SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY PROXY STATEMENT
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-B(E)(2))
[X] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO 240.14A-11(C) OR 240.14A-12
PIZZA INN, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT RULE 0-11(A)(2)
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1) AMOUNT PREVIOUSLY PAID: 2) FORM, SCHEDULE OR REGISTRATION STATEMENT
NO:
3) FILING PARTY: 4) DATE FILED:
PIZZA INN, INC.
5050 QUORUM DRIVE, SUITE 500
DALLAS, TEXAS 75240
(972) 701-9955
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 13, 2000
To our Shareholders:
The Annual Meeting of Shareholders of Pizza Inn, Inc., (the "Company") will
be held at the Company's training facility, 4819 Keller Springs Road, Addison,
Texas 75248, on Wednesday, December 13, 2000, at 10:00 a.m., Dallas time, for
the following purposes:
1. To elect four Class I directors;
2. To approve an increase in number of shares authorized under the 1993
Stock Award Plan and ratify all prior amendments to the Plan; and
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only shareholders of record at the close of business on October 18, 2000 are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof.
Sincerely,
Jeff Rogers
Chief Executive Officer
November 6, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED PROXY, AND MAIL IT IN THE STAMPED ENVELOPE ENCLOSED
FOR YOUR CONVENIENCE. THE ENCLOSED PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS
USE.
YOUR VOTE IS IMPORTANT.
PIZZA INN, INC.
5050 QUORUM DRIVE, SUITE 500
DALLAS, TEXAS 75240
(972) 701-9955
PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 13, 2000
The Board of Directors of Pizza Inn, Inc., a Missouri corporation (the
"Company"), is soliciting proxies to be voted at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Company's training
facility, 4819 Keller Springs Road, Addison, Texas 75248, on Wednesday, December
13, 2000, 10:00 a.m., Dallas time, and at any adjournments thereof. This Proxy
Statement was first mailed to the Company's shareholders on or about November 6,
2000.
If the proxy is signed and returned before the Annual Meeting, it will be
voted in accordance with the directions on the proxy. A proxy may be revoked at
any time before it is voted by execution of a subsequent proxy, by signed
written notice to Pizza Inn, Inc., c/o American Stock Transfer, 59 Maiden Lane,
New York, NY 10007, or by voting in person at the Annual Meeting.
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to notice of, and to vote at, the
Annual Meeting is October 18, 2000. At the close of business on that date,
there were outstanding 10,734,873 shares of Common Stock, $.01 par value
("Common Stock"). No other class of securities of the Company is entitled to
notice of, or to vote at, the Annual Meeting.
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder otherwise specifies in the
proxy, will be voted:
1. FOR the election of the four Class I director nominees named herein, to
serve for a term of two years each or until their respective successors are
elected and qualified; and
2. FOR approval of an increase in the number of shares authorized under the
1993 Stock Award Plan (the "Plan") and ratification of all prior amendments to
the Plan; and
3. In the discretion of the proxy holders, as to the transaction of such
other business as may properly come before the meeting or any adjournments
thereof.
The Board of Directors is not presently aware of any other business to be
brought before the Annual Meeting.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Annual Meeting. In deciding all questions, a holder of Common Stock (a
"Shareholder") is entitled to one vote, in person or by proxy, for each share
held in his name on the record date. Solely with respect to the election of
directors, a Shareholder has that number of votes equal to the number of shares
held by him on the record date multiplied by the number of directors being
elected and he is entitled to cumulate his votes and cast them all for any
single nominee or to spread his votes, so cumulated, among as many nominees and
in such manner as he sees fit. Directors must be elected by a plurality of the
votes cast. To be elected as a director, a candidate must be one of the four
candidates who receive the most votes out of all votes cast at the Annual
Meeting.
A Shareholder who is present, in person or by proxy, and who withholds his
vote in the election of directors, will be counted for purposes of determining
whether a quorum exists, but the withholding of his vote will not affect the
election of directors. A Shareholder who is present, in person or by proxy, and
who abstains from voting on other proposals, will be counted for purposes of a
quorum, and the abstention will have the same effect as a vote against the
proposals. Broker non-votes will be considered shares not present and will have
no effect on the outcome of the vote. If a quorum is not present, in person or
by proxy, the meeting may adjourn from time to time until a quorum is obtained.
The enclosed proxy, if executed and returned, will be voted as directed on
the proxy or, in the absence of such direction, FOR the election of the nominees
as directors. The proxy holders will not cumulate votes. If any other matters
properly come before the meeting, the enclosed proxy will be voted by the proxy
holders in accordance with their best judgment.
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation and By-laws provide that
the Board of Directors shall be divided into two Classes. The terms of the four
Class I directors expire at the Annual Meeting. The Board has nominated for
election at the Annual Meeting all four incumbent Class I directors, each to
serve for a term of two years. Each nominee of the Board has expressed his
intention to serve the entire term for which election is sought. Directors will
be elected by cumulative voting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
EACH OF THE FOUR NOMINEE DIRECTORS.
The following table lists the names and ages, as of October 1, 2000, of the four
nominee directors and the three directors whose terms of office will continue
after the Annual Meeting, the class to which each director has been or will be
elected, the year in which each director was first elected, and the annual
meeting (assuming that it is held in December) at which the term of each
director will expire.
