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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
SCHEDULE 13D
INFORMATION TO BE INCLUDED IN STATEMENTS FILED
PURSUANT TO RULE 13d-1(a) AND AMENDMENTS
THERETO FILED PURSUANT TO RULE 13d-2(a)
(Amendment No. )1
PIZZA INN, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
- --------------------------------------------------------------------------------
(Title of class of securities)
725848 10 5
- --------------------------------------------------------------------------------
(CUSIP number)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
- --------------------------------------------------------------------------------
(Name, address and telephone number of person
authorized to receive notices and communications)
December 6, 2002
- --------------------------------------------------------------------------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box 1
Note. Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. See Rule 13d-7
for other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 45 Pages)
- --------
1 The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall
not be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 2 of 45 pages
- ------------------------- ---------------------
================================================================================
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
NEWCASTLE PARTNERS, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,270,000 (1)
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
0
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
365,000
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,905,000 (1)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,270,000 (1)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
32.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 3 of 45 pages
- ------------------------- ---------------------
(1) Includes 2,905,000 shares of Common Stock held by C. Jeffrey Rogers (the
"Pledged Shares") and pledged to Newcastle Partners L.P. ("NP") pursuant
to the terms of an Omnibus Agreement and Pledge Agreement, each dated as
of December 6, 2002 by and between NP and Mr. Rogers. The Omnibus
Agreement grants NP the option to acquire the Pledged Shares for
$7,373,726.42 (plus accrued interest through the exercise date). The
Pledge Agreement provides (i) that Mr. Rogers may not dispose of the
Pledged Shares without the prior written consent of NP and (ii) that NP
shall have voting power of the Pledged Shares.
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 4 of 45 pages
- ------------------------- ---------------------
================================================================================
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
NEWCASTLE CAPITAL GROUP, L.L.C.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,270,000 (1)
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
0
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
365,000
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,905,000 (1)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,270,000 (1)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
32.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 5 of 45 pages
- ------------------------- ---------------------
(1) Includes 2,905,000 shares of Common Stock held by C. Jeffrey Rogers (the
"Pledged Shares") and pledged to Newcastle Partners L.P. ("NP") pursuant
to the terms of an Omnibus Agreement and Pledge Agreement, each dated as
of December 6, 2002 by and between NP and Mr. Rogers. The Omnibus
Agreement grants NP the option to acquire the Pledged Shares for
$7,373,726.42 (plus accrued interest through the exercise date). The
Pledge Agreement provides (i) that Mr. Rogers may not dispose of the
Pledged Shares without the prior written consent of NP and (ii) that NP
shall have voting power of the Pledged Shares.
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 6 of 45 pages
- ------------------------- ---------------------
================================================================================
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
NEWCASTLE CAPITAL MANAGEMENT, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,270,000 (1)
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
0
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
365,000
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,905,000 (1)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,270,000 (1)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
32.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 7 of 45 pages
- ------------------------- ---------------------
(1) Includes 2,905,000 shares of Common Stock held by C. Jeffrey Rogers (the
"Pledged Shares") and pledged to Newcastle Partners L.P. ("NP") pursuant
to the terms of an Omnibus Agreement and Pledge Agreement, each dated as
of December 6, 2002 by and between NP and Mr. Rogers. The Omnibus
Agreement grants NP the option to acquire the Pledged Shares for
$7,373,726.42 (plus accrued interest through the exercise date). The
Pledge Agreement provides (i) that Mr. Rogers may not dispose of the
Pledged Shares without the prior written consent of NP and (ii) that NP
shall have voting power of the Pledged Shares.
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CUSIP No. 725848 10 5 13D Page 8 of 45 pages
- ------------------------- ---------------------
================================================================================
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
MARK E. SCHWARZ
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S. Citizen
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,270,000 (1)
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
0
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
365,000
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,905,000 (1)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,270,000 (1)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
32.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 9 of 45 pages
- ------------------------- ---------------------
(1) Includes 2,905,000 shares of Common Stock held by C. Jeffrey Rogers (the
"Pledged Shares") and pledged to Newcastle Partners L.P. ("NP") pursuant
to the terms of an Omnibus Agreement and Pledge Agreement, each dated as
of December 6, 2002 by and between NP and Mr. Rogers. The Omnibus
Agreement grants NP the option to acquire the Pledged Shares for
$7,373,726.42 (plus accrued interest through the exercise date). The
Pledge Agreement provides (i) that Mr. Rogers may not dispose of the
Pledged Shares without the prior written consent of NP and (ii) that NP
shall have voting power of the Pledged Shares.
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 10 of 45 pages
- ------------------------- ---------------------
The following statement constitutes the Schedule 13D filed by the
undersigned (the "Statement").
Item 1. Security and Issuer.
-------------------
This Statement relates to the common stock, par value $0.01 per
share ("Common Stock"), of Pizza Inn, Inc. (the "Company"), whose principal
executive offices are located at 3551 Plano Parkway, The Colony, Texas 75056.
Item 2. Identity and Background.
-----------------------
Items 2(a), 2(b) and 2(c) This Statement is jointly filed by
Newcastle Partners, L.P., a Texas limited partnership ("NP"), Newcastle Capital
Management, L.P., a Texas limited partnership ("NCM"), Newcastle Capital Group,
L.L.C., a Texas limited liability company ("NCG"), and Mark Schwarz (together
with NP, NCM and NCG, the "Reporting Persons"). Because Mark Schwarz is the
managing member of NCG, which is the general partner of NCM (with Mark Schwarz,
NCG and NCM, hereinafter referred to as the "Controlling Persons"), which in
turn is the general partner of NP, the Controlling Persons may be deemed,
pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
"Act"), to be the beneficial owners of all shares of Common Stock held by NP.
The Reporting Persons are filing this joint Statement, as they may be considered
a "group" under Section 13(d)(3) of the Act. However, neither the fact of this
filing nor anything contained herein shall be deemed to be an admission by the
Reporting Persons that such a group exists.
As stated above, Mark Schwarz is the managing member of NCG. The
principal business of NCG is acting as the general partner of NCM. The principal
business of NCM is acting as the general partner of NP. The principal business
of NP is investing in securities. The principal place of business for each of
the Reporting Persons is 300 Crescent Court, Suite 1110, Dallas, Texas 75201.
Item 2(d) During the last five years, none of the Reporting Persons
have been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
Item 2(e) During the last five years, none of the Reporting Persons
have been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction, and as a result of such proceeding, was or is subject to
a judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 2(f) Mark Schwarz is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
The net investment cost (including commissions, if any) of the
shares of Common Stock held directly by NP was approximately $594,257.58, all of
which was obtained from NP's working capital. None of NCG, NCM or Mr. Schwarz
directly owns any shares of Common Stock.
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 11 of 45 pages
- ------------------------- ---------------------
NP also acquired an option to purchase 2,905,000 shares of Common
Stock held by C. Jeffrey Rogers for an aggregate exercise price of $7,373,726.42
pursuant to the Omnibus Agreement by and between NP and Mr. Rogers dated as of
December 6, 2002. If exercised, the option will be paid for by canceling the
Promissory Note dated as of December 6, 2002 in the aggregate principal amount
of $7,373,726.42 (plus accrued interest through the exercise date) made by Mr.
Rogers in favor of NP when NP refinanced certain of Mr. Rogers existing debts.
The funds used by NP to refinance certain of Mr. Roger's existing debt were
obtained from NP's working capital.
Item 4. Purpose of Transaction.
----------------------
The Reporting Persons purchased the Common Stock based on the belief
that the Common Stock, at current market prices, was undervalued and represented
an attractive investment opportunity. Depending upon overall market conditions,
other investment opportunities, and the availability of shares of Common Stock
at desirable prices, the Reporting Persons may endeavor to increase their
position in the Company through, among other things, the purchase of shares of
Common Stock in open market or private transactions, on such terms and at such
times as the Reporting Persons deem advisable.
On December 6, 2002, NP entered into an Omnibus Agreement with C.
Jeffrey Rogers whereby NP agreed to refinance certain of the existing
indebtedness of Mr. Rogers in the aggregate amount of $7,373,726.42 (the
"Existing Indebtedness"). In exchange for NP refinancing the Existing
Indebtedness, Mr. Rogers (i) gave NP an option to purchase in whole, but not in
parts, 2,905,000 shares of Common Stock directly held by him (the "Pledged
Shares") at an aggregate exercise price of $7,373,726.42 (plus accrued interest
through the exercise date), (ii) issued a Promissory Note in the aggregate
principal amount of $7,373,726.42 in favor of NP and (iii) entered into a Pledge
Agreement with NP. The Omnibus Agreement and other related documents are
described in more detail in Item 6 hereof.
The Reporting Persons may, from time to time, evaluate various
alternatives that they might consider concerning the business and operations of
the Company. The Reporting Persons intend to hold discussions with the Board of
Directors of the Company (the "Board of Directors") to discuss various matters
relating to the Company, including appropriate representation on the Board of
Directors, such as appointing one or more persons identified by the Reporting
Persons as directors of the Company. If the Reporting Persons are unable to
reach an agreement with the Company regarding appropriate representation on the
Board of Directors, the Reporting Persons reserve the right to take all actions
they deem appropriate, including but not limited to, soliciting proxies and
proposing an alternative slate of directors to be put forth for consideration by
the Company's shareholders at the next scheduled or future annual or special
meeting of the Company's shareholders.
Irrespective of the issue of Board representation, the Reporting
Persons intend to communicate with the Board of Directors and certain
shareholders concerning the Company's performance and their involvement in the
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 12 of 45 pages
- ------------------------- ---------------------
Company. In addition, the Reporting Persons intend to review their investment in
the Company on a continuing basis. Depending on various factors, such as the
Company's financial position and investment strategy, the price levels of the
shares of Common Stock, conditions in the securities market and general economic
and industry conditions, the Reporting Persons may take such actions as they
deem appropriate including, without limitation, making proposals to the Company
concerning corporate governance, the capitalization and operations of the
Company, the sale of the whole or selective assets of the Company, or the
amendment of the Articles of Incorporation or By-Laws of the Company. The
Reporting Persons may also purchase additional shares of Common Stock or sell
some or all of their shares of Common Stock or change their intention with
respect to any and all matters referred to in Item 4.
Except as set forth herein or such as would occur upon completion of
any of the actions discussed above, no Reporting Person has any present plan or
proposal which would relate to or result in any of the matters set forth in
subparagraphs (a) - (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Company.
