EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into effective as of
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March 31, 2005, between Pizza Inn, Inc. (the "Company"), and Xxxxxxx X. Xxxx
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(the "Executive").
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WHEREAS, the Company desires to employ the Executive, and Executive desires
to be employed by the Company, upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
ARTICLE 1
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EMPLOYMENT
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1.1. EMPLOYMENT. The Company hereby employs the Executive and the Executive
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hereby accepts employment by the Company for the period and upon the terms and
conditions contained in this Agreement.
1.2. OFFICE AND DUTIES. The Executive shall serve the Company as President
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and Chief Executive Officer, with the authority, duties and responsibilities
customarily incident to such offices, as governed and limited by the Company's
charter and bylaws. The Executive shall perform such other executive services
commensurate with his position as may from time to time be assigned to the
Executive by the Company's Chairman or Board of Directors. The Board of
Directors of the Company may from time to time redefine the title and duties of
the Executive hereunder in furtherance of the business of the Company. The
Executive's actions shall at all times be subject to the direction of the
Company's Chairman and Board of Directors.
1.3. PERFORMANCE. During the term of employment under this Agreement, the
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Executive shall devote on a full-time basis all of his time, energy, skill and
best efforts to the performance of his duties hereunder in a manner that will
faithfully and diligently further the business and interests of the Company.
The Executive shall comply with the policies or written manuals of the Company
as they exist from time to time as applicable generally to the Company's
executives. It is understood that the Executive may have other business
investments which may, from time to time, require minor portions of his after
hours time and which shall not interfere or be inconsistent with his duties and
contractual obligations hereunder.
1.4. PLACE OF WORK. The Executive shall perform services under this
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Agreement at the Company's principal office currently located in The Colony,
Texas, and at such other place or places as directed by the Chairman or Board of
Directors. The Executive covenants and agrees that, not later than June 1,
2006, he shall relocate his principal residence from Austin, Texas, to a
location not more than 50 miles from the principal office of the Company.
ARTICLE 2
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TERM
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2.1. TERM. Unless otherwise terminated in accordance with Article 4, the
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term of employment under this Agreement shall be for an initial period of two
years from the date hereof. The term of employment hereunder shall
automatically be extended for successive additional one year periods unless, 60
days prior to the end of any employment period, either party provides the other
with written notice that the Executive's employment hereunder will not be so
extended.
ARTICLE 3
COMPENSATION FOR EMPLOYMENT
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3.1. BASE SALARY. During the first twelve months of this Agreement, the
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base salary of the Executive for all of his employment services to the Company
under this Agreement shall be $1 per year, which the Company shall pay to the
Executive in advance. Commencing on the first anniversary of his employment
hereunder, the base salary of the Executive shall be as determined by the Board
of Directors, but not less than $300,000 per year. Commencing on the first
anniversary of his employment hereunder, the base salary of the Executive shall
be payable in equal monthly installments and in accordance with the normal
payroll policies of the Company. The Executive's base salary shall be reviewed
annually by the Board of Directors of the Company.
3.2. BONUSES. During the first twelve months of this Agreement, the
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Executive may receive as additional compensation for his duties and
responsibilities performed pursuant to this Agreement such bonus or bonuses as
the Board of Directors may determine in its sole discretion. Commencing in the
second year of employment hereunder, the Executive shall be eligible to earn an
annual bonus in a maximum amount as determined by the Board of Directors, but
not less than $200,000 per year, conditioned on achieving performance goals for
such year as established by the Board of Directors in its sole discretion.
3.3. STOCK OPTIONS. As additional compensation for the duties and
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responsibilities to be performed hereunder, effective as of the date hereof the
Company shall grant to the Executive non-qualified options to purchase 500,000
shares of the common stock of the Company at a price per share equal to the
closing price of such common stock on Nasdaq on the date hereof. Such
non-qualified stock options shall be immediately exercisable as to 50,000
shares, and shall become exercisable as to an additional 100,000 shares on the
first anniversary hereof, 150,000 shares on the second anniversary hereof and
the remaining 200,000 shares on the third anniversary hereof (provided that,
except as provided in Section 4.4, the Executive continues to be employed by the
Company on each such anniversary hereof). All unexercised stock options shall
expire ten years from the date of grant. All unexercised stock options will
also expire immediately upon the Company's termination of the employment of the
Executive for Cause (as defined in Section 4.1) or the Executive's voluntary
termination of his employment hereunder (except as otherwise provided in Section
4.4). Except as otherwise provided in Section 4.4, all unexercised stock
options will also expire 30 days following termination of the Executive's
employment by the Company without Cause. The non-qualified stock options
granted to the Executive shall not be transferable and shall be subject to a
written grant agreement containing other customary terms and conditions, as
determined in the sole discretion of the Board of Directors.
