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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended January 2, 2000, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission File No. 333-74797
DOMINO'S, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-3025165
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
30 Frank Lloyd Wright Drive Ann Arbor, Michigan 48106
(Address of principal executive offices)(Zip Code)
(734) 930-3030
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
There were 10 shares of the registrant's Common Stock issued and outstanding on
March 15, 2000.
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PART I
ITEM 1. BUSINESS.
Domino's, Inc., is the leading pizza delivery company in the United
States. We operate through a world-wide network of over 6,500 franchise and
corporate-owned stores which generated system-wide sales of approximately $3.4
billion for the fiscal year ended January 2, 2000. System-wide sales by our
domestic franchise and corporate-owned stores accounted for approximately 28% of
the United States pizza delivery market in 1999.
Domino's offers a focused menu of high quality, value priced pizza with
three types of crust (Hand-Tossed, Thin Crust and Deep Dish), along with buffalo
wings, cheesy bread and bread sticks. Our hand-tossed pizza is made from fresh
dough produced in our regional distribution centers. We prepare every pizza
using real cheese, pizza sauce made from fresh tomatoes and a choice of high
quality meat and vegetable toppings in generous portions. Our focused menu and
use of premium ingredients enable us to consistently and efficiently produce
high quality pizza.
Over the 39 years since our founding, we have developed a simple,
cost-efficient model. We offer a limited menu, our stores are designed for
delivery and we do not offer dine-in service. As a result, our stores require
relatively small, low rent locations and limited capital expenditures. Outside
the contiguous United States, we generally follow the same operating model with
some adaptations to local eating habits and consumer preferences. Our simple
operating model helps to maintain consistent food quality and to minimize store
expenses and capital commitments.
The Domino's brand is widely recognized and identified by consumers in
the United States as the leader in pizza delivery. We have built this successful
brand image and recognition through extensive national and local television,
print and direct mail campaigns. Over the past five years, Domino's and its
franchisees have invested an estimated $980 million on national, cooperative and
local advertising in the United States. The Domino's brand name is one of Ad
Age's "100 Megabrands," a list which includes other prominent brands such as
Coke(R), Campbell's(R), Kodak(R) and Wrigley(R).
Domino's operates through three business segments:
- Domestic Stores, consisting of:
Corporate, which operates our domestic network of
656 corporate-owned stores;
Franchise, which oversees our domestic network of
3,973 franchise stores;
- Distribution, which operates our eighteen regional
distribution centers and one equipment distribution center that
sell food, equipment and supplies to our domestic corporate and
franchise stores and equipment to international stores; and
- International, which oversees our network of 1,930
franchise stores in 64 international and off-shore markets,
including Alaska, Hawaii, Puerto Rico, the U.S. Virgin Islands
and Guam, and distributes food to stores in Alaska, Hawaii,
Canada and France.
INDUSTRY OVERVIEW
The United States pizza market had sales of approximately $23.8 billion
in 1999. This market has three segments: dine-in, carry-out and delivery. We
focus on the delivery segment, which accounted for approximately $7.0 billion or
30% of the total United States pizza market in 1999. Pizza delivery has been
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the fastest growing segment of this market, with compound annual growth of 6.3%
between 1997 and 1999, as compared to 3.4% for the dine-in-segment and 5.1% for
the carry-out segment over the same period.
Domestic pizza delivery sales have not only grown quickly, but have
also shown stable growth. From 1989 through 1999, pizza delivery sales in the
United States grew at a compound annual rate of 6.0%. Even in the recessionary
period during 1990 and 1991, pizza delivery sales in the United States continued
to grow at an annual compound rate of 2.5%.
We believe that growth and stability in the pizza delivery market will
persist as a result of several continuing demographic factors. In particular, we
believe that longer work schedules and the prevalence of dual career families
have led to rapid growth in the demand for delivered food. We believe that
delivered pizza is well positioned to capitalize on these trends as other food
products have difficulty matching the value, consistency and timely delivery of
pizza.
COMPETITIVE STRENGTHS
Leading Market Position. With system-wide sales accounting for
approximately 28% of the United States pizza delivery market in 1999, Domino's
is the leading pizza delivery company in the United States. Outside the United
States we generally hold either the leading market share or are a strong number
two in the key markets where we compete. Our leadership positions in these key
markets and our strong global presence provide significant cost and marketing
advantages relative to smaller delivery competitors.
Strong Brand Equity. Our brand name is widely recognized by consumers
in the United States as the leader in pizza delivery. Over the past five years,
Domino's and its franchisees have invested an estimated $980 million on
national, cooperative and local advertising in the United States. We continue to
reinforce the strength of our brand name recognition with extensive advertising
through national and local television, print and direct mail. The strength of
our brand is reflected in its selection as one of Ad Age's "100 Megabrands," a
list which includes other prominent brands such as Coke(R), Campbell's(R),
Kodak(R) and Wrigley(R).
Focused and Cost-efficient Operating System. We have focused on pizza
delivery since our founding in 1960. Over this time, we have developed a simple,
cost-efficient operating system for producing a streamlined menu offering. Our
limited menu, efficient food production process and extensive employee training
program allow us to produce our pizza in approximately ten minutes. The
simplicity and efficiency of our store operations gives us significant
advantages over competitors that also participate significantly in the carry-out
or eat-in segments of the pizza market and, as a result, have more complex
operations. Consequently, we believe these competitors have a difficult time
matching Domino's value, quality and consistency in the delivery segment.
Minimal Capital Requirements. We have minimal capital expenditure and
working capital requirements. Our capital expenditures are minimal because we
focus on delivery and because our franchisees fund all capital expenditures for
their stores. Since our stores do not offer eat-in service, they do not require
expensive locations, are relatively small (1,000-1,300 square feet) and are
inexpensive to build and furnish as compared to other fast food establishments.
A new Domino's store typically requires only $125,000 to $250,000 in initial
capital, far less than typical establishments of many of our major competitors.
Because approximately 86% of our domestic stores are franchised, our share of
system-wide capital expenditures is small. In addition, Domino's requires
minimal working capital as we collect approximately 98% of our royalties from
domestic franchisees within three weeks of when the royalty is generated and
achieve more than 50 inventory turns per year in our regional distribution
centers. We believe these minimal working capital requirements are advantageous
for funding our continued growth.
Strong Franchise Relationships. We believe our strong relationships
with franchisees are a critical component of our success. We support our
franchisees by providing training, financial incentives and infrastructure. We
employ an owner-operator model that results in our franchisees owning an average
of three stores, considerably fewer than most franchise models. We also believe
that our franchise owners enjoy some of the most attractive economics within the
fast food industry. Our strong cooperation with our
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franchisees is demonstrated by an over 96% voluntary participation rate in our
domestic distribution system and strong franchisee participation in co-operative
advertising programs. Because we experienced a contract renewal rate of over 99%
and more than 120 new franchisees entered the system in 1999, we believe our
franchise system will continue to be a stable and growing component of our
business.
Efficient National Distribution System. We operate a nationwide network
of eighteen regional distribution centers. Each is generally located within a
300-mile radius of the stores it serves. We take advantage of volume purchasing
of food and supplies, to provide consistency, efficiencies of scale and low cost
distribution. Our distribution system has an on-time accuracy rate of over 98%
and allows our store managers to focus on store operations and customer service.
BUSINESS STRATEGY
Our business strategy has been to grow revenues and profitability by
focusing on our delivery expertise: prompt delivery of high quality product,
operational excellence and brand recognition through strong promotional
advertising. This strategy has resulted in our leading market position and track
record of profitable growth. We intend to achieve further growth and strengthen
our competitive position through the continued implementation of this strategy
and the following initiatives:
Focus on Core Competencies. We believe three core competencies are
crucial to our future growth: Build the Brand, Maintain High Standards and
Flawless Execution. We have streamlined our organization and structured our
operations, marketing and advertising to achieve these objectives.
Capitalize on Strong Industry Dynamics. We believe that the pizza
delivery market will continue to show strong growth and stability as a result of
several positive demographic trends. These trends include more dual career
families, longer work weeks and increased consumer emphasis on convenience. In
addition, we believe that the low cost and high value of pizza will support
continued industry growth even during an economic slowdown. Domino's is well
positioned to take advantage of these dynamics, given our market leadership
position, strong brand name and cost-efficient operating model.
Leverage Market Leadership Position and High Brand Awareness. Domino's
is the leading pizza delivery company in the United States. System-wide sales by
our corporate and domestic franchise stores accounted for approximately 28% of
the United States pizza delivery market in 1999. Our market leadership position
and strong brand give us significant marketing strength relative to our smaller
competitors. We believe strong brand recognition is important in the pizza
delivery industry because consumer decisions are strongly influenced by brand
awareness. We intend to continue investments that promote our brand name and
enhance our recognition as the leader in pizza delivery.
Expand Store Base. We plan to continue expanding our base of
traditional domestic stores, enter new domestic markets with non-traditional
(Delivery Express) stores and increase our network of international stores. We
plan to strengthen our competitive position in strong markets and improve our
strength in under-penetrated markets. We also believe that a significant
opportunity exists to open new franchise stores in under-penetrated
international markets.
At the end of 1999, we had opened 45 Domino's Delivery Express stores which
provide both delivery and carry-out services from convenience type stores in
lightly populated markets. We intend to aggressively open these non-traditional
stores.
COMPANY HISTORY
Thomas Monaghan founded Domino's in 1960. Prior to December 1998,
Domino's was a wholly-owned subsidiary of Domino's Pizza, Inc. During December
1998, prior to the recapitalization described below, Domino's Pizza distributed
its ownership interest in Domino's to TISM, the current parent corporation of
Domino's. TISM then contributed its ownership interest in Domino's Pizza, which
had been a wholly-owned subsidiary of TISM, to Domino's, effectively converting
Domino's from a subsidiary to the parent of Domino's Pizza.
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On December 21, 1998, investors, including funds associated with Bain
Capital, management and others, acquired a controlling interest in Domino's
through a series of transactions, including a merger of a special purpose
corporation organized by Bain Capital into TISM. Specifically:
- Investors, including funds associated with Bain Capital,
management and others, invested $229.2 million to acquire
common stock of TISM, which represented approximately 93% of
its outstanding common stock immediately following the
recapitalization, and $101.1 million to acquire cumulative
preferred stock of TISM.
- The prior stockholders of TISM retained a portion of their
voting common stock in TISM equal to $17.5 million, or
approximately 7% of the outstanding common stock of TISM
immediately following the recapitalization. In the merger,
these stockholders received $903.2 million for their
remaining common stock and TISM contingent notes payable for
up to an aggregate of $15 million in certain circumstances
upon the sale or transfer to non-affiliates by the Bain
Capital funds of more than 50% of their initial common stock
ownership in TISM.
The recapitalization and related expenses were financed in part through
the sale of equity securities and retention of the common stock discussed above.
The remaining financing was obtained through:
- Borrowings under senior credit facilities with aggregate
availability of $545 million, consisting of $445 million in
term loans and a revolving credit facility of up to $100
million; and
- The sale of $275 million of 10 3/8% Senior Subordinated
Notes due in 2009.
OPERATIONS
General. We believe our operating model is differentiated from other
pizza competitors that are not focused primarily on the delivery business. Our
business model has competitive advantages, including production-oriented store
design, efficient and consistent operational processes, strategic location to
facilitate delivery service, favorable store economics and a focused menu.
Production-Oriented Store Design. Our typical store is small, occupying
approximately 1,000 to 1,300 square feet, and is designed with a focus on
efficient and timely production of consistent, high-quality pizza for delivery.
Our stores are production facilities and, accordingly, do not have a dine-in
section.
Efficient and Consistent Operational Processes. Each store executes an
operational process which includes order taking, pizza preparation, cooking (via
automated, conveyor-driven ovens), boxing, and delivery. The entire pizza
production process is designed for completion in less than ten minutes to allow
sufficient time for safe delivery within 25 to 30 minutes of ordering. This
simple and focused operational process has been achieved through years of
continuous improvement, resulting in a high level of efficiency.
Strategic Locations. We locate our stores strategically to facilitate
quality delivery service to our customers. The majority of our stores are
located in populated areas adjacent to large or mid-size cities, on or near
college campuses or military bases. The majority of our stores serve from 5,000
to 15,000 addresses. We use geographic information software, which incorporates
variables such as household count, traffic volumes, competitor locations,
household demographics and visibility, to evaluate and identify potential store
locations.
Favorable Store Economics. Because our stores do not offer dine-in
service or rely heavily on carry-out, the stores typically do not require
expensive real estate, are relatively small, and are inexpensive
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to build-out and furnish as compared to other fast food establishments. A new
Domino's store typically requires only $125,000 to $250,000 in initial capital,
far less than many other fast food establishments. Our stores also benefit from
lower maintenance costs as store assets have long lives and updates are not
frequently required.
Focused Menu. We maintain a focused menu that is designed to present an
attractive, high quality offering to customers, while expediting delivery and
avoiding errors in the order process. The menu has three simple components:
pizza size, pizza type and pizza toppings. Most stores carry two sizes of
traditional Hand-Tossed, Deep Dish and Thin Crust pizza. The typical store also
offers bread sticks, cheesy bread and buffalo wings. We also occasionally offer
new products on a promotional basis. We believe that our focused menu creates a
strong identity among consumers, improves operating efficiency and maintains
food quality and consistency.
DIVISIONAL OVERVIEW
General. We operate through three business segments: (i) Domestic
Stores, consisting of Corporate, which operates our network of 656
corporate-owned stores, and Franchise, which oversees our domestic network of
3,973 franchise stores; (ii) Distribution, whose eighteen regional food
distribution centers and one equipment distribution center supply food, store
equipment and supplies to corporate-owned and domestic franchise stores and
equipment to international stores; and (iii) International, which oversees our
network of 1,930 international franchise stores in 64 international and
off-shore markets including Alaska, Hawaii, Puerto Rico, the U.S. Virgin Islands
and Guam.
Domestic Stores. Our network of corporate stores plays an important
strategic role in our predominately franchised system. In particular, we utilize
our corporate stores as a forum for training new store managers and prospective
franchisees, and as a test site for new products and store operational
improvements. We also believe that our corporate stores add economies of scale
for advertising, marketing and other fixed costs traditionally borne by
franchisees. Corporate is divided into two geographic regions and is managed
through thirteen field offices in the contiguous United States.
Our domestic franchisees own and operate a network of 3,973 stores in
the contiguous United States. Our domestic franchises are operated by highly
qualified entrepreneurs who own and operate an average of three stores. Our
principal sources of revenue from domestic franchise store operations are
royalty payments and, to a much lesser extent, fees for store openings and
transfers.
Our domestic franchises are currently managed through five regional
offices located in Dallas, Texas; Atlanta, Georgia; Santa Ana, California;
Linthicum, Maryland; and Ann Arbor, Michigan. A sixth office in Nashville,
Tennessee is scheduled to open in fiscal 2000. The regional offices provide
training, financial analysis, store development, store operational audits and
marketing strategy services for the franchisees. We maintain a close
relationship and direct link with the franchise stores through regional
franchise teams, an array of computer-based training materials that ensure
franchise stores operate in compliance with specified standards, and franchise
advisory groups that facilitate communications between us and our franchisees.
Distribution. Distribution operates one equipment distribution center
and eighteen regional food distribution centers located throughout the United
States that purchase, receive, store and deliver uniform, high-quality
pizza-related supplies to both domestic franchise and corporate stores. Each
regional food distribution center serves an average of 250 stores, generally
located within a 300-mile radius.
Distribution services all of the corporate stores and over 96% of the
domestic franchise stores, even though we give our domestic franchisees the
option of satisfying their food and equipment needs through approved independent
suppliers. Distribution supplies products ranging from fresh dough and basic
food items to pizza boxes and cleaning supplies. Distribution drivers also
unload supplies and stock store shelves after hours, thereby minimizing
disruption of store operations during the day. We believe that franchisees
choose to obtain supplies from us because we provide the most efficient and
cost-effective alternative.
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Distribution offers a profit sharing arrangement to stores that
purchase 100% of their food and supplies from Distribution. All of our corporate
stores and substantially all franchise stores buying from Distribution
participate. We believe these arrangements strengthen our ties with these
franchisees, secure a stable source of revenue and provide incentives for
franchisees to work closely with us to reduce costs. These profit sharing
arrangements provide corporate stores and participating franchisees with
approximately 50% of their regional distribution center's pre-tax profits.
Distribution paid out $24.8 million to franchisees participating in the profit
sharing program in 1999.
Distribution's information systems are an integral part of its superior
customer service. Distribution employs routing strategies to reduce the
frequency of late deliveries, utilizing software to determine store routes on a
daily basis for optimal efficiency. Through our strategic distribution center
locations and proven routing systems, we achieved on-time delivery rates of over
98% in 1999.
International. International oversees our network of over 1,930 stores
in 64 international and off-shore markets, including Alaska, Hawaii, Puerto
Rico, the U.S. Virgin Islands and Guam. We have over 200 franchise stores in
each of Mexico, Japan, Canada, and the United Kingdom and over 100 franchise
stores in each of Australia, South Korea and Taiwan. The principal sources of
revenues from international operations are royalty payments by franchisees, food
sales to franchisees, and fees from master franchise agreements and store
openings.
We generally grant international franchises through master franchise
agreements to well-capitalized entities who have knowledge of the local markets.
These master franchise agreements generally grant the franchisee exclusive
rights to develop or sub-franchise stores in a particular geographic area and
contain growth clauses requiring franchisees to open a minimum number of stores
within a specified period. In a small number of countries, we franchise directly
to individual store operators.
FRANCHISE PROGRAM
General. The success of our unique franchise formula, together with the
relatively low initial capital investment required to open a franchise store,
has enabled us to attract a large number of highly motivated entrepreneurs as
franchisees. We consider franchisees to be a vital part of our continued growth
and believe our relationships with franchisees are excellent. The franchise
program consists of a network of domestic and international franchise stores. As
of January 2, 2000, there were 1,322 franchisees operating 3,973 franchise
stores in the contiguous United States and 496 franchisees operating 1,930
stores in 64 international and off-shore markets.
Franchisee Selection. We maintain the strength of our franchise store
base by seeking franchisees who are willing to commit themselves to operating
franchise stores and by applying rigorous standards to prospective franchisees.
Specifically, we require all prospective domestic franchisees to manage a store
for at least one year before being granted a franchise. This enables us to
observe the operational and financial performance of domestic franchisees prior
to entering into a long-term contract. We also restrict the ability of domestic
franchisees to become involved in outside business investments, which focuses
the franchisees on operating their stores. We believe these standards are unique
to the franchise industry and result in highly qualified and focused store
operators, while helping to maintain the strength of the Domino's brand.
Standard Domestic Franchise Agreements. We enter into franchise
agreements with domestic franchisees under which the franchisee is granted the
right to operate a store for a term of ten years, with an option to renew for an
additional ten years. We experienced franchise renewal rates in 1999 in excess
of 99%. Under the current standard franchise agreement, we assign an exclusive
Area of Primary Responsibility to each franchise store. During the term of the
franchise agreement, the franchisee is generally required to pay a 5.5% royalty
fee, subject in certain instances to lower rates based on area development
agreements, sales initiatives and new store incentives. We have the contractual
right, subject to state law, to terminate a franchise agreement for a variety of
reasons, including a franchisee's failure to make payments when due or failure
to adhere to specified policies and standards.
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International Franchisee Selection. The majority of franchisees outside
of the contiguous United States are master franchisees with franchise rights for
entire regions or countries. These prospective candidates are required to
possess or have access to local market knowledge required to establish and
develop Domino's Pizza stores and a distribution system. The local market
knowledge focuses on the ability to identify and access targeted real estate
sites along with expertise in local customs, culture and laws. We also require
the candidates to have access to sufficient capital to meet growth and
development plans.
Standard International Franchise Agreements. We enter into master
franchise agreements with our international franchisees under which the master
franchisee may open and operate franchise stores or, under specified conditions,
enter into sub-franchise agreements for a term of ten to twenty years, with an
option to renew for an additional ten year term. The master franchisee is
required to pay an initial, one-time franchisee fee, as well as an additional
franchise fee upon the opening of each new store. These fees vary by contract.
In addition, the master franchisee is required to pay a continuing royalty fee
as a percentage of sales, which also varies.
Franchise Store Development. We furnish each domestic franchisee with
assistance in selecting sites, developing stores and conforming to the physical
specifications for typical stores. Each domestic franchisee is responsible for
selecting the location for a store but must obtain approval for store design and
location based on accessibility and visibility of the site and targeted
demographic factors, including population density, income, age and traffic. We
provide design plans, fixtures and equipment for most franchisee locations at
competitive prices.
Franchisee Financing Programs. We have an established internal
financing program to assist domestic franchisees in opening stores. We generally
provide financing of up to $100,000 for the purpose of opening new stores to
franchisees who are creditworthy and have adequate working capital. The
franchisees may use the funds to purchase equipment, signage, leasehold
improvements or supplies, with the condition that leasehold improvements cannot
exceed $35,000. We have also historically offered to finance the sale of certain
corporate stores to domestic franchisees and the implementation of new products
and programs. At January 2, 2000, loans outstanding under the franchisee
financing programs totaled $14.2 million.
Franchise Training and Support. Training our store managers and
employees is a critical component of our success. We require all domestic
franchisees to complete initial and ongoing training programs that we provide.
In addition, under the current standard domestic franchise agreement, domestic
franchisees are required to implement training programs for their store
employees. We assist our franchisees by providing training services for store
managers and employees, including CD-ROM based training materials, comprehensive
operations manuals and franchise development classes.
Franchise Operations. We maintain strict control over franchise
operations to protect our brand name and image. All franchisees are required to
operate their stores in compliance with written policies, standards and
specifications, including matters such as menu items, ingredients, materials,
supplies, services, furnishings, decor and signs. Each franchisee has full
discretion to determine the prices to be charged to its customers. We also
provide support to our franchisees, including training, marketing assistance and
consultation to franchisees who experience financial or operational
difficulties. We have established several advisory boards through which
franchisees can contribute to corporate level initiatives.
DOMINO'S IMAGE 2000 CAMPAIGN
We have implemented a reimaging and relocation campaign called Domino's
Image 2000. The reimaging program is aimed at increasing store sales and market
share through greater brand awareness. It involves a variety of store
improvements, including upgrading store interiors, adding new signage to draw
attention to the store and providing contemporary uniforms for its employees. We
believe that average per corporate store capital expenditures for the reimaging
campaign will approximate $30,000. The relocation program is also designed to
increase store sales and market share by choosing store sites that are in more
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accessible and visible locations. The capital expenditures for relocating a
corporate store averages approximately $170,000 per store.
MARKETING OPERATIONS
We coordinate the domestic advertising and marketing efforts at the
national and cooperative market levels. We require corporate and domestic
franchise stores to contribute 3% of their net sales to fund national marketing
and advertising campaigns. The national advertising fund is used primarily to
purchase television advertising, but also supports market research, field
communications, commercial production, talent payments and other activities
supporting the brand. We can require stores to contribute a minimum of 1% to a
maximum of 3% of net sales to cooperative media campaigns. Store contributions
to cooperative media campaigns currently average 2.4% of net sales in our top 40
markets.
We estimate that corporate and domestic franchise stores also spend an
additional 3% to 5% of their net sales on local store marketing, including
targeted database mailings, saturation print mailings to households in a given
area and community involvement through school and civic organizations. The
National Print Program offers cost-effective print materials as an incentive for
franchisees to use the marketing material that we recommend, helping to reflect
our national advertising strategy at the local level.
By communicating common themes at the national, cooperative and local
market levels, we create a consistent marketing message to our customers. Over
the past five years, we estimate that we and our domestic franchisees have
invested over $980 million in system-wide advertising at the national,
cooperative and local levels.
SUPPLIERS
We believe that the length and quality of our relationships with
suppliers provides us with priority service at competitive prices. We have
maintained active relationships of over 15 years with more than half of our
major suppliers. As a result, we have typically relied on oral rather than
written contracts with our suppliers, except where we maintain only one supplier
for a product, such as cheese. In addition, we believe that two factors have
been critical to maintaining long-lasting relationships and keeping our
purchasing costs low. First, we are one of the largest volume purchasers of
pizza-related products such as flour, cheese, sauce, and pizza boxes, which
gives us the ability to maximize leverage with our suppliers. Second, in four of
our five key product categories (meats, dough and parbaked shells, boxes and
sauce), we generally retain active purchasing relationships with at least three
suppliers. This purchasing strategy allows us to shift purchases among suppliers
based on quality, price and timeliness of delivery. For the year ended January
2, 2000, only one supplier represented more than 10% of cost of sales, which was
our cheese supplier accounting for 24.8% of cost of sales.
COMPETITION
The pizza delivery market is highly fragmented. In this market, we
compete against regional and local firms, as well as three national chains,
Pizza Hut, Papa John's and Little Caesar's. We compete generally on the basis of
product quality, location, delivery time, service, and price. We also compete on
a broader scale with other international, national, regional and local
restaurants and quick-service eating establishments. The overall food service
industry and the fast food segment are intensely competitive with respect to
food quality, price, service, convenience, and concept and are often affected by
changes in consumer tastes; national, regional or local economic conditions;
currency fluctuations to the extent international operations are involved;
demographic trends; and disposable purchasing power. We compete within the food
service industry and the fast food segment not only for customers, but also for
management and hourly personnel, suitable real estate sites and qualified
franchisees.
GOVERNMENT REGULATION
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We are subject to various federal, state and local laws affecting the
operation of our business, as are our franchisees. Each store is subject to
licensing and regulation by a number of governmental authorities, which include
zoning, health, safety, sanitation, building and fire agencies in the
jurisdiction in which the store is located. Difficulties in obtaining, or the
failure to obtain, required licenses or approvals can delay or prevent the
opening of a new store in a particular area. Our distribution facilities are
licensed and subject to regulation by federal, state and local health and fire
codes.
We are subject to the rules and regulations of the FTC and various
state laws regulating the offer and sale of franchises. The FTC and various
state laws require that we furnish to prospective franchisees a franchise
offering circular containing prescribed information. A number of states regulate
the sale of franchises and require registration of the franchise offering
circular with state authorities and the delivery of a franchise offering
circular to prospective franchisees. We are operating under exemptions from
registration in several states based on net worth and experience. Substantive
state laws that regulate the franchisor-franchisee relationship presently exist
in a substantial number of states, and bills have been introduced in Congress
from time to time which would provide for federal regulation of the
franchisor-franchisee relationship. The state laws often limit, among other
things, the duration and scope of non-competition provisions, the ability of a
franchisor to terminate or refuse to renew a franchise and the ability of a
franchisor to designate sources of supply.
Internationally, our franchise stores are subject to national and local
laws and regulations which are similar to those affecting our domestic stores,
including laws and regulations concerning franchises, labor, health, sanitation
and safety. Our international franchise stores are also subject to tariffs and
regulations on imported commodities and equipment and laws regulating foreign
investment.
TRADEMARKS
Domino's has several trademarks and service marks and believes that the
Domino's mark has significant value and is materially important to our business.
Our policy is to pursue registration of our important trademarks whenever
possible and to vigorously oppose the infringement of any of our registered or
unregistered trademarks.
EMPLOYEES
As of January 2, 2000, we had approximately 14,400 employees, excluding
employees of franchise-operated stores. None of our domestic employees are
represented by unions.
ITEM 2. PROPERTIES.
We lease approximately 185,000 square feet for our executive offices,
world headquarters and distribution facility located in Ann Arbor, Michigan
under an operating lease with Domino's Farms Office Park Limited Partnership, a
related party, for a term of five years commencing December 21, 1998, with
options to renew for two five-year terms.
We own facilities at fourteen corporate stores and five distribution
facilities. We also own and lease seven store facilities to domestic
franchisees. There are no mortgages on any of these facilities other than
mortgages on the distribution facilities granted in connection with our senior
credit facilities. All other corporate stores and facilities are leased by us,
typically with five-year leases with one or two five-year renewal options. All
other franchise stores are leased or owned directly by the franchisees.
ITEM 3. LEGAL PROCEEDINGS.
On September 10, 1998, Vesture Corporation and its corporate parent,
R.G. Barry, Inc. brought an action in United States District Court for the
Middle District of North Carolina against Domino's and Phase Change
Laboratories, Inc., Domino's supplier of the heating elements used in Domino's
Heat Wave, our pizza delivery system. The plaintiffs asserted that Domino's
purchase and use of the heating elements infringed a patent owned by the
plaintiffs. In March 2000, all claims in the action were settled. The
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plaintiffs granted Domino's and its franchisees a license permitting them to
purchase and use the heating elements in exchange for an initial payment and
royalties. Various parties will participate in the settlement, funding
approximately 80% of the settlement expense, under various indemnification and
other agreements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year covered by this report,
the Company submitted several matters to a vote of its sole stockholder. On
December 14, 1999, in an action by written consent, the sole stockholder of
Domino's approved the employment agreements and stock option agreements with
Executive officers of Domino's Pizza, and approved the Third Amended and
Restated Stock Option Plan.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of March 15, 2000 Domino's had 3,000 authorized shares of common
stock, par value $.01 per share, of which 10 were issued and outstanding and
held by TISM. There is no established public trading market for Domino's common
stock. Domino's ability to pay dividends is limited under the indenture related
to the Senior Subordinated Notes.
ITEM 6. SELECTED FINANCIAL DATA.
Set forth below are selected historical consolidated financial data of
Domino's and subsidiaries at the dates and for the periods indicated. The
following selected financial data, as of and for the fiscal years ended January
2, 2000, January 3, 1999, December 28, 1997 and December 29, 1996 is derived
from audited financial statements of Domino's and subsidiaries. The selected
financial data as of and for the fiscal year ended December 31, 1995 and the
historical balance sheet data as of December 29, 1996 were derived from
unaudited consolidated financial statements of Domino's and subsidiaries which,
in the opinion of management, include all adjustments necessary for a fair
presentation. The data should be read in conjunction with, and is qualified by
reference to, "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
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<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
System-Wide Sales (unaudited):
Domestic $ 2,563,311 $ 2,505,991 $ 2,294,224 $ 2,110,324 $ 1,952,398
International 800,989 717,694 633,857 524,496 441,108
----------- ----------- ----------- ----------- -----------
$ 3,364,300 $ 3,223,685 $ 2,928,081 $ 2,634,820 $ 2,393,506
=========== =========== =========== =========== ===========
Operating Data (a):
Revenues $ 1,156,639 $ 1,176,778 $ 1,044,790 $ 969,937 $ 905,219
Income from operations 75,628(b) 70,269 65,004 56,501 49,804
Income before provision (benefit)
for income taxes and
extraordinary loss 2,504 63,948 61,471 50,611 37,244
Provision (benefit) for income taxes (c) 419 (12,928) 366 30,884 9,353
Extraordinary loss due to refinancing
of debt, net of applicable income
taxes - - - - (2,576)
Net income 2,085 76,876 61,105 19,727 25,315
Other Financial Data:
EBITDA (d) $ 131,055(b) $ 94,962 $ 83,140 $ 72,340 $ 67,367
Net cash provided by operating
activities 63,268 64,731 73,408 53,225 37,012
Depreciation and other
non-cash items 51,427 24,693 18,136 15,839 17,563
Capital expenditures 32,447 49,976 45,412 19,887 14,770
Balance Sheet Data:
Total assets $ 381,130 $ 387,891 $ 212,978 $ 155,454 $ 164,041
Long-term debt 696,132 720,480 36,438 46,224 84,146
Total debt 717,570 728,126 44,408 70,067 110,018
Stockholder's equity (deficit) (478,966) (483,775) 26,118 (34,868) (54,199)
</TABLE>
(a) The Company's fiscal year generally consists of thirteen four-week periods
and ends on the Sunday closest to December 31. The 1999 fiscal year ended
January 2, 2000; the 1998 fiscal year, which consisted of fifty-three
weeks, ended January 3, 1999; the 1997 fiscal year ended December 28, 1997;
the 1996 fiscal year ended December 29, 1996; and the 1995 fiscal year
ended December 31, 1995.
(b) In fiscal 1999, the Company recognized $7.6 million in restructuring
charges comprised of staff reduction costs of $6.3 million and exit cost
liabilities of $1.3 million.
(c) On December 30, 1996, the Company elected to be an "S" Corporation for
federal income tax purposes. The Company reverted to "C" Corporation status
on December 21, 1998. On a pro forma basis had the Company been a "C"
Corporation throughout this period, income tax expense would have been
higher by the following amounts: fiscal year ended December 28, 1997 --
$25.4 million; fiscal year ended January 3, 1999 -- $36.8 million.
(d) EBITDA represents earnings before interest, taxes, depreciation,
amortization, loss on sale of assets (net) and in fiscal 1999, the legal
settlement expense indemnified by a TISM stockholder. EBITDA is presented
because we believe it is frequently used by security analysts in the
evaluation of companies and is an important financial measure in our
indenture and credit agreements. However, EBITDA should not be considered
as an alternative to cash flow from operating activities as a measure of
liquidity or as an alternative to net income as an indicator of our
operating performance or any other measure of performance in accordance
with generally accepted accounting principles.
The following table sets forth a reconciliation of income from operations to
EBITDA:
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<TABLE>
<CAPTION>
----------------------------------------------------------
Fiscal Year
----------------------------------------------------------
Dollars in Thousands 1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income from operations $ 75,628 $ 70,269 $ 65,004 $ 56,501 $ 49,804
Loss on sale of assets (net) (316) 1,570 1,197 353 104
Legal settlement expense indemnified by a TISM
stockholder 4,000 - - - -
Depreciation and amortization 51,743 23,123 16,939 15,486 17,459
--------- --------- --------- --------- ---------
EBITDA $ 131,055 $ 94,962 $ 83,140 $ 72,340 $ 67,367
========= ========= ========= ========= =========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The following discussion and analysis of the financial condition and
results of operations relates substantially to periods prior to completion of
the recapitalization. As a result of the recapitalization, in December 1998, the
Company entered into new financing arrangements, and has a different capital
structure, ownership and executive leadership. Accordingly, the results of
operations for the years end December 28, 1997 and January 3, 1999 will not
necessarily be comparable to the year ended January 2, 2000.
YEAR ENDED JANUARY 2, 2000 COMPARED TO YEAR ENDED JANUARY 3, 1999
Revenues
General. Revenues include sales by corporate-owned stores, royalty fees from
domestic and international franchises and sales by our Distribution commissaries
to domestic and international franchises. Total revenues decreased $20.2
million, or 1.7%, to $1,156.6 million for the year ended January 2, 2000 from
$1,176.8 million for the year ended January 3, 1999. The decrease in total
revenues is principally attributed to the 1998 store rationalization program,
under which 142 under-performing stores were sold to franchisees or closed
primarily in the fourth quarter of 1998, and one additional week in the year
ended January 3, 1999 as compared to the year ended January 2, 2000, partially
offset by increased domestic franchise and domestic distribution revenues.
Domestic Stores
Corporate Stores. Revenues from Corporate Store operations decreased $31.3
million, or 7.6%, to $378.1 million for the year ended January 2, 2000 from
$409.4 million for the year ended January 3, 1999. The decrease is principally
attributed to a reduction in the number of corporate stores resulting from our
store rationalization program. These decreases were partially offset by an 7.3%
increase in average weekly corporate store sales for fiscal 1999 compared to
fiscal 1998. Same store sales for corporate stores increased 1.7% for fiscal
1999 as compared to fiscal 1998. Ending corporate stores increased by 14 to 656
as of January 2, 2000, from 642 as of January 3, 1999.
Domestic Franchise. Revenues from Domestic Franchise operations are derived
primarily from royalty fees. Revenues from Domestic Franchise operations
increased $4.5 million, or 4.0%, to $116.7 million for the year ended January 2,
2000 from $112.2 million for the year ended January 3,1999. This increase in
revenues resulted mainly from a 2.9% increase in same store sales and an
increase in the average number of franchise stores, due mainly to sales of
corporate stores to franchisees under the store rationalization program and
additional store openings. Ending franchise stores increased by 126 to 3,973 as
of January 2, 2000, from 3,847 as of January 3, 1999.
Domestic Distribution. Revenues from Domestic Distribution operations are
derived primarily from the sale of food, equipment and supplies to domestic
franchise stores and, to a lesser extent, the sale of equipment to international
stores, and excludes sales to corporate-owned stores. Revenues from Domestic
Distribution operations increased $4.3 million, or 0.7%, to $603.4 million for
the year ended January
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2,2000 from $599.1 million for the year ended January 3, 1999. The increase in
revenues is principally due to the increase in Domestic Franchise stores sales
and number of stores discussed above, partially offset by a $7.0 million
decrease in equipment sales during 1999 and a shift in dough product mix from
higher priced par-baked deep dish toward lower-priced fresh dough. During the
first half of 1998, equipment and supply sales to franchisees were at high
levels resulting from the roll out of the Domino's HeatWave hot bag systems.
International. Revenues from International operations, which are derived mainly
from food sales to international franchises, master franchise agreement royalty
fees and, to a lesser extent, franchise and development fees and corporate owned
international stores, increased $2.4 million, or 4.3%, to $58.4 million for the
year ended January 2, 2000 from $56.0 million for the year ended January 3,
1999. The increase was partially driven by a 10.3% increase in international
franchise royalty revenues, due primarily to an increase in same store sales, an
increase in the average number of international franchise stores and the
addition of three international corporate stores in France. On a constant dollar
basis, same store sales increased 3.6% during fiscal 1999 compared to fiscal
1998. Ending international stores increased by 200, to 1,930 at January 3, 1999
from 1,730 at January 3, 1999.
Gross Profit. Gross profit increased $16.5 million, or 5.8%, to $302.5 million
for the year ended January 2, 2000 from $286.0 million for the year ended
January 3, 1999. As a percentage of revenues, gross profit increased 1.9% to
26.2% for the year ended January 2, 2000 from 24.3% for the year ended January
3, 1999. These increases were primarily due to reductions in corporate stores'
food, labor and insurance costs that resulted mainly from elimination of
underperforming stores through the store rationalization program as well as
improved shift scheduling, minimized overtime, reduced insurance premiums and
favorable product mix and pricing. Also, Distribution food cost as a percentage
of sales decreased slightly, due mainly to a shift in product mix from par-baked
deep dish and thin crust shells to higher margin fresh dough. In addition, the
cost of sales component of depreciation and amortization expense decreased due
to the modification of estimated useful lives for several fixed asset categories
effective in the first quarter of 1999.
General and Administrative. General and administrative expenses consists
primarily of regional support offices, corporate administrative functions,
corporate store and distribution facility management costs and advertising and
promotional expenses. General and administrative expenses increased $3.6
million, or 1.7%, to $219.3 million for the year ended January 2, 2000 from
$215.7 million for the year ended January 3, 1999. As a percentage of net
revenues, general and administrative expenses increased 0.7% to 19.0% for the
year ended January 2,2000 compared to 18.3% for the year ended January 3, 1999.
These increases are due primarily to a $5.0 million litigation settlement
charge, which was partially offset by the elimination of related party expenses
of $21.0 million, which were primarily comprised of lease payments in excess of
current levels to entities controlled by TISM's former principal stockholder and
charitable contributions to a foundation managed by TISM's former principal
stockholder, one additional week in the year ended January 3, 1999 as compared
to the year ended January 2, 2000 and the impact of eliminating a corporate
stores field office as part of the store rationalization program. The decreases
in expenses were offset primarily by increased amortization expense of $32.5
million in fiscal 1999, with respect to a covenant not-to-compete we entered
into with TISM's former principal stockholder at the time of the
recapitalization.
Restructuring: In fiscal 1999, the Company recognized approximately $7.6 million
in restructuring charges comprised of staff reduction costs of $6.3 million and
exit cost liabilities of $1.3 million.
Interest Expense. Interest expense increased $67 million to $74.1 million for
the year ended January 2, 2000 from $7.1 million for the year ended January 3,
1999. The increase in interest expense is due to the interest costs, including
deferred financing cost amortization, resulting from Domino's December 1998
borrowings of $722.1 million, which were incurred to fund its recapitalization.
Provision (Benefit) for Income Taxes. The provision (benefit) for income taxes
increased to a provision of $0.4 million for the year ended January 2, 2000 from
a benefit of $12.9 million for the year ended January 3, 1999. As part of our
recapitalization, we converted from "S" Corporation status to "C" Corporation
status for federal income tax reporting purposes in December 1998 and
established a $27.9 million deferred
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<PAGE>
tax asset, which was partially offset by the establishment of tax reserves. As a
result, the provision for income taxes for fiscal 1999 includes U.S. federal and
state income taxes and foreign income taxes whereas the provision for income
taxes for fiscal 1998 included only foreign income taxes and income taxes of a
few states for which we had been taxed at the corporate level. Additionally, in
May 1999, the State of Michigan Supreme Court upheld a favorable lower court tax
ruling with respect to an issue that, if decided unfavorably, could have
resulted in significant tax cost to the Company. As a result, during the second
fiscal quarter of 1999, the Company reversed state tax reserves and related
deferred federal tax benefits that were associated with this issue.
YEAR ENDED JANUARY 3, 1999 COMPARED TO YEAR ENDED DECEMBER 28, 1997
Revenues
General. Total revenues increased $132.0 million, or 12.6%, to $1,176.8 million
for the year ended January 3, 1999 from $1,044.8 million for the year ended
December 28, 1997. The increase in total revenues is principally attributed to
increases in domestic and international same store sales, a net increase in the
average number of domestic and international stores and one additional week in
the year ended January 3, 1999 as compared to the year ended December 28, 1997.
Domestic Stores
Corporate Stores. Revenues from Corporate Store operations increased $32.6
million, or 8.7%, to $409.4 million for the year ended January 3, 1999 from
$376.8 million for the year ended December 28, 1997. The increase is principally
attributed to a 4.0% increase in same store sales as well as a slight increase
in the average number of corporate-owned stores. Ending corporate-owned stores,
however, decreased by 125 to 642 as of January 3, 1999 from 767 as of December
28, 1997 as a result of the store rationalization program.
Domestic Franchise. Revenues from Franchise operations increased $9.8 million,
or 9.6%, to $112.2 million for the year ended January 3, 1999 from $102.4
million for the year ended December 28, 1997. This increase in revenues resulted
mainly from a 4.6% increase in same store sales and an increase in the average
number of franchise stores. Ending franchise stores increased by 183 to 3,847 as
of January 3, 1999 from 3,664 as of December 28, 1997.
Domestic Distribution. Revenues from Distribution operations increased $86.0
million, or 16.8%, to $599.1 million for the year ended January 3, 1999 from
$513.1 million for the year ended December 28, 1997. The increase in revenues is
principally due to the increase in franchise stores sales noted above, an
increase in cheese prices, and an increase in equipment and supply sales to
franchisees to roll out the Domino's HeatWave Hot Bag technology in 1998,
partially offset by increases in Distribution's profit sharing, profit
capitation and volume discount programs which were netted against revenues.
International. Revenues from International operations increased $3.5 million, or
6.7%, to $56.0 million for the year ended January 3, 1999 from $52.5 million for
the year ended December 28, 1997. The increase was partially driven by a 12.6%
increase in international franchise royalty revenues due to an increase in the
ending number of international franchise stores to 1,730 at January 3, 1999 from
1,520 at December 28, 1997, partially offset by a decrease in average store
sales caused by unfavorable changes in foreign currency exchange rates,
primarily in Asian markets and Mexico. On a constant dollar basis, same store
sales for the year ended January 3, 1999 increased 3.4% from the year ended
December 28, 1997. Sales of commissary products to international franchisees
increased $1.1 million, or 3.3%, to $34.2 million for the year ended January 3,
1999 from $33.1 million for the year ended December 28, 1997.
Gross Profit. Gross profit increased $28.3 million, or 11%, to $286.0 million
for the year ended January 3, 1999 from $257.7 million for the year ended
December 28, 1997. This increase was driven primarily by the increase in
revenues. As a percentage of revenues, gross profit decreased 0.4% to 24.3% for
the year ended January 3, 1999 from 24.7% for the year ended December 28, 1997.
This decrease resulted primarily from lower margin distribution revenues growing
faster than revenues of other divisions and
14
<PAGE>
higher Corporate operations costs due to increases in the price of cheese and
the minimum wage, partially offset by a $6.7 million credit to insurance expense
due to a reduction in the actuarial calculation of our required insurance
reserves.
General and Administrative. General and administrative expenses increased $23.0
million, or 11.9%, to $215.7 million for the year ended January 3, 1999 from
$192.7 million for the year ended December 28, 1997. This increase is due
primarily to incentive compensation to certain executives in connection with the
recapitalization and an increase in costs that coincide with increased business
volume, including administrative and corporate store manager compensation,
computer expenses, advertising and professional service fees, partially offset
by a decrease in bad debt expenses. As a percentage of revenues, general and
administrative expenses decreased to 18.3% for the year ended January 3, 1999
compared to 18.4% for the year ended December 28, 1997, due primarily to
economies of scale created by an increase in overall business volume and the
decrease in bad debt expenses, partially offset by the recapitalization
incentive compensation.
Interest Expense. Interest expense increased $3.1 million, or 77.5%, to $7.1
million for the year ended January 3, 1999 from $4 million for the year ended
December 28, 1997 primarily as a result of a December 1998 increase in debt to
fund the recapitalization.
Provision (Benefit) for Income Taxes. The provision (benefit) for income taxes
decreased to a benefit of $12.9 million for the year ended January 3, 1999 from
a provision of $0.4 million for the year ended December 28, 1997 driven
primarily by establishment of a $27.9 million deferred tax asset upon the
conversion of the Company to "C" Corporation status from "S" Corporation status
for federal income tax reporting purposes, partially offset by the establishment
of tax reserves.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have required limited levels of working capital to
fund growth. As of January 2, 2000, our working capital was a negative $5.7
million. We operate with negative working capital because our receivable
collection periods and inventory turn rates are faster than the normal payment
terms on our current liabilities. In addition, our sales are not typically
seasonal, which further limits our working capital requirements. Our primary
sources of liquidity are cash flow from operations and borrowings under our
revolving credit facility.
The Company's operating activities provided $63.3 million in cash
resources in fiscal 1999. The cash provided by operating activities in fiscal
1999 consisted mainly of earnings before interest, taxes, depreciation, and
amortization and a $4.0 million capital contribution relating to a lawsuit
settlement, which aggregates to $131.1 million, offset by interest payments of
$56.7 million, income tax payments of $8.1 million and other changes in
operating assets of $3.0 million.
Net cash used in investing activities was $26.4 million in fiscal 1999.
Net cash used in investing activities consists primarily of capital expenditures
and investments in marketable securities, partially offset by proceeds from
collections on notes receivable from franchisees and asset sales.
Capital expenditures were $32.4 million in fiscal 1999. We spent $11.3
million on domestic corporate stores, of which $6.2 million was related to the
Domino's Image 2000 campaign, $4.8 million for acquiring 20 franchise stores,
$10.2 million related to investments in technology, including $4.7 million on
our new financial and supply chain systems and $5.3 million in distribution,
primarily for new equipment and equipment upgrades.
Net cash used in financing activities was $6.9 million in fiscal 1999.
Net cash used in financing activities included repayments of long-term debt of
$5.2 million.
15
<PAGE>
In December 1998, the Company and a subsidiary incurred significant
debt and distributed significantly all of the proceeds to the Parent, which used
those proceeds, along with proceeds from the issuance of two classes of common
stock and one class of preferred stock, to fund our recapitalization including
the purchase of 93% of the outstanding common stock of the Parent from our
former principal stockholder and members of his family. Domino's and a
subsidiary entered into new Senior credit facilities with a consortium of banks
primarily to finance a portion of the recapitalization, to repay existing
indebtedness and to provide available borrowings for use in the normal course of
business.
We incurred substantial indebtedness in connection with the
recapitalization. As of January 2, 2000, we had $717.6 million of indebtedness
outstanding as compared to $46.3 million of indebtedness outstanding immediately
prior to the recapitalization. In addition, we have a stockholders' deficit of
$479.0 million as of January 2, 2000, as compared to stockholders' equity of
$41.8 million immediately prior to the recapitalization.
Concurrent with the recapitalization, we issued $275 million aggregate
principal amount of 10 3/8% Senior Subordinated Notes due 2009 and entered into
new senior credit facilities, including term loan facilities that provide for
multiple tranche term loans in the aggregate principal amount of $445 million
and a revolving credit facility that provides revolving loans in an aggregate
amount of up to $100 million. Upon closing of the recapitalization, we borrowed
the full amount available under the term loan facility and approximately $2.1
million under the revolving credit facility. As of January 2, 2000, there were
no borrowings under the revolving credit facility and letters of credit issued
under that facility were $6.4 million. The borrowings under the revolving credit
facility are available to fund our working capital requirements, capital
expenditures and other general corporate purposes. Principal payments are
required under Term Loans A, B and C, commencing at varied dates and continuing
quarterly thereafter until maturity. The final scheduled principal payments on
the outstanding borrowings under Term Loans A, B and C are due in December 2004,
December 2006 and December 2007, respectively.
Following the recapitalization, our primary sources of liquidity
continue to be cash flow from operations and borrowings under our new revolving
credit facility. We expect that ongoing requirements for debt service and
capital expenditures will be funded from these sources.
We will incur capital expenditures related to our Domino's Image 2000
campaign, on a discretionary basis and only with respect to our corporate
stores. We believe that average per corporate store capital expenditures for the
reimaging campaign will approximate $30,000 and the capital expenditures for
relocating a corporate store will average approximately $170,000 per store.
Based upon the current level of operations and anticipated growth, we
believe that the cash generated from operations and amounts available under the
revolving credit facility will be adequate to meet our anticipated debt services
requirements, capital expenditures and working capital needs for the next
several years. There can be no assurance, however, that our business will
generate sufficient cash flow from operations or that future borrowings will be
available under the senior credit facilities or otherwise to enable us to
service our indebtedness, including the senior credit facilities and the Senior
Subordinated Notes, to redeem or refinance the Cumulative Preferred Stock when
required or to make anticipated capital expenditures. Our future operating
performance and our ability to service or refinance the Senior Subordinated
Notes and to service, extend or refinance the senior credit facilities will be
subject to future economic conditions and to financial, business and other
factors, many of which are beyond our control.
IMPACT OF INFLATION
We believe that our results of operations are not dependent upon
moderate changes in the inflation rate. Inflation and changing prices did not
have a material impact on our operations in 1997, 1998 and 1999. Severe
increases in inflation, however, could affect the global and United States
economy and could have an impact on our business, financial condition and
results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market Risk
The Company's use of derivative instruments is primarily limited to
interest rate swaps and foreign currency forward contracts. The Company does not
enter into financial derivatives for trading purposes.
Interest Rate Swaps
We enter into interest rate swaps with the objective of reducing our
volatility in borrowing costs. In 1999, we entered into two interest rate swap
agreements to effectively convert the Eurodollar rate component of the interest
on a portion of our variable rate bank debt to a fixed rate of 5.12% through
December 2001. At January 2, 2000, the notional amount of these swap agreements
was $178 million (effective January 1, 2000).
Foreign Currency Forward Contracts
We use foreign currency forward contracts to minimize the effect of a
fluctuating Japanese yen on royalty revenues from franchised operations in
Japan. As currency rates change, the gains and losses with respect to these
contracts are recognized in income. For the fiscal year ended January 2, 2000,
no significant gains or losses were recognized under the foreign currency
forward contracts.
Interest Rate Risk
Our variable interest expense is sensitive to changes in the general
level of United States and European interest rates. A portion of our debt
currently is borrowed at Eurodollar rates plus a blended rate of approximately
3.3% and is sensitive to changes in interest rates. At January 2, 2000, the
weighted average interest rate on our $442.3 million of variable interest debt
was approximately 9.5% and the fair value of the debt approximates its carrying
value.
We had interest expense of $74.1 million for the year ended January 2,
2000. The potential increase in interest expense from a hypothetical 2% adverse
change in the variable interest rates, assuming the January 2, 2000 debt was
outstanding for the entire year, would be approximately $5.3 million.
Accounting for Derivative Instruments and Hedging Activities
The Financial Accounting Standards Board has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. This Statement is
effective beginning the first quarter of fiscal 2001. We have not yet quantified
the impact, if any, of adopting this Statement.
16
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
FINANCIAL STATEMENTS
Report of Independent Public Accountants
To Domino's, Inc.:
We have audited the accompanying consolidated balance sheets of Domino's, Inc.
(a Delaware corporation) and subsidiaries as of January 2, 2000 and January 3,
1999, and the related consolidated statements of income, comprehensive income,
stockholder's equity (deficit) and cash flows for each of the three years in the
period ended January 2, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Domino's, Inc. and subsidiaries
as of January 2, 2000 and January 3, 1999, and the results of their operations
and their cash flows for each of the three years in the period ended January 2,
2000 in conformity with accounting principles generally accepted in the United
States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the accompanying
index is presented for purposes of complying with the Securities and Exchange
Commissions rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
January 28, 2000
(except with respect
to the matter discussed in
Note 12, as to which
the date is March 30, 2000).
17
<PAGE>
DOMINO'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 2, 2000 JANUARY 3, 1999
------------------ -----------------
<S> <C> <C>
Assets
Current assets:
Cash $ 30,278 $ 115
Accounts receivable, net of reserves of
$2,444 in 1999 and $2,794 in 1998 40,902 48,858
Notes receivable, net of reserves of
$288 in 1999 and $124 in 1998 5,172 8,271
Inventories 18,624 20,134
Prepaid expenses and other 14,890 9,656
Deferred income taxes 10,498 9,811
----------------- ----------------
Total current assets 120,364 96,845
----------------- ----------------
Property, plant and equipment:
Land and buildings 14,246 14,605
Leasehold and other improvements 54,538 52,248
Equipment 117,018 109,517
Construction in progress 3,548 5,486
----------------- ----------------
189,350 181,856
Accumulated depreciation and amortization 116,287 116,890
----------------- ----------------
Property, plant and equipment, net 73,063 64,966
----------------- ----------------
Other assets:
Investments in marketable securities, restricted 3,187 -
Notes receivable, less current portion, net of
reserves of $3,249 in 1999 and $3,041 in 1998 10,380 18,461
Deferred income taxes 73,038 71,776
Deferred financing costs, net of accumulated
amortization of $6,327 in 1999 and $234 in 1998 37,208 43,046
Goodwill, net of accumulated amortization of
$9,217 in 1999 and $7,139 in 1998 16,034 14,179
Covenants not-to-compete, net of accumulated
amortization of $43,152 in 1999 and $10,009
in 1998 16,970 50,058
Capitalized software, net of accumulated amortization
of $14,332 in 1999 and $9,932 in 1998 26,113 22,593
Other assets, net of accumulated amortization and
reserves of $6,555 in 1999 and $6,163 in 1998 4,773 5,967
----------------- ----------------
Total other assets 187,703 226,080
----------------- ----------------
Total assets $ 381,130 $ 387,891
================= ================
</TABLE>
The accompanying notes are an integral
part of these consolidated balance sheets.
18
<PAGE>
DOMINO'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 2, 2000 JANUARY 3, 1999
---------------- ---------------
<S> <C> <C>
Liabilities and stockholder's deficit
Current liabilities:
Current portion of long-term debt $ 21,438 $ 7,646
Accounts payable 35,108 44,596
Accrued interest 13,643 2,317
Insurance reserves 7,152 9,633
Accrued compensation 18,068 16,295
Accrued income taxes 804 6,501
Accrued restructuring 3,020 -
Other accrued liabilities 26,875 28,081
---------------- ---------------
Total current liabilities 126,108 115,069
---------------- ---------------
Long-term liabilities:
Long-term debt, less current portion 696,132 720,480
Insurance reserves 15,485 15,132
Other accrued liabilities 22,371 20,985
---------------- ---------------
Total long-term liabilities 733,988 756,597
---------------- ---------------
Commitments and contingencies
Stockholder's deficit:
Common stock, par value $0.01 per share;
3,000 shares authorized; 10 shares issued
and outstanding - -
Additional paid-in capital 120,202 114,737
Retained deficit (599,292) (598,209)
Accumulated other comprehensive income 124 (303)
---------------- ---------------
Total stockholder's deficit (478,966) (483,775)
---------------- ---------------
Total liabilities and stockholder's deficit $ 381,130 $ 387,891
================ ===============
</TABLE>
The accompanying notes are an integral
part of these consolidated balance sheets.
19
<PAGE>
DOMINO'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------
JANUARY 2, JANUARY 3, DECEMBER 28,
2000 1999 1997
------------ ------------ --------------
<S> <C> <C> <C>
Revenues:
Corporate stores $ 378,081 $ 409,413 $ 376,837
Domestic franchise royalties 116,715 112,222 102,360
Domestic distribution 603,441 599,121 513,097
International 58,402 56,022 52,496
------------ ------------ --------------
Total revenues 1,156,639 1,176,778 1,044,790
------------ ------------ --------------
Operating expenses:
Cost of sales 854,151 890,784 787,129
General and administrative 219,277 215,725 192,657
Restructuring 7,583 - -
------------ ------------ --------------
Total operating expenses 1,081,011 1,106,509 979,786
------------ ------------ --------------
Income from operations 75,628 70,269 65,004
Interest income 992 730 447
Interest expense (74,116) (7,051) (3,980)
------------ ------------ --------------
Income before provision (benefit)
for income taxes 2,504 63,948 61,471
Provision (benefit) for income taxes 419 (12,928) 366
------------ ------------- --------------
Net income $ 2,085 $ 76,876 $ 61,105
============ ============ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
20
<PAGE>
DOMINO'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JANUARY 2, JANUARY 3, DECEMBER 28,
2000 1999 1997
------------ ------------ -------------
<S> <C> <C> <C>
Net income $ 2,085 $ 76,876 $ 61,105
------------ ------------ ------------
Other comprehensive income, before tax:
Currency translation adjustment 98 (44) (120)
Unrealized gain on investments in
marketable securities 518 - 439
Less: reclassification adjustments for
gains included in net income - (497) -
----------- ------------ ------------
616 (541) 319
Tax attributes of items of other
comprehensive income (189) 30 (26)
------------ ------------ -----------
Other comprehensive income, net of tax 427 (511) 293
----------- ------------ ------------
Comprehensive income $ 2,512 $ 76,365 $ 61,398
=========== ============== ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
21
<PAGE>
DOMINO'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income
--------------------
Unrealized
Gain on
Additional Retained Currency Investments
Common Paid-in Earnings Translation in Marketable
Stock Capital (Deficit) Adjustment Securities
------ ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 29, 1996 $ - $ - $ (34,783) $ (139) $ 54
Net income - - 61,105 - -
Distributions to Parent - - (412) - -
Currency translation adjustment - - - (120) -
Unrealized gain on investments
in marketable securities - - - - 413
-------- ---------- ----------- ------- --------
Balance at December 28, 1997 - - 25,910 (259) 467
Net income - - 76,876 - -
Capital contributions from Parent - 50,430 - - -
Distributions to Parent - - (690,688) - -
Currency translation adjustment - - - (44) -
Reclassification adjustment for
gains included in net income - - - - (467)
Recognition of deferred income taxes
as part of Recapitalization - - 54,000 - -
Reclassification of S Corporation
undistributed earnings upon
conversion to C Corporation - 64,307 (64,307) - -
-------- ---------- ------------ ------- --------
Balance at January 3, 1999 - 114,737 (598,209) (303) -
Net income - - 2,085 - -
Capital contributions from Parent - 5,465 - - -
Distribution to Parent - - (3,168) - -
Currency translation adjustment - - - 98 -
Unrealized gain on investments
in marketable securities - - - - 329
-------- ---------- ----------- ------- --------
Balance at January 2, 2000 $ - $ 120,202 $ (599,292) $ (205) $ 329
======== ========== ============ ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
22
<PAGE>
DOMINO'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
--------------------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 28,
2000 1999 1997
----------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,085 $ 76,876 $ 61,105
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization 51,743 23,123 16,939
Provision (benefit) for losses on accounts
and notes receivable 1,971 (3,212) 1,131
(Gain) loss on sale of property, plant and
equipment (316) 1,570 1,197
Benefit for deferred income taxes (1,949) (27,587) -
Amortization of deferred financing costs 6,093 388 327
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 6,123 (6,254) (13,130)
Decrease (increase) in inventories and
prepaid expenses and other 957 4,531 (15,512)
Increase in accounts payable and accrued
liabilities 1,006 7,989 26,156
Decrease in insurance reserves (4,445) (12,693) (4,805)
----------- ---------- -----------
Net cash provided by operating activities 63,268 64,731 73,408
----------- ---------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (27,882) (48,359) (31,625)
Proceeds from sale of property, plant and equipment 1,769 5,587 52
Purchases of franchise stores and commissaries (4,565) (1,534) (13,692)
Repayments of notes receivable 8,307 414 2,381
(Purchases) sales of investments in marketable
securities (2,858) 5,130 (2,832)
Other (1,127) (386) (1,117)
----------- ---------- -----------
Net cash used in investing activities (26,356) (39,148) (46,833)
----------- ---------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 722,056 35,800
Capital contribution from Parent 1,465 - -
Repayments of long-term debt (5,188) (38,338) (61,583)
Cash paid for financing costs - (43,280) (293)
Distributions to Parent (3,168) (666,020) (412)
----------- ---------- -----------
Net cash used in financing activities (6,891) (25,582) (26,488)
----------- ---------- -----------
Effect of exchange rate changes on cash 142 9 (214)
----------- ---------- -----------
Increase (decrease) in cash 30,163 10 (127)
Cash, at beginning of period 115 105 232
----------- ---------- -----------
Cash, at end of period $ 30,278 $ 115 $ 105
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
23
<PAGE>
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
January 2, 2000
1. Description of Business and Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Domino's, Inc. (formerly known as Domino's Pizza International Payroll Services,
Inc.) (Domino's), a Delaware corporation, and its wholly-owned subsidiaries
(collectively, the Company). All significant intercompany accounts and
transactions have been eliminated. Domino's is a wholly-owned subsidiary of
TISM, Inc. (the Parent).
Description of Business
The Company is primarily engaged in the following business activities: (1)
retail sales of food through Company-owned stores in the contiguous U.S., (2)
sale of food and equipment to Company-owned and franchised stores through
Company-owned distribution centers and (3) receipt of royalties and fees
relating to support of domestic and international franchised stores.
Parent's Recapitalization
On December 21, 1998, the Parent effected a merger with TM Transitory Merger
Corporation (TMTMC) in a leveraged recapitalization transaction whereby TMTMC
was merged with and into the Parent with the Parent being the surviving entity
(the Recapitalization). TMTMC had no operations and was formed solely for the
Parent's purpose of effecting the Recapitalization. As part of the
Recapitalization, the Company incurred significant debt and distributed
significantly all of the proceeds to the Parent, which used those proceeds,
along with proceeds from the Parent's issuance of two classes of common stock
and one class of preferred stock, to fund the purchase of 93% of the outstanding
common stock of the Parent from a Company and Parent Director and certain
members of his family. During 1999, the Company distributed an additional $3.2
million to the Parent, which used the proceeds to satisfy a
Recapitalization-related obligation to a Company and Parent Director and certain
members of his family.
As part of the Recapitalization, the Company entered into a $5.5 million, ten
year consulting agreement with a Company and Parent Director and former majority
Parent stockholder. In 1999, the Company paid $1.0 million under this agreement
and will pay the remaining $4.5 million ratably over nine years beginning in
fiscal 2000. The $5.5 million has been recorded as a charge to retained earnings
as a component of purchase price for the common stock.
As part of the Recapitalization, certain Company executives received stock
options for the purchase of Parent common stock and preferred stock.
Prior to December 1998, Domino's was an indirectly wholly-owned subsidiary of
Domino's Pizza, Inc. (DPI). During December 1998 and before the
Recapitalization, DPI distributed its ownership interest in Domino's to the
Parent. The Parent then contributed its ownership interest in DPI, which had
been a wholly-owned subsidiary of the Parent, to Domino's, effectively
converting Domino's from a subsidiary of DPI into DPI's parent.
The accompanying consolidated financial statements and these Notes to
Consolidated Financial Statements include the results of operations of DPI and
its wholly-owned subsidiaries (including Domino's) for the periods prior to the
Recapitalization.
Domino's amended its charter in December 1998 to increase the total number of
authorized shares of common stock from 1,000 to 3,000 and decreased the par
value of these shares from $1.00 per share to $0.01 per share.
24
<PAGE>
Fiscal Year
The Company's fiscal year ends on the Sunday closest to December 31. The 1999
fiscal year ended January 2, 2000; the 1998 fiscal year ended January 3, 1999;
and the 1997 fiscal year ended December 28, 1997. Each of the fiscal years
consists of fifty-two weeks except for fiscal year 1998 which consists of
fifty-three weeks.
Inventories
Inventories are valued at the lower of cost (on a first-in, first-out basis) or
market.
Inventories at January 2, 2000 and January 3, 1999 are comprised of the
following (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Equipment and supplies $ 5,659 $ 9,947
Food 14,641 12,039
--------- --------
20,300 21,986
Less - reserves 1,676 1,852
--------- --------
Inventories, net $ 18,624 $ 20,134
========= =========
</TABLE>
Notes Receivable
During the normal course of business, the Company provides financing to
franchisees (i) to stimulate franchise store growth, (ii) to finance the sale of
Company-owned stores to franchisees and (iii) to facilitate rapid new equipment
rollouts. Substantially all of the related notes receivable require monthly
payments of principal and interest, or monthly payments of interest only,
generally ranging from 10% to 12%, with balloon payments of the remaining
principal due one to ten years from the original issuance date. Such notes are
generally secured by the assets sold. In financing these transactions, the
Company derives benefits other than interest income. Given the nature of these
borrower/lender relationships, the Company, in essence, makes its own market in
these notes. The carrying amounts of these notes approximate fair value.
During 1998, the Company modified certain criteria it uses to determine
allowance for bad debts for notes receivable. As a result of this change, the
Company recognized a benefit of approximately $3.7 million during fiscal 1998.
Property, Plant and Equipment
Additions to property, plant and equipment are recorded at cost. Depreciation
for financial reporting purposes is provided using the straight-line method over
the estimated useful lives of the related assets. During 1998 and 1997, asset
lives were generally three to seven years for equipment, twenty years for
buildings and improvements and five years or the term of the lease including
renewal options, whichever is shorter, for leasehold and other improvements.
The Company initiated a review of the estimated useful lives for depreciating or
amortizing property, plant and equipment and goodwill, respectively. The review
included consideration of the estimated lives of stores as determined through
quantitative analysis performed in late 1998 and analysis of the historical
longevity of operating assets used in operations. The Company concluded the
review in the first quarter of 1999.
Based on this review, the Company modified the useful lives for several asset
categories. For equipment, estimated useful lives were extended for certain
assets from seven years to either ten or twelve years and were shortened for
other assets, primarily computer equipment, from either five or seven years to
three years. For leasehold improvements, estimated useful lives were extended
from five years to ten years, which generally will result in amortization of
these assets over the term of the respective leases plus one renewal option
period. For goodwill, which primarily arises from purchases of stores from
franchisees, estimated useful lives were shortened in certain circumstances to
ten years.
25
<PAGE>
These changes in useful lives are being applied on a prospective basis to
existing assets and will be applied to assets acquired in the future. These
changes in accounting estimates have been effected as of the beginning of fiscal
1999, resulting in increases in income from operations and net income as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net impact of changes in useful lives $ 5,616
Non-recurring charge to eliminate assets which
had no remaining useful lives (1,025)
--------
Increase in income from operations 4,591
Income tax effect (1,676)
--------
Increase in net income $ 2,915
========
</TABLE>
Depreciation expense was approximately $11.9 million, $16.6 million and $13.4
million in 1999, 1998 and 1997, respectively.
Investments in Marketable Securities
As of December 28, 1997, the Company had investments in marketable securities of
approximately $5.6 million, comprised of both debt and equity securities. These
investments were classified as available-for-sale and were stated at aggregate
fair value. Unrealized gains at December 28, 1997 were $536,000 and unrealized
losses were $69,000, both net of tax. For purposes of determining realized gains
and losses, the cost of securities sold is based upon the specific
identification method.
The Company had placed these investments in "rabbi trusts", whereby the amounts
were irrevocably set aside to fund the Company's obligations under its
nonqualified executive and managerial deferred compensation plans (Note 5).
These plans were terminated during 1998 as part of the Recapitalization and all
related investments in marketable securities were sold with the proceeds being
paid to the participants in the plans.
As of January 2, 2000, the Company has investments in marketable securities of
approximately $3.2 million, comprised of mutual funds. These investments are
classified as available-for-sale and are stated at aggregate fair value.
Unrealized gains at January 2, 2000 are $329,000, net of tax. For purposes of
determining realized gains and losses, the cost of securities sold is based upon
the specific identification method. These investments are in a "rabbi trust",
whereby the amounts are irrevocably set aside to fund the Company's obligations
under its deferred compensation plans which began in 1999.
