital leases, net 78,866 81,895
Long-term investments 33,362 34,119
Notes receivable 7,572 7,898
Related party receivables 7,407 7,020
Costs in excess of assets acquired, net 251,453 252,035
Other assets 46,094 39,477
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$1,537,883 $1,496,914
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,276 $ 4,273
Current portion of capital lease obligations 7,511 7,838
Accounts payable 82,828 88,462
Other current liabilities 102,991 101,074
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Total current liabilities 197,606 201,647
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Long-term debt 195,381 360,684
Senior subordinated notes 200,000 --
Convertible subordinated notes 159,225 162,225
Capital lease obligations 88,843 90,373
Deferred income taxes, net 15,029 15,029
Other long-term liabilities 77,648 80,114
Stockholders' equity:
Preferred stock, $.01 par value; authorized
5,000,000 shares; none issued or outstanding -- --
Common stock, $.01 par value; authorized
100,000,000 shares; issued and outstanding
51,866,131 and 51,850,249 shares 519 519
Additional paid-in capital 380,387 380,423
Retained earnings 223,245 205,900
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Total stockholders' equity 604,151 586,842
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$1,537,883 $1,496,914
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
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May 17, May 18,
1999 1998
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<S> <C> <C>
Revenues:
Company-operated restaurants $ 546,744 $ 478,607
Franchised and licensed restaurants and other 48,979 49,604
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Total revenues 595,723 528,211
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Operating costs and expenses:
Restaurant operations:
Food and packaging 163,732 144,850
Payroll and other employee benefits 165,579 148,703
Occupancy and other operating expenses 110,835 90,890
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440,146 384,443
Franchised and licensed restaurants 35,528 33,301
Advertising expenses 32,679 27,449
General and administrative expenses 39,765 37,384
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Total operating costs and expenses 548,118 482,577
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Operating income 47,605 45,634
Interest expense (15,678) (9,237)
Other income (expense), net (266) 1,396
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Income before income taxes and extraordinary item 31,661 37,793
Income tax expense 12,531 15,061
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Income before extraordinary item 19,130 22,732
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes of $186 290 --
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Net income $ 19,420 $ 22,732
========= =========
Basic income per share before extraordinary item $ 0.36 $ 0.44
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes - basic .01 --
--------- ---------
Net income per share - basic $ 0.37 $ 0.44
========= =========
Weighted average shares outstanding - basic 51,860 51,229
========= =========
Diluted income per share before extraordinary item $ 0.36 $ 0.43
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes - diluted .01 --
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Net income per share - diluted $ 0.37 $ 0.43
========= =========
Weighted average shares outstanding - diluted 56,341 55,581
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
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May 17, May 18,
1999 1998
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<S> <C> <C>
Net cash flow from operating activities:
Net income $ 19,420 $ 22,732
Adjustments to reconcile net income to net cash provided by
operating activities, excluding the effect of acquisitions
and dispositions:
Extraordinary gain on early retirement of debt (476) --
Depreciation and amortization 27,923 19,649
Loss on sale of property and equipment and capital leases 435 376
Net noncash income (140) (387)
Loss on noncurrent asset and liability transactions 370 233
Net change in receivables, inventories, prepaid expenses and
other current assets 2,123 9,474
Net change in accounts payable and other current liabilities (6,459) 5,973
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Net cash provided by operating activities 43,196 58,050
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Cash flow from investing activities:
Purchases of:
Property and equipment (67,183) (23,666)
Proceeds from sale of:
Property and equipment 3,404 5,372
Increases in notes receivable and related party receivables (569) (23)
Collections on notes receivable, related party receivables and
leases receivable 890 2,332
Net change in other assets 558 (1,213)
Acquisitions, net of cash acquired -- (384,711)
Dispositions, net of cash surrendered -- 4,328
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Net cash used in investing activities (62,900) (397,581)
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Cash flow from financing activities:
Net change in bank overdraft 2,743 2,450
Long-term borrowings 237,000 410,445
Repayments of long-term debt (204,825) (41,397)
Repayments of capital lease obligations (1,858) (1,404)
Deferred financing costs (9,686) (10,196)
Net change in other long-term liabilities (2,467) 2,192
Payment of dividends (2,075) (1,895)
Exercise of stock options 104 672
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Net cash provided by financing activities 18,936 360,867
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Net increase (decrease) in cash and cash equivalents $ (768) $ 21,336
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
5
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CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
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May 17, May 18,
1999 1998
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<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest (net of amount capitalized) $15,703 $ 6,654
Income taxes 5,957 7,244
FEI Acquisition:
Tangible assets acquired at fair value $ -- $ 317,056
Costs in excess of net assets acquired -- 152,989
Liabilities assumed at fair value -- (89,408)
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Total purchase price $ -- $ 380,637
======= =========
</TABLE>
6
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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 17, 1999 AND MAY 18, 1998
NOTE (A) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of CKE Restaurants, Inc. and its consolidated wholly-owned subsidiaries
(the "Company" or "CKE") and have been prepared in accordance with generally
accepted accounting principles, the instructions to Form 10-Q, and Article 10 of
Regulation S-X. These statements should be read in conjunction with the audited
consolidated financial statements presented in the Company's 1999 Annual Report
to Stockholders. In the opinion of management, all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of financial
position and results of operations for the interim periods presented have been
reflected herein. The results of operations for such interim periods are not
necessarily indicative of results to be expected for the full year or for any
other future periods. Certain reclassifications have been made to the fiscal
1999 consolidated financial statements to conform to the fiscal 2000
presentation. Share and per share information has been retroactively adjusted to
reflect the ten percent stock dividend paid in January 1999.
NOTE (B) ACQUISITION OF FLAGSTAR ENTERPRISES, INC.
On April 1, 1998, the Company acquired Flagstar Enterprises, Inc.
("FEI"), the largest franchisee in the Hardee's system, previously operating 557
Hardee's restaurants located primarily in the Southeastern United States. In
connection with the acquisition, which was accounted for as a purchase, the
Company acquired all of the issued and outstanding shares of common stock of FEI
from Advantica Restaurant Group, Inc. ("Advantica") for cash consideration of
$380.6 million (which included miscellaneous expenses paid to Advantica) and the
assumption of approximately $45.6 million in capital lease obligations. The
Company used the majority of the net proceeds from the issuance of $197.2
million of convertible subordinated notes together with borrowings of $213.2
million under its senior credit facility to finance the acquisition.
Selected unaudited pro forma combined results of operations for the
16-week period ended May 18, 1998, assuming the acquisition occurred on January
27, 1998, using actual restaurant-level margins and general and administrative
expenses prior to the acquisition, is as follows:
<TABLE>
<CAPTION>
Sixteen Weeks Ended
May 18, 1998
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<S> <C>
Total revenues $649,408
Net income $ 21,949
Net income per share - basic $ 0.43
Net income per share - diluted $ 0.41
</TABLE>
NOTE (C) LONG-TERM DEBT
On March 4, 1999, the Company amended its existing senior credit
facility, which consisted of a $250.0 million term loan facility and a $250.0
million revolving credit facility. The senior credit facility, as amended,
consists of a $500.0 million revolving credit facility and includes a $75.0
million letter of credit sub-facility. The senior credit facility will be
reduced beginning in March 2001 by a minimum of $50.0 million each year, for the
three subsequent years. Additional borrowings under the senior credit facility
may be used for working capital or other general corporate purposes, including
permitted investments and acquisitions, and any amounts outstanding thereunder
will become due in February 2004.
Borrowings and other obligations of the Company under the senior credit
facility are general unsubordinated obligations of the Company and secured by a
pledge of the capital stock of certain of the Company's present and future
subsidiaries, which subsidiaries guarantee such borrowings and other
obligations, and are secured by certain franchise rights, contract rights,
general intangibles (including trademarks) and other assets of the Company and
such
7
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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 17, 1999 AND MAY 18, 1998
(Continued)
subsidiaries. The Company is required to repay borrowings under the senior
credit facility with the proceeds from certain asset sales (unless the net
proceeds of such sales are reinvested in the Company's business), from the
issuance of certain equity securities and from the issuance of additional
indebtedness. Of the various options the Company has regarding interest rates,
it has selected LIBOR plus a margin, with future margin adjustments dependent on
certain financial ratios from time to time.
The senior credit facility contains a number of significant covenants
that, among other things, (i) restrict the ability of the Company and its
subsidiaries to incur additional indebtedness and incur liens on their assets,
in each case subject to specified exceptions, (ii) impose specified financial
tests as a precondition to the Company's and its subsidiaries' acquisition of
other businesses and (iii) limit the Company and its subsidiaries from making
capital expenditures and certain restricted payments (including dividends and
repurchases of stock), subject in certain circumstances to specified financial
tests. In addition, the Company is required to comply with specified financial
ratios and tests, including minimum EBITDA requirements, minimum interest
coverage and fixed charge coverage ratios, minimum consolidated tangible net
worth requirements and maximum leverage ratios. As of May 17, 1999, the Company
was in compliance with all of its covenants related to its senior credit
facility.
NOTE (D) SENIOR SUBORDINATED NOTES
On March 4, 1999, the Company completed a private placement of $200.0
million aggregate principal amount of senior subordinated notes, in which the
Company received net proceeds of approximately $194.8 million, of which $190.0
million was used to repay indebtedness under the senior credit facility. The
senior subordinated notes are due in May 2009, carry a 9.125% coupon rate and
are redeemable by the Company beginning on May 1, 2004. The indenture relating
to the senior subordinated notes imposes restrictions on the Company's ability
(and the ability of its subsidiaries) to incur additional indebtedness, pay
dividends on, redeem or repurchase its capital stock, make investments, incur
liens on its assets, sell assets other than in the ordinary course of business,
and enter into certain transactions with its affiliates. The senior subordinated
notes represent unsecured general obligations subordinate in right of payment to
the Company's senior indebtedness including its senior credit facility.
The Company's senior credit facility is guaranteed on a secured basis by
the Company's direct and indirect subsidiaries (the "Subsidiary Guarantors"),
other than non-guarantor subsidiaries which conduct no material operations, have
no significant assets on a consolidated basis and account for only an
insignificant share of the Company's consolidated revenues. Each of the
Subsidiary Guarantors also fully and unconditionally guarantee the Company's
9.125% senior subordinated notes due 2009 on a joint and several basis. Separate
financial statements and other disclosures concerning the Subsidiary Guarantors
are not presented because management has determined that such information is not
material to investors.
NOTE (E) CONVERTIBLE SUBORDINATED NOTES
During the first quarter of fiscal 2000, the Company repurchased an
additional $3.0 million aggregate principal amount of convertible subordinated
notes for $2.5 million in cash, including accrued interest thereon. The Company
recognized an extraordinary gain on the early retirement of debt of $0.3
million, net of applicable income taxes of $0.2 million. To date, the Company
has repurchased a total of $38.0 million aggregate principal amount of
convertible subordinated notes.
NOTE (F) SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS
131") in its fiscal year ending January 25, 1999.
The Company is engaged principally in developing, operating and
franchising its Carl's Jr., Hardee's and Taco Bueno quick-service restaurants,
each of which are considered strategic businesses that are managed and evaluated
separately. As such, the Company considers its Carl's Jr., Hardee's and Taco
Bueno chains to each be a reportable
8
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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 17, 1999 AND MAY 18, 1998
(Continued)
segment. Management evaluates the performance of its segments and allocates
resources to them based on several factors, of which the primary financial
measure is segment profit before taxes. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies in Note 1 of Notes to Consolidated Financial Statements for the fiscal
year ending January 25, 1999.
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "other" column includes corporate
related items, results of insignificant operations and, as it relates to segment
profit or loss, income and expense not allocated to reportable segments. The
amounts reported for Hardee's reflect only the periods subsequent to the
acquisition date of April 1, 1998 for FEI.
<TABLE>
<CAPTION>
Sixteen Weeks Ended
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Carl's Jr. Hardee's Taco Bueno Other Total
---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
May 17, 1999:
Revenues $207,851 $ 356,230 $27,616 $ 4,026 $ 595,723
Segment profit (loss) 21,288 12,738 2,932 (5,297) 31,661
Total assets 345,830 1,059,755 67,904 64,394 1,537,883
Capital expenditures 9,187 47,182 5,418 5,396 67,183
Depreciation and amortization 7,785 17,219 1,022 1,897 27,923
May 18, 1998:
Revenues $190,233 $ 288,788 $24,584 $ 24,606 $ 528,211
Segment profit (loss) 23,060 15,498 2,533 (3,298) 37,793
Total assets (as of
January 25, 1999) 280,201 1,072,594 62,539 81,580 1,496,914
Capital expenditures 10,325 10,485 836 2,020 23,666
Depreciation and amortization 6,981 9,396 830 2,442 19,649
</TABLE>
9
<PAGE> 10
CKE RESTAURANTS, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
OVERVIEW
Consolidated net income for the 16-week period ended May 17, 1999
decreased 14.6% to $19.4 million, or $0.37 per share on a diluted basis as
compared with net income of $22.7 million, or $0.43 per share on a diluted basis
for the prior year quarter. Net income, excluding the $0.3 million extraordinary
gain on the early retirement of debt, decreased 15.8% for the 16-week period
ended May 17, 1999 to $19.1 million, or $0.36 per share on a diluted basis. The
decline in consolidated net income was primarily due to increased interest
expense incurred in connection with our recent financings. While consolidated
net income reflected a decrease from the level achieved in the prior year
quarter, operating income for the consolidated group continued to grow in the
first quarter of fiscal 2000, increasing 4.3% over the prior year quarter to
$47.6 million. The increase in operating income was largely attributable to the
additional income generated by the 557 previously franchised Hardee's
restaurants as a result of our acquisition of Flagstar Enterprises, Inc. ("FEI")
from Advantica Restaurant Group, Inc. ("Advantica") on April 1, 1998. Operating
results for the 16 weeks ended May 17, 1999 include 16 weeks of operations for
Hardee's Food Systems, Inc. and 16 weeks of operations for FEI. The
corresponding period of the prior fiscal year includes 16 weeks of operations
for Hardee's Food Systems, Inc. and seven weeks of operations for FEI's 557
Hardee's restaurants.
Operating results for Carl's Jr. for the 16-week period ended May 17,
1999 include the results of 63 Hardee's-to-Carl's Jr. conversions in Oklahoma,
Texas and Kansas. These restaurants were included in Hardee's results for the 16
weeks ended May 18, 1998.
We have remodeled approximately 160 company-operated Hardee's
restaurants to the Star Hardee's format during the quarter and our franchisees
have remodeled approximately 55 restaurants, with approximately 325 Hardee's
restaurants remodeled to the Star Hardee's format system-wide, at quarter-end.
In addition to menu enhancements, a Star Hardee's remodel involves installing
charbroilers in the kitchens, remodeling the interior and exterior of the
restaurant, introducing Carl's Jr.-style limited table service, adding
"all-you-can-drink" beverage bars and installing new signage. We plan to remodel
300 to 400 company-operated restaurants and our franchisees plan to remodel 100
to 200 restaurants to the Star Hardee's format this fiscal year. The restaurants
that have already been converted are seeing sales improvements in the range of 8
to 10% above pre-conversion levels.
This Quarterly Report on Form 10-Q contains forward looking statements,
which are subject to known and unknown risks, uncertainties and other factors
which may cause our actual results, performance, or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions; the
impact of competitive products and pricing; success of operating initiatives;
advertising and promotional efforts; adverse publicity; changes in business
strategy or development plans; quality of management; availability, terms and
deployment of capital; changes in prevailing interest rates and the availability
of financing; food, labor, and employee benefit costs; changes in, or the
failure to comply with, government regulations; weather conditions; construction
schedules; demands placed on management and capital resources by the substantial
increase in our size resulting from the acquisitions of Hardee's and FEI;
changes in our integration plans for Hardee's and our expansion plans; risks
that sales growth resulting from our current and future remodeling and
dual-branding of restaurants and other operating strategies can be sustained at
the current levels experienced; and other risks detailed in our filings with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
Revenues from company-operated restaurants increased $68.1 million or
14.2% to $546.7 million in the first quarter of fiscal 2000 over the same period
in the prior year. Carl's Jr., Hardee's and Taco Bueno company-operated
restaurant revenues accounted for sales increases of $16.5 million, $68.7
million and $3.0 million, respectively, offset in part by the decrease in
revenues from our JB's Restaurants and Galaxy Diner restaurants which were sold
to Santa Barbara Restaurant Group, Inc. ("SBRG") in September 1998. On a
same-store sales basis, our Carl's Jr. sales decreased 4.8% for the quarter,
which reflects strong comparisons in the first quarter of the last two fiscal
years, with same-store sales increases of 5.2% for the first quarter of fiscal
1999 and 6.1% for the same period in fiscal 1998. Also included in the current
year same-store sales comparisons are results of the 63 Hardee's-to-Carl's Jr.
conversions in Oklahoma, Texas and Kansas. These are essentially new markets for
Carl's Jr. where additional time is needed to fully realize the brand potential.
Without the inclusion of these restaurants, same-store sales for the quarter
would have
10
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CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
declined 3.8%. Same-store sales for our company-operated Hardee's restaurants
were down 4.8% for the quarter, including both the restaurants initially
purchased from Imasco Holdings, Inc. in July 1997 and the FEI restaurants
purchased in April 1998. Excluding the 557 FEI restaurants, same-store sales for
Hardee's would have been up 0.5% for the quarter. Same-store sales for our
company-operated Taco Bueno restaurants increased 10.6%, marking the 16th
consecutive quarter of same-store sales increases for the chain. The increase in
company-operated revenue from our Carl's Jr. restaurants was primarily
attributable to an increase in the number of restaurants open and operating in
the first quarter of fiscal 2000 as compared with the first quarter of the prior
year and the inclusion of $12.0 million of revenue from the 63
Hardee's-to-Carl's Jr. converted restaurants. The increase in Hardee's
company-operated revenues was primarily due to including a full quarter of
operations of the FEI restaurants acquired from Advantica in April 1998. Taco
Bueno's increase in revenues is due mainly to our advertising campaign, which
focuses on great-tasting food products, the image enhancement program for our
Taco Bueno restaurants, which was begun in fiscal 1999, and the focus on real
estate that is better located and more heavily trafficked than the properties
previously targeted for development of Taco Bueno restaurants. Average unit
volumes for the trailing 52-week period ending May 17, 1999 for our
company-operated Carl's Jr. restaurants, excluding the 63 Hardee's-to-Carl's
conversions were $1,169,000. Average unit volumes at our company-operated
Hardee's restaurants were $797,000, while Taco Bueno's average unit volumes
continued to rise and increased to $768,000 as of May 17, 1999 for the trailing
52-week period.
