UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For Fiscal Year Ended January 25, 2010
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934
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From the transition period from
to
Commission File Number 1-11313
CKE Restaurants, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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33-0602639
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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6307 Carpinteria Ave. Ste. A
Carpinteria, California 93013
(Address of principal executive offices)
(805) 745-7500
(Registrants telephone number)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.01 par value
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes
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No
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Indicate by check mark 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
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes
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No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of
the Act). Yes
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No
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The aggregate market value of the voting stock held by non-affiliates of the registrant as of
August 10, 2009 was approximately $455,282,234.
The number of outstanding shares of the registrants common stock was 55,232,512 as of May 10,
2010.
DOCUMENTS INCORPORATED BY REFERENCE
None
EXPLANATORY NOTE
On March 25, 2010, CKE Restaurants, Inc. (CKE, we, our, us, or the Company) filed
its Annual Report on Form 10-K for the fiscal year ended January 25, 2010 (the Annual Report)
with the Securities and Exchange Commission (SEC). As previously disclosed in a preliminary
proxy statement on Schedule 14A, which was filed with the SEC on May 4, 2010, and other forms and
documents recently filed with the SEC, the Company entered into an Agreement and Plan of Merger
(the Merger Agreement), effective April 18, 2010, pursuant to which it has agreed to be acquired
by affiliates of Apollo Management VII, L.P. for $12.55 per share in cash. As a result of the
proposed transaction, the Company does not intend to hold an annual meeting of stockholders in 2010
unless the proposed transaction is not consummated. Because the Company has determined that it
will not file a definitive proxy statement relating to an annual meeting of stockholders within 120
days following the last day of its most recently completed fiscal year, the Company is providing
the information required by Items 10, 11, 12, 13 and 14 of Part III of Form 10-K in this Amendment
No. 1 on Form 10-K/A (Form 10-K/A). Except as specifically set forth in Part III below, no
other changes are being made to the Annual Report.
1
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Directors
Our Board of Directors has set the number of directors at ten in accordance with our amended
Bylaws. Our Board of Directors is divided into three classes, with each class having approximately
the same number of directors. Each class serves for a period of three years, with the terms of
office of the respective classes expiring in successive years. The foregoing notwithstanding,
directors serve until their successors have been duly elected and qualified or until they resign,
become disqualified or disabled, or are otherwise removed.
The following tables set forth the names, ages, principal occupations, business experience and
directorships of our directors:
DIRECTORS CONTINUING IN OFFICE UNTIL 2010
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Position, Principal Occupation, Business
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Name and Age as of May 25, 2010
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Experience and Directorships
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Byron Allumbaugh
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78
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Mr. Allumbaugh has served as a director
since 1996, and was appointed Chairman of
our Board of Directors on July 19, 2005.
Mr. Allumbaugh retired as Chairman of the
board of directors of Ralphs Grocery
Company on January 31, 1997, where he
held numerous management positions since
1958, serving as Chief Executive Officer
from 1976 to 1995 and Chairman of the
board of directors from 1995 until his
retirement. Currently a self-employed
business consultant, Mr. Allumbaugh is
also a past member of the board of
directors of each of the Automobile Club
of Southern California and The Pantry,
Inc.
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Mr. Allumbaugh brings to the Board a long
and successful business career and with
that extensive experience in the
restaurant and food service industries,
both at the management level and the
board level. His skills include
operations, financial analysis, business
strategy and development, marketing,
distribution management, corporate
governance and risk assessment. Mr.
Allumbaugh has also developed specialized
knowledge of the Company through his
service as a director over the past 14
years.
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Frank P. Willey
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56
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Mr. Willey has served as a director since
1994 and was appointed Vice Chairman in
December 2008. He has served as a
director and Vice Chairman of Fidelity
National Financial, Inc., or FNF, since
1984, and served as General Counsel of
FNF from 1984 to 1995, as well as its
President from 1995 until 2000. Mr.
Willey also currently serves as a
director of PennyMac Mortgage Investment
Trust, which is a public company, and is
a director of several privately held
companies.
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Mr. Willey brings to the Board extensive
legal, operational and financial
experience as an attorney and former
president of FNF. His skills include
finance, accounting and legal expertise,
operations, business strategy and
development, executive compensation and
risk assessment. Mr. Willey has also
developed a unique understanding of the
Company through his 16 years of service
to the Board.
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Matthew Goldfarb
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Mr. Goldfarb has served as a director
since 2006. He has also served as lead
independent director of Xinergy, Ltd.
since December 2009, and served as a
director of James River Coal Co. during
2006. Mr. Goldfarb until February 2010
managed loan sales and trading at Pali
Capital, Inc. and Tradition North
America. Prior thereto, Mr. Goldfarb was
a Director and Senior Investment Analyst
of Blackstone Group/GSO Capital Partners
since January 2007, a Director and Senior
Investment Analyst at Pirate Capital LLC
for approximately two years, and prior to
that was counsel at Icahn Associates
Corp., an investment firm, from July 2000
to January 2005. Prior to that, Mr.
Goldfarb was associated with the law firm
of Schulte Roth & Zabel LLP.
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Mr. Goldfarb brings to the Board
extensive experience with respect to
financial markets, investment strategies
and industry analysis. His particular
skills include financial and business
analysis, financial strategy, business
strategy, long-range planning and
financial market strategy.
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DIRECTORS CONTINUING IN OFFICE UNTIL 2011
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Position, Principal Occupation, Business
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Name and Age as of May 25, 2010
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Experience and Directorships
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Peter Churm
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Mr. Churm has served as a director
since 1979. Mr. Churm was Chairman of
the board of directors of Furon Company
from May 1980 through February 1992 and
was President of that company for more
than 16 years. From February 1992
until November 1999, Mr. Churm served
as Furon Companys Chairman Emeritus as
well as a member of its board of
directors.
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Mr. Churm brings to the Board
unparalleled experience with the
operation and development of the
Company through his service as a
director of the Company for 31 years
and as the Chief Executive Officer of
Furon Company. His particular skills
include executive compensation,
operations, business strategy and
development, and product development.
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Janet E. Kerr
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55
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Professor Kerr has served as a director
since 2004. Professor Kerr is
currently a professor of law and the
Executive Director of the Geoffrey H.
Palmer Center for Entrepreneurship and
the Law at Pepperdine University School
of Law in Malibu, California.
Professor Kerr has served as a
consultant to various companies on
Sarbanes-Oxley Act compliance and
corporate governance. She is currently
a member of the board of directors of
Larta, formerly known as the Southern
California Regional Technology
Alliance, has founded several
technology companies and is a
well-known author in the areas of
securities, corporate law and corporate
governance, having published several
articles and a book on the subjects.
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Professor Kerr was a co-founder of
X-Labs, a technology company co-founded
with HRL Laboratories. Professor Kerr
is also a member of the board of
directors of La-Z-Boy Incorporated.
Professor Kerr has had a distinguished
professional, business and academic
career and from that brings to the
Board extensive business, legal and
corporate governance experience. Her
skills include risk management,
executive compensation, corporate
governance, legal and regulatory
expertise, stockholder relations,
policy matters and social
responsibility matters.
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Daniel D. (Ron) Lane
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Mr. Lane has served as a director since
1993. Since February 1983, he has been
a principal, Chairman and Chief
Executive Officer of Lane/Kuhn Pacific,
Inc. Mr. Lane is also a director of FNF
and Fidelity National Information
Services, Inc.
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Mr. Lane brings to the Board 17 years
of experience as a director of the
Company and extensive experience as the
Chief Executive Officer of a private
company, a member of the board of two
public companies and a trustee of a
highly regarded educational
institution. His skills include
operations, marketing, business
strategy and leadership development.
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Andrew F. Puzder
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Mr. Puzder has served as a director
since 2001. Mr. Puzder became our
Chief Executive Officer in September
2000. From September 2000 to January
2009, he also served as our President.
From February 1997 to September 2000,
he served as our Executive Vice
President, General Counsel and
Secretary. Mr. Puzder was also
Executive Vice President of FNF from
January 1995 to June 2000. Mr. Puzder
was a partner in the Costa Mesa,
California law firm of Lewis, DAmato,
Brisbois & Bisgaard from September 1991
to March 1994, and a shareholder in the
Newport Beach, California law firm of
Stradling Yocca Carlson & Rauth from
March 1994 until joining FNF in 1995.
Mr. Puzder has been an executive
officer of the Company for over 13
years and a director of the Company for
over nine years. As a result, he
brings extensive knowledge of the
operations and long-term strategy of
the Company. His particular skills
include operations, franchising,
management development, business
strategy and development, product
development, marketing, risk assessment
and stockholder relations. The Board
believes that Mr. Puzders vision,
leadership and extensive knowledge of
the Company is essential to the future
growth of the Company.
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DIRECTORS CONTINUING IN OFFICE UNTIL 2012
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Position, Principal Occupation, Business
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Name and Age as of May 25, 2010
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Experience and Directorships
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Carl L. Karcher
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Mr. Karcher has served as a director
since 1992. Mr. Karcher is the
President of CLK, Inc., a Carls Jr.
franchisee. Mr. Karcher has been a
Carls Jr. franchisee since May 1985.
For more than 17 years prior to that
time, Mr. Karcher was employed by us in
several capacities, including Vice
President, Manufacturing and
Distribution. Carl L. Karcher is the
son of the late Carl N. Karcher, our
founder.
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Mr. Karcher brings over 40 years of
experience in the quick service
restaurant industry, including 18 years
serving on the Board. Mr. Karcher
started as a counter employee at the
Company and was promoted to Vice
President of Purchasing, Distribution
and Manufacturing before leaving the
Company to become a franchisee in 1985.
As a former employee, long-time Board
member and franchisee with an operating
interest in 66 restaurants, Mr. Karcher
has considerable personal knowledge of
the Company and a unique perspective
with respect to its operations.
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Jerold H. Rubinstein
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70
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Mr. Rubinstein has served as a director
since 2006. Mr. Rubinstein is Chairman
of U.S. Global Investors, Inc., a
mutual fund advisory company. Mr.
Rubinstein has started and sold many
companies over the years, including Bel
Air Savings and Loan and DMX, a cable
and satellite music distribution
company. Most recently, Mr. Rubinstein
was Managing Partner at Music Imaging &
Media Imaging International. Mr.
Rubinstein started and sold XTRA Music
Ltd., a satellite and cable music
distribution company in Europe. Mr.
Rubinstein is both a CPA and attorney.
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Mr. Rubinstein brings to the Board, as
a result of a lengthy career as an
attorney, CPA and businessman,
extensive experience in the areas of
operations, legal analysis, financial
and accounting expertise, and business
development. His particular skills
include finance and accounting,
operations, long-range planning, brand
and product development, business
strategy and development, corporate
governance and risk assessment.
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Daniel E. Ponder, Jr.
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56
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Mr. Ponder has served as a director
since 2001. He is currently the
President and Chairman of the board of
directors of Ponder Enterprises, Inc.,
a franchisee of Hardees restaurants.
He has been a Hardees franchisee for
over 25 years. Mr. Ponder served in
the Georgia legislature until January
2001. Mr. Ponder was the 2003
recipient of the John F. Kennedy
Profile in Courage Award.
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Mr. Ponder brings to the Board
considerable experience in the quick
service restaurant industry, both as a
significant franchisee for over 25
years and a director for over nine
years. As a franchisee,
Mr. Ponder brings specialized knowledge
and a unique perspective with respect
to the operations, marketing, product
development, business strategies and
franchising of the Hardees brand.
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Executive Officers
The information required to be disclosed about the Companys executive officers is included
under the heading Executive Officers of the Registrant in
Item 10.
Family Relationships
There are no family relationships among any of our directors and executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, officers and beneficial owners of
more than 10% of our common stock to file reports of ownership and reports of changes in ownership
with the SEC. Such persons are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. To our knowledge, based solely upon a review of such reports and
amendments thereto received by us during or with respect to our most recent fiscal year, and upon
written representations regarding all reportable transactions, we did not identify any such
required report that was not timely filed except that Mr. Starke had one late Form 4 filing.
Code of Ethics
The information required to be disclosed about the Companys code of ethics is included under
the heading Code of Ethics and Corporate Governance
Information in Item 10.
Material Changes to the Procedures by Which Security Holders May Recommend Nominees to Our Board
There have been no material changes to the procedures by which our stockholders may recommend
nominees to our Board of Directors.
Audit Committee and Audit Committee Financial Expert
Our Board of Directors has a standing Audit Committee currently consisting of Mr. Rubinstein
(Chairman), Mr. Willey and Mr. Allumbaugh. Our Board of Directors and the Nominating & Corporate
Governance Committee have determined that each member of the Audit Committee is independent
within the meaning of the rules of both the New York Stock Exchange (NYSE) and the SEC. Our
Board of Directors has also determined that each member of the Audit Committee is financially
literate and has accounting or related financial management expertise, as such qualifications are
defined under the rules of the NYSE. Finally, our Board of Directors has determined that Mr.
Rubinstein is an audit committee financial expert within the meaning of the rules of the SEC.
The Audit Committee operates under a written charter adopted by our Board of Directors, which is
available through our website at www.ckr.com, and a copy of which will be made available in print,
without charge, to any stockholder upon request.
5
Item 11.
Executive Compensation
COMPENSATION DISCUSSION AND ANALYSIS
Current Compensation Philosophy and Objectives
The Companys current compensation philosophy is the result of an evolutionary process that
began in fiscal 2001 (which ended in January 2001). During fiscal 2001, the Company was becoming a
financially and operationally challenged company. The Company had $618,322,000 of funded debt
outstanding at the end of its second fiscal quarter (excluding capital leases), a declining
Adjusted EBITDA (as calculated for its senior lenders) and a low stock price of $1.96 on October
18, 2000. The Company also suspended its dividend payments during this fiscal year. With the
Companys operations in a state of decline, and with substantial losses and a decreasing cash flow
from operations, the Company was fighting for its survival.
Also during fiscal 2001, the Companys then Chief Executive Officer resigned. After due
deliberation, in September 2000, the Board turned to Andrew F. Puzder. At that time, Mr. Puzder
was the General Counsel and Secretary of the Company, and he had just recently been appointed the
President and Chief Executive Officer of Hardees, a subsidiary of the Company, to deal with its
operational challenges. Even though Mr. Puzder had neither significant quick service restaurant
(QSR) operating experience, nor significant experience as a corporate turnaround specialist at
that time, the Board nevertheless felt that the Company was in need of his strong leadership, and
his administrative and legal skills.
Mr. Puzder, as Chief Executive Officer, proceeded to assemble the executive team that he felt
was necessary to tackle the challenges facing the Company. In this regard, with Board direction
and approval, he immediately selected E. Michael Murphy, who was then employed by the Company as
Hardees General Counsel, to be Executive Vice President and General Counsel (and essentially the
number two officer). Mr. Puzder then began searching for the right Chief Financial Officer. In
fiscal 2004, Mr. Puzder determined, with Board direction and approval, that Theodore Abajian, who
had experience as both a financial executive and the chief executive officer of a public QSR
company, was the right person for this position. As a result, Messrs. Puzder, Murphy and Abajian
became, and currently are, the top three executive officers of the Company.
The Board also felt that separate executive officers should be made responsible for the
operations conducted by each of the Companys two primary brands, Carls Jr. and Hardees, and a
third executive should be made responsible for marketing all of the Companys brands. In January
2004, because of a competitive labor market, the Board desired to provide stability to each of
these positions. Accordingly, the Company extended to each of the persons who had been
successfully performing these duties, Richard E. Fortman (Carls Jr.), Noah J. Griggs, Jr.
(Hardees) and Bradford R. Haley (Marketing), an employment agreement, which detailed the terms of
his respective employment arrangements.
During fiscal 2008, the Company determined that its training program required strengthening to
support both Company and franchise growth domestically and internationally. Accordingly, the
Company moved Mr. Griggs to Executive Vice President, Director of Training. In this capacity, Mr.
Griggs took charge of the training activities for all of the Companys brands. Except for the
changes to Mr. Griggss title and duties, his employment agreement remained in effect in accordance
with its terms. In connection with the change in Mr. Griggs title and duties, the Company, with
Board direction and approval, promoted Robert J. Starke to the position of Executive Vice
President, Hardees Operations. However, the Company did not enter into an Employment Agreement
with Mr. Starke until the beginning of fiscal 2010.
On
April 13, 2010, the Company separated from Mr. Griggs because the
Company believes Mr. Griggs violated Company policy.
The compensation for each of the Companys current executive officers (Messrs. Puzder, Murphy,
Abajian. Fortman, Haley, and Starke) is provided for in their respective Employment
Agreements, the details of which have been previously disclosed in the Companys filings with the
SEC. This compensation was, for the most part, based on the experience of and performance by these
individuals, and dictated by the facts and circumstances of the Company and its performance during
fiscal 2001 through 2005 (except with respect to Mr. Starke). Fiscal 2006, however, became a year
of planned positive change for the Company.
When Mr. Puzder first assumed the position of Chief Executive Officer in September 2000, the
Company was viewed as a highly troubled and vulnerable turnaround situation. This continued to
be the case through fiscal 2005, even though the Company had made important progress in reducing
its debt and improving sales at both brands, including repositioning Hardees to the verge of
profitability. However, the Company believed that fiscal 2006 was the breakout year, and, by the
end of fiscal 2006, it felt that the Company had successfully completed its turnaround.
6
For fiscal 2006, the Company had (i) a net income of $181,139,000, (ii) an Adjusted EBITDA (as
calculated for the Companys senior lenders) of $152,635,000, (iii) an average unit volume of
$1,341,000 and $874,000 for the Company operated Carls Jr. and Hardees restaurants, respectively,
(iv) average annual same-store sales increases for the preceding three years of 4.3% and 3.1% for
Company operated Carls Jr. and Hardees restaurants, respectively, and (v) substantial decreases
in restaurant operating costs as compared with fiscal 2001. In addition, by the end of fiscal
2006, the Company had reduced its outstanding funded debt (excluding capital leases) by
$405,344,000 from the end of the second fiscal quarter of fiscal 2001, and had a stock price of
$15.51. As a result, the strategic planning for the Company was switched from turnaround to
growth and to enhancement of stockholder value and return of value to stockholders. In this
regard, the Company resumed a dividend payment and adopted a stock repurchase program.
During fiscal 2006, because of the Companys success and the performance of its management
team, another important challenge was developing. There became an increased demand for talented
executives with a proven track record of success, and, accordingly, the Compensation Committee
believed that an interest developed in the Companys executive team by outside influences and
possibly competitors. In part, this demand was driven by the circumstances of the QSR industry and
other related sectors and, in part, by the significant increase in private equity firm activity
during that time. Whatever the reason for this demand, the Board believed that its executive team
was a significant asset of the Company that required protection.
As a result of the confluence of these developments, in early fiscal 2007, the Companys
Compensation Committee undertook a thorough analysis of the compensation packages then in place for
Messrs. Puzder, Murphy and Abajian. The primary objectives of this analysis were to assess whether
the compensation package for each of these executives (i) was effective to retain and incentivize
each of these executives, (ii) was an appropriate and fair reward for their prior performance, and
(iii) was adequately tied to the interests of the Companys stockholders. These objectives remain
the current primary compensation philosophy of the Compensation Committee.
Targeted Overall Compensation
As noted above, during fiscal 2007, the Compensation Committee undertook a thorough analysis
of the Companys compensation packages. To assist the Compensation Committee in this analysis, the
Committee engaged the services of J. Richard with J. Richard & Co., an executive compensation
consultant and a compensation committee advisor. Mr. Richard is an independent compensation
advisor to only the Companys Compensation Committee. Mr. Richard has not previously performed,
and does not currently perform, any other services for the Company or any of its affiliates.
