SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 1999.
--------------------
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO
_______________.
COMMISSION FILE NUMBER 0-12919
PIZZA INN, INC.
(EXACT NAME OF REGISTRANT IN ITS CHARTER)
MISSOURI 47-0654575
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5050 QUORUM DRIVE
SUITE 500
DALLAS, TEXAS 75240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES,
INCLUDING ZIP CODE)
(972) 701-9955
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS 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 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 WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTIONS 12, 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT. YES [X] NO [ ]
AT NOVEMBER 8, 1999, AN AGGREGATE OF 11,704,078 SHARES OF THE REGISTRANT'S
COMMON STOCK, PAR VALUE OF $.01 EACH (BEING THE REGISTRANT'S ONLY CLASS OF
COMMON STOCK), WERE OUTSTANDING.
<PAGE>
<TABLE>
<CAPTION>
PIZZA INN, INC.
Index
-------------
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements Page
- ------- --------------------- ----
<S> <C> <C>
Consolidated Statements of Operations for the three months
ended September 26, 1999 and September 27, 1998 3
Consolidated Balance Sheets at September 26, 1999 and
June 27, 1999. 4
Consolidated Statements of Cash Flows for the three months
ended September 26, 1999 and September 27, 1998 5
Notes to Consolidated Financial Statements 7
Item Management's Discussion and Analysis of
- ----- -------------------------------------
Financial Condition and Results of Operations 10
---------------------------------------------
PART II.OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
- ------ ----------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K 12
- ------- --------------------------------
Signatures 13
----------------------------------------------------------
</TABLE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
- --------------------------------
<TABLE>
<CAPTION>
PIZZA INN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
-------------------
SEPTEMBER 26, SEPTEMBER 27,
REVENUES: 1999 1998
------------------- --------------
<S> <C> <C>
Food and supply sales $ 15,329 $ 14,442
Franchise revenue 1,469 1,454
Restaurant sales 577 596
Other income 19 92
------------------- --------------
17,394 16,584
------------------- --------------
COSTS AND EXPENSES:
Cost of sales 14,584 13,940
Franchise expenses 627 712
General and administrative expenses 907 1,139
Interest expense 139 113
------------------- --------------
16,257 15,904
------------------- --------------
INCOME BEFORE INCOME TAXES 1,137 680
Provision for income taxes 390 210
------------------- --------------
NET INCOME $ 747 $ 470
=================== ==============
BASIC EARNINGS PER COMMON SHARE $ 0.07 $ 0.04
=================== ==============
DILUTED EARNINGS PER COMMON SHARE $ 0.07 $ 0.04
=================== ==============
DIVIDENDS DECLARED PER COMMON SHARE $ 0.06 $ 0.06
=================== ==============
WEIGHTED AVERAGE COMMON SHARES 11,250 12,212
=================== ==============
WEIGHTED AVERAGE COMMON AND
POTENTIAL DILUTIVE COMMON SHARES 11,470 13,009
=================== ==============
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
PIZZA INN, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 26, JUNE 27,
1999 1999
--------------- ---------
ASSETS (unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 396 $ 509
Accounts receivable, less allowance for doubtful
accounts of $829 and $808, respectively 4,937 4,588
Notes receivable, current portion, less allowance
for doubtful accounts of $109 and $144, respectively 808 814
Inventories 2,042 2,393
Deferred taxes, net 1,459 1,149
Prepaid expenses and other 510 591
--------------- ---------
Total current assets 10,152 10,044
LONG-TERM ASSETS
Property, plant and equipment, net 1,760 1,754
Property under capital leases, net 1,401 1,587
Deferred taxes, net 3,733 4,407
Long-term notes receivable, less
allowance for doubtful accounts of $118 and $80,respectively 300 380
Deposits and other 387 414
--------------- ---------
$ 17,733 $ 18,586
=============== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 2,389 $ 2,641
Accrued expenses 1,558 1,795
Current portion of capital lease obligations 456 428
--------------- ---------
Total current liabilities 4,403 4,864
LONG-TERM LIABILITIES
Long-term debt 6,500 5,700
Long-term capital lease obligations 1,107 1,244
Other long-term liabilities 721 719
--------------- ---------
12,731 12,527
--------------- ---------
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; authorized 26,000,000
shares; outstanding 11,090,338 and 11,407,945
shares, respectively (after deducting shares in
treasury: September - 3,851,731 and June -3,519,231) 111 114
Additional paid-in capital 4,671 4,765
Retained earnings 220 1,180
--------------- ---------
Total shareholders' equity 5,002 6,059
--------------- ---------
$ 17,733 $ 18,586
=============== =========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
PIZZA INN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
--------------------
SEPTEMBER 26, SEPTEMBER 27,
1999 1998
-------------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 747 $ 470
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 273 288
Provision for bad debt 25 60
Deferred income taxes 364 170
Changes in assets and liabilities:
Notes and accounts receivable (288) 336
Inventories 351 (243)
Accounts payable - trade (252) 1,068
Accrued expenses (237) (27)
Prepaid expenses and other 153 32
-------------------- ---------------
CASH PROVIDED BY OPERATING ACTIVITIES 1,136 2,154
-------------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (133) (369)
-------------------- ---------------
CASH USED FOR INVESTING ACTIVITIES (133) (369)
-------------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term bank debt 1,000 1,952
Repayments of long-term bank debt and capital lease obligations (309) (14)
Dividends paid (706) (754)
Proceeds from exercise of stock options 30 15
Purchases of treasury stock (1,131) (4,269)
-------------------- ---------------
CASH USED FOR FINANCING ACTIVITIES (1,116) (3,070)
-------------------- ---------------
Net decrease in cash and cash equivalents (113) (1,285)
Cash and cash equivalents, beginning of period 509 2,335
-------------------- ---------------
Cash and cash equivalents, end of period $ 396 $ 1,050
-------------------- ---------------
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
-------------------
SEPTEMBER 26, SEPTEMBER 27,
1999 1998
------------------- --------------
CASH PAYMENTS FOR:
<S> <C> <C>
Interest $ 73 $ 93
Income taxes - -
NONCASH FINANCING AND INVESTING
ACTIVITIES:
Capital lease obligations incurred $ - $ 290
</TABLE>
PIZZA INN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The accompanying consolidated financial statements of Pizza Inn, Inc.
(the "Company") have been prepared without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in the financial statements have been
omitted pursuant to such rules and regulations. The consolidated financial
statements should be read in conjunction with the notes to the Company's audited
consolidated financial statements in its Form 10-K for the fiscal year ended
June 27, 1999. Certain prior year amounts have been reclassified to conform
with current year presentation.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the Company's
financial position and results of operations for the interim periods. All
adjustments contained herein are of a normal recurring nature.
(2) On September 27, 1999, the Company's Board of Directors declared a
quarterly dividend of $.06 per share on the Company's common stock, payable
October 22, 1999 to shareholders of record on October 8, 1999.
(3) The Company entered into an agreement effective August 31, 1999 with its
current lender to extend the term of its existing $9.5 million revolving credit
line through August 2001 and to modify certain financial covenants.
(4) In October 1999, the Company loaned $2,506,754 to certain officers of
the Company in the form of promissory notes due in June 2004 to acquire 900,000
shares of the Company's common stock through the exercise of vested stock
options previously granted to them in 1995 by the Company. The notes bear
interest at the same floating interest rate the Company pays on its credit
facility with Wells Fargo and are collaterized by certain real property and
existing Company stock owned by the officers. The notes will be reflected as a
reduction to stockholders' equity, therefore, causing the transaction to have no
net effect on stockholders' equity.
<PAGE>
(5) The following table shows the reconciliation of the numerator and
denominator of the basic EPS calculation to the numerator and denominator
of the diluted EPS calculation (in thousands, except per share amounts).
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ----------
<S> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 26, 1999
BASIC EPS
Income Available to Common Shareholders $ 747 11,250 $ 0.07
Effect of Dilutive Securities - Stock Options 220
------------
DILUTED EPS
Income Available to Common Shareholders
& Assumed Conversions $ 747 11,470 $ 0.07
============ ============= ==========
THREE MONTHS ENDED SEPTEMBER 27, 1998
BASIC EPS
Income Available to Common Shareholders $ 470 12,212 $ 0.04
Effect of Dilutive Securities - Stock Options 797
------------
DILUTED EPS
Income Available to Common Shareholders
& Assumed Conversions $ 470 13,009 $ 0.04
============ ============= ==========
</TABLE>
(6) Summarized in the following tables are net sales and operating revenues,
operating profit (loss), and geographic information (revenues) for the Company's
reportable segments for the three months ended September 26, 1999, and September
27, 1998:
<TABLE>
<CAPTION>
SEPTEMBER 26, SEPTEMBER 27,
1999 1998
------------------------- --------------------------
<S> <C> <C>
(In thousands)
NET SALES AND OPERATING REVENUES:
Food and Equipment Distribution $ 15,329 $ 14,442
Franchise and Other 2,046 2,050
Intersegment revenues 217 246
------------------------- --------------------------
Combined 17,592 16,738
Other revenues 19 92
Less intersegment revenues (217) (246)
------------------------- --------------------------
Consolidated revenues 17,394 16,584
========================= ==========================
OPERATING PROFIT:
Food and Equipment Distribution (1) $ 727 $ 417
Franchise and Other (1) 846 686
Intersegment profit 56 60
------------------------- --------------------------
Combined 1,629 1,163
Other profit or loss 19 92
Less intersegment profit (56) (60)
Corporate administration and other (455) (515)
------------------------- --------------------------
Income before taxes 1,137 680
========================= ==========================
GEOGRAPHIC INFORMATION (REVENUES):
United States $ 17,073 $ 16,206
Foreign countries 321 378
------------------------- --------------------------
Consolidated total 17,394 16,584
========================= ==========================
<FN>
(1) Does not include full allocation of corporate administration
</TABLE>
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- --------------
Quarter ended September 26, 1999 compared to the quarter ended September 27,
1998.
Diluted earnings per share for the first quarter of the current fiscal year
increased by 75% to $0.07 from $0.04 for the same period last year. Net income
for the quarter increased 59% to $747,000 from $470,000 for the same quarter
last year.
Food and supply sales increased 6% or $887,000 for the quarter compared to
the same period last year. Food and supply sales to domestic franchise
restaurants increased 4% or $623,000 compared to the same quarter last year due
to greater sales volume to franchised restaurants and higher cheese prices.
Equipment sales increased $362,000 due to additional sales to more full-service
stores opened during the quarter. Last year's sales also included temporary
closings of the Company's franchise restaurants in several larger revenue
producing southeastern states that were effected by hurricanes.
Franchise revenue, which includes income from royalties, license fees and
area development and foreign master license (collectively, "Territory") sales,
increased 1% or $15,000 over the same period last year. Domestic and
international royalties increased $61,000 due to higher chainwide sales. The
first quarter of the prior year included final recognition of $53,000 in
proceeds for Territory sales.
Restaurant sales, which consists of revenue generated by Company-owned
stores, decreased 3% or $19,000 due to the closing of one Delco store in August
1998. Comparable store sales growth at Company-owned stores increased 4% for
the quarter.
Other income, which consists primarily of interest income and non-recurring
revenue items decreased 79% or $73,000 for the quarter compared to the same
period last year. The prior year's quarter included recognition of $65,000 in
vendor incentives.
Cost of sales increased 5% or $644,000 compared to the same period last
year. This increase is due primarily to increased domestic retail sales as
noted above and increased vehicle costs caused by higher fuel prices. Cost of
sales, as a percentage of sales, decreased to 92% from 93% compared to the same
quarter last year.
Franchise expenses include selling, general and administrative expenses
directly related to the sale and service of franchises and Territories. These
costs decreased 12% or $85,000 for the first quarter primarily due to lower
compensation expense relating to franchise sales.
General and administrative expenses decreased 20% or $232,000 compared to
the same quarter last year primarily due to decreased miscellaneous expenses and
professional fees. Additionally, Company-owned store expenses were lower due to
increased cost efficiencies.
Interest expense increased 23% or $26,000 for the quarter, as the result of
higher debt balances and interest expense on the new capitalized leases.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 2000, the Company utilized cash provided
by operations in the amount of $1,136,000, bank borrowings of $800,000 and a
portion of its cash balances to purchase 332,500 shares of its own common stock
for $1,131,000 and to pay dividends of $706,000.
Capital expenditures of $133,000 purchased during the first quarter
included computer equipment and freezer upgrades.
In September 1999, the Company's Board of Directors declared a quarterly
dividend of $0.06 per share on the Company's common stock, payable October 22,
1999 to shareholders of record on October 8, 1999.
The Company continues to realize substantial benefit from the utilization
of its net operating loss carryforwards (which currently total $9.6 million and
expire in 2005) to reduce its federal tax liability from the 31% to 34% tax rate
reflected on its statement of operations to an actual payment of approximately
2% of taxable income. Management believes that future operations will generate
sufficient taxable income, along with the reversal of temporary differences, to
fully realize its net deferred tax asset balance ($5.2 million as of September
26, 1999) without reliance on material, non-routine income. Taxable income in
future years at the same level as fiscal 1999 would be sufficient for full
realization of the net tax asset.
The Company has assessed its computerized systems to determine their
ability to correctly identify the year 2000 and is devoting the necessary
internal and external resources to replace, upgrade or modify all significant
systems related to the year 2000. The Company's assessment, purchase of new
equipment, installation of new software, conversion and testing of data are
completed. The Company fully implemented the new system in May 1999 and has
begun processing information.
Because third party computer failures could also have a material impact on
our ability to conduct business, confirmations were requested from our material
vendors and suppliers to certify that plans are being developed to address and
become compliant with the year 2000 issues. As of September 26, 1999, 80% have
replied and are comfortable with their preparations for the year 2000. The
Company believes that any year 2000 impact on its franchisee base will have no
material effect on the Company since sales information is not currently
communicated through computer systems. Through the assessment of the Company's
non-information technology systems, management has determined that no
modifications are required for year 2000 compliance in this area. The Company
will continue to assess and develop contingency plans, if needed, throughout the
remainder of 1999.
New software, testing, and conversion of systems and applications have been
completed and implemented. Total system upgrades are expected to position the
Company for anticipated future growth and enhance corporate service
capabilities. The cost of these upgrades will total approximately $1.2 million.
Of this cost, approximately $930,000 already has been incurred as of September
26, 1999. All of the above capital expenditures are funded through a 36-month
capitalized lease.
This report contains certain forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) relating to the
Company that are based on the beliefs of the management of the Company, as well
as assumptions and estimates made by and information currently available to the
Company's management. When used in the report, the words "anticipate,"
"believe," "estimate," "expect," "intend" and other similar expressions, as they
relate to the Company or the Company's management, identify forward-looking
statements. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks, uncertainties and
assumptions relating to the operations and results of operations of the Company
as well as its customers and suppliers, including as a result of competitive
factors and pricing pressures, shifts in market demand, general economic
conditions and other factors including but not limited to, changes in demand for
Pizza Inn products or franchises, the impact of competitors' actions, changes in
prices or supplies of food ingredients, and restrictions on international trade
and business. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions or estimates prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated, expected or intended.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ---------------------------------------------------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------------
Exhibits:
10.1 Second Amendment to Amended and Restated Loan Agreement between the
Company and Wells Fargo Bank (Texas), N.A. dated as of August 31, 1999.
10.2 Employment Agreement between the Company and C. Jeffrey Rogers
dated as of July 1, 1999.
10.3 Employment Agreement between the Company and Ronald W. Parker
dated as of July 1, 1999.
10.4 Promissory Note between the Company and C. Jeffrey Rogers dated as
of October 6, 1999.
10.5 Promissory Note between the Company and Ronald W. Parker dated as
of October 6, 1999.
10.6 Pledge Agreement between the Company and C. Jeffrey Rogers dated
as of October 6, 1999.
10.7 Pledge Agreement between the Company and Ronald W. Parker dated as
of October 6, 1999.
27.0 Financial Data Schedule
No reports on Form 8-K were filed in the quarter for which this report is
filed.
<PAGE>
------
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIZZA INN, INC.
Registrant
By: /s/Ronald W. Parker
---------------------
Ronald W. Parker
Executive Vice President and
Principal Financial Officer
By: /s/Shawn M. Preator
---------------------
Shawn M. Preator
Controller and
Principal Accounting Officer
Dated: November 9, 1999
<PAGE>
SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
--------------------------------------------------------------
This Second Amendment to Amended and Restated Loan Agreement (this
"Amendment") executed on September 30, 1999, is dated as of August 31, 1999 by
--
and among PIZZA INN, INC., a Missouri corporation (the "Borrower"), and WELLS
--------
FARGO BANK (TEXAS), NATIONAL ASSOCIATION (the "Lender").
