-----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, ETw+so7E82paN1/mY2qsj8gs1rx3PCEWc0hCzDNbu11qzhtZfIv5/N6NFlAMLXNR cyy2nsc8syvYLfRSsFMTXw== 0000898430-96-002688.txt : 19960618 0000898430-96-002688.hdr.sgml : 19960618 ACCESSION NUMBER: 0000898430-96-002688 CONFORMED SUBMISSION TYPE: PRRN14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960617 SROS: NONE 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: PRRN14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-06054 FILM NUMBER: 96581758 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: FIRST GLOBAL SECURITIES INC /CA/ CENTRAL INDEX KEY: 0001015354 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954307359 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRRN14A BUSINESS ADDRESS: STREET 1: 790 E COLORADO NO. 500 CITY: PASADENA STATE: CA ZIP: 91101 BUSINESS PHONE: 8185688800 MAIL ADDRESS: STREET 1: 790 E COLORADO NO. 500 CITY: PASADENA STATE: CA ZIP: 91101 PRRN14A 1 REVISED PRELIMINARY PROXY MATERIALS PRELIMINARY PROXY MATERIAL AMENDMENT SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 10549 SCHEDULE 14A (RULE 14a-6(i)(3)) Pursuant to Section 14(a) of the Securities Exchange Act of 1934 OPPOSITION GROUP'S PROXY STATEMENT PROXY STATEMENT 1 - OPPOSITION TO MERGER THE OPPOSITION GROUP ASKS YOU TO VOTE ON THREE MATTERS: AGAINST THE MERGER, FOR THE RESIGNATION OR REMOVAL OF THE PRESENT BOARD, AND FOR A NEW BOARD OF DIRECTORS ON THE RED PROXY CARDS RELATED TO EACH MATTER FILED BY A PARTY OTHER THAN THE REGISTRANT SUMMIT FAMILY RESTAURANTS, INC. ------------------------------ (Name of Registrant as Specified in Its Charter) First Global Securities, Inc., on behalf of the Opposition Proxy Group, including, itself, Susan W. Trenham, Kennedy Capital Management, Inc., William H. Burgess, J. D. Campa and Associates, Inc., Michael E.Portnoy, Howard Foster Company, Mark R. Tonucci, T.H. Fitzgerald, Peter Sorokin, Mark A. Fries, Gary B. Davidson and Harold Fox - -------------------------------------------------------------------------------- (Names of Persons or Entities Filing Proxy Statement, if other than the Registrant) Contact: Susan W. Trenham Co-Chair and CEO First Global Securities, Inc. 790 East Colorado Blvd., #500 Pasadena, Ca. 91101 (818) 568-8800 Payment of Filing Fee: $500 pursuant to Exchange Act Rule 14a-6(i)(3). Fee previously paid: $500 pursuant to Exchange Act Rule 14a-6(i)(3). PLEASE COMPLETE AND RETURN THE RED PROXY CARD PRELIMINARY JUNE , OPPOSITION TO THE MERGER BETWEEN SUMMIT FAMILY RESTAURANTS, INC. AND CKE RESTAURANTS, INC. Fellow Shareholders: We are a group of Summit shareholders who own 14% of the outstanding shares of common stock of Summit Family Restaurants, Inc. ("Summit"). We oppose the proposed merger between Summit and CKE Restaurants, Inc. ("CKE") to be voted on at a special meeting of Summit shareholders to be held on July 12, 1996, at 10:00 a.m. at the Howard Johnson Hotel, 122 West South Temple, Salt Lake City, Utah ("Special Meeting"). We believe the transaction is not fair and equitable to the shareholders of Summit. The shareholders opposed to the proposed merger are First Global Securities, Inc., Kennedy Capital Management, Inc., William H. Burgess, J. D. Campa and Associates, Michael E. Portnoy, Howard Foster and Company, Mark Tonucci, T.H. Fitzgerald, Gary B. Davidson, Peter Sorokin, and Mark A. Fries. Susan W. Trenham is the Chief Executive Officer of First Global Securities, Inc., and all of the foregoing ("Opposition Group") are participating in this solicitation. We believe that the Board of Summit did not act in the best interests of shareholders by signing two amendments to the Merger Agreement agreeing to reductions in the purchase price to be paid to the shareholders; that members of the Summit Board have acted in a manner designed to give you no viable alternative except to vote for the proposed merger by terminating much of the senior management; that the fairness opinion rendered by Piper Jaffray Inc. may not be objective since Piper Jaffray will be paid $758,000 upon the successful completion of the merger; and that certain issues which shareholders ought to consider in reaching a decision to vote for or against the merger have been obscured such as the fair market value of Summit versus the offer to shareholders. You are an owner of Summit Family Restaurants, Inc. and THIS MERGER IS A DECISION OVER WHICH YOU ARE SUPPOSED TO HAVE AUTHORITY TO ACT. We urge you to take the time to understand the proxy statement which you receive from Summit, to be sure that you understand the proposed merger as it stands as of the time --------------------------- that you vote, and that you take the time to understand why we object to the - -------------- proposed merger. The merger price to be paid to Summit shareholders is based on a formula which takes into consideration the fluctuation of the market price of CKE stock. The recent upward price movement of CKE stock in the past ninety days will result in a substantial reduction (beyond the two announced reductions to which we also object) in the number of CKE shares Summit shareholders will receive at the time of the merger. In the pages that follow we suggest an alternative to the present proposal. The Opposition Proxy - The Red Proxy Card - ----------------------------------------- The OPPOSITION GROUP urges you to vote AGAINST the proposed merger between Summit and CKE on the RED PROXY CARD. Further, we recommend that you assert your Dissenting Shareholders Rights to require an PLEASE COMPLETE AND RETURN THE RED PROXY CARD 2 independent valuation of your shares/1/. All participants in this Opposition Proxy have stated that it is their intention to perfect their Dissenters' Rights. It should be noted that, at the discretion of CKE, the obligations of CKE to effect the Merger are subject to the condition that the holders of not more than 10% of the shares of Summit Common Stock have asserted dissenters' rights. You may use the OPPOSITION GROUP'S PROXY to Vote For or Against the proposed merger. Failure to vote or to return a proxy card will have the same effect as a vote against the Merger. We urge you to complete, sign and date the enclosed OPPOSITION PROXY and to return it in the enclosed prepaid envelope as soon as possible. This will not prevent you from attending the Special Meeting and voting your shares in person even if you have previously returned your proxy card since the proxy is revocable up to the time it is voted. IF YOU HAVE VOTED FOR THE MERGER ON A SUMMIT PROXY, YOU MAY STILL VOTE AGAINST THE PROPOSED MERGER ON THE OPPOSITION PROXY MERELY BY SIGNING, DATING AND MAILING THE ENCLOSED PROXY CARD. RISKS ASSOCIATED IN ACCEPTING THE OPPOSITION GROUP'S PROXY There is No Assurance that the Opposition Proxy Group Will Succeed In - --------------------------------------------------------------------- Implementing It's Proposed Plan - ------------------------------- The Opposition Group urges shareholders to vote against the proposed merger and to support a proposed alternative plan for Summit. In order to implement that plan, shareholders must disapprove the merger, and the present Summit Board must agree to resign and allow shareholders to vote on a new proposed Board or the Opposition Group must succeed through a proxy, a shareholders's suit, or other remedies. There is no assurance that the Opposition Group will succeed. Certain transactions contemplated by the Opposition Group may be subject to approval by the Preferred Shareholders. CKE has indicated a willingness to work cooperatively with the Opposition Group if the Merger is defeated. There Is No Assurance of Success In Selling The Assets of Summit At A Higher - ---------------------------------------------------------------------------- Value - ------ The Opposition Group believes that under new management and a new Board the assets of Summit may be sold at a higher price than the consideration being offered by CKE to Summit shareholders. However, the present Summit Board has outlined in detail the efforts they made to sell the assets. There is no assurance that the proposed Board and management will be more successful in selling the assets at a higher price than the present