-------------------------------------
The aggregate percentage of shares of Common Stock reported to be
owned by the Reporting Persons is based upon 10,058,374 shares of Common Stock
outstanding as of November 4, 2002 as reported in the Company's Form 10-Q for
the period ended September 30, 2002 as filed with the Securities and Exchange
Commission on November 12, 2002.
(a) As of the filing date of this Statement, NP beneficially
owned 3,270,000 shares of Common Stock, representing approximately 32.5% of the
Company's issued and outstanding Common Stock.
NCM, as the general partner of NP, may be deemed to beneficially
own the 3,270,000 shares of Common Stock beneficially owned by NP, representing
approximately 32.5% of the issued and outstanding Common Stock of the Company.
NCG, as the general partner of NCM, which in turn is the general
partner of NP, may also be deemed to beneficially own the 3,270,000 shares of
Common Stock beneficially owned by NP, representing approximately 32.5% of the
issued and outstanding Common Stock of the Company.
Mark Schwarz, as the managing member of NCG, the general partner
of NCM, which in turn is the general partner of NP, may also be deemed to
beneficially own the 3,270,000 shares of Common Stock beneficially owned by NP,
representing approximately 32.5% of the issued and outstanding Common Stock of
the Company.
(b) Pursuant to the terms of the Omnibus Agreement and Pledge
Agreement and by virtue of his position with NP, NCG and NCM, Mark Schwarz has
(i) the sole power to vote over 3,270,000 shares of Common Stock or 32.5% of the
issued and outstanding shares of Common Stock, (ii) the sole power to dispose of
365,000 shares of Common Stock or 3.6% of the issued and outstanding shares of
Common Stock, and (iii) shares the power to dispose over 2,905,000 shares of
Common Stock or 28.9% of the issued and outstanding shares of Common Stock.
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 13 of 45 pages
- ------------------------- ---------------------
(c) Schedule A annexed hereto lists all the transactions in the
Company's Common Stock during the past 60 days. All such transactions were made
in the open market.
Pursuant to the Omnibus Agreement, NP received an option to purchase
2,905,000 shares of Common Stock from C. Jeffrey Rogers on December 6, 2002. The
aggregate exercise price for the option to purchase such shares is $7,373,726.42
or approximately $2.54 per share (plus accrued interest through the exercise
date). Except as otherwise provided in the Omnibus Agreement, the option
exercise period commences on January 3, 2003 and terminates on January 31, 2003.
(d) No person other than the Reporting Persons is known to have the
right to receive, or the power to direct the receipt, of dividends from, or
proceeds from the sale of, the shares of the Common Stock directly held by NP.
Pursuant to the Omnibus Agreement and the Pledge Agreement, NP has
the right to receive, or the power to direct the receipt of, dividends from the
Pledged Shares.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Company.
-------------------------------------------------------------
On December 6, 2002, NP entered into an Omnibus Agreement with C.
Jeffrey Rogers whereby NP agreed to refinance the Existing Indebtedness of Mr.
Rogers in exchange for (i) giving NP an option to purchase in whole, but not in
parts, the Pledged Shares at an aggregate exercise price of $7,373,726.42 (plus
accrued interest through the exercise date), (ii) issuing a Promissory Note in
the aggregate principal amount of $7,373,726.42 in favor of NP and (iii)
entering into a Pledge Agreement with NP.
Except as otherwise provided in the Omnibus Agreement, the option to
purchase the Pledged Shares commences on January 3, 2003 and terminates on
January 31, 2003. The Promissory Note matures on January 15, 2003 and is not
allowed to be prepaid prior to maturity. The Promissory Note incurs interest at
an annual rate of 10%. The Pledge Agreement provides that, among other things,
NP has a lien and security interest in the Pledged Shares and all dividends from
time-to-time received, receivable or otherwise distributed in respect of such
shares. The Pledge Agreement also provides that (i) Mr. Rogers may not dispose
of such shares without the prior written consent of NP and (ii) NP has the
voting power over the Pledged Shares.
Item 7. Materials to be Filed as Exhibits.
---------------------------------
(1) Joint Filing Agreement dated as of December 11, 2002 among NP, NCG,
NCM and Mark Schwarz.
(2) Omnibus Agreement dated as of December 6, 2002 by and between NP and
C. Jeffrey Rogers.
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 14 of 45 pages
- ------------------------- ---------------------
(3) Promissory Note dated December 6, 2002 in the aggregate principal
amount of $7,373,726.42 made by C. Jeffrey Rogers in favor of NP.
(4) Pledge Agreement dated December 6, 2002 by and between C. Jeffrey
Rogers and NP.
[Signature Page Follows]
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 15 of 45 pages
- ------------------------- ---------------------
SIGNATURES
After due inquiry and to the best of his knowledge and belief, each
of the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: December 11, 2002 NEWCASTLE PARTNERS, L.P.
By: Newcastle Capital Management, L.P.,
its general partner
By: Newcastle Capital Group, L.L.C., its
general partner
By: /s/ Mark Schwarz
-----------------------------
Mark Schwarz, Managing Member
NEWCASTLE CAPITAL MANAGEMENT, L.P.
By: Newcastle Capital Group, L.L.C., its
general partner
By: /s/ Mark Schwarz
-----------------------------
Mark Schwarz, Managing Member
NEWCASTLE CAPITAL GROUP, L.L.C.
By: /s/ Mark Schwarz
-----------------------------
Mark Schwarz, Managing Member
/s/ Mark Schwarz
-----------------------------------
MARK SCHWARZ
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 16 of 45 pages
- ------------------------- ---------------------
SCHEDULE A
Transactions in the Common Stock During the Past 60 Days
--------------------------------------------------------
Shares of Common Stock Price Per Date of
Purchased Share($) Purchase
--------- -------- --------
Newcastle Partners, L.P.
------------------------
1,500 1.6350 10/08/02
2,800 1.6503 10/10/02
5,000 1.6480 10/11/02
5,500 1.6477 10/14/02
3,000 1.6700 10/16/02
20,000 1.7500 10/18/02
3,000 1.6700 10/18/02
500 1.6950 10/25/02
10,000 1.6665 11/04/02
40,000 1.6575 11/06/02
23,000 1.6583 11/07/02
5,000 1.6680 11/08/02
100 1.8150 11/15/02
1,200 1.6775 11/20/02
8,400 1.6958 11/21/02
2,000 1.6925 11/25/02
75,000 1.9184 12/09/02
25,700 2.1063 12/10/02
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 17 of 45 pages
- ------------------------- ---------------------
EXHIBIT INDEX
Exhibit Page
- ------- ----
1. Joint Filing Agreement dated as of December 11, 2002 among 18
Newcastle Partners, L.P., Newcastle Capital Group L.L.C.,
Newcastle Capital Management, L.P. and Mark Schwarz.
2. Omnibus Agreement dated as of December 6, 2002 by and between 19
Newcastle Partners, L.P. and C. Jeffrey Rogers.
3. Promissory Note dated December 6, 2002 in the aggregate 26
principal amount of $7,373,726.42 made by C. Jeffrey Rogers in
favor of Newcastle Partners, L.P.
4. Pledge Agreement dated December 6, 2002 by and between C. 32
Jeffrey Rogers and Newcastle Partners, L.P.
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 18 of 45 pages
- ------------------------- ---------------------
EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k)(1) under the Securities Exchange
Act of 1934, as amended, the persons named below agree to the joint filing on
behalf of each of them of a Statement on Schedule 13D dated December 11, 2002
(including amendments thereto) with respect to the Common Stock of Pizza Inn,
Inc. This Joint Filing Agreement shall be filed as an Exhibit to such Statement.
Dated: December 11, 2002 NEWCASTLE PARTNERS, L.P.
By: Newcastle Capital Management, L.P.,
its general partner
By: Newcastle Capital Group, L.L.C., its
general partner
By: /s/ Mark Schwarz
-----------------------------
Mark Schwarz, Managing Member
NEWCASTLE CAPITAL MANAGEMENT, L.P.
By: Newcastle Capital Group, L.L.C., its
general partner
By: /s/ Mark Schwarz
-----------------------------
Mark Schwarz, Managing Member
NEWCASTLE CAPITAL GROUP, L.L.C.
By: /s/ Mark Schwarz
-----------------------------
Mark Schwarz, Managing Member
/s/ Mark Schwarz
-----------------------------------
MARK SCHWARZ
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 19 of 45 pages
- ------------------------- ---------------------
OMNIBUS AGREEMENT
THIS OMNIBUS AGREEMENT (this "Agreement") is entered into on
December 6, 2002 (the "Execution Date"), by C. Jeffrey Rogers ("Rogers"), and
Newcastle Partners, L.P., a Texas limited partnership ("Newcastle").
ARTICLE A PROPOSED REFINANCING
1. Rogers Existing Indebtedness. Rogers has pledged 2,905,000 shares
of common stock, $.01 par value, of Pizza Inn, Inc. (the "Common Stock") to
secure certain indebtedness pursuant to the following (collectively, such
indebtedness referred to herein as the "Existing Indebtedness"):
a. $5,337,000.52 owing to Wells Fargo Bank Texas,
National Association ("Wells Fargo") under the terms of that certain
Loan Agreement dated as of June 2, 1997, executed between Rogers and
Wells Fargo; and
b. $2,036,725.90 owing to Pizza Inn, Inc. (together
with Wells Fargo, collectively referred to herein as the "Existing
Lenders") under the terms of that certain Promissory Note dated
October 6, 1999, in the principal sum of $1,949,697.51, executed by
Rogers payable to the order of Pizza Inn, Inc.
2. Proposed Refinance. Rogers has proposed that Newcastle refinance
the Existing Indebtedness in the amount of $7,373,726.42 under the terms of a
Refinancing Promissory Note (as the same may be hereafter amended, renewed and
extended, the "Note") in the principal amount of $7,373,726.42, executed by
Rogers payable to the order of Newcastle. Rogers has further proposed that
payment and performance of the Note (together with certain other obligations,
including [but not limited to] this Agreement) be secured by a Stock Pledge
Agreement (as the same may hereafter be amended, renewed and extended, the
"Pledge Agreement") dated the date hereof, executed between Rogers and
Newcastle, under the terms of which Rogers shall pledge the "Pledged Shares" (as
defined in the Pledge Agreement) consisting of 2,905,000 shares of the Common
Stock.
