-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UZDslScHsh+C5/vX7huthL5PNZ6z0h/92LG04bOnq/7Ee/FLbQHp+/YaXGqbTCBX t3vmK1mGzE81ZxOwc5/65Q== 0000892569-96-001153.txt : 19960705 0000892569-96-001153.hdr.sgml : 19960705 ACCESSION NUMBER: 0000892569-96-001153 CONFORMED SUBMISSION TYPE: DEF13E3/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19960703 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SUMMIT FAMILY RESTAURANTS INC CENTRAL INDEX KEY: 0000053281 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 870264039 STATE OF INCORPORATION: DE FISCAL YEAR END: 0925 FILING VALUES: FORM TYPE: DEF13E3/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-32907 FILM NUMBER: 96591262 BUSINESS ADDRESS: STREET 1: 440 LAWNDALE DRIVE CITY: SALT LAKE CITY STATE: UT ZIP: 84115 BUSINESS PHONE: 8015327840 MAIL ADDRESS: STREET 1: 440 LAWNDALE DRIVE CITY: SALT LAKE CITY STATE: UT ZIP: 84115 FORMER COMPANY: FORMER CONFORMED NAME: JBS RESTAURANTS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: JBS BIG BOY FAMILY RESTAURANTS INC DATE OF NAME CHANGE: 19810830 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SUMMIT FAMILY RESTAURANTS INC CENTRAL INDEX KEY: 0000053281 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 870264039 STATE OF INCORPORATION: DE FISCAL YEAR END: 0925 FILING VALUES: FORM TYPE: DEF13E3/A BUSINESS ADDRESS: STREET 1: 440 LAWNDALE DRIVE CITY: SALT LAKE CITY STATE: UT ZIP: 84115 BUSINESS PHONE: 8015327840 MAIL ADDRESS: STREET 1: 440 LAWNDALE DRIVE CITY: SALT LAKE CITY STATE: UT ZIP: 84115 FORMER COMPANY: FORMER CONFORMED NAME: JBS RESTAURANTS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: JBS BIG BOY FAMILY RESTAURANTS INC DATE OF NAME CHANGE: 19810830 DEF13E3/A 1 AMENDMENT NO. 4 TO SCHEDULE 13E-3 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- Amendment No. 4 to SCHEDULE 13E-3 Rule 13e-3 Transaction Statement (Pursuant to Section 13(e) of the Securities Exchange Act of 1934) SUMMIT FAMILY RESTAURANTS INC. (Name of the Issuer) ---------------------------------- CKE RESTAURANTS, INC. SUMMIT MERGER, INC. SUMMIT FAMILY RESTAURANTS INC. (Name of Person(s) Filing Statement) ---------------------------------- COMMON STOCK, PAR VALUE $0.10 PER SHARE (Title of Class of Securities) 866056 10 4 (CUSIP Number of Class of Securities) ROBERT A. WILSON, ESQ. CHARLOTTE L. MILLER, ESQ. VICE PRESIDENT AND GENERAL COUNSEL SENIOR VICE PRESIDENT AND GENERAL CKE RESTAURANTS, INC. COUNSEL 1200 NORTH HARBOR BOULEVARD SUMMIT FAMILY RESTAURANTS INC. ANAHEIM, CALIFORNIA 92801 440 LAWNDALE DRIVE SALT LAKE CITY, UTAH 84115-2917
(Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Persons Filing Statement) COPIES TO: C. CRAIG CARLSON, ESQ. RICHARD G. BROWN, ESQ. J. MICHAEL VAUGHN, ESQ. BRIAN G. LLOYD, ESQ. STRADLING, YOCCA, CARLSON & RAUTH KIMBALL, PARR, WADDOUPS, BROWN & GEE 660 NEWPORT CENTER DRIVE, SUITE 1600 185 SOUTH STATE STREET, SUITE 1300 NEWPORT BEACH, CALIFORNIA 92660 SALT LAKE CITY, UTAH 84147
---------------------------------- This Statement is filed in connection with: a. [ ] The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange Act of 1934. b. [X] The filing of a registration statement under the Securities Act of 1933. c. [ ] A tender offer. d. [ ] None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: / / CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRANSACTION VALUATION AMOUNT OF FILING FEE - ------------------------------------------------------------------------------------------------------------------ $28,114,885.50* $5,622.98*
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * For purposes of calculating the filing fee only. The filing fee was calculated, pursuant to Section 13(e)(3) of the Securities Exchange Act of 1934, as amended, and Rule 0-11(b)(2) thereunder, on the basis of up to 5,767,156 shares of Common Stock, par value $0.10 per share (the "Common Stock") of Summit Family Restaurants Inc. (the number of shares proposed to be acquired in the transaction that is the subject of this Statement), multiplied by $4.875, the average of the high and low reported prices of the Common Stock on the Nasdaq National Market on June 3, 1996. The fee paid herewith represents 1/50 of 1% of the proposed Transaction Valuation. /X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number or the form or schedule and the date of its filing. Amount Previously Paid: $6,810.92 Form or Registration No.: Schedule 14A Filing Party: Summit Family Restaurants Inc. Date Filed: February 6, 1996
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INTRODUCTION This Amendment No. 4 to joint Transaction Statement on Schedule 13E-3 (the "Statement") is filed by Summit Family Restaurants Inc., a Delaware corporation ("Summit" or the "Company"), the issuer of the class of equity securities that is the subject of a Rule 13E-3 transaction, CKE Restaurants, Inc., a Delaware corporation ("CKE"), and Summit Merger, Inc., a Delaware corporation and wholly-owned subsidiary of CKE ("Merger Sub"), and relates to the proposed approval and adoption of an Agreement and Plan of Merger, dated as of November 30, 1995 (as amended, the "Merger Agreement"), among the Company, CKE and Merger Sub. Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will be merged with and into Summit (the "Merger"). If the Merger is consummated, holders of outstanding shares of Common Stock of the Company, par value $0.10 per share (the "Summit Common Stock"), other than CKE and stockholders of the Company who perfect statutory dissenters' rights, will be entitled to receive $2.63 in cash and a number of shares of Common Stock of CKE, par value $0.01 per share (the "CKE Common Stock") equal to a fraction, the numerator of which is $2.64 and the denominator of which will be an amount determined on the basis of an average of the closing sales prices of CKE Common Stock on the New York Stock Exchange for the 20 consecutive trading days ending five days prior to the date of the Special Meeting. A copy of the Merger Agreement, and all amendments thereto, is filed by the Company as Appendix A to the Proxy Statement/Prospectus filed as Exhibit 99.8 to this Statement. As a result of the Merger, the Company, as the surviving corporation, will become a privately held corporation and a wholly-owned subsidiary of CKE. ITEM 16. ADDITIONAL INFORMATION Item 16 of the Statement is amended to add the following information: On or about June 24, 1996, the Opposition Group commenced its solicitation of proxies objecting to the Merger. On June 25, 1996, the Company responded to the Opposition Group's proxy solicitation materials by a letter addressed and mailed to the Company's stockholders (which letter is incorporated herein by reference). On June 26, 1996, the Company's Board of Directors received a second fairness opinion from Houlihan, Lokey, Howard & Zukin, Inc. ("Houlihan Lokey") to the effect that the consideration to be received by the Company's public stockholders in connection with the Merger is fair to them from a financial point of view as of June 26, 1996 (the "Houlihan Lokey Fairness Opinion"). The Houlihan Lokey Fairness Opinion was furnished to the holders of record of the Company's Common Stock as of the Record Date with a Proxy Statement/Prospectus Supplement, dated July 2, 1996, which is incorporated by reference herein. On June 26, 1996, Stella Bella Corporation USA ("Stella Bella") issued a press release describing a purported offer to purchase the JB's Restaurant units of the Company. On June 28, 196, the Company issued a press release indicating that the Company's Board of Directors had reviewed the purported offer from Stella Bella and determined not to take any further action with respect thereto. The form of press release, as issued by the Company on June 28, 1996, is incorporated herein by reference. 2 3 17. MATERIAL TO BE FILED AS EXHIBITS. Item 17 is hereby amended to add the following exhibits: 99.12 Letter, dated June 25, 1996, from the Company's Board of Directors to the Company's stockholders responding to the Proxy Statements disseminated by the Opposition Group. 99.13 Proxy Statement/Prospectus Supplement, dated July 2, 1996. 99.14 Opinion of Houlihan, Lokey, Howard & Zukin, Inc. ("Houlihan Lokey"), dated June 26, 1996. 99.15 Report of Houlihan Lokey delivered to the Board of Directors of the Company on June 26, 1996. 99.16 Press Release, in the form issued by the Company on June 28, 1996.
3 4 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: July 3, 1996 CKE RESTAURANTS, INC. By: /s/ ROBERT A. WILSON ----------------------------------- Robert A. Wilson, Vice President and General Counsel 4 5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: July 3, 1996 SUMMIT MERGER, INC. By: /s/ ROBERT A. WILSON ----------------------------------- Robert A. Wilson, Vice President and General Counsel 5 6 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: July 3, 1996 SUMMIT FAMILY RESTAURANTS INC. By: /s/ CHARLOTTE L. MILLER ------------------------------------ Charlotte L. Miller Senior Vice President and General Counsel 6 7 EXHIBIT INDEX
SEQUENTIALLY NUMBERED EXHIBIT NO. DESCRIPTION PAGE - ----------- ----------------------------------------------------------------------- ------------ *99.1 Opinion of Piper Jaffray Inc., dated November 30, 1995. -- *99.2 Report of Piper Jaffray Inc. delivered to the Special Committee on -- November 30, 1995. *99.3 Opinion of Piper Jaffray Inc., dated January 24, 1996. -- *99.4 Report of Piper Jaffray Inc. delivered to the Special Committee on -- January 24, 1996. *99.5 Opinion of Piper Jaffray Inc., dated March 26, 1996. -- *99.6 Report of Piper Jaffray delivered to the Special Committee on March 26, -- 1996. *99.7 Opinion of Piper Jaffray Inc., dated June 5, 1996. *99.8 Agreement and Plan of Merger dated as of November 30, 1995, as amended, -- among the Company, CKE and Merger Sub (attached as Appendix A to the Proxy Statement/Prospectus). *99.9 Copies of Letter to Stockholders, Notice of Special Meeting and Proxy Statement/Prospectus for Special Meeting of the Stockholders of the Company to be held on July 12, 1996. *99.10 Forms of Proxy. *99.11 Text of Section 162 of the General Corporation Law of the State of -- Delaware (attached as Appendix C to the Proxy Statement/Prospectus). 99.12 Letter, dated June 25, 1996, from the Company's Board of Directors to the Company's stockholders responding to the Proxy Statements disseminated by the Opposition Group. 99.13 Proxy Statement/Prospectus Supplement, dated July 2, 1996. 99.14 Opinion of Houlihan, Lokey, Howard & Zukin, Inc. ("Houlihan Lokey"), dated June 26, 1996. 99.15 Report of Houlihan Lokey delivered to the Board of Directors of the Company on June 26, 1996. 99.16 Press Release, in the form issued by the Company on June 28, 1996.
