-----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, TZqj/s/gCVfrD3owu2KlOmpOBsbrGO9KK+klcHOirA46f+uLS32ZNWs41XpQOpPB 2anO8cNM/pBFNQA3KXK2gg== 0000898430-96-002295.txt : 19960529 0000898430-96-002295.hdr.sgml : 19960529 ACCESSION NUMBER: 0000898430-96-002295 CONFORMED SUBMISSION TYPE: PREC14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960528 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: PREC14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-06054 FILM NUMBER: 96573262 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: PREC14A 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 PREC14A 1 PRELIMINARY OPPOSITION PROXY STATEMENT PRELIMINARY PROXY MATERIAL 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 SHAREHOLDERS' OPPOSITION PROXY STATEMENT FILED BY A PARTY OTHER THAN THE REGISTRANT SUMMIT FAMILY RESTAURANTS,INC. ------------------------------ (Name of Registrant as Specified in Its Charter) First Global Securities, Inc. ----------------------------- Kennedy Capital Management, Inc. -------------------------------- William H. Burgess ------------------ J. D. Campa and Associates, Inc. -------------------------------- Michael E.Portnoy ----------------- Howard Foster and Company ------------------------- Mark R. Tonucci --------------- T.H. Fitzgerald --------------- Peter Sorokin ------------- Mark A. Fries ------------- Gary B. Davidson ---------------- (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). PRELIMINARY MAY , SHAREHOLDERS' OPPOSITION PROXY STATEMENT TO THE MERGER BETWEEN SUMMIT FAMILY RESTAURANTS, INC. AND CKE RESTAURANTS, INC. Fellow Shareholders: We are a group of Summit shareholders who own 13.59% 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_____, 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; 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; that on its face, the fairness opinion is incomplete; and that certain issues which shareholders ought to consider in reaching a decision to vote for or against the merger have been obscured. 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 - -------------------- This letter is entitled SHAREHOLDERS' OPPOSITION PROXY STATEMENT TO MERGER. We urge you to vote AGAINST the proposed merger between Summit and Cke. Further, we recommend that you assert your dissenting shareholders rights to require an independent valuation of your shares/1/. It should be noted that the obligations of - ---------- /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). 2 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. CKE may terminate the merger agreement with Summit if more than 10% of the shareholders assert their dissenters rights. Summit management says that if there are insufficient votes to approve the proposed merger that they will attempt to adjourn the meeting in order to obtain more votes. If the merger fails to be consummated at the Special Meeting we urge that you demand that the Board acknowledge the opposition to the merger and immediately notice an Annual Meeting in order to allow shareholders to vote for a new Board of Directors. Summit has staggered terms for the Board of Directors to help prevent unfriendly takeovers of the company. At the same time, the staggered system allows Board members to entrench themselves whether they have performed or not. Only part of the Board is voted on by shareholders each year. We believe that the Board has failed to provide the necessary management and leadership of Summit. If the merger fails we urge the Board of Directors to allow shareholders to vote on a new proposed board. The State of Delaware, where Summit Family Restaurants, Inc. is organized, allows a shareholder to demand an annual meeting for the election of the Board of Directors of their Company when a company has failed to hold a meeting within the previous thirteen months. Summit has not had an annual meeting in sixteen months. You may use the SHAREHOLDERS' OPPOSITION PROXY to Vote AGAINST the proposed merger or return the Summit Proxy with a vote AGAINST the proposed merger if you wish to oppose the merger. Failure to vote or to return either proxy card will have the same effect as a vote against the Merger. However, if you sign and return the Summit Proxy card and fail to vote either FOR or AGAINST the merger, where no direction is given, such shares will be voted for the approval of the Merger by the Summit management. 