Board. There Is No Assurance that Shareholders Will Receive Fair Market or Book Value - ------------------------------------------------------------------------------ The proposed merger offer to Summit shareholders is below the book value of Summit. We believe that the fair market value is considerably higher. However, there is no assurance that shareholders will receive book or fair market value if they vote against the merger and an alternative plan is implemented. The Opposition Group's Proposed Two Dollar Dividend Is Not Assured - ------------------------------------------------------------------ Under the proposed CKE/Summit merger, Summit shareholders will receive $2.63 in cash and an equivalent amount in CKE shares. The Opposition Proxy Group believes that the assets of Summit may be sold for more than $2.63 per share without diluting Summit shares. The Opposition Proxy Group proposes a $2 dividend to shareholders and an alternative business approach for Summit. There is no assurance that the alternative plan will succeed. Shareholders will have to determine whether they would rather receive a - ---------------------- /1/ See Proxy Statement of Summit: "Rights of Dissenting Stockholders--Failure to follow the steps required by Section 262 of the Delaware General Law (the "DGCL"), may result in your loss of such rights (but not in your loss of the merger consideration). PLEASE COMPLETE AND RETURN THE RED PROXY CARD 3 guaranteed $2.63 cash now from CKE and minimum upside value to the remainder of their consideration in stock or to risk a failure on the part of a new Summit management team to take the necessary action to pay a $2 dividend and to provide profits in the future of Summit Family Restaurants, Inc. A Successful New Direction for Summit is Speculative - ---------------------------------------------------- The Opposition Group believes that Summit can become a dynamic and profitable organization through the sale of assets and the successful pursuit of a newly focused direction for Summit. However, the implementation of a new business plan, whether by new management of Summit or by the management of CKE is speculative. Perfection of Dissenter's Rights May Not Result in a Higher Consideration - ------------------------------------------------------------------------- The Opposition Group believes that the value of Summit assets exceeds the consideration offered by CKE and recommends that Summit shareholders assert their Dissenting Shareholders rights and call for appraisal of the value of their stock. Under Delaware law, where Summit is incorporated, CKE must pay shareholders the higher value in cash, if such value is determined by the Court to exist. There is no assurance that the Court will determine that a higher value does exist. If the Court determines that the value of Summit's stock is less than the consideration offered by CKE, the shareholder will receive the lower consideration. At any time within 60 days after the effective date of the merger, if approved, any stockholder has the right to withdraw his demand for appraisal and to accept the terms offered upon the merger. Shareholders should refer to the Summit proxy statement, for details as to how to assert Dissenting Shareholders rights, and obtain legal counsel for further answers to questions. In addition to voting Against the merger on either proxy, shareholders must deliver a letter asking for appraisal of their shares before the vote on the merger if they wish to assert their Dissenting Rights. The letter merely needs to state the identity of the shareholder and that the shareholder intends to demand appraisal of his shares. Risk in Failure To Accept Merger And Failure to Accept Plan ----------------------------------------------------------- Certain risks may exist with respect to a failure to pass the merger and a simultaneous failure to approve the plan of the Opposition Group. As the Summit Board has terminated senior management and has stated in the proxy statement that it does not believe that Summit can continue to operate as a viable company risks may be associated with a failure by shareholders to approve the merger and a simultaneous failure to approve the Opposition Group's plan for an alternative to the merger. It should be noted that the Opposition Group plans to perfect its Dissenters' Rights. If CKE elects to terminate the merger agreement and shareholders fail to approve the alternate proposal or the present Summit Board refuses to allow the Shareholder proposals at the scheduled meeting, the company may be adrift for a considerable period with the attendant loss of performance and risk to shareholders of sale of assets at unfavorable prices or ultimate liquidation. Shareholders voting in favor of the merger may also want to vote in favor of the alternative plan so that if the merger fails to be approved that there is an alternative plan for proceeding. A period of uncertainty may occur in either case. OPPOSITION TO THE MERGER KEY ISSUES The Opposition Group's objections to the proposed merger center around seven key issues: . The actions of the Summit Board of Directors . The pre-merger approval actions on the part of CKE . The reductions in the price to be paid by CKE to Summit shareholders. . The effect of current CKE prices on Summit shareholders under the proposed merger. . The lack of effort to determine the fair market value of the assets of Summit Family Restaurants, Inc. . The lack of an unaffiliated fairness opinion for PLEASE COMPLETE AND RETURN THE RED PROXY CARD 4 Summit shareholders, and possible conflicts on the part of Piper Jaffray, Inc. in rendering it's opinion. . A viable alternative for Shareholders if they disapprove the merger. The Actions of the Summit Board of Directors - -------------------------------------------- The Merger agreement provided for modifications of the employment agreements extending to 90 days following the closing at which time certain key employees could voluntarily resign and obtain severance benefits set forth therein. We believe that pending approval of the merger, the Summit board had a responsibility to maintain all operations so that there would be no diminishment in Summit's performance if shareholders disapproved the merger. Summit states in its proxy statement, under Special Factors, that "Mr. McComas [then President] has entered into an amendment to the change of control provision of the Employment Agreement as requested by CKE...which requires Mr. McComas to continue his employment for the first 90 days following the Merger..." In Summit's news release of December 1, 1995, William P. Foley, CKE Restaurants' chairman and chief executive officer, said, "The merger of Summit Family Restaurants is an excellent financial transaction...' Don McComas is a strong operator, who, along with his management team, has created the Galaxy Diner concept which we are especially excited about and view as a rapid expansion vehicle." According to the Special Factors section, page 27, of the Summit Proxy Statement, the Board states, "On April 9, 1996, the Board of Directors, determined to terminate the employment relationships of Messrs. McComas, Gehling, Bales and Yanez and made payments in the aggregate amount of $1,071,776 under the Employment Agreement with Mr. McComas ..." The proxy goes on to state, "The terminations of employment were a continuation of reductions in force initiated by Summit in September 1995 in response to Summit's deteriorating financial condition and were effected for a variety of reasons, including performance, job responsibilities, assessments of Summit's future needs, strategic direction and financial considerations." Notes to the Consolidated Financial Statements, F-19, indicate "the Company paid $1,236,000 to the President and four senior vice presidents upon their termination in April 1996. The Merger Agreement triggered a provision in the change of control agreements that requires the Company to place in escrow accounts an additional $450,000 for three additional senior vice presidents." According to its minutes, the Summit Board seemed to act at the request of CKE, to terminate the employment of the President, Mr. McComas, the Senior Vice President of