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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
X Filed by Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
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)
PIZZA INN, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2)
$500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3)
Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
PIZZA INN, INC.
5050 QUORUM DRIVE, SUITE 500
DALLAS, TEXAS 75240
(972) 701-9955
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 4, 1996
To our Shareholders:
The Annual Meeting of Shareholders of Pizza Inn, Inc. (the
"Company") will be held at The Westin Hotel (Galleria), 13340
Dallas Parkway, Dallas, Texas 75240, on Wednesday, December 4,
1996, at 10:00 a.m., Dallas time, for the following purposes:
1. To elect four Class I directors;
2. To approve an amendment to the 1993 Stock Award 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 15, 1996 are entitled to notice of, and to vote at, this
meeting and any adjournments thereof.
Sincerely,
Jeff Rogers
President and Chief Executive Officer
October 24, 1996
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 4, 1996
The Board of Directors of Pizza Inn, Inc. (the "Company"), a
Missouri corporation, is soliciting proxies to be voted at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held at
The Westin Hotel (Galleria), 13340 Dallas Parkway, Dallas, Texas
75240, on Wednesday, December 4, 1996, 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 October 24, 1996.
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., Church
Street Station, P.O. Box 1673, New York, New York 10277-1673, 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 15, 1996. At the close of
business on that date, there were outstanding 13,017,152
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;
2. For approval of an amendment to the 1993 Stock Award
Plan (the "Plan") increasing by 500,000 shares
the aggregate number of shares of Common Stock issuable
under 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. Brokers' "non-votes" are treated
the same as votes withheld or abstained.
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 and for the approval of the
proposed amendment to the Stock Plan. 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.
ELECTION OF DIRECTORS
The Company's 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,
1996, 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 (assuming the election of each nominee).
Director Term
Nominee Directors Age Class Since Expires
Bobby L. Clairday 53 I 1990 1998
Don G. Navarro 52 I 1990 1998
Ronald W. Parker 46 I 1993 1998
Ramon D. Phillips 63 I 1990 1998
Continuing Directors
C. Jeffrey Rogers 49 II 1990 1997
F. Jay Taylor 73 II 1994 1997
Steve A. Ungerman 52 II 1990 1997
EXECUTIVE OFFICERS
The following table sets forth certain information, as of
October 1, 1996, regarding the Company's executive officers:
Executive
Officer
Name Age Position Since
C. Jeffrey Rogers 49 President, Vice
Chairman and 1990
Chief Executive Officer
Ronald W. Parker 46 Executive Vice
President and 1992
Chief Operating Officer
Amy E. Manning 33 Controller and
Treasurer 1991
Roy H. Lotz 47 Vice President of
Concept Development 1996
and Equipment
Ward T. Olgreen 37 Vice President of
International
Operations 1995
and Brand R & D
Robert L. Soria 41 Vice President of
Restaurant Development 1993
Donald W. Zentmeyer 44 General Counsel
and Secretary 1993
BIOGRAPHIES OF NOMINEE DIRECTORS AND CONTINUING DIRECTORS
Steve A. Ungerman became President of Medsynergies, Inc., a
physician practice management company, in September 1996, and Of
Counsel to the law firm of Ungerman Sweet & Brousseau. Prior to
September 1996, he practiced law in the areas of business matters,
commercial finance and mediation for 28 years. Mr. Ungerman was
elected a Director and Chairman of the Board of Directors of the
Company in September 1990.
Bobby L. Clairday is an Area Developer of Pizza Inn
restaurants and he is President and sole shareholder of Clairday
Food Services, Inc., a Pizza Inn franchisee operating Pizza Inn
restaurants in three states. Mr. Clairday also is a 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.
Don G. Navarro is President of The Navarro Group, Inc.
("TNG"). TNG and its predecessor, Don Navarro and Associates, LLC,
have provided financial and business advisory services to a wide
range of corporate and individual clients since 1982. Mr. Navarro
is also a Director of IMCO Recycling, Inc., Industrial Thermoform,
Inc. and Southeastern Paralegal Institute. Mr. Navarro was elected
a Director of the Company in September 1990.
Ronald W. Parker is Executive Vice President and Chief
Operating Officer of the Company. 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. From 1987 to May
1989, Mr. Phillips was a Director and Executive Vice President,
responsible for administrative matters, for Pantera's Corporation
(a predecessor of the Company). From 1974 through 1987, Mr.
Phillips was employed in various capacities by Pizza Inn, Inc. (a
Delaware corporation which was also a predecessor of the Company).
Mr. Phillips was elected a Director of the Company in September 1990.
C. Jeffrey Rogers 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 is a Director and
Chairman of the Audit Committee of Michael's Stores, Inc. and a
Director of the Illinois Central Railroad. 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
Amy E. Manning was elected Controller in January 1991 and
Treasurer for the Company in January 1993. She joined the Company
in April 1990. From 1988 to 1990, she was an Accounting Manager
with USACafes, the franchisor of Bonanza restaurants. Prior to
1988, Ms. Manning was an Accounting Manager with the Dondi
Group/Vernon Savings & Loan and an auditor with the public
accounting firm of Deloitte & Touche.
Roy T. Lotz was appointed Vice President of Concept
Development and Equipment for the Company in July 1996. He was
assigned responsibility for concept development and equipment sales
in September 1995. He joined the Company in December 1991 as a
Franchise Operations Consultant. Mr. Lotz was Director of Real
Estate and Construction for Tony Roma's Restaurants from 1988 to
November 1991, and he was employed as Director of Franchise
Operations and in other positions for El Chico Restaurants from
1971 to 1988.
Ward T. Olgreen was appointed Vice President of International
Operations and Brand R&D for the Company in January 1995. He
joined the Company in September 1991 as a Franchise Operations
Consultant. Mr. Olgreen was promoted to Senior Franchise
Operations Consultant in July 1992 and Director of Franchise
Operations in July 1993. Mr. Olgreen was a Branch Manager for GCS
Service, Inc., a restaurant equipment service provider, from 1986
through July 1991.