Deferred Financing Costs
Deferred financing costs include debt issuance costs primarily incurred by the
Company as part of the Recapitalization. Amortization is provided using the
effective interest rate method over the terms of the respective debt instruments
to which the costs relate and is included in interest expense. Amortization of
deferred financing costs was approximately $6.1 million, $0.4 million and $0.3
million in 1999, 1998 and 1997, respectively.
As part of the Recapitalization, the Company paid financing costs to affiliates
of the Parent stockholders of approximately $21.1 million. Approximately $14.4
million of these expenditures were treated by the Company as capitalizable
deferred financing costs while approximately $6.7 million of these expenditures
were made on behalf of the Parent and were treated as distributions to the
Parent.
Goodwill and Covenants Not-to-Compete
Goodwill arising primarily from franchise acquisitions has been recorded at cost
and is being amortized using the straight-line method over periods not exceeding
ten years. Amortization of goodwill was approximately $2.1 million, $2.0 million
and $1.4 million in 1999, 1998 and 1997, respectively.
26
<PAGE>
Covenants not-to-compete, primarily obtained as a part of the Recapitalization
(Note 7), have been recorded at cost and are being amortized using an
accelerated method over a three year period for the covenant not-to-compete with
a Company and Parent Director and former majority Parent stockholder. Other
covenants not-to-compete are being amortized using the straight-line method over
periods not exceeding ten years. Amortization of covenants not-to-compete was
approximately $33.1 million, $2.2 million and $0.7 million in 1999, 1998 and
1997, respectively.
Capitalized Software
The American Institute of Certified Public Accountants has issued Statement of
Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use", which requires entities to capitalize and amortize
certain costs and currently expense certain other costs incurred for software
developed or obtained for internal use. The Company adopted this SOP in 1998.
The adoption of this SOP did not have a significant impact on the accompanying
consolidated financial statements.
Capitalized software is recorded at cost and includes purchased, internally
developed and externally developed software used in the Company's operations.
Amortization for financial reporting purposes is provided using the
straight-line method over the estimated useful lives of the software, which
range from two to seven years. Amortization expense was approximately $4.4
million, $2.0 million and $0.8 million in 1999, 1998 and 1997, respectively.
Other Assets
Other assets primarily include equity investments in international franchisees,
deposits and other intangibles primarily arising from franchise acquisitions.
Amortization of other intangibles is provided using the straight-line method
over the estimated useful lives of the amortizable assets. Amortization expense
was approximately $241,000, $376,000 and $564,000 in 1999, 1998 and 1997,
respectively.
Other Accrued Liabilities
Current and long-term other accrued liabilities primarily include accruals for
sales, income and other taxes, legal matters, marketing and advertising
expenses, equipment warranty expenses, store operating expenses, deferred
revenues, deferred compensation and a consulting fee payable to a Company
Director and former majority Parent stockholder.
Revenue Recognition
Corporate store revenues are comprised of retail sales of food through
Company-owned stores located in the contiguous U.S. and are recognized when the
food is delivered to or carried out by customers.
Domestic franchise royalties are primarily comprised of royalties and fees from
franchisees with operations in the contiguous U.S. and are recognized as revenue
when earned.
Domestic distribution revenues are comprised of sales of food, equipment and
supplies to franchised stores located in the contiguous U.S. and are recognized
as revenue upon shipment of the related products to franchisees.
International revenues are primarily comprised of sales of food and royalties
and fees from foreign, Alaskan and Hawaiian franchisees and are recognized
consistently with the policies applied for revenues generated in the contiguous
U.S.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense, which relates
primarily to Company-owned stores, was approximately $37.8 million, $41.2
million and $40.5 million during 1999, 1998 and 1997, respectively.
27
<PAGE>
Insurance Programs
The Company is partially self-insured for property and health insurance risks
and, for periods up to December 20, 1998, was partially self-insured for
workers' compensation, general liability and owned and non-owned automobile
programs.
The Company's health insurance program provides coverage for life, medical,
dental and accidental death and dismemberment (AD&D) claims. Self-insurance
limitations for medical and dental per a covered individual's lifetime were $2.0
million in 1999, 1998 and 1997. The AD&D and life insurance components of the
health insurance program are fully insured by the Company through third-party
insurance carriers.
Effective July 1, 1996 through December 19, 1998, the self-insurance limitations
per occurrence for the workers' compensation, general liability and owned and
non-owned automobile programs were $500,000, plus a one-time otherwise
recoverable amount of $500,000 in excess of $500,000 on the combined general
liability, owned and non-owned automobile programs for each policy year, except
for the period from July 1, 1998 through December 19, 1998 for which there was
no otherwise recoverable amount.
Total excess insurance limits for all partially self-insured periods were $105.0
million per occurrence under the workers' compensation, general liability and
owned and non-owned automobile programs.
Self-insurance reserves are determined using actuarial estimates. These
estimates are based on historical information along with certain assumptions
about future events. Changes in assumptions for such things as medical costs and
legal actions, as well as changes in actual experience, could cause these
estimates to change in the near term. In management's opinion, the accrued
insurance reserves at January 2, 2000 are sufficient to cover potential
aggregate losses.
Paid claims under the Company's self-insurance programs were $13.6 million in
1999, $23.4 million in 1998 and $20.0 million in 1997. As of January 2, 2000,
the Company has deposits totaling approximately $1.0 million with the Company's
third-party insurance claims administrator. This amount is included in other
assets.
During December 1998, the Company entered into a guaranteed cost, combined
casualty insurance program that is effective for the period December 20, 1998 to
December 20, 2001. The new program covers insurance claims on a first dollar
basis for workers' compensation, general liability and owned and non-owned
automobile liability. Total insurance limits under this program are $106.0
million per occurrence for general liability and owned and non-owned automobile
liability and up to the applicable statutory limits for workers' compensation.
Insurance expense was comprised of the following (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Self-insurance program $ 10.6 $ 22.6 $ 20.0
Combined casualty program 10.3 - -
Reduction in actuarial calculations - (6.7) -
------- ------- --------
$ 20.9 $ 15.9 $ 20.0
======= ======= ========
</TABLE>
Foreign Currency Translation
The Company's foreign entities use their local currency or the U.S. dollar as
the functional currency, in accordance with the provisions of SFAS No. 52,
"Foreign Currency Translation." Where the functional currency is the local
currency, the Company translates net assets into U.S. dollars at yearend
exchange rates, while income and expense accounts are translated at average
exchange rates. Translation adjustments are included in accumulated other
comprehensive income and other foreign currency transaction gains and
losses are included in determining net income.
28
<PAGE>
Financial Derivatives
During 1999, the Company entered into two interest-rate swap agreements (the
1999 Swap Agreements) to effectively convert the Eurodollar component of the
interest rate on a portion of the Company's debt under Term Loans A, B and C
(Note 2) to a fixed rate of 5.12% beginning in January 1999 and continuing
through December 2001, in an effort to reduce the impact of interest rate
changes on income. The total notional amount under the 1999 Swap Agreements is
initially $179.0 million and decreases over time to a total notional amount of
$167.0 million in December 2001. As of January 2, 2000, management estimates the
fair value of the 1999 Swap Agreements to be an asset of approximately $5.0
million.
As a result of generating royalty revenues from franchised operations in Japan,
the Company is exposed to the effect of exchange rate fluctuations between the
Japanese yen and U.S. dollar. During 1999, the Company entered into contracts to
sell 30 million Japanese yen every four weeks during fiscal 2000. In 1998, 1997
and 1996, the Company entered into contracts to sell 30 million, 35 million and
36 million Japanese yen every four weeks in the following fiscal year,
respectively.
Using foreign currency forward contracts enables management to minimize the
effect of a fluctuating Japanese yen on its reported income. Gains and losses
with respect to these contracts are recognized in income at each balance sheet
date based on the exchange rate in effect at that time. No significant gains or
losses were recognized under these contracts during 1999, 1998 or 1997. The
carrying value of these contracts approximates fair value.
Supplemental Disclosures of Cash Flow Information
The Company paid interest of approximately $56.7 million, $4.6 million and $3.9
million during 1999, 1998 and 1997, respectively. Additionally, cash paid for
Federal income taxes was approximately $5.1 million and $2.7 million in 1999 and
1998, respectively. No cash was paid for Federal income taxes in 1997.
During 1998, the Company made non-cash distributions to the Parent of
approximately $16.6 million representing the Company's investment in a related
party limited partnership and approximately $2.6 million representing various
leaseholds and other assets. The Company also assumed a $5.5 million consulting
agreement liability from the Parent during 1998.
Accounting for Derivative Instruments and Hedging Activities
The Financial Accounting Standards Board has issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities", which requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. This Statement is effective
beginning the first quarter of fiscal 2001. Management has not yet quantified
the impact, if any, of adopting this Statement.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain amounts from fiscal 1997 and 1998 have been reclassified to conform to
the fiscal 1999 presentation.
29
<PAGE>
2. Long-Term Debt
At January 2, 2000 and January 3, 1999, long-term debt consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Term Loan A (see below) $ 174,424 $ 175,000
Term Loan B (see below) 133,878 135,000
Term Loan C (see below) 134,017 135,000
Notes to franchisees, interest ranging from 5.8%
to 6.1%, maturing through March 2005 251 -
Revolving credit facility (see below) - 1,700
Notes payable to franchise insurance captive, interest
ranging up to prime plus 1.5%, due on demand - 6,426
Senior subordinated notes, 10 3/8% (see below) 275,000 275,000
---------- ----------
717,570 728,126
Less - current portion 21,438 7,646
---------- ----------
$ 696,132 $ 720,480
========== ==========
</TABLE>
On November 24, 1997, DPI refinanced all obligations remaining under a
previously existing credit facility through a new credit agreement (the 1997
Agreement). The 1997 Agreement provided a $93 million six-year unsecured
revolving credit facility, of which up to $35 million was available for letter
of credit advances. On December 21, 1998, all outstanding borrowings and accrued
interest under the 1997 Agreement were repaid in full and the 1997 Agreement was
terminated.
On December 21, 1998, Domino's and a subsidiary entered into a new credit
agreement (the 1998 Agreement) with a consortium of banks primarily to finance a
portion of the Recapitalization, to repay existing indebtedness under the 1997
Agreement and to provide available borrowings for use in the normal course of
business.
The 1998 Agreement provides the following credit facilities: three term loans
(Term Loan A, Term Loan B and Term Loan C) and a revolving credit facility (the
Revolver). The aggregate borrowings available under the 1998 Agreement are $545
million.
The 1998 Agreement provides for borrowings of $175 million under Term Loan A,
$135 million under Term Loan B and $135 million under Term Loan C. Under the
terms of the 1998 Agreement, the borrowings under Term Loans A, B and C bear
interest, payable at least quarterly, at either (i) the higher of (a) the
specified bank's prime rate (8.5% at January 2, 2000) and (b) 0.5% above the
Federal Reserve reported overnight funds rate, each plus an applicable margin of
between 0.50% to 2.75% or (ii) the Eurodollar rate (6.18% at January 2, 2000)
plus an applicable margin of between 1.50% to 3.75%, with margins determined
based upon the Company's ratio of indebtedness to earnings before interest,
taxes, depreciation and amortization (EBITDA), as defined. At January 2, 2000,
the Company's effective borrowing rates are 8.94%, 9.69% and 9.94% for Term
Loans A, B and C, respectively. As of January 2, 2000, all borrowings under Term
Loans A, B and C were under Eurodollar contracts with interest periods of 90
days. Principal payments are required under Term Loans A, B and C, commencing at
varied dates and continuing quarterly thereafter until maturity. The final
scheduled principal payments on the outstanding borrowings under Term Loans A, B
and C are due in December 2004, December 2006 and December 2007, respectively.
The 1998 Agreement also provides for borrowings of up to $100 million under the
Revolver, of which up to $35.0 million is available for letter of credit
advances and $10.0 million is available for swing-line loans. Borrowings under
the Revolver (excluding the letters of credit and swing-line loans) bear
interest, payable at least quarterly, at either (i) the higher of (a) the
specified bank's prime rate (8.5% at January 2, 2000) and (b) 0.5% above the
Federal Reserve reported overnight funds rate, each plus an applicable margin of
between 0.50% to 2.00% or (ii) the Eurodollar rate (6.18% at January 2, 2000)
plus an applicable margin of between 1.50% to 3.00%, with margins determined
based upon the Company's ratio of indebtedness to EBITDA, as defined. Borrowings
under the swing-line portion of the Revolver bear interest, payable at least
quarterly, at the higher of
30
<PAGE>
(a) the specified bank's prime rate (8.5% at January 2, 2000) and (b) 0.5% above
the Federal Reserve reported overnight funds rate, each plus an applicable
margin of between 0.50% to 2.00% based upon the Company's ratio of indebtedness
to EBITDA, as defined. The Company also pays a commitment fee on the unused
portion of the Revolver ranging from 0.25% to 0.50%, determined based upon the
Company's ratio of indebtedness to EBITDA, as defined. At January 2, 2000 the
commitment fee for such unused borrowings is 0.50%. The fee for letter of credit
amounts outstanding at January 2, 2000 is 3.0%. As of January 2, 2000, there is
$93.6 million in available borrowings under the Revolver, with $6.4 million of
letters of credit outstanding. There are no borrowings outstanding under the
swing-line. The Revolver expires in December 2004.
The credit facilities included in the 1998 Agreement are (i) guaranteed by the
Parent, (ii) jointly and severally guaranteed by each of Domino's domestic
subsidiaries and (iii) secured by a first priority lien on substantially all of
the assets of the Company.
The 1998 Agreement contains certain financial and non-financial covenants that,
among other restrictions, require the maintenance of minimum interest coverage
ratios and consolidated adjusted EBITDA and maximum leverage ratios, all as
defined in the 1998 Agreement, and restrict the Company's ability to pay
dividends on or redeem or repurchase the Company's capital stock, incur
additional indebtedness, issue preferred stock, make investments, use assets as
security in other transactions and sell certain assets or merge with or into
other companies.
On December 21, 1998, Domino's issued $275 million of 10 3/8% Senior
Subordinated Notes due 2009 (the Notes) requiring semi-annual interest payments,
which began July 15, 1999. Prior to January 15, 2002, the Company may redeem, at
a fixed price, up to 35% of the Notes with the proceeds of equity offerings, if
any, by the Parent or the Company. Before January 15, 2004, Domino's may redeem
all, but not part, of the Notes if a change in control occurs, as defined in the
Notes. Beginning January 15, 2004, Domino's may redeem some or all of the Notes
at fixed redemption prices, ranging from 105.19% of par in 2004 to 100% of par
in 2007 and thereafter. In the event of a change in control, as defined, the
Company will be obligated to repurchase Notes tendered by the holders at a fixed
price. The Notes are guaranteed by each of Domino's domestic subsidiaries (non-
domestic subsidiaries do not represent a material amount of revenues and assets)
and are subordinated in right of payment to all existing and future senior debt
of the Company.
The indenture related to the Notes restricts Domino's and its restricted
subsidiaries from, among other restrictions, paying dividends or redeeming
equity interests (including those of the Parent), with certain specified
exceptions, unless a minimum fixed charge coverage ratio is met and, in any
event, such payments are limited to 50% of cumulative net income of the Company
from January 4, 1999 to the payment date plus the net proceeds from any capital
contributions or the sale of equity interests.
In 1998, the Company received $20 million under Term Loans B and C from a
stockholder of the Parent. The Company also issued $20 million of the Notes to
this stockholder. During 1999, the stockholder reduced its holdings in Term
Loans B and C to $12.9 million. Interest expense to this stockholder related to
the Term Loans B and C and the Notes is $3.4 million in 1999.
As of January 2, 2000, management estimates the fair value of the Notes to be
approximately $264.7 million. The carrying amounts of the Company's other debt
approximate fair value.
As of January 2, 2000, maturities of long-term debt are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
2000 $ 21,438
2001 14,792
2002 34,155
2003 48,835
2004 66,940
Thereafter 531,410
-----------
$ 717,570
===========
</TABLE>
31
<PAGE>
3. Commitments and contingencies
Lease Commitments
The Company leases various equipment, store and commissary locations and its
corporate headquarters under operating leases with expiration dates through
2009. Rent expenses totaled approximately $23.5 million, $27.4 million and $26.9
million during 1999, 1998 and 1997, respectively. As of January 2, 2000, the
future minimum rental commitments for all noncancellable leases, which include
approximately $18.0 million in commitments to related parties and is net of
approximately $1.4 million in future minimum rental commitments which have been
assigned to certain franchisees, are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
2000 $ 18,300
2001 13,412
2002 11,146
2003 9,123
2004 2,869
Thereafter 5,962
-----------
$ 60,812
===========
</TABLE>
Legal Proceedings and Related Matters
The Company is a party to lawsuits, revenue agent reviews by taxing authorities
and legal proceedings, of which the majority involve workers' compensation,
employment practices liability, general liability, automobile and franchisee
claims arising in the ordinary course of business. In the opinion of the
Company's management, these matters, individually and in the aggregate, will not
have a material adverse effect on the financial condition and results of
operations of the Company, and the established reserves adequately provide for
the estimated resolution of such claims.
4. Income Taxes
As a result of the Recapitalization, the Parent, Domino's and its qualifying
subsidiaries reverted to C Corporation status effective December 21, 1998 and
filed a consolidated Federal income tax return. The Company records its Federal
income tax provision and related liability as if it files its own consolidated
Federal income tax return in accordance with a December 1998 tax-sharing
agreement. As such, the amounts classified as deferred income taxes are
receivables from the Parent as the ultimate taxpayer.
Prior to the Recapitalization, certain Domino's subsidiaries sold certain
tangible and intangible assets to another Domino's subsidiary, which had revoked
its S Corporation election. The gain on this transaction, while not reflected
for financial reporting purposes, resulted in a Federal deferred tax asset to
the Company of $54 million due to the difference in book and tax bases. This
amount is reflected in deferred income taxes and was initially credited directly
to retained earnings.
32
<PAGE>
The differences between the United States Federal statutory income tax provision
(using the statutory rate of 35%) and the Company's consolidated income tax
provision (benefit) for fiscal year 1999 and for fiscal year 1998 (only two
weeks of which was a C Corporation period) are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
For the Years Ended
-------------------
January 2, January 3,
2000 1999
---------- ----------
<S> <C> <C>
Federal income tax provision based
on the statutory rate $ 876 $ 22,382
State and local taxes, net of
related Federal income taxes 909 1,096
Non-resident withholding and foreign
income taxes 2,792 2,530
Non-deductible expenses 374 578
Foreign tax and other tax credits (3,064) (2,885)
Losses attributable to
foreign subsidiaries 505 -
Tax reserves, net of related
Federal income taxes (2,925) 10,498
Federal tax effect of conversion to
C Corporation 1,001 (27,905)
Exclusion of income earned during
S Corporation period in 1998 - (18,900)
Other (49) (322)
---------- --------
$ 419 $(12,928)
========== ========
</TABLE>
The components of the 1999, 1998 and 1997 provision (benefit) for income taxes
are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
Provision (benefit) for Federal income taxes-
Current provision (benefit) $ 2,577 $ 9,676 $ (7,419)
Deferred benefit (1,949) (27,587) -
--------- ----------- --------
Total provision (benefit) for
Federal income taxes 628 (17,911) (7,419)
(Benefit) provision for state and local
income taxes (3,001) 2,453 5,719
Provision for non-resident withholding and
foreign income taxes 2,792 2,530 2,066
--------- ----------- --------
Provision (benefit) for income taxes $ 419 $ (12,928) $ 366
========= =========== ========
</TABLE>
Realization of the Company's deferred tax assets is dependent upon many factors,
including, but not limited to, the ability of the Company to generate sufficient
taxable income. Although realization of the Company's deferred tax assets is not
assured, management believes it is more likely than not that the deferred tax
assets will be realized. On an ongoing basis, management will assess whether it
remains more likely than not that the deferred tax assets will be realized.
33
<PAGE>
Significant components of net deferred income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Deferred Federal income tax assets -
Step-up of basis on subsidiaries sale of
certain assets $ 45,390 $ 52,374
Covenants not-to-compete 10,605 405
Self-insurance reserves 7,067 8,447
Accruals and other reserves 8,559 8,096
Bad debt reserves 2,080 2,189
Depreciation, amortization and asset basis
differences 6,654 7,422
Deferred revenue 1,517 1,595
Other 2,897 3,096
--------- ---------
84,769 83,624
--------- ---------
Deferred Federal income tax liabilities -
Capitalized development costs 2,922 3,105
Other 504 1,077
--------- ---------
3,426 4,182
--------- ---------
Net deferred Federal income tax asset 81,343 79,442
Net deferred state tax asset 2,193 2,145
--------- ---------
Net deferred income taxes $ 83,536 $ 81,587
========= =========
</TABLE>
As of January 2, 2000, the classification of net deferred income taxes is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Current Long-term Total
--------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets $ 10,990 $ 75,972 $ 86,962
Deferred tax liabilities (492) (2,934) (3,426)
--------- --------- ---------
Net deferred income taxes $ 10,498 $ 73,038 $ 83,536
========= ========= =========
</TABLE>
As of January 3, 1999, the classification of net deferred income taxes is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Current Long-term Total
--------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets $ 10,830 $ 74,939 $ 85,769
Deferred tax liabilities (1,019) (3,163) (4,182)
--------- --------- ---------
Net deferred income taxes $ 9,811 $ 71,776 $ 81,587
========= ========= =========
</TABLE>
5. Employee Benefits
The Company has a deferred salary reduction plan which qualifies under Internal
Revenue Code Section 401(k). All full-time salaried and certain hourly employees
of the Company who have completed one year of service and are at least 21 years
of age are eligible to participate in the plan. Such employees may be able to
participate in the plan after only six months of service if they are employed in
a position regularly scheduled to work at least 1,000 hours annually. The plan
requires the employer to match 50% of the first 6% of employee contributions per
participant. These matching contributions vest immediately. The charges to
operations for Company contributions to the plan were $2.5 million, $2.4 million
and $1.2 million for 1999, 1998 and 1997, respectively.
Through December 20, 1998, the Company also had a nonqualified executive
deferred compensation plan (the executive plan) available for certain executives
and other key employees and a nonqualified managerial deferred compensation plan
(the managerial plan) available for certain managerial employees. Under the
executive plan, eligible executives could defer up to 25% of their annual
compensation, and all other eligible participants could
34
<PAGE>
defer up to 20% of their annual compensation. Under the managerial plan, certain
eligible employees could defer up to 15% of their annual compensation. Both
plans required a Company match of either 30% of employee contributions per
participant or the Company match percentage under the Company 401(k) plan,
whichever was less, with additional Company contributions permitted at the
discretion of the Company. Both plans also required the Company to credit each
participant's account monthly at an annualized rate equal to the prime rate of
interest, as defined, plus 2%. The charges to operations for Company
contributions to these plans, including interest, were $1.9 million and $1.3
million in 1998 and 1997, respectively. The Company terminated both the
executive plan and the managerial plan and paid out the related liabilities on
December 20, 1998.
Effective January 4, 1999, the Company established a nonqualified deferred
compensation plan available for the members of the Company's executive team,
certain other key executives and certain managerial employees. Under this plan,
the participants may defer up to 40% of their annual compensation. The plan
requires the Company to match 30% with respect to the first 25%, 20% or 15% of
participant salary deferrals, depending on the employee. The plan requires the
Company to credit the participants' accounts following each pay period. The
Company may be required to make supplemental contributions to participants'
accounts depending on the earnings of the Company as defined in the plan. The
participants direct the investment of their deferred compensation within seven
mutual funds. The Company contributions to this plan were $905,000 in 1999 and
are included in general and administrative expenses. In 1999, the Company
amended the plan to eliminate the Company match and supplemental contributions
beginning in fiscal 2000.
6. Financial Instruments with Off-Balance Sheet Risk
The Company is party to stand-by letters of credit with off-balance sheet risk.
The Company's exposure to credit loss for stand-by letters of credit and
financial guarantees is represented by the contractual amount of these
instruments. The Company uses the same credit policies in making conditional
obligations as it does for on-balance sheet instruments. Total conditional
commitments under letters of credit as of January 2, 2000 are $6.4 million.
7. Related Party Transactions
Leases
The Company leases its corporate headquarters under a long-term operating lease
agreement with a partnership owned by a Company and Parent Director and former
majority Parent stockholder. The current lease, dated December 21, 1998,
replaced a previous lease agreement with the same partnership. The Company also
leased two commissary locations from partnerships owned by this Company and
Parent Director and former majority Parent stockholder and his family during
1997 and until August 1998 when the Company purchased the commissaries and
terminated the respective leases. Total lease expense for the aforementioned
leases was $4.4 million, $13.6 million and $13.8 million for 1999, 1998 and
1997, respectively, the majority of which is included in general and
administrative expenses.
Aggregate future commitments under these leases are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
2000 $ 4,371
2001 4,486
2002 4,606
2003 4,544
2004 and thereafter -
--------
$ 18,007
========
</TABLE>
The Company was party to an agreement with an affiliated company which was owned
by a Company and Parent Director and former majority Parent stockholder and
members of his family, whereby the Company obtained a 50% limited partner
interest in a real estate partnership which owns certain land surrounding the
Company's corporate headquarters. The Company accounted for this investment
using the equity method, whereby the original investment was recorded at cost
and was adjusted by the Company's share of the partnership's undistributed
earnings and losses, based on a formula defined in the agreement. Under the
terms of this agreement, the
35
<PAGE>
Company leased certain of the land owned by the partnership. Total lease expense
was $1.4 million for 1998 and $1.3 million for 1997. In December 1998, the
Company distributed its investment in the partnership to the Parent.
Charitable Contributions
The Company made contributions of approximately $7.7 million and $6.8 million in
1998 and 1997, respectively, to a charitable foundation founded and operated by
a Company and Parent Director and former majority Parent stockholder. There
were no contributions made to this foundation in 1999.
Covenant Not-to-Compete
As part of the Recapitalization, the Parent entered into a covenant
not-to-compete with a Company and Parent Director and former majority
stockholder. The Parent contributed this asset to the Company during 1998. The
Company has capitalized the $50.0 million paid in consideration for the covenant
not-to-compete and is amortizing this amount over the three-year term of the
covenant using an accelerated amortization method. Amortization expense was
approximately $32.5 million and $1.3 million in 1999 and 1998, respectively.
Management Agreement and Consulting Services
As part of the Recapitalization, the Parent and its subsidiaries (collectively,
the Group) entered into a management agreement with an affiliate of a
stockholder of the Parent to provide the Group with certain management services.
The Company is committed to pay an amount not to exceed $2.0 million per year on
an ongoing basis for management services as defined in the management agreement.
In addition to the management services, the Company engaged another affiliate to
provide consulting services during 1999. In 1999, the Company incurred $2.0
million for management services and $2.2 million for consulting services.
Furthermore, the Group must allow the affiliate to participate in the
negotiation and consummation of future senior financing and pay the affiliate a
fee, as defined in the management agreement.
8. Restructuring
In fiscal 1999, the Company recognized approximately $7.6 million in
restructuring charges comprised of staff reduction costs of $6.3 million and
exit cost liabilities of $1.3 million. The staff reduction costs were incurred
during the second, third and fourth quarters, in connection with the reduction
of 90 corporate and administrative employees. As of January 2, 2000, the Company
had paid $4.6 million of the staff reduction costs and management expects the
remaining amount to be paid during the first and second quarters of fiscal 2000.
The exit costs were recorded in the fourth quarter in connection with the
planned closure and relocation of 50 specifically identified corporate-owned
stores. The exit cost liability is comprised of the operating lease obligations
after the expected closure dates and related leased premises restoration costs.
As of January 2, 2000, no exit cost liabilities had been paid. Management
expects that the exit cost liabilities will be paid during fiscal 2000.
9. Segment Data
The Company has three reportable segments as determined by management using the
"management approach" as defined in SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information": (1) Domestic Stores, (2) Domestic
Distribution and (3) International. The Company's operations are organized by
management on the combined bases of line of business and geography. The Domestic
Stores segment includes Company operations with respect to all franchised and
Company-owned stores throughout the contiguous United States. The Domestic
Distribution segment includes the distribution of food, equipment and supplies
to franchised and Company-owned stores throughout the contiguous United States.
The International segment includes Company operations related to its franchising
business in foreign and non-contiguous United States markets and its food
distribution business in Canada, Alaska and Hawaii.
36
<PAGE>
The accounting policies of the reportable segments are the same as those
described in Note 1. The Company evaluates the performance of its segments and
allocates resources to them based on EBITDA.
The tables below summarize the financial information concerning the Company's
reportable segments for fiscal years 1999, 1998 and 1997. Intersegment Revenues
are comprised of sales of food, equipment and supplies from the Domestic
Distribution segment to the Company-owned stores in the Domestic Stores segment.
Intersegment sales prices are market based. The "Other" column as it relates to
EBITDA information below primarily includes corporate headquarter costs that
management does not allocate to any of the reportable segments and in 1998 and
1997 included a Company and Parent Director and former majority Parent
stockholder's salary and charitable contributions. The "Other" column as it
relates to capital expenditures primarily includes capitalized software and
leasehold improvements that management does not allocate to any of the
reportable segments. All amounts presented below are in thousands.
<TABLE>
<CAPTION>
Domestic Domestic Intersegment
Stores Distribution International Revenues Other Total
-------- ------------ ------------- ------------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues -
1999 $ 494,796 $ 704,970 $ 58,402 $ (101,529) $ - $ 1,156,639
1998 521,635 716,802 56,022 (117,681) - 1,176,778
1997 479,197 617,057 52,496 (103,960) - 1,044,790
EBITDA -
1999 136,842 29,302 10,458 - (45,547) 131,055
1998 121,890 17,972 8,685 - (53,585) 94,962
1997 106,831 15,496 8,617 - (47,804) 83,140
Capital Expenditures -
1999 15,898 5,319 985 - 10,245 32,447
1998 21,795 6,825 249 - 21,107 49,976
1997 26,474 7,322 511 - 11,105 45,412
</TABLE>
The following table reconciles total EBITDA above to consolidated income before
provision (benefit) for income taxes:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Total EBITDA $ 131,055 $ 94,962 $ 83,140
Depreciation and amortization (51,743) (23,123) (16,939)
Interest expense (74,116) (7,051) (3,980)
Interest income 992 730 447
Legal settlement expense indemnified
by a Parent stockholder (4,000) - -
Gain (loss) on sale of plant and equipment 316 (1,570) (1,197)
----------- ----------- ----------
Income before provision (benefit)
for income taxes $ 2,504 $ 63,948 $ 61,471
=========== =========== ==========
</TABLE>
The following table presents the Company's identifiable asset information for
fiscal years 1999 and 1998 and a reconciliation to total consolidated assets:
<TABLE>
<CAPTION>
1999 1998
--------------------------
<S> <C> <C>
Domestic Stores $ 139,119 $ 113,120
Domestic Distribution 58,949 60,948
----------- ------------
Contiguous United States 198,068 174,068
International 15,966 17,879
Unallocated Assets 167,096 195,944
----------- ------------
Total Consolidated Assets $ 381,130 $ 387,891
=========== ============
</TABLE>
37
<PAGE>
Unallocated assets include assets that management does not attribute to the
reportable segments above and primarily includes investments in marketable
securities, deferred financing costs, deferred income taxes, the covenant
not-to-compete obtained as part of the Recapitalization and capitalized
software.
No customer accounted for more than 10% of total consolidated revenues in the
fiscal years ended 1999, 1998 and 1997.
10. Periodic Financial Data
(Unaudited; in thousands)
The Company's convention with respect to reporting periodic financial data is
such that each of the first three periods consists of twelve weeks while the
last period presented consists of sixteen or seventeen weeks depending on the
number of weeks in the fiscal year (See Note 1).
<TABLE>
<CAPTION>
Sixteen
Twelve Weeks Ended Weeks Ended
------------------------------------------ -----------
March 28, June 20, September 12, January 2,
1999 1999 1999 2000
--------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $ 260,768 $ 256,112 $ 271,903 $ 367,856
Income (loss) before provision (benefit)
for income taxes 381 2,857(1) 1,432(2) (2,166)(3)
Net income (loss) 229 4,347(4) 754 (3,245)(5)
</TABLE>
<TABLE>
<CAPTION>
Seventeen
Twelve Weeks Ended Weeks Ended
----------------------------------------- -------------
March 22, June 14, September 6, January 3,
1998 1998 1998 1999
----------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $ 255,856 $ 262,302 $ 265,268 $ 393,352
Income before provision (benefit)
for income taxes 13,801 15,517 15,289 19,341
Net income 12,651 14,381 14,133 35,711(6)
</TABLE>
(1) Includes $1.6 million of restructuring charges.
(2) Includes $2.0 million of restructuring charges.
(3) Includes $4.0 million of restructuring charges and $5.0 million
relating to the settlement of a lawsuit subsequent to year end.
(4) Includes $2.9 million state tax reserve reversal, net of federal tax.
(5) Includes $1.0 million net tax provision resulting from S to C
Corporation conversion.
(6) Includes $17.9 million net tax benefit resulting from S to C
Corporation conversion and establishment of certain tax reserves.
38
<PAGE>
11. Pro Forma Financial Data
(Unaudited; In thousands)
The following unaudited pro forma financial data is presented to illustrate the
estimated effects on net income if the Company had not elected S Corporation
status for fiscal year 1997 and substantially all of fiscal year 1998.
Management estimates that the provision for income taxes would have increased
and net income would have decreased by approximately $36.8 million in 1998 and
approximately $25.4 million in 1997 had the Company remained a C Corporation for
those periods.
<TABLE>
<CAPTION>
1998 1998
Company Pro Forma 1998
Historical Adjustments Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Total revenues $ 1,176,778 $ - $ 1,176,778
Income before provision (benefit)
for income taxes 63,948 - 63,948
Provision (benefit) for
income taxes (12,928) 36,805 23,877
------------ ---------- ------------
Net income $ 76,876 $ (36,805) $ 40,071
============ ========== ============
Comprehensive income $ 76,365 $ (36,636) $ 39,729
============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
1997 1997
Company Pro Forma 1997
Historical Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
Total revenues $ 1,044,790 $ - $ 1,044,790
Income before provision (benefit)
for income taxes 61,471 - 61,471
Provision for income taxes 366 25,419 25,785
------------ --------- ------------
Net income $ 61,105 $ (25,419) $ 35,686
============ ========= ============
Comprehensive income $ 61,398 $ (25,568) $ 35,830
============ ========= ============
</TABLE>
12. Subsequent Event
In March, 2000, the Company settled a lawsuit that was outstanding at January 2,
2000 in which the Company agreed to pay the plaintiffs $5.0 million for a full
release of all related claims. This amount is recorded in general and
administrative expense in fiscal 1999. The Company recorded a related $1.8
million benefit for income taxes. Additionally, a Company and Parent
Director and former majority Parent stockholder agreed to indemnify the Parent
for $4.0 million. The Parent has agreed to contribute the $4.0 million to the
Company. The Company has recorded the $4.0 million as a capital contribution as
of January 2, 2000.
39
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding each
person who is a director or executive officer of TISM, Domino's and each of our
domestic subsidiaries.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David A. Brandon 47 Chairman, Chief Executive Officer and Director of TISM,
Domino's and Domino's Pizza
Harry J. Silverman 41 Chief Financial Officer, Executive Vice President, Finance
and Director of Domino's
Pizza; Vice President of
TISM and Domino's;
President and Director
of each of our domestic
subsidiaries other than
Domino's Pizza
Cheryl A. Bachelder 43 Executive Vice President, Marketing and Product
Development of Domino's Pizza
Patrick Kelly 47 Executive Vice President, Corporate of Domino's Pizza
Hoyt D. Jones, III 42 Executive Vice President, Franchise of Domino's Pizza
J. Patrick Doyle 36 Executive Vice President, International of Domino's Pizza
Michael D. Soignet 40 Executive Vice President, Distribution of Domino's Pizza
James G. Stansik 44 Executive Vice President, Special Assistant to the
Chairman and Chief Executive Officer of Domino's Pizza
Timothy J. Monteith 47 Chief Information Officer, Executive Vice President of
Domino's Pizza
Andrew B. Balson 33 Director of TISM and Domino's
Thomas S. Monaghan 62 Director of TISM and Domino's
Mark E. Nunnelly 41 Director of TISM and Domino's
Christopher C. Behrens 39 Director of TISM and Domino's
Robert M. Rosenberg 62 Director of TISM and Domino's
Robert F. White 44 Director of TISM and Domino's
</TABLE>
DAVID A. BRANDON has served as Chairman, Chief Executive Officer and
Director of TISM, Domino's and Domino's Pizza since March, 1999. Mr. Brandon was
President and Chief Executive Officer of Valassis Communications, Inc., a
company in the sales promotion and couponing industries, from 1991 to 1998 and
Chairman of the Board of Directors of Valassis Communications, Inc. from 1997 to
1998.
HARRY J. SILVERMAN has been Chief Financial Officer and Executive Vice
President of Finance for Domino's Pizza since 1993. Mr. Silverman has served as
Vice President of TISM and Domino's, as President and Director of each of our
domestic subsidiaries other than Domino's Pizza and as a Director of Domino's
Pizza since December, 1998. Mr. Silverman joined Domino's Pizza in 1985 as
Controller for the Chicago Regional Office. Mr. Silverman was named National
Operations Controller in 1988 and later Vice President of Finance for Domino's
Pizza. Prior to joining the Company, Mr. Silverman was employed by Grant
Thornton.
CHERYL A. BACHELDER joined Domino's Pizza in May, 1995 as Executive
Vice President of Marketing and Product Development, overseeing all marketing,
public relations, product development and quality assurance programs. Prior to
that time, Ms. Bachelder served as President of Bachelder & Associates, a
management consulting firm founded by Ms. Bachelder in 1992. From 1984 to 1992,
Ms. Bachelder served in various positions with the Nabisco Foods Group of RJR
Nabisco, Inc., including Vice President and General Manager of
40
<PAGE>
the LifeSavers Division from 1991 to 1992. From 1981 to 1984, Ms. Bachelder
worked in brand management at the PaperMate Division of The Gillette Company.
From 1978 to 1981, Ms. Bachelder held training and brand management posts at the
Procter & Gamble Company.
PATRICK KELLY has served as Executive Vice President of Corporate of
Domino's Pizza since November, 1994. Mr. Kelly joined Domino's Pizza in 1978 as
a manager trainee and has held various positions with the Company since that
time, including Vice President of Corporate and Franchise for the United States
Western and Eastern Regions, Vice President of International and Vice President
of Corporate in the Northern Region.
HOYT D. JONES, III has served as Executive Vice President of Franchise
of Domino's Pizza since December, 1999. Mr. Jones served as Regional Vice
President of Franchise Operations (Northeast) since August, 1992. Mr. Jones
joined Domino's Pizza in 1985 and has held various operations positions,
including Regional Vice President of the Western Region.
J. PATRICK DOYLE has been Executive Vice President of International for
Domino's Pizza since May 1999. Mr. Doyle served as Senior Vice President of
Marketing from the time he joined Domino's Pizza in 1997. During 1991 to 1997,
Mr. Doyle served as Vice President and General Manager at Gerber Products
Company for the U.S. baby food business and as Vice President and General
Manager of their Canadian subsidiary. From 1990-1991, Mr. Doyle was European
General Manager of InterVascular SA.
MICHAEL D. SOIGNET has been Executive Vice President of Distribution of
Domino's Pizza, overseeing United States and international commissary operations
and the Equipment & Supply Division of the Company since 1993. Mr. Soignet
joined the Company in 1981 and since then has held various positions, including
Distribution Center General Manager, Assistant to the DNC General Manager,
Region Manager, Distribution Vice President, and most recently Vice President of
Distribution Operations until his appointment to the executive team in 1993.
JAMES G. STANSIK has been Executive Vice President, Special Assistant
to the Chairman and Chief Executive Officer since August 1999. Prior to August
1999, Mr. Stansik has held various positions, including Senior Vice President of
Franchise Administration, Regional Vice President of Franchise Operations and
National Director of Franchise Operations. From August 1998 to December 1991, he
was Assistant to the President, and from November 1985 to August 1988, he was
the Director of Security for the Midwest area.
TIMOTHY J. MONTEITH has served as Chief Information Officer and
Executive Vice President of Domino's Pizza since October 1999. Mr. Monteith
served as the Senior Vice President of Information Services and Administration
of Domino's Pizza from 1992-1999. From 1988 to 1992, Mr. Monteith was the Chief
Operating Officer and Executive Vice President of Thomas S. Monaghan, Inc. Mr.
Monteith served as Vice President and then President of T and B Computing of Ann
Arbor, Michigan, from 1981 to 1988.
ANDREW B. BALSON has served as a Director of TISM and Domino's since
March, 1999. Mr. Balson has been a Principal of Bain Capital since June 1998 and
was an Associate at Bain Capital from 1996 to 1998. From 1994 to 1996, Mr.
Balson was a consultant at Bain & Company. Mr. Balson serves on the Board of
Managers of Anthony Crane Rental, L.P. and the Board of Directors of Stream
International, Inc.
THOMAS S. MONAGHAN founded Domino's Pizza in 1960 and served as its
President and Chief Executive Officer through July, 1989 and from December 6,
1991 to December 21, 1998. Mr. Monaghan now serves as a Director of TISM and
Domino's. Mr. Monaghan has served as a Director of TISM since 1960 and as a
Director of Domino's since February, 1999. Mr. Monaghan serves on the Board of
Directors of several private companies and non-profit organizations.
MARK E. NUNNELLY has served as a Director of TISM since December 21,
1998 and as a Director of Domino's since February, 1999. Mr. Nunnelly has been a
Managing Director of Bain Capital since 1990. Prior to that time, Mr. Nunnelly
was a Partner at Bain & Company, where he managed several relationships in the
manufacturing sector, and was employed by Procter & Gamble Company Inc. in
product management. Mr. Nunnelly serves on the Board of Directors of several
companies, including Stream International, Inc., The Learning Company and
DoubleClick, Inc.
41
<PAGE>
CHRISTOPHER C. BEHRENS became a Director of TISM and Domino's in
October, 1999. Mr. Behrens has been General Partner at Chase Capital Partners
since 1999. Prior to joining Chase Capital Partners, Mr. Behrens served as Vice
President in Chase's Merchant Banking Group. Mr. Behrens serves on the Board of
Directors of several companies, including Dynamic Details, Patina Oil & Gas, and
Portola Packaging as well as a number of private companies.
ROBERT M. ROSENBERG has served as a Director of TISM and Domino's since
April, 1999. Mr. Rosenberg has been President and Chief Executive Officer of
Allied Domecq Retailing, USA since 1993. Allied Domecq Retailing, USA is
comprised of Dunkin' Donuts, Baskin-Robbins and Togo's Eateries. Mr. Rosenberg
also serves on the Board of Directors of Allied Domecq Retailing, Ltd of England
and Sonic Industries.
ROBERT F. WHITE has served as a Director of TISM since December 21,
1998 and as a Director of Domino's since February, 1999. Mr. White joined Bain
Capital at its inception in 1984. He has been a Managing Director since 1985.
Mr. White has served as the Chief Financial Officer and a founder of MediVision,
a medical services company founded and financed by Bain Capital. Prior to
joining Bain Capital, Mr. White was a Manager at Bain & Company and a Senior
Accountant with Price Waterhouse LLP. Mr. White serves on the Board of Directors
of totes/Isotoner Inc., Brookstone, Inc., Corporate Software & Technologies Int.
Inc., Stream International, Inc. and Modus Media International Inc.
All directors of TISM and Domino's serve until a successor is duly
elected and qualified or until the earlier of his or her death, resignation or
removal. There are no family relationships between any of the directors or
executive officers of TISM or Domino's. The executive officers of TISM and
Domino's are elected by and serve at the discretion of their respective Boards
of Directors.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information concerning the compensation
for the fiscal year ended January 2, 2000 of David A. Brandon, the Chairman and
Chief Executive Officer of TISM, and the four other most highly compensated
executive officers of TISM and its consolidated subsidiaries (collectively, the
"Named Executive Officers").
42
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS(3) COMPENSATION(4)
- ------------------ ---- ------ -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David A. Brandon - 1999 $ 475,385 $ 712,500 $ 22 1,512,516 $ 842
Chairman and Chief
Executive Officer (5)
Cheryl A. Bachelder 1999 282,801 332,856 89 600,000 38,477
Executive Vice 1998 287,300 1,805,657 1,103 - 49,173
President, Marketing
And Product Development
Harry J. Silverman 1999 264,373 311,167 115 550,000 41,599
Chief Financial 1998 268,578 3,076,538 866 111,111 55,656
Officer, Executive
Vice President
Patrick Kelly 1999 255,322 300,514 60 250,000 6,205
Executive Vice 1998 259,720 1,793,547 1,860 166,667 3,403
President, Corporate
Operations
Michael D. Soignet 1999 242,637 285,305 127 500,000 37,606
Executive Vice 1998 246,496 1,832,497 912 111,111 59,276
President, Distribution
</TABLE>
(1) These amounts for 1998 include bonuses of $1,637,697 for Ms. Bachelder,
Mr. Kelly and Mr. Soignet under bonus agreements entered into with each
person and $2,851,078 under a bonus agreement entered into with Mr.
Silverman. Ms. Bachelder received her entire bonus at the closing of
the recapitalization. Messrs. Silverman, Kelly and Soignet received a
portion of their bonuses in cash at the closing of the
recapitalization, and the receipt of the remaining portion of each
other bonus was deferred under the Senior Executive Deferred Bonus
Plan. See "Senior Executive Deferred Bonus Plan."
(2) These amounts include reimbursements during the fiscal year for the
payment of taxes related to insurance premiums paid on behalf of the
Named Executive Officers.
(3) The options are for the purchase of common stock of TISM.
(4) These amounts represent matching funds contributed by us pursuant to
our deferred compensation plan and 401(k) plan and term life insurance
premiums paid by the Company for the benefit of the Named Executive
Officers.
(5) Mr. Brandon was elected Chairman and Chief Executive Officer on March
31, 1999.
43
<PAGE>
OPTION GRANTS
The table below sets forth information for the Named Executive Officers
with respect to grants of stock options of TISM during the fiscal year ended
January 2, 2000.
Option Grants in Fiscal 1999
<TABLE>
<CAPTION>
Potential Realizable Value
Individual Grants At Assumed Rates Of Stock
% Of Total Price Appreciation
Number Of Securities Options For Option Term (3)
Underlying Options(1) To Employees(2) Exercise Price Expiration
Name ($/Share) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
David A. Brandon 1,512,516 27.5% $ .50 3/31/09 $1,231,865 $1,961,538
Chairman and Chief
Executive Officer
Cheryl A. Bachelder 600,000 10.9% .50 12/14/09 488,668 778,123
Executive Vice
President, Marketing and
Product Development
Harry J. Silverman 550,000 10.0% .50 12/14/09 447,946 713,279
Chief Financial
Officer, Executive
Vice President
Patrick Kelly 250,000 4.5% .50 12/14/09 203,612 324,218
Executive Vice
President, Corporate
Operations
Michael D. Soignet 500,000 9.1% .50 12/14/09 407,224 648,436
Executive Vice President,
Distribution
</TABLE>
(1) These represent options to purchase shares of Class A Common
Stock of TISM.
(2) This represents the percentage of total options granted to
employees to purchase shares of Class A Common Stock.
(3) Amounts reported in these columns represent amounts that may
be realized upon exercise of the options immediately prior to the expiration of
their term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the common stock on the date of option grant over the ten
year term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not reflect our
estimate of future stock price growth. Actual gains, if any, on stock option
exercises are dependent on the timing of such exercise and the future
performance of the common stock. There can be no assurance that the rates of
appreciation assumed in this table can be achieved or that the amounts reflected
will be received by the individuals.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information concerning the
number and value of unexercised stock options of TISM held by each of the Named
Executive Officers as of January 2, 2000.
<PAGE>
FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NAME OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
(#) (#) ($) ($)
<S> <C> <C> <C> <C>
David A. Brandon 151,252 1,361,264 - -
Cheryl A. Bachelder 120,000 480,000 - -
Harry J. Silverman 121,111 440,000 - -
Patrick Kelly 66,667 200,000 - -
Michael D. Soignet 111,111 400,000 - -
</TABLE>
(1) There was no public trading market for the common stock of TISM as of
January 2, 2000. Accordingly, these values have been calculated on the
basis of the fair market value of such securities on January 2, 2000,
less the applicable exercise price.
COMPENSATION OF DIRECTORS
TISM and Domino's reimburse members of the board of directors for any
out-of-pocket expenses incurred by them in connection with services provided in
such capacity. In addition, TISM and Domino's may compensate independent members
of the board of directors for services provided in such capacity. In April 1999,
Mr. Rosenberg, an independent Director, was granted a stock option for 55,555
shares of Class A Common Stock of TISM.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
Consulting Agreement with Thomas S. Monaghan
In connection with the closing of the recapitalization, Mr. Monaghan
entered into a Consulting Agreement with Domino's Pizza. The Consulting
Agreement has a term of ten years, is terminable by either Domino's Pizza or Mr.
Monaghan upon thirty days prior written notice, and may be extended or renewed
by written agreement. Under the Consulting Agreement, Mr. Monaghan may be
required to make himself available to Domino's Pizza on a limited basis. Mr.
Monaghan will receive a retainer of $1 million for the first twelve months of
the agreement and $0.5 million per year for the remainder of the term of the
agreement. If we terminate the agreement for any reason, we are required to
remit to Mr. Monaghan a lump sum payment within thirty days of the termination
of the agreement in the full amount of the retainer payable for the remainder of
the term of the Consulting Agreement. As a consultant, Mr. Monaghan is entitled
to reimbursement of travel and other expenses incurred in performance of his
duties but is not entitled to participate in any of our employee benefit plans
or other benefits or conditions of employment available to our employees.
Employment Agreements
Mr. Brandon is employed as Chief Executive Officer and Chairman of the
Board of Directors of TISM, Domino's, and Domino's Pizza pursuant to an
Employment Agreement. Under the Employment Agreement, Mr. Brandon is entitled to
receive an annual salary of $600,000 and is eligible for an annual bonus based
on achievement of performance objectives. If Mr. Brandon is terminated other
than for cause or resigns voluntarily for good reason, he is entitled to receive
continued salary for two years. If Mr. Brandon's employment is terminated by
reason of physical or mental disability, he is entitled to receive continued
salary less the amount of disability income benefits received by him and
continued coverage under group medical plans for eighteen months. Mr. Brandon is
subject to certain non-competition, non-solicitation and confidentiality
provisions.
45
<PAGE>
Each of the Named Executive Officers other than Mr. Brandon is employed
by Domino's Pizza pursuant to a written Employment Agreement. The stated term of
the Employment Agreement with Ms. Bachelder concludes December 31, 2003, with
Mr. Silverman concludes June 30, 2003, with Mr. Soignet concludes December 31,
2002, and with Mr. Kelly concludes December 31, 2001. Under each Employment
Agreement, the Named Executive Officer is entitled to receive an annual salary.
Ms. Bachelder's annual salary is $330,000, Mr. Silverman's annual salary is
$310,000, Mr. Soignet's annual salary is $285,000, and Mr. Kelly's annual salary
is $275,000. Each of the above Named Executive officers is also eligible to
receive an annual formula bonus based on achievement of performance objectives
and a discretionary bonus.
If the employment of any of the above Named Executive Officers is
terminated other than for cause or resigns voluntarily for good reason, the
affected Named Executive Officer is entitled continue to receive his or her
salary for the remainder of the stated term. If the employment of any of the
above Named Executive Officers is terminated by reason of physical or mental
disability, he or she is entitled to receive continued salary less the amount of
disability income benefits received by him or her and continued coverage under
group medical plans for eighteen months. Each of the Named Executive Officers is
subject to certain non-competition, non-solicitation and confidentiality
provisions. The Employment Agreements with the above Named Executive Officers
provides for the waiver of any and all rights and benefits to which he or she
was entitled under the August 4, 1998 Severance Agreements to which each of the
above Named Executive Officers and Domino's Pizza are party and expressly
provides for the termination of such Severance Agreements.
Deferred Compensation Plan
Domino's Pizza has adopted a Deferred Compensation Plan for the benefit
of certain of its executive and managerial employees, including certain of the
Named Executive Officers. Under the Deferred Compensation Plan, eligible
employees are permitted to defer up to 40% of their compensation. In 1999,
Domino's Pizza was required to match 30% of the amount deferred by a participant
under the plan with respect to the first 15%, 20% or 25% of the participant's
compensation, depending on the employee. In addition, in 1999, Domino's Pizza
made a supplemental contribution, in addition to the matching contribution, of
10% of the deferred amounts. In December 1999, we amended the plan to eliminate
the matching requirement and the supplemental contribution beginning in fiscal
2000. The amounts under the plan are required to be paid out upon termination of
employment or a change in control of Domino's Pizza.
Senior Executive Deferred Bonus Plan
Prior to the recapitalization, Domino's Pizza entered into bonus
agreements with Messrs. Silverman, Soignet and Kelly. The bonus agreements, as
amended, provided for bonus payments, a portion of which were payable in cash
upon the closing of the recapitalization and a portion of which were deferred
under the Senior Executive Deferred Bonus Plan. Domino's Pizza adopted a Senior
Executive Deferred Bonus Plan, effective December 21, 1998, which established
deferred bonus accounts for the benefit of the three executives listed above.
Domino's Pizza must pay the deferred amounts in each account to the respective
executive upon the earlier of (i) a change of control, (ii) a qualified public
offering, (iii) the cancellation or forfeiture of stock options held by such
executive or (iv) ten years and 180 days after December 21, 1998. If the board
of directors of Domino's Pizza terminates the plan, it may pay the amounts in
the deferred bonus accounts to the participating executives at that time or make
the payments as if the plan had continued to be in effect.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a compensation committee. Compensation
decisions for fiscal 1999 regarding the Company's executive officers were made
by Mr. Brandon and the Board of Directors.
46
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
All of Domino's issued and outstanding common stock is owned by TISM.
The issued and outstanding capital stock of TISM consists of (i) 50,238,738
shares of Class A Common Stock, of which 9,641,874 shares are of Class A-1
Common Stock, par value $0.001 per share, 9,866,633 shares are Class A-2 Common
Stock, par value $0.001 per share, and 30,730,231 shares are Class A-3 Common
Stock, par value $0.001 per share, (ii) 5,543,194 shares of Class L Common
Stock, par value $0.001 per share, and (iii) 1,003,817 shares of 11.5%
Cumulative Preferred Stock. The three classes of Class A Common Stock have
different rights with respect to the election of members of the Board of
Directors. The shares of Class A-1 Common Stock entitle the holder to one vote
per share on all matters to be voted upon by the stockholders of TISM. The
shares of Class A-2 Common Stock and Class A-3 Common Stock are non-voting. The
Class L Common Stock is identical to the Class A Common Stock except that the
Class L Common Stock is nonvoting and is entitled to a preference over the Class
A Common Stock, with respect to any distribution by TISM to holders of its
capital stock, equal to the original cost of such share plus an amount which
accrues at a rate of 12% per annum, compounded quarterly. The Class L Common
Stock is convertible upon an initial public offering, or certain other
dispositions, of TISM into Class A Common Stock upon a vote of the board of
directors of TISM. The Cumulative Preferred Stock has no voting rights except as
required by law.
The following table sets forth certain information as of March 1, 2000
regarding the approximate beneficial ownership of (i) each person known to TISM
to own more than five percent of the outstanding voting securities of TISM and
(ii) the voting securities of TISM held by each Director of TISM, each Named
Executive Officer and all of such Directors and Named Executive Officers as a
group. Unless otherwise noted, to our knowledge, each of such stockholders has
sole voting and investment power as to the shares shown. Unless otherwise
indicated, the address of each Director and Named Executive Officer is 30 Frank
Lloyd Wright Drive, Ann Arbor, MI 48106.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
-------------------------
NAME AND ADDRESS VOTING SECURITIES
- ---------------- -----------------
PRINCIPAL STOCKHOLDERS:
<S> <C>
Bain Capital Funds (1) 49.0%
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
David A. Brandon*+ --
Cheryl A. Bachelder* --
Harry J. Silverman* --
Patrick Kelly* --
Michael D. Soignet* --
Andrew B. Balson+(2) **
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Thomas S. Monaghan+(3) 36.3%
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Mark E. Nunnelly+(4) 2.6%
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Christopher C. Behrens+(5) 4.9%
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10017
Robert F. White+(6) 2.6%
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Robert M. Rosenberg+ --
All Directors and Named Executive 44.2%
Officers as a Group (10 Persons)
</TABLE>
+ Director
* Named Executive Officer
** Less than one percent.
(1) Consists of (i) 1,849,036 shares of Class A-1 Common Stock owned by
Bain Capital Fund VI, L.P. ("Fund VI"), whose sole general partner is
Bain Capital Partners VI, L.P., whose sole general partner is Bain
Capital Investors VI, Inc., a Delaware corporation wholly owned by W.
Mitt Romney, (ii) 2,104,694 shares of Class A-1 Common Stock owned by
Bain Capital VI Coinvestment Fund ("Coinvest Fund"), whose sole general
partner is Bain Capital Partners VI, L.P., whose sole general partner
is Bain Capital Investors VI, Inc., a Delaware corporation wholly owned
by W. Mitt Romney, (iii) 385,675 shares of Class A-1 Common Stock owned
by Sankaty High Yield Asset Partners, L.P. ("Sankaty"), whose sole
general partner is Sankaty High Yield Asset Investors, LLC, whose
managing member is Sankaty High Yield Asset Investors, Ltd., a Bermuda
corporation wholly owned by W. Mitt Romney, (iv) 96,419 shares of Class
A-1 Common Stock owned by Brookside Capital Partners Fund, L.P.
("Brookside"), whose sole general partner is Brookside Capital
Investors, L.P., whose sole general partner is Brookside Capital
Investors, Inc., a Delaware corporation wholly owned by W. Mitt Romney,
(v) 6,164 shares of Class A-1 Common Stock owned by PEP Investments PTY
Ltd. ("PEP"), whose controlling persons are Timothy J. Sims, Richard J.
Gardell, Simon D. Pillar and Paul J. McCullagh, (vi) 161,215 shares of
Class A-1 Common Stock owned by BCIP Associates II ("BCIP II"), whose
managing partner is Bain Capital, Inc., a Delaware corporation wholly
owned by W. Mitt Romney, (vii) 34,702 shares of Class A-1 Common Stock
owned by BCIP Trust Associates II, L.P.("BCIP Trust II"), whose general
partner is Bain Capital, Inc., a Delaware corporation wholly owned by
W. Mitt Romney, (viii) 26,043 shares of Class A-1 Common Stock owned by
BCIP Associates II-B ("BCIP II-B"), whose managing partner is Bain
Capital, Inc., a Delaware corporation wholly owned by W. Mitt Romney,
(ix) 10,221 shares of Class A-1 Common Stock owned by BCIP Trust
Associates II-B, L.P. ("BCIP Trust II-B"), whose general partner is
Bain Capital, Inc., a Delaware corporation wholly owned by W. Mitt
Romney, and (x) 50,349 shares of Class A-1 Common Stock owned by BCIP
Associates II-C ("BCIP II-C" and collectively with BCIP II, BCIP Trust
II, BCIP II-B and BCIP Trust II-B, the "BCIPs" and the BCIPs, Fund VI,
Coinvest Fund, Sankaty, Brookside and PEP, collectively, the "Bain
Capital funds"), whose managing partner is Bain Capital, Inc., a
Delaware corporation wholly owned by W. Mitt Romney.
(2) Consists of (i) 26,043 shares of Class A-1 Common Stock owned by BCIP
II-B, a Delaware general partnership of which Mr. Balson is a general
partner, and (ii) 10,221 shares of Class A-1 Common Stock owned by BCIP
Trust II-B, a Delaware limited partnership of which Mr. Balson is a
general partner. Mr. Balson disclaims beneficial ownership of any such
shares in which he does not have a pecuniary interest.
(3) Includes shares of Class A-1 Common Stock owned by Mrs. Monaghan.
48
<PAGE>
(4) Consists of (i) 161,215 shares of Class A-1 Common Stock owned by BCIP
II, a Delaware general partnership of which Mr. Nunnelly is a general
partner, (ii) 34,702 shares of Class A-1 Common Stock owned by BCIP
Trust II, a Delaware limited partnership of which Mr. Nunnelly is a
general partner, (iii) 50,349 shares of Class A-1 Common Stock owned by
BCIP II-C, a Delaware general partnership of which Mr. Nunnelly is a
general partner, and (iv) 6,164 shares of Class A-1 Common Stock owned
by PEP, a New South Wales limited company for which Mr. Nunnelly has a
power of attorney. Mr. Nunnelly disclaims beneficial ownership of any
such shares in which he does not have a pecuniary interest.
(5) Mr. Behrens is a principal of Chase Capital Partners, the general
partner of Chase Equity Associates, L.P. Accordingly, Mr. Behrens may
be deemed to beneficially own shares beneficially owned by Chase
Capital Partners. Mr. Behrens disclaims beneficial ownership of any
such shares in which he does not have a pecuniary interest.
(6) Consists of (i) 161,215 shares of Class A-1 Common Stock owned by BCIP
II, a Delaware general partnership of which Mr. White is a general
partner, (ii) 34,702 shares of Class A-1 Common Stock owned by BCIP
Trust II, a Delaware limited partnership of which Mr. White is a
general partner, (iii) 50,349 shares of Class A-1 Common Stock owned by
BCIP II-C, a Delaware general partnership of which Mr. White is a
general partner, and (iv) 6,164 shares of Class A-1 Common Stock owned
by PEP, a New South Wales limited company for which Mr. White has a
power of attorney. Mr. White disclaims beneficial ownership of any such
shares in which he does not have a pecuniary interest.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
STOCKHOLDERS AGREEMENT
In connection with the recapitalization, TISM, certain of its
subsidiaries, including the Company, and all of the equity holders of TISM
(including the Bain Capital funds), entered into a stockholders agreement that,
among other things, provides for tag-along rights, drag-along rights,
registration rights, restrictions on the transfer of shares held by parties to
the stockholders agreement and certain preemptive rights for certain
stockholders. Under the terms of the stockholders agreement, the approval of the
Bain Capital funds will be required for TISM, its subsidiaries, including the
Company, and its stockholders to take various specified actions, including major
corporate transactions such as a sale or initial public offering, acquisitions,
divestitures, financings, recapitalizations and mergers, as well as other
actions such as hiring and firing senior managers, setting management
compensation and establishing capital and operating budgets and business plans.
Pursuant to the stockholders agreement and TISM's Articles of Incorporation, the
Bain Capital funds have the power to elect up to half of the Board of Directors
of TISM. The stockholders agreement includes customary indemnification
provisions in favor of controlling persons against liabilities under the
Securities Act.
MANAGEMENT AGREEMENT
In connection with the recapitalization, TISM and certain of its direct
and indirect subsidiaries entered into a management agreement with Bain Capital
Partners VI, L.P. pursuant to which it provides financial, management and
operation consulting services. In exchange for such services, Bain Capital
Partners VI, L.P. is entitled to an annual management fee of $2 million plus the
reasonable out-of-pocket expenses of Bain Capital Partners VI, L.P. and its
affiliates. In addition, in exchange for assisting the Company in negotiating
the senior financing for any recapitalization, acquisition or other similar
transaction, Bain Capital Partners VI, L.P. is entitled to a transaction fee
equal to 1% of the gross purchase price, including assumed liabilities, for such
transaction, irrespective of whether such senior financing is actually committed
or drawn upon. In connection with the recapitalization, Bain Capital Partners
VI, L.P. received a fee of $11.75 million. The management agreement will
continue in effect as long as Bain Capital Partners VI, L.P. continues to
provide such services. The management agreement, however, may be terminated (i)
by mutual consent of the parties, (ii) by either party following a material
breach of the management agreement by the other party and the failure of such
other party to cure the breach within thirty days of written notice of such
breach or (iii) by Bain Capital Partners VI, L.P. upon sixty days written
notice. The management agreement includes customary indemnification provisions
in favor of Bain Capital Partners VI, L.P. and its affiliates.
49
<PAGE>
LEASE AGREEMENT
In connection with the recapitalization, Domino's entered into a new
lease agreement with Domino's Farms Office Park Limited Partnership with respect
to its executive offices, world headquarters and Michigan distribution center.
The lease provides for lease payments of $4.3 million in the first year,
increasing annually to approximately $4.7 million in the fifth year. Thomas
Monaghan, who is a director of TISM and Domino's, is the ultimate general
partner of Domino's Farms Office Park Limited Partnership. We believe that this
lease is on terms no less favorable than are obtainable from unrelated third
parties.
PURCHASES BY AFFILIATES
In 1998, one or more of the Bain Capital funds purchased $30 million in
aggregate principal amount of the Tranche B and Tranche C senior credit
facilities at a discount of 2%, $20 million in aggregate principal amount of the
Notes at a discount of 3% and $70.2 million of the Cumulative Preferred Stock of
TISM at the liquidation preference less a discount of 3.5%. During 1999, their
holdings in Tranche B and Tranche C were reduced to $12.9 million.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K.
(A) 1. Financial Statements: The following financial statements of Domino's,
Inc. are included in Item 8, "Financial Statements and Supplementary
Data":
Report of Independent Auditors
Consolidated Balance Sheets as of January 2, 2000 and January 3, 1999
Consolidated Statements of Income for the Years Ended January 2,
2000, January 3, 1999 and December 28, 1997
Consolidated Statements of Comprehensive Income for the Years
Ended January 2, 2000, January 3, 1999 and December 28, 1997
Consolidated Statements of Stockholders' Equity (Deficit) for the
Years Ended January 2, 2000, January 3, 1999 and December
28, 1997
Consolidated Statements of Cash Flows for the Years Ended January
2, 2000, January 3, 1999 and December 28, 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedules: The following financial statement schedule
is attached to this report.
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, not required,
or the information is included in the financial statements or the notes thereto.
3. Exhibits: Certain of the following Exhibits have been previously filed
with the Securities and Exchange Commission pursuant to the requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934. Such exhibits
are identified by the parenthetical references following the listing of each
such exhibit and are incorporated herein by reference.
Exhibit
Number Description
2.1 Agreement and Plan of Merger dated as of September 25, 1998 (Form
S-4 Registration Statement filed March 22, 1999).
50
<PAGE>
2.2 Amendment No. 1 to Agreement and Plan of Merger dated as of
November 24, 1998 (Form S-4 Registration Statement filed March 22,
1999).
2.3 Amendment No. 2 to Agreement and Plan of Merger dated as of
November 24, 1998 (Form S-4 Registration Statement filed March 22,
1999).
2.4 Amendment No. 3 to Agreement and Plan of Merger dated December 18,
1998 (Form S-4 Registration Statement filed March 22, 1999).
3.1 Domino's, Inc. Amended and Restated Certificate of Incorporation
(Form S-4 Registration Statement filed March 22, 1999).
3.2 Domino's, Inc. Amended and Restated By-Laws (Form S-4 Registration
Statement filed March 22, 1999).
3.3 Domino's Pizza, Inc. Restated Articles of Incorporation (Form S-4
Registration Statement filed March 22, 1999).
3.4 Domino's Pizza, Inc. By-Laws (Form S-4 Registration Statement
filed March 22, 1999).
3.5 Domino's Pizza PMC, Inc. Articles of Incorporation.
3.6 Domino's Pizza PMC, Inc. By-Laws.
3.7 Domino's Franchise Holding Co. Articles of Incorporation (Form S-4
Registration Statement filed March 22, 1999).
3.8 Domino's Franchise Holding Co. By-Laws (Form S-4 Registration
Statement filed March 22, 1999).
3.9 Domino's Pizza International, Inc. Amended and Restated
Certificate of Incorporation (Form S-4 Registration Statement
filed March 22, 1999).
3.10 Domino's Pizza International, Inc. Amended and Restated By-Laws
(Form S-4 Registration Statement filed March 22, 1999).
3.11 Domino's Pizza International Payroll Services, Inc. Articles of
Incorporation (Form S-4 Registration Statement filed March 22,
1999).
3.12 Domino's Pizza International Payroll Services, Inc. By-Laws (Form
S-4 Registration Statement filed March 22, 1999).
3.13 Domino's Pizza-Government Services Division, Inc. Articles of
Incorporation (Form S-4 Registration Statement filed March 22,
1999).
3.14 Domino's Pizza-Government Services Division, Inc. By-Laws (Form
S-4 Registration Statement filed March 22, 1999).