Our revenues from franchised and licensed restaurants for the 16-week
period ended May 17, 1999 decreased $0.6 million, or 1.3%, to $49.0 million from
the comparable period in fiscal 1999. This decrease is mainly due to the
acquisition of previously franchised Hardee's restaurants during fiscal 1999,
including the 557 formerly franchised FEI restaurants we acquired in April 1998
and the loss of franchised revenues from our JB's restaurants, which were sold
to SBRG in September 1998. Offsetting these factors were increased royalties
from, and food purchases by, Carl's Jr. franchisees and licensees as a result of
an increase in the number of Carl's Jr. franchised restaurants operating in the
first quarter of fiscal 2000 as compared with the first quarter of fiscal 1999
and an increase in equipment sales to Hardee's franchisees in connection with
the remodeling of Hardee's restaurants to the Star Hardee's format.
Restaurant-level margins for our company-operated Carl's Jr. restaurants
decreased 2.1% to 23.8% for the 16-week period ended May 17, 1999 from the first
quarter of fiscal 1999, primarily due to increases in occupancy and other
operating expenses. Excluding the 63 Hardee's-to-Carl's Jr. converted
restaurants, Carl's Jr.'s restaurant-level margins would have been 24.8% for the
first quarter of fiscal 2000. Carl's Jr. food and packaging costs continued to
decrease during the first quarter of fiscal 2000, down 0.8% to 28.3% of revenues
from company-operated Carl's Jr. restaurants, as compared with 29.1% in the
comparable prior year period. This decrease was primarily attributable to
continued purchasing economies achieved as a result of the consolidated buying
power directly realized from our addition of other restaurant concepts,
including our Green Burrito dual-brand restaurants. Payroll and other employee
benefits for our Carl's Jr. restaurant chain, as a percentage of revenues from
company-operated Carl's Jr. restaurants, increased 0.7% to 26.5% in the 16 weeks
ended May 17, 1999 as compared with the same prior year period. The March 1998
California minimum wage increase contributed to the rise in payroll and employee
benefit costs in the first quarter of fiscal 2000, and the increasing number of
our Carl's Jr./Green Burrito dual-brand restaurants added to the greater labor
cost due to the more labor intensive nature of the Green Burrito system. Carl's
Jr. occupancy and other operating expenses, as a percentage of revenues from
company-operated Carl's Jr. restaurants, increased 2.2% to 21.4% for the 16-week
period ended May 17, 1999 over the comparable prior year period, primarily due
to the fixed nature of these costs combined with a decrease in the same-store
revenue base as well as increased repair and maintenance costs and increased
rent expense as a result of scheduled increases in long-term lease contracts.
Although our Hardee's restaurant-level operating margins are
substantially lower than our Carl's Jr. and Taco Bueno quick-service restaurant
concepts, we have increased Hardee's company-operated restaurant-level operating
margins to 16.8% for the first quarter of fiscal 2000, as compared with 16.3%
for the comparable period of fiscal 1999 by implementing many of the same cost
saving measures we implemented at our Carl's Jr. restaurants over the past four
to five years. Hardee's food and packaging costs continued to decrease during
the first quarter of fiscal 2000, down 0.2% to 30.9% of revenues from
company-operated restaurants, as compared with 31.1% in the comparable prior
year period. This decrease was mainly due to a reduction in food waste and theft
tolerance levels and continued purchasing economies achieved as a result of our
increased consolidated buying power. Payroll and other employee benefits as a
percentage of revenues from company-operated Hardee's restaurants, decreased
1.6% to 32.3% in the
11
<PAGE> 12
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
first quarter of fiscal 2000 from the first quarter of the prior year. This
decrease is a result of using the Carl's Jr. labor matrix to refine labor usage
and a focus on safety and accident prevention as a method of lowering workers'
compensation costs. As a percentage of revenues from Hardee's company-operated
restaurants, occupancy and other operating expenses increased 1.3% to 20.0% for
the 16-week period ended May 17, 1999 over the comparable prior year period. The
increase in occupancy and other operating expenses is due to the fixed nature of
the costs combined with a decrease in the same-store revenue base as well as
increased depreciation costs in connection with the remodeling program of the
Hardee's restaurants to the Star Hardee's format.
Taco Bueno's restaurant-level operating margins were 27.2% for the first
quarters of both fiscal 2000 and 1999. While overall Taco Bueno restaurant-level
margins remained constant, food and packaging costs as a percentage of sales
increased by 0.8%, which was offset by a decrease in occupancy and other
operating expenses as a percentage of sales of 0.8%. The increase in food and
packaging was mainly attributable to a change in packaging materials used, while
the decrease in occupancy and other was a result of the fixed nature of these
costs combined with the increase in revenues.
Franchised and licensed restaurant and other costs increased 6.7% to
$35.5 million for the 16 weeks ended May 17, 1999 over the 16-week period ended
May 18, 1998. The increase is primarily due to increased food and other products
purchased from us by Carl's Jr. franchisees and licensees and increased
equipment purchases from us by Hardee's franchisees and licensees. While
royalties from Hardee's franchised and licensed restaurants decreased during the
first quarter in fiscal 2000 from the prior year quarter, revenues from
equipment sales to Hardee's franchised and licensed restaurants increased; the
cost structure associated with equipment sales is much higher than that
associated with the royalty stream of income. As a result, franchised and
licensed restaurant and other costs increased 5.4% as a percentage of revenue
from franchised and licensed restaurants for the first quarter of fiscal 2000
over the first quarter of fiscal 1999.
Advertising expenses increased $5.2 million in the first quarter of
fiscal 2000 over the comparable period of fiscal 1999 principally due to
increased advertising support for Hardee's. Advertising has become increasingly
important in the current competitive environment and, as a result, advertising
expenses have increased in terms of dollars spent in the current fiscal year as
compared with the prior fiscal year, while remaining relatively consistent as a
percentage of company-operated revenues.
General and administrative expenses increased $2.4 million to $39.8
million for the 16 weeks ended May 17, 1999 over the 16-week period ended May
18, 1998. As a percentage of total revenues, general and administrative expenses
decreased 0.4% to 6.7% of total revenues in the first quarter of fiscal 2000,
reflecting the economies of scale we are realizing by absorbing certain costs
associated with FEI into our existing infrastructure. The increases in fiscal
2000 in terms of dollars spent are primarily the result of the added expenses of
supporting FEI's restaurant operations.
Interest expense for the 16-week period ended May 17, 1999 increased
$6.4 million to $15.7 million as compared with the comparable prior year period
due to higher levels of borrowings outstanding under our senior credit facility
and the issuance of convertible subordinated notes in March 1998 and senior
subordinated notes in March 1999. The proceeds from the convertible subordinated
notes, bearing interest at 4.25%, were used to complete the acquisition of FEI
in April 1998, and the proceeds from the senior subordinated notes, bearing
interest at 9.125%, were used to repay existing term loan balances under our
senior credit facility.
Other income (expense), net, mainly consists of interest income, lease
income, dividend income, gains and losses on sales of restaurants, income and
loss on long-term investments, property management expenses and other
non-recurring income and expenses. Other income (expense), net, decreased $1.7
million in the first quarter of fiscal 2000 as compared with the comparable
period in the prior fiscal year. The decrease was due in large part to a
reduction in interest income as a result of our reduced note receivable from
Checkers and reduced notes receivable from our franchisees, and recognition of
income in the prior year quarter from our investment in Star Buffet, Inc., which
was subsequently sold in October 1998.
During the third quarter of fiscal 1999, our Board of Directors approved
the buyback of up to $50.0 million aggregate principal amount of convertible
subordinated notes. In fiscal 1999, we repurchased $35.0 million and, in the
first quarter of fiscal 2000, we repurchased an additional $3.0 million of
convertible subordinated notes for $2.5 million in cash, including accrued
interest thereon. In connection with this repurchase, we recognized an
12
<PAGE> 13
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
extraordinary gain on the early retirement of debt of $0.3 million, net of
applicable taxes of $0.2 million in the 16-week period ended May 17, 1999.
FINANCIAL CONDITION
Cash and cash equivalents decreased $0.8 million to $45.5 million in the
16 week period ended May 17, 1999. Investing activities absorbed $62.9 million
of our cash to fund capital additions of $67.2 million. Partially generating
some of the funds necessary were $3.4 million from the sale of property and
equipment to our franchisees and $0.9 million from collections on and sale of
notes receivable, related party receivables and leases receivable. Financing
activities provided us with $18.9 million in cash, primarily from the net
proceeds of $194.8 million principal amount of senior subordinated notes and
additional borrowings under our senior credit facility. Cash flows from
operating and financing activities were mainly used to repay existing
indebtedness of $204.8 million, to fund the remodeling of our Hardee's
restaurants to the new Star Hardee's format and to convert certain Carl's Jr.
restaurants to the Carl's Jr./Green Burrito dual-brand concepts, to pay $9.7
million of deferred financing costs associated with our issuance of the senior
subordinated notes, to repay $1.9 million in capital lease obligations and to
pay dividends of $2.1 million.
On March 4, 1999, we completed a private placement of $200.0 million
aggregate principal amount of 9.125% senior subordinated notes due 2009. We
received net proceeds of $194.8 million, of which $190.0 million was used to
repay outstanding term loan balances under our senior credit facility. The
indenture relating to the senior subordinated notes imposes certain restrictions
on our ability (and the ability of our subsidiaries) to incur indebtedness, pay
dividends on, redeem or repurchase our capital stock, make investments, incur
liens on our assets, sell assets other than in the ordinary course of business,
or enter into certain transactions with our affiliates. The senior subordinated
notes represent unsecured general obligations subordinate in right of payment to
our senior indebtedness, including our senior credit facility.
In connection with our private placement of senior subordinated notes,
we also amended and restated our senior credit facility to increase the lenders'
commitments under our revolving credit facility to $500.0 million from $250.0
million. Commitments under the amended senior credit facility will be reduced
after two years by a minimum of $50.0 million each year. We also increased our
letter of credit sub-facility to $75.0 million from $65.0 million, and changed
the maturity date of the senior credit facility to February 2004. The term loan
component of the senior credit facility was eliminated as a result of these
transactions. Additional borrowings under the senior credit facility may be used
for working capital and other general corporate purposes, including permitted
investments and acquisitions. We will be required to repay borrowings under the
senior credit facility with the proceeds from (1) certain asset sales (unless
the net proceeds of such sales are reinvested in our business), (2) the issuance
of certain equity securities and (3) the issuance of additional indebtedness. Of
the various options we have regarding interest rates, we have selected LIBOR
plus a margin, with future margin adjustments dependent on certain financial
ratios from time to time.
Our senior credit facility contains the following significant covenants:
o restrictions on our ability to incur additional indebtedness and
incur liens on our assets, subject to specified exceptions;
o requirements that we satisfy specified financial tests as a
precondition to our acquisition of other businesses; and
o limitations on making capital expenditures and certain
restricted payments (including dividends and repurchases of
stock) subject in certain circumstances to specified financial
tests.
In addition, we are required to comply with minimum EBITDA requirements,
minimum interest coverage and fixed charge coverage ratios, minimum consolidated
tangible net worth requirements and maximum leverage ratios. As of May 17, 1999,
we were in compliance with all of our debt covenants.
Our primary source of liquidity is our revenues from company-operated
restaurants, which are generated in cash. Future capital needs will arise
primarily for the construction of new restaurants, the remodeling of our
Hardee's
13
<PAGE> 14
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
restaurants to the Star Hardee's format, the remodeling of existing Taco Bueno
restaurants, purchases of Hardee's franchised restaurants, the conversion of
restaurants to the Carl's Jr./Green Burrito dual-brand concepts and capital
expenditures to be incurred in connection with our integration of Hardee's data
processing systems. In addition, we continue to discuss certain post-closing
purchase price adjustments arising from the Hardee's acquisition with Imasco
Holdings, Inc. We believe that any payments required or to be received as a
result of such purchase price adjustments would not materially affect our
financial condition.
The quick-service restaurant business generally receives simultaneous
cash payment for sales. We presently reinvest the majority of the net cash flow
from operations in long-term assets, primarily for the remodeling and
construction of restaurants. Normal operating expenses for inventories and
current liabilities generally carry longer payment terms (usually 15 to 30
days). As a result, we typically maintain current liabilities in excess of
current assets.
We believe that cash generated from our various restaurant concept
operations, along with cash and cash equivalents on hand as of May 17, 1999 and
amounts available under our senior credit facility, will provide the funds
necessary to meet all of our capital spending and working capital requirements
for the foreseeable future. As of May 17, 1999 we had $262.4 million of
borrowings available to us under our senior credit facility. If those sources of
capital are insufficient to satisfy our capital spending and working capital
requirements, or if we determine to make any significant acquisitions of or
investments in other businesses, we may be required to sell additional equity or
debt securities or obtain additional credit facilities. Any sales of additional
equity or debt securities could result in additional dilution to our
stockholders. In addition, substantially all of the real properties we own and
use for our restaurant operations are unencumbered and could be used by us as
collateral for additional debt financing or could be sold and subsequently
leased back to us.
Year 2000
We are currently working to resolve the potential impact of the Year
2000 ("Y2K") on the processing of data-sensitive information by our computerized
information systems. Y2K problems are the result of computer programs being
written using two-digits (rather than four) to define the applicable year. Any
of our programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
We have investigated the impact of a Y2K problem on our business,
including our operational, information and financial systems. Based on this
investigation, we do not expect a Y2K problem, including the cost of making our
computerized information systems Y2K compliant, to have a material adverse
impact on our financial position or results of operations in future periods.
However, our inability to resolve all potential Y2K problems in a timely manner
could have a material adverse impact on us.
We have also initiated communications with significant suppliers and
vendors on whom we rely in an effort to determine the extent to which our
business is vulnerable to the failure by these third parties to remediate their
Y2K problems. While we have not been informed of any material risks associated
with a Y2K problem for these entities, we cannot assure you that the
computerized information systems of these third parties will be Y2K compliant on
a timely basis. The inability of these third parties to remediate their Y2K
problems could have a material adverse impact on us.
We have completed a review of our information systems and are involved
in a comprehensive program to upgrade computer systems and applications in
connection with our effort to fully integrate our recent restaurant
acquisitions. In conjunction with this computer upgrade process, we believe we
will have addressed any potential Y2K issues. Total expenditures related to the
upgrade of the information systems are expected to range from $20.0 million to
$25.0 million and will be capitalized or expensed in accordance with generally
accepted accounting principles. Through May 17, 1999, we have incurred
approximately $17.4 million of expenditures consisting of hardware and software
purchases, internal staff costs and outside consulting and other expenditures
related to this upgrade process. These costs are being funded through operating
cash flows.
We have developed or are in the process of developing contingency plans
to handle our most reasonably likely worst case Y2K scenarios, which we have not
yet identified fully. We intend to complete our determination of worst
14
<PAGE> 15
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
case scenarios after we have received and analyzed responses to substantially
all of the inquiries we have made of third-parties. Following this analysis,
which we expect to have completed by July 1999, we intend to develop a timetable
for completing our contingency plans.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our principal exposure to financial market risks is the impact that
interest rate changes could have on our $500.0 million senior credit facility,
of which $184.0 million remained outstanding as of May 17, 1999. Borrowings
under our senior credit facility bear interest at the prime rate or at LIBOR
plus an applicable margin based on certain financial ratios (averaging 6.5% in
fiscal 2000). A hypothetical increase of 100 basis points in short-term interest
rates would result in a reduction of approximately $1.8 million in annual
pre-tax earnings. The estimated reduction is based upon the outstanding balance
of our senior credit facility, and assumes no change in the volume, index or
composition of debt at May 17, 1999. Substantially all of our business is
transacted in U.S. dollars. Accordingly, foreign exchange rate fluctuations have
never had a significant impact on us and are not expected to in the foreseeable
future.
Commodity Price Risk
We purchase certain products which are affected by commodity prices and
are, therefore, subject to price volatility caused by weather, market conditions
and other factors which are not considered predictable or within our control.
Although many of the products purchased are subject to changes in commodity
prices, certain purchasing contracts or pricing arrangements contain risk
management techniques designed to minimize price volatility. Typically we use
these types of purchasing techniques to control costs as an alternative to
directly managing financial instruments to hedge commodity prices. In many
cases, we believe we will be able to address commodity cost increases which are
significant and appear to be long-term in nature by adjusting our menu pricing
or changing our product delivery strategy. However, increases in commodity
prices could result in lower restaurant-level operating margins for our
restaurant concepts.
15
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10-1 Employment Agreement dated as of April 9, 1999 by and between
the Company and William P. Foley, II.
10-2 Employment Agreement dated as of April 9, 1999, by and between
the Company and C. Thomas Thompson.
10-3 Employment Agreement dated as of April 9, 1999, by and between
the Company and Rory J. Murphy.
10-4 Employment Agreement dated as of April 9, 1999, by and between
the Company and Robert W. Wisely.
10-5 Employment Agreement dated as of April 9, 1999, by and between
the Company and Carl A. Strunk.
10-6 Employment Agreement dated as of April 9, 1999, by and between
the Company and Andrew F. Puzder.
10-7 Employment Agreement dated as of April 9, 1999, by and between
the Company and John J. Dunion.
11 Calculation of Earnings Per Share.
27-1 Financial Data Schedule (included only with electronic filing).
(b) Current Reports on Form 8-K:
A Current Report on Form 8-K dated February 19, 1999 was filed
during the first quarter of the fiscal year to report the
Company's intention to raise $200.0 million through a private
placement of senior subordinated notes.
A Current Report on Form 8-K dated February 25, 1999 was filed
during the first quarter of the fiscal year to report matters
relating to the Company's private placement of $200.0 million
senior subordinated notes and the Company's amended and restated
senior credit facility.
A Current Report on Form 8-K dated March 18, 1999 was filed
during the first quarter of the fiscal year to report the
election of John J. Dunion to the newly created position of
Executive Vice President, Chief Administrative Officer of the
Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CKE RESTAURANTS, INC.
(Registrant)
June 30, 1999 /s/ Carl A. Strunk
- ----------------------- -----------------------------------
Date Executive Vice President,
Chief Financial Officer
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit # Description
- --------- -----------
<C> <S>
10-1 Employment Agreement dated as of April 9, 1999, by and between the Company and William P. Foley, II.
10-2 Employment Agreement dated as of April 9, 1999, by and between the Company and C. Thomas Thompson.
10-3 Employment Agreement dated as of April 9, 1999, by and between the Company and Rory J. Murphy.
10-4 Employment Agreement dated as of April 9, 1999, by and between the Company and Robert W. Wisely.
