Exhibit 10.1

 

 
LOAN AND SECURITY AGREEMENT
 
DATED AS OF AUGUST 28, 2012
 
among
 
PIZZA INN, INC. AND PIE FIVE PIZZA COMPANY, INC.
 
as Borrowers,
 
THE F&M BANK & TRUST COMPANY,
 
as Agent and as Lender,
 
and
 
The Financial Institution(s) Listed
 
on the Signature Pages Hereof,
 
as Lenders
 

 
 

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TABLE OF CONTENTS
 
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1
1.1
Certain Defined Terms
1
1.2
UCC Defined Terms
20
1.3
Accounting Terms
21
1.4
Other Definitional Provisions
21
SECTION 2
LOANS AND COLLATERAL
21
2.1
Loans.
21
2.2
Interest.
28
2.3
Fees.
29
2.4
Payments and Prepayments.
30
2.5
Term of this Agreement
31
2.6
Statements
32
2.7
Grant of Security Interest.
32
2.8
Yield Protection
33
2.9
Taxes.
33
2.10
[Reserved].
35
2.11
Optional Prepayment/Replacement of Lenders
35
2.12
[Reserved].
36
2.13
[Reserved].
36
2.14
[Reserved].
36
2.15
Endorsement; Insurance Claims
36
SECTION 3
CONDITIONS TO LOANS
37
3.1
Conditions to Initial Loans and the Issuance of Lender Letters of Credit
37
3.2
Additional Conditions to All Loans and Lender Letters of Credit
39
SECTION 4
REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS
40
4.1
Organization, Powers, Capitalization.
40
4.2
Authorization of Borrowing
40
4.3
Financial Condition
41
4.4
Indebtedness and Liabilities
41
4.5
Collateral Warranties and Covenants.
41
4.6
Names and Locations
45
4.7
Title to Properties; Liens
46
4.8
Litigation; Adverse Facts
46
4.9
Payment of Taxes
46
4.10
Performance of Agreements
47
4.11
Employee Benefit Plans
47
4.12
Broker’s Fees
47
4.13
Environmental Compliance
47

 
 
 
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4.14
Solvency
47
4.15
Disclosure
48
4.16
Insurance
48
4.17
Compliance with Laws; Government Authorizations; Consents
48
4.18
Employee Matters
49
4.19
Governmental Regulation
50
4.20
Access to Accountants and Management
50
4.21
Inspection; Appraisals
50
4.22
Primary Deposit Accounts
50
4.23
No Defaults
51
4.24
Margin Stock
51
4.25
Amendment of Schedule
51
4.26
Representations and Warranties Incorporated from Loan Documents
51
SECTION 5
REPORTING AND OTHER AFFIRMATIVE COVENANTS
51
5.1
Financial Statements and Other Reports
51
5.2
Maintenance of Properties
51
5.3
Further Assurances
51
5.4
Mortgages; Title Insurance; Surveys.
52
5.5
Use of Proceeds and Margin Security
52
5.6
Subsidiaries
52
5.7
Post-Closing Obligations
53
SECTION 6
FINANCIAL COVENANTS
53
SECTION 7
NEGATIVE COVENANTS
53
7.1
Indebtedness and Liabilities
53
7.2
Guaranties
53
7.3
Transfers, Liens and Related Matters.
54
7.4
Investments and Loans
54
7.5
Restricted Junior Payments
55
7.6
Restriction on Fundamental Changes
55
7.7
Organizational Documents
55
7.8
Transactions with Affiliates
55
7.9
Conduct of Business
55
7.10
Tax Consolidations
55
7.11
Subsidiaries
55
7.12
Fiscal Year; Accounting Changes
56
7.13
Cayman Subsidiary..
56
7.14
Bank Accounts
56
7.15
Compliance with Anti-Terrorism Laws
56
7.16
Limitation on Action by Parent
56
7.17
Payment of Taxes and Claims
56
7.18
Negative Pledge
57
SECTION 8
DEFAULT, RIGHTS AND REMEDIES
57
8.1
Event of Default
57

 
 
 
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8.2
Suspension of Commitments
60
8.3
Acceleration
60
8.4
Remedies
60
8.5
Appointment of Attorney-in-Fact
61
8.6
Limitation on Duty of Agent and Lenders with Respect to Collateral
61
8.7
Application of Proceeds
62
8.8
License of Intellectual Property
62
8.9
Waivers; Non-Exclusive Remedies
62
SECTION 9
AGENT
63
9.1
Agent.
63
9.2
Notice of Default
67
9.3
Action by Agent
67
9.4
Amendments, Waivers and Consents.
67
9.5
Assignments and Participations in Loans.
69
9.6
Set Off and Sharing of Payments
70
9.7
Disbursement of Funds
71
9.8
Settlements, Payments and Information.
71
9.9
Discretionary Advances
72
9.10
Titles
72
SECTION 10       MISCELLANEOUS   72
10.1
Expenses and Attorneys’ Fees
72
10.2
Indemnity
73
10.3
Notices
74
10.4
Survival of Representations and Warranties and Certain Agreements
74
10.5
Indulgence Not Waiver
75
10.6
Marshaling; Payments Set Aside
75
10.7
Entire Agreement
75
10.8
Severability
75
10.9
Lenders’ Obligations Several; Independent Nature of Lenders’ Rights
75
10.10
Headings
75
10.11
APPLICABLE LAW
76
10.12
Successors and Assigns
76
10.13
No Fiduciary Relationship; No Duty; Limitation of Liabilities.
76
10.14
CONSENT TO JURISDICTION
76
10.15
WAIVER OF JURY TRIAL
77
10.16
Construction
77
10.17
Counterparts; Effectiveness
77
10.18
Confidentiality
77
10.19
Publication
78
10.20
USA PATRIOT ACT
78
10.21
Certifications From Lenders and Participants; USA PATRIOT ACT
78
10.22
Texas Specific Provisions.
78
10.23
Joint and Several Liability
79

 
 
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EXHIBITS
 
A.          Form of Assignment and Acceptance Agreement
B.           Form of Borrowing Base Certificate
C.           Form of Compliance Certificate
D.           [Reserved.]
E.           Form of Notice of Borrowing
F.           Form of Revolving Note
G.           Form of Term Loan A Note
H.           Form of Term Loan B Note
 
 
 
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SCHEDULES
 
1.1
Transaction Fees and Expenses
3.1(H)
Litigation
4.1(B)
Capitalization of Loan Parties
4.5(C)
Motor Vehicles
4.5(I)
Intellectual Property
4.5(K)
Bank Accounts
4.5(L)
Bailees
4.6
Names and Locations
5.4
Mortgaged Property
5.7
Post-Closing Obligations
7.1
Indebtedness
7.3(B)
Other Liens
7.11
Subsidiaries

 
 
 
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RIDERS
 
A.           Reporting Rider
B.           Financial Covenants Rider
 
 
 
 
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LOAN AND SECURITY AGREEMENT
 
This LOAN AND SECURITY AGREEMENT is dated as of August 28, 2012 and entered into
among PIZZA INN, INC., a Missouri corporation (“Pizza Inn”), PIE FIVE PIZZA
COMPANY, INC., a Texas corporation (“Pie Five”, together with Pizza Inn,
individually and collectively, jointly and severally, “Borrower”), the financial
institution(s) listed on the signature pages hereof and their respective
successors and Eligible Assignees (each individually a “Lender” and collectively
“Lenders”) and THE F&M BANK & TRUST COMPANY (in its individual capacity, “F&M
Bank”), for itself as a Lender, and as Agent.
 
WHEREAS, Borrower desires that Lenders extend a credit facility to Borrower
consisting of (i) a revolving facility to (a) to provide working capital
financing and to provide funds for other general corporate purposes and (b) to
pay fees and transaction expenses associated with the closing of this credit
facility and the transactions contemplated hereby, (ii) a term loan A facility
to refinance existing Indebtedness of Borrower, and (iii) a term loan B facility
to finance the opening of new stores of Pie Five;
 
WHEREAS, to secure Borrower’s obligations under the Loan Documents, Borrower is
granting to Agent, for the benefit of Agent and Lenders, a security interest in
and lien upon all of Borrower’s real and personal property; and
 
WHEREAS, Pizza Inn Holdings, Inc., a Missouri corporation (“Parent”), and each
Subsidiary of Parent which is not a Borrower is willing to guaranty all of the
obligations of Borrower to Agent and Lenders under the Loan Documents and to
grant to Agent, for the benefit of Agent and Lenders, a security interest in all
real and personal property of Guarantor to secure such guaranty.
 
NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, Borrower, Agent and Lenders agree as follows:
 
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS
 
1.1 Certain Defined Terms.  The capitalized terms not otherwise defined in this
Agreement shall have the meanings set forth below:
 
“Additional Mortgaged Property” means all real property acquired by Borrower or
Guarantor after the Closing Date, which shall be mortgaged to secure the
Obligations.
 
“Advances” shall mean and include the Revolving Advances and the Term Loan B
Advances.
 
“Affected Lender” has the meaning assigned to that term in subsection 2.11.
 
“Affiliate” means any Person: (a) directly or indirectly controlling, controlled
by, or under common control with, any Loan Party, including Sponsor; (b)
directly or indirectly, (other than through ownership of Equity Interests in
Parent except Sponsor) owning or holding five percent (5%) or more of any equity
interest in Borrower; (c) five percent (5%) or more of whose stock or other
equity interest having ordinary voting power for the election of directors or
the power to direct or cause the direction of management, is directly or
indirectly owned or held by Borrower; or (d) which has a senior officer who is
also a senior officer of Borrower (other than the current Interim Chief
Executive Officer of Parent).  For purposes of this definition and the
definition of Sponsor, “control” (including with correlative meanings, the terms
“controlling”, “controlled by” and “under common control with”) means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
voting securities or other equity interest, or by contract or
otherwise.  Notwithstanding the foregoing, in no event shall the Agent or any
Lender be an affiliate of the Borrower for the purposes of this Agreement.
 
 
 
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“Agent” means The F&M Bank & Trust Company in its capacity as agent for the
Lenders under the Loan Documents and any successor in such capacity appointed
pursuant to subsection 9.1(G).
 
“Agent’s Account” means such bank account as directed by Agent from time to
time.

“Agreement” means this Loan and Security Agreement as it may be amended,
restated, supplemented or otherwise modified from time to time.
 
“Amortization Amount” has the meaning assigned to that term in subsection
2.1(C).
 
“Anti-Terrorism Laws” means any law relating to terrorism or money laundering,
including Executive Order No. 13224, the USA Patriot Act, the laws comprising or
implementing the Bank Secrecy Act, the laws administered by the United States
Treasury Department’s Office of Foreign Asset Control (as any of the foregoing
laws may from time to time be amended, renewed, extended, or replaced).
 
“Applicable Margin” for each type of Loan shall mean the applicable percentage
specified below:
 
APPLICABLE MARGIN
FOR BASE RATE LOANS
APPLICABLE MARGIN
FOR FIXED RATE LOANS
1.00%
3.90%

“Asset Disposition” means the disposition, whether by sale, lease, transfer,
loss, damage, destruction, condemnation or otherwise, of any or all of the
assets of Borrower or any of its Subsidiaries other than sales of Inventory in
the ordinary course of business.
 
“Assigning Lender” has the meaning set forth in subsection 9.5(A).
 
“Assignment and Acceptance Agreement” shall mean an Assignment and Acceptance
Agreement substantially in the form of Exhibit A.
 
“Bank Products Agreement” means any agreement to provide cash management
services, including treasury, depository, overdraft, credit or debit card,
electronic funds transfer and other cash management or depositary arrangements
entered into between any Loan Party and a Lender or an affiliate of a Lender, in
its separate capacity as a provider of such cash management services provided
for in such Bank Products Agreement.
 
 
 
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“Base Rate” means, on any day, the U.S. prime rate as published in The Wall
Street Journal’s “Money Rates” table for such day.  If multiple prime rates are
quoted in such table, then the highest U.S. prime rate quoted therein shall be
the prime rate.  In the event that a U.S. prime rate is not published in The
Wall Street Journal’s “Money Rates” table for any reason or The Wall Street
Journal is not published that day in the United States of America for general
distribution, the Agent will choose a substitute U.S. prime rate, for purposes
of calculating the interest rate applicable hereunder, which is based on
comparable information, until such time as a prime rate is published in The Wall
Street Journal’s “Money Rates” table.  Each change in the Base Rate shall become
effective without notice to the Borrower on the effective date of each such
change.
 
“Base Rate Loans” means Loans bearing interest at rates determined by reference
to the Base Rate.
 
“Blocked Person” means any Person:  (i) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (ii) owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order No.
13224, (iii) with which any Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law, (iv) that commits,
threatens or conspires to commit or supports “terrorism” as defined in Executive
Order No. 13224; (v) that is named as a “specially designated national” on the
most current list published by the U.S. Treasury Department Office of Foreign
Asset Control at its official website or any replacement website or other
replacement official publication of such list, or (vi) a Person or entity who is
affiliated or associated with a Person listed above.
 
“Borrower” has the meaning assigned to that term in the introductory paragraph
of this Agreement.
 
“Borrower’s Accountants” means the independent certified public accountants
selected by Parent to audit the consolidated financial statement of Parent and
its Subsidiaries.
 
“Borrowing Period” has the meaning assigned to that term in subsection 2.1(C).
 
“Borrowing Base” means, as of any date of determination, an amount equal to (a)
up to 25% of Eligible Inventory, plus (b) up to 80% of Eligible Accounts, minus
(c) such reserves as Agent in its Permitted Discretion may elect to establish.
 
“Borrowing Base Certificate” means a certificate and schedule duly executed by
an officer of Borrower appropriately completed and in substantially the form of
Exhibit B.
 
“Business Day” means any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of Texas or is a day on which banking
institutions located in such state are closed.
 
 
 
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“Capital Expenditures” means, with respect to any Person, all expenditures for,
or contracts for expenditures with respect to any fixed assets or improvements,
or for replacements, substitutions or additions thereto, that, in accordance
with GAAP, either would be required to be capitalized on the balance sheet of
such Person, or would be classified and accounted for as capital expenditures on
a statement of cash flows of such Person.
 
“Capital Lease” means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
 
“Cash Equivalents” means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor’s Corporation or at least P-1 from Moody’s Investors Service, Inc.; and (c)
certificates of deposit or bankers’ acceptances maturing within six (6) months
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America, or any state thereof or the District of Columbia, having
combined capital and surplus of not less than $100,000,000 and not subject to
setoff rights in favor of such bank.
 
“Certificate of Exemption” has the meaning assigned to that term in subsection
2.9(D).
 
“Closing Date” means August 28, 2012.
 
“Collateral” has the meaning assigned to that term in subsection 2.7(A).
 
“Commitment” or “Commitments” means the commitment or commitments of Lenders to
make Loans as set forth in subsections 2.1(A), 2.1(B) and 2.1(C) and to provide
Letters of Credit and Lender Letters of Credit as set forth in subsection
2.1(F).
 
“Compliance Certificate” means a certificate duly executed by the chief
executive officer or chief financial officer of each Loan Party appropriately
completed and in substantially the form of Exhibit C.
 
“Control” means “control” as defined in the UCC with respect to a particular
item of Collateral.
 
“Converted Term Loan B Amount” has the meaning assigned to that term in
subsection 2.1(C).
 
“Copyrights” means, collectively, all of the following (a) all copyrights,
rights and interests in copyrights, copyright registrations and copyright
applications which are owned by Borrower or Guarantor, including those listed in
the schedules to any Intellectual Property Security Agreement; (b) all renewals
of any of the foregoing; (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing or with respect to any
of the foregoing, including damages or payments for past, present or future
infringements of any of the foregoing; and (d) the right to sue for past,
present and future infringements of any of the foregoing.
 
 
 
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“Default” means a condition, act or event that, after notice or lapse of time or
both, would constitute an Event of Default if that condition, act or event were
not cured or removed within any applicable grace or cure period.
 
“Default Rate” has the meaning assigned to that term in subsection 2.2(A).
 
“Defaulted Amount” means, with respect to any Lender at any time, any amount
required to be paid hereunder or under any other Loan Document by such Lender to
the Agent or any other Lender which has not been so paid.
 
“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Loans, or participations in Lender Letters of Credit or participations in
Loans required to be funded by it hereunder within one (1) Business Day of the
date required to be funded by it hereunder (including by settlement pursuant to
subsection 9.8), (b) has otherwise failed to pay over to the Agent or any other
Lender any other amount required to be paid by it hereunder within one (1)
Business Day of the date when due, unless the subject of a good faith dispute,
(c) has been deemed or has a parent company that has been deemed insolvent or
become the subject of a bankruptcy, receivership, conservatorship or insolvency
proceeding, (d) has notified Borrower, Agent or any Lender that it does not
intend to comply with any of its funding obligations under this Agreement or has
made a public statement to the effect that it does not intend to comply with its
funding obligations under this Agreement or under other agreements in which it
commits to extend credit or (e) has failed to confirm within three (3) Business
Days of a request by Agent that it will comply with the terms of this Agreement
relating to its obligations to fund prospective Revolving Loans or Term Loan B
Loans and participations in then outstanding Letters of Credit (provided that
such Lender shall cease to be a Defaulting Lender pursuant to this clause (e)
when it has provided such confirmation).
 
“EBITDA” means, for any period, without duplication, the total of the following
for Parent and its Subsidiaries on a consolidated basis, each calculated for
such period:
 
(a) net income determined in accordance with GAAP; plus,
 
(b) to the extent included in the calculation of net income, the sum of (i)
income taxes paid or accrued; (ii) interest expenses paid or accrued; (iii)
non-cash stock compensation; (iv) amortization and depreciation; (v)
non-recurring litigation expenses, provided, the aggregate amount under this
subsection (v) shall not exceed 10% of EBITDA for any period (excluding such
item); (vi) transactions fees and expenses in connection with this Agreement
which are set forth on Schedule 1.1 hereof; (vii) Pre-Opening Soft Costs in an
aggregate amount not to exceed $37,500 per store; and (viii) other non-cash
charges not to exceed $250,000 for the applicable trailing twelve month period,
plus or minus
 
(c) the net change in deferred franchise and development fees.
 
“Eligible Assignee” shall mean (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000 (or $250,000,000 in the case of an assignment
of a Revolving Loan Commitment or Term Loan B Commitment); (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the “OECD”), or a
political subdivision of any such country, and having a combined capital and
surplus of at least $100,000,000 (or $250,000,000 in the case of an assignment
of a Revolving Loan Commitment or Term Loan B Commitment), provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (c) any
nationally recognized financial institution or any other entity which is an
“accredited investor” (as defined in Regulation D under the Securities Act)
which extends credit or buys loans as one of its businesses, including but not
limited to, commercial finance companies, insurance companies, mutual funds and
lease financing companies, (d) a Related Fund (as such term is defined in
subsection 9.5(D)), and (e) a Person that is primarily engaged in the business
of lending that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person
of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a
Subsidiary; provided, however, that no Affiliate of Borrower shall be an
Eligible Assignee.
 
“Eligible Accounts” means, as at any date of determination, the aggregate of all
Accounts of Borrower that Agent, in its Permitted Discretion, deems to be
eligible for borrowing purposes.  Without limiting the generality of the
foregoing, the Agent may determine that the following of Borrower’s Accounts are
not Eligible Accounts:
 
 
 
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(1)           Accounts which do not consist of accounts receivable and contract
receivables, each owed to and owned by Borrower arising or resulting from the
sale of goods or the rendering of services by Borrower and invoiced in
Borrower’s name.
 