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. SHAREHOLDERS' 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 documentation in the Summit proxy statement fails to reflect the current stock market prices of CKE . The lack of effort to determine the fair market value of the assets of Summit Family Restaurants, Inc. 3 . The questionable position of Piper Jaffray, Inc., the lack of an unaffiliated fairness opinion for the Summit shareholders, and the lack of an independent assessment on the part of Piper Jaffray, Inc. . A viable alternative for Shareholders if they disapprove the merger. The Actions of the Summit Board of Directors - -------------------------------------------- According the to the Merger Agreement the present management of Summit was to remain in place until ninety days after the approval of the merger by shareholders. All operations were to be maintained so that there would be no diminishment in Summit's operations if shareholders disapproved the merger. Summit states in its proxy statement 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 fact, as of April 10th, at the request of CKE, the Summit Board terminated 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 management. Further, it was required that Summit pay out more than $1.2 million in payments to these former employees by virtue of the change in control clauses in their employment contracts. We believe that such action was taken in order to leave shareholders with little alternative than to vote for the merger and so that change of control payments would reduce the assets on Summit's balance sheet rather than CKE's. While claiming concern about cash flow, the Board paid out over $1.2 million and reserved several hundred 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. Contrary to statements by Summit that it was their decision to terminate the above individuals because of a lack of cash flow, minutes of the Summit Board state that CKE requested the termination and agreed to indemnify Summit for $300,000 of the `change of control' payments should the merger fail. 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. Subsequently, he negotiated with 4 Piper Jaffray, Inc. to receive a portion of their success fee, approximately $114,000, for the completion of the merger. Pre Shareholder Approval Actions by CKE - --------------------------------------- On April 5, 1996, CKE purchased the Preferred Stock of Summit Family Restaurants, Inc. The preferred stock is convertible into approximately 16.5% of Summit's stock. On April 9, CKE requested that the Summit Board terminate all of the top officers of Summit Family Restaurants, Inc. and agreed to indemnify Summit for $300,000 if the merger is not approved. 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 summarily 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. 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..." 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, CKE was acquiring $45.7 million in assets for approximately $37.7 million dollars which gave CKE incentive to pay the purchase price to shareholders. Subsequently, CKE decided that it did not like the price it has offered and demanded two reductions which were accepted by the Summit Board. The announcements indicated that CKE was disappointed in the performance of Summit but that was not news to CKE or to anyone else. No reasonable explanation has been given by the Board for accepting two reductions other than the fact that CKE wanted them. By the third announcement, the offer to Summit shareholders had been reduced to $5.27 per share, part in cash and part in CKE stock. There was no longer any substantial premium for Summit shareholders over the NASDAQ price and CKE's stock was valued at a multiple of more than 30x price to earnings. Thus Summit shareholders were getting very little more than they would get in the open market and the value of their shares was being highly diluted. Further, as the price of CKE stock advances, the Merger Agreement and subsequent amendments call for a reduction in the number of CKE shares that Summit shareholders will receive. 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 (to $6.27) in the $5.27 consideration now offered by CKE (still less than the original offer), the price of CKE will have to advance $11.11 to 5 $36.61 which is 62x 1995 earnings (as of January 31, 1996), and 46x 1996 projected earnings. We are not aware of any restaurant chain in the industry class which sells at anywhere close to that multiple. 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 2 0.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. 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. Post merger, at $25.50, a point move upward of CKE stock will only be a 1/9th 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 1/9th 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 with a limit to the number of ways one can serve hamburgers, grilled chicken, and high fat content food. 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 than Summit, 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 their business plan based on their current performance. However, the plan itself is ambitious. A 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. 6 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 net book value. 