------
R E C I T A L S:
WHEREAS, Borrower and Lender have entered into that certain Amended and
Restated Loan Agreement dated as of August 28, 1997, as amended by that certain
First Amendment to Amended and Restated Loan Agreement dated as of September 14,
1998 (as the same has been and may be amended, modified or supplemented from
time to time, the "Agreement"), pursuant to which Lender made revolving credit
---------
loans available to Borrower under the terms and provisions stated therein; and
WHEREAS, pursuant to the Agreement, Barko Realty, Inc., a Texas
corporation, R-Check, Inc., a Texas corporation, and Pizza Inn of Delaware,
Inc., a Delaware corporation (collectively, the "Guarantors") executed that
----------
certain Amended and Restated Guaranty Agreement dated as of August 28, 1997 (the
"Guaranty") which guaranteed to Lender the payment and performance of the
--------
Obligations (as defined in the Agreement);
-----
WHEREAS, Borrower has requested Lender to (a) amend certain provisions of
the investment covenant, and (b) extend the Termination Date; and
WHEREAS, Lender is willing to amend the Agreement as hereinafter provided;
and
WHEREAS, Borrower and Lender now desire to amend the Agreement as herein
set forth.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1 ARTICLE
DEFINITIONS
-----------
1.1 Section Definitions. Capitalized terms used in this Amendment,
-----------
to the extent not otherwise defined herein, shall have the same meaning as in
the Agreement, as amended hereby.
2 ARTICLE
AMENDMENTS
----------
2.1 Section Amendments to Section 1.1. Effective as of the date
----------------------------
hereof, the definition of "Termination Date" in Section 1.1 of the Agreement is
amended by deleting the reference to "August 30, 2000" and substituting therefor
"August 30, 2001".
2.2 Section Amendment to Section 9.5(f). Effective as of the date
----------------------------
hereof, Section 9.5(f) of the Agreement is amended in its entirety to read as
follows:
(f) loans or advances to (i) employees of the Borrower in the ordinary
course of business not to exceed $100,000 to any one individual or $250,000 in
the aggregate and (ii) shareholders of the Borrower in an amount not to exceed
$2,750,000 in the aggregate to enable such shareholders to exercise their vested
options to purchase stock of the Borrower;
2.3 Section Deletion of Section 10.2. Effective as of the date
---------------------------
hereof, Section 10.2 of the Agreement is deleted in its entirety.
3 ARTICLE
CONDITIONS PRECEDENT
---------------------
3.1 Section Conditions. The effectiveness of this Amendment is
----------
subject to the satisfaction of the following conditions precedent:
(a) Lender shall have received all of the following, each dated
(unless otherwise indicated) the date of this Amendment, in form and substance
satisfactory to Lender:
(i) Amendment. This Amendment, duly executed by Borrower and
---------
each Guarantor;
(ii) Third Amended and Restated Revolving Credit Note. A Third Amended
------------------------------------------------
and Restated Revolving Credit Note in the form of Annex I attached hereto, duly
-------
executed by Borrower; and
(iii) Additional Information. Such additional documents, instruments
-----------------------
and information as Lender or its legal counsel, Winstead Sechrest & Minick P.C.,
may reasonably request.
(b) The representations and warranties contained herein and in all
other Loan Documents, as amended hereby, shall be true and correct as of the
date hereof as if made on the date hereof.
(c) No Event of Default shall have occurred and be continuing and
no event or condition shall have occurred that with the giving of notice or
lapse of time or both would be an Event of Default.
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments, and
other legal matters incident thereto shall be satisfactory to Lender and its
legal counsel, Winstead Sechrest & Minick P.C.
4 ARTICLE
MISCELLANEOUS
-------------
4.1 Section Ratifications, Representations and Warranties. Except as
---------------------------------------------
expressly modified and superseded by this Amendment, the terms and provisions of
the Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. Borrower agrees that the representations and
warranties contained herein and in all other Loan Documents, as amended hereby,
are true and correct as of, and as if made on, the date hereof. Borrower and
Lender agree that the Agreement as amended hereby and all other documents
executed in connection with the Agreement or this Amendment to which Borrower or
any Guarantor is a party shall continue to be legal, valid, binding and
enforceable in accordance with their respective terms
4.2 Section Reference to the Agreement. Each of the Loan Documents,
---------------------------
including the Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
4.3 Section Expenses of Lender. As provided for in the Agreement,
--------------------
Borrower agrees to pay on demand all reasonable cost and expenses incurred by
Lender in connection with the preparation, negotiation, execution of this
Amendment, and the other Loan Documents executed pursuant hereto and any and all
amendments, modifications and supplements thereto including, without limitation,
the reasonable cost of Lender's legal counsel, and all reasonable costs and
expenses incurred by Lender in connection with the enforcement or preservation
of any rights under the Agreement, as amended hereby, or any other Loan
Documents.
4.4 Section Severability. Any provisions of this Amendment held by
------------
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provisions so held to be invalid or unenforceable.
4.5 Section Applicable Law. This Amendment and all other Loan
---------------
Documents executed pursuant hereto shall be governed by and construed in
accordance with the laws of the State of Texas.
4.6 Section Successors and Assigns. This Amendment is binding upon
------------------------
and shall enure to the benefit of Lender and Borrower and their respective
successors and assigns.
4.7 Section Counterparts. This Amendment may be executed in one or
------------
more counterparts, each of which when so executed shall be deemed to be an
original but all of which when taken together shall constitute one and the same
instrument.
4.8 Section Headings. The headings, captions, and arrangements used
--------
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
4.9 Section NO ORAL AGREEMENTS. THIS AMENDMENT AND ALL OTHER
--------------------
INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION
HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[Balance of this page intentionally left blank.]
<PAGE>
EXECUTED as of the day and year first above written.
BORROWER:
PIZZA INN, INC.
By: /s/ Ronald W. Parker
-----------------------
Name: Ronald W. Parker
Title: Executive Vice President
LENDER:
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By: /s/ Austin D. Nettle
-----------------------
Name: Austin D. Nettle
Title: Banking Officer
Each of the Guarantors hereby consents and agrees to this Amendment and
agrees that the Guaranty shall remain in full force and effect and shall
continue to be the legal, valid and binding obligation of such Guarantor
enforceable against such Guarantor in accordance with its terms.
GUARANTORS:
BARKO REALTY, INC.
By: /s/ Ronald W. Parker
-----------------------
Name: Ronald W. Parker
Title: President
R-CHECK, INC.
By: /s/ Ronald W. Parker
-----------------------
Name: Ronald W. Parker
Title: President
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), executed on October 1, 1999, is
made and entered into effective the 1st day of July, 1999, by and between C.
JEFFREY ROGERS (hereinafter referred to as "Rogers"), and PIZZA INN, INC.
(hereinafter referred to as the "Company").
W I T N E S S E T H:
WHEREAS, the Company and Rogers entered into that certain Employment
Agreement dated July 26, 1990 and subsequent Employment Agreements dated
September 25, 1992, July 1, 1994 and July 1, 1997 (together, the "Employment
Agreement"); and
WHEREAS, pursuant to the Employment Agreement, the Company currently
employs Rogers as its President and Chief Executive Officer, and the Company and
Rogers desire to continue and extend such employment on the terms and conditions
set forth; and
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and Rogers
hereby agree as follows:
ARTICLE I
AGREEMENT
1.01 Employment. Subject to the terms and conditions of this Agreement,
----------
the Company agrees to continue to employ Rogers as its President and Chief
Executive Officer and Rogers hereby accepts such continued employment with the
Company.
1.02 Term. The term (the "Term") of Rogers' employment hereunder shall
----
commence on the effective date of this Agreement set forth above (the "Effective
Date") and shall continue through June 30, 2004, unless earlier terminated as
provided pursuant to Article V hereof.
1.03 Extensions. During each fiscal year of the Company, beginning
----------
with the fiscal year ending in June 2000, the Board of Directors of the Company
may extend the term of this Agreement, by an additional fiscal year, without the
need to execute an amendment to this Agreement by adopting appropriate
resolutions which expressly extend the term of this Agreement for such
additional fiscal year and which establish a target amount for pre-tax operating
cash flow for such fiscal year pursuant to Section 3.02(c) of this Agreement.
ARTICLE II
TITLE AND AUTHORITY
2.01 Rogers agrees to act as President and/or Chief Executive Officer
of the Company and to render such services as are normally delegated to such
offices and positions and such additional services as may be delegated to him
from time to time by the Board of Directors of the Company (the "Board of
Directors") or otherwise stated in the Company's By-Laws, as amended. In
performing such duties hereunder, Rogers shall give the Company the benefit of
his special knowledge, skills, contacts and business experience and shall devote
substantially all of his business time, attention, ability and energy
exclusively to the business of the Company. It is agreed that Rogers may have
other business investments and participate in other business ventures which may,
from time to time, require minor portions of his time, but which shall not
interfere or be inconsistent with his duties hereunder.
ARTICLE III
COMPENSATION
3.01 Base Salary. During the Term, the Company will pay to Rogers, as
------------
compensation for services rendered under this Agreement during the fiscal year
ending June 25, 2000, an aggregate base salary (the "Base Salary") of Five
Hundred Ninety-One Thousand Ten andNo/100 Dollars ($591,010.00) per annum. The
Base Salary shall be paid in equal bi-weekly installments less applicable
withholding, FICA and other taxes, if any. Such Base Salary shall be increased
by 5% per year commencing on each anniversary of the Effective Date thereafter
during the Term.
3.02 Cash Bonuses. The Company agrees to pay Rogers the cash bonuses
-------------
provided below during the term of this Agreement. In the event the Company
fails to meet the required criteria for Rogers to earn any portion of any of the
bonuses listed below due to an extraordinary and/or non-recurring event or
condition, the Compensation Committee of the Board of Directors has the
authority, in its sole discretion, to authorize an additional bonus of an amount
not exceeding the amount lost by Rogers due to such event or condition. The
Compensation Committee also has the authority, in its sole discretion, to
authorize an additional bonus to Rogers at each fiscal quarter end and fiscal
year end in the event the Company experiences superior financial or stock price
performance and the Compensation Committee deems such a bonus appropriate.
(a) Bonus No. 1. During the Term, the Company will pay to Rogers a cash
-------------
incentive bonus ( Bonus No. 1 ) equal to $150,000 per Company fiscal year if at
least 50 new Pizza Inn units are opened during such fiscal year. Payments will
be made on a semi-annual basis, 50% on January 1 and July 1 of each year, based
upon the opening of at least 25 new Pizza Inn units during each semi-annual
period of such fiscal year. To the extent that 25 new units are not opened in
either semi-annual period, the entire unpaid amount of Bonus No. 1 shall be paid
to Rogers at fiscal year end if 50 new units are opened by fiscal year end.
(b) Bonus No. 2. During the Term, the Company will pay to Rogers a cash
-------------
incentive bonus ( Bonus No. 2 ), payable quarterly, in the amount of $37,500 for
each fiscal quarter in which the Company s operating results report pre-tax net
income growth or earnings per share growth of at least 10% more than the same
quarter in the preceding year. To the extent that there is a shortfall from
such goal in any given quarter, the entire year-to-date unpaid amount of Bonus
No. 2 shall be paid to Rogers if the total year-to-date pre-tax income growth
for such fiscal year is at least 10% more than the previous fiscal year.
(c) Bonus No. 3. During the Term, the Company will pay to Rogers a cash
--------------
incentive bonus ( Bonus No. 3 ), payable at the end of each fiscal year, based
on the targets set forth below for EBITDA cash flow. For the purposes of this
Agreement, "EBITDA cash flow" shall mean pre-tax earnings before interest,
taxes, depreciation, and amortization prior to this bonus accrual per Section
3.02. If EBITDA cash flow equals or exceeds the target amount for an applicable
year, then Bonus No. 3 shall equal $200,000. If EBITDA cash flow equals or
exceeds 75% but is less than 100% of the target amount for an applicable year,
then Bonus No. 3 shall equal $150,000. There shall be no Bonus No. 3 if EBITDA
cash flow is less than 75% of the target amount for an applicable year. If
EBITDA cash flow exceeds the target amount for an applicable year by $300,000 or
more, then Bonus No. 3 shall equal $250,000.
EBITDA Cash
Fiscal Year Ending Flow Target
-------------------- ------------------
June 2000 $ 6,000,000
June 2001 $ 6,500,000
June 2002 $ 7,000,000
June 2003 $ 7,500,000
June 2004 $ 8,000,000
3.03 Stock. It is acknowledged that Rogers owns a substantial
-----
number of shares of Common Stock. The issuance of any additional shares of
stock to Rogers would be at the discretion of the Company's Board of Directors.
ARTICLE IV
BENEFITS
4.01 Rogers shall receive a $50,000 yearly allowance to purchase life
and disability insurance on each January 1 during the Term. At his option,
Rogers shall receive $10,000 yearly allowance to maintain secondary health,
dental and other insurance payable at such time as the premiums for such
insurance are due. In addition, Rogers may participate in the Company's benefit
plans. Rogers shall receive an automobile allowance of $1,350 per month payable
on the first day of each month during the Term plus reimbursement of gasoline
and maintenance expenses.
ARTICLE V
TERMINATION
5.01 Disability of Rogers. If Rogers shall become disabled, ill or be
---------------------
injured or otherwise become incapacitated such that, in the good faith opinion
of the Board of Directors, he cannot fully carry out and perform his duties
hereunder, and such incapacity shall continue for a period of 90 consecutive
days, the Board of Directors may, at any time thereafter, fully and finally
terminate his employment under this Agreement by giving Rogers written notice of
such termination; provided, however, Rogers shall continue to receive 25% of his
--------- --------
Base Salary for the remainder of the Term. Termination under this Paragraph
5.01 shall be effective as of the date of such notice. The right to terminate
Rogers hereby shall expire (if not invoked) at such time as the event causing
such incapacity is fully cured.
5.02 Death of Rogers. This Agreement shall automatically terminate
-----------------
upon the death of Rogers; provided, however, that the estate of Rogers shall
receive for one (1) year after the date of death, upon the dates that such
payments would have been made to Rogers, payments of Base Salary, Bonus No. 1,
Bonus No. 2, and Bonus No. 3 pursuant to this Agreement.
.
5.03 Termination by the Company for Cause. In addition to any other
--------------------------------------
remedies which the Company may have at law or in equity, the Board of Directors
may immediately terminate Rogers' employment under this Agreement in the event
of the occurrence of any of the following events:
(a) Rogers willfully engages in an act of dishonesty (including, but not
limited to, conviction of a felony) which act in and of itself materially
injures or damages the Company; or
(b) Rogers willfully fails to substantially perform his duties within
fifteen (15) days after written demand for substantial performance is delivered
to Rogers by the Board of Directors, which demand specifically identifies the
manner in which the Board believes that Rogers has not substantially performed
his duties.
The Board of Directors shall provide at least ten (10) days prior written notice
to Rogers of its intention to discharge Rogers for cause, and such notice must
specify in detail the nature of the cause alleged and provide Rogers an
opportunity to be heard by the Board of Directors prior to the expiration of
such ten day period.
5.04 Termination by the Company Without Cause. The Board of Directors
-----------------------------------------
may terminate Rogers without cause (cause being as defined in Paragraph 5.03
above) upon 30 days prior written notice.
5.05 Termination by Rogers. Rogers may, with or without cause,
-----------------------
terminate his employment under this Agreement at any time by giving the Company
at least 30 days prior written notice of such termination.
5.06 Change of Control. Rogers may terminate this Agreement with or
-------------------
without any reason at any time within six months after a Change of Control has
occurred by giving the Company at least ten days prior written notice of such
termination. Change of Control shall mean any of the following: (a) all or
substantially all of the assets of the Company are sold, leased, exchanged or
otherwise transferred to any person or entity or group of persons or entities
acting in concert as a partnership, limited partnership, syndicate or other
group (a "Group of Persons") other than a person or entity or Group of Persons
at least 50% of the combined voting power of which is held by Rogers; or (b) the
Company is merged or consolidated with or into another corporation with the
effect that the then existing stockholders of the Company hold less than 50% of
the combined voting power of the then outstanding securities of the surviving
corporation of such merger or the corporation resulting from such consolidation
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors; or (c) a person or entity or
Group of Persons (other than (i) the Company or (ii) an employee benefit plan
sponsored by the Company) shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934) of securities of the Company representing 50% or more of the
combined voting power of the then outstanding securities of the Company
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors; or (d) individuals who, as of
the date hereof, constitute the Board of Directors (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board of Directors;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange
Act of 1934) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board of Directors.
5.07 Termination by Rogers for Good Reason. Rogers may terminate his
---------------------------------------
employment for good reason within twelve months following a Change of Control by
giving the Company at least ten days prior written notice of such termination.
For purposes of this Agreement, good reason shall mean, without Rogers
express written consent, that, following a Change of Control, (i) Rogers is
required to relocate, (ii) Rogers is assigned a diminished position or
diminished responsibilities with the Company, or (iii) Rogers annual base
salary, bonus or benefits, as the same may be contractually adjusted from time
to time, are reduced in any manner other than as provided for in Section 3.02 in
this Agreement.
