8
EXECUTIVE COMPENSATION AGREEMENT
THIS EXECUTIVE COMPENSATION AGREEMENT ("Agreement") is made and entered
into and effective the ____ day of ________, ____, by and between
________________ (hereinafter referred to as "Executive") and Pizza Inn, Inc.
(hereinafter referred to as the "Company").
W I T N E S S E T H:
WHEREAS, the Company currently employs Executive as its
________________________________________________, and the Company and Executive
desire to continue and extend such employment on the terms and conditions set
forth;
NOW THEREFORE, for and in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Executive hereby
agree as follows:
ARTICLE I
COMPENSATION
1.01 SALARY AND BONUS. During the period of employment of Executive by the
Company, the Board of Directors of the Company (the "Board") or the Compensation
Committee or Stock Award Plan Committee thereof shall determine, based on
the recommendations of the Company's Chief Executive Officer from time to time,
the compensation of Executive, including salary, bonus, grants of stock options,
and other benefits; provided, however, that Executive shall receive an annual
salary, bonus and all other benefits not less than (i) his then current annual
salary, (ii) a bonus equal to twenty percent (20%) of his then current annual
salary (the "Section 1.01 Bonus"), and (iii) other benefits, except stock
options, including such increases as the Board or Compensation Committee approve
from time to time. Such salary shall be payable in such periodic installments
as established by the Board of Directors of the Company.
1.02 BENEFITS. Executive shall receive a Company provided vehicle or a car
allowance and reimbursement of certain expenses, all as approved from time to
time by the Compensation Committee. All benefits listed above in this section
1.02 shall be referred to as the "Defined Benefits." Executive may also
participate in the Company's benefit plans.
ARTICLE II
TERMINATION OF EMPLOYMENT
2.01 TERMINATION BY THE COMPANY FOR CAUSE. In addition to any other
remedies which the Company may have at law or in equity, the Company may at any
time terminate Executive's employment for Cause. The Company shall provide at
least ten (10) days prior written notice to Executive of its intention to
discharge Executive for Cause, and such notice must specify in detail the nature
of the Cause alleged and provide Executive an opportunity to be heard by
the Board prior to the expiration of such ten-day period (in addition to any
applicable cure period). "Cause" shall mean the occurrence of any of the
following events:
(a) the Executive engages in any violation of this Agreement which
is not cured, or with respect to which Executive is not diligently pursuing a
cure, within ten (10) business days of the Company giving notice to Executive to
do so;
(b) the Executive is convicted of any felony or of any misdemeanor
involving dishonesty such as theft, forgery or fraud, or having been indicted
for, or had an information filed on him for, such a crime, enters a plea of
guilty or nolo contendere;
(c) the Executive engages in any intentional act of fraud against
the Company, any of its subsidiaries or any of their employees or properties,
which is not cured, or with respect to which Executive is not diligently
pursuing a cure, within ten (10) business days of the Company giving notice to
Executive to do so;
(d) the Executive engages in the intemperate use of alcohol or
drugs on a repeated basis in a manner which, in the good faith opinion of the
Company's Board of Directors, is impairing the Executive's ability to perform
his duties or obligations hereunder and such intemperate use thereafter
continues in such a manner following written notice thereof to Executive, with
at least thirty (30) days to correct following such notice;
(e) the Executive engages in conduct giving rise to a breach of a
monetary obligation to the Company and such breach continues following written
notice thereof to Executive, with at least thirty (30) days to correct following
such notice; or
(f) the Executive willfully fails to substantially perform his
duties within fifteen (15) business days after written demand for substantial
performance is delivered to Executive by the Board, which demand specifically
identifies the manner in which the Board believes that Executive has not
substantially performed his duties.
2.02 TERMINATION BY EXECUTIVE IN WINDOW PERIOD. Executive's employment may
be terminated by Executive with or without any reason at any time within twelve
months after a Change of Control (the "Window Period") by giving the Company at
least ten days prior written notice of such termination. "Change of Control"
shall mean 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 Executive; or
(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 having the right to vote in the
election of directors; or
(c) a person or entity or Group of Persons (other than (i) the
Company or (ii) 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 Securities Exchange Act of 1934) 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; or
(d) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange
Act of 1934) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board.