In connection with the analysis in fiscal 2007, Mr. Richard selected 12 peer group companies.
He then conducted an extensive analysis of their compensation practices, and compared them to the
Companys compensation practices. The 12 companies in this peer study group were Applebees
International, Inc., Brinker International, Inc., California Pizza Kitchen, Inc., Cheesecake
Factory Incorporated, Dominos Pizza, Inc., Jack in the Box Inc., Krispy Kreme Doughnuts, Inc.,
Outback Steakhouse, Inc., Panera Bread Company, Red Robin Gourmet Burgers, Inc., Ruby Tuesday, Inc.
and Wendys International, Inc. Mr. Richard also conducted interviews with persons outside the
Company who he thought could add valuable insight to the analysis, and he took note of (i) the
remarkable success that had been achieved over the last five years, with supporting data and
evidence, and (ii) the efficiency with which the Company was managed, with each of the top three
executive officers performing duties that were, in many companies, performed by two or more
persons. Examples of this efficiency were:
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The Company did not have a separate Chief Executive Officer, President and Chief
Operating Officer, as Mr. Puzder performed all three functions;
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Mr. Murphy was not only General Counsel but he was also responsible for the Companys
franchising operations, and he was the Chief Administrative Officer, with human resources
and IT reporting to him; and
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The Company did not have a separate treasury function, as Mr. Abajian essentially
fulfilled both the accounting and treasurer duties, together with being responsible for the
Companys Carls Jr. food distribution operations and the Companys firm-wide equipment
purchasing and distribution operations.
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After Mr. Richard completed his review, analysis and comparison, he rendered a report entitled
Executive Officer Total Compensation and Equity Participation Review to the Compensation
Committee on August 10, 2006, in which he made certain recommendations regarding the total
compensation packages for Messrs. Puzder, Murphy and Abajian. These recommendations were supported
by analysis and data.
7
The Compensation Committee then began the process of determining what, if any, changes should
be made to the Employment Agreements for each of these three executive officers. This process
included three meetings by the Compensation Committee and several communications between meetings.
Also, since it was important to the Committee that the executives feel, at the end of the process,
that they were treated fairly, the Committee solicited input from these executives. This input was
provided both in writing and verbally when the executives were asked to appear at certain of the
Committee meetings. The Committee realized the complexities of comparing total compensation
packages with other peer companies, as these total compensation packages varied widely in their
amounts, makeup and mix. As a result, by seeking input from the executives, the Committee felt
that it could better assess the proper mix of compensation, and the amounts thereof, for these
executives. During this process, and as input was received from the executives, further input and
advice was also provided by Mr. Richard.
This process extended over a two-month period, culminating on October 12, 2006, in an
amendment being made to the Employment Agreement that the Company had with each of Messrs. Puzder,
Murphy and Abajian at that time. The Compensation Committee concluded, in amending these
Employment Agreements, that (i) these three executives had earned the right to be in the higher
percentiles (greater than the 50th percentile) of total compensation within the peer company study
group, (ii) their compensation should be a mix between cash and equity, and (iii) a substantial
portion of their compensation should be earned based on performance. The Compensation Committee
also noted, as part of its compensation determinations and as part of the Companys current
compensation philosophy, that the Company does not provide any pension or retirement benefits to
its executives, thus avoiding any burdensome payments associated with an executives retirement.
The Committee believes that this philosophy has the added benefit of incentivizing the executives
to meet performance criteria to better provide for their retirement years.
There were a few requests that the executives made that were not included in these amendments,
such as a tax gross-up and additional change-in-control benefits; however, the Committee did not
believe that these were appropriate at that time. Even though these requests were not accepted,
the Committee believed that the Companys total compensation packages for these three executives
would now achieve its objectives of retaining, rewarding and incentivizing them, and, at the same
time, better aligning their interests with those of the Companys stockholders. The details and
outcome of this process are described under the appropriate headings below.
With respect to the compensation packages for Messrs. Fortman, Griggs, Haley and Starke, the
Compensation Committee generally relies on recommendations made by Mr. Puzder. Each of these
executives has an Employment Agreement that provides for a base salary and an annual cash bonus to
be determined at the discretion of Mr. Puzder. In connection with the completion of each fiscal
year, Mr. Puzder reviews and makes recommendations to the Compensation Committee regarding the
amount of bonus to be paid to each for the fiscal year. At the same time, Mr. Puzder determines if
he will recommend to the Committee an equity award for any or all of these executives, and whether
there should be any increase in their base salary for the next fiscal year, all of which are
completely discretionary. These recommendations are based primarily on Mr. Puzders assessment of
the individual performances of each of these executives for the fiscal year, the financial
performance of the Companys brands, and the competitive nature of the executive labor environment.
Specific aspects of performance heavily weighted by Mr. Puzder for Messrs. Fortman and Starke are
(i) improvement in same- store sales, (ii) increases in the average unit volume of the Company
operated restaurants, (iii) decreases in operating expenses, and (iv) comparisons to the
performance of the Companys competitors. Also, Mr. Puzder takes into account the efficiency of
Mr. Haley, who is responsible for the marketing of both Carls Jr. and Hardees brands, roles
previously performed by two persons. Mr. Puzders philosophy and objectives in reviewing the
compensation packages for each of these executives is consistent with the Compensation Committees
philosophy and objectives expressed above.
Under rules established by the SEC, Messrs. Puzder and Abajian are each considered to be named
executive officers of the Company in light of their positions as our Chief Executive Officer
(Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer),
respectively. In addition, as a result of the total compensation that we have agreed to pay Mr.
Murphy pursuant to the Employment Agreement, as amended, he is also
considered to be a named
executive officer with respect to each fiscal year. However, because of the discretionary elements
of the compensation packages for each of Messrs. Fortman, Griggs, Haley and Starke, which two of
the four will be included as a named executive officer with respect to each fiscal year may vary
from year to year. For fiscal 2010, based upon the total compensation earned by the executive
officers calculated in accordance with applicable SEC rules, Messrs. Haley and Starke are the
additional two named executive officers. Accordingly, the remainder of this Compensation
Discussion and Analysis focuses on the compensation policies applicable to, and the compensation
paid to, Messrs. Puzder, Murphy, Abajian, Haley and Starke.
8
Employment Agreement Amendments During Fiscal 2009
During fiscal 2009, two significant dynamics occurred that impacted the Employment Agreements
which the Company had with its named executive officers.
The first dynamic was the continued evolution of changes occurring with respect to executive
compensation. Even though the Company had existing Employment Agreements with (at that time) six
of its executive officers, the Compensation Committee felt it important that these agreements be
reviewed in light of current executive compensation practices. In this regard, in October 2008,
the Committee again engaged the services of Mr. Richard to review these agreements and report to
the Committee his findings. On November 12, 2008, Mr. Richard issued a report to the Compensation
Committee that contained two primary findings. The first was that the severance payment to the
Companys Chief Executive Officer, Mr. Puzder, in lieu of his bonus upon a termination without
cause or upon a change in control was now out of line and should be reduced by 50%. This reduction
would decrease this payment from six times his base pay to three times his base pay. The second
had to do with when each of the six Employment Agreements terminated. At that time, none of the
six Employment Agreements had a specific termination date but rather provided that a three-year
notice was required in order to terminate the agreement without cause. Mr. Richard noted that this
provision was now also out of line. As a result, Mr. Richards recommendation was that there be
established a specific date upon which each Employment Agreement terminates without regard to any
notice.
At approximately the same time as the Compensation Committee was reviewing the existing
Employment Agreements, there was a second dynamic occurring, which was the volatility and
instability of the financial markets. One of the consequences of this volatility and instability
was the potential for sudden and erratic shifts in interest rates. As a result, management noted
to the Compensation Committee that, under current accounting rules for derivatives such as interest
rate swap agreements, this could have unintended consequences on the Companys income statement.
In this regard, the Committee was advised by its Chief Financial Officer that:
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the Company had several multi-year interest rate swap agreements in place with respect
to a substantial portion of its senior term debt which had the economic effect of fixing
the Companys cash interest payments on the term debt such that the effective interest rate
was approximately 6.1% per annum during the term of the interest rate swap agreements;
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because these are multi-year swap agreements, the accounting rules require that these
agreements be valued at their fair market value in the Companys financial statements,
which value is dependent upon forward looking interest rate expectations on the date of
valuation;
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depending upon the valuation, there could be either a charge or credit to the Companys
income statement for the relevant accounting period, which over the entire term of the swap
agreement will be zeroed out but, if valued at any given point of time within this term,
could have a significant impact on the respective accounting period;
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in budgeting for fiscal 2009, the Company did not include any credits or charges for
these swap agreement derivatives because (i) the Company could not have foreseen the
financial volatility and instability that was to occur in fiscal 2009, and (ii) even if it
could have foreseen this volatility and instability, due to the magnitude of the volatility
it would not have been able to reasonably estimate the size of any credits or charges
related to these swap agreement derivatives in order to include them in the budget; and
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any charge or credit would be reflected in the Companys pre-tax income and would thus
aberrationally affect the performance cash bonus formula contained in the Employment
Agreements with Messrs. Puzder, Murphy and Abajian.
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Based upon a thorough analysis and consideration of the above, in consultation with Mr.
Richard, the Compensation Committee concluded that Messrs. Puzder, Murphy and Abajian should be
given neither a windfall benefit nor a punitive penalty in any given accounting period resulting
from marking the Companys derivative interest rate swap agreements to market on a financial
statement date.
9
Notwithstanding the occurrence of the above dynamics and the findings of Mr. Richard, the
Compensation Committee could not unilaterally change the Employment Agreements which the Company
had with its executives. Accordingly, the Committee promptly entered into a dialog with each of
its executives to request that they relinquish certain
benefits that they had in their Employment Agreements. After this dialog, on December 16,
2008, the Committee met to review its options in consultation with Mr. Richard. After this review,
and since the Companys executives were willing to relinquish certain of their rights, the
Compensation Committee unanimously agreed with its executive officers to amend the current
Employment Agreements as follows:
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Mr. Puzder agreed to reduce the severance payable to him in lieu of his bonus from six
times his then base salary to three times his then base salary;
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Mr. Puzder, together with each of the other five executives with an Employment Agreement
at that time (Messrs. Murphy, Abajian, Haley, Fortman, and Griggs), agreed that the
Companys requirement to provide a three-year notice of termination will terminate on July
11, 2012 and that each of their respective Employment Agreements will terminate on July 11,
2015;
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Messrs. Puzder, Murphy and Abajian agreed that there will be excluded from their
performance cash bonus calculation any benefit from a credit (or any penalty for a charge)
arising from marking to market the Companys interest rate swap agreement derivatives; and
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Messrs. Murphy and Abajian will each be given the right to voluntarily terminate his
Employment Agreement in the event that there is ever a change in control and receive the
same severance benefits as he would have received had he been terminated without cause,
provided that he gives notice of his termination within 90 days of the change in control.
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In addition, there was a separate amendment to Mr. Murphys Employment Agreement in late
December 2008. During the course of fiscal 2009, Mr. Murphy progressively undertook additional
administrative duties. The Board assessed Mr. Murphys performance of both these new duties and
his prior duties as Executive Vice President, General Counsel, Chief Administrative Officer and
Secretary and concluded that Mr. Murphy performed these duties exceptionally well. Based on this
performance, in December 2008, the Board appointed Mr. Murphy President of the Company, effective
with the commencement of fiscal 2010. As a result of this promotion, the Compensation Committee
requested that Mr. Richard update his report to the Committee regarding any impact which this
promotion and Mr. Murphys added duties may have on Mr. Murphys compensation package. Mr. Richard
updated his prior analysis and recommended to the Board that this promotion and these added duties
should result in an increase in the compensation payable to Mr. Murphy. The Committee considered a
variety of means by which this increase could be effected. In consultation with Mr. Richard, the
Committee approved, effective with the commencement of fiscal 2010 (i) a $75,000 increase in Mr.
Murphys annual base salary, from $561,750 to $636,750, and (ii) an increase in the maximum amount
which Mr. Murphy may receive under his cash performance bonus from 200% of his base salary to 220%
of his base salary. Mr. Murphys Employment Agreement was amended in December 2008 to reflect the
foregoing changes.
Employment Agreement Amendments Effective Following Completion of Fiscal 2010
During fiscal 2010, mainly as a result of the financial market collapse and the resulting
economic recession, the Compensation Committee determined that the performance standards set forth
in the Employment Agreements for each of Messrs. Puzder, Murphy and Abajian had become very
difficult to meet and that the equity incentive portion of the compensation package payable to
those executive officers had lost a significant portion of its incentive and retentive qualities.
As a result, the Compensation Committee requested that Mr. Richard undertake an assessment of the
potential actions the Compensation Committee could take and report his findings to the Compensation
Committee. In providing his report, Mr. Richard noted the following:
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The compensation philosophy of the Compensation Committee is to establish compensation
packages that maximize the retention and motivation of its executive officers;
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The severe stresses that occurred in the financial markets and the resulting recession
have had a dramatic and material adverse impact on the economy and most businesses,
including the Company;
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The scope and depth of this impact was unforeseeable at the time the executive
compensation packages were approved and the equity incentive performance targets were
established;
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The already challenging performance targets relative to peer company performance targets
have been rendered essentially unachievable, as a result of which the incentives provided
for therein have been lost;
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The effectiveness of the Compensation Committees compensation philosophy has been compromised; and
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The executive compensation packages should be assessed in light of the changed circumstances.
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10
The Compensation Committee was in general agreement with Mr. Richard regarding the effect of
the economic recession on the Companys compensation package.
Mr. Richards report, which was provided to the Compensation Committee in December 2009,
detailed the research he conducted at the request of the Compensation Committee with respect to the
cash and equity compensation packages paid to executives at 11 peer group companies holding
comparable positions to those held by Messrs. Puzder, Murphy and Abajian. It also compared the
Companys operational performance for its last fiscal year to the operational performance of those
same peer companies.
Following a review of the report, the Compensation Committee, with input from Mr. Richard,
made certain recommendations about the aspects of the compensation packages with Messrs. Puzder,
Murphy and Abajian that should and should not be modified, which are summarized as follows:
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No change should be made to the cash component of the compensation packages;
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The peer group companies to which the Company is compared should be enlarged and the mix
of companies should be changed.
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No change should be made to the vesting of any shares under the current compensation
plan until after the completion of fiscal 2010. Thus, performance shares may continue to
vest in accordance with the previous vesting schedule through the completion of fiscal
2010. Any modifications to the vesting of performance shares should be prospective only.
Any shares which expire as of the last day of fiscal 2010 will be allowed to expire on
their terms.
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The 80-20 ratio between performance based shares and time based shares for the equity
awards made beginning with awards granted in fiscal 2011 should be re-weighted to a 60-40
ratio such that more shares are subject to time based vesting. A portion of the
performance based shares issued in fiscal 2010 that have not vested in accordance with
their terms at the completion of fiscal 2010 should be reallocated as time based shares in
accordance with a specified formula.
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The Company should establish new vesting criteria for the performance based shares
granted (or to be granted) to Messrs. Puzder, Murphy and Abajian in fiscal 2009, 2010 and
2011 (to the extent they do not vest based upon performance through fiscal 2010 under the
current performance criteria). The new vesting criteria should require the Company to
assess, over one-year and three-year performance periods, its Operating Margin and Total
Return compared to the performance of the new peer group companies. The performance
periods used to determine the vesting of these shares should be fiscal 2011, 2012 and 2013.
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The executives should be required to hold restricted shares granted in fiscal 2010 and
2011 until January 30, 2014.
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The Company should extend the application of the executive officers annual cash bonus
performance awards for an additional year to fiscal 2011.
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Following due deliberation and discussion with Mr. Richard, the Compensation Committee
concluded that the proposed changes would establish new performance criteria that better align the
incentive compensation earned by the Companys top three executive officers with the Companys
financial and market performance. The Committee also believed that the new performance criteria
would directly compare the Companys financial and market performance to that of its competitors,
and utilize incentive awards that provide more meaningful retention qualities.
As a result, on January 19, 2010, the Board of Directors, following the recommendation of the
Compensation Committee, approved amendments to the Employment Agreements for each of Messrs.
Puzder, Murphy and Abajian to incorporate the foregoing changes. The amendments were executed and
delivered by the Company and each of Messrs. Puzder, Murphy and Abajian on January 28, 2010
(following completion of fiscal 2010). On the same date, the Company entered into amendments to
the Employment Agreements with Messrs. Haley and Starke in order to extend the application of their
discretionary bonus payments for an additional year, to fiscal 2011. This was the only change made
to the Employment Agreements with Messrs. Haley and Starke.
11
It is important to note that, while the amendments referred to in the preceding paragraph were
approved by the Board during fiscal 2010, the amendments by their terms do not have a significant
impact on the compensation earned by our named executive officers in fiscal 2010. However, they
could have a significant impact on the compensation earned by our named executive officers with
respect to fiscal 2011 and thereafter.
Salary
A substantial portion of the total compensation for Messrs. Puzder, Murphy and Abajian is
based upon performance as described below. However, the Compensation Committee realizes that it is
important that the total compensation package provide for a reasonable base salary for its
executive officers in the event that the criteria necessary to earn the performance rewards are not
met.
At the beginning of fiscal 2009, the Committee asked Mr. Richard for his recommendation
regarding the base salaries paid to Messrs. Puzder, Murphy and Abajian. Mr. Richard analyzed,
among other things, (i) the available salary information for the peer company study group, (ii) the
scope of responsibilities and duties performed by these executives, and (iii) their respective
performances, and issued a report entitled Executive Officer (Top Five) Total Compensation
Review. Based on this analysis, Mr. Richard, noting that the base salaries were currently in line
with market, recommended that there be no change to the base salaries of Messrs. Puzder, Murphy and
Abajian that were then in effect.
The Compensation Committee reviewed the analysis and supporting materials provided by Mr.
Richard. After their review, the Compensation Committee agreed with the recommendation of Mr.
Richard. Accordingly, the base salaries for Messrs. Puzder, Murphy and Abajian in effect at the
end of fiscal 2008, remained in effect throughout fiscal 2009.
As noted under the above heading Employment Agreement Amendments During Fiscal 2009, Mr.
Murphys base salary was increased by $75,000, effective with the commencement of fiscal 2010 in
connection with his new title as the President of the Company. No other changes were made to the
salaries of the executive officers in fiscal 2010.
Accordingly, at the end of fiscal 2010, the base salaries of the top three executives were as
follows:
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Executive:
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Base Salary:
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Mr. Puzder
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$
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1,070,000
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Mr. Murphy
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$
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636,750
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Mr. Abajian
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$
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454,750
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The base salary for Mr. Haley remained at $350,000 in accordance with the terms of his
Employment Agreement. Any changes to his base salary are made in the sole discretion of Mr. Puzder
in accordance with the terms of Mr. Haleys Employment Agreement.
In addition, the Company entered into an Employment Agreement with Mr. Starke at the beginning
of fiscal 2010. Pursuant to the terms of the Employment Agreement, Mr. Starke receives an annual
base salary of $275,000. Any changes to his base salary are made in the sole discretion of Mr.
Puzder in accordance with the terms of Mr. Starkes Employment Agreement.
Annual Cash Bonus
The Compensation Committee has believed, and currently believes, that an important element of
the executives cash compensation should be a cash bonus, but that this bonus should be based on
the achievement of planned performance targets. The Committee also believes that, if the
performance criteria is met, the cash bonus should be meaningful and one that the executive will
work hard to earn. Similarly, it should be a bonus that, if earned, means that the stockholders
are also seeing their value increased.
