-----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, CEgGVSlo8V8mVgqMD1zd9AGzrNxTr1jRMM0KJFxNyS1TMB+dYJuz2uojvo/hVCL/ sM2wqiTPOlCS3jTdt8Bk5A== 0000892569-99-001839.txt : 19990702 0000892569-99-001839.hdr.sgml : 19990702 ACCESSION NUMBER: 0000892569-99-001839 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19990517 FILED AS OF DATE: 19990701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CKE RESTAURANTS INC CENTRAL INDEX KEY: 0000919628 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 330602639 STATE OF INCORPORATION: DE FISCAL YEAR END: 0125 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11313 FILM NUMBER: 99657784 BUSINESS ADDRESS: STREET 1: 1200 NORTH HARBOR BOULEVARD CITY: ANAHEIM STATE: CA ZIP: 92801 BUSINESS PHONE: 7147745796 MAIL ADDRESS: STREET 1: 1200 NORTH HARBOR BLVD CITY: ANAHEIM STATE: CA ZIP: 92801 10-Q 1 FORM 10-Q FOR THE QUATERLY PERIOD ENDED 5/17/99 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934. For the quarterly period ended May 17, 1999 ----------------------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934. for the transition period from __________ to __________ Commission file number 1-13192 ----------------- CKE RESTAURANTS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 33-0602639 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (I.R.S. Employer Identification No.) of Incorporation or Organization) 401 W. Carl Karcher Way, Anaheim, CA 92801 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (714) 774-5796 ----------------------------- 1200 N. Harbor Boulevard, Anaheim, CA 92801 - -------------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 52,020,861 shares of Common Stock, par value $.01 per share, as of June 18, 1999 ------------------------------------------------------------ 2 CKE RESTAURANTS, INC. AND SUBSIDIARIES INDEX
Page ---- Part I. Financial Information Item 1. Consolidated Financial Statements: Consolidated Balance Sheets as of May 17, 1999 and January 25, 1999......... 3 Consolidated Statements of Income for the sixteen weeks ended May 17, 1999 and May 18, 1998.......................................... 4 Consolidated Statements of Cash Flows for the sixteen weeks ended May 17, 1999 and May 18, 1998.......................................... 5 Notes to Consolidated Financial Statements.................................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk............... 15 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K........................................ 16
2 3 PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CKE RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited)
May 17, January 25, 1999 1999 ---------- ----------- ASSETS Current assets: Cash and cash equivalents $ 45,529 $ 46,297 Accounts receivable, net 38,720 46,820 Related party receivables 1,225 1,474 Inventories 25,068 22,507 Prepaid expenses 17,710 12,349 Other current assets 3,154 4,845 ---------- ---------- Total current assets 131,406 134,292 Property and equipment, net 981,723 940,178 Property under capital leases, net 78,866 81,895 Long-term investments 33,362 34,119 Notes receivable 7,572 7,898 Related party receivables 7,407 7,020 Costs in excess of assets acquired, net 251,453 252,035 Other assets 46,094 39,477 ---------- ---------- $1,537,883 $1,496,914 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 4,276 $ 4,273 Current portion of capital lease obligations 7,511 7,838 Accounts payable 82,828 88,462 Other current liabilities 102,991 101,074 ---------- ---------- Total current liabilities 197,606 201,647 ---------- ---------- Long-term debt 195,381 360,684 Senior subordinated notes 200,000 -- Convertible subordinated notes 159,225 162,225 Capital lease obligations 88,843 90,373 Deferred income taxes, net 15,029 15,029 Other long-term liabilities 77,648 80,114 Stockholders' equity: Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued or outstanding -- -- Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding 51,866,131 and 51,850,249 shares 519 519 Additional paid-in capital 380,387 380,423 Retained earnings 223,245 205,900 ---------- ---------- Total stockholders' equity 604,151 586,842 ---------- ---------- $1,537,883 $1,496,914 ========== ==========
See Accompanying Notes to Consolidated Financial Statements 3 4 CKE RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share amounts) (Unaudited)
Sixteen Weeks Ended ------------------------ May 17, May 18, 1999 1998 --------- --------- Revenues: Company-operated restaurants $ 546,744 $ 478,607 Franchised and licensed restaurants and other 48,979 49,604 --------- --------- Total revenues 595,723 528,211 --------- --------- Operating costs and expenses: Restaurant operations: Food and packaging 163,732 144,850 Payroll and other employee benefits 165,579 148,703 Occupancy and other operating expenses 110,835 90,890 --------- --------- 440,146 384,443 Franchised and licensed restaurants 35,528 33,301 Advertising expenses 32,679 27,449 General and administrative expenses 39,765 37,384 --------- --------- Total operating costs and expenses 548,118 482,577 --------- --------- Operating income 47,605 45,634 Interest expense (15,678) (9,237) Other income (expense), net (266) 1,396 --------- --------- Income before income taxes and extraordinary item 31,661 37,793 Income tax expense 12,531 15,061 --------- --------- Income before extraordinary item 19,130 22,732 Extraordinary item - gain on early retirement of debt, net of applicable income taxes of $186 290 -- --------- --------- Net income $ 19,420 $ 22,732 ========= ========= Basic income per share before extraordinary item $ 0.36 $ 0.44 Extraordinary item - gain on early retirement of debt, net of applicable income taxes - basic .01 -- --------- --------- Net income per share - basic $ 0.37 $ 0.44 ========= ========= Weighted average shares outstanding - basic 51,860 51,229 ========= ========= Diluted income per share before extraordinary item $ 0.36 $ 0.43 Extraordinary item - gain on early retirement of debt, net of applicable income taxes - diluted .01 -- --------- --------- Net income per share - diluted $ 0.37 $ 0.43 ========= ========= Weighted average shares outstanding - diluted 56,341 55,581 ========= =========
See Accompanying Notes to Consolidated Financial Statements 4 5 CKE RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Sixteen Weeks Ended ------------------------ May 17, May 18, 1999 1998 --------- --------- Net cash flow from operating activities: Net income $ 19,420 $ 22,732 Adjustments to reconcile net income to net cash provided by operating activities, excluding the effect of acquisitions and dispositions: Extraordinary gain on early retirement of debt (476) -- Depreciation and amortization 27,923 19,649 Loss on sale of property and equipment and capital leases 435 376 Net noncash income (140) (387) Loss on noncurrent asset and liability transactions 370 233 Net change in receivables, inventories, prepaid expenses and other current assets 2,123 9,474 Net change in accounts payable and other current liabilities (6,459) 5,973 --------- --------- Net cash provided by operating activities 43,196 58,050 --------- --------- Cash flow from investing activities: Purchases of: Property and equipment (67,183) (23,666) Proceeds from sale of: Property and equipment 3,404 5,372 Increases in notes receivable and related party receivables (569) (23) Collections on notes receivable, related party receivables and leases receivable 890 2,332 Net change in other assets 558 (1,213) Acquisitions, net of cash acquired -- (384,711) Dispositions, net of cash surrendered -- 4,328 --------- --------- Net cash used in investing activities (62,900) (397,581) --------- --------- Cash flow from financing activities: Net change in bank overdraft 2,743 2,450 Long-term borrowings 237,000 410,445 Repayments of long-term debt (204,825) (41,397) Repayments of capital lease obligations (1,858) (1,404) Deferred financing costs (9,686) (10,196) Net change in other long-term liabilities (2,467) 2,192 Payment of dividends (2,075) (1,895) Exercise of stock options 104 672 --------- --------- Net cash provided by financing activities 18,936 360,867 --------- --------- Net increase (decrease) in cash and cash equivalents $ (768) $ 21,336 ========= =========
See Accompanying Notes to Consolidated Financial Statements 5 6 CKE RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Sixteen Weeks Ended --------------------- May 17, May 18, 1999 1998 ------- --------- Supplemental disclosures of cash flow information: Cash paid during period for: Interest (net of amount capitalized) $15,703 $ 6,654 Income taxes 5,957 7,244 FEI Acquisition: Tangible assets acquired at fair value $ -- $ 317,056 Costs in excess of net assets acquired -- 152,989 Liabilities assumed at fair value -- (89,408) ------- --------- Total purchase price $ -- $ 380,637 ======= =========
6 7 CKE RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MAY 17, 1999 AND MAY 18, 1998 NOTE (A) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements include the accounts of CKE Restaurants, Inc. and its consolidated wholly-owned subsidiaries (the "Company" or "CKE") and have been prepared in accordance with generally accepted accounting principles, the instructions to Form 10-Q, and Article 10 of Regulation S-X. These statements should be read in conjunction with the audited consolidated financial statements presented in the Company's 1999 Annual Report to Stockholders. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein. The results of operations for such interim periods are not necessarily indicative of results to be expected for the full year or for any other future periods. Certain reclassifications have been made to the fiscal 1999 consolidated financial statements to conform to the fiscal 2000 presentation. Share and per share information has been retroactively adjusted to reflect the ten percent stock dividend paid in January 1999. NOTE (B) ACQUISITION OF FLAGSTAR ENTERPRISES, INC. On April 1, 1998, the Company acquired Flagstar Enterprises, Inc. ("FEI"), the largest franchisee in the Hardee's system, previously operating 557 Hardee's restaurants located primarily in the Southeastern United States. In connection with the acquisition, which was accounted for as a purchase, the Company acquired all of the issued and outstanding shares of common stock of FEI from Advantica Restaurant Group, Inc. ("Advantica") for cash consideration of $380.6 million (which included miscellaneous expenses paid to Advantica) and the assumption of approximately $45.6 million in capital lease obligations. The Company used the majority of the net proceeds from the issuance of $197.2 million of convertible subordinated notes together with borrowings of $213.2 million under its senior credit facility to finance the acquisition. Selected unaudited pro forma combined results of operations for the 16-week period ended May 18, 1998, assuming the acquisition occurred on January 27, 1998, using actual restaurant-level margins and general and administrative expenses prior to the acquisition, is as follows:
Sixteen Weeks Ended May 18, 1998 -------------------- Total revenues $649,408 Net income $ 21,949 Net income per share - basic $ 0.43 Net income per share - diluted $ 0.41
NOTE (C) LONG-TERM DEBT On March 4, 1999, the Company amended its existing senior credit facility, which consisted of a $250.0 million term loan facility and a $250.0 million revolving credit facility. The senior credit facility, as amended, consists of a $500.0 million revolving credit facility and includes a $75.0 million letter of credit sub-facility. The senior credit facility will be reduced beginning in March 2001 by a minimum of $50.0 million each year, for the three subsequent years. Additional borrowings under the senior credit facility may be used for working capital or other general corporate purposes, including permitted investments and acquisitions, and any amounts outstanding thereunder will become due in February 2004. Borrowings and other obligations of the Company under the senior credit facility are general unsubordinated obligations of the Company and secured by a pledge of the capital stock of certain of the Company's present and future subsidiaries, which subsidiaries guarantee such borrowings and other obligations, and are secured by certain franchise rights, contract rights, general intangibles (including trademarks) and other assets of the Company and such 7 8 CKE RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MAY 17, 1999 AND MAY 18, 1998 (Continued) subsidiaries. The Company is required to repay borrowings under the senior credit facility with the proceeds from certain asset sales (unless the net proceeds of such sales are reinvested in the Company's business), from the issuance of certain equity securities and from the issuance of additional indebtedness. Of the various options the Company has regarding interest rates, it has selected LIBOR plus a margin, with future margin adjustments dependent on certain financial ratios from time to time. The senior credit facility contains a number of significant covenants that, among other things, (i) restrict the ability of the Company and its subsidiaries to incur additional indebtedness and incur liens on their assets, in each case subject to specified exceptions, (ii) impose specified financial tests as a precondition to the Company's and its subsidiaries' acquisition of other businesses and (iii) limit the Company and its subsidiaries from making capital expenditures and certain restricted payments (including dividends and repurchases of stock), subject in certain circumstances to specified financial tests. In addition, the Company is required to comply with specified financial ratios and tests, including minimum EBITDA requirements, minimum interest coverage and fixed charge coverage ratios, minimum consolidated tangible net worth requirements and maximum leverage ratios. As of May 17, 1999, the Company was in compliance with all of its covenants related to its senior credit facility. NOTE (D) SENIOR SUBORDINATED NOTES On March 4, 1999, the Company completed a private placement of $200.0 million aggregate principal amount of senior subordinated notes, in which the Company received net proceeds of approximately $194.8 million, of which $190.0 million was used to repay indebtedness under the senior credit facility. The senior subordinated notes are due in May 2009, carry a 9.125% coupon rate and are redeemable by the Company beginning on May 1, 2004. The indenture relating to the senior subordinated notes imposes restrictions on the Company's ability (and the ability of its subsidiaries) to incur additional indebtedness, pay dividends on, redeem or repurchase its capital stock, make investments, incur liens on its assets, sell assets other than in the ordinary course of business, and enter into certain transactions with its affiliates. The senior subordinated notes represent unsecured general obligations subordinate in right of payment to the Company's senior indebtedness including its senior credit facility. The Company's senior credit facility is guaranteed on a secured basis by the Company's direct and indirect subsidiaries (the "Subsidiary Guarantors"), other than non-guarantor subsidiaries which conduct no material operations, have no significant assets on a consolidated basis and account for only an insignificant share of the Company's consolidated revenues. Each of the Subsidiary Guarantors also fully and unconditionally guarantee the Company's 9.125% senior subordinated notes due 2009 on a joint and several basis. Separate financial statements and other disclosures concerning the Subsidiary Guarantors are not presented because management has determined that such information is not material to investors. NOTE (E) CONVERTIBLE SUBORDINATED NOTES During the first quarter of fiscal 2000, the Company repurchased an additional $3.0 million aggregate principal amount of convertible subordinated notes for $2.5 million in cash, including accrued interest thereon. The Company recognized an extraordinary gain on the early retirement of debt of $0.3 million, net of applicable income taxes of $0.2 million. To date, the Company has repurchased a total of $38.0 million aggregate principal amount of convertible subordinated notes. NOTE (F) SEGMENT INFORMATION The Company adopted Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS 131") in its fiscal year ending January 25, 1999. The Company is engaged principally in developing, operating and franchising its Carl's Jr., Hardee's and Taco Bueno quick-service restaurants, each of which are considered strategic businesses that are managed and evaluated separately. As such, the Company considers its Carl's Jr., Hardee's and Taco Bueno chains to each be a reportable 8 9 CKE RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MAY 17, 1999 AND MAY 18, 1998 (Continued) segment. Management evaluates the performance of its segments and allocates resources to them based on several factors, of which the primary financial measure is segment profit before taxes. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1 of Notes to Consolidated Financial Statements for the fiscal year ending January 25, 1999. Summarized financial information concerning the Company's reportable segments is shown in the following table. The "other" column includes corporate related items, results of insignificant operations and, as it relates to segment profit or loss, income and expense not allocated to reportable segments. The amounts reported for Hardee's reflect only the periods subsequent to the acquisition date of April 1, 1998 for FEI.