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. While Piper Jaffray sent out letters to various companies, we have been told by several corporate CEO's that although they expressed an interest in all or a portion of the assets, no one followed up with them. Further, the CEOs of the two companies with which Summit and/or CKE negotiated, state that negotiations were abruptly terminated by Summit or CKE without explanation. In First Global'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. We have, at this time, identified potential buyers who collectively have expressed interest in substantially all of the assets of Summit. We have not even really begun to do further analysis and discussions that we feel would result in a more successful outcome for Summit shareholders. In proxy material, it is stated that Summit and Piper Jaffray negotiated with CKE for Summit shareholders to receive one half of the consideration, if CKE had sold the assets of Summit for more than $40 million AS OF THE DATE OF THE MERGER. We believe that statement is misleading because the proxy statement goes on to say that CKE has not sold the assets--making the point irrelevant but giving the impression that there might be further consideration to shareholders. Further, since CKE apparently terminated discussions relating to the sale of assets, it is not possible to reach a conclusion that it will be difficult or easy to sell the assets. Summit's Proxy Materials - ------------------------ Nothing in the proxy materials of Summit anticipates the exchange of Summit shares for CKE shares at prices above $20 per share for CKE stock. 7 At a CKE stock price of $25.50, there is a fortyseven percent reduction in the number of shares Summit shareholders will receive since the original merger agreement. The following table calculates the exchange ratio under the amended offer at CKE current prices of $20 and beyond.
Average Price Adjusted Price Exchange Ratio (CKE Shares - ----------------- -------------- --------------------------- 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 proposed merger. They will receive a $125,000 fee to render a fairness opinion whether the merger is approved or not. Obviously Piper Jaffray has a financial interest in the Summit shareholders' relying on Piper Jaffray's fairness opinion to approve the merger. Piper Jaffray has based its opinion on the representations of management and conducted no independent assessment of the company. As is disclosed, management, including the Chairman of the Board and the President, 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. Finally, all of the assessments in their opinion and charts were based on market prices well below the present price of CKE stock. They give no opinion or analyses based on a CKE price above $19 and the related reduction in the number of CKE shares for Summit shareholders. There Is A Viable Alternative to the CKE Merger - ----------------------------------------------- By their own account the Summit Board has recommended the merger 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. Clearly, 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 the new 8 Board and management proposed by the Opposition Group to be voted upon by shareholders. The alternative plan of the Opposition Group calls for the seating of a new board and management at Summit; the appraisal and sale of under performing assets based on their fair market value; 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. We urge Summit to notice a 1996 Shareholders' meeting immediately following the Special Meeting--to be held if the merger proposal fails. Clearly, the present Board has no idea for a direction for Summit and if the merger fails they should step aside to allow new management, endorsed by the shareholders, to take control of the corporation. A proposed management team is discussed in this document in order that Summit shareholders may be aware that there is an alternative to voting in favor of the merger, even though the present Board has depleted Summit of its management. Susan W. Trenham would be proposed to shareholders as the new Chair of the Board and CEO of Summit. Trenham has served in chief financial, chief operational, and chief executive positions for more than twenty years and brings the knowledge and contacts of investment banking to the table. Susan Trenham began her career in government. From 1967 to 1969, she served as press aide and legislative assistant to U. S. Congressman John Dellenback of Oregon. From 1969 to 1974, she served in the American Embassies in Zaire, Guinea, and Morocco, as the wife of an American diplomat, and as a free lance writer--with articles published in American newspapers and magazines, in publications going to thirty different countries, and writing for such companies as Goodyear and for the World Bank. In 1974, she returned to the United States where she was recruited by the President's Consultant on Consumer Affairs, Esther Peterson, to join the staff of a new joint White House and Congressional Commission under President Ford. She was