3. Conditions to Refinance. Newcastle has agreed to refinance the
Existing Indebtedness under the terms of the Note, subject to the following:
a. Written confirmation of the amount of the Existing
Indebtedness secured by the Pledged Shares and owing by Rogers to
each of the Existing Lenders and, pursuant to the first advance
under the Note:
1) All obligations owing to the Existing Lenders
shall be paid in full; and
2) All liens or security interests in favor of each
of the Existing Lenders on the Pledged Shares and otherwise in
connection therewith shall be terminated and/or released upon such
payment.
b. Execution and delivery by Rogers to Newcastle of
this Agreement and the following documents:
1) Note
2) Pledge Agreement
- ------------------------- ---------------------
CUSIP No. 725848 10 5 13D Page 20 of 45 pages
- ------------------------- ---------------------
3) Upon payment of the Existing Indebtedness,
delivery of the following stock certificates
Name of Entity Certificate No. Number of Shares
1. Pizza Inn, Inc. PI12370 200,000
2. Pizza Inn, Inc. PI2152 500,000
3. Pizza Inn, Inc. PI12326 500,000
4. Pizza Inn, Inc. PI13354 939,000
5. Pizza Inn, Inc. PI13744 10,000
6. Pizza Inn, Inc. PI14336 300,000
7. Pizza Inn, Inc. PI13776 300,000
8. Pizza Inn, Inc. PI14788 156,000
4) Stock Powers executed in blank (2 for each
certificate)
5) Federal Reserve Form U-1
4. Return of Documents. Newcastle will return to Rogers
documentation concerning the Existing Indebtedness promptly following
Newcastle's receipt thereof from the Existing Lenders.
ARTICLE B. OPTION
1. OPTIONS TO PURCHASE COMMON STOCK. For value received, Newcastle
is entitled, subject to the terms herein, to purchase from Rogers, on or after
January 3, 2003, or from time to time thereafter, fully paid and nonassessable
shares of the Common Stock all on the terms and conditions and pursuant to the
provisions hereinafter set forth (collectively, the "Option"). The exercise
price applicable to this Option (the "Exercise Price") shall be all amounts owed
pursuant to the Note for the aggregate of the 2,905,000 shares of the Common
Stock set forth in the table above in lines 1 through 8 (collectively, the
"Option Shares"). As used herein, the term "Holder" shall initially mean
Newcastle, and shall subsequently mean each person or entity to who this Option
is duly assigned. The Option may be exercised in whole, but not in part,
commencing on January 3, 2003, and shall extend to January 31, 2003 (the
"Exercise Period") unless a court or other governing body prevents or delays the
exercise of the Option in which case the Exercise Period shall extend through
such period of prevention or delay.
2. MANNER OF EXERCISE; PAYMENT FOR SHARES; ISSUANCE OF CERTIFICATES.
Subject to the provisions of this Agreement, the Option Shares may be purchased
by the Holder, in whole, but not in part, by a completed election to purchase
agreement in the form attached to this Omnibus Agreement, to Rogers during
normal business hours on any business day, during the Exercise Period, at
Rogers's principal residence located at 7529 St. Andrews Ct., Plano, Texas 75093
(or such other office or agency of Rogers as he may reasonably designate by
notice to the Holder), which payment shall occur upon the cancellation by
Newcastle, and the declaration by Newcastle, of the payment in full of all
amounts (both principal and interest) owing under the Note and the Pledge
Agreement, in which event the Note shall be returned, marked "Paid in Full," to
Rogers. Payment for any Option Shares shall not be made prior to January 3,
2003.
3. DAMAGES. Rogers agrees that a breach of any of the covenants
contained in this Agreement will cause irreparable injury to Newcastle and that
Newcastle has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Agreement
shall be specifically enforceable against Rogers. Rogers further acknowledges
the impossibility of ascertaining the amount of damages which would be suffered
by Newcastle by reason of a breach of any of the covenants contained in this
Agreement and, consequently, agrees that, if Rogers shall breach any of such
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CUSIP No. 725848 10 5 13D Page 21 of 45 pages
- ------------------------- ---------------------
covenants, Rogers shall pay to Newcastle, as liquidated damages and not as a
penalty, an aggregate amount equal to the excess of the Exercise Price above the
actual price of the related capital stock plus any appropriate premiums.
ARTICLE C. MISCELLANEOUS
1. NOTICES. All notices, requests and other communications required
or permitted to be given or delivered hereunder to the Holder of the Option
shall be in writing, and shall be personally delivered, or shall be sent by
certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to such Holder at the address shown for such Holder on
the books of Rogers, or at such other address as shall have been furnished to
Rogers by notice from such Holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to
Rogers shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed to the office of Rogers at 7529 St. Andrews Ct., Plano,
Texas 75093, or at such other address as shall have been furnished to the Holder
of the Option by notice from Rogers. Any such notice, request or other
communication may be sent by facsimile, but shall in such case be subsequently
confirmed by a writing personally delivered or sent by certified or registered
mail or by recognized overnight mail courier as provided above. All notices,
requests and other communications shall be deemed to have been given either at
the time of the receipt thereof by the person entitled to receive such notice at
the address of such person for purposes of this Section 1 or, if mailed by
registered or certified mail or with a recognized overnight mail courier upon
deposit with the United States Post Office or such overnight mail courier, if
postage is prepaid and the mailing is properly addressed, as the case may be.
2. GOVERNING LAW. THIS OMNIBUS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
TEXAS WITHOUT REGARD TO THE CONFLICTS OF LAW.
3. AMENDMENTS. This Omnibus Agreement may only be amended by an
instrument signed by Rogers and the Holder.
4. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Omnibus Agreement are inserted for purposes of reference
only, and shall not affect the meaning or construction of any of the provisions
of this Omnibus Agreement.
5. SEVERABILITY AND SAVINGS CLAUSE. If any one or more of the
provisions contained in this Omnibus Agreement is for any reason (i) objected
to, contested or challenged by any court, government authority, agency,
department, commission or instrumentality of the United States or any state or
political subdivision thereof, or any securities industry self-regulatory
organization (collectively, "Governmental Authority"), or (ii) held to be
invalid, illegal or unenforceable in any respect, Rogers and the Holder agree to
negotiate in good faith to modify such objected to, contested, challenged,
invalid, illegal or unenforceable provision. It is the intention of Rogers and
the Holder that there shall be substituted for such objected to, contested,
challenged, invalid, illegal or unenforceable provision a provision as similar
to such provision as may be possible and yet be acceptable to any objecting
Governmental Authority and be valid, legal and enforceable. Further, should any
provisions of this Omnibus Agreement ever be reformed or rewritten by a judicial
body, those provisions as rewritten will be binding, but only in that
jurisdiction, on the Holder and Rogers as if contained in the original Omnibus
Agreement. The invalidity, illegality or unenforceability of any one or more
provisions of this Omnibus Agreement will not affect the validity and
enforceability of any other provisions of this Omnibus Agreement.
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CUSIP No. 725848 10 5 13D Page 22 of 45 pages
- ------------------------- ---------------------
6. PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors, assigns and legal representatives; provided,
however, that Rogers may not, without the prior written consent of Newcastle,
assign any rights, powers, duties or obligations hereunder.
7. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK;
SIGNATURE PAGE FOLLOWS]
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CUSIP No. 725848 10 5 13D Page 23 of 45 pages
- ------------------------- ---------------------
EXECUTED as of the date first above stated.
/s/ Jeffrey Rogers
--------------------------------
Jeffrey Rogers
WCASTLE PARTNERS, L.P.,
Texas limited partnership
By:Newcastle Capital Management L.P.,
its general partner
By: Newcastle Capital Group, L.L.C.,
its general partner
By:/s/ Mark Schwarz
-----------------------
Name: Mark Schwarz
------------------
Title: Managing Member
---------------
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CUSIP No. 725848 10 5 13D Page 24 of 45 pages
- ------------------------- ---------------------
Form of Election to Purchase Agreement
Form of Assignment
[FORM OF ASSIGNMENT]
(To be executed by the registered Holder if
such Holder desires to transfer the Option)
FOR VALUE RECEIVED, ________________ hereby sells, assigns and
transfers unto
________________________________________________________________________________
(Please print name, address and taxpayer identification number or social
security number of transferee.)
the accompanying Option, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint:
________________________________________________________________________________
attorney, to transfer the accompanying Option on the books of Rogers, with full
power of substitution. The transferee's tax identification or social security
number is ______________.
Dated:______________, 20 ____.
[HOLDER]
By:
----------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the
name as written upon the face of the accompanying Option or any prior assignment
thereof in every particular, without alteration or enlargement or any change
whatsoever.
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CUSIP No. 725848 10 5 13D Page 25 of 45 pages
- ------------------------- ---------------------
[FORM OF ELECTION TO PURCHASE AGREEMENT ]
(To be executed by the registered Holder if
such Holder desires to exercise the Option)
To: :
---------------------------------
The undersigned hereby irrevocably elects to (i) purchase 2,905,000 (Two Million
Nine Hundred Five Thousand) of the shares of common stock of Pizza Inn, Inc.,
$0.01 par value, ("Common Stock"), pursuant to the provisions of Article B of
the accompanying Omnibus Agreement by cancellation of the Note. The undersigned
requests that certificates for such shares of Common Stock be issued in the name
of:
- --------------------------------------------------------------------------------
(Please print name and address.)
- --------------------------------------------------------------------------------
(Please insert social security or other identifying number.)
The undersigned hereby confirms and acknowledges that it is acquiring the shares
of Common Stock solely for investment for its own account and not with a view to
distribution, and it will not offer, sell or otherwise dispose of any such
shares of Common Stock except in compliance with the Securities Act of 1933, as
amended, or any applicable state securities laws.
Dated:______________________, ____. [HOLDER]
By:
------------------------------
Name:
---------------------------
Title:
--------------------------
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CUSIP No. 725848 10 5 13D Page 26 of 45 pages
- ------------------------- ---------------------
REFINANCING PROMISSORY NOTE
$7,373,726.42 Dallas, Texas December 6, 2002
FOR VALUE RECEIVED, the undersigned, C. JEFFREY ROGERS, an individual ("Maker"),
hereby unconditionally promises to pay to the order of NEWCASTLE PARTNERS, L.P.,
a Texas limited partnership ("Payee"), 300 Crescent Court, Suite 1110, Dallas,
Texas 75201, or such other address given by Payee, the principal sum of
$7,373,726.42, in lawful money of the United States of America, together with
interest (calculated on the basis of a 365-day year) on the unpaid principal
balance from day to day remaining, computed from the date of advance until
maturity at the rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) ten percent (10.0%).