10-5 Employment Agreement dated as of April 9, 1999, by and between the Company and Carl A. Strunk.
10-6 Employment Agreement dated as of April 9, 1999, by and between the Company and Andrew F. Puzder.
10-7 Employment Agreement dated as of April 9, 1999, by and between the Company and John J. Dunion.
11 Calculation of Earnings Per Share.
27-1 Financial Data Schedule (included only with electronic filing).
</TABLE>
17
<PAGE> 1
EXHIBIT 10.1
Employment Agreement (page 1)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April
9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a
Delaware corporation (the "Company"), and WILLIAM P. FOLEY, II (the "Employee").
In consideration of the mutual covenants and agreements set forth herein, the
parties agree as follows:
1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as Chairman of the Board and Chief Executive Officer (or
such other title as the Company may designate), and the Employee accepts such
employment and agrees to perform such reasonable responsibilities and duties
commensurate with the aforesaid positions as directed by the Company's Board of
Directors or as set forth in the Articles of Incorporation and the Bylaws of the
Company.
2. Term. The term of this Agreement shall commence on the Effective
Date and shall continue for a period of five (5) years ending April 9, 2004,
subject to prior termination as set forth in Section 7, below (the "Term"). The
Term may be extended at any time upon mutual written agreement of the parties.
3. Salary. During the Term, the Company shall pay the Employee a
minimum base annual salary, before deducting all applicable withholdings, of
$500,000 per year, payable at the times and in the manner dictated by the
Company's standard payroll policies. Such minimum base annual salary may be
periodically reviewed and increased at the discretion of the Compensation
Committee of the Board of Directors to reflect, among other matters, cost of
living increases and performance results. Should Employee cease to be the
Company's Chief Executive Officer, his salary shall be reduced to $400,000 per
year for the remainder of the Term.
4. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
<PAGE> 2
Employment Agreement (page 2)
may from time to time make available to the Employee upon mutual agreement, the
Employee shall be entitled to the following:
(a) The standard Company benefits enjoyed by the Company's
other top executives;
(b) Payment by the Company of the Employee's initiation and
membership dues in a social and/or recreational club as deemed necessary and
appropriate by the Employee (and pre-approved by the Company at the Company's
discretion) to maintain various business relationships on behalf of the Company;
provided, however, that the Company shall not be obligated to pay for any of the
Employee's personal purchases and expenses at such club;
(c) Provision by the Company during the Term and any
extensions thereof to the Employee and his dependents of the medical and other
insurance coverage provided by the Company to its other top executives;
(d) Provision by the Company of supplemental disability
insurance sufficient to provide two-thirds of the Employee's pre-disability
minimum base annual salary for a two year period;
(e) An Annual Bonus for the fiscal year ended January 31,
2000, equal to 100% of the minimum annual base salary set forth in Section 3
above if the Company achieves 30% growth in earnings per share during fiscal
2000 over earnings per share during fiscal 1999. In all subsequent years, the
Annual Bonus shall be calculated by first determining the amount by which the
Company's net income increases over the prior fiscal year. If such increase is
15%, Employee shall receive a bonus equal to 50% of his then current minimum
base annual salary and if net income increases less than 15% or decreases,
Employee shall receive no bonus. For each full 5% increase in the Company's net
income over the 15% base increase, Employee's Annual Bonus shall increase by an
amount equal to 50% of his minimum base annual salary. For example, a 30%
increase in net income would result in a bonus equal to 200% of the Employee's
then current minimum base annual salary. In no event shall the Annual Bonus
exceed 200% of Employee's minimum annual
<PAGE> 3
Employment Agreement (page 3)
base salary. The Annual Bonus shall be paid within ninety (90) days after the
end of the fiscal year.
(f) A Grant under the Company's Stock Option Plans of options
to purchase 200,000 shares of the Company's Common Stock. The exercise price for
such options shall be the closing price on the Effective Date of the Company's
Common Stock traded on the New York Stock Exchange, as reported by the Wall
Street Journal. Such options shall vest as follows: (i) 1/3 (66,668 shares) on
the Effective Date; (ii) 1/3 (66,666 shares) on the first anniversary of the
Effective Date; and, (iii) 1/3 (66,666 shares) on the second anniversary of the
Effective Date. Such options shall be incentive stock options as defined by
section 422 of the Internal Revenue Code to the maximum extent possible.
The Company shall deduct from all compensation payable under
this Agreement to the Employee any taxes or withholdings the Company is required
to deduct pursuant to state and federal laws or by mutual agreement between the
parties.
5. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with his positions with the Company and in accordance with the
Company's standard policies, or as the Company's Board of Directors may approve.
In addition, the Employee shall be entitled to such holidays consistent with the
Company's standard policies or as the Company's Board of Directors may approve.
6. Expense Reimbursement. In addition to the compensation and benefits
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for his reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses in
accordance with the Company's policies then in effect, all such expense
reimbursements to be approved in writing by the Company's President.
7. Termination.
(a) For Cause. The Company may terminate this Agreement
immediately for cause upon written notice to the Employee, in which event the
<PAGE> 4
Employment Agreement (page 4)
Company shall be obligated only to pay the Employee that portion of the minimum
base annual salary due him through the date of termination. Cause shall be
limited to (i) the failure to perform duties consistent with a commercially
reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal
or other illegal activities; or, (iv) a material breach of this Agreement.
(b) Without Cause. Either party may terminate this Agreement
immediately without cause by giving written notice to the other. If the Company
terminates under this Section 7(b), then it shall be obligated to pay to the
Employee an amount equal to the sum of (i) the Employee's minimum base annual
salary in effect as of the date of termination multiplied by the number one,
plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4
(e) above, but assuming a 30% increase in net income (200% of Employee's minimum
annual base salary), multiplied by the number one. Such payment to be made in a
lump sum on or before the fifth day following the date of termination, or as
otherwise directed by the Employee. In addition, if the Company terminates under
this Section 7(b), the Company shall maintain in full force and effect for the
continued benefit of the Employee for one year, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited. If the Employee terminates under this Section 7(b),
then the Company shall only be obligated to pay the Employee the minimum annual
base salary due him through the date of termination.
(c) Disability. If the Employee fails to perform his duties
hereunder on account of illness or other incapacity for a period of six
consecutive months, then the Company shall have the right upon written notice to
the Employee to terminate this Agreement without further obligation by paying
the Employee the minimum base annual salary, without offset, for the remainder
of the Term in a lump sum or as
<PAGE> 5
Employment Agreement (page 5)
otherwise directed by the Employee.
(d) Death. If the Employee dies during the Term, then this
Agreement shall terminate immediately and the Employee's legal representatives
shall be entitled to receive the minimum annual base salary for the remainder of
the Term in a lump sum or as otherwise directed by the Employee's legal
representative. Executive's outstanding CKE options will immediately vest in
full and be exercisable for a period of 90 days from Executive's death.
(e) Effect of Termination. Termination for any reason or for
no reason shall not constitute a waiver of the Company's rights under this
Agreement nor a release of the Employee from any obligation hereunder except his
obligation to perform his day-to-day duties as an employee.
8. Severance payment.
(a) The Employee may terminate his employment hereunder for
"Good Reason,"which for purposes of this Agreement shall mean a "change in
control of the Company." A "change in control of the Company" shall, for
purposes of this Agreement, be deemed to have occurred if (i) there shall be
consummated, except as hereinafter provided (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation,
or pursuant to which shares of the Company's Common Stock would be converted
into cash, securities or other property, other than a merger of the Company in
which the holders of the Company's Common Stock immediately prior to the merger
have the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (ii) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any "person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than
the Company or any "person" who, on the date hereof, is a director or officer of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), of securities of the Company
<PAGE> 6
Employment Agreement (page 6)
representing 30% or more of the combined voting power of the Company's then
outstanding securities, or (iv) during any period of two (2) consecutive years
during the Term or any extensions thereof, individuals, who, at the beginning of
such period, constitute the Board of Directors, cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period. The Employee may only
terminate this Agreement due to a change in control of the Company during the
period commencing 60 days and expiring 365 days after such change in control.
Notwithstanding anything in this Agreement to the contrary, a "change in control
of the Company" shall not have occurred if officers and/or directors (or
affiliated entities thereof) of the Company at the time of a transaction
described under item (i), (ii) or (iii) above own, immediately after such
transaction, 15% or more of the entity acquiring the stock or assets of the
Company as provided above.
(b) If the Employee terminates his employment for Good Reason,
or, if after a change in control of the Company, the Company shall terminate the
Employee's employment in breach of this Agreement or pursuant to Section 7(b),
then, in lieu of and notwithstanding Section 7 above:
(i) the Company shall pay the Employee his minimum
base annual salary due him through the date of termination:
(ii) in lieu of any further salary and bonus payments
or other payments due to the Employee for periods subsequent to the date of
termination, the Company shall pay, as severance to the Employee, an amount
equal to the sum of (i) the Employee's minimum base annual salary in effect as
of the date of termination multiplied by the number of years (including partial
years) remaining in the Term or the number two (2), whichever is greater, plus
(ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a
30% increase in net income (200% of Employee's minimum annual base salary)
multiplied by the number of years remaining in the contract for which Employee
has not, as yet, received an Annual Bonus or the number two (2), whichever is
greater, such payment to be made in a
<PAGE> 7
Employment Agreement (page 7)
lump sum on or before the fifth day following the date of termination;
(iii) all options granted to the Employee which had
not vested as of the date of termination hereunder shall vest immediately; and
(iv) the Company shall maintain in full force and
effect, for the continued benefit of the Employee for the number of years
(including partial years) remaining in the Term, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited.
(c) The Employee shall not be required to mitigate the amount
of any payment provided for in this Section 8 or Section 7(b), above, by seeking
other employment or otherwise, nor shall any compensation or other payments
received by the Employee after the date of termination reduce any payments due
under this Section 8 or Section 7(b), above.
(d) Notwithstanding anything to the contrary herein, if and to
the extent any payment made under this Agreement, either alone or in conjunction
with other payments Employee has the right to receive either directly or
indirectly from the Company, which would constitute as "excess parachute
payment" under Section 280G of the Internal Revenue Code of 1986, as amended,
then Employee shall be entitled to receive an excise tax gross-up payment not
exceeding one million dollars ($1,000,000) in accordance with Appendix A.
9. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned or transferred in any manner whatsoever, nor are such obligations,
rights or benefits
<PAGE> 8
Employment Agreement (page 8)
subject to involuntary alienation, assignment or transfer.
10. Confidential Information. The Employee acknowledges that in his
capacity as an employee of the Company he will occupy a position of trust and
confidence and he further acknowledges that he will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry, including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 10. Accordingly, the Employee agrees that
during the Term and at all times thereafter he will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will he utilize any
such information, either alone or with others, outside the scope of his duties
and responsibilities with the Company.
11. Non-Competition During Employment Term. The Employee agrees that,
during the Term and any extensions thereof, he will devote substantially all his
business time and effort, and give undivided loyalty, to the Company. He will
not engage in any way whatsoever, directly or indirectly, in any business that
is competitive with the Company or its affiliates, nor solicit, or in any other
manner work for or assist any business which is competitive with the Company or
its affiliates. In addition, during the Term and any extensions thereof, the
Employee will undertake no planning for or organization of any business activity
competitive with the work he performs as an employee of the Company, and the
Employee will not combine or conspire with any other employee of the Company or
any other person for the purpose of organizing any such competitive business
activity.
<PAGE> 9
Employment Agreement (page 9)
12. Non-Competition After Employment Term. The parties acknowledge that
the Employee will acquire substantial knowledge and information concerning the
business of the Company and its affiliates as a result of his employment. The
parties further acknowledge that the scope of business in which the Company is
engaged as of the Effective Date is national and very competitive and one in
which few companies can successfully compete. Competition by the Employee in
that business after this Agreement is terminated would severely injure the
Company. Accordingly, for a period of two years after this Agreement is
terminated or the Employee leaves the employment of the Company for any reason
whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not
to become an employee, consultant, advisor, principal, partner or substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently-existing or then-existing products and
markets; and (ii) not to solicit any person or business that was at the time of
such termination and remains an executive employee of the Company or any of its
affiliates. Notwithstanding any of the foregoing provisions to the contrary, the
Employee shall not be subject to the restrictions set forth in this Section 12
under the following circumstances:
(a) If the Employee's employment with the Company is
terminated by the Company without cause;
(b) If the Employee's employment with the Company is
terminated as a result of the Company's unwillingness to extend the Term of this
Agreement;
(c) If the Employee leaves the employment of the Company for
Good Reason pursuant to Section 8, above; or,
(d) As set forth in Section 14 below.
13. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.
<PAGE> 10
Employment Agreement (page 10)
14. Other Employment and Location. Anything to the contrary hereinabove
notwithstanding, Company acknowledges that Employee is also the Chairman of the
Board and Chief Executive Officer of Fidelity National Financial Inc.("FNFI")
and will direct a reasonable portion of his time to fulfilling his duties as an
officer of FNFI. Company further acknowledges that Employee is an employee of
FNFI in addition to the Company. The Company further acknowledges that Employee
is Chairman of the Board and a director of Rally's Hamburgers, Inc.("RHI"),
Checkers Drive Thru Restaurants, Inc.("CDTR"), Santa Barbara Restaurants Group,
Inc.("SBRG"), and American National Financial, Inc. ("ANFI") and will direct a
reasonable portion of his time to fulfilling his duties as Chairman of the Board
and a director of RHI, CDTR, SBRG, and ANFI. Such employment with FNFI and
serving as Chairman of RHI, CDTR, SBRG and ANFI shall not be a violation of this
Agreement so long as Employee dedicates a reasonable amount of his time to his
duties hereunder. Employment by FNFI and serving as an officer and/or director
of FNFI, RHI, CDTR, SBRG, and/or ANFI, or any affiliates thereof, shall not be
prohibited by Sections 11 or 12 above. The Employee shall not be required to
move from Santa Barbara County, California, to perform his duties hereunder
during the Term without his written consent.
15. Improvements and Inventions. Any and all improvements or inventions
which the Employee may conceive, make or participate in during the period of his
employment shall be the sole and exclusive property of the Company. The Employee
will, whenever requested by the Company, execute and deliver any and all
documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.
16. Actions. The parties agree and acknowledge that the rights conveyed
by this Agreement are of a unique and special nature and that the Company will
not have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is therefore agreed between the parties that, in the event
of a breach by the Employee of any of his obligations contained in this
Agreement, the Company shall
<PAGE> 11
Employment Agreement (page 11)
have the right, among other rights, to damages sustained thereby and to obtain
an injunction or decree of specific performance from any court of competent
jurisdiction to restrain or compel the Employee to perform as agreed herein. The
Employee agrees that this Section 16 shall survive the termination of his
employment and he shall be bound by its terms at all time subsequent to the
termination of his employment for so long a period as Company continues to
conduct the same business or businesses as conducted during the Term or any
extensions thereof. Nothing herein contained shall in any way limit or exclude
any other right granted by law or equity to the Company.
17. Amendment. This Agreement contains, and its terms constitute, the
entire agreement of the parties, and it may be amended only by a written
document signed by both parties to this Agreement.
18. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California.
19. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.
20. Severability. If any section, subsection or provision hereof is
found for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any other provision of this Agreement. If any covenant herein is
determined by a court to be overly broad thereby making the covenant
unenforceable, the parties agree and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of the
offensive part of the covenant and that as so modified the covenant shall be as
fully enforceable as if set forth herein by the parties themselves in the
modified form. The covenants of the Employee in this Agreement shall each be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Employee against the
<PAGE> 12
Employment Agreement (page 12)
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants in this Agreement.
21. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States certified mail, postage prepaid, with
return receipt requested, to the parties at their respective addresses set for
the below:
To the Company:
CKE Restaurants, Inc.
3916 State Street
Santa Barbara, CA 93105
Attention: Andrew F. Puzder, General Counsel
To the Employee:
William P. Foley, II
4181 Creciente Drive
Santa Barbara, California 93110
22. Waiver of Breach. The waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.
IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.
CKE RESTAURANTS, INC.
By:
--------------------------------------
Its:
--------------------------------------
<PAGE> 13
Employment Agreement (page 13)
EMPLOYEE
-------------------------------------------
William P. Foley, II
<PAGE> 1
EXHIBIT 10.2
Employment Agreement (page 1)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April
9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a
Delaware corporation (the "Company"), and C. THOMAS THOMPSON (the "Employee").
In consideration of the mutual covenants and agreements set forth herein, the
parties agree as follows:
1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as President and Chief Operating Officer (or such other
title as the Company may designate), and the Employee accepts such employment
and agrees to perform such reasonable responsibilities and duties commensurate
with the aforesaid positions as directed by the Company's Chief Executive
Officer or Board of Directors or as set forth in the Articles of Incorporation
and the Bylaws of the Company.
2. Term. The term of this Agreement shall commence on the Effective
Date and shall continue for a period of five (5) years ending April 9, 2004,
subject to prior termination as set forth in Section 7, below (the "Term"). The
Term may be extended at any time upon mutual written agreement of the parties.
3. Salary. During the Term, the Company shall pay the Employee a
minimum base annual salary, before deducting all applicable withholdings, of
$650,000 per year, payable at the times and in the manner dictated by the
Company's standard payroll policies. Such minimum base annual salary may be
periodically reviewed and increased at the discretion of the Compensation
Committee of the Board of Directors to reflect, among other matters, cost of
living increases and performance results. Should Employee become the Company's
Chief Executive Officer, his salary shall be increased to $700,000 per year for
the remainder of the Term.
4. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
<PAGE> 2
Employment Agreement (page 2)
may from time to time make available to the Employee upon mutual agreement, the
Employee shall be entitled to the following:
(a) The standard Company benefits enjoyed by the Company's
other top executives;
(b) Payment by the Company of the Employee's initiation and
membership dues in a social and/or recreational club as deemed necessary and
appropriate by the Employee (and pre-approved by the Company at the Company's
discretion) to maintain various business relationships on behalf of the Company;
provided, however, that the Company shall not be obligated to pay for any of the
Employee's personal purchases and expenses at such club;
(c) Provision by the Company during the Term and any
extensions thereof to the Employee and his dependents of the medical and other
insurance coverage provided by the Company to its other top executives;
(d) Provision by the Company of supplemental disability
insurance sufficient to provide two-thirds of the Employee's pre-disability
minimum base annual salary for a two year period;
(e) An Annual Bonus for the fiscal year ended January 31,
2000, equal to 100% of the minimum annual base salary set forth in Section 3
above if the Company achieves 30% growth in earnings per share during fiscal
2000 over earnings per share during fiscal 1999. In all subsequent years, the
Annual Bonus shall be calculated by first determining the amount by which the
Company's net income increases over the prior fiscal year. If such increase is
15%, Employee shall receive a bonus equal to 50% of his then current minimum
base annual salary and if net income increases less than 15% or decreases,
Employee shall receive no bonus. For each full 5% increase in the Company's net
income over the 15% base increase, Employee's Annual Bonus shall increase by an
amount equal to 50% of his minimum base annual salary. For example, a 30%
increase in net income would result in a bonus equal to 200% of the Employee's
then current minimum base annual salary. In no event shall the Annual Bonus
exceed 200% of Employee's minimum annual
<PAGE> 3
Employment Agreement (page 3)
base salary. The Annual Bonus shall be paid within ninety (90) days after the
end of the fiscal year.