(2)           Accounts which, at the date of issuance of the respective invoice
therefor, were payable more than ninety (90) days after the date of issuance;
 
(3)           Accounts which remain unpaid for more than ninety (90) days after
the original invoice date therefor;
 
(4)           Accounts which are otherwise eligible with respect to which the
Person obligated on such Account is owed a credit by Borrower, but only to the
extent of such credit;
 
(5)           Accounts due from a Person whose principal place of business is
located outside the United States of America;
 
(6)           Accounts due from a Person which Agent has notified Borrower does
not have a satisfactory credit standing;
 
(7)           Accounts with respect to which the Account Debtor or the Person
obligated with respect thereto is the United States of America, any state or any
municipality, or any department, agency or instrumentality thereof, unless
Borrower has, with respect to such Account, complied with the Federal Assignment
of Claims Act of 1940 as amended (31 U.S.C. Section 3727 et seq.) or any
applicable statute or municipal ordinance of similar purpose and effect;
 
 
 
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(8)           Accounts with respect to which the Person obligated is an
Affiliate of Borrower or a director, officer, agent, stockholder, member or
employee of Borrower or any of its Affiliates;
 
(9)           Accounts due from a Person if more than twenty-five percent (25%)
of the aggregate amount of Accounts of such Person have at the time remained
unpaid for more than ninety (90) days after the invoice date;
 
(10)           Accounts with respect to which there is any unresolved dispute
with the respective Account Debtor or the Person obligated on such Account (but
only to the extent of such dispute);
 
(11)           Accounts evidenced by an Instrument or Chattel Paper not in the
possession of Agent, for the benefit of itself and Lenders;
 
(12)           Accounts with respect to which Agent, on behalf of itself and
Lenders, does not have a valid, first priority and fully perfected security
interest;
 
(13)           Accounts subject to any Lien except those in favor of Agent, for
the benefit of itself and Lenders, other than Permitted Encumbrances of the type
set forth in clause (a) of the definition thereof;
 
(14)           Accounts with respect to which the Account Debtor or the Person
obligated on the Account is the subject of any bankruptcy or other insolvency
proceeding;
 
(15)           Accounts due from a Person and its affiliates to the extent that
such Accounts exceed in the aggregate an amount equal to twenty percent (20%) of
the aggregate of all Eligible Accounts at said date;
 
(16)           Accounts with respect to which the obligation to pay is
pre-billed or for which the underlying goods have not been shipped or which the
obligation to pay is conditional or subject to a repurchase obligation or right
to return or with respect to which the goods or services giving rise to such
Accounts have not been delivered (or performed, as applicable) and accepted by
the Account Debtor or the Person obligated on such Account, including progress
billings, bill and hold sales, guarantied sales, sale or return transactions,
sales on approval or consignments;
 
(17)           Accounts with respect to which the Account Debtor or the Person
obligated on the Account is located in New Jersey, or any other state denying
out of state creditors access to its courts in the absence of a Notice of
Business Activities Report or other similar filing, unless Borrower has either
qualified as a foreign entity authorized to transact business in such state or
has filed a Notice of Business Activities Report or similar filing with the
applicable state agency for the then current year;
 
(18)           Accounts subject to any offset, deduction, defense dispute or
counterclaim (but only to the extent thereof); or
 
(19)           Accounts with respect to which the Account Debtor or the Person
obligated on Account is a creditor of Borrower; provided, however, that any such
Account shall only be ineligible as to that portion of such Account which is
less than or equal to the amount owed by Borrower to such Person.
 
 
 
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“Eligible Inventory” means, as at any date of determination, the value
(determined at the lower of weighted average cost or market) of all Inventory
owned by Borrower and located in the United States of America, that Agent, in
its Permitted Discretion, deems to be eligible for borrowing purposes.  Without
limiting the generality of the foregoing, the Agent may determine that the
following of Borrower’s Inventory are not Eligible Inventory:
 
(1)           work-in-process, obsolete, slow moving or unmerchantable
Inventory;
 
(2)           finished goods which do not meet the specifications of the
purchase order for such goods;
 
(3)           Inventory which Agent determines in its Permitted Discretion is
unacceptable for borrowing purposes due to age, quality, type, category and/or
quantity;
 
(4)           shipping materials or supplies consumed in Borrower’s business;
 
(5)           Inventory with respect to which Agent, on behalf of itself and
Lenders, does not have a valid, first priority and fully perfected security
interest;
 
(6)           Inventory with respect to which there exists any Lien in favor of
any Person other than Agent, on behalf of itself and Lenders, other than
Permitted Encumbrances;
 
(7)           Inventory produced in violation of the Fair Labor Standards Act
and subject to the so-called “hot goods” provisions contained in Title 29 U.S.C.
215 (a)(i) or any replacement statute that does not conform to all standards
imposed by any Governmental Authority which has regulatory authority over such
goods or the use or sale thereof;
 
(8)           Inventory located at any location other than those locations
identified pursuant to subsection 4.5(L) and subsection 4.6;
 
(9)           Inventory located at a vendor’s location or with a consignee;
 
(10)           Inventory located with a distributor, warehouseman, bailee,
processor or similar third party, unless such Person has executed a waiver of
interest reasonably satisfactory to Agent;
 
(11)           unless otherwise agreed to by Agent, Inventory in any location
leased by Borrower for which Agent has not received an agreement, in form and
substance reasonably acceptable to Agent, acknowledging Agent’s rights and
waiving its own interest in such Inventory from each lessor and sublessor (a
“Landlord Waiver”) and each mortgagee of such location or Agent shall have
reserved two (2) months rent for any such location;
 
(12)           Inventory subject to a License Agreement or other agreement that
limits, conditions or restricts Borrower’s or Agent’s right to sell or otherwise
dispose of such Inventory in any material respect, unless Agent is a party to a
Licensor/Agent Agreement with the Licensor under such License Agreement or the
Licensor has otherwise consented to the sale and other disposition of the
Inventory by Agent; or
 
 
 
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(13)           Inventory which is non-insured, perishable inventory.
 
“Eligible New Store Opening Costs” means for each new store to be opened by Pie
Five, the sum of (i) Pre-Opening Soft Costs, plus (ii) all cost relating to the
finish-out of such store and equipment needed for such store, net of tenant
improvement allowances, in each case incurred by Pie Five in connection with the
opening of such new store and evidenced by an invoice(s) or other supporting
documentation requested by Agent, in form and substance reasonably acceptable to
Agent.
 
“Employee Benefit Plan” means any “employee benefit plan” within the meaning of
Section 3(3) of ERISA (a) maintained for employees of any Loan Party or (b) with
respect to which Loan Party has liability.
 
“Environmental Claims” means claims, liabilities, investigations, litigation,
administrative proceedings, judgments or orders relating to Hazardous Materials.
 
“Environmental Laws” means any present or future federal, state or local law,
rule, regulation or order relating to pollution, disposal of wastes or Hazardous
Materials or the protection of human health or safety, plant life or animal life
(in each case, from exposure to hazardous materials), natural resources or the
environment.
 
“Equity Interests” of any Person shall mean any and all shares, rights to
purchase, options, warrants, general, limited or limited liability partnership
interests, member interests, participation or other equivalents of or interest
in (regardless of how designated) equity of such Person, whether voting or
nonvoting, including common stock, preferred stock, convertible securities or
any other “equity security” (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statute and all rules and regulations
promulgated thereunder.
 
“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with a Loan Party within the meaning of Section 414(b) or
(c) of the IRC (and Sections 414(m) and (o) of the IRC for purposes of
provisions relating to Section 412 of the IRC).
 
“ERISA Event” means (i) a “reportable event” within the meaning of Section 4043
of ERISA and the regulations issued thereunder with respect to any Pension Plan
(excluding those for which the provision for thirty day notice to the PBGC has
been waived by regulation); (ii) the failure to meet the minimum funding
standard of Section 412 of the IRC with respect to any Pension Plan (whether or
not waived in accordance with Section 412(d) of the IRC) or the failure to make
by its due date a required installment under Section 412(m) of the IRC with
respect to any Pension Plan or the failure to make any required contribution to
a Multiemployer Plan; (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA; (iv)
the withdrawal by Borrower or any of its Subsidiaries or any of their respective
ERISA Affiliates from any Pension Plan with two or more contributing sponsors or
the termination of any such Pension Plan resulting in liability to Borrower, any
of its Subsidiaries or any of their respective ERISA Affiliates pursuant to
Section 4063 or 4064 of ERISA; (v) the institution by
 
 
 
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the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any
event or condition which would reasonably be expected to constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (vi) the imposition of liability on Borrower, any
of its Subsidiaries or any of their respective ERISA Affiliates pursuant to
Section 4062(e) or 4069 of ERISA or by reason of the application of Section
4212(c) of ERISA; (vii) the withdrawal of Borrower, any of its Subsidiaries or
any of their respective ERISA Affiliates in a complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer
Plan if there is any potential liability therefor, or the receipt by Borrower,
any of its Subsidiaries or any of their respective ERISA Affiliates of notice
from any Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act
or omission which could give rise to the imposition on any Loan Party, any of
its Subsidiaries or any of their respective ERISA Affiliates of fines,
penalties, taxes or related charges under Chapter 43 of the IRC or under Section
409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any
Employee Benefit Plan; (ix) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against any Loan Party, any of its
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan that would result in material liability to any Loan Party;
(x) receipt from the IRS of notice of the failure of any Pension Plan (or any
other Employee Benefit Plan intended to be qualified under Section 401(a) of the
IRC) to qualify under Section 401(a) of the IRC, or the failure of any trust
forming part of any Pension Plan to qualify for exemption from taxation under
Section 501(a) of the IRC; or (xi) the imposition of a Lien pursuant to Section
401(a)(29), 412(n) or 403(k) of the IRC or pursuant to Section 303(k) of ERISA
with respect to any Pension Plan.
 
“Event of Default” has the meaning assigned to that term in subsection 8.1.
 
“Excess Interest” has the meaning assigned to that term in subsection 2.2(C).
 
“F&M Bank” has the meaning assigned to that term in the introductory paragraph
of this Agreement.
 
“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code, if as
amended, FATCA provides a commercially reasonable mechanism to avoid the tax
imposed thereunder by satisfying the information reporting and other
requirements of FATCA.
 
“Federal Funds Effective Rate” means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Board of Governors of the Federal
Reserve System as the Federal Funds Rate or Federal Reserve Statistical Release
H.15(519) entitled “Selected Interest Rates” or any successor publication of the
Federal Reserve System reporting the Federal Funds Effective Rate or its
equivalent or, if such rate is not published for any Business Day, the average
of the quotations for the day of the requested Loan received by Agent from three
Federal funds brokers of recognized standing selected by Agent.
 
 
 
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“Financial Covenants Rider” means Rider B attached to this Agreement and made a
part hereof.
 
“Fiscal Year” means each twelve (12) month period ending on the last Sunday of
June in each year.
 
“Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal
period, the ratio of (a) EBITDA for such period minus the sum of (i) all
unfinanced Capital Expenditures by Parent and its Subsidiaries made during such
period (other than reinvested net proceeds of Asset Dispositions pursuant to
subsection 2.4(B)(2)), net of any tenant improvement allowances, (ii) all income
taxes actually paid in cash during such period by Parent and its Subsidiaries,
and (iii) any Restricted Junior Payments made by Parent pursuant to clauses (b)
and (c) of Section 7.5 hereof to (b) Total Debt Payments during such period, in
each case for the trailing twelve-month period on a consolidated basis
immediately preceding the date of determination thereof, each calculated as of
the last day of any fiscal quarter.
 
“Fixed Rate” means, on any day a rate per annum equal to the U.S. dollar swap
rate (semi-annually fixed rate, 30/360 accrual convention) versus the U.S dollar
LIBOR offered rate the “4 Year LIBOR Swap Rate” of interest which appears on
Bloomberg Page USSWAP4 <index> (or on such other substitute Bloomberg page that
displays such rate).  If multiple 4 Year LIBOR Swap Rates are quoted on such
page, then the highest 4 Year LIBOR Swap Rates quoted therein shall be the Fixed
Rate.  In the event that the 4 Year LIBOR Swap Rate no longer exists on any
Bloomberg page for any reason, the Agent will choose a substitute 4 Year LIBOR
Swap Rate, for purposes of calculating the interest rate applicable hereunder,
which is based on comparable information, until such time as a 4 Year LIBOR Swap
Rate is published again by Bloomberg.  Each change in the Fixed Rate shall
become effective without notice to the Borrower on the effective date of each
such change.
 
 “Fixed Rate Loans” means at any time that portion of the Loans (excluding
Revolving Loans) bearing interest at rates determined by reference to the Fixed
Rate (it being understood and agreed that no Revolving Loan shall bear interest
at rates determined by reference to the Fixed Rate).
 
“Foreign Lender” has the meaning assigned to that term in subsection 2.9(C).
 
“Fronting Fee” shall mean with respect to any Lender Letter of Credit a fee
equal to the greater of (a) 0.25% of the face amount of any Lender Letter of
Credit to be issued or (b) $100.
 
“Funding Date” means the date of each funding of a Loan or issuance of a Lender
Letter of Credit.
 
 
 
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“GAAP” means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board that are applicable to the circumstances as
of the date of determination.
 
“Governmental Authority” means any federal, state or municipal court or other
governmental department, commission, board, bureau, agency or instrumentality,
governmental or quasi-governmental, domestic or foreign.
 
“Guarantor” means, individually and collectively, Parent, each direct or
indirect Subsidiary of Parent that is not a Borrower and any other Person that
presently or hereafter guarantees payment or performance of any or all of the
Obligations.
 
“Guarantor Security Agreement” shall mean any Security Agreement executed by any
Guarantor in favor of Agent securing the Guaranty of Guarantor, in form and
substance reasonably satisfactory to Agent.
 
“Guaranty” shall mean any guaranty of the obligations of Borrower executed by a
Guarantor in favor of Agent for its benefit and for the ratable benefit of
Lenders, in form and substance reasonably satisfactory to Agent.
 
“Hazardous Material” means all or any of the following: (a) substances that are
defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or regulations as “hazardous substances”, “hazardous materials”, “hazardous
wastes”, “toxic substances” or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, or toxicity; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which contains
any oil or dielectric fluid containing polychlorinated biphenyls.
 
“Indebtedness”, as applied to any Person, means without duplication: (a) all
indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six (6) months from the date the obligation is incurred or is
evidenced by a note or similar written instrument; (e) all indebtedness secured
by any Lien on any property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed by that Person
or is non-recourse to the credit of that Person; (f) obligations in respect of
letters of credit or similar instruments; (g) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement designed
to alter the risks of that Person arising from fluctuations in currency values
or interest rates; (h) “earnouts” and similar payment obligations; (i) any
advances under any factoring arrangement; and (j) all guarantees by such Person
of Indebtedness of others.
 
 
 
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“Indemnified Liabilities” has the meaning assigned to that term in subsection
10.2.
 
“Indemnitees” has the meaning assigned to that term in subsection 10.2.
 
“Intellectual Property” means, collectively, all: Copyrights, Patents and
Trademarks owned by Borrower or Guarantor.
 
“Intellectual Property Security Agreement” means any Intellectual Property
Security Agreement executed and delivered by each of Borrower and its
Subsidiaries to Agent, in form and substance reasonably acceptable to Agent, as
the same may be amended and in effect from time to time.
 
“Interest Rate” has the meaning assigned to that term in subsection 2.2(A).
 
“Interest Rate Agreement” means any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement or similar agreement or
arrangement designed to protect Borrower against fluctuations in interest rates.
 
“IRC” means the Internal Revenue Code of 1986, as amended from time to time, and
any successor statute and all rules and regulations promulgated thereunder.
 
“IRS” has the meaning assigned to that term in subsection 4.9.
 
“Issuing Lender” has the meaning assigned to that term in subsection 2.1(G)(2).
 
“Landlord Waiver”  has the meaning assigned to such term in the definition of
Eligible Inventory.
 
“Lender” or “Lenders” has the meaning assigned to that term in the Recitals
section of this Agreement.
 
“Lender Letter of Credit” has the meaning assigned to that term in subsection
2.1(F).
 
“Letter of Credit” means each letter of credit issued by Agent for the account
of Borrower.
 
“Letter of Credit Liability” means, all reimbursement and other liabilities of
Borrower or any of its Subsidiaries with respect to each Lender Letter of
Credit, whether contingent or otherwise, including: (a) the amount available to
be drawn or which may become available to be drawn; (b) all amounts which have
been paid or made available by any Lender issuing a Lender Letter of Credit or
any bank issuing a Letter of Credit to the extent not reimbursed; and (c) all
unpaid interest, fees and expenses related thereto.
 
“Letter of Credit Reserve” means, at any time, an amount equal to (a) the
aggregate amount of Letter of Credit Liability with respect to all Lender
Letters of Credit outstanding at such time plus, without duplication, (b) the
aggregate amount theretofore paid by Agent or any Lender under Lender Letters of
Credit and not debited to the Revolving Loan pursuant to subsection 2.1(F) (2)
or otherwise reimbursed by Borrower.
 
 
 
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“Letter of Non-Exemption” has the meaning assigned to that term in subsection
2.9(C).
 
“Liabilities” shall have the meaning given that term in accordance with GAAP and
shall include, without limitation, Indebtedness.
 
“License Agreement” shall mean any agreement between Borrower and a Licensor
pursuant to which Borrower is authorized to use any Intellectual Property in
connection with the manufacturing, marketing, sale or other distribution of any
Inventory of Borrower or otherwise in connection with Borrower’s business
operations.
 
“Licensor” shall mean any Person from whom Borrower obtains the right to use
(whether on an exclusive or non-exclusive basis) any Intellectual Property in
connection with Borrower’s manufacture, marketing, sale or other distribution of
any Inventory or otherwise in connection with Borrower’s business operations.
 
“Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor,
in form and content reasonably satisfactory to Agent, by which Agent is given
the unqualified right, vis-à-vis such Licensor, to enforce Agent’s Liens with
respect to and to dispose of Borrower’s Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of Borrower’s default
under any License Agreement with such Licensor.
 
“Lien” means any lien (statutory or otherwise), mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind, whether voluntary or
involuntary (including any conditional sale or other title retention agreement,
any lease in the nature thereof, and any agreement to give any security
interest).
 
“Local Deposit Account” has the meaning assigned to that term in Section 7.14
 
“Loan” or “Loans” means an advance or advances under the Term Loan A Commitment,
the Revolving Loan Commitment or Term Loan B Commitment.
 
“Loan Documents” means this Agreement, the Pledge Agreements, the Mortgages, the
Notes (if any), the Guaranty, the Guarantor Security Agreement, the Intellectual
Property Security Agreement and all other documents, instruments and agreements
executed by or on behalf of any Loan Party in favor of Agent or the Lenders and
delivered concurrently herewith or at any time hereafter to or for Agent or any
Lender in connection with the Loans, any Lender Letter of Credit and any other
transaction contemplated by this Agreement, all as amended, restated,
supplemented or modified from time to time.
 
“Loan Party” means each of Parent, Borrower, Guarantor and each Subsidiary of
Borrower which is or becomes a party to any Loan Document.
 
“Material Adverse Effect” means a material adverse effect upon (a) the business,
operations, properties, assets or condition (financial or otherwise) of the Loan
Parties, taken as a whole, (b) the ability of any Loan Party to perform its
obligations under any Loan Document to which it is a party or of Agent or any
Lender to enforce or collect any of the Obligations, (c) the enforceability or
priority of the Agent’s Liens with respect to the Collateral, or (d) any of the
rights and remedies of the Agent under the Loan Documents.
 
 
 
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“Maximum Rate” has the meaning assigned to that term in subsection 2.2(C).
 
“Maximum Revolving Loan Amount” means, as of any date of determination, the
lesser of (a) the aggregate of the Revolving Loan Commitments of all Lenders
less the sum of the Letter of Credit Reserve and (b) the Borrowing Base.
 
“Mortgage” means each of the mortgages, deeds of trust, collateral assignments
of leases or other real estate security documents delivered by any Loan Party to
Agent, on behalf of Agent and Lenders, with respect to Mortgaged Property or
Additional Mortgaged Property, all in form and substance reasonably satisfactory
to Agent.
 
“Mortgage Policies” has the meaning assigned to that term in subsection 5.4(A).
 
“Mortgaged Property” means the real property owned by Borrower as described on
Schedule 5.4
 
“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer
plan” as defined in Section 3(37) of ERISA.
 
“Note” or “Notes” means the Revolving Notes, the Term Loan A Note and the Term
Loan B Note (in each case, if any).
 
“Notice of Borrowing” means a notice duly executed by an authorized
representative of Borrower appropriately completed and substantially in the form
of Exhibit E.
 
“Obligations” means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Agent or to any Lender under
the Loan Documents, the Interest Rate Agreements and/or the Bank Products
Agreements (whether incurred before or after the Termination Date) including,
without limitation, the principal amount of all debts, claims and indebtedness,
accrued and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable including, without limitation, all
interest, fees, cost and expenses accrued or incurred after the filing of any
petition under any bankruptcy or insolvency law (regardless of whether allowed
or allowable in whole or in part as a claim therein).
 
“OECD” has the meaning provided in the definition of “Eligible Assignee.”
 
“Organizational Documents” means with respect to any Person, its charter,
certificate or articles of incorporation, bylaws, articles of organization,
limited liability agreement, operating agreement, members agreement,
shareholders agreement, partnership agreement, certificate of partnership,
certificate of formation, voting trust agreement, or similar agreement or
instrument governing the formation or operation of such Person.
 
“Over Formula Advance” has the meaning assigned to such term in subsection
2.4(B)(1).
 