12
Based on these beliefs, effective for fiscal 2005, the Employment Agreements with each of
Messrs. Puzder, Murphy and Abajian were structured to provide for an annual cash bonus based on
performance. In this regard, these Employment Agreements provide as follows:
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For each fiscal year, the Compensation Committee approves, at the beginning of the year,
a target income. Generally, the target income is the Income before taxes,
discontinued operations and the cumulative effect of
accounting charge for goodwill reflected in the annual budget for that fiscal year, as
approved by the Board. In developing this annual budget each year, the Board normally
expects realistically achievable improvement over the prior year.
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Upon completion of the fiscal year, the actual income for the year is compared to the
target income.
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If the actual income has the following percentage relativity to the target income,
the indicated bonus amount will be earned:
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Relativity:
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Bonus Amount:
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Under 80%
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0
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Between 80% and 100%
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A percentage of base salary on a sliding scale
beginning at 50% and sliding to 100%
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Between 100% and 120%
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A percentage of base salary on a sliding scale
beginning at 100% and sliding to a maximum of 250%
of base salary for Mr. Puzder, 220% of base salary
for Mr. Murphy and 200% of base salary for Mr.
Abajian.
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Greater than 120%
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A maximum of 250% of base salary for Mr. Puzder,
220% of base salary for Mr. Murphy and 200% of base
salary for Mr. Abajian.
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As described under the above heading Salary, at the beginning of fiscal 2009, the
Compensation Committee conducted an annual review and analysis of the compensation packages for
each of Messrs. Puzder, Murphy and Abajian. As part of this review, the Compensation Committee
requested that Mr. Richard provide to the Committee an analysis of the above bonus formula and any
recommendations which he may have with respect to the bonus formula. Based on Mr. Richards
analysis, he recommended that there be no change to the bonus formula, or the amount of the bonus
to be earned. The Compensation Committee accepted the recommendation of Mr. Richard, and no change
was made to the bonus formula at that time. Similarly, no changes were made to the bonus formula
for fiscal 2010.
As described above under the heading Employment Agreement Amendments During Fiscal 2009, the
above bonus formula was modified to exclude from such formula any credit or charge associated with
marking to market the Companys interest rate swap agreement derivatives. Upon completion of
fiscal 2010, it was determined that a net charge of $6,803,000 was
required to be excluded from the calculation of actual income in response to this
modification.
In addition, in fiscal 2010, the Board resolved that any transaction costs associated with the
negotiation and execution of the Merger Agreement and related activities should be excluded from
the formula. As a result, there were $823,000 of transaction costs excluded.
Accordingly,
this cash bonus formula, as so modified, was in effect for fiscal
2010. In January 2009, the Board approved a budget for fiscal 2010, which included the
target income for the year. This target income for fiscal 2010 was $57,399,000.
For fiscal 2010, the Company had actual income of $70,803,000 (after giving effect to the
above modifications). This actual income was approximately 123% of the target income.
Accordingly, based upon the above formula, the performance bonuses paid to Messrs. Puzder, Murphy
and Abajian were as follows:
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Executive (Base Salary):
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Amount:
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Mr. Puzder ($1,070,000)
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$
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2,675,000
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Mr. Murphy ($636,750)
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$
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1,400,850
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Mr. Abajian ($454,750)
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$
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909,500
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The Employment Agreement with each of Messrs. Haley and Starke provides that each annual cash
bonus will be at the discretion of Mr. Puzder. While Mr. Puzder does establish certain performance
criteria for each of these executives and assess performance with respect to those criteria as a
factor when determining the bonus to be paid to the executives, the bonus awards are ultimately
discretionary in nature. Based on Mr. Puzders recommendation, for fiscal 2010, Mr. Haley was paid
a discretionary bonus of $300,000 and Mr. Starke was paid a discretionary bonus of $325,000.
13
Equity Incentives
During the first half of fiscal 2007, outside investment banking advisors suggested to the
Compensation Committee that the Companys executive team may be vulnerable to outside poaching
because of their insubstantial equity interest in the Company. Because the executive team had
become a very valuable asset of the Company, the Compensation Committee asked Mr. Richard to
analyze this threat.
Mr. Richard undertook, as part of his analysis of the total compensation packages of Messrs.
Puzder, Murphy and Abajian during fiscal 2007, an in-depth review of the retention effectiveness of
the Companys equity participation program at that time. In this regard, among other things, Mr.
Richard reviewed (i) the historic equity awards to these executives, (ii) the equity programs of
the peer company study group, (iii) surveys and research reports regarding compensation trends,
(iv) the performance of these executives over the past several fiscal years, and (v) the
stockholder value created during the Companys management by these executives. In addition, Mr.
Richard interviewed persons from the financial markets regarding both the marketability of these
executives and the impact on equity trends due to the significant activity of private equity funds
in the financial markets.
Based on Mr. Richards review and analysis, he concluded that CKE is highly vulnerable in not
providing sufficient retention effectiveness in its long-term incentive/equity participation
program. This is occurring at a time when demand for top talent is very high. Mr. Richard also
noted the remarkable success that the Company and this management team have achieved over the past
five years, with supporting data and commentary from research analysts.
Based on this conclusion, Mr. Richard recommended to the Compensation Committee in August 2006
that (i) substantially more equity participation was needed for Messrs. Puzder, Murphy and Abajian,
(ii) the form of equity participation should be full-value shares in the form of restricted
share awards, and (iii) substantially all of this participation should be performance based. In
this regard, Mr. Richard specifically recommended that 300,000 restricted shares should be awarded
to Mr. Puzder in each of fiscals 2007, 2008, 2009, 2010 and 2011 (for a total of 1,500,000 shares),
and 75,000 restricted shares should be awarded to both Mr. Murphy and Mr. Abajian in each of these
same fiscal years (for a total of 375,000 shares each). In both cases, Mr. Richard recommended
that vesting should be approximately 87% performance based after three years from date of award and
13% time based over four to five years.
The Compensation Committee then analyzed Mr. Richards recommendations during the next several
weeks of 2006 in great detail. The Committee, based on its analysis, concluded that the equity
participation program for its top three executives needed to be improved in order to achieve its
retention objectives. Based on input from the executives, the Compensation Committee also
considered a tax gross-up and an extension of existing change in control provisions. However,
the Committee concluded that it was not appropriate at that time to provide for a tax gross-up or
any extension of existing change in control provisions.
The Committees primary focus thus became (i) the number of shares to be awarded, (ii) whether
the awards should be restricted shares, options, and/or other equity based instruments, (iii) the
mix between performance based and time based vesting, (iv) the performance criteria used to
determine the vesting of the awards, (v) the vesting periods over which the awards would vest, and
(vi) whether there should be further restrictions on resale after the awards vested.
After further analysis, the Compensation Committee essentially accepted Mr. Richards
recommendations that (a) the total number of shares to be awarded over the five year time period
should be 300,000 to Mr. Puzder and 75,000 to each of Messrs. Murphy and Abajian, per year, (b) the
shares should be restricted shares, with a $0.00 purchase price, and (c) the vesting mix should be
80% to performance based (to provide maximum incentive and to better align the executives
interests with those of the stockholders) and 20% to time based (a slight variation from Mr.
Richards recommendation to give added reward for the job heretofore done by the executives).
(Note that the mix between performance based shares and time based shares will be altered for
fiscal 2011 as discussed above under the heading Employment Agreement Amendments Effective
Following Completion of Fiscal 2010.) In accepting these recommendations, the Committee believed,
subject to changes in circumstances or other unforeseeable developments, that there will be no
further equity awards to Messrs. Puzder, Murphy and Abajian through fiscal 2011.
The Compensation Committee concluded, however, that, even though they are largely a reward,
the restricted shares with vesting based on time should, nevertheless, have a retention feature.
Accordingly, the award was structured to vest annually over four years, which was one year longer
than the vesting schedule that the Company had previously been using for time-based vesting.
14
For the remaining portion of the restricted shares with vesting based on performance, the
Compensation Committee reviewed the various alternatives that might be used as performance
criteria. After considering several different alternatives, the Committee felt that the Companys
operating income would provide the most meaningful means by which performance could be measured.
However, the Committee also felt that, in order to better measure performance, there should be
excluded from operating income (i) gains or losses on the sale of Company operated restaurants,
(ii) fees and costs associated with the purchase or sale of equities or the borrowing or reducing
of debt, and (iii) expense incurred due to the vesting of the performance shares (the items listed
in (i), (ii) and (iii) are referred to below as the Exclusions). The degree of success required
to vest performance shares was then thoroughly considered. It was the Committees belief that the
degree of success had to be realistically achievable to be a true incentive, but not so easily
achievable that the incentive was lost. To balance these considerations, the Committee settled
upon a formula that, initially, keyed off of the Companys operating income for fiscal 2006.
(Note that the performance criteria used to assess the vesting of performance shares will be
altered beginning in fiscal 2011 as discussed above under the heading Employment Agreement
Amendments Effective Following Completion of Fiscal 2010.)
Using fiscal 2006 as the base year, the Compensation Committee determined a Target Operating
Income for fiscal 2007, which was a percentage improvement over the operating income for fiscal
2006. Using the Target Operating Income for fiscal 2007, the Committee determined a Target
Operating Income for fiscal 2008, which was a percentage improvement over the Target Operating
Income for fiscal 2007. This process of using the prior fiscal years Target Operating Income
as the basis for determining the following fiscal years Target Operating Income, with a
percentage improvement thereof, was repeated through fiscal 2013.
The percentage improvement referred to in the preceding paragraph was derived from analyzing
the immediately preceding three year operating income history of each of the companies in Mr.
Richards peer company study group. An average annual increase in operating income for these three
years was calculated for each peer company in the study group. These averages were then ranked.
The percentage used by the Compensation Committee in determining the percentage improvement of the
year over year Target Operating Income was in approximately the 65th percentile.
To meet the Compensation Committees objectives, Mr. Richard had recommended that the
performance shares should cliff vest three years after their award, if the actual cumulative
operating income for these three years was at least equal to the cumulative Target Operating
Income for these same three years. The Compensation Committee concurred, and this was one of the
means by which the performance shares could vest.
However, because factors beyond the control of the executive officers could affect the
achievement of these performance criteria, the Compensation Committee concluded that there would be
three additional means by which performance shares could vest without diluting the incentive
element of the award:
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For each fiscal year within the three years for which the Companys operating income was
at least equal to the Target Operating Income for such year, one-third of the award would
vest;
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|
|
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An annual partial vesting could occur if, for any fiscal year, the Companys operating
income was between 80% and 100% of the Target Operating Income for such fiscal year (with
50% vesting at 80% achievement, and an additional 2.58% vesting for each percent of
achievement over 80%); and
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|
|
|
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If any of the performance shares did not otherwise vest during the first three years
after the award because the applicable Target Operating Income criteria was not
satisfied, such remaining shares could, nevertheless, vest if the Companys average
percentage increase in operating income over the three years was equal to or greater than
the average percentage increase in operating income for at least eight of the 12 companies
in the peer company study group.
|
In order to more closely tie all of these equity awards (both performance based and time
based) to the interests of the Companys stockholders, the Compensation Committee felt that it was
important to prohibit the executive officers from selling any shares that may vest until after
October 12, 2011, with certain exceptions, the most notable of which is that the executives can
dispose of vested shares for the purpose of satisfying any withholding tax obligations resulting
from the vesting of these shares. (Note that any restricted shares that are granted in fiscal 2010
or 2011 may not be sold until January 30, 2014, with certain exceptions, as discussed above under
the heading Employment Agreement Amendments Effective Following Completion of Fiscal 2010.)
15
The above efforts by the Compensation Committee culminated on October 12, 2006, at which time
each of Messrs. Puzder, Murphy and Abajian entered into an amendment to his respective Employment
Agreement that reflects the terms and provisions described above.
In accordance with the terms of their Employment Agreements, on the last day of fiscal 2010,
Messrs. Puzder, Murphy and Abajian had the following performance shares eligible for vesting if the
applicable performance criteria for fiscal 2010 were met:
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|
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|
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From 10/12/07
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From 10/12/08
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From 10/12/09
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Name:
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Award:
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Award:
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Award:
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|
|
|
|
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|
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|
|
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|
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Mr. Puzder
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80,000
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80,000
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|
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80,000
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Mr. Murphy
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20,000
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|
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20,000
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|
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20,000
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Mr. Abajian
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|
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20,000
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|
|
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20,000
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|
|
|
20,000
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The Compensation Committee analyzed both the financial results of the Company for fiscal 2010
and the criteria necessary to vest the above shares, as described above. For purposes of this
analysis, as provided in the Employment Agreements with each of Messrs. Puzder, Murphy and Abajian,
the Companys Target Operating Income for fiscal 2010 was $102,100,000. The Companys actual
operating income for fiscal 2010, adjusted for the Exclusions, was as follows:
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Operating Income as reflected in the Income Statement
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$
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79,495,000
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Add back expenses incurred relating to performance shares
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2,163,000
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Add back net losses/(gains) on sale of restaurants to franchisees
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(254,000
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)
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Adjusted Operating Income
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$
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81,404,000
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Accordingly, Adjusted Operating Income was 80% of the Target Operating Income.
As discussed above, achieving Adjusted Operating Income at the 80% level results in vesting at
the 50% level, as shown in the table below:
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From 10/12/07
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From 10/12/08
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From 10/12/09
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Name:
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Award:
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Award:
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Award:
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Mr. Puzder
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40,000
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40,000
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40,000
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Mr. Murphy
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10,000
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10,000
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10,000
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Mr. Abajian
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10,000
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10,000
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10,000
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Accordingly, not all of the eligible shares were vested under this method. However, as
discussed above, the eligible shares from the October 12, 2007 award that did not vest were also
eligible for vesting based upon a comparison of the cumulative Target Operating Income for fiscal
2008, 2009 and 2010 to the cumulative Actual Operating Income for each such year as adjusted for
the Exclusions. This comparison is as follows:
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Fiscal:
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Target Operating Income:
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Adjusted Operating Income:
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2008
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$
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89,200,000
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$
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90,546,000
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2009
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95,400,000
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|
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90,268,000
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2010
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102,100,000
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81,404,000
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$
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286,700,000
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$
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262,218,000
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Since the cumulative Adjusted Operating Income did not exceed the cumulative Target Operating
Income, no additional shares were eligible for vesting from the October 12, 2007 award based upon a
comparison of the cumulative Target Operating Income for fiscal 2008, 2009 and 2010 to the
cumulative actual Operating Income for those years.
As
discussed above, the remaining unvested shares from the
October 12, 2007 award could also vest if the Companys average
percentage increase in Operating Income over fiscal 2008, 2009 and 2010 was equal to or greater
than the average percentage increase in operating income for at least eight of the 12 companies in
the peer company study group. The analysis with respect to the satisfaction of this
vesting condition will be completed in fiscal 2011 when the necessary
peer data is available.
16
Equity awards to Messrs. Haley and Starke are based on the recommendation of Mr. Puzder. The
Compensation Committee generally follows Mr. Puzders recommendation in this regard. As with
salary increases, in connection with the completion of a fiscal year, Mr. Puzder applies the
criteria described above under the heading Targeted Overall Compensation in determining the
amount of equity incentives to be awarded to Messrs. Haley and Starke for the fiscal year. In
making this determination, Mr. Puzder also takes into account the amount of equity incentives that
had been previously awarded. Equity incentive awards are only made to Messrs. Haley and Starke
once a year. Based on the foregoing and on the recommendation of Mr. Puzder, for their performance
during fiscal 2010, the Compensation Committee awarded each of Messrs. Haley and Starke 20,000
stock options and 1,750 restricted shares (see the Grants of Plan-Based Awards Table below for a
description of the terms of these awards).
Perquisites
The original Employment Agreement with each of Messrs. Puzder, Murphy and Abajian provides for
the following perquisites:
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Payment of the initiation fee and membership dues of a social or recreational club for
the purpose of maintaining various business relationships on behalf of the Company. Each
of Messrs. Puzder, Murphy and Abajian belong to a club.
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Supplemental disability insurance sufficient to provide two-thirds of his pre-disability
base salary for a two-year period (the Employment Agreements with Messrs. Haley and Starke
also extend this benefit to each).
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Dating back several years, the Companys previous executive officers had been provided
an Executive Medical Reimbursement Plan, which allowed these officers to be reimbursed
for medical expenses not covered by the Companys group health plan. This benefit had been
extended to Messrs. Puzder, Murphy and Abajian (the Employment Agreements with Messrs.
Haley and Starke also extend this benefit to each).
|
Except for what is provided for in their respective Employment Agreements, the named executive
officers have not requested perquisites, and the Compensation Committees general philosophy is to
keep perquisites to a minimum. However, the Company does, consistent with what the Compensation
Committee believes to be usual practices at many other companies (i) pay directly or reimburse for
mobile phones used by the named executive officers, (ii) pay the costs of preparing annually the
income tax returns of Messrs. Puzder, Murphy and Abajian, and (iii) provide for a modest automobile
allowance for each of the named executive officers.
The other perquisite set forth in the Perquisites Table below is for personal use of the
Companys aircraft. Because the Companys executives are required to travel extensively, the
Company has had a long-standing policy that allows family members of senior executives to utilize
any empty seats that may exist on a flight originated for business purposes. From time to time
family members of our named executive officers have utilized these seats. All personal usage is
(i) reported as income to the Internal Revenue Service in accordance with its guidelines, on which
the executive personally pays the income taxes, and (ii) valued in the Perquisites Table below in
accordance with the methodology prescribed by the SEC.
Retirement Benefits
The Company does not have any pension or profit sharing plans to which the Company makes
contributions for the benefit of any of our named executive officers. The Company also has no
other plans or contractual obligations to pay retirement benefits of any type to any named
executive officer.
The Compensation Committee does not presently foresee adopting any such benefits. The absence
of these benefits has been taken into account in determining the elements of the total compensation
packages of the named executive officers.
Severance Benefits/Change In Control
During fiscal 2006, at a time when the Company was well on its way to successfully completing
its turnaround, the named executive officers expressed to the Compensation Committee some concerns
about job security, especially as the term of their respective Employment Agreements approached
expiration. For reasons noted above under the heading Current Compensation Philosophy and
Objectives, the Compensation Committee valued the services of the Companys named
executive officers and, accordingly, engaged Mr. Richard to analyze the means by which the
named executive officers concerns could be most effectively addressed, and to make a
recommendation with respect thereto.
17
After his analysis of the matter, Mr. Richard recommended that the term of the Employment
Agreement for each of the named executive officers be amended to a three-year evergreen, which
means that the named executive officers would have a rolling three-year agreement. After studying
Mr. Richards recommendation and other alternatives, the Compensation Committee adopted Mr.
Richards recommendation, and, effective December 6, 2005, the Employment Agreement with each of
the named executive officers was amended to provide for a rolling three-year evergreen term. As
described under the above heading Employment Agreement Amendments During Fiscal 2009, and below
under the heading Employment Agreements this provision was modified in December 2008.
There is some variation among the named executive officers as to the amount of severance that
is paid if any of the named executive officers is terminated without cause. See the descriptions
of the Employment Agreements for each of the named executive officers below under the heading
Employment Agreements, and the Potential Payments Upon Termination or Change in Control Table
for further details regarding the amount of these severance payments and under what circumstances
they are paid.
Mr. Puzder was, until December 2008, the only named executive officer that had a change in
control provision in the Employment Agreement. At the time that Mr. Puzder was given the
Employment Agreement with this provision in it, the then Chairman of the Board of the Company had
an Employment Agreement with this same provision. Accordingly, the intent at the time was to have
Mr. Puzders change in control provision mirror that of the Chairman. Pursuant to this
provision, if there is a change in control, Mr. Puzder has 12 months after such change within
which to elect to terminate his services and receive his severance and other benefits. See the
Potential Payments Upon Termination or Change in Control Table below for further details regarding
the benefits accruing to Mr. Puzder if he elects to terminate his services within the 12 month
period. In the event that Mr. Puzder incurs an excise tax as a result of a change in control,
the Employment Agreement provides that the Company will reimburse him for the lesser of (i) the
excise tax, or (ii) $1,000,000.
