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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
CKE RESTAURANTS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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CKE RESTAURANTS, INC.
1200 NORTH HARBOR BOULEVARD
ANAHEIM, CALIFORNIA 92801
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 18, 1997
To the Stockholders of CKE Restaurants, Inc.:
The Annual Meeting of Stockholders of CKE Restaurants, Inc. ("CKE" or the
"Company"), will be held at the Irvine Marriott Hotel, 18000 Von Karman Avenue,
Irvine, California, on Wednesday, June 18, 1997 at 9:30 a.m. for the following
purposes:
1. To elect three directors, each for a term of three years;
2. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only stockholders of record at the close of business on April 28, 1997 will
be entitled to notice of and to vote at the meeting or any postponement or
adjournment thereof.
By Order of the Board of Directors,
Robert A. Wilson,
Secretary
Anaheim, California
May 14, 1997
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, TO ASSURE THAT YOUR SHARES WILL
BE VOTED AT THE MEETING, YOU ARE REQUESTED TO SIGN THE ATTACHED PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE. NO ADDITIONAL
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING,
YOU MAY VOTE IN PERSON EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
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CKE RESTAURANTS, INC.
1200 N. HARBOR BOULEVARD
ANAHEIM, CALIFORNIA 92801
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 18, 1997
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This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of CKE Restaurants, Inc., a Delaware
corporation, ("CKE" or the "Company"), for use at the Annual Meeting of
Stockholders to be held at the Irvine Marriott Hotel, 18000 Von Karman Avenue,
Irvine, California, on Wednesday, June 18, 1997 at 9:30 a.m. (the "Meeting"),
and at any postponements or adjournments thereof.
This Proxy Statement and accompanying proxy card are first being mailed to
stockholders on or about May 14, 1997.
SOLICITATION OF PROXIES
At the Meeting, the stockholders of CKE will be asked (1) to vote upon the
election of three directors, each for a term of three years, and (2) to act upon
such other matters as may properly come before the Meeting or any postponements
or adjournments thereof. CKE's Board of Directors is asking for your proxy for
use at the Meeting. All shares of CKE Common Stock represented by any properly
executed proxy that is not revoked will be voted at the Meeting in accordance
with the instructions indicated in such proxy. If no instructions are marked on
a properly executed returned proxy, the shares represented thereby will be voted
FOR the election of the director nominees listed below. A properly executed
proxy marked "ABSTAIN", although counted for purposes of determining whether a
quorum is present at the Meeting, will not be voted. Although management does
not know of any other matter to be acted upon at the Meeting, shares represented
by valid proxies will be voted by the persons named on the Proxy Card in
accordance with their best judgment with respect to any other matters that may
properly come before the Meeting. A stockholder giving a proxy may revoke it at
any time before it is exercised by filing with CKE's Secretary either a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Meeting and voting in person. Attendance at the meeting will not,
in itself, constitute revocation of a previously granted proxy.
The cost of solicitation of proxies in the enclosed form will be paid by
CKE. In addition, following the mailing of this Proxy Statement, directors,
officers and regular employees of CKE may solicit proxies by mail, telephone,
telegraph or personal interview. Such persons will receive no additional
compensation for such services. Brokerage houses and other nominees, fiduciaries
and custodians nominally holding shares of CKE Common Stock of record will be
requested to forward proxy soliciting material to the beneficial owners of such
shares and will be reimbursed by CKE for their charges and expenses in
connection therewith. In addition, CKE may use the services of individuals or
companies it does not regularly employ in connection with the solicitation of
proxies if management determines that it is advisable to do so, at an estimated
cost of $5,000 plus out-of-pocket expenses.
RECORD DATE AND VOTING
Only holders of CKE Common Stock of record at the close of business on
April 28, 1997 (the "Record Date") are entitled to notice of, and to vote at,
the Meeting. There were 33,403,234 shares of CKE Common Stock outstanding on the
Record Date. The presence at the Meeting, in person or by proxy, of the holders
of a majority of the shares of Common Stock outstanding on the Record Date will
constitute a quorum, and abstentions and broker non-
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votes will be included in the calculation of the number of shares considered to
be present at the Meeting. On all matters to come before the Meeting, each
holder of Common Stock will be entitled to one vote per share, except that
voting for directors may be cumulative. In the election of directors, holders of
Common Stock are entitled to as many votes as shall equal the number of votes
that he or she would be entitled to cast (but for the cumulative voting
provision) multiplied by the number of directors to be elected, and may cast all
of such votes for a single director or may distribute them among the number to
be voted for, or for any two or more of them, as he or she may see fit.
Election of directors will be determined by the vote of the holders of a
plurality of the shares voting on such election. A proxy may indicate that all
or a portion of the shares represented by such proxy are not being voted with
respect to a specific proposal. This could occur, for example, when a broker is
not permitted to vote shares held in street name on a proposal in the absence of
instructions from the beneficial owner. Shares that are not voted with respect
to a specific proposal will be considered as not present and entitled to vote on
such proposal, even though such shares will be considered present for purposes
of determining a quorum and voting in favor of such proposal. Abstentions on a
specific proposal will be considered as present, but not as voting in favor of
such proposal. Neither broker non-votes nor abstentions will have any effect on
the vote required to elect directors.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of CKE is divided into three classes, as nearly
equal in number as possible. Each class serves for a period of three years, with
the terms of office of the respective classes expiring in successive years. The
foregoing notwithstanding, directors serve until their successors have been duly
elected and qualified or until they resign, become disqualified or disabled, or
are otherwise removed. The class of directors whose term expires as of the date
of the Meeting consists of William P. Foley II, Carl N. Karcher and W. Howard
Lester.
The proxies solicited hereby are intended to be voted for the nominees
whose names are listed below. Discretionary authority to cumulate votes
represented by proxies is solicited by the Board of Directors because, in the
event nominations are made in opposition to the nominees of the Board of
Directors, it is the intention of the persons named in the accompanying Proxy
Card to cumulate votes represented by proxies for individual nominees in
accordance with their best judgment in order to assure the election of as many
of the Board's nominees as possible. The three nominees are presently directors
and have indicated their willingness to continue to serve as directors, if
elected. The persons named in the proxy will have discretionary authority to
vote for others if any nominee becomes unable or unwilling to serve prior to the
Meeting. To the knowledge of CKE, all three nominees are and will be able to
serve.