Director Term
Nominee Directors Age Class Since Expires
------------------ --- ----- ----- -------
Bobby L. Clairday 57 I 1990 2000
Ronald W. Parker 50 I 1993 2000
Ramon D. Phillips 67 I 1990 2000
Butler E. Powell 61 I 1998 2000
Continuing Directors
---------------------
C. Jeffrey Rogers 53 II 1990 2001
F. Jay Taylor 77 II 1994 2001
Steve A. Ungerman 56 II 1990 2001
EXECUTIVE OFFICERS
The following table sets forth certain information, as of October 1, 2000,
regarding the Company's executive officers:
Executive
Officer
Name Age Position Since
---- --- -------- -----
C. Jeffrey Rogers 53 Vice Chairman and Chief Executive Officer 1990
Ronald W. Parker 50 President and Chief Operating Officer 1992
B. Keith Clark 37 Senior Vice President, General Counsel and Secretary
1997
Ward T. Olgreen 41 Senior Vice President of Concept Development 1995
Dennis L. Essary 46 Vice President of Operations - Norco Division 1998
Bradford S. Lucky 34 Vice President of Marketing 1997
Shawn M. Preator 31 Vice President, Controller, Treasurer and Assistant
Secretary 1999
William R. Miniat 43 Vice President of Customer Sales and Service -
Norco Division 2000
Brian L. Waters 49 Vice President of Purchasing - Norco Division 2000
BIOGRAPHIES OF NOMINEE DIRECTORS AND CONTINUING DIRECTORS
Steve A. Ungerman has been Of Counsel to the law firm of Boswell & Kober, P.C
since January 1998. From August 1997 to December 1997, he was employed by
MedSynergies, Inc., a physician practice management company, in the capacity of
Special Projects. From September 1996 to August 1997, he was President of
MedSynergies, Inc. From September 1996 to December 1997, he was Of Counsel to
the law firm of Ungerman, Sweet & Brousseau. Prior to September 1996, he
practiced law as a shareholder of Ungerman & Ungerman, P.C. and its predecessors
for 28 years in the areas of business matters, commercial finance and mediation.
Mr. Ungerman received his Juris Doctor degree from Southern Methodist
University. He was elected a Director and Chairman of the Board of Directors of
Pizza Inn in September 1990.
Bobby L. Clairday is an Area Developer of Pizza Inn restaurants and he is
President, a Director and sole shareholder of Clairday Food Services, Inc., a
Pizza Inn franchisee operating Pizza Inn restaurants in Arkansas. Mr. Clairday
is also sole shareholder of Advance Food Services, Inc., a franchisee operating
Pizza Inn restaurants in Arkansas. From 1990 until his election as a Director
of the Company in January 1993, Mr. Clairday was an ex-officio member of the
Board of Directors, serving as a representative of our franchisees. He has
served as the President of the Pizza Inn Franchisee Association and as a member
of various committees and associations affiliated with the Pizza Inn restaurant
system. Mr. Clairday has been a franchisee of the Company for over twenty
years.
Ronald W. Parker was elected President of the Company in July 2000. Mr.
Parker joined the Company in October 1992 and was elected Executive Vice
President, Chief Operating Officer and a Director in January 1993. From October
1989 to September 1992, he was Executive Vice President and General Manager of
the Bonanza restaurant division of Metromedia Steakhouses, Inc. and its
predecessor Metsa, Inc. From 1983 to 1989, Mr. Parker served in several
executive positions for USACafes, the franchisor of the Bonanza restaurant
chain.
Ramon D. Phillips has been President, Chief Executive Officer and Chairman
of the Board of Hallmark Financial Services, Inc., a financial services company,
since May 1989. Prior to Hallmark Financial Services, Inc., Mr. Phillips had
over fifteen years experience in the franchise restaurant industry, serving in
an executive position with Kentucky Fried Chicken (1969-1974) and Pizza Inn,
Inc. (1974-1989).
Butler E. Powell is Vice President of Business Banking with Hibernia
National Bank in Metairie, Louisiana. He has served in various capacities with
the bank and its predecessors since 1983. He graduated from Loyola University
in New Orleans with BBA and MBA degrees and spent 3 years with the national
accounting firm, Ernst and Ernst, before entering the banking industry. Mr.
Powell was former President and a Director of the New Orleans Athletic Club and
served on the Foundation Board of East Jefferson Hospital. He was elected a
Director of Pizza Inn in January 1998.
C. Jeffrey Rogers is Chief Executive Officer of the Company. He was
appointed President of the Company's predecessor in February 1990 and he became
President, Chief Executive Officer and a Director of the Company in September
1990 pursuant to the terms of the Company's recapitalization plan. From 1983 to
1989, Mr. Rogers was President, Chief Executive Officer and a Director of
USACafes General Partner, Inc., the general partner of the limited partnership
that owned the Bonanza family restaurant system and franchised approximately 650
Bonanza restaurants, and its predecessor USACafes. Mr. Rogers was elected Vice
Chairman of the Board of Directors of the Company in January 1994, and he was
elected a Director of Hallmark Financial Services, Inc. in May 1995.
F. Jay Taylor is an arbitrator in Ruston, Louisiana who is affiliated with
the American Arbitration Association and the Federal Mediation and Conciliation
Service. He formerly served as a Director of USACafes, Earth Resources and Mid
South Railroad. Dr. Taylor, who received his Ph.D. from Tulane University,
served as President of Louisiana Tech University from 1962 to 1987 and currently
serves as its President Emeritus. Mr. Taylor was elected a Director of the
Company in 1994.
BIOGRAPHIES OF NON-DIRECTOR OFFICERS
B. Keith Clark was elected Senior Vice President in June 2000. He joined
the Company in February 1997 and was elected General Counsel and Secretary of
the Company in March 1997. From June 1994 through February 1997, he was
Assistant General Counsel and Assistant Secretary of American Eagle Group, Inc.,
a property and casualty insurance holding company. From January 1990 through May
1994, Mr. Clark was a corporate associate in the Dallas office of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., a diversified international law firm.
Ward T. Olgreen was elected Senior Vice President of Concept Development in July
2000. He was appointed Vice President of Concept Development in February 1999.
He joined the Company in September 1991 as a Franchise Operations Consultant.
Mr. Olgreen was promoted to Senior Franchise Operations Consultant in July 1992,
Director of Franchise Operations in July 1993, and Vice President of
International Operations and Vice President of Brand R&D for the Company in
January 1995. Mr. Olgreen was a Branch Manager for GCS Service, Inc., a
restaurant equipment service provider, from June 1986 through July 1991.
Dennis L. Essary was appointed Vice President of Administration/Controller of
Norco Distributing Company in July 1997. In February 1998 he was appointed Vice
President of Operations - Norco Division. He joined the Company as Controller of
Norco Distributing Company in September 1992. Mr. Essary was Vice President of
Mediquip International, a distributor of medical equipment and supplies, from
April 1990 to September 1992. Mr. Essary owned a certified public accounting
firm from 1987 to 1990.
Bradford S. Lucky was appointed Vice President of Marketing in March 1997. He
joined the Company in December 1996 as Executive Director of Marketing. From
1989 through November 1996, Mr. Lucky served in several account management
positions in the Publicis/Bloom Advertising Agency.