“Parent” has the meaning assigned to that term in the Recitals section of this
Agreement.
 
 
 
 
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“Patents” means collectively all of the following:(a) all patents and patent
applications including, without limitation, those listed on any schedule to any
Intellectual Property Security Agreement and the inventions and improvements
described and claimed therein, and patentable inventions; (b) the reissues,
divisionals, continuations, renewals, extensions and continuations-in-part of
any of the foregoing; (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing or with respect to any
of the foregoing, including, without limitation, damages and payments for past,
present and future infringements of any of the foregoing; and (d) the right to
sue for past, present and future infringements of any of the foregoing.
 
“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.
 
“Pension Plan” means any Employee Benefit Plan (other than a Multiemployer Plan,
which is subject to Section 4.12 of the IRC or Section 302 of ERISA).
 
“Permitted Discretion” shall mean, with respect to any Person, a determination
or judgment made by such Person in the exercise of reasonable (in the business
of secured asset- based lending) credit or business judgment and in good faith.
 
“Permitted Encumbrances” means the following types of Liens: (a) Liens (other
than Liens relating to Environmental Claims or ERISA) for taxes, assessments or
other governmental charges not yet due and payable or which are being contested
by appropriate proceedings (and for which adequate reserves have been
established under GAAP); (b) statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen and other similar liens imposed by law,
which are incurred in the ordinary course of business for sums not more than
thirty (30) days delinquent or which are being contested by appropriate
proceedings (and for which adequate reserves have been established under GAAP);
(c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in
the ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security, statutory
obligations, surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money); (d) easements,
rights-of-way, restrictions, and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business of
any Loan Party; (e) Liens for purchase money obligations incurred within 90 days
of the purchase of the Equipment covered by such Lien, provided that (i) the
Indebtedness secured by any such Lien is permitted under subsection 7.1, and
(ii) such Lien encumbers only the asset so purchased; (f) Liens in favor of the
Agent under the Loan Documents securing indebtedness, liabilities and other
obligations of Borrower and its Subsidiaries under Interest Rate Agreements and
Bank Products Agreements; (g) Liens in favor of Agent, on behalf of itself and
Lenders; and (h) Liens set forth on Schedule 7.3(B).
 
“Person” means and includes natural persons, corporations, limited partnerships,
general partnerships, limited liability companies, limited liability
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
 
 
 
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“PIBC Holding Company” means PIBC Holding, Inc., a Texas corporation.
 
“Pledge Agreements” shall mean collectively (i) the Pledge Agreement entered
into by Parent, PIBC Holding Company and Pie Five with respect to the Equity
Interests of their Subsidiaries and (ii) any other pledge agreement executed in
favor of Agent after the Closing Date, in each case, in form and substance
satisfactory to Agent in its sole discretion.
 
“Primary Deposit Account” has the meaning assigned to that term in Section 4.22.
 
“Pro Rata Share” means (a) with respect to matters relating to a particular
Commitment of a Lender, the percentage obtained by dividing (i) such Commitment
of that Lender by (ii) all such Commitments of all Lenders and (b) with respect
to all other matters, the percentage obtained by dividing (i) the Total Loan
Commitment of a Lender by (ii) the Total Loan Commitments of all Lenders, in
either (a) or (b), as such percentage may be adjusted by assignments permitted
pursuant to subsection 9.5; provided, however, if any Commitment is terminated
pursuant to the terms hereof, then “Pro Rata Share” means the percentage
obtained by dividing (x) the aggregate amount of such Lender’s outstanding Loans
related to such Commitment by (y) the aggregate amount of all outstanding Loans
related to such Commitment.
 
“Pre-Opening Soft Costs” means non-capitalized marketing, rent and training
expenses incurred prior to or in conjunction with the opening of any new Pie
Five store.
 
“Projections” means Borrower’s forecasted consolidated and consolidating:  (a)
balance sheets, (b) profit and loss statements, (c) cash flow statements, (d)
capitalization statements and (e) Revolving Loan availability and Term Loan B
availability, consistent with Borrower’s historical financial statements and
based upon good faith estimates and assumptions by Borrower believed to be
reasonable at the time made, together with appropriate supporting details and a
statement of underlying assumptions.
 
“Protective Advance” has the meaning assigned to that term in subsection 9.9.
 
“Register” has the meaning assigned to that term in subsection 9.5(E).
 
“Related Fund” has the meaning assigned to that term in subsection 9.5 (D).
 
“Replacement Lender” has the meaning assigned to that term in subsection
2.11(A).
 
“Reporting Rider” means Rider A attached to this Agreement and made a part
hereof.
 
“Requisite Lenders” means Lenders (other than a Defaulting Lender), holding or
being responsible for 51% or more of the sum of the (a) outstanding Loans, (b)
Letter of Credit Reserve and (c) unutilized Commitments of all Lenders which are
not Defaulting Lenders.
 
“Restricted Junior Payment” means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Parent,
Borrower or any of its Subsidiaries now or hereafter outstanding, except a
dividend payable solely with shares of the class of stock on which such dividend
is declared; (b) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or
 
 
 
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similar payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of stock of Parent, Borrower or any of its Subsidiaries
now or hereafter outstanding, or the issuance of a notice of an intention to do
any of the foregoing; (c) any payments made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Parent, Borrower or any of its Subsidiaries now
or hereafter outstanding; and (d) any payment by Parent, Borrower or any of its
Subsidiaries of any management, consulting or similar fees to any Affiliate,
whether pursuant to a management agreement or otherwise (but excluding
compensation paid to executives and board of director fees, in each case paid in
the ordinary course of business and consistent with past practices, and any
consulting fees paid to the current interim CEO).
 
“Revolving Advance” means each advance made by Lender(s) under the Revolving
Loan Commitment pursuant to subsection 2.1(A).
 
“Revolving Loan” means the outstanding balance of all Revolving Advances and any
amounts added to the principal balance of the Revolving Loan pursuant to this
Agreement.
 
“Revolving Loan Commitment” means (a) as to any Lender, the commitment of such
Lender to make Revolving Advances pursuant to subsection 2.1(A) and to purchase
participations in Lender Letters of Credit pursuant to subsection 2.1(F)  in the
aggregate amount set forth on the signature page of this Agreement opposite such
Lender’s signature or in the most recent Assignment and Acceptance Agreement, if
any, executed by such Lender and (b) as to all Lenders, the aggregate commitment
of all Lenders to make Revolving Advances and to purchase participations in
Lender Letters of Credit.
 
“Revolving Note” means each promissory note of Borrower in substantially the
form of Exhibit F, issued to evidence the Revolving Loan Commitments (if any).
 
“Revolving Loan Maturity Date” means August 28, 2014.
 
“Scheduled Installment” has the meaning assigned to that term in subsection
2.1(B).
 
“Senior Funded Debt” means, at any time, the aggregate outstanding principal
balance of the Loans.
 
“Senior Funded Debt to EBITDA Ratio” means, as of any date of determination, the
ratio of (a) Senior Funded Debt to (b) EBITDA for the trailing twelve-month
period ended as of such date.
 
“Sponsor” means, collectively, Mark E. Schwarz, Newcastle Partners, L.P., and
Hallmark Financial Services, Inc., together with any other Person controlling,
controlled by or under common control with any of them and any other Person
acting in concert with them with respect to the Equity Interests of Parent.
 
“SPV” has the meaning assigned to that term in subsection 9.5(A).
 
“Subsidiary” means, with respect to any Person, any corporation, association or
other business entity of which more than fifty percent (50%) of the total voting
power of shares of stock (or equivalent ownership or controlling interest)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
subsidiaries of that Person or a combination thereof.
 
 
 
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“Tax Liabilities” has the meaning assigned to that term in subsection 2.9(A).
 
“Term Loan A” means the advance made pursuant to subsection 2.1(B).
 
“Term Loan A Commitment” means (a) as to any Lender, the commitment of such
Lender to make its Pro Rata Share of the Term Loan A in the maximum aggregate
amount set forth on the signature page of this Agreement opposite such Lender’s
signature or in the most recent Assignment and Acceptance Agreements, if any,
executed by such Lender and (b) as to all Lenders, the aggregate commitment of
all Lenders to make the Term Loan A.
 
“Term Loan A Maturity Date” means August 28, 2016.
 
“Term Loan A Note” means each promissory note of Borrower in substantially the
form of Exhibit G, issued to evidence the Term Loan A Commitment (if any).
 
“Term Loan B” means the advance made pursuant to subsection 2.1(C).
 
“Term Loan B Advance” means each advance made by Lender(s) under the Term Loan B
Commitment pursuant to subsection 2.1(C).
 
“Term Loan B Commitment” means (a) as to any Lender, the commitment of such
Lender to make Term Loan B Advances pursuant to subsection 2.1(C), in the
aggregate amount set forth on the signature page of this Agreement opposite such
Lender’s signature or in the most recent Assignment and Acceptance Agreement, if
any, executed by such Lender and (b) as to all Lenders, the aggregate commitment
of all Lenders to make Term Loan B Advances.
 
“Term Loan B Draw Period” has the meaning assigned to that term in subsection
2.1(C).
 
“Term Loan B Maturity Date” means August 28, 2018.
 
“Term Loan B Note” means each promissory note of the Borrower in substantially
the form of Exhibit H, issued to evidence the Term Loan B Commitments (if any).
 
“Termination Date” has the meaning assigned to that term in subsection 2.5.
 
“Total Debt Payments” means and includes all cash actually expended by Parent
and its Subsidiaries to make (a) interest payments on any Advances hereunder,
plus (b) scheduled principal payments on the Term Loan A and the Term Loan B,
plus (c) payments on any Capital Lease, plus (d) interest and principal payments
to any Person other than a Loan Party with respect to any other Indebtedness for
borrowed money.
 
“Total Debt to EBITDA Ratio” means, as of any date of determination, the ratio
of (a) Total Funded Debt to (b) EBITDA for the trailing twelve-month period
ended as of such date.
 
 
 
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“Total Funded Debt” means all Indebtedness of Parent and its Subsidiaries which
should be classified as “funded indebtedness” on a consolidated balance sheet in
accordance with GAAP.
 
“Total Loan Commitment” means as to any Lender the aggregate commitments of such
Lender with respect to its Revolving Loan Commitment, Term Loan A Commitment and
Term Loan B Commitment.
 
“Trademarks” means collectively any of the following items which are owned by
Borrower or Guarantor: (a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos, other business identifiers, prints and labels on which any of the
foregoing have appeared or appear, all registrations and recordings thereof, and
all applications in connection therewith including, without limitation, those
listed on any schedule to any Intellectual Property Security Agreement; (b) all
renewals thereof; (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing or with respect to any
of the foregoing including damages and payments for past, present and future
infringements of any of the foregoing; (d) the right to sue for past, present
and future infringements of any of the foregoing; (e) all rights corresponding
to any of the foregoing throughout the world; and (f) all goodwill associated
with and symbolized by any of the foregoing.
 
“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of Texas; provided, however, to the extent the law of any other state or
other jurisdiction applies to the attachment, perfection, priority or
enforcement of any Lien granted to Agent in any of the Collateral, “UCC” means
the Uniform Commercial Code as in effect in such other state or jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection,
priority or enforcement of a Lien in such Collateral.  To the extent this
Agreement defines the term “Collateral” by reference to terms used in the UCC,
each of such terms shall have the broadest meaning given to such terms under the
UCC as in effect in any state or other jurisdiction.
 
“Unused Commitment” means the total of (a) the Revolving Loan Commitment, plus
(b) the Term Loan B Commitment, minus (c) the average daily balance of the
Revolving Loan during the period of calculation, minus (d) without duplication
of (c) above, the average daily amount of the Letter of Credit Reserve during
the period of calculation, minus (e) the average daily balance of the Term Loan
B during the period of calculation.
 
“USA PATRIOT Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.
 
1.2 UCC Defined Terms.  The following terms used in this Agreement shall have
the respective meanings provided for in the UCC: “Accounts”, “Account Debtor”,
“Buyer in Ordinary Course of Business”, “Chattel Paper”, “Commercial Tort
Claim”, “Deposit Account”, “Documents”, “Electronic Chattel Paper”, “Equipment”,
“Farm Products”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”,
“Inventory”, “Investment Property”, “Letter of Credit”, “Letter-of-Credit
Rights”, “Licensee in Ordinary Course of Business”, “Payment Intangibles”,
“Proceeds”, “Record”, “Software”, “Supporting Obligations” and “Tangible Chattel
Paper”.
 
 
 
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1.3 Accounting Terms.  For purposes of this Agreement, all accounting terms not
otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP.  Financial statements and other information furnished to
Agent or any Lender pursuant to subsection 5.1 shall be prepared in accordance
with GAAP (as in effect at the time of such preparation) on a consistent
basis.  In the event any “Accounting Changes” (as defined below) shall occur and
such changes affect financial covenants, standards or terms in this Agreement,
then Borrower and Lenders agree to enter into negotiations in order to amend
such provisions of this Agreement so as to equitably reflect such Accounting
Changes with the desired result that the criteria for evaluating the financial
condition of Borrower shall be the same after such Accounting Changes as if such
Accounting Changes had not been made, and until such time as such an amendment
shall have been executed and delivered by Borrower and Requisite Lenders, (A)
all financial covenants, standards and terms in this Agreement shall be
calculated and/or construed as if such Accounting Changes had not been made, and
(B) Borrower shall prepare footnotes to each Compliance Certificate and the
financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). “Accounting Changes” means: (a)
changes in accounting principles required by GAAP and implemented by Borrower;
and (b) changes in accounting principles recommended by Borrower’s Accountants.
All such adjustments resulting from expenditures made subsequent to the Closing
Date (including, but not limited to, capitalization of costs and expenses or
payment of pre-Closing Date liabilities) shall be treated as expenses in the
period the expenditures are made and deducted as part of the calculation of
EBITDA in such period.
 
1.4 Other Definitional Provisions.  References to “Sections”, “subsections”,
“Riders”, “Exhibits”, “Schedules” and “Addenda” shall be to Sections,
subsections, Riders, Exhibits,  Schedules and Addenda, respectively, of this
Agreement unless otherwise specifically provided.  Any of the terms defined in
subsection 1.1 or otherwise in this Agreement may, unless the context otherwise
requires, be used in the singular or the plural depending on the reference.  In
this Agreement, words importing any gender include the other genders; the words
“including,” “includes” and “include” shall be deemed to be followed by the
words “without limitation”; the term “or” has, except where otherwise indicated,
the inclusive meaning represented by the phrase “and/or”; references to
agreements and other contractual instruments shall be deemed to include
subsequent amendments, assignments, and other modifications thereto, but only to
the extent such amendments, assignments and other modifications are not
prohibited by the terms of this Agreement or any other Loan Document; references
to Persons include their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such Persons; and all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.
 
SECTION 2 LOANS AND COLLATERAL
 
2.1 Loans.
 
(A) Revolving Loan.  Each Lender, severally, agrees to lend to Borrower from
time to time its Pro Rata Share of each advance under the Revolving Loan
Commitment.  The aggregate amount of the Revolving Loan Commitment shall not
exceed at any time $2,000,000.  Amounts borrowed under this subsection 2.1(A)
may be repaid and reborrowed at any time prior to the earlier of (1) the
termination of the Revolving Loan Commitment pursuant to subsection 8.2 or (2)
Revolving Loan Maturity Date.  Except as otherwise provided herein, no Lender
shall have any obligation to make a Revolving Advance to the extent such
Revolving Advance would cause the Revolving Loan (after giving effect to any
immediate application of the proceeds thereof) to exceed the Maximum Revolving
Loan Amount.
 
 
 
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(B) Term Loan A.  Each Lender, severally, agrees to lend to Borrower, on the
Closing Date, its Pro Rata Share of the Term Loan A Commitment which is in the
aggregate amount of $2,000,000.  The Term Loan A shall be funded in one
drawing.  Amounts borrowed under this subsection 2.1(B) and repaid may not be
reborrowed.  Borrower shall make principal payments in the amount of the
applicable Scheduled Installment of the Term Loan A (or such lesser principal
amount as shall then be outstanding) on the dates set forth below.  “Scheduled
Installment” of the Term Loan means an amount equal to $41,666.67 commencing
October 1, 2012 and the first day of each month thereafter.
 
(C) Term Loan B.  Each Lender, severally, agrees to lend to Borrower from time
to time its Pro Rata Share of each advance under the Term Loan B Commitment
which Term Loan B shall be used by Borrower for Eligible New Store Opening
Costs; provided, however, in no event shall any Term Loan B Advance (i) exceed
80% of the Eligible New Store Opening Costs or (ii) be made by the Agent unless
(a) Agent has received a budget outlining all cost for each new Pie Five store
to be opened, in form and substance satisfactory to Agent in its Permitted
Discretion and (b) subject to the following sentence, Borrower has used
commercially reasonable efforts to obtain a Landlord Waiver for the new Pie Five
store to be opened.  If Borrower has been unable to obtain such Landlord Waiver
despite its commercially reasonable efforts, then Agent may either waive such
requirement or implement a reserve against the Borrowing Base equal to two
month’s rent on such location; provided, however, that if a Landlord Waiver has
not been either obtained or waived with respect to at least 50% of all new Pie
Five stores for which a Term Loan B Advance has been made, Agent may elect, in
its sole discretion, not to make such Term Loan B Advance.  The aggregate amount
of the Term Loan B Commitment shall not exceed at any time $6,000,000.  Amounts
borrowed during a Borrowing Period (defined below) under this subsection 2.1(C)
and repaid during such Borrowing Period may not be reborrowed.  Amounts borrowed
under this subsection 2.1(C) may be borrowed at any time prior to the earlier of
(1) the termination of the Term Loan B Commitment pursuant to subsection 8.2 or
(2) August 28, 2014 (“Term Loan B Draw Period”).  Term Loan B Loans shall be
accumulated during each twelve (12) month period during the Term Loan B Draw
Period ending August 28, 2013 and August 28, 2014 (each a “Borrowing
Period”).  During each Borrowing Period, only interest will be due and payable
on the Term Loan B Advances during such Borrowing Period.  Thereafter, at the
end of each Borrowing Period, the sum of all Term Loan B Advances made during
the applicable Borrowing Period and outstanding as of the last day of the
applicable Borrowing Period (the “Converted Term Loan B Amount”) shall amortize
on the basis of a forty-eight (48) month schedule (such amount as determined
with respect to any Borrowing Period, the “Amortization Amount”).  The amount of
such monthly principal payments shall be increased upon the completion of each
subsequent Borrowing Period by the Amortization Amount for each subsequent
Borrowing Period.  The Term Loan B Loans shall be, with respect to principal,
payable in equal monthly installments based upon the amortization schedule set
forth above, commencing on October 1, 2013 and on the first day of each month
thereafter with the balance payable on the Term Loan B Maturity Date, subject to
acceleration upon the occurrence of an Event of Default under this Agreement or
termination of this Agreement.
 
 
 
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(D) Borrowing Mechanics.  (1) Base Rate Loans made on any Funding Date shall be
in an aggregate minimum amount of $50,000 and integral multiples of $50,000 in
excess of such amount.  (2) On any day when Borrower desires a Revolving Advance
or Term Loan B Advance under this subsection 2.1, Borrower shall give Agent
written or telephonic notice of the proposed borrowing by 11:00 a.m. Dallas,
Texas time on the Funding Date and shall specify the proposed Funding Date
(which shall be a Business Day).  Each Revolving Advance or Term Loan B Advance
shall initially be a Base Rate Loan.  (3) Revolving Advances can not be Fixed
Rate Loans at any time.  The Borrower may make a one-time election on the
Closing Date for the Term Loan A to be a Base Rate Loan or a Fixed Rate Loan
(any such election shall be irrevocable through the term of this Agreement).  At
the end of each Borrowing Period, Borrower make a one time election to convert
the applicable Converted Term Loan B Amount to a Fixed Rate Loan (any such
election shall be irrevocable through the term of this Agreement).  If such
election is not made by Borrower with respect to the Converted Term Loan B
Amount at least three (3) Business Days prior to the end of the Borrowing
Period, such Converted Term Loan B Amount shall continue to be a Base Rate
Loan.  (4) Any such telephonic notice shall be confirmed with a Notice of
Borrowing on the same day as such request.  Neither Agent nor Lender shall incur
any liability to Borrower for acting upon any telephonic notice or a Notice of
Borrowing which Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.1(D).  (5) Neither
Agent nor Lender will be required to make any advance pursuant to any telephonic
or written notice or a Notice of Borrowing, unless all of the terms and
conditions set forth in Section 3 have been satisfied and Agent has also
received the most recent Borrowing Base Certificate and all other documents
required under Section 5 and the Reporting Rider by 11:00 a.m. Dallas, Texas
time on the date of such funding request.  Each Revolving Advance and Term Loan
B Advance shall be deposited by wire transfer in immediately available funds in
such account as Borrower may from time to time designate to Agent in
writing.  (6) The becoming due of any amount required to be paid under this
Agreement or any of the other Loan Documents as principal, Lender Letter of
Credit reimbursement obligation, accrued interest, fees, compensation or any
other amounts shall be deemed irrevocably to be an automatic request by Borrower
for a Revolving Advance on the due date of, and in the amount required to pay
(as set forth on Agent’s books and records), such principal, Lender Letter of
Credit reimbursement, accrued interest, fees, compensation or any other amounts.
 