3.15 Domino's Pizza LLC Articles of Oganization.
3.16 Domino's Pizza LLC By-laws.
3.17 DP CA COMM, Inc. Articles of Incorporation.
3.18 DP CA COMM, Inc. By-laws.
51
<PAGE>
3.19 DP CA CORP, Inc. Articles of Incorporation.
3.20 DP CA CORP, Inc. By-laws.
3.21 Domino's Pizza California LLC Articles of Organization.
3.22 Domino's Pizza California LLC Operating Agreement.
3.23 Domino's Pizza NS Co. Articles of Association.
4.1 Indenture dated as of December 21, 1998 by and among Domino's
Inc., Domino's Pizza, Inc., Metro Detroit Pizza, Bluefence, Inc.,
Domino's Pizza International, Inc., Domino's Pizza International
Payroll Services, Inc., Domino's Pizza-Government Services
Division, Inc. and IBJ Schroder Bank and Trust Company (Form S-4
Registration Statement filed March 22, 1999).
4.2 Registration Rights Agreement dated as of December 21, 1998 by and
among Domino's, Inc., Domino's Pizza, Inc., Metro Detroit Pizza,
Inc., Bluefence, Inc., Domino's Pizza International, Inc.,
Domino's Pizza International Payroll Services, Inc., Domino's
Pizza-Government Services Division, Inc., J.P. Morgan Securities,
Inc. and Goldman, Sachs & Co (Form S-4 Registration Statement
filed March 22, 1999).
10.1 Amended and Restated Purchase Agreement dated December 21, 1998 by
and among Domino's Inc., Domino's Pizza, Inc., Metro Detroit
Pizza, Inc., Bluefence, Inc., Domino's Pizza International, Inc.,
Domino's Pizza International Payroll Services, Inc., Domino's
Pizza-Government Services Division, Inc., J.P. Morgan Securities,
Inc. and Goldman, Sachs & Co (Form S-4 Registration Statement
filed March 22, 1999).
10.2 Consulting Agreement dated December 21, 1998 by and between
Domino's Pizza, Inc. and Thomas S. Monaghan (Form S-4 Registration
Statement filed March 22, 1999).
10.3 Lease Agreement dated as of December 21, 1998 by and between
Domino's Farms Office Park Limited Partnership and Domino's Pizza,
Inc (Form S-4 Registration Statement filed March 22, 1999).
10.4 Management Agreement by and among TISM, Inc., each of its direct
and indirect subsidiaries and Bain Capital Partners VI, L.P (Form
S-4 Registration Statement filed March 22, 1999).
10.5 Stockholders Agreement dated as of December 21, 1998 by and among
TISM, Inc., Domino's, Inc., Bain Capital Fund VI, L.P., Bain
Capital VI Coinvestment Fund, L.P., BCIP, PEP Investments PTY
Ltd., Sankaty High Yield Asset Partners, L.P., Brookside Capital
Partners Fund, L.P., RGIP, LLC, DP Investors I, LLC, DP Investors
II, LLC, J.P. Morgan Capital Corporation, Sixty Wall Street Fund,
L.P., DP Transitory Corporation, Thomas S. Monaghan, individually
and in his capacity as trustee, and Marjorie Monaghan,
individually and in her capacity as trustee, Harry J. Silverman,
Michael D. Soignet, Stuart K. Mathis, Patrick Kelly, Gary M.
McCausland and Cheryl Bachelder (Form S-4 Registration Statement
filed March 22, 1999).
10.6 Senior Executive Deferred Bonus Plan of Domino's, Inc. dated as of
December 21, 1998 (Form S-4 Registration Statement filed March 22,
1999).
10.7 Domino's Pizza, Inc. Deferred Compensation Plan adopted effective
January 4, 1999 (Form S-4 Registration Statement filed March 22,
1999).
10.8 Domino's Pizza, Inc. Amendment to the Deferred Compensation Plan.
52
<PAGE>
10.9 Employment Agreement dated as of December 14, 1999 by and among
Harry Silverman and Domino's Pizza, Inc.
10.10 Employment Agreement dated as of December 14, 1999 by and among
Cheryl Bachelder and Domino's Pizza, Inc.
10.11 Employment Agreement dated as of December 14, 1999 by and among
James Stansik and Domino's Pizza, Inc.
10.12 Employment Agreement dated as of December 14, 1999 by and among
Michael Soignet and Domino's Pizza, Inc.
10.13 Employment Agreement dated as of December 14, 1999 by and among
Hoyt Jones and Domino's Pizza, Inc.
10.14 Employment Agreement dated as of December 14, 1999 by and among J.
Patrick Doyle and Domino's Pizza, Inc.
10.15 Credit Agreement dated as of December 21, 1998 by and among
Domino's, Inc., Bluefence, Inc., J.P. Morgan Securities, Inc.,
Morgan Guaranty Trust Company of New York, Bank One and Comerica
Bank (Form S-4 Registration Statement filed March 22, 1999).
10.16 Borrower Pledge Agreement dated as of December 21, 1998 by and
among Domino's, Inc., Bluefence, Inc. and Morgan Guaranty Trust
Company of New York, as Collateral Agent (Form S-4 Registration
Statement filed March 22, 1999).
10.17 Subsidiary Pledge Agreement dated as of December 21, 1998 by and
among Domino's Pizza, Inc., Metro Detroit Pizza, Inc., Domino's
Pizza International, Inc., Domino's Pizza International Payroll
Services, Inc., Domino's Pizza-Government Services Division, Inc.
and Morgan Guaranty Trust Company of New York, as Collateral Agent
(Form S-4 Registration Statement filed March 22, 1999).
10.18 Borrower Security Agreement dated as of December 21, 1998 by and
among Domino's, Inc., Bluefence, Inc. and Morgan Guaranty Trust
Company of New York, as Collateral Agent (Form S-4 Registration
Statement filed March 22, 1999).
10.19 Subsidiary Security Agreement dated as of December 21, 1998 by and
among Domino's Pizza, Inc., Metro Detroit Pizza, Inc., Domino's
Pizza International, Inc., Domino's Pizza International Payroll
Services, Inc., Domino's Pizza-Government Services Division, Inc.
and Morgan Guaranty Trust Company of New York, as Collateral Agent
(Form S-4 Registration Statement filed March 22, 1999).
10.20 Collateral Account Agreement dated as of December 21, 1998 by and
among Domino's, Inc., Bluefence, Inc. and Morgan Guaranty Trust
Company of New York, as Collateral Agent (Form S-4 Registration
Statement filed March 22, 1999).
10.21 Employment Agreement dated as of March 31, 1999 by and among David
A. Brandon and TISM, Inc., Domino's Inc. and Domino's Pizza, Inc.
(Form S-4 Registration Statement filed March 22, 1999).
10.22 Employment Agreement dated as of January 2, 2000 by and among
Patrick Kelly and Domino's Pizza, Inc.
10.23 TISM, Inc. Third Amended and Restated Stock Option Plan.
53
<PAGE>
27.1 Financial Data Schedule
99.1 Risk Factors.
- -------------
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the fourth quarter of the year
ended January 2, 2000.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
No annual report has been sent to security holders covering the
registrant's last fiscal year and no proxy materials have been sent to more than
10 of the registrant's security holders during the registrant's last fiscal
year.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DOMINO'S, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
Balance *Additions Balance
Beginning Provision Deductions Translation End of
of Year (Benefit) from Reserves Adjustments Year
--------- --------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts receivable
1999 2,794 876 (1,213) (13) 2,444
1998 3,978 174 (1,362) 4 2,794
1997 5,223 904 (2,128) (21) 3,978
Allowance for doubtful notes receivable
1999 3,165 1,066 (694) - 3,537
1998 5,708 (3,386) 837 6 3,165
1997 5,725 227 (222) (22) 5,708
</TABLE>
- -----------------
*Consists primarily of write-offs and recoveries of bad debts
54
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
Township of Ann Arbor, State of Michigan on the 27th day of March, 2000.
DOMINO'S, INC.
/s/ Harry J. Silverman
-----------------------
Harry J. Silverman
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 27, 2000.
/s/ David A. Brandon Chairman, CEO and Director
- ------------------------------------- (Principal Executive Officer)
David A. Brandon
/s/ Harry J. Silverman Chief Financial Officer
- ------------------------------------- (Principal Financial and Accounting
Harry J. Silverman Officer)
/s/ Andrew B. Balson
- -------------------------------------
Andrew B. Balson Director
/s/ Thomas S. Monaghan
- -------------------------------------
Thomas S. Monaghan Director
/s/ Mark E. Nunnelly
- -------------------------------------
Mark E. Nunnelly Director
/s/ Christopher Behrens
- -------------------------------------
Christopher Behrens Director
/s/ Robert M. Rosenberg
- -------------------------------------
Robert M. Rosenberg Director
/s/ Robert F. White
- -------------------------------------
Robert F. White Director
55
<PAGE>
EXHIBIT 3.5
[MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES LOGO]
This is to Certify That
DOMINO'S PIZZA PMC, INC.
was validly incorporated on July 29, 1999, as a Michigan profit corporation, and
said corporation is validly in existence under the laws of this State.
This certificate is issued to attest to the fact that the corporation is in
good standing in this office as of this date and is duly authorized to transact
business or conduct affairs in Michigan and for no other purpose. It is in the
usual form, made by me as the proper officer, and is entitled to have full faith
and credit given it in every court and office within the United States.
In testimony whereof, I have
hereunto set my hand and affixed
the Seal of the Department, in the
City of Lansing, this 23rd day of
September, 1999
/s/ Julia Croll, Director
173 0451362 Corporation, Securities and
Land Development Bureau
[GOLD SEAL APPEARS ONLY ON ORIGINAL]
<PAGE>
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
FILING ENDORSEMENT
THIS IS TO CERTIFY THAT THE ARTICLES OF INCORPORATION -- PROFIT
FOR
DOMINO'S PIZZA PMC, INC.
RECEIVED BY FACSIMILE TRANSMISSION ON JULY 29, 1999 IS HEREBY ENDORSED
FILED ON JULY 29, 1999 BY THE ADMINISTRATOR.
THE DOCUMENT IS A EFFECTIVE ON THE DATE FILED, UNLESS A
SUBSEQUENT EFFECTIVE DATE WITHIN 90 DAYS AFTER
RECEIVED DATE IS STATED IN THE DOCUMENT.
[STATE OF MICHIGAN SEAL] IN TESTIMONY WHEREOF, I HAVE HEREUNTO
SET MY HAND AND AFFIXED THE SEAL OF
THE DEPARTMENT, IN THE CITY OF
LANSING, THIS 29TH DAY OF JULY, 1999
/s/ Julia Croll, Director
CORPORATION, SECURITIES AND LAND
DEVELOPMENT BUREAU
SENT BY FACSIMILE TRANSMISSION 02102
<PAGE>
MICHIGAN DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
This document is effective on the date filed, unless a
subsequent effective date within 90 days after received date
is stated in the document.
- --------------------------------------------------------------------------------
Name
PAUL R. FRANSWAY, PEAR SPEARLING EGGAN & MUSKOVITZ, P.C
- --------------------------------------------------------------------------------
Address
24 FRANK LLOYD WRIGHT DR.
- --------------------------------------------------------------------------------
City State Zip Code
ANN ARBOR MI 48105 EFFECTIVE DATE:
- --------------------------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS
YOU ENTER ABOVE. IF LEFT BLANK DOCUMENT WILL
BE MAILED TO THE REGISTERED OFFICE.
------------------
ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned
corporation executes the following Articles:
ARTICLE I
- --------------------------------------------------------------------------------
The name of the corporation is:
DOMINO'S PIZZA PMC, INC.
- --------------------------------------------------------------------------------
ARTICLE II
- --------------------------------------------------------------------------------
The purpose or purposes for which the corporation is formed is to engage in any
activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
- --------------------------------------------------------------------------------
ARTICLE III
- --------------------------------------------------------------------------------
The total authorized shares:
1. Common Shares 50,000
-------------------------------------------------------
Preferred Shares
-------------------------------------------------------
2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ARTICLE IV
- --------------------------------------------------------------------------------
1. The address of the registered office is:
30600 TELEGRAPH RD. BINGHAM FARMS , Michigan 48205
------------------------------------------------ -----------
(Street Address) (City) (ZIP Code)
2. The mailing address of the registered office, if different than above:
, Michigan
------------------------------------------------ ----------
(Street Address) (City) (ZIP Code)
3. The name of the resident agent at the registered office is:
CT CORPORATION SYSTEM
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE V
- --------------------------------------------------------------------------------
The name(s) and address(es) of the incorporator(s) is (are) as follows:
Name Residence or Business Address
PAUL R. FRANSWAY, PEER SPERLING
EGGAN & MUSKOVITZ, P.C. 24 FRANK LLOYD WRIGHT DR., ANN ARBOR, MI 48105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE VI (OPTIONAL. DELETE IF NOT APPLICABLE)
- --------------------------------------------------------------------------------
When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditor or any class of them or
between this corporation and its shareholders or any class of their, a court of
equity jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such maner as the
court directs. If a majority in number representing 3/4 in value of the
creditors or class or creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders and also on this corporation.
- --------------------------------------------------------------------------------
ARTICLE VII (OPTIONAL. DELETE IF NOT APPLICABLE)
- --------------------------------------------------------------------------------
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice,
and without a vote, if consents in writing, setting forth the action so taken,
are signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote on the action were present and
voted. The written consents shall bear the date of signature of each shareholder
who signs the consent. No written consents shall be effective to take the
corporate action referred to unless, within 60 days after the record date for
determining shareholders entitled to express consent to or to dissent from a
proposal without a meeting, written consents dated not more than 10 days before
the record date and signed by a sufficient number of shareholders to take the
action are delivered to the corporation. Delivery shall be to the corporation's
registered office, its principal place of business, or an officer or agent of
the corporation having custody of the minutes of the proceedings of its
shareholders. Delivery made to a corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who would have
been entitled to notice of the shareholder meeting if the action had been taken
at a meeting and who have not consented in writing.
- --------------------------------------------------------------------------------
<PAGE>
Use space below for additional Articles or for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
See attached pages.
I, (We), the incorporator(s) sign my (our) name(s) this 29th day of July, 1999.
SIGNATURE ILLEGABLE
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
<PAGE>
DOMINO'S PIZZA PMC, INC.
ARTICLES OF INCORPORATION
ARTICLE VIII
SECTION 8.1 Limitation of Liability. A Director of the Corporation shall not be
personally liable to the Corporation or its Shareholders for monetary damages
resulting from a breach of fiduciary duties imposed on the Director, except for
liability:
(a) resulting from breach of the Director's duty of loyalty to the
Corporation or its Shareholders;
(b) resulting from any acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law;
(c) resulting from a violation of Section 551(1) of the Michigan
Business Corporation Act (the "Act"); or
(d) resulting from any transaction from which the Director derived an
improper personal benefit.
In the event that the Michigan Business Corporation Act is hereafter amended to
authorize corporation action further eliminating or limiting personal liability
of directors, then the liability of the Directors of this Corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan
Corporation Act so amended. Any repeal, modification or amendment of any
provision in these Articles of Incorporation inconsistent with this Article
shall not adversely affect any right or protection of a Director of the
Corporation existing at the time of such repeal, modification or amendment for
or with respect to any act or omission occurring prior to the time of such
repeal, modification or amendment.
ARTICLE IX
SECTION 9.1 Action by Third Party. Except to the extent limited by the Act, the
Corporation has the power to indemnify a person who was or is a party or is
threatened to be made a party to a threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, other than an action by or in the right of the
Corporation, by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether profit or not, against expenses, including attorneys'
fees, judgments, penalties, fines and
<PAGE>
amounts paid in settlement actually and reasonably incurred by him or her in
connection with the action, suit or proceeding, if the person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Corporation or its stockholders, and with respect to a
criminal action or proceeding, if the person had no reasonable cause to believe
his or her conduct was unlawful. The termination of an action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Corporation or its
stockholders, and, with respect to a criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
SECTION 9.2 Action by or in Right of Corporation. Except to the extent limited
by the Act, the Corporation has the power to indemnify a person who was or is a
party to or is threatened to be made a party to a threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise, whether for profit or not, against expenses,
including actual and reasonable attorneys' fees, and amount paid in settlement
incurred by the person in connection with the action or suit, if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the Corporation or its stockholders.
However, indemnification shall not be made for a claim, issue, or matter in
which the person has been found liable to the Corporation unless and only to the
extent that the court in which the action or suit was brought has determined
upon application that, despite the adjudication of liability, but in view of all
circumstances of the case, the person is fairly and reasonably entitled to
indemnification for the expenses which the court considers proper.
SECTION 9.3 Expense. Indemnification against expenses:
(a) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in
defense of an action, suit, or proceeding referred to above in
Sections 9.1 or 9.2, or in defense of a claim, issue, or matter in
the action, suit or proceeding, he or she shall be indemnified
against expenses, including actual and reasonable attorneys' fees,
incurred by him or her in connection with the action, suit, or
proceeding and an action, suit or proceeding brought to enforce
the mandatory indemnification provided in this Subsection.
<PAGE>
(b) An indemnification under Sections 9.1 and 9.2 above, unless
ordered by a court, shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Subsections 9.1 and
9.2 above. This determination shall be made in any of the
following ways:
(i) By a majority vote of a quorum of the Board consisting
of directors who were not parties to the action, suit
or proceeding.
(ii) If the quorum described in subdivision (i) is not
obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The
committee shall consist of not less than two (2)
disinterested directors.
(iii) By independent legal counsel in a written opinion.
(iv) By the stockholders.
(c) If a person is entitled to indemnification under Section 9.1 or
9.2 for a portion of expenses including attorneys' fees,
judgments, penalties, fines, and amounts paid in settlement, but
not for the total amount thereof, the Corporation may indemnify
the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is
entitled to be indemnified.
SECTION 9.4 Payment in Advance. Expenses incurred in defending a civil or
criminal action, suit, or proceeding described in Sections 9.1 or 9.2 above may
be paid by the Corporation in advance of the final disposition of the action,
suit, or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee, or agent to repay the expenses if it is ultimately
determined that the person is not entitled to be indemnified by the Corporation.
The undertaking shall be by unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
SECTION 9.5 Nonexclusivity.
(a) The indemnification or advancement of expenses provided under
Sections 9.1 to 9.4 is not exclusive of other rights to which a
person seeking indemnification or advancement of expenses may be
entitled under the Articles of Incorporation, Bylaws or a
contractual
<PAGE>
agreement. However, the total amount of expenses advanced or
indemnified from all sources combined shall not exceed the amount
of actual expenses incurred by the person seeking indemnification
or advancement of expenses.
(b) The indemnification provided for in Sections 9.1 to 9.4 continues
as to a person who ceases to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of the person.
SECTION 9.6 Insurance. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under Sections 9.1 to 9.5.
SECTION 9.7 Constituent Corporations. For purposes of Sections 9.1 to 9.6 above,
"corporation" includes all constituent corporations absorbed in a consolidation
or merger and the resulting or surviving corporation, so that a person who is or
was a director, officer, employee, or agent of the constituent corporation or is
or was serving at the request of the constituent corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise whether for
profit or not shall stand in the same position under the provisions of this
Subsection with respect to the resulting or surviving corporation as the person
would if he or she had served the resulting or surviving corporation in the same
capacity.
SECTION 9.8 Definitions. For the purposes of Sections 9.1 to 9.6 above, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the Corporation" shall include any service as a
director, officer, employee, or agent of the Corporation which imposes duties
on, or involves services by, the director, officer, employee, or agent with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be considered to have acted in a manner "not opposed to the best
interests of the Corporation or its stockholders" as referred to in Sections 9.1
and 9.2 above.
<PAGE>
EXHIBIT 3.6
BY-LAWS
OF
DOMINO'S PIZZA PMC, INC.
ARTICLE I
OFFICE
SECTION 1.1 Principal Office.The Corporation shall maintain its
principal office in the Township of Ann Arbor, State of Michigan.
SECTION 1.2 Registered Office. The Corporation shall maintain a
registered office in the State of Michigan as required by the Michigan Business
Corporation Act (the "Act").
SECTION 1.3 Other Offices. The Corporation may have such offices within
and without the State of Michigan as the business of the Corporation may require
from time to time. The authority to establish or close such other offices may be
delegated by the Board of Directors to one or more of the Corporation's
officers.
SECTION 1.4 Place of Meetings. All meetings of the Corporation's
stockholders or Board of Directors shall be held at the Corporation's principal
office or at such place as shall be designated in the notice of such meetings.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 Annual Meeting of Stockholders. An annual meeting of the
stockholders shall be held in each year, on the 3rd Wednesday of March, or if
such date is a holiday, the meeting shall be on the next succeeding business
day. One of the purposes of the annual meeting of the stockholders shall be to
elect a Board of Directors. If the annual meeting is not held on the date
designated therefor, the Board of Directors shall cause the meeting to be held
thereafter as convenient but within ninety (90) days after said designated date.
SECTION 2.2 Special Meetings. A special meeting of the stockholders may
be called at any time by the President, or by a majority of the Board of
Directors, or the holders of not less than twenty-five percent (25%) of all the
shares entitled to vote at such special meeting. The method by which such
meeting may be
<PAGE>
called is as follows: Upon receipt of a specification in writing setting forth
the date and purposes of such proposed special meeting, signed by the President,
or by a majority of the Board of Directors, or by stockholders as above
provided, the Secretary of this Corporation shall prepare, sign and mail the
notices requisite to such meeting.
SECTION 2.3 Notice of Stockholders' Meeting. Not less than ten (10)
days, nor more than sixty (60) days, prior to the date of an annual or special
meeting of stockholders, written notice of the time, place and purposes of such
meeting shall be mailed, as hereinafter provided, to each stockholder entitled
to vote at such meeting. Every notice shall be deemed duly served when the same
has been deposited in the United States mail, or with a private courier service
(such as Federal Express), with postage prepaid, addressed to the stockholder at
the stockholder's address as it appears on the Corporation's records, or if a
stockholder shall have filed with the Secretary of the Corporation a written
request that the notice be sent to some other address, then at such other
address.
SECTION 2.4 Waiver of Notice. Notice of the time, place and purpose of
any meeting of the stockholders may be waived by telegram, telecopy, confirmed
facsimile or other writing, either before or after such meeting has been held.
The attendance of any stockholder at any stockholders' meeting shall constitute
a waiver of any notice to which such stockholder may be entitled pursuant to
these By-Laws, except when the stockholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully convened.
SECTION 2.5 Quorum of Stockholders. A majority of the outstanding
shares of this Corporation entitled to vote, represented by the record holders
thereof in person or by proxy, shall constitute a quorum at any meeting of the
stockholders. The stockholders present in person or by proxy at such meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
stockholders which results in less than a quorum remaining. Whether or not a
quorum is present, the meeting may be adjourned by a vote of the shares present.
SECTION 2.6 Record Date for Determination of Stockholders. The Board of
Directors shall fix a record date for determining stockholders entitled to
receive payment of a share dividend or distribution, or allotment of a right,
which date shall not precede the date on which the resolution fixing the record
date is adopted by the Board of Directors. The date shall not be more than 60
days before the payment of the share dividend or distribution or allotment of a
right or other action.
SECTION 2.7 Transaction of Business. Business transacted at an annual
meeting of stockholders may include all such business as may properly come
<PAGE>
before the meeting. Business transacted at a special meeting of the stockholders
shall be limited to the purposes set forth in the notice of the meeting.
SECTION 2.8 Voting. Except as otherwise required by the Act or the
Corporation's Articles of Incorporation, each stockholder of the Corporation
shall, at every meeting of the stockholders, be entitled to one vote in person
or by proxy for each share of capital stock of this Corporation held by such
stockholder, subject, however, to the full effect of the limitations imposed by
the fixed record date for determination of stockholders set forth in Section 2.6
of this Article.
SECTION 2.9 Proxies. No proxy shall be deemed operative unless and
until signed by the stockholder and filed with the Secretary of the Corporation.
All proxies shall be executed by the appointing stockholder or such
stockholder's authorized attorney; provided that no proxy shall be valid for
more than three (3) months after execution of such proxy unless the proxy
specifically provides for a longer period.
SECTION 2.10 Vote by Stockholder Corporation. Any other corporation
owning shares of this Corporation entitled to vote may vote upon the same by the
president of such stockholder corporation, or by proxy appointed by him, unless
some other person shall be appointed to vote upon such shares by resolution of
the Board of Directors of such stockholder corporation.
SECTION 2.11 Inspectors of Election. Whenever any person entitled to
vote at a meeting of the stockholders shall request the appointment of
inspectors, the chairman of the meeting shall appoint not more than three
inspectors, who need not be stockholders. If the right of any person to vote at
such meeting shall be challenged, the inspectors shall determine such right. The
inspectors shall receive and count the votes either upon an election or for the
decision of any question, and shall determine the result. Their certificate of
any vote shall be prima facie evidence thereof.
SECTION 2.12 Action by Written Consent. Any action required or
permitted by the Michigan Business Corporation Act to be taken at an annual or
special meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if consents in writing, setting forth the action so
taken, are signed by the holders of all of the outstanding shares of the
Corporation entitled to vote.
SECTION 2.13 Order of Business. The order of business at the annual
meeting of the stockholders, and so far as practicable at all other meetings of
the stockholders, shall be as follows:
1. Proof of Notice of the Meeting
<PAGE>
2. Determination of a Quorum
3. Election of Directors
4. Unfinished Business
5. New Business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws
or the Act, Robert's Rules of Order shall be used to resolve all to resolve all
procedural disputes that may arise at a stockholder's meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1 Authority. The Board of Directors shall have ultimate
authority over the conduct and management of the business and affairs of the
Corporation.
SECTION 3.2 Number and Term. Except as otherwise provided by the
Corporation's Articles of Incorporation, the number of directors of the
Corporation shall be fixed from time to time by the vote of a majority of the
entire Board; provided, that the number of directors shall not be less than one
nor shall the action of the Board shorten the term of any director at that time
in office.
SECTION 3.3 Term. Each Director shall hold office from the date of
election and qualification until his or her successor shall have been duly
elected, or until his or her earlier removal, resignation, death or incapacity.
SECTION 3.4 Removal. Any Director may be removed from office, with or
without cause, by a vote of a majority of the shares of the Corporation's shares
entitled to vote.
SECTION 3.5 Vacancies. Vacancies in the Board of Directors (including
vacancies resulting from an increase in the number of directors) shall be filled
by appointment made by a majority of the remaining directors. Each person so
appointed shall hold office until the next election of Directors or until his or
her successor shall be elected and qualified.
SECTION 3.6 Organizational Meeting of Board. At the place of holding
the annual meeting of stockholders, and immediately following the same, the
Board of Directors as constituted upon final adjournment of such annual meeting,
shall convene for the purposes of electing officers, setting the selling price
for the Corporation's shares as provided in Section 3.18 and transacting any
other business properly brought before it, provided that the organizational
meeting in any
<PAGE>
year may be held at a different time and place than that herein provided by
consent of a majority of the Directors of such new Board.
SECTION 3.7 Regular Meetings of the Board. Regular meetings of the
Board of Directors may be held at times and places agreed upon by a majority of
the directors at any meeting of the Board of Directors and such regular meetings
may be held at such times and places without any further notice of the time,
place or purposes of such regular meetings.
SECTION 3.8 Special Meetings of the Board. Special meetings of the
Board of Directors may be called at the request of any member of the Board at
any time by means of written notice of the time, place and purpose thereof
mailed to each director not less than one (1) day, nor more than sixty (60)
days, prior to the date fixed for the holding of any special meeting of
Directors, but action taken at any such meeting shall not be invalidated for
want of notice if such notice shall be waived as hereinafter provided.
SECTION 3.9 Notices. Every notice of a meeting of the Board of
Directors shall be deemed duly served when the same has been deposited in the
United States mail, or with a private courier service (such as Federal Express),
with postage prepaid, addressed to the director at his or her last known
address, or if a director shall have filed with the Secretary of the Corporation
a written request that the notice be sent to some other address, then at such
other address.
SECTION 3.10 Waiver of Notice. Notice of the time, place and purpose of
any meeting of the Board of Directors may be waived by telegram, telecopy,
confirmed facsimile or other writing, either before or after such meeting has
been held. The attendance of any director at any directors' meeting shall
constitute a waiver of any notice to which such director may be entitled
pursuant to these By-Laws, except when the director attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully convened.
SECTION 3.11 Participation by Telecommunications. Any Director may
participate in, and be regarded as present at, any meeting of the Board of
Directors by means of conference telephone or any other means of communication
by which all persons participating in the meeting can hear each other at the
same time.
SECTION 3.12 Quorum of Directors. A majority of the directors then in
office shall constitute a quorum for transaction of business.
SECTION 3.13 Action. The Board of Directors shall take action pursuant
to resolutions adopted by the affirmative vote of a majority of the Directors
participating in a meeting at which a quorum is present, or affirmative
<PAGE>
vote of a greater number of Directors where required by the Corporation's
Articles of Incorporation or by law.
SECTION 3.14 Action by Unanimous Written Consent. Any action required
or permitted to be taken by the Board of Directors of the Corporation may be
taken without a meeting, without prior notice, and without a vote if consents in
writing, setting forth the action so taken, are signed by all of the directors
of the Corporation.
SECTION 3.15 Selection of Officers. The Board of Directors shall select
a president, treasurer, and a secretary, and may select a chairman of the Board,
one or more vice presidents, one or more assistant treasurers, and one or more
assistant secretaries, and any other officers that the Board of Directors deems
to be in the best interests of the Corporation, which officers may be appointed
and their duties prescribed by resolution of the Board.
SECTION 3.16 Power to Appoint Other Officers and Agents. The Board of
Directors shall have power to appoint such other officers and agents as the
Board may deem necessary for transaction of the business of the Corporation.
SECTION 3.17 Removal of Officers and Agents. Any officer or agent may
be removed by the Board of Directors whenever, in the judgment of the Board, the
business interests of the Corporation will be served thereby.
SECTION 3.18 Share Sale Price. At each organizational meeting of the
Board of Directors, the Board shall set the share selling price for purposes of
various Stock Purchase Agreements entered into from time to time between the
Corporation and its stockholders.
SECTION 3.19 Delegation of Powers. For any reason deemed sufficient by
the Board of Directors, whether occasioned by absence or otherwise, the Board
may delegate all or any of the powers and duties of any officer to any other
officer or director, but no officer or director shall execute, verify or
acknowledge any instrument in more than one capacity unless specifically
authorized by the Board of Directors.
SECTION 3.20 Power to Appoint Committees of the Board. The Board of
Directors shall have power to designate, by resolution, committees composed of
one or more directors who, to the extent provided in such resolution, may
exercise the business and affairs of the Corporation except as restricted by
statute. In the absence or disqualification of a member of the committee, the
members thereof present at a meeting and not disqualified from voting, whether
or not they constitute a quorum, may unanimously appoint another director of the
Board to act at the meeting in place of such an absent or disqualified member. A
majority of the
<PAGE>
members of any committee of the Board will constitute a quorum for all committee
action.
SECTION 3.21 Compensation. The Board of Directors may by resolution
authorize the payment to all Directors of a uniform sum for attendance at each
meeting or a uniform stated fee as a Director. No such payment shall preclude
any Director from serving the Corporation in any other capacity and receiving
compensation therefor. The Board of Directors may also by resolution authorize
the payment of reimbursement of all expenses of each Director related to the
Director's attendance at meetings.
SECTION 3.22 Order of Business. The order of business at all meetings
of the Board of Directors shall be:
1. Determination of a quorum
2. Reading and disposal of all unapproved minutes
3. Reports of officers and committees
4. Unfinished business
5. New business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws
or the Act, Robert's Rules of Order shall be used to resolve all procedural
disputes that may arise at a Director's meeting.
ARTICLE IV
OFFICERS
SECTION 4.1 In General. The officers of the Corporation shall consist
of a chairman, a president, a vice president, a secretary, a treasurer and such
additional vice presidents, assistant secretaries, assistant treasurers, and
other officers and agents as the Board of Directors from time to time deems
advisable. All officers shall be appointed by the Board to serve at its
pleasure. Except as otherwise provided by law or in the Articles of
Incorporation, any officer may be removed by the Board of Directors at any time,
with or without cause. Any vacancy, however occurring, in any office may be
filled by the Board of Directors for the unexpired term. One person may hold two
or more offices. Each officer shall exercise authority and perform the duties
set forth in these By-Laws and any additional authority and duties as the Board
of Directors shall determine from time to time.
<PAGE>
SECTION 4.2 Chairman of the Board. The Chairman of the Board shall be
selected by and from the membership of the Board of Directors. He shall conduct
all meetings of the Board and shall perform all duties incident thereto.
SECTION 4.3 President. The President shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect. He shall be ex-officio, a
member of all standing committees, and shall have the general powers and duties
of supervision and management usually vested in the office of president of a
corporation.
SECTION 4.4 Vice Presidents. Each Vice President shall serve under the
direction of the President and shall perform such other duties as the Board of
Directors shall from time to time direct.
SECTION 4.5 Secretary. Except as otherwise provided by these By-Laws or
otherwise determined by the Board of Directors, the Secretary of the Corporation
shall serve under the direction of the President and shall perform such other
duties as the Board shall from time to time direct. The Secretary shall attend
all meetings of the stockholders and the Board of Directors, and shall preserve
in the books of the Company true minutes of the proceedings of all such
meetings. The Secretary shall safely keep in his or her custody the seal of the
Corporation, and shall have authority to affix the same to all instruments where
its use is required. The Secretary shall give all notices required by statute,
by-law or resolution.
SECTION 4.6 Treasurer. The Treasurer shall serve under the President
and shall perform such other duties as the Board shall from time to time direct.
The Treasurer shall have custody of all corporate funds and securities, and
shall keep in books belonging to the Corporation full and accurate accounts of
all receipts and disbursements. The Treasurer shall deposit all monies,
securities and other valuable effects in the name of the Corporation in such
depositories as may be designated for that purpose by the Board of Directors and
shall disburse the funds of the Corporation as may be ordered by the Board. The
Treasurer shall upon request report to the Board of Directors on the financial
condition of the Corporation.
SECTION 4.7 Assistant Secretary and Assistant Treasurer. The Assistant
Secretary, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary. The Assistant Treasurer, in the
absence or disability of the Treasurer, shall perform the duties and exercise
the powers of the Treasurer.
<PAGE>
ARTICLE V
STOCK AND TRANSFERS
SECTION 5.1 Certificates for Shares. Every stockholder shall be
entitled to a certificate of the shares to which he has subscribed, said
certificate to be signed by the Chairman of the Board, President or a Vice
President, and may be sealed with the seal of the Corporation or a facsimile
thereof certifying the number and class of shares; provided, that where such
certificate is signed by a transfer agent or an assistant transfer agent, or by
a transfer clerk acting on behalf of such entity, and by a registrar, the
signature of any such officers may be a facsimile.
If the shares of the Corporation shall become listed on a national
securities exchange, the Corporation may eliminate certificates representing
such shares and provide such shares and provide for such other methods of
recording, noticing ownership and disclosure as may be provided by the rules of
that national securities exchange.
SECTION 5.2 Transferable Only on Books of the Corporation. Shares shall
be transferable only on the books of the Corporation by the holder thereof in
person or by an attorney lawfully constituted in writing, and upon surrender of
the certificate therefor. A record shall be made of every such transfer and
issue. Whenever any transfer is made for collateral security and not absolutely,
the fact shall be so expressed in the entry of such transfer.
SECTION 5.3 Stock Ledger. The Corporation shall maintain a stock ledger
which contains the name and address of each stockholder and the number of shares
of stock of each class which the stockholder holds. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate of the
stock ledger shall be kept at the office of a transfer agent for the particular
class of stock, within or without the State of Michigan, or, if none, at the
principal office of the Corporation in the State of Michigan.
SECTION 5.4 Registered Stockholders. The Corporation shall have the
right to treat the registered holder of any share as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, save as may be otherwise provided by
the laws of Michigan.
SECTION 5.5 Cancellation; Missing Certificates. All certificates
surrendered to the Corporation for transfer shall be cancelled and no new
certificates representing the same number of shares shall be issued until the
former
<PAGE>
certificate or certificates for the same number of shares shall have been so
surrendered and cancelled. In the event that a certificate of stock is lost or
destroyed another may be issued and unless waived by the President, the party
alleging loss or destruction of the certificate shall post a bond or agree to
indemnify the Corporation, at the election of the President, in an amount not
exceeding two (2) times the value of the stock.
ARTICLE VI
INSTRUMENTS
SECTION 6.1 Checks, Etc. All checks, drafts and orders for payment of
money shall be signed in the name of the Corporation or any assumed name under
which the Corporation has duly filed a certificate therefor and shall be
countersigned by such officers or agents as the Board of Directors shall from
time to time designate for that purpose.
SECTION 6.2 Contracts, Conveyances, Etc. When the execution of any
contract, conveyance or other instrument has been authorized without
specification of the executing officers, the president or any vice president, or
the treasurer or assistant treasurer, or the secretary or assistant secretary,
may execute the same in the name and on behalf of this Corporation, and may
affix the corporate seal thereto. The Board of Directors shall have power to
designate the officers and agents who shall have authority to execute any
instrument on behalf of this Corporation.
SECTION 6.3 Voting Shares of Other Corporations. Stock of other
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice President or a proxy appointed by either of them.
The Board of Directors may by resolution appoint some other person to vote the
shares.
ARTICLE VII
AMENDMENT OF BY-LAWS
SECTION 7.1 Amendment. These By-Laws may be amended, altered, changed,
added to or repealed by the affirmative vote of a majority of the shares
entitled to vote at any regular or special meeting of the stockholders if notice
of the proposed amendment, alteration, change, addition or repeal be contained
on the notice of the meeting, or by the affirmative vote of the majority of the
Board of Directors if notice of the proposed amendment, alteration, change,
addition or repeal be contained in the notice of the meeting or is given at the
meeting preceding the meeting at which the change is adopted, provided, however,
that no change of the date for the annual meeting of the stockholders shall be
made within thirty (30) days next before the day on which such meeting is to be
held unless consented to in writing, or by a resolution adopted at a meeting, by
a majority of all stockholders entitled to vote at the annual meeting.
<PAGE>
EXHIBIT 3.15
MICHIGAN DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
This document is effective on the date filed, unless a
subsequent effective date within 90 days after received date
is stated in the document.
- --------------------------------------------------------------------------------
Name
PAUL R. FRANSWAY, PEAR SPERLING EGGAN & MUSKOVITZ, P.C
- --------------------------------------------------------------------------------
Address
24 FRANK LLOYD WRIGHT DR.
- --------------------------------------------------------------------------------
City State Zip Code
ANN ARBOR MI 48105 EFFECTIVE DATE:
- --------------------------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS
YOU ENTER ABOVE. IF LEFT BLANK DOCUMENT WILL
BE MAILED TO THE REGISTERED OFFICE.
------------------
ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC LIMITED LIABILITY COMPANIES
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 23, Public Acts of 1993, the undersigned
execute the following Articles:
ARTICLE I
- --------------------------------------------------------------------------------
The name of the limited liability company is:
DOMINO'S PIZZA I LLC
- --------------------------------------------------------------------------------
ARTICLE II
- --------------------------------------------------------------------------------
The purpose or purposes for which the limited liability company is formed is
to engage in any activity within the purposes for which a limited liability
company may be formed under the Limited Liability Company Act of Michigan.
- --------------------------------------------------------------------------------
ARTICLE III
- --------------------------------------------------------------------------------
The duration of the limited liability company of other than perpetual is:
- --------------------------------------------------------------------------------
ARTICLE IV
1. The street address of the location of the registered office is:
30600 TELEGRAPH RD., SUITE 3275 BINGHAM FARMS, MICHIGAN 48025
- --------------------------------------------------------------------------------
(Street Address) (City) (ZIP Code)
2. The mailing address of the registered office if different than above:
- --------------------------------------------------------------------------------
(Street Address or P.O. Box) (City) (ZIP Code)
3. The name of the resident agent at the registered office is:
CT CORPORATION SYSTEM
- --------------------------------------------------------------------------------
ARTICLE V (Insert any desired additional provision authorized by the Act;
attach additional pages if needed.)
- --------------------------------------------------------------------------------
Signed this 22nd day of October, 1999
Domino's Pizza, Inc.
By /s/ Harry Silverman
---------------------------------
(Signature)
Harry Silverman, Vice President
---------------------------------
(Type or Print Name)
<PAGE>
DOMINO'S PIZZA I LLC
ARTICLES OF ORGANIZATION
ARTICLE VIII
SECTION 8.1 Limitation of Liability. A Manager of the Company shall not be
personally liable to the Company or its Members for monetary damages resulting
from a breach of fiduciary duties imposed on the Manager, except for liability:
(a) resulting from breach of the Manager's duty of loyalty to the
Company or its Members;
(b) resulting from any acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law;
(c) resulting from a violation of Section 551(1) of the Michigan
Business Corporation Act (the "Act"); or
(d) resulting from any transaction from which the Manager derived an
improper personal benefit.
In the event that the Michigan Business Corporation Act is hereafter amended to
authorize Company action further eliminating or limiting personal liability of
Managers, then the liability of the Managers of this Company shall be eliminated
or limited to the fullest extent permitted by the Michigan Corporation Act so
amended. Any repeal, modification or amendment of any provision in these
Articles of Organization inconsistent with this Article shall not adversely
affect any right or protection of a Manager of the Company existing at the time
of such repeal, modification or amendment for or with respect to any act or
omission occurring prior to the time of such repeal, modification or amendment.
ARTICLE IX
SECTION 9.1 Action by Third Party. Except to the extent limited by the Act, the
Company has the power to indemnify a person who was or is a party or is
threatened to be made a party to a threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, other than an action by or in the right of the
Company, by reason of the fact that he or she is or was a Manager, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a Manager, officer, partner, trustee, employee or agent of another
foreign or domestic Company, partnership, joint venture, trust or other
enterprise, whether profit or not, against expenses, including attorneys' fees,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit or
proceeding, if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the Company
or its Members, and with respect to a criminal action or proceeding, if the
person had no reasonable cause to believe his or
<PAGE>
her conduct was unlawful. The termination of an action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Company or its Members, and, with
respect to a criminal action or proceeding, had reasonable cause to believe that
his or her conduct was unlawful.
SECTION 9.2 Action by or in Right of Company. Except to the extent limited by
the Act, the Company has the power to indemnify a person who was or is a party
to or is threatened to be made a party to a threatened, pending or completed
action or suit by or in the right of the Company to procure a judgment in its
favor by reason of the fact that he or she is or was a Manager, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a Manager, officer, partner, trustee, employee, or agent of another
foreign or domestic Company, partnership, joint venture, trust, or other
enterprise, whether for profit or not, against expenses, including actual and
reasonable attorneys' fees, and amount paid in settlement incurred by the person
in connection with the action or suit, if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the Company or its Members. However, indemnification shall not be
made for a claim, issue, or matter in which the person has been found liable to
the Company unless and only to the extent that the court in which the action or
suit was brought has determined upon application that, despite the adjudication
of liability, but in view of all circumstances of the case, the person is fairly
and reasonably entitled to indemnification for the expenses which the court
considers proper.
SECTION 9.3 Expense. Indemnification against expenses:
(a) To the extent that a Manager, officer, employee, or agent of the
Company has been successful on the merits or otherwise in defense
of an action, suit, or proceeding referred to above in Sections
9.1 or 9.2, or in defense of a claim, issue, or matter in the
action, suit or proceeding, he or she shall be indemnified against
expenses, including actual and reasonable attorneys' fees,
incurred by him or her in connection with the action, suit, or
proceeding and an action, suit or proceeding brought to enforce
the mandatory indemnification provided in this Subsection.
(b) An indemnification under Sections 9.1 and 9.2 above, unless
ordered by a court, shall be made by the Company only as
authorized in the specific case upon a determination that
indemnification of the Manager, officer, employee or agent is
proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Subsections 9.1 and
9.2 above. This determination shall be made in any of the
following ways:
(i) By a majority vote of a quorum of the Board consisting
of Managers who were not parties to the action, suit or
proceeding.
<PAGE>
(ii) If the quorum described in subdivision (i) is not
obtainable, then by a majority vote of a committee of
Managers who are not parties to the action. The
committee shall consist of not less than two (2)
disinterested Managers.
(iii) By independent legal counsel in a written opinion.
(iv) By the Members.
(c) If a person is entitled to indemnification under Section 9.1 or
9.2 for a portion of expenses including attorneys' fees,
judgments, penalties, fines, and amounts paid in settlement, but
not for the total amount thereof, the Company may indemnify the
person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is
entitled to be indemnified.
SECTION 9.4 Payment in Advance. Expenses incurred in defending a civil or
criminal action, suit, or proceeding described in Sections 9.1 or 9.2 above may
be paid by the Company in advance of the final disposition of the action, suit,
or proceeding upon receipt of an undertaking by or on behalf of the Manager,
officer, employee, or agent to repay the expenses if it is ultimately determined
that the person is not entitled to be indemnified by the Company. The
undertaking shall be by unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
SECTION 9.5 Nonexclusivity.
(a) The indemnification or advancement of expenses provided under
Sections 9.1 to 9.4 is not exclusive of other rights to which a
person seeking indemnification or advancement of expenses may be
entitled under the Articles of Organization, Bylaws or a
contractual agreement. However, the total amount of expenses
advanced or indemnified from all sources combined shall not exceed
the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
(b) The indemnification provided for in Sections 9.1 to 9.4 continues
as to a person who ceases to be a Manager, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of the person.
SECTION 9.6 Insurance. The Company shall have the power to purchase and
maintain insurance on behalf of any person who is or was a Manager, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a Manager, officer, employee or agent of another Company,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the Company would have the power to indemnify
him against such liability under Sections 9.1 to 9.5.
<PAGE>
SECTION 9.7 Constituent Companies. For purposes of Sections 9.1 to 9.6 above,
"Company" includes all constituent Companies absorbed in a consolidation or
merger and the resulting or surviving Company, so that a person who is or was a
Manager, officer, employee, or agent of the constituent Company or is or was
serving at the request of the constituent Company as a Manager, officer,
partner, trustee, employee, or agent of another foreign or domestic Company,
partnership, joint venture, trust, or other enterprise whether for profit or not
shall stand in the same position under the provisions of this Subsection with
respect to the resulting or surviving Company as the person would if he or she
had served the resulting or surviving Company in the same capacity.
SECTION 9.8 Definitions. For the purposes of Sections 9.1 to 9.6 above, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the Company" shall include any service as a Manager,
officer, employee, or agent of the Company which imposes duties on, or involves
services by, the Manager, officer, employee, or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a person who acted
in good faith and in a manner he or she reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be considered to have acted in a manner "not opposed to the best interests of
the Company or its Members" as referred to in Sections 9.1 and 9.2 above.
<PAGE>
EXHIBIT 3.16
DOMINO'S PIZZA LLC
BYLAWS
ARTICLE I
MEMBERS
Section 1. Annual Meeting. There shall be an annual meeting of members
of the company for the election of managers, the consideration of reports to be
laid before such meeting, and the transaction of such other business as may
properly be brought before such meeting. Such annual meeting shall be held at
the principal office of the company in the Township of Ann Arbor in Washtenaw
County, or at such other place either within or without the State of Michigan as
may be designated by the Board of Managers or by the President, and specified in
the notice of such meeting, at 10:00 o'clock a.m., or at such other time as may
be designated by the Board of Managers or by the President, and specified in the
notice of the meeting, on the second Monday of January in 2000 and in each year
thereafter, if not a legal holiday, and, if a legal holiday, then on the next
succeeding business day.
Section 2. Special Meetings. Special meetings of the members of the
company may be called by the President, or the Board of Managers acting at a
meeting, or by majority of managers acting without a meeting, or by members
holding at least twenty-five percent (25%) of the capital interests of the
company. Special meetings may be held on any business day. Upon request in
writing delivered either in person or by registered mail to the President or the
Secretary by any persons entitled to call a meeting of members, such officer
shall forthwith cause to be given to the members entitled thereto notice of a
meeting to be held on a date not less than seven or more than sixty days after
the receipt of such request, as such officer may fix. If such notice is not
given within 20 days after the delivery or mailing of such request, the persons
calling the meeting may fix the time of the meeting and give notice thereof as
provided in these Bylaws, or cause such notice to be given by any designated
representative. Each special meeting shall be called to convene between 9:00
a.m. and 4:00 p.m., and shall be held at the principal office of the company,
unless the same is called by the managers, acting with or without a meeting, in
which case such meeting may be held at any place either within or without the
State of Michigan designated by the Board of Managers and specified in the
notice of such meeting.
Section 3. Notice of Meetings. Not less than seven or more than sixty
days before the date fixed for a meeting of members, written notice stating the
time and place of the meeting, and in the case of a special meeting the purposes
of such meeting, shall be given by or at the direction of the Secretary or
Assistant Secretary, or any other person or persons required or permitted by
these Bylaws to give such notice. The notice shall be given by personal delivery
or by mail to each member entitled to notice of the meeting who is of record as
of the day next
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preceding the day on which notice is given or, if a record date therefor is duly
fixed, of record as of said date; if mailed, the notice shall be addressed to
the members at their respective addresses as they appear on the records of the
company. Notice of the time, place and purposes of any meeting of members may be
waived in writing, either before or after the holding of such meeting, by any
members, which writing shall be filed with or entered upon the records of the
meeting. The attendance of any members at any such meeting without protesting
the lack of proper notice, prior to or at the commencement of the meeting, shall
be deemed to have waived notice of such meeting.
Section 4. Quorum; Adjournment. At any meeting of the members the
holders of capital interests in the company entitling them to exercise a
majority of the voting power of the company present in person or by proxy shall
constitute a quorum for such meeting; provided, however, that no action required
by law, by the Articles of Organization, or by these Bylaws, to be authorized or
taken by a designated proportion of the capital interests of the company, or a
particular class thereof, may be authorized or taken by a lesser proportion; and
provided, further, that the holders of a majority of the capital interests
represented thereat, whether or not a quorum is present, may adjourn such
meeting from time to time; if any meeting is adjourned, notice of such
adjournment need not be given if the time and place to which such meeting is
adjourned are fixed and announced at such meeting.
Section 5. Proxies. Members entitled to vote or to act with respect to
capital interests in the company may vote or act in person or by proxy. The
person appointed as proxy need not be a member. Unless the writing appointing a
proxy otherwise provides, the presence at a meeting of the person having
appointed a proxy shall not operate to revoke the appointment. Notice to the
company, in writing or in open meeting, of the revocation of the appointment of
a proxy shall not affect any vote or act previously taken or authorized.
Section 6. Action Without a Meeting. Any action which may be authorized
or taken at a meeting of the members may be authorized or taken without a
meeting in a writing or writings signed by all of the members entitled to vote
on such matter, which writing or writings shall be filed with or entered upon
the records of the company. A telegram, telex, cablegram, or similar
transmission by a member, or a photographic, photostatic, facsimile or similar
reproduction of a writing signed by a member, shall be regarded as signed by the
member for purposes of this Section.
Section 7. Telephonic Participation in Meetings. Members may
participate in any meeting through telephonic or similar communications
equipment by means of which all persons participating in the meeting can hear
one another, and such participation shall constitute presence in person at such
meeting.
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<PAGE>
ARTICLE II
BOARD OF MANAGERS
Section 1. Number. The number of managers constituting the Board of
Managers shall be determined by resolution of the members entitled to vote, but
shall not be less than the number of persons that are directors of Domino's,
Inc., unless a lower number is approved by the members.
Section 2. Election of Managers; Vacancies. The managers shall be
elected at each annual meeting of members, or at a special meeting called for
the purpose of electing managers, or the managers may be designated at any time
by the unanimous written action of the members. In the event of the occurrence
of any vacancy or vacancies in the Board of Managers, however caused, the
remaining managers, though less than a majority of the whole authorized number
of managers, may, by the vote of a majority of their number, fill any vacancy
for the unexpired term.
Section 3. Term of Office; Resignation. Each manager shall hold office
until the next annual meeting of the members and until his successor is elected,
or until his earlier resignation, removal from office, or death. Any manager may
resign at any time by oral statement to that effect made at a meeting of the
Board of Managers or in a writing to that effect delivered to the Secretary,
such resignation to take effect immediately or at such other time as the manager
may specify.
Section 4. Regular Meetings. Regular meetings of the Board of Managers
may be held at such times and places within or without the State of Michigan as
may be provided for in rules or resolutions adopted by the Board of Managers and
upon such notice, if any, as shall be so provided.
Section 5. Special Meetings. Special meetings of the Board of Managers
may be held at any time upon call by the President or a Vice President or any
two managers. Written notice of the time and place of each such meeting shall be
given to each manager, either by personal delivery or by mail, telegram, or
cablegram, at least two days before the meeting, which notice need not specify
the purposes of the meeting.
Section 6. Quorum; Adjournment. A quorum of the Board of Managers shall
consist of a majority of the managers then in office.
Section 7. Action Without a Meeting. Any action which may be authorized
or taken at a meeting of the Board of Managers may be authorized or taken
without a meeting in a writing or writings signed by all of the managers, which
writing or writings shall be filed with or entered upon the records of the
company. A telegram, telex, cablegram, or similar transmission by a member, or a
photographic, photostatic, facsimile or similar reproduction of a writing signed
by a manager, shall be regarded as signed by the manager for purposes of this
Section.
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<PAGE>
Section 8. Telephonic Participation in Meetings. Managers may
participate in any meeting through telephonic or similar communications
equipment by means of which all persons participating in the meeting can hear
one another, and such participation shall constitute presence in person at such
meeting.
ARTICLE III
OFFICERS
Section 1. Election and Designation of Officers. The Board of Managers
shall elect a President, a Secretary, a Treasurer, and, in its discretion, may
elect one or more Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as the Board of Managers may
deem necessary. The President shall be a manager, but no one of the other
officers need be a manager. Any two or more of such offices may be held by the
same person, but no officer shall execute, acknowledge or verify any instrument
in more than one capacity, if such instrument is required to be executed,
acknowledged or verified by two or more officers.
Section 2. Term of Office; Vacancies. The officers of the company shall
hold office until the next annual meeting of the Board of Managers and until
their successors are elected, except in case of resignation, removal from office
or death. The Board of Managers may remove any officer at any time with or
without cause by a majority vote of the managers then in office. Any vacancy in
any office may be filled by the Board of Managers.
Section 3. President. The President shall preside at all meetings of
the members and at all meetings of the Board of Managers. Subject to directions
of the Board of Managers, the President shall have general executive supervision
over the property, business and affairs of the company. He may execute all
authorized deeds, mortgages, bonds, contracts, and other obligations in the name
of the company and shall have such other authority and shall perform such other
duties as may be determined by the Board of Managers.
Section 4. Vice Presidents. The Vice Presidents shall, respectively,
have such authority and perform such duties as may be determined by the Board of
Managers.
Section 5. Secretary. The Secretary shall keep the minutes of meetings
of the members and of the Board of Managers. He shall keep such books as may be
required by the Board of Managers, shall give notices of members' meetings and
of Board meetings required by these Bylaws, or otherwise, and shall have such
authority and shall perform such other duties as may be determined by the Board
of Managers.
Section 6. Treasurer. The Treasurer shall receive and have in charge
all money, bills, notes, bonds, stocks in other companies, and similar property
belonging to the company, and shall do with the same as may be ordered by the
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<PAGE>
Board of Managers. He shall keep accurate financial accounts and hold the same
open for the inspection and examination of the managers and shall have such
authority and shall perform such other duties as may be determined by the Board
of Managers.
Section 7. Other Officers. The Assistant Secretaries and Assistant
Treasurers, if any, and any other officers whom the Board of Managers may elect
shall, respectively, have such authority and perform such duties as may be
determined by the Board of Managers.
Section 8. Delegation of Authority and Duties. The Board of Managers is
authorized to delegate the authority and duties of any officer to any other
officer and generally to control the action of the officers and to require the
performance of duties in addition to those mentioned herein.
ARTICLE IV
COMPENSATION
Section 1. Managers and Members of Committees. Managers shall receive
such stated compensation for their services and such sums for expenses of
attendance, if any, as may be determined by the Board of Managers. Managers that
serve the company in another capacity may also be allowed such other
compensation as may be determined by their contract or agreement with the
company in accordance with the following section. Members of either executive or
special committees may be allowed such compensation as the Board of Managers may
determine for attending committee hearings.
Section 2. Officers and Employees. The compensation of officers and
employees of the company, or the method of fixing such compensation, shall be
determined by or pursuant to authority conferred by the Board of Managers or any
committee of the Board of Managers. Such compensation may include pension,
disability and death benefits, and may be by way of fixed salary, or on the
basis of earnings of the company, or any combination thereof, or otherwise, as
determined or authorized from time to time by the Board of Managers or any
committee of the Board of Managers.
ARTICLE V
INDEMNIFICATION
Section 1. Third Party Actions. The company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, including all appeals (other than an action,
suit or proceeding by or in the right of the company) by reason of the fact that
he is or was a manager, officer or employee of the company, or is or was serving
at the request of the company as a manager, trustee, officer or employee of
another company, partnership, joint
5
<PAGE>
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, decrees, fines, penalties and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the company and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interest of the company and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. Derivative Actions. The company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit, including all appeals, by or in the right
of the company to procure a judgment in its favor by reason of the fact that he
is or was a manager, officer or employee of the company, or is or was serving at
the request of the company as a manager, trustee, officer or employee of another
company, partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
finally adjudged to be liable for negligence or misconduct in the performance of
his duty to the company unless and only to the extent that the Court of Common
Pleas or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the Court of Common Pleas or such other court
shall deem proper.
Section 3. Rights After Successful Defense. To the extent that a
manager, officer or employee has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 1 or 2, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Other Determination of Rights. Except in a situation
governed by Section 3, any indemnification under Section 1 or 2 (unless ordered
by a court) shall be made by the company only as authorized in the specific case
upon a determination that indemnification of the manager, officer or employee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 1 or 2. Such determination shall be made (a) by a
majority vote of managers acting at a meeting at which a quorum consisting of
managers who were
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<PAGE>
not parties to such action, suit or proceeding is present, or (b) if such a
quorum is not obtainable (or even if obtainable), and a majority of
disinterested managers so directs, by independent legal counsel (compensated by
the company) in a written opinion, or (c) by the affirmative vote in person or
by proxy of the holders of a majority of the capital interests of the company
entitled to vote in the election of managers, without regard to voting power
which may thereafter exist upon a default, failure or other contingency.
Section 5. Advances of Expenses. Expenses of each person indemnified
hereunder incurred in defending a civil, criminal, administrative or
investigative action, suit or proceeding (including all appeals), or threat
thereof, may be paid by the company in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Managers, whether a
disinterested quorum exists or not, upon receipt of an undertaking by or on
behalf of the manager, officer or employee, to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the company.
Section 6. Nonexclusiveness; Heirs. The indemnification provided by
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled as a matter of law or under the Articles
of Organization, these Bylaws, any agreement, vote of members, any insurance
purchased by the company, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be manager, officer or employee
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
Section 7. Purchase of Insurance. The company may purchase and maintain
insurance on behalf of any person who is or was a manager, officer or employee
of the company, or is or was serving at the request of the company as a manager,
officer or employee of another company, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
company would have the power to indemnify him against such liability under the
provisions of this Article or of the Michigan Limited Liability Company Act.
ARTICLE VI
CERTIFICATES FOR UNITS
Section 1. Form of Certificates and Signatures. Each holder of a
membership unit shall be entitled to one or more certificates, signed by the
President or a Vice President and by the Secretary, an Assistant Secretary, the
Treasurer, or an Assistant Treasurer of the company, which shall certify the
number and class of membership units held by him in the company, but no
certificate for membership units shall be executed or delivered until such units
are fully paid. When such a
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certificate is countersigned by an transfer agent or registrar, the signature of
any of said officers of the company may be facsimile, engraved, stamped or
printed.
Section 2. Transfer of Units. Membership units in the company shall be
transferable upon the books of the company by the holders thereof, in person, or
by a duly authorized attorney, upon surrender and cancellation of certificates
for a like number of units of the same class, with duly executed assignment and
power of transfer endorsed thereon or attached thereto, and with such proof of
the authenticity of the signatures to such assignment and power of transfer as
the company or its agents may reasonably require.
Section 3. Lost, Stolen or Destroyed Certificates. The company may
issue a new certificate for membership units in place of any certificate
theretofore issued by it and alleged to have been lost, stolen or destroyed, and
the Board of Managers may, in its discretion, require the owner, or his legal
representatives, to give the company a bond containing such terms as the Board
of Managers may require to protect the company or any person injured by the
execution and delivery of a new certificate.
Section 4. Transfer Agent and Registrar. The Board of Managers may
appoint, or revoke the appointment of, transfer agents or registrars and may
require all certificates for membership units to bear the signatures of such
transfer agents and registrars or any of them.
ARTICLE VII
AMENDMENTS
The Bylaws of the company may be amended, or new Bylaws may be adopted,
by the members at a meeting held for such purpose, by the affirmative vote of
the holders of shares entitling them to exercise a majority of the voting power
of the company on such proposal, or without a meeting by the written consent of
the holders of shares entitling them to exercise two-thirds of the voting power
on such proposal.
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EXHIBIT 3.17
MICHIGAN DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
This document is effective on the date filed, unless a
subsequent effective date within 90 days after received date
is stated in the document.
- --------------------------------------------------------------------------------
Name
PAUL R. FRANSWAY, PEAR SPEARLING EGGAN & MUSKOVITZ, P.C
- --------------------------------------------------------------------------------
Address
24 FRANK LLOYD WRIGHT DR.
- --------------------------------------------------------------------------------
City State Zip Code
ANN ARBOR MI 48105 EFFECTIVE DATE:
- --------------------------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS
YOU ENTER ABOVE. IF LEFT BLANK DOCUMENT WILL
BE MAILED TO THE REGISTERED OFFICE.
------------------
ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned
corporation executes the following Articles:
ARTICLE I
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The name of the corporation is:
DP CA CORP INC.
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ARTICLE II
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The purpose or purposes for which the corporation is formed is to engage in any
activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
- --------------------------------------------------------------------------------
ARTICLE III
- --------------------------------------------------------------------------------
The total authorized shares:
1. Common Shares 60,000
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Preferred Shares
-------------------------------------------------------
2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ARTICLE IV
- --------------------------------------------------------------------------------
1. The address of the registered office is:
30600 TELEGRAPH RD. BINGHAM FARMS , Michigan 48205
------------------------------------------------ -----------
(Street Address) (City) (ZIP Code)
2. The mailing address of the registered office, if different than above:
, Michigan
------------------------------------------------ ----------
(Street Address) (City) (ZIP Code)
3. The name of the resident agent at the registered office is:
CT CORPORATION SYSTEM
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ARTICLE V
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The name(s) and address(es) of the incorporator(s) is (are) as follows:
Name Residence or Business Address
PAUL R. FRANSWAY 24 FRANK LLOYD WRIGHT DR., ANN ARBOR, MI 48105
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ARTICLE VI (OPTIONAL. DELETE IF NOT APPLICABLE)
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When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditors or any class of them or
between this corporation and its shareholders or any class of them, a court of
equity jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors of
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders and also on this corporation.
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ARTICLE VII (OPTIONAL. DELETE IF NOT APPLICABLE)
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Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice,
and without a vote, if consents in writing, setting forth the action so taken,
are signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote on the action were present and
voted. The written consents shall bear the date of signature of each shareholder
who signs the consent. No written consents shall be effective to take the
corporate action referred to unless, within 60 days after the record date for
determining shareholders entitled to express consent to or to dissent from a
proposal without a meeting, written consents dated not more than 10 days before
the record date and signed by a sufficient number of shareholders to take the
action are delivered to the corporation. Delivery shall be to the corporation's
registered office, its principal place of business, or an officer or agent of
the corporation having custody of the minutes of the proceedings of its
shareholders. Delivery made to a corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who would have
been entitled to notice of the shareholder meeting if the action had been taken
at a meeting and who have not consented in writing.
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<PAGE>
Use space below for additional Articles or for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
See attached pages.
I, (We), the incorporator(s) sign my (our) name(s) this _______ day of ________,
__________.
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<PAGE>
Name of person or organization Preparer's name and business
remitting fees: telephone number:
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INFORMATION AND INSTRUCTIONS
1. The Articles of Incorporation cannot be filed until this form, or a
comparable document, is submitted.
2. Submit one original of this document. Upon filing, the document will be
added to the records of the Corporation, Securities and Land Development
Bureau. The original will be returned to your registered office address,
unless you enter a different address in the box on the front of this
document.
Since the document will be maintained on optical disk media, it is important
that the filing be legible. Documents with poor black and white contrast, or
otherwise illegible, will be rejected.
3. This document is to be used pursuant to the provisions of Act 284, P.A. of
1972, by one or more persons for the purpose of forming a domestic profit
corporation.
4. Article I - The corporate name of a domestic profit corporation is required
to contain one of the following words or abbreviations: "Corporation",
"Company", "Incorporated", "Limited", "Corp.," "Co.", "Inc.", or "Ltd.".
5. Article II - State, in general terms, the character of the particular
business to be carried on. Under section 202(b) of the Act, it is sufficient
to state substantially, alone or with specifically enumerated purposes, that
the corporation may engage in any activity within the purposes for which
corporations may be formed under the Act. The Act requires, however, that
educational corporations state their specific purposes.
6. Article III - Indicate the total number of shares which the corporation has
authority to issue. If there is more than one class or series of shares,
state the relative rights, preferences and limitations of the shares of each
class in Article III(2).
7. Article IV - A post office box may not be designated as the address of the
registered office.
8. Article V - The Act requires one or more incorporators. Educational
corporations are required to have at least three (3) incorporators. The
address(es) should include a street number and name (or other designation),
city and state.
9. The duration of the corporation should be stated in the Articles only if not
perpetual.
10. This document is effective on the date endorsed "filed" by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be stated as an additional article.
11. The Articles must be signed by each incorporator. The names of the
incorporators as set out in Article V should correspond with the signatures.
12. FEES: Make remittance payable to the State of Michigan. Include corporation
name on check or money order.
NONREFUNDABLE FEE...................................................$10.00
ORGANIZATION FEE: first 60,000 authorized
shares or portion thereof...........................................$50.00
TOTAL MINIMUM FEE...................................................$60.00
ADDITIONAL ORGANIZATION FEE FOR AUTHORIZED SHARES OVER 60,000:
each additional 20,000 authorized shares
or portion thereof.....................................$30.00
maximum fee per filing for first
10,000,000 authorized shares............ ...........$5,000.00
each additional 20,000 authorized shares
or portion thereof in excess of 10,000,000 shares......$30.00
maximum fee per filing for authorized shares
in excess of 10,000,000 shares....................$200,000.00
To submit by mail: To submit in person:
Michigan Department of Consumer & 6546 Mercantile Way
Industry Services Corporation, Securities Lansing, MI
and Land Development Bureau Telephone: (517) 241-6400
Corporation Division
7150 Harris Drive
P.O. Box 30054 Fees may be paid by VISA or
Lansing, MI 48909 Mastercard when delivered in
person to our office.
To submit electronically: (517) 334-8048
*To use this service complete a MICH-ELF application to provide your VISA or
Mastercard number. Include your assigned Filer number on your transmission. To
obtain an application for a filer number, contact (517) 241-6420 or visit our
WEB site at http://www.cis.state.mi.us/corp/.
<PAGE>
DP CA CORP INC.
ARTICLES OF INCORPORATION
ARTICLE VIII
SECTION 8.1 Limitation of Liability. A Director of the Corporation shall not be
personally liable to the Corporation or its Shareholders for monetary damages
resulting from a breach of fiduciary duties imposed on the Director, except for
liability:
(a) resulting from breach of the Director's duty of loyalty to the
Corporation or its Shareholders;
(b) resulting from any acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law;
(c) resulting from a violation of Section 551(1) of the Michigan
Business Corporation Act (the "Act"); or
(d) resulting from any transaction from which the Director derived an
improper personal benefit.
In the event that the Michigan Business Corporation Act is hereafter amended to
authorize corporation action further eliminating or limiting personal liability
of directors, then the liability of the Directors of this Corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan
Corporation Act so amended. Any repeal, modification or amendment of any
provision in these Articles of Incorporation inconsistent with this Article
shall not adversely affect any right or protection of a Director of the
Corporation existing at the time of such repeal, modification or amendment for
or with respect to any act or omission occurring prior to the time of such
repeal, modification or amendment.
ARTICLE IX
SECTION 9.1 Action by Third Party. Except to the extent limited by the Act, the
Corporation has the power to indemnify a person who was or is a party or is
threatened to be made a party to a threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, other than an action by or in the right of the
Corporation, by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether profit or not, against expenses, including attorneys'
fees, judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit or
proceeding, if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation or its stockholders, and with respect to a criminal action or
proceeding, if the person had no reasonable cause to
<PAGE>
believe his or her conduct was unlawful. The termination of an action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Corporation or its
stockholders, and, with respect to a criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
SECTION 9.2 Action by or in Right of Corporation. Except to the extent limited
by the Act, the Corporation has the power to indemnify a person who was or is a
party to or is threatened to be made a party to a threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise, whether for profit or not, against expenses,
including actual and reasonable attorneys' fees, and amount paid in settlement
incurred by the person in connection with the action or suit, if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the Corporation or its stockholders.