Sixteen Weeks Ended ------------------- Carl's Jr. Hardee's Taco Bueno Other Total ---------- ---------- ---------- -------- ---------- May 17, 1999: Revenues $207,851 $ 356,230 $27,616 $ 4,026 $ 595,723 Segment profit (loss) 21,288 12,738 2,932 (5,297) 31,661 Total assets 345,830 1,059,755 67,904 64,394 1,537,883 Capital expenditures 9,187 47,182 5,418 5,396 67,183 Depreciation and amortization 7,785 17,219 1,022 1,897 27,923 May 18, 1998: Revenues $190,233 $ 288,788 $24,584 $ 24,606 $ 528,211 Segment profit (loss) 23,060 15,498 2,533 (3,298) 37,793 Total assets (as of January 25, 1999) 280,201 1,072,594 62,539 81,580 1,496,914 Capital expenditures 10,325 10,485 836 2,020 23,666 Depreciation and amortization 6,981 9,396 830 2,442 19,649
9 10 CKE RESTAURANTS, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation OVERVIEW Consolidated net income for the 16-week period ended May 17, 1999 decreased 14.6% to $19.4 million, or $0.37 per share on a diluted basis as compared with net income of $22.7 million, or $0.43 per share on a diluted basis for the prior year quarter. Net income, excluding the $0.3 million extraordinary gain on the early retirement of debt, decreased 15.8% for the 16-week period ended May 17, 1999 to $19.1 million, or $0.36 per share on a diluted basis. The decline in consolidated net income was primarily due to increased interest expense incurred in connection with our recent financings. While consolidated net income reflected a decrease from the level achieved in the prior year quarter, operating income for the consolidated group continued to grow in the first quarter of fiscal 2000, increasing 4.3% over the prior year quarter to $47.6 million. The increase in operating income was largely attributable to the additional income generated by the 557 previously franchised Hardee's restaurants as a result of our acquisition of Flagstar Enterprises, Inc. ("FEI") from Advantica Restaurant Group, Inc. ("Advantica") on April 1, 1998. Operating results for the 16 weeks ended May 17, 1999 include 16 weeks of operations for Hardee's Food Systems, Inc. and 16 weeks of operations for FEI. The corresponding period of the prior fiscal year includes 16 weeks of operations for Hardee's Food Systems, Inc. and seven weeks of operations for FEI's 557 Hardee's restaurants. Operating results for Carl's Jr. for the 16-week period ended May 17, 1999 include the results of 63 Hardee's-to-Carl's Jr. conversions in Oklahoma, Texas and Kansas. These restaurants were included in Hardee's results for the 16 weeks ended May 18, 1998. We have remodeled approximately 160 company-operated Hardee's restaurants to the Star Hardee's format during the quarter and our franchisees have remodeled approximately 55 restaurants, with approximately 325 Hardee's restaurants remodeled to the Star Hardee's format system-wide, at quarter-end. In addition to menu enhancements, a Star Hardee's remodel involves installing charbroilers in the kitchens, remodeling the interior and exterior of the restaurant, introducing Carl's Jr.-style limited table service, adding "all-you-can-drink" beverage bars and installing new signage. We plan to remodel 300 to 400 company-operated restaurants and our franchisees plan to remodel 100 to 200 restaurants to the Star Hardee's format this fiscal year. The restaurants that have already been converted are seeing sales improvements in the range of 8 to 10% above pre-conversion levels. This Quarterly Report on Form 10-Q contains forward looking statements, which are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions; the impact of competitive products and pricing; success of operating initiatives; advertising and promotional efforts; adverse publicity; changes in business strategy or development plans; quality of management; availability, terms and deployment of capital; changes in prevailing interest rates and the availability of financing; food, labor, and employee benefit costs; changes in, or the failure to comply with, government regulations; weather conditions; construction schedules; demands placed on management and capital resources by the substantial increase in our size resulting from the acquisitions of Hardee's and FEI; changes in our integration plans for Hardee's and our expansion plans; risks that sales growth resulting from our current and future remodeling and dual-branding of restaurants and other operating strategies can be sustained at the current levels experienced; and other risks detailed in our filings with the Securities and Exchange Commission. RESULTS OF OPERATIONS Revenues from company-operated restaurants increased $68.1 million or 14.2% to $546.7 million in the first quarter of fiscal 2000 over the same period in the prior year. Carl's Jr., Hardee's and Taco Bueno company-operated restaurant revenues accounted for sales increases of $16.5 million, $68.7 million and $3.0 million, respectively, offset in part by the decrease in revenues from our JB's Restaurants and Galaxy Diner restaurants which were sold to Santa Barbara Restaurant Group, Inc. ("SBRG") in September 1998. On a same-store sales basis, our Carl's Jr. sales decreased 4.8% for the quarter, which reflects strong comparisons in the first quarter of the last two fiscal years, with same-store sales increases of 5.2% for the first quarter of fiscal 1999 and 6.1% for the same period in fiscal 1998. Also included in the current year same-store sales comparisons are results of the 63 Hardee's-to-Carl's Jr. conversions in Oklahoma, Texas and Kansas. These are essentially new markets for Carl's Jr. where additional time is needed to fully realize the brand potential. Without the inclusion of these restaurants, same-store sales for the quarter would have 10 11 CKE RESTAURANTS, INC. AND SUBSIDIARIES (Continued) declined 3.8%. Same-store sales for our company-operated Hardee's restaurants were down 4.8% for the quarter, including both the restaurants initially purchased from Imasco Holdings, Inc. in July 1997 and the FEI restaurants purchased in April 1998. Excluding the 557 FEI restaurants, same-store sales for Hardee's would have been up 0.5% for the quarter. Same-store sales for our company-operated Taco Bueno restaurants increased 10.6%, marking the 16th consecutive quarter of same-store sales increases for the chain. The increase in company-operated revenue from our Carl's Jr. restaurants was primarily attributable to an increase in the number of restaurants open and operating in the first quarter of fiscal 2000 as compared with the first quarter of the prior year and the inclusion of $12.0 million of revenue from the 63 Hardee's-to-Carl's Jr. converted restaurants. The increase in Hardee's company-operated revenues was primarily due to including a full quarter of operations of the FEI restaurants acquired from Advantica in April 1998. Taco Bueno's increase in revenues is due mainly to our advertising campaign, which focuses on great-tasting food products, the image enhancement program for our Taco Bueno restaurants, which was begun in fiscal 1999, and the focus on real estate that is better located and more heavily trafficked than the properties previously targeted for development of Taco Bueno restaurants. Average unit volumes for the trailing 52-week period ending May 17, 1999 for our company-operated Carl's Jr. restaurants, excluding the 63 Hardee's-to-Carl's conversions were $1,169,000. Average unit volumes at our company-operated Hardee's restaurants were $797,000, while Taco Bueno's average unit volumes continued to rise and increased to $768,000 as of May 17, 1999 for the trailing 52-week period. Our revenues from franchised and licensed restaurants for the 16-week period ended May 17, 1999 decreased $0.6 million, or 1.3%, to $49.0 million from the comparable period in fiscal 1999. This decrease is mainly due to the acquisition of previously franchised Hardee's restaurants during fiscal 1999, including the 557 formerly franchised FEI restaurants we acquired in April 1998 and the loss of franchised revenues from our JB's restaurants, which were sold to SBRG in September 1998. Offsetting these factors were increased royalties from, and food purchases by, Carl's Jr. franchisees and licensees as a result of an increase in the number of Carl's Jr. franchised restaurants operating in the first quarter of fiscal 2000 as compared with the first quarter of fiscal 1999 and an increase in equipment sales to Hardee's franchisees in connection with the remodeling of Hardee's restaurants to the Star Hardee's format. Restaurant-level margins for our company-operated Carl's Jr. restaurants decreased 2.1% to 23.8% for the 16-week period ended May 17, 1999 from the first quarter of fiscal 1999, primarily due to increases in occupancy and other operating expenses. Excluding the 63 Hardee's-to-Carl's Jr. converted restaurants, Carl's Jr.'s restaurant-level margins would have been 24.8% for the first quarter of fiscal 2000. Carl's Jr. food and packaging costs continued to decrease during the first quarter of fiscal 2000, down 0.8% to 28.3% of revenues from company-operated Carl's Jr. restaurants, as compared with 29.1% in the comparable prior year period. This decrease was primarily attributable to continued purchasing economies achieved as a result of the consolidated buying power directly realized from our addition of other restaurant concepts, including our Green Burrito dual-brand restaurants. Payroll and other employee benefits for our Carl's Jr. restaurant chain, as a percentage of revenues from company-operated Carl's Jr. restaurants, increased 0.7% to 26.5% in the 16 weeks ended May 17, 1999 as compared with the same prior year period. The March 1998 California minimum wage increase contributed to the rise in payroll and employee benefit costs in the first quarter of fiscal 2000, and the increasing number of our Carl's Jr./Green Burrito dual-brand restaurants added to the greater labor cost due to the more labor intensive nature of the Green Burrito system. Carl's Jr. occupancy and other operating expenses, as a percentage of revenues from company-operated Carl's Jr. restaurants, increased 2.2% to 21.4% for the 16-week period ended May 17, 1999 over the comparable prior year period, primarily due to the fixed nature of these costs combined with a decrease in the same-store revenue base as well as increased repair and maintenance costs and increased rent expense as a result of scheduled increases in long-term lease contracts. Although our Hardee's restaurant-level operating margins are substantially lower than our Carl's Jr. and Taco Bueno quick-service restaurant concepts, we have increased Hardee's company-operated restaurant-level operating margins to 16.8% for the first quarter of fiscal 2000, as compared with 16.3% for the comparable period of fiscal 1999 by implementing many of the same cost saving measures we implemented at our Carl's Jr. restaurants over the past four to five years. Hardee's food and packaging costs continued to decrease during the first quarter of fiscal 2000, down 0.2% to 30.9% of revenues from company-operated restaurants, as compared with 31.1% in the comparable prior year period. This decrease was mainly due to a reduction in food waste and theft tolerance levels and continued purchasing economies achieved as a result of our increased consolidated buying power. Payroll and other employee benefits as a percentage of revenues from company-operated Hardee's restaurants, decreased 1.6% to 32.3% in the 11 12 CKE RESTAURANTS, INC. AND SUBSIDIARIES (Continued) first quarter of fiscal 2000 from the first quarter of the prior year. This decrease is a result of using the Carl's Jr. labor matrix to refine labor usage and a focus on safety and accident prevention as a method of lowering workers' compensation costs. As a percentage of revenues from Hardee's company-operated restaurants, occupancy and other operating expenses increased 1.3% to 20.0% for the 16-week period ended May 17, 1999 over the comparable prior year period. The increase in occupancy and other operating expenses is due to the fixed nature of the costs combined with a decrease in the same-store revenue base as well as increased depreciation costs in connection with the remodeling program of the Hardee's restaurants to the Star Hardee's format. Taco Bueno's restaurant-level operating margins were 27.2% for the first quarters of both fiscal 2000 and 1999. While overall Taco Bueno restaurant-level margins remained constant, food and packaging costs as a percentage of sales increased by 0.8%, which was offset by a decrease in occupancy and other operating expenses as a percentage of sales of 0.8%. The increase in food and packaging was mainly attributable to a change in packaging materials used, while the decrease in occupancy and other was a result of the fixed nature of these costs combined with the increase in revenues. Franchised and licensed restaurant and other costs increased 6.7% to $35.5 million for the 16 weeks ended May 17, 1999 over the 16-week period ended May 18, 1998. The increase is primarily due to increased food and other products purchased from us by Carl's Jr. franchisees and licensees and increased equipment purchases from us by Hardee's franchisees and licensees. While royalties from Hardee's franchised and licensed restaurants decreased during the first quarter in fiscal 2000 from the prior year quarter, revenues from equipment sales to Hardee's franchised and licensed restaurants increased; the cost structure associated with equipment sales is much higher than that associated with the royalty stream of income. As a result, franchised and licensed restaurant and other costs increased 5.4% as a percentage of revenue from franchised and licensed restaurants for the first quarter of fiscal 2000 over the first quarter of fiscal 1999. Advertising expenses increased $5.2 million in the first quarter of fiscal 2000 over the comparable period of fiscal 1999 principally due to increased advertising support for Hardee's. Advertising has become increasingly important in the current competitive environment and, as a result, advertising expenses have increased in terms of dollars spent in the current fiscal year as compared with the prior fiscal year, while remaining relatively consistent as a percentage of company-operated revenues. General and administrative expenses increased $2.4 million to $39.8 million for the 16 weeks ended May 17, 1999 over the 16-week period ended May 18, 1998. As a percentage of total revenues, general and administrative expenses decreased 0.4% to 6.7% of total revenues in the first quarter of fiscal 2000, reflecting the economies of scale we are realizing by absorbing certain costs associated with FEI into our existing infrastructure. The increases in fiscal 2000 in terms of dollars spent are primarily the result of the added expenses of supporting FEI's restaurant operations. Interest expense for the 16-week period ended May 17, 1999 increased $6.4 million to $15.7 million as compared with the comparable prior year period due to higher levels of borrowings outstanding under our senior credit facility and the issuance of convertible subordinated notes in March 1998 and senior subordinated notes in March 1999. The proceeds from the convertible subordinated notes, bearing interest at 4.25%, were used to complete the acquisition of FEI in April 1998, and the proceeds from the senior subordinated notes, bearing interest at 9.125%, were used to repay existing term loan balances under our