FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This First Amendment to Loan and Security Agreement (this “First Amendment”) is entered into as of June 13, 2013, by and among The F&M Bank & Trust Company, as agent for certain lenders (“Agent”), the lenders party to the Loan Agreement (as defined below) (collectively, the “Lenders”), PIZZA INN, INC., a Missouri corporation (“Pizza Inn”) and PIE FIVE PIZZA COMPANY, INC., a Texas corporation (“Pie Five”, together with Pizza Inn, individually and collectively, jointly and severally, “Borrower”).

 

RECITALS

 

A. WHEREAS, Agent, the Lenders and Borrower entered into that certain Loan and Security Agreement dated as of August 28, 2012 (as further amended, modified or supplemented, the “Loan Agreement”);

 

B. WHEREAS, Borrower has advised Agent and the Lenders that Parent intends to issue additional common stock in an aggregate amount up to $3,000,000, the details of which are set forth in Parent’s registration statement on Form S-3 filed with the Securities Exchange Commission on May 3, 2013, as amended or supplemented to date (the “Proposed Equity Issuance”).

 

C. WHEREAS, Borrower has requested that Agent and the Lenders amend certain financial covenant definitions as set forth herein; and

 

D. WHEREAS, the parties desire to amend the Loan Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the parties’ mutual promises in this First Amendment, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties agree as follows:

 

AGREEMENT

 

1.           Recitals.  The Recitals are incorporated in this First Amendment as set forth above.

 

2.           Definitions.  Any capitalized terms not specifically defined herein will have the meaning ascribed to them in the Loan Agreement.

 

3.           Amendment to Certain Defined Terms.  Effective as of the date hereof, the following definitions contained in Section 1.1 of the Loan Agreement are hereby deleted in their entirety and replaced with the following:

 

“Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal period, the ratio of (a) EBITDA for such period minus the sum of (i) the excess of (Y) all unfinanced Capital Expenditures by Parent and its Subsidiaries made during such period (other than reinvested net proceeds of Asset Dispositions pursuant to subsection 2.4(B)(2)), net of any tenant improvement allowances, over (Z) the aggregate proceeds from the Proposed Equity Issuance (as defined in the First Amendment) at any time received by Parent and not previously applied to reduce unfinanced Capital Expenditures, (ii) all income taxes actually paid in cash during

 

 

“EBITDA” means, for any period, without duplication, the total of the following for Parent and its Subsidiaries on a consolidated basis, each calculated for such period:

 

(a) net income determined in accordance with GAAP; plus,

 

(b) to the extent included in the calculation of net income, the sum of (i) income taxes paid or accrued; (ii) interest expenses paid or accrued; (iii) non-cash stock compensation; (iv) amortization and depreciation; (v) non-recurring litigation expenses, provided, the aggregate amount under this subsection (v) shall not exceed 10% of EBITDA for any period (excluding such item); (vi) transactions fees and expenses in connection with this Agreement which are set forth on Schedule 1.1 hereof; (vii) Pre-Opening Soft Costs in an aggregate amount not to exceed $37,500 per store; and (viii) other non-cash charges not to exceed $750,000 for the applicable trailing twelve month period, plus or minus

 

(c) the net change in deferred franchise and development fees.

 

4.           Addition of a Defined Term.  Effective as of the date hereof, the following definition is hereby added to Section 1.1 of the Loan Agreement in its proper alphabetical order to read as follows:

 

“First Amendment” means the First Amendment to Loan and Security Agreement by and among the Borrower, the Agent and the Lenders dated as June 13, 2013.

 

5.           No Other Waiver.  Nothing contained in this First Amendment shall be construed as a waiver by Agent or any Lender of any covenant or provision of the Loan Agreement, the other Loan Documents, or of any other contract or instrument between any Loan Party and Agent and any Lender, and the failure of Agent or Lenders at any time or times hereafter to require strict performance by any Loan Party of any provision thereof shall not waive, affect or diminish any rights of Agent or Lenders to thereafter demand strict compliance therewith.  Agent and Lenders hereby reserve all rights granted under the Loan Agreement, the other Loan Documents and any other contract or instrument between any Loan Party and Agent or any Lender.