As described under the above heading Employment Agreement Amendments During Fiscal 2009, in
December 2008, the Compensation Committee approved the addition of a change in control provision
to the Employment Agreements of Messrs. Murphy and Abajian. These additions were in conjunction
with other changes being made to these Employment Agreements and were approved by the Compensation
Committee in consultation with Mr. Richard. Pursuant to this change in control provision, each of
Messrs. Murphy and Abajian has 90 days after such change within which to elect to terminate his
services and receive his severance and other benefits. See the Potential Payments Upon Termination
or Change in Control Table below for further details regarding the benefits accruing to Messrs.
Murphy and Abajian if he elects to terminate his services within the 90 day period. Among the
reasons for this addition, the Compensation Committee felt that this would help bring the
Employment Agreements of Messrs. Murphy and Abajian more in line with Mr. Puzders Employment
Agreement.
As discussed under the heading Equity Incentives above, on October 12, 2006, the Employment
Agreements with Messrs. Puzder, Murphy and Abajian were amended to provide, in part, for awards to
each of restricted shares that would vest based solely on achieving specified performance goals
over a three-year period. However, the Compensation Committee recognized that, if there was a
change in control, the underlying set of facts would change, and the performance criteria may,
therefore, no longer be applicable or appropriate. As a result, the Compensation Committee
believed that the appropriate basis for vesting these performance shares should be altered in this
situation if the shares do not otherwise accelerate by reason of the elections described above. In
this regard, the Compensation Committee determined that, if there is a change in control, (i) all
previously awarded performance shares that have not vested as of the change in control will
thereafter vest monthly, in equal amounts, over the balance of their three year performance period,
and (ii) all performance shares which have not yet been awarded will vest monthly, in equal
amounts, over what would have been their three year performance period.
All of the named executive officers receive the benefit of the change in control features of
the Companys three active equity plans, to the extent that they have equity awards under any of
these plans. These change in control features are as follows:
2005 Plan
. The 2005 Plan provides acceleration of all unvested awards (unless the
award agreement provides otherwise) if a Triggering Event occurs within 12 months
following a Change in Control. There are three types of Triggering Events: (1)
involuntary termination of the participants employment by the Company without Cause, (2)
the participants Constructive Termination, which the 2005 Plan defines as the
participants
voluntary termination under specified adverse circumstances or (3) the failure of the
Company (or a successor entity) to assume, replace, convert or otherwise continue any award
in connection with the Change in Control (or another corporate transaction or other change
affecting the Companys common stock).
18
1999 and 2001 Plans
. The 1999 Plan and 2001 Plan provide acceleration of all
unvested equity awards immediately prior to a Change in Control unless the equity awards
are assumed, or there are substituted new equity awards of comparable value covering shares
of a successor corporation. The 1999 Plan expired in March 2009, and, accordingly, no
further awards may be made under the 1999 Plan.
Employee Stock Purchase Plan
In fiscal 1995, the Company adopted an Employee Stock Purchase Plan (ESPP) that is not tax
qualified. This ESPP provides the named executive officers the opportunity to have withheld from
their cash wages, including bonuses, an amount that will be utilized to purchase shares of the
Companys common stock in the open market at the times and in the manner provided for in the ESPP.
For every dollar that the named executive officer has withheld from his wages, the Company will, if
the named executive officer is still employed by the Company one year later, contribute for the
benefit of the named executive officer after the one year 50% of such amount. The Companys
contribution will also be utilized to purchase shares of the Companys common stock in the open
market for the benefit of the named executive officer at the times and in the manner provided for
in the ESPP. The All Other Compensation Table below reflects the amount of contribution that the
Company made for the benefit of each named executive officer under this ESPP during fiscal 2010.
The ESPP was suspended in accordance with the terms of the Merger Agreement.
Deferred Compensation Plan
During fiscal 2006, the Company adopted a Deferred Compensation Plan that allows a named
executive officer to have withheld from his wages, including bonuses, an elective amount, which
would constitute deferred compensation. Under the Deferred Compensation Plan, the Company would
repay this withheld amount, together with the earned income thereon, at a time designated by the
executive (within certain Plan limitations). In the meantime, this deferred amount, and the earned
income thereon, would be a general unsecured obligation of the Company. For any named executive
officer who elected to participate in this Deferred Compensation Plan, there would be no benefit
provided by the Company to any such named executive officer relating to his participation, other
than the administration of the Plan. Any amounts that might be withheld pursuant to this Deferred
Compensation Plan would earn income for the benefit of the named executive officer based upon the
earnings from one of the six investment alternatives selected by the named executive officer.
There is no stated, minimum or guaranteed rate of return that a named executive officer can earn on
his deferred amount. The Compensation Committee recommended that this Deferred Compensation Plan
be adopted to provide the named executive officers added flexibility in their retirement planning.
However, because of the low participation in this Plan, during fiscal 2009 the Board of Directors
approved the termination of this Plan, which was terminated on December 31, 2008.
Employment Agreements
Andrew F. Puzder
. The Company and Mr. Puzder are parties to a three-year Employment Agreement
that commenced as of the beginning of fiscal 2005, pursuant to which Mr. Puzder currently serves as
the Companys Chief Executive Officer. Prior to January 27, 2009, Mr. Puzder also served as the
Companys President. Mr. Puzders Employment Agreement was amended effective December 6, 2005 to
provide for automatic renewal on a daily basis so that the outstanding term on Mr. Puzders
employment is always three years, until notice of non-renewal or termination of the Employment
Agreement is given by either party to the other. Mr. Puzders Employment Agreement was further
amended effective December 16, 2008 to provide that such automatic and continuous three-year
renewal feature will terminate on July 11, 2012, at which time the outstanding term on Mr. Puzders
employment shall convert to a remaining three (3) year term ending on July 11, 2015. Mr. Puzders
Employment Agreement was again amended on January 28, 2010 as discussed above under the heading
Employment Agreement Amendments During Fiscal 2010.
On October 12, 2006, Mr. Puzders Employment Agreement was amended to increase his annual base
salary to $1,000,000, retroactive to August 14, 2006, which base salary is subject to periodic
increases at the discretion of the Compensation Committee of the Board of Directors. Effective
February 1, 2007, Mr. Puzders annual base salary was increased to $1,070,000. The Employment
Agreement, as amended, also provides for annual cash bonuses through fiscal 2011. For each fiscal
year, Mr. Puzders annual bonus is calculated by first determining the difference between the
Companys target annual income, as determined by Mr. Puzder and the Compensation Committee prior to
the commencement of the fiscal year, and its actual annual income, both as defined in the
Employment Agreement. If actual
income is less than 80% of target income, Mr. Puzder shall receive no bonus. If actual income
is 80% of target income, Mr. Puzder shall receive a bonus equal to 50% of his then current annual
base salary. If actual income is greater than 80%, but less than 120%, of target income, Mr.
Puzder shall receive a bonus calculated pursuant to a formula as described above under the heading
Annual Bonus. If actual income is 120% or greater of target income, Mr. Puzder shall receive a
bonus equal to 250% of his then current annual base salary.
19
On October 12, 2006, the Employment Agreement was amended to provide for grants of restricted
shares as follows: (i) a grant of 60,000 restricted shares on October 12, 2006, and the Companys
agreement to grant 60,000 additional restricted shares on October 12 of each of 2007, 2008, 2009
and 2010 (for a total of 300,000 restricted shares), which shares vest in four equal annual
installments commencing one year from the date of grant, and (ii) a grant of 240,000 restricted
shares on October 12, 2006, and the Companys agreement to grant 240,000 additional restricted
shares on October 12 of each of 2007, 2008, 2009 and 2010 (for a total of 1,200,000 restricted
shares), which shares shall only vest if certain performance criteria are satisfied, as set forth
in the Employment Agreement. The allocation of the restricted shares referenced above between
performance based shares and time based shares, and the vesting criteria for the performance
shares, have been modified as discussed above under the heading Employment Agreement Amendments
During Fiscal 2010.
The Employment Agreement can be terminated by the Company for cause as defined in the
Employment Agreement. In the event the Company terminates Mr. Puzders employment without cause,
or Mr. Puzder terminates his employment with the Company for good reason, or in the event of a
change in control of the Company resulting in Mr. Puzders termination, each as defined in the
Employment Agreement, the Company will be obligated to pay a lump sum consisting of (a) Mr.
Puzders minimum annual base salary then in effect multiplied by the number three, plus (b) an
amount equal to 100% of Mr. Puzders minimum annual base salary then in effect multiplied by the
number three. In addition, in the event that the Company terminates Mr. Puzders employment
without cause, or Mr. Puzder terminates his employment with the Company for good reason or in the
event of a change in control of the Company resulting in Mr. Puzders termination, all restricted
stock awards, restricted stock unit awards and other forms of equity compensation awards granted
which have not vested as of the date of termination shall vest immediately, and all restricted
shares which the Company has agreed to grant after the date of such termination shall be granted as
of the date of the termination and shall vest immediately to the maximum extent possible consistent
with limitations imposed under the Companys equity plans. Some circumstances will require that
such payments and grant of restricted shares to Mr. Puzder in the event the Company terminates Mr.
Puzders employment without cause, or Mr. Puzder terminates his employment with the Company for
good reason or in the event of a change in control of the Company resulting in Mr. Puzders
termination, as described above, be made no earlier than six (6) months following Mr. Puzders
termination of employment, as required by Section 409A of the Code. Additionally, the Company
shall maintain, until December 31 of the second calendar year following the calendar year in which
such termination occurred, all those employee benefit plans and programs in which Mr. Puzder was
entitled to participate immediately prior to the date of termination which are exempt from the term
nonqualified deferred compensation plan under Section 409A of the Code. In the event of his
death, Mr. Puzders legal representatives will receive the minimum annual base salary for the
remainder of the term, and all unvested options will immediately vest and be exercisable for 90
days from Mr. Puzders death.
E. Michael Murphy
. In January 2004, the Company entered into a three-year Employment
Agreement with E. Michael Murphy to serve as Executive Vice President, General Counsel and
Secretary of the Company. Effective January 27, 2009, Mr. Murphys Employment Agreement was
amended to change his position to President, Chief Legal Officer and Secretary of the Company, and
to increase his annual base salary to $636,750, which base salary is subject to periodic increases
at the discretion of the Compensation Committee of the Board of Directors. Mr. Murphys Employment
Agreement was amended effective December 6, 2005 to provide for automatic renewal on a daily basis
so that the outstanding term on Mr. Murphys employment is always three years, until notice of
non-renewal or termination of the Employment Agreement is given by either party to the other. Mr.
Murphys Employment Agreement was further amended effective December 16, 2008 to provide that such
automatic and continuous three-year renewal feature will terminate on July 11, 2012, at which time
the outstanding term on Mr. Murphys employment shall convert to a remaining three (3) year term
ending on July 11, 2015. Mr. Murphys Employment Agreement was again amended on January 28, 2010
as discussed above under the heading Employment Agreement Amendments During Fiscal 2010.
Mr. Murphys Employment Agreement, as amended, provides for annual cash bonuses through fiscal
2011. For each fiscal year, Mr. Murphys annual bonus is calculated by first determining the
difference between the Companys target annual income, as determined by the Compensation Committee
prior to the commencement of the fiscal year, and its actual income, both as defined in the
Employment Agreement. If actual income is less than 80% of target income, Mr. Murphy shall receive
no bonus. If actual income is 80% of target income, Mr. Murphy shall receive a bonus equal to 50%
of his then
current annual base salary. If actual income is greater than 80%, but less than 120%, of
target income, Mr. Murphy shall receive a bonus calculated pursuant to a formula as described under
the above heading Annual Bonus. If actual income is 120% or greater of target income, Mr. Murphy
shall receive a bonus equal to 220% of his then current annual base salary.
20
On October 12, 2006, the Employment Agreement was amended to provide for grants of restricted
shares as follows: (i) a grant of 15,000 restricted shares on October 12, 2006, and the Companys
agreement to grant 15,000 additional restricted shares on October 12 of each of 2007, 2008, 2009
and 2010 (for a total of 75,000 restricted shares), which shares vest in four equal annual
installments commencing one year from the date of grant, and (ii) a grant of 60,000 restricted
shares on October 12, 2006, and the Companys agreement to grant 60,000 additional restricted
shares on October 12 of each of 2007, 2008, 2009 and 2010 (for a total of 300,000 restricted
shares), which shares shall only vest if certain performance criteria are satisfied, as set forth
in the Employment Agreement. The allocation of the restricted shares referenced above between
performance based shares and time based shares, and the vesting criteria for the performance
shares, have been modified as discussed above under the heading Employment Agreement Amendments
During Fiscal 2010.
The Employment Agreement can be terminated by the Company for cause as defined in the
Employment Agreement. In the event the Company terminates Mr. Murphys employment without cause,
or Mr. Murphy terminates his employment with the Company for good reason, or in the event of a
change in control of the Company resulting in Mr. Murphys termination, each as defined in the
Employment Agreement, the Company will be obligated to pay a lump sum consisting of (a) Mr.
Murphys minimum annual base salary then in effect times the number three, plus (b) a pro rata
portion of the bonus for the year in which the termination occurs. In addition, in the event that
the Company terminates Mr. Murphys employment without cause, or Mr. Murphy terminates his
employment with the Company for good reason or in the event of a change in control of the Company
resulting in Mr. Murphys termination, all restricted stock awards, restricted stock unit awards
and other forms of equity compensation awards granted which have not vested as of the date of
termination shall vest immediately, and all restricted shares which the Company has agreed to grant
after the date of such termination shall be granted as of the date of termination and shall vest
immediately to the maximum extent possible consistent with limitations imposed under the Companys
equity plans. Some circumstances will require that such payments and grant of restricted shares to
Mr. Murphy in the event the Company terminates Mr. Murphys employment without cause, or Mr. Murphy
terminates his employment with the Company for good reason or in the event of a change in control
of the Company resulting in Mr. Murphys termination, as described above, be made no earlier than
six (6) months following Mr. Murphys termination of employment, as required by Section 409A of the
Code. Additionally, the Company shall maintain, until December 31 of the second calendar year
following the calendar year in which the termination occurred, all those employee benefit plans and
programs in which Mr. Murphy was entitled to participate immediately prior to the date of
termination which are exempt from the term nonqualified deferred compensation plan under Section
409A of the Code. In the event of his death, Mr. Murphys legal representatives will receive the
minimum annual base salary for the remainder of the term, and all unvested options will immediately
vest and be exercisable for 90 days from Mr. Murphys death.
Theodore Abajian
. In January 2004, the Company entered into a three-year Employment Agreement
with Theodore Abajian to serve as Executive Vice President and Chief Financial Officer of the
Company. Mr. Abajians Employment Agreement was amended effective December 6, 2005 to provide for
automatic renewal on a daily basis so that the outstanding term on Mr. Abajians employment is
always three years, until notice of non-renewal or termination of the Employment Agreement is given
by either party to the other. Mr. Abajians Employment Agreement was further amended effective
December 16, 2008 to provide that such automatic and continuous three-year renewal feature will
terminate on July 11, 2012, at which time the outstanding term on Mr. Abajians employment shall
convert to a remaining three (3) year term ending on July 11, 2015. Mr. Abajians Employment
Agreement was again amended on January 28, 2010 as discussed above under the heading Employment
Agreement Amendments During Fiscal 2010.
On October 12, 2006, Mr. Abajians Employment Agreement was amended to increase his annual
base salary to $425,000, retroactive to August 14, 2006, which base salary is subject to periodic
increases at the discretion of the Compensation Committee. Effective February 1, 2007, Mr.
Abajians annual base salary was increased to $454,750.
Mr. Abajians Employment Agreement, as amended, also provides for annual cash bonuses through
fiscal 2011. For each fiscal year, Mr. Abajians annual bonus is calculated by first determining
the difference between the Companys target annual income, as determined by Mr. Abajian and the
Compensation Committee prior to the commencement of each such fiscal year, and its actual income,
both as defined in the Employment Agreement. If actual income is less than 80% of target income,
Mr. Abajian shall receive no bonus. If actual income is 80% of target income, Mr. Abajian shall
receive a bonus equal to 50% of his then current annual base salary. If actual income is greater
than 80%, but less than 120%, of target income, Mr. Abajian shall receive a bonus calculated
pursuant to a formula as described under the above heading Annual
Bonus. If actual income is 120% or greater of target income, Mr. Abajian shall receive a
bonus equal to 200% of his then current annual base salary.
21
On October 12, 2006, the Employment Agreement was amended to provide for grants of restricted
shares as follows: (i) a grant of 15,000 restricted shares on October 12, 2006, and the Companys
agreement to grant 15,000 additional restricted shares on October 12 of each of 2007, 2008, 2009
and 2010 (for a total of 75,000 restricted shares), which shares vest in four equal annual
installments commencing one year from the date of grant, and (ii) a grant of 60,000 restricted
shares on October 12, 2006, and the Companys agreement to grant 60,000 additional restricted
shares on October 12 of each of 2007, 2008, 2009 and 2010 (for a total of 300,000 restricted
shares), which shares shall only vest if certain performance criteria are satisfied, as set forth
in the Employment Agreement. The allocation of the restricted shares referenced above between
performance based shares and time based shares, and the vesting criteria for the performance
shares, have been modified as discussed above under the heading Employment Agreement Amendments
During Fiscal 2010.
The Employment Agreement can be terminated by the Company for cause as defined in the
Employment Agreement. In the event the Company terminates Mr. Abajians employment without cause,
or Mr. Abajian terminates his employment with the Company for good reason, or in the event of a
change in control of the Company resulting in Mr. Abajians termination, each as defined in the
Employment Agreement, the Company will be obligated to pay a lump sum consisting of (a) Mr.
Abajians minimum annual base salary then in effect times the number three, plus (b) a pro rata
portion of the bonus for the year in which the termination occurs. In addition, in the event that
the Company terminates Mr. Abajians employment without cause or Mr. Abajian terminates his
employment with the Company for good reason or in the event of a change in control of the Company
resulting in Mr. Abajians termination, all restricted stock awards, restricted stock unit awards
and other forms of equity compensation awards granted which have not vested as of the date of
termination shall vest immediately, and all restricted shares which the Company has agreed to grant
after the date of such termination shall be granted as of the date of termination and shall vest
immediately to the maximum extent possible consistent with limitations imposed under the Companys
equity plans. Some circumstances will require that such payments and grant of restricted shares to
Mr. Abajian in the event the Company terminates Mr. Abajians employment without cause, or Mr.
Abajian terminates his employment with the Company for good reason or in the event of a change in
control of the Company resulting in Mr. Abajians termination, as described above, be made no
earlier than six (6) months following Mr. Abajians termination of employment, as required by
Section 409A of the Code. Additionally, the Company shall maintain, until December 31 of the
second calendar year following the calendar year in which the termination occurred, all those
employee benefit plans and programs in which Mr. Abajian was entitled to participate immediately
prior to the date of termination which are exempt from the term nonqualified deferred compensation
plan under Section 409A of the Code. In the event of his death, Mr. Abajians legal
representatives will receive the minimum annual base salary for the remainder of the term, and all
unvested options will immediately vest and be exercisable for 90 days from Mr. Abajians death.
Bradford R. Haley
. In January 2004, the Company entered into a three-year Employment
Agreement with Bradford R. Haley to serve as Executive Vice President, Marketing of the Company.