senior credit facility. Other income (expense), net, mainly consists of interest income, lease income, dividend income, gains and losses on sales of restaurants, income and loss on long-term investments, property management expenses and other non-recurring income and expenses. Other income (expense), net, decreased $1.7 million in the first quarter of fiscal 2000 as compared with the comparable period in the prior fiscal year. The decrease was due in large part to a reduction in interest income as a result of our reduced note receivable from Checkers and reduced notes receivable from our franchisees, and recognition of income in the prior year quarter from our investment in Star Buffet, Inc., which was subsequently sold in October 1998. During the third quarter of fiscal 1999, our Board of Directors approved the buyback of up to $50.0 million aggregate principal amount of convertible subordinated notes. In fiscal 1999, we repurchased $35.0 million and, in the first quarter of fiscal 2000, we repurchased an additional $3.0 million of convertible subordinated notes for $2.5 million in cash, including accrued interest thereon. In connection with this repurchase, we recognized an 12 13 CKE RESTAURANTS, INC. AND SUBSIDIARIES (Continued) extraordinary gain on the early retirement of debt of $0.3 million, net of applicable taxes of $0.2 million in the 16-week period ended May 17, 1999. FINANCIAL CONDITION Cash and cash equivalents decreased $0.8 million to $45.5 million in the 16 week period ended May 17, 1999. Investing activities absorbed $62.9 million of our cash to fund capital additions of $67.2 million. Partially generating some of the funds necessary were $3.4 million from the sale of property and equipment to our franchisees and $0.9 million from collections on and sale of notes receivable, related party receivables and leases receivable. Financing activities provided us with $18.9 million in cash, primarily from the net proceeds of $194.8 million principal amount of senior subordinated notes and additional borrowings under our senior credit facility. Cash flows from operating and financing activities were mainly used to repay existing indebtedness of $204.8 million, to fund the remodeling of our Hardee's restaurants to the new Star Hardee's format and to convert certain Carl's Jr. restaurants to the Carl's Jr./Green Burrito dual-brand concepts, to pay $9.7 million of deferred financing costs associated with our issuance of the senior subordinated notes, to repay $1.9 million in capital lease obligations and to pay dividends of $2.1 million. On March 4, 1999, we completed a private placement of $200.0 million aggregate principal amount of 9.125% senior subordinated notes due 2009. We received net proceeds of $194.8 million, of which $190.0 million was used to repay outstanding term loan balances under our senior credit facility. The indenture relating to the senior subordinated notes imposes certain restrictions on our ability (and the ability of our subsidiaries) to incur indebtedness, pay dividends on, redeem or repurchase our capital stock, make investments, incur liens on our assets, sell assets other than in the ordinary course of business, or enter into certain transactions with our affiliates. The senior subordinated notes represent unsecured general obligations subordinate in right of payment to our senior indebtedness, including our senior credit facility. In connection with our private placement of senior subordinated notes, we also amended and restated our senior credit facility to increase the lenders' commitments under our revolving credit facility to $500.0 million from $250.0 million. Commitments under the amended senior credit facility will be reduced after two years by a minimum of $50.0 million each year. We also increased our letter of credit sub-facility to $75.0 million from $65.0 million, and changed the maturity date of the senior credit facility to February 2004. The term loan component of the senior credit facility was eliminated as a result of these transactions. Additional borrowings under the senior credit facility may be used for working capital and other general corporate purposes, including permitted investments and acquisitions. We will be required to repay borrowings under the senior credit facility with the proceeds from (1) certain asset sales (unless the net proceeds of such sales are reinvested in our business), (2) the issuance of certain equity securities and (3) the issuance of additional indebtedness. Of the various options we have regarding interest rates, we have selected LIBOR plus a margin, with future margin adjustments dependent on certain financial ratios from time to time. Our senior credit facility contains the following significant covenants: o restrictions on our ability to incur additional indebtedness and incur liens on our assets, subject to specified exceptions; o requirements that we satisfy specified financial tests as a precondition to our acquisition of other businesses; and o limitations on making capital expenditures and certain restricted payments (including dividends and repurchases of stock) subject in certain circumstances to specified financial tests. In addition, we are required to comply with minimum EBITDA requirements, minimum interest coverage and fixed charge coverage ratios, minimum consolidated tangible net worth requirements and maximum leverage ratios. As of May 17, 1999, we were in compliance with all of our debt covenants. Our primary source of liquidity is our revenues from company-operated restaurants, which are generated in cash. Future capital needs will arise primarily for the construction of new restaurants, the remodeling of our Hardee's 13 14 CKE RESTAURANTS, INC. AND SUBSIDIARIES (Continued) restaurants to the Star Hardee's format, the remodeling of existing Taco Bueno restaurants, purchases of Hardee's franchised restaurants, the conversion of restaurants to the Carl's Jr./Green Burrito dual-brand concepts and capital expenditures to be incurred in connection with our integration of Hardee's data processing systems. In addition, we continue to discuss certain post-closing purchase price adjustments arising from the Hardee's acquisition with Imasco Holdings, Inc. We believe that any payments required or to be received as a result of such purchase price adjustments would not materially affect our financial condition. The quick-service restaurant business generally receives simultaneous cash payment for sales. We presently reinvest the majority of the net cash flow from operations in long-term assets, primarily for the remodeling and construction of restaurants. Normal operating expenses for inventories and current liabilities generally carry longer payment terms (usually 15 to 30 days). As a result, we typically maintain current liabilities in excess of current assets. We believe that cash generated from our various restaurant concept operations, along with cash and cash equivalents on hand as of May 17, 1999 and amounts available under our senior credit facility, will provide the funds necessary to meet all of our capital spending and working capital requirements for the foreseeable future. As of May 17, 1999 we had $262.4 million of borrowings available to us under our senior credit facility. If those sources of capital are insufficient to satisfy our capital spending and working capital requirements, or if we determine to make any significant acquisitions of or investments in other businesses, we may be required to sell additional equity or debt securities or obtain additional credit facilities. Any sales of additional equity or debt securities could result in additional dilution to our stockholders. In addition, substantially all of the real properties we own and use for our restaurant operations are unencumbered and could be used by us as collateral for additional debt financing or could be sold and subsequently leased back to us. Year 2000 We are currently working to resolve the potential impact of the Year 2000 ("Y2K") on the processing of data-sensitive information by our computerized information systems. Y2K problems are the result of computer programs being written using two-digits (rather than four) to define the applicable year. Any of our programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000, which could result in miscalculations or system failures. We have investigated the impact of a Y2K problem on our business, including our operational, information and financial systems. Based on this investigation, we do not expect a Y2K problem, including the cost of making our computerized information systems Y2K compliant, to have a material adverse impact on our financial position or results of operations in future periods. However, our inability to resolve all potential Y2K problems in a timely manner could have a material adverse impact on us. We have also initiated communications with significant suppliers and vendors on whom we rely in an effort to determine the extent to which our business is vulnerable to the failure by these third parties to remediate their Y2K problems. While we have not been informed of any material risks associated with a Y2K problem for these entities, we cannot assure you that the computerized information systems of these third parties will be Y2K compliant on a timely basis. The inability of these third parties to remediate their Y2K problems could have a material adverse impact on us. We have completed a review of our information systems and are involved in a comprehensive program to upgrade computer systems and applications in connection with our effort to fully integrate our recent restaurant acquisitions. In conjunction with this computer upgrade process, we believe we will have addressed any potential Y2K issues. Total expenditures related to the upgrade of the information systems are expected to range from $20.0 million to $25.0 million and will be capitalized or expensed in accordance with generally accepted accounting principles. Through May 17, 1999, we have incurred approximately $17.4 million of expenditures consisting of hardware and software purchases, internal staff costs and outside consulting and other expenditures related to this upgrade process. These costs are being funded through operating cash flows. We have developed or are in the process of developing contingency plans to handle our most reasonably likely worst case Y2K scenarios, which we have not yet identified fully. We intend to complete our determination of worst 14 15 CKE RESTAURANTS, INC. AND SUBSIDIARIES (Continued) case scenarios after we have received and analyzed responses to substantially all of the inquiries we have made of third-parties. Following this analysis, which we expect to have completed by July 1999, we intend to develop a timetable for completing our contingency plans. Item 3. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk Our principal exposure to financial market risks is the impact that interest rate changes could have on our $500.0 million senior credit facility, of which $184.0 million remained outstanding as of May 17, 1999. Borrowings under our senior credit facility bear interest at the prime rate or at LIBOR plus an applicable margin based on certain financial ratios (averaging 6.5% in fiscal 2000). A hypothetical increase of 100 basis points in short-term interest rates would result in a reduction of approximately $1.8 million in annual pre-tax earnings. The estimated reduction is based upon the outstanding balance of our senior credit facility, and assumes no change in the volume, index or composition of debt at May 17, 1999. Substantially all of our business is transacted in U.S. dollars. Accordingly, foreign exchange rate fluctuations have never had a significant impact on us and are not expected to in the foreseeable future. Commodity Price Risk We purchase certain products which are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions and other factors which are not considered predictable or within our control. Although many of the products purchased are subject to changes in commodity prices, certain purchasing contracts or pricing arrangements contain risk management techniques designed to minimize price volatility. Typically we use these types of purchasing techniques to control costs as an alternative to directly managing financial instruments to hedge commodity prices. In many cases, we believe we will be able to address commodity cost increases which are significant and appear to be long-term in nature by adjusting our menu pricing or changing our product delivery strategy. However, increases in commodity prices could result in lower restaurant-level operating margins for our restaurant concepts. 15 16 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10-1 Employment Agreement dated as of April 9, 1999 by and between the Company and William P. Foley, II. 10-2 Employment Agreement dated as of April 9, 1999, by and between the Company and C. Thomas Thompson. 10-3 Employment Agreement dated as of April 9, 1999, by and between the Company and Rory J. Murphy. 10-4 Employment Agreement dated as of April 9, 1999, by and between the Company and Robert W. Wisely. 10-5 Employment Agreement dated as of April 9, 1999, by and between the Company and Carl A. Strunk. 10-6 Employment Agreement dated as of April 9, 1999, by and between the Company and Andrew F. Puzder. 10-7 Employment Agreement dated as of April 9, 1999, by and between the Company and John J. Dunion. 11 Calculation of Earnings Per Share. 27-1 Financial Data Schedule (included only with electronic filing). (b) Current Reports on Form 8-K: A Current Report on Form 8-K dated February 19, 1999 was filed during the first quarter of the fiscal year to report the Company's intention to raise $200.0 million through a private placement of senior subordinated notes. A Current Report on Form 8-K dated February 25, 1999 was filed during the first quarter of the fiscal year to report matters relating to the Company's private placement of $200.0 million senior subordinated notes and the Company's amended and restated senior credit facility. A Current Report on Form 8-K dated March 18, 1999 was filed during the first quarter of the fiscal year to report the election of John J. Dunion to the newly created position of Executive Vice President, Chief Administrative Officer of the Company. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CKE RESTAURANTS, INC. (Registrant) June 30, 1999 /s/ Carl A. Strunk - ----------------------- ----------------------------------- Date Executive Vice President, Chief Financial Officer 16 17 EXHIBIT INDEX
Exhibit # Description - --------- ----------- 10-1 Employment Agreement dated as of April 9, 1999, by and between the Company and William P. Foley, II. 10-2 Employment Agreement dated as of April 9, 1999, by and between the Company and C. Thomas Thompson. 10-3 Employment Agreement dated as of April 9, 1999, by and between the Company and Rory J. Murphy. 10-4 Employment Agreement dated as of April 9, 1999, by and between the Company and Robert W. Wisely. 10-5 Employment Agreement dated as of April 9, 1999, by and between the Company and Carl A. Strunk. 10-6 Employment Agreement dated as of April 9, 1999, by and between the Company and Andrew F. Puzder. 10-7 Employment Agreement dated as of April 9, 1999, by and between the Company and John J. Dunion. 11 Calculation of Earnings Per Share. 27-1 Financial Data Schedule (included only with electronic filing).