William R. Miniat was appointed Vice President of Customer Sales and
Service - Norco Division in February 2000. He joined the Company in January
1995 as a Franchise Operations Consultant. In September 1996 he was appointed
Director of Sales for Norco. Prior to joining the Company, he was a National
Sales Manager for Western Merchandise from 1992 to 1999.
Shawn M. Preator was elected Vice President in June 2000. He was elected
Controller, Treasurer and Assistant Secretary in April 1999. Mr. Preator had
been Assistant Controller at the Company since July 1998. Prior to joining the
Company, Mr. Preator was a Senior Financial Analyst at LSG/Sky Chefs, an
international airline caterer, from September 1996 to July 1998. Prior to
September 1996, Mr. Preator worked for the accounting firm Ernst & Young LLP in
their audit department.
Brian L. Waters was appointed Vice President of Purchasing - Norco Division in
September 2000. He joined the Company in August 1996 as Director of Purchasing.
Prior to joining the Company, Mr. Waters was Senior Purchasing Manager for Fast
Food Merchandisers from 1993 to 1996.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information, as of October 1, 2000,
with respect to the beneficial ownership of Common Stock by: (a) each person
known to be a beneficial owner of more than five percent of the outstanding
Common Stock; (b) each director, nominee director, and executive officer named
in the section entitled "Summary Compensation Table"; and (c) all directors and
executive officers as a group (14 persons). Except as otherwise indicated, each
of the persons named in the table below is believed by the Company to possess
sole voting and investment power with respect to the shares of Common Stock
beneficially owned by such person. Information as to the beneficial ownership
of Common Stock by directors and executive officers of the Company has been
furnished by the respective directors and executive officers.
Name Shares Percent
and Address of Beneficially Of Class
--------
5% Beneficial Owner Owned
- ------------------- ---------
C. Jeffrey Rogers (a)
5050 Quorum Drive, Suite 500
Dallas, Texas 75240 3,939,135 34.25%
Ronald W. Parker (a)
5050 Quorum Drive, Suite 500
Dallas, Texas 75240 1,380,744 12.14%
Butler E. Powell 10,000 less than 1%
Bobby L. Clairday (a) (b) 68,300 less than 1%
Ramon D. Phillips (a) (c) 43,383 less than 1%
Steven A. Ungerman (a) 45,849 less than 1%
F. Jay Taylor 20,000 less than 1%
B. Keith Clark (a)(d) 67,671 less than 1%
Ward T. Olgreen (a) 112,467 1.04%
Dennis L. Essary (a)(e) 40,496 less than 1%
All Directors and 5,834,188 51.15%
Executive Officers as a Group
(a) Includes vested options under the Company's stock option plans, as
follows: 760,000 shares for Mr. Rogers; 623,500 shares for Mr. Parker; 20,000
shares for Mr. Clairday; 5,490 shares for Mr. Phillips; 4,500 shares for Mr.
Powell; 10,000 shares for Mr. Taylor; 15,283 shares for Mr. Ungerman; 55,500
shares for Mr. Clark; 48,833 shares for Mr. Olgreen; and 22,500 shares for Mr.
Essary.
(b) Mr. Clairday shares voting and investment power for 18,200 shares with
his wife.
(c) Mr. Phillips shares voting and investment power for 5,333 shares with
the other shareholders of Wholesale Software International, Inc.
(d) Includes 4,000 shares held by K&A Clark Family Partnership, L.P.
(e) Mr. Essary shares voting and investment power for 1,000 shares with his
wife.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board has established Audit, Compensation, Executive, Finance and Stock
Award Plan Committees. The Audit Committee selects independent auditors and
reviews audit results. The Compensation Committee reviews and approves
remuneration for officers of the Company and administers the 1992 Stock Award
Plan. The Finance Committee reviews and oversees the Company's capital structure
and operating results. The Executive Committee considers business as directed
by the Chairman of the Board. The Stock Award Plan Committee administers the
1993 Stock Award Plan and the 1993 Outside Directors Stock Award Plan.
As of October 1, 2000, Messrs. Parker, Phillips, Powell, Taylor and
Ungerman serve on the Audit Committee; Messrs. Phillips, Powell and Ungerman
serve on the Compensation Committee; Messrs. Phillips, Powell, Ungerman and
Clairday serve on the Stock Award Plan Committee; Messrs. Phillips, Rogers and
Ungerman serve on the Executive Committee; and Messrs. Parker, Phillips, Powell
and Taylor serve on the Finance Committee.
During fiscal year 2000, the Board of Directors held four meetings. The Audit
Committee met three times, the Compensation Committee met once, the Executive
Committee met twelve times and the Finance Committee met four times. In
addition, the Board of Directors and the Compensation and Stock Award Plan
Committees took several actions by unanimous written consent in lieu of
meetings. Each of the directors attended at least three-fourths of the total
number of meetings held by the Board and the committees on which he served.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board is responsible for providing independent
objective oversight of the Company's accounting functions and internal controls.
The Audit Committee is composed of four independent directors and acts under a
written charter adopted and approved by the Board of Directors on May 23, 2000.
Each of the members of the Audit Committee is independent as defined by the
NASDAQ listing standards. A copy of the Audit Committee Charter is attached to
this Proxy Statement as Appendix A.
The responsibilities of the Audit Committee include reviewing the financial
reports and other financial information provided by the Company to any
governmental body or the public; the Company systems of internal controls
regarding finance, accounting, legal compliance and ethics that management and
the Board have established; and the Company auditing, accounting and financial
reporting processes generally. Consistent with this function, the Audit
Committee encourages continuous improvement of, and adherence to, the Company
policies, procedures and practices at all levels. The Audit Committee's primary
duties and responsibilities are to:
- - serve as an independent and objective party to monitor the Company
financial reporting process and internal control system,
- - review and appraise the audit efforts of the Company independent
accountants, and
- - provide an open avenue of communication among the independent accountants,
financial and senior management, and the Board of Directors.
The Committee discussed with the independent accountants matters required
to be discussed by Statement on Auditing Standards No. 61 (Communications with
Audit Committees). The Company independent accountants also provided to the
Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed with the independent accountants that firm's independence.
The Audit Committee is responsible for recommending to the Board that the
Company's financial statements be included in the Company's annual report.