2.03 TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive may terminate his
employment for good reason at any time during the term of this Agreement (the
"Good Reason Period"). For purposes of this Agreement, "good reason" shall
mean, without the Executive's express written consent, that, (i) Executive is
required to relocate, (ii) Executive is assigned a position other than Chief
Financial Officer and Vice President of Distribution or diminished
responsibilities with the Company, (iii) Executive is assigned responsibilities
or travel requirements inconsistent with the office of Chief Financial Officer
and Vice President of Distribution, (iv) Executive is assigned office facilities
or support staff inferior to that currently provided, or (v) Executive's
then current annual base salary, Section 1.01 Bonus or Defined Benefits, as the
same may be increased from time to time, are reduced.
2.04 NOTICE AND DATE OF TERMINATION. Any termination by the Company or by
Executive shall be communicated by written notice. "Date of Termination" means
(i) if Executive's employment is terminated by the Company for Cause or by
Executive, the date of receipt of the notice of termination or any later date
specified therein, as the case may be, or (ii) if Executive's employment is
terminated by the Company other than for Cause, the Date of Termination shall be
the date on which the Company notifies Executive of such termination.
ARTICLE III
OBLIGATIONS OF THE COMPANY UPON TERMINATION
3.01 WINDOW PERIOD; OTHER THAN FOR CAUSE. If the Company terminates
Executive's employment other than for Cause or Executive terminates employment
during the Window Period or Executive terminates his employment for good reason
during the Good Reason period, the Company shall pay to Executive in a lump sum
in cash within thirty (30) days after the Date of Termination an amount equal
to: (a) two and one half (2.5) multiplied by (b) the sum of (i) Executive's
then current annual salary (provided that such salary shall be deemed to be no
lower than Executive's highest salary during any one of the immediately
preceding three fiscal years) plus (ii) the highest amount of bonus and any
other cash compensation (except salary) received by Executive during any one of
the immediately preceding three (3) fiscal years.
3.02 OUTSIDE THE WINDOW PERIOD; FOR CAUSE. If (a) Executive terminates
employment outside of the Window Period without good reason, (b) Executive's
employment is terminated by the Company for Cause, (c) Executive terminates his
employment outside the Good Reason Period, or (d) Executive's employment is
terminated due to death or disability (as defined in the Company's long-term
disability plan), this Agreement shall terminate without further obligations to
Executive other than the obligation to pay to Executive, within thirty (30) days
of the Date of Termination, salary plus accrued bonus and other benefits due
Executive through the Date of Termination and the amount of any compensation
previously deferred by Executive, in each case to the extent theretofore unpaid.
3.03 NOT A PENALTY OR FORFEITURE. The parties hereto acknowledge and agree
that any payment under this Agreement is not a penalty or a forfeiture; rather,
the amount specified is a reasonable and fair reflection of damages that
Executive may incur in the event of Executive's termination.
3.04 TAX LIMITATION. (a) If any payment received or to be received
by Executive in connection with a Change in Control of the Company or
termination of Executive's employment (whether payable pursuant to the terms of
this Agreement or any other plan, arrangement, or agreement with the Company,
any person whose actions result in a Change in Control of the Company, or any
person affiliated with the Company or such person (the "Total Payments")), would
be subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code, the Company will pay to Executive, within 30 days of any payments giving
rise to excise tax, an additional amount (the "gross-up payment") such that the
net amount retained or to be retained by Executive, after deduction of any
excise tax on the total payments and any federal and state and local income tax
and excise tax on the gross-up payment provided for by this section, will equal
the total payments.
(b) For purposes of determining the amount of the gross-up
payment, Executive will be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year that the payment
is to be made, and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the executive's residence on the date of
termination or the date that excise tax is withheld by the Company, net of the
maximum reduction in federal income taxes that could be obtained by deducting
such state and local taxes.