Mr. Haleys Employment Agreement was amended effective December 6, 2005 to provide for automatic
renewal on a daily basis so that the outstanding term on Mr. Haleys employment is always three
years, until notice of non-renewal or termination of the Employment Agreement is given by either
party to the other. Mr. Haleys Employment Agreement was further amended effective December 16,
2008 to provide that such automatic and continuous three-year renewal feature will terminate on
July 11, 2012, at which time the outstanding term on Mr. Haleys employment shall convert to a
remaining three (3) year term ending on July 11, 2015. Mr. Haleys Employment Agreement was again
amended on January 28, 2010 as discussed above under the heading Employment Agreement Amendments
During Fiscal 2010.
Mr. Haleys current annual base salary under the Employment Agreement is $350,012. Mr.
Haleys Employment Agreement, as amended, also provides for annual cash bonuses through fiscal
2011, in amounts determined by the Chief Executive Officer, in his sole discretion.
The Employment Agreement can be terminated by the Company for cause as defined in the
Employment Agreement. In the event the Company terminates Mr. Haleys employment without cause,
(i) the Company will be obligated to pay a lump sum consisting of Mr. Haleys minimum annual base
salary then in effect times the number of years (including partial years) remaining in the term of
the Employment Agreement, (ii) all options granted which have not vested as of the date of
termination shall vest immediately, and (iii) the Company shall maintain, until December 31 of the
second calendar year following the calendar year in which the termination occurred, all employee
benefit plans and programs in which Mr. Haley was entitled to participate immediately prior to the
date of termination which are exempt from the term nonqualified deferred compensation plan under
Section 409A of the Code. In the event of his death, Mr. Haleys legal representatives
will receive the minimum annual base salary for the remainder of the term, and all unvested
options will immediately vest and be exercisable for 90 days from Mr. Haleys death.
22
Robert J. Starke
. In January 2010, the Company entered into a three-year Employment Agreement
with Robert J. Starke to serve as Executive Vice President of Operations, Hardees Operations. Mr.
Starkes Employment Agreement provides for an automatic and continuous three-year renewal feature
until July 11, 2012, at which time the renewal feature will terminate and the outstanding term on
Mr. Starkes employment shall convert to a three (3) year term ending on July 11, 2015. Mr.
Starkes Employment Agreement was amended on January 28, 2010 as discussed above under the heading
Employment Agreement Amendments During Fiscal 2010.
Mr. Starkes current annual base salary under the Employment Agreement is $275,000. Mr.
Starkes Employment Agreement, as amended, also provides for annual cash bonuses through the fiscal
2011, in amounts determined by the Chief Executive Officer, in his sole discretion.
The Employment Agreement can be terminated by the Company for cause as defined in the
Employment Agreement. In the event the Company terminates Mr. Starkes employment without cause,
(i) the Company will be obligated to pay a lump sum consisting of Mr. Starkes minimum annual base
salary then in effect times the number of years (including partial years) remaining in the term of
the Employment Agreement, (ii) all options granted which have not vested as of the date of
termination shall vest immediately, and (iii) the Company shall maintain, until December 31 of the
second calendar year following the calendar year in which the termination occurred, all employee
benefit plans and programs in which Mr. Starke was entitled to participate immediately prior to the
date of termination which are exempt from the term nonqualified deferred compensation plan under
Section 409A of the Code. In the event of his death, Mr. Starkes legal representatives will
receive the minimum annual base salary for the remainder of the term, and all unvested options will
immediately vest and be exercisable for 90 days from Mr. Starkes death.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code generally limits to $1,000,000 the corporate
deduction for compensation paid to certain executive officers, unless certain requirements are met.
The Companys policy with respect to the deductibility limit of Section 162(m) generally is to
preserve the federal income tax deductibility of compensation paid to executive officers. However,
while the tax impact of any compensation arrangement is an important factor to be considered, the
impact is evaluated in light of the Companys overall compensation philosophy. Accordingly, the
Company will authorize the payment of non-deductible compensation if it deems that it is consistent
with its compensation philosophy and objectives and in the best interests of the Company and its
stockholders. In this regard, although the Company believes that a substantial portion of the
equity awards to Messrs. Puzder, Murphy and Abajian that have vesting based on performance, as
described under the heading Equity Incentives above, will be deductible if the performance
criteria are met, the Compensation Committee is aware that the remaining elements of the
compensation packages for these executives in excess of $1,000,000 per calendar year may not be
deductible.
The Company accounts for equity awards in accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 718, and the accounting treatment of the
various types of compensation awarded to named executive officers is reviewed by the Compensation
Committee in making compensation decisions.
Compensation Committee Interlocks and Insider Participation
In fiscal 2010, Peter Churm (Chairman), Frank P. Willey, and Janet E. Kerr served as members
of our Compensation Committee. During fiscal 2010, no member of our Compensation Committee was an
officer or employee, or a former employee, of the Company. During fiscal 2010, none of our
executive officers (i) served as a member of the compensation committee of another entity, one of
whose executive officers served on our Compensation Committee, (ii) served as a director of another
entity, one of whose executive officers served on our Compensation Committee, or (iii) served as a
member of the compensation committee of another entity, one of whose executive officers served as
one of our directors.
23
REPORT OF THE COMPENSATION COMMITTEE
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
required by Item 402(b) of Regulation S-K with management and, based on such review and
discussions, the Compensation Committee recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
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Dated: May 25, 2010
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COMPENSATION COMMITTEE
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Peter Churm (Chairman)
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Janet E. Kerr
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Frank P. Willey
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The report of the Compensation Committee of the Board of Directors shall not be deemed
incorporated by reference by any general statement incorporating by reference this
Form 10-K/A
into
any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed filed under such Acts.
SUMMARY COMPENSATION TABLE
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Change in
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Pension Value
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and
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Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Fiscal
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name and Principal
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Year
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($)
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($)
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($)
(1)
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($)
(1)
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($)
(2)
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($)
(3)
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($)
(4)
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($)
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Andrew F. Puzder
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2010
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1,070,000
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3,192,000
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2,675,000
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351,188
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7,288,188
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Chief Executive Officer
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2009
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1,070,000
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2,784,000
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1,289,853
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519,927
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5,663,780
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2008
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1,068,387
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535,000
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4,839,000
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380,137
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6,822,524
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E. Michael Murphy
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2010
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636,750
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798,000
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1,400,850
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102,990
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2,938,590
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President, Chief Legal Officer and
Secretary
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2009
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561,750
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696,000
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638,699
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171,311
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2,067,760
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2008
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560,905
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280,875
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1,209,750
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99,064
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2,150,594
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Theodore Abajian
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2010
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454,750
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798,000
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909,500
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138,701
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2,300,951
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Executive Vice President and
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2009
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454,750
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696,000
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517,042
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168,722
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1,836,514
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Chief Financial Officer
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2008
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454,064
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227,375
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1,209,750
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140,299
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2,031,488
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Bradford R. Haley
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2010
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350,012
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300,000
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(5)
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14,088
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59,600
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43,041
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766,741
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Executive Vice President,
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2009
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350,012
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250,000
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14,980
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79,000
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46,080
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740,072
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Marketing
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2008
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344,950
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100,000
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19,845
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99,600
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36,585
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600,980
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Robert J. Starke
(6)
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2010
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275,000
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325,000
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(7)
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14,088
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|
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59,600
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|
|
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|
|
|
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32,014
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|
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705,702
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Executive Vice President,
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|
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2009
|
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|
|
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|
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|
|
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|
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|
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|
|
|
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|
Hardees Operations
|
|
|
2008
|
|
|
|
|
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|
|
|
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|
|
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(1)
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The amounts set forth in this column reflect the full grant date fair value of the awards
calculated in accordance with FASB ASC Topic 718. In accordance with SEC rules, for awards
that are subject to performance conditions, the amounts reflect the full grant date fair value
of the awards based upon the probable outcome of the performance conditions. Certain
assumptions used in the calculation of the amounts are included in Note 16 of our Notes to
Consolidated Financial Statements for the fiscal year ended
January 25, 2010 included in Item 8.
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(2)
|
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The amounts set forth in this column represent the dollar amount of the non-equity incentive
compensation earned by each of our named executive officers. See the Compensation Discussion
and Analysis section of this Form 10-K/A for additional information.
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(3)
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We do not sponsor any pension plans on behalf of our named executive officers or other
management personnel. In addition, none of our named executive officers have realized any
above-market earnings on nonqualified deferred compensation.
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(4)
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The amounts set forth in this column represent the dollar amount of compensation earned by
each of our named executive officers which is not reported in any of the columns of this
Summary Compensation Table to the left of this
column. See the All Other Compensation Table below for additional information about the amounts
disclosed in this column for fiscal 2010.
|
24
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(5)
|
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This amount represents the discretionary bonus paid to Mr. Haley for fiscal 2010. Because
the amount of the award was subject to the discretion of our Chief Executive Officer, it has
been disclosed as a discretionary bonus rather than a non-equity incentive plan award.
|
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(6)
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Mr. Starke was not a named executive officer for fiscal 2009 or 2008. In accordance with SEC
rules, the compensation earned by Mr. Starke for fiscal 2009 and 2008 has been excluded from
this Summary Compensation Table.
|
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(7)
|
|
This amount represents the discretionary bonus paid to Mr. Starke for fiscal 2010. Because
the amount of the award was subject to the discretion of our Chief Executive Officer, it has
been disclosed as a discretionary bonus rather than a non-equity incentive plan award.
|
ALL OTHER COMPENSATION TABLE
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Company
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|
|
|
|
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|
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Matching
|
|
|
Dividends on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance
|
|
|
Contributions to
|
|
|
Outstanding
|
|
|
|
|
|
|
Perquisites
|
|
|
Trip Awards
|
|
|
Premiums
|
|
|
ESPP
|
|
|
Stock Awards
|
|
|
Total
|
|
Name
|
|
($)
(1)
|
|
|
($)
|
|
|
($)
(2)
|
|
|
($)
(3)
|
|
|
($)
(4)
|
|
|
($)
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew F. Puzder
|
|
|
87,735
|
|
|
|
|
|
|
|
19,832
|
|
|
|
120,375
|
|
|
|
123,246
|
|
|
|
351,188
|
|
E. Michael Murphy
|
|
|
41,693
|
|
|
|
3,729
|
|
|
|
19,737
|
|
|
|
7,022
|
|
|
|
30,809
|
|
|
|
102,990
|
|
Theodore Abajian
|
|
|
38,650
|
|
|
|
|
|
|
|
18,083
|
|
|
|
51,159
|
|
|
|
30,809
|
|
|
|
138,701
|
|
Bradford R. Haley
|
|
|
15,863
|
|
|
|
3,177
|
|
|
|
17,138
|
|
|
|
6,058
|
|
|
|
805
|
|
|
|
43,041
|
|
Robert J. Starke
|
|
|
16,214
|
|
|
|
3,224
|
|
|
|
11,816
|
|
|
|
|
|
|
|
760
|
|
|
|
32,014
|
|
|
|
|
(1)
|
|
The amounts set forth in this column represent the aggregate dollar amount of perquisites
earned by each of our named executive officers in fiscal 2010. The determinations of the
particular payments that qualify as perquisites were made in accordance with SEC rules.
See the Perquisites Table below for a more detailed explanation of the various perquisites
earned by each of our named executive officers, which comprise the aggregate amounts disclosed
in this column.
|
|
(2)
|
|
The amounts set forth in this column represent our contributions for premiums for group life,
medical, dental, vision and long-term disability insurance for each of our named executive
officers in fiscal 2010.
|
|
(3)
|
|
The amounts set forth in this column represent the dollar amount of our contributions to each
of our named executive officers under our ESPP during fiscal 2010. Additional information
regarding our ESPP is set forth in the Compensation Discussion and Analysis section of this
Form 10-K/A.
|
|
(4)
|
|
The amounts set forth in this column represent the dollar value of dividends paid on unvested
stock awards during fiscal 2010.
|
|
(5)
|
|
The amounts set forth in this column represent the sum of each of the columns to the left of
this column and are equivalent to the amounts set forth in the All Other Compensation column
of the Summary Compensation Table above.
|
PERQUISITES TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of
|
|
|
Reimbursements
|
|
|
Tax/Financial
|
|
|
Club
|
|
|
|
|
|
|
Car
|
|
|
Wireless
|
|
|
Company
|
|
|
for Medical and
|
|
|
Planning
|
|
|
Memberships
|
|
|
Total
|
|
|
|
Allowance
|
|
|
Payments
|
|
|
Aircraft
|
|
|
Dental Costs
|
|
|
Assistance
|
|
|
and Dues
|
|
|
Perquisites
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew F. Puzder
|
|
|
9,960
|
|
|
|
3,167
|
|
|
|
32,104
|
|
|
|
28,917
|
|
|
|
11,400
|
|
|
|
2,187
|
|
|
|
87,735
|
|
E. Michael Murphy
|
|
|
9,960
|
|
|
|
3,268
|
|
|
|
11,389
|
|
|
|
11,387
|
|
|
|
2,015
|
|
|
|
3,674
|
|
|
|
41,693
|
|
Theodore Abajian
|
|
|
6,448
|
|
|
|
2,136
|
|
|
|
1,017
|
|
|
|
21,374
|
|
|
|
99
|
|
|
|
7,576
|
|
|
|
38,650
|
|
Bradford R. Haley
|
|
|
4,287
|
|
|
|
2,404
|
|
|
|
3,924
|
|
|
|
5,248
|
|
|
|
|
|
|
|
|
|
|
|
15,863
|
|
Robert J. Starke
|
|
|
361
|
|
|
|
5,258
|
|
|
|
|
|
|
|
10,595
|
|
|
|
|
|
|
|
|
|
|
|
16,214
|
|
|
|
|
(1)
|
|
The amounts set forth in this column represent the incremental cost to us from the personal
use of our aircraft by each of our named executive officers, and were calculated in accordance
with SEC rules.
|
|
(2)
|
|
The amounts set forth in this column for each of our named executive officers represent the
sum of each of the columns to the left of this column and are equivalent to the amounts set
forth in the Perquisites column of the All Other Compensation Table above.
|
25
GRANTS OF PLAN BASED AWARDS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
All Other
|
|
|
|
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
or Base
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan
|
|
|
Estimated Future Payouts Under
|
|
|
Securities
|
|
|
Securities
|
|
|
Price of
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
Awards
(1)
|
|
|
Equity Incentive Plan Awards
(2)
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
|
|
Grant
|
|
|
Approval
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Options
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
Name
|
|
Date
|
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
(3)
|
|
|
(#)
(4)
|
|
|
($/Sh)
(5)
|
|
|
($)
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew F. Puzder
|
|
|
|
|
|
|
|
|
|
|
535,000
|
|
|
|
1,070,000
|
|
|
|
2,675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
240,000
|
|
|
|
240,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/12/09
|
|
|
|
10/12/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
638,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Michael Murphy
|
|
|
|
|
|
|
|
|
|
|
318,375
|
|
|
|
636,750
|
|
|
|
1,400,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/12/09
|
|
|
|
10/12/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
159,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theodore Abajian
|
|
|
|
|
|
|
|
|
|
|
227,375
|
|
|
|
454,750
|
|
|
|
909,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/12/09
|
|
|
|
10/12/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
159,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford R. Haley
|
|
|
01/08/10
|
|
|
|
01/08/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
|
|
|
20,000
|
|
|
|
8.07
|
|
|
|
73,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Starke
|
|
|
01/08/10
|
|
|
|
01/08/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
|
|
|
20,000
|
|
|
|
8.07
|
|
|
|
73,688
|
|
|
|
|
(1)
|
|
The Threshold, Target and Maximum amounts of non-equity incentive plan awards set forth
in these columns are derived from the terms of the Employment Agreements entered into by and
between us and each of Messrs. Puzder, Murphy and Abajian. Additional information regarding
the Employment Agreements for each of our named executive officers, including the calculation
of the potential non-equity incentive plan awards set forth in these columns, as well as the
determination of the actual non-equity incentive plan awards paid with respect to fiscal 2010,
is set forth in the Compensation Discussion and Analysis section of this Form 10-K/A. The
amounts set forth in these columns do not include non-equity incentive awards which may be
earned pursuant to the Employment Agreements in fiscal 2011.
|
|
(2)
|
|
The Threshold, Target and Maximum amounts of equity incentive plan awards set forth in
these columns are derived from the terms of the Employment Agreements entered into by and
between us and each of Messrs. Puzder, Murphy and Abajian. Additional information regarding
the Employment Agreements for each of our named executive officers, including the
determination of the actual equity incentive plan awards granted with respect to fiscal 2010,
as well as the vesting of such awards, is set forth in the Compensation Discussion and
Analysis section of this Form 10-K/A. The amounts set forth in these columns do not include
grants of restricted stock that we have agreed to make to each of Messrs. Puzder, Murphy and
Abajian in fiscal 2011, pursuant to the terms of their respective Employment Agreements.
|
26
|
|
|
(3)
|
|
The amounts set forth in this column represent the number of shares of restricted stock that
were granted to each of our named executive officers during fiscal 2010 other than grants
shown under the three columns to the left of this column and, with respect to Messrs. Puzder,
Murphy, and Abajian, are derived from the terms of their respective Employment Agreements.