Based on the discussions with the independent accountants concerning the audit,
the financial statement review, and other such matters deemed relevant and
appropriate by the Audit Committee, the Audit Committee recommended to the Board
that the June 25, 2000 financial statements be included in the Company's 2000
Annual Report on Form 10-K.
SUBMITTED BY THE AUDIT COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
Dr. F. Jay Taylor, Chairman
Ray Phillips
Steve Ungerman
Butler Powell
SUMMARY COMPENSATION TABLE
The following table sets forth the annual compensation of the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company for the fiscal years ended June 25, 2000, June 27, 1999 and June
28, 1998 (designated as years 2000, 1999 and 1998).
Annual Compensation
------------------------
Long-Term
Compensation
Awards
-----------------
Securities Under-
Name Other Annual lying Options
(and Principal Position) Year Salary ($) Bonus ($) Compensation ($) (a) (# of shares)
- ------------------------ ----------------- --------------- ---------- --------------------- -------------
C. Jeffrey Rogers. . . . 2000 $ 590,144 $ 662,500 $ 262,882 0
(Chief Executive . . . . 1999 $ 562,333 $ 600,000 $ 252,670 180,000
Officer) . . . . . . . . 1998 $ 536,065 $ 612,500 $ 243,892 0
Ronald W. Parker . . . . 2000 $ 445,379 $ 280,000 $ 212,457 0
(President). . . . . . . 1999 $ 424,871 $ 195,000 $ 231,658 180,000
1998 $ 383,890 $ 186,500 $ 179,402 0
B. Keith Clark (Senior . 2000 $ 129,615 $ 17,000 $ 0 5,000
Vice President and . . . 1999 $ 120,000 $ 5,000 $ 0 16,500
General Counsel) . . . . 1998 $ 107,211 $ 5,000 $ 3,600 15,000
Ward T. Olgreen. . . . . 2000 $ 119,250 $ 8,000 $ 0 2,500
(Senior Vice President . 1999 $ 98,077 $ 5,000 $ 0 16,500
of Concept . . . . . . . 1998 $ 84,690 $ 5,000 $ 3,600 0
Development)
Dennis L. Essary. . . . 2000 $ 94,500 $ 11,500 $ 0 2,500
(Vice President of . . . 1999 $ 90,000 $ 5,000 $ 0 14,000
Operations - Norco . . . 1998 $ 72,917 $ 4,314 $ 0 0
Division)
(a) Includes: for Mr. Rogers, life insurance benefits (which includes the
payment of related taxes) of $86,489 in 2000, $76,702 in 1999 and $86,986 in
1998, supplemental retirement benefits (which includes the payment of related
taxes) of $43,860 per year in 2000, 1999 and 1998, and life and disability
insurance benefits (which includes the payment of related taxes) of $43,860 in
2000, 1999 and 1998; for Mr. Parker, life insurance benefits (which includes the
payment of related taxes) of $74,037 in 2000, $72,139 in 1999 and $67,309 in
1998, supplemental retirement benefits (which includes the payment of related
taxes) of $43,860 per year in 2000, 1999 and 1998, and life and disability
insurance benefits (which includes the payment of related taxes) of $43,860 in
2000, 1999 and 1998; for Mr. Clark, car allowance of $3,600 in 1998; and for
Mr. Olgreen, car allowance of $3,600 in 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding stock options
exercised during fiscal year 2000 and unexercised stock options held at the end
of fiscal year 2000 by the Chief Executive Officer and the other four most
highly compensated executive officers of the Company. The closing bid price for
the Company's Common Stock, as reported by the National Association of
Securities Dealers Automated Quotation System, was $3.50 on June 23, 2000 the
last trading day of the Company's fiscal year.
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year End Fiscal Year
Acquired on Value Realized (Exercisable/ End (Exercisable/
Name Exercise (#) ($) Unexercisable) (#) Unexercisable)
- ----------------- ------------ ---------------- ------------------ -------------------
C. Jeffrey Rogers 700,000 -- 760,000 (e) $ 15,625
0 (u) $ 0
Ronald W. Parker. 200,000 -- 823,500 (e) $ 215,625
0 (u) $ 0
B. Keith Clark. . -- -- 44,500 (e) $ 2,626
22,000 (u) $ 0
Ward. T. Olgreen. 3,333 -- 42,833 (e) $ 21,480
14,500 (u) $ 0
Dennis L. Essary. -- -- 17,500 (e) $ 3,969
10,000 (u) $ 0
(e) Denotes exercisable options.
(u) Denotes unexercisable options.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
during fiscal year 2000, pursuant to the Company's 1993 Stock Award Plan, to the
Chief Executive Officer and the other four most highly compensated executive
officers of the Company.
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term
----------------- -----------------------------
% of Total Options
Granted to Exercise
Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date 5% 10%
- ----------------- ----------------------------- ------------ --------- ----------- ---- ------
C. Jeffrey Rogers -- -- -- -- -- --
Ronald W. Parker -- -- -- -- -- --
B. Keith Clark 5,000 (a) 8.0 3.625 10/18/06 $7,379 $17,195
Ward T. Olgreen 2,500 (a) 4.0 3.625 10/18/06 $3,689 $ 8,598
Dennis L. Essary 2,500 (a) 4.0 3.625 10/18/06 $3,689 $ 8,598
(a) All of such options were granted on October 18, 1999 and become
exercisable on October 18, 2001.
COMPENSATION COMMITTEE AND STOCK AWARD PLAN COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised of three
independent, non-employee directors. The Compensation Committee is responsible
for establishing the level of compensation of the executive officers of the
Company and administering the 1992 Stock Award Plan. The same three directors
also comprise the Stock Award Plan Committee, which administers the 1993 Stock
Award Plan.
In its administration and periodic review of executive compensation, the
Compensation Committee believes in aligning the interests of the executive
officers with those of the Company's shareholders. To accomplish this, the
Compensation Committee seeks to structure and maintain a compensation program
that is directly and materially linked to operating performance and enhancement
of shareholder value. This has been effectively accomplished in the past by
weighting the compensation of most executive officers in favor of equity
ownership incentives and bonuses paid on the basis of performance.