- --------------- * Previously filed 7 EX-99.12 2 LETTER, DATED JUNE 25, 1996 1 EXHIBIT 99.12 [SUMMIT FAMILY RESTAURANTS INC. LETTERHEAD] YOUR BOARD OF DIRECTORS OPPOSES THE EFFORTS OF THE OPPOSITION GROUP TO ABANDON THE MERGER WITH CKE RESTAURANTS INC. AND TO OBTAIN CONTROL OVER SUMMIT FOR NO CONSIDERATION TO THE SUMMIT STOCKHOLDERS June 25, 1996 Dear Summit Stockholder: You may have recently received two proxy statements from a group of dissident stockholders led by First Global Securities, Inc. This so-called "Opposition Group" requests that you vote against the proposed merger of Summit Family Restaurants Inc. with CKE Restaurants, Inc. at the Special Meeting Of Stockholders scheduled to occur on July 12, 1996. It also purports to seek your vote to remove the current directors of Summit and to elect its slate of directors. IT IS APPARENT THAT THE OPPOSITION GROUP'S ULTIMATE GOAL IS TO GAIN CONTROL OVER THE BOARD OF DIRECTORS AND MANAGEMENT OF SUMMIT WITHOUT PAYING ANY CONSIDERATION TO SUMMIT STOCKHOLDERS . WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD TODAY! SINCE TIME IS VERY IMPORTANT, IMMEDIATE ACTION ON YOUR PART IS CRITICAL. REJECTING THE MERGER WITH CKE JEOPARDIZES A CERTAIN PAYMENT TO SUMMIT STOCKHOLDERS The Opposition Group, only one member of which owns a substantial number of shares of Summit Common Stock, asks all Summit stockholders to forego a substantial forthcoming payment in order to further the Opposition Group's goal to obtain control of Summit. In the merger, which is scheduled to occur on or about July 12, 1996, each outstanding share of Summit Common Stock (other than dissenting shares, if any, and shares owned by CKE or its subsidiaries, which will be canceled) will be converted into the right to receive $2.63 in cash and a number of shares of CKE Common Stock equal to a fraction, the numerator of which is $2.64 and the denominator of which will be an amount determined on the basis of an average of the closing sales prices of CKE Common Stock on the New York Stock Exchange for the 20 consecutive trading days ending on July 5, 1996. Using the first 12 trading days ended June 24, 1996, the total consideration in the Summit/CKE merger would be $2.63 in cash plus 0.1043 shares of CKE stock. This represents a total consideration of $5.38 based on the closing stock price of CKE Common Stock of $26.375 as of the close of business on June 24, 1996. The amount you will actually receive in the merger will vary depending on the price of CKE Common Stock. The payment of cash and the issuance of the CKE Common Stock would occur as soon as practicable after the merger. In order to induce you to vote against the Merger, the Opposition Group claims that it would, at an unspecified time, pay a cash dividend of $2 per share out of proceeds of asset sales they claim will be made after the Opposition Group gains control of Summit. Such a dividend would require the Opposition Group to gain control of Summit, locate assets that could be sold, find purchasers for such assets, negotiate and complete the sale of such assets, and then pay all liabilities before being able to pay stockholders any dividend. 2 WHAT IS WRONG WITH THE OPPOSITION GROUP'S "PLAN"? o In the view of your Board of Directors, the Opposition Group's "plan" could require months - if not years - to accomplish and, as the Opposition Group itself states, "there is no assurance that any proposal or combination of proposals contained [in the Opposition Group proxy statements] will result in a successful outcome for [Summit] shareholders." o The Opposition Group purports to seek the removal of all Summit directors at the Special Meeting on July 12, 1996, but such action is not permitted under Summit's Certificate of Incorporation, Bylaws or Delaware law. o Even if the Opposition Group could gain control of Summit, the Opposition Proxy presupposes that the current Summit assets are easily saleable for cash on terms highly favorable to Summit - a dubious assumption based upon Summit's exhaustive search for potential buyers. o The proposal by the Opposition Group could be inefficient to Summit stockholders from a tax standpoint, since any taxable gains resulting from the sale of assets would be recognized first by Summit, and then the dividends would be taxable to the Summit stockholders. o The Opposition Group's claim that it would make a $2 per share dividend is wishful thinking. Your Board of Directors believes that the Opposition Group has made this claim without determining the true value of Summit's assets, considering the funds needed to provide for the liabilities of Summit, assessing the potential for further cash flow deterioration and factoring in the rights of Summit's preferred stockholder. If the Opposition Group were acting in the best interests of Summit stockholders and had in fact identified potential buyers willing to purchase Summit's assets for more than the consideration offered in the merger, WHY HAVE THEY NOT IDENTIFIED SUCH BUYERS TO THE SUMMIT BOARD OF DIRECTORS, SO THE BOARD COULD EVALUATE SUCH OPPORTUNITIES AGAINST THE MERGER OR OFFER A HIGHER CONSIDERATION TO YOU, THE STOCKHOLDER? Further, if the CKE offer is inadequate as they state, why has the Opposition Group not made a higher offer to all stockholders. Summit negotiated a provision to allow it to terminate the Merger Agreement in certain circumstances if a better offer were to materialize. INSTEAD OF IDENTIFYING THE POTENTIAL BUYERS TO THE BOARD OF DIRECTORS OR TO SUMMIT STOCKHOLDERS OR EVEN DESCRIBING THE TERMS ON WHICH SUCH PURCHASES WOULD BE MADE, THE OPPOSITION GROUP ASKS THAT SUMMIT STOCKHOLDERS FOREGO THE MERGER CONSIDERATION AND TURN SUMMIT OVER TO THE OPPOSITION GROUP WITHOUT ANY PAYMENTS TO THE STOCKHOLDERS. THE OPPOSITION GROUP WANTS TO GAIN CONTROL OF SUMMIT WITHOUT PAYING ANYTHING TO YOU The Opposition Group has had plenty of time to propose a plan to acquire Summit. The Board of Directors has publicized its search for a merger or acquisition partner since July 24, 1995. In fact, in the summer and fall of 1995, First Global expressed interest in providing financing or in participating in some way in a purchase. As a result, Summit management provided information about Summit to First Global following First Global's execution of a confidentiality agreement by Nobel Trenham, founder, Co-Chairman of the Board and Chief Investment Officer of First Global Securities. Interestingly, this information was returned by First Global, purportedly unread, after First Global advised Summit management that First Global was not interested in pursuing a transaction with Summit. THE FACT IS, THE OPPOSITION GROUP HAS NO FUNDS OR FINANCING AVAILABLE FOR USE IN CONJUNCTION WITH THIS TRANSACTION AND NOTHING TO OFFER STOCKHOLDERS OTHER THAN VAGUE CLAIMS REGARDING THE POSSIBILITY OF FUTURE DIVIDENDS AND CHANGES IN DIRECTION. Instead, they want you to vote against the Merger and turn control of Summit over to the Opposition Group for no consideration whatsoever. The Summit Board of Directors believes that this gamble is not in your best interest. 3 THE OPPOSITION GROUP CANNOT "REMOVE" SUMMIT'S DIRECTORS The Opposition Group's plan is premised upon taking control of Summit by "removing" Summit's directors at the Special Meeting on July 12, 1996. Under the Delaware General Corporation Law and under the Certificate of Incorporation and Bylaws of Summit, the Opposition Group may not bring to a vote any proposal to remove Summit's directors or elect a new slate of directors at the Special Meeting. Accordingly, any attempt to bring these matters before the Special Meeting will necessarily be deemed out of order and not appropriate for stockholder action and therefore Summit recommends that you do not return the red proxy card, even to vote against the Opposition Group. THE BUSINESS PLAN PROPOSED BY THE OPPOSITION GROUP IS SPECULATIVE AND PROBABLY NOT FINANCEABLE The Opposition Group states that, if it gains control of Summit, it will "create a new direction for Summit focused on themed restaurants and entertainment creating an 'eatertainment' focus." The Opposition Group says that its first themed project will be the "Wave Cafe." According to the Opposition Group, the Wave Cafe will consist of "a surfable wave ridden by employee instructors" and a retail store featuring surf, volleyball, snowboarding and related merchandise. The Wave Cafe concept has never been tried. In the view of the Board of Directors, such a plan is highly speculative and not in your best interest. Summit believes that there have been attempts, albeit unsuccessful, to raise capital for this venture for at least the past year and that the company sponsoring the "Wave Cafe" concept has been unable to obtain financial support to move its concept forward. THE BOARD OF DIRECTORS BELIEVES THAT THE OPPOSITION PROXY IS AN EFFORT TO TAKE THE MONEY OF SUMMIT'S STOCKHOLDERS AND INVEST IT IN A HIGHLY SPECULATIVE, UNTESTED RESTAURANT VENTURE. THE BOARD OF DIRECTORS BELIEVES THAT THIS APPROACH IS AN IRRESPONSIBLE ATTEMPT TO ALLOW FIRST GLOBAL TO SPECULATE WITH THE MONEY OF SUMMIT'S STOCKHOLDERS. THE OPPOSITION GROUP'S ATTACKS ON CKE STOCK ARE UNFOUNDED Even though it is unwilling to offer any consideration of its own, the Opposition Group wants you to believe that the CKE Common Stock is overvalued. Whether CKE's stock is overvalued is certainly a matter of opinion. On June 12, 1996, CKE reported that net income for the first quarter ended May 20, 1996 nearly tripled to $5.3 million, or $0.28 per share, compared with net income of $1.9 million, or $0.11 per share for the prior year period. CKE also reported that revenues for the 16 week period ended May 20, 1996 increased $15.3 million, or 11 percent, to $152.9 million as compared with the prior year 16 week period. SUMMIT MANAGEMENT IS SOUND AND HIGHLY QUALIFIED - THE OPPOSITION GROUP'S ATTACKS ARE INACCURATE First Global is also inaccurate in portraying Summit as a company with no management. The company continues to have two vice presidents overseeing the JB's Restaurants and Galaxy Diners, a senior vice president overseeing the HomeTown Buffets, and two senior vice presidents and a vice president overseeing the support functions. Additionally, Clark D. Jones is currently serving as interim President and Chief Executive Officer. Mr. Jones is familiar with Summit and the restaurant industry, having served as president of the company for 10 years previously and as interim president in 1993. The home office of Summit employs approximately thirty individuals who provide support to the operation of the company. 4 Please show your support by signing, dating and mailing the enclosed WHITE PROXY CARD, and disregarding any Red Proxy Card sent to you by the Opposition Group. Only the latest dated proxy will count. Regardless of how many shares you own, your vote is very important, and I encourage you to exercise your right to vote. PLEASE VOTE ONLY THE WHITE PROXY CARD. Do not sign or return any Red proxy card sent to you by the Opposition Group. In the meantime, if you are contacted by the Opposition Group and wish to voice your concerns to Summit, or have any questions, please call our proxy solicitor, Corporate Investor Communications, Inc., at (800) 346-7885, or collect at (201) 896-1900 or call me, Clark Jones, at (801) 463-5500. Very truly yours, THE BOARD OF DIRECTORS OF SUMMIT FAMILY RESTAURANTS INC. By: /s/ CLARK D. JONES ---------------------------- Clark D. Jones Chairman of the Board =============================================================================== IMPORTANT Whether or not you have previously signed a proxy card from the Opposition Group, please sign, date and mail management's WHITE PROXY CARD in the enclosed postage paid envelope. (If you wish to add your comments and suggestions about the issues discussed in this letter, please note them on the proxy card.) Please DO NOT execute or return any Red card sent to you by the Opposition Group. If you own your shares in the name of a brokerage firm, your broker cannot vote such shares unless he receives your specific instructions. If you have any questions about voting your shares or want further assistance or information, please do not hesitate to call our proxy solicitor: CORPORATE INVESTOR COMMUNICATIONS, INC. AT (800) 346-7885 OR COLLECT AT (201) 896-1900. =============================================================================== 5 [SUMMIT FAMILY RESTAURANTS INC. LETTERHEAD] SHOULD YOU TRUST THE OPPOSITION GROUP? LOOK AT HOW OTHER INVESTORS HAVE FARED WITH FIRST GLOBAL SECURITIES AND THE TRENHAMS You may be interested to know how other investors have fared in investments directed by Susan Trenham and her husband, Noble Trenham, founder, Co-Chairman of the Board and Chief Investment Officer of First Global Securities. They have a well established track record of improper conduct and misleading and taking advantage of investors. The cases outlined below give you a sample of their conduct, and, we believe, put their trustworthiness seriously into question. o CLAIM OF FRAUD -------------- In November 1994, a group of investors filed an action for fraud, negligent misrepresentation, breach of contract and breach of fiduciary duty against Noble Trenham and Susan Trenham, among others. The complaint alleges that the investors agreed to invest their money with the Trenhams by purchasing limited partnership interests in a real estate-related partnership of which Noble Trenham would be the general partner. According to the complaint, Susan Trenham co-hosted meetings with Noble where Noble would fail to disclose material facts about the actual condition of the property. In the