Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), executed on October 23, 1997, is
made and entered into effective the 1st day of July, 1997, by and between C.
XXXXXXX XXXXXX (hereinafter referred to as "Xxxxxx"), and PIZZA INN, INC.
(hereinafter referred to as the "Company").
W I T N E S S E T H:
WHEREAS, the Company and Xxxxxx entered into that certain Employment
Agreement dated July 26, 1990 and subsequent Employment Agreements dated
September 25, 1992 and July 1, 1994 (together, the "Employment Agreement");
and
WHEREAS, pursuant to the Employment Agreement, the Company currently
employs Xxxxxx as its President and Chief Executive Officer, and the Company
and Xxxxxx desire to continue and extend such employment on the terms and
conditions set forth; and
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
Xxxxxx hereby agree as follows:
ARTICLE I
AGREEMENT
1.01 Employment. Subject to the terms and conditions of this
Agreement, the Company agrees to continue to employ Xxxxxx as its President
and Chief Executive Officer and Xxxxxx hereby accepts such continued
employment with the Company.
1.02 Term. The term (the "Term") of Xxxxxx' employment hereunder
shall commence on the effective date of this Agreement set forth above (the
"Effective Date") and shall continue through June 30, 2002, unless earlier
terminated as provided pursuant to Article V hereof.
1.03 Extensions. During each fiscal year of the Company, beginning
with the fiscal year ending in June 1995, the Board of Directors of the
Company may extend the term of this Agreement, by an additional fiscal year,
without the need to execute an amendment to this Agreement by adopting
appropriate resolutions which expressly extend the term of this Agreement for
such additional fiscal year and which establish a target amount for pre-tax
operating cash flow for such fiscal year pursuant to Section 3.02(c) of this
Agreement.
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ARTICLE II
TITLE AND AUTHORITY
2.01 Xxxxxx agrees to act as President and/or Chief Executive Officer
of the Company and to render such services as are normally delegated to such
offices and positions and such additional services as may be delegated to him
from time to time by the Board of Directors of the Company (the "Board of
Directors") or otherwise stated in the Company's By-Laws, as amended. In
performing such duties hereunder, Xxxxxx 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 Xxxxxx 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 III
COMPENSATION
3.01 Base Salary. During the Term, the Company will pay to Xxxxxx,
as compensation for services rendered under this Agreement, an aggregate base
salary (the "Base Salary") of Five Hundred Thirty-Six Thousand Sixty-Five and
No/100 Dollars ($536,065.00) per annum. The Base Salary shall be paid in
equal bi-weekly installments less applicable withholding, FICA and other
taxes, if any. Such Base Salary shall be increased by 5% per year commencing
on the Effective Date, and on each anniversary of the Effective Date
thereafter during the Term.
3.02 Cash Bonuses. The Company agrees to pay Xxxxxx the cash
bonuses provided below during the term of this Agreement. In the event the
Company fails to meet the required criteria for Xxxxxx to earn any portion of
any of the bonuses listed below due to an extraordinary non-recurring event or
condition, the Compensation Committee of the Board of Directors has the
authority, in its sole discretion, to authorize an additional bonus of an
amount not exceeding the amount lost by Xxxxxx due to such event or condition.
The Compensation Committee also has the authority, in its sole discretion, to
authorize an additional bonus to Xxxxxx at each fiscal year end in the event
the Company experiences superior financial or stock price performance and the
Compensation Committee deems such a bonus appropriate.
(a) Bonus No. 1. During the Term, the Company will pay to Xxxxxx a
cash incentive bonus ("Bonus No. 1") equal to $150,000 per Company fiscal year
if at least 50 new Pizza Inn units are opened during such fiscal year.
Payments will be made on a semi-annual basis, 50% on January 1 and July 1 of
each year, based upon the opening of at least 25 new Pizza Inn units during
each semi-annual period of such fiscal year. To the extent that 25 new units
are not opened in either semi-annual period, the entire unpaid amount of Bonus
No. 1 shall be paid to Xxxxxx at fiscal year end if 50 new units are opened by
fiscal year end.