The Company intends for all compensation paid to its executives to be fully
deductible under federal income tax laws. Recently adopted changes to the
Internal Revenue Code impose certain limitations on compensation in excess of $1
million per year paid to executives. The Compensation Committee believes that
performance based bonuses and stock options granted to its executive officers
will continue to be fully deductible.
CHIEF EXECUTIVE OFFICER
The salary and bonus of C. Jeffrey Rogers, Chief Executive Officer of the
Company, is set forth in his most recent Employment Agreement, effective as of
July 1, 1999. The agreement provides for an annual base salary in fiscal year
2001 of $620,561 which will be increased by 5% per year.
In reviewing Mr. Rogers' agreement, the Compensation Committee found his
base salary and bonus to be in line with the overall leadership he has provided
to the employees and to the franchise community. The bonus program established
in Mr. Rogers' agreement is based on new store openings, pre-tax net income
growth, and pre-tax operating cash flow. Termination provisions were found to
be industry competitive and in line with historical performance and expected
future contributions as well as helping to ensure his continued leadership. See
the section entitled "Executive Employment Contracts."
EXECUTIVE OFFICERS
Salaries of the executive officers, excluding Mr. Rogers, are reviewed
annually and adjusted based on competitive practices, changes in level of
responsibilities and, in certain cases, individual performance measured against
goals. The Compensation Committee strongly believes that maintaining a
competitive salary structure is in the best interest of shareholders. It
believes the Company's long-term success in its marketplace is best achieved
through recruitment and retention of high caliber executives who are among the
most skilled and talented in the industry.
Bonus targets for the four most highly paid executive officers, other than
the Chief Executive Officer, are set annually. Mr. Parker's 2000 bonus was
based on individual performance and targets related to the Company's
profitability, cash flow and debt repayments. The 2000 bonuses for Mr. Clark,
Mr. Olgreen, and Mr. Essary were based on individual performance and targets
related to profitability of the Company for the fiscal year.
STOCK OPTIONS
The Compensation Committee and Stock Award Plan Committee believe that
equity ownership motivates officers and employees to provide effective
leadership that contributes to the Company's long-term financial success as
measured by appreciation in its stock price. The Company established the 1993
Stock Award Plan for the purpose of aligning employee and shareholder interests.
Under this plan, stock options have been granted in fiscal year 2000 to certain
executive officers, as well as other employees, based upon their relative
positions and responsibilities, as well as historical and expected contributions
to Company growth.
Submitted by the Compensation Committee and Stock Award Plan Committee:
Ramon D. Phillips
Steve A. Ungerman
Butler E. Powell
EXECUTIVE EMPLOYMENT CONTRACTS
C. Jeffrey Rogers and the Company entered into an Employment Agreement,
executed October 1, 1999 and effective as of July 1, 1999, for a term which
currently extends through June 30, 2004. The agreement provides for an annual
base salary in fiscal year 2000 of $591,010 per annum, increasing by five
percent on each anniversary date of the agreement.
Under the agreement, Mr. Rogers is also entitled to the following cash
bonuses, based on performance: (a) $37,500 payable each quarter, if the
Company's operating results report pre-tax income growth of at least 10% more
than the same quarter in the preceding year; (b) $75,000 payable each
semi-annual period, if the Company opens at least 50 new Pizza Inn units during
such fiscal year; and (c) $200,000 payable annually, if the Company meets
targets established in the agreement for pre-tax operating cash flow (such bonus
being adjustable to a maximum of $250,000 per year if such targets are exceeded
by certain amounts).
Under the agreement, Mr. Rogers also receives a $50,000 annual allowance to
purchase life and disability insurance and a $10,000 annual allowance to
maintain secondary health, dental and other insurance. As compensation for the
use of his personal automobile on Company business, Mr. Rogers receives $1,350
per month as an automobile allowance, plus reimbursement of gasoline and
maintenance expenses.
Ronald W. Parker and the Company entered into an Employment Agreement,
executed October 1, 1999 and effective as of July 1, 1999, for a term which
currently extends through June 30, 2004. The agreement provides for an annual
base salary and bonus not less than the current base salary and bonus with such
increases as the Compensation Committee may approve.
Mr. Rogers or Mr. Parker may terminate their respective agreements at any time
within six months after a "change in control" of the Company occurs or within
twelve months under certain circumstances after a change in control of the
Company occurs. Change in control is defined as: (a) a transfer of
substantially all of the assets of the Company to an outside group or entity;
(b) the acquisition by an outside group or entity of 50% or more of the stock of
the Company or other surviving corporation; or (c) an unapproved change in the
majority of the Company's Board of Directors. If the Company terminates Mr.
Rogers' employment without cause, or if Mr. Rogers terminates his employment
upon a "change in control," he will be entitled to a lump sum payment of his
base salary for the remainder of the term of the agreement plus two times the
maximum annual bonus amounts provided in the agreement. If the Company
terminates Mr. Parker's employment without cause, or if Mr. Parker terminates
his employment upon a "change in control," he will be entitled to a lump sum
payment of three times (i) his highest annual salary over the last three years
plus (ii) the highest bonus and other cash compensation received by Mr. Parker
the last three years. Each agreement includes a noncompetition covenant that
would apply for three years after termination of employment.
COMPENSATION OF DIRECTORS
A director who is an employee of the Company is not compensated for service
as a member of the Board of Directors or any Committee of the Board. Outside
directors receive an annual fee of $17,000 plus meeting fees equal to $1,000 per
Board meeting and $250 per Committee meeting attended. The Chairman of the
Board receives an additional $6,000 annual fee for serving in that capacity.
Directors are also reimbursed for Board related expenses.
Under the 1993 Outside Directors Stock Award Plan each elected outside
director is eligible to receive, as of the first day of the Company's fiscal
year, options for Common Stock equal to twice the number of shares of Common
Stock purchased during the preceding fiscal year or purchases by exercise of
previously granted options during the first ten days of the current fiscal year.
On the first day of the first fiscal year immediately following the day on which
an outside director first becomes eligible to participate in this plan, that
outside director shall receive an option to acquire one share of Common Stock
for each share of Common Stock owned by such director on this first day of the
fiscal year. No outside director shall be entitled to options for more than
20,000 shares per fiscal year. Stock options granted under the plan have an
exercise price equal to the market price of the Common Stock on the date of
grant and are first exercisable one year after grant.