complaint, the investors claimed that they were lulled into making investments they believed to be sound, conservative and prudently managed, while the Trenhams (who allegedly were insolvent at such time) were using investors' funds to pay personal debts and personal litigation expenses completely unrelated to the partnership. There are also allegations in the complaint that the Trenhams were using the partnership's real property for collateral for loans that were used to pay personal expenses of the Trenhams unrelated to the partnership's business. Noble Trenham settled the case for $100,000 together with an agreement to pay the investors 10% of his gross income until June 1, 2001 from investment banking ventures (not to exceed $50,000). (Dashjiam v. Trenham, Case No. BC117223) o CLAIM OF VIOLATIONS OF SECURITIES LAWS -------------------------------------- On July 23, 1987, the United States Securities and Exchange Commission filed an action against Noble Trenham and his former firm alleging violations of (i) Section 13(d) and Rules 13d-1 and 13d-2 of the Securities Exchange Act of 1934 by failing to properly and timely file Schedules 13D disclosing their intentions to change or influence the control of at least eight public companies while beneficially owning at least five percent of the outstanding shares of such companies, (ii) the Investment Advisers Act of 1940 by making false and misleading statements regarding the aggregate concentrations of shares accumulated by Noble Trenham and his firm in their clients' accounts and failing to disclose to their clients the adverse consequences of such concentrations, (iii) the Investment Advisers Act by failing to disclose conflicts of interest between his firm and its clients, and (iv) the Investment Advisers Act by transacting unlawful agency cross- trades. Noble Trenham and his firm consented to final judgments permanently enjoining and restraining them from further violations of the foregoing provisions of the securities laws. (Securities and Exchange Commission v. First Wilshire Management Inc., Frederick Astman and Noble Trenham, U.S. District Court for the District of Columbia, Civil Action No. 87-2037) 6 o CLAIM OF BREACH OF FIDUCIARY DUTY In April 1985, shareholders of Olson Farms filed a lawsuit against Noble Trenham and his firm (as well as numerous other defendants) for breach of fiduciary duty by using fraudulent schemes and conspiring to dilute plaintiffs as controlling shareholders of Olson Farms by funding a company to take control of Olson Farms at a deflated price and then conspiring to obtain an opinion that such deflated price was fair. Noble Trenham and his firm were accused of receiving a finders fee of between $50,000 and $65,000 for bringing together a transaction whereby a company of which Noble Trenham's firm was a shareholder would purchase 500,000 shares of Olson Farms common stock at a deflated price, the sale of which would reduce plaintiff's ownership interest from 42.9% to 30%, in order to raid the assets of Olson Farms to pay off the debts of such company's parent company. The complaint further alleges that the parent company was in severe financial trouble, had a negative net worth, was in violation of bank loan covenants and had loan payments due the following year in excess of $50,000,000. The case was ultimately dismissed. (Olson, C. Dean, et as v. Buffington, Jack W., et al, Case No. C544668) o CLAIM OF VIOLATION OF THE ANTI-RACKETEERING LAWS ------------------------------------------------ In March 1985, a client filed a lawsuit against Noble Trenham and his firm (and other defendants) alleging violations of federal and state securities laws, antiracketeering laws, fraud, breach of fiduciary duty and breach of contract arising from Noble Trenham's and his co-worker's mismanagement of the client's funds. According to the complaint, Noble Trenham was one of the two individuals who personally provided the investment advisory services to the client. One of the other defendants (the clearing broker for securities transactions directed by Noble Trenham's firm) entered into a settlement agreement for $260,000 with the plaintiff. (See Morgan, Olmstead, Kennedy & Gardner Incorporated v. Trenham, Noble, et al, Case No. C717414.) We think that when you compare the proposed merger with CKE Restaurants, Inc. against the Opposition Group proposal, you will agree with the Summit Board of Directors that the merger is in your best interests. ============================================================================== PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD TODAY! SINCE TIME IS VERY IMPORTANT, IMMEDIATE ACTION ON YOUR PART IS CRITICAL. ============================================================================== EX-99.13 3 PROXY STATEMENT/PROSPECTUS SUPPLEMENT 1 EXHIBIT 99.13 [SUMMIT FAMILY RESTAURANTS INC. LETTERHEAD] July 2, 1996 Dear Summit Stockholder: You may have recently received two proxy statements from a group of dissident stockholders led by First Global Securities, Inc. Hopefully, you have also received, in addition to our Proxy Statement/Prospectus dated June 10, 1996, a letter from your Board of Directors dated June 25, 1996 responding to the assertions made by this "Opposition Group." It remains the view of your Board of Directors that the Opposition Group's ultimate goal is to gain control over the Board of Directors and management of Summit without paying any consideration to Summit stockholders. Accordingly, we continue to urge you to approve the proposed merger with CKE Restaurants Inc. and to disregard the proxies sent to you by the Opposition Group. This merger transaction will, in contrast to their "Plan," result in payment to Summit stockholders of $2.63 in cash and a number of shares of CKE common stock equal to a fraction, the numerator of which is $2.64 and the denominator of which will be an amount determined on the basis of an average of the closing sales prices of CKE Common Stock on the New York Stock Exchange for the 20 consecutive trading days ending five days prior to the date of the Special Meeting. Based on the first 17 of the 20 trading days (through July 1, 1996), holders of each share of Summit common stock will receive .1045 shares of CKE common stock, which had a market value of $2.69 based on the closing stock price of CKE Common Stock on July 1, 1996, resulting in total per share consideration of $5.32 as of such date. Since our last letter to you, we have received a second opinion from an investment banking firm to the effect that this merger consideration is fair to the common stockholders of Summit from a financial point of view. The attached Supplement contains further information on that fairness opinion and other matters and deserves your careful attention. THE BOARD OF DIRECTORS OF SUMMIT HAS APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SUMMIT COMMON STOCK AND SUMMIT PREFERRED STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. Stockholders are urged to sign and date the enclosed WHITE PROXY CARD and return it in the enclosed prepaid envelope as soon as possible. A stockholder who has given a proxy may revoke it at any time prior to exercise. Stockholders are further urged NOT to sign or return any red proxy cards or, if you have done so, to revoke that proxy by signing, dating and returning the enclosed WHITE PROXY CARD immediately. Your vote is important. Failure to return your proxy card will have the same effect as a vote against the Merger. If you have any questions, please contact our proxy solicitor, Corporate Investor Communications, Inc., at (800) 346-7885 or collect at (201) 896-1900, or call me, Clark Jones, at (801) 463-5500. Very truly yours, /s/ CLARK D. JONES -------------------------- Clark D. Jones Chairman of the Board YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD. 2 SUMMIT FAMILY RESTAURANTS INC. SUPPLEMENT TO PROXY STATEMENT --------------------- CKE RESTAURANTS, INC. SUPPLEMENT TO PROSPECTUS This Supplement to the Proxy Statement/Prospectus (the "Supplement") is being furnished to the stockholders of Summit Family Restaurants Inc., a Delaware corporation ("Summit"), in connection with the solicitation of proxies by the Board of Directors of Summit for use at the special meeting (the "Special Meeting") of stockholders of Summit to be held on Friday, July 12, 1996, at 10:00 a.m., local time, at the Howard Johnson Hotel, 122 West South Temple, Salt Lake City, Utah, or at any adjournments or postponements thereof. The Special Meeting has been called to consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger and Reorganization, dated as of November 30, 1996, as amended (as so amended, the "Merger Agreement"), between Summit and CKE Restaurants, Inc., a Delaware corporation ("CKE"), which provides for the merger of Summit Merger, Inc., a newly-formed, wholly owned subsidiary of CKE, with and into Summit (the "Merger"). THE BOARD OF DIRECTORS OF SUMMIT HAS APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SUMMIT COMMON STOCK AND SUMMIT PREFERRED STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. Stockholders are urged to sign and date the enclosed WHITE PROXY CARD and return it in the enclosed prepaid envelope as soon as possible. A stockholder who has given a proxy may revoke it at any time prior to exercise. Stockholders are further urged NOT to sign or return any red proxy cards or, if you have done so, to revoke that proxy by signing, dating and returning the enclosed WHITE PROXY CARD immediately. The information set forth herein amends and supplements the Proxy Statement/Prospectus dated June 10, 1996 (the "Proxy Statement") which has been previously mailed to all stockholders of record of Summit as of the close of business on May 20, 1996, the record date for the Special Meeting. The information contained in this Supplement should be read carefully in conjunction with the Proxy Statement. Capitalized terms not defined herein have the meanings set forth in the Proxy Statement. For additional copies of the Proxy Statement or assistance in returning proxies, Summit stockholders may call Summit's proxy solicitation firm, Corporate Investor Communications, Inc., at (800) 346-7885 or collect at (201) 896-1900. Summit stockholders may submit or revoke proxies by telecopier at (201) 804-8693. SEE RISK FACTORS BEGINNING ON PAGE 16 OF THE PROXY STATEMENT FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY SUMMIT STOCKHOLDERS. NEITHER THIS TRANSACTION NOR THE SECURITIES OFFERED IN CONNECTION HEREWITH HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION. THE COMMISSION HAS NOT PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE DATE OF THIS SUPPLEMENT IS JULY 2, 1996 3 GENERAL On June 12, 1996, Summit mailed its Proxy Statement to all stockholders of record of Summit as of the close of business on May 20, 1996, the record date for the Special Meeting. The Proxy Statement relates to the Special Meeting called to consider and vote upon a proposal to approve and adopt the Merger Agreement and the Merger. As more fully set forth therein, the Proxy Statement advised stockholders that, among other things, the Board of Directors of Summit had unanimously determined that the transactions contemplated by the Merger Agreement are fair to and in the best interests of Summit and its stockholders and that the Board of Directors recommended that all Summit stockholders vote for its approval. ADDITIONAL INFORMATION In the supplement to the June Letter entitled "Should You Trust the Opposition Group?", Summit stated that Susan Trenham and Noble Trenham "have a well established track record of improper conduct and misleading and taking advantage of investors." However, only one of the described lawsuits (Dashjiam v. Trenham) involved allegations against Susan Trenham, and the description of that lawsuit did not state that the claims against Susan Trenham were dismissed by the plaintiffs. Also, please be aware that allegations made in a complaint are not proof that the matters alleged actually occurred. SPECIAL FACTORS The following information supplements the information under the caption "Special Factors -- Background" in the Proxy Statement: Subsequent to the mailing by Summit of its Proxy Statement to its stockholders, a group of dissident stockholders led by First Global Securities, Inc. (the "Opposition Group") filed revised materials with the Commission which it mailed to some or all of Summit's stockholders on or about June 24, 1996. The Opposition Group requested that stockholders vote against the Merger and also purported to seek stockholder votes to remove the current directors of Summit and elect the Opposition Group's slate of directors. On June 25, 1996, the Board of Directors of Summit mailed a letter (the "June Letter") to all stockholders responding to the assertions made by the Opposition Group in its materials. The Board of Directors stated in the June Letter its belief that the Opposition Group's ultimate goal is to gain control over the Board of Directors and management of Summit without paying any consideration to Summit stockholders. In particular, the June Letter responded to claims by the Opposition Group that it would, at an unspecified time in the future, pay a cash dividend of $2 per share out of proceeds of asset sales they claim will be made after the Opposition Group were to gain control of Summit. The June Letter pointed out that support of the Opposition Group would jeopardize the Merger with CKE and its payment to Summit stockholders of $2.63 in cash and a number of shares of CKE common stock equal to a fraction, the numerator of which is $2.64 and the denominator of which