INFORMATION CONCERNING NOMINEES AND OTHER DIRECTORS
NOMINEES FOR ELECTION
FIRST YEAR
BECAME OTHER CORPORATE
NAME AGE PRINCIPAL OCCUPATION DIRECTOR DIRECTORSHIPS
- ------------------- --- -------------------- -------- -------------
William P. Foley II 52 Chairman of the Board and Chief 1993 Fidelity National Financial, Inc.; Micro
Executive Officer, CKE; Chairman of General Corporation; Rally's Hamburgers,
the Board and Chief Executive Inc.; Checkers Drive-In Restaurants, Inc.;
Officer, Fidelity National Financial, DataWorks Corporation.
Inc.
Carl N. Karcher 80 Chairman Emeritus, CKE 1966 --
W. Howard Lester 61 Chairman of the Board and Chief 1996 Williams-Sonoma, Inc.; The Good Guys, Inc.;
Executive Officer, Williams-Sonoma, Harold's Stores, Inc.;
Inc. Il Fornaio America.
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WILLIAM P. FOLEY II became Chief Executive Officer of CKE in October 1994
and Chairman of the Board of Directors in March 1994. Since 1981, Mr. Foley has
been Chairman of the Board of Directors, President (until January 1995) and
Chief Executive Officer of Fidelity National Financial, Inc, a company engaged
in title insurance and related services. Mr. Foley is also a member of the
Boards of Directors of Micro General Corporation, Rally's Hamburgers, Inc.,
Checkers Drive-In Restaurants, Inc. and DataWorks Corporation.
CARL N. KARCHER, the Company's founder, purchased his first hot dog
stand on July 17, 1941 and has been developing CKE's concepts since that time.
He first became a director of CKE in 1966 and has served as Chairman Emeritus
since January 1994. He was Chairman of the Board of CKE until October 1993, and
served as Chief Executive Officer until December 1992. Prior to 1980, he was
President of CKE. Carl N. Karcher is Carl L. Karcher's father.
W. HOWARD LESTER was appointed as a director of CKE in January 1996. Mr.
Lester became Chief Executive Officer of San Francisco based Williams-Sonoma,
Inc., a retailer of kitchen and cooking supplies and equipment, in 1978 and
Chairman of its Board in 1986. Mr. Lester also serves as a director of The Good
Guys, Inc., Harold's Stores, Inc. and Il Fornaio America.
THE BOARD OF DIRECTORS OF CKE RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL
OF THE ABOVE NOMINEES.
DIRECTORS CONTINUING TO SERVE UNTIL 1998
FIRST YEAR
BECAME OTHER CORPORATE
NAME AGE PRINCIPAL OCCUPATION DIRECTOR DIRECTORSHIPS
- ---------------- --- -------------------- -------- -------------
Carl L. Karcher 48 President, CLK, Inc. 1992 --
Frank P. Willey 43 President, Fidelity National 1994 Fidelity National Financial, Inc.; Southern
Financial, Inc. Pacific Funding Corporation; Ugly Duckling
Holdings, Inc.
Byron Allumbaugh 65 Business Consultant 1996 H. F. Ahmanson and Company; Automobile Club of
Southern California; El Paso Energy Company;
Ultramar Diamond Shamrock Incorporated.
CARL L. KARCHER is the President of CLK, Inc., a franchisee of CKE. Mr.
Karcher has been a franchisee of CKE since May 1985. For more than 17 years
prior to that time, Mr. Karcher was employed by CKE in several capacities,
including Vice President, Manufacturing and Distribution. Mr. Karcher first
became a director in May 1992. Carl L. Karcher is Carl N. Karcher's son.
FRANK P. WILLEY became President of Fidelity National Financial, Inc. in
January 1995 and has been a director and Executive Vice President of Fidelity
National Financial, Inc. since February 1984, and was General Counsel of
Fidelity National Financial, Inc. from 1984 to January 1995. Mr. Willey also
serves on the Boards of Directors of Southern Pacific Funding Corporation and
Ugly Duckling Holdings, Inc.
BYRON ALLUMBAUGH retired as Chairman of the Board of Ralphs Grocery Company
on January 31, 1997, where he held numerous management positions from 1958,
serving as Chairman of the Board and Chief Executive Officer from 1976 to 1995,
and Chairman of the Board from 1995 until his retirement. Currently a
self-employed business consultant, Mr. Allumbaugh is also a member of the Boards
of Directors of H. F. Ahmanson and Company, Automobile Club of Southern
California, El Paso Energy Company, and Ultramar Diamond Shamrock Incorporated.
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DIRECTORS CONTINUING TO SERVE UNTIL 1999
FIRST YEAR
BECAME OTHER CORPORATE
NAME AGE PRINCIPAL OCCUPATION DIRECTOR DIRECTORSHIPS
- --------------------- --- -------------------- ----------- ---------------------
Peter Churm 71 Chairman Emeritus, Furon Company 1979 Furon Company;
Diedrichs Coffee, Inc.
Daniel D. (Ron) Lane 62 Chairman and Chief Executive 1993 Fidelity National Financial, Inc.;
Officer, Lane/Kuhn Pacific, Inc. Resort Income Investors, Inc.
PETER CHURM was Chairman of the Board of Furon Company, a publicly held
diversified manufacturing company, from May 1980 through February 1992 and was
President of that company for more than 16 years. Since February 1992, he has
been Chairman Emeritus and a member of the Board of Directors of Furon Company.
Mr. Churm is also a member of the Board of Directors of Diedrichs Coffee, Inc.
DANIEL D. (RON) LANE became Vice Chairman of the Board of CKE in October
1994. Since February 1983, he has been a principal, Chairman and Chief Executive
Officer of Lane/Kuhn Pacific, Inc., a real estate development company. Mr. Lane
is a director of Fidelity National Financial, Inc., and also serves as a
director of Resort Income Investors, Inc.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Executive Committee of the Board of Directors, comprised of Messrs.
Foley and Lane, is empowered by the Board of Directors to take all actions that
may otherwise be taken by the Board of Directors, to the extent permitted by
law.
In addition to the Executive Committee, the Board of Directors has two
standing committees: the Audit Committee and the Compensation Committee. The
Board does not have a nominating committee or other committee performing similar
functions. The Audit Committee, whose current members are Messrs. Churm and
Willey (Chairman), monitors CKE's basic accounting policies and their related
system of internal controls, reviews CKE's audit and management reports and
makes recommendations regarding the appointment of independent auditors. The
Compensation Committee, whose current members are Messrs. Churm (Chairman) and
Willey, considers the hiring and election of corporate officers, salary and
incentive compensation policies for officers and directors, and the granting of
stock options to employees.
During fiscal 1997, the Board of Directors held eight meetings, the Audit
Committee held one meeting, the Compensation Committee held one meeting and the
Executive Committee held no meetings. During fiscal 1997, no director attended
fewer than 75% of the aggregate meetings of the Board of Directors and the
committee or committees on which he served, except W. Howard Lester, who
attended two Board meetings.