(c) For purposes of determining whether any of the total
payments would not be deductible by the Company and would be subject to the
excise tax, and the amount of such excise tax, (i) total payments will be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Internal Revenue Code, and all parachute payments in excess of the base amount
within the meaning of Section 280G(b)(3) will be treated as subject to the
excise tax unless, in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to Executive such total payments (in whole
or in part) are not parachute payments, or such parachute payments in excess of
the base amount (in whole or in part) are otherwise not subject to the excise
tax, and (ii) the value of any non-cash benefits or any deferred payment or
benefit will be determined by the Company's independent auditors in accordance
with Sections 280G(d)(3) and (4) of the Internal Revenue Code.
ARTICLE IV
TERM
4.01 The term (the "Term") of this Agreement shall commence on the date of
this Agreement as set forth above (the "Effective Date") and shall continue
through ___________, ____. During each fiscal year of the Company, beginning
with the fiscal year ending in June, ____, the Board may extend the Term by an
additional year, by adopting an appropriate resolution which expressly extends
the Term for such additional year but without the need to execute an amendment
to this Agreement.
ARTICLE V
NONCOMPETE, ETC.
5.01 TRADE SECRETS AND NONCOMPETITION. (a) Trade Secrets. During his
-------------
employment by the Company and at all times thereafter, Executive shall not use
for his personal benefit, or disclose, communicate or divulge to, or use for the
direct or indirect benefit of any person, firm, association or company other
than the Company or any affiliate or subsidiary of the Company, any material
referred to in Paragraph 5.02(a) or (b) or any information regarding the
business methods, business policies, procedures, techniques, research or
development projects or results, trade secrets or other knowledge or processes
of a proprietary nature belonging to, or developed by, the Company or any other
confidential information relating to or dealing with the business operations or
activities of the Company or any affiliate or subsidiary of the Company, made
known to Executive or learned or acquired by Executive while in the employ of
the Company.
(b) Non-Competition. In consideration of Executive's receipt of
---------------
specialized training and proprietary information during the term hereof and
other good and valuable consideration, in the event that the employment of
Executive hereunder terminates for any reason, Executive shall not become
employed by, consult with or otherwise assist in any manner any company (or any
affiliate thereof) the primary business of which involves or relates to the sale
of pizza in the continental United States for a period of years equal to the
number by which Executive's annual salary and bonus is multiplied pursuant to
any payments made to Executive under Paragraph 3.01.
(c) Remedies. Executive acknowledges that the restrictions contained
--------
in the foregoing Paragraphs 5.01(a) and (b) (the "Restrictions"), in view of the
nature of the business in which the Company and its affiliates and subsidiaries
are engaged, are reasonable and necessary in order to protect the legitimate
interests of the Company and its affiliates and subsidiaries, and that any
violation thereof would result in irreparable injury to the Company, and
Executive therefore further acknowledges that, in the event Executive violates,
or threatens to violate, any such Restrictions, the Company and its affiliates
and subsidiaries shall be entitled to obtain from any court of competent
jurisdiction, without the posting of any bond or other security, preliminary and
permanent injunctive relief as well as damages and an equitable accounting of
all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies in
law or equity to which the Company or any affiliate or subsidiary of the Company
may be entitled.
(d) Invalid Provisions. If any Restriction, or any part thereof, is
-------------------
determined in any judicial or administrative proceeding to be invalid or
unenforceable, the remainder of the Restrictions shall not thereby be affected
and shall be given full effect, without regard to the invalid provisions.
(e) Judicial Reformation. If the period of time or the area specified
---------------------
in the Restrictions should be adjudged unreasonable in any judicial or
administrative proceeding, then the court or administrative body shall have the
power to reduce the period of time or the area covered and, in its reduced form,
such provision shall then be enforceable and shall be enforced.
(f) Tolling. If Executive violates any of the Restrictions, the
------
restrictive period shall not run in favor of Executive from the time of the
commencement of any such violation until such time as such violation shall be
cured by Executive to the satisfaction of the Company.
5.02 PROPRIETARY INFORMATION. (a) Disclosure of Information. It is
---------------------------
recognized that Executive will have access to certain confidential information
of the Company and its affiliates and subsidiaries, and that such information
constitutes valuable, special and unique property of the Company and its
affiliates and subsidiaries. Executive shall not at any time disclose any such
confidential information to any party for any reason or purpose except as may be
made in the normal course of business of the Company or its affiliates and
subsidiaries and for the Company's or its affiliates' or subsidiaries' benefits.