(E) Notes.  If so requested by any Lender by written notice to Borrower (with a
copy to Agent) at least two (2) Business Days prior to the Closing Date, or at
any time thereafter, Borrower shall execute and deliver to such Lender (and/or,
if applicable and if so specified in such notice, to any Person who is an
assignee of such Lender pursuant to subsection 9.5) on the Closing Date (or, if
such notice is delivered after the Closing Date, promptly after Borrower’s
receipt of such notice) a Note or Notes to evidence such Lender’s Term Loan A,
Revolving Loan or Term Loan B, as the case may be.
 
(F) Letters of Credit.  The Revolving Loan Commitments may, in addition to
Revolving Advances, be utilized, upon the request of Borrower, for the issuance
of letters of credit by Agent; or with Agent’s consent any Lender, (a “Lender
Letter of Credit”).  Each Lender shall be deemed to have purchased a
participation in each Lender Letter of Credit issued on behalf of Borrower in an
amount equal to its Pro Rata Share thereof.  In no event shall any Lender Letter
of Credit be issued to the extent that the issuance of such Lender Letter of
Credit would cause the sum of the Letter of Credit Reserve (after giving effect
to such issuance), plus the Revolving Loan to exceed the lesser of (1) the
Borrowing Base and (2) the Revolving Loan Commitments.
 
 
 
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(1) Maximum Amount.  The aggregate amount of Letter of Credit Liability with
respect to all Lender Letters of Credit outstanding at any time shall not exceed
$500,000.
 
(2) Reimbursement.  Borrower shall be irrevocably and unconditionally obligated
forthwith without presentment, demand, protest or other formalities of any kind,
to reimburse Agent or the issuer for any amounts paid with respect to a Lender
Letter of Credit including all fees, costs and expenses related
thereto.  Borrower hereby authorizes and directs Agent, at Agent’s option, to
debit Borrower’s account (by increasing the Revolving Loan) in the amount of any
payment made with respect to any Lender Letter of Credit.  In the event that
Agent elects not to debit Borrower’s account and Borrower fails to reimburse
Agent in full on the date of any payment under a Lender Letter of Credit, Agent
shall promptly notify each Lender of the unreimbursed amount of such payment
together with accrued interest thereon and each Lender, on the next Business
Day, shall deliver to Agent an amount equal to its respective participation in
same day funds.  The obligation of each Lender to deliver to Agent an amount
equal to its respective participation pursuant to the foregoing sentence shall
be absolute and unconditional and such remittance shall be made notwithstanding
the occurrence or continuation of an Event of Default or Default or the failure
to satisfy any condition set forth in Section 3.  In the event any Lender fails
to make available to Agent the amount of such Lender’s participation in such
Lender Letter of Credit, Agent shall be entitled to recover such amount on
demand from such Lender together with interest on such amount calculated at the
Federal Funds Effective Rate.
 
(3) Request for Letters of Credit.  Borrower shall give Agent at least five (5)
Business Days prior notice specifying the date a Lender Letter of Credit is to
be issued, identifying the beneficiary and describing the nature of the
transactions proposed to be supported thereby.  The notice shall be accompanied
by the form of the Letter of Credit being requested.  Any Letter of Credit which
Borrower requests must be in such form, be for such amount, contain such terms
and support such transactions as are reasonably satisfactory to Agent.  The
expiration date of each Lender Letter of Credit shall be on a date which is at
least thirty (30) days prior to the Revolving Loan Maturity Date, unless
otherwise agreed to by Agent.
 
(G) Other Letter of Credit Provisions.
 
(1) Obligations Absolute.  The obligation of Borrower to reimburse Agent or any
Lender for payments made under, and other amounts payable in connection with,
any Lender Letter of Credit shall be unconditional and irrevocable and shall be
paid under all circumstances strictly in accordance with the terms of this
Agreement including, without limitation, the following circumstances:
 
 
 
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(a) any lack of validity or enforceability of any Lender Letter of Credit, or
any other agreement;
 
(b) the existence of any claim, set-off, defense or other right which Borrower,
any of its Subsidiaries or Affiliates or any other Person may at any time have
against any beneficiary or transferee of any Lender Letter of Credit (or any
Persons for whom any such transferee may be acting), Agent, any Lender, any bank
issuing a Letter of Credit, or any other Person, whether in connection with this
Agreement, any other Loan Document, or any other related or unrelated agreements
or transactions;
 
(c) any draft, demand, certificate or any other document presented under any
Lender Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect; provided that, in the case of any payment by Agent or a Lender
under any Lender Letter of Credit, Agent or such Lender has not acted with gross
negligence or willful misconduct (as determined by a final non-appealable order
by a court of competent jurisdiction) in determining that the demand for payment
under such Lender Letter of Credit complies on its face with any applicable
requirements for a demand for payment under such Lender Letter of Credit;
 
(d) any adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Loan Parties or any of their
Subsidiaries;
 
(e) any breach of this Agreement or any other Loan Document by any party
thereto;
 
(f) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing;
 
(g) the fact that a Default or an Event of Default shall have occurred and be
continuing; or
 
(h) payment under any Lender Letter of Credit against presentation of a demand,
draft or certificate or other document which does not comply with the terms of
such Lender Letter of Credit; provided that, in the case of any payment by Agent
or a Lender under any Lender Letter of Credit, Agent or such Lender has not
acted with gross negligence or willful misconduct (as determined by a final
non-appealable order by a court of competent jurisdiction) in determining that
the demand for payment under such Lender Letter of Credit complies on its face
with any applicable requirements for a demand for payment under such Lender
Letter of Credit.
 
(2) Nature of Lender’s Duties.  As between any Lender that issues a Lender
Letter of Credit (an “Issuing Lender”), on the one hand, and all Lenders on the
other hand, all Lenders assume all risks of the acts and omissions of, or misuse
of any Lender Letter of Credit by the beneficiary thereof.  In furtherance and
not in limitation of the foregoing, neither Agent nor any Issuing Lender shall
be responsible:  (a) for the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document by any party in connection with the application
for and issuance of any Lender Letter of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (b) for the
 
 
 
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validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Lender Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (c) for failure of the beneficiary of
any Lender Letter of Credit to comply fully with conditions required in order to
demand payment thereunder; provided that, in the case of any payment under any
such Lender Letter of Credit, any Issuing Lender has not acted with gross
negligence or willful misconduct (as determined by a final non-appealable order
by a court of competent jurisdiction) in determining that the demand for payment
under any such Lender Letter of Credit complies on its face with any applicable
requirements for a demand for payment thereunder; (d) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (e) for
errors in interpretation of technical terms; (f) for any loss or delay in the
transmission or otherwise of any document required in order to make a payment
under any such Lender Letter of Credit; (g) for the credit of the proceeds of
any drawing under any such Lender Letter of Credit; and (h) for any consequences
arising from causes beyond the control of Agent or any Lender as the case may
be.
 
(3) Liability.  In furtherance and extension of and not in limitation of, the
specific provisions herein above set forth, any action taken or omitted by Agent
or any Lender under or in connection with any Lender Letter of Credit, if taken
or omitted in good faith, shall not put Agent or any Lender under any resulting
liability to Borrower or any other Lender.
 
(H) Availability of Lender’s Pro Rata Share.
 
(1) Lender’s Amounts Available on a Funding Date.  Unless Agent receives written
notice from a Lender on or prior to any Funding Date that such Lender will not
make available to Agent as and when required such Lender’s Pro Rata Share of the
Term Loan A or any requested Revolving Advance or Term Loan B Advance, Agent may
assume that each Lender will make such amount available to Agent in immediately
available funds on the Funding Date and Agent may (but shall not be so
required), in reliance upon such assumption, make available to Borrower on such
date a corresponding amount.
 
(2) Lender’s Failure to Fund.  A Defaulting Lender shall pay interest to Agent
at the Federal Funds Effective Rate on the Defaulted Amount from the Business
Day following the applicable Funding Date of such Defaulted Amount until the
date such Defaulted Amount is paid to Agent.  A notice of Agent submitted to any
Lender with respect to amounts owing under this subsection shall be conclusive,
absent manifest or demonstrable error. If such amount is not paid when due to
Agent, Agent, at its option, may notify Borrower of such failure to fund and,
upon demand by Agent, Borrower shall pay the unpaid amount to Agent for Agent’s
account, together with interest thereon for each day elapsed since the date of
such borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Loan made by the other Lenders on such Funding Date.  The failure of
any Lender to make available any portion of its Commitment on any Funding Date
or to fund its participation in a Lender Letter of Credit shall not relieve any
other Lender of any obligation hereunder to fund such Lender’s Commitment on
such Funding Date or to fund any such participation, but no Lender shall be
responsible for the failure of any other Lender to honor its Commitment on any
Funding Date or to fund any participation to be funded by any other Lender.
 
 
 
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(3) Payments to a Defaulting Lender.  Any payment of principal, interest, fees
or other amounts received by Agent for the account of a Defaulting Lender
(whether voluntary or mandatory, at maturity, pursuant to subsection 8.3 or
otherwise) or received by Agent from a Defaulting Lender pursuant to subsection
9.6 shall be applied at such time or times as may be determined by the Agent as
follows: first, to the payment of any amounts owing by such Defaulting Lender to
the Agent hereunder; second, to the payment on a pro rata basis of any amounts
owing by such Defaulting Lender to other Lenders; third, as Borrower may request
(so long as no Default or Event of Default exists), to the funding of any Loan
in respect of which such Defaulting Lender has failed to fund its portion
thereof as required by this Agreement, as determined by the Agent; fourth, if so
determined by the Agent and Borrower, to be held in a Deposit Account and
released pro rata in order to satisfy such Defaulting Lender’s potential future
funding obligations with respect to Loans under this Agreement fifth, to deposit
with Agent for the benefit of any Issuing Lender cash collateral in an amount
equal to such Defaulting Lender’s Pro Rata Share of the aggregate amount of
Letter of Credit Liability with respect to Lender Letters of Credit issued by
such Issuing Lender; sixth, to the payment of any amounts owing to the Lenders
as a result of any judgment of a court of competent jurisdiction obtained by any
Lender against such Defaulting Lender as a result of such Defaulting Lender’s
breach of its obligations under this Agreement; seventh, so long as no Default
or Event of Default exists, to the payment of any amounts owing to Borrower as a
result of any judgment of a court of competent jurisdiction obtained by Borrower
against such Defaulting Lender as a result of such Defaulting Lender's breach of
its obligations under this Agreement; eighth, if so determined by the Agent and
Borrower, to be held in a Deposit Account and released pro rata in order to (x)
satisfy such Defaulting Lender’s potential future funding obligations with
respect to Loans under this Agreement and (y) to cash collateralize for the
benefit of any Issuing Lender, such Defaulting Lender’s Pro Rata Share of future
Letter of Credit Liability with respect to future Lender Letters of Credit
issued by such Issuing Lender  and ninth, to such Defaulting Lender or as
otherwise directed by a court of competent jurisdiction; provided that if (x)
such payment is a payment of the principal amount of any Loans or a payment
under any Lender Letters of Credit in respect of which such Defaulting Lender
has not fully funded its Pro Rata Share, and (y) such Loans were made or related
Lender Letters of Credit were issued at a time when the conditions set forth in
subsection 3.2 were satisfied or waived, such payment shall be applied solely to
pay the Loans of all non-defaulting Lenders based on their respective Pro Rata
Share prior to being applied to the payment of any Loans of, or Lender Letters
of Credit owed to, such Defaulting Lender until such time as all Loans and
funded and unfunded participations in Lender Letters of Credit are held by the
Lenders pro rata in accordance with the Term Loan A Commitments, Term Loan B
Commitments and/or Revolving Loan Commitments, as applicable.  Any payments,
prepayments or other amounts paid or payable to a Defaulting Lender that are
applied (or held) to pay amounts owed by a Defaulting Lender shall be deemed
paid to and redirected by such Defaulting Lender, and each Lender irrevocably
consents hereto.
 
(4) Defaulting Lender’s Right to Vote.  No Defaulting Lender shall have any
right to approve or disapprove any amendment, waiver, consent or any other
action the Lenders or the Requisite Lenders have taken or may take hereunder
(including any consent to any amendment or waiver pursuant to subsection 9.4),
provided that any waiver, amendment, consent or modification requiring the
consent of all Lenders or each directly affected Lender which affects such
Defaulting Lender differently than other affected Lenders shall require the
consent of such Defaulting Lender.
 
 
 
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(5) Defaulting Lender Cure.  If Borrower and Agent agree in writing that a
Lender is no longer a Defaulting Lender, Agent will so notify the parties
hereto, whereupon as of the effective date specified in such notice and subject
to any conditions set forth therein (which may include arrangements with respect
to any cash collateral), that Lender will, to the extent applicable, purchase at
par that portion of outstanding Loans of the other Lenders or take such other
actions as Agent may determine to be necessary to cause the Loans and funded and
unfunded participations in Lender Letters of Credit to be held pro rata by the
Lenders in accordance with the Term Loan A Commitments, Term Loan B Commitments
and/or Revolving Loan Commitments, as applicable, whereupon such Lender will
cease to be a Defaulting Lender; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of
Borrower while that Lender was a Defaulting Lender; and provided, further, that
except to the extent otherwise expressly agreed by the affected parties, no
change hereunder from Defaulting Lender to Lender will constitute a waiver or
release of any claim of any party hereunder arising from that Lender’s having
been a Defaulting Lender.
 
2.2  Interest.
 
(A) Rate of Interest.  The Loans and all other Obligations shall bear interest
from the date such Loans are made or such other Obligations become due to the
date paid at a rate per annum equal to (1) in the case of Base Rate Loans and
Obligations for which no interest rate basis is specified, the Base Rate plus
the Applicable Margin and (2) in the case of Fixed Rate Loans, Fixed Rate plus
the Applicable Margin (collectively the “Interest Rate”).  Any designation by
Borrower of a Base Rate Loan or a Fixed Rate Loan may not change, except with
respect to the Converted Term Loan B Amount at the end of each Borrowing Period
which may, at the one-time election of Borrower, be converted to a Fixed Rate
Loan at the end of the applicable Borrowing Period in accordance with Section
2.1(D).
 
Upon the occurrence and during the continuance of an Event of Default (1) the
Loans and all other Obligations shall, at the election of Agent or Requisite
Lenders, bear interest at a rate per annum equal to two percent (2%) plus the
applicable Interest Rate (the “Default Rate”) (provided the Loans and all other
Obligations shall immediately bear interest at the Default Rate upon the
occurrence of any Event of Default described in subsections 8.1(G) or (H)) and
(2) no Loans may be converted to Fixed Rate Loans.
 
(B) Computation and Payment of Interest.  Interest on the Loans and all other
Obligations shall be computed on the daily principal balance on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.  In
computing interest on any  Advance, interest shall accrue on the date of funding
of such Advance, it being understood that, if a Loan is repaid on the same day
an Advance is made, one (1) day’s interest shall be paid on that
Advance.  Interest on Base Rate Loans and Fixed Rate Loans and all other
Obligations shall be payable to Agent for the benefit of Lenders monthly in
arrears on the first day of each month, on the date of any prepayment of Loans,
and at maturity, whether by acceleration or otherwise.
 
(C) Interest Laws.  Notwithstanding any provision to the contrary contained in
this Agreement or any other Loan Document, Borrower shall not be required to
pay, and neither Agent nor any Lender shall be permitted to collect, any amount
of interest in excess of the maximum amount of interest permitted by applicable
law (“Excess Interest”).  If any Excess Interest is provided for or determined
by a court of competent jurisdiction to have been provided for in this Agreement
or in any
 
 
 
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other Loan Document, then in such event:  (1) the provisions of this subsection
shall govern and control; (2) neither Borrower nor any other Loan Party shall be
obligated to pay any Excess Interest; (3) any Excess Interest that Agent or any
Lender may have received hereunder shall be, at such Lender’s option, (a)
applied as a credit against the outstanding principal balance of the Obligations
or accrued and unpaid interest (not to exceed the maximum amount permitted by
law), (b) refunded to the payor thereof, or (c) any combination of the
foregoing; (4) the interest rate(s) provided for herein shall be automatically
reduced to the maximum lawful rate allowed from time to time under applicable
law (the “Maximum Rate”), and this Agreement and the other Loan Documents shall
be deemed to have been and shall be, reformed and modified to reflect such
reduction; and (5) neither Borrower nor any Loan Party shall have any action
against Agent or any Lender for any damages arising out of the payment or
collection of any Excess Interest.  Notwithstanding the foregoing, if for any
period of time interest on any Obligations is calculated at the Maximum Rate
rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest payable
on such Obligations shall remain at the Maximum Rate until each Lender shall
have received the amount of interest which such Lender would have received
during such period on such Obligations had the rate of interest not been limited
to the Maximum Rate during such period.
 
2.3  Fees.
 
(A) Unused Line Fee.  Borrower shall pay to Agent, for the benefit of Lenders,
an unused line fee in an amount equal to the Unused Commitment, multiplied by
0.50% per annum.  Such fee shall be calculated on the basis of a three hundred
sixty (360) day year for the actual number of days elapsed and be payable
quarterly in arrears on the first day of each quarter following the Closing
Date.
 
(B) Other Fees and Expenses.  Borrower shall pay to Agent, for its own account,
all charges for returned items and all other bank charges incurred by Agent, as
well as Agent’s standard wire transfer charges for each wire transfer made under
this Agreement.
 
(C) Commitment Fee.  Borrower shall pay to Agent, for the benefit of the
Lenders, a commitment fee in an amount equal to 0.50% of the Term Loan A
Commitment, the Revolving Loan Commitment and the Term Loan B Commitment (i.e.,
$50,000) on the Closing Date, which commitment fee shall be deemed fully earned
and non-refundable on such date.
 
(D) Letter of Credit Fees.  Borrower shall pay to Agent a fee with respect to
the Lender Letters of Credit (1) for the benefit of all Lenders with a Revolving
Loan Commitment (based on their respective Pro Rata Share) in the greater of (a)
amount of the average daily amount of Letter of Credit Liability outstanding
during such month multiplied by the corresponding Applicable Margin for Base
Rate Loans as in effect on the date on which the fee is payable or (b) $125 per
quarter, and (2) for the account of Agent or such Issuing Lender issuing such
Lender Letter of Credit, a Fronting Fee, together with such issuer’s standard
documentary and processing charges in connection with the issuance, amendment,
cancellation, negotiation, drawing under or transfer of the Lender Letter of
Credit.  Such fees will be calculated on the basis of a three hundred sixty
(360) day year for the actual number of days elapsed and will be payable
quarterly in arrears on the first day of each quarter. Borrower shall also
reimburse Agent for any and all fees and expenses, if any, paid by Agent or any
other Lender to the Issuing Lender.
 
 
 
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2.4  Payments and Prepayments.
 
(A) Manner and Time of Payment.  The Borrower authorizes the Agent to make
Revolving Advances for all principal, Lender Letter of Credit reimbursement
obligations, interest, fees, compensation and any other amounts due hereunder or
under any of the other Loan Documents on their applicable due dates pursuant to
subsection 2.1(C), and the proceeds of each such Revolving Advance shall be
applied as a direct payment of the relevant Obligation.  To the extent such
amounts exceed the Maximum Revolving Loan Amount, or if Agent elects to bill
Borrower for any amount due hereunder or under any of the other Loan Documents,
such amount shall be immediately due and payable with interest thereon accruing
from the applicable due date specified in such bill.  All payments made by
Borrower with respect to the Obligations shall be made without deduction,
defense, setoff or counterclaim.  All payments to Agent hereunder shall, unless
otherwise directed by Agent, be made to Agent's Account.  All payments remitted
to Agent's Account shall be credited to the Obligations on the same Business Day
as such payments are received by Agent in immediately available funds; provided,
however, payments  received by Agent after 2:00 p.m. (Dallas, Texas time) shall
be deemed received on the next Business Day.  Borrower shall notify Agent by
Noon (Dallas, Texas time) if it intends to make any voluntary payment or
repayment of the Obligations to the Agent’s Account.
 