1. DEFINITIONS. When used in this Note, the following terms shall
have the respective meanings specified herein or in the Section referred to:
"BANKRUPTCY DEFAULT" means the occurrence and continuance of either
of the following events: (i) if Maker shall (A) apply for or consent to the
appointment of a receiver, trustee, intervenor, custodian or liquidator of
itself or of all or a substantial part of its assets, (B) be adjudicated a
bankrupt or insolvent or file a voluntary petition for bankruptcy or admit in
writing that it is unable to pay its debts as they become due, (C) make a
general assignment for the benefit of creditors, (D) file a petition or answer
seeking reorganization or an arrangement with creditors or to take advantage of
any bankruptcy or insolvency laws, or (E) file an answer admitting the material
allegations of, or consent to, or default in answering, a petition filed against
it in any bankruptcy, reorganization or insolvency proceeding, or take corporate
action for the purpose of effecting any of the foregoing; or (ii) an order,
judgment or decree shall be entered by any court of competent jurisdiction or
other competent authority approving a petition seeking reorganization of Maker
or appointing a receiver, trustee, intervenor or liquidator of any such person,
or of all or substantially all of its assets, and such order, judgment or decree
shall continue unstayed and in effect for a period of thirty (30) days.
"BUSINESS DAY" means a day upon which business is transacted by
national banks in Dallas, Texas.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section
5 hereof.
"IMMEDIATE DEFAULT" means the occurrence and continuance of any one
or more of the following events: (i) this Note, the Pledge Agreement, or the
Omnibus Agreement shall: (a) cease to be legal, valid, binding agreements
enforceable against any party executing the same in accordance with the
respective terms thereof in all material respects; (b) shall in any way be
terminated, or become or be declared ineffective or inoperative or shall in any
way whatsoever cease to give or provide (1) the respective liens, or security
interests, or (2) or the material rights or remedies intended to be created
thereby; (ii) a Bankruptcy Default; or (iii) Payee's liens, mortgages or
security interests in any of the Pledged Collateral should become unenforceable,
or cease to be first priority liens, mortgages or security interests.
"LOAN DOCUMENTS" means (collectively) this Note, the Pledge
Agreement, the Omnibus Agreement and any agreements, documents, any
modifications, amendments, renewals, extensions, or restatements thereof), or
certificates at any time executed or delivered pursuant to, in collateral
security of, or with reference to, any of the aforementioned documents.
"MATURITY DATE" means January 15, 2003.
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CUSIP No. 725848 10 5 13D Page 27 of 45 pages
- ------------------------- ---------------------
"MAXIMUM RATE" means, with respect to the holder hereof, the highest
non-usurious rate of interest, if any, permitted by applicable law on such day.
"OBLIGATION" means all indebtedness, liabilities and obligations, of
every kind and character, of Maker, now or hereafter existing in favor of Payee,
regardless of whether they are direct, indirect, primary, secondary, joint,
several, joint and several, liquidated, unliquidated, fixed or contingent, and
regardless of whether the same may, prior to their acquisition by Payee, be or
have been payable to some other person or entity, including, but not limited to,
all indebtedness, liabilities and obligations arising under this Note, the
Omnibus Agreement and the other Loan Documents.
"OMNIBUS AGREEMENT" means that certain Omnibus Agreement dated the
date hereof, executed between Maker and Payee.
"PLEDGE AGREEMENT" means that certain Pledge Agreement dated as of
the date hereof, executed by Maker in favor of Payee, as the same may be
hereafter revised, modified, renewed or extended.
"PLEDGED COLLATERAL" shall have the meaning assigned to such term in
the Pledge Agreement.
"RECOURSE EVENT" means at any time Payee brings an action to
foreclose, or exercise its rights against, the Pledged Collateral and Maker, or
any person acting on its behalf, seeks to restrain, enjoin, hinder, impede or
delay the foreclosure, or Maker or such person institutes, any suit or other
proceeding in a civil court filed to hinder, impede or delay the exercise of
Payee's rights or remedies against the Maker or the Pledged Collateral.
"RECOURSE LIABILITIES" means liability for any of the following:
(a) all indemnification obligations of Maker under the
Pledge Agreement;
(b) Maker's fraud or willful misrepresentations in
connection with the Loan Documents;
(c) if a Bankruptcy Default occurs, then accrued, unpaid
interest on this Note; and
(d) Maker, or any person or entity acting on its behalf,
interferes with or contests the exercise or validity of the exercise
of any remedies by Payee or files a petition in bankruptcy on behalf
of Maker or institutes litigation or a petition or claim in any
proceeding contesting the exercise or the validity of the exercise
of any right or remedy by Payee or the legality, validity or
enforceability of any Loan Document, or the legality or validity of
any sum contracted for, charged or received by Payee;
(e) all costs, expenses and fees including, but not
limited to, court costs and reasonable attorneys' fees,
disbursements and expenses, arising in connection with the
collection of items (a) through (d), above.
2. Payment. The principal of and interest upon this Note shall be
due and payable on the Maturity Date. All payments of principal and interest of
this Note shall be made by Maker to Payee in federal or other immediately
available funds. Payments made to Payee by Maker hereunder shall be applied
first to accrued interest and then to principal.
Should the principal of, or any installment of the principal of or
interest upon, this Note become due and payable on any day other than a Business
Day, the maturity thereof shall be extended to the next succeeding Business Day,
and interest shall be payable with respect to such extension.
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CUSIP No. 725848 10 5 13D Page 28 of 45 pages
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All past due principal of and, to the extent permitted by applicable
law, interest upon this Note shall bear interest at the Maximum Rate, or if no
Maximum Rate is established by applicable law, then at the rate per annum which
shall from day to day be equal to fifteen percent (15%).
3. WAIVERS. Maker and each surety, endorser, guarantor, and other
party ever liable for payment of any sums of money payable upon this Note,
jointly and severally waive presentment, demand, protest, notice of protest and
non-payment or other notice of default, notice of acceleration, and intention to
accelerate, or other notice of any kind, and agree that their liability under
this Note shall not be affected by any renewal or extension in the time of
payment hereof, or in any indulgences, or by any release or change in any
security for the payment of this Note, and hereby consent to any and all
renewals, extensions, indulgences, releases, or changes, regardless of the
number of such renewals, extensions, indulgences, releases, or changes.
No waiver by Payee of any of its rights or remedies hereunder or
under any other document evidencing or securing this Note or otherwise, shall be
considered a waiver of any other subsequent right or remedy of Payee; no delay
or omission in the exercise or enforcement by Payee of any rights or remedies
shall ever be construed as a waiver of any right or remedy of Payee; and no
exercise or enforcement of any such rights or remedies shall ever be held to
exhaust any right or remedy of Payee.
4. SECURITY AND OPTION. This Note is the "Refinancing Promissory
Note" referred to in the Omnibus Agreement and Pledge Agreement to which Payee
is entitled to the rights and benefits contained therein including the "Option"
provided and defined by the Omnibus Agreement. Payment and performance of this
Note is secured by the Pledged Collateral pursuant to the terms of the Pledge
Agreement.
5. DEFAULT AND REMEDIES.
(a) An "Event of Default" shall exist hereunder if any one or more
of the following events shall occur and be continuing: (i) Maker shall fail to
pay when due any principal of, or interest upon, this Note or the Obligation;
(ii) any representation or warranty made by Maker to Payee herein or in any of
the Loan Documents shall prove to be untrue or inaccurate in any material
respect; (iii) default or an "Event of Default," shall occur in the performance
of any of the covenants or agreements of Maker contained herein or in the other
Loan Documents; (iv) any of the Loan Documents shall cease to be legal, valid,
binding agreements enforceable against any party executing the same in
accordance with the respective terms thereof or shall in any way be terminated
or become or be declared ineffective or inoperative or shall in any way
whatsoever cease to give or provide the respective liens, security interests,
rights, titles, interests, remedies, powers or privileges intended to be created
thereby; (v) a Bankruptcy Default; or (vi) Payee's liens, mortgages or security
interests in any of the collateral for this Note should become unenforceable, or
cease to be first priority liens, mortgages or security interests.
(b) At any time following the occurrence of an Immediate Default -
and, if any other Event of Default occurs, then at any time following the
Maturity Date - the holder hereof may, at its option: (i) declare the entire
unpaid balance of principal and accrued interest, and any other obligation under
the Note, to be immediately due and payable without presentment or notice of any
kind which Maker waives pursuant to Section 3 herein, (ii) reduce any claim to
judgment, and/or (iii) pursue and enforce any of Payee's rights and remedies
available pursuant to any applicable law or agreement including, without
limitation, foreclosing all liens and security interests securing payment
thereof or any part thereof. If at any time a Bankruptcy Default occurs, then,
without any notice to Maker or any other act by Payee, the principal of and
interest accrued on this Note shall become immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
hereby waived by Maker.
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CUSIP No. 725848 10 5 13D Page 29 of 45 pages
- ------------------------- ---------------------
6. PREPAYMENT NOT ALLOWED. Maker is not entitled to prepay the
outstanding principal balance of this Note prior to Maturity. Payee is, however,
entitled to cancel the Note, and declare the Note paid-in-full, in conjunction
with, and in accordance with, Payee's exercise of the Option
7. USURY LAWS. Regardless of any provisions contained in this Note,
the Payee shall never be deemed to have contracted for or be entitled to
receive, collect, or apply as interest on the Note, any amount in excess of the
Maximum Rate, and, in the event Payee ever receives, collects, or applies as
interest any such excess, such amount which would be excessive interest shall be
applied to the reduction of the unpaid principal balance of this Note, and, if
the principal balance of this Note is paid in full, then any remaining excess
shall forthwith be paid to Maker. In determining whether or not the interest
paid or payable under any specific contingency exceeds the highest lawful rate,
Maker and Payee shall, to the maximum extent permitted under applicable law, (a)
characterize any non-principal payment (other than payments which are expressly
designated as interest payments hereunder) as an expense, fee, or premium,
rather than as interest, (b) exclude voluntary prepayments and the effect
thereof, and (c) spread the total amount of interest throughout the entire
contemplated term of this Note so that the interest rate is uniform throughout
such term.