Marketing and New Development, the Senior Vice President of Food Services, the Senior Vice President of Human Resources and Franchising, and the Senior Vice President of Family Restaurants, leaving the company, with what we believe is a massive void in the management of the company. Further, the change of control payments reduce the assets on Summit's balance sheet rather than CKE's. While in a letter of May 7, 1996, to the Opposition Group, the Summit Board claimed that the termination was a continuation of 'cost-savings measures', the Board paid out over $1.2 million and reserved four hundred fifty thousand dollars in 'change of control' payments--in effect prepaying between one and three years the annual salaries of the six individuals who were terminated rather than continuing to pay only their monthly salaries. Summit states that Clark D. Jones, who had served as Chairman and/or President for more than ten years, stepped in to fill the void left by the president and five senior vice-presidents. Mr. Jones, in addition to apparently serving in the capacities of the six Summit officers who were fired, also is employed full time by the State of Utah as a utilities commissioner. Additionally, Summit's operational performance deteriorated sharply during the most recent five years that Mr. Jones served as Chairman. The minutes state: "A Special Meeting of the Board of Directors (the "Board") of Summit Family Restaurants Inc. (the "Company") was held by telephone conference on April 9, 1996 at 1:00 p.m. MDT, Clark D. Jones, Norman N. Habermann, Carl R. Hays, Norton Parker, Ronald N. Paul and Thomas J. Russo, constituting a majority of the members of the Board each participated in such a way that each could hear each other member during the meeting. Also participating by invitation were Bryant Edwards and Richard G. Brown, outside counsel to the Company. Mr. Jones acted as chairman of the meeting and Mr. Brown acted as secretary thereof. Mr. Jones welcomed all present and asked Mr. Habermann to provide a brief update with respect to the Merger transaction with CKE. Mr. Habermann advised that the purchase of the Company's outstanding Preferred Stock from the holder has been completed pursuant to the second amendment to the Merger Agreement and that Messrs. Bryant and Paternotte have resigned as members of the Board. He further reported that he has been asked by CKE to act as a liaison between CKE and the Company in facilitating the transition and the Merger. He reported a meeting with Mr. Robert E. Wheaton and Mr. Tom Thompson in San Francisco during the week of April 1st to discuss transition matters. Messrs. Wheaton and Thompson have been assigned responsibility for the transaction by CKE. Mr. Jones stated that the purpose of the meeting is to consider matters related to an efficient transition and completion of the Merger transaction, including changes in personnel which might be considered prior to consummation of the Merger. Mr. Habermann advised the Board that CKE has confirmed that it does not intend to continue employment of Messrs. McComas, Gehling, Bales, and Yanez after the Merger and that, in CKE's opinion, termination of these officers at an early date would facilitate the transition plan. The Board was advised that change of control payments required in connection with termination of these officers would aggregate approximately $1.0 million. The Board also considered the effect of termination on the conduct of the Company's business and any associated projects and plans. The Board further considered the possibility that the Merger transaction will not consummate for reasons outside of the control of the Company or CKE which would result in the loss of the change of control payments and of key officers whose services may be lost to the Company. After discussion, the Board concluded that termination of these officers would not materially affect the conduct of the Company's business prior to the Merger and that the risk of the transaction not closing is minimal, particularly in view of CKE's purchase of the outstanding Preferred Stock, but nevertheless determined to request that CKE indemnify the Company in respect of the change of control payments if the Merger transaction is not completed for reasons outside of the control of Summit. After further discussion, upon motion made, seconded and unanimously adopted, it was: RESOLVED, that the employment relationship of Messrs, McComas, Gehling, Bales, and Yanez be terminated, effective April 15th, or on such earlier date as the chairman, in his discretion deems necessary or appropriate, subject, however, to CKE's favorable response to the Company's request for indemnification in respect of the change in control payments." The minutes go on to state: "The meeting was recessed to permit Mr. Jones to consult with Messrs. Wheaton and Thompson concerning the willingness of CKE to indemnify Summit with respect to change of control payments referred to above. At the conclusion of the recess the meeting resumed and Mr. Jones reported to the Board that Messrs, Wheaton and Thompson, on behalf of CKE, had agreed to indemnify Summit in respect of change in control payments to a maximum of $300,000 in the event the Merger transaction is not consummated for reasons outside the control of the Company. After discussion, upon motion made, seconded and unanimously adopted, the Board affirmed its decision to terminate the officers referred to in these minutes and instructed Mr. Jones to effect the terminations with assistance of other members of senior management and to secure an agreement with CKE reflecting CKE's agreement to indemnify the Company in respect of change in control payments up to $300,000." The Board of Summit states that they set up a committee of independent Board members and an unaffiliated financial advisor to determine whether the merger is in the best interests of shareholders. Mr. Norman Habermann, a board member, was named to chair the Special Committee to evaluate the CKE offer and other offers to the company, including a management led buy-out. Mr. Habermann is paid a fee as a Board member and received an additional fee as the head of the Special Committee as is disclosed in the Summit proxy statement. Subsequently, he negotiated with Piper Jaffray, Inc. to receive a portion of their success fee, approximately $115,900, for the completion of the merger as is disclosed on page 24 of the Summit proxy statement. PLEASE COMPLETE AND RETURN THE RED PROXY CARD. 5 On page 24 of the Summit proxy statement, Summit states, "the Summit Board believes that the financial interest of Mr Habermann in completing a transaction to sell Summit is consistent with the Board's previous decision to sell Summit and with the interests of Summit's Board and stockholders to obtain the highest possible consideration for Summit, and as a result, did not affect the manner or the procedural fairness with which the Merger was considered by Summit." The Opposition Group finds that statement difficult to believe when one further considers the minutes of April 9, 1996 which state: "Mr. Habermann reported to the Board that the Company has completed a preliminary analysis of the effects of adopting Statement of Financial Accounting Standards No. 121, 'Accounting for the Impairment of Long-Lived Assets and the Long-Lived Assets to be Disposed Of,' SFAS No. 121 requires the assessment of certain long-lived assets, including many intangible assets, for possible impairment when events or circumstances indicate that carrying amounts of these assets may not be recoverable. He advised the Board that the Company is not required to adopt SFAS No. 121 until the 1997 fiscal year; however, management's preliminary assessment indicates that the adoption will result in a write down of approximately $7.0 million or $1.22 per share which on a per share basis, reduces book value at March, 1996 to approximately $5.32 which is very close to the anticipated aggregate Merger Consideration of $5.27 per share." Mr. Habermann appears to the Opposition Group to have been more concerned with making the price look reasonable to shareholders, by taking a write-down a year early, than he was about actually getting