will be an amount determined on the basis of an average of the closing sales prices of CKE Common Stock on the New York Stock Exchange for the 20 consecutive trading days ending five days prior to the date of the Special Meeting. Based on the first 17 of the 20 trading days (through July 1, 1996), holders of each share of Summit common stock will receive .1045 shares of CKE common stock, which had a market value of $2.69 based on the closing stock price of CKE Common Stock on June 28, 1996, 2 4 resulting in total per share consideration of $5.32 as of such date. In advising stockholders of its views as to what is wrong with the Opposition Group's "Plan," the June Letter also stated that: o In the view of your Board of Directors, the Opposition Group's "plan" could require months--if not years--to accomplish and, as the Opposition Group itself states, "there is no assurance that any proposal or combination of proposals contained [in the Opposition Group proxy statements] will result in a successful outcome for [Summit] shareholders." o The Opposition Group purports to seek the removal of all Summit directors at the Special Meeting on July 12, 1996, but such action is not permitted under Summit's Certificate of Incorporation, Bylaws or Delaware law. Summit will receive an opinion of its Delaware counsel to the foregoing effect. o Even if the Opposition Group could gain control of Summit, the opposition proxy presupposes that the current Summit assets are easily saleable for cash on terms highly favorable to Summit--a dubious assumption based upon Summit's exhaustive search for potential buyers. o The proposal by the Opposition Group could be inefficient to Summit stockholders from a tax standpoint, since any taxable gains resulting from the sale of assets would be recognized first by Summit, and then the dividends would be taxable to Summit stockholders. o The Opposition Group's claim that it would make a $2 per share dividend is, in the opinion of the Board, wishful thinking. Your Board of Directors believes that the Opposition Group has made this claim without determining the true value of Summit's assets, considering the funds needed to provide for the liabilities of Summit, assessing the potential for further cash flow deterioration and factoring in the rights of Summit's preferred stockholder. ADDITIONAL ACTIONS OF THE BOARD OF DIRECTORS As more fully set forth in the Proxy Statement, Piper Jaffray has delivered to the Summit Board of Directors its written opinions, dated March 26, 1996 and June 5, 1996, that, based upon and subject to various considerations set forth in such opinions, the consideration to be received by Summit stockholders in the Merger is fair from a financial point of view. See "Special Factors -- Opinions of Financial Advisor to Summit." Among the allegations made by the Opposition Group was that, in their words, there was "a lack of an unaffiliated representative for Summit shareholders and possible conflicts on the part of Piper Jaffray, Inc. in rendering its opinion." The Opposition Group made these and other assertions when that group made its initial filing of proxy materials with the Commission on May 29, 1996. At a Board of Directors meeting held on June 5, 1996, the Board discussed the matters raised in the Opposition Group's Commission filing. The Board viewed the allegations of the Opposition Group as being without merit and resolved that a responsive letter to that effect from the Board be prepared so that it could be mailed as soon as the Opposition Group's materials were released by the Commission. The Board was, however, particularly troubled by any suggestion by the Opposition Group that the Board and its financial advisor had not acted independently and in the best interests of the stockholders. The Board had reached its unanimous view that the transactions contemplated by the Merger Agreement with CKE are in the best interests of Summit and its stockholders after engaging in an extensive publicized search for a merger or acquisition partner since July 1995. This process resulted 3 5 in no alternative which the Board of Directors viewed as superior to the CKE Merger. The Board has at all times viewed the processes undertaken by it and its advisors as appropriate and designed to best protect the interests of the stockholders. Nonetheless, the Board felt that any suggestion, from whatever source, that its process was unfair required a forceful and compelling response. Accordingly, at the June 5, 1996 meeting, the Board authorized two responses to the Opposition Group. First, as noted above, it authorized preparation of the June Letter in order to respond immediately to the assertions made by the Opposition Group. Second, the Board authorized the retention of an independent investment banking firm to render a second opinion regarding the fairness, from a financial point of view, of the consideration to be received by Summit stockholders in the Merger. To remove any suggestion that such opinion was not entirely impartial, the Board directed that the firm retained have no preexisting ties with Summit or CKE and that such firm be retained for a flat fee, not contingent on either the conclusion reached in the opinion or the approval or disapproval of the Merger by the stockholders. On June 11, 1996, Summit retained the investment banking firm of Houlihan, Lokey, Howard & Zukin ("Houlihan Lokey") to render such an opinion. At a meeting of the Board of Directors held on June 27, 1996, Houlihan Lokey presented its findings to the Board. After that presentation and the response by representatives of Houlihan Lokey to questions of the Board, Houlihan Lokey delivered its written opinion to the Board to the effect that the consideration to be received by the public stockholders of Summit in connection with the Merger is fair to them from a financial point of view. Such opinion is described more fully under the caption "--Opinion of Houlihan Lokey" and a copy thereof is attached to this Supplement as Appendix A. Stockholders are urged to review such materials carefully. Based on its receipt of the Houlihan Lokey opinion, which was consistent with the conclusions previously reached by the Board and Piper Jaffray, the Board unanimously reconfirmed its finding that the transactions contemplated by the Merger Agreement are in the best interests of Summit and its stockholders and its recommendation that all Summit stockholders vote for its approval. The Board also discussed the June 26, 1996 press release of Stella Bella which purported to offer 5,700,000 shares of Stella Bella common stock in exchange for Summit's JB's unit. On June 26, 1996, the last reported sales price of Stella Bella common stock as reported on the Nasdaq Bulletin Board was $0.545 per share. This press release followed unsolicited telephone calls placed by Mr. Zubkis of Stella Bella to Mr. Habermann, Mr. Clark and Ms. Miller during the previous week in which Mr. Zubkis stated a continued desire to arrange a transaction with Summit. The purported "offer" did not constitute an "Acquisition Transaction" under Section 9.1(d)(iii) of the Merger Agreement because, in the view of Summit's Board of Directors, it was not a firm offer and was not financially superior to the Merger with CKE. As a result, Summit was prohibited from taking any further action in respect thereof so long as the Merger Agreement remained effective. At the June 27, 1996 meeting, the Board also considered the fact that the Opposition Group was purporting to solicit proxies to the election of a slate of directors at the Special Meeting notwithstanding Summit's determination that no such matter would be acted upon at the Special Meeting by operation of Summit's Certificate of Incorporation, Bylaws and applicable Delaware law. Summit will receive an opinion of Delaware counsel addressing this matter. In the face of these activities, the Board desired to remove any confusion as to the time and place of a stockholders meeting to consider director nominees. Accordingly, the Board determined that, in the event the Merger is not approved at the Special Meeting, 4 6 the Board will, promptly thereafter, notice an annual meeting of stockholders on September 27, 1996 to act on, among other things, the election of directors. On June 27, 1996, Summit filed a complaint against Hometown Buffet, Inc., together with a motion seeking a temporary restraining order to prevent the Multiple Unit Agreement with Hometown Buffet, Inc. from expiring on June 30, 1996. The court granted a temporary restraining order maintaining the exclusivity under the Multiple Unit Agreement in order to allow Summit's subsidiary to pursue its rights thereunder. The Multiple Unit Agreement provides exclusive franchise and development rights throughout a territory that includes Colorado, Arizona, New Mexico, Utah, Idaho, Montana, Wyoming and Nevada. Any development by Summit of units within the territory is subject to approval by HomeTown Buffet, Inc. RECOMMENDATION OF SUMMIT'S BOARD OF DIRECTORS; FAIRNESS OF THE MERGER The last paragraph on page 32 of the Proxy Statement is deleted and replaced with the following: o The Board of Directors considered the fact that, in addition to the opinion of Piper Jaffray, it also received the opinion of Houlihan Lokey to the effect that the consideration to be received by the public stockholders of Summit in connection with the Merger is fair to them from a financial point of view and that the fee payable to Houlihan Lokey was not contingent on either the conclusions reached in such opinion or the approval or disapproval of the Merger by the stockholders. In view of the wide variety of factors considered in connection with its evaluation of the Merger, the Special Committee and the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the individual factors considered in reaching its determinations. Of primary importance, however, was CKE's willingness to acquire Summit, as an entity, in a single transaction resulting in a non-contingent payment to all stockholders, its ability to finance and consummate the transaction and the absence of any other proposal having similar characteristics. Also of significance to the Special Committee and the Board were the opinions of Piper Jaffray and Houlihan Lokey to the effect that the transaction is fair to the holders of Summit Common Stock. Finally, the willingness of the prior holder of the outstanding Summit Preferred Stock to sell the Summit Preferred Stock to CKE at a cash price below its liquidation preference of $5.50 per share and approximately equivalent to the Merger Consideration was deemed important to the Special Committee and the Board in making their recommendation to the holders of Common Stock. FAIRNESS OPINION OF HOULIHAN LOKEY The following information is added immediately before the caption "--Opinion of Financial Advisor to Summit." Houlihan Lokey was engaged by Summit to render an opinion to the Board of Directors of Summit as to the fairness, from a financial point of view, to the stockholders of Summit, other than CKE (the "Public Stockholders"), of the consideration to be received by them in the Merger (the "Opinion"). The full text of the opinion, which contains a detailed description of the assumptions and qualifications 5 7 made, matters considered and limitations on the review and opinion, is set forth in Appendix A to this Supplement and should be read in its entirety. The Opinion is dated June 26, 1996, and does not take into account any matters that have occurred after that date. The Opinion is necessarily based on business, economic, market and other conditions as they existed and could be evaluated by Houlihan Lokey as of the date of the Opinion. The Opinion does not constitute a recommendation to the Public Stockholders as to how to vote or otherwise act in connection with the Merger. Certain of the material assumptions, qualifications and limitations to the Opinion are set forth below. The summary set forth below does not purport to be a complete description of the analyses used by Houlihan Lokey in rendering the Opinion. Arriving at a fairness opinion is a complex analytical process not necessarily susceptible to partial analysis or amenable to summary description. Experience of Houlihan Lokey. Houlihan Lokey is engaged in the investment banking business, providing a broad range of investment banking and other financial services to clients located throughout the United States. The business activities of Houlihan Lokey include: financial opinions, investment banking, financial restructuring and fixed income asset management. Houlihan Lokey was retained to render an opinion in part because of its experience in valuation and financial analysis and in the restaurant industry. Houlihan Lokey advised the Board of Directors of Summit that it had no prior business relationship with either Summit or CKE. The Opinion does not address the Company's underlying business decision to effect the Merger. Houlihan Lokey was not requested to, and did not, solicit third party indications of interest in acquiring all or part of Summit. Furthermore, at Summit's request, Houlihan Lokey did not negotiate the Merger or advise Summit with respect to alternatives to the Merger. Summary of Materials Considered. In connection with its analysis, Houlihan Lokey (i) reviewed Summit's annual reports to stockholders and on Form 10-K for the five fiscal years ended September 25, 1995 and quarterly reports on Form 10-Q for the quarters ended December 18, 1995 and March 11, 1996; (ii) reviewed the Proxy Statement; (iii) reviewed, as contained in the Proxy Statement/Prospectus, the Merger