ARTICLE VI
RIGHTS UPON TERMINATION
6.01 If the Company terminates this Agreement pursuant to Paragraphs
5.01 or 5.03 hereof, or if this Agreement is automatically terminated pursuant
to Paragraph 5.02 hereof, or if Rogers terminates this Agreement pursuant to
Paragraph 5.05 hereof, then Rogers or Rogers' estate, as the case may be, will
only be entitled to the salary (under Paragraph 3.01) which has been received or
accrued to the date of termination, and Rogers or Rogers' estate, as the case
may be, will not be entitled to any additional salary for the remainder of the
Term (except as otherwise provided in Paragraph 5.01 or 5.02 hereof). Rogers
will not be entitled to any bonus (including any bonuses set forth herein),
further equity participation, employee benefit, or any other payment except for
bonuses which may have accrued prior to the date of termination (except as
otherwise provided in Paragraph 5.02 hereof).
6.02 If the Company terminates this Agreement pursuant to Paragraph
5.04 hereof, or if Rogers terminates this Agreement pursuant to Paragraph 5.06
or 5.07 hereof, Rogers will be entitled to a lump sum payment within 30 days of
termination of all ordinary salary payments as provided in Paragraph 3.01 which
would have been paid had Rogers remained in the employment of the Company during
the complete Term together with an amount equal to (i) two times the sum of
Bonus No. 1, Bonus No. 2 and Bonus No. 3 Rogers would have received in the
fiscal year of such termination assuming the Company's financial and
operational results for such fiscal year attained the highest levels set forth
in Paragraph 3.02 hereof, less (ii) any Bonus No. 1, Bonus No. 2, and Bonus No.
3 actually received in such fiscal year based on operating results of such
fiscal year.
6.03 The parties hereto acknowledge and agree that the amount set forth
in Paragraph 6.02 is not a penalty or a forfeiture; rather, the amount specified
is a reasonable and fair reflection of damages that Rogers might incur in the
event this Agreement is terminated pursuant to such paragraph.
6.04(a) If any payment received or to be received by Rogers in
connection with a change in control of the Company or termination of Rogers'
employment (whether payable pursuant to the terms of this Agreement or any other
plan, arrangement, or agreement with the Company, any person whose actions
result in a change in control of the Company, or any person affiliated with the
Company or such person (together with the severance payment, the "total
payments"), will be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code, the Company will pay to Rogers, within 30 days of any
payments giving rise to excise tax, an additional amount (the "gross-up
payment") such that the net amount retained or to be retained by Rogers, after
deduction of any excise tax on the total payments and any federal and state and
local income tax and excise tax on the gross-up payment provided for by this
section, will equal the total payments.
6.04(b) For purposes of determining the amount of the gross-up payment,
Rogers will be deemed to pay federal income taxes at the highest marginal rate
of federal income taxation in the calendar year that the payment is to be made,
and state and local income taxes at the highest marginal rate of taxation in the
state and locality of the executive's residence on the date of termination or
the date that excise tax is withheld by the Company, net of the maximum
reduction in federal income taxes that could be obtained by deducting such state
and local taxes.
6.04(c) For purposes of determining whether any of the total payments
would not be deductible by the Company and would be subject to the excise tax,
and the amount of such excise tax, (i) total payments will be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Internal
Revenue Code, and all parachute payments in excess of the base amount within the
meaning of Section 280G(b)(3) will be treated as subject to the excise tax
unless, in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to Rogers such total payments (in whole or in part) are
not parachute payments, or such parachute payments in excess of the base amount
(in whole or in part) are otherwise not subject to the excise tax, and (ii) the
value of any non-cash benefits or any deferred payment or benefit will be
determined by the Company's independent auditors in accordance with Sections
280G(d)(3) and (4) of the Internal Revenue Code.
ARTICLE VII
EXPENSE REIMBURSEMENT
7.01 Rogers is authorized to incur reasonable business expenses in
promoting the business of the Company, including expenditures for entertainment
and travel. Such expenses shall include economy airfare for commuting between
Rogers' residence (which may be his primary or secondary residence) and the
Company's corporate office (or such other locations as Rogers needs to conduct
the Company's business from time to time). The Company shall reimburse Rogers
from time to time for all business expenses which are determined by the Board of
Directors to be reasonable. The Company shall reimburse Rogers' legal and
resultant accounting expenses incurred in connection with this Agreement.
ARTICLE VIII
BOARD OF DIRECTORS
8.01 In the event of termination of this Agreement, Rogers shall tender
his resignation from the Board of Directors.
<PAGE>
ARTICLE IX
TRADE SECRETS AND NON COMPETITION
9.01 Trade Secrets. During the Term and at all times thereafter, Rogers
--------------
shall not use for his personal benefit, or disclose, communicate or divulge to,
or use for the direct or indirect benefit of any person, firm, association or
company other than the Company or any affiliate or subsidiary of the Company,
any material referred to in Paragraph 10.01 or 10.02 or any information
regarding the business methods, business policies, procedures, techniques,
research or development projects or results, trade secrets or other knowledge
or processes of a proprietary nature belonging to, or developed by, the Company
or any other confidential information relating to or dealing with the business
operations or activities of the Company or any affiliate or subsidiary of the
Company, made known to Rogers or learned or acquired by Rogers while in the
employ of the Company.
9.02 Non-Competition. For a period of three years after the
---------------
termination of his employment with the Company, Rogers shall not become employed
by, consult with or otherwise assist in any manner any company (or any affiliate
thereof) the primary business of which involves or relates to the sale of pizza
in the continental United States.
9.03 Remedies. Rogers acknowledges that the restrictions contained in
--------
the foregoing Paragraphs 9.01 and 9.02 (the "Restrictions"), in view of the
nature of the business in which the Company and its affiliates and subsidiaries
are engaged, are reasonable and necessary in order to protect the legitimate
interests of the Company and its affiliates and subsidiaries, and that any
violation thereof would result in irreparable injury to the Company, and Rogers
therefore further acknowledges that, in the event Rogers violates, or threatens
to violate, any such Restrictions, the Company and its affiliates and
subsidiaries shall be entitled to obtain from any court of competent
jurisdiction, without the posting of any bond or other security, preliminary and
permanent injunctive relief as well as damages and an equitable accounting of
all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies in
law or equity to which the Company or any affiliate or subsidiary of the Company
may be entitled.
9.04 Invalid Provisions. If any Restriction, or any part thereof, is
-------------------
determined in any judicial or administrative proceeding to be invalid or
unenforceable, the remainder of the Restrictions shall not thereby be affected
and shall be given full effect, without regard to the invalid provisions.
9.05 Judicial Reformation. If the period of time or the area specified
--------------------
in the Restrictions should be adjudged unreasonable in any judicial or
administrative proceeding, then the court or administrative body shall have the
power to reduce the period of time or the area covered and, in its reduced form,
such provision shall then be enforceable and shall be enforced.
9.06 Tolling. If Rogers violates any of the Restrictions, the restrictive
-------
period shall not run in favor of Rogers from the time of the commencement of any
such violation until such time as such violation shall be cured by Rogers to the
satisfaction of the Company.
ARTICLE X
PROPRIETARY INFORMATION
10.01 Disclosure of Information. It is recognized that Rogers will
---------------------------
have access to certain confidential information of the Company and its
affiliates and subsidiaries, and that such information constitutes valuable,
special and unique property of the Company and its affiliates and subsidiaries.
Rogers shall not at any time disclose any such confidential information to any
party for any reason or purpose except as may be made in the normal course of
business of the Company or its affiliates and subsidiaries and for the Company's
or its affiliates' or subsidiaries' benefits.
10.02 Return of Information. All advertising, sales and other
-----------------------
materials or articles of information, including without limitation data
processing reports, invoices, or any other materials or data of any kind
furnished to Rogers by the Company or developed by Rogers on behalf of the
Company or at the Company's direction or for the Company's use or otherwise in
connection with Rogers' employment hereunder, are and shall remain the sole and
confidential property of the Company; if the Company requests the return of such
materials at any time during, upon or after the termination of Rogers'
employment, Rogers shall immediately deliver the same to the Company.
ARTICLE XI
ARBITRATION
11.01 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof of Rogers' employment relationship with the
Company shall be settled by arbitration in the City of Dallas in accordance with
the laws of the State of Texas by three arbitrators, one of whom shall be
appointed by the Company, one by Rogers, and the third of whom shall be
appointed by the first two arbitrators. If the first two arbitrators cannot
agree on the appointment of a third arbitrator, then the third arbitrator shall
be appointed by the Chief Judge of the United States Court of Appeals for the
Fifth Circuit. The arbitration shall be conducted in accordance with the rules
of the American Arbitration Association, except with respect to the selection of
arbitrators which shall be as provided in this Article XI. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction.
ARTICLE XII
MISCELLANEOUS
12.01 Notices. Any notices to be given hereunder by either party to
-------
the other shall be in writing and may be effected either by personal delivery or
by mail, registered or certified, postage prepaid with return receipt requested.
Mailed notices shall be addressed to the parties at the following addresses:
If to Company: Pizza Inn, Inc.
5050 Quorum Drive
Suite 500
Dallas, Texas 75240
Attn: Chairman of the Board
If to Rogers: C. Jeffrey Rogers
5050 Quorum Drive
Suite 500
Dallas, Texas 75240
Any party may change his or its address by written notice in accordance
with this Paragraph 12.01. Notices delivered personally shall be deemed
communicated as of actual receipt; mailed notices shall be deemed communicated
as of three days after proper mailing.
12.02 Entire Agreement. This Agreement supersedes any and all other
-----------------
agreements, either oral or in writing, between the parties hereto with respect
to the employment of Rogers by the Company, including, but without limitation,
the Employment Agreement, and contains all of the covenants and agreements
between the parties with respect to such employment in any manner whatsoever.
12.03 Law Governing Agreement. This Agreement shall be governed by and
------------------------
construed in accordance with the laws of the State of Texas and all obligations
shall be performable in Dallas County, Texas.
12.04 Waivers. No term or condition of this Agreement shall be deemed
-------
to have been waived nor shall there be any estoppel to enforce any of the terms
or provisions of this Agreement except by written instrument of the party
charged with such waiver or estoppel, and, if the Company is the waiving party,
such waiver must be approved by the Board of Directors. Further, it is agreed
that no waiver at any time of any of the terms or provisions of this Agreement
shall be construed as a waiver of any of the other terms or provisions of this
Agreement, and that a waiver at any time of any of the terms or provisions of
this Agreement shall not be construed as a waiver at any subsequent time of the
same terms or provisions.
12.05 Amendments. No amendment or modification of this Agreement shall
----------
be deemed effective unless and until executed in writing by all of the parties
hereto and approved by the Board of Directors.
12.06 Severability and Limitation. All agreements and covenants
-----------------------------
contained herein are severable and in the event any of them shall be held to be
invalid by any competent court, this Agreement shall be interpreted as if such
invalid agreements or covenants were not contained herein. Should any court or
other legally constituted authority determine that for any such agreement or
covenant to be effective that it must be modified to limit its duration or
scope, the parties hereto shall consider such agreement or covenant to be
amended or modified with respect to duration and scope so as to comply with the
orders of any such court or other legally constituted authority, and, as to all
other portions of such agreements or covenants, they shall remain in full force
and effect as originally written.
12.07 Headings. All headings set forth in this Agreement are intended
--------
for convenience only and shall not control or affect the meaning, construction
or effect of this Agreement or of any of the provisions thereof.
12.08 Assignment. Rogers agrees that his representations, warranties,
----------
covenants, promises and obligations contained herein may be assigned by the
Company to any person, partnership, firm, association, corporation or other
business entity to which the Company may transfer all or substantially all of
its business or assets.
12.09 Survival. Articles VI, IX and XI shall survive the termination
--------
of this Agreement.
EXECUTED as of the date and year first above written.
PIZZA INN, INC.
By: /s/ Ronald W. Parker
-----------------------
Ronald W. Parker, Executive
Vice President
/s/ C. Jeffrey Rogers
------------------------
C. Jeffrey Rogers
EXECUTIVE COMPENSATION AGREEMENT
THIS EXECUTIVE COMPENSATION AGREEMENT ("Agreement"), executed on October 1,
1999, is made and entered into and executed effective the 1st day of July, 1999,
by and between Ronald W. Parker (hereinafter referred to as "Executive") and
Pizza Inn, Inc. (hereinafter referred to as the "Company").
W I T N E S S E T H:
WHEREAS, the Company currently employs Executive as its Executive Vice
President and Chief Operating Officer, and the Company and Executive desire to
continue and extend such employment on the terms and conditions set forth;
NOW THEREFORE, for and in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and
Executive hereby agree as follows:
ARTICLE I
COMPENSATION
1.01 During the period of employment of Executive by the Company, the
Board of Directors of the Company (the "Board") or the Compensation Committee or
Stock Award Plan Committee thereof shall determine, based on the recommendations
of the Company's Chief Executive Officer from time to time, the compensation of
Executive, including salary, bonus, grants of stock options, and other benefits;
provided, however, that Executive shall receive an annual salary, bonus and all
other benefits not less than his then current annual salary, bonus and all other
benefits, except stock options, including such increases as the Board or the
Compensation Committee approve from time to time.
<PAGE>
ARTICLE II
TERMINATION OF EMPLOYMENT
TERMINATION BY THE COMPANY FOR CAUSE
2.01 In addition to any other remedies which the Company may have at
law or in equity, the Company may at any time terminate Executive's employment
for Cause. The Company shall provide at least ten (10) days prior written
notice to Executive of its intention to discharge Executive for Cause, and such
notice must specify in detail the nature of the Cause alleged and provide
Executive an opportunity to be heard by the Board prior to the expiration of
such ten-day period. "Cause" shall mean the occurrence of any of the following
events:
(a) Executive willfully engages in an act of dishonesty (including, but
not limited to, conviction of a felony) which act in and of itself materially
injures or damages the Company; or
(b) Executive willfully fails to substantially perform his duties
within fifteen (15) days after written demand for substantial performance is
delivered to Executive by the Board, which demand specifically identifies the
manner in which the Board believes that Executive has not substantially
performed his duties.
TERMINATION BY EXECUTIVE IN WINDOW PERIOD
2.02 Executive's employment may be terminated by Executive with or
without any reason at any time within six months after a Change of Control (the
"Window Period") by giving the Company at least ten days prior written notice of
such termination. "Change of Control" shall mean any of the following: (a) all
or substantially all of the assets of the Company are sold, leased, exchanged or
otherwise transferred to any person or entity or group of persons or entities
acting in concert as a partnership, limited partnership, syndicate or other
group (a "Group of Persons") other than a person or entity or Group of Persons
at least 50% of the combined voting power of which is held by Executive; or (b)
the Company is merged or consolidated with or into another corporation with the
effect that the then existing stockholders of the Company hold less than 50% of
the combined voting power of the then outstanding securities of the surviving
corporation of such merger or the corporation resulting from such consolidation
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors; or (c) a person or entity or
Group of Persons (other than (i) the Company or (ii) an employee benefit plan
sponsored by the Company) shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934) of securities of the Company representing 50% or more of the
combined voting power of the then outstanding securities of the Company
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors; or (d) individuals who, as of
the date hereof, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Securities Exchange Act of 1934) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board.
TERMINATION BY EXECUTIVE FOR GOOD REASON
2.03 Executive may terminate his employment for good reason within
twelve months following a Change of Control (the "Good Reason Period"). For
purposes of this Agreement, "good reason" shall mean, without the Executive's
express written consent, that, following a Change of Control, (i) Executive is
required to relocate, (ii) Executive is assigned a diminished position or
diminished responsibilities with the Company, or (iii) Executive's annual base
salary or benefits, as the same may be increased from time to time, are reduced.
NOTICE AND DATE OF TERMINATION
2.04 Any termination by the Company or by Executive shall be
communicated by written notice. "Date of Termination" means (i) if Executive's
employment is terminated by the Company for Cause or by Executive, the date of
receipt of the notice of termination or any later date specified therein, as the
case may be, or (ii) if Executive's employment is terminated by the Company
other than for Cause, the Date of Termination shall be the date on which the
Company notifies Executive of such termination.
ARTICLE III
OBLIGATIONS OF THE COMPANY UPON TERMINATION
WINDOW PERIOD; OTHER THAN FOR CAUSE
3.01 If the Company terminates Executive's employment other than for
Cause or Executive terminates employment during the Window Period or Executive
terminates his employment for good reason during the Good Reason period, the
Company shall pay to Executive in a lump sum in cash within thirty (30) days
after the Date of Termination an amount equal to: (a) three (3) multiplied by
(b) the sum of (i) Executive's then current annual salary (provided that such
salary shall be deemed to be no lower than Executive's highest salary during any
one of the immediately preceding three fiscal years) plus (ii) the highest
amount of bonus and any other cash compensation (except salary) received by
Executive during any one of the immediately preceding three (3) fiscal years.
OUTSIDE THE WINDOW PERIOD; FOR CAUSE
3.02 If (a) Executive terminates employment outside of the Window
Period without good reason, (b) Executive's employment is terminated by the
Company for Cause, (c) Executive terminates his employment outside the Good
Reason Period, or (d) Executive's employment is terminated due to death or
disability (as defined in the Company's long-term disability plan), this
Agreement shall terminate without further obligations to Executive other than
the obligation to pay to Executive, within thirty (30) days of the Date of
Termination, salary plus accrued bonus and other benefits due Executive through
the Date of Termination and the amount of any compensation previously deferred
by Executive, in each case to the extent theretofore unpaid.