(B) Mandatory Prepayments.
 
(1) Over Formula Advance.  At any time that the Revolving Loan exceeds the
Maximum Revolving Loan Amount (an “Over Formula Advance”), Borrower shall,
immediately repay the Revolving Loan to the extent necessary to eliminate the
Over Formula Advance.
 
(2) Prepayments from Proceeds of Asset Dispositions.  Immediately upon receipt
by Borrower or any of its Subsidiaries of net cash proceeds (excluding any bona
fide costs incurred by Borrower to a non-Affiliate incurred in such sale and
taxes payable by Borrower as a result of such sale) of (a) any Asset Disposition
(in one or a series of related transactions), which net proceeds exceed $50,000,
or (b) all Asset Dispositions in any Fiscal Year in excess of $100,000 in the
aggregate, in each case, Borrower shall prepay the Obligations in an amount
equal to such proceeds (it being understood that if the net cash proceeds exceed
the applicable ceiling amount, the entire net cash proceeds and not just the
portion above the ceiling amount shall be subject to this subsection
2.4(B)(2)).  All such prepayments shall be applied to the Loans in accordance
with subsection 2.4(D); provided, however, if Borrower reasonably expects the
proceeds of any Asset Disposition to be reinvested within twelve (12) months to
repair or replace such assets with like assets, Borrower shall deliver the
proceeds to Agent to be applied to the Revolving Loan, to the extent of any
principal balance thereof, and Agent shall establish a reserve against available
funds for borrowing purposes under the Revolving Loan for such amount, until
such time as such proceeds have been re-borrowed or applied to other Obligations
as set forth herein.  If Borrower so elects to deliver such proceeds to Agent,
Borrower may, so long as no Default or Event of Default shall have occurred and
be continuing, reborrow such proceeds only for such repair or replacement.  If
Borrower fails to reinvest such proceeds within twelve (12) months or an Event
of Default has occurred, Borrower shall remit the proceeds to Agent and the
Lenders to repay the Loans or hereby authorizes Agent and Lenders to make a
Revolving Advance in the amount of the remaining reserve to repay the Loans, in
each case, in the manner set forth in subsection 2.4(D).
 
 
 
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(3) [Reserved].
 
(4) [Reserved.]
 
(C) Payments on Business Days.  Whenever any payment to be made hereunder shall
be stated to be due on a day that is not a Business Day, the payment may be made
on the next succeeding Business Day and such extension of time shall be included
in the computation of the amount of interest or fees due hereunder.
 
(D) Application of Prepayment Proceeds.  With respect to the prepayments
described in subsections 2.4(B)(2), such prepayments shall be applied first, to
the payment of outstanding principal in respect of the Term Loan A, in inverse
order of maturity until all Obligations in respect of the Term Loan A have been
repaid in full, second, to the payment of the outstanding principal balance of
the Term Loan B Loans in inverse order of maturity until all Obligations in
respect of the Term Loan B Loans have been repaid in full, and third, to the
Revolving Loan (without permanent reduction in the commitments therefor) until
the outstanding balance thereof has been repaid in full. Any notice of
prepayment in full of the Term Loan A and the termination of the Revolving Loan
Commitment and Term Loan B Commitment may be conditional upon the closing of any
transaction and shall be revocable.
 
(E) Voluntary Prepayments and Repayments.  Borrower may, at any time upon not
less than three (3) Business Days prior notice to Agent, prepay the Term Loan A
or any Term Loan B in an aggregate minimum amount of $100,000 and integral
multiples of $50,000, to be applied as directed by the Borrower, or terminate
the Revolving Loan Commitment and the Term Loan B Commitment; provided, however,
the Revolving Loan Commitment and the Term Loan B Commitment may not be
terminated by Borrower until all Obligations are paid in full.  Any prepayment
of the Obligations permitted in this subsection 2.4(E) shall be subject to the
payment of all fees set forth in subsection 2.3 and any prepayment of a Fixed
Rate Loan shall be subject to a prepayment penalty in an amount equal to (x)
103% of the prepaid principal amount of such Obligations if the prepayment date
occurs on or after the Closing Date to and including the date immediately
preceding the first anniversary of the Closing Date, (y) 102% of the prepaid
principal amount of such Obligations if the prepayment date occurs on or after
the first anniversary of the Closing Date to and including the date immediately
preceding the second anniversary of the Closing Date, and (z) 101% of the
prepaid principal amount of such Obligations if the prepayment date occurs on or
after the second anniversary of the Closing Date to and including the date
immediately preceding the third anniversary of the Closing Date.
 
2.5 Term of this Agreement.  This Agreement shall be effective until the earlier
of (a) August 28, 2018 and (b) the acceleration of all Obligations pursuant to
subsection 8.3 (the “Termination Date”) provided that the Borrower may terminate
this Agreement upon the repayment in full, in cash, of all Obligations (other
than contingent indemnity obligations that are not yet due and payable) and
termination of all Commitments hereunder.  The Revolving Loan Commitment shall
terminate
 
 
 
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(unless earlier terminated pursuant to the terms hereunder) on the Revolving
Loan Maturity Date and all Revolving Loans and all Obligations related thereto
(unless otherwise required to be repaid on an earlier date as set forth herein)
shall immediately become due and payable without notice or demand.  The Term
Loan A Commitments shall terminate on the Closing Date and all Obligations
related thereto shall become immediately due and payable without notice or
demand on the Term Loan A Maturity Date (unless otherwise required to be repaid
on an earlier date as set forth herein).  The Term Loan B Commitment shall
terminate (unless earlier terminated pursuant to the terms hereunder) on
August 28, 2014 and all Term Loan B and all Obligations related thereto shall be
immediately due and payable on the Term Loan B Maturity Date (unless otherwise
required to be repaid on an earlier date as set forth herein).  Notwithstanding
any termination, until all Obligations have been fully paid and satisfied,
Agent, on behalf of itself and Lenders, shall be entitled to retain security
interests in and liens upon all Collateral, and even after payment of all
Obligations hereunder, Borrower’s obligation to indemnify Agent and each Lender
in accordance with the terms hereof shall continue.
 
2.6 Statements.  Agent shall render a monthly statement of account to Borrower
within thirty (30) days after the end of each month.  Such statement of account
shall constitute an account stated unless Borrower makes written objection
thereto within thirty (90) days from the date such statement is mailed to
Borrower.  Agent shall record in its books and records, including computer
records, (a) all Loans, interest charges and payments thereof, (b) all Letter of
Credit Liability, (c) the charging and payment of all fees, costs and expenses
and (d) all other debits and credits pursuant to this Agreement.  The balance in
the loan accounts shall constitute presumptive evidence, absent manifest or
demonstrable error, of the accuracy of the information contained therein;
provided, however, that any failure by Agent to so record shall not limit or
affect the Borrower’s obligation to pay.
 
2.7 Grant of Security Interest.  
 
(A) Grant of Liens in the Collateral.  To secure the payment and performance of
the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, Borrower hereby grants to Agent,
for the benefit of Agent and Lenders, a continuing security interest in, lien
and mortgage in and to, right of setoff against and collateral assignment of all
of Borrower’s: (1) Accounts; (2) Chattel Paper; (3) Commercial Tort Claims; (4)
Deposit Accounts and cash and other monies and property of Borrower in the
possession or under the control of Agent, any Lender or any participant of any
Lender in the Loans; (5) Documents; (6) Equipment; (7) Fixtures; (8) General
Intangibles (including Intellectual Property); (9) Goods; (10) Instruments; (11)
Inventory; (12) Investment Property; (13) Letter-of-Credit Rights and Supporting
Obligations; (14) other personal property whether or not subject to the UCC;
(15) Mortgaged Property; (16) Additional Mortgaged Property; and (17) all other
personal property, in each case, whether now owned or existing or hereafter
acquired or arising and regardless of where located, together with all books,
records, ledger cards, files, correspondence, computer programs, tapes, disks
and related data processing software that at any time evidence or contain
information relating to any of the property described above or are otherwise
necessary or helpful in the collection thereof or realization thereon; and
Proceeds and products of all or any of the property described above (all being
collectively referred to as the “Collateral”).
 
 
 
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(B) Borrower Remains Liable.  Anything herein to the contrary notwithstanding:
(a) Borrower shall remain liable under the contracts and agreements included in
the Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement or the other Loan
Documents had not been executed; (b) the exercise by Agent of any of the rights
under this Agreement or the other Loan Documents shall not release Borrower from
any of its duties or obligations to the parties under the contracts and
agreements included in the Collateral; (c) neither Agent nor any Lender shall
have any obligation or liability under the contracts and agreements included in
the Collateral by reason of this Agreement or the other Loan Documents, nor
shall Agent nor any Lender be obligated to perform any of the obligations or
duties of Borrower thereunder or to take any action to collect or enforce any
claim for payment assigned under this Agreement or the other Loan Documents; and
(d) neither Agent nor any Lender shall have any liability in contract or tort
for Borrower’s acts or omissions.
 
2.8 Yield Protection.  In the event any Lender shall have determined that the
adoption after the date hereof of any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements or similar requirements or compliance by such
Lender or any corporation controlling such Lender with any request or directive
regarding capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) from any central bank or governmental agency or
body having jurisdiction does or shall have the effect of increasing the amount
of capital, reserves or other funds required to be maintained by such Lender or
any corporation controlling such Lender and thereby reducing the rate of return
on such Lender’s or such corporation’s capital as a consequence of its
obligations hereunder, then Borrower shall within fifteen (15) days after notice
and demand from such Lender (together with the certificate referred to in the
next sentence and with a copy to Agent) pay to Agent, for the account of such
Lender, additional amounts sufficient to compensate such Lender for such
reduction.  A certificate as to the amount of such cost and showing the basis of
the computation of such cost submitted by such Lender to Borrower shall, absent
manifest or demonstrable error, be final, conclusive and binding for all
purposes.
 
Notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street
Reform and Consumer Protection Act and all requests, rules, regulations,
guidelines or directives thereunder or issued in connection therewith and (ii)
all requests, rules, guidelines or directives promulgated by the Bank for
International Settlements, the Basel Committee on Banking Supervision (or any
successor or similar authority) or the United States or foreign regulatory
authorities, in each case pursuant to Basel III, shall be deemed to be a change
in law occurring after the date hereof for purposes of this Agreement (including
without limitation for purposes of this subsection 2.8, regardless of the date
enacted, adopted or issued).
 
2.9 Taxes.
 
(A) No Deductions.  Any and all payments or reimbursements made hereunder shall
be made free and clear of and without deduction for any and all taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto (all such taxes, levies, imposts, deductions, charges or withholdings
and all liabilities with respect thereto referred to herein as “Tax
Liabilities”; provided that Tax Liabilities shall not include taxes imposed on,
or determined by reference to, the net income or revenue of any Lender or
Agent.  If Borrower shall be required by law to deduct any such Tax Liabilities
from or in respect of any sum payable hereunder to Agent or any Lender, then the
sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, Agent or such Lender receives an amount equal to
the sum it would have received had no such deductions been made.
 
 
 
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(B) Changes in Tax Laws.  In the event that, subsequent to the Closing Date, (1)
any changes in any existing law, regulation, treaty or directive or in the
interpretation or application thereof, (2) any new law, regulation, treaty or
directive enacted or any interpretation or application thereof, or (3)
compliance by Lender with any request or directive (whether or not having the
force of law) from any Governmental Authority:
 
(1) does or shall subject Agent or any Lender to any tax of any kind whatsoever
with respect to this Agreement, the other Loan Documents or any Loans made or
Lender Letters of Credit issued hereunder, or change the basis of taxation of
payments to Agent or such Lender of principal, fees, interest or any other
amount payable hereunder (except for net income taxes, or franchise taxes
imposed in lieu of net income taxes, imposed generally by federal, state or
local taxing authorities with respect to interest or commitment or other fees
payable hereunder or changes in the rate of tax on the overall net income of
Agent or such Lender); or
 
(2) does or shall impose on Agent or any Lender any other condition or increased
cost in connection with the transactions contemplated hereby or participations
herein; and the result of any of the foregoing is to increase the cost to Agent
or such Lender of issuing any Lender Letter of Credit or making or continuing
any Loan hereunder, as the case may be, or to reduce any amount receivable
hereunder;
 
then, in any such case, Borrower shall promptly pay to Agent or such Lender,
upon its notice and demand, any additional amounts necessary to compensate Agent
or such Lender, on an after-tax basis, for such additional cost or reduced
amount receivable, as determined by Agent or such Lender with respect to this
Agreement or the other Loan Documents.  If Agent or any Lender becomes entitled
to claim any additional amounts pursuant to this subsection, it shall promptly
notify Borrower of the event by reason of which Agent or such Lender has become
so entitled (with any such Lender concurrently notifying Agent).  A certificate
as to any additional amounts payable pursuant to the foregoing sentence
submitted by Agent or any Lender to Borrower shall, absent manifest error, be
final, conclusive and binding for all purposes.
 
(C) Foreign Lenders.  Each Lender organized under the laws of a jurisdiction
outside the United States (a “Foreign Lender”) as to which payments to be made
under this Agreement are exempt from United States withholding tax or are
subject to United States withholding tax at a reduced rate under an applicable
statute or tax treaty shall provide to Borrower and Agent (1) a properly
completed and executed Internal Revenue Service Form W-8BEN or Form W-8ECI or
other applicable form, certificate or document prescribed by the Internal
Revenue Service of the United States of America certifying as to such Foreign
Lender’s entitlement to such exemption or reduced rate of withholding with
respect to payments to be made to such Foreign Lender under this Agreement, (a
“Certificate of Exemption”), or (2) a letter from any such Foreign Lender
stating that it is not entitled to any such exemption or reduced rate of
withholding (a “Letter of Non-Exemption”).  Prior to becoming a Lender under
this Agreement and within fifteen (15) days after a reasonable written request
of Borrower or Agent from time to time thereafter, each Foreign Lender that
becomes a Lender under this Agreement shall provide a Certificate of Exemption
or a Letter of Non-Exemption to Borrower and Agent.
 
 
 
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If a Foreign Lender is entitled to an exemption with respect to payments to be
made to such Foreign Lender under this Agreement (or to a reduced rate of
withholding) and does not provide a Certificate of Exemption to Borrower and
Agent within the time periods set forth in the preceding paragraph, Borrower
shall withhold taxes from payments to such Foreign Lender at the applicable
statutory rates and Borrower shall not be required to pay any additional amounts
as a result of such withholding; provided, however, that all such withholding
shall cease upon delivery by such Foreign Lender of a Certificate of Exemption
to Borrower and Agent.
 
Without limiting the foregoing, if any payment made hereunder or under any other
Loan Document would be subject to United States withholding tax imposed pursuant
to FATCA if the recipient of such payment fails to comply with applicable
reporting and other requirements of FATCA (including those contained in Section
1471(b) or 1472(b) of the Code, as applicable), such recipient shall use
commercially reasonable efforts to deliver to Borrower and Agent, at the time or
times prescribed by applicable law or as reasonably requested by Borrower or
Agent, (1) two accurate, complete and signed certifications prescribed by
applicable law and/or reasonably satisfactory to Borrower and Agent that
establish that such payment is exempt from United States withholding tax imposed
pursuant to FATCA and (2) any other documentation reasonably requested by
Borrower or Agent sufficient for Borrower and Agent to comply with their
obligations under FATCA and to determine that such recipient has complied with
such applicable reporting and other requirements of FATCA.
 
2.10 [Reserved].
 
2.11 Optional Prepayment/Replacement of Lenders.  Within fifteen (15) days after
(a) receipt by Borrower of written notice and demand from any Lender for payment
of additional costs as provided in subsection 2.8 or subsection 2.9(B) or (b)
the failure of any Foreign Lender to timely deliver to Borrower any certificate,
letter or other documentation required by subsection 2.9(C), (any such Lender
demanding such payment or failing to provide such documentation being referred
to herein as an “Affected Lender”), Borrower may, at its option notify Agent and
such Affected Lender of its intention to take one of the actions set forth
herein in subparagraphs (A) or (B) below.
 
(A) Replacement of an Affected Lender.  Borrower may obtain, at Borrower’s
expense, a replacement Lender (“Replacement Lender”) for an Affected Lender,
which Replacement Lender shall be reasonably satisfactory to Agent.  In the
event Borrower obtains a Replacement Lender that will purchase all outstanding
Obligations owed to such Affected Lender and assume its Commitments hereunder
within one hundred twenty (120) days following notice of Borrower’s intention to
do so, the Affected Lender shall sell and assign its Loans and Commitments to
such Replacement Lender in accordance with the provisions of subsection 9.5;
provided, however, Borrower has (1) reimbursed such Affected Lender for any
administrative fee payable by such Affected Lender to Agent pursuant to
subsection 9.5 and, (2) in any case where such replacement occurs as the result
of a demand for payment of certain costs pursuant to subsection 2.8 or
subsection 2.9(B), paid all increased costs for which such Affected Lender is
entitled to under subsection 2.8 or subsection 2.9(B) through the date of such
sale and assignment; or
 
 
 
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(B) Prepayment of an Affected Lender.  Borrower may prepay in full all
outstanding Obligations owed to an Affected Lender and terminate such Affected
Lender’s Commitments.  Borrower shall, within one hundred twenty (120) days
following notice of its intention to do so, prepay in full all outstanding
Obligations owed to such Affected Lender, including such Affected Lender’s
increased costs for which it is entitled to reimbursement under this Agreement
through the date of such prepayment, and terminate such Affected Lender’s
Commitments.
 
(C) Replacement of a Defaulting Lender.  Borrower may obtain, at Borrower’s
expense, a Replacement Lender for a Defaulting Lender, which Replacement Lender
shall be reasonably satisfactory to Agent.  In the event Borrower obtains a
Replacement Lender that will purchase all outstanding Obligations owed to such
Defaulting Lender and assume its Commitments hereunder within one hundred twenty
(120) days following notice of Borrower’s intention to do so, the Defaulting
Lender shall sell and assign its Loans and Commitments to such Replacement
Lender in accordance with the provisions of subsection 9.5.  Upon such purchase
and assumption (pursuant to an Assignment and Acceptance Agreement), such
Defaulting Lender shall no longer be a party hereto or have any rights hereunder
(other than rights with respect to indemnities and similar rights applicable to
such Lender prior to the date of such purchase and assumption) and shall be
relieved from all obligations to Borrower hereunder (except claims arising from
its status as a Defaulting Lender), and the Replacement Lender shall succeed to
the rights and obligations of such Lender hereunder.
 
2.12 [Reserved].
 
2.13 [Reserved].
 
2.14 [Reserved].
 
2.15 Endorsement; Insurance Claims.  Borrower hereby constitutes and appoints
Agent and all Persons designated by Agent for that purpose as Borrower’s true
and lawful attorney-in-fact, with power in the place and stead of Borrower and
in the name of Borrower (a) to endorse Borrower’s name to any of proceeds of
Collateral that come into Agent’s possession or under Agent’s control, including
without limitation, with respect to any drafts, Instruments, Documents and
Chattel Paper, and (b) to obtain, adjust and settle insurance claims, which are
required to be paid to Agent.  Borrower hereby ratifies and approves all acts of
Agent made or taken pursuant to this subsection 2.15.  Both the appointment of
Agent as Borrower’s attorney and Agent’s rights and powers are coupled with an
interest and are irrevocable, so long as any of the Commitments hereunder shall
be in effect and until payment in full, in cash, of all Obligations and
termination of all Lender Letters of Credit (other than contingent indemnity
obligations that are not yet due and payable) and termination of all Commitments
thereunder.
 
 
 
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SECTION 3 CONDITIONS TO LOANS
 
3.1 Conditions to Initial Loans and the Issuance of Lender Letters of
Credit.  The obligations of Agent and each Lender to make the initial Loans
and/or the obligation of Agent or any Lender to issue (or cause the issuance of)
the initial Lender Letters of Credit on the Closing Date are subject to
satisfaction of all of the terms and conditions set forth below and the accuracy
of all the representations and warranties of Borrower and the other Loan Parties
set forth herein and in the other Loan Documents:
 
(A) Closing Deliveries.  Agent shall have received, in form and substance
satisfactory to Agent, all documents, instruments, agreements, notes,
certificates, orders, authorizations, financing statements, mortgages and other
documents which Agent may at any time reasonably request, including the Loan
Documents.
 