STOCKHOLDER NOMINATIONS
The Bylaws of CKE provide that any stockholder entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if timely written notice of such stockholder's intent to make
such nomination is given, either by personal delivery or United States mail,
postage prepaid, to the Secretary, CKE Restaurants, Inc., P.O. Box 4349,
Anaheim, California 92803-4349. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the address provided not later than 90
days in advance of such meeting, or, if later, the seventh day following the
first public announcement of the date of such meeting. A stockholder's notice to
the Secretary must set forth: (i) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated,
(ii) a representation that the stockholder is a holder of record of CKE's Common
Stock entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting and nominate the person or persons specified in the notice,
(iii) a description of all arrangements or understandings
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between the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the stockholder, (iv) such other information relating to the person
that is required to be disclosed in solicitations for proxies for election of
directors pursuant to the Securities Exchange Act of 1934, as amended, and (v)
the consent of each nominee to serve as a director of CKE if so elected. CKE may
require the stockholders making such nomination to furnish such other
information as may be reasonably requested by CKE.
COMPENSATION OF DIRECTORS
For their services as directors in fiscal 1997, each non-employee director
received a base fee of $18,000 for attendance at the quarterly Board meetings.
For attendance at each special Board meeting (meetings other than quarterly
Board meetings), each non-employee director received a fee of $1,000. For
attendance at Board Committee meetings which are held on a day other than the
date of a scheduled Board meeting, each non-employee director received a fee of
$1,000. For participation in telephonic Board meetings, each non-employee
director received a fee of $500. Each non-employee director is expected to
receive a fee of $18,000 in fiscal 1998 and $1,000 ($500 for telephonic
meetings) for each Board meeting or committee meeting other than regular
meetings attended in fiscal 1998.
OTHER BUSINESS
Presented by Management. Management does not know of any matter to be acted
upon at the Meeting other than the matters described above, but if any other
matter properly comes before the Meeting, the persons named on the enclosed
Proxy Card will vote thereon in accordance with their best judgment.
Presented by Stockholders. Pursuant to CKE's Bylaws, only such business
shall be conducted at an annual meeting of stockholders as is properly brought
before the meeting. For business to be properly brought before an annual meeting
by a stockholder, in addition to any other applicable requirements, timely
notice of the matter must be first given to the Secretary of CKE. To be timely,
written notice must be received by the Secretary not later than 90 days in
advance of such meeting or, if later, the seventh day following the first public
announcement of the date of such meeting. Any notice to the Secretary must
include as to each matter the stockholder proposes to bring before the meeting:
(a) a brief description of the business desired to be brought before the meeting
and the reason for conducting such business at the annual meeting; (b) the name
and record address of the stockholder proposing such business; (c) the class and
number of shares of CKE which are beneficially owned by the stockholder; and (d)
any material interest of the stockholder in such business. In addition, the
stockholders making such proposal shall promptly provide any other information
reasonably requested by CKE.
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OWNERSHIP OF THE COMPANY'S SECURITIES
The following table sets forth certain information regarding beneficial
ownership of CKE's Common Stock as of the Record Date, by (i) each person who is
known by CKE to beneficially own more than five percent of the outstanding CKE
Common Stock, (ii) each director of CKE, (iii) each Named Executive Officer of
CKE and (iv) all directors and executive officers of CKE as a group. Except as
otherwise indicated, beneficial ownership includes both voting and investment
power.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (#) CLASS (%)
- ------------------------------------ ----------------- ----------
Cannae Limited Partnership.......... 5,283,378(1) 15.8%
3811 W. Charleston, Suite 210
Las Vegas, Nevada 89102
Carl N. Karcher..................... 2,147,627(2) 6.4%
1200 North Harbor Boulevard
Anaheim, California 92801
William P. Foley II................. 588,590(3) 1.8%
Daniel D. (Ron) Lane................ 148,750(4) *
Frank P. Willey..................... 16,250(5) *
Peter Churm......................... 36,986(6) *
Carl L. Karcher..................... 123,242(7) *
W. Howard Lester.................... 10,000(8) *
Byron Allumbaugh.................... 2,000 *
C. Thomas Thompson.................. 86,561(9) *
Rory J. Murphy...................... 163,859(9) *
Robert E. Wheaton................... 12,500(9) *
Robert W. Wisely.................... 24,363(9) *
All executive officers and directors
as a group (15 persons)........... 3,804,559(10) 11.1%
- ----------
* Less than one percent.
(1) Based on a Schedule 13D, as amended, filed by Cannae Limited Partnership
(the "Partnership"), Folco Development Corporation ("Folco"), Daniel V.,
Inc. and the Daniel P. Lane Revocable Trust U/D/T July 10, 1992
(collectively, the "Daniel Entities"), Frank P. Willey and other persons
and entities who are Class B Limited Partners of the Partnership. The
aggregate number of shares set forth above includes: (a) 4,812,753 shares
held directly by the Partnership; (b) 395,625 shares held directly by
Folco; and (c) 75,000 shares held directly in the aggregate by the Daniel
Entities. The Schedule 13D states that each of the foregoing persons and
entities has sole voting and dispositive power with respect to the shares
directly held by him or it. The Schedule 13D states that the Class A
Limited Partner of the Partnership is Carl N. Karcher, as sole trustee of
the Carl N. and Margaret M. Karcher Trust (the "Trust") (see the table
above and related footnotes). In its Schedule 13D, the Trust and Mr. and
Mrs. Karcher disclaim beneficial ownership of shares of Common Stock
beneficially owned by the Partnership. The General Partner of the
Partnership is Bognor Regis, Inc., a Nevada corporation. According to the
Schedule 13D, William P. Foley II is a director of Bognor Regis, Inc. and
owns and controls Folco.
(2) Includes (a) 1,963,386 shares beneficially held by the Trust; (b) 94 shares
held by Mrs. Karcher; and (c) 182,500 shares subject to presently
exercisable options or options that become exercisable on or prior to June
30, 1997. Excludes 26,100 shares held by the Carl N. and Margaret M.
Karcher Foundation, the beneficial ownership of which the Trust and Mr. and
Mrs. Karcher disclaim. The Trust and Mr. and Mrs. Karcher disclaim any
beneficial ownership of the 4,812,753 shares held directly by the
Partnership.
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(3) Includes 395,625 shares held directly by Folco and 191,250 shares subject
to presently exercisable options or options that become exercisable on or
prior to June 30, 1997. Excludes (a) an aggregate of 4,887,753 of the
shares described in footnote (1) above which are held directly by the
Partnership and the Daniel Entities, and (b) 745,500 shares held by
Fidelity National Financial, Inc. ("Fidelity"), of which Mr. Foley is a
director and an executive officer.