NOT A PENALTY OR FORFEITURE
3.03 The parties hereto acknowledge and agree that any payment under
this Agreement is not a penalty or a forfeiture; rather, the amount specified is
a reasonable and fair reflection of damages that Executive may incur in the
event of Executive's termination.
TAX LIMITATION
3.04(a) If any payment received or to be received by Executive in
connection with a Change in Control of the Company or termination of Executive's
employment (whether payable pursuant to the terms of this Agreement or any other
plan, arrangement, or agreement with the Company, any person whose actions
result in a Change in Control of the Company, or any person affiliated with the
Company or such person (the "Total Payments")), would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code, the Company will pay
to Executive, within 30 days of any payments giving rise to excise tax, an
additional amount (the "gross-up payment") such that the net amount retained or
to be retained by Executive, after deduction of any excise tax on the total
payments and any federal and state and local income tax and excise tax on the
gross-up payment provided for by this section, will equal the total payments.
3.04(b) For purposes of determining the amount of the gross-up payment,
Executive will be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year that the payment is to be
made, and state and local income taxes at the highest marginal rate of taxation
in the state and locality of the executive's residence on the date of
termination or the date that excise tax is withheld by the Company, net of the
maximum reduction in federal income taxes that could be obtained by deducting
such state and local taxes.
3.04(c) For purposes of determining whether any of the total payments
would not be deductible by the Company and would be subject to the excise tax,
and the amount of such excise tax, (i) total payments will be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Internal
Revenue Code, and all parachute payments in excess of the base amount within the
meaning of Section 280G(b)(3) will be treated as subject to the excise tax
unless, in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to Executive such total payments (in whole or in part)
are not parachute payments, or such parachute payments in excess of the base
amount (in whole or in part) are otherwise not subject to the excise tax, and
(ii) the value of any non-cash benefits or any deferred payment or benefit will
be determined by the Company's independent auditors in accordance with Sections
280G(d)(3) and (4) of the Internal Revenue Code.
ARTICLE IV
TERM
4.01 The term (the "Term") of this Agreement shall commence on the date of
this Agreement as set forth above (the "Effective Date") and shall continue
through June 30, 2004. During each fiscal year of the Company, beginning with
the fiscal year ending in June, 2000, the Board may extend the Term by an
additional year, by adopting an appropriate resolution which expressly extends
the Term for such additional year but without the need to execute an amendment
to this Agreement.
ARTICLE V
NONCOMPETE, ETC.
TRADE SECRETS AND NONCOMPETITION
5.01(a) Trade Secrets. During his employment by the Company and at all
-------------
times thereafter, Executive shall not use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than the Company or any affiliate or
subsidiary of the Company, any material referred to in Paragraph 5.02(a) or (b)
or any information regarding the business methods, business policies,
procedures, techniques, research or development projects or results, trade
secrets or other knowledge or processes of a proprietary nature belonging to, or
developed by, the Company or any other confidential information relating to or
dealing with the business operations or activities of the Company or any
affiliate or subsidiary of the Company, made known to Executive or learned or
acquired by Executive while in the employ of the Company.
5.01(b) Non-Competition. In the event that Executive receives payment
---------------
from the Company pursuant to Paragraph 3.01 of this Agreement, Executive shall
not become employed by, consult with or otherwise assist in any manner any
company (or any affiliate thereof) the primary business of which involves or
relates to the sale of pizza in the continental United States for a period of
years equal to the number by which Executive's annual salary and bonus is
multiplied pursuant to Paragraph 3.01(a).
5.01(c) Remedies. Executive acknowledges that the restrictions
--------
contained in the foregoing Paragraphs 5.01(a) and (b) (the "Restrictions"), in
view of the nature of the business in which the Company and its affiliates and
subsidiaries are engaged, are reasonable and necessary in order to protect the
legitimate interests of the Company and its affiliates and subsidiaries, and
that any violation thereof would result in irreparable injury to the Company,
and Executive therefore further acknowledges that, in the event Executive
violates, or threatens to violate, any such Restrictions, the Company and its
affiliates and subsidiaries shall be entitled to obtain from any court of
competent jurisdiction, without the posting of any bond or other security,
preliminary and permanent injunctive relief as well as damages and an equitable
accounting of all earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies in law or equity to which the Company or any affiliate or subsidiary
of the Company may be entitled.
5.01(d) Invalid Provisions. If any Restriction, or any part thereof,
-------------------
is determined in any judicial or administrative proceeding to be invalid or
unenforceable, the remainder of the Restrictions shall not thereby be affected
and shall be given full effect, without regard to the invalid provisions.
5.01(e) Judicial Reformation. If the period of time or the area
---------------------
specified in the Restrictions should be adjudged unreasonable in any judicial or
administrative proceeding, then the court or administrative body shall have the
power to reduce the period of time or the area covered and, in its reduced form,
such provision shall then be enforceable and shall be enforced.
5.01(f) Tolling. If Executive violates any of the Restrictions,
-------
the restrictive period shall not run in favor of Executive from the time of the
commencement of any such violation until such time as such violation shall be
cured by Executive to the satisfaction of the Company.
PROPRIETARY INFORMATION
5.02(a) Disclosure of Information. It is recognized that Executive
---------------------------
will have access to certain confidential information of the Company and its
affiliates and subsidiaries, and that such information constitutes valuable,
special and unique property of the Company and its affiliates and subsidiaries.
Executive shall not at any time disclose any such confidential information to
any party for any reason or purpose except as may be made in the normal course
of business of the Company or its affiliates and subsidiaries and for the
Company's or its affiliates' or subsidiaries' benefits.
5.02(b) Return of Information. All advertising, sales and other
-----------------------
materials or articles of information, including without limitation data
processing reports, invoices, or any other materials or data of any kind
furnished to Executive by the Company or developed by Executive on behalf of the
Company or at the Company's direction or for the Company's use or otherwise in
connection with Executive' employment hereunder, are and shall remain the sole
and confidential property of the Company; if the Company requests the return of
such materials at any time during, upon or after the termination of Executive's
employment, Executive shall immediately deliver the same to the Company.
ARTICLE VI
TITLE AND AUTHORITY
6.01 In performing such duties hereunder, Executive shall give the
Company the benefit of his special knowledge, skills, contacts and business
experience and shall devote substantially all of his business time, attention,
ability and energy exclusively to the business of the Company. It is agreed
that Executive may have other business investments and participate in other
business ventures which may, from time to time, require minor portions of his
time, but which shall not interfere or be inconsistent with his duties
hereunder.
ARTICLE VII
ARBITRATION
7.01 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof of Executive's employment relationship with the
Company shall be settled by arbitration in the City of Dallas in accordance with
the laws of the State of Texas by three arbitrators, one of whom shall be
appointed by the Company, one by Executive, and the third of whom shall be
appointed by the first two arbitrators. If the first two arbitrators cannot
agree on the appointment of a third arbitrator, then the third arbitrator shall
be appointed by the Chief Judge of the United States Court of Appeals for the
Fifth Circuit. The arbitration shall be conducted in accordance with the rules
of the American Arbitration Association, except with respect to the selection of
arbitrators which shall be as provided in this Article VII. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction.
ARTICLE VIII
MISCELLANEOUS
NOTICES
8.01 Any notices to be given hereunder by either party to the other
shall be in writing and may be effected either by personal delivery or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the following addresses:
If to Company: Pizza Inn, Inc.
5050 Quorum Drive
Suite 500
Dallas, Texas 75240
Attn: Chairman of the Board
If to Executive: Ronald W. Parker
5050 Quorum Drive
Suite 500
Dallas, Texas 75240
Any party may change his or its address by written notice in accordance with
this Paragraph 8.01. Notice delivered personally shall be deemed communicated
as of actual receipt; mailed notices shall be deemed communicated as of three
days after proper mailing.
INCLUSION OF ENTIRE AGREEMENT HEREIN
8.02 This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the employment of
Executive by the Company upon a Change of Control and contains all of the
covenants and agreements between the parties with respect thereto. This
Agreement does not deal with compensation or any other employment terms of
Executive prior to a Change of Control, except as specifically provided herein
for termination and in Section 1.01, and does not impact additional benefits to
which Executive may be entitled upon termination pursuant to Company benefit
plans or by other written or oral agreement.
LAW GOVERNING AGREEMENT
8.03 This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas and all obligations shall be performable in
Dallas County, Texas.
<PAGE>
WAIVERS
8.04 No term or condition of this Agreement shall be deemed to have
been waived nor shall there be any estoppel to enforce any of the terms or
provisions of this Agreement except by written instrument of the party charged
with such waiver or estoppel, and, if the Company is the waiving party, such
waiver must be approved by the Board. Further, it is agreed that no waiver at
any time of any of the terms or provisions of this Agreement shall be construed
as a waiver of any of the other terms or provisions of this Agreement, and that
a waiver at any time of any of the terms or provisions of this Agreement shall
not be construed as a waiver at any subsequent time of the same terms or
provisions.
AMENDMENTS
8.05 No amendment or modification of this Agreement shall be deemed
effective unless and until executed in writing by all of the parties hereto and
approved by the Board.
SEVERABILITY AND LIMITATION
8.06 All agreements and covenants contained herein are severable and in
the event any of them shall be held to be invalid by any competent court, this
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein. Should any court or other legally constituted authority
determine that for any such agreement or covenant to be effective that it must
be modified to limit its duration or scope, the parties hereto shall consider
such agreement or covenant to be amended or modified with respect to duration
and scope so as to comply with the orders of any such court or other legally
constituted authority, and, as to all other portions of such agreements or
covenants, they shall remain in full force and effect as originally written.
HEADINGS
8.07 All headings set forth in this Agreement are intended for
convenience only and shall not control or affect the meaning, construction or
effect of this Agreement or of any of the provisions thereof.
<PAGE>
SURVIVAL
8.08 Articles III, V and VII shall survive termination of this
Agreement.
EXECUTED as of the date and year first above written.
PIZZA INN, INC.
By: /s/ C. Jeffrey Rogers
------------------------
C. JEFFREY ROGERS, President
and Chief Executive Officer
/s/ Ronald W. Parker
-----------------------
Ronald W. Parker
PROMISSORY NOTE
$1,949,697.51 Dallas, Texas October 6, 1999
FOR VALUE RECEIVED, the undersigned, C. JEFFREY ROGERS, an individual
resident of Dallas County, Texas ("Maker"), hereby promises to pay to the order
-----
of PIZZA INN, INC., a Missouri corporation ("Payee"), at its offices at 5050
-----
Quorum Drive, Suite 500, Dallas, Texas, on June 30, 2004, in lawful money of the
United States of America and in immediately available funds, the principal sum
of ONE MILLION NINE HUNDRED FORTY-NINE THOUSAND SIX HUNDRED NINETY-SEVEN AND
43/100 DOLLARS ($1,949,697.51), together with interest on the outstanding
principal balance from day to day remaining, at a rate per annum which shall
from day to day be equal to the weighted average rate paid by the Payee from
time to time under that certain Loan Agreement, dated as of August 28, 1997,
between Payee and Wells Fargo Bank (Texas), National Association, as amended
(the "WF Loan Agreement"), or any successor credit agreement of Payee. All
accrued and unpaid interest on this Note shall be due and payable on February 1,
May 1, August 1 and November 1 of each year, commencing on November 1, and at
maturity.
Interest on the indebtedness evidenced by this Note shall be computed on
the basis of a year of 360 days and the actual number of days elapsed (including
the first day but excluding the last day) unless such calculation would result
in a usurious rate, in which case interest shall be calculated on the basis of a
year of 365 or 366 days, as the case may be. This is the promissory note
referenced in that certain Pledge Agreement, dated as of the date hereof, by and
between Maker and Payee (the "Pledge Agreement"). Terms defined in the Pledge
Agreement are used in this Note as defined in the Pledge Agreement unless
otherwise defined herein.
All payments of principal, interest, and other amounts to be made by Maker
shall be made to the Payee at its principal office in Dallas, Texas in U.S.
dollars and immediately available funds, without setoff, deduction, or
counterclaim, not later than 11:00 a.m., Dallas, Texas, time on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding business
day). The Maker shall, at the time of making each such payment, specify to the
Payee the sums payable by the Maker to which such payment is to be applied (and
in the event the Maker fails to so specify, or if an Event of Default has
occurred and is continuing, the Payee may apply such payment to the Obligations
in such order and manner as it may elect in its sole discretion). Whenever any
payment under this Note or the Pledge Agreement shall be stated to be due on a
day that is not a business day, such payment shall be made on the next
succeeding business day, and such extension of time shall in such case be
included in the computation of the payment of interest and commitment fee, as
the case may be.
As used in this Note, the following terms shall have the respective
meanings indicated below:
"Pledge Agreement" means that certain Pledge Agreement dated as of the date
----------------
hereof between Maker and Payee, as the same has been or may be amended or
modified from time to time.
"Maximum Rate" is as defined in the WF Loan Agreement.
-------------
"Mortgage" means that certain Mortgage dated October 6, 1999 by Maker to
--------
Payee relating to certain real property located in Douglas County, Nevada.
Maker may prepay the principal of this Note in whole at any time or from
time to time in part without premium or penalty but with accrued interest to the
date of prepayment on the amount so prepaid.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate, Maker and Payee shall, to the extent permitted
by applicable law, (i) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal
or unequal parts the total amount of interest throughout the entire contemplated
term of the indebtedness evidenced by this Note so that the interest for the
entire term does not exceed the Maximum Rate.
If any Event of Default, as such term is defined in the Pledge Agreement or
the Mortgage, shall occur and be continuing, the holder hereof may, at its
option, declare the entire unpaid principal of and accrued interest on this Note
immediately due and payable without notice, demand or presentment, all of which
are hereby waived, and upon such declaration, the same shall become and shall be
immediately due and payable, and the holder hereof shall have the right to
foreclose or otherwise enforce all liens or security interests securing payment
hereof, or any part hereof, and offset against this Note any sum or sums owed by
the holder hereof to Maker. Failure of the holder hereof to exercise this
option shall not constitute a waiver of the right to exercise the same upon the
occurrence of a subsequent Event of Default.
If the holder hereof expends any effort in any attempt to enforce payment
of all or any part or installment of any sum due the holder hereunder, or if
this Note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including reasonable attorneys' fees,
plus accrued and unpaid interest hereunder.
This Note shall be governed by and construed in accordance with the laws of
the State of Texas and the applicable laws of the United States of America.
This Note has been entered into in Dallas County, Texas, and it shall be
performable for all purposes in Dallas County, Texas.
Maker and each surety, guarantor, endorser, and other party ever liable for
payment of any sums of money payable on this Note jointly and severally waive
notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at
any time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
/s/ C. Jeffrey Rogers_____________
-------------------------------------
C. JEFFREY ROGERS
PROMISSORY NOTE
$557,056.43 Dallas, Texas October 6, 1999
FOR VALUE RECEIVED, the undersigned, RONALD W. PARKER, an individual
resident of Collin County, Texas, and ANNE G. PARKER, an individual resident of
Collin County, Texas (each individually a "Maker", and collectively "Makers"),
----- ------
hereby jointly and severally promise to pay to the order of PIZZA INN, INC., a
Missouri corporation ("Payee"), at its offices at 5050 Quorum Drive, Suite 500,
-----
Dallas, Texas, on June 30, 2004, in lawful money of the United States of America
and in immediately available funds, the principal sum of FIVE HUNDRED
FIFTY-SEVEN THOUSAND FIFTY-SIX AND 43/100 DOLLARS ($557,056.43), together with
interest on the outstanding principal balance from day to day remaining, at a
rate per annum which shall from day to day be equal to the weighted average rate
paid by the Payee from time to time under that certain Loan Agreement, dated as
of August 28, 1997, between Payee and Wells Fargo Bank (Texas), National
Association, as amended (the "WF Loan Agreement"), or any successor credit
agreement of the Payee. All accrued and unpaid interest on this Note shall be
due and payable on February 1, May 1, August 1 and November 1 of each year,
commencing on November 1, and at maturity.
Interest on the indebtedness evidenced by this Note shall be computed on
the basis of a year of 360 days and the actual number of days elapsed (including
the first day but excluding the last day) unless such calculation would result
in a usurious rate, in which case interest shall be calculated on the basis of a
year of 365 or 366 days, as the case may be. This is the promissory note
referenced in that certain Pledge Agreement, dated as of the date hereof, by and
between Makers and Payee (the "Pledge Agreement"). Terms defined in the Pledge
Agreement are used in this Note as defined in the Pledge Agreement unless
otherwise defined herein.
All payments of principal, interest, and other amounts to be made by Makers
shall be made to the Payee at its principal office in Dallas, Texas in U.S.
dollars and immediately available funds, without setoff, deduction, or
counterclaim, not later than 11:00 a.m., Dallas, Texas, time on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding business
day). The Makers shall, at the time of making each such payment, specify to the
Payee the sums payable by the Makers to which such payment is to be applied (and
in the event the Makers fail to so specify, or if an Event of Default has
occurred and is continuing, the Payee may apply such payment to the Obligations
in such order and manner as it may elect in its sole discretion). Whenever any
payment under this Note or the Pledge Agreement shall be stated to be due on a
day that is not a business day, such payment shall be made on the next
succeeding business day, and such extension of time shall in such case be
included in the computation of the payment of interest and commitment fee, as
the case may be.