Robert L. Soria was appointed Vice President of Restaurant
Development for the Company in February 1996. He was Vice
President of Franchise Operations from July 1993 through February
1996. Mr. Soria joined the Company in May 1991 as a Regional
Director, and he was promoted to Director of Franchise Services in
September 1991. Mr. Soria was a Regional Franchise Manager for
Popeye's Fried Chicken in San Antonio, Texas from 1989 through May
1991. Prior to 1989, Mr. Soria served in several positions for
USACafes with responsibility for restaurant and franchise
operations.
Donald W. Zentmeyer was elected General Counsel and Secretary
of the Company in August 1993. From 1987 through August 1993, he
was Assistant General Counsel and Assistant Secretary of ShowBiz
Pizza Time, Inc., a company which franchises and operates
restaurants. From 1987 through October 1988, he was also Assistant
General Counsel and Assistant Secretary for Integra - A Hotel and
Restaurant Company. Prior to 1987, Mr. Zentmeyer was Senior
Counsel for Maxus Energy Corporation.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information, as of
October 1, 1996, 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 (12 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
(and Address of Beneficially Percent
5% Beneficial Owner ) Owned of Class
C. Jeffrey Rogers (a) 3,939,244 27.0%
5050 Quorum Drive, Suite 500
Dallas, Texas 75240
Ronald W. Parker (a) 694,828 4.8%
Don G. Navarro (a) (b) 122,000 less than 1%
Bobby L. Clairday (a) 98,300 less than 1%
Ramon D. Phillips (a) (c) 40,646 less than 1%
Steve A. Ungerman (a)(d) 30,566 less than 1%
F. Jay Taylor (a) 10,000 less than 1%
Robert L. Soria (a) 65,708 less than 1%
Amy E. Manning (a) 59,557 less than 1%
Donald W. Zentmeyer (a) 98,950 less than 1%
All Directors and
Executive Officers as a Group 5,259,951 36.1%
(a) Includes vested options under the Company's stock option plans, as
follows: 700,000 shares for Mr. Rogers; 600,000 shares for Mr. Parker; 30,000
shares for Mr. Navarro; 10,000 shares for Mr. Clairday; 20,323 shares for
Mr. Phillips; 6,783 shares for Mr. Ungerman; 5,000 shares for Mr. Taylor;
57,000 shares for Mr. Soria; 45,000 shares for Ms. Manning; and 91,000
shares for Mr. Zentmeyer.
(b) Mr. Navarro shares voting and investment power for 90,000 shares with the
general partners of Pistalero Partners, L.P.
(c) Mr. Phillips shares voting and investment power for 18,490 shares with
the shareholders of Wholesale Software International, Inc.
(d) Mr. Ungerman shares voting and investment power for 1,000 shares with Jay
W. Ungerman.
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, 1996, Messrs. Clairday, Phillips, Taylor and
Ungerman serve on the Audit Committee; Messrs. Navarro, Phillips
and Ungerman serve on both the Compensation and Stock Award Plan
Committees; Messrs. Navarro, Phillips, Rogers and Ungerman serve on
the Executive Committee; and Messrs. Parker, Phillips and Taylor
serve on the Finance Committee.
During fiscal year 1996, the Board of Directors held four
meetings. The Audit Committee met three times, the Compensation
and Stock Award Plan Committees jointly met once, the Executive
Committee met five times and the Finance Committee met three times.
In addition, 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.
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 30, 1996, June 25, 1995, and
June 26, 1994 (designated as years 1996, 1995, and 1994).
Annual Compensation Long Term
Compensation Awards
Securities
Name Other Underlying
(and Annual Comp- Options (#
Principal Position) Year Salary ($) Bonus ($) ensation ($)(a) of shares)
C. Jeffrey Rogers 1996 $495,107(b) $500,000 $236,158 330,000 shares
(Chief Executive 1995 462,711 650,000 153,267 1,400,000(d)
Officer) 1994 441,727 500,000 228,928 350,000
Ronald W. Parker 1996 $295,149(b) $267,660 $165,207 193,500
(Chief Operating 1995 267,554 230,000 115,123 800,000(d)
Officer) 1994 222,500 219,500 135,820(c) 200,000
Robert L. Soria 1996 $ 84,581(b) $ 34,160 $ 5,474 10,000
(Vice President of 1995 84,365 15,000 6,624 130,000(d)
Restaurant 1994 70,769 15,000 8,625(c) 35,000
Development)
Amy E. Manning 1996 $ 87,242(b) $ 24,260 $ 5,178 10,000
(Controller) 1995 79,021 15,000 5,479 70,000(d)
1994 72,368 15,000 8,994(c) 5,000
Donald W. Zentmeyer 1996 $102,662(b) $ 24,260 $ 6,467 10,000
(General Counsel) 1995 100,000 10,000 6,075 171,000(d)
1994 76,154 15,200 4,092(c) 41,000
(a) Includes: for Mr. Rogers, supplemental retirement benefits of
$43,860 in 1996, $43,860 in 1995, and $177,383 in 1994 (for
service in past and current years) and life insurance benefits
of $42,842 in 1996 and $42,842 in 1995; for Mr. Parker,
supplemental retirement benefits of $43,860 in 1996, $43,860 in
1995, and $99,965 in 1994 (for service in past and current
years) and life insurance benefits of $36,400 in 1996 and
$39,210 in 1995; for Mr. Soria, car allowance of $4,800 in 1996,
$4,800 in 1995, and $4,750 in 1994; for Ms. Manning, car allowance
of $3,600 in 1996, $3,600 in 1995 and $3,115 in 1994;
for Mr. Zentmeyer, car allowance of $4,800 in 1996 and $4,800 in 1995.
(b) The Company's 1996 fiscal year included 53 weeks, compared to 52 weeks
in 1995 and 1994.