(4) Includes 75,000 shares held directly by the Daniel Entities and 73,750
shares subject to presently exercisable options or options that become
exercisable on or prior to June 30, 1997. Excludes (a) an aggregate of
5,208,378 of the shares described in footnote (1) above which are held
directly by the Partnership and Folco, and (b) 745,500 shares held by
Fidelity, of which Mr. Lane is a director.
(5) Includes 16,250 shares subject to presently exercisable options or options
that become exercisable on or prior to June 30, 1997. Excludes (a) an
aggregate of 5,283,378 of the shares described in footnote (1) above which
are held directly by the Partnership, Folco and the Daniel Entities, and
(b) 745,500 shares held by Fidelity, of which Mr. Willey is a director and
an executive officer.
(6) Includes 19,250 shares subject to presently exercisable options or options
that become exercisable on or prior to June 30, 1997.
(7) Includes (a) 98,049 shares held by Carl L. Karcher and Peggy L. Karcher, as
trustees under a trust for the benefit of Carl L. and Peggy L. Karcher, (b)
19,250 shares subject to presently exercisable options or options that
become exercisable on or prior to June 30, 1997, and (c) 5,673 shares owned
by Carl L. Karcher's minor children.
(8) Includes 10,000 shares subject to presently exercisable options or options
that become exercisable on or prior to June 30, 1997.
(9) Includes for Messrs. Thompson, Murphy, Wheaton and Wisely, 75,000 shares,
159,931 shares, 12,500 shares, and 17,500 shares, respectively, subject to
presently exercisable options or options that become exercisable on or
prior to June 30, 1997. Also includes for Mr. Thompson 150 shares owned by
his minor children, for Mr. Murphy 2,256 shares held for his benefit under
CKE's voluntary contributory profit sharing and savings investment plan and
for Mr. Wisely 3,750 shares owned by R.W.W., Inc., of which Mr. Wisely is
an officer and director.
(10) Includes shares described in footnotes (2) through (9) above and 204,382
shares subject to presently exercisable options or options that become
exercisable on or prior to June 30, 1997 which are held by executive
officers not listed in the above table. Excludes 4,812,753 shares described
in footnote (1) above which are held directly by the Partnership, and
745,500 shares which are held directly by Fidelity.
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EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR THE FISCAL YEAR
ENDED JANUARY 27, 1997
The Committee, comprised of two non-employee directors, is responsible for
administering the executive compensation policies, administering the various
management incentive programs (including option plans), and making
recommendations to the Board of Directors with respect to these policies and
programs. In addition, the Committee makes annual recommendations to the Board
of Directors concerning the compensation paid to the Chief Executive Officer and
to each of the other executive officers of CKE (each, an "Executive Officer"),
including the Named Executive Officers. Set forth below is a report submitted by
the Committee addressing compensation policies for fiscal 1997 as they affected
(i) William P. Foley II, the Chief Executive Officer of CKE, and (ii) the other
Executive Officers.
Compensation Policies Towards Executive Officers. The Committee believes
that the most effective executive compensation program is one that provides
incentives to achieve both current and long-term strategic management goals,
with the ultimate objective of enhancing stockholder value. In this regard, the
Committee believes executive compensation should be comprised of cash as well as
equity-based programs. Base salaries are generally set at market levels in order
to attract and retain qualified and experienced executives. With respect to
equity-based compensation, the Committee believes that an integral part of CKE's
compensation program is the ownership and retention of CKE's Common Stock by its
Executive Officers. By providing Executive Officers with a meaningful stake in
CKE, the value of which is dependent on CKE's long-term success, a commonality
of interests between CKE's Executive Officers and its stockholders is fostered.
Relationship of Performance to Compensation. Compensation that may be
earned by the Executive Officers in any fiscal year consists primarily of base
salary, cash bonus and stock options. The significant factors that were
considered in establishing the components of each Executive Officer's
compensation package for fiscal 1997 are summarized below. The Committee, in its
discretion, may apply entirely different factors, particularly different
measures of financial performance, in setting executive compensation for future
fiscal years, but all compensation decisions will be designed to further the
general compensation policies indicated above.
- Base Salary. The base salary for each Executive Officer is set on the
basis of personal performance, the salary levels in effect for comparable
positions with CKE's principal competitors (including, but not limited to,
CKE's self-determined peer group set forth in the "Stockholder Performance
Graph"), and CKE's financial performance relative to such competitors.
Factors relating to individual performance that are assessed in setting
base compensation are based on the particular duties and areas of
responsibility of the individual Executive Officer. Factors relating to
CKE's financial performance that may be related to increasing or decreasing
base salary include revenues and earnings. The establishment of base
compensation involves a subjective assessment and weighing of the foregoing
criteria and is not based on any specific formula. After reviewing the
major events and changes that occurred in fiscal 1996, the Committee
approved increases in some base salaries to remain competitive with market
base salaries and to reflect new responsibilities for some Executive
Officers.
- Cash Bonus. Annual bonuses are earned by each Executive Officer on the
basis of CKE's achievement of pre-tax income targets established at the
start of the fiscal year and on the basis of the particular Executive
Officer's duties and areas of responsibility. Bonus amounts are established
based on various levels of performance against such targets. The Committee
assesses CKE and individual performance against the established targets and
provides for bonuses based on the targeted performance levels actually
achieved. Because CKE achieved the targeted levels of pre-tax income for
fiscal 1997, the Committee approved bonuses for CKE's Executive Officers in
the total amount of $1,233,436, of which $523,283 was paid subsequent to
the fiscal 1997 year end.
- Stock Options. Stock option grants motivate Executive Officers to manage
the business to improve long-term CKE performance and align the interests
of Executive Officers with stockholder value. Customarily, option grants
are made with exercise prices equal to the fair market value of the shares
on the grant date and
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will be of no value unless the market price of CKE's shares of Common Stock
appreciates, thereby aligning a substantial part of the Executive Officer's
compensation package with the return realized by the stockholders. Options
generally vest in equal installments over a period of time, contingent upon
the Executive Officer's continued employment with CKE. Accordingly, an
option will provide a return to the Executive Officer only if the Executive
Officer remains employed by CKE and the market price of the underlying
shares appreciates over the option term. The size of an option grant is
designed to create a meaningful opportunity for stock ownership and is
based upon the individual's current position with CKE, internal
comparability with option grants made to other CKE executives and the
individual's potential for future responsibility and promotion over the
option term. The Committee has established an award program which takes
into account the level of responsibility in the organization and total
compensation compared to comparable companies in making option grants to
the Executive Officers, in an attempt to target a fixed number of unvested
option shares based upon the individual's position with CKE and the
Executive Officer's existing holdings of unvested options. As such, the
award of stock options requires subjective judgment as to the amount of the
option. However, the Committee does not adhere strictly to these guidelines
and will occasionally vary the size of the option grant, if any, made to
each Executive Officer as circumstances warrant.