(B) Security Interests.  Agent shall have received satisfactory evidence that
all security interests and liens granted to Agent for the benefit of Agent and
Lenders pursuant to this Agreement or the other Loan Documents have been duly
perfected and constitute first priority liens on the Collateral, subject only to
Permitted Encumbrances.
 
(C) Representations and Warranties.  The representations and warranties
contained herein and in the Loan Documents shall be true, correct and complete
in all material respects on and as of the Closing Date to the same extent as
though made on and as of that date, except for any representation or warranty
limited by its terms to a specific date.
 
(D) Fees and Expenses.  Borrower shall have paid all fees, costs and expenses
due and payable under this Agreement and the other Loan Documents on the Closing
Date.
 
(E) No Default.  After giving effect to the transactions contemplated hereby, no
event shall have occurred and be continuing or would result from funding a Loan
or issuing a Lender Letter of Credit requested by Borrower that would constitute
an Event of Default or a Default.
 
(F) Performance of Agreements.  Each Loan Party shall have performed in all
material respects all agreements and satisfied all conditions which any Loan
Document provides shall be performed by it on or before the Closing Date.
 
(G) No Prohibition.  No order, judgment or decree of any court, arbitrator or
Governmental Authority shall purport to enjoin or restrain Agent or any Lender
from making any Loans or issuing any Lender Letters of Credit.
 
(H) No Litigation.  Except as set forth on Schedule 3.1(H), there shall not be
pending or, to the knowledge of Borrower, threatened any action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
by, against or affecting any Loan Party or any property of any Loan Party and
there shall have occurred no development in any such action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration in
each case that would reasonably be expected to have a Material Adverse Effect.
 
(I) No Material Adverse Effect.  There shall not have occurred any Material
Adverse Effect since June 26, 2011.
 
 
 
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(J) Corporate Structure.  The documentation reflecting the ownership, capital,
corporate, tax, organizational and legal structure of the Loan Parties shall be
acceptable to Agent.
 
(K) Regulatory Approvals and other Third-Party Approvals.  The Loan Parties
shall have received (i) any and all regulatory approvals necessary to consummate
the transactions contemplated by the Loan Documents, which approvals are final
and non-appealable and (ii) any and all corporate and other third party
approvals necessary to consummate the transactions contemplated by the Loan
Documents.
 
(L) Insurance Policies. Agent shall have received policies or binders for
property and casualty, liability, workers compensation, business interruption,
and other insurance satisfying subsection 4.16 hereof with appropriate
endorsements naming Agent as loss payee, mortgagee and additional insured, as
appropriate and the collateral assignments required pursuant to subsection 4.16.
 
(M) Stock Pledge Agreements.  Agent shall have received the Pledge Agreements
duly executed by Parent, Pie Five and PIBC Holding Company accompanied by the
original stock certificates or equivalent evidence of equity ownership interest
to the extent certificated and by stock powers duly executed in blank or other
method of providing Agent Control thereof reasonably acceptable to Agent.
 
(N) Projections.  Agent shall have received satisfactory Projections, including
month by month projected operating budget and cash flow of Loan Parties on a
consolidated basis.
 
(O)  Existing Indebtedness. Agent shall have received payoff letters in
connection with the existing Indebtedness of Borrower to be paid off, each in
form and substance reasonably satisfactory to Agent, together with UCC
termination statements, releases of mortgage Liens, and other instruments,
documents and/or agreements necessary or appropriate to terminate any Liens in
connection with such existing Indebtedness, which is to be paid in full on or
prior to the Closing Date, as Agent may reasonably request, duly executed and in
recordable form, if applicable, and otherwise in form and substance reasonably
satisfactory to Agent.
 
(P) Due Diligence.  Agent shall have completed due diligence on the Borrower to
its reasonable satisfaction, including, but not limited to, review of licenses,
the business, operations, prospects, customer relations, and contracts, which
review is satisfactory to Agent in all respects.
 
(Q) Guaranty.  Agent shall have received the Guaranty and Guarantor Security
Agreement, each duly executed by Parent and each Borrower’s Subsidiaries, for
the benefit of Agent and the Lenders, in form and substance reasonably
satisfactory to Agent.
 
(R) Secretary's Certificates.  Agent shall have received a certificate of a duly
authorized officer of each Loan Party certifying and acknowledging (1) that
attached copies of such Loan Party’s Organizational Documents are true and
complete, and in full force and effect, without amendment except as shown, (2)
that an attached copy of resolutions authorizing execution, delivery and
performance of the Loan Documents by such Loan Party is true and complete, and
that such resolutions are in full force and effect, were duly adopted, have not
been amended, modified or revoked, and constitute all resolutions adopted with
respect to this credit facility, (3) the names of the officers of each Loan
Party authorized to sign this Agreement and each of the other Loan Documents to
which any Loan Party is or is to be a party hereunder (including the
certificates contemplated herein) together with specimen signatures of such
officers, and (4) certificates of good standing, status, compliance or similar
certificates dated not more than 10 days prior to the Closing Date for each of
the Loan Parties issued by their respective jurisdictions of organization and
each jurisdiction where they are qualified to operate as a foreign or
extra-provincial corporation, or its equivalent, where the failure of such Loan
Party to be qualified to do business as a foreign entity could reasonably be
expected to have a Material Adverse Effect.
 
 
 
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(S) Solvency.  Agent shall have received a certificate from Borrower certifying
that, after giving effect to the transactions contemplated by this Agreement,
(i) the Loan Parties, taken as a whole, are (a) solvent; (b) own assets the fair
saleable value of which are greater than the total amount of their liabilities
(including contingent liabilities) and (c) have capital that is not unreasonably
small in relation to their business as presently conducted or any contemplated
or undertaken transaction and (ii) no Loan Party intends to incur, nor does any
Loan Party believe that it will incur, debts beyond its ability to pay such
debts as they become due.
 
(T) Legal Opinion.  An opinion of McGuire, Craddock & Strother, P.C., counsel to
Borrower dated as of the Closing Date addressed to the Agent and the Lenders and
covering such matters as the Agent or the Lenders may reasonably request, in
form and substance reasonably acceptable to Agent.
 
3.2 Additional Conditions to All Loans and Lender Letters of Credit.  The
obligations of Agent and each Lender to make Loans and/or the obligation of
Agent or any Lender to issue (or cause the issuance of) Lender Letters of Credit
on each Funding Date (including the Closing Date) shall be subject to the
further conditions precedent that (i) on or prior to the date of such Loan or
issuance, the Agent shall have received all notices required in accordance with
the terms of this Agreement and (ii) on the date of such Loan or the date of
such issuance, the following statements shall be true and correct (and each of
the giving of any applicable Notice of Borrowing, and the acceptance by Borrower
of the proceeds of each borrowing, and each Lender Letter of Credit issued,
increased or extended on behalf of the Borrower shall constitute a
representation and warranty by Borrower, that on the date of such borrowing such
statements are true and correct):
 
(A) Representations and Warranties.  The representations and warranties of
Borrower contained in this Agreement are true and correct in all material
respects on and as of the date of such Loan or issuance (except for those
representations or warranties or parts thereof that, by their terms, expressly
relate solely to a specific date and taking into account any amendments to the
Schedules or Exhibits as a result of any disclosures made by Borrower to Agent
after the Closing Date and approved by Agent, in which case such representations
and warranties shall be true and correct in all material respects as of such
specific date), before and after giving effect to such Loan or issuance, and to
the application of the proceeds therefrom, as though made on and as of such
date; and
 
(B) No Default.  No Default or Event of Default shall have occurred and be
continuing or would result from such Loan or issuance.
 
 
 
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SECTION 4  REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS
 
To induce Agent and each Lender to enter into the Loan Documents, to make and to
continue to make Loans and to issue and to continue to issue Lender Letters of
Credit, Borrower represents, warrants and covenants to Agent and each Lender
that the following statements are and will be true, correct and complete on the
Closing Date and the date of any requested borrowing hereunder:
 
4.1 Organization, Powers, Capitalization.
 
(A) Organization and Powers.  Each of the Loan Parties is an entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and qualified to do business in all states and
other jurisdictions where such qualification is required except where failure to
be so qualified could not reasonably be expected to have a Material Adverse
Effect.  Each of the Loan Parties has all requisite power and authority to own
and operate its properties, to carry on its business as now conducted and
proposed to be conducted and to enter into each Loan Document.  The name (within
the meaning of Section 9-503 of the UCC) and jurisdiction of organization of
each Loan Party is set forth on Schedule 4.6.  The chief executive office of
each Loan Party is located at the address indicated on Schedule 4.6.  Each Loan
Party’s organizational identification numbers, if any, are identified on
Schedule 4.6.
 
(B) Capitalization.  The authorized capital stock of each of the Loan Parties is
as set forth on Schedule 4.1(B), including all preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from any such Loan Party of any
shares of capital stock or other securities or Equity Interests of any such
entity.  All issued and outstanding shares of capital stock or other Equity
Interests of each of the Loan Parties other than Parent are duly authorized and
validly issued, fully paid, nonassessable, free and clear of all Liens other
than those in favor of Agent for the benefit of Agent and Lenders, and such
shares or Equity Interests were issued in compliance with all applicable state
and federal laws concerning the issuance of securities.  Each Loan Party will
promptly notify Lender of any change in its organizational structure and each
Loan Party other than Parent will promptly notify Lender of any change in its
ownership.
 
4.2 Authorization of Borrowing; No Conflict.  Borrower has the power and
authority to incur the Obligations and to grant security interests in the
Collateral.  On the Closing Date, the execution, delivery and performance of the
Loan Documents by each Loan Party signatory thereto will have been duly
authorized by all necessary corporate and shareholder action.  The execution,
delivery and performance by each Loan Party of each Loan Document to which it is
a party and the consummation of the transactions contemplated by the Loan
Documents by each Loan Party do not contravene any applicable law, the
Organizational Documents of any Loan Party or any other material agreement or
order by which any Loan Party or any Loan Party’s property is bound.  The Loan
Documents are the legally valid and binding obligations of the applicable Loan
Parties respectively, each enforceable against the Loan Parties, as applicable,
in accordance with their respective terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency or other similar laws relating to the
enforcement of creditors’ rights generally and by general equitable principles.
 
 
 
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4.3 Financial Condition.  All financial statements concerning Parent and its
direct or indirect Subsidiaries furnished by or on behalf of Borrower to Agent
or any Lender pursuant to this Agreement have been prepared in accordance with
GAAP consistently applied throughout the periods involved (except as disclosed
therein) and present fairly in all material respects the financial condition of
the Persons covered thereby as at the dates thereof and the results of their
operations for the periods then ended, subject in the case of interim financial
statements to the absence of footnote disclosures and year end adjustments.  The
Projections delivered by Borrower were and will be prepared in good faith and on
the basis of assumptions believed to be reasonable when made, it being
understood that the Projections are subject to inherent uncertainty and no
assurances may be made that such results will be achieved.
 
4.4 Indebtedness and Liabilities.  As of the Closing Date, neither Borrower nor
any of its Subsidiaries has (a) any Indebtedness except as reflected on the most
recent financial statements delivered to Agent and Lenders; or (b) any material
Liabilities other than as reflected on the most recent financial statements
delivered to Agent and Lenders or as incurred in the ordinary course of business
following the date of the most recent financial statements delivered to Agent
and Lenders, except, in each case, the Indebtedness and Liabilities
hereunder.  Borrower shall promptly deliver copies of all notices given or
received by Borrower and any of its Subsidiaries with respect to noncompliance
with any term or condition related to any Indebtedness in excess of $100,000,
and shall promptly notify Agent of any potential or actual Event of Default with
respect to any Indebtedness.
 
4.5 Collateral Warranties and Covenants.
 
(A) Accounts Warranties and Covenants.  Except as otherwise disclosed to Agent
in writing, as to each of Borrower’s existing Accounts and each of its hereafter
arising Accounts that: at the time of its creation, such Account is a valid,
bona fide obligation, representing an undisputed indebtedness incurred by the
Account Debtor (and any other Person obligated on such Account) for property
actually sold and delivered or for services completely rendered; there are no
defenses, setoffs, offsets, claims, or counterclaims, genuine or otherwise,
against such Account; such Account does not represent a sale to a Subsidiary or
an Affiliate, or a consignment, sale or return or a bill and hold transaction;
the amount represented by Borrower to Agent as owing by each Account Debtor (and
by each of the other Persons obligated on such Account) is, or will be, the
correct amount actually and unconditionally owing, no agreement exists
permitting any other deduction or discount; Borrower is the lawful owner of such
Account and has the right to assign the same to Agent, for the benefit of Agent
and Lenders; such Account is free of all Liens, other than those in favor of
Agent, on behalf of itself and Lenders, and such Account constitutes, the
legally valid and binding obligation of the applicable Account Debtor (and any
other Person obligated on such Account) and is due and payable in accordance
with its terms.
 
Borrower shall, at its own expense, use its best efforts to assure prompt
payment of all amounts due or to become due under Accounts.  No discounts,
credits or allowances will be issued, granted or allowed by Borrower to
customers and no returns will be accepted without Agent’s prior written consent;
provided, however, so long as such discounts, credits, allowances or returns are
customarily issued or accepted in the ordinary course of business and are in
amounts which are not material to Borrower, or until Agent notifies Borrower to
the contrary, Borrower may presume consent.  Borrower will immediately notify
Agent in the event that any Account Debtor (or any other Person obligated on
such Account) alleges any
 
 
 
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dispute or claim with respect to such Account or of any other circumstances
known to Borrower that may impair the validity or collectibility of any such
Account.  Agent, or its designee, shall have the right, at any time or times
hereafter, to verify the validity, amount or any other matter relating to any
Account, by mail, telephone or in person.  After the occurrence of a Default or
an Event of Default: (i) Borrower shall not, without the prior consent of Agent,
adjust, settle or compromise the amount or payment of any Account, or release
wholly or partly any Account Debtor (or any other Person obligated on such
Account), or allow any credit or discount thereon, and (ii) Agent shall have the
right at any time (A) to exercise the rights of Borrower, with respect to the
obligation of the Account Debtor (or any other Person obligated on such Account)
to make payment or otherwise render performance to Borrower, and with respect to
any property that secures the obligations of the Account Debtor or of any such
other Person obligated on such Account; and (B) to adjust, settle or compromise
the amount or payment of any such Account or release wholly or partly any
Account Debtor or obligor thereunder or allow any credit or discount thereon.
 
(B) Inventory Warranties and Covenants.  Except as otherwise disclosed to Agent
in writing, all of Borrower’s Inventory is of good and merchantable quality,
free from any material defects, and such Inventory is not subject to any License
Agreement with any Person that restricts Borrower’s ability to manufacture
and/or sell the Inventory, unless Agent is a party to a Licensor/Agent Agreement
with the Licensor under such License Agreement.  The completion and
manufacturing process of such Inventory by a Person other than Borrower would be
permitted under any contract to which Borrower is a party or to which the
Inventory is subject.  None of Borrower’s Inventory has been or will be produced
in violation of the Fair Labor Standards Act and subject to the so-called “hot
goods” provisions contained in Title 29 U.S.C. 215 or in violation of any other
law.  All inventory and products owned by Persons other than Borrower and
located on any premises owned, leased or controlled by Borrower, shall be
separately and conspicuously identified as such and shall be segregated from
Borrower’s own Inventory located at such premises.
 
(C) Equipment Warranties and Covenants.  Borrower has maintained and shall cause
all of its Equipment to be maintained and preserved in good repair and working
order, ordinary wear and tear excepted, and shall promptly make or cause to be
made all repairs, replacements, and other improvements in connection therewith
that are necessary or desirable to such end.  Except as set forth on Schedule
4.5(C), none of Borrower’s Equipment is covered by any certificate of title and
Borrower shall promptly notify Agent to the extent Borrower obtains any
Equipment covered by any certificate of title not listed on Schedule
4.5(C).  Borrower shall promptly deliver to Agent any and all certificates of
title, applications for title or similar evidence of ownership of all of its
Equipment and shall cause Agent to be named as lienholder on any such
certificate of title or other evidence of ownership.  Borrower shall promptly
inform Agent of any additions to or deletions from the Equipment and shall not
permit any such items to become Fixtures to real estate other than real estate
subject to mortgages or deeds of trust in favor of Agent, for the benefit of
itself and Lenders.
 
 
 
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(D) Chattel Paper Warranties and Covenants.  As of the Closing Date, Borrower
does not hold any Chattel Paper and does not anticipate holding any Chattel
Paper in the ordinary course of its business.  To the extent Borrower holds or
obtains any Chattel Paper, Borrower will promptly (i) deliver to Agent all
tangible Chattel Paper duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to Agent and (ii) provide Agent with Control of all Electronic
Chattel Paper, by having Agent identified as the assignee of the Records(s)
pertaining to the single authoritative copy thereof and otherwise complying with
the applicable elements of Control set forth in the UCC.  Borrower will also
deliver to Agent all security agreements securing any Chattel Paper and execute
UCC financing statement amendments assigning to Agent any UCC financing
statements filed by Borrower in connection with such security
agreements.  Borrower will mark conspicuously all Chattel Paper with a legend,
in form and substance reasonably satisfactory to Agent, indicating that such
Chattel Paper is subject to the Lien of Agent.
 
(E) Instruments Warranties and Covenants.  Borrower will deliver to Agent all
Instruments it holds or obtains duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to Agent.  Borrower will also deliver to Agent all security
agreements securing any Instruments and execute UCC financing statement
amendments assigning to Agent any UCC financing statements filed by Borrower in
connection with such security agreements.
 
(F) Investment Property Warranties and Covenants.  Borrower will take any and
all actions necessary (or reasonably required or requested by Agent), from time
to time, to (i) cause Agent to obtain exclusive Control of any Investment
Property owned by Borrower in a manner reasonably acceptable to Agent and (ii)
obtain from any issuers of such Investment Property and such other Persons,
reasonably required by Agent written confirmation of Agent’s Control over such
Investment Property upon terms and conditions reasonably acceptable to Agent.
 
(G) Letters of Credit Warranties and Covenants.  If requested by Agent, Borrower
will deliver to Agent all Letters of Credit under which it is the beneficiary or
is otherwise entitled to receive proceeds duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
reasonably satisfactory to Agent.  Borrower will also deliver to Agent all
security agreements securing any such Letters of Credit and execute UCC
financing statement amendments assigning to Agent any UCC financing statements
filed by Borrower in connection with such security agreements.  Borrower will
take any and all actions necessary (or reasonably required or requested by
Agent), from time to time, to cause Agent to obtain exclusive Control of any
Letter-of-Credit Rights owned by Borrower in a manner reasonably acceptable to
Agent.
 
(H) General Intangibles Warranties and Covenants.  Borrower shall use its best
efforts to obtain any consents, waivers or agreements necessary to enable Agent
to exercise remedies hereunder and under the other Loan Documents with respect
to any of Borrower’s rights under any General Intangibles, including Borrower’s
rights as a licensee of computer software (other than off the shelf software).
 
(I) Intellectual Property Warranties and Covenants.  Intellectual Property
Warranties and Covenants.  Borrower and each of its Subsidiaries owns, is
licensed to use or otherwise has the right to use, all Intellectual Property
used in or necessary for the conduct of its business as currently conducted, and
all registered Intellectual Property owned by Borrower or any of its
Subsidiaries as of the Closing Date is identified on Schedule 4.5(I).  Except as
set forth on Schedule 4.5(I), there
 
 
 
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are no restrictions on Borrower’s and each of its Subsidiaries’ right to create
a Lien in such Intellectual Property nor in Agent’s right to perfect and enforce
such Lien.  Borrower shall concurrently herewith deliver to Agent any
Intellectual Property Security Agreement and all other documents, instruments
and other items as may be necessary for Agent to file such agreements with the
U.S. Copyright Office or the U.S. Patent and Trademark Office, as
appropriate.  The Copyrights, Patents and Trademarks listed on the schedules to
any Intellectual Property Security Agreement constitute all of the Patents,
Trademarks and Copyrights owned by Borrower and its Subsidiaries that are
registered or that are subject to an application for registration.  If, before
the Obligations are paid in full, Borrower acquires any new or additional
registered Patents, Trademarks or Copyrights or applications therefor, Borrower
shall give to Agent prompt written notice thereof (it being understood that for
the purposes of this Agreement, notice quarterly is prompt), and shall at the
request of Agent amend the schedules to the applicable Intellectual Property
Security Agreement to include any such new Patents, Trademarks or
Copyrights.  Borrower shall: (a) prosecute, as reasonably deemed appropriate by
Borrower and consistent with Borrower’s past practices, any application to
register any copyright, patent or trademark owned by Borrower and at any time
pending, (b) make application for registration or issuance of all new
copyrights, patents and trademarks as reasonably deemed appropriate by Borrower;
(c) preserve and maintain all rights in the Intellectual Property; and (d) use
its best efforts to obtain any consents, waivers or agreements necessary to
enable Agent to exercise its remedies with respect to the Intellectual
Property.  Borrower shall not abandon any pending copyright, patent or trademark
application, or registered Copyright, Patent or Trademark owned or controlled by
such Borrower without the prior written consent of Agent which consent shall not
be unreasonably withheld.  All registered Intellectual Property owned by
Borrower and its Subsidiaries is valid, subsisting and enforceable and all
filings necessary to maintain the effectiveness of such registrations have been
made.  The execution, delivery and performance of this Agreement by Borrower
will not violate or cause a default under any of the Intellectual Property or
any agreement in connection therewith.
 