(c) Includes grants of Common Stock issued pursuant to the Company's
recapitalization plan, as follows: to Mr. Parker, 2,000 shares ($7,125 value)
granted and vested 5-13-94 and 2,600 shares ($7,150 value) granted 7-6-93 and
vested 1-1-95; to Mr. Soria, 1,000 shares ($2,750 value) granted
7-6-93 and vested 1-1-95; to Ms. Manning 500 shares ($1,781 value)
granted and vested 5-13-94 and 1,000 shares ($2,750 value) granted 7-6-93 and
vested 1-1-95; to Mr. Zentmeyer, 1,000 shares ($3,563 value) granted and
vested 5-13-94. Dollar values are calculated as the closing bid price
(or the average of high and low bid prices if closing price is not published)
for the Common Stock on the date of grant, multiplied by the number of shares
granted. Grants made with deferred vesting are subject to forfeiture if the
officer's employment terminates before the vesting date. The officer
does not receive any dividends paid on the Common Stock before the
vesting date. All grants have totally vested.
(d) Includes newly granted options as well as replacement options granted in
exchange for the cancellation of previously granted options, as follows:
for Mr. Rogers 350,000 new options on 7-21-94 and 350,000 replacement options
on 12-20-94, all subsequently replaced on 6-12-95 by 700,000 options
which he currently holds; for Mr. Parker 200,000 new options on
7-21-94 and 200,000 replacement options on 12-20-94, all subsequently replaced
on 6-12-95 by 400,000 options which he currently holds; for Mr. Soria 30,000
new options on 7-21-94 and 35,000 replacement options on 12-20-94, all
subsequently replaced on 6-12-95 by 65,000 options which he currently holds;
for Ms. Manning 30,000 new options on 7-21-94 and 5,000 replacement options
on 12-20-94, all subsequently replaced on 6-12-95 by 35,000 options which
she currently holds; for Mr. Zentmeyer 50,000 new options on 7-21-94 and
30,000 replacement options on 12-20-94, all subsequently replaced (along
with 11,000 previous options) on 6-12-95 by 91,000 options which he currently
holds. For the total number of options (net of replacement options) held by
each named officer, see the table entitled "Aggregated Option Exercises in
Last Fiscal Year and Fiscal Year-End Option Values."
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 1996 and unexercised stock options held at the
end of fiscal year 1996 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
$4.25 on June 28, 1996 (the last trading day of the Company's fiscal year).
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal YearEnd Fiscal Year
Acquired on Value Realized (Exercisable/ End (Exercisable/
Name Exercise (#) ($) Unexercisable) Unexercisable)($)
(#)
C. Jeffrey Rogers -- -- 700,000 (e) $ 1,225,000
330,000 (u) 41,250
Ronald W. Parker -- -- 600,000 (e) 1,325,000
193,500 (u) 24,188
Robert L. Soria 27,000 61,750 25,000 (e) 44,500
53,000 (u) 76,500
Amy E. Manning -- -- 15,000 (e) 28,750
40,000 (u) 53,750
Donald W. Zentmeyer -- -- 66,000 (e) 115,500
35,00 (u) 45,000
(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 1996, 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
Individual Grants Option Term
% of Total
Options
Granted to
Employees Exercise Expir-
Options in Price ation
Name Granted (#) Fiscal Year ($/Share) Date 5% ($) 10%($)
C. Jeffrey 330,000 (a) 43.7 4.125 06/28/02 462,955 1,050,287
Rogers
Ronald W. 193,500 (a) 25.6 4.125 06/28/02 271,460 615,850
Parker
Robert L. 10,000 (b) 1.3 4.125 06/28/04 19,695 47,173
Soria
Amy E. 10,000 (b) 1.3 4.125 06/28/04 19,695 47,173
Manning
Donald W. 10,000 (b) 1.3 4.125 06/28/04 19,695 47,173
Zentmeyer
(a) All of such options become exercisable on June 28, 1997.
(b) One half of such options become exercisable on June 28, 1997 and the
other half become exercisable on June 28, 1999.
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 heavily 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 Employment Agreement, which was originally
executed in connection with Mr. Rogers' joining the Company in 1990 and was
most recently amended in July 1994.
In reviewing Mr. Rogers' agreement, as amended, 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 the
Company's profitability, cash flow and debt repayments. 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
nnually 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 1996 bonus
was based on individual performance and targets related to the Company's
profitability, cash flow and debt repayments. The 1996 bonuses for Mr.
Soria, Ms. Manning and Mr. Zentmeyer were based on 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 these plans, stock options have been granted in
fiscal year 1996 to Mr. Rogers and the other 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:
Don G. Navarro
Ramon D. Phillips
Steve A. Ungerman
EXECUTIVE EMPLOYMENT CONTRACTS
C. Jeffrey Rogers and the Company entered into an Employment Agreement
dated July 1, 1994, for a term which currently extends through June 30, 2000.
The agreement provides for an annual base salary in fiscal year 1996 of
$485,847, which will be increased by 5% per year.
Under the agreement, Mr. Rogers is also entitled to the following cash
bonuses, based on performance: (a) $37,500 payable quarterly, if the Company
earns a profit for the quarter; (b) $75,000 payable semi-annually, if the
Company makes all required payments when due under its bank loans; and
(c) $150,000 payable annually, if the Company meets targets established in
the agreement for cash flow from operations (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 $25,000 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.
Mr. Rogers may terminate the agreement at any time within six months
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. The agreement includes a noncompetition covenant that would
apply for three years after termination of employment.
Ronald W. Parker and Donald W. Zentmeyer entered into Executive
Compensation Agreements with the Company in July 1994. Both agreements
provide for payment of compensation (three times annual salary and bonus for
Mr. Parker, and two times annual salary and bonus for Mr.
Zentmeyer) if the Company terminates the executive's employment without cause
or if the executive terminates his employment within six months after a
change in control of the Company. The agreements include a noncompetition
covenant which would apply for the same number of years that salary and bonus
are paid under the agreement 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. Mr. Navarro receives an additional $250 per month to partially
pay for a health insurance policy. 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 the total number of shares which he
owns when first elected, purchases during the preceding fiscal year, or
purchases by exercise of previously granted options during the first ten
days of the current fiscal year, subject to a maximum of 20,000 shares per
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 1996, stock options were granted to
outside directors pursuant to such plan as follows: on June 26, 1995, options
for 20,000 shares (at $2.6875) to Mr. Navarro and 6,783 shares (at $2.6875)
to Mr. Ungerman; on July 1, 1996, options for 20,000 shares (at $4.25) to
Mr. Clairday, 20,000 shares (at $4.25) to Mr. Navarro, and 8,500
shares (at $4.25) to Mr. Ungerman.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 1996 were
Messrs. Navarro, Phillips and Ungerman. During fiscal year 1996, 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
Bobby L. Clairday is President and a shareholder of Clairday Food
Services, Inc. and is a 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. As franchisees, the two corporations
purchase a majority of their food and other supplies from the Company. In
fiscal year 1996, purchases by these franchisees made up 8% of the Company's
food and supply sales, and royalties, license fees and area development fees
from Mr. Clairday and such franchisees made up 6% of the Company's franchise
revenues.