 

6.           Conditions.  In order to induce Agent and the Lenders to enter into this First Amendment, Borrower hereby agrees:

 

 

 

(i)

to deliver the First Amendment duly executed by Borrowers and the Consent, Ratification and Release duly executed by the Guarantors, in each case, in form and substance satisfactory to the Agent;

 

(ii)

to pay to Agent and the Lenders a non-refundable amendment fee in the amount of $5,000 which shall be deemed fully earned and non-refundable on the date hereof and to pay to Agent and the Lenders all other fees, costs, and expenses owed to and/or incurred by Agent in connection with this First Amendment; and

 

(iii)

that all corporate proceedings taken by Borrower in connection with the transactions contemplated by this First Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Agent and its legal counsel.

 

7.           Representations and Warranties.  Borrower expressly reaffirms all of its representations and warranties in the Loan Agreement as true and correct in all material respects as of the date of this First Amendment (except such representations and warranties that expressly relate to an earlier date), including without limitation all representations and warranties in Section 4 of the Loan Agreement.

 

8.           No Waiver.  All of the terms and conditions of the Loan Agreement remain in full force and effect and none of such terms and conditions are, or shall be construed as, otherwise amended or modified, except as specifically set forth herein and nothing in this Agreement shall constitute a waiver by the Agent or Lenders of any Default or Event of Default, or of any right, power or remedy available to the Agent or the Lenders under the Loan Agreement, whether any such defaults, rights, powers or remedies presently exist or arise in the future.

 

9.           Signatures.  This First Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument.

 

10.           Ratification.  The Loan Agreement, together with this First Amendment and any related documents, instruments and agreements, shall hereafter refer to the Loan Agreement, as amended hereby.

 

11.           Release.  EACH BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE OBLIGATIONS OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM AGENT AND THE LENDERS WHICH ARE KNOWN TO IT AS OF THE DATE HEREOF.  EACH BORROWER HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT, THE LENDERS AND EACH OF THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, AFFILIATES, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “RELEASED PARTIES”) FROM ALL KNOWN CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES AND LIABILITIES WHATSOEVER, ANTICIPATED OR

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed as of the date first above written.

 

BORROWER:

PIZZA INN, INC.

Title:                     

[Signature Page to First Amendment to Credit Agreement]

CONSENT, RATIFICATION AND RELEASE

Each undersigned hereby consents to the terms of the First Amendment to Loan and Security Agreement (the “First Amendment”), dated as of June 13, 2013, among The F&M Bank & Trust Company, as agent for certain lenders (“Agent”), the lenders party to the Loan Agreement (as defined below) (collectively, the “Lenders”) and PIZZA INN, INC., a Missouri corporation, PIE FIVE PIZZA COMPANY, INC., a Texas corporation (collectively, “Borrower”), and confirms and ratifies the terms of that certain Guaranty executed by each undersigned Guarantor in favor of Agent and the other Lenders.  Capitalized terms used herein shall have the meaning assigned to them in the Loan Agreement. Each undersigned acknowledges that its Guaranty is in full force and effect and ratifies the same, acknowledges that no undersigned has any defense, counterclaim, set-off or any other claim known to it to diminish any undersigned’s liability under such documents, that no undersigned’s consent is required to the effectiveness of the foregoing First Amendment, and that no consent by any undersigned is required for the effectiveness of any future amendment, modification, forbearance or other action with respect to the Obligations, the Collateral, or any of the Loan Documents.  EACH UNDERSIGNED HEREBY ACKNOWLEDGES AND AGREES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND KNOWN TO IT OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE OBLIGATIONS OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM AGENT AND THE LENDERS.  EACH UNDERSIGNED HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT, THE LENDERS AND EACH OF THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, AFFILIATES, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “RELEASED PARTIES”) FROM ALL KNOWN CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES AND LIABILITIES WHATSOEVER, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT OR CONDITIONAL, OR AT LAW OR IN EQUITY, IN ANY CASE ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE HEREOF THAT ANY UNDERSIGNED NOW OR HEREAFTER HAS AGAINST THE RELEASED PARTIES, IF ANY, IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND THAT ARISE FROM ANY OF THE LOANS, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND/OR THE NEGOTIATION FOR AND EXECUTION OF THE FIRST AMENDMENT, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE.

 

IN WITNESS WHEREOF, each undersigned hereto has caused this Consent, Ratification and Release to be executed as of the date first above written.

 

[Signature Page to First Amendment to Loan Agreement]