PIZZA INN, Inc.
November 22, 2005
Page 2
XXXXX FARGO
November 22, 2005
Pizza Inn, Inc.
0000 Xxxxx Xxxxxxx
Xxx Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Chief Financial Officer
Re: Third Amended and Restated Loan Agreement dated as of January 22, 2003,
by and between PIZZA INN, INC. ("Borrower") and XXXXX FARGO BANK, NATIONAL
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ASSOCIATION ("Lender"), as amended by First Amendment to Third Amended and
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Restated Loan Agreement effective as of March 28, 2004, Second Amendment to
Third Amended and Restated Loan Agreement effective as of December 26, 2004, and
Third Amendment to Third Amended and Restated Loan Agreement effective as of
June 26, 2005 (said loan agreement as so amended is herein called the "Loan
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Agreement"). All terms used herein and not otherwise defined herein shall have
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the meanings given to them in the Loan Agreement.
This letter serves as notice to Borrower that Lender is in receipt of
Borrower's letter dated as of October 18, 2005 (the "Letter"), in which Borrower
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acknowledges its default in the performance and/or observance of two financial
covenants in the Loan Agreement, each constituting an Event of Default under the
Loan Agreement. In the Letter, Borrower acknowledges the following two Events
of Default: (a) its failure to maintain a Fixed Charge Coverage Ratio greater
than 0.90% for the period from Closing through November 30, 2005 in accordance
with Section 12.1 of the Loan Agreement, and (b) its sustaining an aggregate net
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loss in excess of $200,000.0 for the fiscal quarter ending September 30, 2005 in
accordance with Section 12.3 of the Loan Agreement (collectively, the "Specified
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Events of Default").
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As a result of the Specified Events of Default, Lender has no obligation to
advance additional funds to Borrower. Notwithstanding the foregoing, so long as
no default or Event of Default (other than the Specified Events of Default)
occurs under the Loan Documents, Lender agrees to continue to make Revolving
Credit Loans to Borrower in accordance with the terms of the Loan Agreement
provided that the aggregate principal amount of all such Revolving Credit Loans
does not exceed $3,000,000.00 at any one time.
Furthermore, this letter is to inform you that effective October 1, 2005, the
LIBOR Rate Margin is increased to 3.75% and the Prime Rate Margin is increased
to 1.75% based upon the Funded Debt Ratio being in excess of 5.50 to 1.
Please be advised that the notice given hereby is being made pursuant to the
terms and provisions of the Loan Documents and is not intended to and does not
constitute a waiver of any of the rights or remedies which Lender may have
pursuant to the Loan Documents. No failure to exercise and no delay in
exercising, on the part of Lender shall operate as a waiver of any rights which
Lender may have pursuant to the terms of the Loan Documents. Further, any
reference by the Lender of any defaults mentioned herein shall in no way
constitute, or be construed to be, a waiver of any other default which may now
exist or hereafter arise under the Loan Documents.
Notwithstanding any previous actions or inactions by the Lender to the contrary,
if any, you are hereby notified that Lender requires a strict compliance with
the terms and conditions of the Loan Documents and Lender does not in any manner
waive any rights or remedies available against Borrower pursuant to the Loan
Agreement, the other Loan Documents or applicable law.
Please be advised that no statement contained in this letter or any other
communication between Lender and Borrower shall be deemed a waiver of any
default then existing under the terms of the Loan Agreement or any other Loan
Document. Lender expressly reserves any rights, privileges and remedies
available to it under the Loan Agreement and the other Loan Documents in
connection with any default referenced above, and no failure to exercise and no
delay on the part of Lender in exercising any right under the Loan Agreement or
any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any right preclude any other or further exercise thereof,
or the exercise of any other right. No waiver of any provision of the Loan
Agreement or any other Loan Document shall be effective unless the same shall be
in writing and signed by Lender, and then such waiver or consent shall be
effective only in the specific instance to which it relates and for the purpose
for which it is given. The rights provided for in the Loan Agreement and the
other Loan Documents are cumulative and not intended to be exclusive of any
other right given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.
Very truly yours,
XXXXX FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Xxx X. Xxxxx
Name: Xxx X. Xxxxx
Title: Senior Vice President