In September 1990, Clairday Food Services, Inc. purchased from the
Company seven Pizza Inn restaurants in Missouri for a price of $1,308,000,
paid in cash and promissory notes with an interest rate of prime plus 2% and
a maturity of July 1995. These notes have been paid in full.
In December 1992, Mr. Clairday purchased area development rights for
Arkansas and a portion of Missouri for a price of $1,250,000, paid in cash
and a promissory note with an interest rate of 8% and a maturity of July 1998.
This note has been paid in full.
Ramon D. Phillips is a Vice President, and his sons are shareholders 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.
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 30, 1991. The
Company has not paid any 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 (Boston Chicken, Inc., Brinker International,
Inc., Cracker Barrel Old Country Store, Inc., Darden Restaurants,
Inc., McDonald's Corporation, Sysco Corporation, and Wendy's
International, Inc.).
6/30/91 6/27/92 6/26/93 6/25/94 6/24/95 6/28/96
Pizza Inn, Inc. 100 192 733 900 767 1133
Dow Jones Equity Market 100 113 130 132 168 212
Dow Jones Entertainment
& Leisure Restaurant
Index 100 134 146 161 200 238
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 300 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.
The total number of shares of the Company's Common Stock which may be
issued to employees under the Plan (before the proposed amendment) shall not
exceed 2,000,000. During any one Plan year, the total number of options
granted and shares issued pursuant to stock appreciation rights ("SARs")
shall 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 an 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
resale 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
In June 1996, the Stock Award Plan Committee granted certain stock
options subject to shareholder approval of the proposed amendment to the Plan,
increasing by 500,000 shares the total number of shares issuable under
the Plan. The following table sets forth the dollar value and number of
stock options which were granted, subject to shareholder approval of such
amendment, to each of the named executive officers, all executive officers as
a group, and all other participating employees (excluding executive officers)
as a group. Outside directors, who are not employees of the Company, are not
eligible to receive stock options under this Plan.
Name
(and Position) Dollar Value ($)(a) Number of Units
C. Jeffrey Rogers (b) $ 0 0
(Chief Executive
Officer)
Ronald W. Parker (b) $ 0 0
(Chief Operating
Officer)
Robert L. Soria (c) $ 8,130 10,000
(Vice President of
Restaurant Development)
Amy E. Manning (c) $ 8,130 10,000
(Controller)
Donald W. Zentmeyer (c) $ 8,130 10,000
(General Counsel)
All Executive
Officers $ 40,650 50,000
All Other
Employees
(27 persons) $132,519 163,000
(a) Based on the difference between the exercise price
of $4.125 per share and the closing bid price of the Common Stock of $4.938
per share on October 1, 1996.
(b) In June 1996, Mr. Rogers and Mr. Parker were granted
stock options which are not subject to the proposed amendment to the Plan.
See the table above entitled "Option Grants in Last Fiscal Year."
(c) Terms of the options granted to Mr. Soria, Ms. Manning, and
Mr. Zentmeyer are set forth in the table above entitled "Option
Grants in the Last Fiscal Year."
AMENDMENT TO THE 1993 STOCK AWARD PLAN
INCREASING THE NUMBER OF SHARES ISSUABLE
UNDER SUCH PLAN
In June 1996, the Stock Award Plan Committee adopted, subject to the
approval of the Company's shareholders, an amendment to the Company's 1993
Stock Award Plan (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 amendment, the total number of shares issuable under the Plan
will be 2,500,000.
As of June 28, 1996, there were only 17,000 shares available for the
grant of options under the Plan, as currently constituted. The Board of
Directors believes that the amendment 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 "1993 Stock Award Plan."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS APPROVE THE
AMENDMENT TO THE PLAN.
INDEPENDENT AUDITORS
The Audit Committee has selected Price Waterhouse, certified public
accountants, as the independent auditors of the Company for fiscal year 1997.
A representative of Price Waterhouse 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
A shareholder wishing to present a proposal at the Annual Meeting of
Shareholders tentatively scheduled for December 1997 must deliver his or her
proposal to the Company at its principal executive offices no later than June
26, 1997, in such form as required under rules issued by the Securities and
Exchange Commission, in order to have it included in the proxy materials of
the Company for such Annual Meeting of Shareholders.
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 27, 1996, 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.
APPENDIX I
PIZZA INN, INC.
1993 STOCK AWARD PLAN
Statement of the 1993 Stock Award Plan (the "Plan") of Pizza Inn, Inc.,
a Missouri corporation (the "Company").
1. Purpose. The purpose of the Plan is to provide a means by which
the Company shall be able to attract and retain excellent employees and provide
those personnel with an opportunity to participate in the increased value of the
Company which their efforts, initiative and skill have helped produce.
2. Administration. The Plan shall be administered by the Stock Award
Plan Committee or any successor thereto (the "Committee") of the Board of
Directors (the "Board") as that Committee may be constituted from time to time.
The Committee shall consist of not less than two members of the Board of
Directors of the Company, each of whom shall qualify as a "disinterested person"
to administer the Plan within the meaning of Rule 16b-3, as amended, or other
applicable rules under Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Committee shall administer the Plan so as to
conform at all times with the provisions of Section 16(b) of the Exchange Act
and Rule 16b-3 promulgated thereunder. A majority of the Committee shall
constitute a quorum, and subject to the provisions of the following section,
the acts of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority of the Committee,
shall be the acts of the Committee.