Agreement; (iv) met with certain members of the senior management of Summit to discuss the operations, financial condition and future prospects of Summit, and spoke with a representative of Summit's financial advisor; (v) met with certain members of the senior management of CKE to discuss the operations, financial condition and future prospects of CKE; (vi) visited certain facilities and business offices of Summit and CKE; (vii) reviewed forecasts and projections on a consolidated basis prepared by Summit's management with respect to Summit for the years ending 1996 through 2000, as contained under the caption "Certain Projections of Summit" in the Special Factors section of the Proxy Statement; (viii) reviewed CKE's annual reports to stockholders and on Form 10-K for the three fiscal years ended January 29, 1996; (ix) reviewed the historical market prices and trading volume for Summit's and CKE's publicly traded securities; (x) reviewed certain other publicly available financial data for certain companies that Houlihan Lokey deems comparable to Summit, and publicly available prices and premiums paid in other transactions that it considered similar to the Merger; (xi) reviewed the Opposition Proxy Group's Proxy Statement 1--Opposition to Merger and Proxy Statement 2--For Resignation or Removal of Directors and For Election of New Directors both dated June 20, 1996; and (xii) conducted such other studies, analyses and inquiries as Houlihan Lokey deemed appropriate. General. In arriving at the Opinion, Houlihan Lokey conducted various analyses supporting a valuation of Summit and then compared that valuation to the consideration being received by the Public Stockholders in the Merger. Houlihan Lokey did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. In the analyses, Houlihan Lokey made numerous assumptions with respect to 6 8 Summit, industry performance, general business and economic, market and financial conditions and other matters. Additionally, analyses relating to the value of businesses or securities are not appraisals. Accordingly, such analyses and estimates are inherently subject to substantial uncertainty. The values expressed or implied by the Opinion may or may not bear a relationship to the present or future value of the Company, CKE or the shares of either of them. In the analysis of Summit, Houlihan Lokey took into account the income- and cash-generating capability of Summit. In Houlihan Lokey's view, an investor contemplating an investment in companies with income- and cash-generating capability similar to Summit would typically evaluate the risks and returns of its investment on a going-concern basis. Accordingly, the value of Summit was analyzed primarily on the basis of a market multiple analysis and a discounted cash flow analysis. Acquisition Premium. An acquisition or control premium is defined as the additional consideration that an investor would pay over a marketable minority equity value in order to own a controlling interest in the equity of a company. Owners of minority interests, by themselves, generally do not have the powers or the prestige that comes with control. Consequently, a controlling interest is generally considered to be worth more per share than a minority interest and is usually expressed as a percentage of the marketable minority price. In the case of the Market Multiple Analysis and Discounted Cash Flow Analysis outlined below, the equity values determined by Houlihan Lokey were on a marketable minority equity value, which were then multiplied by the acquisition premium determined by Houlihan Lokey to be appropriate. In the experience of Houlihan Lokey, the magnitude of a control premium will often depend on several factors related to the particular company, including the degree of financial leverage in the company, the overall quality and depth of management, and the nature and magnitude of business opportunities not currently being exploited by incumbent management (e.g., potential streamlining, consolidation of operations, and cash flow improvements). Houlihan Lokey measured the difference in value between controlling interests in companies and minority interests by reviewing recent public tender offers where the investor successfully acquired a control position. The market price of the stock prior to the tender offer is compared to the higher price at which the transaction closed, resulting in the premium paid for the control position. Houlihan Lokey concluded that control premiums ranged from no control premium to a high of approximately 242%, with a mean of 31.8% and a median of 38.6%. However, Houlihan Lokey concluded that most of these transactions involved "strategic buyers" who pay higher premiums for particular businesses that offer benefits to the acquiror in the form of "synergies." Houlihan Lokey believed that the fair market value of a company, which is an important element in reaching a fairness opinion, should not take into account the particular parties to a comparable transaction, such as strategic buyers. Accordingly, Houlihan Lokey determined that the choice of an appropriate control premium for Summit should consider only what a financial investor would pay, and ignore any benefits that might accrue to an investor purely as a result of operational synergies unique to a particular investor. Following a review of the operating and financial characteristics of the companies surveyed and selection of the most comparable transactions, Houlihan Lokey determined the appropriate premium for Summit based on Summit's weaker financial performance among other factors. Based upon Houlihan Lokey's analysis of these data and consideration of relevant qualitative factors, Houlihan Lokey concluded that an appropriate control premium for Summit's equity was 20% (the "Acquisition Premium"). This 7 9 compares with an effective control premium in the range of 34% to 78% being paid by CKE if Summit is valued on the market value approach as described below and an effective control premium in the range of 181% to 193% being paid by CKE if Summit is valued on the discounted cash flow basis as described below. Market Multiple Analysis. The fundamental concept underlying the market multiple analysis is that an investor should earn a fair and reasonable return on the investment at the concluded value. Market multiples applied to various earnings or revenues levels should reflect all risks of ownership and the associated risks of realizing income generated by the company. Houlihan Lokey conducted a market multiple analysis by first comparing certain financial and operational factors of Summit to two groups of comparable publicly traded companies. The first group of comparable companies consisted of those that operate family style, casual dining restaurants, other than the "cafeteria/buffet" segment and the second group consisted of those in the cafeteria/buffet segment. The first group ("Group One") consisted of Bob Evans Farms, Cracker Barrel, Flagstar, Ground Round Restaurant, Perkins Family Restaurants and Ryan's Family Steak Houses. The second group ("Group Two") consisted of Piccadilly Cafeterias, Buffets, Inc., Hometown Buffet Inc. and Luby's Cafeterias. Among other factors, Houlihan Lokey considered Summit's loss of exclusivity for its HomeTown Buffet franchise territory if another HomeTown Buffet restaurant is not opened by June 30, 1996 and another five HomeTown Buffet restaurants are not opened by December 31, 1996, the financial performance of JB's Restaurants, and Summit's inability to access capital to finance HomeTown Buffet expansion, Galaxy Diner expansion or remodel existing restaurant locations. Houlihan Lokey determined that the comparable companies in Group One and Group Two had a ratio of the median stock price to latest-twelve month revenues of 0.88x and 0.99x, respectively, and that the appropriate multiple for Summit is 0.2x. Houlihan Lokey also determined that the comparable companies in Group One and Group Two had a ratio of the median stock price to next fiscal year earnings before interest, taxes, depreciation and amortization ("EBDIT") of 6.5x and 5.9x, respectively, and that the appropriate multiple for Summit is 5.0x. Houlihan Lokey also determined that the comparable companies in Group One and Group Two had a median stock price to net book value of 2.1x and 2.3x, respectively, and that the appropriate multiple for Summit is .5x. Summit's other income and cash flow were either negative or nominal in the latest twelve months and next fiscal year periods which makes a comparison of other multiples not meaningful. Based upon its market approach analysis, Houlihan Lokey concluded the fair market value range of equity for Summit was determined by Houlihan Lokey to be $17,200,000 to $22,800,000 (approximately $2.99 to $3.96 per share, compared to the total consideration of $5.32 per share being paid by CKE in the Merger based on the assumptions described above), after deduction for interest bearing debt of $11,197,000 (as appropriate), the addition of the Acquisition Premium and the addition of the value of the HomeTown Buffet, Inc. common stock of $1,649,000 (net of taxes). Discounted Cash Flow Analysis. Houlihan Lokey's discounted cash flow analysis estimated the value of Summit on the present worth of the projected net debt-free cash flows generated by the business and available (although not necessarily paid) to debt and equity holders. Net debt-free cash flow is defined as cash flow before interest expense less capital expenditures and working capital requirements. Houlihan Lokey relied on, without independent investigation, Summit's consolidated projections for the period from 1996 to 2000, as contained in the Proxy Statement, to conduct its analysis. 8 10 The present values of the projected net debt-free cash flows provided by management were determined by Houlihan Lokey using risk-adjusted discount rates ranging from 17.0% to 18.0% based on the calculated weighted average cost of capital ("WACC") and the risks associated with the Company's business. The WACC was developed based on a weighted average of the estimated costs of borrowing for Summit and the required rate of return on equity of the selected comparable public companies identified above. In valuing Summit using the discounted cash flow analysis, a provision was made for the value of the business at the end of the forecast period, or terminal value, by the use of a Gordon Growth model. A Gordon Growth analysis values future cash flow streams through a mathematical expression for the present value of a cash flow stream growing at a constant rate and discounted at a constant rate. The discount rate employed in determining the terminal value was the same as that employed in present valuing the interim projected net debt-free cash flows. An annual growth rate of 3% to 4% was considered appropriate by Houlihan Lokey based on discussions with management and consideration of industry factors. Based upon the discounted cash flow analysis, Houlihan Lokey concluded that the fair market value range of equity for Summit to be $10,400,000 to $10,900,000 (approximately $1.81 to $1.89 per share, compared to the total consideration of $5.32 per share being paid by CKE in the Merger based on the assumptions described above), after deduction for interest bearing debt of $11,197,000 (as appropriate), the addition of the Acquisition Premium and the addition of the value of the HomeTown Buffet, Inc. common stock of $1,649,000 (net of taxes). Conclusions. Based on the foregoing, Houlihan Lokey rendered the Opinion to Summit's Board of Directors that, based upon its analysis and assumptions, and as of the date of the Opinion, the consideration to be received by the Public Stockholders in the Merger is fair, from a financial point of view. Assumptions. In rendering the Opinion, Houlihan Lokey relied on and assumed, without independent verification, that the data, material and other information (including, but not limited to, financial forecasts and projections and the information set forth in the Proxy Statement) provided to it were reasonably prepared and reflect the best currently available estimates of the future financial results and condition of Summit, and that there has been no material change in the assets, financial condition, business or prospects of Summit since the date of the most recent financial statements made available to Houlihan Lokey. Houlihan Lokey does not assume responsibility for the accuracy and completeness of such information including, but not limited to, any information contained in this Proxy Statement. Under its engagement letter, Houlihan Lokey was not obligated to conduct any independent study or investigation as to the accuracy or completeness of such information. Fees and Terms of Engagement. Summit has paid Houlihan Lokey $75,000 in fees for rendering the Opinion. No portion of the fee was contingent upon consummation of the Merger or the conclusions reached in the opinion. Summit has agreed to indemnify Houlihan Lokey against certain liabilities incurred and to reimburse Houlihan Lokey for its reasonable out-of-pocket expenses. 