the best price for shareholders. The minutes also do not explain why, in one moment the Board unanimously agreed that CKE should indemnify Summit for the entire amount of change in control payments if the merger was not approved and then several minutes later, after talking with CKE, voted unanimously for an indemnification of only $300,000. First Global Securities, Inc. received the minutes, marked for discussion purposes only, unidentified and unsolicited. The Opposition Group disclosed the minutes in their Schedule 13D filing with the Securities and Exchange Commission on April 26, 1996. Mr. Richard Brown, outside counsel to Summit later purported to have prepared the minutes. Pre Shareholder Approval Actions by CKE - --------------------------------------- On April 5, 1996, CKE purchased all of the 946,714 shares of the Preferred Stock of Summit Family Restaurants, Inc. from ABS MB(JB) Limited Partnership ("ABS") for an all cash price of $5.27 per share. The preferred stock is convertible into approximately 16.5% of Summit's stock. On April 9, CKE requested that the Summit Board terminate the employment of all of the top officers of Summit Family Restaurants, Inc. and agreed to indemnify Summit for up to $300,000 if the merger is not approved as disclosed on page 28 of the Summit Proxy Statement. CKE had previously announced that it was not the intention of CKE to effect a change of control without approval of the merger by the shareholders. If converted, the stock owned by CKE is the single largest block of stock. We believe, that by virtue of its reductions in the offer to Summit shareholders which were approved by the Summit Board, the acquisition of the single largest block of Summit stock, and the termination of virtually all of the top management of Summit, that CKE took control of Summit Family Restaurants, Inc. without Summit shareholder approval. According to the April 9, 1996 Board minutes, CKE seemed to determine the daily management of Summit at that time. The minutes state: "Mr. Jones reported that CKE has suggested that he be appointed to act as interim Chief Executive Officer of the Company following the termination of Mr. McComas." The Reductions in the Price by CKE - ---------------------------------- On December 1, 1995, Summit announced the signing of an agreement and plan of merger and reorganization with CKE. According to Summit's press release, "CKE will acquire all of the outstanding common and preferred stock of Summit Family Restaurants for a purchase price equal to $3.00 per share in cash and .20513 shares of CKE common stock..." The Summit press releases on the merger seemed to be inconsistant with the actual terms of the merger agreement. Actually, according to the merger agreement which was later disclosed, the price was $3.00 in cash and a number of shares equal to $3.00 divided by the average adjusted CKE price. Thus, at that time CKE was acquiring Summit's assets for approximately $34.8 million dollars (approximately $6.00 x 5.8 million shares) on the date of the announcement, if calculated according to the press announcement. As of June 10, 1996, because of the price advance of CKE, they are now paying under $31 million for Summit. According to the Summit proxy statement on page 24 and the Merger agreement, CKE was to receive a fairness opinion from NatWest Markets, CKE's financial advisor, with respect to the Merger within ten days of the original merger agreement. On December 11, 1996, CKE advised Summit that it had not received the fairness opinion from NatWest and that CKE would not go forward with the agreement. Although the Merger agreement required a fairness opinion from NatWest Markets, it was never received and the agreement was modified to eliminate the requirement. Estimates have now been given in the Special Factors section of the Summit proxy statement of potential liabilities identified by CKE which resulted in the second amendment to the merger agreement. The total liabilities of Summit were known to CKE before the Merger Agreement was signed. The Summit proxy statement says that CKE determined that there would be a potential $3 million lease liability as a result of the bankruptcy of two franchisees. We believe that half of that potential liability may actually accrue to the benefit of Summit, as it is a Summit owned property in Spanish Fork, Utah. We believe the location is prime, in a new attractive building on Interstate 15, and just as there was a potential liability--there is a potential gain from having the lease returned to Summit. By the second reduction in the offer to Summit shareholders, CKE's stock was valued at a multiple of a 30x price to earnings. Thus Summit was getting very little more than they would get in the open market and the value of their shares was being highly diluted. Actually, the press announcement failed to give the actual offer as amended in the merger agreement because it is actually based on a formula to be calculated just before the time of the merger. As the price of CKE stock advances, the Merger Agreement and subsequent amendments call for a further reduction in the number of CKE shares that Summit shareholders will receive. On June 5, a limitation was placed on the reduction in shares after a CKE price of $30. At that point Summit share holders will receive 1/11th of a share of CKE for every Summit share, in addition to the $2.63 cash price. PLEASE COMPLETE AND RETURN THE RED PROXY CARD 6 As of May 22, 1996, based on the closing NYSE price of $25.50 per share of CKE stock, Summit shareholders will receive $2.63 in cash and less than 1/9th (.108) of a share of CKE stock for each share of Summit stock. After the merger, in order for Summit shareholders to receive a $1 increase (still less than the original offer), the price of CKE will have to advance $11.11 to $36.61 which is 62x 1995 earnings (as of January 31, 1996), and 46x 1996 Dow Jones projected earnings. We are not aware of any restaurant chain in the industry class which sells at anywhere close to that multiple. Estimates are a Dow Jones composite of analysts projections of earnings based upon the public statements of CKE management. Following are some comparisons:
Company 52-Week 1995 1995 Earnings P/E Ratio - ------- ------------ ------------- --------- CKE 18-6 .59 30x CKE (5/22/96) 25.50 .59 43x .79 E 32x Company 52-Week 1995 1995 Earnings P/E Ratio - ------- ------------ ------------- --------- Brinker International 21-12 .98 17x Cracker Barrel Stores 25-16 1.09 16x Darden Restaurants 13-9 .80 16.1x McDonald's 54-32 1.97 23.5x Morrison 28-13 1.35 20.x Ryan's Stk Hses 9-6 0.62 10x Shoney's 13-8 1.10 11.8x
Under the Merger Agreement shareholders will receive $2.63 in cash. They will hand in their Summit certificates and receive CKE certificates following the merger, if it is approved. We believe the risk in a substantial drop in the value of CKE stock, to Summit shareholders, dramatically increases as the price of CKE increases, because of the price/earnings ratio of CKE and the concurrent reduction in the number of shares a Summit shareholder will receive. According to Schedule 13D filings with the SEC, William Foley, the CEO/Chairman of CKE, several Vice Presidents, and a Director have sold more than $8 million in CKE Stock in the past ninety days causing us to wonder whether they expect the continued performance of the Company. Post merger, at $26.00, a point move upward of CKE stock will only be a 1/10th point upside for Summit shareholders as a result of the exchange rate. There is little upside value to Summit shareholders if CKE prices continue to escalate after the merger. Further, although the merger was announced as a tax free reorganization, Summit has now determined that it is a taxable transaction to Summit shareholders. We also believe that there is a limit to which Carl's Restaurants, serving basically the same fast food, with a much lower market share than many other chains, can increase Summit shareholder value when they have received 1/10th of a CKE share for one share of Summit stock. While CKE has been successful in the short term in restructuring and putting on a cleaned up face, and an "in your face TV advertising campaign" for their