The Committee may delegate to one or more of its members such
administrative duties as it may deem advisable, and the Committee or any person
to whom it has delegated duties may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may have under
the Plan; provided, however, that the Committee may not delegate any duties to
a member of the Board of Directors of the Company who, if elected to serve on
the Committee, would not qualify as a "disinterested person" to administer the
Plan as contemplated by Rule 16b-3, as amended, or other applicable rules under
the Exchange Act. The Committee may employ attorneys, consultants,
accountants, or other persons and the Committee, the Company, and its
officers and directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all persons who have received grants under the Plan, the Company and all
other interested persons.
No member or agent of the Committee shall be personally liable for any
action, determination or interpretation made in good faith with respect to the
Plan and all members and agents of the Committee shall be fully protected by
the Company in respect of any such action, determination or interpretation.
In addition to other authority granted to the committee under the
Plan, and subject to and not inconsistent with the express provisions of the
Plan and the Code (as defined in Section 17), the Committee shall have
authority, in its sole discretion, to:
(a) prescribe, amend, modify and rescind rules and regulations
relating to the Plan;
(b) make all determinations specified in or permitted by the Plan or
deemed necessary or desirable for its administration or for the
conduct of the Committee's business; and
(c) establish any procedure determined to be appropriate in
discharging its responsibilities under the Plan.
3. Eligibility. The class of persons eligible to receive Options and
/or awards of Units pursuant to this Plan shall be all officers and all
employees.
The Options and Units awarded pursuant to this Plan collectively are referred to
as "Awards". From time to time the Committee shall designate, from among such
eligible persons, the persons to whom Awards shall be granted (each person so
designated, a "Participant", and collectively, the "Participants"). Such
designations shall be made in the absolute discretion of the Committee. In
designating Participants, the Committee shall fix the number of shares subject
to an option or number of Units to be granted to Participants in its absolute
discretion.
4. Vesting; Award Restrictions. All Awards shall be subject to a
minimum six-month vesting period. The Committee may, in its absolute
discretion, impose a longer vesting period or other restrictions on any Award
under this Plan or may choose not to impose any additional restriction on any
Award. The vesting period of an Award shall lapse in accordance with a
schedule established by the Committee, provided the Participant continues to
be employed by the Company at the end of the vesting period, except as otherwise
provided below. Each such schedule may provide for installment vesting or full
vesting at the end of the period, and may include any other conditions upon the
vesting of the Award as the Committee shall determine. Any unvested Award
shall vest upon a Change of Control. The terms and conditions of each Award
shall be set forth in a written document constituting a "Stock Award Agreement"
substantially in the form attached hereto (the "Agreement") or in such other
form as may be adopted by the Committee from time to time, to be signed by the
Participant and returned to the Company. An Agreement must be executed and
returned by the Participant to the Company within thirty (30) days after the
Award Date or the Award will be null and void; provided, however, that such
period may be extended by the Committee.
5. Termination of Employment.
(a) Termination Due to Death or Disability. If a Participant's
employment terminates during the vesting period due to death or Disability (as
defined in Section 17), the Award will fully vest as of the date of death or
Disability. In the event of the death of any Participant, the estate of such
Participant shall have the right, within one (1) year after the date of death,
to exercise such Participant's options with respect to all or any part of the
related shares of Stock. If the employment of any Participant is terminated
because of Disability, such Participant shall have the right, within one (1)
year after the date of termination, to exercise the options with respect to all
or any part of the related shares of Stock. In the event of death or
Disability, the Account of a holder of Units shall be credited as set forth in
Section 8(g)(ii).
(b) Termination for other Reasons. Termination as an employee for any
other reason, including retirement, resignation or discharge, will result in
forfeiture of the Award at the time of termination as to any unvested shares of
Stock, unvested options or unvested Units, unless otherwise specified in writing
by the Committee. The Committee, in its sole discretion, may waive the
forfeiture in whole or in part in connection with any terminated Participant,
Provided, however, that, in the case of an Incentive Option, any exercise must
take place within three (3) months of the date of termination. The discharged
person will have a twenty-one (21) day period in which to exercise vested
Awards, unless such time is extended by the Committee.
6. Amount of Stock. The total aggregate number of shares of the
Company's Stock which may be subject to Options under Section 7 of this Plan and
distribution upon exercise of Units under Section 8 of this Plan shall be Two
Million Five Hundred Thousand (2,500,000) shares of the Company's Stock, subject
to legal availability; provided, however, that no more than One Million
(1,000,000) shares (plus unused allocations from prior years) may become subject
to Options and distributed in payment of Units in any one Plan Year. This total
number of shares available under the Plan shall be subject to appropriate
increase or decrease in the event of a stock split, stock dividend,
reclassification, reorganization, or other capital adjustment of shares of Stock
(but excluding, without limitation, issuance of authorized but unissued shares
whether or not as a result of an increase in the number of authorized shares).
In the event Options under this Plan are forfeited or expire as provided in this
Plan, such forfeited or expired options may be granted to other Participants as
provided in this Plan.
7. Provisions Applicable to Stock Options.
(a) Incentive and Non-qualified options. The Committee shall have the
authority, in its sole discretion, to grant incentive stock options ("Incentive
Options") pursuant to Section 422 of the Code, or to grant non-qualified stock
options ("Standard Options") (options which do not qualify under Section 422 of
the Code) or to grant both types of Options. No Awards shall be granted after
the tenth anniversary of the Effective Date as provided in Section 17. Each
Option shall be clearly identified in the Agreement as an Incentive Option or
Standard Option. Upon exercise of any Incentive Option, the Company shall
provide the Participant with the written statement required by Section 6039(a)
of the Code and any additional or other information then required by the Code.
(b) Expiration. Subject to the following sentence, Options shall
expire as specified in the respective Agreement establishing the award of
options for each Participant. No Options shall be exercisable and all Options
shall expire no later than ten (10) years from the date of the grant of the
Option or five (5) years from the date of vesting of the Option; provided,
however, in the case of an Incentive Option granted to a person who, at the
time such Option is granted, owns Stock of the company, or any parent
corporation or subsidiary corporation thereof, possessing more than ten
percent (10%) of the total combined voting power of all classes of Stock of
the Company, or any parent corporation or subsidiary corporation thereof
(a "Ten Percent Holder"), such Option shall not be exercisable after the
expiration of five (5) years from the date such Option is granted.