(J) Commercial Tort Claims Warranties and Covenants.  Borrower does not own any
Commercial Tort Claims.  Borrower shall advise Agent promptly upon Borrower
becoming aware that it owns any additional Commercial Tort Claims.  With respect
to any new Commercial Tort Claim, Borrower will execute and deliver such
documents as Agent reasonably deems necessary to create, perfect and protect
Agent’s security interest in such Commercial Tort Claim.
 
(K) Deposit Accounts; Bank Accounts Warranties and Covenants.  Schedule 4.5(K)
sets forth the account numbers and locations of all Deposit Accounts or other
bank accounts of Borrower and Guarantor.
 
(L) Bailees.  Except as disclosed on Schedule 4.5(L), none of the Collateral is
in the possession of any consignee, bailee, warehouseman, agent or
processor.  Except as disclosed on Schedule 4.5(L), no portion of the Collateral
valued in excess of $100,000 at one location or at all locations shall at any
time be in the possession or control of any warehouse, bailee or any of
Borrower’s agents or processors without Agent’s prior written consent and unless
Agent, if Agent has so requested, has received warehouse receipts or bailee lien
waivers satisfactory to Agent prior to the commencement of such possession or
control.  If any portion of the Collateral at one location or at all locations
is at any time in the possession or control of any warehouse, bailee or any of
Borrower’s agents or processors, Borrower shall, upon the request of Agent,
notify such warehouse, bailee, agent or processor of the Liens in favor of
Agent, for the benefit of Agent and Lenders, created hereby, shall instruct such
Person to hold all such Collateral for Agent’s account subject to Agent’s
instructions, and shall obtain such Person’s acknowledgement that it is holding
the Collateral for Agent’s benefit.
 
 
 
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(M) Collateral Description; Use of Collateral.  Borrower will furnish to Agent,
from time to time upon reasonable request, statements and schedules further
identifying, updating, and describing the Collateral and such other information,
reports and evidence concerning the Collateral, as Agent may reasonably request,
all in reasonable detail.  Borrower will not use or permit any Collateral to be
used unlawfully or in violation of any provision of applicable law, or any
policy of insurance covering any of the Collateral.
 
(N) Collateral Filing Requirements; Collateral Records.  None of the Collateral
is of a type in which Liens may be registered, recorded or filed under, or
notice thereof given under, any U.S. federal statute or regulation except for
Collateral described on the schedules to any Intellectual Property Security
Agreement.  Borrower shall promptly notify Agent in writing upon acquiring any
interest hereafter in any material Collateral that is of a type where a Lien may
be registered, recorded or filed under, or notice thereof given under, any
federal statute or regulation.  Borrower shall keep full and accurate books and
records relating to the Collateral and shall stamp or otherwise mark such books
and records in such manner as Agent may reasonably request to indicate Agent’s
Liens in the Collateral, for the benefit of Agent and Lenders.
 
(O) Federal Claims.  None of the Collateral constitutes a claim against the
United States of America, or any State or municipal government or any
department, instrumentality or agency thereof, the assignment of which claim is
restricted by law.  Borrower shall notify Agent of any Collateral which
constitutes a claim against the United States of America, or any State or
municipal government or any department, instrumentality or agency thereof, the
assignment of which claim is restricted by law.  Upon the request of Agent,
Borrower shall take such steps as may be necessary to comply with any applicable
federal assignment of claims laws and other comparable laws.
 
(P) Agent Authorized.  Borrower hereby authorizes and, until such time as the
Obligations are  paid in full in cash (other than contingent indemnity
obligations that are not yet due and payable) and termination of all Commitments
hereunder, shall continue to authorize Agent to file one or more financing or
continuation statements, and amendments thereto (or similar documents required
by any laws of any applicable jurisdiction), relating to all or any part of the
Collateral without the signature of Borrower and hereby specifically ratifies
all such actions previously taken by Agent, which financing statements may
identify the Collateral as “all assets” or “all personal property” or words of
like import.
 
4.6 Names and Locations.  Schedule 4.6 sets forth (a) all legal names and all
other names (including trade names, fictitious names and business names) under
which Borrower and each of its Subsidiaries currently conducts business, or has
at any time during the past five years conducted business, (b) the name of any
entity which Borrower or any of its Subsidiaries has acquired in whole or in
part or from whom Borrower or any of its Subsidiaries has acquired a significant
amount of
 
 
 
 
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assets within the past five years, (c) the location of Borrower’s and each of
its Subsidiaries’ principal place of business, (d) the state or other
jurisdiction of organization for each Loan Party and sets forth each Loan
Party’s organizational identification number or specifically designates that one
does not exist, (e) the location of Borrower’s and each of its Subsidiary’s
books and records, (f) the location of all other offices of Borrower and each of
its Subsidiaries, (g) all Collateral locations (designating Inventory and
Equipment locations and indicating between owned, leased, warehouse, storage,
and processor locations); and (h) each Loan Party’s federal tax identification
number.  The locations designated on Schedule 4.6 are Borrower’s and each of its
Subsidiary’s sole locations for their respective businesses and the
Collateral.  Borrower will give Agent at least thirty (30) days advance written
notice of any: (a) change of legal name of Borrower or any of its Subsidiaries,
(b) change of principal place of business of Borrower or any of its
Subsidiaries, (c) change in the location of Borrower’s or any of its
Subsidiaries’ books and records or the Collateral, (d) new location for
Borrower’s or any of its Subsidiaries’ books and records or the Collateral, or
(e) changes in any Loan Party’s state or other jurisdiction of organization or
its organizational identification number.
 
4.7 Title to Properties; Liens.  Borrower and each of its Subsidiaries has good,
sufficient and legal title to or rights in the Collateral and will have good,
sufficient and legal title to or rights in all after-acquired Collateral, in
each case, free and clear of all Liens except for the Permitted
Encumbrances.  Upon the timely filing of UCC financing statements and any
Intellectual Property Security Agreement with the U.S. Patent and Trademark
Office and U.S. Copyright Office,  Agent shall have a valid, perfected and first
priority Lien in the Collateral (subject to Permitted Encumbrances), securing
the payment of the Obligations, and such Lien shall be entitled to all of the
rights, priorities and benefits afforded by the UCC or other applicable law as
enacted in any relevant jurisdiction which relates to perfected Liens; provided,
however, that additional filings may be required to perfect the Agent’s Lien in
any Copyrights, Trademarks or Patents acquired after the date hereof.
 
4.8 Litigation; Adverse Facts.  There are no judgments outstanding against any
Loan Party or affecting any property of any Loan Party nor is there any action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to the knowledge of Borrower after due inquiry,
threatened against or affecting any Loan Party or any property of any Loan
Party, in each case which could reasonably be expected to result in any Material
Adverse Effect.  Promptly upon any officer of Borrower or its Subsidiaries
obtaining knowledge of (a) the institution of any action, suit, proceeding,
governmental investigation or arbitration against or affecting any Loan Party or
any property of any Loan Party not previously disclosed by Borrower to Agent or
(b) any material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or affecting any Loan
Party or any property of any Loan Party, Borrower will promptly give notice
thereof to Agent and provide such other information as may be reasonably
available to enable Agent and its counsel to evaluate such matter.
 
4.9 Payment of Taxes.  All material tax returns and reports of Borrower and each
of its Subsidiaries required to be filed by any of them have been timely filed
and are complete and accurate in all material respects.  All taxes, assessments,
fees and other governmental charges which are due and payable by Borrower and
each of its Subsidiaries have been paid when due; provided that no such tax need
be paid if Borrower or one of its Subsidiaries is contesting same in good faith
by appropriate proceedings promptly instituted and diligently conducted and if
Borrower or such Subsidiary has established appropriate reserves as shall be
required in conformity with GAAP.  As of the Closing Date, none of the income
tax returns of Borrower or any of its Subsidiaries are under audit and Borrower
shall promptly notify Agent in the event that any of Borrower’s or any of its
Subsidiaries’ tax returns become the subject of an audit.  No tax liens have
been filed against Borrower or any of its Subsidiaries.  The charges, accruals
and reserves on the books of Borrower and each of its Subsidiaries in respect of
any taxes or other governmental charges are in accordance with GAAP.
 
 
 
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4.10 Performance of Agreements.  None of the Loan Parties are in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any material contractual obligation of any such Person,
and no condition exists that, with the giving of notice or the lapse of time or
both, would constitute such a default.  Borrower shall promptly notify Agent of
(a) the occurrence of any default or breach under any material contractual
obligation of any Loan Party in excess of $100,000, (b) the termination of any
material contractual obligation of any Loan Party other than in accordance with
its terms, or (c) the amendment or modification of any material contractual
obligation of any Loan Party.
 
4.11 Employee Benefit Plans.  Borrower, each of its Subsidiaries and each ERISA
Affiliate is in compliance, and will continue to remain in compliance, in all
material respects with all applicable provisions of ERISA, the IRC and all other
applicable laws thereunder with respect to all Employee Benefit Plans.  No
liability has been incurred by Borrower, any Subsidiaries or any ERISA Affiliate
which remains unsatisfied for any funding obligation, taxes or penalties with
respect to any Employee Benefit Plan.  Neither Borrower nor any of its
Subsidiaries shall establish any new Employee Benefit Plan or amend any existing
Employee Benefit Plan if the liability or increased liability resulting from
such establishment or amendment is material.
 
4.12 Broker’s Fees.  No broker’s or finder’s fee or commission will be payable
with respect to any of the transactions contemplated hereby.
 
4.13 Environmental Compliance.  Each Loan Party is and shall continue to remain
in compliance with all applicable Environmental Laws. There are no claims,
liabilities, Liens, investigations, litigation, administrative proceedings,
whether pending or threatened, or judgments or orders relating to any Hazardous
Materials asserted or threatened against any Loan Party or relating to any real
property currently or formerly owned, leased or operated by any Loan Party.
 
4.14 Solvency.  The Loan Parties, taken as a whole:  (a) own assets the fair
saleable value of which are greater than the total amount of their liabilities
(including contingent liabilities) and (b) have capital that is not unreasonably
small in relation to their business as presently conducted or any contemplated
or undertaken transaction.  No Loan Party intends to incur, nor does any Loan
Party believe that it will incur debts beyond its ability to pay such debts as
they become due.
 
 
 
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4.15 Disclosure.  No representation or warranty of Borrower, any of its
Subsidiaries or any other Loan Party contained in this Agreement, or any other
Loan Documents contains any untrue statement of a material fact or omitted,
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made.   There is no material fact known to
Borrower that has had or could have a Material Adverse Effect and that has not
been disclosed herein or in such other documents, certificates and statements
furnished to Agent or any Lender for use in connection with the transactions
contemplated hereby.
 
4.16 Insurance.  Borrower and each of its Subsidiaries maintains and shall
continue to maintain adequate insurance policies and shall provide Agent with
evidence of such insurance coverage for public liability, property damage,
product liability, and business interruption with respect to its business and
properties and the business and properties of its Subsidiaries against loss or
damage of the kinds customarily carried or maintained by corporations of
established reputation engaged in similar businesses and in amounts acceptable
to Agent in its Permitted Discretion.  Borrower shall cause Agent at all times
to be named as loss payee on all insurance policies relating to any Collateral
and shall cause Agent at all times to be named as additional insured under all
liability policies, in each case pursuant to appropriate endorsements in form
and substance reasonably satisfactory to Agent and shall collaterally assign to
Agent, for itself and on behalf of Lenders, as security for the payment of the
Obligations all business interruption insurance of Borrower.  Borrower shall
cause each issuer of an insurance policy to provide Agent with an endorsement
providing that 30 days’ (and 10 days for non-payment of premiums) notice (or a
shorter period as may be agreed to by Agent) will be given to Agent prior to any
cancellation of, or reduction or change in, coverage provided by or other
material modification to such policy.  No notice of cancellation has been
received with respect to such policies and Borrower and each of its Subsidiaries
is in compliance with all conditions contained in such policies.  Any proceeds
received from any policies of insurance relating to any Collateral shall be
applied to the Obligations.  Borrower shall provide Agent evidence of the
insurance coverage and of the assignments and endorsements required by this
Agreement promptly upon request by Agent and upon renewal of any existing
policy.  If Borrower elects to change insurance carriers, policies or coverage
amounts, Borrower shall notify Agent and provide Agent with evidence of the
updated insurance coverage and of the assignments and endorsements required by
this Agreement.  In the event Borrower fails to provide Agent with evidence of
the insurance coverage required by this Agreement, Agent may, but is not
required to, purchase insurance at Borrower’s expense to protect Agent’s and the
Lender’s interests in the Collateral.  This insurance may, but need not, protect
Borrower’s interests.  The coverage purchased by Agent may not pay any claim
made by Borrower or any claim that is made against Borrower in connection with
the Collateral.  Borrower may later cancel any insurance purchased by Agent, but
only after providing Agent with evidence that Borrower has obtained insurance as
required by this Agreement.  If Agent purchases insurance for the Collateral,
Borrower will be responsible for the costs of that insurance, including interest
thereon and other charges imposed on Agent in connection with the placement of
the insurance, until the effective date of the cancellation or expiration of the
insurance, and such costs may be added to the Obligations.  The costs of the
insurance may be more than the cost of insurance Borrower is able to obtain on
its own.
 
4.17 Compliance with Laws; Government Authorizations; Consents.  Neither
Borrower nor any of its Subsidiaries is in violation of any law, ordinance,
rule, regulation, order, policy, guideline or other requirement of (a) any
Governmental Authority in any jurisdictions in which Borrower or any of its
Subsidiaries is now doing business, and (b) any Government Authority otherwise
having jurisdiction over the conduct of Borrower or any of its Subsidiaries or
any of its respective
 
 
 
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businesses, or the ownership of any of its respective properties, which
violation would reasonably be expected to have a Material Adverse Effect and no
such violation has been alleged.  No Loan Party and no Sponsor is in violation
of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
Law.  Neither Borrower nor to the knowledge of Borrower, any of its agents
acting in any capacity in connection with the Loans or other transactions
hereunder (a) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, or (b) deals in, or otherwise engages in any transaction relating to,
any property or interests in property blocked pursuant to the Executive Order
No. 13224.  Borrower will and will cause each of its Subsidiaries to comply with
the requirements of all applicable laws, ordinances, rules, regulations, orders,
policies, guidelines or other requirements of (a) any Governmental Authority as
now in effect and which may be imposed in the future in all jurisdictions in
which Borrower or any of its Subsidiaries is now doing business or may hereafter
be doing business, and (b) any government authority otherwise having
jurisdiction over the conduct of Borrower or any of its Subsidiaries or any of
its respective businesses, or the ownership of any of its respective properties,
except to the extent the noncompliance with which would not have a Material
Adverse Effect.  Borrower shall not, nor shall permit any other Loan Party to,
(x) be or become a Person whose property or interests in property are blocked or
subject to blocking pursuant to any Anti-Terrorism Law, (y) engage in any
dealings or transactions prohibited by any Anti-Terrorism Law, or otherwise be
associated with any such Person in any manner violative of any Anti-Terrorism
Law, or (z) otherwise become a Person on the list of Specially Designated
Nationals and Blocked Persons in violation of the limitations or prohibitions
under any Anti-Terrorism Law.  No part of the proceeds of the Loans will be
used, directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.  No
authorization, approval or other action by, and no notice to or filing with, any
domestic or foreign Governmental Authority or regulatory body or consent of any
other Person is required for (a) the grant by Borrower of the Liens granted
hereby or for the execution, delivery or performance of this Agreement or the
other Loan Documents by Borrower or any Loan Party; (b) the perfection of the
Liens granted hereby and pursuant to any other Loan Documents in the United
States (except for filing UCC financing statements with the appropriate
jurisdiction and filing any Intellectual Property Security Agreement with the
U.S. Copyright Office and the U.S. Patent and Trademark Office, as applicable);
or (c) the exercise by Agent of its rights and remedies hereunder (except as may
have been taken by or at the direction of Borrower or Agent).
 
4.18 Employee Matters.  (a) No Loan Party nor any of such Loan Party’s employees
is subject to any collective bargaining agreement, (b) no petition for
certification or union election is pending with respect to the employees of any
Loan Party and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of any Loan Party and
(c) there are no strikes, slowdowns, work stoppages or controversies pending or,
to the knowledge of Borrower, threatened between any Loan Party and its
respective employees, other than employee grievances arising in the ordinary
course of business, which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
 
 
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4.19 Governmental Regulation.  None of the Loan Parties is subject to regulation
under the Federal Power Act or the Investment Company Act of 1940 or to any
federal or state statute or regulation limiting its ability to incur
indebtedness for borrowed money.
 
4.20 Access to Accountants and Management.  Borrower authorizes Agent and
Lenders to discuss the financial condition and financial statements of Borrower
and its Subsidiaries with Borrower’s Accountants upon reasonable notice to
Borrower of its intention to do so and, so long as no Default or Event of
Default shall have occurred and be continuing, Borrower’s right to participate
therein.  Agent and each Lender may, with the consent of Agent, which will not
be unreasonably denied, confer with Borrower’s management directly regarding
Borrower’s business, operations and financial condition from time to time upon
reasonable request and without disruption to the business of the Borrower.
 
4.21 Inspection; Appraisals.  Borrower shall (i) permit Agent and any authorized
representatives designated by Agent to visit and inspect any of the properties
of Borrower or any of its Subsidiaries, including their books and records and
financial and accounting records, and, in conjunction with such inspection, to
make copies and take extracts therefrom, and to discuss their affairs, finances
and business with their officers and Borrower’s Accountants, at such reasonable
times during normal business hours and as often as may be reasonably requested
and  (ii) not more than once per calendar year, so long as no Event of Default
has occurred and is continuing, permit Agent and any authorized representatives
designated by Agent to (a) perform desktop Collateral appraisals in form and
substance satisfactory to Agent at Borrower’s cost and expense as Agent deems
appropriate in Agent’s Permitted Discretion and (b) select examiners to conduct
asset-based field examinations at Borrower’s cost and expense as Agent deems
appropriate in Agent’s Permitted Discretion. Each Lender may with the consent of
Agent, which will not be unreasonably denied, and at their own expense accompany
Agent on any such visit or inspection.
 
4.22 Primary Deposit Accounts.  Within sixty (60) days following the Closing
Date, Borrower shall establish its primary deposit account (“Primary Deposit
Account”) in Borrower’s name with Agent. All commercial account debtors of
Borrower shall be directed to remit all payments on Borrower’s Accounts to the
Primary Deposit Account or to remit its payment by check directly to
Borrower.  Immediately upon receipt by Borrower of any such check, Borrower
shall deposit such check in the Primary Deposit Account.  Any customer payments
received by Borrower or any Subsidiary with respect to a Pizza Inn or Pie Five
store, whether in cash or check, shall be remitted within two (2) Business Days
to either a Local Deposit Account or the Primary Deposit Account. Except as set
forth above, any payments received by Borrower constituting proceeds of
Collateral shall be remitted within two (2) Business Days to the Primary Deposit
Account in the identical form in which such payment was made, whether by cash or
check.  Borrower hereby agrees that all payments made to such Primary Deposit
Account or otherwise received by Agent will be subject to the control of Agent,
for the benefit of the Lenders, as set forth in Section 9-104 of the UCC.
 
 
 
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4.23 No Defaults.  No event or circumstance has occurred or exists that
constitutes a Default or Event of Default.
 
4.24 Margin Stock.  No Borrower or Subsidiary is 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.  No Loan proceeds or Lender Letters
of Credit will be used by Borrower to purchase or carry, or to reduce or
refinance any Indebtedness incurred to purchase or carry, any Margin Stock or
for any related purpose governed by Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
 
4.25 Amendment of Schedule.  Borrower may amend any one or more of the Schedules
referred to in this Agreement (subject to prior written notice to and written
approval thereof by Agent in its Permitted Discretion) and any representation,
warranty, or covenant contained herein which refers to any such Schedule shall
from and after the date of any such amendment refer to such Schedule as so
amended; provided however, that in no event shall the amendment of any such
Schedule constitute a waiver by Agent and Lenders of any Default or Event of
Default that exists notwithstanding the amendment of such Schedule.
 
