DEF 14A: Definitive proxy statements
Published on October 16, 1996
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.
(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).
(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).
(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.
(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.).
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.
(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.