17 EX-10.1 2 EMPT AGMT 4/9/99 WITH WILLIAM P. FOLEY, II. 1 EXHIBIT 10.1 Employment Agreement (page 1) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April 9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a Delaware corporation (the "Company"), and WILLIAM P. FOLEY, II (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as Chairman of the Board and Chief Executive Officer (or such other title as the Company may designate), and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as directed by the Company's Board of Directors or as set forth in the Articles of Incorporation and the Bylaws of the Company. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of five (5) years ending April 9, 2004, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual written agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable withholdings, of $500,000 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased at the discretion of the Compensation Committee of the Board of Directors to reflect, among other matters, cost of living increases and performance results. Should Employee cease to be the Company's Chief Executive Officer, his salary shall be reduced to $400,000 per year for the remainder of the Term. 4. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company 2 Employment Agreement (page 2) may from time to time make available to the Employee upon mutual agreement, the Employee shall be entitled to the following: (a) The standard Company benefits enjoyed by the Company's other top executives; (b) Payment by the Company of the Employee's initiation and membership dues in a social and/or recreational club as deemed necessary and appropriate by the Employee (and pre-approved by the Company at the Company's discretion) to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club; (c) Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of the medical and other insurance coverage provided by the Company to its other top executives; (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary for a two year period; (e) An Annual Bonus for the fiscal year ended January 31, 2000, equal to 100% of the minimum annual base salary set forth in Section 3 above if the Company achieves 30% growth in earnings per share during fiscal 2000 over earnings per share during fiscal 1999. In all subsequent years, the Annual Bonus shall be calculated by first determining the amount by which the Company's net income increases over the prior fiscal year. If such increase is 15%, Employee shall receive a bonus equal to 50% of his then current minimum base annual salary and if net income increases less than 15% or decreases, Employee shall receive no bonus. For each full 5% increase in the Company's net income over the 15% base increase, Employee's Annual Bonus shall increase by an amount equal to 50% of his minimum base annual salary. For example, a 30% increase in net income would result in a bonus equal to 200% of the Employee's then current minimum base annual salary. In no event shall the Annual Bonus exceed 200% of Employee's minimum annual 3 Employment Agreement (page 3) base salary. The Annual Bonus shall be paid within ninety (90) days after the end of the fiscal year. (f) A Grant under the Company's Stock Option Plans of options to purchase 200,000 shares of the Company's Common Stock. The exercise price for such options shall be the closing price on the Effective Date of the Company's Common Stock traded on the New York Stock Exchange, as reported by the Wall Street Journal. Such options shall vest as follows: (i) 1/3 (66,668 shares) on the Effective Date; (ii) 1/3 (66,666 shares) on the first anniversary of the Effective Date; and, (iii) 1/3 (66,666 shares) on the second anniversary of the Effective Date. Such options shall be incentive stock options as defined by section 422 of the Internal Revenue Code to the maximum extent possible. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties. 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his positions with the Company and in accordance with the Company's standard policies, or as the Company's Board of Directors may approve. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 6. Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses in accordance with the Company's policies then in effect, all such expense reimbursements to be approved in writing by the Company's President. 7. Termination. (a) For Cause. The Company may terminate this Agreement immediately for cause upon written notice to the Employee, in which event the 4 Employment Agreement (page 4) Company shall be obligated only to pay the Employee that portion of the minimum base annual salary due him through the date of termination. Cause shall be limited to (i) the failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities; or, (iv) a material breach of this Agreement. (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b), then it shall be obligated to pay to the Employee an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number one, plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (200% of Employee's minimum annual base salary), multiplied by the number one. Such payment to be made in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, if the Company terminates under this Section 7(b), the Company shall maintain in full force and effect for the continued benefit of the Employee for one year, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. If the Employee terminates under this Section 7(b), then the Company shall only be obligated to pay the Employee the minimum annual base salary due him through the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of six consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base annual salary, without offset, for the remainder of the Term in a lump sum or as 5 Employment Agreement (page 5) otherwise directed by the Employee. (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. Executive's outstanding CKE options will immediately vest in full and be exercisable for a period of 90 days from Executive's death. (e) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. 8. Severance payment. (a) The Employee may terminate his employment hereunder for "Good Reason,"which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company" shall, for purposes of this Agreement, be deemed to have occurred if (i) there shall be consummated, except as hereinafter provided (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company 6 Employment Agreement (page 6) representing 30% or more of the combined voting power of the Company's then outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. The Employee may only terminate this Agreement due to a change in control of the Company during the period commencing 60 days and expiring 365 days after such change in control. Notwithstanding anything in this Agreement to the contrary, a "change in control of the Company" shall not have occurred if officers and/or directors (or affiliated entities thereof) of the Company at the time of a transaction described under item (i), (ii) or (iii) above own, immediately after such transaction, 15% or more of the entity acquiring the stock or assets of the Company as provided above. (b) If the Employee terminates his employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 7(b), then, in lieu of and notwithstanding Section 7 above: (i) the Company shall pay the Employee his minimum base annual salary due him through the date of termination: (ii) in lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date of termination, the Company shall pay, as severance to the Employee, an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number of years (including partial years) remaining in the Term or the number two (2), whichever is greater, plus (ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (200% of Employee's minimum annual base salary) multiplied by the number of years remaining in the contract for which Employee has not, as yet, received an Annual Bonus or the number two (2), whichever is greater, such payment to be made in a 7 Employment Agreement (page 7) lump sum on or before the fifth day following the date of termination; (iii) all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) the Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) The Employee shall not be required to mitigate the amount of any payment provided for in this Section 8 or Section 7(b), above, by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under this Section 8 or Section 7(b), above. (d) Notwithstanding anything to the contrary herein, if and to the extent any payment made under this Agreement, either alone or in conjunction with other payments Employee has the right to receive either directly or indirectly from the Company, which would constitute as "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended, then Employee shall be entitled to receive an excise tax gross-up payment not exceeding one million dollars ($1,000,000) in accordance with Appendix A. 9. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits 8 Employment Agreement (page 8) subject to involuntary alienation, assignment or transfer. 10. Confidential Information. The Employee acknowledges that in his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry, including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 10. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company. 11. Non-Competition During Employment Term. The Employee agrees that, during the Term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. He will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 9 Employment Agreement (page 9) 12. Non-Competition After Employment Term. The parties acknowledge that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of two years after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company or its affiliates in any of their presently-existing or then-existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains an executive employee of the Company or any of its affiliates. Notwithstanding any of the foregoing provisions to the contrary, the Employee shall not be subject to the restrictions set forth in this Section 12 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 8, above; or, (d) As set forth in Section 14 below. 13. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 10 Employment Agreement (page 10) 14. Other Employment and Location. Anything to the contrary hereinabove notwithstanding, Company acknowledges that Employee is also the Chairman of the Board and Chief Executive Officer of Fidelity National Financial Inc.("FNFI") and will direct a reasonable portion of his time to fulfilling his duties as an officer of FNFI. Company further acknowledges that Employee is an employee of FNFI in addition to the Company. The Company further acknowledges that Employee is Chairman of the Board and a director of Rally's Hamburgers, Inc.("RHI"), Checkers Drive Thru Restaurants, Inc.("CDTR"), Santa Barbara Restaurants Group, Inc.("SBRG"), and American National Financial, Inc. ("ANFI") and will direct a reasonable portion of his time to fulfilling his duties as Chairman of the Board and a director of RHI, CDTR, SBRG, and ANFI. Such employment with FNFI and serving as Chairman of RHI, CDTR, SBRG and ANFI shall not be a violation of this Agreement so long as Employee dedicates a reasonable amount of his time to his duties hereunder. Employment by FNFI and serving as an officer and/or director of FNFI, RHI, CDTR, SBRG, and/or ANFI, or any affiliates thereof, shall not be prohibited by Sections 11 or 12 above. The Employee shall not be required to move from Santa Barbara County, California, to perform his duties hereunder during the Term without his written consent. 15. Improvements and Inventions. Any and all improvements or inventions which the Employee may conceive, make or participate in during the period of his employment shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 16. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is therefore agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall 11 Employment Agreement (page 11) have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 16 shall survive the termination of his employment and he shall be bound by its terms at all time subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 17. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 18. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. 19. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 20. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the 12 Employment Agreement (page 12) Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 21. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States certified mail, postage prepaid, with return receipt requested, to the parties at their respective addresses set for the below: To the Company: CKE Restaurants, Inc. 3916 State Street Santa Barbara, CA 93105 Attention: Andrew F. Puzder, General Counsel To the Employee: William P. Foley, II 4181 Creciente Drive Santa Barbara, California 93110 22. Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. CKE RESTAURANTS, INC. By: -------------------------------------- Its: -------------------------------------- 13 Employment Agreement (page 13) EMPLOYEE ------------------------------------------- William P. Foley, II EX-10.2 3 EMPT AGMT 4/9/99 WITH C. THOMAS THOMPSON. 1 EXHIBIT 10.2 Employment Agreement (page 1) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April 9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a Delaware corporation (the "Company"), and C. THOMAS THOMPSON (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as President and Chief Operating Officer (or such other title as the Company may designate), and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as directed by the Company's Chief Executive Officer or Board of Directors or as set forth in the Articles of Incorporation and the Bylaws of the Company. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of five (5) years ending April 9, 2004, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual written agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable withholdings, of $650,000 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased at the discretion of the Compensation Committee of the Board of Directors to reflect, among other matters, cost of living increases and performance results. Should Employee become the Company's Chief Executive Officer, his salary shall be increased to $700,000 per year for the remainder of the Term. 4. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company 2 Employment Agreement (page 2) may from time to time make available to the Employee upon mutual agreement, the Employee shall be entitled to the following: (a) The standard Company benefits enjoyed by the Company's other top executives; (b) Payment by the Company of the Employee's initiation and membership dues in a social and/or recreational club as deemed necessary and appropriate by the Employee (and pre-approved by the Company at the Company's discretion) to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club; (c) Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of the medical and other insurance coverage provided by the Company to its other top executives; (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary for a two year period; (e) An Annual Bonus for the fiscal year ended January 31, 2000, equal to 100% of the minimum annual base salary set forth in Section 3 above if the Company achieves 30% growth in earnings per share during fiscal 2000 over earnings per share during fiscal 1999. In all subsequent years, the Annual Bonus shall be calculated by first determining the amount by which the Company's net income increases over the prior fiscal year. If such increase is 15%, Employee shall receive a bonus equal to 50% of his then current minimum base annual salary and if net income increases less than 15% or decreases, Employee shall receive no bonus. For each full 5% increase in the Company's net income over the 15% base increase, Employee's Annual Bonus shall increase by an amount equal to 50% of his minimum base annual salary. For example, a 30% increase in net income would result in a bonus equal to 200% of the Employee's then current minimum base annual salary. In no event shall the Annual Bonus exceed 200% of Employee's minimum annual 3 Employment Agreement (page 3) base salary. The Annual Bonus shall be paid within ninety (90) days after the end of the fiscal year. (f) A Grant under the Company's Stock Option Plans of options to purchase 200,000 shares of the Company's Common Stock. The exercise price for such options shall be the closing price on the Effective Date of the Company's Common Stock traded on the New York Stock Exchange, as reported by the Wall Street Journal. Such options shall vest as follows: (i) 1/3 (66,668 shares) on the Effective Date; (ii) 1/3 (66,666 shares) on the first anniversary of the Effective Date; and, (iii) 1/3 (66,666 shares) on the second anniversary of the Effective Date. Such options shall be incentive stock options as defined by section 422 of the Internal Revenue Code to the maximum extent possible. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties. 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his positions with the Company and in accordance with the Company's standard policies, or as the Company's Board of Directors may approve. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 6. Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses in accordance with the Company's policies then in effect, all such expense reimbursements to be approved in writing by the Company's Chief Executive Officer. 