shareholders and customers, they still remain a fast food entity. CKE has announced that in addition to paying $2.63 cash to Summit shareholders, they plan to expand the Galaxy concept in Summit, to open 17 new restaurants, to take over 28 Rally's restaurants, and to refurbish as many as 160 restaurants at a cost ranging from $100,000 to $130,000 per location for total capital needs in excess of $60 million. While CKE has a much larger existing capital base their proposed plan is capital intensive and CKE has a debt to equity ratio of 47% (or $144 million in debts). The Opposition Group believes that CKE is capable of providing or raising the capital needed to implement PLEASE COMPLETE AND RETURN THE RED PROXY CARD 7 their business plan based on their current performance. However, the plan itself is ambitious. We believe lag in their plan would reduce the results for CKE, as it did for Summit, and presumably impair their ability to raise significant amounts of capital. The Value of Summit - ------------------- Neither Summit, nor Piper Jaffray, Inc., in its fairness opinion, discuss the market value, in terms of the physical assets of Summit, and what that may mean to Summit shareholders. Rather they have focused on the market value of Summit's stock. We believe that the fair market value of Summit's assets is important to Summit shareholders in making their decision as to where they may realize the greatest value for their shares. According to Summit's audited financial statements for the fiscal year as of September 25, 1995, the value of Summit's property, buildings, equipment, and land is $83.1 million less $37.4 million in depreciation and amortization or $45.7 million. Summit has owned some of its properties for thirty years. There is no indication that anyone has attempted to determine the fair market value of the assets or the highest and best use for the properties. The depreciation of the assets of Summit on the balance sheet reflects standard accounting principles. Presumably some of Summit's properties have actually appreciated in thirty years. Piper Jaffray, in its opinion, states that it neither valued the assets nor visited any of Summit's restaurant sites. Instead, the Summit Board and Piper Jaffray focus Summit shareholders on Summit's failure to attract a better offer than the CKE offer. We do not understand how Piper Jaffray can state that they made a serious attempt to sell the assets without having visited sites, without having made geographical and demographical determinations as to markets which would find portions of the assets attractive, and without appraisals of the properties. In a May 7, 1996 letter from the Summit Board to the Opposition Group, Summit stated, "Of the 70 potential purchasers contacted by Piper Jaffray, only six expressed general interest and two parties made offers for portions of Summit's assets. Only two of the potential purchasers (one of which was CKE) showed sufficient interest to review further Summit's books, records and assets. CKE was the only party to make an offer for all of Summit which included a purchase price and available financing...the party which initially expressed interest in acquiring the JB's Restaurants and franchise system unilaterally terminated those discussions and there is no indication as to whether or when they may be resumed." On pages 21 and 22 of the Summit proxy under Special Factors it states that 25 requested confidential memoranda, that there was one proposal from HomeTown to acquire Summit's HomeTown Buffet restaurant assets, and one proposal from Flagstar Companies, Inc. to acquire all of Summit's JB's Restaurants and Galaxy Diner restaurant assets. In contradiction to the Summit letter to the Opposition Group, Flagstar indicated that it was Summit and CKE who had terminated discussions, even though Flagstar remained interested in purchasing the assets. HomeTown Buffet also indicated that Summit had terminated discussions as is disclosed in the Summit proxy statement. HomeTown Buffet stated a continued interest in the HomeTown franchises to us. On page 22 of the Summit proxy statement, dated June 10, 1996, it is stated, that interest was expressed by Buffets, Inc. Perkins Family restaurants, Saunders Karp & Co., Den America, Inc., Concept Restaurant Ventures and the Summit management group. The Opposition Group was told by the CEO's of Lions and Vicorp that they had been contacted and had also expressed an interest in the assets but that there had been no follow-up. In the Opposition Group's opinion, based on visits to individual sites, preliminary conversations with potential buyers, and preliminary discussions with real estate appraisers, greater value may be realized by Summit shareholders for their company. Collectively, the Opposition Group have more than five hundred years experience in evaluating projects or companies to determine their value. Where Summit is concerned, we have identified potential buyers, who have expressed an interest in substantially all of the assets of Summit. We have not even really begun to engage in further analysis and discussions that we feel would result in a more successful outcome for Summit shareholders. We believe that one of the difficulties that Summit has had in selling the assets is that by failing to do demographic and geographic analyses, and by approaching potential buyers on the basis of buying all of the assets simultaneously, that potential buyers were faced with pre-existing units in the same areas which would have been in competition with the units offered for sale. Flagstar, for instance, expressed an interest in purchasing all of the JB's at an approximate price of $240,000 per unit. They have made an offer for units of Coco's and Carrows Restaurants for more than $900,000 per unit. Flagstar expressed to us that they would be much more amenable to better pricing if they were able to choose units which do not sit in competition with their pre-existing units. In initial discussions with commercial real estate brokers, in Arizona and in Utah, one of whom has managed a real estate trust, it was indicated that certain properties which have been owned by Summit for many years are located in prime areas and would likely sell for uses other than restaurants at considerably higher prices than book value. In its May 7, 1996 letter to the Opposition Group, the Summit board stated, "You should also note on page 40 of the Proxy/Prospectus the requirement that any amount that CKE is to receive in excess of $40,000,000 for the Summit assets will be shared with Summit, thereby benefiting the Summit shareholders." Actually, that was not the case. On page 7 of the Proxy statement, it is stated that Summit shareholders would receive one half of the consideration, if CKE sells the assets of Summit for more than $40 million AS OF THE DATE OF THE MERGER. SUMMIT SHAREHOLDERS NEED TO BE AWARE THAT FURTHER CONSIDERATION IS UNLIKELY because the proxy statement goes on to say that CKE has not sold the assets and is unlikely to sell the assets prior to the merger. We were told in late April, by the CEOs of both Flagstar and Hometown Buffets, with whom CKE had publicly announced they had had discussions that discussions had been terminated with regard to the sale of assets. Both entities indicated that they were still interested in the assets. Thus, we believe it is not possible to reach a conclusion that it will be difficult or easy to sell the assets. Under the proposed merger, Summit's tax loss carry forward will be lost to CKE because of the change in control. The Opposition Group has not obtained a tax opinion on its proposal and it is not aware of significant adverse tax consequences. PLEASE COMPLETE AND RETURN THE RED PROXY CARD. 8 Summit's Proxy Materials - ------------------------ The negotiations for the proposed merger were completed by the management of Summit and Piper Jaffray when CKE was selling below $20 per share. At a CKE stock price of $25.50, there is a forty-seven percent reduction in the number of shares Summit shareholders will receive since the original merger offer. The following table calculates the exchange ratio under the amended offer at CKE current prices of $20 and beyond.