(b) Bonus No. 2. During the Term, the Company will pay to Xxxxxx a
cash incentive bonus ("Bonus No. 2"), payable quarterly, in the amount of
$37,500 for each fiscal quarter in which the Company's operating results
report pre-tax income growth or earnings per share growth of at least 10% more
than the same quarter in the preceding year. To the extent that there is a
shortfall from such goal in any given quarter, the entire year-to-date unpaid
amount of Bonus No. 2 shall be paid to Xxxxxx if the total year-to-date
pre-tax income growth for such fiscal year is at least 10% more than the
previous fiscal year.
(c) Bonus No. 3. During the Term, the Company will pay to Xxxxxx a
cash incentive bonus ("Bonus No. 3"), payable at the end of each fiscal year,
based on the targets set forth below for pre-tax operating cash flow. For
the purposes of this Agreement, "pre-tax operating cash flow" shall mean
pre-tax income plus depreciation, amortization, allowance for bad debt, and
accrued expense for bonuses issued under this Section 3.02. If pre-tax
operating cash flow equals or exceeds the target amount for an applicable
year, then Bonus No. 3 shall equal $200,000. If pre-tax operating cash flow
equals or exceeds 75% but is less than 100% of the target amount for an
applicable year, then Bonus No. 3 shall equal $150,000. There shall be no
Bonus No. 3 if pre-tax operating cash flow is less than 75% of the target
amount for an applicable year. If pre-tax operating cash flow exceeds the
target amount for an applicable year by $300,000 or more, then Bonus No. 3
shall equal $250,000.
Pre-Tax
Operating Cash
Fiscal Year Ending Flow Target
-------------------- ----------------
June 1998 $ 8,000,000
June 1999 $ 9,000,000
June 2000 $ 10,000,000
June 2001 $ 11,000,000
June 2002 $ 12,000,000
3.03 Stock. It is acknowledged that Xxxxxx owns a substantial
number of shares of Common Stock. The issuance of any additional shares of
stock to Xxxxxx would be at the discretion of the Company's Board of
Directors.
ARTICLE IV
BENEFITS
4.01 Xxxxxx shall receive a $25,000 yearly allowance to purchase life
and disability insurance on each July 1 during the Term. At his option,
Xxxxxx shall receive up to a $10,000 yearly allowance to maintain secondary
health, dental and other insurance payable at such time as the premiums for
such insurance are due. In addition, Xxxxxx may participate in the Company's
benefit plans. Xxxxxx shall receive an automobile allowance of $1,350 per
month payable on the first day of each month during the Term plus
reimbursement of gasoline and maintenance expenses.
ARTICLE V
TERMINATION
5.01 Disability of Xxxxxx. If Xxxxxx shall become disabled, ill or
be injured or otherwise become incapacitated such that, in the good faith
opinion of the Board of Directors, he cannot fully carry out and perform his
duties hereunder, and such incapacity shall continue for a period of 90
consecutive days, the Board of Directors may, at any time thereafter, fully
and finally terminate his employment under this Agreement by giving Xxxxxx
written notice of such termination; provided, however, Xxxxxx shall
continue to receive 25% of his Base Salary for the remainder of the Term.
Termination under this Paragraph 5.01 shall be effective as of the date of
such notice. The right to terminate Xxxxxx hereby shall expire (if not
invoked) at such time as the event causing such incapacity is fully cured.
5.02 Death of Xxxxxx. This Agreement shall automatically
terminate upon the death of Xxxxxx; provided, however, that the estate of
Xxxxxx shall receive for one (1) year after the date of death, upon the dates
that such payments would have been made to Xxxxxx, payments of Base Salary,
Bonus Xx. 0, Xxxxx Xx. 0, and Bonus No. 3 pursuant to this Agreement.