8. COSTS. If this Note is placed in the hands of an attorney for
collection, or if it is collected through any legal proceeding at law or in
equity, or in bankruptcy, receivership or other court proceedings, Maker agrees
to pay all costs of collection, including, but not limited to, court costs and
reasonable attorneys' fees, including all costs of appeal.
9. BINDING EFFECT. This Note shall be binding upon and inure to the
benefit of Maker and Payee and their respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Maker
hereunder can be assigned without prior written consent of Payee. Any attempted
assignment in violation of this Section 9 shall be null and void.
10. GOVERNING LAW. THIS INSTRUMENT AND ALL ISSUES AND CLAIMS ARISING
IN CONNECTION WITH OR RELATING TO THE INDEBTEDNESS EVIDENCED HEREBY SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
11. LIMITATION OF LIABILITY. So long as no Recourse Event occurs,
Maker shall not have any personal liability for payment of the Obligation other
than the Recourse Liabilities. Following the occurrence of a Recourse Event,
Maker shall have unlimited personal liability for the Obligation. Nothing
contained in this Section shall (a) impair the validity of this Note or the
Obligation or any collateral or security therefor, or (b) affect, diminish,
negate, alter, amend or impair the validity or enforceability of the Recourse
Liabilities, it being intended that Maker shall at all times be fully liable for
the Recourse Liabilities. The provisions of this Section shall not in any way
affect or impair the right of any holder of this Note or any of the other Loan
Documents to exercise any or all of its rights under the Note or any of the
other Loan Documents against Maker or the Pledged Collateral pursuant to the
Payee's rights of foreclosure or other rights with respect to collateral or
security for the Obligation.
12. WAIVER OF TRIAL BY JURY. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, MAKER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR
THE ACTIONS OF PAYEE IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT HEREOF
OR THEREOF.
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CUSIP No. 725848 10 5 13D Page 30 of 45 pages
- ------------------------- ---------------------
13. ENTIRETY. THE PROVISIONS OF THIS NOTE AND THE LOAN DOCUMENTS MAY
BE AMENDED OR REVISED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY MAKER AND
PAYEE. THIS NOTE AND ALL THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE
AGREEMENT OF MAKER AND PAYEE AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF MAKER AND PAYEE. THERE ARE NO ORAL AGREEMENTS BETWEEN MAKER AND
PAYEE.
[Remainder of Page Intentionally Blank;
Signature Page Follows]
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CUSIP No. 725848 10 5 13D Page 31 of 45 pages
- ------------------------- ---------------------
MAKER:
C. JEFFREY ROGERS
/s/ C. JEFFREY ROGERS
---------------------------------------
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CUSIP No. 725848 10 5 13D Page 32 of 45 pages
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----------------
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (herein so called) is entered into on December
6, 2002, by C. Jeffrey Rogers ("Pledgor"), in favor of Newcastle Partners, L.P.,
a Texas limited partnership ("Lender").
W I T N E S E T H
1. Pledgor is the owner of the capital stock of Pizza Inn, Inc. (the
"Issuer") set forth on Exhibit A attached hereto (such capital stock being
herein referred to as the "Pledged Shares").
2. Pledgor, as borrower, and Lender, as lender, have entered into
the Note pursuant to which Lender has refinanced certain of Pledgor's previously
outstanding indebtedness (the "Existing Indebtedness") to Wells Fargo Bank
Texas, National Association and Pizza Inn, Inc., in the form of a term loan (the
"Loan") to Pledgor in the aggregate principal amount of $7,373,726.42.
3. Pledgor wishes to provide collateral security for the Secured
Indebtedness (as hereinafter defined) in the form of a pledge of the Pledged
Collateral (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and the benefit to be received by Pledgor by reason
of the Loan, which benefit is hereby expressly acknowledged by Pledgor, the
parties hereto agree as follows:
SECTION 1. Defined Terms. Capitalized terms used herein which are
defined in the Note shall have the same meanings when used herein unless the
context hereof shall otherwise require or provide. In addition, for the purposes
of this Pledge Agreement, the following terms shall have the respective meanings
assigned to them in this Section 1:
"Event of Default" shall mean: (a) the occurrence of an "Event of
Default" under, and as defined by, the Note; (b) the failure of Pledgor to
observe any of the terms, conditions, or covenants contained in this Pledged
Agreement; or (c) any legal or equitable interest in any of the Pledged
Collateral becomes vested in a person or entity other than Pledgor.
"Governmental Authority" means any state or federal entity
exercising executive, legislative, judicial, regulatory, or administrative
functions of or pertaining to government.
"Note" means that certain Refinancing Promissory Note dated of even
date herewith, executed by Pledgor and payable to the order of Lender in the
original principal amount of $7,373,726.42, together with all renewals,
extensions, restatements, modifications, and amendments thereof.
"Obligation" shall mean all indebtedness, liabilities and
obligations, of every kind and character, of Pledgor, now or hereafter existing
in favor of Lender, regardless of whether they are direct, indirect, primary,
secondary, joint, several, joint and several, liquidated, unliquidated, fixed or
contingent, and regardless of whether the same may, prior to their acquisition
by Lender, be or have been payable to some other person or entity, including,
but not limited to, all indebtedness, liabilities and obligations arising under
the Note, the Omnibus Agreement and the other Loan Documents. The term
"Obligation" shall include (but is not limited to) any damage or indemnification
claims now or hereafter existing in favor of Lender. Among other things, the
parties acknowledge and agree that in the event that Lender is precluded from
exercising the "Option" (as such term is defined in the Omnibus Agreement),
Lender would incur significant damages, which damages shall include but not be
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CUSIP No. 725848 10 5 13D Page 33 of 45 pages
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limited to, any excess of the "Exercise Price" (as such term is defined in the
Omnibus Agreement) above the actual price of the related capital stock plus any
appropriate premiums.
"Omnibus Agreement" means that certain Omnibus Agreement dated the
date hereof, executed between Pledgor and Lender.
"Pledged Collateral" shall have the meaning assigned to it in
Section 2 hereof.
"Pledged Shares" shall have the meaning assigned to it in the
recitals.
"Secured Indebtedness" shall mean all indebtedness, obligations, and
liabilities described or referred to in clauses (a) through (c) below:
(a) the Obligation;
(b) all fees and expenses, including, without limitation, all
reasonable attorneys' fees and legal expenses incurred by Lender to preserve and
maintain the Pledged Collateral, collect the obligations herein described, and
enforce any of the Loan Documents; and
(c) all extensions, renewals, amendments, and modifications of any
of the foregoing.
SECTION 2. Pledge. As collateral security for the payment and
performance of the Secured Indebtedness, Pledgor hereby pledges, hypothecates,
assigns, transfers, sets over, and delivers unto Lender, and hereby grants
Lender a lien and security interest in, the following:
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all cash, securities, dividends, increases, distributions, and
profits received therefrom or in connection therewith, including distributions
or payments in partial or complete liquidation or redemption, or as a result of
reclassifications, readjustments, reorganizations, or changes in the capital
structure of the Issuer, and any other property at any time and from
time-to-time received, receivable, or otherwise distributed or delivered to
Lender, and all rights and privileges pertaining thereto;
(b) all dividends, cash, instruments, and other property from
time-to-time received, receivable, or otherwise distributed in respect of or in
exchange for any or all of such shares;
(c) all securities hereafter delivered to Lender in substitution
for, or in addition to, any of the foregoing, all certificates representing or
evidencing such securities, and all cash, securities, instruments, documents,
dividends, increases, distributions, and profits received therefrom, and any
other property at any time and from time-to-time received by, receivable by, or
otherwise distributed or delivered to Lender in respect of or in exchange for
any or all of the property described;
(d) all subscriptions, warrants, options, and any other rights
issued now or hereafter by the Issuer or any other person whatsoever upon or in
connection with the Pledged Shares and any part of the Pledged Collateral; and
(e) all products and proceeds of the foregoing and all general
intangibles and contract rights related thereto, including without limitation,
all revenues, distributions, dividends, property, registration rights, contract
rights, and other rights and interests that Pledgor is, or may hereafter become,
entitled to receive on account of any collateral described in subsections 2(a)
through (e);
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CUSIP No. 725848 10 5 13D Page 34 of 45 pages
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(all such Pledged Shares, certificates, securities, instruments, documents,
dividends, increases, distributions, profits, intangibles, contract rights, and
other property being herein collectively called the "Pledged Collateral").
Pledgor shall forthwith deliver to Lender all subscriptions, warrants, options,
and all such other rights, and upon delivery to Lender, Lender shall hold such
subscriptions, warrants, options and other rights as additional collateral
pledged to secure the Secured Indebtedness; provided, however, that if Lender
determines, in its sole discretion, that the value of any such subscriptions,
warrants, options, or other rights shall terminate, expire, or be materially
reduced in value by holding the same as Pledged Collateral, Lender shall have
the right (but not the obligation), in its sole discretion after sending written
notice to Pledgor, to sell or exercise the same, and if exercised, then the
monies disbursed by Lender in connection therewith shall become part of the
Secured Indebtedness and all of the stock, securities, evidences of
indebtedness, and other items so acquired shall become part of the Pledged
Collateral;
TO HAVE AND TO HOLD the Pledged Collateral, together with all
rights, titles, interests, privileges, and preferences appertaining to or
incidental thereto, unto Lender, its successors, and assigns, forever subject,
however, to the terms, covenants, and conditions hereafter set forth.
SECTION 3. Lender As Custodian. Lender (or an agent designated by
Lender) shall have physical possession of the certificates or instruments
representing or evidencing the Pledged Collateral. Pledgor agrees that either
(a) all certificates representing Pledged Shares shall be registered in the
appropriate stock record books in the name of Lender or a nominee or nominees of
Lender and, in either such case, such registration shall reflect that the
registered owner is acting as agent on behalf of Lender, or (b) in lieu of or,
at Lenders option, in addition to presently registering the Pledged Collateral
in the name of Lender or its nominee as provided in clause (a) above, Pledgor
will deposit with Lender, along with the certificates or instruments
representing or evidencing the Pledged Collateral, duly executed stock powers in
favor of Lender or its nominee. In addition, Lender shall at all times have the
right to exchange certificates or instruments representing or evidencing the
Pledged Collateral for certificates or instruments of smaller or larger
denominations for any purpose consistent with its performance of this Pledge
Agreement.
