- WHITE PAPERS
THE COLONY, Texas -- Newcastle Partners, the largest shareholder (36 percent) of Pizza Inn, gained two board seats and the chairman's spot during the 419-unit company's annual meeting at its headquarters on Feb. 11.
The board shuffle ended a bitterly contested proxy battle between Newcastle and Pizza Inn's board, which initially began in December 2002. Days after Newcastle's Dec. 16, 2002, purchase of 35 percent of Pizza Inn's stock, the chain's board amended the company's bylaws to protect its top executives from a potential change of control. Such change, the rewritten bylaws stated, likely would trigger $7.4 million in payouts to Pizza Inn's top executives, including more than $5 million to CEO and President Ronnie Parker.
Newcastle balked at the changes, and launched a bid in 2003 to gain increased control of the board via shareholder proxy vote and repeal the amended bylaws.
According to a Pizza Inn news release, the following Newcastle nominees were elected to the board at the annual meeting: Steve Pully, an existing director, was re-elected for another term; Ray Phillips and Robert Page were elected as new directors replacing Steve Ungerman and Dr. F. Jay Taylor. Mark Schwarz, president of Dallas-based Newcastle and a Pizza Inn board member, was elected the board chair, succeeding Ungerman, and Phillips was named vice chairman of the board.
In addition to shareholder approval of the new board, resolutions submitted by Newcastle to repeal amendments to Pizza Inn's bylaws (relative to the perceived change of control on the board). Newcastle also will be reimbursed for expenses it incurred in its proxy solicitation.
Pizza Inn's Parker said in the release he was glad the disputes between the company and Newcastle are resolved and that he looks forward to a bright future for the company.
"We will continue our ongoing efforts to increase franchisee profitability and shareholder value," Parker said.
"I look forward to working together with the Pizza Inn management team and franchisees to help build a strong future for our company," he said.
Dallas-based securities broker Sterling May, who owns a 14 percent stake in Pizza Inn, told PizzaMarketplace.com the twice-postponed annual meeting was amicable and did not become the shouting match some anticipated.
"It was very civil, everyone spoke kindly to everyone and nobody rushed out of there after it was over," May said. "After it ended, they brought in a bunch of new product, and everyone was chatting and eating and drinking."
Like Parker and Schwarz, May believes the two parties finally are ready to work together to revitalize Pizza Inn. But he's not certain, whether the arrangement of the new board will effect the change of control defined in the employment contracts of Pizza Inn's top executives.
"I think everyone's going to buckle down and run the company, which is what shareholders wanted all along," May said. "To settle the other issues, they have to have another board meeting, which wasn't scheduled. ... I just hope the matter can be settled by them, and not the lawyers."