Chief Executive Officer Compensation. William P. Foley II became CKE's
Chief Executive Officer in October 1994. Mr. Foley did not receive any
compensation during fiscal 1995 for such position. In March 1995, Mr. Foley's
base compensation was established at $200,000 for fiscal 1996, based on
information provided by Kieckhafer, Kraus & Company ("Kieckhafer"). While
certain of the companies taken into account by Kieckhafer were the same as those
considered in setting Mr. Foley's compensation level for fiscal 1996, the
Kieckhafer information also included a number of other companies. Mr. Foley's
base compensation remained unchanged for fiscal 1997. Additionally, Mr. Foley
received a bonus pursuant to his fiscal 1997 bonus program. Mr. Foley's
compensation under that bonus program was substantially related to the Company's
performance because it provided for a bonus, determined pursuant to a specific
formula based on the achievement of certain financial goals of the Company.
Corporate Deduction for Compensation. Section 162(m) of the Internal
Revenue Code generally limits to $1.0 million the corporate deduction for
compensation paid to certain executive officers, unless certain requirements are
met. At this time, CKE's deduction for officer compensation is not limited by
the provisions of Section 162(m). The Committee intends to monitor regulations
issued pursuant to Section 162(m) and to take such actions with respect to the
executive compensation program as are reasonably necessary to preserve the
corporate tax deduction for executive compensation paid.
Peter Churm (Chairman)
Frank P. Willey
The report of the Compensation Committee of the Board of Directors shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that CKE
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
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STOCKHOLDER PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN AMONG
CKE RESTAURANTS, INC., RUSSELL 2000 INDEX AND
SELECTED RESTAURANT PEER GROUP INDEX(1)
-------------------------------------------------------------------------------------------------
1/27/92 1/25/93 1/31/94 1/30/95 1/29/96 1/27/97
-------------------------------------------------------------------------------------------------
CKE Restaurants, Inc. $100 $104 $167 $ 85 $207 $416
Russell 2000 $100 $118 $143 $141 $186 $221
Restaurant Peer Group $100 $107 $109 $ 88 $ 70 $ 75
-------------------------------------------------------------------------------------------------
(1) Restaurant Peer Group Index is comprised of the following companies: Bob
Evans Farms, Inc.; Foodmaker Inc.; Ground Round Restaurants, Inc.; Hanover
Direct, Inc.*; IHOP Corporation; Luby's Cafeterias, Inc.; Morrison Inc.;
Piccadilly Cafeterias, Inc.; Ryan's Family Steak Houses, Inc.; Shoney's
Inc.; Sizzler International, Inc.; and VICORP Restaurants, Inc.
* On 4/15/93, Horn & Hardart Co. merged with and into Hanover Direct, Inc.
The Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that CKE specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
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SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth, for the years indicated, the compensation
awarded to, earned by or paid to the Chief Executive Officer of CKE and each of
the four other most highly compensated executive officers (collectively with the
Chief Executive Officer, the "Named Executive Officers") of CKE who were so
employed by CKE as of January 27, 1997.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------ --------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND TITLE YEAR ($) ($) ($)(1) (#)(2) ($)(3)
-------------- ------- ------------ ------------ ------------- -------------- ------------
William P. Foley II........... 1997 200,000 150,000 -- 187,500 --
Chairman, Chief 1996 194,904 -- -- 337,500 --
Executive Officer 1995 -- -- -- 41,250 --
C. Thomas Thompson............ 1997 280,077 550,000 6,331 187,500 4,012
President and Chief 1996 250,000 152,000 5,055 187,500 --
Operating Officer 1995 46,535 -- -- -- --
Rory J. Murphy................ 1997 200,085 229,141 16,154 60,000 1,087
Executive Vice President, 1996 187,200 77,380 14,635 67,500 --
Restaurant Operations 1995 182,192 -- 12,284 22,500 2,849
Robert E. Wheaton............. 1997 200,000 70,000 9,344 30,000 --
Executive Vice President 1996 3,365 -- -- 37,500 --
1995 -- -- -- -- --
Robert W. Wisely.............. 1997 170,465 173,520 8,604 30,000 --
Senior Vice President, 1996 155,923 41,502 3,266 33,750 --
Marketing 1995 -- -- -- -- --
- ----------
(1) "Other Annual Compensation" for fiscal 1997 includes the following amounts
for Messrs. Thompson, Murphy, Wheaton and Wisely: (a) auto related payments
of $1,252, $9,960, $9,344, and $8,604 respectively, (b) reimbursements for
medical and dental costs of $3,344, $5,000, $0 and $0, respectively, and
(c) payments of life insurance premiums of $1,735, $1,194, $0, and $0,
respectively.
(2) The number of securities underlying options has been adjusted to reflect
CKE's three-for-two stock split on January 22, 1997.
(3) "All Other Compensation" includes matching and voluntary contributions by
CKE to CKE's employee stock purchase plan, voluntary contributory profit
sharing and 401(k) savings plan for Messrs. Thompson and Murphy. For fiscal
1997, the amounts matched by CKE in the employee stock purchase plan were
$4,012 and $1,087, respectively. As of January 1995, CKE no longer matches
contributions to the CKE 401(k) savings plan. In fiscal 1997, there were no
voluntary contributions by CKE to CKE's voluntary contributory profit
sharing plan or 401(k) savings plan.
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STOCK OPTIONS
The following table sets forth certain information with respect to the
stock options granted during fiscal 1997 to the Named Executive Officers and the
potential realizable value of such stock options.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OR OPTION TERM(3)
OPTIONS FISCAL BASE PRICE EXPIRATION -----------------------------
NAME GRANTED (#) YEAR ($/SHARE)(1) DATE(2) 5%($) 10%($)
---- ------------ ------- ------------ -------------- ------------ -----------
William P. Foley II......... 187,500 16.6% $ 19.67 Nov. 13, 2006 $2,323,164 $5,863,224
C. Thomas Thompson.......... 187,500 16.6% $ 19.67 Nov. 13, 2006 $2,323,164 $5,863,224
Rory J. Murphy.............. 60,000 5.3% $ 19.67 Nov. 13, 2006 $ 743,413 $1,876,232
Robert E. Wheaton........... 30,000 2.7% $ 19.67 Nov. 13, 2006 $ 371,706 $ 938,116
Robert W. Wisely............ 30,000 2.7% $ 19.67 Nov. 13, 2006 $ 371,706 $ 938,116
- ----------
(1) The fair market value of CKE's Common Stock on the date of grant.