Since the beginning of fiscal year 2000, stock options were granted to
outside directors pursuant to such plan as follows: on June 28, 1999, options
for 10,000 shares (at $3.46875) to Mr. Taylor, and 2,000 shares (at $3.46875)
for Mr. Powell.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 2000 were
Messrs. Powell, Phillips and Ungerman. During fiscal year 2000, C. Jeffrey
Rogers served on the Board of Directors and the Compensation Committee of
Hallmark Financial Services, Inc., of which Mr. Phillips is Chief Executive
Officer and Chairman of the Board of Directors. Prior to 1990, Mr. Phillips
served as a director and officer of two predecessors of the Company. See
"Biographies of Nominee Directors and Continuing Directors."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 6, 1999, the Company loaned C. Jeffrey Rogers, the Company's
Chief Executive Officer, approximately $1.95 million to acquire 700,000 shares
of the Company's common stock through the exercise of vested stock options
previously granted to him by the Company. The interest rate on the loan is the
same floating interest rate the Company pays in its credit facility with Wells
Fargo (Texas), N. A. ("Wells Fargo"). As collateral for the loan, Mr. Rogers
granted the Company a second lien on 2,749,000 shares of the Company's common
stock and certain real property. The Company has agreed to subordinate its loan
to an existing personal loan made by Wells Fargo to Mr. Rogers. The Wells Fargo
loan is secured by a first lien on the collateral pledged to the Company.
On October 6, 1999, the Company loaned Ronald W. Parker, the Company's
President and Chief Operating Officer, approximately $560,000 to acquire 200,000
shares of the Company's common stock through the exercise of vested stock
options previously granted to him by the Company. On July 7, 2000, the Company
loaned Mr. Parker approximately $302,000 to acquire an additional 200,000 shares
of the Company's common stock through the exercise of vested stock options
previously granted to him by the Company. The interest rate on the loans is the
same floating interest rate the Company pays in its credit facility with Wells
Fargo. As collateral for the loans, Mr. Parker granted the Company (i) a first
lien on 100,000 previously purchased shares of the Company's common stock and
certain real property, and (ii) a second lien in certain additional real
property.
Each loan was approved by the Board of Directors, with the specific terms
and collateral being approved by the Compensation Committee.
Bobby L. Clairday is President and sole shareholder of Clairday Food
Services, Inc. and is sole shareholder of Advance Food Services, Inc., both of
which are franchisees of the Company. Mr. Clairday also holds area development
rights in his own name. Mr. Clairday currently operates 16 restaurants in
Arkansas, either individually or through the corporations noted above. As
franchisees, the two corporations purchase a majority of their food and other
supplies from the Company's distribution division. In fiscal year 2000,
purchases by these franchisees made up 5% of the Company's food and supply
sales, and royalties, license fees and area development fees from Mr. Clairday
and such franchisees made up 3% of the Company's franchise revenues.
Ramon D. Phillips is a Vice President, board member and shareholder of
Wholesale Software International, Inc., which is a franchisee operating one
Pizza Inn restaurant.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and the persons who own more than ten percent
of the Company's Common Stock to file initial reports of ownership of Common
Stock and reports of changes of ownership with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. and to
furnish the Company with copies of such reports. The Company believes that,
during the preceding fiscal year, all of the Company's executive officers,
directors and holders of more than 10% of its Common Stock complied with all
Section 16(a) filing requirements.
INDEPENDENT AUDITORS
The Audit Committee has selected PricewaterhouseCoopers LLP certified
public accountants as the independent auditors of the Company for fiscal year
2001. A representative of PricewaterhouseCoopers LLP will be present at the
Annual Meeting, will be available to respond to appropriate questions, and will
have an opportunity to make a statement.
SHAREHOLDER PROPOSALS
If a shareholder wishes to present a proposal at the Annual Meeting of
Shareholders tentatively scheduled for December 2001, the shareholder must
deliver his or her proposal to the Company at its principal executive offices no
later than July 12, 2001, in such form as required under rules issued by the
Securities and Exchange Commission, in order to have that proposal included in
the proxy materials of the Company for such Annual Meeting of Shareholders.
If a shareholder wishes to present a proposal at the 2001 Annual Meeting of
Shareholders, but does not wish to include the proposal in the proxy materials
of the Company for such Annual Meeting of Shareholders, the shareholder must
notify the Company in writing of his or her intent to make such presentation no
later than September 25, 2001 or the Company shall have the right to exercise
its discretionary voting authority when such proposal is presented at the Annual
Meeting of Shareholders, without including any discussion of that proposal in
the proxy materials for the Annual Meeting.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative annual total shareholder return
(change in share price plus reinvestment of any dividends) on the Company's
Common Stock versus two indexes for the past five fiscal years. The graph
assumes $100 was invested on the last trading day of the fiscal year ending June
24, 1995. Until fiscal year 1998, the Company did not pay cash dividends on
its Common Stock during the applicable period. The Dow Jones Equity Market
Index is a published broad equity market index. The Dow Jones Entertainment and
Leisure Restaurant Index is compiled by Dow Jones and Company, Inc., and is
comprised of seven public companies, weighted for the market capitalization of
each company, engaged in restaurant or related businesses (CKE Restaurants,
Inc., Brinker International, Inc., Cracker Barrel Old Country Store, Inc.,
Darden Restaurants, Inc., McDonald's Corporation, Tricon Global Restaurants,
Inc., and Wendy's International, Inc.).
CUMULATIVE TOTAL RETURN
-----------------------
6/24/95 6/28/96 6/29/97 6/28/98 6/27/99 6/25/00
PIZZA INN, INC.. . . . 100 148 130 189 126 133
DOW JONES TOTAL MARKET 100 125 164 210 244 276
DOW JONES RESTAURANTS. 100 119 119 153 170 135
INCREASE IN SHARES AUTHORIZED AND RATIFICATION OF ALL PRIOR AMENDMENTS TO THE
1993 STOCK AWARD PLAN
The Company's 1993 Stock Award Plan (the "Plan") became effective as of
October 13, 1993. The purpose of the Plan is to attract and retain excellent
officers and employees by providing opportunities for them to participate in
increased stock value which their efforts help to produce.