7. Termination. (a) For Cause. The Company may terminate this Agreement 4 Employment Agreement (page 4) immediately for cause upon written notice to the Employee, in which event the Company shall be obligated only to pay the Employee that portion of the minimum base annual salary due him through the date of termination. Cause shall be limited to (i) the failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities; or, (iv) a material breach of this Agreement. (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b), then it shall be obligated to pay to the Employee an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number one, plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (200% of Employee's minimum annual base salary), multiplied by the number one. Such payment to be made in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, if the Company terminates under this Section 7(b), the Company shall maintain in full force and effect for the continued benefit of the Employee for one year, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. Prior to terminating this Agreement under this Section 7(b), Employee must give the Company 9 months advance notice in writing of his intent to so terminate this Agreement. If the Employee terminates under this Section 7(b), then the Company shall only be obligated to pay the Employee the minimum annual base salary due him through the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of six consecutive months, then 5 Employment Agreement (page 5) the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base annual salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee. (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. Executive's outstanding CKE options will immediately vest in full and be exercisable for a period of 90 days from Executive's death. (e) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. 8. Severance payment. (a) The Employee may terminate his employment hereunder for "Good Reason,"which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company" shall, for purposes of this Agreement, be deemed to have occurred if (i) there shall be consummated, except as hereinafter provided (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the 6 Employment Agreement (page 6) "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. The Employee may only terminate this Agreement due to a change in control of the Company during the period commencing 60 days and expiring 365 days after such change in control. Notwithstanding anything in this Agreement to the contrary, a "change in control of the Company" shall not have occurred if officers and/or directors (or affiliated entities thereof) of the Company at the time of a transaction described under item (i), (ii) or (iii) above own, immediately after such transaction, 15% or more of the entity acquiring the stock or assets of the Company as provided above. (b) If the Employee terminates his employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 7(b), then, in lieu of and notwithstanding Section 7 above: (i) the Company shall pay the Employee his minimum base annual salary due him through the date of termination: (ii) in lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date of termination, the Company shall pay, as severance to the Employee, an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number of years (including partial years) remaining in the Term or the number two (2), whichever is greater, plus (ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (200% 7 Employment Agreement (page 7) of Employee's minimum annual base salary) multiplied by the number of years remaining in the contract for which Employee has not, as yet, received an Annual Bonus or the number two (2), whichever is greater, such payment to be made in a lump sum on or before the fifth day following the date of termination; (iii) all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) the Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) The Employee shall not be required to mitigate the amount of any payment provided for in this Section 8 or Section 7(b), above, by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under this Section 8 or Section 7(b), above. (d) Notwithstanding anything to the contrary herein, if and to the extent any payment made under this Agreement, either alone or in conjunction with other payments Employee has the right to receive either directly or indirectly from the Company, which would constitute as "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended, then Employee shall be entitled to receive an excise tax gross-up payment not exceeding one million dollars ($1,000,000) in accordance with Appendix A. 8 Employment Agreement (page 8) 9. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. 10. Confidential Information. The Employee acknowledges that in his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry, including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 10. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company. 11. Non-Competition During Employment Term. The Employee agrees that, during the Term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. He will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not 9 Employment Agreement (page 9) combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 12. Non-Competition After Employment Term. The parties acknowledge that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of two years after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company or its affiliates in any of their presently-existing or then-existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains an executive employee of the Company or any of its affiliates. Notwithstanding any of the foregoing provisions to the contrary, the Employee shall not be subject to the restrictions set forth in this Section 12 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 8, above; or, (d) As set forth in Section 14 below. 13. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or 10 Employment Agreement (page 10) pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 14. Other Employment and Location. Anything to the contrary hereinabove notwithstanding: (a) Company acknowledges that Employee is also a member of the Board of Directors of Rally's Hamburgers, Inc.("RHI"), Checkers Drive Thru Restaurants, Inc.("CDTR"), and Santa Barbara Restaurants Group, Inc.("SBRG") and will direct a reasonable portion of his time to fulfilling his duties as a director of RHI, CDTR and SBRG. Serving as a director of RHI, CDTR and SBRG shall not be a violation of this Agreement so long as Employee dedicates a reasonable amount of his time to his duties hereunder. Serving as a director of RHI, CDTR and/or SBRG, or any affiliate thereof, shall not be prohibited by Sections 11 or 12 above. (b) Anything to the contrary hereinabove notwithstanding, Company acknowledges that Employee is also a franchisee and/or owns an equity interest in a franchisee of the Company. Company further acknowledges that Employee is or may be an employee of such franchisee in addition to the Company and that such employment shall not be a violation of this Agreement so long as Employee dedicates an reasonable amount of his time to his duties hereunder. (c) The Employee shall not be required to move from the State of California to perform his duties hereunder during the Term without his written consent. 15. Improvements and Inventions. Any and all improvements or inventions which the Employee may conceive, make or participate in during the period of his employment shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 11 Employment Agreement (page 11) 16. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is therefore agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 16 shall survive the termination of his employment and he shall be bound by its terms at all time subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 17. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 18. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. 19. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 20. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any 12 Employment Agreement (page 12) other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 21. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States certified mail, postage prepaid, with return receipt requested, to the parties at their respective addresses set for the below: To the Company: CKE Restaurants, Inc. 3916 State Street Santa Barbara, CA 93105 Attention: Andrew F. Puzder, General Counsel To the Employee: C. Thomas Thompson 1175 Jackling Drive Hillsboro, California 94010 22. Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. 13 Employment Agreement (page 13) CKE RESTAURANTS, INC. By: --------------------------------------- Its: --------------------------------------- EMPLOYEE -------------------------------------------- C. Thomas Thompson EX-10.3 4 EMPT AGMT 4/9/99 WITH RORY J. MURPHY. 1 EXHIBIT 10.3 Employment Agreement (page 1) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April 9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a Delaware corporation (the "Company"), and RORY J. MURPHY (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as an Executive Vice President of the Company and as President and Chief Operating Officer of the Company's wholly owned subsidiary, Hardee's Food Systems, Inc. ("HFS") (or such other title as the Company may designate), and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as directed by the Company's Board of Directors, its Chief Executive Officer or its President, or as set forth in the Articles of Incorporation and the Bylaws of the Company. 2. Prior Agreement. Employee and the Company's wholly owned subsidiary HFS have an existing Employment Agreement dated July 15, 1997 which expires July 15, 1999 (the "HFS Agreement"). This Agreement supersedes and replaces the HFS Agreement which shall no longer be of any force or effect except to the extent set forth in Section 5(e) below. 3. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of four (4) years ending April 9, 2003, subject to prior termination as set forth in Section 8, below (the "Term"). The Term may be extended at any time upon mutual written agreement of the parties. 4. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable withholdings, of $450,000 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased at the discretion of the Compensation Committee of the 2 Employment Agreement (page 2) Board of Directors to reflect, among other matters, cost of living increases and performance results. 5. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company may from time to time make available to the Employee upon mutual agreement, the Employee shall be entitled to the following: (a) The standard Company benefits enjoyed by the Company's other executive vice presidents as a group; (b) Payment by the Company of the Employee's initiation and membership dues in a social and/or recreational club as deemed necessary and appropriate by the Employee (and pre-approved by the Company at the Company's discretion) to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club; (c) Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of the medical and other insurance coverage provided by the Company to its other executive vice presidents as a group; (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary for a two year period; (e) An Annual Bonus for the period ending July 15, 1999 equal to the Annual Bonus provided for in Section 4(b)(ii) of the HFS Agreement as if such Section 4(b) of the HFS Agreement had remained in full force and effect until July 15, 1999. An Annual Bonus for the fiscal year ended January 31, 2000, equal to 100% of the minimum annual base salary set forth in Section 4 above if the Company achieves 30% growth in earnings per share during fiscal 2000 over earnings per share during fiscal 1999, reduced pro rata for the portion of the year prior to July 15, 1999 covered by Section 4(b)(ii) of the HFS Agreement. In all subsequent years, the 3 Employment Agreement (page 3) Annual Bonus shall be calculated by first determining the amount by which the Company's net income increases over the prior fiscal year. If such increase is 15%, Employee shall receive a bonus equal to 25% of his then current minimum base annual salary and if net income increases less than 15% or decreases, Employee shall receive no bonus. For each full 5% increase in the Company's net income over the 15% base increase, Employee's Annual Bonus shall increase by an amount equal to 25% of his minimum base annual salary. For example, a 30% increase in net income would result in a bonus equal to 100% of the Employee's then current minimum base annual salary. In no event shall the Annual Bonus exceed 100% of Employee's minimum annual base salary. The Annual Bonus shall be paid within ninety (90) days after the end of the fiscal year. (f) A Grant under the Company's Stock Option Plans of options to purchase 100,000 shares of the Company's Common Stock. The exercise price for such options shall be the closing price on the Effective Date of the Company's Common Stock traded on the New York Stock Exchange, as reported by the Wall Street Journal. Such options shall vest as follows: (i) 1/3 (33,334 shares) on the Effective Date; (ii) 1/3 (33,333 shares) on the first anniversary of the Effective Date; and, (iii) 1/3 (33,333 shares) on the second anniversary of the Effective Date. Such options shall be incentive stock options as defined by section 422 of the Internal Revenue Code to the maximum extent possible. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties. 6. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his positions with the Company and in accordance with the Company's standard policies, or as the Company's Board of Directors may approve. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 7. Expense Reimbursement. In addition to the compensation and benefits 4 Employment Agreement (page 4) provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses in accordance with the Company's policies then in effect, all such expense reimbursements to be approved in writing by the Company's Chief Executive Officer or President. 8. Termination. (a) For Cause. The Company may terminate this Agreement immediately for cause upon written notice to the Employee, in which event the Company shall be obligated only to pay the Employee that portion of the minimum base annual salary due him through the date of termination. Cause shall be limited to (i) the failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities; or, (iv) a material breach of this Agreement. (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 8(b), then it shall be obligated to pay to the Employee an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number one, plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 5(e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary), multiplied by the number one. Such payment to be made in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, if the Company terminates under this Section 8(b), the Company shall maintain in full force and effect for the continued benefit of the Employee for one year, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would 5 Employment Agreement (page 5) otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. If the Employee terminates under this Section 8(b), then the Company shall only be obligated to pay the Employee the minimum annual base salary due him through the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of six consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base annual salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee. (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. Executive's outstanding CKE options will immediately vest in full and be exercisable for a period of 90 days from Executive's death. (e) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. 9. Severance payment. (a) The Employee may terminate his employment hereunder for "Good Reason,"which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company" shall, for purposes of this Agreement, be deemed to have occurred if (i) there shall be consummated, except as hereinafter provided (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders 6 Employment Agreement (page 6) of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. The Employee may only terminate this Agreement due to a change in control of the Company during the period commencing 60 days and expiring 365 days after such change in control. Notwithstanding anything in this Agreement to the contrary, a "change in control of the Company" shall not have occurred if officers and/or directors (or affiliated entities thereof) of the Company at the time of a transaction described under item (i), (ii) or (iii) above own, immediately after such transaction, 15% or more of the entity acquiring the stock or assets of the Company as provided above. (b) If the Employee terminates his employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 8(b), then, in lieu of and notwithstanding Section 8 above: (i) the Company shall pay the Employee his minimum base annual salary due him through the date of termination: 7 Employment Agreement (page 7) (ii) in lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date of termination, the Company shall pay, as severance to the Employee, an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number of years (including partial years) remaining in the Term or the number two (2), whichever is greater, plus (ii), an Annual Bonus calculated pursuant to Section 5(e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary) multiplied by the number of years remaining in the contract for which Employee has not, as yet, received an Annual Bonus or the number two (2), whichever is greater, such payment to be made in a lump sum on or before the fifth day following the date of termination; (iii) all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) the Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) The Employee shall not be required to mitigate the amount of any payment provided for in this Section 9 or Section 8(b), above, by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under this Section 9 or Section 8(b), above. (d) Notwithstanding anything to the contrary herein, if and to the extent any payment made under this Agreement, either alone or in conjunction with 8 Employment Agreement (page 8) other payments Employee has the right to receive either directly or indirectly from the Company, which would constitute as "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended, then Employee shall be entitled to receive an excise tax gross-up payment not exceeding one million dollars ($1,000,000) in accordance with Appendix A. 10. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. 11. Confidential Information. The Employee acknowledges that in his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry, including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 11. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company. 