However, indemnification shall not be made for a claim, issue, or matter in
which the person has been found liable to the Corporation unless and only to the
extent that the court in which the action or suit was brought has determined
upon application that, despite the adjudication of liability, but in view of all
circumstances of the case, the person is fairly and reasonably entitled to
indemnification for the expenses which the court considers proper.
SECTION 9.3 Expense. Indemnification against expenses:
(a) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in
defense of an action, suit, or proceeding referred to above in
Sections 9.1 or 9.2, or in defense of a claim, issue, or matter in
the action, suit or proceeding, he or she shall be indemnified
against expenses, including actual and reasonable attorneys' fees,
incurred by him or her in connection with the action, suit, or
proceeding and an action, suit or proceeding brought to enforce
the mandatory indemnification provided in this Subsection.
(b) An indemnification under Sections 9.1 and 9.2 above, unless
ordered by a court, shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Subsections 9.1 and
9.2 above. This determination shall be made in any of the
following ways:
<PAGE>
(i) By a majority vote of a quorum of the Board consisting
of directors who were not parties to the action, suit
or proceeding.
(ii) If the quorum described in subdivision (i) is not
obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The
committee shall consist of not less than two (2)
disinterested directors.
(iii) By independent legal counsel in a written opinion.
(iv) By the stockholders.
(c) If a person is entitled to indemnification under Section 9.1 or
9.2 for a portion of expenses including attorneys' fees,
judgments, penalties, fines, and amounts paid in settlement, but
not for the total amount thereof, the Corporation may indemnify
the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is
entitled to be indemnified.
SECTION 9.4 Payment in Advance. Expenses incurred in defending a civil or
criminal action, suit, or proceeding described in Sections 9.1 or 9.2 above may
be paid by the Corporation in advance of the final disposition of the action,
suit, or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee, or agent to repay the expenses if it is ultimately
determined that the person is not entitled to be indemnified by the Corporation.
The undertaking shall be by unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
SECTION 9.5 Nonexclusivity.
(a) The indemnification or advancement of expenses provided under
Sections 9.1 to 9.4 is not exclusive of other rights to which a
person seeking indemnification or advancement of expenses may be
entitled under the Articles of Incorporation, Bylaws or a
contractual agreement. However, the total amount of expenses
advanced or indemnified from all sources combined shall not exceed
the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
(b) The indemnification provided for in Sections 9.1 to 9.4 continues
as to a person who ceases to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of the person.
SECTION 9.6 Insurance. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a
<PAGE>
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under Sections 9.1 to 9.5.
SECTION 9.7 Constituent Corporations. For purposes of Sections 9.1 to 9.6 above,
"corporation" includes all constituent corporations absorbed in a consolidation
or merger and the resulting or surviving corporation, so that a person who is or
was a director, officer, employee, or agent of the constituent corporation or is
or was serving at the request of the constituent corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise whether for
profit or not shall stand in the same position under the provisions of this
Subsection with respect to the resulting or surviving corporation as the person
would if he or she had served the resulting or surviving corporation in the same
capacity.
SECTION 9.8 Definitions. For the purposes of Sections 9.1 to 9.6 above, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the Corporation" shall include any service as a
director, officer, employee, or agent of the Corporation which imposes duties
on, or involves services by, the director, officer, employee, or agent with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be considered to have acted in a manner "not opposed to the best
interests of the Corporation or its stockholders" as referred to in Sections 9.1
and 9.2 above.
<PAGE>
EXHIBIT 3.18
BY-LAWS
OF
DP CA COMM INC.
ARTICLE I
OFFICE
SECTION 1.1 Principal Office. The Corporation shall maintain its
principal office in the Township of Ann Arbor, State of Michigan.
SECTION 1.2 Registered Office. The Corporation shall maintain a
registered office in the State of Michigan as required by the Michigan Business
Corporation Act (the "Act").
SECTION 1.3 Other Offices. The Corporation may have such offices within
and without the State of Michigan as the business of the Corporation may require
from time to time. The authority to establish or close such other offices may be
delegated by the Board of Directors to one or more of the Corporation's
officers.
SECTION 1.4 Place of Meetings. All meetings of the Corporation's
stockholders or Board of Directors shall be held at the Corporation's principal
office or at such place as shall be designated in the notice of such meetings.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 Annual Meeting of Stockholders. An annual meeting of the
stockholders shall be held in each year, on the 3rd Wednesday of March, or if
such date is a holiday, the meeting shall be on the next succeeding business
day. One of the purposes of the annual meeting of the stockholders shall be to
elect a Board of Directors. If the annual meeting is not held on the date
designated therefor, the Board of Directors shall cause the meeting to be held
thereafter as convenient but within ninety (90) days after said designated date.
SECTION 2.2 Special Meetings.A special meeting of the stockholders may
be called at any time by the President, or by a majority of the Board of
Directors, or the holders of not less than twenty-five percent (25%) of all the
shares entitled to vote at such special meeting. The method by which such
meeting may be
<PAGE>
called is as follows: Upon receipt of a specification in writing setting forth
the date and purposes of such proposed special meeting, signed by the President,
or by a majority of the Board of Directors, or by stockholders as above
provided, the Secretary of this Corporation shall prepare, sign and mail the
notices requisite to such meeting.
SECTION 2.3 Notice of Stockholders' Meeting. Not less than ten (10)
days, nor more than sixty (60) days, prior to the date of an annual or special
meeting of stockholders, written notice of the time, place and purposes of such
meeting shall be mailed, as hereinafter provided, to each stockholder entitled
to vote at such meeting. Every notice shall be deemed duly served when the same
has been deposited in the United States mail, or with a private courier service
(such as Federal Express), with postage prepaid, addressed to the stockholder at
the stockholder's address as it appears on the Corporation's records, or if a
stockholder shall have filed with the Secretary of the Corporation a written
request that the notice be sent to some other address, then at such other
address.
SECTION 2.4 Waiver of Notice.Notice of the time, place and purpose of
any meeting of the stockholders may be waived by telegram, telecopy, confirmed
facsimile or other writing, either before or after such meeting has been held.
The attendance of any stockholder at any stockholders' meeting shall constitute
a waiver of any notice to which such stockholder may be entitled pursuant to
these By-Laws, except when the stockholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully convened.
SECTION 2.5 Quorum of Stockholders. A majority of the outstanding
shares of this Corporation entitled to vote, represented by the record holders
thereof in person or by proxy, shall constitute a quorum at any meeting of the
stockholders. The stockholders present in person or by proxy at such meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
stockholders which results in less than a quorum remaining. Whether or not a
quorum is present, the meeting may be adjourned by a vote of the shares present.
SECTION 2.6 Record Date for Determination of Stockholders. The Board of
Directors shall fix a record date for determining stockholders entitled to
receive payment of a share dividend or distribution, or allotment of a right,
which date shall not precede the date on which the resolution fixing the record
date is adopted by the Board of Directors. The date shall not be more than 60
days before the payment of the share dividend or distribution or allotment of a
right or other action.
SECTION 2.7 Transaction of Business. Business transacted at an annual
meeting of stockholders may include all such business as may properly come
<PAGE>
before the meeting. Business transacted at a special meeting of the stockholders
shall be limited to the purposes set forth in the notice of the meeting.
SECTION 2.8 Voting. Except as otherwise required by the Act or the
Corporation's Articles of Incorporation, each stockholder of the Corporation
shall, at every meeting of the stockholders, be entitled to one vote in person
or by proxy for each share of capital stock of this Corporation held by such
stockholder, subject, however, to the full effect of the limitations imposed by
the fixed record date for determination of stockholders set forth in Section 2.6
of this Article.
SECTION 2.9 Proxies. No proxy shall be deemed operative unless and
until signed by the stockholder and filed with the Secretary of the Corporation.
All proxies shall be executed by the appointing stockholder or such
stockholder's authorized attorney; provided that no proxy shall be valid for
more than three (3) months after execution of such proxy unless the proxy
specifically provides for a longer period.
SECTION 2.10 Vote by Stockholder Corporation. Any other corporation
owning shares of this Corporation entitled to vote may vote upon the same by the
president of such stockholder corporation, or by proxy appointed by him, unless
some other person shall be appointed to vote upon such shares by resolution of
the Board of Directors of such stockholder corporation.
SECTION 2.11 Inspectors of Election. Whenever any person entitled to
vote at a meeting of the stockholders shall request the appointment of
inspectors, the chairman of the meeting shall appoint not more than three
inspectors, who need not be stockholders. If the right of any person to vote at
such meeting shall be challenged, the inspectors shall determine such right. The
inspectors shall receive and count the votes either upon an election or for the
decision of any question, and shall determine the result. Their certificate of
any vote shall be prima facie evidence thereof.
SECTION 2.12 Action by Written Consent. Any action required or
permitted by the Michigan Business Corporation Act to be taken at an annual or
special meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if consents in writing, setting forth the action so
taken, are signed by the holders of all of the outstanding shares of the
Corporation entitled to vote.
SECTION 2.13 Order of Business. The order of business at the annual
meeting of the stockholders, and so far as practicable at all other meetings of
the stockholders, shall be as follows:
1. Proof of Notice of the Meeting
<PAGE>
2. Determination of a Quorum
3. Election of Directors
4. Unfinished Business
5. New Business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws
or the Act, Robert's Rules of Order shall be used to resolve all to resolve all
procedural disputes that may arise at a stockholder's meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1 Authority. The Board of Directors shall have ultimate
authority over the conduct and management of the business and affairs of the
Corporation.
SECTION 3.2 Number and Term. Except as otherwise provided by the
Corporation's Articles of Incorporation, the number of directors of the
Corporation shall be fixed from time to time by the vote of a majority of the
entire Board; provided, that the number of directors shall not be less than one
nor shall the action of the Board shorten the term of any director at that time
in office.
SECTION 3.3 Term. Each Director shall hold office from the date of
election and qualification until his or her successor shall have been duly
elected, or until his or her earlier removal, resignation, death or incapacity.
SECTION 3.4 Removal. Any Director may be removed from office, with or
without cause, by a vote of a majority of the shares of the Corporation's shares
entitled to vote.
SECTION 3.5 Vacancies. Vacancies in the Board of Directors (including
vacancies resulting from an increase in the number of directors) shall be filled
by appointment made by a majority of the remaining directors. Each person so
appointed shall hold office until the next election of Directors or until his or
her successor shall be elected and qualified.
SECTION 3.6 Organizational Meeting of Board. At the place of holding
the annual meeting of stockholders, and immediately following the same, the
Board of Directors as constituted upon final adjournment of such annual meeting,
shall convene for the purposes of electing officers, setting the selling price
for the Corporation's shares as provided in Section 3.18 and transacting any
other business properly brought before it, provided that the organizational
meeting in any
<PAGE>
year may be held at a different time and place than that herein provided by
consent of a majority of the Directors of such new Board.
SECTION 3.7 Regular Meetings of the Board. Regular meetings of the
Board of Directors may be held at times and places agreed upon by a majority of
the directors at any meeting of the Board of Directors and such regular meetings
may be held at such times and places without any further notice of the time,
place or purposes of such regular meetings.
SECTION 3.8 Special Meetings of the Board. Special meetings of the
Board of Directors may be called at the request of any member of the Board at
any time by means of written notice of the time, place and purpose thereof
mailed to each director not less than one (1) day, nor more than sixty (60)
days, prior to the date fixed for the holding of any special meeting of
Directors, but action taken at any such meeting shall not be invalidated for
want of notice if such notice shall be waived as hereinafter provided.
SECTION 3.9 Notices. Every notice of a meeting of the Board of
Directors shall be deemed duly served when the same has been deposited in the
United States mail, or with a private courier service (such as Federal Express),
with postage prepaid, addressed to the director at his or her last known
address, or if a director shall have filed with the Secretary of the Corporation
a written request that the notice be sent to some other address, then at such
other address.
SECTION 3.10 Waiver of Notice.Notice of the time, place and purpose of
any meeting of the Board of Directors may be waived by telegram, telecopy,
confirmed facsimile or other writing, either before or after such meeting has
been held. The attendance of any director at any directors' meeting shall
constitute a waiver of any notice to which such director may be entitled
pursuant to these By-Laws, except when the director attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully convened.
SECTION 3.11 Participation by Telecommunications. Any Director may
participate in, and be regarded as present at, any meeting of the Board of
Directors by means of conference telephone or any other means of communication
by which all persons participating in the meeting can hear each other at the
same time.
SECTION 3.12 Quorum of Directors. A majority of the directors then in
office shall constitute a quorum for transaction of business.
SECTION 3.13 Action. The Board of Directors shall take action pursuant
to resolutions adopted by the affirmative vote of a majority of the Directors
participating in a meeting at which a quorum is present, or affirmative
<PAGE>
vote of a greater number of Directors where required by the Corporation's
Articles of Incorporation or by law.
SECTION 3.14 Action by Unanimous Written Consent. Any action required
or permitted to be taken by the Board of Directors of the Corporation may be
taken without a meeting, without prior notice, and without a vote if consents in
writing, setting forth the action so taken, are signed by all of the directors
of the Corporation.
SECTION 3.15 Selection of Officers. The Board of Directors shall select
a president, treasurer, and a secretary, and may select a chairman of the Board,
one or more vice presidents, one or more assistant treasurers, and one or more
assistant secretaries, and any other officers that the Board of Directors deems
to be in the best interests of the Corporation, which officers may be appointed
and their duties prescribed by resolution of the Board.
SECTION 3.16 Power to Appoint Other Officers and Agents. The Board of
Directors shall have power to appoint such other officers and agents as the
Board may deem necessary for transaction of the business of the Corporation.
SECTION 3.17 Removal of Officers and Agents. Any officer or agent may
be removed by the Board of Directors whenever, in the judgment of the Board, the
business interests of the Corporation will be served thereby.
SECTION 3.18 Share Sale Price.At each organizational meeting of the
Board of Directors, the Board shall set the share selling price for purposes of
various Stock Purchase Agreements entered into from time to time between the
Corporation and its stockholders.
SECTION 3.19 Delegation of Powers. For any reason deemed sufficient by
the Board of Directors, whether occasioned by absence or otherwise, the Board
may delegate all or any of the powers and duties of any officer to any other
officer or director, but no officer or director shall execute, verify or
acknowledge any instrument in more than one capacity unless specifically
authorized by the Board of Directors.
SECTION 3.20 Power to Appoint Committees of the Board. The Board of
Directors shall have power to designate, by resolution, committees composed of
one or more directors who, to the extent provided in such resolution, may
exercise the business and affairs of the Corporation except as restricted by
statute. In the absence or disqualification of a member of the committee, the
members thereof present at a meeting and not disqualified from voting, whether
or not they constitute a quorum, may unanimously appoint another director of the
Board to act at the meeting in place of such an absent or disqualified member. A
majority of the
<PAGE>
members of any committee of the Board will constitute a quorum for all committee
action.
SECTION 3.21 Compensation. The Board of Directors may by resolution
authorize the payment to all Directors of a uniform sum for attendance at each
meeting or a uniform stated fee as a Director. No such payment shall preclude
any Director from serving the Corporation in any other capacity and receiving
compensation therefor. The Board of Directors may also by resolution authorize
the payment of reimbursement of all expenses of each Director related to the
Director's attendance at meetings.
SECTION 3.22 Order of Business. The order of business at all meetings
of the Board of Directors shall be:
1. Determination of a quorum
2. Reading and disposal of all unapproved minutes
3. Reports of officers and committees
4. Unfinished business
5. New business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws
or the Act, Robert's Rules of Order shall be used to resolve all procedural
disputes that may arise at a Director's meeting.
ARTICLE IV
OFFICERS
SECTION 4.1 In General. The officers of the Corporation shall consist
of a chairman, a president, a vice president, a secretary, a treasurer and such
additional vice presidents, assistant secretaries, assistant treasurers, and
other officers and agents as the Board of Directors from time to time deems
advisable. All officers shall be appointed by the Board to serve at its
pleasure. Except as otherwise provided by law or in the Articles of
Incorporation, any officer may be removed by the Board of Directors at any time,
with or without cause. Any vacancy, however occurring, in any office may be
filled by the Board of Directors for the unexpired term. One person may hold two
or more offices. Each officer shall exercise authority and perform the duties
set forth in these By-Laws and any additional authority and duties as the Board
of Directors shall determine from time to time.
<PAGE>
SECTION 4.2 Chairman of the Board. The Chairman of the Board shall be
selected by and from the membership of the Board of Directors. He shall conduct
all meetings of the Board and shall perform all duties incident thereto.
SECTION 4.3 President. The President shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect. He shall be ex-officio, a
member of all standing committees, and shall have the general powers and duties
of supervision and management usually vested in the office of president of a
corporation.
SECTION 4.4 Vice Presidents. Each Vice President shall serve under the
direction of the President and shall perform such other duties as the Board of
Directors shall from time to time direct.
SECTION 4.5 Secretary. Except as otherwise provided by these By-Laws or
otherwise determined by the Board of Directors, the Secretary of the Corporation
shall serve under the direction of the President and shall perform such other
duties as the Board shall from time to time direct. The Secretary shall attend
all meetings of the stockholders and the Board of Directors, and shall preserve
in the books of the Company true minutes of the proceedings of all such
meetings. The Secretary shall safely keep in his or her custody the seal of the
Corporation, and shall have authority to affix the same to all instruments where
its use is required. The Secretary shall give all notices required by statute,
by-law or resolution.
SECTION 4.6 Treasurer. The Treasurer shall serve under the President
and shall perform such other duties as the Board shall from time to time direct.
The Treasurer shall have custody of all corporate funds and securities, and
shall keep in books belonging to the Corporation full and accurate accounts of
all receipts and disbursements. The Treasurer shall deposit all monies,
securities and other valuable effects in the name of the Corporation in such
depositories as may be designated for that purpose by the Board of Directors and
shall disburse the funds of the Corporation as may be ordered by the Board. The
Treasurer shall upon request report to the Board of Directors on the financial
condition of the Corporation.
SECTION 4.7 Assistant Secretary and Assistant Treasurer. The Assistant
Secretary, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary. The Assistant Treasurer, in the
absence or disability of the Treasurer, shall perform the duties and exercise
the powers of the Treasurer.
<PAGE>
ARTICLE V
STOCK AND TRANSFERS
SECTION 5.1 Certificates for Shares. Every stockholder shall be
entitled to a certificate of the shares to which he has subscribed, said
certificate to be signed by the Chairman of the Board, President or a Vice
President, and may be sealed with the seal of the Corporation or a facsimile
thereof certifying the number and class of shares; provided, that where such
certificate is signed by a transfer agent or an assistant transfer agent, or by
a transfer clerk acting on behalf of such entity, and by a registrar, the
signature of any such officers may be a facsimile.
If the shares of the Corporation shall become listed on a national
securities exchange, the Corporation may eliminate certificates representing
such shares and provide such shares and provide for such other methods of
recording, noticing ownership and disclosure as may be provided by the rules of
that national securities exchange.
SECTION 5.2 Transferable Only on Books of the Corporation. Shares shall
be transferable only on the books of the Corporation by the holder thereof in
person or by an attorney lawfully constituted in writing, and upon surrender of
the certificate therefor. A record shall be made of every such transfer and
issue. Whenever any transfer is made for collateral security and not absolutely,
the fact shall be so expressed in the entry of such transfer.
SECTION 5.3 Stock Ledger. The Corporation shall maintain a stock ledger
which contains the name and address of each stockholder and the number of shares
of stock of each class which the stockholder holds. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate of the
stock ledger shall be kept at the office of a transfer agent for the particular
class of stock, within or without the State of Michigan, or, if none, at the
principal office of the Corporation in the State of Michigan.
SECTION 5.4 Registered Stockholders. The Corporation shall have the
right to treat the registered holder of any share as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, save as may be otherwise provided by
the laws of Michigan.
SECTION 5.5 Cancellation; Missing Certificates. All certificates
surrendered to the Corporation for transfer shall be cancelled and no new
certificates representing the same number of shares shall be issued until the
former
<PAGE>
certificate or certificates for the same number of shares shall have been so
surrendered and cancelled. In the event that a certificate of stock is lost or
destroyed another may be issued and unless waived by the President, the party
alleging loss or destruction of the certificate shall post a bond or agree to
indemnify the Corporation, at the election of the President, in an amount not
exceeding two (2) times the value of the stock.
ARTICLE VI
INSTRUMENTS
SECTION 6.1 Checks, Etc. All checks, drafts and orders for payment of
money shall be signed in the name of the Corporation or any assumed name under
which the Corporation has duly filed a certificate therefor and shall be
countersigned by such officers or agents as the Board of Directors shall from
time to time designate for that purpose.
SECTION 6.2 Contracts, Conveyances, Etc. When the execution of any
contract, conveyance or other instrument has been authorized without
specification of the executing officers, the president or any vice president, or
the treasurer or assistant treasurer, or the secretary or assistant secretary,
may execute the same in the name and on behalf of this Corporation, and may
affix the corporate seal thereto. The Board of Directors shall have power to
designate the officers and agents who shall have authority to execute any
instrument on behalf of this Corporation.
SECTION 6.3 Voting Shares of Other Corporations. Stock of other
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice President or a proxy appointed by either of them.
The Board of Directors may by resolution appoint some other person to vote the
shares.
ARTICLE VII
AMENDMENT OF BY-LAWS
SECTION 7.1 Amendment. These By-Laws may be amended, altered, changed,
added to or repealed by the affirmative vote of a majority of the shares
entitled to vote at any regular or special meeting of the stockholders if notice
of the proposed amendment, alteration, change, addition or repeal be contained
on the notice of the meeting, or by the affirmative vote of the majority of the
Board of Directors if notice of the proposed amendment, alteration, change,
addition or repeal be contained in the notice of the meeting or is given at the
meeting preceding the meeting at which the change is adopted, provided, however,
that no change of the date for the annual meeting of the stockholders shall be
made within thirty (30) days next before the day on which such meeting is to be
held unless consented to in writing, or by a resolution adopted at a meeting, by
a majority of all stockholders entitled to vote at the annual meeting.
<PAGE>
EXHIBIT 3.19
MICHIGAN DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
This document is effective on the date filed, unless a
subsequent effective date within 90 days after received date
is stated in the document.
- --------------------------------------------------------------------------------
Name
PAUL R. FRANSWAY, PEAR SPEARLING EGGAN & MUSKOVITZ, P.C
- --------------------------------------------------------------------------------
Address
24 FRANK LLOYD WRIGHT DR.
- --------------------------------------------------------------------------------
City State Zip Code
ANN ARBOR MI 48105 EFFECTIVE DATE:
- --------------------------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS
YOU ENTER ABOVE. IF LEFT BLANK DOCUMENT WILL
BE MAILED TO THE REGISTERED OFFICE.
------------------
ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned
corporation executes the following Articles:
ARTICLE I
- --------------------------------------------------------------------------------
The name of the corporation is:
DP CA CORP INC.
- --------------------------------------------------------------------------------
ARTICLE II
- --------------------------------------------------------------------------------
The purpose or purposes for which the corporation is formed is to engage in any
activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
- --------------------------------------------------------------------------------
ARTICLE III
- --------------------------------------------------------------------------------
The total authorized shares:
1. Common Shares 60,000
-------------------------------------------------------
Preferred Shares
-------------------------------------------------------
2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ARTICLE IV
- --------------------------------------------------------------------------------
1. The address of the registered office is:
30600 TELEGRAPH RD. BINGHAM FARMS , Michigan 48205
------------------------------------------------ -----------
(Street Address) (City) (ZIP Code)
2. The mailing address of the registered office, if different than above:
, Michigan
------------------------------------------------ ----------
(Street Address) (City) (ZIP Code)
3. The name of the resident agent at the registered office is:
CT CORPORATION SYSTEM
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE V
- --------------------------------------------------------------------------------
The name(s) and address(es) of the incorporator(s) is (are) as follows:
Name Residence or Business Address
PAUL R. FRANSWAY 24 FRANK LLOYD WRIGHT DR., ANN ARBOR, MI 48105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE VI (OPTIONAL. DELETE IF NOT APPLICABLE)
- --------------------------------------------------------------------------------
When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditor or any class of them or
between this corporation and its shareholders or any class of their, a court of
equity jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such maner as the
court directs. If a majority in number representing 3/4 in value of the
creditors or class or creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders and also on this corporation.
- --------------------------------------------------------------------------------
ARTICLE VII (OPTIONAL. DELETE IF NOT APPLICABLE)
- --------------------------------------------------------------------------------
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice,
and without a vote, if consents in writing, setting forth the action so taken,
are signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote on the action were present and
voted. The written consents shall bear the date of signature of each shareholder
who signs the consent. No written consents shall be effective to take the
corporate action referred to unless, within 60 days after the record date for
determining shareholders entitled to express consent to or to dissent from a
proposal without a meeting, written consents dated not more than 10 days before
the record date and signed by a sufficient number of shareholders to take the
action are delivered to the corporation. Delivery shall be to the corporation's
registered office, its principal place of business, or an officer or agent of
the corporation having custody of the minutes of the proceedings of its
shareholders. Delivery made to a corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who would have
been entitled to notice of the shareholder meeting if the action had been taken
at a meeting and who have not consented in writing.
- --------------------------------------------------------------------------------
<PAGE>
Use space below for additional Articles or for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
See attached pages.
I, (We), the incorporator(s) sign my (our) name(s) this _______ day of ________,
__________.
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
<PAGE>
EXHIBIT 3.19
Name of person or organization Preparer's name and business
remitting fees: telephone number:
------------------------------ ----------------------------
------------------------------ ----------------------------
INFORMATION AND INSTRUCTIONS
1. The Articles of Incorporation cannot be filed until this form, or a
comparable document, is submitted.
2. Submit one original of this document. Upon filing, the document will be
added to the records of the Corporation, Securities and Land Development
Bureau. The original will be returned to your registered office address,
unless you enter a different address in the box on the front of this
document.
Since the document will be maintained on optical disk media, it is important
that the filing be legible. Documents with poor black and white contrast, or
otherwise illegible, will be rejected.
3. This document is to be used pursuant to the provisions of Act 284, P.A. of
1972, by one or more persons for the purpose of forming a domestic profit
corporation.
4. Article I - The corporate name of a domestic profit corporation is required
to contain one of the following words or abbreviations: "Corporation",
"Company", "Incorporated", "Limited", "Corp.," "Co.", "Inc.", or "Ltd.".
5. Article II - State, in general terms, the character of the particular
business to be carried on. Under section 202(b) of the Act, it is sufficient
to state substantially, alone or with specifically enumerated purposes, that
the corporation may engage in any activity within the purposes for which
corporations may be formed under the Act. The Act requires, however, that
educational corporations state their specific purposes.
6. Article III - Indicate the total number of shares which the corporation has
authority to issue. If there is more than one class or series of shares,
state the relative rights, preferences and limitations of the shares of each
class in Article III(2).
7. Article IV - A post office box may not be designated as the address of the
registered office.
8. Article V - The Act requires one or more incorporators. Educational
corporations are required to have at least three (3) incorporators. The
address(es) should include a street number and name (or other designation),
city and state.
9. The duration of the corporation should be stated in the Articles only if not
perpetual.
10. This document is effective on the date endorsed "filed" by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be stated as an additional article.
11. The Articles must be signed by each incorporator. The names of the
incorporators as set out in Article V should correspond with the signatures.
12. FEES: Make remittance payable to the State of Michigan. Include corporation
name on check or money order.
NONREFUNDABLE FEE...................................................$10.00
ORGANIZATION FEE: first 60,000 authorized
shares or portion thereof...........................................$50.00
TOTAL MINIMUM FEE...................................................$60.00
ADDITIONAL ORGANIZATION FEE FOR AUTHORIZED SHARES OVER 60,000:
each additional 20,000 authorized shares
or portion thereof.....................................$30.00
maximum fee per filing for first
10,000,000 authorized shares............ ...........$5,000.00
each additional 20,000 authorized shares
or portion thereof in excess of 10,000,000 shares......$30.00
maximum fee per filing for authorized shares
in excess of 10,000,000 shares....................$200,000.00
To submit by mail: To submit in person:
Michigan Department of Consumer & 6546 Mercantile Way
Industry Services Corporation, Securities Lansing, MI
and Land Development Bureau Telephone: (517) 241-6400
Corporation Division
7150 Harris Drive
P.O. Box 30054
Lansing, MI 48909
To submit electronically: (517) 334-8048
*To use this service complete a MICH-ELF application to provide your VISA or
Mastercard number. Include your assigned Filer number on your transmission. To
obtain an application for a filer number, contact (517) 241-6420 or visit our
WEB site at http://www.cis.state.mi.us/corp/.
<PAGE>
DP CA CORP INC.
ARTICLES OF INCORPORATION
ARTICLE VIII
SECTION 8.1 Limitation of Liability. A Director of the Corporation shall not be
personally liable to the Corporation or its Shareholders for monetary damages
resulting from a breach of fiduciary duties imposed on the Director, except for
liability:
(a) resulting from breach of the Director's duty of loyalty to the
Corporation or its Shareholders;
(b) resulting from any acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law;
(c) resulting from a violation of Section 551(1) of the Michigan
Business Corporation Act (the "Act"); or
(d) resulting from any transaction from which the Director derived an
improper personal benefit.
In the event that the Michigan Business Corporation Act is hereafter amended to
authorize corporation action further eliminating or limiting personal liability
of directors, then the liability of the Directors of this Corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan
Corporation Act so amended. Any repeal, modification or amendment of any
provision in these Articles of Incorporation inconsistent with this Article
shall not adversely affect any right or protection of a Director of the
Corporation existing at the time of such repeal, modification or amendment for
or with respect to any act or omission occurring prior to the time of such
repeal, modification or amendment.
ARTICLE IX
SECTION 9.1 Action by Third Party. Except to the extent limited by the Act, the
Corporation has the power to indemnify a person who was or is a party or is
threatened to be made a party to a threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, other than an action by or in the right of the
Corporation, by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether profit or not, against expenses, including attorneys'
fees, judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit or
proceeding, if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation or its stockholders, and with respect to a criminal action or
proceeding, if the person had no reasonable cause to
<PAGE>
believe his or her conduct was unlawful. The termination of an action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Corporation or its
stockholders, and, with respect to a criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
SECTION 9.2 Action by or in Right of Corporation. Except to the extent limited
by the Act, the Corporation has the power to indemnify a person who was or is a
party to or is threatened to be made a party to a threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise, whether for profit or not, against expenses,
including actual and reasonable attorneys' fees, and amount paid in settlement
incurred by the person in connection with the action or suit, if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the Corporation or its stockholders.
However, indemnification shall not be made for a claim, issue, or matter in
which the person has been found liable to the Corporation unless and only to the
extent that the court in which the action or suit was brought has determined
upon application that, despite the adjudication of liability, but in view of all
circumstances of the case, the person is fairly and reasonably entitled to
indemnification for the expenses which the court considers proper.
SECTION 9.3 Expense. Indemnification against expenses:
(a) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in
defense of an action, suit, or proceeding referred to above in
Sections 9.1 or 9.2, or in defense of a claim, issue, or matter in
the action, suit or proceeding, he or she shall be indemnified
against expenses, including actual and reasonable attorneys' fees,
incurred by him or her in connection with the action, suit, or
proceeding and an action, suit or proceeding brought to enforce
the mandatory indemnification provided in this Subsection.
(b) An indemnification under Sections 9.1 and 9.2 above, unless
ordered by a court, shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Subsections 9.1 and
9.2 above. This determination shall be made in any of the
following ways:
<PAGE>
(i) By a majority vote of a quorum of the Board consisting
of directors who were not parties to the action, suit
or proceeding.
(ii) If the quorum described in subdivision (i) is not
obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The
committee shall consist of not less than two (2)
disinterested directors.
(iii) By independent legal counsel in a written opinion.
(iv) By the stockholders.
(c) If a person is entitled to indemnification under Section 9.1 or
9.2 for a portion of expenses including attorneys' fees,
judgments, penalties, fines, and amounts paid in settlement, but
not for the total amount thereof, the Corporation may indemnify
the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is
entitled to be indemnified.
SECTION 9.4 Payment in Advance. Expenses incurred in defending a civil or
criminal action, suit, or proceeding described in Sections 9.1 or 9.2 above may
be paid by the Corporation in advance of the final disposition of the action,
suit, or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee, or agent to repay the expenses if it is ultimately
determined that the person is not entitled to be indemnified by the Corporation.
The undertaking shall be by unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
SECTION 9.5 Nonexclusivity.
(a) The indemnification or advancement of expenses provided under
Sections 9.1 to 9.4 is not exclusive of other rights to which a
person seeking indemnification or advancement of expenses may be
entitled under the Articles of Incorporation, Bylaws or a
contractual agreement. However, the total amount of expenses
advanced or indemnified from all sources combined shall not exceed
the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
(b) The indemnification provided for in Sections 9.1 to 9.4 continues
as to a person who ceases to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of the person.
SECTION 9.6 Insurance. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a
<PAGE>
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under Sections 9.1 to 9.5.
SECTION 9.7 Constituent Corporations. For purposes of Sections 9.1 to 9.6 above,
"corporation" includes all constituent corporations absorbed in a consolidation
or merger and the resulting or surviving corporation, so that a person who is or
was a director, officer, employee, or agent of the constituent corporation or is
or was serving at the request of the constituent corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise whether for
profit or not shall stand in the same position under the provisions of this
Subsection with respect to the resulting or surviving corporation as the person
would if he or she had served the resulting or surviving corporation in the same
capacity.
SECTION 9.8 Definitions. For the purposes of Sections 9.1 to 9.6 above, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the Corporation" shall include any service as a
director, officer, employee, or agent of the Corporation which imposes duties
on, or involves services by, the director, officer, employee, or agent with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be considered to have acted in a manner "not opposed to the best
interests of the Corporation or its stockholders" as referred to in Sections 9.1
and 9.2 above.
<PAGE>
EXHIBIT 3.20
BY-LAWS
OF
DP CA CORP INC.
ARTICLE I
OFFICE
SECTION 1.1 Principal Office. The Corporation shall maintain its
principal office in the Township of Ann Arbor, State of Michigan.
SECTION 1.2 Registered Office. The Corporation shall maintain a
registered office in the State of Michigan as required by the Michigan Business
Corporation Act (the "Act").
SECTION 1.3 Other Offices. The Corporation may have such offices within
and without the State of Michigan as the business of the Corporation may require
from time to time. The authority to establish or close such other offices may be
delegated by the Board of Directors to one or more of the Corporation's
officers.
SECTION 1.4 Place of Meetings. All meetings of the Corporation's
stockholders or Board of Directors shall be held at the Corporation's principal
office or at such place as shall be designated in the notice of such meetings.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 Annual Meeting of Stockholders. An annual meeting of the
stockholders shall be held in each year, on the 3rd Wednesday of March, or if
such date is a holiday, the meeting shall be on the next succeeding business
day. One of the purposes of the annual meeting of the stockholders shall be to
elect a Board of Directors. If the annual meeting is not held on the date
designated therefor, the Board of Directors shall cause the meeting to be held
thereafter as convenient but within ninety (90) days after said designated date.
SECTION 2.2 Special Meetings. A special meeting of the stockholders may
be called at any time by the President, or by a majority of the Board of
Directors, or the holders of not less than twenty-five percent (25%) of all the
shares entitled to vote at such special meeting. The method by which such
meeting may be
<PAGE>
called is as follows: Upon receipt of a specification in writing setting forth
the date and purposes of such proposed special meeting, signed by the President,
or by a majority of the Board of Directors, or by stockholders as above
provided, the Secretary of this Corporation shall prepare, sign and mail the
notices requisite to such meeting.
SECTION 2.3 Notice of Stockholders' Meeting. Not less than ten (10)
days, nor more than sixty (60) days, prior to the date of an annual or special
meeting of stockholders, written notice of the time, place and purposes of such
meeting shall be mailed, as hereinafter provided, to each stockholder entitled
to vote at such meeting. Every notice shall be deemed duly served when the same
has been deposited in the United States mail, or with a private courier service
(such as Federal Express), with postage prepaid, addressed to the stockholder at
the stockholder's address as it appears on the Corporation's records, or if a
stockholder shall have filed with the Secretary of the Corporation a written
request that the notice be sent to some other address, then at such other
address.
SECTION 2.4 Waiver of Notice. Notice of the time, place and purpose of
any meeting of the stockholders may be waived by telegram, telecopy, confirmed
facsimile or other writing, either before or after such meeting has been held.
The attendance of any stockholder at any stockholders' meeting shall constitute
a waiver of any notice to which such stockholder may be entitled pursuant to
these By-Laws, except when the stockholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully convened.
SECTION 2.5 Quorum of Stockholders. A majority of the outstanding
shares of this Corporation entitled to vote, represented by the record holders
thereof in person or by proxy, shall constitute a quorum at any meeting of the
stockholders. The stockholders present in person or by proxy at such meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
stockholders which results in less than a quorum remaining. Whether or not a
quorum is present, the meeting may be adjourned by a vote of the shares present.
SECTION 2.6 Record Date for Determination of Stockholders. The Board of
Directors shall fix a record date for determining stockholders entitled to
receive payment of a share dividend or distribution, or allotment of a right,
which date shall not precede the date on which the resolution fixing the record
date is adopted by the Board of Directors. The date shall not be more than 60
days before the payment of the share dividend or distribution or allotment of a
right or other action.
SECTION 2.7 Transaction of Business. Business transacted at an annual
meeting of stockholders may include all such business as may properly come
<PAGE>
before the meeting. Business transacted at a special meeting of the stockholders
shall be limited to the purposes set forth in the notice of the meeting.
SECTION 2.8 Voting. Except as otherwise required by the Act or the
Corporation's Articles of Incorporation, each stockholder of the Corporation
shall, at every meeting of the stockholders, be entitled to one vote in person
or by proxy for each share of capital stock of this Corporation held by such
stockholder, subject, however, to the full effect of the limitations imposed by
the fixed record date for determination of stockholders set forth in Section 2.6
of this Article.
SECTION 2.9 Proxies. No proxy shall be deemed operative unless and
until signed by the stockholder and filed with the Secretary of the Corporation.
All proxies shall be executed by the appointing stockholder or such
stockholder's authorized attorney; provided that no proxy shall be valid for
more than three (3) months after execution of such proxy unless the proxy
specifically provides for a longer period.
SECTION 2.10 Vote by Stockholder Corporation. Any other corporation
owning shares of this Corporation entitled to vote may vote upon the same by the
president of such stockholder corporation, or by proxy appointed by him, unless
some other person shall be appointed to vote upon such shares by resolution of
the Board of Directors of such stockholder corporation.
SECTION 2.11 Inspectors of Election. Whenever any person entitled to
vote at a meeting of the stockholders shall request the appointment of
inspectors, the chairman of the meeting shall appoint not more than three
inspectors, who need not be stockholders. If the right of any person to vote at
such meeting shall be challenged, the inspectors shall determine such right. The
inspectors shall receive and count the votes either upon an election or for the
decision of any question, and shall determine the result. Their certificate of
any vote shall be prima facie evidence thereof.
SECTION 2.12 Action by Written Consent. Any action required or
permitted by the Michigan Business Corporation Act to be taken at an annual or
special meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if consents in writing, setting forth the action so
taken, are signed by the holders of all of the outstanding shares of the
Corporation entitled to vote.
SECTION 2.13 Order of Business. The order of business at the annual
meeting of the stockholders, and so far as practicable at all other meetings of
the stockholders, shall be as follows:
1. Proof of Notice of the Meeting
<PAGE>
2. Determination of a Quorum
3. Election of Directors
4. Unfinished Business
5. New Business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws
or the Act, Robert's Rules of Order shall be used to resolve all to resolve all
procedural disputes that may arise at a stockholder's meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1 Authority. The Board of Directors shall have ultimate
authority over the conduct and management of the business and affairs of the
Corporation.
SECTION 3.2 Number and Term. Except as otherwise provided by the
Corporation's Articles of Incorporation, the number of directors of the
Corporation shall be fixed from time to time by the vote of a majority of the
entire Board; provided, that the number of directors shall not be less than one
nor shall the action of the Board shorten the term of any director at that time
in office.
SECTION 3.3 Term. Each Director shall hold office from the date of
election and qualification until his or her successor shall have been duly
elected, or until his or her earlier removal, resignation, death or incapacity.
SECTION 3.4 Removal. Any Director may be removed from office, with or
without cause, by a vote of a majority of the shares of the Corporation's shares
entitled to vote.
SECTION 3.5 Vacancies. Vacancies in the Board of Directors (including
vacancies resulting from an increase in the number of directors) shall be filled
by appointment made by a majority of the remaining directors. Each person so
appointed shall hold office until the next election of Directors or until his or
her successor shall be elected and qualified.
SECTION 3.6 Organizational Meeting of Board. At the place of holding
the annual meeting of stockholders, and immediately following the same, the
Board of Directors as constituted upon final adjournment of such annual meeting,
shall convene for the purposes of electing officers, setting the selling price
for the Corporation's shares as provided in Section 3.18 and transacting any
other business properly brought before it, provided that the organizational
meeting in any
<PAGE>
year may be held at a different time and place than that herein provided by
consent of a majority of the Directors of such new Board.
SECTION 3.7 Regular Meetings of the Board. Regular meetings of the
Board of Directors may be held at times and places agreed upon by a majority of
the directors at any meeting of the Board of Directors and such regular meetings
may be held at such times and places without any further notice of the time,
place or purposes of such regular meetings.
SECTION 3.8 Special Meetings of the Board. Special meetings of the
Board of Directors may be called at the request of any member of the Board at
any time by means of written notice of the time, place and purpose thereof
mailed to each director not less than one (1) day, nor more than sixty (60)
days, prior to the date fixed for the holding of any special meeting of
Directors, but action taken at any such meeting shall not be invalidated for
want of notice if such notice shall be waived as hereinafter provided.
SECTION 3.9 Notices. Every notice of a meeting of the Board of
Directors shall be deemed duly served when the same has been deposited in the
United States mail, or with a private courier service (such as Federal Express),
with postage prepaid, addressed to the director at his or her last known
address, or if a director shall have filed with the Secretary of the Corporation
a written request that the notice be sent to some other address, then at such
other address.
SECTION 3.10 Waiver of Notice. Notice of the time, place and purpose of
any meeting of the Board of Directors may be waived by telegram, telecopy,
confirmed facsimile or other writing, either before or after such meeting has
been held. The attendance of any director at any directors' meeting shall
constitute a waiver of any notice to which such director may be entitled
pursuant to these By-Laws, except when the director attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully convened.
SECTION 3.11 Participation by Telecommunications. Any Director may
participate in, and be regarded as present at, any meeting of the Board of
Directors by means of conference telephone or any other means of communication
by which all persons participating in the meeting can hear each other at the
same time.
SECTION 3.12 Quorum of Directors. A majority of the directors then in
office shall constitute a quorum for transaction of business.
SECTION 3.13 Action. The Board of Directors shall take action pursuant
to resolutions adopted by the affirmative vote of a majority of the Directors
participating in a meeting at which a quorum is present, or affirmative
<PAGE>
vote of a greater number of Directors where required by the Corporation's
Articles of Incorporation or by law.
SECTION 3.14 Action by Unanimous Written Consent. Any action required
or permitted to be taken by the Board of Directors of the Corporation may be
taken without a meeting, without prior notice, and without a vote if consents in
writing, setting forth the action so taken, are signed by all of the directors
of the Corporation.
SECTION 3.15 Selection of Officers. The Board of Directors shall select
a president, treasurer, and a secretary, and may select a chairman of the Board,
one or more vice presidents, one or more assistant treasurers, and one or more
assistant secretaries, and any other officers that the Board of Directors deems
to be in the best interests of the Corporation, which officers may be appointed
and their duties prescribed by resolution of the Board.
SECTION 3.16 Power to Appoint Other Officers and Agents. The Board of
Directors shall have power to appoint such other officers and agents as the
Board may deem necessary for transaction of the business of the Corporation.
SECTION 3.17 Removal of Officers and Agents. Any officer or agent may
be removed by the Board of Directors whenever, in the judgment of the Board, the
business interests of the Corporation will be served thereby.
SECTION 3.18 Share Sale Price. At each organizational meeting of the
Board of Directors, the Board shall set the share selling price for purposes of
various Stock Purchase Agreements entered into from time to time between the
Corporation and its stockholders.
SECTION 3.19 Delegation of Powers. For any reason deemed sufficient by
the Board of Directors, whether occasioned by absence or otherwise, the Board
may delegate all or any of the powers and duties of any officer to any other
officer or director, but no officer or director shall execute, verify or
acknowledge any instrument in more than one capacity unless specifically
authorized by the Board of Directors.
SECTION 3.20 Power to Appoint Committees of the Board. The Board of
Directors shall have power to designate, by resolution, committees composed of
one or more directors who, to the extent provided in such resolution, may
exercise the business and affairs of the Corporation except as restricted by
statute. In the absence or disqualification of a member of the committee, the
members thereof present at a meeting and not disqualified from voting, whether
or not they constitute a quorum, may unanimously appoint another director of the
Board to act at the meeting in place of such an absent or disqualified member. A
majority of the
<PAGE>
members of any committee of the Board will constitute a quorum for all committee
action.
SECTION 3.21 Compensation. The Board of Directors may by resolution
authorize the payment to all Directors of a uniform sum for attendance at each
meeting or a uniform stated fee as a Director. No such payment shall preclude
any Director from serving the Corporation in any other capacity and receiving
compensation therefor. The Board of Directors may also by resolution authorize
the payment of reimbursement of all expenses of each Director related to the
Director's attendance at meetings.
SECTION 3.22 Order of Business. The order of business at all meetings
of the Board of Directors shall be:
1. Determination of a quorum
2. Reading and disposal of all unapproved minutes
3. Reports of officers and committees
4. Unfinished business
5. New business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws
or the Act, Robert's Rules of Order shall be used to resolve all procedural
disputes that may arise at a Director's meeting.
ARTICLE IV
OFFICERS
SECTION 4.1 In General. The officers of the Corporation shall consist
of a chairman, a president, a vice president, a secretary, a treasurer and such
additional vice presidents, assistant secretaries, assistant treasurers, and
other officers and agents as the Board of Directors from time to time deems
advisable. All officers shall be appointed by the Board to serve at its
pleasure. Except as otherwise provided by law or in the Articles of
Incorporation, any officer may be removed by the Board of Directors at any time,
with or without cause. Any vacancy, however occurring, in any office may be
filled by the Board of Directors for the unexpired term. One person may hold two
or more offices. Each officer shall exercise authority and perform the duties
set forth in these By-Laws and any additional authority and duties as the Board
of Directors shall determine from time to time.
<PAGE>
SECTION 4.2 Chairman of the Board. The Chairman of the Board shall be
selected by and from the membership of the Board of Directors. He shall conduct
all meetings of the Board and shall perform all duties incident thereto.
SECTION 4.3 President. The President shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect. He shall be ex-officio, a
member of all standing committees, and shall have the general powers and duties
of supervision and management usually vested in the office of president of a
corporation.
SECTION 4.4 Vice Presidents. Each Vice President shall serve under the
direction of the President and shall perform such other duties as the Board of
Directors shall from time to time direct.
SECTION 4.5 Secretary. Except as otherwise provided by these By-Laws or
otherwise determined by the Board of Directors, the Secretary of the Corporation
shall serve under the direction of the President and shall perform such other
duties as the Board shall from time to time direct. The Secretary shall attend
all meetings of the stockholders and the Board of Directors, and shall preserve
in the books of the Company true minutes of the proceedings of all such
meetings. The Secretary shall safely keep in his or her custody the seal of the
Corporation, and shall have authority to affix the same to all instruments where
its use is required. The Secretary shall give all notices required by statute,
by-law or resolution.
SECTION 4.6 Treasurer. The Treasurer shall serve under the President
and shall perform such other duties as the Board shall from time to time direct.
The Treasurer shall have custody of all corporate funds and securities, and
shall keep in books belonging to the Corporation full and accurate accounts of
all receipts and disbursements. The Treasurer shall deposit all monies,
securities and other valuable effects in the name of the Corporation in such
depositories as may be designated for that purpose by the Board of Directors and
shall disburse the funds of the Corporation as may be ordered by the Board. The
Treasurer shall upon request report to the Board of Directors on the financial
condition of the Corporation.
SECTION 4.7 Assistant Secretary and Assistant Treasurer. The Assistant
Secretary, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary. The Assistant Treasurer, in the
absence or disability of the Treasurer, shall perform the duties and exercise
the powers of the Treasurer.
<PAGE>
ARTICLE V
STOCK AND TRANSFERS
SECTION 5.1 Certificates for Shares. Every stockholder shall be
entitled to a certificate of the shares to which he has subscribed, said
certificate to be signed by the Chairman of the Board, President or a Vice
President, and may be sealed with the seal of the Corporation or a facsimile
thereof certifying the number and class of shares; provided, that where such
certificate is signed by a transfer agent or an assistant transfer agent, or by
a transfer clerk acting on behalf of such entity, and by a registrar, the
signature of any such officers may be a facsimile.
If the shares of the Corporation shall become listed on a national
securities exchange, the Corporation may eliminate certificates representing
such shares and provide such shares and provide for such other methods of
recording, noticing ownership and disclosure as may be provided by the rules of
that national securities exchange.
SECTION 5.2 Transferable Only on Books of the Corporation. Shares shall
be transferable only on the books of the Corporation by the holder thereof in
person or by an attorney lawfully constituted in writing, and upon surrender of
the certificate therefor. A record shall be made of every such transfer and
issue. Whenever any transfer is made for collateral security and not absolutely,
the fact shall be so expressed in the entry of such transfer.
SECTION 5.3 Stock Ledger. The Corporation shall maintain a stock ledger
which contains the name and address of each stockholder and the number of shares
of stock of each class which the stockholder holds. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate of the
stock ledger shall be kept at the office of a transfer agent for the particular
class of stock, within or without the State of Michigan, or, if none, at the
principal office of the Corporation in the State of Michigan.
SECTION 5.4 Registered Stockholders. The Corporation shall have the
right to treat the registered holder of any share as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, save as may be otherwise provided by
the laws of Michigan.
SECTION 5.5 Cancellation; Missing Certificates. All certificates
surrendered to the Corporation for transfer shall be cancelled and no new
certificates representing the same number of shares shall be issued until the
former
<PAGE>
certificate or certificates for the same number of shares shall have been so
surrendered and cancelled. In the event that a certificate of stock is lost or
destroyed another may be issued and unless waived by the President, the party
alleging loss or destruction of the certificate shall post a bond or agree to
indemnify the Corporation, at the election of the President, in an amount not
exceeding two (2) times the value of the stock.
ARTICLE VI
INSTRUMENTS
SECTION 6.1 Checks, Etc. All checks, drafts and orders for payment of
money shall be signed in the name of the Corporation or any assumed name under
which the Corporation has duly filed a certificate therefor and shall be
countersigned by such officers or agents as the Board of Directors shall from
time to time designate for that purpose.
SECTION 6.2 Contracts, Conveyances, Etc. When the execution of any
contract, conveyance or other instrument has been authorized without
specification of the executing officers, the president or any vice president, or
the treasurer or assistant treasurer, or the secretary or assistant secretary,
may execute the same in the name and on behalf of this Corporation, and may
affix the corporate seal thereto. The Board of Directors shall have power to
designate the officers and agents who shall have authority to execute any
instrument on behalf of this Corporation.
SECTION 6.3 Voting Shares of Other Corporations. Stock of other
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice President or a proxy appointed by either of them.
The Board of Directors may by resolution appoint some other person to vote the
shares.
ARTICLE VII
AMENDMENT OF BY-LAWS
SECTION 7.1 Amendment. These By-Laws may be amended, altered, changed,
added to or repealed by the affirmative vote of a majority of the shares
entitled to vote at any regular or special meeting of the stockholders if notice
of the proposed amendment, alteration, change, addition or repeal be contained
on the notice of the meeting, or by the affirmative vote of the majority of the
Board of Directors if notice of the proposed amendment, alteration, change,
addition or repeal be contained in the notice of the meeting or is given at the
meeting preceding the meeting at which the change is adopted, provided, however,
that no change of the date for the annual meeting of the stockholders shall be
made within thirty (30) days next before the day on which such meeting is to be
held unless consented to in writing, or by a resolution adopted at a meeting, by
a majority of all stockholders entitled to vote at the annual meeting.
<PAGE>
EXHIBIT 3.21
[SEAL OF CALIFORNIA] File#____________________
STATE OF CALIFORNIA
BILL JONES
SECRETARY OF STATE
LIMITED LIABILITY COMPANY
ARTICLES OF ORGANIZATION
A $70.00 FILING FEE MUST ACCOMPANY THIS FORM.
IMPORTANT - READ INSTRUCTIONS BEFORE COMPLETING THIS FORM.
This Space if For Filing Use Only
- --------------------------------------------------------------------------------
1. Name of the limited liability company (end the name with the words "Limited
Liability Company," "Ltd. Liability Co.," or the abbreviations "LLC" or
"L.L.C.")
DOMINO'S PIZZA CALIFORNIA LLC
- --------------------------------------------------------------------------------
2. The purpose of the limited liability company is to engage in any lawful act
or activity for which a limited liability company may be organized under the
Beverly-Killea limited liability company act.
- --------------------------------------------------------------------------------
3. Name the agent for service of process and check the appropriate provision
below:
C T Corporation System which is
-------------------------------------------------------
[ ] an individual residing in California. Proceed to item 4.
[x] a corporation which has filed a certificate pursuant to section 1505.
Proceed to item 5.
- --------------------------------------------------------------------------------
4. If an individual, California address of the agent for service of process:
Address:
City: State: CA Zip Code:
- --------------------------------------------------------------------------------
5. The limited liability company will be managed by: (CHECK ONE)
[ ] ONE MANAGER [ ] MORE THAN ONE MANAGER
[x] LIMITED LIABILITY COMPANY MEMBERS
- --------------------------------------------------------------------------------
6. Other matters to be included in this certificate may be set forth on
separate attached pages and are made a part of this certificate. Other
matters may include the latest date on which the limited liability company
is to dissolve.
- --------------------------------------------------------------------------------
7. Number of pages attached, if any:
4
- --------------------------------------------------------------------------------
Type of business of the limited liability company.
Domino's Pizza California LLC will be an operating company that operates
Domino's Pizza corporate stores and commissaries within the State of
California.
- --------------------------------------------------------------------------------
DECLARATION: It is hereby declared that I am the person who executed this
instrument, which execution is my act and deed.
Harry Silverman
------------------------------- ----------------------------------
Signature of Organizer Type or Print Name of Organizer
November 10, 1999
-------------------------------
Date
- --------------------------------------------------------------------------------
SEC/STATE (REV. 1/99) FORM LLC-1 - FILING FEE $70.00
Approved by Secretary of State
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS FOR COMPLETING THE ARTICLES OF ORGANIZATION (LLC-1)
DO NOT ALTER THIS FORM
TYPE OR LEGIBLY PRINT IN BLACK INK.
PROFESSIONAL LIMITED LIABILITY COMPANIES ARE PROHIBITED FROM FORMING OR
REGISTERING IN CALIFORNIA.
- - Attach the fee for filing the Articles or Organization (LLC-1) with the
Secretary of State. The fee is seventy dollars ($70).
- - Make check(s) payable to the Secretary of State.
- - Send the executed document and filing fee to:
California Secretary of State
Limited Liability Company Unit
P.O. Box 944228
Sacramento, CA 94244-2280
- - Fill in the items as follows:
ITEM 1. Enter the name of the limited liability company. The name shall
contain the words "Limited Liability Company," or the
abbreviations "LLC" or L.L.C." The words "Limited" and "Company"
may be abbreviated to "Ltd." and "Co." The name of the limited
liability company may not contain the words "bank," "trust,"
"trustee," "incorporated," "inc.," "corporation," or "corp.," and
shall not contain the words "insurer" or "insurance company" or
any other words suggesting that it is in the business of issuing
policies of insurance and assuming insurance risks. (Section
17052)
ITEM 2. Execution of this document confirms the following statement which
has been preprinted on the form and may not be altered: "The
purpose of the limited liability company is to engage in any
lawful act or activity for which a limited liability company may
be organized under the Beverly-Killea Limited Liability Company
Act." Provisions limiting or restricting the business of the
limited liability company may be included as an attachment.
ITEM 3. Enter the name of the agent for service of process. The agent for
service of process must be an individual residing in California or
a corporation which has filed a certificate pursuant to California
Corporations Code Section 1505. Check the appropriate provision.
ITEM 4. If an individual is designated as the agent for service of
process, enter an address in California. Do not enter "in care
of" (c/o) or abbreviate the name of the city. DO NOT enter an
address if a corporation is designated as the agent for service of
process.
ITEM 5. Check the appropriate provision indicating whether the limited
liability company is to be managed by one manager, more than one
manager, or the limited liability company members. Section
17051(a)(5).
ITEM 6. The Articles of Organization (LLC-1) may include other matters
that the person filing the Articles of Organization determines to
include. Other matters may include the latest date on which the
limited liability company is to dissolve. If other matters are to
be included check the box in this item and attach one or more
pages setting forth the other matters.
ITEM 7. Indicate the total number of additional pages attached. All
attachments should be 8 1/2" x 11", one-sided and legible.
For informational purposes only, briefly describe the type of
business that constitutes the principal business activity of the
limited liability company. Note restrictions in the rendering of
professional services by Limited Liability Companies. Professional
services are defined in California Corporations Code, Section
13401(a) as: "Any type of professional services that may be
lawfully rendered only pursuant to a license, certification, or
registration authorized by the Business and Professions Code or
the Chiropractic Act."
DECLARATION: The Articles of Organization (LLC-1) shall be executed with an
original signature of the organizer. A facsimile or photocopy of
the signature is not acceptable for the purpose of filing with the
Secretary of State.
The person executing the Articles of Organization (LLC-1)need not
be a member or manager of the limited liability company.
If an entity is signing the Articles of Organization (LLC-1), the
person who signs for the entity must note the exact entity name,
his/her name, and his/her position.
If an attorney-in-fact is signing the Articles of Organization
(LLC-1), the signature must be followed by the words
"Attorney-in-fact for (name of person)."
If a trust is signing the Articles of Organization (LLC-1), the
articles must be signed by a trustee as follows:
_____________, trustee for ____________ trust (including the date
of the trust, if applicable). Example: Mary Todd, trustee of the
Lincoln Family Trust (U/T/A 5-1-94).
- - Statutory provisions can be found in Section 17051 of the California
Corporations Code, unless otherwise indicated.
- - For further information contact the Limited Liability Company Unit at (916)
653-3795
<PAGE>
DOMINO'S PIZZA CALIFORNIA LLC
ARTICLES OF INCORPORATION
ARTICLE VIII
SECTION 8.1 Limitation of Liability. A Director of the Corporation shall not be
personally liable to the Corporation or its Shareholders for monetary damages
resulting from a breach of fiduciary duties imposed on the Director, except for
liability:
(a) resulting from breach of the Director's duty of loyalty to the
Corporation or its Shareholders;
(b) resulting from any acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law;
(c) resulting from a violation of Section 551(1) of the Michigan
Business Corporation Act (the "Act"); or
(d) resulting from any transaction from which the Director derived an
improper personal benefit.
In the event that the Michigan Business Corporation Act is hereafter amended to
authorize corporation action further eliminating or limiting personal liability
of directors, then the liability of the Directors of this Corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan
Corporation Act so amended. Any repeal, modification or amendment of any
provision in these Articles of Incorporation inconsistent with this Article
shall not adversely affect any right or protection of a Director of the
Corporation existing at the time of such repeal, modification or amendment for
or with respect to any act or omission occurring prior to the time of such
repeal, modification or amendment.
ARTICLE IX
SECTION 9.1 Action by Third Party. Except to the extent limited by the Act, the
Corporation has the power to indemnify a person who was or is a party or is
threatened to be made a party to a threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, other than an action by or in the right of the
Corporation, by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether profit or not, against expenses, including attorneys'
fees, judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit or
proceeding, if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation or its stockholders, and with respect to a criminal action or
proceeding, if the person had no reasonable cause to believe his or
<PAGE>
her conduct was unlawful. The termination of an action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation or its stockholders, and,
with respect to a criminal action or proceeding, had reasonable cause to believe
that his or her conduct was unlawful.
SECTION 9.2 Action by or in Right of Corporation. Except to the extent limited
by the Act, the Corporation has the power to indemnify a person who was or is a
party to or is threatened to be made a party to a threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise, whether for profit or not, against expenses,
including actual and reasonable attorneys' fees, and amount paid in settlement
incurred by the person in connection with the action or suit, if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the Corporation or its stockholders.
However, indemnification shall not be made for a claim, issue, or matter in
which the person has been found liable to the Corporation unless and only to the
extent that the court in which the action or suit was brought has determined
upon application that, despite the adjudication of liability, but in view of all
circumstances of the case, the person is fairly and reasonably entitled to
indemnification for the expenses which the court considers proper.
SECTION 9.3 Expense. Indemnification against expenses:
(a) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in
defense of an action, suit, or proceeding referred to above in
Sections 9.1 or 9.2, or in defense of a claim, issue, or matter in
the action, suit or proceeding, he or she shall be indemnified
against expenses, including actual and reasonable attorneys' fees,
incurred by him or her in connection with the action, suit, or
proceeding and an action, suit or proceeding brought to enforce
the mandatory indemnification provided in this Subsection.
(b) An indemnification under Sections 9.1 and 9.2 above, unless
ordered by a court, shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Subsections 9.1 and
9.2 above. This determination shall be made in any of the
following ways:
(i) By a majority vote of a quorum of the Board consisting
of directors who were not parties to the action, suit
or proceeding.
<PAGE>
(ii) If the quorum described in subdivision (i) is not
obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The
committee shall consist of not less than two (2)
disinterested directors.
(iii) By independent legal counsel in a written opinion.
(iv) By the stockholders.
(c) If a person is entitled to indemnification under Section 9.1 or
9.2 for a portion of expenses including attorneys' fees,
judgments, penalties, fines, and amounts paid in settlement, but
not for the total amount thereof, the Corporation may indemnify
the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is
entitled to be indemnified.
SECTION 9.4 Payment in Advance. Expenses incurred in defending a civil or
criminal action, suit, or proceeding described in Sections 9.1 or 9.2 above may
be paid by the Corporation in advance of the final disposition of the action,
suit, or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee, or agent to repay the expenses if it is ultimately
determined that the person is not entitled to be indemnified by the Corporation.
The undertaking shall be by unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
SECTION 9.5 Nonexclusivity.
(a) The indemnification or advancement of expenses provided under
Sections 9.1 to 9.4 is not exclusive of other rights to which a
person seeking indemnification or advancement of expenses may be
entitled under the Articles of Incorporation, Bylaws or a
contractual agreement. However, the total amount of expenses
advanced or indemnified from all sources combined shall not exceed
the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
(b) The indemnification provided for in Sections 9.1 to 9.4 continues
as to a person who ceases to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of the person.
SECTION 9.6 Insurance. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under Sections 9.1 to 9.5.
<PAGE>
SECTION 9.7 Constituent Corporations. For purposes of Sections 9.1 to 9.6 above,
"corporation" includes all constituent corporations absorbed in a consolidation
or merger and the resulting or surviving corporation, so that a person who is or
was a director, officer, employee, or agent of the constituent corporation or is
or was serving at the request of the constituent corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise whether for
profit or not shall stand in the same position under the provisions of this
Subsection with respect to the resulting or surviving corporation as the person
would if he or she had served the resulting or surviving corporation in the same
capacity.
SECTION 9.8 Definitions. For the purposes of Sections 9.1 to 9.6 above, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the Corporation" shall include any service as a
director, officer, employee, or agent of the Corporation which imposes duties
on, or involves services by, the director, officer, employee, or agent with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be considered to have acted in a manner "not opposed to the best
interests of the Corporation or its stockholders" as referred to in Sections 9.1
and 9.2 above.
<PAGE>
EXHIBIT 3.22
OPERATING AGREEMENT FOR DOMINO'S PIZZA CALIFORNIA LLC
This operating agreement is made on __________________ among the
DOMINO'S PIZZA CALIFORNIA LLC, a California Limited Liability Company (the
"Company"); the entities executing this Operating Agreement as members of the
Company; and all of those who shall later be admitted as members (individually,
a "Member," and collectively, the "Members") who agree as follows:
ARTICLE I
ORGANIZATION
1.1 Formation. The Company has been organized as a California Limited
Liability Company under the Beverly Killea Limited Liability Act, California
Corporations Code ss.17050, et seq., as amended (the "Act"), by the filing of
Articles of Organization ("Articles") with the Secretary of State of California
as required by the Act.
1.2 Name. The name of the Company is the DOMINO'S PIZZA CALIFORNIA LLC.
The Company may also conduct its business under one or more assumed names.
1.3 Purposes. The purpose of the Company is to engage in any activity
for which limited liability companies may be formed under the Act, including the
operation of pizza stores, food commissary facilities, the ownership and
improvement of real property related thereto and all other lawful businesses
solely within the state of California. The Company shall have all the powers
necessary or convenient to effect any purpose for which it is formed, including
all powers granted by the Act.
1.4 Duration. The Company shall be perpetual unless otherwise stated in
the Articles or until the Company dissolves and its affairs are wound up in
accordance with the Act or this Operating Agreement.
1.5 Agent for Service of Process. The Agent of the Company for service
of process shall be as designated in the initial or amended Articles. The Agent
may be changed from time to time. Any such change shall be made in accordance
with the Act. If the Agent resigns, the Company shall promptly appoint a
successor.
1.6 Intention for Company. The Members have formed the Company as a
limited liability company under the Act. The Members specifically intend and
agree that the Company not be a partnership (including a limited partnership) or
any other venture, but a limited liability company under and pursuant to the
Act. No Member or Manager shall be construed to be a partner in the Company or a
partner of any other Member, Manager, or person, and the Articles, this
Operating Agreement, and the relationships created by and arising from them
shall not be construed to suggest otherwise.
1
<PAGE>
ARTICLE II
BOOKS, RECORDS, AND ACCOUNTING
2.1 Books and Records. The Company shall maintain complete and accurate
books and records of the Company's business and affairs as required by the Act
and such records shall be kept at the locations determined by the Company.
2.2 Fiscal Year; Accounting. The Company's fiscal year and the
particular accounting methods and principles to be followed by the Company shall
be selected by the Members from time to time.
2.3 Member's Accounts. The Company shall maintain separate Capital
Accounts for each Member. Each Member's Capital Account shall reflect the
Member's capital contributions and increases for the Member's share of any net
income or gain of the Company. Each Member's Capital Account shall also reflect
decreases for distributions made to the Member and the Member's share of any of
the Company's losses and deductions.
ARTICLE III
MEETINGS OF MEMBERS
3.1 Voting. All Members shall be entitled to vote on any matter
submitted to a vote of the Members. The Members shall have the right to vote on
all of the following: (a) the dissolution of the Company pursuant to this
Operating Agreement; (b) the merger of the Company; (c) an amendment to the
Articles; (d) a transaction with the Company or a transaction connected with the
conduct or winding up of the Company; (e) the sale, exchange, lease, or other
transfer of all or substantially all of the Company's assets other than in the
ordinary course of business, (f) such other matters as may come before the
Members.
3.2 Required Vote. Unless a greater vote is required by the Act or the
Articles, the affirmative vote of a majority of the Sharing Ratios of all the
Members entitled to vote on such matter is required.
3.3 Meetings. An annual meeting of Members for the transaction of such
business as may properly come before the meeting shall be held at the time,
date, and place that the Members shall determine.
3.4 Consent. Any action required or permitted to be taken at an annual
or special meeting of the Members may be taken by consent or approval without a
meeting or prior notice. The consent or approval must be in writing, set forth
the action to be taken, and be signed by the Members having at least the minimum
number of votes necessary to authorize or take such an action at a meeting at
which all membership interests entitled to vote on the action are present and
voting. Every written consent or approval shall also bear the date of when each
Member signed the consent. Prompt notice of the taking of action without a
meeting by less than unanimous written consent of the members entitled to vote
shall be given to all Members who did not consent to or approve the action.
2
<PAGE>
ARTICLE IV
MANAGEMENT
4.1 Management of Business. The Company shall be managed by the
Members. The Members may appoint day to day management if they so determine but
this appointment shall not be construed to limit the rights of the Members to
manage the Company.