Exchange Ratio (CKE Shares Average Price Adjusted Price to Summit Shares) - -------------- -------------- --------------------------- 20 19 0.139 21 20 0.132 22 21 0.126 23 22 0.120 24 23 0.115 25 24 0.110 26 25 0.106 27 26 0.102 28 27 0.098 29 28 0.094 30 29 0.091
Analysis of the Position of Piper Jaffray - ----------------------------------------- In the Summit Proxy materials, the Summit Board states that Piper Jaffray has rendered an opinion as to the fairness of the proposed transaction. We have a number of questions regarding the opinion. Piper Jaffray was originally engaged by Summit to advise management on direction for the company. They received an undisclosed fee for that engagement. Piper Jaffray negotiated a fee of approximately $758,000 for the successful completion of the present merger. They will receive a $125,000 fee to render a fairness opinion. We believe that Piper Jaffray has a financial interest in the Summit shareholders' relying on Piper Jaffray's fairness opinion to approve the merger in order to obtain its success fee. Piper Jaffray, in its opinion letter of June 5, 1996, states that it relied on the representations of management with regard to financial statements and projections and have not attempted independently to verify such information. Page 37 of the Summit proxy statement points out that Summit does not as a matter of course make projections of forecasts as to future revenues or operations. As is disclosed, in the Special Factors Section, management, including the Chairman of the Board and the CEO, may have had a vested interest at the time of the discussions with Piper Jaffray, because they themselves wished to do a management buy-out. Further, as stated above, we do not see how Piper Jaffray can claim to have done sufficient analysis to express an opinion when they state that they did not visit sites and had no independent appraisal of the assets. The Opposition Group has difficulty with the 'arm chair' approach that Piper Jaffray took to making recommendations on the sale of Summit assets. On page 22 in the Special Factors section of the proxy, Summit comments that almost no one made an offer to Summit which included a price. (Although on page 25 of the proxy statement Summit goes on to say that when considering CKE's proposed reduction in the price the board considered prior offers to purchase certain assets of Summit.) We find it unusual that there was an apparent expectation that interested parties would make offers prior to reasonable analysis and negotiation. We fail to see how Piper Jaffray could represent Summit in the sale of the assets when they had no familiarity with them and apparently made no active effort to create competitive interest. The End of An Era - ----------------- In its letter of May 7th to the Opposition Group, the Summit Board states that along with Piper Jaffray, it concluded that Summit is not a viable company, "because of four successive years of losses, shrinking sales and customer counts, and the unsuccessful turnaround plan that had been implemented by a new Summit management team put in place over two years ago." We believe the present Board and management of Summit are incapable of providing vision, leadership, and profits to its shareholders. We believe that if the merger fails all of the Board members of Summit should resign and allow a new Board and management proposed by the Opposition Group to be voted upon by shareholders. We still believe in the assets and the people of Summit and believe that the foundation exists for Summit to be restored to profitability. On page 28 of its proxy statement, Summit discusses a letter from the Opposition Group which suggests that there are outsiders attempting to take over Summit without making an offer, The statement reads, "The Opposition Group has not made any offer to purchase Summit or any of Summit's assets nor has it indicated any consideration it is willing to pay for control of Summit." The proxy statement fails to state that the Opposition Group already owned fourteen percent of the common stock of the company and includes a composite of the largest shareholder to one of the smallest shareholders. The management of Summit Family Restaurants, Inc. has been under the control of 1.5% of the voting shares of common stock for the past five years. CKE is offering $2.63 cash and an exchange of Summit shares at the rate of approximately 1/10th of a share (at market prices as of June 10) of CKE for every share of Summit stock. At approximately thirty-four times twelve month trailing earnings we believe the dilution of Summit stock is not justified. There Is a Viable Alternative to the CKE Merger - ----------------------------------------------- The alternative plan of the Opposition Group, as was publicly disclosed in its Schedule 13D filing with the Securities and Exchange Commission on April 26, 1995, calls for the seating of a new board and management at Summit; the appraisal and the sale of most of the assets based on their fair market value or higher and best use; payment of a $2 per share cash dividend to shareholders from the sale of assets; the retention of certain employees to maintain existing operations until they are determined to be profitable and retained or to be sold; and the use of the remaining cash to create a new direction for Summit focused on themed restaurants and entertainment--creating an "eatertainment" focus. The one substantial corporate success that Summit has had in the last five years came as a result of a $3.8 million investment (borrowed from the bank) in a new venture entity, Americana Entertainment Group, Inc., now known as Hometown Buffets. According to its proxy statement Summit made $16.4 million dollars from its investment in the stock and operationally has profits from the sixteen Hometown franchises it developed. The highly competitive restaurant business is one in which success can only be achieved by maintaining current and repetitive appeal to the customer base. One of the fastest growing areas in the restaurant industry has been the themed restaurant segment. Capitalizing on a central theme or concept, these restaurants provide guests with a combined dining and entertainment experience. Coupled with a strong retail operation, themed restaurants provide sales volumes and returns on investment previously unheard of in the restaurant industry. The successful public offerings for Cheesecake Factory, Rainforest Cafe and the IPO for Planet Hollywood illustrate the high multiples that investors are willing to pay for entry into the themed restaurant industry. The table following shows various statistical data for two of the publicly held large sized restaurant companies, plus Planet Hollywood. Each of these restaurants is based upon some form of unique appeal e.g. Rainforest Cafe has recreated a rain forest within each restaurant complete with thunderstorms: Cheesecake Factory has emphasized its extensive dessert offerings featuring a variety of cheese cakes. Operating Data --------------
Planet Hollywood Rainforest Cafe Cheesecake - ------------------------------------------------------------------------------- Av. Sq. Feet 18,000 21,650 12,000 - ------------------------------------------------------------------------------- Av. Retail 3,250 3,500 N/A - ------------------------------------------------------------------------------- Av. Seats 315 405 375 - ------------------------------------------------------------------------------- Av. check $15.75 $11.50 $13.40 - ------------------------------------------------------------------------------- Av. Revenue $14.30 $ 9.70 $ 8.50 - ------------------------------------------------------------------------------- Gross Margin Food/Beverage 76.% 72.2% 69.9% - ------------------------------------------------------------------------------- Gross Margin Merchandise 55.4% 63.6% 59.2% - -------------------------------------------------------------------------------