12. Non-Competition During Employment Term. The Employee agrees that, during the Term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. He will not 9 Employment Agreement (page 9) engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 13. Non-Competition After Employment Term. The parties acknowledge that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of two years after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company or its affiliates in any of their presently-existing or then-existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains an executive employee of the Company or any of its affiliates. Notwithstanding any of the foregoing provisions to the contrary, the Employee shall not be subject to the restrictions set forth in this Section 13 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; or, 10 Employment Agreement (page 10) (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 9. 14. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 15. Improvements and Inventions. Any and all improvements or inventions which the Employee may conceive, make or participate in during the period of his employment shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 16. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is therefore agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 16 shall survive the termination of his employment and he shall be bound by its terms at all time subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 17. Amendment. This Agreement contains, and its terms constitute, the 11 Employment Agreement (page 11) entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 18. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. 19. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 20. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 21. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States certified mail, postage prepaid, with return receipt requested, to the parties at their respective addresses set for the below: 12 Employment Agreement (page 12) To the Company: CKE Restaurants, Inc. 3916 State Street Santa Barbara, CA 93105 Attention: Andrew F. Puzder, General Counsel To the Employee: Rory J. Murphy 18772 Ridgewood Lane Villa Park, California 92681 22. Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. CKE RESTAURANTS, INC. By: ---------------------------------------- Its: ---------------------------------------- EMPLOYEE --------------------------------------------- Rory J. Murphy EX-10.4 5 EMPT AGMT 4/9/99 WITH ROBERT W. WISELY. 1 EXHIBIT 10.4 Employment Agreement (page 1) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April 9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a Delaware corporation (the "Company"), and ROBERT W. WISELY (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as Executive Vice President, Marketing (or such other title as the Company may designate), and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as directed by the Company's Board of Directors, its Chief Executive Officer or its President, or as set forth in the Articles of Incorporation and the Bylaws of the Company. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of three (3) years ending April 9, 2002, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual written agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable withholdings, of $300,000 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased at the discretion of the Compensation Committee of the Board of Directors to reflect, among other matters, cost of living increases and performance results. 4. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company may from time to time make available to the Employee upon mutual agreement, the Employee shall be entitled to the following: 2 Employment Agreement (page 2) (a) The standard Company benefits enjoyed by the Company's other executive vice presidents as a group; (b) Payment by the Company of the Employee's initiation and membership dues in a social and/or recreational club as deemed necessary and appropriate by the Employee (and pre-approved by the Company at the Company's discretion) to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club; (c) Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of the medical and other insurance coverage provided by the Company to its other executive vice presidents as a group; (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary for a two year period; (e) An Annual Bonus for the fiscal year ended January 31, 2000, equal to 100% of the minimum annual base salary set forth in Section 3 above if the Company achieves 30% growth in earnings per share during fiscal 2000 over earnings per share during fiscal 1999. In all subsequent years, the Annual Bonus shall be calculated by first determining the amount by which the Company's net income increases over the prior fiscal year. If such increase is 15%, Employee shall receive a bonus equal to 25% of his then current minimum base annual salary and if net income increases less than 15% or decreases, Employee shall receive no bonus. For each full 5% increase in the Company's net income over the 15% base increase, Employee's Annual Bonus shall increase by an amount equal to 25% of his minimum base annual salary. For example, a 30% increase in net income would result in a bonus equal to 100% of the Employee's then current minimum base annual salary. In no event shall the Annual Bonus exceed 100% of Employee's minimum annual base salary. The Annual Bonus shall be paid within ninety (90) days after the end of the fiscal year. 3 Employment Agreement (page 3) (f) A Grant under the Company's Stock Option Plans of options to purchase 50,000 shares of the Company's Common Stock. The exercise price for such options shall be the closing price on the Effective Date of the Company's Common Stock traded on the New York Stock Exchange, as reported by the Wall Street Journal. Such options shall vest as follows: (i) 1/3 (16,667 shares) on the Effective Date; (ii) 1/3 (16,667 shares) on the first anniversary of the Effective Date; and, (iii) 1/3 (16,666 shares) on the second anniversary of the Effective Date. Such options shall be incentive stock options as defined by section 422 of the Internal Revenue Code to the maximum extent possible. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties. 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his positions with the Company and in accordance with the Company's standard policies, or as the Company's Board of Directors may approve. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 6. Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses in accordance with the Company's policies then in effect, all such expense reimbursements to be approved in writing by the Company's Chief Executive Officer or President. 7. Termination. (a) For Cause. The Company may terminate this Agreement immediately for cause upon written notice to the Employee, in which event the Company shall be obligated only to pay the Employee that portion of the minimum 4 Employment Agreement (page 4) base annual salary due him through the date of termination. Cause shall be limited to (i) the failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities; or, (iv) a material breach of this Agreement. (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b), then it shall be obligated to pay to the Employee an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number one, plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary), multiplied by the number one. Such payment to be made in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, if the Company terminates under this Section 7(b), the Company shall maintain in full force and effect for the continued benefit of the Employee for one year, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. If the Employee terminates under this Section 7(b), then the Company shall only be obligated to pay the Employee the minimum annual base salary due him through the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of six consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base annual salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee. 5 Employment Agreement (page 5) (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. Executive's outstanding CKE options will immediately vest in full and be exercisable for a period of 90 days from Executive's death. (e) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. 8. Severance payment. (a) The Employee may terminate his employment hereunder for "Good Reason,"which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company" shall, for purposes of this Agreement, be deemed to have occurred if (i) there shall be consummated, except as hereinafter provided (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then 6 Employment Agreement (page 6) outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. The Employee may only terminate this Agreement due to a change in control of the Company during the period commencing 60 days and expiring 365 days after such change in control. Notwithstanding anything in this Agreement to the contrary, a "change in control of the Company" shall not have occurred if officers and/or directors (or affiliated entities thereof) of the Company at the time of a transaction described under item (i), (ii) or (iii) above own, immediately after such transaction, 15% or more of the entity acquiring the stock or assets of the Company as provided above. (b) If the Employee terminates his employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 7(b), then, in lieu of and notwithstanding Section 7 above: (i) the Company shall pay the Employee his minimum base annual salary due him through the date of termination: (ii) in lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date of termination, the Company shall pay, as severance to the Employee, an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number of years (including partial years) remaining in the Term or the number two (2), whichever is greater, plus (ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary) multiplied by the number of years remaining in the contract for which Employee has not, as yet, received an Annual Bonus or the number two (2), whichever is greater, such payment to be made in a lump sum on or before the fifth day following the date of termination; 7 Employment Agreement (page 7) (iii) all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) the Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) The Employee shall not be required to mitigate the amount of any payment provided for in this Section 8 or Section 7(b), above, by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under this Section 8 or Section 7(b), above. (d) Notwithstanding anything to the contrary herein, if and to the extent any payment made under this Agreement, either alone or in conjunction with other payments Employee has the right to receive either directly or indirectly from the Company, which would constitute as "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended, then Employee shall be entitled to receive an excise tax gross-up payment not exceeding one million dollars ($1,000,000) in accordance with Appendix A. 9. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. 8 Employment Agreement (page 8) 10. Confidential Information. The Employee acknowledges that in his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry, including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 10. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company. 11. Non-Competition During Employment Term. The Employee agrees that, during the Term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. He will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 12. Non-Competition After Employment Term. The parties acknowledge 9 Employment Agreement (page 9) that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of two years after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company or its affiliates in any of their presently-existing or then-existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains an executive employee of the Company or any of its affiliates. Notwithstanding any of the foregoing provisions to the contrary, the Employee shall not be subject to the restrictions set forth in this Section 12 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 8, above; or, (d) As set forth in Section 14 below. 13. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 14. Other Employment and Location. Anything to the contrary hereinabove notwithstanding, Company acknowledges that Employee is also a franchisee and/or 10 Employment Agreement (page 10) owns an equity interest in a franchisee of the Company. Company further acknowledges that Employee is or may be an employee of such franchisee in addition to the Company and that such employment shall not be a violation of this Agreement so long as Employee dedicates a reasonable amount of his time to his duties hereunder. The Employee shall not be required to move from the State of California to perform his duties hereunder during the Term without his written consent. 15. Improvements and Inventions. Any and all improvements or inventions which the Employee may conceive, make or participate in during the period of his employment shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 16. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is therefore agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 16 shall survive the termination of his employment and he shall be bound by its terms at all time subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 17. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document 11 Employment Agreement (page 11) signed by both parties to this Agreement. 18. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. 19. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 20. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 21. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States certified mail, postage prepaid, with return receipt requested, to the parties at their respective addresses set for the below: To the Company: CKE Restaurants, Inc. 3916 State Street Santa Barbara, CA 93105 Attention: Andrew F. Puzder, General Counsel 12 Employment Agreement (page 12) To the Employee: Robert W. Wisely 3551 Southridge Drive Santa Rosa, California 95403 22. Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. CKE RESTAURANTS, INC. By: --------------------------------------- Its: --------------------------------------- EMPLOYEE -------------------------------------------- Robert W. Wisely EX-10.5 6 EMPT AGMT 4/9/99 WITH CARL A. STRUNK. 1 EXHIBIT 10.5 Employment Agreement (page 1) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April 9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a Delaware corporation (the "Company"), and CARL A. STRUNK (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as Executive Vice President, Chief Financial Officer (or such other title as the Company may designate), and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as directed by the Company's Board of Directors, its Chief Executive Officer or its President, or as set forth in the Articles of Incorporation and the Bylaws of the Company. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of three (3) years ending April 9, 2002, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual written agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable withholdings, of $312,500 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased at the discretion of the Compensation Committee of the Board of Directors to reflect, among other matters, cost of living increases and performance results. 4. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company 2 Employment Agreement (page 2) may from time to time make available to the Employee upon mutual agreement, the Employee shall be entitled to the following: (a) The standard Company benefits enjoyed by the Company's other executive vice presidents as a group; (b) Payment by the Company of the Employee's initiation and membership dues in a social and/or recreational club as deemed necessary and appropriate by the Employee (and pre-approved by the Company at the Company's discretion) to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club; (c) Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of the medical and other insurance coverage provided by the Company to its other executive vice presidents as a group; (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary for a two year period; (e) An Annual Bonus for the fiscal year ended January 31, 2000, equal to 100% of the minimum annual base salary set forth in Section 3 above if the Company achieves 30% growth in earnings per share during fiscal 2000 over earnings per share during fiscal 1999. In all subsequent years, the Annual Bonus shall be calculated by first determining the amount by which the Company's net income increases over the prior fiscal year. If such increase is 15%, Employee shall receive a bonus equal to 25% of his then current minimum base annual salary and if net income increases less than 15% or decreases, Employee shall receive no bonus. For each full 5% increase in the Company's net income over the 15% base increase, Employee's Annual Bonus shall increase by an amount equal to 25% of his minimum base annual salary. For example, a 30% increase in net income would result in a bonus equal to 100% of the Employee's then current minimum base annual salary. In no event shall the Annual Bonus exceed 100% of Employee's minimum annual 3 Employment Agreement (page 3) base salary. The Annual Bonus shall be paid within ninety (90) days after the end of the fiscal year. (f) A Grant under the Company's Stock Option Plans of options to purchase 50,000 shares of the Company's Common Stock. The exercise price for such options shall be the closing price on the Effective Date of the Company's Common Stock traded on the New York Stock Exchange, as reported by the Wall Street Journal. Such options shall vest as follows: (i) 1/3 (16,667 shares) on the Effective Date; (ii) 1/3 (16,667 shares) on the first anniversary of the Effective Date; and, (iii) 1/3 (16,666 shares) on the second anniversary of the Effective Date. Such options shall be incentive stock options as defined by section 422 of the Internal Revenue Code to the maximum extent possible. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties. 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his positions with the Company and in accordance with the Company's standard policies, or as the Company's Board of Directors may approve. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 6. Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses in accordance with the Company's policies then in effect, all such expense reimbursements to be approved in writing by the Company's Chief Executive Officer or President. 7. Termination. (a) For Cause. The Company may terminate this Agreement 4 Employment Agreement (page 4) immediately for cause upon written notice to the Employee, in which event the Company shall be obligated only to pay the Employee that portion of the minimum base annual salary due him through the date of termination. Cause shall be limited to (i) the failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities; or, (iv) a material breach of this Agreement. (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b), then it shall be obligated to pay to the Employee an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number one, plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary), multiplied by the number one. Such payment to be made in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, if the Company terminates under this Section 7(b), the Company shall maintain in full force and effect for the continued benefit of the Employee for one year, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. If the Employee terminates under this Section 7(b), then the Company shall only be obligated to pay the Employee the minimum annual base salary due him through the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of six consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base 5 Employment Agreement (page 5) annual salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee. (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. Executive's outstanding CKE options will immediately vest in full and be exercisable for a period of 90 days from Executive's death. (e) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. 8. Severance payment. (a) The Employee may terminate his employment hereunder for "Good Reason,"which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company" shall, for purposes of this Agreement, be deemed to have occurred if (i) there shall be consummated, except as hereinafter provided (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" 6 Employment Agreement (page 6) (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. The Employee may only terminate this Agreement due to a change in control of the Company during the period commencing 60 days and expiring 365 days after such change in control. Notwithstanding anything in this Agreement to the contrary, a "change in control of the Company" shall not have occurred if officers and/or directors (or affiliated entities thereof) of the Company at the time of a transaction described under item (i), (ii) or (iii) above own, immediately after such transaction, 15% or more of the entity acquiring the stock or assets of the Company as provided above. (b) If the Employee terminates his employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 7(b), then, in lieu of and notwithstanding Section 7 above: (i) the Company shall pay the Employee his minimum base annual salary due him through the date of termination: (ii) in lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date of termination, the Company shall pay, as severance to the Employee, an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number of years (including partial years) remaining in the Term or the number two (2), whichever is greater, plus (ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary) multiplied by the number of years remaining in the contract for which Employee has not, as yet, received an Annual 7 Employment Agreement (page 7) Bonus or the number two (2), whichever is greater, such payment to be made in a lump sum on or before the fifth day following the date of termination; (iii) all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) the Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) The Employee shall not be required to mitigate the amount of any payment provided for in this Section 8 or Section 7(b), above, by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under this Section 8 or Section 7(b), above. (d) Notwithstanding anything to the contrary herein, if and to the extent any payment made under this Agreement, either alone or in conjunction with other payments Employee has the right to receive either directly or indirectly from the Company, which would constitute as "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended, then Employee shall be entitled to receive an excise tax gross-up payment not exceeding one million dollars ($1,000,000) in accordance with Appendix A. 9. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned 8 Employment Agreement (page 8) or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. 10. Confidential Information. The Employee acknowledges that in his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry, including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 10. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company. 11. Non-Competition During Employment Term. The Employee agrees that, during the Term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. He will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 9 Employment Agreement (page 9) 12. Non-Competition After Employment Term. The parties acknowledge that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of two years after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company or its affiliates in any of their presently-existing or then-existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains an executive employee of the Company or any of its affiliates. Notwithstanding any of the foregoing provisions to the contrary, the Employee shall not be subject to the restrictions set forth in this Section 12 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 8, above; or, (d) As set forth in Section 14 below. 13. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 10 Employment Agreement (page 10) 14. Other Employment and Location. Anything to the contrary hereinabove notwithstanding, Company acknowledges that Employee is also the Executive Vice President and Chief Financial Officer of American National Financial Inc.("ANFI") and will direct a reasonable portion of his time to fulfilling his duties as an officer of ANFI. Employee may also be an officer or director of Fidelity National Financial, Inc. or one of its subsidiaries ("FNFI") and/or Santa Barbara Restaurant Group ("SBRG"). Company further acknowledges that Employee is or may be an employee of ANFI, SBRG or FNFI in addition to the Company and that such employment shall not be a violation of this Agreement so long as Employee dedicates a reasonable amount of his time to his duties hereunder. Should any portion of Employee's minimum annual base salary be allocated to SBRG, ANFI or FNFI, such allocation shall not affect the calculation of any payments due to Employee (other than the non-allocated portion of his minimum base annual salary), including, but not limited to any payments due under Sections 4(e), 7(b) and 8(b)(ii). Employment by SBRG, ANFI or FNFI, or any affiliate thereof, shall not be prohibited by Sections 11 or 12 above. The Employee shall not be required to move from Santa Barbara County, California, to perform his duties hereunder during the Term without his written consent. 15. Improvements and Inventions. Any and all improvements or inventions which the Employee may conceive, make or participate in during the period of his employment shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 16. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is therefore agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall 11 Employment Agreement (page 11) have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 16 shall survive the termination of his employment and he shall be bound by its terms at all time subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 17. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 18. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. 19. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 20. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the 12 Employment Agreement (page 12) Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 21. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States certified mail, postage prepaid, with return receipt requested, to the parties at their respective addresses set for the below: To the Company: CKE Restaurants, Inc. 3916 State Street Santa Barbara, CA 93105 Attention: Andrew F. Puzder, General Counsel To the Employee: Carl A. Strunk 123 Via Alicia Santa Barbara, California 93108 22. Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. CKE RESTAURANTS, INC. By: ----------------------------------------- Its: ----------------------------------------- 13 Employment Agreement (page 13) EMPLOYEE --------------------------------------------- Carl A. Strunk EX-10.6 7 EMPT AGMT 4/9/99 WITH ANDREW F. PUZDER. 1 EXHIBIT 10.6 Employment Agreement (page 1) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April 9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a Delaware corporation (the "Company"), and ANDREW F. PUZDER (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as Executive Vice President, General Counsel and Executive Vice President, Franchising (or such other title as the Company may designate), and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as directed by the Company's Board of Directors, its Chief Executive Officer or its President, or as set forth in the Articles of Incorporation and the Bylaws of the Company. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of three (3) years ending April 9, 2002, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual written agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable withholdings, of $312,500 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased at the discretion of the Compensation Committee of the Board of Directors to reflect, among other matters, cost of living increases and performance results. 4. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company 2 Employment Agreement (page 2) may from time to time make available to the Employee upon mutual agreement, the Employee shall be entitled to the following: (a) The standard Company benefits enjoyed by the Company's other executive vice presidents as a group; (b) Payment by the Company of the Employee's initiation and membership dues in a social and/or recreational club as deemed necessary and appropriate by the Employee (and pre-approved by the Company at the Company's discretion) to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club; (c) Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of the medical and other insurance coverage provided by the Company to its other executive vice presidents as a group; (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary for a two year period; (e) An Annual Bonus for the fiscal year ended January 31, 2000, equal to 100% of the minimum annual base salary set forth in Section 3 above if the Company achieves 30% growth in earnings per share during fiscal 2000 over earnings per share during fiscal 1999. In all subsequent years, the Annual Bonus shall be calculated by first determining the amount by which the Company's net income increases over the prior fiscal year. If such increase is 15%, Employee shall receive a bonus equal to 25% of his then current minimum base annual salary and if net income increases less than 15% or decreases, Employee shall receive no bonus. For each full 5% increase in the Company's net income over the 15% base increase, Employee's Annual Bonus shall increase by an amount equal to 25% of his minimum base annual salary. For example, a 30% increase in net income would result in a bonus equal to 100% of the Employee's then current minimum base annual salary. In no event shall the Annual Bonus exceed 100% of Employee's minimum base 3 Employment Agreement (page 3) annual salary. The Annual Bonus shall be paid within ninety (90) days after the end of the fiscal year. (f) A Grant under the Company's Stock Option Plans of options to purchase 50,000 shares of the Company's Common Stock. The exercise price for such options shall be the closing price on the Effective Date of the Company's Common Stock traded on the New York Stock Exchange, as reported by the Wall Street Journal. Such options shall vest as follows: (i) 1/3 (16,667 shares) on the Effective Date; (ii) 1/3 (16,667 shares) on the first anniversary of the Effective Date; and, (iii) 1/3 (16,666 shares) on the second anniversary of the Effective Date. Such options shall be incentive stock options as defined by section 422 of the Internal Revenue Code to the maximum extent possible. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties. 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his positions with the Company and in accordance with the Company's standard policies, or as the Company's Board of Directors may approve. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 6. Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses in accordance with the Company's policies then in effect, all such expense reimbursements to be approved in writing by the Company's Chief Executive Officer or President. 7. Termination. (a) For Cause. The Company may terminate this Agreement 4 Employment Agreement (page 4) immediately for cause upon written notice to the Employee, in which event the Company shall be obligated only to pay the Employee that portion of the minimum base annual salary due him through the date of termination. Cause shall be limited to (i) the failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities; or, (iv) a material breach of this Agreement. (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b), then it shall be obligated to pay to the Employee an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number one, plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary), multiplied by the number one. Such payment to be made in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, if the Company terminates under this Section 7(b), the Company shall maintain in full force and effect for the continued benefit of the Employee for one year, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. If the Employee terminates under this Section 7(b), then the Company shall only be obligated to pay the Employee the minimum annual base salary due him through the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of six consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base 5 Employment Agreement (page 5) annual salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee. (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. Executive's outstanding CKE options will immediately vest in full and be exercisable for a period of 90 days from Executive's death. (e) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. 8. Severance payment. (a) The Employee may terminate his employment hereunder for "Good Reason,"which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company" shall, for purposes of this Agreement, be deemed to have occurred if (i) there shall be consummated, except as hereinafter provided (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" 6 Employment Agreement (page 6) (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. The Employee may only terminate this Agreement due to a change in control of the Company during the period commencing 60 days and expiring 365 days after such change in control. Notwithstanding anything in this Agreement to the contrary, a "change in control of the Company" shall not have occurred if officers and/or directors (or affiliated entities thereof) of the Company at the time of a transaction described under item (i), (ii) or (iii) above own, immediately after such transaction, 15% or more of the entity acquiring the stock or assets of the Company as provided above. (b) If the Employee terminates his employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 7(b), then, in lieu of and notwithstanding Section 7 above: (i) the Company shall pay the Employee his minimum base annual salary due him through the date of termination: (ii) in lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date of termination, the Company shall pay, as severance to the Employee, an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number of years (including partial years) remaining in the Term or the number two (2), whichever is greater, plus (ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary) multiplied by the number of years remaining in the contract for which Employee has not, as yet, received an Annual 7 Employment Agreement (page 7) Bonus or the number two (2), whichever is greater, such payment to be made in a lump sum on or before the fifth day following the date of termination; (iii) all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) the Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) The Employee shall not be required to mitigate the amount of any payment provided for in this Section 8 or Section 7(b), above, by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under this Section 8 or Section 7(b), above. (d) Notwithstanding anything to the contrary herein, if and to the extent any payment made under this Agreement, either alone or in conjunction with other payments Employee has the right to receive either directly or indirectly from the Company, which would constitute as "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended, then Employee shall be entitled to receive an excise tax gross-up payment not exceeding one million dollars ($1,000,000) in accordance with Appendix A. 9. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned 8 Employment Agreement (page 8) or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. 10. Confidential Information. The Employee acknowledges that in his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry, including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 10. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company. 