subsequently promoted to Assistant Director developing and supervising a staff of thirty people. The General Accounting Office later estimated that recommendations made by her and her staff, and negotiated by her to be adopted by Federal agencies and the Congress, resulted in more than $3 billion in savings to the taxpayer. In 1978, she served for four months in the Carter White House as an analyst on the staff of Stuart Eizenstadt, preparing a White Paper for the President on the constitutional issues of privacy in financial and medical records. In 1979, she became Special Assistant to the U. S. Comptroller of the Currency, the regulator for national banks. Ms. Trenham specialized in international banking issues and market surveillance issues for the Comptroller. When the silver market crashed she headed the investigation of the markets on behalf of the banking agencies. She also served simultaneously on the White House Conference on Small Business and received special recognition from President Carter. Subsequently, she was named by President Reagan as Executive Director of the U. S. Commodity Futures Trading Commission, the regulator of commodity exchanges in the United States with a $30 million budget and 470 person staff. In that capacity she directed all financial, data processing, leasing, strategic planning, and budgetary functions for the Commission. The agency had just gone through the most difficult time ever in the commodity markets when she took over. She upgraded the data processing and surveillance systems, and along with new Commissioners, restored the credibility and production of the Commission. Subsequently she left the government to develop and patent the first computerized system for trading energy futures. That system 9 remains state of the art today. She served as president of the World Energy Exchange in Dallas, Texas, and simultaneously as a partner in the Rand Financial Group raising venture capital and structuring debt financing. She was named a Dallas Press Club Headliner in 1982, for bringing business innovation to Dallas. In 1988, she came to California as Chief Financial Officer of World Vision International, Inc., a $135 million humanitarian relief organization with 16,000 projects worldwide. She bought First Global Securities, Inc. in 1991, and remains as Co-Chair and CEO today. She served simultaneously as Treasurer and Chief Financial Officer of CAS Refining, Inc. in 1990, having structured the debt financing for crude operations of the refinery. She has structured and obtained over $400 million in financing for clients for various projects. Other Proposed Directors - ------------------------ Mr. Harold Fox, is proposed to be CFO of Summit and to serve on the Board of Directors. Mr. Fox began his business career with Coopers & Lybrand in 1967. While at Coopers & Lybrand, he obtained his CPA license and served in various capacities including Audit Supervisor and Senior Manager in the Management Consulting Services Division. In 1975, Mr. Fox joined W. R. Grace & Co. where he served as an Assistant Corporate Controller, Deputy Corporate Controller and Executive Vice President and Chief Financial Officer of Grace Restaurant Company. During Mr. Fox's tenure, Grace Restaurant Company owned and operated over 800 restaurants with sales in excess of $1.1 billion. Mr. Fox subsequently became a founding shareholder and Vice President of Finance for American Restaurant Group, acquiring assets in excess of $350 million, including Stuart Anderson's Black Angus Restaurants, Grandy's, Spoons and Spectrum Foods. When the major shareholders of American Restaurant Group acquired Del Taco and Naugles, Mr. Fox transferred to the new entity as Executive Vice President and Chief Financial Officer. In that capacity he implemented cost reduction savings that decreased G& A expenses from $14.0 million to $6.4 million and participated in a turn around situation that moved the company from a negative $5.0 million cash flow to a positive $10.2 million. In 1993, Mr. Fox sold his 25% interest in Del Taco to GE Capital and joined R. J. Morris Enterprises as a Partner. Mr. Fox served on the boards of Grace Restaurant Company and Applebys Restaurants. Mr. Fox is a graduate of the City University of New York and attended graduate business school at New York University. He is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Ms. Vida Icenogle grew up in California and graduated from California State University, Los Angeles. She received her MA from Simmons College in Boston and has concentrated in investment management, marketing, and client servicing. She is a former Assistant Vice President of Security Pacific Bank and Vice President and Director of Investment Marketing for Republic Bank Dallas. She is a principal in Zuidema & Icenogle, Inc. representing clients such as Breau Capital Management, Boston; Sandler Capital Management, New York; Finovelec, Paris. She presently markets financial advisors to pension, trust, and capital intensive entities. She serves on the Board of Directors of Zuidema & Icenogole and World Vision, U. S. She is a member of the Association of Investment Management Sales Executives (AIMSE). Mr. James F. Pomroy is Chairman of InterNutria, Inc.