The Plan is administered by the Stock Award Plan Committee (the
"Committee"), which is comprised of three outside directors who are not employed
by the Company and who qualify as "disinterested persons" under rules issued by
the Securities and Exchange Commission. All officers and employees of the
Company (approximately 235 persons) are eligible to participate in the Plan. The
Committee determines, in its discretion but subject to the limitations set forth
in the Plan, the persons to whom awards are granted, the number of shares
covered by awards, the exercise price of awards, and the conditions, if any,
imposed upon the granting of awards under the Plan. The Committee issues awards
under the Plan to employees in correlation with their respective
responsibilities to the Company.
During any one Plan year, the total number of options granted and shares
issued pursuant to stock appreciation rights ("SARs") may not exceed 1,000,000,
plus any unused allocations from prior years. Awards granted under the Plan
which expire or terminate without being exercised may be regranted.
The exercise price for any option granted under the Plan may not be less
than the fair market value of the Company's Common Stock on the date of grant.
For all awards under the Plan, the minimum vesting period is six months after
grant and the maximum exercise period is five years after vesting. Payment for
shares purchased pursuant to an option must be made at the time of exercise in
cash or other payment method approved by the Committee. The Plan terminates on
October 13, 2003 and no awards may be granted thereafter.
Awards granted pursuant to the Plan may not be transferred and may only be
exercised by the participant, or, in the event of his death, by his heirs or
estate. Upon the death (or permanent disability) of a participant while he is
employed by the Company, any outstanding unvested award becomes immediately
vested and the award may be exercised by the participant's heirs, estate or
guardian within one year following the participant's death (or commencement of
such disability), after which any unexercised award terminates. If the
employment of a participant terminates for any reason other than death or
disability, he may exercise any vested award within 21 days after termination,
after which period any unexercised award terminates. In the event of a "change
of control" of the Company, as defined in the Plan, all outstanding awards will
become immediately vested and exercisable.
The Plan authorizes the Committee to grant "Incentive Options," which are
intended to permit the participant to defer resulting federal income taxes, as
well as "Standard Options" which do not have such tax benefit. The Plan also
authorizes the Committee to grant SARs either independent of, or in connection
with, options. Upon exercise of either form of option, the participant
purchases shares of Common Stock. Upon exercise of an SAR, the participant
receives, for each share with respect to which the SAR is exercised, an amount
equal to the difference between the fair market value of the Common Stock on the
date of the award and the fair market value of the Common Stock on the date of
exercise. Payment of a SAR benefit may be, at the discretion of the Committee,
in the form of cash, a note, or Common Stock of equivalent value.
The Committee may amend or terminate the Plan, including modification or
waiver of terms as they apply to individual participants. Shareholder approval
is required for any amendment which would: increase the aggregate number of
shares of Common Stock issuable under the Plan; materially increase the benefits
accruing to participants in the Plan; or modify the eligibility requirements
for, or decrease the minimum exercise price of, any Incentive Options. No
amendment or termination of the Plan may adversely affect the rights of any
participant under any then outstanding award without the consent of the
participant. The Plan provides for automatic adjustments to prevent dilution or
enlargement of the participant's rights in the event of a stock split, stock
dividend or similar transaction.
FEDERAL INCOME TAX CONSEQUENCES UNDER THE PLAN
Under the Internal Revenue Code (the "Code"), the holder of a Standard
Option will realize no taxable income upon the receipt of the option but will
realize compensation upon the exercise of such option, taxable as ordinary
income to the extent that the fair market value on the date of exercise exceeds
the option price. The Company is entitled to a deduction from income in an equal
amount at the time the optionee realizes such income. Upon a sale of shares
acquired pursuant to exercise of an option, any difference between the sale
price and the fair market value of the shares on the date of exercise will be
treated as capital gain or loss.
Incentive Options are intended to qualify as incentive stock options under
Section 422 of the Code. Generally, the optionee is not taxed and the Company
is not entitled to a deduction on the grant or exercise of an Incentive Option.
However, if the optionee disposes of the Option shares at any time within (i)
one year after the transfer of such shares to the optionee pursuant to the
exercise of such Incentive Option, or (ii) two years after the grant of such
Incentive Option, then the optionee will recognize ordinary income equal to the
excess, if any, of the lesser of the amount realized from such disposition or
the fair market value of the shares on the exercise date, over the exercise
price of such Incentive Option (with any remaining gain being taxed as a capital
gain). In such event, the Company will generally be entitled to a deduction in
an amount equal to the amount of ordinary income recognized by the optionee. If
the optionee disposes of the option shares outside of the above described time
limits, then capital gain or loss will be recognized in an amount equal to the
difference between the amount realized on the disposition and the exercise
price. The Company will not be entitled to any deduction in this event.
Finally, any excess of the fair market value of the stock on the date the
Incentive Option is exercised over the option exercise price will be included in
the calculation of the optionee's alternative minimum taxable income, which may
subject the optionee to the alternative minimum tax.
NEW PLAN BENEFITS
None of the additional 100,000 shares authorized by the proposed amendment
to the Plan have been granted by the Company. The members of the Committee
which approved the proposed amendment to the Plan are not eligible to receive
stock options under the Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Plan originally provided for the granting of options to acquire up to
2,000,000 Shares of Common Stock. In each of June 1996, August 1997 and August
1998, the Committee adopted, and the Company's shareholders subsequently
approved, an amendment to the Plan , increasing by 500,000 shares the total
number of shares of Common Stock which may be issued under the Plan. After
giving effect to such amendments, the total number of shares issuable under the
Plan was 3,500,000.
In October 2000, the Committee adopted an amendment to the Plan increasing by
100,000 shares the total number of shares of Common Stock which may be issued
under the Plan and ratified all prior amendments to the Plan, subject to the
approval of the Company's shareholders. After giving effect to such amendment,
the total number of shares issuable under the Plan will be 3,600,000.
As of September 18, 2000, there were 3,483,700 outstanding options granted
under the Plan, leaving only 16,300 shares available for the grant of options
under the Plan, as currently constituted. The Board of Directors believes that
the increase in the number of authorized shares under the Plan will enable the
Company and its shareholders, through future grants of stock options, to
continue to secure the benefits of the incentives inherent in stock ownership by
its officers and employees. For additional information regarding the Plan, see
the section entitled "Increase in Shares Authorized and Ratification of all
Prior Amendments to the 1993 Stock Award Plan."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS APPROVE THE INCREASE IN THE
NUMBER OF SHARES AUTHORIZED UNDER THE PLAN BY 100,000 SHARES AND RATIFY ALL
PRIOR AMENDMENTS TO THE PLAN.