The shares held by Messrs. Puzder, Murphy and Abajian are subject to service-based vesting in
equal installments over four years with vesting occurring on each anniversary of the date of
grant. The shares held by Messrs. Haley and Starke are subject to service-based vesting in
equal installments over three years with vesting occurring on each anniversary of the date of
grant. The amounts set forth in these columns do not include grants of restricted stock that
we have agreed to make, to each
of Messrs. Puzder, Murphy and Abajian in fiscal 2011, pursuant to the terms of their
respective Employment Agreements.
|
|
(4)
|
|
The amounts set forth in this column represent the number of options that were granted to
each of our named executive officers during fiscal 2010. Each of these options are subject to
service-based vesting in equal installments over three years with vesting occurring on each
anniversary of the date of grant.
|
|
(5)
|
|
The amounts set forth in this column represent the exercise price for the stock options
granted in the column immediately to the left of this column, which is equal to average of the
high and low trading prices of our common stock on the date of grant as required by the terms
of the equity incentive plan pursuant to which the stock options were granted.
|
|
(6)
|
|
This column shows the full grant date fair value of restricted stock and option awards that
we must expense in our financial statements over the respective vesting periods in accordance
with FASB ASC Topic 718. In the case of the restricted stock awards, this is equal to the
number of restricted shares multiplied by the closing price of our common stock on the date of
grant. In the case of stock options, this is the value of the options calculated using a
Black-Scholes valuation methodology in accordance with FASB ASC Topic 718. Assumptions used
in the calculation of these amounts are included in Note 16 of our Notes to Consolidated
Financial Statements for the fiscal year ended January 25, 2010
included in Item 8.
|
27
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Units or
|
|
|
Units or
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
Other
|
|
|
Other
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Rights That
|
|
|
Rights That
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
(1)
|
|
|
(#)
|
|
|
($)
(2)
|
|
|
(#)
(3)
|
|
|
($)
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew F. Puzder
|
|
|
12,275
|
|
|
|
|
|
|
|
3.87
|
|
|
|
10/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
11.10
|
|
|
|
06/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
5.75
|
|
|
|
06/10/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
11.26
|
|
|
|
06/14/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
16.50
|
|
|
|
03/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
13.09
|
|
|
|
12/06/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(5)
|
|
|
129,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(6)
|
|
|
258,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
(7)
|
|
|
387,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
(8)
|
|
|
516,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
379,648
|
|
|
|
3,268,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Michael Murphy
|
|
|
11,000
|
|
|
|
|
|
|
|
2.63
|
|
|
|
01/03/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
2.92
|
|
|
|
06/12/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
11.10
|
|
|
|
06/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
5.75
|
|
|
|
06/10/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
11.26
|
|
|
|
06/14/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
16.50
|
|
|
|
03/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
13.09
|
|
|
|
12/06/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
(5)
|
|
|
32,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
(6)
|
|
|
64,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
(7)
|
|
|
96,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(8)
|
|
|
129,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,912
|
|
|
|
817,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theodore Abajian
|
|
|
53,887
|
|
|
|
|
|
|
|
2.04
|
|
|
|
10/25/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,100
|
|
|
|
|
|
|
|
3.87
|
|
|
|
10/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
11.10
|
|
|
|
06/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
5.75
|
|
|
|
06/10/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
11.26
|
|
|
|
06/14/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
16.50
|
|
|
|
03/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
13.09
|
|
|
|
12/06/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
(5)
|
|
|
32,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
(6)
|
|
|
64,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
(7)
|
|
|
96,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(8)
|
|
|
129,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,912
|
|
|
|
817,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford R. Haley
|
|
|
10,000
|
|
|
|
|
|
|
|
3.38
|
|
|
|
09/14/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
2.92
|
|
|
|
06/12/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
11.10
|
|
|
|
06/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
5.75
|
|
|
|
06/10/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
11.26
|
|
|
|
06/14/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
13.15
|
|
|
|
11/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
19.13
|
|
|
|
10/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,334
|
|
|
|
6,666
|
(9)
|
|
|
11.34
|
|
|
|
01/08/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
13,333
|
(10)
|
|
|
8.56
|
|
|
|
01/08/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(11)
|
|
|
8.07
|
|
|
|
01/08/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
583
|
(12)
|
|
|
5,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,166
|
(13)
|
|
|
10,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
(14)
|
|
|
15,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Starke
|
|
|
3,333
|
|
|
|
|
|
|
$
|
11.26
|
|
|
|
06/14/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
$
|
13.15
|
|
|
|
11/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
19.13
|
|
|
|
10/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,334
|
|
|
|
6,666
|
(9)
|
|
$
|
11.34
|
|
|
|
01/08/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
13,333
|
(10)
|
|
$
|
8.56
|
|
|
|
01/08/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(11)
|
|
$
|
8.07
|
|
|
|
01/08/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
583
|
(12)
|
|
|
5,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,166
|
(13)
|
|
|
10,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
(14)
|
|
|
15,068
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The expiration date of all option awards is ten years from the date of their respective
grants.
|
28
|
|
|
(2)
|
|
The amounts set forth in this column represent the value of shares that have not vested
calculated by multiplying the number of shares set forth in the column immediately to the left
of this column by the closing price of our common stock on January 25, 2010, which was $8.61.
|
|
(3)
|
|
The amounts set forth in this column represent the number of shares of restricted stock that
were granted to our named executive officers pursuant to the terms of their respective
Employment Agreements, but which have not vested as of January 25, 2010. Additional
information regarding the Employment Agreements between us and each of our named executive
officers is set forth in the Compensation Discussion and Analysis section of this Form 10-K/A.
|
|
(4)
|
|
The amounts set forth in this column represent the value of shares granted pursuant to our
equity incentive plans that have not vested calculated by multiplying the number of shares set
forth in the column immediately to the left of this column by the closing price of our common
stock on January 25, 2010, which was $8.61.
|
|
(5)
|
|
These shares will vest on October 12, 2010.
|
|
(6)
|
|
One half of these shares will vest on October 12, 2010 and the other half will vest on
October 12, 2011.
|
|
(7)
|
|
One third of these shares will vest on October 12, 2010, one third will vest on October 12,
2011 and one third will vest on October 12, 2012.
|
|
(8)
|
|
One fourth of these shares will vest on October 12, 2010, one fourth will vest on October 12,
2011, one fourth will vest on October 12, 2012 and one fourth will vest on October 12, 2013.
|
|
(9)
|
|
These options will vest on January 8, 2011.
|
|
(10)
|
|
One half of these options will vest on January 8, 2011 and the other half will vest on
January 8, 2012.
|
|
(11)
|
|
One third of these options will vest on January 8, 2011, one third will vest on January 8,
2012 and one third will vest on January 8, 2013.
|
|
(12)
|
|
These shares will vest on January 8, 2011.
|
|
(13)
|
|
One half of these shares will vest on January 8, 2011 and the other half will vest on
January 8, 2012.
|
|
(14)
|
|
One third of these shares will vest on January 8, 2011, one third will vest on January 8,
2012 and one third will vest on January 8, 2013.
|
29
OPTION EXERCISES AND STOCK VESTED TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
|
Acquired on Exercise
|
|
|
Exercise
|
|
|
Acquired on Vesting
|
|
|
Vesting
|
|
Name
|
|
(#)
|
|
|
($)
(1)
|
|
|
(#)
|
|
|
($)
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew F. Puzder
|
|
|
146,480
|
|
|
|
644,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
(3)
|
|
|
1,033,200
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
479,250
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Michael Murphy
|
|
|
14,910
|
|
|
|
79,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(3)
|
|
|
258,300
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
|
119,813
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theodore Abajian
|
|
|
14,730
|
|
|
|
70,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(3)
|
|
|
258,300
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
|
119,813
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford R. Haley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
583
|
|
|
|
6,209
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
1,167
|
|
|
|
9,394
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Starke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
333
|
|
|
|
3,546
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
1,167
|
|
|
|
9,394
|
(6)
|
|
|
|
(1)
|
|
The amounts set forth in this column are determined by subtracting the exercise price of the
options set forth in the column to the left of this column from the closing price of our
common stock on the date of exercise and then multiplying that result by the number of shares
received upon exercise.
|
|
(2)
|
|
The amounts set forth in this column are determined by multiplying the number of shares
acquired upon vesting set forth in the column immediately to the left of this column by the
closing price of our common stock on the date of vesting.
|
|
(3)
|
|
These amounts reflect the number of performance shares that vested in fiscal 2010 as a result
of the Companys achievement of certain financial performance targets as discussed in the
Compensation Discussion and Analysis section of this Form 10-K/A.
|
|
(4)
|
|
The closing price of our common stock on January 25, 2010, which is the date on which the
shares vested, was $8.61.
|
|
(5)
|
|
The closing price of our common stock on October 12, 2009, which is the date on which the
shares vested, was $10.65.
|
|
(6)
|
|
The closing price of our common stock on January 8, 2010, which is the date on which the
shares vested, was $8.05.
|
30
Potential Payments Upon Termination or Change in Control
The information set forth in the table below describes the compensation that would become
payable under existing plans and arrangements, including the Employment Agreements, by and between
us and each of our named executive officers, if each named executive officers employment with us
had terminated effective as of January 25, 2010, the last day of fiscal 2010.
The table assumes that each named executive officers salary and service levels will be the
same on the date of termination as they were on the last day of our fiscal year. In addition, to
the extent applicable, the disclosures set forth in the table are based on the closing price of our
common stock on the same date. The amounts set forth for insurance, health benefits and similar
policies also assume the continued availability of such policies on terms which are equivalent to
those in effect as of the last day of fiscal 2010. The compensation amounts set forth in the table
exclude benefits that accrued prior to January 25, 2010, and are in addition to benefits generally
available to salaried employees, such as subsidized medical benefits and disability benefits.
The
table does not attempt to set forth the compensation that may be payable to the named
executive officers upon the occurrence of any particular change in control transaction. In
particular, it does not attempt to provide any information relating to compensation that may be
payable to the named executive officers in the event the Merger
Agreement is closed.
Because the disclosures in the table assume the occurrence of a termination or change in
control as of a particular date and under a particular set of circumstances, and therefore make a
number of important assumptions, the actual amounts to be paid to each of our named executive
officers upon a termination or change in control may vary significantly from the amounts included
herein. Factors that could affect these amounts include the timing during the year of any such
event, our stock price on such date, the continued availability of benefit policies at similar
prices, and the type of termination event that occurs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
Accelerated
|
|
|
Vesting of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Vesting of
|
|
|
Contractually
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Restricted
|
|
|
Outstanding
|
|
|
Obligated
|
|
|
|
|
|
|
Excise Tax
|
|
|
|
|
|
|
|
Cash
|
|
|
Stock
|
|
|
Option
|
|
|
Restricted
|
|
|
Other
|
|
|
(including
|
|
|
|
Salary
|
|
|
Payments
|
|
|
Awards
|
|
|
Awards
|
|
|
Stock Awards
|
|
|
Benefits
|
|
|
gross-up)
|
|
Name
|
|
($)
(1)
|
|
|
($)
(2)
|
|
|
($)
(3)
|
|
|
($)
(4)
|
|
|
($)
(5)(6)
|
|
|
($)
(7)
|
|
|
($)
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew F. Puzder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement or Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination for Good
Reason
(9)
|
|
|
3,210,000
|
|
|
|
3,210,000
|
|
|
|
4,560,269
|
|
|
|
|
|
|
|
2,583,000
|
|
|
|
57,843
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
3,210,000
|
|
|
|
3,210,000
|
|
|
|
4,560,269
|
|
|
|
|
|
|
|
2,583,000
|
|
|
|
57,843
|
|
|
|
|
|
Termination Upon a Change in Control
(9)
|
|
|
3,210,000
|
|
|
|
3,210,000
|
|
|
|
4,560,269
|
|
|
|
|
|
|
|
2,583,000
|
|
|
|
57,843
|
|
|
|
1,000,000
|
|
Termination Upon Death or Disability
(10)
|
|
|
3,210,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Michael Murphy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement or Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination for Good
Reason
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
1,910,250
|
|
|
|
1,400,850
|
|
|
|
1,140,067
|
|
|
|
|
|
|
|
645,750
|
|
|
|
57,566
|
|
|
|
|
|
Termination Upon a Change in Control
(9)
|
|
|
1,910,250
|
|
|
|
1,400,850
|
|
|
|
1,140,067
|
|
|
|
|
|
|
|
645,750
|
|
|
|
|
|
|
|
|
|
Termination Upon Death or Disability
(10)
|
|
|
1,910,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theodore Abajian
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement or Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination for Good
Reason
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
1,364,250
|
|
|
|
909,500
|
|
|
|
1,140,067
|
|
|
|
|
|
|
|
645,750
|
|
|
|
52,742
|
|
|
|
|
|
Termination Upon a Change in Control
(9)
|
|
|
1,364,250
|
|
|
|
909,500
|
|
|
|
1,140,067
|
|
|
|
|
|
|
|
645,750
|
|
|
|
|
|
|
|
|
|
Termination Upon Death or Disability
(10)
|
|
|
1,364,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
Accelerated
|
|
|
Vesting of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Vesting of
|
|
|
Contractually
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Restricted
|
|
|
Outstanding
|
|
|
Obligated
|
|
|
|
|
|
|
Excise Tax
|
|
|
|
|
|
|
|
Cash
|
|
|
Stock
|
|
|
Option
|
|
|
Restricted
|
|
|
Other
|
|
|
(including
|
|
|
|
Salary
|
|
|
Payments
|
|
|
Awards
|
|
|
Awards
|
|
|
Stock Awards
|
|
|
Benefits
|
|
|
gross-up)
|
|
Name
|
|
($)
(1)
|
|
|
($)
(2)
|
|
|
($)
(3)
|
|
|
($)
(4)
|
|
|
($)
(5)(6)
|
|
|
($)
(7)
|
|
|
($)
(8)
|
|
|
Bradford R. Haley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement or Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination for Good
Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
1,050,036
|
|
|
|
|
|
|
|
|
|
|
|
11,467
|
|
|
|
|
|
|
|
49,986
|
|
|
|
|
|
Termination Upon a Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Upon Death or Disability
(10)
|
|
|
1,050,036
|
|
|
|
|
|
|
|
|
|
|
|
11,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Starke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement or Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination for Good
Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
825,000
|
|
|
|
|
|
|
|
|
|
|
|
11,467
|
|
|
|
|
|
|
|
34,463
|
|
|
|
|
|
Termination Upon a Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Upon Death or Disability
(10)
|
|
|
825,000
|
|
|
|
|
|
|
|
|
|
|
|
11,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
In the event of a termination under specified circumstances as detailed in their respective
Employment Agreements, our named executive officers are entitled to an amount equal to their
minimum base salary in effect as of the date of termination multiplied by the number of years
remaining in the term of their employment, which is currently three years.
|
|
(2)
|
|
In the event of a termination under specified circumstances as detailed in their respective
Employment Agreements, Mr. Puzder is entitled to a bonus amount equal to his base annual
salary in effect as of the date of termination multiplied by the number three, and each of
Messrs. Murphy and Abajian are entitled to a bonus amount equal to a pro rata portion of the
bonus for the year in which the termination occurs. Because the amounts in this table assume
that any termination occurred on January 25, 2010, the bonus amounts provided for Messrs.
Murphy and Abajian are equal to the non-equity incentive compensation amounts paid to each of
them with respect to fiscal 2010.
|
|
(3)
|
|
The amounts set forth in this column represent the value which would be realized by each of
our named executive officers upon the accelerated vesting of outstanding restricted stock
awards, which is calculated by multiplying the number of unvested shares of restricted stock
held by each named executive officer as of January 25, 2010 by the closing price of our common
stock on that date, which was $8.61.
|
|
(4)
|
|
The amounts set forth in this column represent the value which would be realized by each of
our named executive officers upon the accelerated vesting of outstanding option awards, which
is based on the difference between the exercise price of each of the outstanding options and
the closing price of our common stock on January 25, 2010, which was $8.61, multiplied by the
number of outstanding options held by each named executive officer on that date.
|
|
(5)
|
|
All shares of restricted stock that we have agreed to grant to each of Messrs. Puzder, Murphy
and Abajian under their respective Employment Agreements, but which have not yet been granted,
shall be granted and shall vest immediately as of the date of termination of their respective
employment under specified circumstances, as detailed in their respective Employment
Agreements, to the maximum extent possible consistent with the limitations imposed under our
equity incentive plans, which prevent us from issuing more than 375,000 shares to any
individual plan participant during any fiscal period. Additional information regarding the
restricted shares to be granted upon termination events pursuant to the Employment Agreements
is set forth in the Compensation Discussion and Analysis section of this Form 10-K/A.
|
|
(6)
|
|
Assuming continued employment following a change in control, each of Messrs. Puzder, Murphy
and Abajian shall continue to receive grants of shares of restricted stock in accordance with
the schedule set forth in their respective Employment Agreements. However, all restricted
shares that would otherwise have been subject to a performance-based vesting shall instead
vest monthly, in equal amounts, on the last day of each calendar month, commencing with the
month immediately following the month in which the grant occurs over a period of three years.
|
|
(7)
|
|
Our named executive officers are entitled to the continuation of the various employee benefit
plans and programs under which they were entitled to participate prior to termination in the
event of a termination of their employment under specified circumstances, as detailed in their
respective Employment Agreements. Each is entitled to continued participation until
December 31 of the second calendar year following the calendar year in which the termination
occurred (or December 31, 2012, assuming a January 25, 2010 termination date). The amounts
set forth in this column
are estimates of the benefit payments to be made on each named executive officers behalf in
connection with his termination assuming that the cost to us of providing his current benefits
remains the same.
|
32
|
|
|
(8)
|
|
We are not obligated to make any excise tax payments or related tax gross up payments on
behalf of any of our named executive officers except for Mr. Puzder. If and to the extent
that any payment to Mr. Puzder upon a termination upon a change in control would constitute an
excess parachute payment then Mr. Puzder shall be entitled to receive an excise tax gross-up
payment not exceeding $1,000,000, in accordance with the provisions of his Employment
Agreement.
|
|
(9)
|
|
Each of Messrs. Puzder, Murphy and Abajian are entitled to receive certain payments and
benefits upon a termination of their respective Employment Agreements for Good Reason.
Good Reason is defined in Mr. Puzders Employment Agreement to include both a relocation and
a Change in Control. Good Reason is defined in the Employment Agreements for Messrs.
Murphy and Abajian to include only a Change in Control. In the event of a termination of
any of Messrs. Puzder, Murphy and Abajian for Good Reason, including a Change in Control,
they shall generally be entitled to receive the same payments and benefits as if they had been
terminated Without Cause. Additional information regarding the payments and benefits to be
received by our named executive officers upon a termination of their employment for Good
Reason (including a Change in Control) is set forth in the Compensation Discussion and
Analysis section of this Form 10-K/A.
|
|
(10)
|
|
In the event a named executive officers employment is terminated due to his death or
disability, he (or his successors) would be entitled to the amount of his base salary for the
remainder of the term of the Employment Agreement. Additionally, in the event of death, each
of his outstanding options would vest and remain exercisable for a period of 90 days following
the date of his death. In the event of a named executive officers disability, the option
acceleration provision would not apply.
|
Director Compensation
On and effective September 5, 2006, we approved and adopted a compensation policy for
non-management directors. Under the current policy, non-management directors receive a base annual
retainer of $50,000. The Chairman of our Board of Directors receives an additional $125,000 (for a
total annual retainer of $175,000), the Vice Chairman of our Board of Directors receives an
additional $100,000 (for a total annual retainer of $150,000), the Chairman of the Audit Committee
receives an additional $75,000 (for a total annual retainer of $125,000), and the Chairman of the
Compensation Committee and the Nominating & Corporate Governance Committee each receive an
additional $35,000 (for a total annual retainer of $85,000 each). Additionally, non-management
directors receive a grant of options to purchase 25,000 shares of common stock and 10,000 shares of
restricted stock upon appointment or election to our Board of Directors. Furthermore, each
non-management director receives an annual grant of options to purchase an aggregate of 15,000
shares of common stock and 7,500 shares of restricted stock.
The Chairman of our Board of Directors receives options to purchase an additional 35,000
shares of common stock (for a total annual grant of options to purchase 50,000 shares of common
stock) and the members of the Audit Committee each receive options to purchase an additional 5,000
shares of common stock (for total annual grants of options to purchase 20,000 shares of common
stock). The Vice Chairman of our Board of Directors receives an additional 5,000 shares of
restricted stock (for a total annual issuance of 12,500 shares) and the Chairmen of the committees
of our Board of Directors each receive an additional 2,500 shares of restricted common stock (for
total annual issuances of 10,000 shares). All options are granted with an exercise price at the
fair market value as of the date of grant, and all options and shares of restricted stock vest in
equal increments over a two-year period.
For attendance at all meetings of our Board of Directors and committees thereof (whether
scheduled quarterly meetings or special meetings), each non-management director receives, in
addition to the retainers discussed above, a fee of $2,000 ($1,000 for telephonic meetings).
Reasonable travel and lodging expenses are reimbursed to directors.
Under our non-management director compensation policy, a director may elect to receive
additional shares of restricted common stock in lieu of 1.2 times all, or a portion of, his or her
annual cash retainer, valued at the fair market value of our common stock on the date of grant.
Shares of restricted stock received in lieu of the annual cash retainer will vest one year from the
date of grant. In fiscal 2010, none of our directors made an election to receive additional shares
of restricted stock in lieu of their cash retainers. Additionally, under this policy each director
may elect to forfeit all or a portion of his or her annual grant of options in order to receive
additional shares of restricted stock, in the amount of one-half of the number of option shares
forfeited. In fiscal 2010, all of the directors made this election with respect to all of the
options each of them would have received, except Mr. Churm, who received options.