(f) A Grant under the Company's Stock Option Plans of options
to purchase 200,000 shares of the Company's Common Stock. The exercise price for
such options shall be the closing price on the Effective Date of the Company's
Common Stock traded on the New York Stock Exchange, as reported by the Wall
Street Journal. Such options shall vest as follows: (i) 1/3 (66,668 shares) on
the Effective Date; (ii) 1/3 (66,666 shares) on the first anniversary of the
Effective Date; and, (iii) 1/3 (66,666 shares) on the second anniversary of the
Effective Date. Such options shall be incentive stock options as defined by
section 422 of the Internal Revenue Code to the maximum extent possible.
The Company shall deduct from all compensation payable under
this Agreement to the Employee any taxes or withholdings the Company is required
to deduct pursuant to state and federal laws or by mutual agreement between the
parties.
5. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with his positions with the Company and in accordance with the
Company's standard policies, or as the Company's Board of Directors may approve.
In addition, the Employee shall be entitled to such holidays consistent with the
Company's standard policies or as the Company's Board of Directors may approve.
6. Expense Reimbursement. In addition to the compensation and benefits
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for his reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses in
accordance with the Company's policies then in effect, all such expense
reimbursements to be approved in writing by the Company's Chief Executive
Officer.
7. Termination.
(a) For Cause. The Company may terminate this Agreement
<PAGE> 4
Employment Agreement (page 4)
immediately for cause upon written notice to the Employee, in which event the
Company shall be obligated only to pay the Employee that portion of the minimum
base annual salary due him through the date of termination. Cause shall be
limited to (i) the failure to perform duties consistent with a commercially
reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal
or other illegal activities; or, (iv) a material breach of this Agreement.
(b) Without Cause. Either party may terminate this Agreement
immediately without cause by giving written notice to the other. If the Company
terminates under this Section 7(b), then it shall be obligated to pay to the
Employee an amount equal to the sum of (i) the Employee's minimum base annual
salary in effect as of the date of termination multiplied by the number one,
plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4
(e) above, but assuming a 30% increase in net income (200% of Employee's minimum
annual base salary), multiplied by the number one. Such payment to be made in a
lump sum on or before the fifth day following the date of termination, or as
otherwise directed by the Employee. In addition, if the Company terminates under
this Section 7(b), the Company shall maintain in full force and effect for the
continued benefit of the Employee for one year, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited. Prior to terminating this Agreement under this
Section 7(b), Employee must give the Company 9 months advance notice in writing
of his intent to so terminate this Agreement. If the Employee terminates under
this Section 7(b), then the Company shall only be obligated to pay the Employee
the minimum annual base salary due him through the date of termination.
(c) Disability. If the Employee fails to perform his duties
hereunder on account of illness or other incapacity for a period of six
consecutive months, then
<PAGE> 5
Employment Agreement (page 5)
the Company shall have the right upon written notice to the Employee to
terminate this Agreement without further obligation by paying the Employee the
minimum base annual salary, without offset, for the remainder of the Term in a
lump sum or as otherwise directed by the Employee.
(d) Death. If the Employee dies during the Term, then this
Agreement shall terminate immediately and the Employee's legal representatives
shall be entitled to receive the minimum annual base salary for the remainder of
the Term in a lump sum or as otherwise directed by the Employee's legal
representative. Executive's outstanding CKE options will immediately vest in
full and be exercisable for a period of 90 days from Executive's death.
(e) Effect of Termination. Termination for any reason or for
no reason shall not constitute a waiver of the Company's rights under this
Agreement nor a release of the Employee from any obligation hereunder except his
obligation to perform his day-to-day duties as an employee.
8. Severance payment.
(a) The Employee may terminate his employment hereunder for
"Good Reason,"which for purposes of this Agreement shall mean a "change in
control of the Company." A "change in control of the Company" shall, for
purposes of this Agreement, be deemed to have occurred if (i) there shall be
consummated, except as hereinafter provided (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation,
or pursuant to which shares of the Company's Common Stock would be converted
into cash, securities or other property, other than a merger of the Company in
which the holders of the Company's Common Stock immediately prior to the merger
have the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (ii) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any "person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the
<PAGE> 6
Employment Agreement (page 6)
"Exchange Act")), other than the Company or any "person" who, on the date
hereof, is a director or officer of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the
Company representing 30% or more of the combined voting power of the Company's
then outstanding securities, or (iv) during any period of two (2) consecutive
years during the Term or any extensions thereof, individuals, who, at the
beginning of such period, constitute the Board of Directors, cease for any
reason to constitute at least a majority thereof, unless the election of each
director who was not a director at the beginning of such period has been
approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the period. The
Employee may only terminate this Agreement due to a change in control of the
Company during the period commencing 60 days and expiring 365 days after such
change in control. Notwithstanding anything in this Agreement to the contrary, a
"change in control of the Company" shall not have occurred if officers and/or
directors (or affiliated entities thereof) of the Company at the time of a
transaction described under item (i), (ii) or (iii) above own, immediately after
such transaction, 15% or more of the entity acquiring the stock or assets of the
Company as provided above.
(b) If the Employee terminates his employment for Good Reason,
or, if after a change in control of the Company, the Company shall terminate the
Employee's employment in breach of this Agreement or pursuant to Section 7(b),
then, in lieu of and notwithstanding Section 7 above:
(i) the Company shall pay the Employee his minimum
base annual salary due him through the date of termination:
(ii) in lieu of any further salary and bonus payments
or other payments due to the Employee for periods subsequent to the date of
termination, the Company shall pay, as severance to the Employee, an amount
equal to the sum of (i) the Employee's minimum base annual salary in effect as
of the date of termination multiplied by the number of years (including partial
years) remaining in the Term or the number two (2), whichever is greater, plus
(ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a
30% increase in net income (200%
<PAGE> 7
Employment Agreement (page 7)
of Employee's minimum annual base salary) multiplied by the number of years
remaining in the contract for which Employee has not, as yet, received an Annual
Bonus or the number two (2), whichever is greater, such payment to be made in a
lump sum on or before the fifth day following the date of termination;
(iii) all options granted to the Employee which had
not vested as of the date of termination hereunder shall vest immediately; and
(iv) the Company shall maintain in full force and
effect, for the continued benefit of the Employee for the number of years
(including partial years) remaining in the Term, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited.
(c) The Employee shall not be required to mitigate the amount
of any payment provided for in this Section 8 or Section 7(b), above, by seeking
other employment or otherwise, nor shall any compensation or other payments
received by the Employee after the date of termination reduce any payments due
under this Section 8 or Section 7(b), above.
(d) Notwithstanding anything to the contrary herein, if and to
the extent any payment made under this Agreement, either alone or in conjunction
with other payments Employee has the right to receive either directly or
indirectly from the Company, which would constitute as "excess parachute
payment" under Section 280G of the Internal Revenue Code of 1986, as amended,
then Employee shall be entitled to receive an excise tax gross-up payment not
exceeding one million dollars ($1,000,000) in accordance with Appendix A.
<PAGE> 8
Employment Agreement (page 8)
9. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned or transferred in any manner whatsoever, nor are such obligations,
rights or benefits subject to involuntary alienation, assignment or transfer.
10. Confidential Information. The Employee acknowledges that in his
capacity as an employee of the Company he will occupy a position of trust and
confidence and he further acknowledges that he will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry, including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 10. Accordingly, the Employee agrees that
during the Term and at all times thereafter he will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will he utilize any
such information, either alone or with others, outside the scope of his duties
and responsibilities with the Company.
11. Non-Competition During Employment Term. The Employee agrees that,
during the Term and any extensions thereof, he will devote substantially all his
business time and effort, and give undivided loyalty, to the Company. He will
not engage in any way whatsoever, directly or indirectly, in any business that
is competitive with the Company or its affiliates, nor solicit, or in any other
manner work for or assist any business which is competitive with the Company or
its affiliates. In addition, during the Term and any extensions thereof, the
Employee will undertake no planning for or organization of any business activity
competitive with the work he performs as an employee of the Company, and the
Employee will not
<PAGE> 9
Employment Agreement (page 9)
combine or conspire with any other employee of the Company or any other person
for the purpose of organizing any such competitive business activity.
12. Non-Competition After Employment Term. The parties acknowledge that
the Employee will acquire substantial knowledge and information concerning the
business of the Company and its affiliates as a result of his employment. The
parties further acknowledge that the scope of business in which the Company is
engaged as of the Effective Date is national and very competitive and one in
which few companies can successfully compete. Competition by the Employee in
that business after this Agreement is terminated would severely injure the
Company. Accordingly, for a period of two years after this Agreement is
terminated or the Employee leaves the employment of the Company for any reason
whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not
to become an employee, consultant, advisor, principal, partner or substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently-existing or then-existing products and
markets; and (ii) not to solicit any person or business that was at the time of
such termination and remains an executive employee of the Company or any of its
affiliates. Notwithstanding any of the foregoing provisions to the contrary, the
Employee shall not be subject to the restrictions set forth in this Section 12
under the following circumstances:
(a) If the Employee's employment with the Company is
terminated by the Company without cause;
(b) If the Employee's employment with the Company is
terminated as a result of the Company's unwillingness to extend the Term of this
Agreement;
(c) If the Employee leaves the employment of the Company for
Good Reason pursuant to Section 8, above; or,
(d) As set forth in Section 14 below.
13. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
<PAGE> 10
Employment Agreement (page 10)
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.
14. Other Employment and Location. Anything to the contrary hereinabove
notwithstanding:
(a) Company acknowledges that Employee is also a member of the
Board of Directors of Rally's Hamburgers, Inc.("RHI"), Checkers Drive Thru
Restaurants, Inc.("CDTR"), and Santa Barbara Restaurants Group, Inc.("SBRG") and
will direct a reasonable portion of his time to fulfilling his duties as a
director of RHI, CDTR and SBRG. Serving as a director of RHI, CDTR and SBRG
shall not be a violation of this Agreement so long as Employee dedicates a
reasonable amount of his time to his duties hereunder. Serving as a director of
RHI, CDTR and/or SBRG, or any affiliate thereof, shall not be prohibited by
Sections 11 or 12 above.
(b) Anything to the contrary hereinabove notwithstanding,
Company acknowledges that Employee is also a franchisee and/or owns an equity
interest in a franchisee of the Company. Company further acknowledges that
Employee is or may be an employee of such franchisee in addition to the Company
and that such employment shall not be a violation of this Agreement so long as
Employee dedicates an reasonable amount of his time to his duties hereunder.
(c) The Employee shall not be required to move from the State
of California to perform his duties hereunder during the Term without his
written consent.
15. Improvements and Inventions. Any and all improvements or inventions
which the Employee may conceive, make or participate in during the period of his
employment shall be the sole and exclusive property of the Company. The Employee
will, whenever requested by the Company, execute and deliver any and all
documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.
<PAGE> 11
Employment Agreement (page 11)
16. Actions. The parties agree and acknowledge that the rights conveyed
by this Agreement are of a unique and special nature and that the Company will
not have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is therefore agreed between the parties that, in the event
of a breach by the Employee of any of his obligations contained in this
Agreement, the Company shall have the right, among other rights, to damages
sustained thereby and to obtain an injunction or decree of specific performance
from any court of competent jurisdiction to restrain or compel the Employee to
perform as agreed herein. The Employee agrees that this Section 16 shall survive
the termination of his employment and he shall be bound by its terms at all time
subsequent to the termination of his employment for so long a period as Company
continues to conduct the same business or businesses as conducted during the
Term or any extensions thereof. Nothing herein contained shall in any way limit
or exclude any other right granted by law or equity to the Company.
17. Amendment. This Agreement contains, and its terms constitute, the
entire agreement of the parties, and it may be amended only by a written
document signed by both parties to this Agreement.
18. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California.
19. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.
20. Severability. If any section, subsection or provision hereof is
found for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any
<PAGE> 12
Employment Agreement (page 12)
other provision of this Agreement. If any covenant herein is determined by a
court to be overly broad thereby making the covenant unenforceable, the parties
agree and it is their desire that such court shall substitute a reasonable
judicially enforceable limitation in place of the offensive part of the covenant
and that as so modified the covenant shall be as fully enforceable as if set
forth herein by the parties themselves in the modified form. The covenants of
the Employee in this Agreement shall each be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of the Employee against the Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the covenants in this Agreement.
21. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States certified mail, postage prepaid, with
return receipt requested, to the parties at their respective addresses set for
the below:
To the Company:
CKE Restaurants, Inc.
3916 State Street
Santa Barbara, CA 93105
Attention: Andrew F. Puzder, General Counsel
To the Employee:
C. Thomas Thompson
1175 Jackling Drive
Hillsboro, California 94010
22. Waiver of Breach. The waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.
IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.
<PAGE> 13
Employment Agreement (page 13)
CKE RESTAURANTS, INC.
By:
---------------------------------------
Its:
---------------------------------------
EMPLOYEE
--------------------------------------------
C. Thomas Thompson
<PAGE> 1
EXHIBIT 10.3
Employment Agreement (page 1)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April
9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a
Delaware corporation (the "Company"), and RORY J. MURPHY (the "Employee"). In
consideration of the mutual covenants and agreements set forth herein, the
parties agree as follows:
1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as an Executive Vice President of the Company and as
President and Chief Operating Officer of the Company's wholly owned subsidiary,
Hardee's Food Systems, Inc. ("HFS") (or such other title as the Company may
designate), and the Employee accepts such employment and agrees to perform such
reasonable responsibilities and duties commensurate with the aforesaid positions
as directed by the Company's Board of Directors, its Chief Executive Officer or
its President, or as set forth in the Articles of Incorporation and the Bylaws
of the Company.
2. Prior Agreement. Employee and the Company's wholly owned subsidiary
HFS have an existing Employment Agreement dated July 15, 1997 which expires July
15, 1999 (the "HFS Agreement"). This Agreement supersedes and replaces the HFS
Agreement which shall no longer be of any force or effect except to the extent
set forth in Section 5(e) below.
3. Term. The term of this Agreement shall commence on the Effective
Date and shall continue for a period of four (4) years ending April 9, 2003,
subject to prior termination as set forth in Section 8, below (the "Term"). The
Term may be extended at any time upon mutual written agreement of the parties.
4. Salary. During the Term, the Company shall pay the Employee a
minimum base annual salary, before deducting all applicable withholdings, of
$450,000 per year, payable at the times and in the manner dictated by the
Company's standard payroll policies. Such minimum base annual salary may be
periodically reviewed and increased at the discretion of the Compensation
Committee of the
<PAGE> 2
Employment Agreement (page 2)
Board of Directors to reflect, among other matters, cost of living increases and
performance results.
5. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
may from time to time make available to the Employee upon mutual agreement, the
Employee shall be entitled to the following:
(a) The standard Company benefits enjoyed by the Company's
other executive vice presidents as a group;
(b) Payment by the Company of the Employee's initiation and
membership dues in a social and/or recreational club as deemed necessary and
appropriate by the Employee (and pre-approved by the Company at the Company's
discretion) to maintain various business relationships on behalf of the Company;
provided, however, that the Company shall not be obligated to pay for any of the
Employee's personal purchases and expenses at such club;
(c) Provision by the Company during the Term and any
extensions thereof to the Employee and his dependents of the medical and other
insurance coverage provided by the Company to its other executive vice
presidents as a group;
(d) Provision by the Company of supplemental disability
insurance sufficient to provide two-thirds of the Employee's pre-disability
minimum base annual salary for a two year period;
(e) An Annual Bonus for the period ending July 15, 1999 equal
to the Annual Bonus provided for in Section 4(b)(ii) of the HFS Agreement as if
such Section 4(b) of the HFS Agreement had remained in full force and effect
until July 15, 1999. An Annual Bonus for the fiscal year ended January 31, 2000,
equal to 100% of the minimum annual base salary set forth in Section 4 above if
the Company achieves 30% growth in earnings per share during fiscal 2000 over
earnings per share during fiscal 1999, reduced pro rata for the portion of the
year prior to July 15, 1999 covered by Section 4(b)(ii) of the HFS Agreement. In
all subsequent years, the
<PAGE> 3
Employment Agreement (page 3)
Annual Bonus shall be calculated by first determining the amount by which the
Company's net income increases over the prior fiscal year. If such increase is
15%, Employee shall receive a bonus equal to 25% of his then current minimum
base annual salary and if net income increases less than 15% or decreases,
Employee shall receive no bonus. For each full 5% increase in the Company's net
income over the 15% base increase, Employee's Annual Bonus shall increase by an
amount equal to 25% of his minimum base annual salary. For example, a 30%
increase in net income would result in a bonus equal to 100% of the Employee's
then current minimum base annual salary. In no event shall the Annual Bonus
exceed 100% of Employee's minimum annual base salary. The Annual Bonus shall be
paid within ninety (90) days after the end of the fiscal year.
(f) A Grant under the Company's Stock Option Plans of options
to purchase 100,000 shares of the Company's Common Stock. The exercise price for
such options shall be the closing price on the Effective Date of the Company's
Common Stock traded on the New York Stock Exchange, as reported by the Wall
Street Journal. Such options shall vest as follows: (i) 1/3 (33,334 shares) on
the Effective Date; (ii) 1/3 (33,333 shares) on the first anniversary of the
Effective Date; and, (iii) 1/3 (33,333 shares) on the second anniversary of the
Effective Date. Such options shall be incentive stock options as defined by
section 422 of the Internal Revenue Code to the maximum extent possible.
The Company shall deduct from all compensation payable under
this Agreement to the Employee any taxes or withholdings the Company is required
to deduct pursuant to state and federal laws or by mutual agreement between the
parties.
6. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with his positions with the Company and in accordance with the
Company's standard policies, or as the Company's Board of Directors may approve.