9 11 SHOULD YOU TRUST THE OPPOSITION GROUP? In a press release dated June 26, 1996, First Global Securities states: "Noble Trenham has not been a participant in the effort of the Opposition Group." Summit asks you to make up your own mind in light of the following: o In August 1995, Noble Trenham on behalf of First Global Securities requested information from Summit management concerning a proposed management-led buyout. In order to provide the information, Summit requested a confidentiality agreement. The confidentiality agreement that was returned to Summit was signed "Noble B. Trenham." o On August 29, 1995, First Global Securities, in a letter signed by Noble B. Trenham, returned the confidential information to Summit. The letter stated: "I have decided today that it is not in the interests of First Global's clients or our own interest for me to read or document and I have not done so." o In a letter from First Global Securities to Lyons Restaurants dated March 29, 1996, Noble Trenham stated that "Just five of my institutional clients and friends own or control 41.3% of a public company in the restaurant business, Summit Family Restaurants . . . " o Noble Trenham proposed to Lyons Restaurants that it "engage First Global as its investment banker." In the letter, Mr. Trenham proposed that: We will assess your profitable operations; design a strategy for you to take control of Summit in exchange for new Summit stock; you win the $42MM in cash and control a public company after the current shareholders vote you in. o In the same letter, Noble Trenham stated that: "My objective is to serve my clients by executing a plan with a new profitable operator." In closing, he stated: We need a profitable private operator. This is a splendid opportunity for an expansion minded CEO. Where could you receive such a cash source and seasoned set of stockholders? I hope I have made myself clear? Are YOU that special person into whose hands we can entrust our company? o Two weeks later, on April 15, 1996, First Global Securities, in a letter signed by Noble Trenham, wrote to Summit asking for copies of its bylaws and articles of incorporation. Summit believes that these documented actions demonstrate that Noble Trenham has, directly or indirectly, organized and directed multiple aspects of the effort by First Global Securities to form the Opposition Group and to oppose the proposed Merger. As a result, Summit believes that Noble Trenham 10 12 is a participant with the Opposition Group and that his background, including the information included in the June Letter, is highly relevant to the decision that Summit stockholders must make. 11 13 IMPORTANT Whether or not you have previously signed a proxy card from the Opposition Group, please sign, date and mail management's WHITE PROXY CARD in the enclosed postage-paid envelope. Summit stockholders may submit or revoke proxies by telecopier at (201) 804-8693. (If you wish to add to your comments and suggestions about the issues discussed in this letter, please note them on the proxy card.) Please DO NOT execute or return any Red card sent to you by the Opposition Group. If you own your shares in the name of a brokerage firm, your broker cannot vote such shares unless he receives your specific instructions. If you have questions about voting your shares or want further assistance or information, please do not hesitate to call our proxy solicitor: CORPORATE INVESTOR COMMUNICATIONS, INC. AT (800) 346-7885 OR COLLECT AT (201) 896-1900 EX-99.14 4 OPINION OF HOULIHAN, LOKEY, HOWARD & ZUKIN 1 EXHIBIT 99.14 [HOULIHAN LOKEY HOWARD & ZUKIN LETTERHEAD] June 26, 1996 To The Board of Directors Summit Family Restaurants Inc. We understand that Summit Family Restaurants Inc. (the "Company") has entered into an Agreement and Plan of Merger and Reorganization, dated as of November 30, 1995 and amended as of January 24, 1996, April 2, 1996 and June 5, 1996 (as so amended, the "Merger Agreement"), with CKE Restaurants, Inc., ("CKE) and Summit Merger, Inc. The Merger Agreement provides for the merger of Summit Merger, Inc., a newly formed, wholly owned subsidiary of CKE, with and into the Company (the "Merger"). As a result of the Merger, the Company will become a wholly owned subsidiary of CKE. Upon consummation of the Merger each outstanding share of the Company's common stock will be converted into the right to receive (the "Consideration"): (i) $2.63 in cash; and (ii) a number of CKE common shares equal to the greater of (a) 0.09103 or (b) a fraction, the numerator of which is $2.64 and the denominator will be an amount determined on the basis of an average of the closing sales prices of CKE common stock on the New York Stock Exchange for the 20 consecutive trading days ending five days prior to the date of the Special Meeting of the Company's stockholders. Based upon the recent average CKE price, the range of the consideration for each share of the Company's common stock, including both cash and the CKE common shares as described above, is approximately $5.09 to $5.44. The Merger, the exchange of the Company's common stock for the Consideration, and other related transactions described in the Company's Proxy Statement/Prospectus dated June 10, 1996 are referred to collectively herein as the "Transaction." The Company's Board of Directors has requested that Houlihan Lokey render an opinion as to the fairness, from a financial point of view, to the stockholders of the Company, other than CKE, (the "Public Stockholders") of the Consideration to be received by them in connection with the Transaction. You have requested our opinion (the "Opinion") as to the matters set forth below. The Opinion does not address the Company's underlying business decision to effect the Transaction. We have not been requested to, and did not, solicit third party indications of interest in acquiring all or any part of the Company. Furthermore, at your request, we have not negotiated the Transaction or advised you with respect to alternatives to it. 2 To The Board of Directors Summit Family Restaurants Inc. June 26, 1996 -2- In connection with this Opinion, we have made such reviews, analyses and inquiries as we have deemed necessary and appropriate under the circumstances. Among other things, we have: 1. reviewed the Company's annual reports to shareholders and on Form 10-K for the five fiscal years ended September 25, 1995 and quarterly reports on Form 10-Q for the quarters ended December 18, 1995 and March 11, 1996, which the Company's management has identified as being the most current financial statements publicly available; 2. reviewed the Summit Proxy Statement/Prospectus, dated June 10, 1996 (the "Proxy"); 3. reviewed, as contained in the Proxy Statement/Prospectus, the Agreement and Plan of Merger and Reorganization, dated as of November 30, 1995, and amended as of January 24, 1996, April 2, 1996 and June 5, 1996; 4. met with certain members of the senior management of the Company to discuss the operations, financial condition and future prospects of the Company, and spoke with a representative of the Company's investment banker; 5. met with certain members of the senior management of CKE to discuss the operations, financial condition and future prospects of CKE; 6. visited certain facilities and business offices of the Company and CKE; 7. reviewed forecasts and projections on a consolidated basis prepared by the Company's management with respect to the Company for the years ending 1996 through 2000, as contained under the caption "Certain Projections of Summit" in the Special Factors section of the June 10, 1996 Proxy Statement/Prospectus and related supporting data; 8. reviewed CKE's annual reports to shareholders and on Form 10-K for the three fiscal years ended January 29, 1996; 9. reviewed the historical market prices and trading volume for the Company's and CKE's publicly traded securities; 10. reviewed certain other publicly available financial data for certain companies that we deem comparable to the Company, and publicly available prices and premiums paid in other transactions that we considered similar to the Transaction; 3 To The Board of Directors Summit Family Restaurants Inc. June 26, 1996 -3- 11. reviewed the Opposition Proxy Group's Proxy Statement 1 - Opposition to Merger and Proxy Statement 2 - for Resignation or Removal of Directors and For Election of New Directors both dated June 20, 1996; and 12. conducted such other studies, analyses and inquiries as we have deemed appropriate. We have relied upon and assumed, without independent verification, that the financial forecasts and projections provided to us have been reasonably prepared and reflect the best currently available estimates of the future financial results and condition of the Company, and that there has been no material change in the assets, financial condition, business or prospects of the Company since the date of the most recent financial statements made available to us. We have not independently verified the accuracy and completeness of the information supplied to us with respect to the Company and do not assume any responsibility with respect to it. We have not made any physical inspection or independent appraisal of any of the properties or assets of the Company. Our opinion is necessarily based on business, economic, market and other conditions as they exist and can be evaluated by us at the date of this letter. Based upon the foregoing, and in reliance thereon, it is our opinion that the consideration to be received by the Public Stockholders of the Company in connection with the Transaction is fair to them from a financial point of view as of the date of this letter. HOULIHAN, LOKEY, HOWARD & ZUKIN, INC. [SIG] EX-99.15 5 REPORT OF HOULIHAN LOKEY DELIVERED ON JUNE 6, 1996 1 Exhibit 99.15 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- BOARD OF DIRECTORS PRESENTATION I. Scope II. Transaction Overview III. Due Diligence IV. Valuation Approaches V. Market Approach VI. Discounted Cash Flow Analysis VII. Transaction Multiples APPENDIX - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 2 - ------------------------------------------------------------------------------- SCOPE - ------------------------------------------------------------------------------- 3 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- I. SCOPE We understand that the Company's Board of Directors has requested that Houlihan Lokey render an opinion as to the fairness, from a financial point of view, to the public stockholders of the Company of the consideration to be received by them in connection with the Transaction. The Opinion shall not address the Company's underlying business decision to effect the Transaction. We have not been engaged to initiate any discussions with third parties with respect to a possible acquisition of the Company. - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 1 4 - ------------------------------------------------------------------------------- TRANSACTION OVERVIEW - ------------------------------------------------------------------------------- 5 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- II. TRANSACTION OVERVIEW Summit has entered into an Agreement and Plan of Merger and Reorganization, dated as of November 30, 1995, (as amended, the "Merger Agreement") with CKE Restaurants, Inc., ("CKE"). The Merger Agreement provides for the merger of Summit Merger, Inc., a newly formed, wholly owned subsidiary of CKE, with and into the Company, (the "Merger"). As a result of the Merger, the Company will become a wholly owned subsidiary of CKE. Upon consummation of the Merger each outstanding share of the Company's common stock will be converted into the right to receive, (the "Consideration"):(i) $2.63 in cash; and (ii) a number of CKE common shares equal to the greater of (a) 0.09103 or (b) a fraction, the numerator of which is $2.64 and the denominator will be an amount determined on the basis of an average of the closing sales prices of CKE common stock on the New York Stock Exchange for the 20 consecutive trading days ending five days prior to the date of the Special Meeting of the Company's shareholders. Based upon the recent average CKE price, the range of the consideration for each share of the Company's common stock, including both cash and the CKE common shares as described above, is approximately $5.09 to $5.44. The range as stated in the proxy statement/prospectus filed 6/10/96 is $5.09 - $5.44 per Summit share; this implies a market value of equity in the range of $29,280,052 to $31,294,231. - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 2 6 - ------------------------------------------------------------------------------- DUE DILIGENCE - ------------------------------------------------------------------------------- 7 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- III. DUE DILIGENCE In connection with this Opinion, we have made such reviews, analyses and inquiries as we have deemed necessary and appropriate under the circumstances. Among other things, we have: 1. reviewed the Company's annual reports to shareholders and on Form 10-K for the five fiscal years ended September 25, 1995 and quarterly reports on Form 10-Q for the quarters ended December 18, 1995 and March 11, 1996, which the Company's management has identified as being the most current financial statements publicly available; 2. reviewed the Summit Proxy Statement/Prospectus, dated June 10, 1996 (the "Proxy"); 3. reviewed, as contained in the Proxy Statement/Prospectus, the Agreement and Plan of Merger and Reorganization, dated as of November 30, 1995, and amended as of January 24, 1996, April 2, 1996 and June 5, 1996; 4. met with certain members of the senior management of the Company to discuss the operations, financial condition and future prospects of the Company, and spoke with a representative of the Company's investment banker; 5. met with certain members of the senior management of CKE to discuss the operations, financial condition and future prospects of CKE; 6. visited certain facilities and business offices of the Company and CKE; 7. reviewed forecasts and projections on a consolidated basis prepared by the Company's management with respect to the Company for the years ending 1996 through 2000, as contained under the caption "Certain Projections of Summit" in the Special Factors section of the June 10, 1996 Proxy Statement/Prospectus and related supporting data; 8. reviewed CKE's annual reports to shareholders and on Form 10-K for the three fiscal years ended January 29, 1996; - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 3 8 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- 9. reviewed the historical market prices and trading volume for the Company's and CKE's publicly traded securities; 10. reviewed certain other publicly available financial data for certain companies that we deem comparable to the Company, and publicly available prices and premiums paid in other transactions that we considered similar to the Transaction; 11. reviewed the Opposition Proxy Group's Proxy Statement 1 - Opposition to Merger and Proxy Statement 2 - For Resignation or Removal of Directors and For Election of New Directors both dated June 20, 1996; and 12. conducted such other studies, analyses and inquiries as we have deemed appropriate. - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 4 9 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- VALUATION APPROACHES - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 10 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- IV. VALUATION APPROACHES - Market Approach (Revenue, Book Value, Earnings Before Interest, Taxes, and Depreciation) - Discounted Cash Flow Analysis - Transaction Multiples - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 5 11 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- Summit Family Restaurants Inc. Fairness Opinion As of June 26, 1996 - ------------------------------------------------------------------------------- ($ In 000s, exept per share numbers) EQUITY RESULTS SUMMARY:
----------------------------------------------------------------------- Concluded Valuation Range based on HLHZ analysis Low High Market Approach and Discounted Cash Flow Analysis (rounded) 8,800 21,200 Plus: HomeTown stock (1) 1,649 1,649 Total Aggregate equity value (rounded) 10,400 22,800 1) Based on $13.875 per share x 130,000 shares (net of taxes at 10% based on discussions with management) ----------------------------------------------------------------------- CKE consideration offered: $29,280 to $31,294
6 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 12 - ------------------------------------------------------------------------------- MARKET APPROACH - ------------------------------------------------------------------------------- 13 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- V. MARKET APPROACH - Reviewed and analyzed quantitative and qualitative risk factors for Summit Family Restaurants Inc. - Reviewed and analyzed quantitative and qualitative risk factors for public company comparables (see Appendix) - Compared and contrasted quantitative and qualitative risk factors and selected multiples based on these risk factors SUMMARY - Summit is a much greater investment risk than the public companies - Therefore, discount to the public company multiples were applied to capture these risks CONCLUSION $15,579,000 to $21,162,000 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 7 14 Summit Family Restaurants Inc. SUMMIT FAMILY RESTAURANTS INC. - SELECTION OF MARKET MULTIPLES - ------------------------------------------------------------------------------- - Declining sales - Poor historical performance - Weakness in brand and franchise system - Almost certain loss of exlusive territority - HomeTown Buffet - Access to capital is limited; limits remodels, advertising, and expansion Cash flow is primarily the result of sales of HomeTown Buffet stock - Many "Big Restaurant Players" already have a presence in Summit's markets which limits the number and type of acquiror candidates - Significant staff reductions - Significant potential liabilities related to cost of closing "problem" restaurants - Negative working capital + Western region is generally perceived as high growth area + Staff terminations have reduced overhead 8 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 15 Summit Family Restaurants Inc. SUMMIT FAMILY RESTAURANTS INC. - MARKET MULTIPLES - -------------------------------------------------------------------------------- ($000S)
Market Acquisition Control Approach Rep. Level Multiple TIC Debt Equity Premium Equity - -------------------------------------------------------------------------------------------------- At 3/11/96 NEXT FISCAL YEAR (97) EBDITA* 5,079 5.00 25,395 (11,197) 14,198 1.20 17,038 LATEST TWELVE MONTHS Revenue 120,897 0.20 24,179 (11,197) 12,982 1.20 15,579 Book Value** 35,270 0.50 1.20 21,162
* Earnings before depreciation/amortization, interest and taxes ** Less: book value of HomeTown shares @ $1,430 as of 3/11/96. 9 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 16 - ------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS - ------------------------------------------------------------------------------- 17 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- VI. DISCOUNTED CASH FLOW ANALYSIS - Used management projections (as contained in the June 10, 1996 Proxy) - Selected appropriate risk adjusted discount rate - Selected appropriate terminal multiples and growth rates CONCLUSIONS Range of Total Interested Capital: $18,550,150 to $18,920,304 Less: Interest Bearing Debt: 11,197,000 -------------------------- Range of Equity Value: $8,823,780 to $9,267,965
- ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 10 18 Summit Family Restaurants Inc. DISCOUNTED CASH FLOW ANALYSIS - SUMMIT FAMILY RESTAURANTS INC. - -------------------------------------------------------------------------------
1996 1997 1998 1999 2000 ----------------------------------------------------------------------- Revenues 120,311,303 120,350,837 122,816,850 125,334,443 127,904,718 Growth NA 0.0% 2.0% 2.0% 2.1% Earnings (EBIT) (1,821,102) (1,277,111) (1,166,338) (687,893) 199,728 Less: Income Taxes @ 40% 0 0 0 0 79,891 ----------------------------------------------------------------------- Debt Free Earnings (1,821,102) (1,277,111) (1,166,338) (687,893) 119,837 Add: Depreciation/Amortiztion 6,926,449 6,355,429 6,572,229 6,669,029 6,765,829 Less: Changes in Working Capital 1,400,059 (734,730) (734,731) (734,729) (734,731) Less: Capital Expenditures 1,473,000 2,084,000 2,084,000 2,084,000 2,084,000 ----------------------------------------------------------------------- Net Debt Free Cash Flow 2,232,288 3,729,048 4,056,622 4,631,865 5,536,397 Selected discount range: 17.0% to 18.0% Selected terminal growth range: 3.0% to 4.0% Concluded range of TIC value *: $ 18,550,150 $ 18,920,304 Less: Debt $(11,197,000) $(11,197,000) Concluded Equity Range $ 7,353,150 $ 7,723,304 Concluded Conrol Value Equity Range $ 8,823,780 $ 9,267,965
* TIC: Total Invested Capital (Interest bearing debt plus market value of equity) - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 11 19 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- TRANSACTION MULTIPLES - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 20 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- VII. TRANSACTION MULTIPLES - Looked at 20 acquisitions of publicly-traded companies in the restaurant industry. - Transactions from January 1994 to the present were considered. CONCLUSIONS Based on our analysis of the financial and operational characteristics of Summit Family Restaurants Inc., no transactions occurred that were identical to the proposed Summit Family Restaurants Inc. transaction. - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 12 21 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- RECENT RESTAURANT INDUSTRY MERGER AND ACQUISITION ACTIVITY SINCE 1994 - ------------------------------------------------------------------------------- ($ in Millions)
Implied Target LTM Date Enterprise --------------------- EBITDA/ Announced Target Acquiror Value Sales EBIT EBITDA Sales - --------- ------ -------- ---------- ----- ---- ------ ----- 06/05/96 HomeTown Buffet Inc. Buffet's Inc. 227.9 152.4 11.4 21.3 14% 05/03/96 Houlihan's Restaurants Group Zapata Corp. 168.9 258.9 15.3 30.3 12% 04/19/96 Bayport Restaurant Group Landry's 63.8 59.5 2.4 3.9 7% 01/01/96 Franchise Groups (Proforma) Outback Steakhouse Inc 146.8 141.6 - 26.2 19% 01/01/96 Franchise Groups Outback Steakhouse Inc 146.8 112.9 9.6 13.4 12% 11/02/95 Brinker Int'l-Gradys American Quality Dining Inc 74.4 100.9 3.2 4.6 5% 10/10/95 Champps Entertainment DAKA International 70.0 16.3 NA NA 09/18/95 Del Frisco's Double Eagle Lone Star Steakhouse & Saloon 23.0 10.1 3.7 3.8 38% 08/15/95 DF&R Restaurants Inc Apple South 194.1 84.3 9.5 14.0 17% 07/20/95 Let Us Entertain You (Units) Brinker International 67.0 35.0 NA NA 05/01/95 Marcus Corp-Applebee's Apple South 48.0 35.5 2.3 4.1 11% 04/21/95 Denwest Restaurant Corp American Family Restaurants 52.0 67.8 7.4 10.0 15% 03/21/95 TUG Inc-Restaurants(8) Apple South 17.0 11.9 1.5 1.8 15% 02/01/95 Dave and Buster's Inc Shareholders 94.6 49.4 4.0 8.0 16% 11/10/94 Tia's Inc Morrison Restaurants Inc 23.0 12.1 - - - 10/24/94 Grayling Corp Quality Dining Inc 19.9 18.1 2.3 3.0 17% 10/14/94 Innovative Restaurant Concepts Applebee's International Inc 63.7 51.9 3.9 6.2 12% 07/14/94 Southern Hospitality Corp DavCo Restaurants Inc 18.4 32.4 3.1 4.5 14% 07/05/94 Marco's Mexican Restaurants Billy Blues Food Corp 24.9 22.0 0.3 1.0 5% 01/24/94 On The Border Cafes Inc Brinker International Inc 34.4 30.6 (2.6) (1.1) NMF
Implied Multiples Date ----------------------- Announced Target Acquiror Sales EBIT EBITDA - --------- ------ -------- ----- ---- ------ 06/05/96 HomeTown Buffet Inc. Buffet's Inc. 1.50 20.0 10.7 05/03/96 Houlihan's Restaurants Group Zapata Corp. 0.65 11.0 5.6 04/19/96 Bayport Restaurant Group Landry's 1.07 26.8 16.5 01/01/96 Franchise Groups (Proforma) Outback Steakhouse Inc 1.04 NA 5.6 01/01/96 Franchise Groups Outback Steakhouse Inc 1.30 15.3 11.0 11/02/95 Brinker Int'l-Gradys American Quality Dining Inc 0.74 23.2 16.3 10/10/95 Champps Entertainment DAKA International NA NA NA 09/18/95 Del Frisco's Double Eagle Lone Star Steakhouse & Saloon 2.28 6.1 6.0 08/15/95 DF&R Restaurants Inc Apple South 2.30 20.4 13.9 07/20/95 Let Us Entertain You (Units) Brinker International NA NA NA 05/01/95 Marcus Corp-Applebee's Apple South 1.35 21.3 11.9 04/21/95 Denwest Restaurant Corp American Family Restaurants 0.77 7.0 5.2 03/21/95 TUG Inc-Restaurants(8) Apple South 1.43 11.7 9.3 02/01/95 Dave and Buster's Inc Shareholders 1.91 23.5 11.9 11/10/94 Tia's Inc Morrison Restaurants Inc 1.90 NA NA 10/24/94 Grayling Corp Quality Dining Inc 1.10 8.7 6.6 10/14/94 Innovative Restaurant Concepts Applebee's International Inc 1.23 16.3 10.3 07/14/94 Southern Hospitality Corp DavCo Restaurants Inc 0.57 5.9 4.1 07/05/94 Marco's Mexican Restaurants Billy Blues Food Corp 1.13 83.0 24.9 01/24/94 On The Border Cafes Inc Brinker International Inc 1.13 -13.2 -31.3 - --------------------------------------------------------------------------------------------------------- Median 1.13 11.38 7.96 Mean 1.17 14.35 6.91 - ---------------------------------------------------------------------------------------------------------
13 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 22 - ------------------------------------------------------------------------------- APPENDIX - ------------------------------------------------------------------------------- 23 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- PUBLIC COMPANY COMPARATIVE FINANCIAL ANALYSIS
BOB CRACKER GROUND PERKINS RYAN'S STATISTICS & RATIOS EVANS BARREL FLAGSTAR ROUND IHOP FAMILY FAMILY - ------------------- ------ ------- -------- ------ ------ ------- ------ Updated Through Apr-96 Apr-96 Mar-96 Mar-96 Mar-96 Mar-96 Mar-96 Fiscal Year Ended Apr-95 Jul-95 Dec-95 Sep-95 Dec-95 Dec-95 Dec-95 SIZE ($ MILLIONS) - ----------------- Revenues $797.3 $ 882.3 $ 2,485.4 $220.8 $171.4 $248.8 $528.4 Total Assets $531.8 $ 618.0 $ 1,451.7 $135.0 $262.4 $159.5 $449.2 Net Worth (Common, Tangible) $404.9 $ 527.2 $(1,184.2) $ 53.1 $ 98.3 $ 34.9 $302.1 Earnings Before Interest & Taxes $ 76.7 $ 110.8 $ 141.8 $ (9.8) $ 38.3 $ 16.6 $ 56.7 Earnings Before Depr, Interest, Tax & Amort $ 97.6 $ 140.0 $ 278.2 $ 4.0 $ 45.5 $ 31.5 $ 79.8 Adjusted Net Income $ 47.2 $ 68.6 $ (121.2) $(11.2) $ 17.4 $ 10.9 $ 34.4 Cash Flow $ 68.1 $ 97.9 $ 15.2 $ 2.6 $ 24.6 $ 25.8 $ 57.4 Total Interest--Bearing Debt $ 54.7 $ 24.7 $ 2,028.8 $ 53.7 $105.8 $ 70.1 $ 85.9 Market Value Of Equity $636.8 $1,558.4 $ 147.1 $ 37.8 $267.6 $126.1 $465.9 Total Invested Capital (No Control Premium) $691.4 $1,583.1 $ 2,176.1 $ 91.5 $373.4 $196.2 $551.8 LIQUIDITY RATIOS - ---------------- Quick Ratio 0.3 0.6 0.6 0.2 0.9 0.4 0.1 Current Ratio 0.5 1.4 0.6 0.2 0.9 0.5 0.1 Working Capital Turnover -14.4 32.7 -17.7 -10.0 -81.9 -17.7 -4.3 FINANCIAL LEVERAGE RATIOS - ------------------------- Total Liabilities To Net Worth 0.3 0.2 -2.2 1.5 1.5 2.8 0.5 Total Interest Bearing Debt To Net Worth 0.1 0.0 -1.7 1.0 1.1 2.0 0.3 Interest Coverage 470.8 522.5 1.2 0.8 4.8 6.3 40.3 Interest Expense To Total Interest--Bearing Debt 0.6% 1.2% 11.2% 9.0% 17.7% 7.8% 2.6% Total Interest--Bearing Debt To FMV Of Net Worth 0.1 0.0 13.8 1.4 0.4 0.6 0.2 ACTIVITY RATIOS - --------------- Inventory Turnover 34.8 6.3 46.4 97.2 160.3 54.2 125.9 Asset Turnover 1.6 1.5 1.7 1.6 0.7 1.6 1.3 Average A/R Collection Period (In Days) 6.6 1.0 4.0 2.3 40.6 11.2 1.1
A-1 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 24 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- PUBLIC COMPANY COMPARATIVE FINANCIAL ANALYSIS