33
The compensation earned by our non-management directors in fiscal 2010 is set forth in the
table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Nonqualified
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
or Paid in
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
Cash
|
|
|
Awards
(1)(2)
|
|
|
Awards
(1)(2)
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Byron Allumbaugh
|
|
|
210,000
|
|
|
|
359,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
569,450
|
|
Peter Churm
|
|
|
109,000
|
|
|
|
102,700
|
|
|
|
67,050
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278,750
|
|
Matthew Goldfarb
|
|
|
63,000
|
|
|
|
154,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,050
|
|
Carl L. Karcher
|
|
|
62,000
|
|
|
|
154,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,050
|
|
Janet E. Kerr
|
|
|
124,000
|
|
|
|
179,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
303,725
|
|
Daniel D. (Ron) Lane
|
|
|
63,000
|
|
|
|
154,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,050
|
|
Daniel E. Ponder, Jr.
|
|
|
63,000
|
|
|
|
154,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,050
|
|
Jerold H. Rubinstein
|
|
|
161,000
|
|
|
|
205,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
366,400
|
|
Frank P. Willey
|
|
|
187,000
|
|
|
|
231,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
418,075
|
|
|
|
|
(1)
|
|
The amounts set forth in this column reflect the full grant date fair value of the awards for
each of our non-management directors calculated in accordance with FASB ASC Topic 718.
Assumptions used in the calculation of the amounts are included in Note 16 of our Notes to
Consolidated Financial Statements for the fiscal year ended
January 25, 2010 included in Item 8.
|
|
(2)
|
|
The table below sets forth the number of restricted stock awards and options granted to each
of our non-management directors in fiscal 2010 and the aggregate number of restricted stock
awards and options held by each our non-management directors as of the last day of fiscal
2010. All stock awards and option awards granted in fiscal 2010 vest in equal increments over
a two-year period from the date of grant.
|
|
(3)
|
|
As discussed above, Mr. Churm elected to receive his annual option grant instead of
forfeiting all or a portion of the grant in favor of receiving additional shares of restricted
stock. Each of the other non-management directors elected to receive additional shares of
restricted stock in lieu of their respective option grants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
Option Awards
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Granted in Fiscal
|
|
|
Granted in Fiscal
|
|
|
Stock Awards Outstanding
|
|
|
Outstanding at the End of
|
|
Name
|
|
2010
|
|
|
2010
|
|
|
at the End of Fiscal 2010
|
|
|
Fiscal 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Byron Allumbaugh
|
|
|
35,000
|
|
|
|
|
|
|
|
52,500
|
|
|
|
105,000
|
|
Peter Churm
|
|
|
10,000
|
|
|
|
15,000
|
|
|
|
18,750
|
|
|
|
155,000
|
|
Matthew Goldfarb
|
|
|
15,000
|
|
|
|
|
|
|
|
18,750
|
|
|
|
40,000
|
|
Carl L. Karcher
|
|
|
15,000
|
|
|
|
|
|
|
|
22,500
|
|
|
|
60,000
|
|
Janet E. Kerr
|
|
|
17,500
|
|
|
|
|
|
|
|
26,250
|
|
|
|
25,000
|
|
Daniel D. (Ron) Lane
|
|
|
15,000
|
|
|
|
|
|
|
|
22,500
|
|
|
|
50,000
|
|
Daniel E. Ponder, Jr.
|
|
|
15,000
|
|
|
|
|
|
|
|
22,500
|
|
|
|
45,000
|
|
Jerold H. Rubinstein
|
|
|
20,000
|
|
|
|
|
|
|
|
30,000
|
|
|
|
19,666
|
|
Frank P. Willey
|
|
|
22,500
|
|
|
|
|
|
|
|
31,250
|
|
|
|
50,000
|
|
34
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Equity Compensation Plan Information
The information required to be disclosed about the Companys equity compensation plan
information is included under the heading Equity Compensation Plan Information in Item 12.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information regarding the beneficial ownership of our
common stock as of May 10, 2010 by persons or entities other than our directors and executive
officers known to us (based solely upon Schedules 13G and amendments thereto filed with the SEC) to
be the beneficial owners of more than 5% of our common stock. Except as otherwise indicated,
beneficial ownership includes both voting and investment power.
|
|
|
|
|
|
|
|
|
|
|
Total Share
|
|
|
Percentage of All
|
|
Stockholder
|
|
Ownership
|
|
|
Shares
(1)
|
|
|
BlackRock, Inc.
(2)
|
|
|
3,853,863
|
|
|
|
7.0
|
%
|
40 East 52nd
Street, New York, NY 10022
|
|
|
|
|
|
|
|
|
Todd Martin Pickup
(3)
|
|
|
3,060,200
|
|
|
|
5.5
|
%
|
2532 Dupont Drive, Irvine, CA 92612
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Calculated based on 55,232,512 shares of our common stock outstanding on May 10, 2010.
|
|
(2)
|
|
The information relating to this stockholder was obtained from the Schedule 13G filed on January 29, 2010 by
BlackRock, Inc. (BlackRock). As previously announced on December 1, 2009, BlackRock completed its acquisition
of Barclays Global Investors, NA and certain affiliates (the BGI Entities) from Barclays Bank PLC. As a
result, substantially all of the BGI Entities are now included as subsidiaries of BlackRock for purposes of
Schedule 13G filings.
|
|
(3)
|
|
The information relating to this stockholder was obtained from the Schedule 13G filed on March 10, 2010 by Todd
Martin Pickup (Mr. Pickup) and Vintage Trust II (the Trust). The referenced shares include: (i) 40,200
shares owned directly by Mr. Pickup, (ii) 2,815,000 shares owned directly by the Trust, over which Mr. Martin has
sole investment and voting power, (iii) 80,000 shares owned directly by the Trust, over which Mr. Martin has
shared investment and voting power, (iv) 25,000 shares owned directly by Pickup Grandchildrens Trust, over which
Mr. Martin has shared investment and voting power, and (v) 100,000 shares owned directly by Plus Four Equity
Partners, L.P., over which Mr. Pickup has shared investment and voting power.
|
35
Security Ownership of Management
The following table sets forth certain information regarding the beneficial ownership of our
common stock as of May 10, 2010 by (i) each of our
directors, (ii) each of our named executive officers, and
(iii) all of our directors and executive officers as a group. Except as otherwise indicated,
beneficial ownership includes both voting and investment power.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Total Share
|
|
|
Percentage of All
|
|
Name
|
|
Common Stock
|
|
|
Equivalents
(1)
|
|
|
Ownership
|
|
|
Shares
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel D. (Ron) Lane
|
|
|
801,451
|
(3)
|
|
|
50,000
|
|
|
|
851,451
|
|
|
|
1.5
|
%
|
Byron Allumbaugh
|
|
|
261,285
|
(4)
|
|
|
105,000
|
|
|
|
366,285
|
|
|
|
*
|
|
Peter Churm
|
|
|
91,765
|
(5)
|
|
|
120,000
|
|
|
|
211,765
|
|
|
|
*
|
|
Carl L. Karcher
|
|
|
643,845
|
(6)
|
|
|
60,000
|
|
|
|
703,845
|
|
|
|
1.3
|
%
|
Daniel E. Ponder, Jr.
|
|
|
80,865
|
(7)
|
|
|
45,000
|
|
|
|
125,865
|
|
|
|
*
|
|
Frank P. Willey
|
|
|
440,202
|
|
|
|
50,000
|
|
|
|
490,202
|
|
|
|
*
|
|
Andrew F. Puzder, Principal Executive Officer
|
|
|
1,356,947
|
(8)
|
|
|
687,275
|
|
|
|
2,044,222
|
|
|
|
3.7
|
%
|
Janet E. Kerr
|
|
|
62,333
|
|
|
|
25,000
|
|
|
|
87,333
|
|
|
|
*
|
|
Matthew Goldfarb
|
|
|
48,651
|
(9)
|
|
|
32,500
|
|
|
|
81,151
|
|
|
|
*
|
|
Jerold H. Rubinstein
|
|
|
30,000
|
|
|
|
19,666
|
|
|
|
49,666
|
|
|
|
*
|
|
Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Michael Murphy
|
|
|
275,263
|
|
|
|
216,000
|
|
|
|
491,263
|
|
|
|
*
|
|
Theodore Abajian, Principal Financial Officer
|
|
|
370,888
|
|
|
|
232,987
|
|
|
|
603,875
|
|
|
|
1.1
|
%
|
Bradford R. Haley
|
|
|
38,558
|
|
|
|
155,001
|
|
|
|
193,559
|
|
|
|
*
|
|
Robert J. Starke
|
|
|
5,969
|
|
|
|
48,334
|
|
|
|
54,303
|
|
|
|
*
|
|
Directors and Executive Officers as a Group
(15 persons)
|
|
|
4,532,488
|
|
|
|
1,971,764
|
|
|
|
6,504,252
|
|
|
|
11.8
|
%
|
|
|
|
*
|
|
Represents less than 1% of our common stock.
|
|
(1)
|
|
Common Stock Equivalents include stock options or other convertible securities exercisable
within 60 days after May 10, 2010.
|
|
(2)
|
|
Calculated based on 55,232,512 shares of our common stock
outstanding on May 10, 2010.
|
|
(3)
|
|
Includes 232,147 shares of our common stock held indirectly by Mr. Lane through Daniel V., a
Nevada corporation of which Mr. Lane is sole stockholder and director, as well as
175,288 shares of common stock held by a family trust.
|
|
(4)
|
|
Includes 208,785 shares of our common stock held indirectly by a family trust.
|
|
(5)
|
|
Includes 23,865 shares of our common stock held indirectly by Mr. Churm through a community
property trust as well as 400 shares of common stock held by Mr. Churms wife.
|
|
(6)
|
|
Includes 438,400 shares of our common stock held indirectly by Mr. Karcher through the Karcher
Childrens Trust and 182,945 shares of common stock held by the Carl L. Karcher Family Trust.
|
|
(7)
|
|
Includes 43,365 shares of our common stock pledged as security with respect to a personal loan.
|
|
(8)
|
|
Includes 46,710 shares of our common stock held indirectly by Mr. Puzder through UTMA accounts
owned for the benefit of his children.
|
|
(9)
|
|
Includes 27,901 shares of our common stock pledged as security with respect to a margin account.
|
36
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Review, Approval or Ratification of Transactions with Related Persons
We describe below all related party transactions that have occurred since the beginning of
fiscal 2010 and any such transactions that are currently proposed. In accordance with Item 404(a)
of Regulation S-K, a related party transaction is any transaction or series of transactions
exceeding $120,000 in which we are a participant and any related person has a material interest.
A related person would include any director, nominee for director, executive officer, or person
controlling over five percent of our outstanding common stock (and immediate family members of any
of such persons).
A related party transaction must be approved by a majority of the disinterested directors in
accordance with Delaware law. In reviewing and considering whether to approve a related party
transaction, our disinterested directors consider all relevant facts and circumstances to determine
whether such transaction meets our standard that the transaction is fair to us and in our best
interests and the interests of our stockholders. There are no pre-established procedures by which
the disinterested directors make this determination other than those prescribed by Delaware law
regarding the fulfillment of a directors fiduciary duty.
Certain Relationships and Related Transactions
JCK, Inc.
, or JCK, is one of our franchisees and currently operates 18 Carls Jr. restaurants,
12 of which are Carls Jr./Green Burrito dual-branded restaurants. Joseph C. Karcher is the
brother of Carl L. Karcher, one of our directors, a partner in Karcher Partners (defined below
under the heading Carl L. Karcher) and an affiliate of JCK. JCK, pursuant to a development
agreement with us, is obligated to develop and franchise one additional Carls Jr. restaurant by
2012. JCK paid us an aggregate of $2,000 in franchise fees in fiscal 2010. In connection with the
operation of its 18 franchised restaurants, JCK regularly purchases food and other products from us
on the same terms and conditions as other franchisees. During fiscal 2010, these purchases totaled
approximately $6,086,102. During fiscal 2010, JCK paid royalty fees of $799,568, including royalty
fees paid to us for its Carls Jr./Green Burrito dual-branded restaurants, and advertising and
promotional fees of $995,363 for all 18 restaurants combined.
JCK of Southern Oregon, Inc.
, or JCK SO, is one of our franchisees and currently operates four
Carls Jr. restaurants, two of which are Carls Jr./Green Burrito dual-branded restaurants. Joseph
C. Karcher is the brother of Carl L. Karcher, one of our directors, a partner in Karcher Partners,
and an affiliate of JCK SO. In connection with the operation of its four franchised restaurants,
JCK SO regularly purchases food and other products from us on the same terms and conditions as
other franchisees. During fiscal 2010, these purchases totaled approximately $1,457,205. During
fiscal 2010, JCK SO paid us royalty fees of $189,533, including royalty fees paid to us for its
Carls Jr./Green burrito dual-branded restaurants, and advertising and promotional fees of $243,606
for all four restaurants combined.
Wiles Restaurants, Inc.
, or Wiles, is one of our franchisees and currently operates 12 Carls
Jr. restaurants, four of which are Carls Jr./Green Burrito dual-branded restaurants. Anne M.
Wiles is the sister of Carl L. Karcher, one of our directors, a partner in Karcher Partners, and an
affiliate of Wiles. In connection with the operation of its 12 franchised restaurants, Wiles
regularly purchases food and other products from us on the same terms and conditions as other
franchisees. During fiscal 2010, these purchases totaled approximately $4,202,380. During fiscal
2010, Wiles paid royalty fees of $553,070, including royalty fees paid to us for its Carls
Jr./Green Burrito dual-branded restaurants, and advertising and promotional fees of $747,874 for
all 12 restaurants combined. Wiles is also our sublessee with respect to two restaurant locations.
Minimum monthly rental payments range from $7,174 to $13,562, or 5.5% to 8% of annual gross sales
of the restaurant. The subleases expire in August 2011 and November 2013. The rents paid under
these subleases during fiscal 2010 totaled $283,967.
Star of the High Desert, Inc.,
or SHD, is one of our franchisees and currently operates 17
Carls Jr. restaurants, one of which is a Carls Jr./Green Burrito dual-branded restaurant. Anne M.
Wiles is the sister of Carl L. Karcher, one of our directors, a partner in Karcher Partners, and an
affiliate of SHD. On or about January 27, 2009, former franchisees Sierra Surf Connection, Inc. and
Estrella del Rio Grande, Inc., of which Anne M. Wiles was an affiliate, merged and were renamed
Star of the High Desert, Inc. SHD is obligated, pursuant to a development agreement with us, to
develop and franchise seven additional Carls Jr. restaurants at various times by 2017. In
connection with the operation of its 17 franchised restaurants, SHD regularly purchases food and
other products from us on the same terms and conditions as other franchisees. During fiscal 2010,
these purchases totaled approximately $1,465,368. In addition, during fiscal 2010, SHD paid
royalty fees of $662,560, including royalty fees paid to us for its Carls Jr. /Green Burrito
dual-branded restaurants, and advertising and
promotional fees of $911,042 for all 17 restaurants combined. SHD is also our sublessee with
respect to one restaurant location. Rental payments are equal to 5% of the annual gross sales of
the restaurant or minimum monthly rental payments of $5,266. The lease expires in January 2013. The
rents paid under this sublease during fiscal 2010 totaled $69,625.
37
MJKL Enterprises, L.L.C.
, or MJKL, is one of our franchisees and operator of 61 Carls Jr.
restaurants, two of which closed in fiscal 2010 and 18 of which are Carls Jr./Green Burrito
dual-branded restaurants. Margaret LeVecke is the sister of Carl L. Karcher, one of our directors,
a partner in Karcher Partners, and an affiliate of MJKL. MJKL is obligated, pursuant to development
agreements with us, to develop and franchise 21 additional Carls Jr. restaurants at various times
by 2014. MJKL paid us an aggregate of $30,000 in franchise fees and $20,000 in development fees in
fiscal 2010. In connection with the operation of its 61 restaurants, MJKL regularly purchases food
and other products from us on the same terms and conditions as other franchisees. During fiscal
2010, these purchases totaled approximately $17,193,080. During fiscal 2010, MJKL paid royalty
fees of $2,383,547, including royalty fees paid to us for its Carls Jr./Green Burrito dual-branded
restaurants, and advertising and promotional fees of $3,347,819 for all 61 restaurants combined.
During fiscal 2010, MJKL was also our lessee or sublessee with respect to 14 restaurant locations,
one sublease of which was terminated. The current monthly rental payments to CKE range from $3,417
to $8,750 and/or a percentage of the annual gross sales of the restaurants ranging from 4% to 10%
once certain financial thresholds have been met. The leases and subleases expire at various times
between May 2010 and December 2020. Rents paid during fiscal 2010 under these leases and subleases
totaled $1,097,525.
MJKL Enterprises Midwest, LLC
, or MJKL Midwest, is one of our franchisees and currently
operates 60 Hardees restaurants, eight of which are Hardees/Red Burrito dual-branded restaurants.
Margaret LeVecke is the sister of Carl L. Karcher, one of our directors, a partner in Karcher
Partners, and an affiliate of MJKL Midwest. MJKL Midwest is obligated, pursuant to development
agreements with us, to develop and franchise 35 additional Hardees restaurants at varying times by
2016. In connection with the operation of its 60 restaurants, MJKL Midwest regularly purchases
other products from us on the same terms and conditions as other franchisees. During fiscal 2010,
these purchases totaled approximately $61,592. During fiscal 2010, MJKL paid royalty fees of
$2,078,254, including royalty fees paid to us for its Hardees/Red Burrito dual-branded
restaurants. MJKL Midwest is also our lessee or sublessee with respect to 47 restaurant locations.
Monthly rental payments range from $825 to $6,527 and/or a percentage of the annual gross sales of
the restaurants ranging from 1% to 6.5% once certain financial thresholds have been met. The
leases and subleases expire at various times between December 2010 and April 2028. Rents paid
during fiscal 2010 under these leases and subleases totaled $2,242,522.
Carl L. Karcher
. CLK, Inc., or CLK, is one of our franchisees and an operator of 29 Carls
Jr. restaurants, one of which closed in fiscal 2010, and 15 of which are Carls Jr./Green Burrito
dual-branded restaurants. Carl L. Karcher is one of our directors, a partner in Karcher Partners,
a member of Karcher GP, a co-trustee of the Carl N. and Margaret M. Karcher Trust and an affiliate
of CLK. CLK paid an aggregate of $79,063 to us in franchise fees in fiscal 2010. In connection
with the operation of its 29 franchised restaurants, CLK regularly purchases food and other
products from us on the same terms and conditions as other franchisees. During fiscal 2010, these
purchases totaled approximately $11,729,894. During fiscal 2010, CLK paid royalty fees of
$1,528,355, including royalties fees paid to us for its Carls Jr./Green Burrito dual-branded
restaurants, and advertising and promotional fees of $2,005,860 for all 29 restaurants combined.
CLK is also our sublessee with respect to eight restaurant locations. Rental payments equal a
percentage of the annual gross sales of the restaurants, ranging from 4.5% to 8%, or minimum
monthly rentals, ranging from $4,913 to $13,048. The leases expire at various times between
December 2010 and December 2028. The rents paid under these leases during fiscal 2010 totaled
$903,264. During fiscal 2010, we leased certain land and buildings for our Anaheim corporate
offices, which included an office building located at 401 Carl Karcher Way, offices located in a
portion of the former distribution center building, an adjoining parcel for additional office space
and parking, and one restaurant in Carl Karcher Plaza, located at 1200 N. Harbor Boulevard,
Anaheim, California, or the Original Office Leases, from Karcher Partners, a California limited
partnership, or Karcher Partners. The General Partner of Karcher Partners is Karcher GP, LLC, a
Delaware limited liability company, or Karcher GP. Karcher GP is wholly owned by the Carl N.