SECTION 4. Representations and Warranties. Pledgor hereby represents
and warrants that: (a) Pledgor is a resident of the State of Texas, residing at
7529 St. Andrews Ct., Plano, Texas 75093; (b) after giving effect to the
refinancing of the Existing Indebtedness, Pledgor is the sole legal and
beneficial owner of the Pledged Collateral free and clear of all liens, charges,
pledges, encumbrances, and security interests of every kind and nature, other
than liens and security interests in favor of Lender; (c) each Pledged Share has
been validly authorized, issued, and is fully paid and non-assessable; (d)
Pledgor has good right and lawful authority to pledge the Pledged Collateral in
the manner hereby done or contemplated; (e) no consent or approval of any
Governmental Authority, or of any securities exchange, is necessary to effect
the validity of the rights created hereunder which have not been obtained; (f)
except for any financing statement which may have been filed by Lender, after
giving effect to the refinancing of the Existing Indebtedness, no financing
statement covering the Pledged Collateral, or any part thereof, has been filed
with any filing officer or office; (g) after giving effect to the refinancing of
the Existing Indebtedness, no security agreement covering the Pledged
Collateral, or any part thereof, has been made and no security interest, other
than the one herein created, has attached or been perfected in the Pledged
Collateral or any part thereof; (h) the execution, delivery, and consummation of
this Pledge Agreement will not violate any law, regulation, mortgage, indenture,
contract, instrument, judgment, or decree applicable to or binding on Pledgor;
(i) to the best of Pledgor's knowledge, the aggregate fair market value of
Pledgor's assets exceeds Pledgor's liquidated liabilities; (j) the Note
constitutes a refinancing by Pledgor of certain of the Existing Indebtedness;
and (k) Pledgor is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any "margin stock" within the meaning of Regulation U and no part of
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CUSIP No. 725848 10 5 13D Page 35 of 45 pages
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Previous Indebtedness has been used for, nor will the proceeds of the Note be
used for, directly or indirectly, a purpose which violates any law, statute or
regulation, including, without limitation, the provisions of Regulations T, U,
or X (as enacted by the Board of Governors of the Federal Reserve System, as
amended). The delivery at any time by Pledgor to Lender of additional Pledged
Collateral shall constitute a representation and warranty by Pledgor that, with
respect to such Pledged Collateral and each item thereof, the matters heretofore
warranted in clauses (a) through (k) immediately above are true and correct in
all material respects at, and as if they were made at, the date of such
delivery.
SECTION 5. Covenants.
(a) Additional Documents and Information. Pledgor covenants and
agrees to: (i) from time-to-time promptly execute and deliver to Lender all such
stock powers, assignments, certificates, supplemental writings, financing
statements, and other items and do all other acts or things as Lender may
reasonably request in order more fully to evidence and perfect the interest of
Lender in the Pledged Collateral; (ii) punctually and properly perform all of
Pledgor's covenants and duties under any other security agreement, deed of
trust, collateral pledge agreement, or contract of any kind now or hereafter
existing as security for or in connection with payment of the Secured
Indebtedness (to the extent liable thereon) in accordance with the terms hereof;
(iii) promptly furnish Lender with any information or writings which Lender may
reasonably request concerning the Pledged Collateral or the Issuer; (iv) allow
Lender to inspect all records of Pledgor relating to the Pledged Collateral or
to the Secured Indebtedness, and to make and take away copies of such records;
(v) promptly notify Lender of any material change in any fact or circumstance
warranted or represented by Pledgor in this Pledge Agreement or in any other
writing furnished by Pledgor to Lender in connection with the Pledged Collateral
or the Secured Indebtedness; (vi) promptly notify Lender of any claim, action,
or proceeding affecting title to the Pledged Collateral, or any part thereof, or
the security interest therein, and, at the request of Lender, appear in and
defend, at Pledgor's expense, any such action or proceeding; and (vii) promptly,
after being requested by Lender, pay to Lender the amount of all reasonable
expenses, including reasonable attorneys' fees and other legal expenses,
incurred by Lender in enforcing the security interest.
(b) Proceeds. Should the Pledged Collateral, or any part thereof,
ever be in any manner converted by the Issuer or maker into another type of
property, or any money or other proceeds ever be paid or delivered to Pledgor as
a result of Pledgor's rights in the Pledged Collateral, then, in any such event,
all such property, money, and other proceeds, except only ordinary cash
dividends (unless and until payable to Lender pursuant to Section 6(c) hereof),
shall become part of the Pledged Collateral and shall be delivered to Lender by
Pledgor.
(c) Performance by Lender. Should any covenant, duty, or agreement
of Pledgor fail to be performed in accordance with its terms hereunder, Lender
may, but shall never be obligated to, perform or attempt to perform such
covenant, duty, or agreement on behalf of Pledgor, and any amount expended by
Lender in such performance or attempted performance shall become a part of the
Secured Indebtedness. At the request of Lender, Pledgor agrees to pay such
amount promptly to Lender at Lender's office in Dallas, Texas, together with
interest thereon at the rate provided in the Note.
(d) Negative Covenants. Pledgor covenants and agrees that, without
the prior written consent of Lender, Pledgor will not: (i) sell, assign, or
transfer any rights of Pledgor in the Pledged Collateral except pursuant to the
"Option" (as such term is defined in the Omnibus Agreement); (ii) except for the
Option, grant any options or other rights in the Pledged Collateral; (iii)
create any other lien or security interest in, mortgage, or otherwise encumber
the Pledged Collateral, or any part thereof, or permit the same to be or become
subject to any lien, security interest, mortgage, attachment, execution,
sequestration, other legal or equitable process, or any encumbrance of any kind
or character, except the security interest herein created; (iv) vote for,
consent to, or permit any amendment of the articles of incorporation or charter
of the Issuer that might materially adversely affect the value of the Pledged
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CUSIP No. 725848 10 5 13D Page 36 of 45 pages
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Collateral; or (v) vote for, consent to, or permit (A) any transfer of shares
in, or change in ownership of, the Issuer, or (B) any other changes in the
capital structure of the Issuer.
SECTION 6. Voting Rights; Dividends, Etc.
(a) Termination of Rights. All rights of Pledgor to exercise the
voting and/or consensual rights and powers under the Pledged Collateral shall
hereby cease, and all such rights shall thereupon become vested in Lender, who
shall have the sole and exclusive right and authority to exercise such voting
and/or consensual rights. Further, Lender shall have the right to notify and
direct the Issuer to make all payments, dividends, and any other distributions
payable in respect thereof directly to Lender. The Issuer making any such
payment or distribution to Lender hereunder shall be fully protected in relying
on the written statement of Lender that it then holds a security interest which
entitles it to receive such payments and distributions. Any and all money and
other property paid over to or received by Lender pursuant to the provisions of
this subsection (a) shall be retained by Lender as additional collateral
hereunder and may be applied (and upon Pledgor's written request all cash shall
promptly be applied) in accordance with the provisions hereof.
(b) Dividends. All cash dividends, returns of capital, or other
distributions made on or in respect of the Pledged Collateral, whether resulting
from a subdivision, combination, or reclassification of the outstanding capital
stock or other ownership interests of the Issuer, received in exchange for
Pledged Collateral or any part thereof, or as a result of any merger,
consolidation, acquisition, or other exchange of assets to which the Issuer may
be a party or otherwise, and any and all cash and other property received in
exchange for the Pledged Collateral, or received in payment of the principal of
or in redemption of the Pledged Collateral, shall be paid or delivered to
Lender.
SECTION 7. Rights and Remedies of Lender Upon and After Default.
----------------------------------------------------
(a) Remedies. In addition to any and all other rights and remedies
which Lender may then have hereunder, under other contracts or agreements
between Pledgor and Lender (including, without limitation, the Omnibus
Agreement), under applicable law, or under the Uniform Commercial Code as in
effect in the State of Texas (hereinafter called "Code"), or otherwise, Lender
may (at its option) at any time following the occurrence of an Immediate Default
(as such term is defined in the Note) - and, if any other Event of Default
occurs, then at any time following the Maturity Date: (i) declare the entire
unpaid balance of principal and all accrued interest on the Secured Indebtedness
immediately due and payable, without written notice of demand, notice of intent
to accelerate, notice of acceleration, or presentment, all of which are hereby
waived; (ii) reduce its claim to judgment, foreclose, or otherwise enforce its
security interest in all or any part of the Pledged Collateral by any available
judicial procedure; (iii) after notification, if any, expressly provided for
herein, sell or otherwise dispose of, at the office of Lender or elsewhere, as
chosen by Lender, all or any part of the Pledged Collateral, and any such sale
or other disposition may be as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
of any part of the Pledged Collateral shall not exhaust Lender's power of sale,
but sales may be made from time to time until all of the Pledged Collateral has
been sold or until the Secured Indebtedness has been paid in full; provided,
however that Lender shall have no obligation to sell the Pledged Collateral
piecemeal, it being specifically acknowledged that a sale of all of the Pledged
Collateral to one purchaser in a single transaction shall be conclusively
presumed to be commercially reasonable), and at any such sale it shall not be
necessary to exhibit the Pledged Collateral; (iv) at its discretion, retain the
Pledged Collateral in satisfaction of the Secured Indebtedness whenever the
circumstances are such that Lender is entitled to do so under the Code; (v)
purchase the Pledged Collateral at any public sale in accordance with the Code;
(vi) purchase the Pledged Collateral at any private sale in accordance with the
Code; and (vii) exercise the rights set forth in Section 7 hereof in accordance
with the Code.