(c) Exercise Price--Standard Options. The exercise price for shares
purchasable under Standard Options shall be equal to the Fair Market Value (as
defined in Section 17) per share of Stock on the date the option is granted.
(d) Exercise Price--Incentive Options. The exercise price for shares
purchasable under Incentive Options shall be such amount as the Committee shall,
in its best judgment, determine to be not less than one hundred percent (100%)
of the Fair Market Value (as defined in Section 17) per share at the date the
Option is granted; provided, however, that in the case of an Incentive Option
granted to a Ten Percent Holder, the purchase price for each share shall be such
amount as the Committee, in its best judgment, shall determine to be not less
than one hundred ten percent (110%) of the Fair Market Value per share at the
date the option is granted.
(e) Exercise. Options may be exercised, to the extent exercisable by
their terms, in whole or in part from time to time and at any time after their
vesting and before their expiration. Any exercise shall be accompanied by a
written notice to the Company specifying the number of options being exercised.
(f) Maximum Exercise--Incentive options. The aggregate Fair Market
Value of Stock (determined at the time of the grant of the option) with respect
to which Incentive Options are exercisable for the first time by a Participant
during any calendar year under all plans of the Company, or any parent
corporation or subsidiary corporation thereof, shall not exceed $100,000.
(g) Payment. The price per share of Stock with respect to each option
shall be payable at the time the option is exercised. Such price shall be
payable in cash, which may be paid by wire transfer in immediately available
funds, by certified or cashier's check, or, in the sole discretion of the
Committee, by: (i) a commitment by a broker-dealer to pay to the Company that
portion of any sale proceeds receivable by the Participant upon exercise of an
Option in the manner permitted under Section 9(a) hereof or by any other
instrument acceptable to the Committee, or (ii) by delivery to the Company of
shares of Stock of the Company owned by the Participant or by the Company
withholding from the total number of shares to be acquired pursuant to the
option a portion of such shares. Shares delivered to or withheld by the
Company in payment of the Option price shall be valued at the Fair Market
Value of the Stock of the Company on the day preceding the date of the
exercise of the option.
(h) Adjustment in Number of Shares Subject to Option. In the event of
a stock split, stock dividend, reclassification, reorganization, or other
capital adjustment of shares of Stock (but excluding, without limitation,
issuance of authorized but unissued shares whether or not as a result of an
increase in the number of authorized shares), the number of Shares subject to
the Participant's Option shall be adjusted in the same manner as shares of
Stock subject to the Option would be adjusted. Any fractional shares or
interests resulting from such adjustment shall be eliminated.
Notwithstanding the foregoing, (i) each such adjustment with respect to an
Incentive Option shall comply with the rules of Section 424(a) of the Code,
and (ii) in no event shall any adjustment be made which would render any
Incentive Option granted hereunder other than an "incentive stock option"
for purposes of Section 422 of the Code.
(i) Merger. In the event of a merger between the Company and another
corporation in which the Company is not the surviving entity and where any
Participant holds options issued pursuant to the Plan which have not been
exercised, such options shall be cancelled and replacement Options shall be
issued by the surviving entity in accordance with Rule 16b-3(f)(1) under the
Exchange Act.
8. Provisions Applicable to Stock Appreciation Units.
(a) Expiration. Units shall expire no later than five years from the
date of vesting.
(b) Exercise. A Unit may not be exercised by a Participant until
vested, except that this limitation shall not be applicable in the event of
death or Disability of that Participant occurring before the expiration of
the vesting period. Except as provided in the previous sentence, Units may be
exercised, to the extent exercisable by their terms, in whole or in part from
time to time and at any time before their expiration, Provided, however, that
any election by the Participant to exercise a Unit may be made only during the
period beginning on the third business day following the date of release of the
quarterly and annual summary statements of sales and earnings specified in
section 8(k) below and ending on the twelfth business day following such
date. This condition will not apply to any exercise
by a Participant where the date of exercise is automatic or fixed in advance and
is outside the control of the Participant. Any exercise shall be accompanied by
a written notice to the Company specifying the number of Units being exercised.
(c) Units; Value. Units shall be established by ledger, shall be
valued and payment at exercise or upon termination shall be made, all as
provided in this Plan.
(d) Nature of Units. The Units shall be used solely as a device for
the measurement and determination of the amount to be paid to Participants as
provided in the Plan. The Units shall not constitute or be treated as property
or as a trust fund of any kind and shall not constitute ownership of Stock or
any other equity security of or interest in the Company. All amounts at any
time attributable to the Units shall be and remain the sole property of the
Company.
(e) Dilution. In the event of a stock split, stock dividend,
reclassification, reorganization, or other capital adjustment of shares of Stock
(but excluding, without limitation, issuance of authorized but unissued shares
whether or not as a result of an increase in the number of authorized shares),
the number of Units of a Participant shall be adjusted in the same manner as
shares of Stock reflected by those Units would be adjusted.
(f) Establishment of Special Ledger. When Units are awarded to the
Participant, the Company shall enter in the Special Ledger the name of the
Participant, the number of Units granted to the Participant, and an amount
equivalent to the Fair Market Value of a number of shares of Stock equal to the
number of Units granted to the Participant.
(g) Credits to Account in Special Ledger.
(i) So long as the Plan remains in effect, the Company shall
credit the Account throughout the term of the Participant's employment with the
Company, with amounts equivalent to dividends payable in cash or property paid
from time to time on issued and outstanding shares of Stock equal to the number
of Units in the Account, so that the amount of each such credit will be
equivalent to dividends which the Participant would have received had the
Participant been the owner of the number of shares of Stock equal to the number
of Units in the Account. No such credit shall be made with respect to any
dividend paid after he Termination Date or Exercise Date, even though the
record date is prior thereto.
(ii) On the Termination Date of a Participant, the Company shall
credit to the Account an amount equivalent to the excess, if any, of the Fair
Market Value on the Termination Date of a number of shares of Stock equal to the
number of Units then in the account over the Fair Market Value of such shares at
the Award Date.