Karcher and Margaret M. Karcher Trust dated August 17, 1970, as amended, or the 1970 Karcher Trust,
of which Carl L. Karcher is a co-trustee. As a result of the death of Carl N. Karcher and the
earlier death of Margaret M. Karcher, pursuant to the provisions of the trust instrument for the
1970 Karcher Trust, the ownership of Karcher GP is in the process of being transferred to certain
subtrusts of the 1970 Karcher Trust, and ultimately will be distributed to the beneficiaries of
such subtrusts (the 1970 Karcher Trust and such subtrusts are collectively referred to as the
Karcher Trust). By lease amendment dated October 2006, or the October 2006 Amendment, we amended
the Original Office Leases with Karcher Partners to eliminate a portion of the leased premises
within the former distribution center facility, to permit demolition of a portion of the former
distribution center improvements and to allow for the construction of a new building. The October
2006 Amendment also provided for removal of the restaurant property located at 1200 N. Harbor
Boulevard, Anaheim, California. We concurrently entered into a new lease for the restaurant
property with Karcher Partners, or the Restaurant Lease, with a commencement date in October 2006. The initial
38
term of the Restaurant Lease expires in April 2023, and
we have options to extend the
Restaurant Lease for two additional five-year terms. The current rent under the Restaurant Lease is $15,000 per month and 5.75% of annual
gross sales in excess of $3,130,435 for the restaurant. In March 2008, we entered into a new
office lease, or the New Office Lease, with Karcher Partners for an approximately six acre parcel
in Carl Karcher Plaza and an approximately 90,000 rentable square foot building to be constructed
by Karcher Partners thereon. The building is comprised of approximately 87,000 rentable square feet
of office space and approximately 3,000 rentable square feet of storage space. The initial term of
the New Office Lease is 15 years from the commencement date of March 9, 2009, and includes options
to extend the New Office Lease for two additional five-year terms. During fiscal 2010, Karcher
Partners sold the property that was the subject of the New Office Lease to a third party that is
unaffiliated with the Company and the New Office Lease was assigned to that unaffiliated party.
The aggregate rents paid by us to Karcher Partners in fiscal 2010 pursuant to the New Office Lease
were $1,525,952. The Original Office Leases expired upon the commencement date of the New Office
Lease in March 2009. The aggregate rents paid by Karcher Partners to us in fiscal 2010 pursuant to
the Original Office Leases and the restaurant in Carl Karcher Plaza were $295,741. In addition, we
had a lease with the Karcher Trust with respect to one other restaurant property, which was
scheduled to expire in May 2010. The minimum monthly rent was the greater of $6,799 or 5.5% of
annual gross sales. The aggregate rents paid by us to the Karcher Trust for such other restaurant
property during fiscal 2010 were $2,156. We purchased the restaurant from the Karcher Trust in
December 2008 for approximately $1,840,000.
CLK New-Star, L.P.
, or New-Star, is one of our franchisees and currently operates 10 Carls
Jr. restaurants, two of which are Carls Jr./Green Burrito dual-branded restaurants. Carl L.
Karcher is one of our directors, a partner in Karcher Partners, a member of Karcher GP, a
co-trustee of the Carl N. and Margaret M. Karcher Trust and an affiliate of New-Star. New-Star,
pursuant to a development agreement with us, is obligated to develop and franchise five additional
Carls Jr. restaurants at varying times by 2011. New-Star paid us an aggregate of $30,000 in
franchise fees and $20,000 in development fees in fiscal 2010. In connection with the operation of
its 10 franchised restaurants, New-Star purchases food and other products from us on the same terms
and conditions as other franchisees. During fiscal 2010, these purchases totaled approximately
$619,700. During fiscal 2010, New-Star paid royalty fees of $419,792, including royalty fees paid
to us for its Carls Jr./Green Burrito dual-branded restaurants, and advertising and promotional
fees of $568,310 for its 10 restaurants combined.
Border Star de Mexico, S.de R.L. de C.V.
, or BSM, is our licensee and currently operates five
Carls Jr. restaurants. Carl L. Karcher is one of our directors, a partner in Karcher Partners, a
member of Karcher GP, a co-trustee of the Carl N. and Margaret M. Karcher Trust and an affiliate of
BSM. During fiscal 2010, BSM paid royalty fees of $135,509 for its five restaurants combined.
KWK Foods, L.L.C.
, or KWK, is one of our franchisees and an operator of 15 Carls Jr.
restaurants, two of which closed in fiscal 2010 and four of which are Carls Jr./Green Burrito
dual-branded restaurants. Carl L. Karcher is one of our directors, a partner in Karcher Partners,
a member of Karcher GP, a co-trustee of the Carl N. and Margaret M. Karcher Trust and an affiliate
of KWK. Joseph C. Karcher is the brother of Carl L. Karcher, one of our directors, a partner in
Karcher Partners, and an affiliate of KWK. Gary Wiles is the brother-in-law of Carl L. Karcher and
an affiliate of KWK. KWK paid us an aggregate of $3,833 in franchise fees in fiscal 2010. In
connection with the operation of its 15 franchised restaurants, KWK regularly purchases food and
other products from us on the same terms and conditions as other franchisees. During fiscal 2010,
these purchases totaled approximately $3,971,243. During fiscal 2010, KWK paid royalty fees of
$647,796, including royalties paid to us for its Green Burrito dual-branded restaurants, and
advertising and promotional fees of $873,244 for all 15 restaurants combined. KWK was also our
sublessee with respect to three restaurant locations during fiscal 2010. Rental payments are equal
to 1% of annual gross sales of the restaurant in excess of $900,000, and/or minimum monthly rentals
ranging from $5,831 to $10,376. The leases expire at various times between September 2015 and
February 2018. Total rents paid under these leases during fiscal 2010 totaled $294,351.
KWKG, Inc.
, or KWKG, is one of our franchisees and currently operates four Carls Jr.
restaurants, all of which are Carls Jr./Green Burrito dual-branded restaurants. Joseph C. Karcher
is the brother of Carl L. Karcher, one of our directors, a partner in Karcher Partners, and an
affiliate of KWKG. Carl L. Karcher is one of our directors, the son of Carl N. Karcher, a partner
in Karcher Partners, a member of Karcher GP, a co-trustee of the Carl N. and Margaret M. Karcher
Trust and an affiliate of KWKG. KWKG is obligated, pursuant to a development agreement with us, to
develop and franchise two additional Carls Jr. restaurants by 2011. In connection with the
operation of its four franchised restaurants, KWKG regularly purchases food and other products from
us on the same terms and conditions as other franchisees. During fiscal 2010, these purchases
totaled approximately $1,441,669. During fiscal 2010, KWKG paid royalty fees of $210,384,
including royalties paid to us for its Carls Jr./Green Burrito dual-branded restaurants, and
advertising and promotional fees of $255,848 for all four restaurants combined.
39
CLK Desert Star, LP
, or CLK-DS, formerly known as CLK-CH Desert Star, LP, is one of our
franchisees and currently operates four Carls Jr. restaurant, three of which are Carls Jr./Green
Burrito dual-branded restaurants. Carl L. Karcher is one of our directors, a partner in Karcher
Partners, a member of Karcher GP, a co-trustee of the Carl N. and Margaret M. Karcher Trust and an
affiliate of CLK-DS. CLK-DS is obligated, pursuant to a development agreement with us, to develop
and franchise two additional Carls Jr. restaurants at varying times by 2014. CLK-DS paid us an
aggregate of $40,000 in franchise fees and $20,000 in development fees in fiscal 2010. In
connection with the operation of its four franchised restaurants, CLK-DS regularly purchases food
and other products from us on the same terms and conditions as other franchisees. During fiscal
2010, these purchases totaled approximately $1,423,580. During fiscal 2010, CLK-DS paid royalty
fees of $74,962, including royalties paid to us for its Carls Jr./Green Burrito dual-branded
restaurants, and advertising and promotional fees of $90,039 for all four restaurants combined.
Daniel D. (Ron) Lane
. M & N Foods, L.L.C., or M&N, is one of our franchisees and currently
operates 25 Carls Jr. restaurants, 11 of which are Carl Jr./Green Burrito dual-branded
restaurants. Daniel D. (Ron) Lane is one of our directors and an affiliate of M&N. In connection
with the operation of its 25 restaurants, M&N regularly purchases food and other products from us
on the same terms and conditions as other franchisees. During fiscal 2010, these purchases totaled
approximately $9,296,224. During fiscal 2010, M&N paid royalty fees of $1,242,150, including
royalty fees paid to us for its Carls Jr./Green Burrito dual-branded restaurants, and advertising
and promotional fees of $1,666,142 for all 25 restaurants combined. M&N was also our sublessee
with respect to 24 restaurant locations during fiscal 2010. Rental payments are equal to a
percentage of the annual gross sales of the restaurants ranging from 5% to 6% once certain
financial thresholds and/or minimum monthly rental payments have been met. The subleases will
expire at various times between June 2010 and November 2027. Rents paid under these leases and
subleases during fiscal 2010 totaled $2,573,569.
Daniel E. Ponder, Jr.
Ponder Enterprises, Inc., or PEI, is a franchisee of Hardees and
currently operates 23 Hardees restaurants. Daniel E. Ponder, Jr. is one of our directors and
President and Chairman of the board of directors of PEI. PEI paid us an aggregate of $35,700 in
franchise fees and $10,000 in development fees in fiscal 2010. In connection with the operation of
its 23 restaurants, PEI regularly purchases products from us on the same terms and conditions as
other franchisees. During fiscal 2010, these purchases totaled approximately $219,215. During
fiscal 2010, PEI paid us royalty fees of $665,210 for all 23 restaurants combined. PEI was also
our sublessee with respect to four restaurant locations during fiscal 2010. Minimum monthly rental
payments range from $1,458 to $5,290. The subleases will expire at various times between December
2012 and July 2014. Total rent paid under these subleases during fiscal 2010 aggregated $163,207.
CKE also leases a restaurant property at 3929 S. El Camino Real in San Clemente, California
from Margaret LeVecke, the sister of Carl L. Karcher, one of our directors, a partner in Karcher
Partners, and an affiliate of MJKL and MJKL Midwest. Rental payments are equal to 5.5% of gross
sales of the restaurant or $7,174. Rents paid by CKE to Ms. LeVecke under the lease during fiscal
2010 totaled $125,282.
Director Independence
The corporate governance listing standards of the NYSE require that we have and maintain a
board of directors with at least a majority of independent directors. In addition to setting
forth the minimum standards for independence, the NYSE rules require a companys board of directors
to annually affirmatively determine the independence of each of our directors. Generally, to
qualify as independent, a director must not have any direct or indirect material relationship with
the company. Our Board of Directors has determined that it would be appropriate to apply a higher
standard of independence than the minimum requirements established by the NYSE. Such requirements
are set forth in our Corporate Governance Guidelines, a copy of which is available under the
section entitled Corporate Governance on our website at www.ckr.com, and a copy of which will be
made available in print, without charge, to any stockholder upon request.
40
Our Board of Directors has determined that a director will not be considered independent if,
within a three-year period: (i) the director is or has been an employee, or a member of a
directors immediate family is or has been an executive officer, of us; (ii) the director, or a
member of a directors immediate family, receives or has received, more than $75,000 per year in
direct compensation from us, other than director and committee fees and pension or other forms of
deferred compensation for prior service (provided such compensation is not contingent in any way on
continued service); (iii) the director is or has been affiliated with or employed by, or a member
of directors immediate family is or has been affiliated with, or employed in a professional
capacity by, a present or former internal or external auditor of ours; (iv) the director, or a
member of a directors immediate family, is or has been employed as an executive officer of another
company where any of our present executives serve on that companys compensation committee; (v) the
director is or has been an executive officer or an employee, or a member of a directors immediate
family is or has been an executive officer, of a company that makes payments to, or receives
payments from, us for property or services in an amount which, in any single fiscal, exceeds the
greater of $750,000 or one percent of such other companys consolidated gross revenues;
(vi) the director, or a member of a directors immediate family, is or has been associated with a
charitable organization that receives payments from us in an amount which, in any single fiscal,
exceeds the greater of $750,000 or one percent of such charitable organizations annual gross
revenues; and (vii) the director is a principal of a law firm, an investment banking firm, a
financial advisory firm or a consulting firm that performs services for us, and payments made by us
to the firm in any single fiscal exceeds one percent of the firms annual gross revenues.
Our Board of Directors has determined that the following relationships generally will not be
considered to be material relationships that would impair a directors independence: (i) if a
director has any relationship described in items (ii), (v), (vi) and (vii) above where the payments
do not exceed the guidelines provided therein; (ii) if a director owns any of our equity
securities, or securities convertible into our equity securities; (iii) if a director is an
executive officer, director or equity owner of another company that owns less than 10% of our
equity securities, or securities convertible into our equity securities; and (iv) if a director is
an executive officer, director or equity owner of another company that is indebted to us, or to
which we are indebted, and the total amount of indebtedness to the other is less than one percent
of the total consolidated assets of the other company. For relationships not covered by items (i)
through (iv) of this paragraph, the determination of whether the relationship is material or not,
and therefore whether a director would be independent or not, shall be made by our entire Board of
Directors and in accordance with applicable NYSE rules.
In accordance with the standards set forth in our Corporate Governance Guidelines, and in
light of NYSE rules regarding independence requirements for boards of directors, our Board of
Directors has reviewed the independence of each of our directors. During the review of the
independence of our directors, our Board of Directors reviewed both direct and indirect
transactions and relationships that each of our directors had or maintained with us and our
management and employees, including those transactions that are more fully described in this Form
10-K/A under the heading Certain Relationships and Related Transactions. The purpose of this
review was to determine the independence of each director and whether such director would be
considered an independent director under the NYSE rules.
As a result of this review, our Board of Directors affirmatively determined that six of our
ten directors currently are independent under our Corporate Governance Guidelines. These
independent directors are Byron Allumbaugh, Peter Churm, Matthew Goldfarb, Janet E. Kerr, Jerold H.
Rubinstein and Frank P. Willey.
Independence of Committee Members
In accordance with SEC and NYSE rules, our Board of Directors has an Audit Committee, a
Compensation Committee and a Nominating & Corporate Governance Committee. Each of the members of
the Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee are
independent under the SEC and NYSE rules applicable to them.
41
Item 14.
Principal Accounting Fees and Services
Independent Registered Public Accountants
KPMG LLP, or KPMG, served as our independent registered public accounting firm for the fiscal
years ended January 25, 2010 and January 26, 2009. In addition to rendering audit services during
fiscal 2010 and 2009, KPMG provided various audit-related, tax, and other professional services for
the Company. The following is a summary of the fees billed to us by KPMG for professional services
rendered for fiscal 2010 and 2009, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Approved by
|
|
|
|
2010
|
|
|
2009
|
|
|
Audit
|
|
Fee Category
|
|
Fees
|
|
|
Fees
|
|
|
Committee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit Fees
|
|
$
|
1,230,350
|
|
|
$
|
1,145,698
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit-Related Fees
|
|
|
13,000
|
|
|
|
15,500
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
|
60,130
|
|
|
|
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
1,304,980
|
|
|
$
|
1,162,698
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
Audit Fees
Audit fees during fiscal 2010 and 2009 were associated with the annual audit of our
consolidated financial statements, reviews of our quarterly reports filed with the SEC, the
audit of effectiveness of the Companys internal control over financial reporting in accordance
with Section 404 of the Sarbanes-Oxley Act of 2002, statutory audits, review of franchise disclosure documents, and issuance of consents.
Audit-Related Fees
Audit-related
fees during fiscal 2010 and 2009 were associated with other services
related to the audit or review of the Companys financial statements
which are separate from the services described under Audit
Fees.
Tax Fees
Tax fees during fiscal 2010 were associated with cost segregation studies related to the
depreciation of fixed assets. KPMG did not render any tax-related services to the Company during
fiscal 2009.
All Other Fees
All other fees during fiscal 2010 and 2009 were associated with the Companys subscription for
and use of KPMGs accounting research tool.
Audit Committee Pre-Approval Policies
Consistent with SEC policies regarding auditor independence, the Audit Committee has
responsibility for appointing, setting compensation for, and overseeing the work of the independent
registered public accounting firm. In recognition of this responsibility, the Audit Committee has
established a policy to pre-approve all audit and permissible non-audit services provided by the
independent registered public accounting firm.
Prior to engagement of the independent registered public accounting firm for the next years
audit, management will submit an aggregate of services expected to be rendered during that year for
each of four categories of services to the Audit Committee for approval.
1. Audit services include audit work performed in the preparation of financial statements, as
well as work that generally only the independent registered public accounting firm can reasonably
be expected to provide, including comfort letters, statutory audits, and attest services and
consultation regarding financial accounting and/or reporting standards.
42
2. Audit-related services include assurance and related services that are traditionally
performed by the independent registered public accounting firm, including due diligence related to
mergers and acquisitions, employee benefit plan audits and special procedures required to meet
certain regulatory requirements.
3. Tax services include all services performed by the independent registered public accounting
firms tax personnel, except those services specifically related to the audit of the financial
statements, and include fees in the areas of tax compliance, tax planning and tax advice.
4. Other fees are those associated with services not captured in the other categories. We
generally do not request such services from the independent registered public accounting firm.
Prior to engagement, the Audit Committee pre-approves these services by category of service.
The fees are budgeted and the Audit Committee requires the independent registered public accounting
firm and management to report actual fees versus the budget periodically throughout the year by
category of service. During the year, circumstances may arise when it may become necessary to
engage the independent registered public accounting firm for additional services not contemplated
in the original pre-approval. In those instances, the Audit Committee requires specific
pre-approval before engaging the independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of its members. The
member to whom such authority is delegated must report, for informational purposes only, any
pre-approval decisions to the Audit Committee at its next scheduled meeting.
The Audit Committee has considered whether the independent registered public accounting firms
provision of non-audit services to us is compatible with maintaining the registered public
accounting firms independence and has concluded that the provision of such non-audit services does
not compromise the independence of KPMG.
43
PART IV
Item 15:
Exhibits
The exhibits filed as part of this Form 10-K/A are as follows:
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
|
31.1
|
|
|
Certification of Chief Executive Officer Pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
|
|
|
|
|
|
|
31.2
|
|
|
Certification of Chief Financial Officer Pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
|
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
|
|
Date: May 25, 2010
|
By:
|
/s/ Andrew F. Puzder
|
|
|
|
Andrew F. Puzder,
|
|
|
|
Chief Executive Officer
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
Chairman of the Board
|
|
May 25, 2010
|
|
|
|
|
|
|
|
Vice Chairman of the Board
|
|
May 25, 2010
|
|
|
|
|
|
/s/ Andrew F. Puzder
Andrew F. Puzder
|
|
Chief Executive Officer (Principal
Executive Officer) and Director
|
|
May 25, 2010
|
|
|
|
|
|
/s/ Theodore Abajian
Theodore Abajian
|
|
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
|
|
May 25, 2010
|
|
|
|
|
|
/s/ Reese Stewart
Reese Stewart
|
|
Senior Vice President and Chief Accounting
Officer (Principal Accounting Officer)
|
|
May 25, 2010
|
|
|
|
|
|
|
|
Director
|
|
May 25, 2010
|
|
|
|
|
|
|
|
Director
|
|
May 25, 2010
|
|
|
|
|
|
|
|
Director
|
|
May 25, 2010
|
|
|
|
|
|
|
|
Director
|
|
May 25, 2010
|
|
|
|
|
|
|
|
Director
|
|
May 25, 2010
|
|
|
|
|
|
|
|
Director
|
|
May 25, 2010
|
|
|
|
|
|
|
|
Director
|
|
May 25, 2010
|
|
|
|
|
|
* By:
|
|
/s/ Andrew F. Puzder
Andrew F. Puzder
|
|
|
|
|
As Attorney-in-Fact
|
|
|
45
EXHIBIT INDEX
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
|
31.1
|
|
|
Certification of Chief Executive Officer Pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
|
|
|
|
|
|
|
31.2
|
|
|
Certification of Chief Financial Officer Pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
|
Cke Restaurants (NYSE:CKR)
過去 株価チャート
から 8 2024 まで 9 2024
Cke Restaurants (NYSE:CKR)
過去 株価チャート
から 9 2023 まで 9 2024