Summit's board apparently rejected the Opposition Group's proposed concepts, in part, because it appeared to them to be an appropriate investment for venture capital. We believe that is not the case for two reasons. First, the individuals identified to develop the themed restaurant division include Robert Morris and Harold Fox. Robert Morris was the first restaurateur in the U.S. to break $10 million in sales in a single location and has repeated that accomplishment several times in the past ten years. Robert J. Morris Enterprises is based in Universal City and in partnership with MCA operates Gladstone's Universal at City Walk, a 750 seat themed restaurant developed by Robert Morris in 1973. RJM is also a consulting company and has provided themed expertise to most of the successful themed restaurants today. They provide menu and operational expertise to Country Star at Universal and at the new Country Star in Las Vegas. The consulting revenue and intellectual assets from RJM, excluding Gladstone's but including Country Star, is expected to move with them to Summit if shareholders approve the Opposition Group's plan. Conceptually, the first themed project proposed for Summit is the Wave Cafe. The Wave Cafe will be a themed restaurant, retail and entertainment concept embodying California beach life. The Cafe will consist of a restaurant, a surfable 'wave' ridden by employee instructors and a retail store featuring surf, volleyball, snowborading and related retail merchandise. Arriving at the Wave Cafe, guests will be greeted by an enormous rushing wave curling over the walkway creating an aqua canopy leading up to the door. Near the entryway in an open glass paned environment, there will be a fully operating and functioning bakery, which will provide the restaurant will all of its baked goods. Walking through the front door, guests will be greeted by the "Lifeguards", the Wave Cafe's hosts and hostesses. Giant video screens will occupy the wall and each screen will be filled with various action images of sports such as surfing, snowboarding, in-line skating, skateboarding, etc. In its proxy, Summit states that "it advised the Opposition Group that it was incorrect in its assumption that the assets of Summit were salable at a price, net of liabilities, that would allow for payment of any dividend to holders of Summit Common Stock..." At no time has either Summit nor CKE suggested that the net value of Summit's assets is less than $30 million. The Summit Board entered a lease in 1995, wherein their credit application claimed a net worth of at least $40 million dollars. The revised application in January, 1996, claimed a net worth in excess of $33 million. See Summit proxy statement F-20. The Opposition Group believes the Summit Board is incorrect when it states that through the sale of assets the Opposition Group would be unable to pay a $2 per share dividend for a total of $11.6 million. As noted in our risk factors, however, no assurance can be given that the Opposition Group would be successful in selling the assets at book or fair market value. We believe the proposed management and Board have been composed in a manner to provide for significant financial and investment banking expertise as well as industry and marketing expertise. Since the filing of its Schedule 13D, in April, the Opposition Group has been approached by no less than four entities interested in providing the financing or, if necessary, the equity to carry the group's proposed plans forward. The Opposition Group believes it will be able to accomplish its goals mainly through the sale of Summit assets and believes that it will be able to raise the capital, if necessary to complete its goals. PLEASE COMPLETE AND RETURN THE RED PROXY CARD 9 Three Votes by the Shareholders - ------------------------------- The Opposition Group will provide two proxy cards to the shareholders of Summit Family Restaurants, Inc. to be mailed simultaneously and voted upon simultaneously. SEC regulations require that we provide separate proxy statements and cards for the matters to be acted on by shareholders. The first proxy discussed herein calls for a vote against the merger. NO OTHER MATTER MAY BE VOTED ON THE PROXY CARD THAN THE SPECIFIC VOTE CALLED FOR ON THE PROXY CARD. The second proxy calls for the resignation or removal of the present Board of Directors of Summit Family Restaurants, Inc. if the merger fails. The Certificate of Incorporation of Summit provides that shareholders may remove all or part of the Board with not less than 80% of the stock entitled to vote upon the election of directors. We believe such a restrictive covenant is contrary to the 'majority rules' standard most of us live by. However, we believe that the Board has failed the shareholders of Summit Family Restaurants, Inc. and that eighty percent of the shareholders may agree with us. If the merger fails, the third vote calls for a new board of directors proposed by the Opposition Group to fill the three seats to be vacated in 1996 by the present board, and to fill the other seats vacated as a result of the resignation or removal of the other directors. Under the proposed plan the first priority will be to complete the analysis of Summit Family Restaurants, Inc. assets, to sell most to the existing assets, to pay shareholders a proposed $2 dividend. New business, in the form of themed restaurants and an entertainment entity will also be pursued. It is believed that the proposed management, particularly Harold Fox and Susan Trenham, have the background and the industry knowledge to complete detailed financial packages tailored appropriately to specific potential buyers to complete the sale of assets. Specific expertise would be contracted as it relates to real estate appraisals and equipment valuations. There is no intention to sell any assets to any affiliate of the Opposition Group. PLEASE COMPLETE AND RETURN THE RED PROXY CARD. 10 While a proposed new direction for Summit involves a decision on the part of Summit shareholders that they are willing to step into new arenas, we believe it is only through the success of a new direction that Summit shareholders can achieve both a cash return and a fully realized upside for their Summit shares. INCORPORATION OF CERTAIN DOCUMENTS AND CROSS REFERENCE TO THE SUMMIT PROXY STATEMENT/PROSPECTUS--THE OPPOSITION PROXY STATEMENT HEREBY INCORPORATES ALL DOCUMENTS CONTAINED IN THE SUMMIT PROXY/PROSPECTUS BY REFERENCE. SOLICITATION OTHERWISE THAN THROUGH MAIL Solicitation for the Opposition Proxy will be through the mail and by telephone. If shareholders have questions they may contact Susan W. Trenham at (818) 568-8800. COST OF SOLICITATION Costs of the solicitation will be borne by the Opposition Group. Administrative, legal, filing, printing, and distribution costs are $30,000 to date. Estimated total cost is $60,000. If the proposed merger is successfully defeated and a new management and board is approved by Shareholders as outlined herein, the Company may be asked to reimburse the group for its expenses. CONTRACTS, ARRANGEMENTS, OR UNDERSTANDINGS No participant is, or was within the past year, a party to any contract, arrangements or understandings with any person with respect to any securities of the registrant. No participant has had any related transaction of any nature with Summit./2/ SECURITY OWNERSHIP OF SUMMIT The following table sets forth certain information as of May 14, 1966, with respect to voting securities of Summit held by (1) each person who owns of record, or is known by the Opposition Group to own beneficially, more than five percent of any class of voting securities of Summit.