4.2 General Powers of Members. Each Member has the power, on behalf of
the Company, to do all things necessary or convenient to carry out the Company's
business and affairs, including the power to (a) purchase, lease, or otherwise
acquire any real or personal property; (b) sell, convey, mortgage, grant a
security interest in, pledge, lease, exchange, or otherwise dispose of or
encumber any real or personal property; (c) open one or more depository accounts
and make deposits into, write checks against, and make withdrawals against such
accounts; (d) borrow money and incur liabilities and other obligations; (e)
enter into any and all agreements and execute any and all contracts, documents,
and instruments; (f) engage employees and agents and define their respective
duties and compensation; (g) establish pension plans, trusts, profit-sharing
plans, and other benefit and incentive plans for Members, employees, and agents
of the Company; (h) obtain insurance covering the business and affairs of the
Company and its property, and on the lives and well-being of its Members,
employees, and agents; (i) begin, prosecute, or defend any proceeding in the
Company's name; and (j) participate with others in partnerships, joint ventures,
and other associations and strategic alliances.
ARTICLE V
DISSOLUTION AND WINDING UP
5.1 Continuity of Life -- Continuation of Company after Disassociation.
Notwithstanding the withdrawal, expulsion, bankruptcy, or dissolution of a
Member or the occurrence of any other event that terminates the continued
membership of a Member in the Company, the Company's business and affairs shall
continue and shall not be dissolved or terminated, pursuant to and in accordance
with the Act. On a Member's withdrawal, expulsion, bankruptcy, or dissolution,
the Company shall purchase, and the holder shall sell, the disassociating
Member's Membership Interest in the Company at its book value, determined in
accordance with generally accepted accounting principles consistently applied.
The sale and purchase shall be completed within ninety (90) days of any such
event.
5.2 Dissolution. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following events only: (a) at any time
specified in the Articles; (b) on the occurrence of any event specified in the
Articles; or (c) on the unanimous consent of all the Members.
5.3 Winding Up. On dissolution, the Company shall cease carrying on its
business and affairs and shall begin to wind them up. The Company shall complete
the winding up as soon as practicable. On the winding up of the Company, its
assets shall be distributed first to creditors, to the extent permitted by law,
in satisfaction of Company debts, liabilities, and obligations, and then
3
<PAGE>
to Members and former Members. Distributions to Members and former Members shall
be made first to satisfy liabilities for distributions and then in accordance
with the Members' Sharing Ratios. The proceeds shall be paid to the Members
within ninety (90) days after the date of the winding up.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Terms. Nouns and pronouns will be deemed to refer singular, and
plural, as the identity of the firm, or corporation may in the context require.
6.2 Article Headings. The article headings contained in this Operating
Agreement have been inserted only as a matter of convenience and for reference
and in no way shall be construed to define, limit, or describe the scope or
intent of any provision of this Operating Agreement.
6.3 Counterparts. This Operating Agreement may be executed in several
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same.
6.4 Severability. The invalidity or unenforceability of any particular
provision of this Operating Agreement shall not affect the other provisions, and
this Operating Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
6.5 Amendment. This Operating Agreement may be amended or revoked at
any time by a written agreement executed by all of the parties to this Operating
Agreement. No change or modification to this Operating Agreement shall be valid
unless made in writing and signed by all the parties to this Operating
Agreement.
The parties have executed this Operating Agreement on the dates set
below their names, to be effective on the date listed on the first page of this
Operating Agreement.
DOMINO'S PIZZA CALIFORNIA LLC
By: DP CA CORP, INC.
Its: Member
By:
------------------------------
Harry Silverman
Dated:
----------------------------
DP CA CORP INC.
By:
------------------------------
HARRY SILVERMAN
Dated:
----------------------------
DP CA COMM INC.
By:
------------------------------
HARRY SILVERMAN
Dated:
----------------------------
<PAGE>
EXHIBIT 3.23
MEMORANDUM
AND
ARTICLES OF ASSOCIATION
OF
DOMINO'S PIZZA NS CO.
STEWART MCKELVEY STIRLING SCALES
BARRISTERS & SOLICITORS
HALIFAX, NOVA SCOTIA
<PAGE>
MEMORANDUM OF ASSOCIATION
OF
DOMINO'S PIZZA NS CO.
1. The name of the Company is DOMINO'S PIZZA NS CO..
2. There are no restrictions on the objects and powers of the Company and
the Company shall expressly have the following powers:
(1) to sell or dispose of its undertaking, or a substantial part
thereof;
(2) to distribute any of its property in specie among its members; and
(3) to amalgamate with any company or other body of persons.
3. The liability of the members is unlimited.
I, the undersigned, whose name, address and occupation are subscribed,
am desirous of being formed into a company in pursuance of this Memorandum of
Association, and I agree to take the number and kind of shares in the capital
stock of the Company written below my name.
----------------------------------------------------
Name of Subscriber: Charles S. Reagh
800-1959 Upper Water Street, Halifax, NS B3J 2X2
Occupation: Solicitor
Number of shares subscribed: One Common share
TOTAL SHARES TAKEN: one common share
Dated this 18th day of November, 1999.
Witness to above signature:
-------------------------------------------------
Name of Witness: Leanne M. Thomas
800-1959 Upper Water Street, Halifax, NS B3J 2X2
Occupation: Legal Assistant
<PAGE>
ARTICLES OF ASSOCIATION
OF
DOMINO'S PIZZA NS CO.
INTERPRETATION
1. In these Articles, unless there be something in the subject or context
inconsistent therewith:
(1) "Act" means the Companies Act (Nova Scotia);
(2) "Articles" means these Articles of Association of the Company and
all amendments hereto;
(3) "Company" means the company named above;
(4) "director" means a director of the Company;
(5) "Memorandum" means the Memorandum of Association of the Company
and all amendments thereto;
(6) "month" means calendar month;
(7) "Office" means the registered office of the Company;
(8) "person" includes a body corporate;
(9) "proxyholder" includes an alternate proxyholder;
(10) "Register" means the register of members kept pursuant to the Act,
and where the context permits includes a branch register of
members;
(11) "Registrar" means the Registrar as defined in the Act;
(12) "Secretary" includes any person appointed to perform the duties of
the Secretary temporarily;
(13) "shareholder" means member as that term is used in the Act in
connection with an unlimited company having share capital and as
that term is used in the Memorandum;
<PAGE>
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(14) "special resolution" has the meaning assigned by the Act;
(15) "in writing" and "written" includes printing, lithography and
other modes of representing or reproducing words in visible form;
(16) words importing number or gender include all numbers and genders
unless the context otherwise requires. 1. The regulations in Table
A in the First Schedule to the Act shall not apply to the Company.
2. The directors may enter into and carry into effect or adopt and carry
into effect any agreement made by the promoters of the Company on
behalf of the Company and may agree to any modification in the terms of
any such agreement, either before or after its execution.
3. The directors may, out of the funds of the Company, pay all expenses
incurred for the incorporation and organization of the Company.
4. The Company may commence business on the day following incorporation or
so soon thereafter as the directors think fit, notwithstanding that
part only of the shares has been allotted.
SHARES
1. The capital of the company shall consist of 1,000,000 common shares
without nominal or par value, with the power to divide the shares in
the capital for the time being into classes or series and to attach
thereto respectively any preferred, deferred or qualified rights,
privileges or conditions, including restrictions on voting rights and
including redemption, purchase and other acquisition of such shares,
subject, however, to the provisions of the Act.
2. The directors shall control the shares and, subject to the provisions
of these Articles, may allot or otherwise dispose of them to such
person at such times, on such terms and conditions and, if the shares
have a par value, either at a premium or at par, as they think fit.
3. The directors may pay on behalf of the Company a reasonable commission
to any person in consideration of subscribing or agreeing to subscribe
(whether absolutely or conditionally) for any shares in the Company, or
procuring or agreeing to procure subscriptions (whether absolute or
conditional) for any shares in the Company. Subject to the Act, the
commission may be paid or satisfied in shares of the Company.
4. On the issue of shares the Company may arrange among the holders
thereof differences in the calls to be paid and in the times for their
payment.
5. If the whole or part of the allotment price of any shares is, by the
conditions of their
<PAGE>
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allotment, payable in instalments, every such instalment shall, when
due, be payable to the Company by the person who is at such time the
registered holder of the shares.
6. Shares may be registered in the names of joint holders not exceeding
three in number.
7. Joint holders of a share shall be jointly and severally liable for the
payment of all instalments and calls due in respect of such share. On
the death of one or more joint holders of shares the survivor or
survivors of them shall alone be recognized by the Company as the
registered holder or holders of the shares.
8. Save as herein otherwise provided, the Company may treat the registered
holder of any share as the absolute owner thereof and accordingly shall
not, except as ordered by a court of competent jurisdiction or required
by statute, be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person.
9. The Company is a private company, and:
(1) no transfer of any share or prescribed security of the Company
shall be effective unless or until approved by the directors;
(2) the number of holders of issued and outstanding prescribed
securities or shares of the Company, exclusive of persons who are
in the employment of the Company or in the employment of an
affiliate of the Company and exclusive of persons who, having been
formerly in the employment of the Company or the employment of an
affiliate of the Company, were, while in that employment, and have
continued after termination of that employment, to own at least
one prescribed security or share of the Company, shall not exceed
50 in number, two or more persons or companies who are the joint
registered owners of one or more prescribed securities or shares
being counted as one holder; and
(3) the Company shall not invite the public to subscribe for any of
its securities.
In this Article, "private company" and "securities" have the meanings
ascribed to those terms in the Securities Act (Nova Scotia), and
"prescribed security" means any of the securities prescribed by the
Nova Scotia Securities Commission from time to time for the purpose of
the definition of "private company" in the Securities Act (Nova
Scotia).
<PAGE>
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CERTIFICATES
1. Certificates of title to shares shall comply with the Act and may
otherwise be in such form as the directors may from time to time
determine. Unless the directors otherwise determine, every certificate
of title to shares shall be signed manually by at least one of the
Chairman, President, Secretary, Treasurer, a vice-president, an
assistant secretary, any other officer of the Company or any director
of the Company or by or on behalf of a share registrar transfer agent
or branch transfer agent appointed by the Company or by any other
person whom the directors may designate. When signatures of more than
one person appear on a certificate all but one may be printed or
otherwise mechanically reproduced. All such certificates when signed as
provided in this Article shall be valid and binding upon the Company.
If a certificate contains a printed or mechanically reproduced
signature of a person, the Company may issue the certificate,
notwithstanding that the person has ceased to be a director or an
officer of the Company and the certificate is as valid as if such
person were a director or an officer at the date of its issue.
2. Except as the directors may determine, each shareholder's shares may be
evidenced by any number of certificates so long as the aggregate of the
shares stipulated in such certificates equals the aggregate registered
in the name of the shareholder.
3. Where shares are registered in the names of two or more persons, the
Company shall not be bound to issue more than one certificate or set of
certificates, and such certificate or set of certificates shall be
delivered to the person first named on the Register.
4. Any certificate that has become worn, damaged or defaced may, upon its
surrender to the directors, be cancelled and replaced by a new
certificate. Any certificate that has become lost or destroyed may be
replaced by a new certificate upon proof of such loss or destruction to
the satisfaction of the directors and the furnishing to the Company of
such undertakings of indemnity as the directors deem adequate.
5. The sum of one dollar or such other sum as the directors from time to
time determine shall be paid to the Company for every certificate other
than the first certificate issued to any holder in respect of any share
or shares.
6. The directors may cause one or more branch Registers of shareholders to
be kept in any place or places, whether inside or outside of Nova
Scotia.
CALLS
1. The directors may make such calls upon the shareholders in respect of
all amounts unpaid on the shares held by them respectively and not made
payable at fixed times by the conditions on which such shares were
allotted, and each shareholder shall pay the amount of every call
<PAGE>
-4-
so made to the person and at the times and places appointed by the
directors. A call may be made payable by instalments.
2. A call shall be deemed to have been made at the time when the
resolution of the directors authorizing such call was passed.
3. At least 14 days' notice of any call shall be given, and such notice
shall specify the time and place at which and the person to whom such
call shall be paid.
4. If the sum payable in respect of any call or instalment is not paid on
or before the day appointed for the payment thereof, the holder for the
time being of the share in respect of which the call has been made or
the instalment is due shall pay interest on such call or instalment at
the rate of 9% per year or such other rate of interest as the directors
may determine from the day appointed for the payment thereof up to the
time of actual payment.
5. At the trial or hearing of any action for the recovery of any amount
due for any call, it shall be sufficient to prove that the name of the
shareholder sued is entered on the Register as the holder or one of the
holders of the share or shares in respect of which such debt accrued,
that the resolution making the call is duly recorded in the minute book
and that such notice of such call was duly given to the shareholder
sued in pursuance of these Articles. It shall not be necessary to prove
the appointment of the directors who made such call or any other
matters whatsoever and the proof of the matters stipulated shall be
conclusive evidence of the debt.
FORFEITURE OF SHARES
1. If any shareholder fails to pay any call or instalment on or before the
day appointed for payment, the directors may at any time thereafter
while the call or instalment remains unpaid serve a notice on such
shareholder requiring payment thereof together with any interest that
may have accrued and all expenses that may have been incurred by the
Company by reason of such non-payment.
2. The notice shall name a day (not being less than 14 days after the date
of the notice) and a place or places on and at which such call or
instalment and such interest and expenses are to be paid. The notice
shall also state that, in the event of non-payment on or before the day
and at the place or one of the places so named, the shares in respect
of which the call was made or instalment is payable will be liable to
be forfeited.
3. If the requirements of any such notice are not complied with, any
shares in respect of which such notice has been given may at any time
thereafter, before payment of all calls or instalments, interest and
expenses due in respect thereof, be forfeited by a resolution of the
directors to that effect. Such forfeiture shall include all dividends
declared in respect of the
<PAGE>
-5-
forfeited shares and not actually paid before the forfeiture.
4. When any share has been so forfeited, notice of the resolution shall be
given to the shareholder in whose name it stood immediately prior to
the forfeiture and an entry of the forfeiture shall be made in the
Register.
5. Any share so forfeited shall be deemed the property of the Company and
the directors may sell, re-allot or otherwise dispose of it in such
manner as they think fit.
6. The directors may at any time before any share so forfeited has been
sold, re-allotted or otherwise disposed of, annul the forfeiture
thereof upon such conditions as they think fit.
7. Any shareholder whose shares have been forfeited shall nevertheless be
liable to pay and shall forthwith pay to the Company all calls,
instalments, interest and expenses owing upon or in respect of such
shares at the time of the forfeiture together with interest thereon at
the rate of 9% per year or such other rate of interest as the directors
may determine from the time of forfeiture until payment. The directors
may enforce such payment if they think fit, but are under no obligation
to do so.
8. A certificate signed by the Secretary stating that a share has been
duly forfeited on a specified date in pursuance of these Articles and
the time when it was forfeited shall be conclusive evidence of the
facts therein stated as against any person who would have been entitled
to the share but for such forfeiture.
LIEN ON SHARES
1. The Company shall have a first and paramount lien upon all shares
(other than fully paid-up shares) registered in the name of a
shareholder (whether solely or jointly with others) and upon the
proceeds from the sale thereof for debts, liabilities and other
engagements of the shareholder, solely or jointly with any other
person, to or with the Company, whether or not the period for the
payment, fulfilment or discharge thereof has actually arrived, and such
lien shall extend to all dividends declared in respect of such shares.
Unless otherwise agreed, the registration of a transfer of shares shall
operate as a waiver of any lien of the Company on such shares.
2. For the purpose of enforcing such lien the directors may sell the
shares subject to it in such manner as they think fit, but no sale
shall be made until the period for the payment, fulfilment or discharge
of such debts, liabilities or other engagements has arrived, and until
notice in writing of the intention to sell has been given to such
shareholder or the shareholder's executors or administrators and
default has been made by them in such payment, fulfilment or discharge
for seven days after such notice.
<PAGE>
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3. The net proceeds of any such sale after the payment of all costs shall
be applied in or towards the satisfaction of such debts, liabilities or
engagements and the residue, if any, paid to such shareholder.
VALIDITY OF SALES
1. Upon any sale after forfeiture or to enforce a lien in purported
exercise of the powers given by these Articles the directors may cause
the purchaser's name to be entered in the Register in respect of the
shares sold, and the purchaser shall not be bound to see to the
regularity of the proceedings or to the application of the purchase
money, and after the purchaser's name has been entered in the Register
in respect of such shares the validity of the sale shall not be
impeached by any person and the remedy of any person aggrieved by the
sale shall be in damages only and against the Company exclusively.
TRANSFER OF SHARES
1. The instrument of transfer of any share in the Company shall be signed
by the transferor. The transferor shall be deemed to remain the holder
of such share until the name of the transferee is entered in the
Register in respect thereof and shall be entitled to receive any
dividend declared thereon before the registration of the transfer.
2. The instrument of transfer of any share shall be in writing in the
following form or to the following effect:
For value received, _________ hereby sell, assign, and transfer
unto ________ , ___________ shares in the capital of the Company
represented by the within certificate, and do hereby irrevocably
constitute and appoint ______________ attorney to transfer such
shares on the books of the Company with full power of
substitution in the premises.
Dated the ____ day of _____________________ , ______
Witness:
3. The directors may, without assigning any reason therefor, decline to
register any transfer of shares
(1) not fully paid-up or upon which the Company has a lien, or
(2) the transfer of which is restricted by any agreement to which the
Company is a party.
4. Every instrument of transfer shall be left for registration at the
Office of the Company, or at any office of its transfer agent where a
Register is maintained, together with the certificate of the shares to
be transferred and such other evidence as the Company may require to
prove title to or the right to transfer the shares.
<PAGE>
-7-
5. The directors may require that a fee determined by them be paid before
or after registration of any transfer.
6. Every instrument of transfer shall, after its registration, remain in
the custody of the Company. Any instrument of transfer that the
directors decline to register shall, except in case of fraud, be
returned to the person who deposited it.
TRANSMISSION OF SHARES
1. The executors or administrators of a deceased shareholder (not being
one of several joint holders) shall be the only persons recognized by
the Company as having any title to the shares registered in the name of
such shareholder. When a share is registered in the names of two or
more joint holders, the survivor or survivors or the executors or
administrators of the deceased shareholder, shall be the only persons
recognized by the Company as having any title to, or interest in, such
share.
2. Notwithstanding anything in these Articles, if the Company has only one
shareholder (not being one of several joint holders) and that
shareholder dies, the executors or administrators of the deceased
shareholder shall be entitled to register themselves in the Register as
the holders of the shares registered in the name of the deceased
shareholder whereupon they shall have all the rights given by these
Articles and by law to shareholders.
3. Any person entitled to shares upon the death or bankruptcy of any
shareholder or in any way other than by allotment or transfer, upon
producing such evidence of entitlement as the directors require, may be
registered as a shareholder in respect of such shares, or may, without
being registered, transfer such shares subject to the provisions of
these Articles respecting the transfer of shares. The directors shall
have the same right to refuse registration as if the transferee were
named in an ordinary transfer presented for registration.
SURRENDER OF SHARES
1. The directors may accept the surrender of any share by way of
compromise of any question as to the holder being properly registered
in respect thereof. Any share so surrendered may be disposed of in the
same manner as a forfeited share.
<PAGE>
-8-
INCREASE AND REDUCTION OF CAPITAL
1. Subject to the Act, the shareholders may by special resolution amend
these Articles to increase or alter the share capital of the Company as
they think expedient. Without prejudice to any special rights
previously conferred on the holders of existing shares, any share may
be issued with such preferred, deferred or other special rights, or
with such restrictions, whether in regard to dividends, voting, return
of share capital or otherwise, as the shareholders may from time to
time determine by special resolution. Except as otherwise provided by
the conditions of issue, or by these Articles, any capital raised by
the creation of new shares shall be considered part of the original
capital and shall be subject to the provisions herein contained with
reference to payment of calls and instalments, transfer and
transmission, forfeiture, lien and otherwise.
2. The Company may, by special resolution where required, reduce its share
capital in any way and with and subject to any incident authorized and
consent required by law. Subject to the Act and any provisions attached
to such shares, the Company may redeem, purchase or acquire any of its
shares and the directors may determine the manner and the terms for
redeeming, purchasing or acquiring such shares and may provide a
sinking fund on such terms as they think fit for the redemption,
purchase or acquisition of shares of any class or series.
MEETINGS AND VOTING BY CLASS OR SERIES
1. Where the holders of shares of a class or series have, under the Act,
the terms or conditions attaching to such shares or otherwise, the
right to vote separately as a class in respect of any matter then,
except as provided in the Act, these Articles or such terms or
conditions, all the provisions in these Articles concerning general
meetings (including, without limitation, provisions respecting notice,
quorum and procedure) shall, mutatis mutandis, apply to every meeting
of holders of such class or series of shares convened for the purpose
of such vote.
2. Unless the rights, privileges, terms or conditions attached to a class
or series of shares provide otherwise, such class or series of shares
shall not have the right to vote separately as a class or series upon
an amendment to the Memorandum or Articles to:
(1) increase or decrease any maximum number of authorized shares of
such class or series, or increase any maximum number of authorized
shares of a class or series having rights or privileges equal or
superior to the shares of such class or series;
(2) effect an exchange, reclassification or cancellation of all or
part of the shares of such class or series; or
(3) create a new class or series of shares equal or superior to the
shares of such class or series.
<PAGE>
-9-
BORROWING POWERS
1. The directors on behalf of the Company may:
(1) raise or borrow money for the purposes of the Company or any of
them;
(2) secure, subject to the sanction of a special resolution where
required by the Act, the repayment of funds so raised or borrowed
in such manner and upon such terms and conditions in all respects
as they think fit, and in particular by the execution and delivery
of mortgages of the Company's real or personal property, or by the
issue of bonds, debentures or other securities of the Company
secured by mortgage or other charge upon all or any part of the
property of the Company, both present and future including its
uncalled capital for the time being;
(3) sign or endorse bills, notes, acceptances, cheques, contracts, and
other evidence of or securities for funds borrowed or to be
borrowed for the purposes aforesaid;
(4) pledge debentures as security for loans;
(5) guarantee obligations of any person.
2. Bonds, debentures and other securities may be made assignable, free
from any equities between the Company and the person to whom such
securities were issued.
3. Any bonds, debentures and other securities may be issued at a discount,
premium or otherwise and with special privileges as to redemption,
surrender, drawings, allotment of shares, attending and voting at
general meetings of the Company, appointment of directors and other
matters.
GENERAL MEETINGS
1. Ordinary general meetings of the Company shall be held at least once in
every calendar year at such time and place as may be determined by the
directors and not later than 15 months after the preceding ordinary
general meeting. All other meetings of the Company shall be called
special general meetings. Ordinary or special general meetings may be
held either within or without the Province of Nova Scotia.
2. The President, a vice-president or the directors may at any time
convene a special general meeting, and the directors, upon the
requisition of shareholders in accordance with the Act shall forthwith
proceed to convene such meeting or meetings to be held at such time and
place or times and places as the directors determine.
<PAGE>
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3. The requisition shall state the objects of the meeting requested, be
signed by the requisitionists and deposited at the Office of the
Company. It may consist of several documents in like form each signed
by one or more of the requisitionists.
4. At least seven clear days' notice, or such longer period of notice as
may be required by the Act, of every general meeting, specifying the
place, day and hour of the meeting and, when special business is to be
considered, the general nature of such business, shall be given to the
shareholders entitled to be present at such meeting by notice given as
permitted by these Articles. With the consent in writing of all the
shareholders entitled to vote at such meeting, a meeting may be
convened by a shorter notice and in any manner they think fit, or
notice of the time, place and purpose of the meeting may be waived by
all of the shareholders.
5. When it is proposed to pass a special resolution, the two meetings may
be convened by the same notice, and it shall be no objection to such
notice that it only convenes the second meeting contingently upon the
resolution being passed by the requisite majority at the first meeting.
6. The accidental omission to give notice to a shareholder, or non-receipt
of notice by a shareholder, shall not invalidate any resolution passed
at any general meeting.
RECORD DATES
1. (1) The directors may fix in advance a date as the record date for the
determination of shareholders
(a) entitled to receive payment of a dividend or entitled to
receive any distribution;
(b) entitled to receive notice of a meeting; or
(c) for any other purpose.
(2) If no record date is fixed, the record date for the determination
of shareholders
(a) entitled to receive notice of a meeting shall be the day
immediately preceding the day on which the notice is
given, or, if no notice is given, the day on which the
meeting is held; and
(b) for any other purpose shall be the day on which the
directors pass the resolution relating to the particular
purpose.
<PAGE>
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PROCEEDINGS AT GENERAL MEETINGS
2. The business of an ordinary general meeting shall be to receive and
consider the financial statements of the Company and the report of the
directors and the report, if any, of the auditors, to elect directors
in the place of those retiring and to transact any other business which
under these Articles ought to be transacted at an ordinary general
meeting.
3. No business shall be transacted at any general meeting unless the
requisite quorum is present at the commencement of the business. A
corporate shareholder of the Company that has a duly authorized agent
or representative present at any such meeting shall for the purpose of
this Article be deemed to be personally present at such meeting.
4. One person, being a shareholder, proxyholder or representative of a
corporate shareholder, present and entitled to vote shall constitute a
quorum for a general meeting, and may hold a meeting.
5. The Chairman shall be entitled to take the chair at every general
meeting or, if there be no Chairman, or if the Chairman is not present
within fifteen 15 minutes after the time appointed for holding the
meeting, the President or, failing the President, a vice-president
shall be entitled to take the chair. If the Chairman, the President or
a vice-president is not present within 15 minutes after the time
appointed for holding the meeting or if all such persons present
decline to take the chair, the shareholders present entitled to vote at
the meeting shall choose another director as chairman and if no
director is present or if all the directors present decline to take the
chair, then such shareholders shall choose one of their number to be
chairman.
6. If within half an hour from the time appointed for a general meeting a
quorum is not present, the meeting, if it was convened pursuant to a
requisition of shareholders, shall be dissolved; if it was convened in
any other way, it shall stand adjourned to the same day, in the next
week, at the same time and place. If at the adjourned meeting a quorum
is not present within half an hour from the time appointed for the
meeting, the shareholders present shall be a quorum and may hold the
meeting.
7. Subject to the Act, at any general meeting a resolution put to the
meeting shall be decided by a show of hands unless, either before or on
the declaration of the result of the show of hands, a poll is demanded
by the chairman, a shareholder or a proxyholder; and unless a poll is
so demanded, a declaration by the chairman that the resolution has been
carried, carried by a particular majority, lost or not carried by a
particular majority and an entry to that effect in the Company's book
of proceedings shall be conclusive evidence of the fact without proof
of the number or proportion of the votes recorded in favour or against
such resolution.
<PAGE>
-12-
8. When a poll is demanded, it shall be taken in such manner and at such
time and place as the chairman directs, and either at once or after an
interval or adjournment or otherwise. The result of the poll shall be
the resolution of the meeting at which the poll was demanded. The
demand of a poll may be withdrawn. When any dispute occurs over the
admission or rejection of a vote, it shall be resolved by the chairman
and such determination made in good faith shall be final and
conclusive.
9. The chairman shall not have a casting vote in addition to any vote or
votes that the chairman has as a shareholder.
10. The chairman of a general meeting may with the consent of the meeting
adjourn the meeting from time to time and from place to place, but no
business shall be transacted at any adjourned meeting other than the
business left unfinished at the meeting that was adjourned.
11. Any poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith without adjournment.
12. The demand of a poll shall not prevent the continuance of a meeting for
the transaction of any business other than the question on which a poll
has been demanded.
VOTES OF SHAREHOLDERS
1. Subject to the Act and to any provisions attached to any class or
series of shares concerning or restricting voting rights:
(1) on a show of hands every shareholder entitled to vote present in
person, every duly authorized representative of a corporate
shareholder, and, if not prevented from voting by the Act, every
proxyholder, shall have one vote; and
(2) on a poll every shareholder present in person, every duly
authorized representative of a corporate shareholder, and every
proxyholder, shall have one vote for every share held;
whether or not such representative or proxyholder is a shareholder.
2. Any person entitled to transfer shares upon the death or bankruptcy of
any shareholder or in any way other than by allotment or transfer may
vote at any general meeting in respect thereof in the same manner as if
such person were the registered holder of such shares so long as the
directors are satisfied at least 48 hours before the time of holding
the meeting of such person's right to transfer such shares.
3. Where there are joint registered holders of any share, any of such
holders may vote such
<PAGE>
share at any meeting, either personally or by proxy, as if solely
entitled to it. If more than one joint holder is present at any
meeting, personally or by proxy, the one whose name stands first on the
Register in respect of such share shall alone be entitled to vote it.
Several executors or administrators of a deceased shareholder in whose
name any share stands shall for the purpose of this Article be deemed
joint holders thereof.
4. Votes may be cast either personally or by proxy or, in the case of a
corporate shareholder by a representative duly authorized under the
Act.
5. A proxy shall be in writing and executed in the manner provided in the
Act. A proxy or other authority of a corporate shareholder does not
require its seal.
6. A shareholder of unsound mind in respect of whom an order has been made
by any court of competent jurisdiction may vote by guardian or other
person in the nature of a guardian appointed by that court, and any
such guardian or other person may vote by proxy.
7. A proxy and the power of attorney or other authority, if any, under
which it is signed or a notarially certified copy of that power or
authority shall be deposited at the Office of the Company or at such
other place as the directors may direct. The directors may, by
resolution, fix a time not exceeding 48 hours excluding Saturdays and
holidays preceding any meeting or adjourned meeting before which time
proxies to be used at that meeting must be deposited with the Company
at its Office or with an agent of the Company. Notice of the
requirement for depositing proxies shall be given in the notice calling
the meeting. The chairman of the meeting shall determine all questions
as to validity of proxies and other instruments of authority.
8. A vote given in accordance with the terms of a proxy shall be valid
notwithstanding the previous death of the principal, the revocation of
the proxy, or the transfer of the share in respect of which the vote is
given, provided no intimation in writing of the death, revocation or
transfer is received at the Office of the Company before the meeting or
by the chairman of the meeting before the vote is given.
9. Every form of proxy shall comply with the Act and its regulations and
subject thereto may be in the following form:
I, __________ of _____________ being a shareholder of
____________ hereby appoint _____________ of
___________ (or failing him/her _____________ of
_____________ ) as my proxyholder to attend and to vote
for me and on my behalf at the ordinary/special general
meeting of the Company, to be held on the _____ day of
______ and at any adjournment thereof, or at any
meeting of the Company which may be held prior to
[insert specified date or event]. [If the proxy is
solicited by or behalf of the management of the
Company, insert a statement to that effect.]
Dated this ____ day of _____ ___.
<PAGE>
-13-
Shareholder
10. Subject to the Act, no shareholder shall be entitled to be present or
to vote on any question, either personally or by proxy, at any general
meeting or be reckoned in a quorum while any call is due and payable to
the Company in respect of any of the shares of such shareholder.
11. Any resolution passed by the directors, notice of which has been given
to the shareholders in the manner in which notices are hereinafter
directed to be given and which is, within one month after it has been
passed, ratified and confirmed in writing by shareholders entitled on a
poll to three-fifths of the votes, shall be as valid and effectual as a
resolution of a general meeting. This Article shall not apply to a
resolution for winding up the Company or to a resolution dealing with
any matter that by statute or these Articles ought to be dealt with by
a special resolution or other method prescribed by statute.
12. A resolution, including a special resolution, in writing and signed by
every shareholder who would be entitled to vote on the resolution at a
meeting is as valid as if it were passed by such shareholders at a
meeting and satisfies all of the requirements of the Act respecting
meetings of shareholders.
DIRECTORS
1. Unless otherwise determined by resolution of shareholders, the number
of directors shall not be less than one or more than ten.
2. Notwithstanding anything herein contained the subscribers to the
Memorandum shall be the first directors of the Company.
3. The directors may be paid out of the funds of the Company as
remuneration for their service such sums, if any, as the Company may by
resolution of its shareholders determine, and such remuneration shall
be divided among them in such proportions and manner as the directors
determine. The directors may also be paid their reasonable travelling,
hotel and other expenses incurred in attending meetings of directors
and otherwise in the execution of their duties as directors.
4. The continuing directors may act notwithstanding any vacancy in their
body, but if their number falls below the minimum permitted, the
directors shall not, except in emergencies or for the purpose of
filling vacancies, act so long as their number is below the minimum.
5. A director may, in conjunction with the office of director, and on such
terms as to remuneration and otherwise as the directors arrange or
determine, hold any other office or place of profit under the Company
or under any company in which the Company is a
<PAGE>
-14-
shareholder or is otherwise interested.
6. The office of a director shall ipso facto be vacated, if the director:
(1) becomes bankrupt or makes an assignment for the benefit of
creditors;
(2) is, or is found by a court of competent jurisdiction to be, of
unsound mind;
(3) by notice in writing to the Company, resigns the office of
director; or
(4) is removed in the manner provided by these Articles.
7. No director shall be disqualified by holding the office of director
from contracting with the Company, either as vendor, purchaser, or
otherwise, nor shall any such contract, or any contract or arrangement
entered into or proposed to be entered into by or on behalf of the
Company in which any director is in any way interested, either directly
or indirectly, be avoided, nor shall any director so contracting or
being so interested be liable to account to the Company for any profit
realized by any such contract or arrangement by reason only of such
director holding that office or of the fiduciary relations thereby
established, provided the director makes a declaration or gives a
general notice in accordance with the Act. No director shall, as a
director, vote in respect of any contract or arrangement in which the
director is so interested, and if the director does so vote, such vote
shall not be counted. This prohibition may at any time or times be
suspended or relaxed to any extent by a resolution of the shareholders
and shall not apply to any contract by or on behalf of the Company to
give to the directors or any of them any security for advances or by
way of indemnity.
ELECTION OF DIRECTORS
1. At the dissolution of every ordinary general meeting at which their
successors are elected, all the directors shall retire from office and
be succeeded by the directors elected at such meeting. Retiring
directors shall be eligible for re-election.
2. If at any ordinary general meeting at which an election of directors
ought to take place no such election takes place, or if no ordinary
general meeting is held in any year or period of years, the retiring
directors shall continue in office until their successors are elected.
3. The Company may by resolution of its shareholders elect any number of
directors permitted by these Articles and may determine or alter their
qualification.
4. The Company may, by special resolution or in any other manner permitted
by statute, remove any director before the expiration of such
director's period of office and may, if desired, appoint a replacement
to hold office during such time only as the director so removed would
have held office.
<PAGE>
-15-
5. The directors may appoint any other person as a director so long as the
total number of directors does not at any time exceed the maximum
number permitted. No such appointment, except to fill a casual vacancy,
shall be effective unless two-thirds of the directors concur in it. Any
casual vacancy occurring among the directors may be filled by the
directors, but any person so chosen shall retain office only so long as
the vacating director would have retained it if the vacating director
had continued as director.
MANAGING DIRECTOR
1. The directors may appoint one or more of their body to be managing
directors of the Company, either for a fixed term or otherwise , and
may remove or dismiss them from office and appoint replacements.
2. Subject to the provisions of any contract between a managing director
and the Company, a managing director shall be subject to the same
provisions as to resignation and removal as the other directors of the
Company. A managing director who for any reason ceases to hold the
office of director shall ipso facto immediately cease to be a managing
director.
3. The remuneration of a managing director shall from time to time be
fixed by the directors and may be by way of any or all of salary,
commission and participation in profits.
4. The directors may from time to time entrust to and confer upon a
managing director such of the powers exercisable under these Articles
by the directors as they think fit, and may confer such powers for such
time, and to be exercised for such objects and purposes and upon such
terms and conditions, and with such restrictions as they think
expedient; and they may confer such powers either collaterally with, or
to the exclusion of, and in substitution for, all or any of the powers
of the directors in that behalf; and may from time to time revoke,
withdraw, alter or vary all or any of such powers.
CHAIRMAN OF THE BOARD
1. The directors may elect one of their number to be Chairman and may
determine the period during which the Chairman is to hold office. The
Chairman shall perform such duties and receive such special
remuneration as the directors may provide.
<PAGE>
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PRESIDENT AND VICE-PRESIDENTS
1. The directors shall elect the President of the Company, who need not be
a director, and may determine the period for which the President is to
hold office. The President shall have general supervision of the
business of the Company and shall perform such duties as may be
assigned from time to time by the directors.
2. The directors may also elect vice-presidents, who need not be
directors, and may determine the periods for which they are to hold
office. A vice-president shall, at the request of the President or the
directors and subject to the directions of the directors, perform the
duties of the President during the absence, illness or incapacity of
the President, and shall also perform such duties as may be assigned by
the President or the directors.
SECRETARY AND TREASURER
1. The directors shall appoint a Secretary of the Company to keep minutes
of shareholders' and directors' meetings and perform such other duties
as may be assigned by the directors. The directors may also appoint a
temporary substitute for the Secretary who shall, for the purposes of
these Articles, be deemed to be the Secretary.
2. The directors may appoint a treasurer of the Company to carry out such
duties as the directors may assign.
OFFICERS
1. The directors may elect or appoint such other officers of the Company,
having such powers and duties, as they think fit.
2. If the directors so decide the same person may hold more than one of
the offices provided for in these Articles.
PROCEEDINGS OF DIRECTORS
1. The directors may meet together for the dispatch of business, adjourn
and otherwise regulate their meetings and proceedings, as they think
fit, and may determine the quorum necessary for the transaction of
business. Until otherwise determined, one director shall constitute a
quorum and may hold a meeting.
2. If all directors of the Company entitled to attend a meeting either
generally or specifically consent, a director may participate in a
meeting of directors or of a committee of directors by means of such
telephone or other communications facilities as permit all persons
participating in the meeting to hear each other, and a director
participating in such a meeting by such means is deemed to be present
at that meeting for purposes of these Articles.
<PAGE>
-17-
3. Meetings of directors may be held either within or without the Province
of Nova Scotia and the directors may from time to time make
arrangements relating to the time and place of holding directors'
meetings, the notices to be given for such meetings and what meetings
may be held without notice. Unless otherwise provided by such
arrangements:
(1) A meeting of directors may be held at the close of every ordinary
general meeting of the Company without notice.
(2) Notice of every other directors' meeting may be given as permitted
by these Articles to each director at least 48 hours before the
time fixed for the meeting.
(3) A meeting of directors may be held without formal notice if all
the directors are present or if those absent have signified their
assent to such meeting or their consent to the business transacted
at such meeting.
4. The President or any director may at any time, and the Secretary, upon
the request of the President or any director, shall summon a meeting of
the directors to be held at the Office of the Company. The President,
the Chairman or a majority of the directors may at any time, and the
Secretary, upon the request of the President, the Chairman or a
majority of the directors shall, summon a meeting to be held elsewhere.
5. (1) Questions arising at any meeting of directors shall be decided by a
majority of votes. The chairman of the meeting may vote as a director
but shall not have a second or casting vote.
(2) At any meeting of directors the chairman shall receive and count
the vote of any director not present in person at such meeting on
any question or matter arising at such meeting whenever such
absent director has indicated by telegram, letter or other writing
lodged with the chairman of such meeting the manner in which the
absent director desires to vote on such question or matter and
such question or matter has been specifically mentioned in the
notice calling the meeting as a question or matter to be discussed
or decided thereat. In respect of any such question or matter so
mentioned in such notice any director may give to any other
director a proxy authorizing such other director to vote for such
first named director at such meeting, and the chairman of such
meeting, after such proxy has been so lodged, shall receive and
count any vote given in pursuance thereof notwithstanding the
absence of the director giving such proxy.
6. If no Chairman is elected, or if at any meeting of directors the
Chairman is not present within five minutes after the time appointed
for holding the meeting, or declines to take the
<PAGE>
chair, the President, if a director, shall preside. If the President is
not a director, is not present at such time or declines to take the
chair, a vice-president who is also a director shall preside. If no
person described above is present at such time and willing to take the
chair, the directors present shall choose some one of their number to
be chairman of the meeting.
7. A meeting of the directors at which a quorum is present shall be
competent to exercise all or any of the authorities, powers and
discretions for the time being vested in or exercisable by the
directors generally.
8. The directors may delegate any of their powers to committees consisting
of such number of directors as they think fit. Any committee so formed
shall in the exercise of the powers so delegated conform to any
regulations that may be imposed on them by the directors.
9. The meetings and proceedings of any committee of directors shall be
governed by the provisions contained in these Articles for regulating
the meetings and proceedings of the directors insofar as they are
applicable and are not superseded by any regulations made by the
directors.
10. All acts done at any meeting of the directors or of a committee of
directors or by any person acting as a director shall, notwithstanding
that it is afterwards discovered that there was some defect in the
appointment of the director or person so acting, or that they or any of
them were disqualified, be as valid as if every such person had been
duly appointed and was qualified to be a director.
11. A resolution in writing and signed by every director who would be
entitled to vote on the resolution at a meeting is as valid as if it
were passed by such directors at a meeting.
12. If any one or more of the directors is called upon to perform extra
services or to make any special exertions in going or residing abroad
or otherwise for any of the purposes of the Company or the business
thereof, the Company may remunerate the director or directors so doing,
either by a fixed sum or by a percentage of profits or otherwise. Such
remuneration shall be determined by the directors and may be either in
addition to or in substitution for remuneration otherwise authorized by
these Articles.
REGISTERS
1. The directors shall cause to be kept at the Company's Office in
accordance with the provisions of the Act a Register of the
shareholders of the Company, a register of the holders of bonds,
debentures and other securities of the Company and a register of its
directors. Branch registers of the shareholders and of the holders of
bonds, debentures and other securities may be kept elsewhere, either
within or without the Province of Nova Scotia, in accordance with the
Act.
<PAGE>
-18-
MINUTES
1. The directors shall cause minutes to be entered in books designated for
the purpose:
(1) of all appointments of officers;
(2) of the names of directors present at each meeting of directors and
of any committees of directors;
(3) of all orders made by the directors and committees of directors;
and
(4) of all resolutions and proceedings of meetings of shareholders and
of directors.
Any such minutes of any meeting of directors or of any committee of
directors or of shareholders, if purporting to be signed by the
chairman of such meeting or by the chairman of the next succeeding
meeting, shall be receivable as prima facie evidence of the matters
stated in such minutes.
POWERS OF DIRECTORS
1. The management of the business of the Company is vested in the
directors who, in addition to the powers and authorities by these
Articles or otherwise expressly conferred upon them, may exercise all
such powers and do all such acts and things as may be exercised or done
by the Company and are not hereby or by statute expressly directed or
required to be exercised or done by the shareholders, but subject
nevertheless to the provisions of any statute, the Memorandum or these
Articles. No modification of the Memorandum or these Articles shall
invalidate any prior act of the directors that would have been valid if
such modification had not been made.
2. Without restricting the generality of the terms of any of these
Articles and without prejudice to the powers conferred thereby, the
directors may:
(1) take such steps as they think fit to carry out any agreement or
contract made by or on behalf of the Company;
(2) pay costs, charges and expenses preliminary and incidental to the
promotion, formation, establishment, and registration of the
Company;
(3) purchase or otherwise acquire for the Company any property, rights
or privileges that the Company is authorized to acquire, at such
price and generally on such terms and conditions as they think
fit;
<PAGE>
-19-
(4) pay for any property, rights or privileges acquired by, or
services rendered to the Company either wholly or partially in
cash or in shares (fully paid-up or otherwise), bonds, debentures
or other securities of the Company;
(5) subject to the Act, secure the fulfilment of any contracts or
engagements entered into by the Company by mortgaging or charging
all or any of the property of the Company and its unpaid capital
for the time being, or in such other manner as they think fit;
(6) appoint, remove or suspend at their discretion such experts,
managers, secretaries, treasurers, officers, clerks, agents and
servants for permanent, temporary or special services, as they
from time to time think fit, and determine their powers and duties
and fix their salaries or emoluments and require security in such
instances and to such amounts as they think fit;
(7) accept a surrender of shares from any shareholder insofar as the
law permits and on such terms and conditions as may be agreed;
(8) appoint any person or persons to accept and hold in trust for the
Company any property belonging to the Company, or in which it is
interested, execute and do all such deeds and things as may be
required in relation to such trust, and provide for the
remuneration of such trustee or trustees;
(9) institute, conduct, defend, compound or abandon any legal
proceedings by and against the Company, its directors or its
officers or otherwise concerning the affairs of the Company, and
also compound and allow time for payment or satisfaction of any
debts due and of any claims or demands by or against the Company;
(10) refer any claims or demands by or against the Company to
arbitration and observe and perform the awards;
(11) make and give receipts, releases and other discharges for amounts
payable to the Company and for claims and demands of the Company;
(12) determine who may exercise the borrowing powers of the Company and
sign on the Company's behalf bonds, debentures or other
securities, bills, notes, receipts, acceptances, assignments,
transfers, hypothecations, pledges, endorsements, cheques, drafts,
releases, contracts, agreements and all other instruments and
documents;
(13) provide for the management of the affairs of the Company abroad in
such manner as they think fit, and in particular appoint any
person to be the attorney or agent of the Company with such powers
(including power to sub-delegate) and upon such terms
<PAGE>
-20-
as may be thought fit;
(14) invest and deal with any funds of the Company in such securities
and in such manner as they think fit; and vary or realize such
investments;
(15) subject to the Act, execute in the name and on behalf of the
Company in favour of any director or other person who may incur or
be about to incur any personal liability for the benefit of the
Company such mortgages of the Company's property, present and
future, as they think fit;
(16) give any officer or employee of the Company a commission on the
profits of any particular business or transaction or a share in
the general profits of the Company;
(17) set aside out of the profits of the Company before declaring any
dividend such amounts as they think proper as a reserve fund to
meet contingencies or provide for dividends, depreciation,
repairing, improving and maintaining any of the property of the
Company and such other purposes as the directors may in their
absolute discretion think in the interests of the Company; and
invest such amounts in such investments as they think fit, and
deal with and vary such investments, and dispose of all or any
part of them for the benefit of the Company, and divide the
reserve fund into such special funds as they think fit, with full
power to employ the assets constituting the reserve fund in the
business of the Company without being bound to keep them separate
from the other assets;
(18) make, vary and repeal rules respecting the business of the
Company, its officers and employees, the shareholders of the
Company or any section or class of them;
(19) enter into all such negotiations and contracts, rescind and vary
all such contracts, and execute and do all such acts, deeds and
things in the name and on behalf of the Company as they consider
expedient for or in relation to any of the matters aforesaid or
otherwise for the purposes of the Company;
(20) provide for the management of the affairs of the Company in such
manner as they think fit.
SOLICITORS
1. The Company may employ or retain solicitors any of whom may, at the
request or on the instruction of the directors, the Chairman, the
President or a managing director, attend meetings of the directors or
shareholders, whether or not the solicitor is a shareholder or a
director of the Company. A solicitor who is also a director may
nevertheless charge for services rendered to the Company as a
solicitor.
<PAGE>
-21-
THE SEAL
1. The directors shall arrange for the safe custody of the common seal of
the Company (the "Seal"). The Seal may be affixed to any instrument in
the presence of and contemporaneously with the attesting signature of
(i) any director or officer acting within such person's authority or
(ii) any person under the authority of a resolution of the directors or
a committee thereof. For the purpose of certifying documents or
proceedings the Seal may be affixed by any director or the President, a
vice-president, the Secretary, an assistant secretary or any other
officer of the Company without the authorization of a resolution of the
directors.
2. The Company may have facsimiles of the Seal which may be used
interchangeably with the Seal.
3. The Company may have for use at any place outside the Province of Nova
Scotia, as to all matters to which the corporate existence and capacity
of the Company extends, an official seal that is a facsimile of the
Seal of the Company with the addition on its face of the name of the
place where it is to be used; and the Company may by writing under its
Seal authorize any person to affix such official seal at such place to
any document to which the Company is a party.
DIVIDENDS
1. The directors may from time to time declare such dividend as they deem
proper upon shares of the Company according to the rights and
restrictions attached to any class or series of shares, and may
determine the date upon which such dividend will be payable and that it
will be payable to the persons registered as the holders of the shares
on which it is declared at the close of business upon a record date. No
transfer of such shares registered after the record date shall pass any
right to the dividend so declared.
2. Dividends may be paid as permitted by law and, without limitation, may
be paid out of the profits, retained earnings or contributed surplus of
the Company. No interest shall be payable on any dividend except
insofar as the rights attached to any class or series of shares provide
otherwise.
3. The declaration of the directors as to the amount of the profits,
retained earnings or contributed surplus of the Company shall be
conclusive.
4. The directors may from time to time pay to the shareholders such
interim dividends as in their judgment the position of the Company
justifies.
5. Subject to these Articles and the rights and restrictions attached to
any class or series of
<PAGE>
-22-
shares, dividends may be declared and paid to the shareholders in
proportion to the amount of capital paid-up on the shares (not
including any capital paid-up bearing interest) held by them
respectively.
6. The directors may deduct from the dividends payable to any shareholder
amounts due and payable by the shareholder to the Company on account of
calls, instalments or otherwise, and may apply the same in or towards
satisfaction of such amounts so due and payable.
7. The directors may retain any dividends on which the Company has a lien,
and may apply the same in or towards satisfaction of the debts,
liabilities or engagements in respect of which the lien exists.
8. The directors may retain the dividends payable upon shares to which a
person is entitled or entitled to transfer upon the death or bankruptcy
of a shareholder or in any way other than by allotment or transfer,
until such person has become registered as the holder of such shares or
has duly transferred such shares.
9. When the directors declare a dividend on a class or series of shares
and also make a call on such shares payable on or before the date on
which the dividend is payable, the directors may retain all or part of
the dividend and set off the amount retained against the call.
10. The directors may declare that a dividend be paid by the distribution
of cash, paid-up shares (at par or at a premium), debentures, bonds or
other securities of the Company or of any other company or any other
specific assets held or to be acquired by the Company or in any one or
more of such ways.
11. The directors may settle any difficulty that may arise in regard to the
distribution of a dividend as they think expedient, and in particular
without restricting the generality of the foregoing may issue
fractional certificates, may fix the value for distribution of any
specific assets, may determine that cash payments will be made to any
shareholders upon the footing of the value so fixed or that fractions
may be disregarded in order to adjust the rights of all parties, and
may vest cash or specific assets in trustees upon such trusts for the
persons entitled to the dividend as may seem expedient to the
directors.
12. Any person registered as a joint holder of any share may give effectual
receipts for all dividends and payments on account of dividends in
respect of such share.
13. Unless otherwise determined by the directors, any dividend may be paid
by a cheque or warrant delivered to or sent through the post to the
registered address of the shareholder entitled, or, when there are
joint holders, to the registered address of that one whose name stands
first on the register for the shares jointly held. Every cheque or
warrant so delivered or sent shall be made payable to the order of the
person to whom it is delivered or sent. The
<PAGE>
-23-
mailing or other transmission to a shareholder at the shareholder's
registered address (or, in the case of joint shareholders at the
address of the holder whose name stands first on the register) of a
cheque payable to the order of the person to whom it is addressed for
the amount of any dividend payable in cash after the deduction of any
tax which the Company has properly withheld, shall discharge the
Company's liability for the dividend unless the cheque is not paid on
due presentation. If any cheque for a dividend payable in cash is not
received, the Company shall issue to the shareholder a replacement
cheque for the same amount on such terms as to indemnity and evidence
of non-receipt as the directors may impose. No shareholder may recover
by action or other legal process against the Company any dividend
represented by a cheque that has not been duly presented to a banker of
the Company for payment or that otherwise remains unclaimed for 6 years
from the date on which it was payable.
ACCOUNTS
1. The directors shall cause proper books of account to be kept of the
amounts received and expended by the Company, the matters in respect of
which such receipts and expenditures take place, all sales and
purchases of goods by the Company, and the assets, credits and
liabilities of the Company.
2. The books of account shall be kept at the head office of the Company or
at such other place or places as the directors may direct.
3. The directors shall from time to time determine whether and to what
extent and at what times and places and under what conditions the
accounts and books of the Company or any of them shall be open to
inspection of the shareholders, and no shareholder shall have any right
to inspect any account or book or document of the Company except as
conferred by statute or authorized by the directors or a resolution of
the shareholders.
4. At the ordinary general meeting in every year the directors shall lay
before the Company such financial statements and reports in connection
therewith as may be required by the Act or other applicable statute or
regulation thereunder and shall distribute copies thereof at such times
and to such persons as may be required by statute or regulation.
<PAGE>
-24-
AUDITORS AND AUDIT
1. Except in respect of a financial year for which the Company is exempt
from audit requirements in the Act, the Company shall at each ordinary
general meeting appoint an auditor or auditors to hold office until the
next ordinary general meeting. If at any general meeting at which the
appointment of an auditor or auditors is to take place and no such
appointment takes place, or if no ordinary general meeting is held in
any year or period of years, the directors shall appoint an auditor or
auditors to hold office until the next ordinary general meeting.
2. The first auditors of the Company may be appointed by the directors at
any time before the first ordinary general meeting and the auditors so
appointed shall hold office until such meeting unless previously
removed by a resolution of the shareholders, in which event the
shareholders may appoint auditors.
3. The directors may fill any casual vacancy in the office of the auditor
but while any such vacancy continues the surviving or continuing
auditor or auditors, if any, may act.
4. The Company may appoint as auditor any person, including a shareholder,
not disqualified by statute.
5. An auditor may be removed or replaced in the circumstances and in the
manner specified in the Act.
6. The remuneration of the auditors shall be fixed by the shareholders, or
by the directors pursuant to authorization given by the shareholders,
except that the remuneration of an auditor appointed to fill a casual
vacancy may be fixed by the directors.
7. The auditors shall conduct such audit as may be required by the Act and
their report, if any, shall be dealt with by the Company as required by
the Act.
NOTICES
1. A notice (including any communication or document) shall be
sufficiently given, delivered or served by the Company upon a
shareholder, director, officer or auditor by personal delivery at such
person's registered address (or, in the case of a director, officer or
auditor, last known address) or by prepaid mail, telegraph, telex,
facsimile machine or other electronic means of communication addressed
to such person at such address.
2. Shareholders having no registered address shall not be entitled to
receive notice.
3. All notices with respect to registered shares to which persons are
jointly entitled may be
<PAGE>
sufficiently given to all joint holders thereof by notice given to
whichever of such persons is named first in the Register for such
shares.
4. Any notice sent by mail shall be deemed to be given, delivered or
served on the earlier of actual receipt and the third business day
following that upon which it is mailed, and in proving such service it
shall be sufficient to prove that the notice was properly addressed and
mailed with the postage prepaid thereon. Any notice given by electronic
means of communication shall be deemed to be given when entered into
the appropriate transmitting device for transmission. A certificate in
writing signed on behalf of the Company that the notice was so
addressed and mailed or transmitted shall be conclusive evidence
thereof.
5. Every person who by operation of law, transfer or other means
whatsoever becomes entitled to any share shall be bound by every notice
in respect of such share that prior to such person's name and address
being entered on the Register was duly served in the manner
hereinbefore provided upon the person from whom such person derived
title to such share.
6. Any notice delivered, sent or transmitted to the registered address of
any shareholder pursuant to these Articles, shall, notwithstanding that
such shareholder is then deceased and that the Company has notice
thereof, be deemed to have been served in respect of any registered
shares, whether held by such deceased shareholder solely or jointly
with other persons, until some other person is registered as the holder
or joint holder thereof, and such service shall for all purposes of
these Articles be deemed a sufficient service of such notice on the
heirs, executors or administrators of the deceased shareholder and all
joint holders of such shares.
7. Any notice may bear the name or signature, manual or reproduced, of the
person giving the notice written or printed.
8. When a given number of days' notice or notice extending over any other
period is required to be given, the day of service and the day upon
which such notice expires shall not, unless it is otherwise provided,
be counted in such number of days or other period.
<PAGE>
-25-
INDEMNITY
1. Every director or officer, former director or officer, or person who
acts or acted at the Company's request, as a director or officer of the
Company, a body corporate, partnership or other association of which
the Company is or was a shareholder, partner, member or creditor, and
the heirs and legal representatives of such person, in the absence of
any dishonesty on the part of such person, shall be indemnified by the
Company against, and it shall be the duty of the directors out of the
funds of the Company to pay, all costs, losses and expenses, including
an amount paid to settle an action or claim or satisfy a judgment, that
such director, officer or person may incur or become liable to pay in
respect of any claim made against such person or civil, criminal or
administrative action or proceeding to which such person is made a
party by reason of being or having been a director or officer of the
Company or such body corporate, partnership or other association,
whether the Company is a claimant or party to such action or proceeding
or otherwise; and the amount for which such indemnity is proved shall
immediately attach as a lien on the property of the Company and have
priority as against the shareholders over all other claims.
2. No director or officer, former director or officer, or person who acts
or acted at the Company's request, as a director or officer of the
Company, a body corporate, partnership or other association of which
the Company is or was a shareholder, partner, member or creditor, in
the absence of any dishonesty on such person's part, shall be liable
for the acts, receipts, neglects or defaults of any other director,
officer or such person, or for joining in any receipt or other act for
conformity, or for any loss, damage or expense happening to the Company
through the insufficiency or deficiency of title to any property
acquired for or on behalf of the Company, or through the insufficiency
or deficiency of any security in or upon which any of the funds of the
Company are invested, or for any loss or damage arising from the
bankruptcy, insolvency or tortious acts of any person with whom any
funds, securities or effects are deposited, or for any loss occasioned
by error of judgment or oversight on the part of such person, or for
any other loss, damage or misfortune whatsoever which happens in the
execution of the duties of such person or in relation thereto.
REMINDERS
1. The directors shall comply with the following provisions of the Act or
the Corporations Registration Act (Nova Scotia) where indicated:
(1) Keep a current register of shareholders (Section 42).
(2) Keep a current register of directors, officers and managers, send
to the Registrar a copy thereof and notice of all changes therein
(Section 98).
(3) Keep a current register of holders of bonds, debentures and other
securities (Section 111 and Third Schedule).
<PAGE>
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(4) Call a general meeting every year within the proper time (Section
83). Meetings must be held not later than 15 months after the
preceding general meeting.
(5) Send to the Registrar copies of all special resolutions (Section
88).
(6) Send to the Registrar notice of the address of the Company's
Office and of all changes in such address (Section 79).
(7) Keep proper minutes of all shareholders' meetings and directors'
meetings in the Company's minute book kept at the Company's Office
(Sections 89 and 90).
(8) Obtain a certificate under the Corporations Registration Act (Nova
Scotia) as soon as business is commenced.
(9) Send notice of recognized agent to the Registrar under the
Corporations Registration Act (Nova Scotia).
NAME OF SUBSCRIBER
Dated at Halifax, Nova Scotia the 18th day of November, 1999.
Witness to above signature:
Halifax, Nova Scotia
<PAGE>
EXHIBIT 10.8
AMENDMENT TO THE
DOMINO'S PIZZA
DEFERRED COMPENSATION PLAN
Domino's Pizza, Inc., having determined that the Company shall no longer make
either Employer Matching Contributions or Supplemental Contributions after the
end of the 1999 Plan Year and having further determined to provide a modified
Employer benefit to the plan for the Plan Year 2000 which is not yet determined
desires to grant Participants with a limited opportunity to change their
Participant elections this one year only prior to their receipt of compensation
adopts the following amendment to the Plan effective immediately:
Section 3.1 is deleted in its entirety and the following is substituted in its
place:
DEFERRAL CONTRIBUTIONS. Each Participant may elect to execute a salary
reduction agreement with the Employer to reduce their Compensation by a
specified percentage: determined by the Compensation Committee of the Board
of Directors of the Employer not exceeding the percentage of his or her
Compensation applicable to their particular job grade and position as
described on the attached Exhibit B in a whole number multiple of five (5)
percent. Such agreement shall become effective on the first day of the
period as set forth in the Participant's election. The election will be
effective to defer Compensation relating to all services performed in a
Plan Year subsequent to the filing of such an election. An election once
made will remain in effect until a new election is made. A new election
will be effective as of the first day of the following Plan Year and will
apply only to Compensation payable with respect to services rendered after
such date, provided however, that for the Plan Year 2000, Participants
shall be entitled to change their election on one occasion before February
28, 2000 in this Plan Year only due to a change in the terms of the
Employer contributions to the Plan which will not become effective or
determined until after the commencement of the 2000 Plan Year. Amounts
credited to a Participant's account prior to the effective date of any new
election will not be affected and will be paid in accordance with that
prior election. A Participant shall have nonforfeitable right to his or
her Deferral Contributions.
This amendments shall be effective immediately. Other than the foregoing
amendment, the plan remains in full force and effect and unmodified.
<PAGE>
IN WITNESS WHEREOF, the Company has amended the plan to be effective
immediately.
DOMINO'S PIZZA, INC.
By:
---------------------------------------------
Harry Silverman
Its: Chief Financial Officer
Dated:
--------------------
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of December 14, 1999, by Domino's
Pizza, Inc., a Michigan corporation (the "Company") with Harry Silverman (the
"Executive").
RECITALS
1. The Executive has experience and expertise required by the Company
and its Affiliates.
2. Subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Chief
Financial Officer and the Executive wishes to accept such
employment.
AGREEMENT
NOW, THEREFORE, for valid consideration received, the parties agree as
follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive accepts employment
hereunder effective as of the date first set forth above (the
"Effective Date").
2. Term. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term
commencing on the Effective Date and ending on June 30, 2003, which
term shall be automatically extended thereafter for successive
terms of one year each, unless either party provides notice to the
other at least 30 days prior to the expiration of the original or
any extension term that this Agreement is not to be extended. The
term of the Executive's employment under this Agreement, as from
time to time extended, is referred to as the "Term."
3. Capacity and Performance.
3.1 Offices. During the Term, the Executive shall serve the
Company in the office of Chief Financial Officer. The Executive shall have such
other powers, duties and responsibilities consistent with the Executive's
position as Chief Financial Officer as may from time to time be prescribed by
the Chief Executive Officer of the Company ("CEO").
3.2 Performance. During the Term, the Executive shall be employed
by the Company on a full-time basis and shall perform and discharge, faithfully,
diligently and to the best of his ability, his duties and responsibilities
hereunder. During the Term, the Executive shall devote his full business time
exclusively to the advancement of the business and interests of the Company and
its Affiliates and to the discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other business activity or
serve in any industry, trade, professional, governmental, political, charitable
or academic position during the Term of this Agreement, except for such
directorships or other positions which he currently holds and has disclosed to
the CEO in Exhibit 3.2 hereof and except as otherwise may be approved in advance
by the CEO.
4. Compensation and Benefits. During the Term, as compensation for all
services performed by the Executive under this Agreement and subject to
performance of the Executive's duties and obligations to the Company and its
Affiliates, pursuant to this Agreement or otherwise, the Executive shall receive
the following:
4.1 Base Salary.
(a) Through December 31, 1999. From the Effective Date of
this Agreement through December 31, 1999, the Company shall pay the Executive a
base salary at the rate of Two Hundred Sixty-Four Thousand Three Hundred
Seventy-Three Dollars ($264,373) per year, payable in accordance with the
payroll practices of the Company for its executives (the "1999 Base Salary"),
and
(b) Commencing January 1, 2000. Commencing January 1, 2000,
the Company shall pay the Executive a base salary at the rate of Three Hundred
Ten Thousand Dollars ($310,000) per year, payable in
<PAGE>
accordance with the payroll practices of the Company for its executives and
subject to such increases as the Board of Directors of the Company (the "Board")
in its sole discretion may determine from time to time (the "Base Salary").
4.2 Bonus.
(a) Formula Bonus. Commencing in 2000, subject to Section 5
hereof, the Company shall pay the Executive a bonus in each fiscal year that he
is an employee (the "Bonus") within 75 days of the end of the fiscal year in
which such Bonus is earned. The amount of the Bonus shall be determined by the
Board based on the Company's achievement of pre-established annual targets (each
annual target being referred to as "Target"), which shall be based upon the
Company's EBITDA. The term "EBITDA" shall mean earnings before interest, taxes,
depreciation, amortization, Leadership Team bonuses, and loss or gain on sale or
disposal of assets outside of the ordinary course of business (including sales
of stores), all as reflected on the Company's financial statements as regularly
and consistently prepared. No Bonus shall be paid unless 90% of Target is
exceeded in the applicable fiscal year. The Executive shall receive a bonus of
one-tenth of one percent (0.1%) of his Base Salary for every one-hundredth of
one percent (0.01%) (rounded to the nearest hundredth) in excess of 90% of
Target that is achieved in the applicable fiscal year. By way of example only,
if 100% of Target is achieved, Executive would receive a Bonus under this
Section 4.2(a) equal to 100% of Executive's Base Salary.
(b) Discretionary Bonus Commencing in 2000, the Executive
shall also be eligible for an annual discretionary bonus, the amount of which is
determined in the sole discretion of the CEO based on subjective and objective
criteria established by the CEO, of up to 25% of Base Salary.
(c) Pro-Ration Anything to the contrary in this Agreement
notwithstanding, whenever any Bonus payable to the Executive is stated in this
Agreement to be prorated for any period of service less than a full year, such
Bonus shall be prorated by multiplying (x) the amount of the Bonus otherwise
payable for the applicable fiscal year in accordance with this Section 4.2 by
(y) a fraction, the denominator of which shall be 365 and the numerator of which
shall be the number of days during the applicable fiscal year for which the
Executive was employed by the Company.
4.3 Vacations. During the Term, the Executive shall be entitled
to four weeks of vacation per calendar year, to be taken at such times and
intervals as shall be determined by the Executive, subject to the reasonable
business needs of the Company. The Executive may not accumulate or carry over
from one calendar year to another any unused, accrued vacation time. The
Executive shall not be entitled to compensation for vacation time not taken.
4.4 Other Benefits. During the Term and subject to any
contribution therefor required of executives of the Company generally, the
Executive shall be entitled to participate in all employee benefit plans,
including without limitation any 401(k) plan, from time to time adopted by the
Board and in effect for executives of the Company generally (except to the
extent such plans are in a category of benefit otherwise provided the Executive
hereunder). Such participation shall be subject to (i) the terms of the
applicable plan documents and (ii) generally applicable policies of the Company.
The Company may alter, modify, add to or delete any aspects of its employee
benefit plans at any time as the Board, in its sole judgment, determines to be
appropriate.
4.5 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable business expenses, including without limitation the
cost of first class air travel and dues for industry-related association
memberships, incurred or paid by the Executive in the performance of his duties
and responsibilities hereunder, subject to (i) any expense policy of the Company
set by the Board from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board or CEO from time to
time.
4.6 Airline Clubs. Upon receiving the prior written approval of
the CEO authorizing the Executive to join a particular airline club, the Company
shall pay or reimburse the Executive for dues for not less than two nor more
than four airline clubs, provided such club memberships serve a direct business
purpose and subject to such reasonable substantiation and documentation
requirements as to cost and purpose as may be specified by the CEO from time to
time.
-2-
<PAGE>
4.7 Physicals. The Company shall annually pay for or reimburse
the Executive for the cost of a physical examination and health evaluation
performed by a licensed medical doctor, subject to such reasonable
substantiation and documentation requirements as to cost as may be specified by
the Board or CEO from time to time.
4.8 Nonqualified Plan. The Executive agrees that the Company may
amend its nonqualified deferred compensation plan to exclude the Executive from
receiving benefits based upon any deferral matching credit or formula.
5. Termination of Employment and Severance Benefits. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1 Retirement or Death. In the event of the Executive's
retirement or death during the Term, the Executive's employment hereunder shall
immediately and automatically terminate. In the event of the Executive's
retirement after the age of 65 with the prior consent of the Board or death
during the Term, the Company shall pay to the Executive (or in the case of
death, the Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate) any Base Salary earned but unpaid
through the date of such retirement or death, any Bonus for the fiscal year
preceding the year in which such retirement or death occurs that was earned but
has not yet been paid and, at the times the Company pays its executives bonuses
in accordance with its general payroll policies, an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such retirement or
death (prorated in accordance with Section 4.2).
5.2 Disability.
5.2.1 The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the Executive becomes
disabled during his employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature and, as a result, is
unable to perform substantially all of his duties and responsibilities hereunder
for an aggregate of 120 days during any period of 365 consecutive calendar days.
5.2.2 The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability.
Notwithstanding any such designation, the Executive shall continue to receive
the Base Salary in accordance with Section 4.1 and to receive benefits in
accordance with Section 4.5, to the extent permitted by the then current terms
of the applicable benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan maintained by the
Company, or until the termination of his employment, whichever shall first
occur. Upon becoming so eligible, or upon such termination, whichever shall
first occur, the Company shall pay to the Executive any Base Salary earned but
unpaid through the date of such eligibility or termination and any Bonus for the
fiscal year preceding the year of such eligibility or termination that was
earned but unpaid. At the times the Company pays its executives bonuses
generally, the Company shall pay the Executive an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such eligibility or
termination (prorated in accordance with Section 4.2). During the 18-month
period from the date of such eligibility or termination, the Company shall pay
the Executive, at its regular pay periods, an amount equal to the difference
between the Base Salary and the amounts of disability income benefits that the
Executive receives pursuant to the above-referenced disability income plan in
respect of such period.