5.03 Termination by the Company for Cause. In addition to any
other remedies which the Company may have at law or in equity, the Board of
Directors may immediately terminate Xxxxxx' employment under this Agreement in
the event of the occurrence of any of the following events:
(a) Xxxxxx 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) Xxxxxx willfully fails to substantially perform his duties within
fifteen (15) days after written demand for substantial performance is
delivered to Xxxxxx by the Board of Directors, which demand specifically
identifies the manner in which the Board believes that Xxxxxx has not
substantially performed his duties.
The Board of Directors shall provide at least ten (10) days prior written
notice to Xxxxxx of its intention to discharge Xxxxxx for cause, and such
notice must specify in detail the nature of the cause alleged and provide
Xxxxxx an opportunity to be heard by the Board of Directors prior to the
expiration of such ten day period.
5.04 Termination by the Company Without Cause. The Board of
Directors may terminate Xxxxxx without cause (cause being as defined in
Paragraph 5.03 above) upon 30 days prior written notice.
5.05 Termination by Xxxxxx. Xxxxxx may, with or without cause,
terminate his employment under this Agreement at any time by giving the
Company at least 30 days prior written notice of such termination.
5.06 Change of Control. Xxxxxx may terminate this Agreement with
or without any reason at any time within six months after a Change of Control
has occurred 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
Xxxxxx; 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 of Directors (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board of Directors; 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 of Directors.
5.07 Termination by Xxxxxx for Good Reason. Xxxxxx may terminate
his employment for good reason within twelve months following a Change of
Control by giving the Company at least ten days prior written notice of such
termination. For purposes of this Agreement, "good reason" shall mean,
without Xxxxxx' express written consent, that, following a Change of Control,
(i) Xxxxxx is required to relocate, (ii) Xxxxxx is assigned a diminished
position or diminished responsibilities with the Company, or (iii) Xxxxxx'
annual base salary, bonus or benefits, as the same may be contractually
adjusted from time to time, are reduced in any manner other than as provided
for in Section 3.02 in this Agreement.
ARTICLE VI
RIGHTS UPON TERMINATION
6.01 If the Company terminates this Agreement pursuant to Paragraphs
5.01 or 5.03 hereof, or if this Agreement is automatically terminated pursuant
to Paragraph 5.02 hereof, or if Xxxxxx terminates this Agreement pursuant to
Paragraph 5.05 hereof, then Xxxxxx or Xxxxxx' estate, as the case may be, will
only be entitled to the salary (under Paragraph 3.01) which has been received
or accrued to the date of termination, and Xxxxxx or Xxxxxx' estate, as the
case may be, will not be entitled to any additional salary for the remainder
of the Term (except as otherwise provided in Paragraph 5.01 or 5.02 hereof).
Xxxxxx will not be entitled to any bonus (including any bonuses set forth
herein), further equity participation, employee benefit, or any other payment
except for bonuses which may have accrued prior to the date of termination.
6.02 If the Company terminates this Agreement pursuant to Paragraph
5.04 hereof, or if Xxxxxx terminates this Agreement pursuant to Paragraph 5.06
or 5.07 hereof, Xxxxxx will be entitled to a lump sum payment within 30 days
of termination of all ordinary salary payments as provided in Paragraph 3.01
which would have been paid had Xxxxxx remained in the employment of the
Company during the complete Term together with an amount equal to (i) two
times the sum of Bonus Xx. 0, Xxxxx Xx. 0 and Bonus No. 3 Xxxxxx would have
received in the fiscal year of such termination assuming the Company's
financial and operational results for such fiscal year attained the highest
levels set forth in Paragraph 3.02 hereof, less (ii) any Bonus Xx. 0, Xxxxx
Xx. 0, and Bonus No. 3 actually received in such fiscal year based on
operating results of such fiscal year.
6.03 The parties hereto acknowledge and agree that the amount set
forth in Paragraph 6.02 is not a penalty or a forfeiture; rather, the amount
specified is a reasonable and fair reflection of damages that Xxxxxx might
incur in the event this Agreement is terminated pursuant to such paragraph.