(2) All the options vest 33 1/3% on the first anniversary of the date of grant,
33 1/3% on the second anniversary of the date of grant and 33 1/3% on the
third anniversary of the date of grant.
(3) Calculated over a ten-year period, representing the terms of the options.
These are assumed rates of appreciation, and are not intended to forecast
future appreciation of the CKE Common Stock.
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OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to stock
options exercised during fiscal 1997 and year-end stock option values for each
of the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
(#) ($)
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------------- -------------- ------------- ----------------
William P. Foley II.... -- -- 140,000 / 426,250 $1,970,663 / $3,682,200
C. Thomas Thompson -- -- 62,500 / 312,500 $ 811,475 / $2,013,513
Rory J. Murphy......... 22,407 $337,782 142,431 / 112,500 $2,238,097 / $ 872,498
Robert E. Wheaton...... -- -- 12,500 / 55,000 $ 138,538 / $ 339,565
Robert W. Wisely....... -- -- 11,250 / 52,500 $ 164,791 / $ 392,073
- ------------
(1) In accordance with the rules of the Securities and Exchange Commission,
values are calculated by subtracting the exercise price from the fair
market value of the underlying Common Stock. For purposes of this table,
the fair market value is deemed to be $21.75, the closing price of the
Common Stock of CKE reported by the New York Stock Exchange on January 27,
1997.
EMPLOYMENT AGREEMENTS
In November 1994, CKE entered into a two-year employment agreement with C.
Thomas Thompson which provides for an annual base salary and cash bonuses during
his employment term. In March 1996, Mr. Thompson's employment agreement was
amended to extend the employment term to March 31, 1999. The amendment provides
for an increase in annual base salary to $285,000, commencing April 1, 1996, and
increases in base salary to $325,000 for the fiscal year ending January 26, 1998
if Mr. Thompson earns a bonus of $150,000 or greater for the fiscal year ending
January 27, 1997, and $350,000 for the fiscal year ending January 25, 1999 if
Mr. Thompson earns a bonus of $150,000 or greater for the fiscal year ending
January 26, 1998. In the event CKE terminates Mr. Thompson's employment without
cause, CKE will be obligated to pay a lump sum equal to the lesser of six
month's compensation or the balance of compensation due for the remainder of the
employment agreement, plus any accrued and unpaid compensation. In addition, the
employment agreement provides for certain payments in the event CKE is acquired
by or merged with another entity, or another entity acquires all or
substantially all of CKE's assets, resulting in such other entity gaining
direction or control of CKE and Mr. Thompson being terminated for reasons other
than cause. In such event, Mr. Thompson's agreement requires CKE to pay, in a
lump sum, Mr. Thompson's base salary for the balance of the employment term. The
amendment also provides for a one time cash bonus based on performance criteria
specified by CKE's Compensation Committee in addition to the current bonus for
the second year provided for under the agreement, and an annual bonus during the
extended term based upon performance criteria specified by CKE's Compensation
Committee.
Effective in January 1996, CKE entered into a two-year employment agreement
with Robert E. Wheaton. Mr. Wheaton's annual base salary payable under this
agreement is $200,000. Mr. Wheaton's employment agreement provides for an annual
bonus based upon performance criteria specified by the Compensation Committee.
In the event of a change of control or termination of employment without cause,
vesting of such options shall accelerate to the date
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of termination and Mr. Wheaton shall have ninety (90) days after such
termination within which to exercise the options. In the event CKE terminates
Mr. Wheaton without cause, CKE will be obligated to pay a lump sum equal to the
balance of compensation due for the remainder of the employment agreement, plus
any accrued and unpaid compensation. In addition, the employment agreement
provides for certain payments in the event CKE is acquired by or merged with
another entity, or another entity acquires all or substantially all of CKE's
assets, resulting in such other entity gaining direction or control of CKE and
Mr. Wheaton is terminated for other than cause. In such event, Mr. Wheaton's
agreement requires CKE to pay, in a lump sum, Mr. Wheaton's base salary for the
balance of the employment term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the members of the Compensation Committee of CKE's
Board of Directors were Messrs. Churm, Willey and Carl L. Karcher. Neither of
Messrs. Churm or Willey was an officer, former officer or employee of CKE during
fiscal 1997. Mr. Karcher was employed by CKE in various capacities from February
1968 to May 1985, including Vice President Manufacturing and Distribution. Mr.
Karcher resigned as a member of the Compensation Committee in February 1997.
During fiscal 1997, Mr. Foley served as Chairman of the Board and Chief
Executive Officer of Fidelity National Financial, Inc., Mr. Lane served as a
director of Fidelity National Financial, Inc., and Mr. Willey served as
President and a director of Fidelity National Financial, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires CKE's
executive officers and directors, and persons who own more than 10% of a
registered class of CKE's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors and greater than 10% stockholders are required by
SEC regulations to furnish CKE with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, CKE believes that, during fiscal 1997, all filing
requirements applicable to its executive officers, directors and greater than
10% stockholders were satisfied, except that the Form 4 required to be filed in
February 1997 by Byron Allumbaugh, reflecting the direct ownership of shares of
CKE's Common Stock purchased by him, was approximately two weeks late.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
CKE leases the land and buildings, which include the headquarters of CKE,
its distribution center and one restaurant location in Carl Karcher Plaza,
located at 1200 North Harbor Boulevard, Anaheim, California from Carl N.
Karcher, as sole trustee of the Carl N. and Margaret M. Karcher Trust (the
"Trust"). The original term of the lease expires in April 2003, and CKE has the
option to renew the leases for two additional five-year terms. The current rent
under these leases is $89,276 per month, subject to adjustment every five years.
CKE also leases two adjacent parcels of land in Carl Karcher Plaza from the
Trust. One parcel is being utilized by CKE for its training facilities and
parking. The rent is $5,443 per month, subject to adjustment every five years.
The other parcel is being utilized, in part, for the distribution center parking
and storage. The unused portion of this parcel has been subleased to various
small commercial tenants. The rent for this second parcel is $6,250 per month,
also subject to adjustment every five years. The lease term for both parcels
expires in April 2003, and CKE has the option to renew each of these leases for
two additional five-year terms. The aggregate rents paid by CKE to the Trust for
the corporate offices and adjacent facilities during fiscal 1997 were
$1,211,625.
CKE presently has two leases with the Trust with respect to restaurant
properties. The terms of these leases range from 20 to 35 years. The minimum
monthly rental is the greater of $6,799 or 5.5% of annual gross sales in one of
the leases, and a minimum monthly rental for improvements of $2,871 or 4% of
annual gross sales and a fixed monthly rental of $5,699 for the land, in the
other lease. The leases expire in May 1999 and May 2010, respectively. CKE
purchased a third restaurant property, previously leased from the Trust, in
September 1996 for a purchase price
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of $1,059,434. The aggregate rents paid by CKE to the Trust for these restaurant
properties during fiscal 1997 were $252,014.