5.2.3 Except as provided in Section 5.2.2, while receiving
disability income payments under any disability income plan maintained by the
Company, the Executive shall not be entitled to receive any Base Salary under
Section 4.1 or Bonus payments under Section 4.2 but shall continue to
participate in benefit plans of the Company in accordance with Section 4.4 and
the terms of such plans, until the termination of his employment. During the
18-month period from the date of eligibility or termination, whichever shall
first occur, the Company shall contribute to the cost of the Executive's
participation in group medical plans of the Company, provided that the Executive
is entitled to continue such participation under applicable law and plan terms.
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5.2.4 If any question shall arise as to whether during any
period the Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be unable to
perform substantially all of his duties and responsibilities hereunder, the
Executive may, and at the request of the Company shall, submit to a medical
examination by a physician selected by the Company to whom the Executive or his
duly appointed guardian, if any, has no reasonable objection, to determine
whether the Executive is so disabled and such determination shall for the
purposes of this Agreement be conclusive of the issue. If such question shall
arise and the Executive shall fail to submit to such medical examination, the
Board's determination of the issue shall be binding on the Executive.
5.3 By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following events or conditions shall constitute "Cause" for termination: (i)
Executive's willful failure to perform (other than by reason of disability), or
gross negligence in the performance of his duties to the Company or any of its
Affiliates and the continuation of such failure or negligence for a period of
ten (10) days after notice to the Executive; (ii) the Executive's willful
failure to perform (other than by reason of disability) any lawful and
reasonable directive of the CEO; (iii) the commission of fraud, embezzlement or
theft by the Executive with respect to the Company or any of its Affiliates; or
(iv) the conviction of the Executive of, or plea by the Executive of nolo
contendere to, any felony or any other crime involving dishonesty or moral
turpitude. Anything to the contrary in this Agreement notwithstanding, upon the
giving of notice of termination of the Executive's employment hereunder for
Cause, the Company and its Affiliates shall have no further obligation or
liability to the Executive hereunder, other than for Base Salary earned but
unpaid through the date of termination. Without limiting the generality of the
foregoing, the Executive shall not be entitled to receive any Bonus amounts
which have not been paid prior to the date of termination.
5.4 By the Company Other Than for Cause. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, the Company
shall pay the Executive: (i) Base Salary earned but unpaid through the date of
termination, plus (ii) monthly severance payments, each in an amount equal to
the Executive's monthly base compensation in effect at the time of such
termination (i.e., 1/12th of the Base Salary) throughout the remainder of the
Term, provided should termination occur during the original Term or during any
one-year automatic extension thereof, the Term shall be deemed to expire at the
end of such original Term or at the end of the current extension year, as
applicable, plus (iii) any unpaid portion of any Bonus for the fiscal year
preceding the year in which such termination occurs that was earned but has not
been paid, plus (iv) at the times the Company pays its executives bonuses
generally, an amount equal to that portion of any Bonus earned but unpaid during
the fiscal year of such termination (prorated in accordance with Section 4.2).
5.5 By the Executive for Good Reason. The Executive may terminate
his employment hereunder for Good Reason, upon notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute "Good Reason" for termination by the Executive: (i) any material
diminution in the nature and scope of the Executive's responsibilities, duties,
authority or title; (ii) material failure of the Company to provide the
Executive the Base Salary and benefits in accordance with the terms of Section 4
hereof; or (iii) relocation of the Executive's office to a location outside a
50-mile radius of the Company's current headquarters in Ann Arbor, Michigan. In
the event of termination in accordance with this Section 5.5, then the Company
shall pay the Executive the amounts specified in Section 5.4.
5.6 By the Executive Other Than for Good Reason. The Executive
may terminate his employment hereunder at any time upon 90 days written notice
to the Company. In the event of termination of the Executive's employment
pursuant to this Section 5.6, the CEO or the Board may elect to waive the period
of notice, or any portion thereof. The Company will pay the Executive his Base
Salary for the notice period, except to the extent so waived by the Board. Upon
the giving of notice of termination of the Executive's employment hereunder
pursuant to this Section 5.6, the Company and its Affiliates shall have no
further obligation or liability to the Executive, other than (i) payment to the
Executive of his Base Salary for the period (or portion of such period)
indicated above, (ii) continuation of the provision of the benefits set forth in
Section 4.4 for the period (or portion of such period) indicated above, and
(iii) any unpaid portion of any Bonus for the fiscal year preceding the year in
which such termination occurs that was earned but has not been paid.
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5.7 Post-Agreement Employment. In the event the Executive remains
in the employ of the Company or any of its Affiliates following termination of
this Agreement, by the expiration of the Term or otherwise, then such employment
shall be at will.
6. Effect of Termination of Employment. The provisions of this Section
6 shall apply in the event of termination of Executive's employment, whether due
to the expiration of the Term, pursuant to Section 5, or otherwise.
6.1 Payment in Full. Payment by the Company or its Affiliates of
any Base Salary, Bonus or other specified amounts that are due to the Executive
under the applicable termination provision of Section 5 shall constitute the
entire obligation of the Company and its Affiliates to the Executive, except
that nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company or its Affiliates, on the one hand, and
the Executive, on the other, with respect to any option plans, option
agreements, subscription agreements, stockholders agreements or other agreements
to the extent said rights or obligations therein survive termination of
employment.
6.2 Termination of Benefits. If Executive is terminated by the
Company without Cause, or terminates his employment with the Company for Good
Reason, and provided that Executive elects continuation of health coverage
pursuant to Section 601 through 608 of the Employee Retirement Income Security
Act of 1974, as amended ("COBRA"), Company shall pay Executive an amount equal
to his monthly COBRA premiums for a period equal to the period remaining in the
Term after termination; provided further, such payment will cease upon
Executive's entitlement to other health insurance without charge. Except for
medical insurance coverage continued pursuant to Section 5.2 hereof, all other
benefits shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive's employment without regard to
any continuation of Base Salary or other payments to the Executive following
termination of his employment.
6.3 Survival of Certain Provisions. Provisions of this Agreement
shall survive any termination of employment if so provided herein or if
necessary to accomplish the purpose of other surviving provisions, including,
without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of the
Executive under Sections 5.2, 5.4 or 5.5 hereof is expressly conditioned upon
the Executive's continued full performance of his obligations under Sections 7
and 8 hereof. The Executive recognizes that, except as expressly provided in
Section 5.2, 5.4 or 5.5, no compensation is earned after the termination of his
employment.
7. Confidential Information; Intellectual Property.
7.1 Confidentiality. The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information (as that term is
defined in Section 11.2, below); that the Executive may develop Confidential
Information for the Company or its Affiliates and that the Executive may learn
of Confidential Information during the course of his employment. The Executive
will comply with the policies and procedures of the Company and its Affiliates
for protecting Confidential Information and shall never use or disclose to any
Person (except as required by applicable law or for the proper performance of
his duties and responsibilities to the Company) any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company and its Affiliates. The Executive understands that this restriction
shall continue to apply after his employment terminates, regardless of the
reason for such termination.
7.2 Return of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company and its Affiliates and any copies, in whole or in
part, thereof (the "Documents"), whether or not prepared by the Executive, shall
be the sole and exclusive property of the Company and its Affiliates. The
Executive shall safeguard all Documents and shall surrender to the Company and
its Affiliates at the time his employment terminates, or at such earlier time or
times as the Board or CEO designee may specify, all Documents then in the
Executive's possession or control.
7.3 Assignment of Rights to Intellectual Property. The Executive
shall promptly and fully disclose all Intellectual Property to the Company. The
Executive hereby assigns to the Company (or as otherwise directed by the
Company) the Executive's full right, title and interest in and to all
Intellectual Property. The Executive shall execute any and all applications for
domestic and foreign patents, copyrights or other proprietary rights and to do
such other acts
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(including without limitation the execution and delivery of instruments of
further assurance or confirmation) requested by the Company or its Affiliates to
assign the Intellectual Property to the Company and to permit the Company and
its Affiliates to enforce any patents, copyrights or other proprietary rights to
the Intellectual Property. The Executive will not charge the Company or its
Affiliates for time spent in complying with these obligations. All copyrightable
works that the Executive creates shall be considered "Work For Hire" under
applicable laws.
8. Restricted Activities.
8.1 Agreement Not to Compete With the Company. During the
Executive's employment hereunder and for a period of 24 months following the
date of termination thereof (the "Non-Competition Period"), the Executive will
not, directly or indirectly, own, manage, operate, control or participate in any
manner in the ownership, management, operation or control of, or be connected as
an officer, employee, partner, director, principal, member, manager, consultant,
agent or otherwise with, or have any financial interest in, or aid or assist
anyone else in the conduct of, any business, venture or activity which in any
material respect competes with the following enumerated business activities to
the extent then being conducted or being planned to be conducted by the Company
or its Affiliates or being conducted or known by the Executive to being planned
to be conducted by the Company or by any of its Affiliates, at or prior to the
date on which the Executive's employment under this Agreement is terminated (the
"Date of Termination"), in the United States or any other geographic area where
such business is being conducted or being planned to be conducted at or prior to
the Date of Termination (a "Competitive Business", defined below). For purposes
of this Agreement, "Competitive Business" shall be defined as: (i) any company
or other entity engaged as a "quick service restaurant" ("QSR") which offers
pizza for sale; (ii) any "quick service restaurant" which is then contemplating
entering into the pizza business or adding pizza to its menu; (iii) any entity
which at the time of Executive's termination of employment with the Company,
offers, as a primary product or service, products or services then being offered
by the Company or which the Company is actively contemplating offering; and (iv)
any entity under common control with an entity included in (i), (ii) or (iii),
above. Notwithstanding the foregoing, ownership of not more than 5% of any class
of equity security of any publicly traded corporation shall not, of itself,
constitute a violation of this Section 8.1.
8.2 Agreement Not to Solicit Employees or Customers of the
Company. During his employment and during the Non-Competition Period the
Executive will not, directly or indirectly, (i) recruit or hire or otherwise
seek to induce any employees of the Company or any of the Company's Affiliates
to terminate their employment or violate any agreement with or duty to the
Company or any of the Company's Affiliates; or (ii) solicit or encourage any
franchisee or vendor of the Company or of any of the Company's Affiliates to
terminate or diminish its relationship with any of them or to violate any
agreement with any of them, or, in the case of a franchisee, to conduct with any
Person any business or activity that such franchisee conducts or could conduct
with the Company or any of the Company's Affiliates.
9. Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including without limitation the restraints imposed upon him pursuant to
Sections 7 and 8 hereof. The Executive agrees that said restraints are necessary
for the reasonable and proper protection of the Company and its Affiliates and
that each and every one of the restraints is reasonable in respect to subject
matter, length of time and geographic area. The Executive further acknowledges
that, were he to breach any of the covenants or agreements contained in Sections
7 or 8 hereof, the damage to the Company and its Affiliates could be
irreparable. The Executive, therefore, agrees that the Company and its
Affiliates, in addition to any other remedies available to it, shall be entitled
to preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants or agreements. The parties
further agree that in the event that any provision of Section 7 or 8 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of it being extended over too great a time, too large a geographic
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which or by which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or solicitation or
similar covenants or other obligations that would affect the performance of his
obligations hereunder. The Executive will not disclose to or use on behalf of
the Company or any of its Affiliates any proprietary information of a third
party without such party's consent.
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11. Definitions. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 11
or as specifically defined elsewhere in this Agreement. For purposes of this
Agreement, the following definitions apply:
11.1 Affiliates. "Affiliates" shall mean TISM, Inc., Domino's,
Inc. and all other persons and entities controlling, controlled by or under
common control with the Company, where control may be by management authority or
equity interest.
11.2 Confidential Information. "Confidential Information" means
any and all information of the Company and its Affiliates that is not generally
known by others with whom they compete or do business, or with whom they plan to
compete or do business, and any and all information the disclosure of which
would otherwise be adverse to the interest of the Company or any of its
Affiliates. Confidential Information includes without limitation such
information relating to (i) the products and services sold or offered by the
Company or any of its Affiliates (including without limitation recipes,
production processes and heating technology), (ii) the costs, sources of supply,
financial performance and strategic plans of the Company and its Affiliates,
(iii) the identity of the suppliers to the Company and its Affiliates, and (iv)
the people and organizations with whom the Company and its Affiliates have
business relationships and those relationships. Confidential Information also
includes information that the Company or any of its Affiliates have received
belonging to others with any understanding, express or implied, that it would
not be disclosed.
11.3 ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 and any successor statute, and the rules and regulations
thereunder, and, in the case of any referenced section thereof, any successor
section thereto, collectively and as from time to time amended and in effect.
11.4 Intellectual Property. "Intellectual Property" means
inventions, discoveries, developments, methods, processes, compositions, works,
concepts, recipes and ideas (whether or not patentable or copyrightable or
constituting trade secrets or trademarks or service marks) conceived, made,
created, developed or reduced to practice by the Executive (whether alone or
with others, whether or not during normal business hours or on or off Company
premises) during the Executive's employment that relate to either the business
activities or any prospective activity of the Company or any of its Affiliates.
11.5 Person. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
12. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
13. Waiver, Release and Termination of Prior Agreement. Effective upon
the execution of this Agreement, Executive hereby waives any and all rights and
benefits to which he was entitled under a prior Severance Agreement with the
Company dated August 4, 1998 (the "Prior Agreement"), releases the Company and
its Affiliates from any and all obligations under the Prior Agreement, and
agrees that such Prior Agreement is terminated and of no force or effect.
14. Miscellaneous.
14.1 Assignment. Neither the Company nor the Executive may assign
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
the Executive in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into, any other Person or transfer
all or substantially all of its properties or assets to any other Person, in
which event such other Person shall be deemed the "Company" hereunder, as
applicable, for all purposes of this Agreement; provided, further, that nothing
contained herein shall be construed to place any limitation or restriction on
the transfer of the Company's Common Stock in addition to any restrictions set
forth in any stockholder agreement applicable to the holders of such shares.
This Agreement shall inure to the benefit of and be binding upon the Company and
the Executive, and their respective successors, executors, administrators,
representatives, heirs and permitted assigns.
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14.2 Severability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the application of such provision in such circumstances shall
be deemed modified to permit its enforcement to the maximum extent permitted by
law, and both the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable and the
remainder of this Agreement shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
14.3 Waiver; Amendment. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. The failure of
either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach. This Agreement may be amended or modified only
by a written instrument signed by the Executive and any expressly authorized
representative of the Company.
14.4 Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed (i) in the case of the
Executive, to: Harry Silverman, at 1833 Wintergreen Court, Ann Arbor, Michigan
48103, and (ii) in the case of the Company, to the attention of Mr. David A.
Brandon, CEO, at 30 Frank Lloyd Wright Drive, Ann Arbor, Michigan 48106, or to
such other address as either party may specify by notice to the other actually
received.
14.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes any and all prior communications,
agreements and understandings, written or oral, between the Executive and the
Company, or any of its predecessors, with respect to the terms and conditions of
the Executive's employment.
14.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instruments.
14.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Michigan without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
14.8 Consent to Jurisdiction. Each of the Company and the
Executive by its or his execution hereof, (i) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Michigan for the purpose of any
claim or action arising out of or based upon this Agreement or relating to the
subject matter hereof and (ii) hereby waives, to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such claim or action, any claim that it or he is not subject
personally to the jurisdiction of the above-named courts, that its or his
property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court. Each of
the Company and the Executive hereby consents to service of process in any such
proceeding in any manner permitted by Michigan law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 13.4 hereof is reasonably calculated to
give actual notice.
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IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY: DOMINO'S PIZZA, INC.
By: /s/
-----------------------------------
Name: David A. Brandon
Title: CEO
THE EXECUTIVE: /s/
--------------------------------------
Name: Harry Silverman
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EXHIBIT 3.2
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EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of December 14, 1999, by Domino's
Pizza, Inc., a Michigan corporation (the "Company") with Cheryl Bachelder (the
"Executive").
RECITALS
1. The Executive has experience and expertise required by the Company
and its Affiliates.
2. Subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Executive Vice President
of Marketing and Research Development and the Executive wishes to accept such
employment.
AGREEMENT
NOW, THEREFORE, for valid consideration received, the parties agree as
follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive accepts employment hereunder
effective as of the date first set forth above (the "Effective Date").
2. Term. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending on December 31, 2003, which term shall be
automatically extended thereafter for successive terms of one year each, unless
either party provides notice to the other at least 30 days prior to the
expiration of the original or any extension term that this Agreement is not to
be extended. The term of the Executive's employment under this Agreement, as
from time to time extended, is referred to as the "Term."
3. Capacity and Performance.
3.1 Offices. During the Term, the Executive shall serve the
Company in the office of Executive Vice President of Marketing and Research
Development. The Executive shall have such other powers, duties and
responsibilities consistent with the Executive's position as Executive Vice
President of Marketing and Research Development as may from time to time be
prescribed by the Chief Executive Officer of the Company ("CEO").
3.2 Performance. During the Term, the Executive shall be employed
by the Company on a full-time basis and shall perform and discharge, faithfully,
diligently and to the best of her ability, her duties and responsibilities
hereunder. During the Term, the Executive shall devote her full business time
exclusively to the advancement of the business and interests of the Company and
its Affiliates and to the discharge of her duties and responsibilities
hereunder. The Executive shall not engage in any other business activity or
serve in any industry, trade, professional, governmental, political, charitable
or academic position during the Term of this Agreement, except for such
directorships or other positions which she currently holds and has disclosed to
the CEO in Exhibit 3.2 hereof and except as otherwise may be approved in advance
by the CEO.
4. Compensation and Benefits. During the Term, as compensation for all
services performed by the Executive under this Agreement and subject to
performance of the Executive's duties and obligations to the Company and its
Affiliates, pursuant to this Agreement or otherwise, the Executive shall receive
the following:
4.1 Base Salary.
(a) Through December 31, 1999. From the Effective Date of
this Agreement through December 31, 1999, the Company shall pay the Executive a
base salary at the rate of Two Hundred Eighty-Two Thousand Eight Hundred One
Dollars ($282,801) per year, payable in accordance with the payroll practices of
the Company for its executives (the "1999 Base Salary"), and
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(b) Commencing January 1, 2000. Commencing January 1, 2000,
the Company shall pay the Executive a base salary at the rate of Three Hundred
Thirty Thousand Dollars ($330,000) per year, payable in accordance with the
payroll practices of the Company for its executives and subject to such
increases as the Board of Directors of the Company (the "Board") in its sole
discretion may determine from time to time (the "Base Salary").
4.2 Bonus.
(a) Formula Bonus. Commencing in 2000, subject to Section 5
hereof, the Company shall pay the Executive a bonus in each fiscal year that she
is an employee (the "Bonus") within 75 days of the end of the fiscal year in
which such Bonus is earned. The amount of the Bonus shall be determined by the
Board based on the Company's achievement of pre-established annual targets (each
annual target being referred to as "Target"), which shall be based upon the
Company's EBITDA. The term "EBITDA" shall mean earnings before interest, taxes,
depreciation, amortization, Leadership Team bonuses, and loss or gain on sale or
disposal of assets outside of the ordinary course of business (including sales
of stores), all as reflected on the Company's financial statements as regularly
and consistently prepared. No Bonus shall be paid unless 90% of Target is
exceeded in the applicable fiscal year. The Executive shall receive a bonus of
one-tenth of one percent (0.1%) of her Base Salary for every one-hundredth of
one percent (0.01%) (rounded to the nearest hundredth) in excess of 90% of
Target that is achieved in the applicable fiscal year. By way of example only,
if 100% of Target is achieved, Executive would receive a Bonus under this
Section 4.2(a) equal to 100% of Executive's Base Salary.
(b) Discretionary Bonus Commencing in 2000, the Executive
shall also be eligible for an annual discretionary bonus, the amount of which is
determined in the sole discretion of the CEO based on subjective and objective
criteria established by the CEO, of up to 25% of Base Salary.
(c) Pro-Ration Anything to the contrary in this Agreement
notwithstanding, whenever any Bonus payable to the Executive is stated in this
Agreement to be prorated for any period of service less than a full year, such
Bonus shall be prorated by multiplying (x) the amount of the Bonus otherwise
payable for the applicable fiscal year in accordance with this Section 4.2 by
(y) a fraction, the denominator of which shall be 365 and the numerator of which
shall be the number of days during the applicable fiscal year for which the
Executive was employed by the Company.
4.3 Vacations. During the Term, the Executive shall be entitled
to four weeks of vacation per calendar year, to be taken at such times and
intervals as shall be determined by the Executive, subject to the reasonable
business needs of the Company. The Executive may not accumulate or carry over
from one calendar year to another any unused, accrued vacation time. The
Executive shall not be entitled to compensation for vacation time not taken.
4.4 Other Benefits. During the Term and subject to any
contribution therefor required of executives of the Company generally, the
Executive shall be entitled to participate in all employee benefit plans,
including without limitation any 401(k) plan, from time to time adopted by the
Board and in effect for executives of the Company generally (except to the
extent such plans are in a category of benefit otherwise provided the Executive
hereunder). Such participation shall be subject to (i) the terms of the
applicable plan documents and (ii) generally applicable policies of the Company.
The Company may alter, modify, add to or delete any aspects of its employee
benefit plans at any time as the Board, in its sole judgment, determines to be
appropriate.
4.5 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable business expenses, including without limitation the
cost of first class air travel and dues for industry-related association
memberships, incurred or paid by the Executive in the performance of her duties
and responsibilities hereunder, subject to (i) any expense policy of the Company
set by the Board from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board or CEO from time to
time.
4.6 Airline Clubs. Upon receiving the prior written approval of
the CEO authorizing the Executive to join a particular airline club, the Company
shall pay or reimburse the Executive for dues for not less than two nor more
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than four airline clubs, provided such club memberships serve a direct business
purpose and subject to such reasonable substantiation and documentation
requirements as to cost and purpose as may be specified by the CEO from time to
time.
4.7 Physicals. The Company shall annually pay for or reimburse
the Executive for the cost of a physical examination and health evaluation
performed by a licensed medical doctor, subject to such reasonable
substantiation and documentation requirements as to cost as may be specified by
the Board or CEO from time to time.
4.8 Nonqualified Plan. The Executive agrees that the Company may
amend its nonqualified deferred compensation plan to exclude the Executive from
receiving benefits based upon any deferral matching credit or formula.
5. Termination of Employment and Severance Benefits. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1 Retirement or Death. In the event of the Executive's
retirement or death during the Term, the Executive's employment hereunder shall
immediately and automatically terminate. In the event of the Executive's
retirement after the age of 65 with the prior consent of the Board or death
during the Term, the Company shall pay to the Executive (or in the case of
death, the Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to her estate) any Base Salary earned but unpaid
through the date of such retirement or death, any Bonus for the fiscal year
preceding the year in which such retirement or death occurs that was earned but
has not yet been paid and, at the times the Company pays its executives bonuses
in accordance with its general payroll policies, an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such retirement or
death (prorated in accordance with Section 4.2).
5.2 Disability.
5.2.1 The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the Executive becomes
disabled during her employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature and, as a result, is
unable to perform substantially all of her duties and responsibilities hereunder
for an aggregate of 120 days during any period of 365 consecutive calendar days.
5.2.2 The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability.
Notwithstanding any such designation, the Executive shall continue to receive
the Base Salary in accordance with Section 4.1 and to receive benefits in
accordance with Section 4.5, to the extent permitted by the then current terms
of the applicable benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan maintained by the
Company, or until the termination of her employment, whichever shall first
occur. Upon becoming so eligible, or upon such termination, whichever shall
first occur, the Company shall pay to the Executive any Base Salary earned but
unpaid through the date of such eligibility or termination and any Bonus for the
fiscal year preceding the year of such eligibility or termination that was
earned but unpaid. At the times the Company pays its executives bonuses
generally, the Company shall pay the Executive an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such eligibility or
termination (prorated in accordance with Section 4.2). During the 18-month
period from the date of such eligibility or termination, the Company shall pay
the Executive, at its regular pay periods, an amount equal to the difference
between the Base Salary and the amounts of disability income benefits that the
Executive receives pursuant to the above-referenced disability income plan in
respect of such period.
5.2.3 Except as provided in Section 5.2.2, while receiving
disability income payments under any disability income plan maintained by the
Company, the Executive shall not be entitled to receive any Base Salary under
Section 4.1 or Bonus payments under Section 4.2 but shall continue to
participate in benefit plans of the Company in accordance with Section 4.4 and
the terms of such plans, until the termination of her employment. During the
18-month period from the date of eligibility or termination, whichever shall
first occur, the Company shall contribute
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to the cost of the Executive's participation in group medical plans of the
Company, provided that the Executive is entitled to continue such participation
under applicable law and plan terms.
5.2.4 If any question shall arise as to whether during any
period the Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be unable to
perform substantially all of her duties and responsibilities hereunder, the
Executive may, and at the request of the Company shall, submit to a medical
examination by a physician selected by the Company to whom the Executive or her
duly appointed guardian, if any, has no reasonable objection, to determine
whether the Executive is so disabled and such determination shall for the
purposes of this Agreement be conclusive of the issue. If such question shall
arise and the Executive shall fail to submit to such medical examination, the
Board's determination of the issue shall be binding on the Executive.
5.3 By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following events or conditions shall constitute "Cause" for termination: (i)
Executive's willful failure to perform (other than by reason of disability), or
gross negligence in the performance of her duties to the Company or any of its
Affiliates and the continuation of such failure or negligence for a period of
ten (10) days after notice to the Executive; (ii) the Executive's willful
failure to perform (other than by reason of disability) any lawful and
reasonable directive of the CEO; (iii) the commission of fraud, embezzlement or
theft by the Executive with respect to the Company or any of its Affiliates; or
(iv) the conviction of the Executive of, or plea by the Executive of nolo
contendere to, any felony or any other crime involving dishonesty or moral
turpitude. Anything to the contrary in this Agreement notwithstanding, upon the
giving of notice of termination of the Executive's employment hereunder for
Cause, the Company and its Affiliates shall have no further obligation or
liability to the Executive hereunder, other than for Base Salary earned but
unpaid through the date of termination. Without limiting the generality of the
foregoing, the Executive shall not be entitled to receive any Bonus amounts
which have not been paid prior to the date of termination.
5.4 By the Company Other Than for Cause. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, the Company
shall pay the Executive: (i) Base Salary earned but unpaid through the date of
termination, plus (ii) monthly severance payments, each in an amount equal to
the Executive's monthly base compensation in effect at the time of such
termination (i.e., 1/12th of the Base Salary) throughout the remainder of the
Term, provided should termination occur during the original Term or during any
one-year automatic extension thereof, the Term shall be deemed to expire at the
end of such original Term or at the end of the current extension year, as
applicable, plus (iii) any unpaid portion of any Bonus for the fiscal year
preceding the year in which such termination occurs that was earned but has not
been paid, plus (iv) at the times the Company pays its executives bonuses
generally, an amount equal to that portion of any Bonus earned but unpaid during
the fiscal year of such termination (prorated in accordance with Section 4.2).
5.5 By the Executive for Good Reason. The Executive may terminate
her employment hereunder for Good Reason, upon notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute "Good Reason" for termination by the Executive: (i) any material
diminution in the nature and scope of the Executive's responsibilities, duties,
authority or title; (ii) material failure of the Company to provide the
Executive the Base Salary and benefits in accordance with the terms of Section 4
hereof; or (iii) relocation of the Executive's office to a location outside a
50-mile radius of the Company's current headquarters in Ann Arbor, Michigan. In
the event of termination in accordance with this Section 5.5, then the Company
shall pay the Executive the amounts specified in Section 5.4.
5.6 By the Executive Other Than for Good Reason. The Executive
may terminate her employment hereunder at any time upon 90 days written notice
to the Company. In the event of termination of the Executive's employment
pursuant to this Section 5.6, the CEO or the Board may elect to waive the period
of notice, or any portion thereof. The Company will pay the Executive her Base
Salary for the notice period, except to the extent so waived by the Board. Upon
the giving of notice of termination of the Executive's employment hereunder
pursuant to this Section 5.6, the Company and its Affiliates shall have no
further obligation or liability to the Executive, other than (i) payment to the
Executive of her Base Salary for the period (or portion of such period)
indicated above, (ii) continuation of the provision of the benefits set forth in
Section 4.4 for the period (or portion of such period) indicated above, and
(iii) any
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unpaid portion of any Bonus for the fiscal year preceding the year in which such
termination occurs that was earned but has not been paid.
5.7 Post-Agreement Employment. In the event the Executive remains
in the employ of the Company or any of its Affiliates following termination of
this Agreement, by the expiration of the Term or otherwise, then such employment
shall be at will.
6. Effect of Termination of Employment. The provisions of this Section
6 shall apply in the event of termination of Executive's employment, whether due
to the expiration of the Term, pursuant to Section 5, or otherwise.
6.1 Payment in Full. Payment by the Company or its Affiliates of
any Base Salary, Bonus or other specified amounts that are due to the Executive
under the applicable termination provision of Section 5 shall constitute the
entire obligation of the Company and its Affiliates to the Executive, except
that nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company or its Affiliates, on the one hand, and
the Executive, on the other, with respect to any option plans, option
agreements, subscription agreements, stockholders agreements or other agreements
to the extent said rights or obligations therein survive termination of
employment.
6.2 Termination of Benefits. If Executive is terminated by the
Company without Cause, or terminates her employment with the Company for Good
Reason, and provided that Executive elects continuation of health coverage
pursuant to Section 601 through 608 of the Employee Retirement Income Security
Act of 1974, as amended ("COBRA"), Company shall pay Executive an amount equal
to her monthly COBRA premiums for a period equal to the period remaining in the
Term after termination; provided further, such payment will cease upon
Executive's entitlement to other health insurance without charge. Except for
medical insurance coverage continued pursuant to Section 5.2 hereof, all other
benefits shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive's employment without regard to
any continuation of Base Salary or other payments to the Executive following
termination of her employment.
6.3 Survival of Certain Provisions. Provisions of this Agreement
shall survive any termination of employment if so provided herein or if
necessary to accomplish the purpose of other surviving provisions, including,
without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of the
Executive under Sections 5.2, 5.4 or 5.5 hereof is expressly conditioned upon
the Executive's continued full performance of her obligations under Sections 7
and 8 hereof. The Executive recognizes that, except as expressly provided in
Section 5.2, 5.4 or 5.5, no compensation is earned after the termination of her
employment.
7. Confidential Information; Intellectual Property.
7.1 Confidentiality. The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information (as that term is
defined in Section 11.2, below); that the Executive may develop Confidential
Information for the Company or its Affiliates and that the Executive may learn
of Confidential Information during the course of her employment. The Executive
will comply with the policies and procedures of the Company and its Affiliates
for protecting Confidential Information and shall never use or disclose to any
Person (except as required by applicable law or for the proper performance of
her duties and responsibilities to the Company) any Confidential Information
obtained by the Executive incident to her employment or other association with
the Company and its Affiliates. The Executive understands that this restriction
shall continue to apply after her employment terminates, regardless of the
reason for such termination.
7.2 Return of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company and its Affiliates and any copies, in whole or in
part, thereof (the "Documents"), whether or not prepared by the Executive, shall
be the sole and exclusive property of the Company and its Affiliates. The
Executive shall safeguard all Documents and shall surrender to the Company and
its Affiliates at the time her employment terminates, or at such earlier time or
times as the Board or CEO designee may specify, all Documents then in the
Executive's possession or control.
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7.3 Assignment of Rights to Intellectual Property. The Executive
shall promptly and fully disclose all Intellectual Property to the Company. The
Executive hereby assigns to the Company (or as otherwise directed by the
Company) the Executive's full right, title and interest in and to all
Intellectual Property. The Executive shall execute any and all applications for
domestic and foreign patents, copyrights or other proprietary rights and to do
such other acts (including without limitation the execution and delivery of
instruments of further assurance or confirmation) requested by the Company or
its Affiliates to assign the Intellectual Property to the Company and to permit
the Company and its Affiliates to enforce any patents, copyrights or other
proprietary rights to the Intellectual Property. The Executive will not charge
the Company or its Affiliates for time spent in complying with these
obligations. All copyrightable works that the Executive creates shall be
considered "Work For Hire" under applicable laws.
8. Restricted Activities.
8.1 Agreement Not to Compete With the Company. During the
Executive's employment hereunder and for a period of 24 months following the
date of termination thereof (the "Non-Competition Period"), the Executive will
not, directly or indirectly, own, manage, operate, control or participate in any
manner in the ownership, management, operation or control of, or be connected as
an officer, employee, partner, director, principal, member, manager, consultant,
agent or otherwise with, or have any financial interest in, or aid or assist
anyone else in the conduct of, any business, venture or activity which in any
material respect competes with the following enumerated business activities to
the extent then being conducted or being planned to be conducted by the Company
or its Affiliates or being conducted or known by the Executive to being planned
to be conducted by the Company or by any of its Affiliates, at or prior to the
date on which the Executive's employment under this Agreement is terminated (the
"Date of Termination"), in the United States or any other geographic area where
such business is being conducted or being planned to be conducted at or prior to
the Date of Termination (a "Competitive Business", defined below). For purposes
of this Agreement, "Competitive Business" shall be defined as: (i) any company
or other entity engaged as a "quick service restaurant" ("QSR") which offers
pizza for sale; (ii) any "quick service restaurant" which is then contemplating
entering into the pizza business or adding pizza to its menu; (iii) any entity
which at the time of Executive's termination of employment with the Company,
offers, as a primary product or service, products or services then being offered
by the Company or which the Company is actively contemplating offering; and (iv)
any entity under common control with an entity included in (i), (ii) or (iii),
above. Notwithstanding the foregoing, ownership of not more than 5% of any class
of equity security of any publicly traded corporation shall not, of itself,
constitute a violation of this Section 8.1.
8.2 Agreement Not to Solicit Employees or Customers of the
Company. During her employment and during the Non-Competition Period the
Executive will not, directly or indirectly, (i) recruit or hire or otherwise
seek to induce any employees of the Company or any of the Company's Affiliates
to terminate their employment or violate any agreement with or duty to the
Company or any of the Company's Affiliates; or (ii) solicit or encourage any
franchisee or vendor of the Company or of any of the Company's Affiliates to
terminate or diminish its relationship with any of them or to violate any
agreement with any of them, or, in the case of a franchisee, to conduct with any
Person any business or activity that such franchisee conducts or could conduct
with the Company or any of the Company's Affiliates.
9. Enforcement of Covenants. The Executive acknowledges that she has
carefully read and considered all the terms and conditions of this Agreement,
including without limitation the restraints imposed upon her pursuant to
Sections 7 and 8 hereof. The Executive agrees that said restraints are necessary
for the reasonable and proper protection of the Company and its Affiliates and
that each and every one of the restraints is reasonable in respect to subject
matter, length of time and geographic area. The Executive further acknowledges
that, were she to breach any of the covenants or agreements contained in
Sections 7 or 8 hereof, the damage to the Company and its Affiliates could be
irreparable. The Executive, therefore, agrees that the Company and its
Affiliates, in addition to any other remedies available to it, shall be entitled
to preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants or agreements. The parties
further agree that in the event that any provision of Section 7 or 8 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of it being extended over too great a time, too large a geographic
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of her
obligations hereunder will not breach or be in conflict with any other agreement
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to which or by which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or solicitation or
similar covenants or other obligations that would affect the performance of her
obligations hereunder. The Executive will not disclose to or use on behalf of
the Company or any of its Affiliates any proprietary information of a third
party without such party's consent.
11. Definitions. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 11
or as specifically defined elsewhere in this Agreement. For purposes of this
Agreement, the following definitions apply:
11.1 Affiliates. "Affiliates" shall mean TISM, Inc., Domino's,
Inc. and all other persons and entities controlling, controlled by or under
common control with the Company, where control may be by management authority or
equity interest.
11.2 Confidential Information. "Confidential Information" means
any and all information of the Company and its Affiliates that is not generally
known by others with whom they compete or do business, or with whom they plan to
compete or do business, and any and all information the disclosure of which
would otherwise be adverse to the interest of the Company or any of its
Affiliates. Confidential Information includes without limitation such
information relating to (i) the products and services sold or offered by the
Company or any of its Affiliates (including without limitation recipes,
production processes and heating technology), (ii) the costs, sources of supply,
financial performance and strategic plans of the Company and its Affiliates,
(iii) the identity of the suppliers to the Company and its Affiliates, and (iv)
the people and organizations with whom the Company and its Affiliates have
business relationships and those relationships. Confidential Information also
includes information that the Company or any of its Affiliates have received
belonging to others with any understanding, express or implied, that it would
not be disclosed.
11.3 ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 and any successor statute, and the rules and regulations
thereunder, and, in the case of any referenced section thereof, any successor
section thereto, collectively and as from time to time amended and in effect.
11.4 Intellectual Property. "Intellectual Property" means
inventions, discoveries, developments, methods, processes, compositions, works,
concepts, recipes and ideas (whether or not patentable or copyrightable or
constituting trade secrets or trademarks or service marks) conceived, made,
created, developed or reduced to practice by the Executive (whether alone or
with others, whether or not during normal business hours or on or off Company
premises) during the Executive's employment that relate to either the business
activities or any prospective activity of the Company or any of its Affiliates.
11.5 Person. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
12. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
13. Waiver, Release and Termination of Prior Agreement. Effective upon
the execution of this Agreement, Executive hereby waives any and all rights and
benefits to which she was entitled under a prior Severance Agreement with the
Company dated August 4, 1998 (the "Prior Agreement"), releases the Company and
its Affiliates from any and all obligations under the Prior Agreement, and
agrees that such Prior Agreement is terminated and of no force or effect.
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14. Miscellaneous.
14.1 Assignment. Neither the Company nor the Executive may assign
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
the Executive in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into, any other Person or transfer
all or substantially all of its properties or assets to any other Person, in
which event such other Person shall be deemed the "Company" hereunder, as
applicable, for all purposes of this Agreement; provided, further, that nothing
contained herein shall be construed to place any limitation or restriction on
the transfer of the Company's Common Stock in addition to any restrictions set
forth in any stockholder agreement applicable to the holders of such shares.
This Agreement shall inure to the benefit of and be binding upon the Company and
the Executive, and their respective successors, executors, administrators,
representatives, heirs and permitted assigns.
14.2 Severability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the application of such provision in such circumstances shall
be deemed modified to permit its enforcement to the maximum extent permitted by
law, and both the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable and the
remainder of this Agreement shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
14.3 Waiver; Amendment. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. The failure of
either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach. This Agreement may be amended or modified only
by a written instrument signed by the Executive and any expressly authorized
representative of the Company.
14.4 Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed (i) in the case of the
Executive, to: Cheryl Bachelder, at 1029 Andover Drive, Northville, Michigan
48167, and (ii) in the case of the Company, to the attention of Mr. David A.
Brandon, CEO, at 30 Frank Lloyd Wright Drive, Ann Arbor, Michigan 48106, or to
such other address as either party may specify by notice to the other actually
received.
14.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes any and all prior communications,
agreements and understandings, written or oral, between the Executive and the
Company, or any of its predecessors, with respect to the terms and conditions of
the Executive's employment.
14.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instruments.
14.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Michigan without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
14.8 Consent to Jurisdiction. Each of the Company and the
Executive by its or her execution hereof, (i) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Michigan for the purpose of any
claim or action arising out of or based upon this Agreement or relating to the
subject matter hereof and (ii) hereby waives, to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such claim or action, any claim that it or she is not subject
personally to the jurisdiction of the above-named courts, that its or her
property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court. Each of
the Company and the Executive hereby consents to service of process in any such
proceeding
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in any manner permitted by Michigan law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 13.4 hereof is reasonably calculated to give actual notice.
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY: DOMINO'S PIZZA, INC.
By: /s/
-----------------------------------
Name: David A. Brandon
Title: CEO
THE EXECUTIVE: /s/
--------------------------------------
Name: Cheryl Bachelder
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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of December 14, 1999, by Domino's
Pizza, Inc., a Michigan corporation (the "Company") with Jim Stansik (the
"Executive").
RECITALS
1. The Executive has experience and expertise required by the Company
and its Affiliates.
2. Subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Special Assistant to the
Chairman and the Executive wishes to accept such employment.
AGREEMENT
NOW, THEREFORE, for valid consideration received, the parties agree as
follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive accepts employment hereunder
effective as of the date first set forth above (the "Effective Date").
2. Term. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending on June 30, 2002, which term shall be automatically
extended thereafter for successive terms of one year each, unless either party
provides notice to the other at least 30 days prior to the expiration of the
original or any extension term that this Agreement is not to be extended. The
term of the Executive's employment under this Agreement, as from time to time
extended, is referred to as the "Term."
3. Capacity and Performance.
3.1 Offices. During the Term, the Executive shall serve the
Company in the office of Special Assistant to the Chairman. The Executive shall
have such other powers, duties and responsibilities consistent with the
Executive's position as Special Assistant to the Chairman as may from time to
time be prescribed by the Chief Executive Officer of the Company ("CEO").
3.2 Performance. During the Term, the Executive shall be employed
by the Company on a full-time basis and shall perform and discharge, faithfully,
diligently and to the best of his ability, his duties and responsibilities
hereunder. During the Term, the Executive shall devote his full business time
exclusively to the advancement of the business and interests of the Company and
its Affiliates and to the discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other business activity or
serve in any industry, trade, professional, governmental, political, charitable
or academic position during the Term of this Agreement, except for such
directorships or other positions which he currently holds and has disclosed to
the CEO in Exhibit 3.2 hereof and except as otherwise may be approved in advance
by the CEO.
4. Compensation and Benefits. During the Term, as compensation for all
services performed by the Executive under this Agreement and subject to
performance of the Executive's duties and obligations to the Company and its
Affiliates, pursuant to this Agreement or otherwise, the Executive shall receive
the following:
4.1 Base Salary.
(a) Through December 31, 1999. From the Effective Date of
this Agreement through December 31, 1999, the Company shall pay the Executive a
base salary at the rate of One Hundred Ninety Thousand Three Hundred Ninety-Five
Dollars ($190,395) per year, payable in accordance with the payroll practices of
the Company for its executives (the "1999 Base Salary"), and
(b) Commencing January 1, 2000. Commencing January 1, 2000,
the Company shall pay the Executive a base salary at the rate of Two Hundred
Thousand Dollars ($200,000) per year, payable in accordance
<PAGE>
with the payroll practices of the Company for its executives and subject to such
increases as the Board of Directors of the Company (the "Board") in its sole
discretion may determine from time to time (the "Base Salary").
4.2 Bonus.
(a) Formula Bonus. Commencing in 2000, subject to Section 5
hereof, the Company shall pay the Executive a bonus in each fiscal year that he
is an employee (the "Bonus") within 75 days of the end of the fiscal year in
which such Bonus is earned. The amount of the Bonus shall be determined by the
Board based on the Company's achievement of pre-established annual targets (each
annual target being referred to as "Target"), which shall be based upon the
Company's EBITDA. The term "EBITDA" shall mean earnings before interest, taxes,
depreciation, amortization, Leadership Team bonuses, and loss or gain on sale or
disposal of assets outside of the ordinary course of business (including sales
of stores), all as reflected on the Company's financial statements as regularly
and consistently prepared. No Bonus shall be paid unless 90% of Target is
exceeded in the applicable fiscal year. The Executive shall receive a bonus of
one-tenth of one percent (0.1%) of his Base Salary for every one-hundredth of
one percent (0.01%) (rounded to the nearest hundredth) in excess of 90% of
Target that is achieved in the applicable fiscal year. By way of example only,
if 100% of Target is achieved, Executive would receive a Bonus under this
Section 4.2(a) equal to 100% of Executive's Base Salary.
(b) Discretionary Bonus Commencing in 2000, the Executive
shall also be eligible for an annual discretionary bonus, the amount of which is
determined in the sole discretion of the CEO based on subjective and objective
criteria established by the CEO, of up to 25% of Base Salary.
(c) Pro-Ration Anything to the contrary in this Agreement
notwithstanding, whenever any Bonus payable to the Executive is stated in this
Agreement to be prorated for any period of service less than a full year, such
Bonus shall be prorated by multiplying (x) the amount of the Bonus otherwise
payable for the applicable fiscal year in accordance with this Section 4.2 by
(y) a fraction, the denominator of which shall be 365 and the numerator of which
shall be the number of days during the applicable fiscal year for which the
Executive was employed by the Company.
4.3 Vacations. During the Term, the Executive shall be entitled
to four weeks of vacation per calendar year, to be taken at such times and
intervals as shall be determined by the Executive, subject to the reasonable
business needs of the Company. The Executive may not accumulate or carry over
from one calendar year to another any unused, accrued vacation time. The
Executive shall not be entitled to compensation for vacation time not taken.
4.4 Other Benefits. During the Term and subject to any
contribution therefor required of executives of the Company generally, the
Executive shall be entitled to participate in all employee benefit plans,
including without limitation any 401(k) plan, from time to time adopted by the
Board and in effect for executives of the Company generally (except to the
extent such plans are in a category of benefit otherwise provided the Executive
hereunder). Such participation shall be subject to (i) the terms of the
applicable plan documents and (ii) generally applicable policies of the Company.
The Company may alter, modify, add to or delete any aspects of its employee
benefit plans at any time as the Board, in its sole judgment, determines to be
appropriate.
4.5 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable business expenses, including without limitation the
cost of first class air travel and dues for industry-related association
memberships, incurred or paid by the Executive in the performance of his duties
and responsibilities hereunder, subject to (i) any expense policy of the Company
set by the Board from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board or CEO from time to
time.
4.6 Airline Clubs. Upon receiving the prior written approval of
the CEO authorizing the Executive to join a particular airline club, the Company
shall pay or reimburse the Executive for dues for not less than two nor more
than four airline clubs, provided such club memberships serve a direct business
purpose and subject to such reasonable substantiation and documentation
requirements as to cost and purpose as may be specified by the CEO from time to
time.
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4.7 Physicals. The Company shall annually pay for or reimburse the
Executive for the cost of a physical examination and health evaluation performed
by a licensed medical doctor, subject to such reasonable substantiation and
documentation requirements as to cost as may be specified by the Board or CEO
from time to time.
4.8 Nonqualified Plan. The Executive agrees that the Company may
amend its nonqualified deferred compensation plan to exclude the Executive from
receiving benefits based upon any deferral matching credit or formula.
5. Termination of Employment and Severance Benefits. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1 Retirement or Death. In the event of the Executive's
retirement or death during the Term, the Executive's employment hereunder shall
immediately and automatically terminate. In the event of the Executive's
retirement after the age of 65 with the prior consent of the Board or death
during the Term, the Company shall pay to the Executive (or in the case of
death, the Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate) any Base Salary earned but unpaid
through the date of such retirement or death, any Bonus for the fiscal year
preceding the year in which such retirement or death occurs that was earned but
has not yet been paid and, at the times the Company pays its executives bonuses
in accordance with its general payroll policies, an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such retirement or
death (prorated in accordance with Section 4.2).
5.2 Disability.
5.2.1 The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the Executive becomes
disabled during his employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature and, as a result, is
unable to perform substantially all of his duties and responsibilities hereunder
for an aggregate of 120 days during any period of 365 consecutive calendar days.
5.2.2 The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability.
Notwithstanding any such designation, the Executive shall continue to receive
the Base Salary in accordance with Section 4.1 and to receive benefits in
accordance with Section 4.5, to the extent permitted by the then current terms
of the applicable benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan maintained by the
Company, or until the termination of his employment, whichever shall first
occur. Upon becoming so eligible, or upon such termination, whichever shall
first occur, the Company shall pay to the Executive any Base Salary earned but
unpaid through the date of such eligibility or termination and any Bonus for the
fiscal year preceding the year of such eligibility or termination that was
earned but unpaid. At the times the Company pays its executives bonuses
generally, the Company shall pay the Executive an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such eligibility or
termination (prorated in accordance with Section 4.2). During the 18-month
period from the date of such eligibility or termination, the Company shall pay
the Executive, at its regular pay periods, an amount equal to the difference
between the Base Salary and the amounts of disability income benefits that the
Executive receives pursuant to the above-referenced disability income plan in
respect of such period.
5.2.3 Except as provided in Section 5.2.2, while receiving
disability income payments under any disability income plan maintained by the
Company, the Executive shall not be entitled to receive any Base Salary under
Section 4.1 or Bonus payments under Section 4.2 but shall continue to
participate in benefit plans of the Company in accordance with Section 4.4 and
the terms of such plans, until the termination of his employment. During the
18-month period from the date of eligibility or termination, whichever shall
first occur, the Company shall contribute to the cost of the Executive's
participation in group medical plans of the Company, provided that the Executive
is entitled to continue such participation under applicable law and plan terms.
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5.2.4 If any question shall arise as to whether during any
period the Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be unable to
perform substantially all of his duties and responsibilities hereunder, the
Executive may, and at the request of the Company shall, submit to a medical
examination by a physician selected by the Company to whom the Executive or his
duly appointed guardian, if any, has no reasonable objection, to determine
whether the Executive is so disabled and such determination shall for the
purposes of this Agreement be conclusive of the issue. If such question shall
arise and the Executive shall fail to submit to such medical examination, the
Board's determination of the issue shall be binding on the Executive.
5.3 By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following events or conditions shall constitute "Cause" for termination: (i)
Executive's willful failure to perform (other than by reason of disability), or
gross negligence in the performance of his duties to the Company or any of its
Affiliates and the continuation of such failure or negligence for a period of
ten (10) days after notice to the Executive; (ii) the Executive's willful
failure to perform (other than by reason of disability) any lawful and
reasonable directive of the CEO; (iii) the commission of fraud, embezzlement or
theft by the Executive with respect to the Company or any of its Affiliates; or
(iv) the conviction of the Executive of, or plea by the Executive of nolo
contendere to, any felony or any other crime involving dishonesty or moral
turpitude. Anything to the contrary in this Agreement notwithstanding, upon the
giving of notice of termination of the Executive's employment hereunder for
Cause, the Company and its Affiliates shall have no further obligation or
liability to the Executive hereunder, other than for Base Salary earned but
unpaid through the date of termination. Without limiting the generality of the
foregoing, the Executive shall not be entitled to receive any Bonus amounts
which have not been paid prior to the date of termination.
5.4 By the Company Other Than for Cause. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, the Company
shall pay the Executive: (i) Base Salary earned but unpaid through the date of
termination, plus (ii) monthly severance payments, each in an amount equal to
the Executive's monthly base compensation in effect at the time of such
termination (i.e., 1/12th of the Base Salary) throughout the remainder of the
Term, provided should termination occur during the original Term or during any
one-year automatic extension thereof, the Term shall be deemed to expire at the
end of such original Term or at the end of the current extension year, as
applicable, plus (iii) any unpaid portion of any Bonus for the fiscal year
preceding the year in which such termination occurs that was earned but has not
been paid, plus (iv) at the times the Company pays its executives bonuses
generally, an amount equal to that portion of any Bonus earned but unpaid during
the fiscal year of such termination (prorated in accordance with Section 4.2).
5.5 By the Executive for Good Reason. The Executive may terminate
his employment hereunder for Good Reason, upon notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute "Good Reason" for termination by the Executive: (i) any material
diminution in the nature and scope of the Executive's responsibilities, duties,
authority or title; (ii) material failure of the Company to provide the
Executive the Base Salary and benefits in accordance with the terms of Section 4
hereof; or (iii) relocation of the Executive's office to a location outside a
50-mile radius of the Company's current headquarters in Ann Arbor, Michigan. In
the event of termination in accordance with this Section 5.5, then the Company
shall pay the Executive the amounts specified in Section 5.4.
5.6 By the Executive Other Than for Good Reason. The Executive
may terminate his employment hereunder at any time upon 90 days written notice
to the Company. In the event of termination of the Executive's employment
pursuant to this Section 5.6, the CEO or the Board may elect to waive the period
of notice, or any portion thereof. The Company will pay the Executive his Base
Salary for the notice period, except to the extent so waived by the Board. Upon
the giving of notice of termination of the Executive's employment hereunder
pursuant to this Section 5.6, the Company and its Affiliates shall have no
further obligation or liability to the Executive, other than (i) payment to the
Executive of his Base Salary for the period (or portion of such period)
indicated above, (ii) continuation of the provision of the benefits set forth in
Section 4.4 for the period (or portion of such period) indicated above, and
(iii) any unpaid portion of any Bonus for the fiscal year preceding the year in
which such termination occurs that was earned but has not been paid.
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5.7 Post-Agreement Employment. In the event the Executive remains
in the employ of the Company or any of its Affiliates following termination of
this Agreement, by the expiration of the Term or otherwise, then such employment
shall be at will.
6. Effect of Termination of Employment. The provisions of this Section
6 shall apply in the event of termination of Executive's employment, whether due
to the expiration of the Term, pursuant to Section 5, or otherwise.
6.1 Payment in Full. Payment by the Company or its Affiliates of
any Base Salary, Bonus or other specified amounts that are due to the Executive
under the applicable termination provision of Section 5 shall constitute the
entire obligation of the Company and its Affiliates to the Executive, except
that nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company or its Affiliates, on the one hand, and
the Executive, on the other, with respect to any option plans, option
agreements, subscription agreements, stockholders agreements or other agreements
to the extent said rights or obligations therein survive termination of
employment.
6.2 Termination of Benefits. If Executive is terminated by the
Company without Cause, or terminates his employment with the Company for Good
Reason, and provided that Executive elects continuation of health coverage
pursuant to Section 601 through 608 of the Employee Retirement Income Security
Act of 1974, as amended ("COBRA"), Company shall pay Executive an amount equal
to his monthly COBRA premiums for a period equal to the period remaining in the
Term after termination; provided further, such payment will cease upon
Executive's entitlement to other health insurance without charge. Except for
medical insurance coverage continued pursuant to Section 5.2 hereof, all other
benefits shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive's employment without regard to
any continuation of Base Salary or other payments to the Executive following
termination of his employment.
6.3 Survival of Certain Provisions. Provisions of this Agreement
shall survive any termination of employment if so provided herein or if
necessary to accomplish the purpose of other surviving provisions, including,
without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of the
Executive under Sections 5.2, 5.4 or 5.5 hereof is expressly conditioned upon
the Executive's continued full performance of his obligations under Sections 7
and 8 hereof. The Executive recognizes that, except as expressly provided in
Section 5.2, 5.4 or 5.5, no compensation is earned after the termination of his
employment.
7. Confidential Information; Intellectual Property.
7.1 Confidentiality. The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information (as that term is
defined in Section 11.2, below); that the Executive may develop Confidential
Information for the Company or its Affiliates and that the Executive may learn
of Confidential Information during the course of his employment. The Executive
will comply with the policies and procedures of the Company and its Affiliates
for protecting Confidential Information and shall never use or disclose to any
Person (except as required by applicable law or for the proper performance of
his duties and responsibilities to the Company) any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company and its Affiliates. The Executive understands that this restriction
shall continue to apply after his employment terminates, regardless of the
reason for such termination.
7.2 Return of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company and its Affiliates and any copies, in whole or in
part, thereof (the "Documents"), whether or not prepared by the Executive, shall
be the sole and exclusive property of the Company and its Affiliates. The
Executive shall safeguard all Documents and shall surrender to the Company and
its Affiliates at the time his employment terminates, or at such earlier time or
times as the Board or CEO designee may specify, all Documents then in the
Executive's possession or control.
7.3 Assignment of Rights to Intellectual Property. The Executive
shall promptly and fully disclose all Intellectual Property to the Company. The
Executive hereby assigns to the Company (or as otherwise directed by the
Company) the Executive's full right, title and interest in and to all
Intellectual Property. The Executive shall execute any and all applications for
domestic and foreign patents, copyrights or other proprietary rights and to do
such other acts
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(including without limitation the execution and delivery of instruments of
further assurance or confirmation) requested by the Company or its Affiliates to
assign the Intellectual Property to the Company and to permit the Company and
its Affiliates to enforce any patents, copyrights or other proprietary rights to
the Intellectual Property. The Executive will not charge the Company or its
Affiliates for time spent in complying with these obligations. All copyrightable
works that the Executive creates shall be considered "Work For Hire" under
applicable laws.
8. Restricted Activities.
8.1 Agreement Not to Compete With the Company. During the
Executive's employment hereunder and for a period of 24 months following the
date of termination thereof (the "Non-Competition Period"), the Executive will
not, directly or indirectly, own, manage, operate, control or participate in any
manner in the ownership, management, operation or control of, or be connected as
an officer, employee, partner, director, principal, member, manager, consultant,
agent or otherwise with, or have any financial interest in, or aid or assist
anyone else in the conduct of, any business, venture or activity which in any
material respect competes with the following enumerated business activities to
the extent then being conducted or being planned to be conducted by the Company
or its Affiliates or being conducted or known by the Executive to being planned
to be conducted by the Company or by any of its Affiliates, at or prior to the
date on which the Executive's employment under this Agreement is terminated (the
"Date of Termination"), in the United States or any other geographic area where
such business is being conducted or being planned to be conducted at or prior to
the Date of Termination (a "Competitive Business", defined below). For purposes
of this Agreement, "Competitive Business" shall be defined as: (i) any company
or other entity engaged as a "quick service restaurant" ("QSR") which offers
pizza for sale; (ii) any "quick service restaurant" which is then contemplating
entering into the pizza business or adding pizza to its menu; (iii) any entity
which at the time of Executive's termination of employment with the Company,
offers, as a primary product or service, products or services then being offered
by the Company or which the Company is actively contemplating offering; and (iv)
any entity under common control with an entity included in (i), (ii) or (iii),
above. Notwithstanding the foregoing, ownership of not more than 5% of any class
of equity security of any publicly traded corporation shall not, of itself,
constitute a violation of this Section 8.1.
8.2 Agreement Not to Solicit Employees or Customers of the
Company. During his employment and during the Non-Competition Period the
Executive will not, directly or indirectly, (i) recruit or hire or otherwise
seek to induce any employees of the Company or any of the Company's Affiliates
to terminate their employment or violate any agreement with or duty to the
Company or any of the Company's Affiliates; or (ii) solicit or encourage any
franchisee or vendor of the Company or of any of the Company's Affiliates to
terminate or diminish its relationship with any of them or to violate any
agreement with any of them, or, in the case of a franchisee, to conduct with any
Person any business or activity that such franchisee conducts or could conduct
with the Company or any of the Company's Affiliates.
9. Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including without limitation the restraints imposed upon him pursuant to
Sections 7 and 8 hereof. The Executive agrees that said restraints are necessary
for the reasonable and proper protection of the Company and its Affiliates and
that each and every one of the restraints is reasonable in respect to subject
matter, length of time and geographic area. The Executive further acknowledges
that, were he to breach any of the covenants or agreements contained in Sections
7 or 8 hereof, the damage to the Company and its Affiliates could be
irreparable. The Executive, therefore, agrees that the Company and its
Affiliates, in addition to any other remedies available to it, shall be entitled
to preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants or agreements. The parties
further agree that in the event that any provision of Section 7 or 8 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of it being extended over too great a time, too large a geographic
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which or by which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or solicitation or
similar covenants or other obligations that would affect the performance of his
obligations hereunder. The Executive will not disclose to or use on behalf of
the Company or any of its Affiliates any proprietary information of a third
party without such party's consent.
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11. Definitions. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 11
or as specifically defined elsewhere in this Agreement. For purposes of this
Agreement, the following definitions apply:
11.1 Affiliates. "Affiliates" shall mean TISM, Inc., Domino's,
Inc. and all other persons and entities controlling, controlled by or under
common control with the Company, where control may be by management authority or
equity interest.
11.2 Confidential Information. "Confidential Information" means
any and all information of the Company and its Affiliates that is not generally
known by others with whom they compete or do business, or with whom they plan to
compete or do business, and any and all information the disclosure of which
would otherwise be adverse to the interest of the Company or any of its
Affiliates. Confidential Information includes without limitation such
information relating to (i) the products and services sold or offered by the
Company or any of its Affiliates (including without limitation recipes,
production processes and heating technology), (ii) the costs, sources of supply,
financial performance and strategic plans of the Company and its Affiliates,
(iii) the identity of the suppliers to the Company and its Affiliates, and (iv)
the people and organizations with whom the Company and its Affiliates have
business relationships and those relationships. Confidential Information also
includes information that the Company or any of its Affiliates have received
belonging to others with any understanding, express or implied, that it would
not be disclosed.
11.3 ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 and any successor statute, and the rules and regulations
thereunder, and, in the case of any referenced section thereof, any successor
section thereto, collectively and as from time to time amended and in effect.
11.4 Intellectual Property. "Intellectual Property" means
inventions, discoveries, developments, methods, processes, compositions, works,
concepts, recipes and ideas (whether or not patentable or copyrightable or
constituting trade secrets or trademarks or service marks) conceived, made,
created, developed or reduced to practice by the Executive (whether alone or
with others, whether or not during normal business hours or on or off Company
premises) during the Executive's employment that relate to either the business
activities or any prospective activity of the Company or any of its Affiliates.
11.5 Person. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
12. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
13. Waiver, Release and Termination of Prior Agreement. Effective upon
the execution of this Agreement, Executive hereby waives any and all rights and
benefits to which he was entitled under a prior Severance Agreement with the
Company dated August 4, 1998 (the "Prior Agreement"), releases the Company and
its Affiliates from any and all obligations under the Prior Agreement, and
agrees that such Prior Agreement is terminated and of no force or effect.
14. Miscellaneous.
14.1 Assignment. Neither the Company nor the Executive may assign
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
the Executive in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into, any other Person or transfer
all or substantially all of its properties or assets to any other Person, in
which event such other Person shall be deemed the "Company" hereunder, as
applicable, for all purposes of this Agreement; provided, further, that nothing
contained herein shall be construed to place any limitation or restriction on
the transfer of the Company's Common Stock in addition to any restrictions set
forth in any stockholder agreement applicable to the holders of such shares.
This Agreement shall inure to the benefit of and be binding upon the Company and
the Executive, and their respective successors, executors, administrators,
representatives, heirs and permitted assigns.
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14.2 Severability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the application of such provision in such circumstances shall
be deemed modified to permit its enforcement to the maximum extent permitted by
law, and both the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable and the
remainder of this Agreement shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
14.3 Waiver; Amendment. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. The failure of
either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach. This Agreement may be amended or modified only
by a written instrument signed by the Executive and any expressly authorized
representative of the Company.
14.4 Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed (i) in the case of the
Executive, to: Jim Stansik, at 4026 Ramsgate, Ann Arbor, Michigan 48105, and
(ii) in the case of the Company, to the attention of Mr. David A. Brandon, CEO,
at 30 Frank Lloyd Wright Drive, Ann Arbor, Michigan 48106, or to such other
address as either party may specify by notice to the other actually received.
14.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes any and all prior communications,
agreements and understandings, written or oral, between the Executive and the
Company, or any of its predecessors, with respect to the terms and conditions of
the Executive's employment.
14.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instruments.
14.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Michigan without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
14.8 Consent to Jurisdiction. Each of the Company and the
Executive by its or his execution hereof, (i) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Michigan for the purpose of any
claim or action arising out of or based upon this Agreement or relating to the
subject matter hereof and (ii) hereby waives, to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such claim or action, any claim that it or he is not subject
personally to the jurisdiction of the above-named courts, that its or his
property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court. Each of
the Company and the Executive hereby consents to service of process in any such
proceeding in any manner permitted by Michigan law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 13.4 hereof is reasonably calculated to
give actual notice.
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IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY: DOMINO'S PIZZA, INC.
By:/s/
--------------------------------------
Name: David A. Brandon
Title: CEO
THE EXECUTIVE: /s/
--------------------------------------
Name: Jim Stansik
EXHIBIT 3.2
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EXHIBIT 3.2
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EXHIBIT 10.12
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of December 14, 1999, by Domino's
Pizza, Inc., a Michigan corporation (the "Company") with Mike Soignet (the
"Executive").
RECITALS
1. The Executive has experience and expertise required by the Company
and its Affiliates.
2. Subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Executive Vice President
of Distribution and the Executive wishes to accept such employment.
AGREEMENT
NOW, THEREFORE, for valid consideration received, the parties agree as
follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive accepts employment hereunder
effective as of the date first set forth above (the "Effective Date").
2. Term. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending on December 31, 2002, which term shall be
automatically extended thereafter for successive terms of one year each, unless
either party provides notice to the other at least 30 days prior to the
expiration of the original or any extension term that this Agreement is not to
be extended. The term of the Executive's employment under this Agreement, as
from time to time extended, is referred to as the "Term."
3. Capacity and Performance.
3.1 Offices. During the Term, the Executive shall serve the
Company in the office of Executive Vice President of Distribution. The Executive
shall have such other powers, duties and responsibilities consistent with the
Executive's position as Executive Vice President of Distribution as may from
time to time be prescribed by the Chief Executive Officer of the Company
("CEO").
3.2 Performance. During the Term, the Executive shall be
employed by the Company on a full-time basis and shall perform and discharge,
faithfully, diligently and to the best of his ability, his duties and
responsibilities hereunder. During the Term, the Executive shall devote his full
business time exclusively to the advancement of the business and interests of
the Company and its Affiliates and to the discharge of his duties and
responsibilities hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental, political,
charitable or academic position during the Term of this Agreement, except for
such directorships or other positions which he currently holds and has disclosed
to the CEO in Exhibit 3.2 hereof and except as otherwise may be approved in
advance by the CEO.
4. Compensation and Benefits. During the Term, as compensation for
all services performed by the Executive under this Agreement and subject to
performance of the Executive's duties and obligations to the Company and its
Affiliates, pursuant to this Agreement or otherwise, the Executive shall receive
the following:
4.1 Base Salary.
(a) Through December 31, 1999. From the Effective Date of
this Agreement through December 31, 1999, the Company shall pay the Executive a
base salary at the rate of Two Hundred Forty-Two Thousand Six Hundred
Thirty-Seven Dollars ($242,637) per year, payable in accordance with the payroll
practices of the Company for its executives (the "1999 Base Salary"), and
<PAGE>
(b) Commencing January 1, 2000. Commencing January 1, 2000,
the Company shall pay the Executive a base salary at the rate of Two Hundred
Eighty-Five Thousand Dollars ($285,000) per year, payable in accordance with the
payroll practices of the Company for its executives and subject to such
increases as the Board of Directors of the Company (the "Board") in its sole
discretion may determine from time to time (the "Base Salary").
4.2 Bonus.
(a) Formula Bonus. Commencing in 2000, subject to Section 5
hereof, the Company shall pay the Executive a bonus in each fiscal year that he
is an employee (the "Bonus") within 75 days of the end of the fiscal year in
which such Bonus is earned. The amount of the Bonus shall be determined by the
Board based on the Company's achievement of pre-established annual targets (each
annual target being referred to as "Target"), which shall be based upon the
Company's EBITDA. The term "EBITDA" shall mean earnings before interest, taxes,
depreciation, amortization, Leadership Team bonuses, and loss or gain on sale or
disposal of assets outside of the ordinary course of business (including sales
of stores), all as reflected on the Company's financial statements as regularly
and consistently prepared. No Bonus shall be paid unless 90% of Target is
exceeded in the applicable fiscal year. The Executive shall receive a bonus of
one-tenth of one percent (0.1%) of his Base Salary for every one-hundredth of
one percent (0.01%) (rounded to the nearest hundredth) in excess of 90% of
Target that is achieved in the applicable fiscal year. By way of example only,
if 100% of Target is achieved, Executive would receive a Bonus under this
Section 4.2(a) equal to 100% of Executive's Base Salary.
(b) Discretionary Bonus Commencing in 2000, the Executive
shall also be eligible for an annual discretionary bonus, the amount of which is
determined in the sole discretion of the CEO based on subjective and objective
criteria established by the CEO, of up to 25% of Base Salary.
(c) Pro-Ration Anything to the contrary in this Agreement
notwithstanding, whenever any Bonus payable to the Executive is stated in this
Agreement to be prorated for any period of service less than a full year, such
Bonus shall be prorated by multiplying (x) the amount of the Bonus otherwise
payable for the applicable fiscal year in accordance with this Section 4.2 by
(y) a fraction, the denominator of which shall be 365 and the numerator of which
shall be the number of days during the applicable fiscal year for which the
Executive was employed by the Company.
4.3 Vacations. During the Term, the Executive shall be entitled
to four weeks of vacation per calendar year, to be taken at such times and
intervals as shall be determined by the Executive, subject to the reasonable
business needs of the Company. The Executive may not accumulate or carry over
from one calendar year to another any unused, accrued vacation time. The
Executive shall not be entitled to compensation for vacation time not taken.