11. Non-Competition During Employment Term. The Employee agrees that, during the Term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. He will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 9 Employment Agreement (page 9) 12. Non-Competition After Employment Term. The parties acknowledge that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of two years after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company or its affiliates in any of their presently-existing or then-existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains an executive employee of the Company or any of its affiliates. Notwithstanding any of the foregoing provisions to the contrary, the Employee shall not be subject to the restrictions set forth in this Section 12 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 8, above; or, (d) As set forth in Section 14 below. 13. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 10 Employment Agreement (page 10) 14. Other Employment and Location. Anything to the contrary hereinabove notwithstanding, Company acknowledges that Employee is also the Chief Executive Officer of Santa Barbara Restaurant Group, Inc. ("SBRG"), a director of Rally's Hamburgers, Inc. (which may be merged with Checkers Drive Thru Restaurants, Inc.) ("RHI"), and Executive Vice President of Fidelity National Financial, Inc. ("FNFI") and will direct a reasonable portion of his time to fulfilling his duties in such capacities. Company further acknowledges that Employee is or may be an Employee of SBRG, RHI and/or FNFI, or any affiliate thereof, in addition to the Company and that such employment shall not be a violation of this Agreement so long as Employee dedicates a reasonable amount of his time to his duties hereunder. Should any portion of Employee's minimum base annual salary be allocated to such entities, such allocation shall not affect the calculation of any payments due to Employee (other than the non-allocated portion of his minimum base annual salary under Section 3 above), including, but not limited to any payments due under Sections 4(e), 7(b) and 8(b)(ii). Employment by such entities shall not be prohibited by Sections 11 or 12 above. The Employee shall not be required to move from Santa Barbara County, California, to perform his duties hereunder during the Term without his written consent. 15. Improvements and Inventions. Any and all improvements or inventions which the Employee may conceive, make or participate in during the period of his employment shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 16. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is therefore agreed between the parties that, in the event of a breach by the 11 Employment Agreement (page 11) Employee of any of his obligations contained in this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 16 shall survive the termination of his employment and he shall be bound by its terms at all time subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 17. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 18. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. 19. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 20. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each 12 Employment Agreement (page 12) be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 21. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States certified mail, postage prepaid, with return receipt requested, to the parties at their respective addresses set for the below: To the Company: CKE Restaurants, Inc. 3916 State Street Santa Barbara, CA 93105 Attention: Tom Thompson, President To the Employee: Andrew F. Puzder 570 Meadow Wood Lane Montecito, California 93108 22. Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. CKE RESTAURANTS, INC. By: --------------------------------------- Its: --------------------------------------- 13 Employment Agreement (page 13) EMPLOYEE ------------------------------------------- Andrew F. Puzder EX-10.7 8 EMPT AGMT 4/9/99 WITH JOHN J. DUNION. 1 EXHIBIT 10.7 Employment Agreement (page 1) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April 9th, 1999 (the "Effective Date"), by and between CKE RESTAURANTS, INC., a Delaware corporation (the "Company"), and JOHN J. DUNION (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as Executive Vice President, Chief Administrative Officer (or such other title as the Company may designate), and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as directed by the Company's Board of Directors, its Chief Executive Officer or its President, or as set forth in the Articles of Incorporation and the Bylaws of the Company. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of three (3) years ending April 9, 2002, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual written agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable withholdings, of $190,000 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased at the discretion of the Compensation Committee of the Board of Directors to reflect, among other matters, cost of living increases and performance results. 4. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company may from time to time make available to the Employee upon mutual agreement, the 2 Employment Agreement (page 2) Employee shall be entitled to the following: (a) The standard Company benefits enjoyed by the Company's other executive vice presidents as a group; (b) Payment by the Company of the Employee's initiation and membership dues in a social and/or recreational club as deemed necessary and appropriate by the Employee (and pre-approved by the Company at the Company's discretion) to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club; (c) Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of the medical and other insurance coverage provided by the Company to its other executive vice presidents as a group; (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary for a two year period; (e) An Annual Bonus for the fiscal year ended January 31, 2000, equal to 100% of the minimum annual base salary set forth in Section 3 above if the Company achieves 30% growth in earnings per share during fiscal 2000 over earnings per share during fiscal 1999. In all subsequent years, the Annual Bonus shall be calculated by first determining the amount by which the Company's net income increases over the prior fiscal year. If such increase is 15%, Employee shall receive a bonus equal to 25% of his then current minimum base annual salary and if net income increases less than 15% or decreases, Employee shall receive no bonus. For each full 5% increase in the Company's net income over the 15% base increase, Employee's Annual Bonus shall increase by an amount equal to 25% of his minimum base annual salary. For example, a 30% increase in net income would result in a bonus equal to 100% of the Employee's then current minimum base annual salary. In no event shall the Annual Bonus exceed 100% of Employee's minimum base annual salary. The Annual Bonus shall be paid within ninety (90) days after the end of the fiscal year. 3 Employment Agreement (page 3) (f) A Grant under the Company's Stock Option Plans of options to purchase 50,000 shares of the Company's Common Stock. The exercise price for such options shall be the closing price on the Effective Date of the Company's Common Stock traded on the New York Stock Exchange, as reported by the Wall Street Journal. Such options shall vest as follows: (i) 1/3 (16,667 shares) on the Effective Date; (ii) 1/3 (16,667 shares) on the first anniversary of the Effective Date; and, (iii) 1/3 (16,666 shares) on the second anniversary of the Effective Date. Such options shall be incentive stock options as defined by section 422 of the Internal Revenue Code to the maximum extent possible. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties. 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his positions with the Company and in accordance with the Company's standard policies, or as the Company's Board of Directors may approve. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 6. Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses in accordance with the Company's policies then in effect, all such expense reimbursements to be approved in writing by the Company's Chief Executive Officer or President. 7. Termination. (a) For Cause. The Company may terminate this Agreement immediately for cause upon written notice to the Employee, in which event the Company shall be obligated only to pay the Employee that portion of the minimum 4 Employment Agreement (page 4) base annual salary due him through the date of termination. Cause shall be limited to (i) the failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities; or, (iv) a material breach of this Agreement. (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b), then it shall be obligated to pay to the Employee an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number one, plus (ii), an amount equal to the Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary), multiplied by the number one. Such payment to be made in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, if the Company terminates under this Section 7(b), the Company shall maintain in full force and effect for the continued benefit of the Employee for one year, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. If the Employee terminates under this Section 7(b), then the Company shall only be obligated to pay the Employee the minimum annual base salary due him through the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of six consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base annual salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee. 5 Employment Agreement (page 5) (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. Executive's outstanding CKE options will immediately vest in full and be exercisable for a period of 90 days from Executive's death. (e) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. 8. Severance payment. (a) The Employee may terminate his employment hereunder for "Good Reason,"which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company" shall, for purposes of this Agreement, be deemed to have occurred if (i) there shall be consummated, except as hereinafter provided (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then 6 Employment Agreement (page 6) outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. The Employee may only terminate this Agreement due to a change in control of the Company during the period commencing 60 days and expiring 365 days after such change in control. Notwithstanding anything in this Agreement to the contrary, a "change in control of the Company" shall not have occurred if officers and/or directors (or affiliated entities thereof) of the Company at the time of a transaction described under item (i), (ii) or (iii) above own, immediately after such transaction, 15% or more of the entity acquiring the stock or assets of the Company as provided above. (b) If the Employee terminates his employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 7(b), then, in lieu of and notwithstanding Section 7 above: (i) the Company shall pay the Employee his minimum base annual salary due him through the date of termination: (ii) in lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date of termination, the Company shall pay, as severance to the Employee, an amount equal to the sum of (i) the Employee's minimum base annual salary in effect as of the date of termination multiplied by the number of years (including partial years) remaining in the Term or the number two (2), whichever is greater, plus (ii), an Annual Bonus calculated pursuant to Section 4 (e) above, but assuming a 30% increase in net income (100% of Employee's minimum annual base salary) multiplied by the number of years remaining in the contract for which Employee has not, as yet, received an Annual Bonus or the number two (2), whichever is greater, such payment to be made in a lump sum on or before the fifth day following the date of termination; 7 Employment Agreement (page 7) (iii) all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) the Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans (except for the Company's stock option plans) and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) The Employee shall not be required to mitigate the amount of any payment provided for in this Section 8 or Section 7(b), above, by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under this Section 8 or Section 7(b), above. (d) Notwithstanding anything to the contrary herein, if and to the extent any payment made under this Agreement, either alone or in conjunction with other payments Employee has the right to receive either directly or indirectly from the Company, which would constitute as "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended, then Employee shall be entitled to receive an excise tax gross-up payment not exceeding one million dollars ($1,000,000) in accordance with Appendix A. 9. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. 8 Employment Agreement (page 8) 10. Confidential Information. The Employee acknowledges that in his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry, including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 10. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company. 11. Non-Competition During Employment Term. The Employee agrees that, during the Term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. He will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 12. Non-Competition After Employment Term. The parties acknowledge 9 Employment Agreement (page 9) that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of two years after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated hereinbelow, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company or its affiliates in any of their presently-existing or then-existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains an executive employee of the Company or any of its affiliates. Notwithstanding any of the foregoing provisions to the contrary, the Employee shall not be subject to the restrictions set forth in this Section 12 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; or, (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 8. 13. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 14. Location. The Employee shall not be required to move from Orange County, California, to perform his duties hereunder during the Term without his 10 Employment Agreement (page 10) written consent. 15. Improvements and Inventions. Any and all improvements or inventions which the Employee may conceive, make or participate in during the period of his employment shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 16. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is therefore agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 16 shall survive the termination of his employment and he shall be bound by its terms at all time subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 17. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 18. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. 11 Employment Agreement (page 11) 19. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 20. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 21. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States certified mail, postage prepaid, with return receipt requested, to the parties at their respective addresses set for the below: To the Company: CKE Restaurants, Inc. 3916 State Street Santa Barbara, CA 93105 Attention: Andrew F. Puzder, General Counsel To the Employee: John J. Dunion 940 South Camerford Lane Anaheim Hills, California 92808 12 Employment Agreement (page 12) 22. Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. CKE RESTAURANTS, INC. By: --------------------------------------- Its: --------------------------------------- EMPLOYEE ------------------------------------------- John J. Dunion EX-11 9 CALCULATION OF EARNINGS PER SHARE. 1 EXHIBIT 11 CKE RESTAURANTS, INC. AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE (In thousands except per share amounts)
Sixteen Weeks Ended ------------------- May 17, May 18, 1999 1998 ------- ------- BASIC EARNINGS PER SHARE - ------------------------ Income before extraordinary item $19,130 $22,732 Extraordinary item - gain on early retirement of debt, net of applicable income taxes of $186 290 -- ------- ------- Net income $19,420 $22,732 ======= ======= Weighted average number of common shares outstanding during the period 51,860 51,229 ======= ======= Basic earnings per share before extraordinary item $ 0.36 $ 0.44 Extraordinary item - gain on early retirement of debt, net of applicable income taxes - basic 0.01 -- ------- ------- Basic net income per share $ 0.37 $ 0.44 ======= ======= DILUTED EARNINGS PER SHARE - -------------------------- Income before extraordinary item $19,130 $22,732 Interest expense and amortization of debt issuance costs, net of income tax effect applicable to convertible subordinated notes 1,415 1,016 ------- ------- Diluted income before extraordinary item 20,545 23,748 Extraordinary item - gain on early retirement of debt, net of applicable income taxes of $186 290 -- ------- ------- Diluted net income $20,835 $23,748 ======= ======= Weighted average number of common shares outstanding during the period 51,860 51,229 Incremental common shares attributable to: Exercise of outstanding options 839 1,700 Issuance of convertible subordinated notes 3,642 2,652 ------- ------- Total shares 56,341 55,581 ======= ======= Diluted net income per share before extraordinary item $ 0.36 $ 0.43 Extraordinary item - gain on early retirement of debt, net of applicable income taxes - diluted 0.01 -- ------- ------- Diluted earnings per share $ 0.37 $ 0.43 ======= =======
18 EX-27.1 10 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from CKE Restaurants, Inc. Consolidated Balance Sheets and Consolidated Statements of Income as of and for the sixteen weeks ended May 17, 1999 and is qualified in its entirety by reference to such Form 10-Q for the quarterly period ended May 17, 1999. 1,000 3-MOS JAN-31-2000 JAN-26-1999 MAY-17-1999 45,529 0 54,924 0 25,068 131,406 1,258,905 277,182 1,537,883 197,606 0 0 0 519 603,632 1,537,883 546,744 595,723 440,146 548,118 266 0 15,678 31,661 12,531 19,130 0 290 0 19,420 .37 .37
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