(iii) on the Exercise Date, the Company shall credit to the
Account an amount equivalent to the excess, if any, of the Fair Market Value on
the Exercise Date of a number of shares of Stock equal to the number of Units
being exercised by the Participant over the Fair Market Value of such shares at
the Award Date.
(iv) The Company shall have the right to terminate the Plan with
respect to Units at any time by giving written notice to the Participants,
whereupon no further credits whatsoever shall be made to the Accounts, but such
termination shall not affect the Participants, rights to payment for amounts
already standing to the Participants' credit in the Accounts as of the
Termination Date. The notice of termination may specify an effective date. If
no effective date is specified, the notice shall be effective when mailed or
delivered to the Participants.
(h) Payment of Benefits.
(i) The Committee in its sole discretion shall determine the form
in which payment of the economic value for Units will be made, in cash, a note,
shares of Stock, or any combination thereof.
(ii) Within ninety (90) days following the Termination Date or an
Exercise Date, the Company and the Participant, or in the event of the
Participant's death, the personal representative of the Participant's estate,
shall close the payment of benefits to the Participant on account of the Units.
At the closing, the full amount of the credit in the Account as of the
Termination Date or the amount due to the Participant pursuant to the
Participant's exercise of Units (the "Amount Due") shall be payable, at the
Company's sole option, (x) in cash or by check at closing, or (y) in accordance
with a promissory note delivered at closing bearing simple interest at the rate
of ten percent (10%) per annum with principal and accrued interest to be paid
within thirty-six (36) months after date of closing, or (z) through issuance to
the Participant, or in the event of the Participant's death, the personal
representative of the Participant's estate, of the number of shares of Stock
with a Fair Market Value as of the Termination Date or Exercise Date equal to
the Amount Due.
(i) Limitation of Rights. Nothing in Section 8 of this Plan shall be
construed to:
(i) Give the Participant any rights whatsoever with respect to
shares of Stock, or any other equity security of or interest in the Company.
(ii) Give the Participant any rights whatsoever with respect to any
assets of the Company, the Participant at all times remaining in the status of
a general creditor of the Company with respect to the SAR obligations created
under this Plan.
(j) Tandem Awards. Units may be granted in tandem with Options only in
the manner permitted pursuant to applicable regulations under section 422 of the
Code.
(k) Informational Requirements. At any time while Units are outstanding
and vested, the Company will comply with the information availability rules of
Regulation 16b-3(e)(1) relating to filing of regular reports under the Exchange
Act and regular release of quarterly and annual summary statements of sales and
earnings through the news media.
(1) Merger. In the sole discretion of the Committee, the Plan may
be terminated as provided in Section 8 (g) (iv) , including, without limitation,
upon any merger of the Company and another corporation in which the Company is
not the surviving entity. In addition, the Committee in its sole discretion,
with respect to unexercised units issued under the Plan, may cancel such Units
and issue replacement Units issued by the surviving entity in accordance with
Rule 16b-3(f)(1) under the Exchange Act. Any such replacement Units shall be
subject to such terms and conditions as may be determined by the Committee in
its sole discretion.
9. Additional Authority of Committee. In addition to other authority
granted to the Committee under Section 2, and subject to and not inconsistent
with the express provisions of the Plan and the Code (as defined in Section 17),
the Committee shall have authority, in its sole discretion, to:
(a) provide an arrangement through registered broker-dealers whereby
temporary financing may be made available to a Participant by the broker-dealer,
under the rules and regulations of the Federal Reserve Board, for the purpose of
assisting the Participant in the exercise of an Option, such authority to
include the payment by the Company of the commissions, fees and charges of the
broker-dealer;
(b) provide the establishment of procedures for a Participant (1) to
have withheld from the total number of shares to be acquired upon the exercise
of an option that number of shares having a Fair Market Value (as defined in
Section 17) which, together with such cash as shall be paid in respect of
fractional shares, shall equal the option exercise price, and (2) to exercise a
portion of an Option by delivering that number of shares already owned by such
Participant having a Fair Market Value which shall equal the partial Option
exercise price and to deliver the shares thus acquired by such Participant in
payment of shares to be received pursuant to the exercise of additional
portions of such Option, the effect of which shall be that such Participant
can in sequence utilize such newly acquired shares in payment of the exercise
price of the entire Option, together with such cash as shall be paid in respect
of fractional shares; and
(c) provide the establishment of a procedure whereby a number of
shares of Stock or other securities may be withheld from the total number of
shares of Stock or other securities to be issued upon exercise of an option to
meet the obligation of withholding for taxes incurred by a Participant upon
such exercise.
10. Condition of Employment. The granting of Awards under this Plan
shall impose no obligation on the Company (or any of its parent or subsidiary
corporations) to continue the employment of any Participant and shall not lessen
or affect the right to terminate such employment of the Participant.
11. Transferability; Nonalienation of Benefits. Any rights arising
under the Plan with respect to Awards shall not be transferable otherwise than
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, shall be exercisable only by the Participant.. No right or benefit
of the Participant under the Plan with respect to Awards shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge
the same shall be void. No right or benefit with respect to Awards hereunder
shall in any manner be liable for or subject to the debts, contracts,
liabilities or torts of the Participant.
12. Amendment of the Plan. The Committee shall have the right to
amend, modify, suspend or terminate the Plan at any time; provided, however,
that no amendment shall be made which shall:
(a) increase the total number of shares of the Stock of the Company
which may be issued and sold pursuant to Options granted under the Plan,
(b) materially increase the benefits accruing to participants under
the Plan,
(c) decrease the minimum option price in the case of an Incentive
Option, or
(d) modify the provisions of the Plan relating to eligibility with
respect to Incentive options, unless in any such event such amendment is made
by or with the approval of the stockholders. The Committee shall be authorized
to amend the Plan and the options granted thereunder (i) to qualify as
"incentive stock options" within the meaning of Section 422 of the Code or
(ii) to comply with Rule 16b-3 (or any successor rule) under the Exchange Act.
No amendment, modification, suspension or termination of the Plan shall alter
or impair any Options previously granted under the Plan, without the consent of
the holder thereof.