--a company which develops and markets nutrient based foods and beverages. Early in his career Mr. 10 Pomroy was senior product manager for Colgate Palmolive Co. From 1963 to 1965, he was Marketing Director Human Foods for Ralston Purina Company and from 1965 to 1970 he was Vice president and Partner, heading the consumer marketing practice of Booz Allen & Hamilton. From July, 1983 to March, 1989, he was Chief Executive officer of Sundor Brands, Inc., a beverage company based in Darien, Connecticut. Some of the brand names included were Texsun Grapefruit, Sunny Delight Orange Drink and Rolling Rock Beer--growing the company from $60 million to over $300 million in sales. In April, 1989, Sundor was sold to Proctor and Gamble. Mr. Pomroy served as Chief Executive Officer of Drake Bakeries, Inc., the largest bakery in the northeast in which his financial partner was the Rockefeller Group. Drake was sold to Culinar Bakeries of Montreal in December 1991. From 1992 to 1994, Mr. Pomroy organized a leveraged buyout to acquire Everfresh Juice Co. and Sundance Beverages, and merged the two companies to form Everfresh Beverages. Nutriceutical Products Corporation was spun out from Everfresh Beverages in 1994 and acquired by InterNutria in 1996. Mr. Pomroy graduated from Allegheny College and received his MBA from Harvard University. Ms. Beverly Sassoon was born in Edmonton, Canada and raised in Burbank, California. She began an acting career at the age of eighteen and appeared in numerous films for Columbia Pictures. While shooting a film, Beverly met and married Vidal Sassoon. She left the entertainment business and for the next decade was involved with the development and growth of the Sassoon brand-- focusing on product development, promotion, public relations and corporate positioning. She also served on the Board of Directors of the Sassoon corporation. During her involvement the entity grew from a multifaceted hair salon to worldwide franchising and product distribution. Among her other credits were a collaborative publishing effort, A Year of Health & Beauty (Simon ------------------------- & Shuster, 1976), Beauty for Always (Avon Press. 1980) and a novel in 1990 for ----------------- Pocket Books. Ms. Sassoon serves as a contributing health and beauty editor for a number of magazines. One other individual, a partner in a major U. S. investment banking firm, has been asked to join the proposed Board and is presently going through corporate clearances to participate. Another individual, a CEO in a major food company, is also expected to be proposed if the Summit/CKE merger is defeated. President of a New Restaurant Division - --------------------------------------- Mr. Robert Morris is proposed as the President of the Restaurant Division. Robert Morris is a native Southern Californian and has been in the restaurant and recreational business all of his life. He has founded and operated many successful restaurants in the Los Angeles area over the past twenty-five years. In 1973, he opened Gladstone's 4 Fish in the Santa Monica Canyon. In 1981, Gladstone's moved to its current location at Sunset and Pacific Coast highway thus becoming Gladstone's Malibu and one of the top grossing restaurants in America. He was the first restaurateur to exceed $10 million in sales in a single location. At the time of his departure sales for the one unit were in excess of $15 million. He also originated the Original Jetty, R. J.'s the Rib Joint, Adam's, Sea View Seafoods on the Santa Monica Pier and revitalized the Malibu Sea Lion. Mr. Morris' company was acquired in 1983 by the W. R. Grace Company and became the Mor Food `n Fun division of the Grace Restaurant Company. As part of the Grace Restaurant Company he developed and managed many restaurants in southern California. Mr. Morris subsequently became Chairman and Chief executive Officer of California Beach Restaurants, Inc. which owns Gladstone's Malibu and R. J.'s the Rib Joint. In 1992, Bob left his position in order to assume the management contract for MCA's Universal Gladstone's at Universal CityWalk. 