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CUSIP No. 725848 10 5 13D Page 37 of 45 pages
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(b) Sale of Pledged Collateral. Lender is authorized at any sale of
the Pledged Collateral, if it deems it advisable, to restrict the prospective
bidders or purchasers to those persons who will represent and agree that they
are purchasing for their own account, for investment, and not with a view to
distribution or sale of any of the Pledged Collateral. Upon any such sale,
Lender shall have the right to deliver, assign, and transfer to the purchaser
thereof the Pledged Collateral so sold. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right of whatsoever
kind, including any equity or right of redemption of Pledgor which hereby
specifically waives, to the fullest extent permitted by applicable law, all
rights of redemption, stay, or appraisal which it has or may have under any rule
of law or statute now existing or hereafter adopted, and such waiver shall be
deemed to have been made after default. Lender shall give Pledgor ten (10) days'
written notice of its intention to make any such public or private sale or sale
at broker's board or on a securities exchange. Such notice, in case of sale at
broker's board or on a securities exchange, shall state the board or exchange at
which such sale is to be made and the day on which the Pledged Collateral, or
that portion thereof so being sold, which will first be offered for sale at such
board or exchange. Lender shall have no obligation to disclose or provide any
information concerning the Issuer or the Pledged Collateral to prospective
purchasers of the Pledged Collateral other than information in its possession at
such time, and Pledgor agrees and acknowledges that it shall be commercially
reasonable for any notices of any such sale, published or otherwise, to
specifically so state. At any such sale the Pledged Collateral may be sold in
one lot as an entirety or in separate parcels, as Lender may elect, and any such
election shall be presumed to be commercially reasonable. Lender shall not be
obligated to make any such sale pursuant to any such notice. Lender may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the same may
be so adjourned. In case of any sale of all or any part of the Pledged
Collateral on credit or for future delivery, the Pledged Collateral so sold may
be retained by Lender until the selling price is paid by the purchaser thereof,
but Lender shall not incur any liability in case of the failure of such
purchaser to take and pay for the Pledged Collateral so sold, and, in case of
any such failure, such Pledged Collateral may again be sold upon like notice.
Lender may also, at its discretion, proceed by a suit or suits at law or in
equity to foreclose the pledge and sell the Pledged Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction. If any consent, approval, or authorization of any state,
municipal, or other governmental department, agency, or authority should be
necessary to effectuate any sale or other disposition of the Pledged Collateral,
or any partial disposition of the Pledged Collateral, Pledgor will execute all
such applications and other instruments as may be required in connection with
securing any such consent, approval, or authorization, and will otherwise use
its best efforts to secure the same.
(c) Possible Restrictions on Sale of Pledged Collateral. Because of
the Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable laws or regulations, there may be legal restrictions or limitations
affecting Lender in any attempts to dispose of certain portions of the Pledged
Collateral in the enforcement of its rights and remedies hereunder. For these
reasons Lender is hereby authorized by Pledgor, but not obligated, in the event
of any Event of Default hereunder giving rise to Lender's rights, to sell or
otherwise dispose of the Pledged Collateral, and after the giving of any notices
required herein, to sell all or any part of the Pledged Collateral at a private
sale, subject to an investment letter or in any other manner which will not
require the Pledged Collateral, or any part thereof, to be registered in
accordance with the Securities Act, as amended, or other applicable rules and
regulations promulgated thereunder, or any other law or regulation, at the best
price reasonably obtainable by Lender at any such private sale or other
disposition in the manner mentioned above, and Pledgor specifically acknowledges
that any such disposition shall be commercially reasonable under the Code.
Lender is also hereby authorized by Pledgor, but not obligated, to take such
actions, give such notices, obtain such consents, and do such other things as
Pledgor may deem required or appropriate in the event of a sale or disposition
of any of the Pledged Collateral. Pledgor clearly understands that Lender may at
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its discretion approach a restricted number of potential purchasers and that a
sale under such circumstances may yield a lower price for the Pledged
Collateral, or any part or parts thereof, than would otherwise be obtainable if
same were registered and sold in the open market. Pledgor agrees (i) in the
event Lender shall, upon an Event of Default hereunder, sell the Pledged
Collateral, or any portion thereof, at such private sale or sales, Lender shall
have the right to rely upon the advice and opinion of any member firm of a
National Security Exchange (as defined in the Securities Exchange Act of 1934)
or other business or stock valuation company as to the best price reasonably
obtainable upon such private sale thereof, and (ii) that such reliance shall be
conclusive evidence that Lender handled such matter in a commercially reasonable
manner under the Code.
(d) Notification. Reasonable notification of the time and place of
any public sale of the Pledged Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the Pledged
Collateral is to be made, shall be sent to Pledgor and to any other person
entitled under the Code to notice. It is agreed that notice sent or given not
less than ten calendar days prior to the taking of the action to which the
notice relates is reasonable notification and notice for the purpose of this
Pledge Agreement.
(e) Application of Proceeds. Upon the maturity of any instrument
evidencing the Secured Indebtedness or any part thereof, whether such maturity
be by such terms of such instruments or through the exercise of any power of
acceleration, Lender is authorized and empowered to apply any and all funds
realized from the sale of the Pledged Collateral not previously credited against
the Secured Indebtedness first, toward the payment of the costs, charges, and
expenses, if any, incurred in the collection of such funds hereunder, and then,
toward the payment (in such order as Lender shall elect) of the Secured
Indebtedness, and shall pay any balance remaining to Pledgor or as prescribed by
the Code.
(f) Notices. In the event that any notice is required to be given to
Pledgor with respect to any sale or liquidation of the Pledged Collateral, any
notice addressed to Pledgor at the address set forth in Section 12(g) below,
postage prepaid, deposited in the United States mail ten (10) days prior to the
date of any such intended action shall be deemed to be a sufficient and
commercially reasonable notice. Nothing contained herein shall prevent Lender
from giving notice in any other manner which is considered reasonable.
SECTION 8. Authority of Lender. Lender shall have and be entitled to
exercise all such powers hereunder as are specifically delegated to Lender by
the terms hereof, together with such powers as are reasonably incidental
thereto. Lender may execute any of its duties hereunder by or through sub-agents
or employees and shall be entitled to retain counsel and to act in reliance upon
the advice of such counsel concerning all matters pertaining to said duties.
Lender and any affiliate, director, officer, or employee of Lender shall not be
liable for any action taken or omitted to be taken by them or any of them
hereunder or in connection herewith, except for their own gross negligence or
willful misconduct; nor shall Lender be responsible for the validity,
effectiveness, or sufficiency hereof or of any document or security furnished
pursuant hereto or in connection herewith. Lender shall be entitled to rely on
any communication, instrument, or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons. Pledgor
hereby agrees to reimburse Lender, on demand, for all reasonable expenses
incurred by it in connection with the administration and enforcement of this
Pledge Agreement and agrees to indemnify and hold harmless Lender from and
against any and all liability incurred by it hereunder or in connection
herewith, unless such liability shall be due to willful misconduct or gross
negligence on the part of Lender. Other than the exercise of reasonable care in
the physical custody of the Pledged Collateral while held by Lender, Lender
shall have no responsibility for or obligation or duty with respect to all or
any part of the Pledged 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
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CUSIP No. 725848 10 5 13D Page 39 of 45 pages
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understood and agreed that Pledgor shall be responsible generally for the
preservation of all rights in the Pledged Collateral. Without limiting the
generality of the foregoing, Lender shall be conclusively deemed to have
exercised reasonable care in the custody of the Pledged Collateral if Lender
takes such action, for purposes of preserving rights in the Pledged Collateral,
as Pledgor may reasonably request in writing, but no failure or omission or
delay by Lender in complying with any such request by Pledgor, and no refusal by
Lender to comply with any such request by Pledgor, shall be deemed to be a
failure to exercise reasonable care.
SECTION 9. Lender Appointed Attorney-in-Fact. Pledgor hereby
appoints Lender Pledgor's attorney-in-fact for the purpose of carrying out the
provisions of this Pledge Agreement and taking any action and executing any
instrument which Lender may deem reasonably necessary or advisable to accomplish
the purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, Lender shall have
the right and power, to receive, endorse, and collect all checks and other
orders for the payment of money made payable to Pledgor representing any
dividend or other distribution payable or distributable in respect of the
Pledged Collateral, or any part thereof, and to give full discharge for the
same.
SECTION 10. Certain Rights Before and After an Event of Default.
---------------------------------------------------
(a) Lender's Responsibility for Pledged Collateral. Lender shall
have no duty to fix or preserve rights against prior parties to the Pledged
Collateral, and shall never be liable (except for its own gross negligence or
willful misconduct) for its failure to use diligence to collect any amount
payable with respect to the Pledged Collateral, but shall be liable only to
account to Pledgor for what it may actually collect or receive thereon.
(b) Purchase Price for Pledged Collateral. If Lender advances funds
to or for the account of Pledgor to enable the latter to purchase or otherwise
acquire rights in the Pledged Collateral, or any part thereof, such funds may,
at Lender's option, be paid (i) directly to the person, firm, or corporation
from whom Pledgor will make such purchase or acquisition or (ii) to Pledgor, in
which event Pledgor covenants to promptly pay the same to such person, firm, or
corporation and forthwith furnish to Lender evidence satisfactory to Lender that
such payment has been made.
(c) Financing Statement. Lender shall have the right at any time to
execute and file this Pledge Agreement as a financing statement, but the failure
of Lender to do so shall not impair the validity or enforceability of this
Pledge Agreement.
(d) Maximum Interest. It is expressly stipulated and agreed to be
the intent of Pledgor and Lender at all times to comply with applicable state
law or applicable United States federal law (to the extent that it permits
Lender to contract for, charge, take, reserve, or receive a greater amount of
interest than under state law) and that this Section 10(d) shall control every
other covenant and agreement in this Pledge Agreement and the other Loan
Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under this Pledge
Agreement, the Note, or under any of the other Loan Documents, or contracted
for, charged, taken, reserved, or received with respect to the indebtedness
evidenced by the Loan, or if Lender's exercise of the option to accelerate the
maturity of the Note (pursuant to an Event of Default or otherwise), or if any
prepayment by Pledgor, late payment charge, default interest, or any fee,
charge, or imposition of any kind under applicable law results in Pledgor having
paid any interest in excess of that permitted by applicable law, then it is
Pledgor's and Lender's express intent that all excess amounts theretofore
collected by Lender be repaid to Pledgor with interest thereon at the Maximum
Rate (or if any principal of the Loan is outstanding, that such amounts with
such interest thereon be applied to reduce the principal balance of the Loan),
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CUSIP No. 725848 10 5 13D Page 40 of 45 pages
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and the provisions of this Pledge Agreement, the Note, and the other Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
All sums paid or agreed to be paid to Lender for the use, forbearance, and
detention of the indebtedness represented by the Loan shall be considered to be
earned over the term of the Loan regardless of when paid and shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term of such indebtedness until payment in full so
that the rate or amount of interest on account of such indebtedness does not
exceed the Maximum Rate from time-to-time in effect and applicable to the
indebtedness evidenced by the Loan Documents for so long as such indebtedness
remains outstanding. Notwithstanding anything to the contrary contained herein
or in any of the Loan Documents, it is not the intention of Lender to accelerate
the maturity of any interest that has not accrued at the time of any
acceleration of the Loan or to collect unearned interest at the time of such an
acceleration.