As used in this Note, the following terms shall have the respective
meanings indicated below:
"Pledge Agreement" means that certain Pledge Agreement dated as of the date
----------------
hereof between Makers and Payee, as the same has been or may be amended or
modified from time to time.
"Maximum Rate" is as defined in the WF Loan Agreement.
-------------
"Mortgages" means those certain Mortgages dated October 6, 1999 by Maker to
---------
Payee relating to certain real property located in Wood County and Collin
County, Texas.
Makers or either Maker may prepay the principal of this Note in whole at
any time or from time to time in part without premium or penalty but with
accrued interest to the date of prepayment on the amount so prepaid.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Makers nor the sureties,
guarantors, successors or assigns of Makers or either Maker shall be obligated
to pay the excess amount of such interest, or any other excess sum paid for the
use, forbearance or detention of sums loaned pursuant hereto. If for any reason
interest in excess of the Maximum Rate shall be deemed charged, required or
permitted by any court of competent jurisdiction, any such excess shall be
applied as a payment and reduction of the principal of indebtedness evidenced by
this Note; and, if the principal amount hereof has been paid in full, any
remaining excess shall forthwith be paid to Makers. In determining whether or
not the interest paid or payable exceeds the Maximum Rate, Makers and Payee
shall, to the extent permitted by applicable law, (i) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by this Note so that the interest for the entire term does not exceed the
Maximum Rate.
If any Event of Default, as such term is defined in the Pledge Agreement or
the Mortgagees, shall occur and be continuing, the holder hereof may, at its
option, declare the entire unpaid principal of and accrued interest on this Note
immediately due and payable without notice, demand or presentment, all of which
are hereby waived, and upon such declaration, the same shall become and shall be
immediately due and payable, and the holder hereof shall have the right to
foreclose or otherwise enforce all liens or security interests securing payment
hereof, or any part hereof, and offset against this Note any sum or sums owed by
the holder hereof to either Maker. Failure of the holder hereof to exercise
this option shall not constitute a waiver of the right to exercise the same upon
the occurrence of a subsequent Event of Default.
If the holder hereof expends any effort in any attempt to enforce payment
of all or any part or installment of any sum due the holder hereunder, or if
this Note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, each Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including reasonable attorneys' fees,
plus accrued and unpaid interest hereunder.
This Note shall be governed by and construed in accordance with the laws of
the State of Texas and the applicable laws of the United States of America.
This Note has been entered into in Dallas County, Texas, and it shall be
performable for all purposes in Dallas County, Texas.
Each Maker and each surety, guarantor, endorser, and other party ever
liable for payment of any sums of money payable on this Note jointly and
severally waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, diligence in collecting, grace, and all
other formalities of any kind, and consent to all extensions without notice for
any period or periods of time and partial payments, before or after maturity,
and any impairment of any collateral securing this Note, all without prejudice
to the holder. The holder shall similarly have the right to deal in any way, at
any time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
/s/ Ronald W. Parker
------------------------------------
Ronald W. Parker
/s/ Anne G. Parker
--------------------------------------
Anne G. Parker
PLEDGE AGREEMENT
- -----------------
THIS PLEDGE AGREEMENT dated as of October 6, 1999, is by and between C.
JEFFREY ROGERS, an individual resident of Dallas County, Texas (the "Pledgor"),
and PIZZA INN, INC., a Missouri corporation (the "Secured Party").
R E C I T A L S:
----------------------
A. Secured Party has agreed to loan to Pledgor $1,949,697.51 pursuant
to the terms of a promissory note made by Pledgor payable to the order of
Secured Party as of October 6, 1999 (the "Note").
B. Secured Party has conditioned its obligations under the Note upon
the execution and delivery of this Agreement by Pledgor and that certain
mortgage dated as of the date hereof by Pledgor in favor of the Secured Party
(the "Mortgage").
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
Security Interest and Pledge
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Section 1 Security Interest and Pledge. As collateral security for the
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prompt payment in full when due of all obligations, indebtedness and liabilities
of the Pledgor to the Secured Party, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, whether at stated maturity,
by acceleration, or otherwise, under this Agreement, the Mortgage and the Note,
and all interest receiving thereon and all attorneys' fees and other expenses
incurred in the enforcement or collection thereof (the "Obligations"), Pledgor
hereby pledges and grants to Secured Party a security interest in the following
property (such property being hereinafter sometimes called the "Collateral"):
(a) 2,449,000 shares of common capital stock of Secured Party,
evidenced by certificate numbers P1 12370, P1 12397, P1 2152, P1 12326, P1
13354, and P1 13744;
(b) 300,000 additional shares of common capital stock of Secured Party,
evidenced by certificates to be delivered to Wells Fargo Bank (Texas), National
Association ("Wells Fargo") within five (5) business days of the date hereof;
(c) all shares of common capital stock of Secured Party hereafter
delivered by Pledgor to Wells Fargo, pursuant to the terms of that certain Loan
Agreement, dated as of August 28, 1997, by and between Pledgor and Wells Fargo
and the related loan documents, each as amended (the "Wells Fargo Loan
Documents");
(d) all shares of common capital stock of Secured Party hereinafter
delivered by Pledgor to Secured Party pursuant to the terms hereof;
(e) all products, proceeds, revenues, distributions, dividends, stock
dividends, securities, and other property, rights, and interests that Pledgor
receives or is at any time entitled to receive on account of the same; and
(f) certain real property described in the Mortgage.
ARTICLE II
Representations and Warranties
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Pledgor represents and warrants to Secured Party that:
Section 2.1 Title. Pledgor owns, and with respect to Collateral
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acquired after the date hereof, Pledgor will own, legally and beneficially, the
Collateral free and clear of any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or title retention agreement), whether
arising by contract, operation of law, or otherwise (each a "Lien"), or any
right or option on the part of any third person or entity to purchase or
otherwise acquire the Collateral or any part thereof, except for the security
interest granted hereunder and a first priority security interest granted to
Wells Fargo (the "WF Lien") pursuant to the terms of the Wells Fargo Loan
Documents. The Collateral is not subject to any restriction on transfer or
assignment except for compliance with applicable federal and state securities
laws and regulations promulgated thereunder and the WF Lien. Pledgor has the
unrestricted right to pledge the Collateral as contemplated hereby. All of the
Collateral has been duly and validly issued and is fully paid and nonassessable.
Section 2.2 Marital Status. The Collateral constitutes the separate
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property of Pledgor and no person (including Diane P. Rogers) possesses a
community property interest in any part of the Collateral.
Section 2.3 Security Interest. This Agreement creates in favor of
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Secured Party a second priority security interest in the Collateral. There are
no conditions precedent to the effectiveness of this Agreement that have not
been fully and permanently satisfied.
Section 2.4 Information Regarding Collateral to be Pledged. Pledgor
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has completed the Information Regarding Shares to be Pledged form (the "Rule 144
Questionnaire"), and the information contained therein is true, accurate and
complete. The Rule 144 Questionnaire contains no untrue statement of a material
fact nor does it omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
Section 2.5 No Breach. The execution, delivery, and performance by
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the Pledgor of this Agreement, the Mortgage and the Note and compliance with the
terms and provisions hereof and thereof do not and will not (a) violate or
conflict with, or result in a breach of, or require any consent under (i) any
applicable law, rule, or regulation or any order, writ, injunction, or decree of
any governmental authority or arbitrator, or (ii) any agreement or instrument to
which the Pledgor is a party or by which his property is bound or subject, or
(b) constitute a default under any such agreement or instrument, or result in
the creation or imposition of any Lien (except as provided in this Agreement and
the Mortgage) upon any of the revenues or assets of the Pledgor.
Section 2.6 Litigation and Judgments. There is no action, suit,
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investigation, or proceeding before or by any governmental authority or
arbitrator pending, or to the knowledge of the Pledgor, threatened against or
affecting the Pledgor.
Section 2.7 Enforceability. This Agreement, the Mortgage and the
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Note constitute valid, and binding obligations of the Pledgor, enforceable
against the Pledgor in accordance with their respective terms, except as limited
by bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors' rights.
Section 2.8 Approvals. No authorization, approval, or consent of,
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and no filing or registration with, any governmental authority or third party is
or will be necessary for the execution, delivery, or performance by the Pledgor
of this Agreement, the Mortgage and the Note or the validity or enforceability
thereof, except for filings provided for herein or in the Wells Fargo Loan
Documents.
Section 2.9 Disclosure. No statement, information, report,
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representation, or warranty made by the Pledgor in this Agreement or the Note or
furnished to the Secured Party in connection with this Agreement, the Mortgage
or any of the transactions contemplated hereby contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to the
Pledgor which has a material adverse effect, or which might in the future have a
material adverse effect, on the condition (financial or otherwise), prospects,
or properties of the Pledgor that has not been disclosed in writing to the
Secured Party.
Section 2.10 Agreements. The Pledgor is not a party to any
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indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, which could have a material adverse effect on the business,
condition (financial or otherwise), prospects, or properties of the Pledgor, or
the ability of the Pledgor to pay and perform his obligations under the Note.
ARTICLE III
Affirmative and Negative Covenants
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Pledgor covenants and agrees with Secured Party that:
Section 3.1 Delivery. Within five (5) business days of the date
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hereof, Pledgor shall deliver to Wells Fargo certificate(s) representing the
shares of capital stock identified in Section 1(b) hereof, accompanied by
undated stock powers only executed in blank. In the event that Wells Fargo
relinquishes the WF Lien on any of the Collateral, Pledgor shall deliver to
Secured Party all certificate(s) representing such Collateral, accompanied by
undated stock powers duly executed in blank.
Section 3.2 Encumbrances. Pledgor shall not create, permit, or suffer
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to exist, and shall defend the Collateral against, any Lien, security interest,
or other encumbrance on the Collateral except the pledge and security interest
of Secured Party hereunder and liens permitted in the Wells Fargo Loan
Documents, and shall defend Pledgor's rights in the Collateral and Secured
Party's security interest in the Collateral against the claims of all persons or
entities.
Section 3.3 Sale of Collateral. With the exception of the WF Lien,
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Pledgor shall not sell, assign, or otherwise dispose of the Collateral or any
part thereof without the prior written consent of Secured Party.
Section 3.4 Distributions. If Pledgor shall become entitled to receive
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or shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase, or reduction of capital or issued in connection
with any reorganization), option or rights, whether in substitution of, or in
exchange for any Collateral, Pledgor agrees to accept the same as Secured
Party's agent and to hold the same in trust for Secured Party, and to deliver
the same forthwith to Secured Party in the exact form received, with the
appropriate endorsement of Pledgor when necessary and/or appropriate undated
stock powers duly executed in blank, to be held by Secured Party as additional
Collateral for the Obligations, subject to the terms hereof. Upon the
occurrence of an Event of Default, Pledgor shall become entitled to receive or
shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase, or reduction of capital or issued in connection
with any reorganization), option or rights, whether as an addition to, in
substitution of, or in exchange for any Collateral or otherwise, Pledgor agrees
to accept the same as Secured Party's agent and to hold the same in trust for
Secured Party, and to deliver the same forthwith to Secured Party in the exact
form received, with the appropriate endorsement of Pledgor when necessary and/or
appropriate undated stock powers duly executed in blank, to be held by Secured
Party as additional Collateral for the Obligations, subject to the terms hereof.
Any sums paid upon or in respect of the Collateral upon the liquidation or
dissolution of the issuer thereof shall be paid over to Secured Party to be held
by it as additional Collateral for the Obligations subject to the terms hereof;
and in case any distribution of capital shall be made on or in respect of the
Collateral or any property shall be distributed upon or with respect to the
Collateral pursuant to any recapitalization or reclassification of the capital
of the issuer thereof or pursuant to any reorganization of the issuer thereof,
the property so distributed shall be delivered to the Secured Party to be held
by it, as additional Collateral for the Obligations, subject to the terms
hereof. All sums of money and property so paid or distributed in respect of the
Collateral that are received by Pledgor shall, until paid or delivered to
Secured Party, be held by Pledgor in trust as additional security for the
Obligations. Secured Party agrees and acknowledges that during such time as the
WF Lien remains in effect, Wells Fargo may have a first priority interest in
certain of the Collateral described in this Section 3.4 entitling Wells Fargo to
possession of certain of the certificates described herein.
Section 3.5 Further Assurances. At any time and from time to time,
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upon the request of Secured Party, and at the sole expense of Pledgor, Pledgor
shall promptly execute and deliver all such further instruments and documents
and take such further action as Secured Party may reasonably deem necessary or
desirable to preserve and perfect its security interest in the Collateral and
carry out the provisions and purposes of this Agreement, including, without
limitation, the execution and filing of such financing statements as Secured
Party may require. A carbon, photographic, or other reproduction of this
Agreement or of any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement and may be filed as a
financing statement. Secured Party shall at all times have the right to
exchange any certificates representing Collateral for certificates of smaller
or larger denominations for any purpose consistent with this Agreement.
Section 3.6 Taxes. Pledgor agrees to pay or discharge prior to
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delinquency all taxes, assessments, levies, and other governmental charges
imposed on him or his property, except Pledgor shall not be required to pay or
discharge any tax, assessment, levy, or other governmental charge if (i) the
amount or validity thereof is being contested by Pledgor in good faith by
appropriate proceedings diligently pursued, and (ii) such proceedings do not
involve any risk of sale, forfeiture, or loss of the Collateral or any interest
therein.
Section 3.7 Notification. Pledgor shall promptly notify Secured Party
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of (i) any Lien, security interest, encumbrance, or claim made or threatened
against the Collateral, (ii) any material change in the Collateral, including,
without limitation, any material decrease in the value of the Collateral, (iii)
the occurrence or existence of any Event of Default under this Agreement, the
Note, the Mortgage or the Wells Fargo Loan Documents or the occurrence or
existence of any condition or event that, with the giving of notice or lapse of
time or both, would be an Event of Default under any such agreements or the
Wells Fargo Loan Documents, and (iv) any matter that could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise) prospects or properties of the Pledgor.
Section 3.8 Compliance with Agreements. Pledgor shall comply in all
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material respects with all agreements, contracts, and instruments binding on him
or affecting his properties or employment.
Section 3.9 Compliance with Laws. Pledgor shall comply in all material
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respects with all applicable laws, rules, regulations, and orders of any court
or governmental authority.
Section 3.10 Provide Information. Pledgor shall fully cooperate, to
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the extent requested by Secured Party, in the completion of any notice, form,
schedule, or other document filed by Secured Party on its own behalf or on
behalf of Pledgor, including, without limitation, any required notice or
statement of beneficial ownership or of the acquisition of beneficial ownership
of equity securities constituting part of the Collateral and any notice of
proposed sale of any such securities pursuant to Rule 144 as promulgated by the
SEC under the Securities Act of 1933, as amended. Without limiting the
generality of the foregoing, Pledgor shall furnish to Secured Party any and all
information which Secured Party may reasonably request for purposes of any such
filing, regarding Pledgor, the Collateral, and any issuer of any of the
Collateral.
Section 3.11 Notification of Changes in Beneficial Ownership. Pledgor
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shall promptly notify Secured Party of any sale of securities of Secured Party
by Pledgor or by any person or entity named on the Rule 144 Questionnaire and
shall furnish promptly to Secured Party a copy of any Form 144 filed in respect
of any such sale. In addition, if Pledgor or any other person or entity named
in the Rule 144 Questionnaire shall file with the SEC a form or other document
reporting any change in the beneficial ownership of the common stock of Secured
Party, Pledgor shall promptly furnish to Secured Party a copy of such form or
document.
Section 3.12 Restriction on Sales after Default. Pledgor shall not
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sell or suffer or permit any person or entity named in the Rule 144
Questionnaire to sell any shares of the same class of securities as the
Collateral at any time after any Event of Default shall have occurred.
Section 3.13 Limitations on Liens. Pledgor will not incur, create, assume,
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or permit to exist any Lien upon the Collateral or the real property and
interests in real property owned by Pledgor and located at 2 Cedarbrook,
Glenbrook, Nevada 89448 as described in Schedule A attached hereto, and all
improvements and fixtures thereon and all appurtenances thereto (the "Nevada
Property"), except liens permitted herein, in the Mortgage or in the Wells Fargo
Loan Documents. With the exception of Wells Fargo, the Pledgor will not grant to
any other Person a negative pledge with respect to the Collateral or the Nevada
Property.
Section 3.14 Limitation on Debt. Pledgor will not incur, create,
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assume, or permit to exist any debt except debt described in the April 16, 1998,
financial statement of the Pledgor delivered to the Secured Party, debt to Wells
Fargo in the maximum amount of the total debt to Wells Fargo as of the date of
this Agreement, debt to Farmers & Merchants Bank in the maximum amount of the
total debt to Farmers & Merchants Bank as of the date of this Agreement, debt to
Secured Party, and other debt in the aggregate not to exceed $250,000 at any
time outstanding.