In addition, the Employee shall be entitled to such holidays consistent with the
Company's standard policies or as the Company's Board of Directors may approve.
7. Expense Reimbursement. In addition to the compensation and benefits
<PAGE> 4
Employment Agreement (page 4)
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for his reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses in
accordance with the Company's policies then in effect, all such expense
reimbursements to be approved in writing by the Company's Chief Executive
Officer or President.
8. Termination.
(a) For Cause. The Company may terminate this Agreement
immediately for cause upon written notice to the Employee, in which event the
Company shall be obligated only to pay the Employee that portion of the minimum
base annual salary due him through the date of termination. Cause shall be
limited to (i) the failure to perform duties consistent with a commercially
reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal
or other illegal activities; or, (iv) a material breach of this Agreement.
(b) Without Cause. Either party may terminate this Agreement
immediately without cause by giving written notice to the other. If the Company
terminates under this Section 8(b), then it shall be obligated to pay to the
Employee an amount equal to the sum of (i) the Employee's minimum base annual
salary in effect as of the date of termination multiplied by the number one,
plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section
5(e) above, but assuming a 30% increase in net income (100% of Employee's
minimum annual base salary), multiplied by the number one. Such payment to be
made in a lump sum on or before the fifth day following the date of termination,
or as otherwise directed by the Employee. In addition, if the Company terminates
under this Section 8(b), the Company shall maintain in full force and effect for
the continued benefit of the Employee for one year, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would
<PAGE> 5
Employment Agreement (page 5)
otherwise have been entitled to receive under such plans and programs from which
his continued participation is prohibited. If the Employee terminates under this
Section 8(b), then the Company shall only be obligated to pay the Employee the
minimum annual base salary due him through the date of termination.
(c) Disability. If the Employee fails to perform his duties
hereunder on account of illness or other incapacity for a period of six
consecutive months, then the Company shall have the right upon written notice to
the Employee to terminate this Agreement without further obligation by paying
the Employee the minimum base annual salary, without offset, for the remainder
of the Term in a lump sum or as otherwise directed by the Employee.
(d) Death. If the Employee dies during the Term, then this
Agreement shall terminate immediately and the Employee's legal representatives
shall be entitled to receive the minimum annual base salary for the remainder of
the Term in a lump sum or as otherwise directed by the Employee's legal
representative. Executive's outstanding CKE options will immediately vest in
full and be exercisable for a period of 90 days from Executive's death.
(e) Effect of Termination. Termination for any reason or for
no reason shall not constitute a waiver of the Company's rights under this
Agreement nor a release of the Employee from any obligation hereunder except his
obligation to perform his day-to-day duties as an employee.
9. Severance payment.
(a) The Employee may terminate his employment hereunder for
"Good Reason,"which for purposes of this Agreement shall mean a "change in
control of the Company." A "change in control of the Company" shall, for
purposes of this Agreement, be deemed to have occurred if (i) there shall be
consummated, except as hereinafter provided (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation,
or pursuant to which shares of the Company's Common Stock would be converted
into cash, securities or other property, other than a merger of the Company in
which the holders
<PAGE> 6
Employment Agreement (page 6)
of the Company's Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock of the surviving corporation immediately
after the merger, or (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (ii) the stockholders of the Company approve
any plan or proposal for the liquidation or dissolution of the Company, or (iii)
any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act")), other than the Company or any
"person" who, on the date hereof, is a director or officer of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), of securities of the Company representing 30% or more of the combined
voting power of the Company's then outstanding securities, or (iv) during any
period of two (2) consecutive years during the Term or any extensions thereof,
individuals, who, at the beginning of such period, constitute the Board of
Directors, cease for any reason to constitute at least a majority thereof,
unless the election of each director who was not a director at the beginning of
such period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period. The Employee may only terminate this Agreement due to a change in
control of the Company during the period commencing 60 days and expiring 365
days after such change in control. Notwithstanding anything in this Agreement to
the contrary, a "change in control of the Company" shall not have occurred if
officers and/or directors (or affiliated entities thereof) of the Company at the
time of a transaction described under item (i), (ii) or (iii) above own,
immediately after such transaction, 15% or more of the entity acquiring the
stock or assets of the Company as provided above.
(b) If the Employee terminates his employment for Good Reason,
or, if after a change in control of the Company, the Company shall terminate the
Employee's employment in breach of this Agreement or pursuant to Section 8(b),
then, in lieu of and notwithstanding Section 8 above:
(i) the Company shall pay the Employee his minimum
base annual salary due him through the date of termination:
<PAGE> 7
Employment Agreement (page 7)
(ii) in lieu of any further salary and bonus payments
or other payments due to the Employee for periods subsequent to the date of
termination, the Company shall pay, as severance to the Employee, an amount
equal to the sum of (i) the Employee's minimum base annual salary in effect as
of the date of termination multiplied by the number of years (including partial
years) remaining in the Term or the number two (2), whichever is greater, plus
(ii), an Annual Bonus calculated pursuant to Section 5(e) above, but assuming a
30% increase in net income (100% of Employee's minimum annual base salary)
multiplied by the number of years remaining in the contract for which Employee
has not, as yet, received an Annual Bonus or the number two (2), whichever is
greater, such payment to be made in a lump sum on or before the fifth day
following the date of termination;
(iii) all options granted to the Employee which had
not vested as of the date of termination hereunder shall vest immediately; and
(iv) the Company shall maintain in full force and
effect, for the continued benefit of the Employee for the number of years
(including partial years) remaining in the Term, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited.
(c) The Employee shall not be required to mitigate the amount
of any payment provided for in this Section 9 or Section 8(b), above, by seeking
other employment or otherwise, nor shall any compensation or other payments
received by the Employee after the date of termination reduce any payments due
under this Section 9 or Section 8(b), above.
(d) Notwithstanding anything to the contrary herein, if and to
the extent any payment made under this Agreement, either alone or in conjunction
with
<PAGE> 8
Employment Agreement (page 8)
other payments Employee has the right to receive either directly or indirectly
from the Company, which would constitute as "excess parachute payment" under
Section 280G of the Internal Revenue Code of 1986, as amended, then Employee
shall be entitled to receive an excise tax gross-up payment not exceeding one
million dollars ($1,000,000) in accordance with Appendix A.
10. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned or transferred in any manner whatsoever, nor are such obligations,
rights or benefits subject to involuntary alienation, assignment or transfer.
11. Confidential Information. The Employee acknowledges that in his
capacity as an employee of the Company he will occupy a position of trust and
confidence and he further acknowledges that he will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry, including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 11. Accordingly, the Employee agrees that
during the Term and at all times thereafter he will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will he utilize any
such information, either alone or with others, outside the scope of his duties
and responsibilities with the Company.
12. Non-Competition During Employment Term. The Employee agrees that,
during the Term and any extensions thereof, he will devote substantially all his
business time and effort, and give undivided loyalty, to the Company. He will
not
<PAGE> 9
Employment Agreement (page 9)
engage in any way whatsoever, directly or indirectly, in any business that is
competitive with the Company or its affiliates, nor solicit, or in any other
manner work for or assist any business which is competitive with the Company or
its affiliates. In addition, during the Term and any extensions thereof, the
Employee will undertake no planning for or organization of any business activity
competitive with the work he performs as an employee of the Company, and the
Employee will not combine or conspire with any other employee of the Company or
any other person for the purpose of organizing any such competitive business
activity.
13. Non-Competition After Employment Term. The parties acknowledge that
the Employee will acquire substantial knowledge and information concerning the
business of the Company and its affiliates as a result of his employment. The
parties further acknowledge that the scope of business in which the Company is
engaged as of the Effective Date is national and very competitive and one in
which few companies can successfully compete. Competition by the Employee in
that business after this Agreement is terminated would severely injure the
Company. Accordingly, for a period of two years after this Agreement is
terminated or the Employee leaves the employment of the Company for any reason
whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not
to become an employee, consultant, advisor, principal, partner or substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently-existing or then-existing products and
markets; and (ii) not to solicit any person or business that was at the time of
such termination and remains an executive employee of the Company or any of its
affiliates. Notwithstanding any of the foregoing provisions to the contrary, the
Employee shall not be subject to the restrictions set forth in this Section 13
under the following circumstances:
(a) If the Employee's employment with the Company is
terminated by the Company without cause;
(b) If the Employee's employment with the Company is
terminated as a result of the Company's unwillingness to extend the Term of this
Agreement; or,
<PAGE> 10
Employment Agreement (page 10)
(c) If the Employee leaves the employment of the Company for
Good Reason pursuant to Section 9.
14. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.
15. Improvements and Inventions. Any and all improvements or inventions
which the Employee may conceive, make or participate in during the period of his
employment shall be the sole and exclusive property of the Company. The Employee
will, whenever requested by the Company, execute and deliver any and all
documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.
16. Actions. The parties agree and acknowledge that the rights conveyed
by this Agreement are of a unique and special nature and that the Company will
not have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is therefore agreed between the parties that, in the event
of a breach by the Employee of any of his obligations contained in this
Agreement, the Company shall have the right, among other rights, to damages
sustained thereby and to obtain an injunction or decree of specific performance
from any court of competent jurisdiction to restrain or compel the Employee to
perform as agreed herein. The Employee agrees that this Section 16 shall survive
the termination of his employment and he shall be bound by its terms at all time
subsequent to the termination of his employment for so long a period as Company
continues to conduct the same business or businesses as conducted during the
Term or any extensions thereof. Nothing herein contained shall in any way limit
or exclude any other right granted by law or equity to the Company.
17. Amendment. This Agreement contains, and its terms constitute, the
<PAGE> 11
Employment Agreement (page 11)
entire agreement of the parties, and it may be amended only by a written
document signed by both parties to this Agreement.
18. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California.
19. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.
20. Severability. If any section, subsection or provision hereof is
found for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any other provision of this Agreement. If any covenant herein is
determined by a court to be overly broad thereby making the covenant
unenforceable, the parties agree and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of the
offensive part of the covenant and that as so modified the covenant shall be as
fully enforceable as if set forth herein by the parties themselves in the
modified form. The covenants of the Employee in this Agreement shall each be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Employee against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants in this Agreement.
21. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States certified mail, postage prepaid, with
return receipt requested, to the parties at their respective addresses set for
the below:
<PAGE> 12
Employment Agreement (page 12)
To the Company:
CKE Restaurants, Inc.
3916 State Street
Santa Barbara, CA 93105
Attention: Andrew F. Puzder, General Counsel
To the Employee:
Rory J. Murphy
18772 Ridgewood Lane
Villa Park, California 92681
22. Waiver of Breach. The waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.
IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.
CKE RESTAURANTS, INC.
By:
----------------------------------------
Its:
----------------------------------------
EMPLOYEE
---------------------------------------------
Rory J. Murphy
<PAGE> 1
EXHIBIT 10.4
Employment Agreement (page 1)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April
9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a
Delaware corporation (the "Company"), and ROBERT W. WISELY (the "Employee"). In
consideration of the mutual covenants and agreements set forth herein, the
parties agree as follows:
1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as Executive Vice President, Marketing (or such other title
as the Company may designate), and the Employee accepts such employment and
agrees to perform such reasonable responsibilities and duties commensurate with
the aforesaid positions as directed by the Company's Board of Directors, its
Chief Executive Officer or its President, or as set forth in the Articles of
Incorporation and the Bylaws of the Company.
2. Term. The term of this Agreement shall commence on the Effective
Date and shall continue for a period of three (3) years ending April 9, 2002,
subject to prior termination as set forth in Section 7, below (the "Term"). The
Term may be extended at any time upon mutual written agreement of the parties.
3. Salary. During the Term, the Company shall pay the Employee a
minimum base annual salary, before deducting all applicable withholdings, of
$300,000 per year, payable at the times and in the manner dictated by the
Company's standard payroll policies. Such minimum base annual salary may be
periodically reviewed and increased at the discretion of the Compensation
Committee of the Board of Directors to reflect, among other matters, cost of
living increases and performance results.
4. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
may from time to time make available to the Employee upon mutual agreement, the
Employee shall be entitled to the following:
<PAGE> 2
Employment Agreement (page 2)
(a) The standard Company benefits enjoyed by the Company's
other executive vice presidents as a group;
(b) Payment by the Company of the Employee's initiation and
membership dues in a social and/or recreational club as deemed necessary and
appropriate by the Employee (and pre-approved by the Company at the Company's
discretion) to maintain various business relationships on behalf of the Company;
provided, however, that the Company shall not be obligated to pay for any of the
Employee's personal purchases and expenses at such club;
(c) Provision by the Company during the Term and any
extensions thereof to the Employee and his dependents of the medical and other
insurance coverage provided by the Company to its other executive vice
presidents as a group;
(d) Provision by the Company of supplemental disability
insurance sufficient to provide two-thirds of the Employee's pre-disability
minimum base annual salary for a two year period;
(e) An Annual Bonus for the fiscal year ended January 31,
2000, equal to 100% of the minimum annual base salary set forth in Section 3
above if the Company achieves 30% growth in earnings per share during fiscal
2000 over earnings per share during fiscal 1999. In all subsequent years, the
Annual Bonus shall be calculated by first determining the amount by which the
Company's net income increases over the prior fiscal year. If such increase is
15%, Employee shall receive a bonus equal to 25% of his then current minimum
base annual salary and if net income increases less than 15% or decreases,
Employee shall receive no bonus. For each full 5% increase in the Company's net
income over the 15% base increase, Employee's Annual Bonus shall increase by an
amount equal to 25% of his minimum base annual salary. For example, a 30%
increase in net income would result in a bonus equal to 100% of the Employee's
then current minimum base annual salary. In no event shall the Annual Bonus
exceed 100% of Employee's minimum annual base salary. The Annual Bonus shall be
paid within ninety (90) days after the end of the fiscal year.
<PAGE> 3
Employment Agreement (page 3)
(f) A Grant under the Company's Stock Option Plans of options
to purchase 50,000 shares of the Company's Common Stock. The exercise price for
such options shall be the closing price on the Effective Date of the Company's
Common Stock traded on the New York Stock Exchange, as reported by the Wall
Street Journal. Such options shall vest as follows: (i) 1/3 (16,667 shares) on
the Effective Date; (ii) 1/3 (16,667 shares) on the first anniversary of the
Effective Date; and, (iii) 1/3 (16,666 shares) on the second anniversary of the
Effective Date. Such options shall be incentive stock options as defined by
section 422 of the Internal Revenue Code to the maximum extent possible.
The Company shall deduct from all compensation payable under
this Agreement to the Employee any taxes or withholdings the Company is required
to deduct pursuant to state and federal laws or by mutual agreement between the
parties.
5. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with his positions with the Company and in accordance with the
Company's standard policies, or as the Company's Board of Directors may approve.
In addition, the Employee shall be entitled to such holidays consistent with the
Company's standard policies or as the Company's Board of Directors may approve.
6. Expense Reimbursement. In addition to the compensation and benefits
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for his reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses in
accordance with the Company's policies then in effect, all such expense
reimbursements to be approved in writing by the Company's Chief Executive
Officer or President.
7. Termination.
(a) For Cause. The Company may terminate this Agreement
immediately for cause upon written notice to the Employee, in which event the
Company shall be obligated only to pay the Employee that portion of the minimum
<PAGE> 4
Employment Agreement (page 4)
base annual salary due him through the date of termination. Cause shall be
limited to (i) the failure to perform duties consistent with a commercially
reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal
or other illegal activities; or, (iv) a material breach of this Agreement.
(b) Without Cause. Either party may terminate this Agreement
immediately without cause by giving written notice to the other. If the Company
terminates under this Section 7(b), then it shall be obligated to pay to the
Employee an amount equal to the sum of (i) the Employee's minimum base annual
salary in effect as of the date of termination multiplied by the number one,
plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4
(e) above, but assuming a 30% increase in net income (100% of Employee's minimum
annual base salary), multiplied by the number one. Such payment to be made in a
lump sum on or before the fifth day following the date of termination, or as
otherwise directed by the Employee. In addition, if the Company terminates under
this Section 7(b), the Company shall maintain in full force and effect for the
continued benefit of the Employee for one year, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited. If the Employee terminates under this Section 7(b),
then the Company shall only be obligated to pay the Employee the minimum annual
base salary due him through the date of termination.
(c) Disability. If the Employee fails to perform his duties
hereunder on account of illness or other incapacity for a period of six
consecutive months, then the Company shall have the right upon written notice to
the Employee to terminate this Agreement without further obligation by paying
the Employee the minimum base annual salary, without offset, for the remainder
of the Term in a lump sum or as otherwise directed by the Employee.
<PAGE> 5
Employment Agreement (page 5)
(d) Death. If the Employee dies during the Term, then this
Agreement shall terminate immediately and the Employee's legal representatives
shall be entitled to receive the minimum annual base salary for the remainder of
the Term in a lump sum or as otherwise directed by the Employee's legal
representative. Executive's outstanding CKE options will immediately vest in
full and be exercisable for a period of 90 days from Executive's death.
(e) Effect of Termination. Termination for any reason or for
no reason shall not constitute a waiver of the Company's rights under this
Agreement nor a release of the Employee from any obligation hereunder except his
obligation to perform his day-to-day duties as an employee.
8. Severance payment.
(a) The Employee may terminate his employment hereunder for
"Good Reason,"which for purposes of this Agreement shall mean a "change in
control of the Company." A "change in control of the Company" shall, for
purposes of this Agreement, be deemed to have occurred if (i) there shall be
consummated, except as hereinafter provided (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation,
or pursuant to which shares of the Company's Common Stock would be converted
into cash, securities or other property, other than a merger of the Company in
which the holders of the Company's Common Stock immediately prior to the merger
have the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (ii) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any "person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than
the Company or any "person" who, on the date hereof, is a director or officer of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), of securities of the Company representing 30% or more
of the combined voting power of the Company's then
<PAGE> 6
Employment Agreement (page 6)
outstanding securities, or (iv) during any period of two (2) consecutive years
during the Term or any extensions thereof, individuals, who, at the beginning of
such period, constitute the Board of Directors, cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period. The Employee may only
terminate this Agreement due to a change in control of the Company during the
period commencing 60 days and expiring 365 days after such change in control.
Notwithstanding anything in this Agreement to the contrary, a "change in control
of the Company" shall not have occurred if officers and/or directors (or
affiliated entities thereof) of the Company at the time of a transaction
described under item (i), (ii) or (iii) above own, immediately after such
transaction, 15% or more of the entity acquiring the stock or assets of the
Company as provided above.