3.4. PAYMENT AND REIMBURSEMENT OF EXPENSES. The Company shall pay or
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reimburse the Executive for reasonable expenses incurred by the Executive in
performing his obligations under this Agreement in accordance with the policies
and procedures of the Company, provided that the Executive properly accounts for
such expenses in accordance with the regular policies of the Company.
3.5. OTHER EMPLOYEE BENEFITS. The Executive shall be entitled to participate
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in or receive benefits under any plan or arrangement made available by the
Company to its senior executives generally and to its senior executive officers
(including any health, dental, disability, and life insurance programs), subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. Any such plan or arrangement
shall be revocable and subject to termination or amendment at any time.
ARTICLE 4
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TERMINATION
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4.1. TERMINATION FOR CAUSE. The Company may terminate the employment of the
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Executive at any time for Cause. For purposes hereof, "Cause" shall mean the
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occurrence of any of the following:
(i) the Executive's commission of a dishonest or fraudulent act in
connection with his employment, or the misappropriation of Company property in
the reasonable determination of the Board;
(iii) the death of the Executive, or the inability (with, in the case of
disability, reasonable accommodation) of the Executive for any reason to perform
his duties hereunder for a continuous period of 30 days (60 days in the case of
disability) for reasons other than actions by the Company;
(iv) the Executive's willful disobedience of a lawful directive of the Board
of Directors (whether by commission or omission);
(v) the Executive's indictment on, formal charge of, conviction of, or plea
of nolo contendere to, a felony;
(vi) the Executive's indictment on, formal charge of, conviction of, or plea
of nolo contendere to any misdemeanor involving dishonesty (such as theft,
forgery or fraud) or moral turpitude;
(vii) the Executive's insobriety during working hours, in violation of
standard Company policy;
(viii) the Executive's use of illegal drugs in violation of standard Company
policy;
(ix) gross negligence or willful misconduct in the performance of the
Executive's duties or responsibilities under this Agreement; or
(x) any violation of Article 5 or Article 6 of this Agreement by the
Executive.
Any notice of discharge for Cause shall describe with reasonable specificity the
Cause for termination of Executive's employment as well as the effective date of
the termination.
4.2. VOLUNTARY TERMINATION BY EXECUTIVE. Executive may voluntarily
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terminate employment hereunder by providing the Company with 30 days prior
notice. After receipt of said notice, the Company may, in its sole discretion,
relieve Executive of his duties prior to the expiration of the notice period
without affecting the voluntary nature of the Executive's termination.
4.3. POST-TERMINATION OBLIGATIONS TO EXECUTIVE. If the Company terminates
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the employment of the Executive for Cause, or the Executive voluntary terminates
his employment, the Company shall have no further liability or obligation to the
Executive under this Agreement or otherwise in connection with his employment
hereunder, except for (i) any unpaid salary accrued through the date of
termination, (ii) any unreimbursed expenses properly incurred prior to the date
of termination, and (iii) rights granted to the Executive under any executive
benefit plan (in accordance with the terms of any such plan). If the Company
terminates the employment of the Executive without Cause, then the Executive
shall be entitled to be paid, in addition to the foregoing amounts, either (a)
during the first twelve months of this Agreement, an amount equal to $25,000 for
each full month the Executive has been employed hereunder, payable in a lump sum
within 30 business days following such termination, or (b) commencing on the
first anniversary of his employment hereunder, an amount equal to twelve months
of the then base salary of the Executive, payable at the election of the Company
either (x) in a lump sum, or (y) in equal monthly installments in the same
manner as if the employment of the Executive had not been terminated.
4.4. TERMINATION ON CHANGE IN CONTROL. If, within six months following a
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Change in Control (as defined below), the Company terminates the employment of
the Executive without Cause, or the Executive terminates his employment with the
Company for Good Reason (as defined below), then the Executive shall be entitled
to be paid all amounts specified in Section 4.3 and, in addition, all unvested
stock options granted to the Executive shall become immediately exercisable by
the Executive and shall remain exercisable for a period of 90 days thereafter,
at which time all unexercised stock options granted to the Executive hereunder
shall expire.