ARTICLE IV
Rights of Secured Party and Pledgor
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Section 4.1 Power of Attorney. Pledgor hereby irrevocably constitutes
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and appoints Secured Party and any officer or agent thereof (other than
Pledgor), with full power of substitution, as Pledgor's true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead and in the name of Pledgor or in its own name, from time to time in
Secured Party's discretion, so long as an Event of Default exists, to take any
and all action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement and, without
limiting the generality of the foregoing, hereby gives Secured Party the power
and right on behalf of Pledgor and in its own name to do any of the following
(subject to the rights of Pledgor under Sections 4.2 and 4.3 hereof), without
notice to or the consent of Pledgor:
(i) to demand, sue for, collect, or receive in the name of Pledgor or
in its own name, any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral and, in connection
therewith, endorse checks, notes, drafts, acceptances, money orders, or any
other instruments for the payment of money under the Collateral;
(ii) to pay or discharge taxes, Liens, security interests, or other
encumbrances levied or placed on or threatened against the Collateral;
(iii) (A) to direct account debtors and any other parties liable for
any payment under any of the Collateral to make payment of any and all monies
due and to become due thereunder directly to Secured Party or as Secured Party
shall direct; (B) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect of or
arising out of any Collateral; (C) to sign and endorse any drafts, assignments,
proxies, stock powers, verifications, notices, and other documents relating to
the Collateral; (D) to commence and prosecute any suit, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action, or proceeding brought against
Pledgor with respect to any Collateral; (F) to settle, compromise, or adjust any
suit, action, or proceeding described above and, in connection therewith, to
give such discharges or releases as Secured Party may deem appropriate; (G) to
exchange any of the Collateral for other property upon any merger,
consolidation, reorganization, recapitalization, or other readjustment of the
issuer thereof and, in connection therewith, deposit any of the Collateral with
any committee, depositary, transfer agent, registrar, or other designated agency
upon such terms as Secured Party may determine; (H) to add or release any
guarantor, indorser, surety, or other party to any of the Collateral or the
Obligations; (I) to renew, extend, or otherwise change the terms and conditions
of any of the Collateral or Obligations; (J) to insure any of the Collateral;
(K) to sell, transfer, pledge, make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though Secured Party
were the absolute owner thereof for all purposes, and to do, at Secured Party's
option and Pledgor's expense, at any time, or from time to time, all acts and
things which Secured Party deems necessary to protect, preserve, or realize upon
the Collateral and Secured Party's security interest therein; and (L) to
complete, execute and file with the SEC one or more notices of proposed sale of
securities pursuant to Rule 144.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be liable
for any failure to do so or any delay in doing so. Secured Party shall not be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on Secured Party solely to
protect, preserve, and realize upon its security interest in the Collateral.
Section 4.2 Voting Rights. Unless and until an Event of Default shall
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have occurred and be continuing, Pledgor shall be entitled to exercise any and
all voting rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of this Agreement. Secured Party shall
execute and deliver to the Pledgor all such proxies and other instruments as
Pledgor may reasonably request for the purpose of enabling Pledgor to exercise
the voting rights which he is entitled to exercise pursuant to this Section.
Section 4.3 Dividends. Unless and until an Event of Default shall have
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occurred and be continuing, Pledgor shall be entitled to receive and retain any
dividends on the Collateral paid in cash.
Section 4.4 Performance by Secured Party. If Pledgor fails to perform
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or comply with any of the agreements contained herein after being given notice
of such failure by Secured Party, Secured Party itself may, at its sole
discretion, cause or attempt to cause performance or compliance with such
agreement and the expenses of Secured Party, together with interest thereon at
the Default Rate, shall be payable by Pledgor to Secured Party on demand and
shall constitute Obligations secured by this Agreement. Notwithstanding the
foregoing, it is expressly agreed that Secured Party shall not have any
liability or responsibility for the performance of any obligation of Pledgor
under this Agreement.
Section 4.5 Secured Party's Duty of Care. Other than the exercise of
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reasonable care in the physical custody of the Collateral while held by Secured
Party hereunder, Secured Party shall have no responsibility for or obligation or
duty with respect to all or any part of the Collateral or any matter or
proceeding arising out of or relating thereto, including, without limitation,
any obligation or duty to collect any sums due in respect thereof or to protect
or preserve any rights against prior parties or any other rights pertaining
thereto, it being understood and agreed that Pledgor shall be responsible for
preservation of all rights in the Collateral. Without limiting the generality
of the foregoing, Secured Party shall be conclusively deemed to have exercised
reasonable care in the custody of the Collateral if Secured Party takes such
action, for purposes of preserving rights in the Collateral, as Pledgor may
reasonably request in writing, but no failure or omission or delay by Secured
Party in complying with any such request by Pledgor, and no refusal by Secured
Party to comply with any such request by Pledgor, shall be deemed to be a
failure to exercise reasonable care.
Section 4.6 Setoff. If an Event of Default shall have occurred and
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be continuing, Secured Party shall have the right to set off and apply against
the Obligations in such manner as the Secured Party may determine, at any time
and without notice to the Pledgor, any and all sums at any time credited by or
owing from the Secured Party to the Pledgor whether or not the Obligations are
then due. In addition to the Secured Party's right of setoff and as further
security for the Obligations, the Pledgor hereby grants to the Secured Party a
security interest in all sums at any time credited by or owing from the Secured
Party to the Pledgor. The rights and remedies of the Secured Party hereunder
are in addition to other rights and remedies (including, without limitation,
other rights of setoff) which the Secured Party may have.
ARTICLE V
Default
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Section 5.1 Events of Default. Each of the following shall be
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deemed an "Event of Default":
(1) The Pledgor shall fail to pay when due the Obligations or any part
thereof and such failure shall continue for ten (10) days.
(2) Any representation or warranty made or deemed made by the Pledgor
in this Agreement, the Mortgage, the Note or the Wells Fargo Loan Documents, or
in any certificate, report, notice, or financial statement furnished at any time
in connection with any such agreements shall be false, misleading, or erroneous
in any material respect when made or deemed to have been made.
(3) The Pledgor shall fail to perform, observe, or comply with any
covenant, agreement, or term contained in this Agreement, the Mortgage, the Note
or the Wells Fargo Loan Documents (other than as provided in (1) and (2) of this
Section), and such failure shall continue for ten (10) days after the earlier of
(i) the Pledgor has knowledge of such failure, or (ii) the Secured Party sends
the Pledgor written notice of such failure.
(4) The Pledgor shall commence a voluntary proceeding seeking
liquidation, reorganization, or other relief with respect to himself or his
debts under any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian,
or other similar official of him or a substantial part of his property or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against him
or shall make a general assignment for the benefit of creditors or shall
generally fail to pay his debts as they become due or shall take any corporate
action to authorize any of the foregoing.
(5) An involuntary proceeding shall be commenced against the Pledgor
seeking liquidation, reorganization, or other relief with respect to him or his
debts under any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian,
or other similar official for him or a substantial part of its property, and
such involuntary proceeding shall remain undismissed and unstayed for a period
of sixty (60) days.
(6) The Pledgor shall fail to pay when due any principal of or interest
on any debt with a then-current outstanding principal balance in excess of
$50,000 (other than the Obligations) and such failure shall continue beyond
expiration of any cure period therefor, if any, or the maturity of any such debt
shall have been accelerated, or any such debt shall have been required to be
prepaid prior to the stated maturity thereof, or any event shall have occurred
that permits (or, with the giving of notice or lapse of time or both, would
permit) any holder or holders of such debt or any person or entity acting on
behalf of such holder or holders to accelerate the maturity thereof or require
any such prepayment.
(7) This Agreement, the Mortgage or the Note shall cease to be in full
force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by the Pledgor, or the
Pledgor shall deny that it has any further liability or obligation under this
Agreement, the Mortgage or the Note, or any lien or security interest created by
this Agreement, the Mortgage or the Note shall for any reason cease to be a
valid, perfected security interest in and lien upon any of the Collateral
purported to be covered thereby.
(8) The Pledgor shall cease to be active in the management of Pizza
Inn, Inc.
(9) The Pledgor or any of his properties, revenues or assets shall
become subject to an order of forfeiture, seizure or divestiture (whether under
RICO or otherwise) and the same shall not have been discharged within thirty
(30) days from the date of entry thereof.
Section 5.2 Rights and Remedies. If any Event of Default shall exist,
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Secured Party shall have the following rights and remedies:
(i) In addition to all other rights and remedies granted to Secured
Party in this Agreement and in any other instrument or agreement securing,
evidencing, or relating to the Obligations, Secured Party shall have all of the
rights and remedies of a secured party under the Uniform Commercial Code as
adopted by the State of Texas. Without limiting the generality of the
foregoing, Secured Party may (A) without demand or notice to Pledgor, collect,
receive, or take possession of the Collateral or any part thereof, (B) sell or
otherwise dispose of the Collateral, or any part thereof, in one or more parcels
at public or private sale or sales, at Secured Party's offices or elsewhere, for
cash, on credit, or for future delivery, and/or (C) bid and become a purchaser
at any sale free of any right or equity of redemption in Pledgor, which right or
equity is hereby expressly waived and released by Pledgor. Upon the request of
Secured Party, Pledgor shall assemble the Collateral and make it available to
Secured Party at any place designated by Secured Party that is reasonably
convenient to Pledgor and Secured Party. Pledgor agrees that Secured Party
shall not be obligated to give more than five (5) days written notice of the
time and place of any public sale or of the time after which any private sale
may take place and that such notice shall constitute reasonable notice of such
matters. Secured Party shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Pledgor shall be liable for
all expenses of retaking, holding, preparing for sale, or the like, and all
reasonable attorneys' fees and other expenses incurred by Secured Party in
connection with the collection of the Obligations and the enforcement of Secured
Party's rights under this Agreement, all of which expenses and fees shall
constitute additional Obligations secured by this Agreement. Secured Party may
apply the Collateral against the Obligations in such order and manner as Secured
Party may elect in its sole discretion. Pledgor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay the Obligations. Pledgor waives all rights of marshalling
in respect of the Collateral.
(ii) Secured Party may cause any or all of the Collateral held by it to
be transferred into the name of Secured Party or the name or names of Secured
Party's nominee or nominees.
(iii) Secured Party may collect or receive all money or property at any
time payable or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so.
(iv) Secured Party shall have the right, but shall not be obligated to,
exercise or cause to be exercised all voting, consensual, and other powers of
ownership pertaining to the Collateral, and Pledgor shall deliver to Secured
Party, if requested by Secured Party, irrevocable proxies with respect to the
Collateral in form satisfactory to Secured Party.
(v) Pledgor hereby acknowledges and confirms that Secured Party may be
unable to effect a public sale of any or all of the Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and
applicable state securities laws and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers who will be obligated
to agree, among other things, to acquire any shares of the Collateral for their
own respective accounts for investment and not with a view to distribution or
resale thereof. Pledgor further acknowledges and confirms that any such private
sale may result in prices or other terms less favorable to the seller than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner, in accordance with the Uniform Commercial Code, as adopted in
the State of Texas, and Secured Party shall be under no obligation to take any
steps in order to permit the Collateral to be sold at a public sale. Secured
Party shall be under no obligation to delay a sale of any of the Collateral for
any period of time necessary to permit any issuer thereof to register such
Collateral for public sale under the Securities Act of 1933, as amended, or
under applicable state securities laws.
(vi) If Secured Party determines that it will sell all or part of the
Collateral pursuant to Section 5.2 hereof, and if, in the opinion of Secured
Party it is necessary or advisable to have the Collateral, or that portion
thereof to be sold, registered under the Securities Act of 1933, as amended, and
any applicable state securities laws designated by Secured Party, Pledgor will,
at Pledgor's expense, use reasonable efforts to cause each issuer of the
Collateral, or that portion thereof to be sold, to execute and deliver, and
cause the directors and officers of each such issuer to execute and deliver all
such instruments and documents and cause such issuer(s), directors, and officers
to do or use reasonable efforts to cause to be done all such other acts and
things as may be necessary or, in Secured Party's opinion, advisable to register
the Collateral, or that portion thereof to be sold, under the Securities Act of
1933, as amended, and any applicable state securities laws designated by Secured
Party, and to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the date of the
first public offering of the Collateral, or that portion thereof to be sold, and
to make all amendments thereto and to the related prospectus that, in Secured
Party's opinion, are necessary or advisable, all in conformity with the
requirements of the Securities Act of 1933, as amended, and any applicable state
securities laws designated by Secured Party, and the rules and regulations of
the SEC applicable thereto and any applicable state securities laws designated
by Secured Party. Pledgor agrees to use reasonable efforts to cause each issuer
of the Collateral, or that portion thereof to be sold, to comply with Securities
Act of 1933, as amended, and the blue sky laws of any jurisdiction that Secured
Party shall designate and cause each such issuer to make available to its
security holders, as soon as practical, an earnings statement (which need not be
audited) that will satisfy the provisions of the Securities Act of 1933, as
amended.
(vii) On any sale of the Collateral, Secured Party is hereby authorized
to comply with any limitation or restriction with which compliance is necessary,
in the view of Secured Party's counsel, in order to avoid any violation of
applicable law or in order to obtain any required approval of the purchaser or
purchasers by any applicable governmental authority.
Section 5.3 Performance by the Secured Party. If the Pledgor shall
--------------------------------
fail to perform any covenant or agreement contained in this Agreement or the
Note after being given notice of such failure by the Secured Party, the Secured
Party may perform or attempt to perform such covenant or agreement on behalf of
the Pledgor. In such event, the Pledgor shall, at the request of the Secured
Party, promptly pay any amount expended by the Secured Party in connection with
such performance or attempted performance to the Secured Party, together with
interest thereon at the Default Rate from and including the date of such
expenditure to but excluding the date such expenditure is paid in full.
Notwithstanding the foregoing, it is expressly agreed that the Secured Party
shall not have any liability or responsibility for the performance of any
obligation of the Pledgor under this Agreement, the Note or the Wells Fargo Loan
Documents.
ARTICLE VI
Miscellaneous
-------------
Section 6.1 No Waiver; Cumulative Remedies. No failure on the part of
------------------------------
Secured Party to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
Section 6.2 Successors and Assigns. This Agreement shall be binding
------------------------
upon and inure to the benefit of Pledgor and Secured Party and their respective
heirs, personal representatives, successors, and assigns, except that Pledgor
may not assign any of his rights or delegate any of his obligations under this
Agreement without the prior written consent of Secured Party.
Section 6.3 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT, THE MORTGAGE
---------------------------
AND THE NOTE EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Agreement may
be amended or waived only by an instrument in writing signed by the parties
hereto.
Section 6.4 Limitation of Liability. Neither the Secured Party nor
-----------------------
any affiliate, officer, director, employee, attorney, or agent of the Secured
Party shall have any liability with respect to, and the Pledgor hereby waives,
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by the
Pledgor in connection with, arising out of, or in any way related to, this
Agreement, the Mortgage or the Note, or any of the transactions contemplated by,
in connection with, arising out of, or in any way related to this Agreement, the
Mortgage or the Note. The Pledgor hereby waives, releases, and agrees not to
sue the Secured Party or any of the Secured Party's affiliates, officers,
directors, employees, attorneys, or agents for punitive damages in respect of
any claim in connection with, arising out of, or in any way related to, this
Agreement, the Mortgage or the Note, or any of the transactions contemplated by,
in connection with, arising out of, or in any way related to this Agreement, the
Mortgage or the Note. Nothing in this Section shall impair or restrict the
Pledgor's right to sue the Secured Party for actual damages arising as a result
of the gross negligence or willful misconduct of the Secured Party.
Section 6.5 No Duty. All attorneys, accountants, appraisers, and
--------
other professional persons or entities and consultants retained by the Secured
Party shall have the right to act exclusively in the interest of the Secured
Party and shall have no duty of disclosure, duty of loyalty, duty of care, or
other duty or obligation of any type or nature whatsoever to the Pledgor or any
other person or entity.
Section 6.6 Equitable Relief. The Pledgor recognizes that in the
-----------------
event the Pledgor fails to pay, perform, observe, or discharge any or all of the
Obligations, any remedy at law may prove to be inadequate relief to the Secured
Party. The Pledgor therefore agrees that the Secured Party, if the Secured
Party so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
Section 6.7 Notices. All notices and other communications provided for
-------
in this Agreement shall be given as provided on the signature page hereof.
Section 6.8 Applicable Law; Venue; Service of Process. This Agreement
-----------------------------------------
shall be governed by and construed in accordance with the laws of the State of
Texas and the applicable laws of the United States of America. This Agreement
has been entered into in Dallas County, Texas, and it shall be performable for
all purposes in Dallas County, Texas.
Section 6.9 Headings. The headings, captions, and arrangements used in
--------
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 6.10 Survival. All representations and warranties made in this
--------
Agreement shall survive the execution and delivery of this Agreement, and no
investigation by Secured Party shall affect the representations and warranties
of Pledgor herein or the right of Secured Party to rely upon them.
Section 6.11 Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 6.12 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 6.13 Construction. Pledgor and Secured Party acknowledge that each
------------
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Pledgor and Secured
Party.