In January 1994, CKE entered into an Employment Agreement with Carl N.
Karcher which expires in January 1999. The contract provides that Mr. Karcher
will be employed as the Chairman Emeritus of the Board as a non-executive
officer reporting to the Chief Executive Officer. It provides for a base salary
of $400,000 with bonuses to be paid in the sole and absolute discretion of the
Chairman of the Board and the Compensation Committee. The agreement entitles Mr.
Karcher to participate in CKE's stock option program and provided for an initial
grant of an option to purchase 150,000 shares with an exercise price equal to
the then fair market value of CKE's Common Stock on the date of grant, which was
$8.92. The agreement provides that if Mr. Karcher is terminated by CKE without
cause or, if after a change in control of CKE following a merger, sale of assets
or acquisition, Mr. Karcher is terminated or exercises his right to terminate
employment following a change in control, Mr. Karcher becomes entitled to
payments due under the agreement as they become due for the remainder of the
term without the obligation of further services. The agreement also provides for
a retirement benefit for Mr. Karcher in the amount of $200,000 per year for life
after the end of the employment term.
During fiscal 1995, CKE made two advances to Carl N. Karcher aggregating
$714,756. CKE accepted a promissory note in payment of the first, totaling
$250,000, which was paid in full in fiscal 1997. The second advance, which
totaled $464,756, is noninterest-bearing, is currently being repaid through
biweekly payroll deductions, and will be paid in full in December 1998. During
fiscal 1997, the largest amount outstanding under these advances was $594,692,
of which $222,354 remained outstanding at the end of fiscal 1997.
CKE leases a restaurant property from Loren C. Pannier, an executive
officer of CKE, and his wife. This lease expires in July 2004 and provides for a
minimum monthly rental equal to the greater of $4,910 or 5% of annual gross
sales of the Carl's Jr. restaurant at that location. CKE leases two additional
restaurant properties in which Mr. Pannier has a 56% and a 33% undivided
interest. These leases expire between January 2001 and April 2002 and provide
for minimum monthly rentals equal to the greater of $3,290 or 5.5% of annual
gross sales of the Carl's Jr. restaurant at one location and the greater of
$3,440 or 6% of annual gross sales of the Carl's Jr. restaurant at the other
location. The aggregate rents paid by CKE to Mr. Pannier under all three leases
during fiscal 1997 were $134,544.
CLK, Inc. ("CLK") is a franchisee of CKE and currently operates 23 Carl's
Jr. restaurants. Carl L. Karcher is a son of Carl N. Karcher, a director of CKE,
and an affiliate of CLK. In connection with the operation of its 23 franchised
restaurants, CLK regularly purchases food and other products from CKE on the
same terms and conditions as other franchisees. During fiscal 1997, these
purchases totaled approximately $6,148,941. During fiscal 1997, CLK paid royalty
fees of $746,554 and advertising and promotional fees of $752,790 for all 23
restaurants combined. CLK is also a lessee or sublessee of CKE with respect to
15 restaurant locations. Rental payments equal the greater of a percentage of
the annual gross sales, ranging from 5% to 10%, of the restaurant or minimum
monthly rentals ranging from $4,157 to $8,750. The leases expire between
November 1999 and June 2011. The rents paid under these leases during fiscal
1997 aggregated $1,168,939. CLK was also indebted to CKE in fiscal 1997 under an
interest bearing promissory note. The largest aggregate amount outstanding under
this note during fiscal 1997 was $143,061, none of which remained payable to CKE
at the end of fiscal 1997.
JCK, Inc. ("JCK") is a franchisee of CKE and currently operates seven
Carl's Jr. restaurants. Joseph C. Karcher is a son of Carl N. Karcher and an
affiliate of JCK. In connection with the operation of its seven franchised
restaurants, JCK regularly purchases food and other products from CKE on the
same terms and conditions as other franchisees. During fiscal 1997, these
purchases totaled approximately $1,372,144. During fiscal 1997, JCK was not
obligated to pay royalty fees, but paid advertising and promotional fees of
$192,450. In December 1994, CKE loaned the amount of $324,168 to JCK pursuant to
the terms of a loan agreement. During fiscal 1997 the largest aggregate amount
outstanding under the loan agreement was $305,118, none of which remained
outstanding at the end of fiscal 1997.
Wiles Restaurants, Inc. ("Wiles") is a franchisee of CKE and currently
operates eight Carl's Jr. restaurants. Anne M. Wiles is a daughter of Carl N.
Karcher and an affiliate of Wiles. In connection with the operation of its eight
franchised restaurants, Wiles regularly purchases food and other products from
CKE on the same terms and conditions
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as other franchisees. During fiscal 1997, these purchases totaled approximately
$2,353,752. During fiscal 1997, Wiles paid royalty fees of $293,969 and
advertising and promotional fees of $242,580 for all eight restaurants combined.
Wiles is also a lessee of CKE with respect to one restaurant location. Rental
payments equal the greater of 8% of the annual gross sales of the restaurant or
a minimum monthly rental equal to $10,270. The rents paid under this lease
during fiscal 1997 aggregated $109,726.
Bernard Karcher Investments, Inc. ("BKI") is a franchisee of CKE and
currently operates 12 Carl's Jr. restaurants. Bernard W. Karcher is a brother of
Carl N. Karcher and an affiliate of BKI. In connection with the operation of its
12 franchised restaurants, BKI regularly purchases food and other products from
CKE on the same terms and conditions as other franchisees. During fiscal 1997,
these purchases totaled approximately $3,940,242. During fiscal 1997, BKI paid
royalty fees of $489,019 and advertising and promotional fees of $453,173 for
all 12 restaurants combined. BKI is also a lessee of CKE with respect to two
restaurant locations. Rental payments equal a percentage of annual gross sales,
ranging from 7.5% to 10%, for one of the restaurants and a fixed monthly rental
of $9,600 for the other. The leases expire in January 2006 and September 2012,
respectively. The rents paid under these two leases during fiscal 1997
aggregated $269,766.