13. Grants Discretionary. The granting of Awards under this Plan
shall be entirely discretionary and, except as expressly stated herein, nothing
in the Plan shall be deemed to give any employee any right to participate in
the Plan or to receive an Award.
14. Securities Laws. The Company has no obligation to register Awards
granted to Participants or Stock distributed under this Plan. If Awards granted
have not been registered, upon issuance of Awards to the Participant and upon
issuance of Stock upon exercise of an Award, the Participant shall represent and
warrant to the Company that shares of Stock or the Award are being acquired for
investment purposes and shall acknowledge transfer restrictions under applicable
securities laws. The Company shall place a legend on any Stock certificate
issued under the Plan to assure compliance with this Section. No shares of
Stock shall be required to be distributed until the Company shall have taken
such action, if any, as is then required to comply with the provisions of the
Securities Act of 1933 and any other than applicable securities law. If,
subsequent to the delivery by a Participant of the representation and warranty
described in the preceding sentence, the Stock issuable upon exercise of an
Award is registered under the Securities Act, the Company may release such
Participant from such written statement without effecting a "modification" of
the Plan within the meaning of Section 424(h)(3) of the Code.
15. Withholding of Tax. There shall be deducted from each
distribution under the Plan the amount of any tax required by any governmental
authority to be withheld and paid over by the Company to that governmental
authority for the account of the Participant entitled to the distribution. At
its discretion, the Company may require a Participant receiving shares of Stock
hereunder to reimburse the Company for any such taxes required to be withheld by
the Company and withhold any distribution in whole or in part until the
Company is so reimbursed. In lieu thereof, the Company shall have the right to
withhold from any other cash amounts due or to become due from the Company to
the Participant an amount equal to such taxes required to be withheld by the
Company to reimburse the Company for any such taxes or retain and withhold a
number of shares having a Fair Market Value not less than the amount of such
taxes and cancel (in whole or in part) any such shares so withheld in order
to reimburse the Company for any such taxes.
16. Miscellaneous.
(a) Impact on Other Benefits. At no time shall the value of any Award
be includable as compensation or earnings for purposes of any other benefit plan
offered by the Company.
(b) Funding of Plan. The Plan shall be unfunded. The Company
shall not be required to make any segregation of assets to assure the payment
of any benefits under the Plan.
17. Definitions. In addition to the definitions of terms contained
elsewhere in this Plan, the following terms are defined as follows:
Account: A Participant's credit account in the Special Ledger.
Award Date: The date of granting of any Award, as specified in the
Terms and Conditions for any particular Award.
Change of
Control: Any of the following: (a) all or substantially all of the
assets of the Company are sold, leased, exchanged or
otherwise transferred to any person or entity or group of
persons or entities acting in concert as a partnership,
limited partnership, syndicate or other group (a "Group of
Persons") other than a person or entity or Group of Persons
at least 50% of the combined voting power of which is held
by persons who, pursuant to the Company's plan of
reorganization, were holders of Stock or rights to acquire
Stock; (b) the Company is merged or consolidated with or
into another corporation with the effect that the then
existing stockholders of the Company hold less than 50% of
the combined voting power of the then outstanding
securities of the surviving corporation of such
merger or the corporation resulting from such consolidation
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of
directors; or (c) a person or entity or Group of Persons
(other than (1) the Company or (2) an employee benefit plan
sponsored by the Company) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated
purchases or otherwise, have become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing 50% or more of the
combined voting power of the then outstanding securities of
the Company ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the
election of directors.
Code: The Internal Revenue Code of 1986, as amended.
Disability: A disability as construed under the appropriate
provisions of the long-term disability plan
maintained for the benefit ofemployees of the Company
who are regularly employed on a salaried basis,
unless another meaning shall be adopted by the
Committee.
Exercise
Date: A particular date on which a Participant chooses to
exercise one or more Awards.
Fair Market
Value: As it relates to the Stock of the Company, the fair
market value as of the applicable date determined in
good faith by the Committee, taking into account bid,
ask, and/or trading information, as available to the
Committee at the time of its determination.
Option: An option to acquire Stock created under this Plan.
Plan Year: The plan year which shall run concurrently with the
fiscal year of the Company.
Special
Ledger: The record of the Accounts and other information as
provided in Section 8.
Stock: The Company's common stock, par value $0.01.
Termination
Date: With respect to Units, the earliest of: (a) the
termination of a Participant's employment for any reason
whatsoever, including death, retirement, resignation,
discharge, Disability or otherwise; (b) the date that
there ceases to be any issued and outstanding Stock; or
(c) the date that the Company terminates this Plan as to
Units.
Terms and
Conditions: The terms and conditions of the Award set forth in any
Agreement.
Unit: A stock appreciation right unit created under this Plan.
18. Effective Date; Term of Plan. The Plan shall become effective as of
October 13, 1993, the date as of which the Plan was adopted by the Board of
Directors (the "Effective Date"). No Awards shall be granted under this Plan
from and after the tenth anniversary of the Effective Date.
(As amended by the Stock Award Plan Committee on June 28, 1996, subject to
shareholder approval.)
APPENDIX II
SIDE ONE
PROXY
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 4, 1996
The undersigned, revoking all proxies heretofore given, hereby
appoints C. Jeffrey Rogers and Donald W. Zentmeyer, 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 4, 1996, at the Westin Hotel (Galleria), 13340 Dallas
Parkway, Dallas, Texas 75240, 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.
(continued, and to be marked, dated and signed on the other side)
SIDE TWO
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.
Please mark your votes as this X
The Board of Directors recommends a
vote FOR Items 1 and 2.
ITEM 1 WITHHELD
ELECTION OF FOR FOR ALL
CLASS I DIRECTORS
Nominees:
Bobby L. Clairday
Don G. Navarro
Ronald W. Parker
Ramon D. Phillips
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
BY 500,000 SHARES THE AGGREGATE
NUMBER OF SHARES OF STOCK
ISSUABLE UNDER SUCH PLAN.
FOR AGAINST ABSTAIN
If you plan to attend the Annual
Meeting, please mark the WILL ATTEND block.
WILL ATTEND
Date:
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.