Class Name and Address Amount Percent of Class - ----- ---------------- -------- ---------------- Series A CKE Restaurants, Inc. 946,714 100% Convertible 1200 North Harbor Blvd. Preferred Anaheim, CA 92803 Common Kennedy Capital Management 567,600 11.8% 10829 Olive Boulevard St. Louis, Missouri 63141 Common Heartland Advisors, Inc. 512,500 10.6% 790 North Milwaukee St. Milwaukee, WI 53202 Common David L. Babson & Co., Inc. 422,500 8.79% One Memorial Drive Cambridge, MA 02142 Common Dimensional Fund Advisors, Inc. 315,150 6.56% 1299 Ocean Avenue, Suite 1100 Santa Monica, CA 90401
SHARES REPRESENTED BY THIS OPPOSITION PROXY STATEMENT The aggregate number of shares represented in this Opposition Proxy Statement is as follows:
Class Name and Address Amount of Shares - ----- ---------------- ---------------- Common First Global Securities, Inc. 5 790 East Colorado Blvd., #500 Pasadena, Ca. 91101 Common Kennedy Capital Management, Inc. 567,600 10829 Olive Boulevard St. Louis, Missouri 63141 Common William H. Burgess 4,000 550 Palisades Drive Palm Springs, Ca. 92262 Common Joe Campa & Associates 14,000 301 East Colorado, Suite 800 Pasadena, Ca. 91101 Common Michael E. Portnoy 42,250 14 Winding Brook Road Newtown, CT. 06471
/2/ First Global Securities, Inc. issued a purchase recommendation on Summit Family Restaurants, Inc. in September, 1994. In August, 1995 Summit management asked First Global to consider representing them in a management led buyout. First Global declined and returned unopened information on the subject to the company. First Global had not requested the information. At no time has First Global Securities, Inc. had any contracts or arrangements with Summit Family Restaurants, Inc. PLEASE COMPLETE AND RETURN THE RED PROXY CARD 11
Class Name and Address Amount of Shares - ----- ---------------- ---------------- Common Howard Foster Company 26,000 80 East Sir Francis Drake Boulevard Number C Larkspur, Ca. 94939 Common Mark R. Tonucci 5,000 142 Bennett Road East Haven, CT. 06513 Common T. H. Fitzgerald 2,000 180 Church Street Naugatuck, CT. 06770 Common Peter Sorokin 5,000 615 Fern Street West Hartford, CT. 06107 Common Mark A. Fries 9,600 31 Zoar Road Sandy Hook, Ct. 06482 Common Gary B. Davidson 4,100 3567 E. Sunrise, Suite 219 Tucson, Az. 85718 Harold Fox 0 679,955 The Opposition Group
PLEASE COMPLETE AND RETURN THE RED PROXY CARD. 12 Beneficial Owners
Data Name Shares-Buy Shares-Sell 12/29/95 First Global Securities, Inc. 5 02/15/95 Kennedy Capital Mgmt. 7,500 02/16/95 " 21,000 02/17/95 " 28,000 02/22/95 " 8,000 02/24/95 " 25,000 02/29/95 " 6,000 03/01/95 " 200 03/01/95 " 5,000 03/02/95 " 4,600 03/03/95 " 7,000 03/07/95 " 5,000 03/08/95 " 1,750 03/09/95 " 5,000 03/10/95 " 3,500 03/13/95 " 500 03/13/95 " 1,500 03/14/95 " 5,000 03/15/95 " 4,000 03/17/95 " 5,000 03/17/95 " 2,000 03/20/95 " 5,000 03/21/95 " 5,500 03/26/95 " 10,000 03/27/95 " 14,000 03/28/95 " 2,000 03/31/95 " 3,000 04/03/95 " 5,000 04/04/95 " 5,000 04/05/95 " 1,500 04/06/95 " 4,000 04/10/95 " 10,000 04/11/95 " 6,000 04/12/95 " 5,000 04/13/95 " 17,500 04/17/95 " 3,000 04/18/95 " 2,000 05/11/95 " 5,000 05/17/95 " 1,000 05/19/95 " 4,000 05/22/95 " 10,000 05/23/95 " 5,000 05/28/95 " 10,000 06/05/95 " 5,000 06/06/95 " 3,500 06/09/95 " 300 06/12/95 " 6,000 06/13/95 " 2,500 06/16/95 " 8,000 06/16/95 " 5,000 06/18/95 " 11,300 06/21/95 " 3,800 06/23/95 " 10,000 06/27/95 " 5,000 06/28/95 " 10,000 06/30/95 " 2,000 06/29/95 " 2,000 06/29/95 " 3,400 06/30/95 " 1,000 07/07/95 " 5,500 07/07/95 " 8,000 07/10/95 " 10,000 07/12/95 " 6,000 07/13/95 " 30,000 07/14/95 " 2,000 07/17/95 " 2,000 07/18/95 " 10,000 07/18/95 " 19,500 07/19/95 " 5,000 07/26/95 " 500 08/02/95 " 25,000 08/02/95 " 2,500 08/04/95 " 2,500 11/12/95 " 15,000 11/13/95 " 5,000 11/14/95 " 10,000 12/04/95 " 8,500 12/05/95 " 2,000 12/06/95 " 2,200 12/11/95 " 400 12/12/95 " 660 12/13/95 " 5,600 12/13/95 " 5,000 12/18/95 " 2,500 12/19/95 " 4,500 12/22/95 " 4,000 12/26/95 " 2,000 12/28/95 " 3,000 12/28/95 " 5,000 01/02/94 " 300 01/03/94 " 2,000 01/04/94 " 4,000 09/19/94 William H. Burguss 4,000 10/06/95 J.D. Camps & Assoc., Inc. 8,000 10/09/95 " 3,000 10/09/95 " 3,000 09/20/94 Michael E. Portnoy 2,000 10/27/94 " 4,000 12/09/94 " 6,000 08/16/95 " 5,000 08/17/95 " 2,000 08/17/95 " 3,000 09/21/94 " 1,200 09/23/94 " 3,000 05/11/95 " 2,000 05/30/95 " 1,000 05/31/95 " 500 10/12/95 " 200 11/02/95 " 5,000 11/16/95 " 3,000 11/22/95 " 5,000 03/20/95 " 2,150 03/22/95 " 3,300 12/16/94 Howard Foster Company 3,000 12/16/94 " 7,000 12/16/94 " 2,500 12/28/94 " Mark R. Tonucci 2,000 01/15/96 " 4,500 11/20/95 " 500 09/27/94 T.H. Fitzgerald 08/16/95 Peter Sorokin 5,000 08/23/95 Mark A. Fries 200 08/23/95 " 1,400 11/03/95 Nancy Taylor (Fries Spouse) 3,000 11/16/95 " 2,000 02/09/95 Gary B. Davidson 600 02/09/95 " 1,000 02/13/95 " 1,500 02/13/95 " 1,200 02/13/95 " 3,100 02/16/95 " 400
PLEASE COMPLETE AND RETURN THE RED PROXY CARD. 13 OPPOSITION PROXY CARD Summit Family Restaurants, Inc. Special Meeting of Stockholders -- To Be Held July 12, 1996 SOLICITED BY THE OPPOSITION GROUP. The undersigned hereby appoints Susan W. Trenham individually, as proxy of the undersigned, with full power to appoint her substitute, to represent and to vote, as designated below, all of the shares of common stock of Summit Family Restaurants, Inc. standing in the name of the undersigned, at the above Special Meeting and at any adjournment or postponement thereof. TO VOTE ON THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, AND AMENDMENTS OF JANUARY 24, APRIL 2, AND JUNE 5, 1996 BY AND BETWEEN SUMMIT FAMILY RESTAURANTS, INC. AND CKE RESTAURANTS, INC. FOR [ ] AGAINST [ ] ABSTAIN [ ] THE OPPOSITION GROUP RECOMMENDS A VOTE AGAINST ADOPTION OF THE MERGER. IMPORTANT PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY THIS PROXY CARD MAY ONLY BE USED TO VOTE FOR OR AGAINST THE MERGER AND ON NO OTHER MATTER THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER ON THE REVERSE SIDE OF THIS PROXY. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED AGAINST THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. Date _______________________, 1996 __________________________________ (Signature of shareholder) Please sign your name exactly as it appears hereon and mail this proxy in the enclosed envelope. Where there is more than one owner, each should sign. When signing as an executor, administrator, guardian or trustee, please add your title as such. If executed by a corporation, the proxy should be signed by a duly authorized officer. -----END PRIVACY-ENHANCED MESSAGE-----