11 Today, Robert J. Morris Enterprises, of which Robert Morris and Harold Fox are principal owners, is based in Universal City. In partnership with MCA Universal, the company owns and operates Gladstone's Universal, a 750 seat restaurant in the heart of Universal CityWalk at Universal Studios Hollywood, with sales of approximately ten million dollars annually and a return on investment in excess of 40%. In addition, the company manages the food and beverage service for Country Star restaurants, a publicly held company located at Universal CityWalk and new locations slated for Las Vegas and Atlanta in 1996. Mr. Morris is a former member and trustee of the Bay Area Restaurant Association. Mr. Morris is a past board member of the Los Angeles County Mental Health Commission and the Santa Monica Medical Center Foundation. He is a founder of the Los Angeles Music Center as well as a founding member of the American Institute of Wine and Food. In 1983, he was named Restaurateur of the Year by the Restaurant Writer's Association of Los Angeles and in 1986 he was inducted into the Southern California Restaurant Hall of Fame. Priorities for Proceeding - ------------------------- Upon the defeat of the proposed merger and the seating of a new Board of Directors and management, the first priority would be to complete the analysis of Summit Family Restaurants, Inc. assets, to sell most of the existing assets, and to pay shareholders a proposed $2 dividend. New business, in the form of themed restaurants and an entertainment entity will also be pursued. The only success that Summit has had in the last five years came as a result of an investment in a new venture entity, Hometown Buffets. The highly competitive restaurant business is one in which success can only be achieved by maintaining current and repetitive appeal to the customer base. We do not believe that the existing Summit can create sufficient appeal to maintain or increase value for Summit shareholders. 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. RISKS ASSOCIATED IN ACCEPTING THE SHAREHOLDER'S OPPOSITION PROXY There Is No Assurance of Success In Selling The Assets of Summit At A Higher - ---------------------------------------------------------------------------- Value - ------ The Opposition Group believes that the proposed new Summit management and Board have the background, capability, and opportunity to sell the under performing assets of Summit 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. A Two Dollar Dividend to Summit Shareholders Is Not Assured - ----------------------------------------------------------- Under the proposed CKE/Summit merger, Summit shareholders will receive $2.63 in cash and have their ownership in Summit reduced to approximately 3.28 percent ownership in CKE based on current market prices. The proposed new team for Summit believes that they can sell various assets for more than $2.63 per share and that they will be able to pay the proposed $2 dividend to shareholders but there is no assurance that they will be able to do so. Shareholders will have to determine whether they would rather receive a 12 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. Under Delaware law, 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 Appendix C of 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 written demand 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. 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; COSTS OF SOLICITATION--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. Costs of the solicitation will be borne by the Opposition Group. If the proposed merger is successfully defeated and the proposed new management and board is approved by Shareholders, the Company will be asked to reimburse the group for its expenses. Sincerely, The Opposition Group 13 SHAREHOLDERS' OPPOSITION PROXY CARD. In the Proposed Merger Between Summit Family Restaurants, Inc. ("Summit") and CKE Restaurants, Inc., Special Meeting to Be HELD , 1996. THIS PROXY IS SOLICITED BY SHAREHOLDERS IN OPPOSITION TO THE PROPOSED MERGER. The undersigned hereby appoints SUSAN W. Trenham individually, as the agent and proxy of the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned to vote, as designated below, to act with respect to all of the shares of Common Stock, par value $0.10 per share ("Common Stock"), of Summit standing in the name of the undersigned, or with respect to which the undersigned is entitled to vote and act, at the above Special Meeting and at any adjournment or postponement thereof, AND TO VOTE AGAINST THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, BY AND BETWEEN SUMMIT AND CKE RESTAURANTS, INC. DATED AS OF NOVEMBER 30, 1995, AND AMENDED AS OF JANUARY 24, 1996 AND APRIL 2, 1996. And At The Discretion Of The Proxy Holder To Vote On Any Other Business Which Properly Comes Before The Special Meeting. I hereby let Summit Family Restaurants, Inc. and the Opposing Shareholders know that it is my intention to assert my Dissenting Rights to an independent appraisal of my stock I hereby let the Board of Directors of Summit know that I am against any postponement of the Special Meeting if the proposed merger is not consummated. I request the Board of Directors to immediately notice an Annual Shareholders Meeting, if the proposed merger is not approved by shareholders, for the purpose of electing a new Board of Directors. Date , 1996 ---------------- --------------------------------------- (Signature of shareholder) -----END PRIVACY-ENHANCED MESSAGE-----