6.04(a) If any payment received or to be received by Xxxxxx in
connection with a change in control of the Company or termination of Xxxxxx'
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 (together with the severance payment, the
"total payments"), will be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code, the Company will pay to Xxxxxx, 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 Xxxxxx, 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.
6.04(b) For purposes of determining the amount of the gross-up
payment, Xxxxxx 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.
6.04(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 Xxxxxx 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 VII
EXPENSE REIMBURSEMENT
7.01 Xxxxxx is authorized to incur reasonable business expenses in
promoting the business of the Company, including expenditures for
entertainment and travel. Such expenses shall include economy airfare for
commuting between Xxxxxx' residence (which may be his primary or secondary
residence) and the Company's corporate office (or such other locations as
Xxxxxx needs to conduct the Company's business from time to time). The
Company shall reimburse Xxxxxx from time to time for all business expenses
which are determined by the Board of Directors to be reasonable. The Company
shall reimburse Xxxxxx' legal and resultant accounting expenses incurred in
connection with this Agreement.
ARTICLE VIII
BOARD OF DIRECTORS
8.01 In the event of termination of this Agreement, Xxxxxx shall
tender his resignation from the Board of Directors.
ARTICLE IX
TRADE SECRETS AND NON COMPETITION
9.01 Trade Secrets. During the Term and at all times thereafter,
Xxxxxx 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 10.01 or 10.02 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 Xxxxxx or learned or
acquired by Xxxxxx while in the employ of the Company.
9.02 Non-Competition. For a period of three years after the
termination of his employment with the Company, Xxxxxx 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.
9.03 Remedies. Xxxxxx acknowledges that the restrictions contained
in the foregoing Paragraphs 9.01 and 9.02 (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 Xxxxxx therefore further acknowledges that, in the event Xxxxxx 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.
9.04 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.
9.05 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.
9.06 Tolling. If Xxxxxx violates any of the Restrictions, the
restrictive period shall not run in favor of Xxxxxx from the time of the
commencement of any such violation until such time as such violation shall be
cured by Xxxxxx to the satisfaction of the Company.
ARTICLE X
PROPRIETARY INFORMATION
10.01 Disclosure of Information. It is recognized that Xxxxxx 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. Xxxxxx 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.
10.02 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 Xxxxxx by the Company or developed by Xxxxxx on behalf of the
Company or at the Company's direction or for the Company's use or otherwise in
connection with Xxxxxx' 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 Xxxxxx'
employment, Xxxxxx shall immediately deliver the same to the Company.
ARTICLE XI
ARBITRATION
11.01 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof of Xxxxxx' 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 Xxxxxx, 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 XI.
Judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction.
ARTICLE XII
MISCELLANEOUS
12.01 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.
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Chairman of the Board
If to Xxxxxx: C. Xxxxxxx 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 12.01. Notices delivered personally shall be deemed
communicated as of actual receipt; mailed notices shall be deemed communicated
as of three days after proper mailing.
12.02 Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the employment of Xxxxxx by the Company, including, but without limitation,
the Employment Agreement, and contains all of the covenants and agreements
between the parties with respect to such employment in any manner whatsoever.
12.03 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 Dallas County, Texas.
12.04 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 of Directors. 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.
12.05 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 of Directors.
12.06 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.
12.07 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.
12.08 Assignment. Xxxxxx agrees that his representations,
warranties, covenants, promises and obligations contained herein may be
assigned by the Company to any person, partnership, firm, association,
corporation or other business entity to which the Company may transfer all or
substantially all of its business or assets.
12.09 Survival. Articles VI, IX and XI shall survive the
termination of this Agreement.
EXECUTED as of the date and year first above written.
PIZZA INN, INC.
By: /s/Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Operating Officer
/s/C. Xxxxxxx Xxxxxx
