Exhibit 10.2
EXECUTIVE COMPENSATION AGREEMENT
THIS EXECUTIVE COMPENSATION AGREEMENT ("Agreement"), executed on October
23, 1997, is made and entered into and executed effective the 1st day of July,
1997, by and between Xxxxxx X. Xxxxxx (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 Executive Vice
President and Chief Operating Officer, 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 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 his then current
annual salary, bonus and all other benefits including such increases as the
Board or the Compensation Committee approve from time to time.
ARTICLE II
TERMINATION OF EMPLOYMENT
TERMINATION BY THE COMPANY FOR CAUSE
2.01 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. "Cause" shall mean the occurrence of any of the
following events:
(a) Executive willfully engages in an act of dishonesty (including,
but not limited to, conviction of a felony) which act in and of itself
materially injures or damages the Company; or
(b) Executive willfully fails to substantially perform his duties
within fifteen (15) 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.
TERMINATION BY EXECUTIVE IN WINDOW PERIOD
2.02 Executive's employment may be terminated by Executive with or
without any reason at any time within six 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 (and apart from
rights accruing under special circumstances) having the right to vote in the
election of directors; or (c) a person or entity or Group of Persons (other
than (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.
TERMINATION BY EXECUTIVE FOR GOOD REASON
2.03 Executive may terminate his employment for good reason within
twelve months following a Change of Control (the "Good Reason Period"). For
purposes of this Agreement, "good reason" shall mean, without the Executive's
express written consent, that, following a Change of Control, (i) Executive is
required to relocate, (ii) Executive is assigned a diminished position or
diminished responsibilities with the Company, or (iii) Executive's annual base
salary or benefits, as the same may be increased from time to time, are
reduced.
NOTICE AND DATE OF TERMINATION
2.04 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
WINDOW PERIOD; OTHER THAN FOR CAUSE
3.01 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) three (3) 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.
OUTSIDE THE WINDOW PERIOD; FOR CAUSE
3.02 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.
NOT A PENALTY OR FORFEITURE
3.03 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.
TAX LIMITATION
3.04(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.
3.04(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.
3.04(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 June 30, 2002. During each fiscal year of the Company, beginning with
the fiscal year ending in June, 1998, 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.
TRADE SECRETS AND NONCOMPETITION
5.01(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.
5.01(b) Non-Competition. In the event that Executive receives
payment from the Company pursuant to Paragraph 3.01 of this Agreement,
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 Paragraph 3.01(a).
5.01(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.
5.01(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.
5.01(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.
5.01(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.
PROPRIETARY INFORMATION
5.02(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.
5.02(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 such duties 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 three arbitrators, one of
whom shall be appointed by the Company, one by Executive, and the third of
whom shall be appointed by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the Chief Judge of the United States
Court of Appeals for the Fifth Circuit. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Article VII. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction.
ARTICLE VIII
MISCELLANEOUS
NOTICES
8.01 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.
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Chairman of the Board
If to Executive: Xxxxxx X. Xxxxxx
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
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.
INCLUSION OF ENTIRE AGREEMENT HEREIN
8.02 This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the employment
of Executive by the Company upon a Change of Control and contains all of the
covenants and agreements between the parties with respect thereto. This
Agreement does not deal with compensation or any other employment terms of
Executive prior to a Change of Control, except as specifically provided herein
for termination and in Section 1.01, and does not impact additional benefits
to which Executive may be entitled upon termination pursuant to Company
benefit plans or by other written or oral agreement.
LAW GOVERNING AGREEMENT
8.03 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 Dallas County, Texas.
WAIVERS
8.04 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.
AMENDMENTS
8.05 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.
SEVERABILITY AND LIMITATION
8.06 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.
HEADINGS
8.07 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.
SURVIVAL
8.08 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: /s/C. Xxxxxxx Xxxxxx
Name: C. Xxxxxxx Xxxxxx
Title: Chief Executive Officer
/s/Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