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and mailing the
proxy and the material used in the solicitation thereof will be borne by the
Company. In addition to the use of the mails, proxies may be solicited by
directors, officers and employees of the Company by personal interview,
telephone or telefax. Arrangements may also be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of stock held of record by such persons, and
the Company may reimburse them for reasonable out-of-pocket expenses of such
solicitation.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K EXCLUDING EXHIBITS,
DATED SEPTEMBER 21, 2000, IS BEING FURNISHED TO SHAREHOLDERS WITH THIS PROXY
STATEMENT. COPIES OF SUCH EXHIBITS WILL BE FURNISHED UPON WRITTEN REQUEST AND
UPON REIMBURSEMENT OF THE COMPANY'S REASONABLE EXPENSES FOR FURNISHING SUCH
EXHIBITS. REQUESTS SHOULD BE ADDRESSED TO PIZZA INN, INC., 5050 QUORUM DRIVE,
SUITE 500, DALLAS, TEXAS 75240, ATTENTION: CORPORATE SECRETARY.
Please mark Your votes as indicated
This Proxy, when properly executed, will be voted by the Proxies in the manner
designated below. If this Proxy is returned signed but without a clear voting
designation, the Proxies will vote FOR Items 1 and 2. IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
Item 1. ELECTION OF CLASS I DIRECTORS. Nominees: Bobby L. Clairday,
Ronald W. Parker
Ramon D. Phillips
Butler E. Powell
FOR [ ]
WITHHELD FOR ALL [ ]
WITHHELD FOR: (Write that nominee's name in the space
provided below).
Item 2. PROPOSED AMENDMENT TO THE COMPANY'S 1993 STOCK AWARD
PLAN INCREASING THE NUMBER OF SHARES OF STOCK ISSUABLE
UNDER SUCH PLAN BY 100,000 SHARES AND RATIFICATION OF ALL
PRIOR AMENDMENTS TO THE PLAN.
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
If you plan to attend the Annual
Meeting, please mark the WILL
ATTEND block.
WILL
ATTEND
[ ]
Date: , 2000
-
Signature
Signature if held jointly
NOTE: Please sign as name appears hereon.
Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give
full title as such.
FOLD AND DETACH HERE
PROXY
(1) THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PIZZA INN, INC.
5050 QUORUM, SUITE 500
DALLAS, TEXAS 75240
ANNUAL MEETING OF SHAREHOLDERS ON DECEMBER 13, 2000
The undersigned, revoking all proxies heretofore given, hereby appoints C.
Jeffrey Rogers and B. Keith Clark, or either of them, as proxies of the
undersigned, with full power of substitution and resubstitution, to vote on
behalf of the undersigned the shares of Pizza Inn, Inc. (the "Company") which
the undersigned is entitled to vote at the Annual Meeting of Shareholders to be
held at 10:00 a.m., Dallas time on Wednesday, December 13, 2000, at the
Company's training facility, 4819 Keller Springs Road, Addison, TX 75248, and at
all adjournments thereof, as fully as the undersigned would be entitled to vote
if personally present, as specified on the reverse side of this card and on such
other matters as may properly come before the meeting or any adjournments
thereof.
PIZZA INN, INC.
Audit Committee Charter
I. PURPOSE
-------
The responsibilities of the Audit Committee include reviewing the financial
reports and other financial information provided by the Corporation to any
governmental body or the public; the Corporation's systems of internal controls
regarding finance, accounting, legal compliance and ethics that management and
the Board have established; and the Corporation's auditing, accounting and
financial reporting processes generally. Consistent with this function, the
Audit Committee encourages continuous improvement of, and adherence to, the
Corporation's policies, procedures and practices at all levels. The Audit
Committee's primary duties and responsibilities are to:
- - Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
- -
- - Review and appraise the audit efforts of the Corporation's independent
accountants.
- - Provide an open avenue of communication among the independent accountants,
financial and senior management, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
-----------
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Committee.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise. Committee members may
enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Corporation or an outside consultant.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.
III. MEETINGS
--------
The Committee shall meet at least three times annually, or more frequently
as circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately. In
addition, the Committee or at least its Chair should meet with the independent
accountants and management quarterly to review the Corporation's financials
consistent with IV.4 below.
IV. RESPONSIBILITIES AND DUTIES
-----------------------------
To fulfill its responsibilities and duties, the Audit Committee shall:
Documents/Reports Review
- -------------------------
1. Review this Charter annually, and update it as conditions dictate.
2. Review the organization's annual financial statements and any reports or
other financial information deemed necessary by the Committee, management and
the independent accountants.
3. Review the monthly internal reports to management prepared by financial
management.
4. Review with financial management and the independent accountants the 10-Q
prior to its filing or prior to the release of earnings. The Chair of the
Committee may represent the entire Committee for purposes of this review.
Independent Accountants
- ------------------------
5. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness, and approve the fees
and other compensation to be paid to the independent accountants. On an annual
basis, the Committee should review and discuss with the accountants all
significant relationships the accountants have with the Corporation to determine
the accountants' independence.
6. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances warrant.
7. Periodically consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of the
organization's financial statements.
Financial Reporting Processes
- -------------------------------
8. In consultation with the independent accountants, review the integrity of
the organization's financial reporting processes, both internal and external.
9. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in its
financial reporting.
10. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practices as suggested by the independent
accountants or management.
Process Improvement
- --------------------
11. Following completion of the annual audit, review with management and the
independent accountants any significant judgments made in management's
preparation of the financial statements and the view of each as to
appropriateness of such judgments.
12. Following completion of the annual audit, review separately with
management and the independent accountants any significant difficulties
encountered during the course of the audit, including any restrictions on the
scope of the work or access to required information.
13. Review any significant disagreement among management and the independent
accountants in connection with the preparation of the financial statements.
14. Review with the independent accountants and management the extent to
which changes or improvements in financial or accounting practices, as approved
by the Committee, have been implemented. (This review should be conducted at an
appropriate time subsequent to implementation of changes or improvements, as
decided by the Committee.)
15. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board deems
necessary or appropriate.