(i) For purposes of this Section 4.4, "Change in Control" shall mean any
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circumstances in which any person or group which does not include Xxxx X.
Xxxxxxx, Newcastle Partners L.P. or any of their respective affiliates becomes
the beneficial owner of securities representing more than 50% of the combined
voting power of the Company's outstanding securities entitled to vote on the
election of directors (for which purpose the terms "person," "group" and
"beneficial owner" have the same meaning as used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules promulgated thereunder, and the
term "affiliate" has the same meaning as defined in Rule 405 promulgated under
the Securities Act of 1933).
(ii) For purposes of this Section 4.4, "Good Reason" shall mean (a) a
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reduction in the base salary of the Executive following any Change in Control;
or (b) a material diminution of the employment responsibilities and authority of
the Executive following any Change in Control.
4.5. EXCLUSIVE BENEFITS. Any post-termination payments made to the
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Executive pursuant to Section 4.3 or Section 4.4 are in lieu of any and all
other benefits or claims which the Executive might assert against the Company,
and may be conditioned upon the Executive's execution of a full and complete
release of the Company from any and all liabilities arising in connection with
his employment by the Company or the termination thereof. Except as otherwise
expressly provided, such payments shall be made to the Executive in accordance
with the Company's customary payroll practices and shall be subject to
withholding for federal and state income taxes, social security payments and
similar deductions, as required by applicable law. The Company shall be
entitled to suspend all post-termination payments to the Executive during any
period when the Executive is in breach of any of the covenants contained in
Article 5 and Article 6.
ARTICLE 5
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OWNERSHIP OF INFORMATION, INVENTIONS AND ORIGINAL WORK
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5.1. OWNERSHIP OF INFORMATION, INVENTIONS AND ORIGINAL WORK. The Executive
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agrees that any creative works, discoveries, designs, software, computer
programs, inventions, improvements, modifications, enhancements, know-how and
other information conceived, created or developed by Executive, either alone or
with others (collectively referred to as "Work Product") during his employment
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by Company is the exclusive property of the Company
5.2. WORK PRODUCT DISCLOSURE. The Executive agrees to promptly disclose to
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the Company any such Work Product, and to assist the Company in obtaining any
patents or copyrights on such Work Product. Any Work Product disclosed by the
Executive to the Company or any third party within one year following the
termination of employment from the Company shall be deemed to be owned by the
Company under the terms of this Agreement, unless conclusively established by
the Executive to have been conceived after such termination.
ARTICLE 6
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RESTRICTIVE COVENANTS
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6.1. PERFORMANCE OF SERVICES. Throughout his employment by the Company, the
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Executive agrees to perform faithfully and industriously the duties assigned to
him hereunder to the best of his ability, to devote substantial business time
and attention, and his best efforts, abilities, experience, and talent, to the
positions and titles held and for the business of the Company.
6.2. CONFIDENTIAL INFORMATION. The Company covenants and agrees that, prior
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to termination of this Agreement for any reason, the Company will disclose to
the Executive substantially all confidential information relating to the
business conducted and to be conducted by the Company. Executive acknowledges
that such confidential information includes, but is not limited to, trade
secrets, proprietary developments and all non-public information concerning the
Company including, but not limited to, its business plans, marketing strategies
and financial information. The Executive further acknowledges that he will have
access to and learn additional trade secrets, proprietary information and
non-public information of a similar nature regarding the Company during
employment with the Company. The Executive further acknowledges and agrees that
all of such current and future confidential information of the Company is
valuable, confidential, important to his employment, and delivered in
consideration of his performance hereunder.
