AGREEMENT
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THIS AGREEMENT, dated December 18, 2002, by and between Pizza Inn, Inc., a
Missouri corporation (the "Company"), and Newcastle Partners, L.P., a Texas
limited partnership ("Newcastle").
W I T N E S S E T H:
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WHEREAS, the Company acknowledges that Newcastle is the beneficial owner of
3,277,700 shares (the "Newcastle Shares") of common stock, $0.01 par value of
the Company (the "Common Stock"), or approximately 32.6% of the shares of Common
Stock issued and outstanding;
WHEREAS, the Newcastle Shares includes 2,905,000 shares of Common Stock held by
C. Jeffrey Rogers and pledged to Newcastle pursuant to the terms of an Omnibus
Agreement and a Pledge Agreement, each dated as of December 6, 2002 by and
between Newcastle and Mr. Rogers and which Newcastle has the option to acquire
commencing on January 3, 2003 (the "Pledged Shares");
WHEREAS, the 2002 annual meeting of stockholders of the Company is scheduled to
be held on December 18, 2002 (the "Annual Meeting");
WHEREAS, Newcastle has held discussions with the Board of Directors of the
Company (the "Board") seeking representation on the Board;
WHEREAS, Newcastle and the Board have agreed to grant Newcastle appropriate
representation on the Board following the conclusion of the Annual Meeting
subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound, the parties hereto
hereby agree as follows:
Section 1. Representations, Warranties and Covenants of the Company.
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The Company hereby represents, warrants and agrees that (a) it has full
legal right, power and authority to execute, deliver and perform this Agreement,
and consummate the transactions contemplated hereby, (b) the execution and
delivery of this Agreement, and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate actions, and (c) this Agreement constitutes valid, legal and binding
obligations of the Company, enforceable against it in accordance with its terms,
except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium (whether general or specific) or other laws now or
hereafter in effect.
Section 2. Representations, Warranties and Covenants of Newcastle.
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Newcastle hereby represents, warrants and agrees that (a) it has full legal
right, power and authority to execute, deliver and perform this Agreement, and
consummate the transactions contemplated hereby, (b) the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary limited partnership actions, and (c)
this Agreement constitutes valid, legal and binding obligations of Newcastle,
enforceable against it in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
(whether general or specific) or other laws now or hereafter in effect.
Section 3. Board Composition; Related Matters.
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3.1 Prior to the close of business on the first business day following the
Annual Meeting which the Company will hold on December 18, 2002, the Board will
cause at least one member of each class of directors of the Company to resign
from the Board. Upon obtaining such resignations, the Board shall appoint the
following representatives of Newcastle to replace the resigning directors: (i)
Mark E. Schwarz, as a Class I director, whose term will expire at the 2004
annual meeting of stockholders of the Company and until his replacement has been
duly elected and qualifies, and (ii) Steven Pully, as a Class II director,
whose term will expire at the 2003 annual meeting of stockholders of the Company
and until his replacement has been duly elected and qualifies (together with Mr.
Schwarz, the "Newcastle Directors").
3.2 Reserved.
3.3 In the event that the Newcastle Directors are appointed to the Board
pursuant to Section 3.1, the Board shall immediately thereafter take all actions
necessary to amend the Company's By-laws to provide that during the period that
either of the Newcastle Directors is serving on the Board, the Company shall not
expand the size of the Board above seven members.
3.4 During the period from the date hereof until the first anniversary of
this Agreement, Newcastle shall not, directly or indirectly, beneficially own in
excess of 40% of the issued and outstanding shares of Common Stock of the
Company, during the period from the first anniversary of this Agreement until
the second anniversary of this Agreement, Newcastle shall not, directly or
indirectly, beneficially own in excess of 45% of the issued and outstanding
shares of Common Stock of the Company and the Company will take no action which
will limit Newcastle's ability to acquire shares of Common Stock up to the limit
of the outstanding shares set forth by this Section 3.4.
3.5 Newcastle agrees to attend the Company's Annual Meeting and Newcastle
agrees to vote any shares of Common Stock of the Company that it has the right
to vote at the Annual Meeting for the election of the Class I directors
nominated for election at the Annual Meeting.
3.6 If (i) Newcastle does not become the beneficial owner of any of the
Pledged Shares prior to December 31, 2003 or (ii) in connection with any
bankruptcy filing by Jeffrey Rogers, the Pledged Shares become beneficially
owned by a party other than Newcastle, Jeffrey Rogers or any of their respective
affiliates, then in either such case, the Newcastle Directors will promptly
resign from the Company's Board of Directors.
Section 4. Miscellaneous.
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4.1 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be delivered personally, by facsimile or
sent by certified, registered or express air mail, or overnight carrier,
postage prepaid, and shall be deemed given when so delivered personally, or by
facsimile, or if mailed, five (5) days after the date of mailing, or if sent by
overnight carrier, one (1) day after the date of mailing to the addresses set
forth in the signature page.
4.2 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Missouri, without reference
to the choice of law principles thereof.
4.3 Assignment; Successors and Assigns; No Third Party Rights. This
Agreement may not be assigned by operation of law or otherwise, and any
attempted assignment shall be null and void. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
successors, assigns and legal representatives.
4.4 Entire Agreement; Counterparts. This Agreement constitutes the entire
agreement among the parties with respect to the matters covered hereby and
supersedes all previous written, oral or implied understandings among them with
respect to such matters. This Agreement may be executed in counterparts, each
of which shall be deemed an original agreement, but all of which together shall
constitute one and the same instrument.
4.5 Titles. The titles in this Agreement are for reference purposes only,
and shall not in any way affect the meaning or interpretation of this Agreement.
4.6 Amendment and Modification. This Agreement may only be amended or
modified in writing signed by the party against whom enforcement of such
amendment or modification is sought.
4.7 Expenses. Upon execution of this Agreement, the Company shall reimburse
Newcastle for its reasonable fees and expenses not to exceed $45,000 (subject to
presentation of documentation for such fees and expenses) incurred in connection
with this Agreement and related matters.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement or
caused this Agreement to be duly executed by their authorized representative, as
of the day and year first above written.
PIZZA INN, INC.
By:_/s/ Ronald W. Parker
Name: Ronald W. Parker
Title: President and CEO Address: 3551 Plano
Parkway,
The Colony, Texas 75056
Telephone: (469) 384-5000
Facsimile: (469) 384-5060
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
Address: 300 Crescent Court, Suite 1110
Dallas, Texas 75201
Telephone: (214) 661-7474
Facsimile: (214) 661-7475