(b) Return of Information. All advertising, sales and other materials
----------------------
or articles of information, including without limitation data processing
reports, invoices, or any other materials or data of any kind furnished to
Executive by the Company or developed by Executive on behalf of the Company or
at the Company's direction or for the Company's use or otherwise in connection
with Executive' employment hereunder, are and shall remain the sole and
confidential property of the Company; if the Company requests the return of such
materials at any time during, upon or after the termination of Executive's
employment, Executive shall immediately deliver the same to the Company.
ARTICLE VI
TITLE AND AUTHORITY
6.01 In performing the duties of
__________________________________________________________ hereunder, Executive
shall give the Company the benefit of his special knowledge, skills, contacts
and business experience and shall devote substantially all of his business time,
attention, ability and energy exclusively to the business of the Company.
It is agreed that Executive may have other business investments and participate
in other business ventures which may, from time to time, require minor portions
of his time, but which shall not interfere or be inconsistent with his duties
hereunder.
ARTICLE VII
ARBITRATION
7.01 Any controversy or claim arising out of or relating to this Agreement
or the breach thereof of Executive's employment relationship with the Company
shall be settled by arbitration in the City of Dallas in accordance with the
laws of the State of Texas by one arbitrator. The American Arbitration
Association shall provide each party with a list of five arbitrators and each
party to the arbitration shall be allowed to strike up to two of the arbitrators
from the list provided. The arbitration shall be conducted in accordance
with the rules of the American Arbitration Association. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction.
ARTICLE VIII
MISCELLANEOUS
8.01 NOTICES. Any notices to be given hereunder by either party to the
other shall be in writing and may be effected either by personal delivery or by
mail, registered or certified, postage prepaid with return receipt requested.
Mailed notices shall be addressed to the parties at the following addresses:
If to Company: Pizza Inn, Inc.
3551 Plano Parkway
The Colony, Texas 75056
Attn: Corporate Secretary
If to Executive: _________________
Any party may change his or its address by written notice in accordance with
this Paragraph 8.01. Notice delivered personally shall be deemed communicated
as of actual receipt; mailed notices shall be deemed communicated as of three
days after proper mailing.
8.02 LAW GOVERNING AGREEMENT. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas and all obligations
shall be performable in Denton County, Texas.
8.03 WAIVERS. No term or condition of this Agreement shall be deemed to
have been waived nor shall there be any estoppel to enforce any of the terms or
provisions of this Agreement except by written instrument of the party charged
with such waiver or estoppel, and, if the Company is the waiving party, such
waiver must be approved by the Board. Further, it is agreed that no waiver at
any time of any of the terms or provisions of this Agreement shall be construed
as a waiver of any of the other terms or provisions of this Agreement, and that
a waiver at any time of any of the terms or provisions of this Agreement shall
not be construed as a waiver at any subsequent time of the same terms or
provisions.
8.04 AMENDMENTS. No amendment or modification of this Agreement shall be
deemed effective unless and until executed in writing by all of the parties
hereto and approved by the Board.
8.05 SEVERABILITY AND LIMITATION. All agreements and covenants contained
herein are severable and in the event any of them shall be held to be invalid by
any competent court, this Agreement shall be interpreted as if such invalid
agreements or covenants were not contained herein. Should any court or other
legally constituted authority determine that for any such agreement or covenant
to be effective that it must be modified to limit its duration or scope, the
parties hereto shall consider such agreement or covenant to be amended or
modified with respect to duration and scope so as to comply with the orders of
any such court or other legally constituted authority, and, as to all other
portions of such agreements or covenants, they shall remain in full force and
effect as originally written.
8.06 HEADINGS. All headings set forth in this Agreement are intended for
convenience only and shall not control or affect the meaning, construction or
effect of this Agreement or of any of the provisions thereof.
8.07 SURVIVAL. Articles III, V and VII shall survive termination of this
Agreement.
EXECUTED as of the date and year first above written.
PIZZA INN, INC.
By:
Ronald W. Parker, President and CEO
EXECUTIVE ________________________________________