BOB CRACKER GROUND PERKINS RYAN'S STATISTICS & RATIOS EVANS BARREL FLAGSTAR ROUND IHOP FAMILY FAMILY - ------------------- ------ ------- -------- ------ ------ ------- ------ Updated Through Apr-96 Apr-96 Mar-96 Mar-96 Mar-96 Mar-96 Mar-96 Fiscal Year Ended Apr-95 Jul-95 Dec-95 Sep-95 Dec-95 Dec-95 Dec-95 PROFITABILITY RATIOS - -------------------- Gross Profit Margin Latest 12 Months 22.2% 65.7% 6.3% 2.8% 22.3% 15.5% 14.0% Fiscal Year End 24.1% 66.2% 6.4% 6.5% 22.1% 15.6% 14.9% Five-Year Average 23.5% 54.1% 6.3% 10.8% 19.1% 16.8% 15.5% Adjusted Net Income To: Sales Latest 12 Months 5.9% 7.8% -4.9% -5.1% 10.2% 4.4% 6.5% Fiscal Year End 7.0% 8.4% -4.5% -2.1% 10.1% 4.4% 6.4% Five-Year Average 6.9% 8.5% -6.4% 1.1% 8.6% 6.2% 7.2% Average Net Worth Latest 12 Months 12.2% 13.9% NA -19.0% 19.7% 29.7% 11.9% Fiscal Year End 14.9% 14.3% NA -7.6% 19.6% 29.1% 11.6% Five-Year Average 14.4% 13.3% NA 4.3% 19.1% 35.6% 12.0% EBIT To: Sales Latest 12 Months 9.6% 12.6% 5.7% -4.4% 22.3% 6.7% 10.7% Fiscal Year End 11.3% 13.5% 5.9% -0.4% 22.1% 6.7% 10.6% Five-Year Average 11.0% 14.1% 5.1% 4.0% 19.1% 7.9% 11.5% Average Total Assets Latest 12 Months 15.5% 19.1% 9.5% -6.9% 16.4% 10.6% 13.5% Fiscal Year End 19.3% 18.7% 9.8% -0.6% 16.0% 10.6% 13.5% Five-Year Average 18.6% 17.0% 7.2% 6.0% 14.4% 12.2% 14.0% EBDIT To Sales Latest 12 Months 12.2% 15.9% 11.2% 1.8% 26.5% 12.7% 15.1% Fiscal Year End 14.8% 16.9% 11.3% 6.1% 26.3% 12.6% 15.0% Five-Year Average 14.3% 17.3% 11.1% 9.5% 23.4% 13.4% 16.1% Return On Average Invested Capital Latest 12 Months 10.8% 13.4% 1.2% -7.2% 14.9% 11.0% 9.7% Fiscal Year End 14.2% 13.6% 2.5% -1.4% 12.7% 13.6% 9.7% Five-Year Average 14.0% 12.4% -5.3% 4.7% 12.0% 18.1% 10.0% Adjusted Tax Rate Latest 12 Months 38.3% 37.9% NA NA 39.5% 5.9% 37.2% Fiscal Year End 38.4% 37.3% -25.2% NA 39.5% 5.9% 37.2% Five-Year Average 37.5% 37.3% -99.9% 38.5% 40.4% 1.5% 37.1%
A-2 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 25 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- PUBLIC COMPANY COMPARATIVE FINANCIAL ANALYSIS
BOB CRACKER GROUND PERKINS RYAN'S STATISTICS & RATIOS EVANS BARREL FLAGSTAR ROUND IHOP FAMILY FAMILY - ------------------- ------ ------- -------- ------ ------ ------- ------ Updated Through Apr-96 Apr-96 Mar-96 Mar-96 Mar-96 Mar-96 Mar-96 Fiscal Year Ended Apr-95 Jul-95 Dec-95 Sep-95 Dec-95 Dec-95 Dec-95 GROWTH STATISTICS - ----------------- Annual Revenue Growth 5.6% 18.6% -7.1% -8.5% 14.0% 9.1% 14.9% Four-Year Compound Annual Revenue Growth 11.2% 27.1% -8.2% 9.2% 11.8% 8.0% 14.6% Annual EBIT Growth -10.9% 8.2% -33.1% -208.7% 18.8% 1.8% 15.0% Four-Year Compound Annual EBIT Growth 12.7% 28.1% -9.3% NA 25.6% -1.4% 10.1% Annual EBDIT Growth -7.6% 10.1% -20.4% -83.3% 17.7% 9.1% 13.6% Four-Year Compound Annual EBDIT Growth 12.3% 28.4% -10.5% -5.4% 22.0% 3.0% 11.5% Annual Net Income Growth -10.9% 7.2% -197.4% -479.3% 15.4% -11.0% 12.3% Four-Year Compound Annual Net Income Growth 12.3% 30.4% -14.5% NA 33.9% -7.8% 9.2% DEPRECIATION & CAPITAL SPENDING MEASURES - ---------------------------------------- Depreciation To: Adjusted Net Income Latest 12 Months 44.1% 42.6% -112.5% -123.5% 41.3% 136.5% 67.1% Fiscal Year End 49.8% 40.1% -120.7% -316.4% 41.6% 133.1% 67.6% Five-Year Average 49.3% 37.5% -95.7% 497.0% 50.1% 88.9% 64.2% EBIT Latest 12 Months 27.1% 26.4% 96.2% -140.4% 18.8% 89.6% 40.6% Fiscal Year End 30.7% 25.0% 92.8% NMF 19.0% 87.4% 41.0% Five-Year Average 30.8% 22.7% 120.2% 137.3% 22.5% 70.5% 39.9% Capital Expenditures Latest 12 Months 32.2% 23.7% 133.6% 394.6% 15.4% 58.9% 29.8% Fiscal Year End 28.1% 21.9% 113.4% 155.0% 16.5% 49.8% 31.4% Five-Year Average 36.6% 19.1% 153.4% 80.8% 20.7% 54.4% 30.0% Capital Expenditures To Sales Latest 12 Months 8.1% 14.0% 4.1% 1.6% 27.2% 10.2% 14.7% Fiscal Year End 12.4% 15.5% 4.8% 4.2% 25.6% 11.8% 13.9% Five-Year Average 9.2% 16.8% 4.0% 6.8% 20.7% 10.2% 15.3%
A-3 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 26 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- TOTAL INVESTED CAPITAL / REVENUE RATIOS OF COMPARATIVE PUBLIC COMPANIES
LATEST FISCAL AVAILABLE YEAR TIC TO REVENUE 12 MONTHS END - -------------- --------- ------ Bob Evans Farms 0.87 0.90 Cracker Barrel Old Ctry Stor 1.79 2.02 Flagstar Cos Inc 0.88 0.85 Ground Round Restaurant 0.41 0.40 Ihop Corp 2.18 2.27 Perkins Family Rests -Lp 0.79 0.80 Ryan's Family Stk Houses Inc 1.04 1.07 Range: Low 0.41 0.40 High 2.18 2.27 Median: 0.88 0.90 Mean: 1.14 1.19
A-4 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 27 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- TOTAL INVESTED CAPITAL / EBDIT RATIOS OF COMPARATIVE PUBLIC COMPANIES
NEXT LATEST FISCAL FISCAL AVAILABLE YEAR TIC TO EBDIT YEAR 12 MONTHS END - ------------ ------ --------- ------ Bob Evans Farms 6.5 7.1 6.1 Cracker Barrel Old Ctry Stor 9.1 11.3 11.9 Flagstar Cos Inc 7.8 7.8 7.5 Ground Round Restaurant NA 23.1 6.5 Ihop Corp 6.6 8.2 8.6 Perkins Family Rests -Lp 4.3 6.2 6.4 Ryan's Family Stk Houses Inc 5.7 6.9 7.2 Range: Low 4.3 6.2 6.1 High 9.1 23.1 11.9 Median: 6.5 7.8 7.2 Mean: 6.6 10.1 7.7
A-5 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 28 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- PRICE TO NET BOOK VALUE OF COMPARATIVE PUBLIC COMPANIES
LATEST BOOK MEAN PRICE TO NET BOOK VALUE VALUE - ---------------------------- ------ Bob Evans Farms 1.6 Cracker Barrel Old Ctry Stor 3.0 Flagstar Cos Inc -0.1 Ground Round Restaurant 0.7 Ihop Corp 2.7 Perkins Family Rests -Lp 3.6 Ryan's Family Stk Houses Inc 1.5 Range: Low 0.7 High 3.6 Median: 2.1 Mean: 2.2
A-6 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 29 SUMMIT FAMILY RESTAURANTS INC. - ------------------------------------------------------------------------------- PUBLIC COMPANY COMPARATIVE FINANCIAL ANALYSIS
PUBLIC COMPANIES ------------------------------------------ PICCADILLY HOMETOWN STATISTICS & RATIOS CAFETERIAS BUFFETS BUFFET LUBYS - ------------------- ------------------------------------------ Updated Through Mar-96 Mar-96 Mar-96 Feb-96 Fiscal Year Ended Jun-95 Dec-95 Dec-95 Aug-95 SIZE ($ MILLIONS) - ----------------- Revenues $298.6 $523.8 $175.5 $434.2 Total Assets $160.0 $255.9 $145.9 $313.7 Net Worth (Common, Tangible) $ 80.0 $166.6 $ 72.2 $207.5 Earnings Before Interest & Taxes $ 14.6 $ 41.4 $ 13.0 $ 62.4 Earnings Before Depr, Interest, Tax & Amort $ 27.7 $ 66.5 $ 23.0 $ 79.4 Adjusted Net Income $ 6.7 $ 25.6 $ 6.9 $ 37.6 Cash Flow $ 19.8 $ 50.8 $ 17.0 $ 54.6 Total Interest-Bearing Debt $ 39.0 $ 14.0 $ 52.7 $ 53.0 Market Value Of Equity $106.8 $389.4 $160.7 $586.6 Total Invested Capital (No Control Premium) $145.8 $403.4 $213.3 $639.6 LIQUIDITY RATIOS - ---------------- Quick Ratio 0.1 0.5 1.5 0.2 Current Ratio 0.4 0.5 1.6 0.3 Working Capital Turnover -13.4 -18.7 13.3 -18.4 FINANCIAL LEVERAGE RATIOS - ------------------------- Total Liabilities To Net Worth 1.0 0.5 1.0 0.5 Total Interest Bearing Debt To Net Worth 0.5 0.1 0.7 0.3 Interest Coverage 7.4 665.5 17.9 31.5 Interest Expense To Total Interest-Bearing Debt 8.6% 0.8% 4.1% 4.9% Total Interest-Bearing Debt To FMV Of Net Worth 0.4 0.0 0.3 0.1 ACTIVITY RATIOS - --------------- Inventory Turnover 26.5 160.5 148.1 63.8 Asset Turnover 1.8 2.3 1.5 1.4 Average A/R Collection Period (In Days) 0.7 2.9 6.5 0.3
A-7 - ------------------------------------------------------------------------------- HOULIHAN LOKEY HOWARD & ZUKIN 30 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- PUBLIC COMPANY COMPARATIVE FINANCIAL ANALYSIS
PUBLIC COMPANIES ------------------------------------------ PICCADILLY HOMETOWN STATISTICS & RATIOS CAFETERIAS BUFFETS BUFFET LUBYS - ------------------- ------------------------------------------ Updated Through Mar-96 Mar-96 Mar-96 Feb-96 Fiscal Year Ended Jun-95 Dec-95 Dec-95 Aug-95 PROFITABILITY RATIOS - -------------------- Gross Profit Margin Latest 12 Months 9.4% 13.0% 14.0% 48.0% Fiscal Year End 9.3% 13.7% 14.2% 48.1% Five-Year Average 9.6% 15.8% 31.3% 47.7% Adjusted Net Income To: Sales Latest 12 Months 2.2% 4.9% 3.9% 8.7% Fiscal Year End 1.9% 5.3% 4.3% 8.8% Five-Year Average 2.0% 5.6% 3.3% 9.5% Average Net Worth Latest 12 Months 8.5% 16.9% 10.0% 19.0% Fiscal Year End 7.0% 17.7% 9.5% 18.2% Five-Year Average 7.7% 18.2% 5.1% 16.5% EBIT To: Sales Latest 12 Months 4.9% 7.9% 7.4% 14.4% Fiscal Year End 4.3% 8.5% 7.8% 14.5% Five-Year Average 5.0% 9.3% 5.6% 15.0% Average Total Assets Latest 12 Months 8.9% 17.8% 11.3% 20.6% Fiscal Year End 7.7% 18.7% 10.4% 20.2% Five-Year Average 8.8% 19.4% 5.3% 19.3% EBDIT To Sales Latest 12 Months 9.3% 12.7% 13.1% 18.3% Fiscal Year End 8.8% 13.4% 14.4% 18.4% Five-Year Average 8.6% 14.0% 10.5% 19.1% Return On Average Invested Capital Latest 12 Months 7.3% 15.3% 8.0% 15.7% Fiscal Year End 6.4% 16.6% 7.6% 15.9% Five-Year Average 7.0% 17.0% 5.3% 15.5% Adjusted Tax Rate Latest 12 Months 38.4% 38.0% 38.9% 37.2% Fiscal Year End 39.2% 38.0% 38.2% 37.2% Five-Year Average 44.4% 39.1% 35.4% 36.3%
A-8 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 31 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- PUBLIC COMPANY COMPARATIVE FINANCIAL ANALYSIS
PUBLIC COMPANIES ------------------------------------------ PICCADILLY HOMETOWN STATISTICS & RATIOS CAFETERIAS BUFFETS BUFFET LUBYS - ------------------- ------------------------------------------ Updated Through Mar-96 Mar-96 Mar-96 Feb-96 Fiscal Year Ended Jun-95 Dec-95 Dec-95 Aug-95 GROWTH STATISTICS Annual Revenue Growth 5.7% 19.2% 80.5% 7.3% Four-Year Compound Annual Revenue Growth -1.3% 27.0% NMF 6.3% Annual EBIT Growth 16.4% 9.3% 91.1% 0.7% Four-Year Compound Annual EBIT Growth -9.3% 23.8% NMF 5.4% Annual EBDIT Growth 9.6% 12.5% 80.3% 1.7% Four-Year Compound Annual EBDIT Growth -6.5% 26.1% NMF 5.6% Annual Net Income Growth 19.6% 9.9% 60.5% -0.6% Four-Year Compound Annual Net Income Growth -11.5% 24.7% NMF 3.4% DEPRECIATION & CAPITAL SPENDING MEASURES Depreciation To: Adjusted Net Income Latest 12 Months 196.4% 98.5% 145.0% 45.1% Fiscal Year End 241.8% 93.9% 152.9% 44.4% Five-Year Average 218.0% 83.9% 185.8% 42.8% EBIT Latest 12 Months 89.8% 60.9% 77.1% 27.2% Fiscal Year End 104.5% 58.1% 84.3% 27.1% Five-Year Average 89.7% 51.0% 109.6% 27.0% Capital Expenditures Latest 12 Months 161.4% 38.4% 25.2% 40.3% Fiscal Year End 47.8% 38.4% 25.2% 44.1% Five-Year Average 67.3% 29.3% 16.2% 49.3% Capital Expenditures To Sales Latest 12 Months 2.7% 12.5% 22.7% 9.7% Fiscal Year End 9.4% 12.9% 26.1% 8.9% Five-Year Average 6.6% 16.2% 37.9% 8.2%
A-9 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 32 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- PRICE TO NET BOOK VALUE OF COMPARATIVE PUBLIC COMPANIES
LATEST BOOK MEAN PRICE TO NET BOOK VALUE VALUE - ---------------------------- ------ Picadilly Cafeterias Inc 1.3 Buffets Inc 2.3 HomeTown Buffet Inc 2.2 Lubys Inc 2.8 Range: Low 1.3 High 2.8 Median: 2.3 Mean: 2.2
A-10 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 33 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- TOTAL INVESTED CAPITAL / EBDIT RATIOS OF COMPARATIVE PUBLIC COMPANIES
NEXT LATEST FISCAL FISCAL AVAILABLE YEAR TIC TO EBDIT YEAR 12 MONTHS END - ------------ ------ --------- ------ Picadilly Cafeterias Inc 3.4 5.3 5.8 Buffets Inc 4.8 6.1 5.9 HomeTown Buffet Inc 7.5 9.3 9.7 Lubys Inc 6.9 8.1 8.3 Range: Low 3.4 5.3 5.8 High 7.5 9.3 9.7 Median: 5.9 7.1 7.1 Mean: 5.7 7.2 7.4
A-11 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin 34 Summit Family Restaurants Inc. - ------------------------------------------------------------------------------- TOTAL INVESTED CAPITAL / REVENUE RATIOS OF Comparative Public Companies
LATEST FISCAL AVAILABLE YEAR TIC TO REVENUE 12 MONTHS END - -------------- --------- ------ Picadilly Cafeterias Inc 0.49 0.51 Buffets Inc 0.77 0.79 HomeTown Buffet Inc 1.22 1.40 Lubys Inc 1.47 1.53 Range: Low 0.49 0.51 High 1.47 1.53 Median: 0.99 1.10 Mean: 0.99 1.06
A-12 - ------------------------------------------------------------------------------- Houlihan Lokey Howard & Zukin EX-99.16 6 PRESS RELEASE 1 EXHIBIT 99.16 [SUMMIT LOGO] 440 LAWNDALE DRIVE SALT LAKE CITY, UTAH 84115-2917 801-463-5500 NEWS RELEASE FOR IMMEDIATE RELEASE: Monday, July 1, 1996 CONTACT: David E. Pertl Senior Vice President, CFO Summit Family Restaurants Inc. (801) 463-5500 SUMMIT FAMILY RESTAURANTS RESPONDS TO PURPORTED OFFER OF STELLA BELLA SALT LAKE CITY, UTAH -- Summit Family Restaurants Inc. (NASDAQ: SMFR) announced today that its Board of Directors has reviewed a press release issued by Stella Bella Corporation on June 26, 1996 which referred to an offer to exchange 5.7 million shares of the Common Stock of Stella Bella for Summit's JB's Restaurant assets. Based upon quotations of the market prices of Stella Bella Common Stock and other information available Stella Bella's purported offer has a value to Summit of no more than $3.1 million. The Board of Directors determined that the value represented by such an offer is not financially superior to the consideration provided under the Company's current agreement with CKE Restaurants, Inc. and that, under its agreement with CKE, Summit is precluded from any further consideration of the offer. As previously reported, the Company has scheduled a Special Meeting of Stockholders to vote upon the proposed merger with CKE Restaurants, Inc. The Special Meeting will be held at 10:00 a.m. on Friday, July 12, 1996, in Salt Lake City, Utah. Stockholders of record as of the close of business on May 20, 1996 are entitled to receive notice of, and to vote at, the Special Meeting. Summit Family Restaurants Inc. has restaurant operations in nine western states including 77 Company-operated and 24 franchised JB's Restaurants, 6 Galaxy Diner restaurants and 16 Home Town Buffet restaurants. # # # -----END PRIVACY-ENHANCED MESSAGE-----