R.W.W., Inc. ("RWW") is a franchisee of CKE and currently operates seven
Carl's Jr. restaurants. Robert W. Wisely, an officer of CKE, is an affiliate of
RWW. In connection with the operation of its seven restaurants, RWW regularly
purchases food and other products from CKE on the same terms and conditions as
other franchisees. During fiscal 1997, these purchases totaled approximately
$1,904,249. During fiscal 1997, RWW paid royalty fees of $149,179 and
advertising and promotional fees of $277,665. RWW is also a sublessee of CKE
with respect to six restaurant locations. Rental payments equal a percentage of
the annual gross sales of the restaurant ranging from 4% to 12.5%, or minimum
monthly rentals ranging from $9,166 to $9,473. The leases expire between August
1999 and July 2006. Total rents paid under these six leases during fiscal 1997
aggregated $461,797.
TWM Industries ("TWM") is a franchisee of CKE and currently operates 15
Carl's Jr. restaurants. C. Thomas Thompson, an executive officer of CKE, is an
affiliate of TWM. In connection with the operation of its 15 franchised
restaurants, TWM regularly purchases food and other products from CKE on the
same terms and conditions as other franchisees. During fiscal 1997, these
purchases totaled approximately $3,413,263. During fiscal 1997, TWM paid royalty
fees of $404,039 and advertising and promotional fees of $544,836. TWM was also
a lessee or sublessee of CKE with respect to 13 restaurant locations during
fiscal 1997. Two of these leases expired in fiscal 1997, and a third was
assigned to TWM in March 1997. Rental payments equal a percentage of the annual
gross sales of the restaurants ranging from 3.5% to 8% or a minimum monthly
rental ranging from $3,000 to $8,056. The leases expire between April 1999 and
January 2012; one lease is on a month-to-month tenancy. Total rents paid under
these thirteen leases during fiscal 1997 aggregated $712,065.
KWK Foods, L.L.C. ("KWK") is a franchisee of CKE and currently operates
three Carl's Jr. restaurants. Carl L. Karcher is the son of Carl N. Karcher, a
Director of CKE and an affiliate of KWK and CLK. Joseph C. Karcher is the son of
Carl N. Karcher and an affiliate of KWK and JCK. Gary Wiles is a son-in-law of
Carl N. Karcher and an affiliate of KWK and Wiles. KWK is obligated, pursuant to
a Development Agreement with CKE, to develop and become a franchisee with
respect to ten additional Carl's Jr. restaurants at varying times between 1997
and 2004. In connection with the operation of its three franchised restaurants,
KWK regularly purchases food and other products from CKE on the same terms and
conditions as other franchisees. During fiscal 1997, these purchases totaled
approximately $176,484. During fiscal 1997, KWK paid royalty fees of $7,938 and
advertising and promotional fees of $23,237. KWK was also a sublessee of CKE
with respect to one restaurant location during fiscal 1997. Rental payments are
a fixed monthly rental of $8,183. The lease expires in September 2015. Total
rents paid under this lease during fiscal 1997 aggregated $16,367. KWK purchased
three restaurants from CKE during fiscal 1997. In connection with that purchase,
CKE agreed to guarantee up to $580,000 of a loan to KWK from an independent
third party.
In December 1995, CKE sold certain of its franchise notes receivable, with
recourse, to an independent third party. Included in the franchise notes
receivable sold were notes in the aggregate principal amount of $1,379,689
payable to CKE from CLK, Wiles and RWW. In connection with this transaction, CKE
also agreed to guarantee the payment obligations of CLK, Wiles and RWW under
these notes in fiscal 1998 up to a maximum amount of $604,643.
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Restaurants leased from related parties generally were constructed by CKE
on land acquired by CKE. The properties were then sold to these parties and
leased back by CKE. CKE believes that these sale and leaseback arrangements are
at rental rates generally similar to those with unaffiliated third parties.
Except as described above, all of the foregoing franchise and lease arrangements
are on terms generally similar to those with unaffiliated parties.
INDEPENDENT AUDITORS
Selection of an independent auditor is made by the Board of Directors upon
consultation with the Audit Committee. CKE's independent auditor for the fiscal
year ended January 27, 1997 was KPMG Peat Marwick LLP. The Board of Directors
will vote upon the selection of an auditor for the current fiscal year at a
future Board meeting.
Representatives of KPMG Peat Marwick LLP are expected to attend the Meeting
and be available to respond to appropriate questions. The representatives of
KPMG Peat Marwick LLP also will have an opportunity to make a formal statement,
if they so desire.
STOCKHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Pursuant to the rules of the Securities and Exchange Commission, proposals
by eligible stockholders (as defined below) which are intended to be presented
at CKE's Annual Meeting of Stockholders in 1998 must be received by CKE by
January 14, 1998 in order to be considered for inclusion in CKE's proxy
materials. The Board of Directors of CKE will determine whether any such
proposal will be included in its 1998 proxy solicitation materials. An eligible
stockholder is one who is the record or beneficial owner of at least 1% or
$1,000 in market value of securities entitled to be voted at the 1998 Annual
Meeting and has held such securities for at least one year, and who shall
continue to own such securities through the date on which the meeting is held.
ANNUAL REPORT
CKE's 1997 Annual Report, including consolidated financial statements for
fiscal 1997, accompanies this Proxy Statement. The Annual Report is not to be
regarded as proxy solicitation material.
Stockholders are urged to sign and return their proxies without delay.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
JANUARY 27, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO INVESTOR
RELATIONS, CKE RESTAURANTS, INC., P. O. BOX 4349, ANAHEIM, CALIFORNIA 92803.
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PROXY
CKE RESTAURANTS, INC.
1200 NORTH HARBOR BOULEVARD
ANAHEIM, CALIFORNIA 92801
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CKE RESTAURANTS,
INC. The undersigned hereby appoints William P. Foley II and Carl A. Strunk, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote as designated below, all
the shares of Common Stock of CKE Restaurants, Inc. held of record by the
undersigned on April 28, 1997, at the Annual Meeting of Stockholders to be held
on June 18, 1997 and any postponements or adjournments thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
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21
1. ELECTION OF DIRECTORS: FOR all of the nominees listed WITHHOLD AUTHORITY to vote for
(INSTRUCTION: To withhold authority below (except as marked to the all nominees listed below
to vote for any individual nominee contrary below)
strike a line through the nominee's
name in the list below.)
[ ] [ ]
WILLIAM P. FOLEY II---CARL N. KARCHER---
W. HOWARD LESTER
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before such meeting or any and all
postponements or adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THE PROXIES WILL VOTE
FOR THE NOMINEES LISTED ABOVE, AND IN THEIR DISCRETION ON MATTERS DESCRIBED IN
ITEM 2.
DO YOU PLAN TO ATTEND THE MEETING?
YES [ ] NO [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature______________________________
Signature if held jointly___________________________________
Dated:__________, 1997
Please sign exactly as the name appears below. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give your full title as such. If a corporation,
please sign in full corporate name by the President or other authorized officer.
If a partnership, please sign in the partnership name by an authorized person.
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