4.4 Other Benefits. During the Term and subject to any
contribution therefor required of executives of the Company generally, the
Executive shall be entitled to participate in all employee benefit plans,
including without limitation any 401(k) plan, from time to time adopted by the
Board and in effect for executives of the Company generally (except to the
extent such plans are in a category of benefit otherwise provided the Executive
hereunder). Such participation shall be subject to (i) the terms of the
applicable plan documents and (ii) generally applicable policies of the Company.
The Company may alter, modify, add to or delete any aspects of its employee
benefit plans at any time as the Board, in its sole judgment, determines to be
appropriate.
4.5 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable business expenses, including without limitation the
cost of first class air travel and dues for industry-related association
memberships, incurred or paid by the Executive in the performance of his duties
and responsibilities hereunder, subject to (i) any expense policy of the Company
set by the Board from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board or CEO from time to
time.
4.6 Airline Clubs. Upon receiving the prior written approval of
the CEO authorizing the Executive to join a particular airline club, the Company
shall pay or reimburse the Executive for dues for not less than two nor more
than four airline clubs, provided such club memberships serve a direct business
purpose and subject to such reasonable substantiation and documentation
requirements as to cost and purpose as may be specified by the CEO from time to
time.
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4.7 Physicals. The Company shall annually pay for or reimburse
the Executive for the cost of a physical examination and health evaluation
performed by a licensed medical doctor, subject to such reasonable
substantiation and documentation requirements as to cost as may be specified by
the Board or CEO from time to time.
4.8 Nonqualified Plan. The Executive agrees that the Company may
amend its nonqualified deferred compensation plan to exclude the Executive from
receiving benefits based upon any deferral matching credit or formula.
5. Termination of Employment and Severance Benefits. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1 Retirement or Death. In the event of the Executive's
retirement or death during the Term, the Executive's employment hereunder shall
immediately and automatically terminate. In the event of the Executive's
retirement after the age of 65 with the prior consent of the Board or death
during the Term, the Company shall pay to the Executive (or in the case of
death, the Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate) any Base Salary earned but unpaid
through the date of such retirement or death, any Bonus for the fiscal year
preceding the year in which such retirement or death occurs that was earned but
has not yet been paid and, at the times the Company pays its executives bonuses
in accordance with its general payroll policies, an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such retirement or
death (prorated in accordance with Section 4.2).
5.2 Disability.
5.2.1 The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the Executive becomes
disabled during his employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature and, as a result, is
unable to perform substantially all of his duties and responsibilities hereunder
for an aggregate of 120 days during any period of 365 consecutive calendar days.
5.2.2 The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability.
Notwithstanding any such designation, the Executive shall continue to receive
the Base Salary in accordance with Section 4.1 and to receive benefits in
accordance with Section 4.5, to the extent permitted by the then current terms
of the applicable benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan maintained by the
Company, or until the termination of his employment, whichever shall first
occur. Upon becoming so eligible, or upon such termination, whichever shall
first occur, the Company shall pay to the Executive any Base Salary earned but
unpaid through the date of such eligibility or termination and any Bonus for the
fiscal year preceding the year of such eligibility or termination that was
earned but unpaid. At the times the Company pays its executives bonuses
generally, the Company shall pay the Executive an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such eligibility or
termination (prorated in accordance with Section 4.2). During the 18-month
period from the date of such eligibility or termination, the Company shall pay
the Executive, at its regular pay periods, an amount equal to the difference
between the Base Salary and the amounts of disability income benefits that the
Executive receives pursuant to the above-referenced disability income plan in
respect of such period.
5.2.3 Except as provided in Section 5.2.2, while receiving
disability income payments under any disability income plan maintained by the
Company, the Executive shall not be entitled to receive any Base Salary under
Section 4.1 or Bonus payments under Section 4.2 but shall continue to
participate in benefit plans of the Company in accordance with Section 4.4 and
the terms of such plans, until the termination of his employment. During the
18-month period from the date of eligibility or termination, whichever shall
first occur, the Company shall contribute to the cost of the Executive's
participation in group medical plans of the Company, provided that the Executive
is entitled to continue such participation under applicable law and plan terms.
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5.2.4 If any question shall arise as to whether during any
period the Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be unable to
perform substantially all of his duties and responsibilities hereunder, the
Executive may, and at the request of the Company shall, submit to a medical
examination by a physician selected by the Company to whom the Executive or his
duly appointed guardian, if any, has no reasonable objection, to determine
whether the Executive is so disabled and such determination shall for the
purposes of this Agreement be conclusive of the issue. If such question shall
arise and the Executive shall fail to submit to such medical examination, the
Board's determination of the issue shall be binding on the Executive.
5.3 By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following events or conditions shall constitute "Cause" for termination: (i)
Executive's willful failure to perform (other than by reason of disability), or
gross negligence in the performance of his duties to the Company or any of its
Affiliates and the continuation of such failure or negligence for a period of
ten (10) days after notice to the Executive; (ii) the Executive's willful
failure to perform (other than by reason of disability) any lawful and
reasonable directive of the CEO; (iii) the commission of fraud, embezzlement or
theft by the Executive with respect to the Company or any of its Affiliates; or
(iv) the conviction of the Executive of, or plea by the Executive of nolo
contendere to, any felony or any other crime involving dishonesty or moral
turpitude. Anything to the contrary in this Agreement notwithstanding, upon the
giving of notice of termination of the Executive's employment hereunder for
Cause, the Company and its Affiliates shall have no further obligation or
liability to the Executive hereunder, other than for Base Salary earned but
unpaid through the date of termination. Without limiting the generality of the
foregoing, the Executive shall not be entitled to receive any Bonus amounts
which have not been paid prior to the date of termination.
5.4 By the Company Other Than for Cause. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, the Company
shall pay the Executive: (i) Base Salary earned but unpaid through the date of
termination, plus (ii) monthly severance payments, each in an amount equal to
the Executive's monthly base compensation in effect at the time of such
termination (i.e., 1/12th of the Base Salary) throughout the remainder of the
Term, provided should termination occur during the original Term or during any
one-year automatic extension thereof, the Term shall be deemed to expire at the
end of such original Term or at the end of the current extension year, as
applicable, plus (iii) any unpaid portion of any Bonus for the fiscal year
preceding the year in which such termination occurs that was earned but has not
been paid, plus (iv) at the times the Company pays its executives bonuses
generally, an amount equal to that portion of any Bonus earned but unpaid during
the fiscal year of such termination (prorated in accordance with Section 4.2).
5.5 By the Executive for Good Reason. The Executive may
terminate his employment hereunder for Good Reason, upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The following
shall constitute "Good Reason" for termination by the Executive: (i) any
material diminution in the nature and scope of the Executive's responsibilities,
duties, authority or title; (ii) material failure of the Company to provide the
Executive the Base Salary and benefits in accordance with the terms of Section 4
hereof; or (iii) relocation of the Executive's office to a location outside a
50-mile radius of the Company's current headquarters in Ann Arbor, Michigan. In
the event of termination in accordance with this Section 5.5, then the Company
shall pay the Executive the amounts specified in Section 5.4.
5.6 By the Executive Other Than for Good Reason. The Executive
may terminate his employment hereunder at any time upon 90 days written notice
to the Company. In the event of termination of the Executive's employment
pursuant to this Section 5.6, the CEO or the Board may elect to waive the period
of notice, or any portion thereof. The Company will pay the Executive his Base
Salary for the notice period, except to the extent so waived by the Board. Upon
the giving of notice of termination of the Executive's employment hereunder
pursuant to this Section 5.6, the Company and its Affiliates shall have no
further obligation or liability to the Executive, other than (i) payment to the
Executive of his Base Salary for the period (or portion of such period)
indicated above, (ii) continuation of the provision of the benefits set forth in
Section 4.4 for the period (or portion of such period) indicated above, and
(iii) any unpaid portion of any Bonus for the fiscal year preceding the year in
which such termination occurs that was earned but has not been paid.
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5.7 Post-Agreement Employment. In the event the Executive
remains in the employ of the Company or any of its Affiliates following
termination of this Agreement, by the expiration of the Term or otherwise, then
such employment shall be at will.
6. Effect of Termination of Employment. The provisions of this
Section 6 shall apply in the event of termination of Executive's employment,
whether due to the expiration of the Term, pursuant to Section 5, or otherwise.
6.1 Payment in Full. Payment by the Company or its Affiliates of
any Base Salary, Bonus or other specified amounts that are due to the Executive
under the applicable termination provision of Section 5 shall constitute the
entire obligation of the Company and its Affiliates to the Executive, except
that nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company or its Affiliates, on the one hand, and
the Executive, on the other, with respect to any option plans, option
agreements, subscription agreements, stockholders agreements or other agreements
to the extent said rights or obligations therein survive termination of
employment.
6.2 Termination of Benefits. If Executive is terminated by the
Company without Cause, or terminates his employment with the Company for Good
Reason, and provided that Executive elects continuation of health coverage
pursuant to Section 601 through 608 of the Employee Retirement Income Security
Act of 1974, as amended ("COBRA"), Company shall pay Executive an amount equal
to his monthly COBRA premiums for a period equal to the period remaining in the
Term after termination; provided further, such payment will cease upon
Executive's entitlement to other health insurance without charge. Except for
medical insurance coverage continued pursuant to Section 5.2 hereof, all other
benefits shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive's employment without regard to
any continuation of Base Salary or other payments to the Executive following
termination of his employment.
6.3 Survival of Certain Provisions. Provisions of this Agreement
shall survive any termination of employment if so provided herein or if
necessary to accomplish the purpose of other surviving provisions, including,
without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of the
Executive under Sections 5.2, 5.4 or 5.5 hereof is expressly conditioned upon
the Executive's continued full performance of his obligations under Sections 7
and 8 hereof. The Executive recognizes that, except as expressly provided in
Section 5.2, 5.4 or 5.5, no compensation is earned after the termination of his
employment.
7. Confidential Information; Intellectual Property.
7.1 Confidentiality. The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information (as that term is
defined in Section 11.2, below); that the Executive may develop Confidential
Information for the Company or its Affiliates and that the Executive may learn
of Confidential Information during the course of his employment. The Executive
will comply with the policies and procedures of the Company and its Affiliates
for protecting Confidential Information and shall never use or disclose to any
Person (except as required by applicable law or for the proper performance of
his duties and responsibilities to the Company) any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company and its Affiliates. The Executive understands that this restriction
shall continue to apply after his employment terminates, regardless of the
reason for such termination.
7.2 Return of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company and its Affiliates and any copies, in whole or in
part, thereof (the "Documents"), whether or not prepared by the Executive, shall
be the sole and exclusive property of the Company and its Affiliates. The
Executive shall safeguard all Documents and shall surrender to the Company and
its Affiliates at the time his employment terminates, or at such earlier time or
times as the Board or CEO designee may specify, all Documents then in the
Executive's possession or control.
7.3 Assignment of Rights to Intellectual Property. The Executive
shall promptly and fully disclose all Intellectual Property to the Company. The
Executive hereby assigns to the Company (or as otherwise directed by the
Company) the Executive's full right, title and interest in and to all
Intellectual Property. The Executive shall execute any and all applications for
domestic and foreign patents, copyrights or other proprietary rights and to do
such other acts
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(including without limitation the execution and delivery of
instruments of further assurance or confirmation) requested by the Company or
its Affiliates to assign the Intellectual Property to the Company and to permit
the Company and its Affiliates to enforce any patents, copyrights or other
proprietary rights to the Intellectual Property. The Executive will not charge
the Company or its Affiliates for time spent in complying with these
obligations. All copyrightable works that the Executive creates shall be
considered "Work For Hire" under applicable laws.
8. Restricted Activities.
8.1 Agreement Not to Compete With the Company. During the
Executive's employment hereunder and for a period of 24 months following the
date of termination thereof (the "Non-Competition Period"), the Executive will
not, directly or indirectly, own, manage, operate, control or participate in any
manner in the ownership, management, operation or control of, or be connected as
an officer, employee, partner, director, principal, member, manager, consultant,
agent or otherwise with, or have any financial interest in, or aid or assist
anyone else in the conduct of, any business, venture or activity which in any
material respect competes with the following enumerated business activities to
the extent then being conducted or being planned to be conducted by the Company
or its Affiliates or being conducted or known by the Executive to being planned
to be conducted by the Company or by any of its Affiliates, at or prior to the
date on which the Executive's employment under this Agreement is terminated (the
"Date of Termination"), in the United States or any other geographic area where
such business is being conducted or being planned to be conducted at or prior to
the Date of Termination (a "Competitive Business", defined below). For purposes
of this Agreement, "Competitive Business" shall be defined as: (i) any company
or other entity engaged as a "quick service restaurant" ("QSR") which offers
pizza for sale; (ii) any "quick service restaurant" which is then contemplating
entering into the pizza business or adding pizza to its menu; (iii) any entity
which at the time of Executive's termination of employment with the Company,
offers, as a primary product or service, products or services then being offered
by the Company or which the Company is actively contemplating offering; and (iv)
any entity under common control with an entity included in (i), (ii) or (iii),
above. Notwithstanding the foregoing, ownership of not more than 5% of any class
of equity security of any publicly traded corporation shall not, of itself,
constitute a violation of this Section 8.1.
8.2 Agreement Not to Solicit Employees or Customers of the
Company. During his employment and during the Non-Competition Period the
Executive will not, directly or indirectly, (i) recruit or hire or otherwise
seek to induce any employees of the Company or any of the Company's Affiliates
to terminate their employment or violate any agreement with or duty to the
Company or any of the Company's Affiliates; or (ii) solicit or encourage any
franchisee or vendor of the Company or of any of the Company's Affiliates to
terminate or diminish its relationship with any of them or to violate any
agreement with any of them, or, in the case of a franchisee, to conduct with any
Person any business or activity that such franchisee conducts or could conduct
with the Company or any of the Company's Affiliates.
9. Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including without limitation the restraints imposed upon him pursuant to
Sections 7 and 8 hereof. The Executive agrees that said restraints are necessary
for the reasonable and proper protection of the Company and its Affiliates and
that each and every one of the restraints is reasonable in respect to subject
matter, length of time and geographic area. The Executive further acknowledges
that, were he to breach any of the covenants or agreements contained in Sections
7 or 8 hereof, the damage to the Company and its Affiliates could be
irreparable. The Executive, therefore, agrees that the Company and its
Affiliates, in addition to any other remedies available to it, shall be entitled
to preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants or agreements. The parties
further agree that in the event that any provision of Section 7 or 8 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of it being extended over too great a time, too large a geographic
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which or by which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or solicitation or
similar covenants or other obligations that would affect the performance of his
obligations hereunder. The Executive will not disclose to or use on behalf of
the Company or any of its Affiliates any proprietary information of a third
party without such party's consent.
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11. Definitions. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 11
or as specifically defined elsewhere in this Agreement. For purposes of this
Agreement, the following definitions apply:
11.1 Affiliates. "Affiliates" shall mean TISM, Inc., Domino's,
Inc. and all other persons and entities controlling, controlled by or under
common control with the Company, where control may be by management authority or
equity interest.
11.2 Confidential Information. "Confidential Information" means
any and all information of the Company and its Affiliates that is not generally
known by others with whom they compete or do business, or with whom they plan to
compete or do business, and any and all information the disclosure of which
would otherwise be adverse to the interest of the Company or any of its
Affiliates. Confidential Information includes without limitation such
information relating to (i) the products and services sold or offered by the
Company or any of its Affiliates (including without limitation recipes,
production processes and heating technology), (ii) the costs, sources of supply,
financial performance and strategic plans of the Company and its Affiliates,
(iii) the identity of the suppliers to the Company and its Affiliates, and (iv)
the people and organizations with whom the Company and its Affiliates have
business relationships and those relationships. Confidential Information also
includes information that the Company or any of its Affiliates have received
belonging to others with any understanding, express or implied, that it would
not be disclosed.
11.3 ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 and any successor statute, and the rules and regulations
thereunder, and, in the case of any referenced section thereof, any successor
section thereto, collectively and as from time to time amended and in effect.
11.4 Intellectual Property. "Intellectual Property" means
inventions, discoveries, developments, methods, processes, compositions, works,
concepts, recipes and ideas (whether or not patentable or copyrightable or
constituting trade secrets or trademarks or service marks) conceived, made,
created, developed or reduced to practice by the Executive (whether alone or
with others, whether or not during normal business hours or on or off Company
premises) during the Executive's employment that relate to either the business
activities or any prospective activity of the Company or any of its Affiliates.
11.5 Person. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
12. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
13. Waiver, Release and Termination of Prior Agreement. Effective upon
the execution of this Agreement, Executive hereby waives any and all rights and
benefits to which he was entitled under a prior Severance Agreement with the
Company dated August 4, 1998 (the "Prior Agreement"), releases the Company and
its Affiliates from any and all obligations under the Prior Agreement, and
agrees that such Prior Agreement is terminated and of no force or effect.
14. Miscellaneous.
14.1 Assignment. Neither the Company nor the Executive may assign
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
the Executive in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into, any other Person or transfer
all or substantially all of its properties or assets to any other Person, in
which event such other Person shall be deemed the "Company" hereunder, as
applicable, for all purposes of this Agreement; provided, further, that nothing
contained herein shall be construed to place any limitation or restriction on
the transfer of the Company's Common Stock in addition to any restrictions set
forth in any stockholder agreement applicable to the holders of such shares.
This Agreement shall inure to the benefit of and be binding upon the Company and
the Executive, and their respective successors, executors, administrators,
representatives, heirs and permitted assigns.
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14.2 Severability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the application of such provision in such circumstances shall
be deemed modified to permit its enforcement to the maximum extent permitted by
law, and both the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable and the
remainder of this Agreement shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
14.3 Waiver; Amendment. No waiver of any provision hereof shall
be effective unless made in writing and signed by the waiving party. The failure
of either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach. This Agreement may be amended or modified only
by a written instrument signed by the Executive and any expressly authorized
representative of the Company.
14.4 Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed (i) in the case of the
Executive, to: Mike Soignet, at 9540 Penniman, Plymouth, Michigan 48170, and
(ii) in the case of the Company, to the attention of Mr. David A. Brandon, CEO,
at 30 Frank Lloyd Wright Drive, Ann Arbor, Michigan 48106, or to such other
address as either party may specify by notice to the other actually received.
14.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes any and all prior communications,
agreements and understandings, written or oral, between the Executive and the
Company, or any of its predecessors, with respect to the terms and conditions of
the Executive's employment.
14.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which together
shall constitute one and the same instruments.
14.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Michigan without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
14.8 Consent to Jurisdiction. Each of the Company and the
Executive by its or his execution hereof, (i) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Michigan for the purpose of any
claim or action arising out of or based upon this Agreement or relating to the
subject matter hereof and (ii) hereby waives, to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such claim or action, any claim that it or he is not subject
personally to the jurisdiction of the above-named courts, that its or his
property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court. Each of
the Company and the Executive hereby consents to service of process in any such
proceeding in any manner permitted by Michigan law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 13.4 hereof is reasonably calculated to
give actual notice.
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IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY: DOMINO'S PIZZA, INC.
By:/s/
-----------------------------------------
Name: David A. Brandon
Title: CEO
THE EXECUTIVE: /s/
---------------------------------------------
Name: Mike Soignet
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EXHIBIT 3.2
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EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of December 14, 1999, by Domino's
Pizza, Inc., a Michigan corporation (the "Company") with Hoyt Jones (the
"Executive").
RECITALS
1. The Executive has experience and expertise required by the Company
and its Affiliates.
2. Subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Executive Vice President
of Franchise Operations and the Executive wishes to accept such employment.
AGREEMENT
NOW, THEREFORE, for valid consideration received, the parties agree as
follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive accepts employment hereunder
effective as of the date first set forth above (the "Effective Date").
2. Term. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending on December 31, 2001, which term shall be
automatically extended thereafter for successive terms of one year each, unless
either party provides notice to the other at least 30 days prior to the
expiration of the original or any extension term that this Agreement is not to
be extended. The term of the Executive's employment under this Agreement, as
from time to time extended, is referred to as the "Term."
3. Capacity and Performance.
3.1 Offices. During the Term, the Executive shall serve the
Company in the office of Executive Vice President of Franchise Operations. The
Executive shall have such other powers, duties and responsibilities consistent
with the Executive's position as Executive Vice President of Franchise
Operations as may from time to time be prescribed by the Chief Executive Officer
of the Company ("CEO").
3.2 Performance. During the Term, the Executive shall be
employed by the Company on a full-time basis and shall perform and discharge,
faithfully, diligently and to the best of his ability, his duties and
responsibilities hereunder. During the Term, the Executive shall devote his full
business time exclusively to the advancement of the business and interests of
the Company and its Affiliates and to the discharge of his duties and
responsibilities hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental, political,
charitable or academic position during the Term of this Agreement, except for
such directorships or other positions which he currently holds and has disclosed
to the CEO in Exhibit 3.2 hereof and except as otherwise may be approved in
advance by the CEO.
4. Compensation and Benefits. During the Term, as compensation
for all services performed by the Executive under this Agreement and subject to
performance of the Executive's duties and obligations to the Company and its
Affiliates, pursuant to this Agreement or otherwise, the Executive shall receive
the following:
4.1 Base Salary.
(a) Through December 31, 1999. From the Effective Date of
this Agreement through December 31, 1999, the Company shall pay the Executive a
base salary at the rate of One Hundred Seventy Thousand Dollars ($170,000) per
year, payable in accordance with the payroll practices of the Company for its
executives (the "1999 Base Salary"), and
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(b) Commencing January 1, 2000. Commencing January 1,
2000, the Company shall pay the Executive a base salary at the rate of One
Hundred Seventy Thousand Dollars ($170,000) per year, payable in accordance with
the payroll practices of the Company for its executives and subject to such
increases as the Board of Directors of the Company (the "Board") in its sole
discretion may determine from time to time (the "Base Salary").
4.2 Bonus.
(a) Formula Bonus. Commencing in 2000, subject to Section
5 hereof, the Company shall pay the Executive a bonus in each fiscal year that
he is an employee (the "Bonus") within 75 days of the end of the fiscal year in
which such Bonus is earned. The amount of the Bonus shall be determined by the
Board based on the Company's achievement of pre-established annual targets (each
annual target being referred to as "Target"), which shall be based upon the
Company's EBITDA. The term "EBITDA" shall mean earnings before interest, taxes,
depreciation, amortization, Leadership Team bonuses, and loss or gain on sale or
disposal of assets outside of the ordinary course of business (including sales
of stores), all as reflected on the Company's financial statements as regularly
and consistently prepared. No Bonus shall be paid unless 90% of Target is
exceeded in the applicable fiscal year. The Executive shall receive a bonus of
one-tenth of one percent (0.1%) of his Base Salary for every one-hundredth of
one percent (0.01%) (rounded to the nearest hundredth) in excess of 90% of
Target that is achieved in the applicable fiscal year. By way of example only,
if 100% of Target is achieved, Executive would receive a Bonus under this
Section 4.2(a) equal to 100% of Executive's Base Salary.
(b) Discretionary Bonus Commencing in 2000, the Executive
shall also be eligible for an annual discretionary bonus, the amount of which is
determined in the sole discretion of the CEO based on subjective and objective
criteria established by the CEO, of up to 25% of Base Salary.
(c) Pro-Ration Anything to the contrary in this Agreement
notwithstanding, whenever any Bonus payable to the Executive is stated in this
Agreement to be prorated for any period of service less than a full year, such
Bonus shall be prorated by multiplying (x) the amount of the Bonus otherwise
payable for the applicable fiscal year in accordance with this Section 4.2 by
(y) a fraction, the denominator of which shall be 365 and the numerator of which
shall be the number of days during the applicable fiscal year for which the
Executive was employed by the Company.
4.3 Vacations. During the Term, the Executive shall be entitled
to four weeks of vacation per calendar year, to be taken at such times and
intervals as shall be determined by the Executive, subject to the reasonable
business needs of the Company. The Executive may not accumulate or carry over
from one calendar year to another any unused, accrued vacation time. The
Executive shall not be entitled to compensation for vacation time not taken.
4.4 Other Benefits. During the Term and subject to any
contribution therefor required of executives of the Company generally, the
Executive shall be entitled to participate in all employee benefit plans,
including without limitation any 401(k) plan, from time to time adopted by the
Board and in effect for executives of the Company generally (except to the
extent such plans are in a category of benefit otherwise provided the Executive
hereunder). Such participation shall be subject to (i) the terms of the
applicable plan documents and (ii) generally applicable policies of the Company.
The Company may alter, modify, add to or delete any aspects of its employee
benefit plans at any time as the Board, in its sole judgment, determines to be
appropriate.
4.5 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable business expenses, including without limitation the
cost of first class air travel and dues for industry-related association
memberships, incurred or paid by the Executive in the performance of his duties
and responsibilities hereunder, subject to (i) any expense policy of the Company
set by the Board from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board or CEO from time to
time.
4.6 Airline Clubs. Upon receiving the prior written approval of
the CEO authorizing the Executive to join a particular airline club, the Company
shall pay or reimburse the Executive for dues for not less than two nor more
than four airline clubs, provided such club memberships serve a direct business
purpose and subject to such reasonable substantiation and documentation
requirements as to cost and purpose as may be specified by the CEO from time to
time.
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4.7 Physicals. The Company shall annually pay for or reimburse
the Executive for the cost of a physical examination and health evaluation
performed by a licensed medical doctor, subject to such reasonable
substantiation and documentation requirements as to cost as may be specified by
the Board or CEO from time to time.
4.8 Nonqualified Plan. The Executive agrees that the Company may
amend its nonqualified deferred compensation plan to exclude the Executive from
receiving benefits based upon any deferral matching credit or formula.
5. Termination of Employment and Severance Benefits. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1 Retirement or Death. In the event of the Executive's
retirement or death during the Term, the Executive's employment hereunder shall
immediately and automatically terminate. In the event of the Executive's
retirement after the age of 65 with the prior consent of the Board or death
during the Term, the Company shall pay to the Executive (or in the case of
death, the Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate) any Base Salary earned but unpaid
through the date of such retirement or death, any Bonus for the fiscal year
preceding the year in which such retirement or death occurs that was earned but
has not yet been paid and, at the times the Company pays its executives bonuses
in accordance with its general payroll policies, an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such retirement or
death (prorated in accordance with Section 4.2).
5.2 Disability.
5.2.1 The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the Executive becomes
disabled during his employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature and, as a result, is
unable to perform substantially all of his duties and responsibilities hereunder
for an aggregate of 120 days during any period of 365 consecutive calendar days.
5.2.2 The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability.
Notwithstanding any such designation, the Executive shall continue to receive
the Base Salary in accordance with Section 4.1 and to receive benefits in
accordance with Section 4.5, to the extent permitted by the then current terms
of the applicable benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan maintained by the
Company, or until the termination of his employment, whichever shall first
occur. Upon becoming so eligible, or upon such termination, whichever shall
first occur, the Company shall pay to the Executive any Base Salary earned but
unpaid through the date of such eligibility or termination and any Bonus for the
fiscal year preceding the year of such eligibility or termination that was
earned but unpaid. At the times the Company pays its executives bonuses
generally, the Company shall pay the Executive an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such eligibility or
termination (prorated in accordance with Section 4.2). During the 18-month
period from the date of such eligibility or termination, the Company shall pay
the Executive, at its regular pay periods, an amount equal to the difference
between the Base Salary and the amounts of disability income benefits that the
Executive receives pursuant to the above-referenced disability income plan in
respect of such period.
5.2.3 Except as provided in Section 5.2.2, while receiving
disability income payments under any disability income plan maintained by the
Company, the Executive shall not be entitled to receive any Base Salary under
Section 4.1 or Bonus payments under Section 4.2 but shall continue to
participate in benefit plans of the Company in accordance with Section 4.4 and
the terms of such plans, until the termination of his employment. During the
18-month period from the date of eligibility or termination, whichever shall
first occur, the Company shall contribute to the cost of the Executive's
participation in group medical plans of the Company, provided that the Executive
is entitled to continue such participation under applicable law and plan terms.
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5.2.4 If any question shall arise as to whether during any
period the Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be unable to
perform substantially all of his duties and responsibilities hereunder, the
Executive may, and at the request of the Company shall, submit to a medical
examination by a physician selected by the Company to whom the Executive or his
duly appointed guardian, if any, has no reasonable objection, to determine
whether the Executive is so disabled and such determination shall for the
purposes of this Agreement be conclusive of the issue. If such question shall
arise and the Executive shall fail to submit to such medical examination, the
Board's determination of the issue shall be binding on the Executive.
5.3 By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following events or conditions shall constitute "Cause" for termination: (i)
Executive's willful failure to perform (other than by reason of disability), or
gross negligence in the performance of his duties to the Company or any of its
Affiliates and the continuation of such failure or negligence for a period of
ten (10) days after notice to the Executive; (ii) the Executive's willful
failure to perform (other than by reason of disability) any lawful and
reasonable directive of the CEO; (iii) the commission of fraud, embezzlement or
theft by the Executive with respect to the Company or any of its Affiliates; or
(iv) the conviction of the Executive of, or plea by the Executive of nolo
contendere to, any felony or any other crime involving dishonesty or moral
turpitude. Anything to the contrary in this Agreement notwithstanding, upon the
giving of notice of termination of the Executive's employment hereunder for
Cause, the Company and its Affiliates shall have no further obligation or
liability to the Executive hereunder, other than for Base Salary earned but
unpaid through the date of termination. Without limiting the generality of the
foregoing, the Executive shall not be entitled to receive any Bonus amounts
which have not been paid prior to the date of termination.
5.4 By the Company Other Than for Cause. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, the Company
shall pay the Executive: (i) Base Salary earned but unpaid through the date of
termination, plus (ii) monthly severance payments, each in an amount equal to
the Executive's monthly base compensation in effect at the time of such
termination (i.e., 1/12th of the Base Salary) throughout the remainder of the
Term, provided should termination occur during the original Term or during any
one-year automatic extension thereof, the Term shall be deemed to expire at the
end of such original Term or at the end of the current extension year, as
applicable, plus (iii) any unpaid portion of any Bonus for the fiscal year
preceding the year in which such termination occurs that was earned but has not
been paid, plus (iv) at the times the Company pays its executives bonuses
generally, an amount equal to that portion of any Bonus earned but unpaid during
the fiscal year of such termination (prorated in accordance with Section 4.2).
5.5 By the Executive for Good Reason. The Executive may
terminate his employment hereunder for Good Reason, upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The following
shall constitute "Good Reason" for termination by the Executive: (i) any
material diminution in the nature and scope of the Executive's responsibilities,
duties, authority or title; (ii) material failure of the Company to provide the
Executive the Base Salary and benefits in accordance with the terms of Section 4
hereof; or (iii) relocation of the Executive's office to a location outside a
50-mile radius of the Company's current headquarters in Ann Arbor, Michigan. In
the event of termination in accordance with this Section 5.5, then the Company
shall pay the Executive the amounts specified in Section 5.4.
5.6 By the Executive Other Than for Good Reason. The Executive
may terminate his employment hereunder at any time upon 90 days written notice
to the Company. In the event of termination of the Executive's employment
pursuant to this Section 5.6, the CEO or the Board may elect to waive the period
of notice, or any portion thereof. The Company will pay the Executive his Base
Salary for the notice period, except to the extent so waived by the Board. Upon
the giving of notice of termination of the Executive's employment hereunder
pursuant to this Section 5.6, the Company and its Affiliates shall have no
further obligation or liability to the Executive, other than (i) payment to the
Executive of his Base Salary for the period (or portion of such period)
indicated above, (ii) continuation of the provision of the benefits set forth in
Section 4.4 for the period (or portion of such period) indicated above, and
(iii) any unpaid portion of any Bonus for the fiscal year preceding the year in
which such termination occurs that was earned but has not been paid.
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5.7 Post-Agreement Employment. In the event the Executive
remains in the employ of the Company or any of its Affiliates following
termination of this Agreement, by the expiration of the Term or otherwise, then
such employment shall be at will.
6. Effect of Termination of Employment. The provisions of this
Section 6 shall apply in the event of termination of Executive's employment,
whether due to the expiration of the Term, pursuant to Section 5, or otherwise.
6.1 Payment in Full. Payment by the Company or its Affiliates of
any Base Salary, Bonus or other specified amounts that are due to the Executive
under the applicable termination provision of Section 5 shall constitute the
entire obligation of the Company and its Affiliates to the Executive, except
that nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company or its Affiliates, on the one hand, and
the Executive, on the other, with respect to any option plans, option
agreements, subscription agreements, stockholders agreements or other agreements
to the extent said rights or obligations therein survive termination of
employment.
6.2 Termination of Benefits. If Executive is terminated by the
Company without Cause, or terminates his employment with the Company for Good
Reason, and provided that Executive elects continuation of health coverage
pursuant to Section 601 through 608 of the Employee Retirement Income Security
Act of 1974, as amended ("COBRA"), Company shall pay Executive an amount equal
to his monthly COBRA premiums for a period equal to the period remaining in the
Term after termination; provided further, such payment will cease upon
Executive's entitlement to other health insurance without charge. Except for
medical insurance coverage continued pursuant to Section 5.2 hereof, all other
benefits shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive's employment without regard to
any continuation of Base Salary or other payments to the Executive following
termination of his employment.
6.3 Survival of Certain Provisions. Provisions of this Agreement
shall survive any termination of employment if so provided herein or if
necessary to accomplish the purpose of other surviving provisions, including,
without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of the
Executive under Sections 5.2, 5.4 or 5.5 hereof is expressly conditioned upon
the Executive's continued full performance of his obligations under Sections 7
and 8 hereof. The Executive recognizes that, except as expressly provided in
Section 5.2, 5.4 or 5.5, no compensation is earned after the termination of his
employment.
7. Confidential Information; Intellectual Property.
7.1 Confidentiality. The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information (as that term is
defined in Section 11.2, below); that the Executive may develop Confidential
Information for the Company or its Affiliates and that the Executive may learn
of Confidential Information during the course of his employment. The Executive
will comply with the policies and procedures of the Company and its Affiliates
for protecting Confidential Information and shall never use or disclose to any
Person (except as required by applicable law or for the proper performance of
his duties and responsibilities to the Company) any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company and its Affiliates. The Executive understands that this restriction
shall continue to apply after his employment terminates, regardless of the
reason for such termination.
7.2 Return of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company and its Affiliates and any copies, in whole or in
part, thereof (the "Documents"), whether or not prepared by the Executive, shall
be the sole and exclusive property of the Company and its Affiliates. The
Executive shall safeguard all Documents and shall surrender to the Company and
its Affiliates at the time his employment terminates, or at such earlier time or
times as the Board or CEO designee may specify, all Documents then in the
Executive's possession or control.
7.3 Assignment of Rights to Intellectual Property. The Executive
shall promptly and fully disclose all Intellectual Property to the Company. The
Executive hereby assigns to the Company (or as otherwise directed by the
Company) the Executive's full right, title and interest in and to all
Intellectual Property. The Executive shall execute any and all applications for
domestic and foreign patents, copyrights or other proprietary rights and to do
such other acts
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(including without limitation the execution and delivery of instruments of
further assurance or confirmation) requested by the Company or its Affiliates to
assign the Intellectual Property to the Company and to permit the Company and
its Affiliates to enforce any patents, copyrights or other proprietary rights to
the Intellectual Property. The Executive will not charge the Company or its
Affiliates for time spent in complying with these obligations. All copyrightable
works that the Executive creates shall be considered "Work For Hire" under
applicable laws.
8. Restricted Activities.
8.1 Agreement Not to Compete With the Company. During the
Executive's employment hereunder and for a period of 24 months following the
date of termination thereof (the "Non-Competition Period"), the Executive will
not, directly or indirectly, own, manage, operate, control or participate in any
manner in the ownership, management, operation or control of, or be connected as
an officer, employee, partner, director, principal, member, manager, consultant,
agent or otherwise with, or have any financial interest in, or aid or assist
anyone else in the conduct of, any business, venture or activity which in any
material respect competes with the following enumerated business activities to
the extent then being conducted or being planned to be conducted by the Company
or its Affiliates or being conducted or known by the Executive to being planned
to be conducted by the Company or by any of its Affiliates, at or prior to the
date on which the Executive's employment under this Agreement is terminated (the
"Date of Termination"), in the United States or any other geographic area where
such business is being conducted or being planned to be conducted at or prior to
the Date of Termination (a "Competitive Business", defined below). For purposes
of this Agreement, "Competitive Business" shall be defined as: (i) any company
or other entity engaged as a "quick service restaurant" ("QSR") which offers
pizza for sale; (ii) any "quick service restaurant" which is then contemplating
entering into the pizza business or adding pizza to its menu; (iii) any entity
which at the time of Executive's termination of employment with the Company,
offers, as a primary product or service, products or services then being offered
by the Company or which the Company is actively contemplating offering; and (iv)
any entity under common control with an entity included in (i), (ii) or (iii),
above. Notwithstanding the foregoing, ownership of not more than 5% of any class
of equity security of any publicly traded corporation shall not, of itself,
constitute a violation of this Section 8.1.
8.2 Agreement Not to Solicit Employees or Customers of the
Company. During his employment and during the Non-Competition Period the
Executive will not, directly or indirectly, (i) recruit or hire or otherwise
seek to induce any employees of the Company or any of the Company's Affiliates
to terminate their employment or violate any agreement with or duty to the
Company or any of the Company's Affiliates; or (ii) solicit or encourage any
franchisee or vendor of the Company or of any of the Company's Affiliates to
terminate or diminish its relationship with any of them or to violate any
agreement with any of them, or, in the case of a franchisee, to conduct with any
Person any business or activity that such franchisee conducts or could conduct
with the Company or any of the Company's Affiliates.
9. Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including without limitation the restraints imposed upon him pursuant to
Sections 7 and 8 hereof. The Executive agrees that said restraints are necessary
for the reasonable and proper protection of the Company and its Affiliates and
that each and every one of the restraints is reasonable in respect to subject
matter, length of time and geographic area. The Executive further acknowledges
that, were he to breach any of the covenants or agreements contained in Sections
7 or 8 hereof, the damage to the Company and its Affiliates could be
irreparable. The Executive, therefore, agrees that the Company and its
Affiliates, in addition to any other remedies available to it, shall be entitled
to preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants or agreements. The parties
further agree that in the event that any provision of Section 7 or 8 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of it being extended over too great a time, too large a geographic
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which or by which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or solicitation or
similar covenants or other obligations that would affect the performance of his
obligations hereunder. The Executive will not disclose to or use on behalf of
the Company or any of its Affiliates any proprietary information of a third
party without such party's consent.
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11. Definitions. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 11
or as specifically defined elsewhere in this Agreement. For purposes of this
Agreement, the following definitions apply:
11.1 Affiliates. "Affiliates" shall mean TISM, Inc., Domino's,
Inc. and all other persons and entities controlling, controlled by or under
common control with the Company, where control may be by management authority or
equity interest.
11.2 Confidential Information. "Confidential Information" means
any and all information of the Company and its Affiliates that is not generally
known by others with whom they compete or do business, or with whom they plan to
compete or do business, and any and all information the disclosure of which
would otherwise be adverse to the interest of the Company or any of its
Affiliates. Confidential Information includes without limitation such
information relating to (i) the products and services sold or offered by the
Company or any of its Affiliates (including without limitation recipes,
production processes and heating technology), (ii) the costs, sources of supply,
financial performance and strategic plans of the Company and its Affiliates,
(iii) the identity of the suppliers to the Company and its Affiliates, and (iv)
the people and organizations with whom the Company and its Affiliates have
business relationships and those relationships. Confidential Information also
includes information that the Company or any of its Affiliates have received
belonging to others with any understanding, express or implied, that it would
not be disclosed.
11.3 ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 and any successor statute, and the rules and regulations
thereunder, and, in the case of any referenced section thereof, any successor
section thereto, collectively and as from time to time amended and in effect.
11.4 Intellectual Property. "Intellectual Property" means
inventions, discoveries, developments, methods, processes, compositions, works,
concepts, recipes and ideas (whether or not patentable or copyrightable or
constituting trade secrets or trademarks or service marks) conceived, made,
created, developed or reduced to practice by the Executive (whether alone or
with others, whether or not during normal business hours or on or off Company
premises) during the Executive's employment that relate to either the business
activities or any prospective activity of the Company or any of its Affiliates.
11.5 Person. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
12. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
13. Waiver, Release and Termination of Prior Agreement. Effective upon
the execution of this Agreement, Executive hereby waives any and all rights and
benefits to which he was entitled under a prior Severance Agreement with the
Company dated August 4, 1998 (the "Prior Agreement"), releases the Company and
its Affiliates from any and all obligations under the Prior Agreement, and
agrees that such Prior Agreement is terminated and of no force or effect.
14. Miscellaneous.
14.1 Assignment. Neither the Company nor the Executive may assign
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
the Executive in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into, any other Person or transfer
all or substantially all of its properties or assets to any other Person, in
which event such other Person shall be deemed the "Company" hereunder, as
applicable, for all purposes of this Agreement; provided, further, that nothing
contained herein shall be construed to place any limitation or restriction on
the transfer of the Company's Common Stock in addition to any restrictions set
forth in any stockholder agreement applicable to the holders of such shares.
This Agreement shall inure to the benefit of and be binding upon the Company and
the Executive, and their respective successors, executors, administrators,
representatives, heirs and permitted assigns.
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14.2 Severability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the application of such provision in such circumstances shall
be deemed modified to permit its enforcement to the maximum extent permitted by
law, and both the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable and the
remainder of this Agreement shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
14.3 Waiver; Amendment. No waiver of any provision hereof shall
be effective unless made in writing and signed by the waiving party. The failure
of either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach. This Agreement may be amended or modified only
by a written instrument signed by the Executive and any expressly authorized
representative of the Company.
14.4 Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed (i) in the case of the
Executive, to: Hoyt Jones, at 320 Bowline Court, Soverna Park, Maryland 21146,
and (ii) in the case of the Company, to the attention of Mr. David A. Brandon,
CEO, at 30 Frank Lloyd Wright Drive, Ann Arbor, Michigan 48106, or to such other
address as either party may specify by notice to the other actually received.
14.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes any and all prior communications,
agreements and understandings, written or oral, between the Executive and the
Company, or any of its predecessors, with respect to the terms and conditions of
the Executive's employment.
14.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which together
shall constitute one and the same instruments.
14.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Michigan without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
14.8 Consent to Jurisdiction. Each of the Company and the
Executive by its or his execution hereof, (i) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Michigan for the purpose of any
claim or action arising out of or based upon this Agreement or relating to the
subject matter hereof and (ii) hereby waives, to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such claim or action, any claim that it or he is not subject
personally to the jurisdiction of the above-named courts, that its or his
property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court. Each of
the Company and the Executive hereby consents to service of process in any such
proceeding in any manner permitted by Michigan law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 13.4 hereof is reasonably calculated to
give actual notice.
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IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY: DOMINO'S PIZZA, INC.
By: /s/
------------------------------------------
Name: David A. Brandon
Title: CEO
THE EXECUTIVE: /s/
---------------------------------------------
Name: Hoyt Jones
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EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of December 14, 1999, by Domino's
Pizza, Inc., a Michigan corporation (the "Company") with Patrick Doyle (the
"Executive").
RECITALS
1. The Executive has experience and expertise required by the Company
and its Affiliates.
2. Subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Executive Vice President
of International and the Executive wishes to accept such employment.
AGREEMENT
NOW, THEREFORE, for valid consideration received, the parties agree as
follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive accepts employment hereunder
effective as of the date first set forth above (the "Effective Date").
2. Term. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending on December 31, 2002, which term shall be
automatically extended thereafter for successive terms of one year each, unless
either party provides notice to the other at least 30 days prior to the
expiration of the original or any extension term that this Agreement is not to
be extended. The term of the Executive's employment under this Agreement, as
from time to time extended, is referred to as the "Term."
3. Capacity and Performance.
3.1 Offices. During the Term, the Executive shall serve the
Company in the office of Executive Vice President of International. The
Executive shall have such other powers, duties and responsibilities consistent
with the Executive's position as Executive Vice President of International as
may from time to time be prescribed by the Chief Executive Officer of the
Company ("CEO").
3.2 Performance. During the Term, the Executive shall be
employed by the Company on a full-time basis and shall perform and discharge,
faithfully, diligently and to the best of his ability, his duties and
responsibilities hereunder. During the Term, the Executive shall devote his full
business time exclusively to the advancement of the business and interests of
the Company and its Affiliates and to the discharge of his duties and
responsibilities hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental, political,
charitable or academic position during the Term of this Agreement, except for
such directorships or other positions which he currently holds and has disclosed
to the CEO in Exhibit 3.2 hereof and except as otherwise may be approved in
advance by the CEO.
4. Compensation and Benefits. During the Term, as compensation for
all services performed by the Executive under this Agreement and subject to
performance of the Executive's duties and obligations to the Company and its
Affiliates, pursuant to this Agreement or otherwise, the Executive shall receive
the following:
4.1 Base Salary.
(a) Through December 31, 1999. From the Effective Date of
this Agreement through December 31, 1999, the Company shall pay the Executive a
base salary at the rate of Two Hundred Eighteen Thousand Dollars ($218,000) per
year, payable in accordance with the payroll practices of the Company for its
executives (the "1999 Base Salary"), and
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(b) Commencing January 1, 2000. Commencing January 1, 2000,
the Company shall pay the Executive a base salary at the rate of Two Hundred
Thirty Thousand Dollars ($230,000) per year, payable in accordance with the
payroll practices of the Company for its executives and subject to such
increases as the Board of Directors of the Company (the "Board") in its sole
discretion may determine from time to time (the "Base Salary").
4.2 Bonus.
(a) Formula Bonus. Commencing in 2000, subject to Section 5
hereof, the Company shall pay the Executive a bonus in each fiscal year that he
is an employee (the "Bonus") within 75 days of the end of the fiscal year in
which such Bonus is earned. The amount of the Bonus shall be determined by the
Board based on the Company's achievement of pre-established annual targets (each
annual target being referred to as "Target"), which shall be based upon the
Company's EBITDA. The term "EBITDA" shall mean earnings before interest, taxes,
depreciation, amortization, Leadership Team bonuses, and loss or gain on sale or
disposal of assets outside of the ordinary course of business (including sales
of stores), all as reflected on the Company's financial statements as regularly
and consistently prepared. No Bonus shall be paid unless 90% of Target is
exceeded in the applicable fiscal year. The Executive shall receive a bonus of
one-tenth of one percent (0.1%) of his Base Salary for every one-hundredth of
one percent (0.01%) (rounded to the nearest hundredth) in excess of 90% of
Target that is achieved in the applicable fiscal year. By way of example only,
if 100% of Target is achieved, Executive would receive a Bonus under this
Section 4.2(a) equal to 100% of Executive's Base Salary.
(b) Discretionary Bonus. Commencing in 2000, the Executive
shall also be eligible for an annual discretionary bonus, the amount of which is
determined in the sole discretion of the CEO based on subjective and objective
criteria established by the CEO, of up to 25% of Base Salary.
(c) Pro-Ration. Anything to the contrary in this Agreement
notwithstanding, whenever any Bonus payable to the Executive is stated in this
Agreement to be prorated for any period of service less than a full year, such
Bonus shall be prorated by multiplying (x) the amount of the Bonus otherwise
payable for the applicable fiscal year in accordance with this Section 4.2 by
(y) a fraction, the denominator of which shall be 365 and the numerator of which
shall be the number of days during the applicable fiscal year for which the
Executive was employed by the Company.
4.3 Vacations. During the Term, the Executive shall be entitled
to four weeks of vacation per calendar year, to be taken at such times and
intervals as shall be determined by the Executive, subject to the reasonable
business needs of the Company. The Executive may not accumulate or carry over
from one calendar year to another any unused, accrued vacation time. The
Executive shall not be entitled to compensation for vacation time not taken.
4.4 Other Benefits. During the Term and subject to any
contribution therefor required of executives of the Company generally, the
Executive shall be entitled to participate in all employee benefit plans,
including without limitation any 401(k) plan, from time to time adopted by the
Board and in effect for executives of the Company generally (except to the
extent such plans are in a category of benefit otherwise provided the Executive
hereunder). Such participation shall be subject to (i) the terms of the
applicable plan documents and (ii) generally applicable policies of the Company.
The Company may alter, modify, add to or delete any aspects of its employee
benefit plans at any time as the Board, in its sole judgment, determines to be
appropriate.
4.5 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable business expenses, including without limitation the
cost of first class air travel and dues for industry-related association
memberships, incurred or paid by the Executive in the performance of his duties
and responsibilities hereunder, subject to (i) any expense policy of the Company
set by the Board from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board or CEO from time to
time.
4.6 Airline Clubs. Upon receiving the prior written approval of
the CEO authorizing the Executive to join a particular airline club, the Company
shall pay or reimburse the Executive for dues for not less than two nor more
than four airline clubs, provided such club memberships serve a direct business
purpose and subject to such reasonable substantiation and documentation
requirements as to cost and purpose as may be specified by the CEO from time to
time.
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4.7 Physicals. The Company shall annually pay for or reimburse
the Executive for the cost of a physical examination and health evaluation
performed by a licensed medical doctor, subject to such reasonable
substantiation and documentation requirements as to cost as may be specified by
the Board or CEO from time to time.
4.8 Nonqualified Plan. The Executive agrees that the Company may
amend its nonqualified deferred compensation plan to exclude the Executive from
receiving benefits based upon any deferral matching credit or formula.
5. Termination of Employment and Severance Benefits. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1 Retirement or Death. In the event of the Executive's
retirement or death during the Term, the Executive's employment hereunder shall
immediately and automatically terminate. In the event of the Executive's
retirement after the age of 65 with the prior consent of the Board or death
during the Term, the Company shall pay to the Executive (or in the case of
death, the Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate) any Base Salary earned but unpaid
through the date of such retirement or death, any Bonus for the fiscal year
preceding the year in which such retirement or death occurs that was earned but
has not yet been paid and, at the times the Company pays its executives bonuses
in accordance with its general payroll policies, an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such retirement or
death (prorated in accordance with Section 4.2).
5.2 Disability.
5.2.1 The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the Executive becomes
disabled during his employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature and, as a result, is
unable to perform substantially all of his duties and responsibilities hereunder
for an aggregate of 120 days during any period of 365 consecutive calendar days.
5.2.2 The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability.
Notwithstanding any such designation, the Executive shall continue to receive
the Base Salary in accordance with Section 4.1 and to receive benefits in
accordance with Section 4.5, to the extent permitted by the then current terms
of the applicable benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan maintained by the
Company, or until the termination of his employment, whichever shall first
occur. Upon becoming so eligible, or upon such termination, whichever shall
first occur, the Company shall pay to the Executive any Base Salary earned but
unpaid through the date of such eligibility or termination and any Bonus for the
fiscal year preceding the year of such eligibility or termination that was
earned but unpaid. At the times the Company pays its executives bonuses
generally, the Company shall pay the Executive an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such eligibility or
termination (prorated in accordance with Section 4.2). During the 18-month
period from the date of such eligibility or termination, the Company shall pay
the Executive, at its regular pay periods, an amount equal to the difference
between the Base Salary and the amounts of disability income benefits that the
Executive receives pursuant to the above-referenced disability income plan in
respect of such period.
5.2.3 Except as provided in Section 5.2.2, while receiving
disability income payments under any disability income plan maintained by the
Company, the Executive shall not be entitled to receive any Base Salary under
Section 4.1 or Bonus payments under Section 4.2 but shall continue to
participate in benefit plans of the Company in accordance with Section 4.4 and
the terms of such plans, until the termination of his employment. During the
18-month period from the date of eligibility or termination, whichever shall
first occur, the Company shall contribute to the cost of the Executive's
participation in group medical plans of the Company, provided that the Executive
is entitled to continue such participation under applicable law and plan terms.
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5.2.4 If any question shall arise as to whether during any
period the Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be unable to
perform substantially all of his duties and responsibilities hereunder, the
Executive may, and at the request of the Company shall, submit to a medical
examination by a physician selected by the Company to whom the Executive or his
duly appointed guardian, if any, has no reasonable objection, to determine
whether the Executive is so disabled and such determination shall for the
purposes of this Agreement be conclusive of the issue. If such question shall
arise and the Executive shall fail to submit to such medical examination, the
Board's determination of the issue shall be binding on the Executive.
5.3 By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following events or conditions shall constitute "Cause" for termination: (i)
Executive's willful failure to perform (other than by reason of disability), or
gross negligence in the performance of his duties to the Company or any of its
Affiliates and the continuation of such failure or negligence for a period of
ten (10) days after notice to the Executive; (ii) the Executive's willful
failure to perform (other than by reason of disability) any lawful and
reasonable directive of the CEO; (iii) the commission of fraud, embezzlement or
theft by the Executive with respect to the Company or any of its Affiliates; or
(iv) the conviction of the Executive of, or plea by the Executive of nolo
contendere to, any felony or any other crime involving dishonesty or moral
turpitude. Anything to the contrary in this Agreement notwithstanding, upon the
giving of notice of termination of the Executive's employment hereunder for
Cause, the Company and its Affiliates shall have no further obligation or
liability to the Executive hereunder, other than for Base Salary earned but
unpaid through the date of termination. Without limiting the generality of the
foregoing, the Executive shall not be entitled to receive any Bonus amounts
which have not been paid prior to the date of termination.
5.4 By the Company Other Than for Cause. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, the Company
shall pay the Executive: (i) Base Salary earned but unpaid through the date of
termination, plus (ii) monthly severance payments, each in an amount equal to
the Executive's monthly base compensation in effect at the time of such
termination (i.e., 1/12th of the Base Salary) throughout the remainder of the
Term, provided should termination occur during the original Term or during any
one-year automatic extension thereof, the Term shall be deemed to expire at the
end of such original Term or at the end of the current extension year, as
applicable, plus (iii) any unpaid portion of any Bonus for the fiscal year
preceding the year in which such termination occurs that was earned but has not
been paid, plus (iv) at the times the Company pays its executives bonuses
generally, an amount equal to that portion of any Bonus earned but unpaid during
the fiscal year of such termination (prorated in accordance with Section 4.2).
5.5 By the Executive for Good Reason. The Executive may
terminate his employment hereunder for Good Reason, upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The following
shall constitute "Good Reason" for termination by the Executive: (i) any
material diminution in the nature and scope of the Executive's responsibilities,
duties, authority or title; (ii) material failure of the Company to provide the
Executive the Base Salary and benefits in accordance with the terms of Section 4
hereof; or (iii) relocation of the Executive's office to a location outside a
50-mile radius of the Company's current headquarters in Ann Arbor, Michigan. In
the event of termination in accordance with this Section 5.5, then the Company
shall pay the Executive the amounts specified in Section 5.4.
5.6 By the Executive Other Than for Good Reason. The Executive
may terminate his employment hereunder at any time upon 90 days written notice
to the Company. In the event of termination of the Executive's employment
pursuant to this Section 5.6, the CEO or the Board may elect to waive the period
of notice, or any portion thereof. The Company will pay the Executive his Base
Salary for the notice period, except to the extent so waived by the Board. Upon
the giving of notice of termination of the Executive's employment hereunder
pursuant to this Section 5.6, the Company and its Affiliates shall have no
further obligation or liability to the Executive, other than (i) payment to the
Executive of his Base Salary for the period (or portion of such period)
indicated above, (ii) continuation of the provision of the benefits set forth in
Section 4.4 for the period (or portion of such period) indicated above, and
(iii) any unpaid portion of any Bonus for the fiscal year preceding the year in
which such termination occurs that was earned but has not been paid.
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5.7 Post-Agreement Employment. In the event the Executive
remains in the employ of the Company or any of its Affiliates following
termination of this Agreement, by the expiration of the Term or otherwise, then
such employment shall be at will.
6. Effect of Termination of Employment. The provisions of this
Section 6 shall apply in the event of termination of Executive's employment,
whether due to the expiration of the Term, pursuant to Section 5, or otherwise.
6.1 Payment in Full. Payment by the Company or its Affiliates of
any Base Salary, Bonus or other specified amounts that are due to the Executive
under the applicable termination provision of Section 5 shall constitute the
entire obligation of the Company and its Affiliates to the Executive, except
that nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company or its Affiliates, on the one hand, and
the Executive, on the other, with respect to any option plans, option
agreements, subscription agreements, stockholders agreements or other agreements
to the extent said rights or obligations therein survive termination of
employment.
6.2 Termination of Benefits. If Executive is terminated by the
Company without Cause, or terminates his employment with the Company for Good
Reason, and provided that Executive elects continuation of health coverage
pursuant to Section 601 through 608 of the Employee Retirement Income Security
Act of 1974, as amended ("COBRA"), Company shall pay Executive an amount equal
to his monthly COBRA premiums for a period equal to the period remaining in the
Term after termination; provided further, such payment will cease upon
Executive's entitlement to other health insurance without charge. Except for
medical insurance coverage continued pursuant to Section 5.2 hereof, all other
benefits shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive's employment without regard to
any continuation of Base Salary or other payments to the Executive following
termination of his employment.
6.3 Survival of Certain Provisions. Provisions of this Agreement
shall survive any termination of employment if so provided herein or if
necessary to accomplish the purpose of other surviving provisions, including,
without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of the
Executive under Sections 5.2, 5.4 or 5.5 hereof is expressly conditioned upon
the Executive's continued full performance of his obligations under Sections 7
and 8 hereof. The Executive recognizes that, except as expressly provided in
Section 5.2, 5.4 or 5.5, no compensation is earned after the termination of his
employment.
7. Confidential Information; Intellectual Property.
7.1 Confidentiality. The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information (as that term is
defined in Section 11.2, below); that the Executive may develop Confidential
Information for the Company or its Affiliates and that the Executive may learn
of Confidential Information during the course of his employment. The Executive
will comply with the policies and procedures of the Company and its Affiliates
for protecting Confidential Information and shall never use or disclose to any
Person (except as required by applicable law or for the proper performance of
his duties and responsibilities to the Company) any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company and its Affiliates. The Executive understands that this restriction
shall continue to apply after his employment terminates, regardless of the
reason for such termination.
7.2 Return of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company and its Affiliates and any copies, in whole or in
part, thereof (the "Documents"), whether or not prepared by the Executive, shall
be the sole and exclusive property of the Company and its Affiliates. The
Executive shall safeguard all Documents and shall surrender to the Company and
its Affiliates at the time his employment terminates, or at such earlier time or
times as the Board or CEO designee may specify, all Documents then in the
Executive's possession or control.
7.3 Assignment of Rights to Intellectual Property. The Executive
shall promptly and fully disclose all Intellectual Property to the Company. The
Executive hereby assigns to the Company (or as otherwise directed by the
Company) the Executive's full right, title and interest in and to all
Intellectual Property. The Executive shall execute any and all applications for
domestic and foreign patents, copyrights or other proprietary rights and to do
such other acts
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(including without limitation the execution and delivery of instruments of
further assurance or confirmation) requested by the Company or its Affiliates to
assign the Intellectual Property to the Company and to permit the Company and
its Affiliates to enforce any patents, copyrights or other proprietary rights to
the Intellectual Property. The Executive will not charge the Company or its
Affiliates for time spent in complying with these obligations. All copyrightable
works that the Executive creates shall be considered "Work For Hire" under
applicable laws.
8. Restricted Activities.
8.1 Agreement Not to Compete With the Company. During the
Executive's employment hereunder and for a period of 24 months following the
date of termination thereof (the "Non-Competition Period"), the Executive will
not, directly or indirectly, own, manage, operate, control or participate in any
manner in the ownership, management, operation or control of, or be connected as
an officer, employee, partner, director, principal, member, manager, consultant,
agent or otherwise with, or have any financial interest in, or aid or assist
anyone else in the conduct of, any business, venture or activity which in any
material respect competes with the following enumerated business activities to
the extent then being conducted or being planned to be conducted by the Company
or its Affiliates or being conducted or known by the Executive to being planned
to be conducted by the Company or by any of its Affiliates, at or prior to the
date on which the Executive's employment under this Agreement is terminated (the
"Date of Termination"), in the United States or any other geographic area where
such business is being conducted or being planned to be conducted at or prior to
the Date of Termination (a "Competitive Business", defined below). For purposes
of this Agreement, "Competitive Business" shall be defined as: (i) any company
or other entity engaged as a "quick service restaurant" ("QSR") which offers
pizza for sale; (ii) any "quick service restaurant" which is then contemplating
entering into the pizza business or adding pizza to its menu; (iii) any entity
which at the time of Executive's termination of employment with the Company,
offers, as a primary product or service, products or services then being offered
by the Company or which the Company is actively contemplating offering; and (iv)
any entity under common control with an entity included in (i), (ii) or (iii),
above. Notwithstanding the foregoing, ownership of not more than 5% of any class
of equity security of any publicly traded corporation shall not, of itself,
constitute a violation of this Section 8.1.
8.2 Agreement Not to Solicit Employees or Customers of the
Company. During his employment and during the Non-Competition Period the
Executive will not, directly or indirectly, (i) recruit or hire or otherwise
seek to induce any employees of the Company or any of the Company's Affiliates
to terminate their employment or violate any agreement with or duty to the
Company or any of the Company's Affiliates; or (ii) solicit or encourage any
franchisee or vendor of the Company or of any of the Company's Affiliates to
terminate or diminish its relationship with any of them or to violate any
agreement with any of them, or, in the case of a franchisee, to conduct with any
Person any business or activity that such franchisee conducts or could conduct
with the Company or any of the Company's Affiliates.
9. Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including without limitation the restraints imposed upon him pursuant to
Sections 7 and 8 hereof. The Executive agrees that said restraints are necessary
for the reasonable and proper protection of the Company and its Affiliates and
that each and every one of the restraints is reasonable in respect to subject
matter, length of time and geographic area. The Executive further acknowledges
that, were he to breach any of the covenants or agreements contained in Sections
7 or 8 hereof, the damage to the Company and its Affiliates could be
irreparable. The Executive, therefore, agrees that the Company and its
Affiliates, in addition to any other remedies available to it, shall be entitled
to preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants or agreements. The parties
further agree that in the event that any provision of Section 7 or 8 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of it being extended over too great a time, too large a geographic
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which or by which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or solicitation or
similar covenants or other obligations that would affect the performance of his
obligations hereunder. The Executive will not disclose to or use on behalf of
the Company or any of its Affiliates any proprietary information of a third
party without such party's consent.
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11. Definitions. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 11
or as specifically defined elsewhere in this Agreement. For purposes of this
Agreement, the following definitions apply:
11.1 Affiliates. "Affiliates" shall mean TISM, Inc., Domino's,
Inc. and all other persons and entities controlling, controlled by or under
common control with the Company, where control may be by management authority or
equity interest.
11.2 Confidential Information. "Confidential Information" means
any and all information of the Company and its Affiliates that is not generally
known by others with whom they compete or do business, or with whom they plan to
compete or do business, and any and all information the disclosure of which
would otherwise be adverse to the interest of the Company or any of its
Affiliates. Confidential Information includes without limitation such
information relating to (i) the products and services sold or offered by the
Company or any of its Affiliates (including without limitation recipes,
production processes and heating technology), (ii) the costs, sources of supply,
financial performance and strategic plans of the Company and its Affiliates,
(iii) the identity of the suppliers to the Company and its Affiliates, and (iv)
the people and organizations with whom the Company and its Affiliates have
business relationships and those relationships. Confidential Information also
includes information that the Company or any of its Affiliates have received
belonging to others with any understanding, express or implied, that it would
not be disclosed.
11.3 ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 and any successor statute, and the rules and regulations
thereunder, and, in the case of any referenced section thereof, any successor
section thereto, collectively and as from time to time amended and in effect.
11.4 Intellectual Property. "Intellectual Property" means
inventions, discoveries, developments, methods, processes, compositions, works,
concepts, recipes and ideas (whether or not patentable or copyrightable or
constituting trade secrets or trademarks or service marks) conceived, made,
created, developed or reduced to practice by the Executive (whether alone or
with others, whether or not during normal business hours or on or off Company
premises) during the Executive's employment that relate to either the business
activities or any prospective activity of the Company or any of its Affiliates.
11.5 Person. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
12. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
13. Waiver, Release and Termination of Prior Agreement. Effective upon
the execution of this Agreement, Executive hereby waives any and all rights and
benefits to which he was entitled under a prior Severance Agreement with the
Company dated August 4, 1998 (the "Prior Agreement"), releases the Company and
its Affiliates from any and all obligations under the Prior Agreement, and
agrees that such Prior Agreement is terminated and of no force or effect.
14. Miscellaneous.
14.1 Assignment. Neither the Company nor the Executive may assign
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
the Executive in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into, any other Person or transfer
all or substantially all of its properties or assets to any other Person, in
which event such other Person shall be deemed the "Company" hereunder, as
applicable, for all purposes of this Agreement; provided, further, that nothing
contained herein shall be construed to place any limitation or restriction on
the transfer of the Company's Common Stock in addition to any restrictions set
forth in any stockholder agreement applicable to the holders of such shares.
This Agreement shall inure to the benefit of and be binding upon the Company and
the Executive, and their respective successors, executors, administrators,
representatives, heirs and permitted assigns.
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14.2 Severability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the application of such provision in such circumstances shall
be deemed modified to permit its enforcement to the maximum extent permitted by
law, and both the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable and the
remainder of this Agreement shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
14.3 Waiver; Amendment. No waiver of any provision hereof shall
be effective unless made in writing and signed by the waiving party. The failure
of either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach. This Agreement may be amended or modified only
by a written instrument signed by the Executive and any expressly authorized
representative of the Company.
14.4 Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed (i) in the case of the
Executive, to: Patrick Doyle, at 2269 Trillium Woods Drive, Ann Arbor, Michigan
48105, and (ii) in the case of the Company, to the attention of Mr. David A.
Brandon, CEO, at 30 Frank Lloyd Wright Drive, Ann Arbor, Michigan 48106, or to
such other address as either party may specify by notice to the other actually
received.
14.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes any and all prior communications,
agreements and understandings, written or oral, between the Executive and the
Company, or any of its predecessors, with respect to the terms and conditions of
the Executive's employment.
14.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which together
shall constitute one and the same instruments.
14.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Michigan without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
14.8 Consent to Jurisdiction. Each of the Company and the
Executive by its or his execution hereof, (i) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Michigan for the purpose of any
claim or action arising out of or based upon this Agreement or relating to the
subject matter hereof and (ii) hereby waives, to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such claim or action, any claim that it or he is not subject
personally to the jurisdiction of the above-named courts, that its or his
property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court. Each of
the Company and the Executive hereby consents to service of process in any such
proceeding in any manner permitted by Michigan law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 13.4 hereof is reasonably calculated to
give actual notice.
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IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY: DOMINO'S PIZZA, INC.
By: /s/
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Name: David A. Brandon
Title:CEO
THE EXECUTIVE:
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Name: Patrick Doyle
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EXHIBIT 3.2
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EXHIBIT 10.22
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of January 1, 2000, by Domino's
Pizza, Inc., a Michigan corporation (the "Company") with Patrick Kelly (the
"Executive").
RECITALS
1. The Executive has experience and expertise required by the Company
and its Affiliates.
2. Subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Executive Vice President
of Flawless Execution and the Executive wishes to accept such employment.
AGREEMENT
NOW, THEREFORE, for valid consideration received, the parties agree as
follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive accepts employment hereunder
effective as of the date first set forth above (the "Effective Date").
2. Term. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending on December 31, 2001, which term shall be
automatically extended thereafter for successive terms of one year each, unless
either party provides notice to the other at least 30 days prior to the
expiration of the original or any extension term that this Agreement is not to
be extended. The term of the Executive's employment under this Agreement, as
from time to time extended, is referred to as the "Term."
3. Capacity and Performance.
3.1 Offices. During the Term, the Executive shall serve the
Company in the office of Executive Vice President of Flawless Execution. The
Executive shall have such other powers, duties and responsibilities consistent
with the Executive's position as Executive Vice President of Flawless Execution
as may from time to time be prescribed by the Chief Executive Officer of the
Company ("CEO").
3.2 Performance. During the Term, the Executive shall be
employed by the Company on a full-time basis and shall perform and discharge,
faithfully, diligently and to the best of his ability, his duties and
responsibilities hereunder. During the Term, the Executive shall devote his full
business time exclusively to the advancement of the business and interests of
the Company and its Affiliates and to the discharge of his duties and
responsibilities hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental, political,
charitable or academic position during the Term of this Agreement, except for
such directorships or other positions which he currently holds and has disclosed
to the CEO in Exhibit 3.2 hereof and except as otherwise may be approved in
advance by the CEO.