6.3. CONFIDENTIALITY. The Executive acknowledges and agrees that any and all
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information that may be obtained by him in the course of his employment with the
Company with respect to the conduct and details of the business of the Company
shall be deemed to be confidential information. The Executive covenants and
agrees that he will not, at any time during his employment with the Company or
thereafter, make use of any non-public data or information of any kind or
character relating to the business of the Company or any of its subsidiaries, or
divulge any trade secrets, business policies or other confidential information
of the Company or any of its subsidiaries except to the extent that the Board of
Directors may so authorize in writing. The Executive further covenants and
agrees that, upon termination of his employment hereunder, he will surrender to
the Company all books, lists, records, documents and other similar Company
property obtained by him or entrusted to him during the course of his employment
by the Company (together with all copies thereof) which contain any confidential
information of the Company or which were paid for by the Company, it being
explicitly understood and agreed that all such books, records, lists, documents
and property are and shall remain the property of the Company;
6.4. NON-COMPETE. The Executive acknowledges that the confidential
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information which the Company is obligated to provide to him under the terms of
Section 6.2 is special and unique, and that the receipt of it by the Executive
is of benefit and value to him. The Executive acknowledges receipt of such
confidential information, including any and all confidential information
disclosed to the Executive by the Company in conjunction with the execution of
this Agreement, such confidential information being disclosed to the Executive
expressly in consideration of his agreement to be bound by the provisions of
this Section 6.4. The Executive also acknowledges that Company does not normally
disclose such confidential information and takes steps to protect it. The
Executive further acknowledges that the services he is to render to the Company
are of a special and unusual character with a unique value to the Company, the
loss of which cannot adequately be compensated by damages in action at law.
Accordingly, and expressly in consideration for the Company's agreement in
Section 6.2 of this Agreement to provide confidential information to him, as
well as the various compensation and benefits paid by Company hereunder, the
Executive agrees that during the term of his employment and continuing for a
period of one year thereafter:
(i) the Executive will not engage in any activities, whether as employee,
agent, proprietor, owner, partner, independent contractor, consultant,
stockholder (other than as the holder of less than 5% of the stock of a
corporation the securities of which are traded in the United States of America
or in another country on a national securities exchange or in the
over-the-counter or another comparable market), member, director or otherwise,
which compete within the continental United States with any business activities
conducted by the Company or any of its subsidiaries at any time during the term
of the Executive's employment by the Company;
(ii) the Executive will not solicit, in competition with the Company or any
of its subsidiaries, any person who was a customer, client, candidate,
independent contractor, or consultant or supplier of the Company or its any of
its subsidiaries at any time during the term of the Executive's employment by
the Company; and
(iii) the Executive will not induce or attempt to persuade any employee or
independent contractor of the Company or any of its subsidiaries to terminate
such person's or entity's employment or independent contractor relationship with
the Company.
6.5. ENFORCEABILITY OF COVENANTS. The following provisions shall apply to
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the covenants of the Executive set forth above in this Article 6:
(i) Without limiting the right of the Company to pursue all other legal and
equitable remedies available for violation by the Executive of the covenants
contained in this Article 6, it is expressly agreed that such other remedies
cannot fully compensate the Company for such a violation and that the Company
shall be entitled to injunctive relief (including temporary retraining orders
after reasonable notice prior to application therefor) to prevent any such
violation or continuing violation hereof, and the Executive hereby consents to
the granting of such relief (including temporary restraining orders after
reasonable notice prior to application therefor) by any court of competent
jurisdiction.
(ii) It is the intent and understanding of each party hereto that if in any
action before any court or agency legally empowered to enforce the covenants
contained in this Article 6 or any term, restriction, covenant, or promise
contained herein is found to be unreasonable and accordingly unenforceable, then
such term, restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such court or agency.
(iii) The covenants contained in this Article 6 shall continue in effect
pursuant to and to the extent consistent with their terms, notwithstanding the
termination of the Executive's employment pursuant to this Agreement.
ARTICLE 7
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REMEDIES
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7.1. REMEDIES. The Executive expressly acknowledges that the remedy at law
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for any breach of Article 5 or Article 6 may be inadequate and that upon any
such breach or threatened breach, the Company shall be entitled, subject to
Section 8.2 below, as a matter of right to injunctive relief in any court of
competent jurisdiction, in equity or otherwise, and to enforce the specific
performance of the Executive's obligations under those provisions without the
necessity of proving the actual damage to the Company or the inadequacy of a
legal remedy. The rights conferred upon the Company by the preceding sentence
shall not be exclusive of, but shall be in addition to, any other rights or
remedies which the Company may have at law, in equity or otherwise. During any
period in which the Executive is in breach of the covenants contained in Article
6, the time period of those covenants shall be extended for an amount of time
that the Executive is in breach of the covenants.
ARTICLE 8
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GENERAL
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8.1. GOVERNING LAW. This Agreement shall be governed by, construed,
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interpreted and applied in accordance with the laws of the State of Texas,
without giving effect to any conflict of laws rules that would refer the matter
to the laws of another jurisdiction.