(e) Disclosure. Lender is granted the right to discuss Pledgor's and
Issuer's affairs, finances, and accounts with all parties to such degree as
Lender deems necessary or advisable to protect its security interest and/or the
repayment of the indebtedness secured hereby. Pledgor covenants to do all things
necessary or appropriate to permit Lender to fully exercise its rights under
this paragraph.
(f) Deposit of Proceeds. Except as expressly prescribed above, all
payments received by Lender with respect to the Pledged Collateral shall, at
Lender's option, be deposited in a special interest bearing account at a bank
(which may be, but need not be, a trust account or escrow account maintained at
Lender) to be designated by Lender in the name of Lender styled "Collateral
Account." Funds in said account are hereby assigned to Lender and shall be
impressed with a lien to secure the Secured Indebtedness, and shall be applied
by Lender as provided for above.
(g) Payment of Expenses. At Lender's option, Lender may (but shall
not be obligated to) discharge taxes, liens, and interest, perform or cause to
be performed, for and on behalf of Pledgor, any actions and conditions,
obligations, or covenants which Pledgor has failed or refused to perform, and
may pay for the repair, maintenance, or preservation of any of the Pledged
Collateral, and all sums so expended, including, but not limited to, reasonable
attorneys' fees, court costs, agents' fee or commissions, or any other costs or
expenses, shall become part of the Secured Indebtedness, shall bear interest
from the date of payment at the Maximum Rate, shall be payable at the place
designated for payment of the Secured Indebtedness, and shall be secured by this
Pledge Agreement.
SECTION 11. Obligations of Pledgor. So long as no Recourse Event
occurs, Pledgor shall not have any personal liability for payment of the
Obligation other than the Recourse Liabilities. Following the occurrence of a
Recourse Event, Pledgor shall have unlimited personal liability for the
Obligation. Nothing contained in this Section shall (a) impair the validity of
the Note or the Obligation or any collateral or security securing the payment
and performance thereof, (b) affect, diminish, negate, alter, amend or impair
the validity or enforceability of the Recourse Liabilities, it being intended
that Pledgor shall at all times be fully liable for the Recourse Liabilities.
The provisions of this Section shall not in any way affect or impair the right
of any holder of the Note or any of the other Loan Documents to exercise any or
all of its rights under the Note or any of the other Loan Documents against
Pledgor or the Pledged Collateral pursuant to the Lender's rights of foreclosure
or other rights with respect to collateral or security for the Obligation.
SECTION 12. Miscellaneous.
-------------
(a) Terms Commercially Reasonable. The terms of this Pledge
Agreement shall be deemed commercially reasonable within the meaning of the Code
in effect and applicable hereto.
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CUSIP No. 725848 10 5 13D Page 41 of 45 pages
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(b) Headings. The headings of articles and sections herein are
inserted only for convenience and shall in no way define, describe, or limit the
scope or intent of any provision of this Pledge Agreement.
(c) Amendments. No change, amendment, modification, cancellation, or
discharge of any provision of this Pledge Agreement shall be valid unless
consented to in writing by the party or parties against whom enforcement is
being sought.
(d) Assignment of Lender's Rights. Lender shall have the right to
assign all or any portion of its rights under this Pledge Agreement to any
subsequent holder or holders of the Secured Indebtedness.
(e) Parties in Interest. As and when used herein, the term "Pledgor"
shall mean and include Pledgor herein named and his heirs, personal
representatives, successors and permitted assigns, and the term "Lender" shall
mean and include Lender herein named and its successors and assigns, and all
covenants and agreements herein shall be binding upon and inure to the benefit
of Pledgor and Lender and their respective heirs, personal representatives,
successors and assigns, provided that Pledgor shall have no right to assign his
rights hereunder to any other person or entity.
(f) Applicable Laws. THIS PLEDGE AGREEMENT AND ALL ISSUES AND CLAIMS
ARISING IN CONNECTION WITH OR RELATING TO THE PLEDGED COLLATERAL OR THE SECURED
INDEBTEDNESS, INCLUDING BUT WITHOUT LIMITATION, ALL CONTRACT, TORT, EQUITY, OR
OTHER CLAIMS OR COUNTERCLAIMS SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS (WITHOUT CONSIDERATION OF ITS CONFLICTS OF LAWS
RULES) AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. If any provision
of this Pledge Agreement is held to be invalid or unenforceable, the validity
and enforceability of the other provisions of this Pledge Agreement shall remain
unaffected.
(g) Notices. Any notices or other communications required or
permitted to be given by this Pledge Agreement or any other documents and
instruments referred to herein must be in writing and shall be deemed to have
been given when personally served or when deposited in the United States mails,
registered or certified, return receipt requested, addressed to the party to be
notified at the following address (or at such other address as may have been
designated by written notice):
If to Lender: Newcastle Partners, L.P.
300 Crescent Court, Suite 1110
Dallas, Texas 75201
Attention: Mark E. Schwarz, Managing Member
If to Pledgor: C. Jeffrey Rogers
7529 St. Andrews Ct.
Plano, Texas 75093
(h) Obligations Absolute. All rights and remedies of Lender
hereunder, and all obligations of Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(i) any lack of validity or enforceability of the Note
or any of the other Loan Documents or any other agreement or
instrument relating to any of the foregoing;
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CUSIP No. 725848 10 5 13D Page 42 of 45 pages
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(ii) any change in the time, manner, or place of payment
of, or in any other term of, all or any of the Secured Indebtedness,
or any other amendment or waiver of or any consent to any departure
from the Note or any of the other Loan Documents; or
(iii) any exchange, release, or nonperfection of any
interest in any Pledged Collateral, or any release or amendment or
waiver of or consent to any departure from any guarantee, for all or
any of the Secured Indebtedness.
(i) Counterparts. This Pledge Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument, and in making proof of this Pledge
Agreement it shall not be necessary to produce or account for more than one such
counterpart.
(j) Entirety. This Pledge Agreement and the other Loan Documents
embody the final, entire agreement among Pledgor and Lender with respect to the
pledge and assignment of the Pledged Collateral and the other matters addressed
herein and therein, and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and thereof, 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.
(k) Waiver of Trial by Jury. To the fullest extent permitted by
applicable law, Pledgor hereby irrevocably and expressly waives all right to a
trial by jury in any action, proceeding, or counterclaim (whether based upon
contract, tort, or otherwise) arising out of or relating to this Pledge
Agreement or any of the other Loan Documents or the transactions contemplated
hereby or thereby, or the actions of Lender in the negotiation, administration,
or enforcement hereof or thereof.
(l) Waiver of Certain Claims. Pledgor hereby waives any right or
claim to consequential or punitive damages arising out of or relating to this
Pledge Agreement or any of the other Loan Documents or the transactions
contemplated hereby or thereby, or the actions of Lender in the negotiation,
administration, or enforcement hereof or thereof.
(m) WAIVER OF NOTICE AND HEARING. PLEDGOR HEREBY WAIVES ANY AND ALL
RIGHTS IT MAY HAVE TO NOTICE OR HEARING PRIOR TO SEIZURE BY LENDER OF THE
COLLATERAL, WHETHER BY WRIT OF POSSESSION OR OTHERWISE.
(n) Bankruptcy Automatic Stay. As additional consideration for
extending the Loan, Pledgor agrees that if a bankruptcy petition under any
Chapter of the Bankruptcy Code (11 U.S.C. ss.101, et seq.) is filed by or
against Pledgor at any time after the execution of this Pledge Agreement, Lender
shall be entitled to the immediate entry of an order from the appropriate
bankruptcy court granting Lender complete relief from the automatic stay imposed
by ss.362 of the Bankruptcy Code (11 U.S.C. ss.362) to exercise its rights and
remedies, including but not limited to obtaining a foreclosure judgment and
foreclosure sale, upon the filing with the appropriate court of a motion for
relief from the automatic stay with a copy of this Pledge Agreement attached
thereto. Pledgor specifically agrees (i) that upon filing a motion for relief
from the automatic stay, Lender shall be entitled to relief from the stay
without the necessity of an evidentiary hearing and without the necessity or
requirement of Lender to establish or prove the value of any property securing
the Secured Indebtedness, the lack of adequate protection of its interest in
such property, or the lack of equity in such property; (ii) that the lifting of
the automatic stay hereunder by the appropriate bankruptcy court shall be deemed
to be "for cause" pursuant to ss.362(d)(1) of the Bankruptcy Code (11 U.S.C.
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CUSIP No. 725848 10 5 13D Page 43 of 45 pages
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ss.362(d)(1)); and (iii) that Pledgor will not directly or indirectly oppose or
otherwise defend against Lender's efforts to gain relief from the automatic
stay. This provision is not intended to preclude Pledgor from filing for
protection under any chapter of the Bankruptcy Code. The remedies prescribed in
this paragraph are not exclusive and shall not limit Lender's rights under the
Loan Documents, this Pledge Agreement or under any law.
(o) Contemporaneous Exchange. Both Pledgor and Lender acknowledge
and agree that the pledge, hypothecation, assignment, transfer, security
interest and lien evidenced by this Pledge Agreement is intended to be, and was
in fact, a contemporaneous exchange by Pledgor for new value from Lender.
[Remainder of Page Intentionally Blank;
Signature Page Follows]
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CUSIP No. 725848 10 5 13D Page 44 of 45 pages
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EXECUTED as of the date first above stated.
PLEDGOR:
/s/ C. Jeffrey Rogers
--------------------------------------------
C. Jeffrey Rogers
LENDER:
Newcastle Partners, L.P.,
a Texas limited partnership
By: Newcastle Capital Management L.P.,
its general partner
By: Newcastle Capital Group, L.L.C.,
its general partner
By: /s/ Mark Schwarz
-------------------------------
Name: Mark Schwarz
--------------------------
Title: Managing Member
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CUSIP No. 725848 10 5 13D Page 45 of 45 pages
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EXHIBIT A
PLEDGED SHARES
Name of Entity Certificate No. Number of Shares
Pizza Inn, Inc. PI12370 200,000
Pizza Inn, Inc. PI2152 500,000
Pizza Inn, Inc. PI12326 500,000
Pizza Inn, Inc. PI13354 939,000
Pizza Inn, Inc. PI13744 10,000
Pizza Inn, Inc. PI14336 300,000
Pizza Inn, Inc. PI13776 300,000
Pizza Inn, Inc. PI14788 156,000