4. Compensation and Benefits. During the Term, as compensation for
all services performed by the Executive under this Agreement and subject to
performance of the Executive's duties and obligations to the Company and its
Affiliates, pursuant to this Agreement or otherwise, the Executive shall receive
the following:
4.1 Base Salary. Commencing January 1, 2000, the Company shall
pay the Executive a base salary at the rate of Two Hundred Seventy-Five Thousand
Dollars ($275,000) per year, payable in accordance with the payroll practices of
the Company for its executives and subject to such increases as the Board of
Directors of the Company (the "Board") in its sole discretion may determine from
time to time (the "Base Salary").
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4.2 Bonus.
(a) Formula Bonus. Commencing in 2000, subject to Section 5
hereof, the Company shall pay the Executive a bonus in each fiscal year that he
is an employee (the "Bonus") within 75 days of the end of the fiscal year in
which such Bonus is earned. The amount of the Bonus shall be determined by the
Board based on the Company's achievement of pre-established annual targets (each
annual target being referred to as "Target"), which shall be based upon the
Company's EBITDA. The term "EBITDA" shall mean earnings before interest, taxes,
depreciation, amortization, Leadership Team bonuses, and loss or gain on sale or
disposal of assets outside of the ordinary course of business (including sales
of stores), all as reflected on the Company's financial statements as regularly
and consistently prepared. No Bonus shall be paid unless 90% of Target is
exceeded in the applicable fiscal year. The Executive shall receive a bonus of
one-tenth of one percent (0.1%) of his Base Salary for every one-hundredth of
one percent (0.01%) (rounded to the nearest hundredth) in excess of 90% of
Target that is achieved in the applicable fiscal year. By way of example only,
if 100% of Target is achieved, Executive would receive a Bonus under this
Section 4.2(a) equal to 100% of Executive's Base Salary.
(b) Discretionary Bonus Commencing in 2000, the Executive
shall also be eligible for an annual discretionary bonus, the amount of which is
determined in the sole discretion of the CEO based on subjective and objective
criteria established by the CEO, of up to 25% of Base Salary.
(c) Pro-Ration Anything to the contrary in this Agreement
notwithstanding, whenever any Bonus payable to the Executive is stated in this
Agreement to be prorated for any period of service less than a full year, such
Bonus shall be prorated by multiplying (x) the amount of the Bonus otherwise
payable for the applicable fiscal year in accordance with this Section 4.2 by
(y) a fraction, the denominator of which shall be 365 and the numerator of which
shall be the number of days during the applicable fiscal year for which the
Executive was employed by the Company.
4.3 Vacations. During the Term, the Executive shall be entitled
to four weeks of vacation per calendar year, to be taken at such times and
intervals as shall be determined by the Executive, subject to the reasonable
business needs of the Company. The Executive may not accumulate or carry over
from one calendar year to another any unused, accrued vacation time. The
Executive shall not be entitled to compensation for vacation time not taken.
4.4 Other Benefits. During the Term and subject to any
contribution therefor required of executives of the Company generally, the
Executive shall be entitled to participate in all employee benefit plans,
including without limitation any 401(k) plan, from time to time adopted by the
Board and in effect for executives of the Company generally (except to the
extent such plans are in a category of benefit otherwise provided the Executive
hereunder). Such participation shall be subject to (i) the terms of the
applicable plan documents and (ii) generally applicable policies of the Company.
The Company may alter, modify, add to or delete any aspects of its employee
benefit plans at any time as the Board, in its sole judgment, determines to be
appropriate.
4.5 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable business expenses, including without limitation the
cost of first class air travel and dues for industry-related association
memberships, incurred or paid by the Executive in the performance of his duties
and responsibilities hereunder, subject to (i) any expense policy of the Company
set by the Board from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board or CEO from time to
time.
4.6 Airline Clubs. Upon receiving the prior written approval of
the CEO authorizing the Executive to join a particular airline club, the Company
shall pay or reimburse the Executive for dues for not less than two nor more
than four airline clubs, provided such club memberships serve a direct business
purpose and subject to such reasonable substantiation and documentation
requirements as to cost and purpose as may be specified by the CEO from time to
time.
4.7 Physicals. The Company shall annually pay for or reimburse
the Executive for the cost of a physical examination and health evaluation
performed by a licensed medical doctor, subject to such reasonable
substantiation and documentation requirements as to cost as may be specified by
the Board or CEO from time to time.
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4.8 Nonqualified Plan. The Executive agrees that the Company may
amend its nonqualified deferred compensation plan to exclude the Executive from
receiving benefits based upon any deferral matching credit or formula.
5. Termination of Employment and Severance Benefits. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1 Retirement or Death. In the event of the Executive's
retirement or death during the Term, the Executive's employment hereunder shall
immediately and automatically terminate. In the event of the Executive's
retirement after the age of 65 with the prior consent of the Board or death
during the Term, the Company shall pay to the Executive (or in the case of
death, the Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate) any Base Salary earned but unpaid
through the date of such retirement or death, any Bonus for the fiscal year
preceding the year in which such retirement or death occurs that was earned but
has not yet been paid and, at the times the Company pays its executives bonuses
in accordance with its general payroll policies, an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such retirement or
death (prorated in accordance with Section 4.2).
5.2 Disability.
5.2.1 The Company may terminate the Executive's employment
hereunder, upon notice to the Executive, in the event that the Executive becomes
disabled during his employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature and, as a result, is
unable to perform substantially all of his duties and responsibilities hereunder
for an aggregate of 120 days during any period of 365 consecutive calendar days.
5.2.2 The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability.
Notwithstanding any such designation, the Executive shall continue to receive
the Base Salary in accordance with Section 4.1 and to receive benefits in
accordance with Section 4.5, to the extent permitted by the then current terms
of the applicable benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan maintained by the
Company, or until the termination of his employment, whichever shall first
occur. Upon becoming so eligible, or upon such termination, whichever shall
first occur, the Company shall pay to the Executive any Base Salary earned but
unpaid through the date of such eligibility or termination and any Bonus for the
fiscal year preceding the year of such eligibility or termination that was
earned but unpaid. At the times the Company pays its executives bonuses
generally, the Company shall pay the Executive an amount equal to that portion
of any Bonus earned but unpaid during the fiscal year of such eligibility or
termination (prorated in accordance with Section 4.2). During the 18-month
period from the date of such eligibility or termination, the Company shall pay
the Executive, at its regular pay periods, an amount equal to the difference
between the Base Salary and the amounts of disability income benefits that the
Executive receives pursuant to the above-referenced disability income plan in
respect of such period.
5.2.3 Except as provided in Section 5.2.2, while receiving
disability income payments under any disability income plan maintained by the
Company, the Executive shall not be entitled to receive any Base Salary under
Section 4.1 or Bonus payments under Section 4.2 but shall continue to
participate in benefit plans of the Company in accordance with Section 4.4 and
the terms of such plans, until the termination of his employment. During the
18-month period from the date of eligibility or termination, whichever shall
first occur, the Company shall contribute to the cost of the Executive's
participation in group medical plans of the Company, provided that the Executive
is entitled to continue such participation under applicable law and plan terms.
5.2.4 If any question shall arise as to whether during any
period the Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be unable to
perform substantially all of his duties and responsibilities hereunder, the
Executive may, and at the request of the Company shall,
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submit to a medical examination by a physician selected by the Company to whom
the Executive or his duly appointed guardian, if any, has no reasonable
objection, to determine whether the Executive is so disabled and such
determination shall for the purposes of this Agreement be conclusive of the
issue. If such question shall arise and the Executive shall fail to submit to
such medical examination, the Board's determination of the issue shall be
binding on the Executive.
5.3 By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following events or conditions shall constitute "Cause" for termination: (i)
Executive's willful failure to perform (other than by reason of disability), or
gross negligence in the performance of his duties to the Company or any of its
Affiliates and the continuation of such failure or negligence for a period of
ten (10) days after notice to the Executive; (ii) the Executive's willful
failure to perform (other than by reason of disability) any lawful and
reasonable directive of the CEO; (iii) the commission of fraud, embezzlement or
theft by the Executive with respect to the Company or any of its Affiliates; or
(iv) the conviction of the Executive of, or plea by the Executive of nolo
contendere to, any felony or any other crime involving dishonesty or moral
turpitude. Anything to the contrary in this Agreement notwithstanding, upon the
giving of notice of termination of the Executive's employment hereunder for
Cause, the Company and its Affiliates shall have no further obligation or
liability to the Executive hereunder, other than for Base Salary earned but
unpaid through the date of termination. Without limiting the generality of the
foregoing, the Executive shall not be entitled to receive any Bonus amounts
which have not been paid prior to the date of termination.
5.4 By the Company Other Than for Cause. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, the Company
shall pay the Executive: (i) Base Salary earned but unpaid through the date of
termination, plus (ii) monthly severance payments, each in an amount equal to
the Executive's monthly base compensation in effect at the time of such
termination (i.e., 1/12th of the Base Salary) throughout the remainder of the
Term, provided should termination occur during the original Term or during any
one-year automatic extension thereof, the Term shall be deemed to expire at the
end of such original Term or at the end of the current extension year, as
applicable, plus (iii) any unpaid portion of any Bonus for the fiscal year
preceding the year in which such termination occurs that was earned but has not
been paid, plus (iv) at the times the Company pays its executives bonuses
generally, an amount equal to that portion of any Bonus earned but unpaid during
the fiscal year of such termination (prorated in accordance with Section 4.2).
5.5 By the Executive for Good Reason. The Executive may
terminate his employment hereunder for Good Reason, upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The following
shall constitute "Good Reason" for termination by the Executive: (i) any
material diminution in the nature and scope of the Executive's responsibilities,
duties, authority or title; (ii) material failure of the Company to provide the
Executive the Base Salary and benefits in accordance with the terms of Section 4
hereof; or (iii) relocation of the Executive's office to a location outside a
50-mile radius of the Company's current headquarters in Ann Arbor, Michigan. In
the event of termination in accordance with this Section 5.5, then the Company
shall pay the Executive the amounts specified in Section 5.4.
5.6 By the Executive Other Than for Good Reason. The Executive
may terminate his employment hereunder at any time upon 90 days written notice
to the Company. In the event of termination of the Executive's employment
pursuant to this Section 5.6, the CEO or the Board may elect to waive the period
of notice, or any portion thereof. The Company will pay the Executive his Base
Salary for the notice period, except to the extent so waived by the Board. Upon
the giving of notice of termination of the Executive's employment hereunder
pursuant to this Section 5.6, the Company and its Affiliates shall have no
further obligation or liability to the Executive, other than (i) payment to the
Executive of his Base Salary for the period (or portion of such period)
indicated above, (ii) continuation of the provision of the benefits set forth in
Section 4.4 for the period (or portion of such period) indicated above, and
(iii) any unpaid portion of any Bonus for the fiscal year preceding the year in
which such termination occurs that was earned but has not been paid.
5.7 Post-Agreement Employment. In the event the Executive remains
in the employ of the Company or any of its Affiliates following termination of
this Agreement, by the expiration of the Term or otherwise, then such employment
shall be at will.
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6. Effect of Termination of Employment. The provisions of this
Section 6 shall apply in the event of termination of Executive's employment,
whether due to the expiration of the Term, pursuant to Section 5, or otherwise.
6.1 Payment in Full. Payment by the Company or its Affiliates of
any Base Salary, Bonus or other specified amounts that are due to the Executive
under the applicable termination provision of Section 5 shall constitute the
entire obligation of the Company and its Affiliates to the Executive, except
that nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company or its Affiliates, on the one hand, and
the Executive, on the other, with respect to any option plans, option
agreements, subscription agreements, stockholders agreements or other agreements
to the extent said rights or obligations therein survive termination of
employment.
6.2 Termination of Benefits. If Executive is terminated by the
Company without Cause, or terminates his employment with the Company for Good
Reason, and provided that Executive elects continuation of health coverage
pursuant to Section 601 through 608 of the Employee Retirement Income Security
Act of 1974, as amended ("COBRA"), Company shall pay Executive an amount equal
to his monthly COBRA premiums for a period equal to the period remaining in the
Term after termination; provided further, such payment will cease upon
Executive's entitlement to other health insurance without charge. Except for
medical insurance coverage continued pursuant to Section 5.2 hereof, all other
benefits shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive's employment without regard to
any continuation of Base Salary or other payments to the Executive following
termination of his employment.
6.3 Survival of Certain Provisions. Provisions of this Agreement
shall survive any termination of employment if so provided herein or if
necessary to accomplish the purpose of other surviving provisions, including,
without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of the
Executive under Sections 5.2, 5.4 or 5.5 hereof is expressly conditioned upon
the Executive's continued full performance of his obligations under Sections 7
and 8 hereof. The Executive recognizes that, except as expressly provided in
Section 5.2, 5.4 or 5.5, no compensation is earned after the termination of his
employment.
7. Confidential Information; Intellectual Property.
7.1 Confidentiality. The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information (as that term is
defined in Section 11.2, below); that the Executive may develop Confidential
Information for the Company or its Affiliates and that the Executive may learn
of Confidential Information during the course of his employment. The Executive
will comply with the policies and procedures of the Company and its Affiliates
for protecting Confidential Information and shall never use or disclose to any
Person (except as required by applicable law or for the proper performance of
his duties and responsibilities to the Company) any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company and its Affiliates. The Executive understands that this restriction
shall continue to apply after his employment terminates, regardless of the
reason for such termination.
7.2 Return of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company and its Affiliates and any copies, in whole or in
part, thereof (the "Documents"), whether or not prepared by the Executive, shall
be the sole and exclusive property of the Company and its Affiliates. The
Executive shall safeguard all Documents and shall surrender to the Company and
its Affiliates at the time his employment terminates, or at such earlier time or
times as the Board or CEO designee may specify, all Documents then in the
Executive's possession or control.
7.3 Assignment of Rights to Intellectual Property. The Executive
shall promptly and fully disclose all Intellectual Property to the Company. The
Executive hereby assigns to the Company (or as otherwise directed by the
Company) the Executive's full right, title and interest in and to all
Intellectual Property. The Executive shall execute any and all applications for
domestic and foreign patents, copyrights or other proprietary rights and to do
such other acts (including without limitation the execution and delivery of
instruments of further assurance or confirmation) requested by the Company or
its Affiliates to assign the Intellectual Property to the Company and to permit
the Company and its Affiliates to enforce any patents, copyrights or other
proprietary rights to the Intellectual Property. The Executive will
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not charge the Company or its Affiliates for time spent in complying with these
obligations. All copyrightable works that the Executive creates shall be
considered "Work For Hire" under applicable laws.
8. Restricted Activities.
8.1 Agreement Not to Compete With the Company. During the
Executive's employment hereunder and for a period of 24 months following the
date of termination thereof (the "Non-Competition Period"), the Executive will
not, directly or indirectly, own, manage, operate, control or participate in any
manner in the ownership, management, operation or control of, or be connected as
an officer, employee, partner, director, principal, member, manager, consultant,
agent or otherwise with, or have any financial interest in, or aid or assist
anyone else in the conduct of, any business, venture or activity which in any
material respect competes with the following enumerated business activities to
the extent then being conducted or being planned to be conducted by the Company
or its Affiliates or being conducted or known by the Executive to being planned
to be conducted by the Company or by any of its Affiliates, at or prior to the
date on which the Executive's employment under this Agreement is terminated (the
"Date of Termination"), in the United States or any other geographic area where
such business is being conducted or being planned to be conducted at or prior to
the Date of Termination (a "Competitive Business", defined below). For purposes
of this Agreement, "Competitive Business" shall be defined as: (i) any company
or other entity engaged as a "quick service restaurant" ("QSR") which offers
pizza for sale; (ii) any "quick service restaurant" which is then contemplating
entering into the pizza business or adding pizza to its menu; (iii) any entity
which at the time of Executive's termination of employment with the Company,
offers, as a primary product or service, products or services then being offered
by the Company or which the Company is actively contemplating offering; and (iv)
any entity under common control with an entity included in (i), (ii) or (iii),
above. Notwithstanding the foregoing, ownership of not more than 5% of any class
of equity security of any publicly traded corporation shall not, of itself,
constitute a violation of this Section 8.1.
8.2 Agreement Not to Solicit Employees or Customers of the
Company. During his employment and during the Non-Competition Period the
Executive will not, directly or indirectly, (i) recruit or hire or otherwise
seek to induce any employees of the Company or any of the Company's Affiliates
to terminate their employment or violate any agreement with or duty to the
Company or any of the Company's Affiliates; or (ii) solicit or encourage any
franchisee or vendor of the Company or of any of the Company's Affiliates to
terminate or diminish its relationship with any of them or to violate any
agreement with any of them, or, in the case of a franchisee, to conduct with any
Person any business or activity that such franchisee conducts or could conduct
with the Company or any of the Company's Affiliates.
9. Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including without limitation the restraints imposed upon him pursuant to
Sections 7 and 8 hereof. The Executive agrees that said restraints are necessary
for the reasonable and proper protection of the Company and its Affiliates and
that each and every one of the restraints is reasonable in respect to subject
matter, length of time and geographic area. The Executive further acknowledges
that, were he to breach any of the covenants or agreements contained in Sections
7 or 8 hereof, the damage to the Company and its Affiliates could be
irreparable. The Executive, therefore, agrees that the Company and its
Affiliates, in addition to any other remedies available to it, shall be entitled
to preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants or agreements. The parties
further agree that in the event that any provision of Section 7 or 8 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of it being extended over too great a time, too large a geographic
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which or by which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or solicitation or
similar covenants or other obligations that would affect the performance of his
obligations hereunder. The Executive will not disclose to or use on behalf of
the Company or any of its Affiliates any proprietary information of a third
party without such party's consent.
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11. Definitions. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 11
or as specifically defined elsewhere in this Agreement. For purposes of this
Agreement, the following definitions apply:
11.1 Affiliates. "Affiliates" shall mean TISM, Inc., Domino's,
Inc. and all other persons and entities controlling, controlled by or under
common control with the Company, where control may be by management authority or
equity interest.
11.2 Confidential Information. "Confidential Information" means
any and all information of the Company and its Affiliates that is not generally
known by others with whom they compete or do business, or with whom they plan to
compete or do business, and any and all information the disclosure of which
would otherwise be adverse to the interest of the Company or any of its
Affiliates. Confidential Information includes without limitation such
information relating to (i) the products and services sold or offered by the
Company or any of its Affiliates (including without limitation recipes,
production processes and heating technology), (ii) the costs, sources of supply,
financial performance and strategic plans of the Company and its Affiliates,
(iii) the identity of the suppliers to the Company and its Affiliates, and (iv)
the people and organizations with whom the Company and its Affiliates have
business relationships and those relationships. Confidential Information also
includes information that the Company or any of its Affiliates have received
belonging to others with any understanding, express or implied, that it would
not be disclosed.
11.3 ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 and any successor statute, and the rules and regulations
thereunder, and, in the case of any referenced section thereof, any successor
section thereto, collectively and as from time to time amended and in effect.
11.4 Intellectual Property. "Intellectual Property" means
inventions, discoveries, developments, methods, processes, compositions, works,
concepts, recipes and ideas (whether or not patentable or copyrightable or
constituting trade secrets or trademarks or service marks) conceived, made,
created, developed or reduced to practice by the Executive (whether alone or
with others, whether or not during normal business hours or on or off Company
premises) during the Executive's employment that relate to either the business
activities or any prospective activity of the Company or any of its Affiliates.
11.5 Person. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
12. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
13. Waiver, Release and Termination of Prior Agreement. Effective upon
the execution of this Agreement, Executive hereby waives any and all rights and
benefits to which he was entitled under a prior Severance Agreement with the
Company dated August 4, 1998 (the "Prior Agreement"), releases the Company and
its Affiliates from any and all obligations under the Prior Agreement, and
agrees that such Prior Agreement is terminated and of no force or effect.
14. Miscellaneous.
14.1 Assignment. Neither the Company nor the Executive may assign this
Agreement or any interest herein, by operation of law or otherwise, without the
prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
the Executive in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into, any other Person or transfer
all or substantially all of its properties or assets to any other Person, in
which event such other Person shall be deemed the "Company" hereunder, as
applicable, for all purposes of this Agreement; provided, further, that nothing
contained herein shall be construed to place any limitation or restriction on
the transfer of the Company's Common Stock in addition to any restrictions set
forth in any stockholder agreement applicable to the holders of such shares.
This Agreement shall inure to the benefit of and be binding upon the Company and
the Executive, and their respective successors, executors, administrators,
representatives, heirs and permitted assigns.
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14.2 Severability. If any portion or provision of this
Agreement shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the application of such provision in such
circumstances shall be deemed modified to permit its enforcement to the maximum
extent permitted by law, and both the application of such portion or provision
in circumstances other than those as to which it is so declared illegal or
unenforceable and the remainder of this Agreement shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.
14.3 Waiver; Amendment. No waiver of any provision hereof
shall be effective unless made in writing and signed by the waiving party. The
failure of either party to require the performance of any term or obligation of
this Agreement, or the waiver by either party of any breach of this Agreement,
shall not prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach. This Agreement may be amended or
modified only by a written instrument signed by the Executive and any expressly
authorized representative of the Company.
14.4 Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed (i) in the case of the
Executive, to: Patrick Kelly, at 10989 Charring Cross, Whitmore Lake, Michigan
48189, and (ii) in the case of the Company, to the attention of Mr. David A.
Brandon, CEO, at 30 Frank Lloyd Wright Drive, Ann Arbor, Michigan 48106, or to
such other address as either party may specify by notice to the other actually
received.
14.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes any and all prior communications,
agreements and understandings, written or oral, between the Executive and the
Company, or any of its predecessors, with respect to the terms and conditions of
the Executive's employment.
14.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original and all of which
together shall constitute one and the same instruments.
14.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Michigan without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
14.8 Consent to Jurisdiction. Each of the Company and the
Executive by its or his execution hereof, (i) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Michigan for the purpose of any
claim or action arising out of or based upon this Agreement or relating to the
subject matter hereof and (ii) hereby waives, to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such claim or action, any claim that it or he is not subject
personally to the jurisdiction of the above-named courts, that its or his
property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court. Each of
the Company and the Executive hereby consents to service of process in any such
proceeding in any manner permitted by Michigan law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 13.4 hereof is reasonably calculated to
give actual notice.
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY: DOMINO'S PIZZA, INC.
By: /s/
------------------------------------------
Name: David A. Brandon
Title: CEO
THE EXECUTIVE: /s/
---------------------------------------------
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EXHIBIT 10.23
TISM, INC.
THIRD AMENDED AND RESTATED STOCK OPTION PLAN
(As Amended And Restated Effective December 14, 1999)
WHEREAS, TISM, Inc. (the Company) adopted a stock option plan known as
the TISM, Inc. Stock Option Plan (the Plan) for the benefit of eligible
employees as determined from time to time by its Board of Directors; and
WHEREAS, the Company has amended and restated the Plan before; and
WHEREAS, the Company desires to further amend and restate the Plan,
effective December 14, 1999.
NOW, THEREFORE, the Plan is hereby amended and restated in its entirety
effective December 14, 1999.
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") is to advance the
interests of TISM, Inc., a Michigan corporation (the "Company"), by enhancing
the ability of the Company and its subsidiaries (if any) to attract and retain
able employees and directors of the Company and its subsidiaries; to reward such
individuals for their contributions; and to encourage such individuals to take
into account the long-term interests of the Company and its subsidiaries through
interests in shares of the Companys Common Stock, $.001 par value per share (the
"Stock"). Any employee or director selected to receive an award under the Plan
is referred to as a participant.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors ( the "Board")
of the Company. Subject to applicable law, the Board shall have discretionary
authority, not inconsistent with the express provisions of the Plan, (a) to
grant option awards to such eligible persons as the Board may select; (b) to
determine the time or times when awards shall be granted and the number of
shares of Stock subject to each award; (c) to determine the terms and conditions
of each award; (d) to prescribe the form or forms of any instruments evidencing
awards and any other instruments required under the Plan and to change such
forms from time to time; (e) to adopt, amend, and rescind rules and regulations
for the administration of the Plan; and (f) to interpret the Plan and to decide
any questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations of the Board shall be conclusive
and shall bind all parties. Subject to Section 9, the Board shall also have the
authority, both generally and in particular instances, to waive compliance by a
participant with any obligation to be performed by him or her under an award, to
waive any condition or provision of an award, and to amend or cancel any award
(and if an award is canceled, to grant a new award on such terms as the Board
shall specify), except that the Board may not take any action with respect to an
outstanding award that would adversely affect the rights of the participant
under such award without such participants consent. Nothing in the preceding
sentence shall be construed as limiting the power of the Board to make
adjustments required by Section 4(c) and Section 6(g).
The Board may, in its discretion, delegate some or all of its powers
with respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee. The Committee, if one is appointed, shall consist of at least two
directors. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members. On and after registration of the Stock under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), the Board shall delegate the
power to select directors and officers to receive awards under the Plan and the
timing, pricing, and amount of such awards to a Committee, all members of which
shall be "non-employee directors" within the meaning of Rule 16b-3 under the
1934 Act and "outside directors" within the meaning of Section 162(m)(4)(c)(i)
of the Internal Revenue Code of 1986, as amended (the "Code"), in which event
all references (as appropriate) to the Board hereunder shall be deemed to refer
to the Committee.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan became effective on December 21, 1998, and was approved by the
stockholders of the Company. Grants of awards under the Plan made prior to that
date (but after Board adoption of the Plan), were subject to approval of the
Plan by the stockholders.
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No awards shall be granted under the Plan after the completion of 10
years from the date on which the Plan was initially adopted by the Board, but
awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in Section
4(c), the aggregate number of shares of Stock that may be the subject of awards
granted under the Plan shall be 6,273,558 shares of Class A-3 Common Stock and
62,576 shares of Class L Common Stock. If any award granted under the Plan
terminates without having been exercised in full, or upon exercise is satisfied
other than by delivery of Stock, the number of shares of Stock as to which such
award was not exercised shall be available for future grants.
(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock, or if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in its
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split
or combination of shares, recapitalization, or other transaction or event that
affects the Companys capital stock, the number and kind of shares of stock or
securities of the Company subject to awards then outstanding or subsequently
granted under the Plan, the exercise price of such awards, the maximum number of
shares or securities that may be delivered under the Plan, and other relevant
provisions shall be appropriately adjusted to prevent enlargement or dilution of
benefits intended to be made available under the Plan by the Board, whose
determination shall be binding on all persons.
The Board may in good faith also adjust the number of shares subject to
outstanding awards, the exercise price of outstanding awards, and the terms of
outstanding awards, to take into consideration material changes in accounting
practices or principles, extraordinary dividends, consolidations or mergers
(except those described in Section 6(g)), acquisitions or dispositions of stock
or property, or any other event if it is determined by the Board that such
adjustment is appropriate to avoid distortion in the operation of the Plan.
5. ELIGIBILITY AND PARTICIPATION
Persons eligible to receive awards under the Plan shall be those
persons who, in the opinion of the Board, are in a position to make a
significant contribution to the success of the Company and its subsidiaries. A
subsidiary for purposes of the Plan shall be a corporation in which the Company
owns, directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Exercise Price of Options. The exercise price of each option
shall be determined by the Board, but the exercise price shall not be less, in
the case of an original issue of authorized stock, than par value.
(b) Duration of Options. An option shall be exercisable during such
period or periods as the Board may specify. The latest date on which an option
may be exercised (the Expiration Date) shall be the date that is 10 years from
the date the option was granted or such earlier date as may be specified by the
Board at the time the option is granted.
(c) Exercise of Options.
(1) An option shall become exercisable at such time or times and
upon such conditions as the Board shall specify. In the case of an option not
immediately exercisable in full, the Board may at any time accelerate the time
at which all or any part of the option may be exercised.
(2) Any exercise of an option shall be in writing by the proper
person and furnished to the Company, accompanied by (A) such documents as may be
required by the Board and (B) payment in full as specified below in Section 6(d)
for the number of shares for which the option is exercised.
(3) The Board shall have the right to require that the participant
exercising the option remit to the Company an amount sufficient to satisfy any
federal, state, or local withholding tax requirements (or make other
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arrangements satisfactory to the Company with regard to such taxes) prior to the
delivery of any Stock pursuant to the exercise of the option. If permitted by
the Board, either at the time of the grant of the option or in connection with
exercise, the participant may elect, at such time and in such manner as the
Board may prescribe, to satisfy such withholding obligation by (A) delivering to
the Company Stock owned by such individual having a fair market value equal to
such withholding obligation, or (B) requesting that the Company withhold from
the shares of Stock to be delivered upon the exercise a number of shares of
Stock having a fair market value equal to such withholding obligation.
In addition, if at the time the option is exercised the Board
determines that under applicable law and regulations the Company could be liable
for the withholding of any federal or state tax with respect to a disposition of
the Stock received upon exercise, the Board may require as a condition of
exercise that the participant exercising the option agree to give such security
as the Board deems adequate to meet the potential liability of the Company for
the withholding of tax, and to augment such security from time to time in any
amount reasonably deemed necessary by the Board to preserve the adequacy of such
security.
(4) If an option is exercised by the executor or administrator of a
deceased participant, or by the person or persons to whom the option has been
transferred by the participants will or the applicable laws of descent and
distribution, the Company shall be under no obligation to deliver Stock pursuant
to such exercise until the Company is satisfied as to the authority of the
person or persons exercising the option.
(d) Payment for and Delivery of Stock. Stock purchased upon exercise
of an option under the Plan shall be paid for as follows: (1) in cash, check
acceptable to the Company (determined in accordance with such guidelines as the
Board may prescribe), or money order payable to the order of the Company; (2) by
the Company retaining from the shares of Stock to be delivered upon exercise of
the Option that number of shares of Stock having a fair market value on the date
of exercise equal to the option price of the number of shares of Stock with
respect to which the participant or other eligible person exercises the option,
or (3) if so permitted by the Board, (A) through the delivery of shares of Stock
(which, in the case of Stock acquired from the Company, shall have been held for
at least 6 months unless the Board specifies a shorter period) having a fair
market value on the last business day preceding the date of exercise equal to
the purchase price, or (B) by delivery of a promissory note of the participant
to the Company, such note to be payable on such terms as are specified by the
Board, or (C) by delivery of an unconditional and irrevocable undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or (D) by any combination of the permissible forms of payment; provided,
that if the Stock delivered upon exercise of the option is an original issue of
authorized Stock, at least so much of the exercise price as represents the par
value of such Stock shall be paid other than with a personal check or promissory
note of the person exercising the option.
(e) Delivery of Stock. A participant shall not have the rights of a
stockholder with regard to awards under the Plan except as to Stock actually
received by him under the Plan.
The Company shall not be obligated to deliver any shares of
Stock (1) until, in the opinion of the Companys counsel, all applicable federal
and state laws and regulations have been complied with, (2) if the outstanding
Stock is at the time listed on any stock exchange, until the shares to be
delivered have been listed or authorized to be listed on such exchange upon
official notice of issuance, and (3) until all other legal matters in connection
with the issuance and delivery of such shares have been approved by the Companys
counsel. Without limiting the generality of the foregoing, if the sale of Stock
has not been registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting transfer.
(f) Nontransferability of Awards. Except as specifically provided in
an option approved by the Board, no option or other award may be transferred
other than by will or by the laws of descent and distribution, and during a
participants lifetime an award may be exercised only by him or her.
(g) Mergers, etc. In the event of any merger, consolidation,
dissolution, or liquidation of the Company, the Board in its sole discretion
may, as to any outstanding options or other awards, make such substitution or
adjustment in the aggregate number of shares reserved for issuance under the
Plan and in the number and purchase price (if any) of shares subject to such
awards as it may determine, or accelerate, amend, or terminate such awards upon
such terms and
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conditions as it shall provide (which, in the case of the termination of the
vested portion of any award, shall require payment or other consideration that
the Board deems equitable in the circumstances).
7. TERMINATION OF EMPLOYMENT OR BOARD MEMBERSHIP
(a) If a participants employment or service as a member of the Board
with the Company and its subsidiaries terminates prior to the Expiration Date,
the Board in its sole discretion may provide (either prior to or within 30 days
following termination) that (1) any or all of such portion of any option not
otherwise vested (i.e., exercisable) prior to termination shall be treated as
having become vested immediately prior to termination, in which case, as to that
number of shares of Stock for which the award was vested, or deemed vested by
action of the Board, immediately prior to termination, such award shall continue
to be exercisable thereafter during the period prior to the Expiration Date and
within one year following the termination; or (2) except if otherwise set forth
in an award, the participant or beneficiary receive in cash, with respect to
each share of Stock to which an option or other award relates, the excess of (x)
the shares fair market value on the date of the participants termination over
(y) the option exercise price. Except as otherwise provided in an award, after
completion of the one-year period, such awards shall terminate to the extent not
previously exercised, expired, or terminated. No option shall be exercised or
surrendered in exchange for a cash payment after the Expiration Date.
(b) Notwithstanding the foregoing, except as otherwise provided in
an award, if the participant is terminated for cause (as defined in (c) below),
all options and other awards shall immediately terminate as to all shares of
Stock subject hereto, whether or not vested immediately prior to such
termination for cause.
(c) "Cause", with respect to any participant who is an employee of
the Company and its subsidiaries, shall mean the following events or conditions:
(1) the failure to devote substantially all of his or her business time to the
performance of his or her duties to the Company or any of its subsidiaries
(other than by reason of disability), or refusal or failure to follow or carry
out any reasonable direction of the Board of Directors, and the continuance of
such refusal or failure for a period of 10 days after notice to such
participant; (2) the material breach by the participant of any material
agreement to which such participant and the Company or any of its affiliates are
a party; (3) the commission of fraud, embezzlement, theft or other dishonesty by
such participant with respect to the Company or any of its affiliates; (4) the
conviction of such participant of, or plea by such participant of nolo
contendere to, any felony or any other crime involving dishonesty or moral
turpitude; and (5) any other intentional action or intentional omission that
involves a material breach of fiduciary obligation on the part of such
participant.
(d) The Board may provide in the case of any award for
post-termination exercise provisions different from those expressly set forth in
this Section 7, including without limitation terms allowing a later exercise by
a former employee or director (or, in the case of a former employee or director
who is deceased, the person or persons to whom the award is transferred by will
or the laws of descent and distribution) as to all or any portion of the award
not exercisable immediately prior to termination of employment or service as a
director, but in no case may an award be exercised after the Expiration Date.
8. EMPLOYMENT OR DIRECTORSHIP RIGHTS
Neither the adoption of the Plan nor the grant of awards shall confer
upon any participant any right to continue as an employee or director of the
Company, its parent, or any subsidiary or affect in any way the right of the
Company, its parent, or a subsidiary to terminate the participants relationship
at any time. Except as specifically provided by the Board in any particular
case, the loss of existing or potential profit in awards granted under this Plan
shall not constitute an element of damages in the event of termination of the
relationship of a participant.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, AND TERMINATION
Neither adoption of the Plan nor the grant of awards to a participant
shall affect the Companys right to make awards to such participant that are not
subject to the Plan, to issue to such participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued. No
option granted pursuant to the Plan is intended to be an incentive stock option
under Section 422 of the Code.
The Board may at any time or times amend the Plan or any outstanding
award for the purpose of satisfying the requirements of any changes in
applicable laws or regulations or for any other purpose that may at the time be
permitted
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by law, or may at any time terminate the Plan as to any further grants of
awards; provided, that, except to the extent expressly required by the Plan, no
such amendment shall adversely affect the rights of any participant (without his
or her consent) under any award previously granted, nor shall such amendment,
without the approval of the stockholders of the Company, effectuate a change for
which stockholder approval is required to comply with any tax or regulatory
requirement, including in order for the Plan to continue to qualify under Rule
16b-3 promulgated under Section 16 of the 1934 Act.
10. MISCELLANEOUS
The Plan shall be governed by Michigan law. The Board may provide in a
particular case that an award shall be evidenced by an award agreement or
certificate.
* * *
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M O D E L
Optionee:_______________________
Grant Date:______________________
Number of Shares of
Class A-3 Common Stock:__________
Price Per Share:___________________
This option and any securities issued upon exercise of this option are subject
to restrictions on voting and transfer and requirements of sale and other
provisions as set forth in a Stockholders Agreement (the "Stockholders
Agreement") among the Company, the Optionee and certain other parties, dated as
of December 21, 1998 (the "Commencement Date"), and this option and any
securities issued upon exercise of this option constitute Management Shares as
defined therein. The Company will furnish a copy of such Stockholders Agreement
to the holder of this option without charge upon written request.
TISM, INC.
STOCK OPTION
[OPTIONEE] BASIC CLASS A OPTION AGREEMENT
This option agreement (the "Agreement") is made as of the Grant Date by and
between TISM, Inc., a Michigan corporation (the "Company"), and the Optionee,
pursuant to the TISM, Inc. Second Amended and Restated Stock Option Plan (as
amended and restated effective October 19, 1999) (the "Plan"). The initially
capitalized terms Optionee, Grant Date, Number of Shares and Price Per Share
shall have the meanings set forth above; initially capitalized terms not
otherwise defined herein shall have the meaning provided in the Plan. The
Company and the Optionee hereby agree as follows:
1. GRANT OF OPTION.
A. This Agreement evidences the grant by the Company on the Grant Date to
the Optionee of an option to purchase, in whole or in part, on the terms
provided herein and in the Plan, the number of shares of Class A-3 Common Stock,
par value $.001 per share, of the Company set forth above (the "Shares") at the
Price Per Share. The price at which the Option may be exercised is the Price
Per Share. The number of Shares for which the Option may be exercised is the
number of shares set forth above.
B. This Option shall become vested and exercisable as to 20% of the total
number of shares on December 18 of each of 1999, 2000, 2001, 2002 and 2003, that
Optionee remains an employee with the Company or its subsidiaries; provided,
however, that in the event of the termination of the employment of the Optionee
with the Company and its subsidiaries prior to December 18, 2003, (i) by
Optionee with Good Reason as defined pursuant to Section 5.5 of the Optionee's
Employment Agreement or (ii) by the Company and its subsidiaries other than for
Cause, that portion of the total number of option shares not otherwise vested
that would vest on December 18 of the year of termination if the Optionee
continued his employment shall also become vested and exercisable as of the date
of termination. Notwithstanding anything in this Section 1.B to the contrary,
Optionee's Option shall become fully vested upon a Change in Control occurring
prior to termination of employment, but shall remain exerciseable only as to an
additional 20% of the total number of shares on December 18 of each of 1999,
2000, 2001, 2002 and 2003; provided, however, that (a) in the event of the
termination of the employment of the Optionee with the Company and its
subsidiaries (i) by the Optionee with Good Reason as defined pursuant to Section
5.5 of the Optionee's Employment Agreement after a Change in Control or (ii) by
the Company and its subsidiaries other than for Cause after a Change in Control,
the total number of option shares shall be exerciseable; (b) in the event of the
termination of the employment of the Optionee with the Company and its
subsidiaries by the Optionee without Good Reason after a Change in Control, the
total number of Option Shares shall become exercisable as if no such termination
occurred; and (c) in the event of the termination of the employment of the
Optionee with the Company and its subsidiaries by the Company and its
subsidiaries for Cause after a Change in Control then the Option shall be
immediately cancelled to the extent not previously exercised. The latest date
on which this Option may be exercised (the "Final Exercise Date") is the
earliest of (x) 10 years following the Grant Date, (y) 12 months after
termination of employment, or (z) the termination hereof in accordance with this
Agreement or the Plan.
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C. As used herein, the following terms shall have the meanings set forth
below:
"Affiliate" shall mean, with respect to any specified Person, any
other Person which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person (for the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management of policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise).
"Board" shall mean the board of directors of the Company.
"Cause" shall mean, with respect to the Optionee, the following events
or conditions: (i) Optionee's willful failure to perform (other than by reason
of disability), or gross negligence in the performance of his duties to the
Company or any of its Affiliates and the continuation of such failure or
negligence for a period of ten (10) days after notice to the Optionee; (ii)
Optionee's willful failure to perform (other than by reason of disability) any
lawful and reasonable directive of the Company's Chief Executive Officer
("CEO"); (iii) the commission of fraud, embezzlement or theft by Optionee with
respect to the Company or any of its Affiliates; or (iv) the conviction of
Optionee of, or plea by Optionee of nolo contendere to, any felony or any other
crime involving dishonesty or moral turpitude.
"Change of Control" shall have the meaning of that term as defined in
the Stockholders Agreement.
"Credit Agreement Rate" shall have the meaning of that term as defined
in the Stockholders Agreement.
"Fair Market Value" shall mean, as of any date, as to any Share of
Common Stock, the Board's good faith determination of the fair value of such
Share as of the applicable reference date.
"Option" shall mean the option to purchase the Shares of Class A
Common Stock granted to the Optionee pursuant to this Agreement.
"Person" shall mean any individual, partnership, corporation, Company,
association, trust, joint venture, unincorporated organization, entity, or any
government, governmental department or agency or political subdivision thereof.
"Stockholders Agreement" shall mean the Stockholders Agreement dated
as of December 21, 1998, among the Company, certain of its subsidiaries and
certain of its shareholders.
2. EXERCISE OF OPTION. Any election to exercise this Option shall be in
writing, signed by the Optionee or by such Person's executor or administrator
(the "Legal Representative"), and received by the Company at its principal
office, accompanied by payment in full and by such additional reasonable
documentation evidencing the right to exercise (or, in the case of a Legal
Representative, of the authority of such person) as the Company may require.
The purchase price shall be paid by bank check or wire transfer of immediately
available federal funds, pursuant to a cashless exercise as set forth in the
Plan, or using such other form of consideration as is designated by the Board.
3. OTHER AGREEMENTS. In addition to the terms and provisions of this Agreement
and the Plan, this Option and any Shares received upon the exercise of this
Option shall be subject to certain rights, restrictions and obligations set
forth in the Stockholders Agreement and shall constitute "Management Shares"
thereunder and the Optionee shall be party thereto and bound thereby as a
"Manager" thereunder with respect to this Option and such Shares as fully as if
he were an original signatory thereto; provided, however, that the provisions of
Section 5 hereof shall control and apply in lieu of Section 9 of the
Stockholders Agreement.
4. WITHHOLDING. No Shares will be transferred pursuant to the exercise of this
Option unless and until the person exercising this Option shall have remitted to
the Company an amount sufficient to satisfy any federal, state or local
withholding tax requirements, or shall have made other arrangements reasonably
satisfactory to the Company with respect to such taxes.
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5. CERTAIN OPTIONS TO PURCHASE OR SELL SHARES.
A. Call Options. Upon any termination of the employment of the Optionee,
the Company shall have the following rights (each a "Call Option") with respect
to the Option and any shares of Common Stock acquired upon exercise of the
Option:
(i) Termination of Employment For Cause.
(a) If the employment of the Optionee with the Company and its
subsidiaries is terminated by the Company or its subsidiaries for
Cause, then the Company may (x) purchase all or any portion of the
shares of Common Stock acquired by the Optionee upon exercise of this
Option at a price per share equal to the Price Per Share, and (y)
cancel the Option to the extent not previously exercised.
(b) Subject to the provisions of Section 5(C), in each case
shares of Common Stock are purchased pursuant to clause (a) above, the
Company will pay for such shares of Common Stock in cash.
(ii) Other Termination of Employment.
(a) If the employment of the Optionee with the Company and its
subsidiaries is terminated for any reason other than by the Company or
its subsidiaries for Cause, then the Company may (x) purchase all or
any portion of the shares of Common Stock acquired by the Optionee
upon exercise of this Option at a Price Per Share equal to the Fair
Market Value, and (y) cancel the Option to the extent not previously
exercised in return for payment of an amount for each share for which
the Option is then vested equal to the difference between the Fair
Market Value and the Price Per Share.
(b) Subject to the provisions of Section 5(C), in each case
shares of Common Stock are purchased or the Option is canceled
pursuant to clause (a) above, the Company will pay for such shares of
Common Stock or Option in cash.
(iii) Notices, etc. Any Call Option may be exercised by delivery of
written notice thereof (the "Call Notice") to the Optionee within 60 days
of the effectiveness of the termination of employment in question (the
"Call Option Exercise Period"). The Call Notice shall state that the
Company has elected to exercise the Call Option, and the number and price
of the shares of Common Stock or the Option with respect to which the Call
Option is being exercised.
B. Put Option. Except as the Company may otherwise agree, upon the
termination of the employment of the Optionee as set forth below, the Optionee
shall have the following rights (each a "Put Option") with respect to the Option
and any shares of Common Stock acquired upon exercise of the Option:
(i) Termination of Employment Due to Death or Disability.
(a) If the employment of the Optionee with the Company and its
subsidiaries is terminated due to death or disability (as determined,
in the case of disability, by the Board of Directors of the Company in
its reasonable judgment), the Optionee may (x) require the Company to
purchase all or any portion of the shares of Common Stock acquired by
the Optionee upon exercise of this Option in return for payment of an
amount per share equal to the Fair Market Value, and (y) require the
Company to purchase the Option to the extent not previously exercised
in return for payment of an amount for each share for which the Option
is then exercisable equal to the difference between the Fair Market
Value and the Price Per Share.
(b) Subject to the provisions of Section 5(C), in each case
shares of Common Stock or the Option are purchased pursuant to clause
(a) above, the Company will pay for such shares of Common Stock or
Option in cash.
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(ii) Notices, etc. Any Put Option may be exercised by delivery of
written notice thereof (the "Put Notice") to the Company within 60 days of
the effectiveness of the termination of employment in question (the "Put
Option Exercise Period"). The Put Notice shall state that the Optionee has
elected to exercise the Put Option, and the number and price of the shares
of Common Stock or the Option with respect to which the Put Option is being
exercised.
C. Cash Payments. If any payment of cash required upon the purchase and
sale of shares of Common Stock or the Option to the Company upon the exercise of
any Call Option or Put Option or any payment on a promissory notice issued under
this Section 5(C) would (i) constitute, result in or give rise to any breach or
violation of, or any default or right or cause of action under, any agreement to
which the Company or any of its subsidiaries is, from time to time, a party or
(ii) leave the Company and its subsidiaries with less cash than, in the good
faith judgment of the Board, is necessary to operate the business of the Company
and its subsidiaries in the ordinary course of business; then,
(a) in the case of a cash payment due at a closing of any purchase and
sale of shares of Common Stock or the Option to the Company upon the
exercise of any Call or Put Option, the Company will issue a promissory
note of the Company in the aggregate principal amount of such payment, the
principal amount of which note will be due and payable in four equal annual
installments, the first such installment becoming due and payable on the
first anniversary of the issuance of such note, and interest will accrue on
such note from the date of issuance at a floating rate equal to the Credit
Agreement Rate and be payable annually in arrears, in each case subject to
the provisions of clause (b) below, and
(b) in the case of the cash payment in respect of a promissory note
issued under this Section 5(C), notwithstanding any of the provisions of
such note, including without limitation the stated maturity of such note
and the stated date on which interest payments are due, such payment will
not become due and payable until such time as such payment can be made
without violating any such agreement and not resulting in the Company and
its subsidiaries having less cash than the Board determines is necessary to
operate the business as contemplated above; provided, however, that the
promissory note shall be payable in full upon a Change of Control.
(c) Prepayment. Any promissory note issued under this Section 5(C)
may be prepaid in whole or in part at any time and from time to time
without premium or penalty.
D. Closing. The closing of any purchase and sale of shares of Common
Stock pursuant to this Section 5 shall take place as soon as reasonably
practicable and in no event later than 30 days after termination of the
applicable Call Option Exercise Period or Put Option Exercise Period at the
principal office of the Company, or at such other time and location as the
parties to such purchase and sale may mutually determine. At the closing of any
purchase and sale of shares of Common Stock or the Option pursuant to any Call
or Put Option, the Optionee (or his or her Legal Representative) shall deliver
to the Company, as applicable, this Agreement representing the Option, or a
certificate or certificates representing the shares of Common Stock to be
purchased by the Company duly endorsed, or with stock (or equivalent) powers
duly endorsed, for transfer with signature guaranteed, free and clear of any
lien or encumbrance, with any necessary stock (or equivalent) transfer tax
stamps affixed, and the Company shall pay to the Optionee (or his or her Legal
Representative) by certified or bank check or wire transfer of immediately
available federal funds or note, as may be applicable, the purchase price of the
shares of Common Stock or the Option being purchased by the Company. The
purchase price shall be in each case determined as of the date of the
termination of the employment of the Optionee. The delivery of a certificate or
certificates for shares of Common Stock by any Person selling shares of Common
Stock, or the delivery of this Agreement by any Person selling this Option,
pursuant to any Call or Put Option shall be deemed a representation and warranty
by such Person that: (i) such Person has full right, title and interest in and
to such shares of Common Stock or the Option; (ii) such Person has all necessary
power and authority and has taken all necessary action to sell such shares of
Common Stock or the Option as contemplated; (iii) such shares of Common Stock
are, or the Option is, free and clear of any and all liens or encumbrances; and
(iv) there is no adverse claim (as defined in Section 8-302 of the applicable
Uniform Commercial Code) with respect to such shares of Common Stock or the
Option.
E. Acknowledgment. The Optionee acknowledges and agrees that neither the
Company nor any Person directly or indirectly affiliated with the Company (in
each case whether as a director, officer, manager, employee, agent or otherwise)
shall have any duty or obligation to affirmatively disclose to him, and he shall
not have any right to be advised of, any material information regarding the
Company or otherwise at any time prior to, upon, or in connection with any
termination of his employment by the Company and its subsidiaries or any
repurchase of the shares of Common Stock or the Option upon the exercise of any
Call Option or Put Option.
4
<PAGE>
F. Period. The foregoing provisions of this Section 5 shall expire upon
the earlier of (i) a Change in Control and (ii) the closing of a "Qualified
Public Offering" as defined in the Stockholders Agreement.
6. PREEMPTIVE RIGHT. The Option shall be subject to the rights, restrictions
and obligations set forth in Section 10 of the Stockholders Agreement and shall
constitute "Management Shares" thereunder for purposes of Section 10 of the
Stockholders Agreement notwithstanding clause (i) in the definition of
"Management Shares" in Section 16 of the Stockholders Agreement.
7. REPRESENTATIONS AND WARRANTIES. The Optionee represents and warrants to the
Company as follows:
The Optionee has been advised that the Shares to be received upon the
exercise of this Option have not been registered under the Securities Act
or any state securities laws and, therefore, cannot be resold unless they
are registered under the Securities Act and applicable state securities
laws or unless an exemption from such registration requirements is
available. The Optionee is aware that the Company is under no obligation
to effect any such registration with respect to the Shares or to file for
or comply with any exemption from registration. Any election by the
Optionee to exercise this Option to purchase the Shares will be made by the
Optionee hereunder for its own account and not with a view to, or for
resale in connection with, the distribution of the Shares in violation of
the Securities Act. The Optionee has such knowledge and experience in
financial and business matters that the Optionee is capable of evaluating
the merits and risks of an investment in the Shares, is able to incur a
complete loss of such investment and is able to bear the economic risk of
such investment for an indefinite period of time. The Optionee is an
accredited investor as that term is defined in Regulation D under the
Securities Act.
8. EFFECT ON EMPLOYMENT. Neither the grant of this Option, nor the issuance of
Shares upon exercise of this Option, shall give the Optionee any right to be
retained in the employ of the Company or any affiliate of the Company, affect
the right of the Company or any affiliate of the Company to discharge or
discipline such Optionee at any time, or affect any right of such Optionee to
terminate his or her employment at any time.
9. CHANGE OF CONTROL. Subject to any provisions of the Stockholders Agreement,
upon a Change of Control, the Company may cancel the Option to the extent not
previously exercised; provided, except in the case of termination pursuant to
Section 1.B(c) hereof, the Board shall cause the Optionee to receive in lieu
thereof cash, options, securities or other property of equal or greater value as
determined by the Board in good faith; and provided, further, that nothing
herein is intended to preclude the inclusion of the Options in any Tag-Along or
Drag-Along Sale which constitutes a Change of Control as set forth in the
Stockholders Agreement. The Company shall furnish to the Optionee five (5)
days' prior written notice of such Change of Control.
10. NOTICES. Any notices or other communications required or permitted
hereunder shall be effective if in writing and delivered in the manner required
by the Optionee's employment agreement, in each case addressed as provided by
the employment agreement.
11. PROVISIONS OF THE PLAN, ETC. This Option is subject in its entirety to the
provisions of the Plan, a copy of which is furnished to the Optionee with this
Option; provided, that in the event of any conflict between the terms of this
Option and the Plan, the terms of the Option shall control. The Option
evidenced by this Agreement is not intended to qualify as an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code").
12. REMEDIES.
A. Generally. The Company and the Optionee shall have all remedies
available at law, in equity or otherwise in the event of any breach or violation
of this Agreement or any default hereunder by the Company or the Optionee. The
parties acknowledge and agree that in the event of any breach of this Agreement,
in addition to any other remedies which may be available, each of the parties
hereto shall be entitled to specific performance of the obligations of the other
parties hereto and, in addition, to such other equitable remedies (including
without limitation preliminary or temporary relief) as may be appropriate in the
circumstances.
B. Deposit. Without limiting the generality of Section 12(A), if any
holder of shares of Common Stock fails to deliver to the Company the certificate
or certificates evidencing shares of Common Stock to be sold to the
5
<PAGE>
Company pursuant to Section 5 hereof, the Company may, at its option, in
addition to all other remedies it may have, deposit the purchase price
(including any promissory note constituting all or any portion thereof) for such
shares of Common Stock with any national bank or trust Company having combined
capital, surplus and undivided profits in excess of One Hundred Million Dollars
($100,000,000) (the "Escrow Agent") and the Company shall cancel on its books
the certificate or certificates representing such shares of Common Stock and
thereupon all of such holder's rights in and to such shares of Common Stock
shall terminate. Thereafter, upon delivery to the Company by such holder of the
certificate or certificates evidencing such shares of Common Stock (duly
endorsed, or with stock powers duly endorsed, for transfer, with signature
guaranteed, free and clear of any liens or encumbrances, and with any stock
transfer tax stamps affixed), the Company shall instruct the Escrow Agent to
deliver the purchase price (without any interest from the date of the closing to
the date of such delivery, any such interest to accrue to the Company) to such
holder.
13. MISCELLANEOUS.
A. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of Michigan.
B. Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings
between the parties with respect to the subject matter herein other than those
expressly set forth herein. This Agreement may not be altered, modified, or
amended except by written instrument signed by the parties hereto.
C. No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
D. Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality, and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
E. Consent to Jurisdiction. Each party to this Agreement, by its
execution hereof, (i) hereby irrevocably submits to the jurisdiction of the
state courts of the State of Michigan sitting in the County of Washtenaw or the
United States District Court for the Eastern District of Michigan for the
purpose of any action, claim, cause of action or suit (in contract, tort or
otherwise), inquiry, proceeding or investigation arising out of or based upon
this Agreement or relating to the subject matter hereof and (ii) hereby waives
to the extent not prohibited by applicable law, and agrees not to assert, and
agrees not to allow any of its subsidiaries to assert, by way of motion, as a
defense or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Agreement or the
subject matter hereof or thereof may not be enforced in or by such court. Each
party hereto hereby consents to service of process in any such proceeding in any
manner permitted by Michigan law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to the Stockholders Agreement is reasonably calculated to give actual
notice.
F. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT
WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF
ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.
EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES
HERETO THAT THIS SECTION 13(F) CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY
ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13(F) WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO
TRIAL BY JURY.
6
<PAGE>
G. Legends. In addition to the legends required by Section 14 of the
Stockholders Agreement, all certificates representing Shares issued hereunder
shall bear a legend in substantially the following form:
"The securities represented by this certificate are subject to certain
put and call rights and other provisions of the [Optionee] Basic Class
A Option Agreement to which the issuer and the initial holder are
party, a copy of which may be inspected at the principal offices of
the issuer or obtained from the issuer without charge."
Any person who acquires Shares issued hereunder which are not subject
to the terms of this Agreement shall have the right to have such legend removed
from certificates representing such Shares.
H. Authority; Effect; etc. Each party hereto represents and warrants to
and agrees with each other party that the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized on behalf of such party and do not violate any agreement or
other instrument applicable to such party or by which its assets are bound.
This Agreement does not, and shall not be construed to, give rise to the
creation of a partnership among any of the parties hereto, or to constitute any
of such parties members of a joint venture or other association.
I. Assignment. This Agreement shall not be assignable by the Optionee and
shall be assignable by the Company only with the consent of the Optionee;
provided, however, that the Company shall require any successor to substantially
all of the stock, assets or business of the Company to assume this Agreement.
J. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the Optionee and the Company and their respective
personal or legal representatives, executors, administrators, successors,
including successors to all or substantially all of the stock, business and/or
assets of the Company, heirs, distributees, devisees and legatees of the
parties.
K. Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
TISM, INC.
By:
--------------------------------------------
Name:
Title:
[OPTIONEE]
-----------------------------------------------
Name:
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JAN-02-2000 JAN-03-1999
<PERIOD-START> JAN-04-1999 DEC-29-1998
<PERIOD-END> JAN-02-2000 JAN-03-1999
<CASH> 30,278 115
<SECURITIES> 0 0
<RECEIVABLES> 48,806 60,047
<ALLOWANCES> 2,732 2,918
<INVENTORY> 18,624 20,134
<CURRENT-ASSETS> 120,364 96,845
<PP&E> 189,350 181,856
<DEPRECIATION> 116,287 116,890
<TOTAL-ASSETS> 381,130 387,891
<CURRENT-LIABILITIES> 126,108 115,069
<BONDS> 275,000 275,000
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (478,966) (483,775)
<TOTAL-LIABILITY-AND-EQUITY> 381,130 387,891
<SALES> 1,016,220 1,042,744
<TOTAL-REVENUES> 1,156,639 1,176,778
<CGS> 584,455 602,925
<TOTAL-COSTS> 854,151 890,784
<OTHER-EXPENSES> 219,277 215,725
<LOSS-PROVISION> 1,971 (3,212)
<INTEREST-EXPENSE> 73,124 6,321
<INCOME-PRETAX> 2,504 63,948
<INCOME-TAX> 419 (12,928)
<INCOME-CONTINUING> 2,085 76,876
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,085 76,876
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
RISK FACTORS
This Annual Report on Form 10-K includes various forward-looking statements
about Domino's that are subject to risks and uncertainties. Forward-looking
statements include information concerning future results of operations, and
business strategy. Also, statements that contain words such as "believes,"
"expects," "anticipates," "intends," "estimated" or similar expressions are
forward-looking statements. We have based these forward looking statements on
our current expectations and projections about future events. While we believe
these expectations and projections are reasonable, such forward-looking
statements are inherently subject to risks, uncertainties and assumptions about
us, including the following factors. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks, uncertainties
and assumptions, the forward-looking events discussed in this Annual Report on
Form 10-K might not occur.
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
SEVERELY LIMIT OUR ABILITY TO PLAN FOR OR RESPOND TO CHANGES IN OUR BUSINESS.
IN ADDITION, WE ARE PERMITTED TO INCUR SUBSTANTIALLY MORE DEBT IN THE FUTURE,
WHICH COULD AGGRAVATE THESE RISKS DESCRIBED BELOW.
To finance the 1998 recapitalization, we have incurred a significant amount of
indebtedness. Further, the terms of the indenture relating to our senior
subordinated notes permit us to incur substantial indebtedness in the future,
including up to an addition $100 million under our revolving credit facility.
Our ability to make payment on and to refinance our indebtedness will depend on
our ability to generate cash in the future. This, to a certain extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. Based on our current level of
operations, we believe our cash flow from operations and available borrowings
under our new revolving credit facility will be adequate to meet our liquidity
needs over the next several years.
We cannot assure you, however, that our business will generate sufficient cash
flow from operations, or that future borrowings will be available to us under
our revolving credit facility in amounts sufficient to enable us to pay our
indebtedness or to fund our other liquidity needs. If we cannot generate
sufficient cash flow from operations to pay our indebtedness when due, we may
need to refinance all or a portion of our indebtedness on or before maturity,
sell assets, delay capital expenditures, or seek additional equity. We cannot
assure you that we will be able to refinance any of our indebtedness on
commercially reasonable terms or at all or that any other action can be effected
on satisfactory terms, if at all.
Our substantial indebtedness could have other important consequences. For
example, it could:
- increase our vulnerability to general adverse economic and industry
conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow for other purposes;
- limit our flexibility in planning for, or reacting to, changes in
our business and the industry in which we operate, thereby placing
us at a competitive disadvantage compared to our competitors that
may have less debt;
- limit, by the financial and other restrictive covenants in the
indebtedness, among other things, our ability to borrow additional
funds; and
- have a material adverse effect on us if we fail to comply with the
covenants in our indebtedness because such failure could result in
an event of default which, if not cured or waived, could result in a
substantial amount of our indebtedness becoming immediately due and
payable.
<PAGE>
THE PIZZA DELIVERY MARKET IS HIGHLY COMPETITIVE, AND INCREASED COMPETITION COULD
ADVERSELY AFFECT OUR OPERATING RESULTS.
We believe we compete on the basis of product quality, delivery time, service
and price. We compete in the United States against three national chains, Pizza
Hut, Papa John's and, to a lesser extent, Little Caesars, along with regional
and local concerns. Although we believe we are well positioned to compete
because of our leading market position, focus and expertise in the pizza
delivery business and strong national brand name recognition, we could
experience increased competition from existing or new companies and loss of
market share, which could have an adverse effect on our operating results.
We also compete on a broader scale with other international, national, regional
and local restaurants and quick-service eating establishments. No reasonable
estimate can be made of the number of competitors on this scale. The overall
food service industry and the quick-service eating establishment segment are
intensely competitive with respect to food quality, price, service, convenience
and concept, and are often affected by changes in consumer tastes; national,
regional or local economic conditions; currency fluctuations to the extent
international operations are involved; demographic trends; and disposable
purchasing power. We compete within the food service industry and the quick-
service eating establishment segment not only for customers, but also for
management and hourly personnel, suitable real estate sites and qualified
franchisees.
WE DO NOT HAVE WRITTEN CONTRACTS WITH MOST OF OUR SUPPLIERS, AND AS A RESULT
THEY COULD SEEK TO SIGNIFICANTLY INCREASE PRICES OR FAIL TO DELIVER AS REQUIRED.
We have historically had long-lasting relationships with our suppliers. More
than half of our major suppliers have been with us for over 15 years. As a
result, we typically rely on oral rather than written contracts with our
suppliers. In the case of cheese, where we have only one supplier, we have a
written agreement. Although we have not experienced significant problems with
our suppliers, there can be no assurance that our suppliers will not implement
significant price increases or that suppliers will meet our requirements in a
timely fashion, if at all. The occurrence of any of the foregoing could have a
material adverse effect on our operating results.
INCREASES IN FOOD, LABOR AND OTHER COSTS COULD ADVERSELY AFFECT OUR
PROFITABILITY AND OPERATING RESULTS.
An increase in our operating costs could adversely affect our profitability.
Factors such as inflation, increased food costs, increased labor and employee
benefit costs and the availability of qualified management and hourly employees
may adversely affect our operating costs. Most of the factors affecting costs
are beyond our control. Most products used in our pizza, particularly cheese,
are subject to price fluctuations, seasonality, weather, demand and other
factors. Labor costs are primarily a function of minimum wage and availability
of labor. Cheese and labor costs of a typical store represent approximately
10.0% and 30.0% of store sales, respectively, although we only bear such costs
at our corporate-owned stores.
IF WE FAIL TO SUCCESSFULLY IMPLEMENT OUR GROWTH STRATEGY, OUR ABILITY TO
INCREASE OUR REVENUES AND OPERATING PROFIT COULD BE ADVERSELY AFFECTED.
We have grown rapidly in recent periods. We intend to continue our growth
strategy primarily by increasing the number of our domestic and international
stores. We and our franchisees face many challenges in opening new stores,
including, among others:
- selection and availability of suitable store locations;
- negotiation of acceptable lease or financing terms;
- securing of required domestic or foreign governmental permits and
approvals; and
- employment and training of qualified personnel.
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<PAGE>
The opening of additional franchises also depends, in part, upon the
availability of prospective franchisees who meet our criteria. Our failure to
add a significant number of new stores would adversely affect our ability to
increase revenue and operating income. In addition, although we have
successfully tested the Delivery Express concept, we have not yet opened a
significant number of Delivery Express stores and cannot predict with certainty
the success of the concept on a widespread basis.
OUR INTERNATIONAL OPERATIONS SUBJECT US TO ADDITIONAL RISKS WHICH MAY DIFFER IN
EACH COUNTRY IN WHICH WE DO BUSINESS.
Our financial condition and results of operation may be adversely affected when
global markets in which our franchised stores compete are affected by changes in
political, economic or other factors. These factors over which neither we nor
our franchisees have control may include changes in exchange rates, inflation
rates, recessionary or expansive trends, tax changes, legal and regulatory
changes or other external factors. We are currently planning to expand our
international operations which may increase the effect of these factors.
OUR BUSINESS DEPENDS ON THE RETENTION OF OUR CURRENT SENIOR EXECUTIVES AND THE
RECRUITMENT AND RETENTION OF QUALIFIED PERSONNEL
Our success will continue to depend to a significant extent on our executive
team and other key management personnel. We have entered into employment
agreements with certain of our executive officers. There can be no assurance
that we will be able to retain our executive officers and key personnel or
attract additional qualified management. Our success also will continue to
depend on our ability to attract and retain qualified personnel to operate our
stores, distribution centers and international operations. The loss of these
employees or our inability to recruit and retain qualified employees could have
a material adverse effect on our operating results.
THE ABILITY OF THE COMPANY TO TAKE MAJOR CORPORATE ACTIONS IS LIMITED BY THE
TISM STOCKHOLDERS AGREEMENT.
In connection with the recapitalization, all of the stockholders of TISM entered
into a stockholders agreement which provides, among other things, that the
approval of the holders of a majority of the voting stock of TISM subject to the
stockholders agreement will be required for TISM or its subsidiaries, including
the Company, to take various specified actions, including among others, major
corporate transactions such as a sale or initial public offering, acquisitions
and divestitures, financings, recapitalizations and mergers, as well as other
actions such as hiring and firing senior managers, setting management
compensation and establishing capital and operating budgets and business plans.
Pursuant to the stockholders agreement and the Articles of Incorporation of
TISM, the Bain Capital funds will have the power to block any such transaction
or action and to elect up to half of the Board of Directors of TISM.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY OUR INDENTURE.
Upon the occurrence of certain specific kinds of change of control events, we
must offer to repurchase all outstanding Notes. It is possible, however, that
we will not have sufficient funds at the time of the change of control to make
the required repurchase of the Notes or that restrictions in our senior credit
facilities will not allow such repurchases. In addition, certain important
corporate events, such as leveraged recapitalizations that would increase the
level of our indebtedness, would not constitute a change of control under the
indenture.
The occurrences of certain of the events that would constitute a change of
control under the indenture would constitute a default under the senior credit
facilities. Our senior indebtedness and the senior indebtedness of our
subsidiaries may also contain prohibitions of certain events that would
constitute a change of control. Moreover, the exercise by the holders of the
Notes of their right to require us to repurchase the Notes could cause a default
under such senior indebtedness, even if the change of control itself does not,
due to the financial effect on us of such repurchase. The terms of the senior
credit facilities will, and other senior debt may, prohibit the prepayment of
the Notes by us prior to their scheduled maturity. Consequently, if we are not
able to prepay the indebtedness
2
<PAGE>
under the senior credit facilities and any other senior indebtedness containing
similar restrictions, we will be unable to fulfill our repurchase obligations if
holders of the Notes exercise their repurchase rights following a change of
control, thereby resulting in a default under the indenture.
THERE CAN BE NO ASSURANCE THAT OUR CURRENT INSURANCE COVERAGE WILL BE ADEQUATE,
THAT INSURANCE PREMIUMS FOR SUCH COVERAGE WILL NOT INCREASE OR THAT IN THE
FUTURE WE WILL BE ABLE TO OBTAIN INSURANCE AT ACCEPTABLE RATES, IF AT ALL.
Through December 19, 1998, we self-insured our commercial general liability,
automobile liability, and workers' compensation liability exposures up to levels
ranging from $500,000 to $1 million per occurrence, and maintained excess and
umbrella insurance coverage above those levels up to amounts ranging from $60
million to $105 million per occurrence on our commercial general liability and
automobile liability policies and up to statutory limits on our workers'
compensation policies. Effective December 20, 1998, we acquired first-dollar
insurance coverage for all of the above exposures, with total coverage of $105
million per occurrence on our commercial general liability and automobile
liability policies and up to statutory limits on our workers' compensation
policies. We also maintain commercial property liability insurance. These
policies provide a variety of coverages and are subject to various limitations,
exclusions and deductibles. There can be no assurance that such liability
limitations will be adequate, that insurance premiums for such coverage will not
increase or that in the future we will be able to obtain insurance at acceptable
rates, if at all. Any such inadequacy of or inability to obtain insurance
coverage could have a material adverse effect on our business, financial
condition and results of operations.
3