Section 6.14 Obligations Absolute. The obligations of Pledgor under
---------------------
this Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any release
of any other collateral or any guarantor, or any subordination or impairment of
any collateral, or any waiver, consent, extension, indulgence, compromise,
settlement, or other action or inaction in respect of this Agreement, the
Obligations, or any document or instrument evidencing, securing, or otherwise
relating to the Obligations, or any exercise or failure to exercise any right,
remedy, power, or privilege in respect of the Obligations.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
PLEDGOR:
- -------
/s/ C. Jeffrey Rogers
- ------------------------
C. JEFFREY ROGERS
Address for Notices:
5050 Quorum Drive, Suite 500
Dallas, TX 75240
Fax No.: (972) 702-9510
Telephone No.: (972) 701-9955
SECURED PARTY:
- --------------
PIZZA INN, INC.
By:/s/ Ronald W. Parker
-----------------------
Ronald W. Parker, Executive Vice President
Address for Notices:
5050 Quorum Drive, Suite 500
Dallas, TX 75240
Fax No.: (972) 702-9507
Telephone No.: (972) 701-9955
Attention: Ronald W. Parker
THIS PLEDGE AGREEMENT dated as of October 6, 1999, is by and between RONALD
W. PARKER and ANNE G. PARKER, each an individual resident of Collin County,
Texas (each individually a Pledgor and collectively, the "Pledgors"), and PIZZA
INN, INC., a Missouri corporation (the "Secured Party").
R E C I T A L S:
----------------------
A. Secured Party has agreed to loan to Pledgors $577,056.43 pursuant to
the terms of a promissory note made by Pledgors payable to the order of Secured
Party as of October 6, 1999 (the "Note").
B. Secured Party has conditioned its obligations under the Note upon
the execution and delivery of this Agreement by Pledgors and those certain
mortgages dated as of the date hereof by Pledgors in favor of Secured Party (the
"Mortgages").
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
Security Interest and Pledge
----------------------------
Section 1 Security Interest and Pledge. As collateral security for the
----------------------------
prompt payment in full when due of all obligations, indebtedness and liabilities
of the Pledgors to the Secured Party, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, whether at stated maturity,
by acceleration, or otherwise under this Agreement, the Mortgages and the Note,
and all interest receiving thereon and all attorneys' fees and other expenses
incurred in the enforcement or collection thereof (the "Obligations"), Pledgors
hereby pledge and grant to Secured Party a security interest in the following
property (such property being hereinafter sometimes called the "Collateral"):
(a) 100,000 shares of common capital stock of Secured Party, evidenced
by certificates to be delivered to Secured Party within five (5) business days
of the date hereof;
(b) all shares of common capital stock of Secured Party hereinafter
delivered by Pledgor to Secured Party pursuant to the terms hereof;
(c) all products, proceeds, revenues, distributions, dividends, stock
dividends, securities, and other property, rights, and interests that Pledgors
receive or is at any time entitled to receive on account of the same; and
(d) certain real property described in Schedule A and Schedule B attached
---------- ----------
hereto (the "Property").
ARTICLE II
Representations and Warranties
------------------------------
Pledgors represent and warrant to Secured Party that:
Section 2.1 Title. Pledgors own, and with respect to Collateral
-----
acquired after the date hereof, Pledgors will own, legally and beneficially, the
Collateral free and clear of any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or title retention agreement), whether
arising by contract, operation of law, or otherwise (each a "Lien"), or any
right or option on the part of any third person or entity to purchase or
otherwise acquire the Collateral or any part thereof, except for the security
interest granted hereunder and a first priority security interest granted to
First Union Mortgage Corp. on the property described on Schedule B (the
----------
"Property Lien") and the security interest granted hereunder. The Collateral is
not subject to any restriction on transfer or assignment except for compliance
with applicable federal and state securities laws and regulations promulgated
thereunder and the Property Lien. Pledgors have the unrestricted right to
pledge the Collateral as contemplated hereby. All of the Collateral received by
Secured Party under Sections 1(a) will be, upon receipt by Secured Party, duly
and validly issued and fully paid and nonassessable.
Section 2.2 First Priority Security Interest. With the exception of
----------------------------------
the property listed on Schedule B and liens permitted in the Mortgages, this
----------
Agreement creates in favor of Secured Party a first priority security interest
in the Collateral. This Agreement creates a second priority lien on the
property listed on Schedule B. There are no conditions precedent to the
-----------
effectiveness of this Agreement that have not been fully and permanently
satisfied.
Section 2.3 Information Regarding Collateral to be Pledged. Pledgors
-----------------------------------------------
have completed the Information Regarding Shares to be Pledged form (the "Rule
144 Questionnaire"), and the information contained therein is true, accurate and
complete. The Rule 144 Questionnaire contains no untrue statement of a material
fact nor does it omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
Section 2.4 No Breach. The execution, delivery, and performance by
---------
the Pledgors of this Agreement, the Mortgages and the Note and compliance with
the terms and provisions hereof and thereof do not and will not (a) violate or
conflict with, or result in a breach of, or require any consent under (i) any
applicable law, rule, or regulation or any order, writ, injunction, or decree of
any governmental authority or arbitrator, or (ii) any agreement or instrument to
which either Pledgor is a party or by which their property is bound or subject,
or (b) constitute a default under any such agreement or instrument, or result in
the creation or imposition of any Lien (except as provided in this Agreement and
the Mortgages) upon any of the revenues or assets of the Pledgors.
Section 2.5 Litigation and Judgments. There is no action, suit,
--------------------------
investigation, or proceeding before or by any governmental authority or
arbitrator pending, or to the knowledge of either Pledgor, threatened against or
affecting the Pledgors.
Section 2.6 Enforceability. This Agreement, the Mortgages and the
--------------
Note constitute valid, and binding obligations of the Pledgors, enforceable
against the Pledgors in accordance with their respective terms, except as
limited by bankruptcy, insolvency, or other laws of general application relating
to the enforcement of creditors' rights.
Section 2.7 Approvals. No authorization, approval, or consent of,
---------
and no filing or registration with, any governmental authority or third party is
or will be necessary for the execution, delivery, or performance by the Pledgors
of this Agreement, the Mortgages and the Note or the validity or enforceability
thereof, except for filings provided for herein.
Section 2.8 Disclosure. No statement, information, report,
----------
representation, or warranty made by the Pledgors in this Agreement or the Note
or furnished to the Secured Party in connection with this Agreement, the
Mortgages or any of the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known to
the Pledgors which has a material adverse effect, or which might in the future
have a material adverse effect, on the condition (financial or otherwise),
prospects, or properties of the Pledgors that has not been disclosed in writing
to the Secured Party.
Section 2.9 Agreements. The Pledgors are not a party to any
----------
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, which could have a material adverse effect on the business,
condition (financial or otherwise), prospects, or properties of the Pledgors, or
the ability of the Pledgors to pay and perform their obligations under the Note.
ARTICLE III
Affirmative and Negative Covenants
----------------------------------
Pledgors covenant and agree with Secured Party that:
Section 3.1 Delivery. Within five (5) business days of the date
--------
hereof, Pledgors shall deliver to Secured Party certificate(s) representing the
shares of capital stock identified in Section 1(a) hereof, accompanied by
undated stock powers duly executed in blank.
Section 3.2 Real Estate. Pledgors will deliver to the Secured Party
------------
within ninety (90) days of the date hereof a paid mortgagee policy of title
insurance in an amount not less than the most recent appraised value of the
Property, insuring that the mortgage dated as of October 6, 1999 between
Pledgors and Secured Party, and all amendments, restatements and modifications
thereof creates in favor of the Secured Party a first priority lien on the
Property, except for the Property Lien and other encumbrances of record
acceptable to the Secured Party in its sole discretion. The mortgagee policy of
title insurance shall have been issued at the Pledgors' expense by a title
insurance company acceptable to the Secured Party, shall show a state of title
and exceptions thereto, if any, acceptable to the Secured Party, and shall
contain such endorsements as may be required by the Secured Party. The Pledgors
will deliver to Secured Party a survey of the Property in form and substance
reasonably acceptable to Secured Party and certified to the Secured Party by a
registered public surveyor acceptable to the Secured Party, showing (a) a metes
and bounds description of the Property, (b) all recorded or visible boundary
lines, building locations, locations of utilities, easements, rights-of-way,
rights of access, building or set-back lines, dedications, and natural and
manufactured objects affecting the Property, (c) any encroachments upon or
protrusions from the Property, (d) any area federally designated as a flood
hazard, and (e) any other matters as the Secured Party may require.
Section 3.3 Encumbrances. Pledgors shall not create, permit, or suffer
------------
to exist, and shall defend the Collateral against, any Lien, security interest,
or other encumbrance on the Collateral except the pledge and security interest
of Secured Party hereunder, liens permitted in the Mortgages and the Property
Lien, and shall defend Pledgors' rights in the Collateral and Secured Party's
security interest in the Collateral against the claims of all persons or
entities.
Section 3.4 Sale of Collateral. With the exception of the Property
--------------------
Lien, Pledgors shall not sell, assign, or otherwise dispose of the Collateral or
any part thereof without the prior written consent of Secured Party.
Section 3.5 Distributions. If Pledgors shall become entitled to
-------------
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase, or reduction of capital or issued in
connection with any reorganization), option or rights, whether in substitution
of, or in exchange for any Collateral, Pledgors agree to accept the same as
Secured Party's agent and to hold the same in trust for Secured Party, and to
deliver the same forthwith to Secured Party in the exact form received, with the
appropriate endorsement of Pledgors when necessary and/or appropriate undated
stock powers duly executed in blank, to be held by Secured Party as additional
Collateral for the Obligations, subject to the terms hereof. Upon the
occurrence of an Event of Default, Pledgors shall become entitled to receive or
shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase, or reduction of capital or issued in connection
with any reorganization), option or rights, whether as an addition to, in
substitution of, or in exchange for any Collateral or otherwise, Pledgors agree
to accept the same as Secured Party's agent and to hold the same in trust for
Secured Party, and to deliver the same forthwith to Secured Party in the exact
form received, with the appropriate endorsement of Pledgors when necessary
and/or appropriate undated stock powers duly executed in blank, to be held by
Secured Party as additional Collateral for the Obligations, subject to the terms
hereof. Any sums paid upon or in respect of the Collateral upon the liquidation
or dissolution of the issuer thereof shall be paid over to Secured Party to be
held by it as additional Collateral for the Obligations subject to the terms
hereof; and in case any distribution of capital shall be made on or in respect
of the Collateral or any property shall be distributed upon or with respect to
the Collateral pursuant to any recapitalization or reclassification of the
capital of the issuer thereof or pursuant to any reorganization of the issuer
thereof, the property so distributed shall be delivered to the Secured Party to
be held by it, as additional Collateral for the Obligations, subject to the
terms hereof. All sums of money and property so paid or distributed in respect
of the Collateral that are received by Pledgors shall, until paid or delivered
to Secured Party, be held by Pledgors in trust as additional security for the
Obligations.
Section 3.6 Further Assurances. At any time and from time to time,
-------------------
upon the request of Secured Party, and at the sole expense of Pledgors, Pledgors
shall promptly execute and deliver all such further instruments and documents
and take such further action as Secured Party may reasonably deem necessary or
desirable to preserve and perfect its security interest in the Collateral and
carry out the provisions and purposes of this Agreement, including, without
limitation, the execution and filing of such financing statements as Secured
Party may require. A carbon, photographic, or other reproduction of this
Agreement or of any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement and may be filed as a
financing statement. Secured Party shall at all times have the right to
exchange any certificates representing Collateral for certificates of smaller
or larger denominations for any purpose consistent with this Agreement.
Section 3.7 Taxes. Pledgors agree to pay or discharge prior to
-----
delinquency all taxes, assessments, levies, and other governmental charges
imposed on them or their property, except Pledgor shall not be required to pay
or discharge any tax, assessment, levy, or other governmental charge if (i) the
amount or validity thereof is being contested by Pledgors in good faith by
appropriate proceedings diligently pursued, and (ii) such proceedings do not
involve any risk of sale, forfeiture, or loss of the Collateral or any interest
therein.
Section 3.8 Notification. Pledgors shall promptly notify Secured Party
------------
of (i) any Lien, security interest, encumbrance, or claim made or threatened
against the Collateral, (ii) any material change in the Collateral, including,
without limitation, any material decrease in the value of the Collateral, (iii)
the occurrence or existence of any Event of Default under this Agreement, the
Note, the Mortgages or the Wells Fargo Loan Documents or the occurrence or
existence of any condition or event that, with the giving of notice or lapse of
time or both, would be an Event of Default under any such agreements, and (iv)
any matter that could reasonably be expected to have a material adverse effect
on the condition (financial or otherwise), prospects or properties of the
Pledgors. Wells Fargo Loan Documents shall mean that certain Loan Agreement,
dated as of June 30, 1997, by and between Pledgors and Wells Fargo Bank (Texas),
National Association and the related loan documents, each as amended.
Section 3.9 Compliance with Agreements. Pledgors shall comply in all
---------------------------
material respects with all agreements, contracts, and instruments binding on
them or affecting their properties or employment.
Section 3.10 Compliance with Laws. Pledgors shall comply in all
----------------------
material respects with all applicable laws, rules, regulations, and orders of
any court or governmental authority.
Section 3.11 Provide Information. Pledgors shall fully cooperate, to
--------------------
the extent requested by Secured Party, in the completion of any notice, form,
schedule, or other document filed by Secured Party on its own behalf or on
behalf of Pledgors, including, without limitation, any required notice or
statement of beneficial ownership or of the acquisition of beneficial ownership
of equity securities constituting part of the Collateral and any notice of
proposed sale of any such securities pursuant to Rule 144 as promulgated by the
SEC under the Securities Act of 1933, as amended. Without limiting the
generality of the foregoing, Pledgors shall furnish to Secured Party any and all
information which Secured Party may reasonably request for purposes of any such
filing, regarding Pledgors, the Collateral, and any issuer of any of the
Collateral.
Section 3.12 Notification of Changes in Beneficial Ownership. Pledgors
-----------------------------------------------
shall promptly notify Secured Party of any sale of securities of Secured Party
by either Pledgor or by any person or entity named on the Rule 144 Questionnaire
and shall furnish promptly to Secured Party a copy of any Form 144 filed in
respect of any such sale. In addition, if either Pledgor or any other person or
entity named in the Rule 144 Questionnaire shall file with the SEC a form or
other document reporting any change in the beneficial ownership of the common
stock of Secured Party, Pledgors shall promptly furnish to Secured Party a copy
of such form or document.
Section 3.13 Restriction on Sales after Default. Pledgors shall not
------------------------------------
sell or suffer or permit any person or entity named in the Rule 144
Questionnaire to sell any shares of the same class of securities as the
Collateral at any time after any Event of Default shall have occurred.
Section 3.14 Limitations on Liens. The Pledgors will not incur, create,
----------------------
assume, or permit to exist any Lien upon the Collateral, except liens permitted
herein, liens in the Mortgages or the Property Lien.
ARTICLE IV
Rights of Secured Party and Pledgors
-----------------------------------------
Section 4.1 Power of Attorney. Pledgors hereby irrevocably constitute
-----------------
and appoint Secured Party and any officer or agent thereof (other than Pledgor),
with full power of substitution, as Pledgors' true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead and in the name
of Pledgors or in its own name, from time to time in Secured Party's discretion,
so long as an Event of Default exists, to take any and all action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives Secured Party the power and right on behalf of
Pledgors and in its own name to do any of the following (subject to the rights
of Pledgors under Sections 4.2 and 4.3 hereof), without notice to or the consent
of Pledgors:
(i) to demand, sue for, collect, or receive in the name of Pledgors or
in its own name, any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral and, in connection
therewith, endorse checks, notes, drafts, acceptances, money orders, or any
other instruments for the payment of money under the Collateral;
(ii) to pay or discharge taxes, Liens, security interests, or other
encumbrances levied or placed on or threatened against the Collateral;
(iii) (A) to direct account debtors and any other parties liable for
any payment under any of the Collateral to make payment of any and all monies
due and to become due thereunder directly to Secured Party or as Secured Party
shall direct; (B) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect of or
arising out of any Collateral; (C) to sign and endorse any drafts, assignments,
proxies, stock powers, verifications, notices, and other documents relating to
the Collateral; (D) to commence and prosecute any suit, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action, or proceeding brought against
Pledgors with respect to any Collateral; (F) to settle, compromise, or adjust
any suit, action, or proceeding described above and, in connection therewith, to
give such discharges or releases as Secured Party may deem appropriate; (G) to
exchange any of the Collateral for other property upon any merger,
consolidation, reorganization, recapitalization, or other readjustment of the
issuer thereof and, in connection therewith, deposit any of the Collateral with
any committee, depositary, transfer agent, registrar, or other designated agency
upon such terms as Secured Party may determine; (H) to add or release any
guarantor, indorser, surety, or other party to any of the Collateral or the
Obligations; (I) to renew, extend, or otherwise change the terms and conditions
of any of the Collateral or Obligations; (J) to insure any of the Collateral;
(K) to sell, transfer, pledge, make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though Secured Party
were the absolute owner thereof for all purposes, and to do, at Secured Party's
option and Pledgors' expense, at any time, or from time to time, all acts and
things which Secured Party deems necessary to protect, preserve, or realize upon
the Collateral and Secured Party's security interest therein; and (L) to
complete, execute and file with the SEC one or more notices of proposed sale of
securities pursuant to Rule 144.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be liable
for any failure to do so or any delay in doing so. Secured Party shall not be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on Secured Party solely to
protect, preserve, and realize upon its security interest in the Collateral.
