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SEC filing details battle for Pizza Inn board

December 18, 2003

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THE COLONY, Texas—Pizza Inn, a 417-unit buffet-centerd chain, is urging its shareholders to vote by proxy against board nominees submitted by Newcastle Partners, which owns more than 35 percent of Pizza Inn's stock.

According to an SEC filing, Pizza Inn's board is recommending shareholders reject Newcastle's proxy solicitation and its proposals to repeal bylaw amendments that would allow it to increase the chain's board size by two persons. Newcastle also wants shareholders to reimburse it for expenses incurred during its own proxy solicitation and board nominee recruitment efforts.

The Dec. 15 filing indicated that the final vote will occur during the company's annual meeting on Jan., 21, 2004, at Pizza Inn's headquarters.

"This annual meeting is of particular importance to all shareholders of the company because of the attempts by Newcastle to take over your board," the filing read.

According to the filing, should Newcastle's nominees be elected to the board, Pizza Inn believes it may represent a "change of employment" relative to its top officers, including: President and CEO Ronald W. Parker; Senior Vice President, Corporate Development, General Counsel and Corporate Secretary B. Keith Clark; Senior Vice President of Franchise Operations and Concept Development Ward T. Olgreen; and Chief Financial Officer and Vice President of Distribution Shawn M. Preator.

As stated in the filing, the removal of any or all of these officers from their positions could cost Pizza Inn as much as $7.4 million in "parachute" payouts per each officer's employment contract. The departure of Parker alone could cost the company $5.1 million and place it in default of "approximately $9.5 million of indebtedness owed to Wells Fargo Bank (Texas)."

See related Pizza Inn stories ...
* Pizza Inn reschedules annual meeting as proxy battle looms
* Largest Pizza Inn shareholder wants to expand board with two pizza veterans
* Pizza Inn's Q1 '03 comp-sales drop 4.8%