(b) If the Employee terminates his employment for Good Reason,
or, if after a change in control of the Company, the Company shall terminate the
Employee's employment in breach of this Agreement or pursuant to Section 7(b),
then, in lieu of and notwithstanding Section 7 above:
(i) the Company shall pay the Employee his minimum
base annual salary due him through the date of termination:
(ii) in lieu of any further salary and bonus payments
or other payments due to the Employee for periods subsequent to the date of
termination, the Company shall pay, as severance to the Employee, an amount
equal to the sum of (i) the Employee's minimum base annual salary in effect as
of the date of termination multiplied by the number of years (including partial
years) remaining in the Term or the number two (2), whichever is greater, plus
(ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a
30% increase in net income (100% of Employee's minimum annual base salary)
multiplied by the number of years remaining in the contract for which Employee
has not, as yet, received an Annual Bonus or the number two (2), whichever is
greater, such payment to be made in a lump sum on or before the fifth day
following the date of termination;
<PAGE> 7
Employment Agreement (page 7)
(iii) all options granted to the Employee which had
not vested as of the date of termination hereunder shall vest immediately; and
(iv) the Company shall maintain in full force and
effect, for the continued benefit of the Employee for the number of years
(including partial years) remaining in the Term, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited.
(c) The Employee shall not be required to mitigate the amount
of any payment provided for in this Section 8 or Section 7(b), above, by seeking
other employment or otherwise, nor shall any compensation or other payments
received by the Employee after the date of termination reduce any payments due
under this Section 8 or Section 7(b), above.
(d) Notwithstanding anything to the contrary herein, if and to
the extent any payment made under this Agreement, either alone or in conjunction
with other payments Employee has the right to receive either directly or
indirectly from the Company, which would constitute as "excess parachute
payment" under Section 280G of the Internal Revenue Code of 1986, as amended,
then Employee shall be entitled to receive an excise tax gross-up payment not
exceeding one million dollars ($1,000,000) in accordance with Appendix A.
9. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned or transferred in any manner whatsoever, nor are such obligations,
rights or benefits subject to involuntary alienation, assignment or transfer.
<PAGE> 8
Employment Agreement (page 8)
10. Confidential Information. The Employee acknowledges that in his
capacity as an employee of the Company he will occupy a position of trust and
confidence and he further acknowledges that he will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry, including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 10. Accordingly, the Employee agrees that
during the Term and at all times thereafter he will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will he utilize any
such information, either alone or with others, outside the scope of his duties
and responsibilities with the Company.
11. Non-Competition During Employment Term. The Employee agrees that,
during the Term and any extensions thereof, he will devote substantially all his
business time and effort, and give undivided loyalty, to the Company. He will
not engage in any way whatsoever, directly or indirectly, in any business that
is competitive with the Company or its affiliates, nor solicit, or in any other
manner work for or assist any business which is competitive with the Company or
its affiliates. In addition, during the Term and any extensions thereof, the
Employee will undertake no planning for or organization of any business activity
competitive with the work he performs as an employee of the Company, and the
Employee will not combine or conspire with any other employee of the Company or
any other person for the purpose of organizing any such competitive business
activity.
12. Non-Competition After Employment Term. The parties acknowledge
<PAGE> 9
Employment Agreement (page 9)
that the Employee will acquire substantial knowledge and information concerning
the business of the Company and its affiliates as a result of his employment.
The parties further acknowledge that the scope of business in which the Company
is engaged as of the Effective Date is national and very competitive and one in
which few companies can successfully compete. Competition by the Employee in
that business after this Agreement is terminated would severely injure the
Company. Accordingly, for a period of two years after this Agreement is
terminated or the Employee leaves the employment of the Company for any reason
whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not
to become an employee, consultant, advisor, principal, partner or substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently-existing or then-existing products and
markets; and (ii) not to solicit any person or business that was at the time of
such termination and remains an executive employee of the Company or any of its
affiliates. Notwithstanding any of the foregoing provisions to the contrary, the
Employee shall not be subject to the restrictions set forth in this Section 12
under the following circumstances:
(a) If the Employee's employment with the Company is
terminated by the Company without cause;
(b) If the Employee's employment with the Company is
terminated as a result of the Company's unwillingness to extend the Term of this
Agreement;
(c) If the Employee leaves the employment of the Company for
Good Reason pursuant to Section 8, above; or,
(d) As set forth in Section 14 below.
13. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.
14. Other Employment and Location. Anything to the contrary hereinabove
notwithstanding, Company acknowledges that Employee is also a franchisee and/or
<PAGE> 10
Employment Agreement (page 10)
owns an equity interest in a franchisee of the Company. Company further
acknowledges that Employee is or may be an employee of such franchisee in
addition to the Company and that such employment shall not be a violation of
this Agreement so long as Employee dedicates a reasonable amount of his time to
his duties hereunder. The Employee shall not be required to move from the State
of California to perform his duties hereunder during the Term without his
written consent.
15. Improvements and Inventions. Any and all improvements or inventions
which the Employee may conceive, make or participate in during the period of his
employment shall be the sole and exclusive property of the Company. The Employee
will, whenever requested by the Company, execute and deliver any and all
documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.
16. Actions. The parties agree and acknowledge that the rights conveyed
by this Agreement are of a unique and special nature and that the Company will
not have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is therefore agreed between the parties that, in the event
of a breach by the Employee of any of his obligations contained in this
Agreement, the Company shall have the right, among other rights, to damages
sustained thereby and to obtain an injunction or decree of specific performance
from any court of competent jurisdiction to restrain or compel the Employee to
perform as agreed herein. The Employee agrees that this Section 16 shall survive
the termination of his employment and he shall be bound by its terms at all time
subsequent to the termination of his employment for so long a period as Company
continues to conduct the same business or businesses as conducted during the
Term or any extensions thereof. Nothing herein contained shall in any way limit
or exclude any other right granted by law or equity to the Company.
17. Amendment. This Agreement contains, and its terms constitute, the
entire agreement of the parties, and it may be amended only by a written
document
<PAGE> 11
Employment Agreement (page 11)
signed by both parties to this Agreement.
18. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California.
19. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.
20. Severability. If any section, subsection or provision hereof is
found for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any other provision of this Agreement. If any covenant herein is
determined by a court to be overly broad thereby making the covenant
unenforceable, the parties agree and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of the
offensive part of the covenant and that as so modified the covenant shall be as
fully enforceable as if set forth herein by the parties themselves in the
modified form. The covenants of the Employee in this Agreement shall each be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Employee against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants in this Agreement.
21. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States certified mail, postage prepaid, with
return receipt requested, to the parties at their respective addresses set for
the below:
To the Company:
CKE Restaurants, Inc.
3916 State Street
Santa Barbara, CA 93105
Attention: Andrew F. Puzder, General Counsel
<PAGE> 12
Employment Agreement (page 12)
To the Employee:
Robert W. Wisely
3551 Southridge Drive
Santa Rosa, California 95403
22. Waiver of Breach. The waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.
IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.
CKE RESTAURANTS, INC.
By:
---------------------------------------
Its:
---------------------------------------
EMPLOYEE
--------------------------------------------
Robert W. Wisely
<PAGE> 1
EXHIBIT 10.5
Employment Agreement (page 1)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April
9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a
Delaware corporation (the "Company"), and CARL A. STRUNK (the "Employee"). In
consideration of the mutual covenants and agreements set forth herein, the
parties agree as follows:
1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as Executive Vice President, Chief Financial Officer (or
such other title as the Company may designate), and the Employee accepts such
employment and agrees to perform such reasonable responsibilities and duties
commensurate with the aforesaid positions as directed by the Company's Board of
Directors, its Chief Executive Officer or its President, or as set forth in the
Articles of Incorporation and the Bylaws of the Company.
2. Term. The term of this Agreement shall commence on the Effective
Date and shall continue for a period of three (3) years ending April 9, 2002,
subject to prior termination as set forth in Section 7, below (the "Term"). The
Term may be extended at any time upon mutual written agreement of the parties.
3. Salary. During the Term, the Company shall pay the Employee a
minimum base annual salary, before deducting all applicable withholdings, of
$312,500 per year, payable at the times and in the manner dictated by the
Company's standard payroll policies. Such minimum base annual salary may be
periodically reviewed and increased at the discretion of the Compensation
Committee of the Board of Directors to reflect, among other matters, cost of
living increases and performance results.
4. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
<PAGE> 2
Employment Agreement (page 2)
may from time to time make available to the Employee upon mutual agreement, the
Employee shall be entitled to the following:
(a) The standard Company benefits enjoyed by the Company's
other executive vice presidents as a group;
(b) Payment by the Company of the Employee's initiation and
membership dues in a social and/or recreational club as deemed necessary and
appropriate by the Employee (and pre-approved by the Company at the Company's
discretion) to maintain various business relationships on behalf of the Company;
provided, however, that the Company shall not be obligated to pay for any of the
Employee's personal purchases and expenses at such club;
(c) Provision by the Company during the Term and any
extensions thereof to the Employee and his dependents of the medical and other
insurance coverage provided by the Company to its other executive vice
presidents as a group;
(d) Provision by the Company of supplemental disability
insurance sufficient to provide two-thirds of the Employee's pre-disability
minimum base annual salary for a two year period;
(e) An Annual Bonus for the fiscal year ended January 31,
2000, equal to 100% of the minimum annual base salary set forth in Section 3
above if the Company achieves 30% growth in earnings per share during fiscal
2000 over earnings per share during fiscal 1999. In all subsequent years, the
Annual Bonus shall be calculated by first determining the amount by which the
Company's net income increases over the prior fiscal year. If such increase is
15%, Employee shall receive a bonus equal to 25% of his then current minimum
base annual salary and if net income increases less than 15% or decreases,
Employee shall receive no bonus. For each full 5% increase in the Company's net
income over the 15% base increase, Employee's Annual Bonus shall increase by an
amount equal to 25% of his minimum base annual salary. For example, a 30%
increase in net income would result in a bonus equal to 100% of the Employee's
then current minimum base annual salary. In no event shall the Annual Bonus
exceed 100% of Employee's minimum annual
<PAGE> 3
Employment Agreement (page 3)
base salary. The Annual Bonus shall be paid within ninety (90) days after the
end of the fiscal year.
(f) A Grant under the Company's Stock Option Plans of options
to purchase 50,000 shares of the Company's Common Stock. The exercise price for
such options shall be the closing price on the Effective Date of the Company's
Common Stock traded on the New York Stock Exchange, as reported by the Wall
Street Journal. Such options shall vest as follows: (i) 1/3 (16,667 shares) on
the Effective Date; (ii) 1/3 (16,667 shares) on the first anniversary of the
Effective Date; and, (iii) 1/3 (16,666 shares) on the second anniversary of the
Effective Date. Such options shall be incentive stock options as defined by
section 422 of the Internal Revenue Code to the maximum extent possible.
The Company shall deduct from all compensation payable under
this Agreement to the Employee any taxes or withholdings the Company is required
to deduct pursuant to state and federal laws or by mutual agreement between the
parties.
5. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with his positions with the Company and in accordance with the
Company's standard policies, or as the Company's Board of Directors may approve.
In addition, the Employee shall be entitled to such holidays consistent with the
Company's standard policies or as the Company's Board of Directors may approve.
6. Expense Reimbursement. In addition to the compensation and benefits
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for his reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses in
accordance with the Company's policies then in effect, all such expense
reimbursements to be approved in writing by the Company's Chief Executive
Officer or President.
7. Termination.
(a) For Cause. The Company may terminate this Agreement
<PAGE> 4
Employment Agreement (page 4)
immediately for cause upon written notice to the Employee, in which event the
Company shall be obligated only to pay the Employee that portion of the minimum
base annual salary due him through the date of termination. Cause shall be
limited to (i) the failure to perform duties consistent with a commercially
reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal
or other illegal activities; or, (iv) a material breach of this Agreement.
(b) Without Cause. Either party may terminate this Agreement
immediately without cause by giving written notice to the other. If the Company
terminates under this Section 7(b), then it shall be obligated to pay to the
Employee an amount equal to the sum of (i) the Employee's minimum base annual
salary in effect as of the date of termination multiplied by the number one,
plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4
(e) above, but assuming a 30% increase in net income (100% of Employee's minimum
annual base salary), multiplied by the number one. Such payment to be made in a
lump sum on or before the fifth day following the date of termination, or as
otherwise directed by the Employee. In addition, if the Company terminates under
this Section 7(b), the Company shall maintain in full force and effect for the
continued benefit of the Employee for one year, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited. If the Employee terminates under this Section 7(b),
then the Company shall only be obligated to pay the Employee the minimum annual
base salary due him through the date of termination.
(c) Disability. If the Employee fails to perform his duties
hereunder on account of illness or other incapacity for a period of six
consecutive months, then the Company shall have the right upon written notice to
the Employee to terminate this Agreement without further obligation by paying
the Employee the minimum base
<PAGE> 5
Employment Agreement (page 5)
annual salary, without offset, for the remainder of the Term in a lump sum or as
otherwise directed by the Employee.
(d) Death. If the Employee dies during the Term, then this
Agreement shall terminate immediately and the Employee's legal representatives
shall be entitled to receive the minimum annual base salary for the remainder of
the Term in a lump sum or as otherwise directed by the Employee's legal
representative. Executive's outstanding CKE options will immediately vest in
full and be exercisable for a period of 90 days from Executive's death.
(e) Effect of Termination. Termination for any reason or for
no reason shall not constitute a waiver of the Company's rights under this
Agreement nor a release of the Employee from any obligation hereunder except his
obligation to perform his day-to-day duties as an employee.
8. Severance payment.
(a) The Employee may terminate his employment hereunder for
"Good Reason,"which for purposes of this Agreement shall mean a "change in
control of the Company." A "change in control of the Company" shall, for
purposes of this Agreement, be deemed to have occurred if (i) there shall be
consummated, except as hereinafter provided (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation,
or pursuant to which shares of the Company's Common Stock would be converted
into cash, securities or other property, other than a merger of the Company in
which the holders of the Company's Common Stock immediately prior to the merger
have the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (ii) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any "person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than
the Company or any "person" who, on the date hereof, is a director or officer of
the Company, is or becomes the "beneficial owner"
<PAGE> 6
Employment Agreement (page 6)
(as defined in Rule 13d-3 under the Exchange Act), of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities, or (iv) during any period of two (2) consecutive years
during the Term or any extensions thereof, individuals, who, at the beginning of
such period, constitute the Board of Directors, cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period. The Employee may only
terminate this Agreement due to a change in control of the Company during the
period commencing 60 days and expiring 365 days after such change in control.
Notwithstanding anything in this Agreement to the contrary, a "change in control
of the Company" shall not have occurred if officers and/or directors (or
affiliated entities thereof) of the Company at the time of a transaction
described under item (i), (ii) or (iii) above own, immediately after such
transaction, 15% or more of the entity acquiring the stock or assets of the
Company as provided above.
(b) If the Employee terminates his employment for Good Reason,
or, if after a change in control of the Company, the Company shall terminate the
Employee's employment in breach of this Agreement or pursuant to Section 7(b),
then, in lieu of and notwithstanding Section 7 above:
(i) the Company shall pay the Employee his minimum
base annual salary due him through the date of termination:
(ii) in lieu of any further salary and bonus payments
or other payments due to the Employee for periods subsequent to the date of
termination, the Company shall pay, as severance to the Employee, an amount
equal to the sum of (i) the Employee's minimum base annual salary in effect as
of the date of termination multiplied by the number of years (including partial
years) remaining in the Term or the number two (2), whichever is greater, plus
(ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a
30% increase in net income (100% of Employee's minimum annual base salary)
multiplied by the number of years remaining in the contract for which Employee
has not, as yet, received an Annual
<PAGE> 7
Employment Agreement (page 7)
Bonus or the number two (2), whichever is greater, such payment to be made in a
lump sum on or before the fifth day following the date of termination;
(iii) all options granted to the Employee which had
not vested as of the date of termination hereunder shall vest immediately; and
(iv) the Company shall maintain in full force and
effect, for the continued benefit of the Employee for the number of years
(including partial years) remaining in the Term, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited.
(c) The Employee shall not be required to mitigate the amount
of any payment provided for in this Section 8 or Section 7(b), above, by seeking
other employment or otherwise, nor shall any compensation or other payments
received by the Employee after the date of termination reduce any payments due
under this Section 8 or Section 7(b), above.
(d) Notwithstanding anything to the contrary herein, if and to
the extent any payment made under this Agreement, either alone or in conjunction
with other payments Employee has the right to receive either directly or
indirectly from the Company, which would constitute as "excess parachute
payment" under Section 280G of the Internal Revenue Code of 1986, as amended,
then Employee shall be entitled to receive an excise tax gross-up payment not
exceeding one million dollars ($1,000,000) in accordance with Appendix A.
9. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned
<PAGE> 8
Employment Agreement (page 8)
or transferred in any manner whatsoever, nor are such obligations, rights or
benefits subject to involuntary alienation, assignment or transfer.
10. Confidential Information. The Employee acknowledges that in his
capacity as an employee of the Company he will occupy a position of trust and
confidence and he further acknowledges that he will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry, including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 10. Accordingly, the Employee agrees that
during the Term and at all times thereafter he will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will he utilize any
such information, either alone or with others, outside the scope of his duties
and responsibilities with the Company.
11. Non-Competition During Employment Term. The Employee agrees that,
during the Term and any extensions thereof, he will devote substantially all his
business time and effort, and give undivided loyalty, to the Company. He will
not engage in any way whatsoever, directly or indirectly, in any business that
is competitive with the Company or its affiliates, nor solicit, or in any other
manner work for or assist any business which is competitive with the Company or
its affiliates. In addition, during the Term and any extensions thereof, the
Employee will undertake no planning for or organization of any business activity
competitive with the work he performs as an employee of the Company, and the
Employee will not combine or conspire with any other employee of the Company or
any other person for the purpose of organizing any such competitive business
activity.
<PAGE> 9
Employment Agreement (page 9)
12. Non-Competition After Employment Term. The parties acknowledge that
the Employee will acquire substantial knowledge and information concerning the
business of the Company and its affiliates as a result of his employment. The
parties further acknowledge that the scope of business in which the Company is
engaged as of the Effective Date is national and very competitive and one in
which few companies can successfully compete. Competition by the Employee in
that business after this Agreement is terminated would severely injure the
Company. Accordingly, for a period of two years after this Agreement is
terminated or the Employee leaves the employment of the Company for any reason
whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not
to become an employee, consultant, advisor, principal, partner or substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently-existing or then-existing products and
markets; and (ii) not to solicit any person or business that was at the time of
such termination and remains an executive employee of the Company or any of its
affiliates. Notwithstanding any of the foregoing provisions to the contrary, the
Employee shall not be subject to the restrictions set forth in this Section 12
under the following circumstances:
(a) If the Employee's employment with the Company is
terminated by the Company without cause;
(b) If the Employee's employment with the Company is
terminated as a result of the Company's unwillingness to extend the Term of this
Agreement;
(c) If the Employee leaves the employment of the Company for
Good Reason pursuant to Section 8, above; or,
(d) As set forth in Section 14 below.
13. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.
<PAGE> 10
Employment Agreement (page 10)
14. Other Employment and Location. Anything to the contrary hereinabove
notwithstanding, Company acknowledges that Employee is also the Executive Vice
President and Chief Financial Officer of American National Financial
Inc.("ANFI") and will direct a reasonable portion of his time to fulfilling his
duties as an officer of ANFI. Employee may also be an officer or director of
Fidelity National Financial, Inc. or one of its subsidiaries ("FNFI") and/or
Santa Barbara Restaurant Group ("SBRG"). Company further acknowledges that
Employee is or may be an employee of ANFI, SBRG or FNFI in addition to the
Company and that such employment shall not be a violation of this Agreement so
long as Employee dedicates a reasonable amount of his time to his duties
hereunder. Should any portion of Employee's minimum annual base salary be
allocated to SBRG, ANFI or FNFI, such allocation shall not affect the
calculation of any payments due to Employee (other than the non-allocated
portion of his minimum base annual salary), including, but not limited to any
payments due under Sections 4(e), 7(b) and 8(b)(ii). Employment by SBRG, ANFI or
FNFI, or any affiliate thereof, shall not be prohibited by Sections 11 or 12
above. The Employee shall not be required to move from Santa Barbara County,
California, to perform his duties hereunder during the Term without his written
consent.
15. Improvements and Inventions. Any and all improvements or inventions
which the Employee may conceive, make or participate in during the period of his
employment shall be the sole and exclusive property of the Company. The Employee
will, whenever requested by the Company, execute and deliver any and all
documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.
16. Actions. The parties agree and acknowledge that the rights conveyed
by this Agreement are of a unique and special nature and that the Company will
not have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is therefore agreed between the parties that, in the event
of a breach by the Employee of any of his obligations contained in this
Agreement, the Company shall
<PAGE> 11
Employment Agreement (page 11)
have the right, among other rights, to damages sustained thereby and to obtain
an injunction or decree of specific performance from any court of competent
jurisdiction to restrain or compel the Employee to perform as agreed herein. The
Employee agrees that this Section 16 shall survive the termination of his
employment and he shall be bound by its terms at all time subsequent to the
termination of his employment for so long a period as Company continues to
conduct the same business or businesses as conducted during the Term or any
extensions thereof. Nothing herein contained shall in any way limit or exclude
any other right granted by law or equity to the Company.
17. Amendment. This Agreement contains, and its terms constitute, the
entire agreement of the parties, and it may be amended only by a written
document signed by both parties to this Agreement.
18. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California.
19. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.
20. Severability. If any section, subsection or provision hereof is
found for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any other provision of this Agreement. If any covenant herein is
determined by a court to be overly broad thereby making the covenant
unenforceable, the parties agree and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of the
offensive part of the covenant and that as so modified the covenant shall be as
fully enforceable as if set forth herein by the parties themselves in the
modified form. The covenants of the Employee in this Agreement shall each be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Employee against the
<PAGE> 12
Employment Agreement (page 12)
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants in this Agreement.
21. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States certified mail, postage prepaid, with
return receipt requested, to the parties at their respective addresses set for
the below:
To the Company:
CKE Restaurants, Inc.
3916 State Street
Santa Barbara, CA 93105
Attention: Andrew F. Puzder, General Counsel
To the Employee:
Carl A. Strunk
123 Via Alicia
Santa Barbara, California 93108
22. Waiver of Breach. The waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.
IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.
CKE RESTAURANTS, INC.
By:
-----------------------------------------
Its:
-----------------------------------------
<PAGE> 13
Employment Agreement (page 13)
EMPLOYEE
---------------------------------------------
Carl A. Strunk
<PAGE> 1
EXHIBIT 10.6
Employment Agreement (page 1)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April
9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a
Delaware corporation (the "Company"), and ANDREW F. PUZDER (the "Employee"). In
consideration of the mutual covenants and agreements set forth herein, the
parties agree as follows:
1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as Executive Vice President, General Counsel and Executive
Vice President, Franchising (or such other title as the Company may designate),
and the Employee accepts such employment and agrees to perform such reasonable
responsibilities and duties commensurate with the aforesaid positions as
directed by the Company's Board of Directors, its Chief Executive Officer or its
President, or as set forth in the Articles of Incorporation and the Bylaws of
the Company.
2. Term. The term of this Agreement shall commence on the Effective
Date and shall continue for a period of three (3) years ending April 9, 2002,
subject to prior termination as set forth in Section 7, below (the "Term"). The
Term may be extended at any time upon mutual written agreement of the parties.
3. Salary. During the Term, the Company shall pay the Employee a
minimum base annual salary, before deducting all applicable withholdings, of
$312,500 per year, payable at the times and in the manner dictated by the
Company's standard payroll policies. Such minimum base annual salary may be
periodically reviewed and increased at the discretion of the Compensation
Committee of the Board of Directors to reflect, among other matters, cost of
living increases and performance results.
4. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
<PAGE> 2
Employment Agreement (page 2)
may from time to time make available to the Employee upon mutual agreement, the
Employee shall be entitled to the following:
(a) The standard Company benefits enjoyed by the Company's
other executive vice presidents as a group;
(b) Payment by the Company of the Employee's initiation and
membership dues in a social and/or recreational club as deemed necessary and
appropriate by the Employee (and pre-approved by the Company at the Company's
discretion) to maintain various business relationships on behalf of the Company;
provided, however, that the Company shall not be obligated to pay for any of the
Employee's personal purchases and expenses at such club;
(c) Provision by the Company during the Term and any
extensions thereof to the Employee and his dependents of the medical and other
insurance coverage provided by the Company to its other executive vice
presidents as a group;
(d) Provision by the Company of supplemental disability
insurance sufficient to provide two-thirds of the Employee's pre-disability
minimum base annual salary for a two year period;
(e) An Annual Bonus for the fiscal year ended January 31,
2000, equal to 100% of the minimum annual base salary set forth in Section 3
above if the Company achieves 30% growth in earnings per share during fiscal
2000 over earnings per share during fiscal 1999. In all subsequent years, the
Annual Bonus shall be calculated by first determining the amount by which the
Company's net income increases over the prior fiscal year. If such increase is
15%, Employee shall receive a bonus equal to 25% of his then current minimum
base annual salary and if net income increases less than 15% or decreases,
Employee shall receive no bonus. For each full 5% increase in the Company's net
income over the 15% base increase, Employee's Annual Bonus shall increase by an
amount equal to 25% of his minimum base annual salary. For example, a 30%
increase in net income would result in a bonus equal to 100% of the Employee's
then current minimum base annual salary. In no event shall the Annual Bonus
exceed 100% of Employee's minimum base
<PAGE> 3
Employment Agreement (page 3)
annual salary. The Annual Bonus shall be paid within ninety (90) days after the
end of the fiscal year.
(f) A Grant under the Company's Stock Option Plans of options
to purchase 50,000 shares of the Company's Common Stock. The exercise price for
such options shall be the closing price on the Effective Date of the Company's
Common Stock traded on the New York Stock Exchange, as reported by the Wall
Street Journal. Such options shall vest as follows: (i) 1/3 (16,667 shares) on
the Effective Date; (ii) 1/3 (16,667 shares) on the first anniversary of the
Effective Date; and, (iii) 1/3 (16,666 shares) on the second anniversary of the
Effective Date. Such options shall be incentive stock options as defined by
section 422 of the Internal Revenue Code to the maximum extent possible.
The Company shall deduct from all compensation payable under
this Agreement to the Employee any taxes or withholdings the Company is required
to deduct pursuant to state and federal laws or by mutual agreement between the
parties.
5. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with his positions with the Company and in accordance with the
Company's standard policies, or as the Company's Board of Directors may approve.
In addition, the Employee shall be entitled to such holidays consistent with the
Company's standard policies or as the Company's Board of Directors may approve.
6. Expense Reimbursement. In addition to the compensation and benefits
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for his reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses in
accordance with the Company's policies then in effect, all such expense
reimbursements to be approved in writing by the Company's Chief Executive
Officer or President.
7. Termination.
(a) For Cause. The Company may terminate this Agreement
<PAGE> 4
Employment Agreement (page 4)
immediately for cause upon written notice to the Employee, in which event the
Company shall be obligated only to pay the Employee that portion of the minimum
base annual salary due him through the date of termination. Cause shall be
limited to (i) the failure to perform duties consistent with a commercially
reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal
or other illegal activities; or, (iv) a material breach of this Agreement.
(b) Without Cause. Either party may terminate this Agreement
immediately without cause by giving written notice to the other. If the Company
terminates under this Section 7(b), then it shall be obligated to pay to the
Employee an amount equal to the sum of (i) the Employee's minimum base annual
salary in effect as of the date of termination multiplied by the number one,
plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4
(e) above, but assuming a 30% increase in net income (100% of Employee's minimum
annual base salary), multiplied by the number one. Such payment to be made in a
lump sum on or before the fifth day following the date of termination, or as
otherwise directed by the Employee. In addition, if the Company terminates under
this Section 7(b), the Company shall maintain in full force and effect for the
continued benefit of the Employee for one year, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited. If the Employee terminates under this Section 7(b),
then the Company shall only be obligated to pay the Employee the minimum annual
base salary due him through the date of termination.
(c) Disability. If the Employee fails to perform his duties
hereunder on account of illness or other incapacity for a period of six
consecutive months, then the Company shall have the right upon written notice to
the Employee to terminate this Agreement without further obligation by paying
the Employee the minimum base
<PAGE> 5
Employment Agreement (page 5)
annual salary, without offset, for the remainder of the Term in a lump sum or as
otherwise directed by the Employee.
(d) Death. If the Employee dies during the Term, then this
Agreement shall terminate immediately and the Employee's legal representatives
shall be entitled to receive the minimum annual base salary for the remainder of
the Term in a lump sum or as otherwise directed by the Employee's legal
representative. Executive's outstanding CKE options will immediately vest in
full and be exercisable for a period of 90 days from Executive's death.
(e) Effect of Termination. Termination for any reason or for
no reason shall not constitute a waiver of the Company's rights under this
Agreement nor a release of the Employee from any obligation hereunder except his
obligation to perform his day-to-day duties as an employee.
8. Severance payment.
(a) The Employee may terminate his employment hereunder for
"Good Reason,"which for purposes of this Agreement shall mean a "change in
control of the Company." A "change in control of the Company" shall, for
purposes of this Agreement, be deemed to have occurred if (i) there shall be
consummated, except as hereinafter provided (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation,
or pursuant to which shares of the Company's Common Stock would be converted
into cash, securities or other property, other than a merger of the Company in
which the holders of the Company's Common Stock immediately prior to the merger
have the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (ii) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any "person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than
the Company or any "person" who, on the date hereof, is a director or officer of
the Company, is or becomes the "beneficial owner"
<PAGE> 6
Employment Agreement (page 6)
(as defined in Rule 13d-3 under the Exchange Act), of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities, or (iv) during any period of two (2) consecutive years
during the Term or any extensions thereof, individuals, who, at the beginning of
such period, constitute the Board of Directors, cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period. The Employee may only
terminate this Agreement due to a change in control of the Company during the
period commencing 60 days and expiring 365 days after such change in control.
Notwithstanding anything in this Agreement to the contrary, a "change in control
of the Company" shall not have occurred if officers and/or directors (or
affiliated entities thereof) of the Company at the time of a transaction
described under item (i), (ii) or (iii) above own, immediately after such
transaction, 15% or more of the entity acquiring the stock or assets of the
Company as provided above.
(b) If the Employee terminates his employment for Good Reason,
or, if after a change in control of the Company, the Company shall terminate the
Employee's employment in breach of this Agreement or pursuant to Section 7(b),
then, in lieu of and notwithstanding Section 7 above:
(i) the Company shall pay the Employee his minimum
base annual salary due him through the date of termination:
(ii) in lieu of any further salary and bonus payments
or other payments due to the Employee for periods subsequent to the date of
termination, the Company shall pay, as severance to the Employee, an amount
equal to the sum of (i) the Employee's minimum base annual salary in effect as
of the date of termination multiplied by the number of years (including partial
years) remaining in the Term or the number two (2), whichever is greater, plus
(ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a
30% increase in net income (100% of Employee's minimum annual base salary)
multiplied by the number of years remaining in the contract for which Employee
has not, as yet, received an Annual
<PAGE> 7
Employment Agreement (page 7)
Bonus or the number two (2), whichever is greater, such payment to be made in a
lump sum on or before the fifth day following the date of termination;
(iii) all options granted to the Employee which had
not vested as of the date of termination hereunder shall vest immediately; and
(iv) the Company shall maintain in full force and
effect, for the continued benefit of the Employee for the number of years
(including partial years) remaining in the Term, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited.
(c) The Employee shall not be required to mitigate the amount
of any payment provided for in this Section 8 or Section 7(b), above, by seeking
other employment or otherwise, nor shall any compensation or other payments
received by the Employee after the date of termination reduce any payments due
under this Section 8 or Section 7(b), above.
(d) Notwithstanding anything to the contrary herein, if and to
the extent any payment made under this Agreement, either alone or in conjunction
with other payments Employee has the right to receive either directly or
indirectly from the Company, which would constitute as "excess parachute
payment" under Section 280G of the Internal Revenue Code of 1986, as amended,
then Employee shall be entitled to receive an excise tax gross-up payment not
exceeding one million dollars ($1,000,000) in accordance with Appendix A.
9. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned
<PAGE> 8
Employment Agreement (page 8)
or transferred in any manner whatsoever, nor are such obligations, rights or
benefits subject to involuntary alienation, assignment or transfer.
10. Confidential Information. The Employee acknowledges that in his
capacity as an employee of the Company he will occupy a position of trust and
confidence and he further acknowledges that he will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry, including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 10. Accordingly, the Employee agrees that
during the Term and at all times thereafter he will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will he utilize any
such information, either alone or with others, outside the scope of his duties
and responsibilities with the Company.
11. Non-Competition During Employment Term. The Employee agrees that,
during the Term and any extensions thereof, he will devote substantially all his
business time and effort, and give undivided loyalty, to the Company. He will
not engage in any way whatsoever, directly or indirectly, in any business that
is competitive with the Company or its affiliates, nor solicit, or in any other
manner work for or assist any business which is competitive with the Company or
its affiliates. In addition, during the Term and any extensions thereof, the
Employee will undertake no planning for or organization of any business activity
competitive with the work he performs as an employee of the Company, and the
Employee will not combine or conspire with any other employee of the Company or
any other person for the purpose of organizing any such competitive business
activity.
<PAGE> 9
Employment Agreement (page 9)
12. Non-Competition After Employment Term. The parties acknowledge that
the Employee will acquire substantial knowledge and information concerning the
business of the Company and its affiliates as a result of his employment. The
parties further acknowledge that the scope of business in which the Company is
engaged as of the Effective Date is national and very competitive and one in
which few companies can successfully compete. Competition by the Employee in
that business after this Agreement is terminated would severely injure the
Company. Accordingly, for a period of two years after this Agreement is
terminated or the Employee leaves the employment of the Company for any reason
whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not
to become an employee, consultant, advisor, principal, partner or substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently-existing or then-existing products and
markets; and (ii) not to solicit any person or business that was at the time of
such termination and remains an executive employee of the Company or any of its
affiliates. Notwithstanding any of the foregoing provisions to the contrary, the
Employee shall not be subject to the restrictions set forth in this Section 12
under the following circumstances:
(a) If the Employee's employment with the Company is
terminated by the Company without cause;
(b) If the Employee's employment with the Company is
terminated as a result of the Company's unwillingness to extend the Term of this
Agreement;
(c) If the Employee leaves the employment of the Company for
Good Reason pursuant to Section 8, above; or,
(d) As set forth in Section 14 below.
13. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.
<PAGE> 10
Employment Agreement (page 10)
14. Other Employment and Location. Anything to the contrary hereinabove
notwithstanding, Company acknowledges that Employee is also the Chief Executive
Officer of Santa Barbara Restaurant Group, Inc. ("SBRG"), a director of Rally's
Hamburgers, Inc. (which may be merged with Checkers Drive Thru Restaurants,
Inc.) ("RHI"), and Executive Vice President of Fidelity National Financial, Inc.
("FNFI") and will direct a reasonable portion of his time to fulfilling his
duties in such capacities. Company further acknowledges that Employee is or may
be an Employee of SBRG, RHI and/or FNFI, or any affiliate thereof, in addition
to the Company and that such employment shall not be a violation of this
Agreement so long as Employee dedicates a reasonable amount of his time to his
duties hereunder. Should any portion of Employee's minimum base annual salary be
allocated to such entities, such allocation shall not affect the calculation of
any payments due to Employee (other than the non-allocated portion of his
minimum base annual salary under Section 3 above), including, but not limited to
any payments due under Sections 4(e), 7(b) and 8(b)(ii). Employment by such
entities shall not be prohibited by Sections 11 or 12 above. The Employee shall
not be required to move from Santa Barbara County, California, to perform his
duties hereunder during the Term without his written consent.
15. Improvements and Inventions. Any and all improvements or inventions
which the Employee may conceive, make or participate in during the period of his
employment shall be the sole and exclusive property of the Company. The Employee
will, whenever requested by the Company, execute and deliver any and all
documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.
16. Actions. The parties agree and acknowledge that the rights conveyed
by this Agreement are of a unique and special nature and that the Company will
not have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is therefore agreed between the parties that, in the event
of a breach by the
<PAGE> 11
Employment Agreement (page 11)
Employee of any of his obligations contained in this Agreement, the Company
shall have the right, among other rights, to damages sustained thereby and to
obtain an injunction or decree of specific performance from any court of
competent jurisdiction to restrain or compel the Employee to perform as agreed
herein. The Employee agrees that this Section 16 shall survive the termination
of his employment and he shall be bound by its terms at all time subsequent to
the termination of his employment for so long a period as Company continues to
conduct the same business or businesses as conducted during the Term or any
extensions thereof. Nothing herein contained shall in any way limit or exclude
any other right granted by law or equity to the Company.
17. Amendment. This Agreement contains, and its terms constitute, the
entire agreement of the parties, and it may be amended only by a written
document signed by both parties to this Agreement.
18. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California.
19. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.
20. Severability. If any section, subsection or provision hereof is
found for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any other provision of this Agreement. If any covenant herein is
determined by a court to be overly broad thereby making the covenant
unenforceable, the parties agree and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of the
offensive part of the covenant and that as so modified the covenant shall be as
fully enforceable as if set forth herein by the parties themselves in the
modified form. The covenants of the Employee in this Agreement shall each
<PAGE> 12
Employment Agreement (page 12)
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of the Employee
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of the covenants in
this Agreement.
21. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States certified mail, postage prepaid, with
return receipt requested, to the parties at their respective addresses set for
the below:
To the Company:
CKE Restaurants, Inc.
3916 State Street
Santa Barbara, CA 93105
Attention: Tom Thompson, President
To the Employee:
Andrew F. Puzder
570 Meadow Wood Lane
Montecito, California 93108
22. Waiver of Breach. The waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.
IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.
CKE RESTAURANTS, INC.
By:
---------------------------------------
Its:
---------------------------------------
<PAGE> 13
Employment Agreement (page 13)
EMPLOYEE
-------------------------------------------
Andrew F. Puzder
<PAGE> 1
EXHIBIT 10.7
Employment Agreement (page 1)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April
9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a
Delaware corporation (the "Company"), and JOHN J. DUNION (the "Employee"). In
consideration of the mutual covenants and agreements set forth herein, the
parties agree as follows:
1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as Executive Vice President, Chief Administrative Officer
(or such other title as the Company may designate), and the Employee accepts
such employment and agrees to perform such reasonable responsibilities and
duties commensurate with the aforesaid positions as directed by the Company's
Board of Directors, its Chief Executive Officer or its President, or as set
forth in the Articles of Incorporation and the Bylaws of the Company.
2. Term. The term of this Agreement shall commence on the Effective
Date and shall continue for a period of three (3) years ending April 9, 2002,
subject to prior termination as set forth in Section 7, below (the "Term"). The
Term may be extended at any time upon mutual written agreement of the parties.
3. Salary. During the Term, the Company shall pay the Employee a
minimum base annual salary, before deducting all applicable withholdings, of
$190,000 per year, payable at the times and in the manner dictated by the
Company's standard payroll policies. Such minimum base annual salary may be
periodically reviewed and increased at the discretion of the Compensation
Committee of the Board of Directors to reflect, among other matters, cost of
living increases and performance results.
4. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
may from time to time make available to the Employee upon mutual agreement, the
<PAGE> 2
Employment Agreement (page 2)
Employee shall be entitled to the following:
(a) The standard Company benefits enjoyed by the Company's
other executive vice presidents as a group;
(b) Payment by the Company of the Employee's initiation and
membership dues in a social and/or recreational club as deemed necessary and
appropriate by the Employee (and pre-approved by the Company at the Company's
discretion) to maintain various business relationships on behalf of the Company;
provided, however, that the Company shall not be obligated to pay for any of the
Employee's personal purchases and expenses at such club;
(c) Provision by the Company during the Term and any
extensions thereof to the Employee and his dependents of the medical and other
insurance coverage provided by the Company to its other executive vice
presidents as a group;
(d) Provision by the Company of supplemental disability
insurance sufficient to provide two-thirds of the Employee's pre-disability
minimum base annual salary for a two year period;
(e) An Annual Bonus for the fiscal year ended January 31,
2000, equal to 100% of the minimum annual base salary set forth in Section 3
above if the Company achieves 30% growth in earnings per share during fiscal
2000 over earnings per share during fiscal 1999. In all subsequent years, the
Annual Bonus shall be calculated by first determining the amount by which the
Company's net income increases over the prior fiscal year. If such increase is
15%, Employee shall receive a bonus equal to 25% of his then current minimum
base annual salary and if net income increases less than 15% or decreases,
Employee shall receive no bonus. For each full 5% increase in the Company's net
income over the 15% base increase, Employee's Annual Bonus shall increase by an
amount equal to 25% of his minimum base annual salary. For example, a 30%
increase in net income would result in a bonus equal to 100% of the Employee's
then current minimum base annual salary. In no event shall the Annual Bonus
exceed 100% of Employee's minimum base annual salary. The Annual Bonus shall be
paid within ninety (90) days after the end of the fiscal year.
<PAGE> 3
Employment Agreement (page 3)
(f) A Grant under the Company's Stock Option Plans of options
to purchase 50,000 shares of the Company's Common Stock. The exercise price for
such options shall be the closing price on the Effective Date of the Company's
Common Stock traded on the New York Stock Exchange, as reported by the Wall
Street Journal. Such options shall vest as follows: (i) 1/3 (16,667 shares) on
the Effective Date; (ii) 1/3 (16,667 shares) on the first anniversary of the
Effective Date; and, (iii) 1/3 (16,666 shares) on the second anniversary of the
Effective Date. Such options shall be incentive stock options as defined by
section 422 of the Internal Revenue Code to the maximum extent possible.
The Company shall deduct from all compensation payable under
this Agreement to the Employee any taxes or withholdings the Company is required
to deduct pursuant to state and federal laws or by mutual agreement between the
parties.
5. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with his positions with the Company and in accordance with the
Company's standard policies, or as the Company's Board of Directors may approve.
In addition, the Employee shall be entitled to such holidays consistent with the
Company's standard policies or as the Company's Board of Directors may approve.
6. Expense Reimbursement. In addition to the compensation and benefits
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for his reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses in
accordance with the Company's policies then in effect, all such expense
reimbursements to be approved in writing by the Company's Chief Executive
Officer or President.
7. Termination.
(a) For Cause. The Company may terminate this Agreement
immediately for cause upon written notice to the Employee, in which event the
Company shall be obligated only to pay the Employee that portion of the minimum
<PAGE> 4
Employment Agreement (page 4)
base annual salary due him through the date of termination. Cause shall be
limited to (i) the failure to perform duties consistent with a commercially
reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal
or other illegal activities; or, (iv) a material breach of this Agreement.
(b) Without Cause. Either party may terminate this Agreement
immediately without cause by giving written notice to the other. If the Company
terminates under this Section 7(b), then it shall be obligated to pay to the
Employee an amount equal to the sum of (i) the Employee's minimum base annual
salary in effect as of the date of termination multiplied by the number one,
plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4
(e) above, but assuming a 30% increase in net income (100% of Employee's minimum
annual base salary), multiplied by the number one. Such payment to be made in a
lump sum on or before the fifth day following the date of termination, or as
otherwise directed by the Employee. In addition, if the Company terminates under
this Section 7(b), the Company shall maintain in full force and effect for the
continued benefit of the Employee for one year, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited. If the Employee terminates under this Section 7(b),
then the Company shall only be obligated to pay the Employee the minimum annual
base salary due him through the date of termination.
(c) Disability. If the Employee fails to perform his duties
hereunder on account of illness or other incapacity for a period of six
consecutive months, then the Company shall have the right upon written notice to
the Employee to terminate this Agreement without further obligation by paying
the Employee the minimum base annual salary, without offset, for the remainder
of the Term in a lump sum or as otherwise directed by the Employee.
<PAGE> 5
Employment Agreement (page 5)
(d) Death. If the Employee dies during the Term, then this
Agreement shall terminate immediately and the Employee's legal representatives
shall be entitled to receive the minimum annual base salary for the remainder of
the Term in a lump sum or as otherwise directed by the Employee's legal
representative. Executive's outstanding CKE options will immediately vest in
full and be exercisable for a period of 90 days from Executive's death.
(e) Effect of Termination. Termination for any reason or for
no reason shall not constitute a waiver of the Company's rights under this
Agreement nor a release of the Employee from any obligation hereunder except his
obligation to perform his day-to-day duties as an employee.
8. Severance payment.
(a) The Employee may terminate his employment hereunder for
"Good Reason,"which for purposes of this Agreement shall mean a "change in
control of the Company." A "change in control of the Company" shall, for
purposes of this Agreement, be deemed to have occurred if (i) there shall be
consummated, except as hereinafter provided (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation,
or pursuant to which shares of the Company's Common Stock would be converted
into cash, securities or other property, other than a merger of the Company in
which the holders of the Company's Common Stock immediately prior to the merger
have the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (ii) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any "person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than
the Company or any "person" who, on the date hereof, is a director or officer of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), of securities of the Company representing 30% or more
of the combined voting power of the Company's then
<PAGE> 6
Employment Agreement (page 6)
outstanding securities, or (iv) during any period of two (2) consecutive years
during the Term or any extensions thereof, individuals, who, at the beginning of
such period, constitute the Board of Directors, cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period. The Employee may only
terminate this Agreement due to a change in control of the Company during the
period commencing 60 days and expiring 365 days after such change in control.
Notwithstanding anything in this Agreement to the contrary, a "change in control
of the Company" shall not have occurred if officers and/or directors (or
affiliated entities thereof) of the Company at the time of a transaction
described under item (i), (ii) or (iii) above own, immediately after such
transaction, 15% or more of the entity acquiring the stock or assets of the
Company as provided above.
(b) If the Employee terminates his employment for Good Reason,
or, if after a change in control of the Company, the Company shall terminate the
Employee's employment in breach of this Agreement or pursuant to Section 7(b),
then, in lieu of and notwithstanding Section 7 above:
(i) the Company shall pay the Employee his minimum
base annual salary due him through the date of termination:
(ii) in lieu of any further salary and bonus payments
or other payments due to the Employee for periods subsequent to the date of
termination, the Company shall pay, as severance to the Employee, an amount
equal to the sum of (i) the Employee's minimum base annual salary in effect as
of the date of termination multiplied by the number of years (including partial
years) remaining in the Term or the number two (2), whichever is greater, plus
(ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a
30% increase in net income (100% of Employee's minimum annual base salary)
multiplied by the number of years remaining in the contract for which Employee
has not, as yet, received an Annual Bonus or the number two (2), whichever is
greater, such payment to be made in a lump sum on or before the fifth day
following the date of termination;
<PAGE> 7
Employment Agreement (page 7)
(iii) all options granted to the Employee which had
not vested as of the date of termination hereunder shall vest immediately; and
(iv) the Company shall maintain in full force and
effect, for the continued benefit of the Employee for the number of years
(including partial years) remaining in the Term, all employee benefit plans
(except for the Company's stock option plans) and programs in which the Employee
was entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Employee's participation in any such plan or program is prohibited, the Company
shall, at its expense, arrange to provide the Employee with benefits
substantially similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is prohibited.
(c) The Employee shall not be required to mitigate the amount
of any payment provided for in this Section 8 or Section 7(b), above, by seeking
other employment or otherwise, nor shall any compensation or other payments
received by the Employee after the date of termination reduce any payments due
under this Section 8 or Section 7(b), above.
(d) Notwithstanding anything to the contrary herein, if and to
the extent any payment made under this Agreement, either alone or in conjunction
with other payments Employee has the right to receive either directly or
indirectly from the Company, which would constitute as "excess parachute
payment" under Section 280G of the Internal Revenue Code of 1986, as amended,
then Employee shall be entitled to receive an excise tax gross-up payment not
exceeding one million dollars ($1,000,000) in accordance with Appendix A.
9. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned or transferred in any manner whatsoever, nor are such obligations,
rights or benefits subject to involuntary alienation, assignment or transfer.
<PAGE> 8
Employment Agreement (page 8)
10. Confidential Information. The Employee acknowledges that in his
capacity as an employee of the Company he will occupy a position of trust and
confidence and he further acknowledges that he will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry, including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 10. Accordingly, the Employee agrees that
during the Term and at all times thereafter he will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will he utilize any
such information, either alone or with others, outside the scope of his duties
and responsibilities with the Company.
11. Non-Competition During Employment Term. The Employee agrees that,
during the Term and any extensions thereof, he will devote substantially all his
business time and effort, and give undivided loyalty, to the Company. He will
not engage in any way whatsoever, directly or indirectly, in any business that
is competitive with the Company or its affiliates, nor solicit, or in any other
manner work for or assist any business which is competitive with the Company or
its affiliates. In addition, during the Term and any extensions thereof, the
Employee will undertake no planning for or organization of any business activity
competitive with the work he performs as an employee of the Company, and the
Employee will not combine or conspire with any other employee of the Company or
any other person for the purpose of organizing any such competitive business
activity.
12. Non-Competition After Employment Term. The parties acknowledge
<PAGE> 9
Employment Agreement (page 9)
that the Employee will acquire substantial knowledge and information concerning
the business of the Company and its affiliates as a result of his employment.
The parties further acknowledge that the scope of business in which the Company
is engaged as of the Effective Date is national and very competitive and one in
which few companies can successfully compete. Competition by the Employee in
that business after this Agreement is terminated would severely injure the
Company. Accordingly, for a period of two years after this Agreement is
terminated or the Employee leaves the employment of the Company for any reason
whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not
to become an employee, consultant, advisor, principal, partner or substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently-existing or then-existing products and
markets; and (ii) not to solicit any person or business that was at the time of
such termination and remains an executive employee of the Company or any of its
affiliates. Notwithstanding any of the foregoing provisions to the contrary, the
Employee shall not be subject to the restrictions set forth in this Section 12
under the following circumstances:
(a) If the Employee's employment with the Company is
terminated by the Company without cause;
(b) If the Employee's employment with the Company is
terminated as a result of the Company's unwillingness to extend the Term of this
Agreement; or,
(c) If the Employee leaves the employment of the Company for
Good Reason pursuant to Section 8.
13. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.
14. Location. The Employee shall not be required to move from Orange
County, California, to perform his duties hereunder during the Term without his
<PAGE> 10
Employment Agreement (page 10)
written consent.
15. Improvements and Inventions. Any and all improvements or inventions
which the Employee may conceive, make or participate in during the period of his
employment shall be the sole and exclusive property of the Company. The Employee
will, whenever requested by the Company, execute and deliver any and all
documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.
16. Actions. The parties agree and acknowledge that the rights conveyed
by this Agreement are of a unique and special nature and that the Company will
not have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is therefore agreed between the parties that, in the event
of a breach by the Employee of any of his obligations contained in this
Agreement, the Company shall have the right, among other rights, to damages
sustained thereby and to obtain an injunction or decree of specific performance
from any court of competent jurisdiction to restrain or compel the Employee to
perform as agreed herein. The Employee agrees that this Section 16 shall survive
the termination of his employment and he shall be bound by its terms at all time
subsequent to the termination of his employment for so long a period as Company
continues to conduct the same business or businesses as conducted during the
Term or any extensions thereof. Nothing herein contained shall in any way limit
or exclude any other right granted by law or equity to the Company.
17. Amendment. This Agreement contains, and its terms constitute, the
entire agreement of the parties, and it may be amended only by a written
document signed by both parties to this Agreement.
18. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California.
<PAGE> 11
Employment Agreement (page 11)
19. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.
20. Severability. If any section, subsection or provision hereof is
found for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any other provision of this Agreement. If any covenant herein is
determined by a court to be overly broad thereby making the covenant
unenforceable, the parties agree and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of the
offensive part of the covenant and that as so modified the covenant shall be as
fully enforceable as if set forth herein by the parties themselves in the
modified form. The covenants of the Employee in this Agreement shall each be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Employee against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants in this Agreement.
21. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States certified mail, postage prepaid, with
return receipt requested, to the parties at their respective addresses set for
the below:
To the Company:
CKE Restaurants, Inc.
3916 State Street
Santa Barbara, CA 93105
Attention: Andrew F. Puzder, General Counsel
To the Employee:
John J. Dunion
940 South Camerford Lane
Anaheim Hills, California 92808
<PAGE> 12
Employment Agreement (page 12)
22. Waiver of Breach. The waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.
IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.
CKE RESTAURANTS, INC.
By:
---------------------------------------
Its:
---------------------------------------
EMPLOYEE
-------------------------------------------
John J. Dunion
<PAGE> 1
EXHIBIT 11
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
-------------------
May 17, May 18,
1999 1998
------- -------
<S> <C> <C>
BASIC EARNINGS PER SHARE
- ------------------------
Income before extraordinary item $19,130 $22,732
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes of $186 290 --
------- -------
Net income $19,420 $22,732
======= =======
Weighted average number of common shares outstanding
during the period 51,860 51,229
======= =======
Basic earnings per share before extraordinary item $ 0.36 $ 0.44
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes - basic 0.01 --
------- -------
Basic net income per share $ 0.37 $ 0.44
======= =======
DILUTED EARNINGS PER SHARE
- --------------------------
Income before extraordinary item $19,130 $22,732
Interest expense and amortization of debt issuance costs,
net of income tax effect applicable to convertible
subordinated notes 1,415 1,016
------- -------
Diluted income before extraordinary item 20,545 23,748
Extraordinary item - gain on early retirement of debt, net
of applicable income taxes of $186 290 --
------- -------
Diluted net income $20,835 $23,748
======= =======
Weighted average number of common shares outstanding
during the period 51,860 51,229
Incremental common shares attributable to:
Exercise of outstanding options 839 1,700
Issuance of convertible subordinated notes 3,642 2,652
------- -------
Total shares 56,341 55,581
======= =======
Diluted net income per share before extraordinary item $ 0.36 $ 0.43
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes - diluted 0.01 --
------- -------
Diluted earnings per share $ 0.37 $ 0.43
======= =======
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from CKE
Restaurants, Inc. Consolidated Balance Sheets and Consolidated Statements of
Income as of and for the sixteen weeks ended May 17, 1999 and is qualified in
its entirety by reference to such Form 10-Q for the quarterly period ended May
17, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> JAN-26-1999
<PERIOD-END> MAY-17-1999
<CASH> 45,529
<SECURITIES> 0
<RECEIVABLES> 54,924
<ALLOWANCES> 0
<INVENTORY> 25,068
<CURRENT-ASSETS> 131,406
<PP&E> 1,258,905
<DEPRECIATION> 277,182
<TOTAL-ASSETS> 1,537,883
<CURRENT-LIABILITIES> 197,606
<BONDS> 0
0
0
<COMMON> 519
<OTHER-SE> 603,632
<TOTAL-LIABILITY-AND-EQUITY> 1,537,883
<SALES> 546,744
<TOTAL-REVENUES> 595,723
<CGS> 440,146
<TOTAL-COSTS> 548,118
<OTHER-EXPENSES> 266
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,678
<INCOME-PRETAX> 31,661
<INCOME-TAX> 12,531
<INCOME-CONTINUING> 19,130
<DISCONTINUED> 0
<EXTRAORDINARY> 290
<CHANGES> 0
<NET-INCOME> 19,420
<EPS-BASIC> .37
<EPS-DILUTED> .37
</TABLE>