Section 4.2 Voting Rights. Unless and until an Event of Default shall
-------------
have occurred and be continuing, Pledgors shall be entitled to exercise any and
all voting rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of this Agreement. Secured Party shall
execute and deliver to the Pledgors all such proxies and other instruments as
Pledgors may reasonably request for the purpose of enabling Pledgors to exercise
the voting rights which they are entitled to exercise pursuant to this Section.
Section 4.3 Dividends. Unless and until an Event of Default shall have
---------
occurred and be continuing, Pledgors shall be entitled to receive and retain any
dividends on the Collateral paid in cash.
Section 4.4 Performance by Secured Party. If Pledgors fail to perform
----------------------------
or comply with any of the agreements contained herein after being given notice
of such failure by Secured Party, Secured Party itself may, at its sole
discretion, cause or attempt to cause performance or compliance with such
agreement and the expenses of Secured Party, together with interest thereon at
the Default Rate, shall be payable by Pledgors to Secured Party on demand and
shall constitute Obligations secured by this Agreement. Notwithstanding the
foregoing, it is expressly agreed that Secured Party shall not have any
liability or responsibility for the performance of any obligation of Pledgors
under this Agreement.
Section 4.5 Secured Party's Duty of Care. Other than the exercise of
-----------------------------
reasonable care in the physical custody of the Collateral while held by Secured
Party hereunder, Secured Party shall have no responsibility for or obligation or
duty with respect to all or any part of the Collateral or any matter or
proceeding arising out of or relating thereto, including, without limitation,
any obligation or duty to collect any sums due in respect thereof or to protect
or preserve any rights against prior parties or any other rights pertaining
thereto, it being understood and agreed that Pledgors shall be responsible for
preservation of all rights in the Collateral. Without limiting the generality
of the foregoing, Secured Party shall be conclusively deemed to have exercised
reasonable care in the custody of the Collateral if Secured Party takes such
action, for purposes of preserving rights in the Collateral, as Pledgors may
reasonably request in writing, but no failure or omission or delay by Secured
Party in complying with any such request by Pledgors, and no refusal by Secured
Party to comply with any such request by Pledgors, shall be deemed to be a
failure to exercise reasonable care.
Section 4.6 Setoff. If an Event of Default shall have occurred and
------
be continuing, Secured Party shall have the right to set off and apply against
the Obligations in such manner as the Secured Party may determine, at any time
and without notice to the Pledgors, any and all sums at any time credited by or
owing from the Secured Party to the Pledgors whether or not the Obligations are
then due. In addition to the Secured Party's right of setoff and as further
security for the Obligations, the Pledgors hereby grant to the Secured Party a
security interest in all sums at any time credited by or owing from the Secured
Party to the Pledgors. The rights and remedies of the Secured Party hereunder
are in addition to other rights and remedies (including, without limitation,
other rights of setoff) which the Secured Party may have.
ARTICLE V
Default
-------
Section 5.1 Events of Default. Each of the following shall be
-------------------
deemed an "Event of Default":
(1) The Pledgors shall fail to pay when due the Obligations or any part
thereof and such failure shall continue for ten (10) days.
(2) Any representation or warranty made or deemed made by the Pledgor
in this Agreement, the Mortgages, the Note or the Wells Fargo Loan Documents, or
in any certificate, report, notice, or financial statement furnished at any time
in connection with any such agreements shall be false, misleading, or erroneous
in any material respect when made or deemed to have been made.
(3) The Pledgors shall fail to perform, observe, or comply with any
covenant, agreement, or term contained in this Agreement, the Mortgages, the
Note or the Wells Fargo Loan Documents (other than as provided in (1) and (2) of
this Section), and such failure shall continue for ten (10) days after the
earlier of (i) either Pledgor has knowledge of such failure, or (ii) the Secured
Party sends either Pledgor written notice of such failure.
(4) Either Pledgor shall commence a voluntary proceeding seeking
liquidation, reorganization, or other relief with respect to themselves or their
debts under any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian,
or other similar official of them or a substantial part of their property or
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against them or shall make a general assignment for the benefit of creditors or
shall generally fail to pay their debts as they become due or shall take any
corporate action to authorize any of the foregoing.
(5) An involuntary proceeding shall be commenced against either Pledgor
seeking liquidation, reorganization, or other relief with respect to them or
their debts under any bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official for them or a substantial part
of its property, and such involuntary proceeding shall remain undismissed and
unstayed for a period of sixty (60) days.
(6) The Pledgors shall fail to pay when due any principal of or
interest on any debt with a then-current outstanding principal balance in excess
of $50,000 (other than the Obligations) and such failure shall continue beyond
expiration of any cure period therefor, if any, or the maturity of any such debt
shall have been accelerated, or any such debt shall have been required to be
prepaid prior to the stated maturity thereof, or any event shall have occurred
that permits (or, with the giving of notice or lapse of time or both, would
permit) any holder or holders of such debt or any person or entity acting on
behalf of such holder or holders to accelerate the maturity thereof or require
any such prepayment.
(7) This Agreement , the Mortgages or the Note shall cease to be in
full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by either Pledgor, or
either Pledgor shall deny that he or she has any further liability or obligation
under this Agreement, the Mortgages or the Note, or any lien or security
interest created by this Agreement, the Mortgagees or the Note shall for any
reason cease to be a valid, perfected security interest in and lien upon any of
the Collateral purported to be covered thereby.
(8) Ronald W. Parker shall cease to be active in the management of
Pizza Inn, Inc.
(9) The Pledgors or any of their properties, revenues or assets shall
become subject to an order of forfeiture, seizure or divestiture (whether under
RICO or otherwise) and the same shall not have been discharged within thirty
(30) days from the date of entry thereof.
Section 5.2 Rights and Remedies. If any Event of Default shall exist,
-------------------
Secured Party shall have the following rights and remedies:
(1) In addition to all other rights and remedies granted to Secured
Party in this Agreement and in any other instrument or agreement securing,
evidencing, or relating to the Obligations, Secured Party shall have all of the
rights and remedies of a secured party under the Uniform Commercial Code as
adopted by the State of Texas. Without limiting the generality of the
foregoing, Secured Party may (A) without demand or notice to Pledgors, collect,
receive, or take possession of the Collateral or any part thereof, (B) sell or
otherwise dispose of the Collateral, or any part thereof, in one or more parcels
at public or private sale or sales, at Secured Party's offices or elsewhere, for
cash, on credit, or for future delivery, and/or (C) bid and become a purchaser
at any sale free of any right or equity of redemption in Pledgors, which right
or equity is hereby expressly waived and released by Pledgors. Upon the request
of Secured Party, Pledgors shall assemble the Collateral and make it available
to Secured Party at any place designated by Secured Party that is reasonably
convenient to Pledgors and Secured Party. Pledgors agree that Secured Party
shall not be obligated to give more than five (5) days written notice of the
time and place of any public sale or of the time after which any private sale
may take place and that such notice shall constitute reasonable notice of such
matters. Secured Party shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Pledgors shall be liable for
all expenses of retaking, holding, preparing for sale, or the like, and all
reasonable attorneys' fees and other expenses incurred by Secured Party in
connection with the collection of the Obligations and the enforcement of Secured
Party's rights under this Agreement, all of which expenses and fees shall
constitute additional Obligations secured by this Agreement. Secured Party may
apply the Collateral against the Obligations in such order and manner as Secured
Party may elect in its sole discretion. Pledgors shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay the Obligations. Pledgors waive all rights of marshalling
in respect of the Collateral.
(2) Secured Party may cause any or all of the Collateral held by it to
be transferred into the name of Secured Party or the name or names of Secured
Party's nominee or nominees.
(3) Secured Party may collect or receive all money or property at any
time payable or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so.
(4) Secured Party shall have the right, but shall not be obligated to,
exercise or cause to be exercised all voting, consensual, and other powers of
ownership pertaining to the Collateral, and Pledgors shall deliver to Secured
Party, if requested by Secured Party, irrevocable proxies with respect to the
Collateral in form satisfactory to Secured Party.
(5) Pledgors hereby acknowledge and confirm that Secured Party may be
unable to effect a public sale of any or all of the Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and
applicable state securities laws and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers who will be obligated
to agree, among other things, to acquire any shares of the Collateral for their
own respective accounts for investment and not with a view to distribution or
resale thereof. Pledgors further acknowledge and confirm that any such private
sale may result in prices or other terms less favorable to the seller than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner, in accordance with the Uniform Commercial Code, as adopted in
the State of Texas, and Secured Party shall be under no obligation to take any
steps in order to permit the Collateral to be sold at a public sale. Secured
Party shall be under no obligation to delay a sale of any of the Collateral for
any period of time necessary to permit any issuer thereof to register such
Collateral for public sale under the Securities Act of 1933, as amended, or
under applicable state securities laws.
(6) If Secured Party determines that it will sell all or part of the
Collateral pursuant to Section 5.2 hereof, and if, in the opinion of Secured
Party it is necessary or advisable to have the Collateral, or that portion
thereof to be sold, registered under the Securities Act of 1933, as amended, and
any applicable state securities laws designated by Secured Party, Pledgors will,
at Pledgors' expense, use reasonable efforts to cause each issuer of the
Collateral, or that portion thereof to be sold, to execute and deliver, and
cause the directors and officers of each such issuer to execute and deliver all
such instruments and documents and cause such issuer(s), directors, and officers
to do or use reasonable efforts to cause to be done all such other acts and
things as may be necessary or, in Secured Party's opinion, advisable to register
the Collateral, or that portion thereof to be sold, under the Securities Act of
1933, as amended, and any applicable state securities laws designated by Secured
Party, and to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the date of the
first public offering of the Collateral, or that portion thereof to be sold, and
to make all amendments thereto and to the related prospectus that, in Secured
Party's opinion, are necessary or advisable, all in conformity with the
requirements of the Securities Act of 1933, as amended, and any applicable state
securities laws designated by Secured Party, and the rules and regulations of
the SEC applicable thereto and any applicable state securities laws designated
by Secured Party. Pledgors agree to use reasonable efforts to cause each issuer
of the Collateral, or that portion thereof to be sold, to comply with Securities
Act of 1933, as amended, and the blue sky laws of any jurisdiction that Secured
Party shall designate and cause each such issuer to make available to its
security holders, as soon as practical, an earnings statement (which need not be
audited) that will satisfy the provisions of the Securities Act of 1933, as
amended.
(7) On any sale of the Collateral, Secured Party is hereby authorized
to comply with any limitation or restriction with which compliance is necessary,
in the view of Secured Party's counsel, in order to avoid any violation of
applicable law or in order to obtain any required approval of the purchaser or
purchasers by any applicable governmental authority.
Section 5.3 Performance by the Secured Party. If the Pledgors shall
--------------------------------
fail to perform any covenant or agreement contained in this Agreement or the
Note after being given notice of such failure by the Secured Party, the Secured
Party may perform or attempt to perform such covenant or agreement on behalf of
the Pledgor. In such event, the Pledgor shall, at the request of the Secured
Party, promptly pay any amount expended by the Secured Party in connection with
such performance or attempted performance to the Secured Party, together with
interest thereon at the Default Rate from and including the date of such
expenditure to but excluding the date such expenditure is paid in full.
Notwithstanding the foregoing, it is expressly agreed that the Secured Party
shall not have any liability or responsibility for the performance of any
obligation of the Pledgors under this Agreement on the Note.
ARTICLE VI
Miscellaneous
-------------
Section 6.1 No Waiver; Cumulative Remedies. No failure on the part of
------------------------------
Secured Party to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
Section 6.2 Successors and Assigns. This Agreement shall be binding
------------------------
upon and inure to the benefit of Pledgors and Secured Party and their respective
heirs, personal representatives, successors, and assigns, except that Pledgors
may not assign any of their rights or delegate any of their obligations under
this Agreement without the prior written consent of Secured Party.
Section 6.3 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT, THE MORTGAGES
---------------------------
AND THE NOTE EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Agreement may
be amended or waived only by an instrument in writing signed by the parties
hereto.
Section 6.4 Limitation of Liability. Neither the Secured Party nor
-----------------------
any affiliate, officer, director, employee, attorney, or agent of the Secured
Party shall have any liability with respect to, and the Pledgors hereby waive,
release, and agree not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by the
Pledgors in connection with, arising out of, or in any way related to, this
Agreement, the Mortgages or the Note, or any of the transactions contemplated
by, in connection with, arising out of, or in any way related to this Agreement,
the Mortgages or the Note. The Pledgors hereby waive, release, and agree not to
sue the Secured Party or any of the Secured Party's affiliates, officers,
directors, employees, attorneys, or agents for punitive damages in respect of
any claim in connection with, arising out of, or in any way related to, this
Agreement, the Mortgages or the Note, or any of the transactions contemplated
by, in connection with, arising out of, or in any way related to this Agreement,
the Mortgages or the Note. Nothing in this Section shall impair or restrict the
Pledgors' right to sue the Secured Party for actual damages arising as a result
of the gross negligence or willful misconduct of the Secured Party.
Section 6.5 No Duty. All attorneys, accountants, appraisers, and
--------
other professional persons or entities and consultants retained by the Secured
Party shall have the right to act exclusively in the interest of the Secured
Party and shall have no duty of disclosure, duty of loyalty, duty of care, or
other duty or obligation of any type or nature whatsoever to the Pledgors or any
other person or entity.
Section 6.6 Equitable Relief. The Pledgors recognize that in the
-----------------
event the Pledgors fail to pay, perform, observe, or discharge any or all of the
Obligations, any remedy at law may prove to be inadequate relief to the Secured
Party. The Pledgors therefore agree that the Secured Party, if the Secured
Party so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
Section 6.7 Notices. All notices and other communications provided for
-------
in this Agreement shall be given as provided on the signature page hereof.
Section 6.8 Applicable Law; Venue; Service of Process. This Agreement
-----------------------------------------
shall be governed by and construed in accordance with the laws of the State of
Texas and the applicable laws of the United States of America. This Agreement
has been entered into in Dallas County, Texas, and it shall be performable for
all purposes in Dallas County, Texas.
Section 6.9 Headings. The headings, captions, and arrangements used in
--------
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 6.10 Survival. All representations and warranties made in this
--------
Agreement shall survive the execution and delivery of this Agreement, and no
investigation by Secured Party shall affect the representations and warranties
of Pledgors herein or the right of Secured Party to rely upon them.
Section 6.11 Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 6.12 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 6.13 Construction. Pledgors and Secured Party acknowledge that each
------------
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Pledgors and Secured
Party.
Section 6.14 Obligations Absolute. The obligations of Pledgors under
---------------------
this Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any release
of any other collateral or any guarantor, or any subordination or impairment of
any collateral, or any waiver, consent, extension, indulgence, compromise,
settlement, or other action or inaction in respect of this Agreement, the
Obligations, or any document or instrument evidencing, securing, or otherwise
relating to the Obligations, or any exercise or failure to exercise any right,
remedy, power, or privilege in respect of the Obligations.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
PLEDGOR:
- -------
/s/ Ronald W. Parker
- -----------------------
Ronald W. Parker
/s/ Anne G. Parker
- ---------------------
Anne G. Parker
Address for Notices:
5050 Quorum Drive, Suite 500
Dallas, TX 75240
Fax No.: (972) 702-9510
Telephone No.: (972) 701-9955
SECURED PARTY:
- --------------
PIZZA INN, INC.
By:/s/ C. Jeffrey Rogers
------------------------
C. Jeffrey Rogers, President and
Chief Executive Officer
Address for Notices:
5050 Quorum Drive, Suite 500
Dallas, TX 75240
Fax No.: (972) 702-9507
Telephone No.: (972) 701-9955
Attention: C. Jeffrey Rogers
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-25-2000
<PERIOD-START> JUN-28-1999
<PERIOD-END> SEPT-26-1999
<CASH> 396
<SECURITIES> 0
<RECEIVABLES> 5745
<ALLOWANCES> 938
<INVENTORY> 2042
<CURRENT-ASSETS> 10152
<PP&E> 1760
<DEPRECIATION> 3966
<TOTAL-ASSETS> 17733
<CURRENT-LIABILITIES> 4403
<BONDS> 0
<COMMON> 111
0
0
<OTHER-SE> 4891
<TOTAL-LIABILITY-AND-EQUITY> 17733
<SALES> 15906
<TOTAL-REVENUES> 17394
<CGS> 14584
<TOTAL-COSTS> 14584
<OTHER-EXPENSES> 627
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 139
<INCOME-PRETAX> 1137
<INCOME-TAX> 390
<INCOME-CONTINUING> 747
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 747
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