8.2. DISPUTE RESOLUTION. Except as provided below, in the event of any
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dispute, claim or disagreement arising out of or in connection with this
Agreement or Executive's employment with Company, including, without limitation,
the negotiation, execution, interpretation, performance or non-performance of
this Agreement, the parties shall first submit the dispute, claim or
disagreement to non-binding mediation administered by the American Arbitration
Association (the "AAA") in accordance with its Employment Mediation Rules. The
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place of mediation shall be Xxxxxx County, Texas. If the dispute, claim or
disagreement is not resolved within 30 days after the initial mediation meeting
among the parties and the mediator, or if the mediation is otherwise terminated,
then either party may submit the dispute, claim or disagreement to binding
arbitration administered by the AAA in accordance with the provisions of its
Employment Arbitration Rules (the "Rules"). The place of arbitration shall be
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Xxxxxx County, Texas. The arbitration shall be conducted by a single arbitrator
selected in accordance with the Rules. Any mediator or arbitrator selected
under this Section 8.2 shall be a practicing attorney experienced in employment
agreements and shall not have been employed or engaged by or affiliated with
either of the parties or their respective affiliates. Each party shall bear its
own costs and expenses in connection with any mediation or arbitration
hereunder, including, without limitation, its attorneys' fees, and an equal
share of the mediator's or arbitrator's and administrative fees of mediation or
arbitration. The decision of any arbitrator shall be in writing and shall state
the reasons therefor. Judgment upon an arbitration award may be entered in any
court of competent jurisdiction and shall be final, binding and non-appealable.
Notwithstanding anything in this Section 8.2 to the contrary, each party shall
be entitled to seek injunctive or other equitable relief in any court of
competent jurisdiction without first submitting the matter to mediation or
arbitration in accordance with the provisions of this Section 8.2, even if a
similar or related matter has already been referred to meditation or arbitration
in accordance with the terms of this Section 8.2.
8.3. BINDING EFFECT. All of the terms and provisions of this Agreement
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shall be binding upon and inure to the benefit and be enforceable by the
respective heirs, representatives, successors (including any successor as a
result of a merger or similar reorganization) and assigns of the parties hereto,
except that the duties and responsibilities of the Executive hereunder are of a
personal nature and shall not be assignable in whole or in part by the
Executive, and the Company may not assign its rights, duties, or
responsibilities without the consent of the Executive.
8.4. NOTICES. All notices required to be given under this Agreement shall
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be in writing and shall be deemed to have been given and received when
personally delivered, or when mailed by registered or certified mail, postage
prepaid, return receipt requested, or when sent by overnight delivery service,
addressed as follows:
If to the Executive:
Xxxxxxx X. Xxxx
0000 Xxxxxxxx Xxxxxxxx
Xxxxxx, Xxxxx 00000
If to the Employer:
Pizza Inn, Inc.
0000 Xxxxx Xxxxxxx
Xxx Xxxxxx, Xxxxx 00000
Such addresses may be changed from time to time by written notice to the
other party.
8.5. ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the entire
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agreement of the parties hereto with respect to the subject matter hereof, and
supersedes all other agreements (oral or written) with respect to the subject
matter hereof. This Agreement may not be modified or amended in any way except
in writing by the parties hereto.
8.6. DURATION. Notwithstanding the termination of the Executive's
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employment by the Company, this Agreement shall continue to bind the parties for
so long as any obligations remain under the terms of this Agreement.
8.7. WAIVER. No waiver of any breach of this Agreement shall be construed
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to be a waiver as to succeeding breaches.
8.8. SEVERABILITY. Whenever possible, each provision of this Agreement
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shall be interpreted in such a manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such provision or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
8.9. SUBSIDIARIES. Wherever the term Company is referred to in this
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Agreement, it shall include all subsidiaries of the Company even where the term
"subsidiaries" is not explicitly stated in connection with such reference, as
such subsidiaries may exist from time to time.
8.10. COUNTERPARTS. This Agreement may be executed in multiple
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counterparts, each of which shall be deemed an original, but all of which
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together shall constitute the same Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
duly executed this Agreement as of the day and year first written above.
EXECUTIVE:
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/s/Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx
COMPANY:
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PIZZA INN, INC.
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxxx, Chairman of the Board