4.26 Representations and Warranties Incorporated from Loan Documents.  As of the
Closing Date, each of the representations and warranties made in the Loan
Documents by the Loan Parties is true and correct in all material respects.
 
SECTION 5 REPORTING AND OTHER AFFIRMATIVE COVENANTS
 
Borrower covenants and agrees that, so long as any of the Commitments hereunder
shall be in effect and until payment in full, in cash, of all Obligations (other
than contingent indemnity obligations that are not yet due and payable) and
termination of all Commitments hereunder including termination of all Lender
Letters of Credit, Borrower shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Section 5.
 
5.1 Financial Statements and Other Reports.  Borrower will deliver to Agent and
each Lender (unless specified to be delivered solely to Agent) the financial
statements and other reports contained in the Reporting Rider attached hereto.
 
5.2 Maintenance of Properties.  Borrower will maintain or cause to be maintained
in good repair, working order and condition all material properties used in the
business of Borrower and its Subsidiaries and will make or cause to be made all
appropriate repairs, renewals and replacements thereof.
 
5.3 Further Assurances.  Borrower shall, and shall cause each of its
Subsidiaries and any Loan Party to, from time to time, execute such guaranties,
financing or continuation statements, documents, security agreements, reports
and other documents or deliver to Agent such instruments, certificates of title,
mortgages, deeds of trust, or other documents as Agent at any time may
reasonably request to evidence, perfect or otherwise implement the guaranties
and security for repayment of the Obligations provided for in the Loan
Documents.
 
 
 
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5.4 Mortgages; Title Insurance; Surveys.
 
(A) Title Insurance.  Within thirty (30) days following delivery of any Mortgage
with respect to Additional Mortgaged Property, Borrower shall deliver or cause
to be delivered to Agent ALTA lender’s title insurance policies issued by title
insurers reasonably satisfactory to Agent (the “Mortgage Policies”) in form and
substance and in amounts reasonably satisfactory to Agent assuring Agent that
the Mortgages are valid and enforceable first priority mortgage liens on the
respective Mortgaged Property or Additional Mortgaged Property, free and clear
of all defects and encumbrances except Permitted Encumbrances.  The Mortgage
Policies shall be in form and substance reasonably satisfactory to Agent and
shall include an endorsement insuring against the effect of future advances
under this Agreement and for any other matter that Agent may reasonably request.
 
(B) Additional Mortgaged Property.  Borrower shall as promptly as possible (and
in any event within sixty (60) days after such designation) deliver to Agent a
fully executed Mortgage, in form and substance reasonably satisfactory to Agent
together with title insurance policies and surveys on any Additional Mortgaged
Property designated by Agent.
 
(C) Surveys.  Within thirty (30) days following delivery of any Mortgage with
respect to Additional Mortgaged Property, Borrower shall deliver or cause to be
delivered to Agent current surveys, certified by a licensed surveyor, for all
real property that is the subject of the Mortgage.  All such surveys shall be
sufficient to allow the issuer of the Mortgage Policy to issue an ALTA lender’s
policy.
 
5.5 Use of Proceeds and Margin Security.  Borrower shall use the proceeds of all
Loans as described in the recitals to this Agreement consistent with all
applicable laws, statutes, rules and regulations.  No portion of the proceeds of
any Loan shall be used for the purpose of purchasing or carrying margin stock
within the meaning of Regulation U, or in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation T or
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act.
 
5.6 Subsidiaries.  Borrower shall not acquire any foreign Subsidiary, and in the
event that any Person becomes a domestic Subsidiary of Borrower, Borrower shall
(a) concurrently with such Person becoming a domestic Subsidiary cause such
domestic Subsidiary to become a Guarantor (or a Borrower hereunder by delivery
of a joinder agreement) and execute and deliver to Agent, for the benefit of the
Lenders, if a Guarantor, a Guaranty Agreement and Guarantor Security Agreement
and Borrower shall cause 100% of the Equity Interests of such Person to be
pledged pursuant to a Pledge Agreement and such certificated Equity Interest (if
any) should be delivered to Agent, for the benefit of the Lenders, (b) cause
such Person to grant to Agent, for the benefit of the Lenders, a Lien on all
personal and real property of such Person, and (c) take all such actions and
execute and deliver, or cause to be executed and delivered, all such documents,
instruments, agreements, and certificates as are similar to those Borrower
and/or its Subsidiaries (as applicable) delivered on the Closing Date.
 
 
 
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5.7 Post-Closing Obligations.  Borrower shall cause the conditions set forth on
Schedule 5.7 hereto to be satisfied in full, on or before the date specified for
each such condition, time being of the essence, in a manner reasonably
satisfactory, in form and substance to Agent.
 
SECTION 6 FINANCIAL COVENANTS
 
Borrower covenants and agrees that so long as any of the Commitments remain in
effect and until payment in full, in cash, of all Obligations (other than
contingent indemnity obligations that are not yet due and payable) and
termination of all Lender Letters of Credit Commitments hereunder, Borrower
shall comply with and shall cause each of its Subsidiaries to comply with all
covenants contained in the Financial Covenants Rider.  Furthermore, for periods
prior to the Closing Date, the performance of Borrower shall be used for all
covenants contained in the Financial Covenants Rider, to the extent applicable.
 
SECTION 7 NEGATIVE COVENANTS
 
Borrower covenants and agrees that so long as any of the Commitments remain in
effect and until payment in full, in cash, of all Obligations (other than
contingent indemnity obligations that are not yet due and payable) and
termination of all Lender Letters of Credit Commitments hereunder, Borrower
shall not and will not permit any of its Subsidiaries to:
 
7.1 Indebtedness and Liabilities.  Directly or indirectly create, incur, assume,
guaranty, or otherwise become or remain directly or indirectly liable, on a
fixed or contingent basis, with respect to any Indebtedness except: (a) the
Obligations; (b) intercompany Indebtedness among Borrower and any of the other
Loan Parties, provided that each of the Borrowers agrees that any debt owing to
Borrower by any Loan Party, whether now existing or hereafter incurred, shall at
all times, including after any bankruptcy proceeding, be subordinate and junior
in right of payment, to the Obligations; (c) Indebtedness (excluding Capital
Leases) not to exceed $100,000 in the aggregate at any time outstanding, either
unsecured or secured by purchase money Liens as permitted by the definition of
Permitted Encumbrances; (d) Indebtedness under Capital Leases not to exceed
$100,000 outstanding at any time in the aggregate; (e) Indebtedness existing on
the Closing Date and identified on Schedule 7.1, and (f) any other Indebtedness
which is unsecured and subordinated to Agent and the Lenders pursuant to a
subordination agreement acceptable to Agent in its Permitted Discretion;
provided, however, no such Indebtedness shall be incurred by the Borrowers
unless at the time of incurrence and after giving effect thereto, the Parent and
its Subsidiaries are in pro forma compliance with each of the financial
covenants set forth on Rider B attached hereto.  Borrower will not, and will not
permit any of its Subsidiaries to, incur any Indebtedness except for
Indebtedness permitted herein and trade payables and normal accruals in the
ordinary course of business not yet due and payable or with respect to which
Borrower or any of its Subsidiaries is contesting in good faith the amount or
validity thereof by appropriate proceedings and then only to the extent that
Borrower or any of its Subsidiaries has established adequate reserves therefor
under GAAP.
 
7.2 Guaranties.  Except for endorsements of instruments or items of payment for
collection in the ordinary course of business Borrower will not guaranty,
endorse, or otherwise in any way become or be responsible for any obligations of
any Person other than the Loan Parties, whether directly or indirectly by
agreement to purchase the indebtedness of any other Person or through the
purchase of goods, supplies or services, or maintenance of working capital or
other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance or loan for the purpose of paying or discharging
any indebtedness or obligation of such other Person or otherwise.
 
 
 
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7.3 Transfers, Liens and Related Matters.
 
(A) Transfers.  Sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to any of the Collateral or the
assets of any Loan Party, except that Borrower and its Subsidiaries may (1) in
the ordinary course of its business, sell Inventory and license a General
Intangible to a licensee; and (2) make Asset Dispositions, if all of the
following conditions are met: (a) the market value of assets sold or otherwise
disposed of in any single transaction or series of related transactions does not
exceed $50,000 and the aggregate market value of assets sold or otherwise
disposed of in any Fiscal Year does not exceed $100,000; (b) the consideration
received is at least equal to the fair market value of such assets; (c) the sole
consideration received is cash; (d) the net proceeds of such Asset Disposition
are applied as and to the extent required by subsection 2.4; (e) after giving
effect to the sale or other disposition of the assets included within the Asset
Disposition and the repayment of the Obligations with the proceeds thereof,
Borrower is in compliance on a pro forma basis with the covenants set forth in
the Financial Covenant Rider recomputed for the most recently ended month for
which information is available and is in compliance with all other terms and
conditions contained in this Agreement; and (f) no Default or Event of Default
shall then exist or result from such sale or other disposition.
 
(B) Liens.  Except for Permitted Encumbrances, directly or indirectly create,
incur, assume or permit to exist any Lien on or with respect to any of the
Collateral or the assets of such Person or any proceeds, income or profits
therefrom.
 
(C) No Negative Pledges.  Enter into or assume any agreement (other than the
Loan Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
 
(D) No Restrictions on Subsidiary Distributions to Borrower.  Except as provided
herein, directly or indirectly create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to: (1) pay dividends or make any other
distribution on any of such Subsidiary’s capital stock owned by Borrower or any
Subsidiary of Borrower; (2) pay any indebtedness owed to Borrower or any other
Subsidiary; (3) make loans or advances to Borrower or any other Subsidiary; or
(4) transfer any of its property or assets to Borrower or any other Subsidiary.
 
7.4 Investments and Loans.  Make or permit to exist investments in or loans to
any other Person, except:  (a) Cash Equivalents; (b) loans and advances to
employees for moving, entertainment, travel and other similar expenses in the
ordinary course of business in an aggregate outstanding amount not in excess of
$25,000; and (c) notes issued by franchisees to Borrowers for past-due Accounts
arising in the ordinary course of business.
 
 
 
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7.5 Restricted Junior Payments.  Directly or indirectly declare, order, pay,
make or set apart any sum for any Restricted Junior Payment, except that: (a)
any Loan Party may make Restricted Junior Payments to any other Loan Party; (b)
Parent may make Restricted Junior Payments to pay a dividend or other
distribution with respect to its outstanding common stock or to repurchase
shares of its outstanding common stock; and (c) Parent may make Restricted
Junior Payments to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of its common stock;
provided that, in each case of clauses (b) and (c) hereof, (y) immediately prior
to and after giving effect to such Restricted Junior Payment, Parent and its
Subsidiaries are in pro forma compliance with each of the financial covenants
set forth on Rider B hereto and no Event of Default has occurred or would result
therefrom, and (z) the aggregate amount of all such Restricted Junior Payments
made pursuant to clauses (b) and (c) hereof, does not exceed $100,000 in any
twelve month period unless a greater amount is approved by Agent in its sole
discretion.
 
7.6 Restriction on Fundamental Changes.  (a) Enter into any transaction of
merger or consolidation, provided that any Subsidiary of the Borrower may merge
(i) with and into the Borrower (so long as the Borrower is the survivor of such
merger) or (ii) another Subsidiary of the Borrower, (b) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); (c) convey, sell,
lease, sublease, transfer or otherwise dispose of (including a disposition in
connection with a sale-leaseback transaction), in one transaction or a series of
transactions, all or substantially all of its business or assets, or the capital
stock of any of its Subsidiaries, whether now owned or hereafter acquired; or
(d) acquire by purchase or otherwise all or any substantial part of the business
or assets of, or stock or other beneficial ownership of, any Person.
 
7.7 Organizational Documents.  Amend, modify or otherwise change any of its or
their Organizational Documents as in effect on the Closing Date.
 
7.8 Transactions with Affiliates.  Directly or indirectly, enter into or permit
to exist any transaction (including the purchase, sale or exchange of property
or the rendering of any service) with any Affiliate or with any officer,
director or employee of any Loan Party, except for transactions in the ordinary
course of Borrower’s business and upon fair and reasonable terms which are no
less favorable taken as a whole to Borrower than it would obtain in a comparable
arm’s length transaction with an unaffiliated Person.
 
7.9 Conduct of Business.  From and after the Closing Date, engage in any
business other than businesses of the type engaged in by Borrower or any
Subsidiary on the Closing Date.
 
7.10 Tax Consolidations.  File or consent to the filing of any consolidated
income tax return with any Person other than Parent or any of its Subsidiaries,
provided that in the event Borrower files a consolidated return with any such
Person, Borrower’s contribution with respect to taxes as a result of the filing
of such consolidated return shall not be greater, nor the receipt of tax
benefits less, than they would have been had Borrower not filed a consolidated
return with such Person.
 
7.11 Subsidiaries.  Other than the Subsidiaries set forth on Schedule 7.11,
establish, create or acquire any new Subsidiaries.
 
 
 
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7.12 Fiscal Year; Accounting Changes.  Change its Fiscal Year; or make any
material change in accounting treatment or reporting practices, except as
required or permitted by GAAP and in accordance with subsection 1.3.
 
7.13 Bermuda Subsidiary. As of the Closing Date, PIBCO, Ltd., a Bermuda captive
insurer, has (a) no material assets, (b) no material operations or liabilities
other than the run-off of medical claims from a single remaining claimant, and
(c) no employees; provided, however, PIBCO, Ltd. may receive payments from
Borrowers and Parent solely to the extent necessary to service the run-off of
such medical insurance claims in the ordinary course of business, plus operating
expenses consistent with past practices.
 
7.14 Bank Accounts.  Establish any Deposit Account with any financial
institution other than Agent; provided, however, that Borrower or its
Subsidiaries may establish not more than one Deposit Account per Pizza Inn or
Pie Five store (such account, a “Local Deposit Account”) so long as the
aggregate amount deposited in all such Deposit Accounts does not exceed $50,000
at any time, provided, further, upon the occurrence of an Event of Default,
Agent may require that any Deposit Account that is not maintained with Agent be
subject to a deposit account control agreement, in form and substance reasonably
acceptable to Agent, which the Loan Parties shall obtain within thirty (30) days
of such request, and/or the Agent may require that certain cash management to be
transferred to Agent which shall be completed within thirty (30) days of such
request.
 
7.15 Compliance with Anti-Terrorism Laws.  Directly or indirectly, knowingly
enter into any material agreements with any Blocked Person, nor indirectly, (i)
conduct any business or engage in any transaction or dealing with any Blocked
Person, including, without limitation, the making or receiving of any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, (ii) deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to Executive Order No. 13224,
any similar executive order or other Anti-Terrorism Law, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law.
 
7.16 Limitation on Action by Parent.  Parent shall not (i) at any time conduct
any business operations other than business activities incidental to the
operations of its Subsidiaries, the satisfaction of regulatory requirements and
the performance of its obligations under the Loan Documents to which it is a
party or (ii) hold or own any material assets or property of any kind other than
the outstanding equity interests of its Subsidiaries existing on the Closing
Date, cash permitted to be distributed to Parent by Borrower hereunder and
treasury stock.
 
7.17 Payment of Taxes and Claims.  Borrower will, and will cause each of its
Subsidiaries to, file all tax returns required to be filed in any jurisdiction
and to pay and discharge all taxes shown to be due and payable on such returns
and all other taxes, assessments, governmental charges, or levies imposed on
them or any of their properties, assets, income or franchises, to the extent the
same have become due and payable and before they have become delinquent and all
claims for which sums have become due and payable that have or might become a
Lien on properties or assets of Borrower or any Subsidiary, provided that
neither Borrower nor any Subsidiary need file any tax return or pay any such
tax, assessment, charge, levy or claim if (i) the obligation to file or the
amount, applicability or validity thereof is contested by Borrower or such
Subsidiary on a timely basis in good faith and in appropriate proceedings, and
Borrower or a Subsidiary has established adequate reserves therefore in
accordance with GAAP on the books of Borrower or such Subsidiary or (ii) the
failure to file or the nonpayment of all such taxes, assessments, charges,
levies and claims in the aggregate could not reasonably be expected to have
a  Material Adverse Effect.
 
 
 
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7.18 Negative Pledge.  Borrower shall not grant a lien in any real property to
any Person without the prior written consent of Agent and upon the reasonable
request of Agent, the Loan Parties shall execute a negative pledge in favor of
Agent to evidence the foregoing.
 
SECTION 8 DEFAULT, RIGHTS AND REMEDIES
 
8.1 Event of Default.  “Event of Default” shall mean the occurrence or existence
of any one or more of the following (for each subsection a different grace or
cure period may be specified, if no grace or cure period is specified, such
occurrence or existence constitutes an immediate Event of Default):
 
(A) Payment.  Failure to make payment of any of the Obligations when due; or
 
(B) Default in Other Agreements.  (1) Failure of Borrower or any of its
Subsidiaries to pay when due any principal or interest on any Indebtedness
(other than the Obligations), or (2) breach or default of Borrower or any of its
Subsidiaries with respect to any Indebtedness (other than the Obligations); if
such failure to pay, breach or default entitles the holder to cause such
Indebtedness having an individual principal amount in excess of $100,000 or
having an aggregate principal amount in excess of $250,000 to become or be
declared due prior to its stated maturity; or
 
(C) Breach of Certain Provisions.  Failure of Borrower to perform or comply with
any term or condition contained in paragraphs (A), (B) and (C) of the Reporting
Rider and subsections 5.3, 5.4 or 5.5, or contained in Section 6, Section 7 or
the Financial Covenants Rider; or
 
(D) Breach of Warranty.  Any representation or warranty made by any Loan Party
in any Loan Document or in any statement or certificate at any time given by
such Person in writing pursuant or in connection with any Loan Document is false
in any respect (or in any material respect if such representation or warranty is
not by its terms already qualified as to materiality) on the date made (or
deemed made); or
 
(E) Other Defaults Under Loan Documents.  Borrower or any other Loan Party
defaults in the performance of or compliance with any term contained in this
Agreement other than those otherwise set forth in this subsection 8.1, or
defaults in the performance of or compliance with any term contained in the
other Loan Documents, and such default is not remedied or waived within thirty
(30) days after notice from Agent, or Requisite Lenders, to Borrower of such
default; or
 
 
 
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(F) Change in Control.  (1) Parent ceases to own and control, beneficially and
of record, directly or indirectly, all Equity Interests in Borrower, (2) either
Pie Five or PIBC Holding Company ceases to own and control, beneficially and of
record, directly or indirectly, all Equity Interests in each of its Subsidiaries
owned as of the Closing Date (other than pursuant to a disposition or merger
permitted hereunder), (3) Sponsor ceases to own and control, directly or
indirectly, at least 10% of the Equity Interests of Parent (the “Sponsor Change
of Control Threshold Event”), unless with respect to this subsection (3) only,
within one hundred twenty (120) days of the Sponsor Change of Control Threshold
Event, Sponsor is back in compliance with subsection (3) or Agent has waived the
the Sponsor Change of Control Threshold Event in its Permitted Discretion, or
(4) any person or group of persons acting jointly or in concert (other than
Sponsor) (the “Acquiring Group”) beneficially owns, directly or indirectly,
shares carrying the right to exercise more than 35 percent of the total voting
power attached to all classes of the outstanding voting capital of Parent (the
“Beneficial Ownership Change”), unless with respect to this subsection (4) only,
within one hundred twenty (120) days of the Beneficial Ownership Change, such
Acquiring Group has lowered its beneficial ownership percentage to less than 35
percent or Agent has waived the Beneficial Ownership Change in its Permitted
Discretion, or
 
(G) Involuntary Bankruptcy; Appointment of Receiver, etc.  (1) A court enters a
decree or order for relief with respect to any Loan Party in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, which decree or order is not stayed or other similar relief
is not granted under any applicable federal or state law; or (2) the continuance
of any of the following events for sixty (60) days unless dismissed, bonded or
discharged: (a) an involuntary case is commenced against any Loan Party, under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (b) a receiver, liquidator, sequestrator, trustee, custodian or other
fiduciary having similar powers over any Loan Party, or over all or
substantially all of their respective property, is appointed; or
 
(H) Voluntary Bankruptcy; Appointment of Receiver, etc.  (1) Any Loan Party
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case or to the conversion of an involuntary case to a
voluntary case under any such law or consents to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or (2) any Loan Party makes any assignment for the benefit
of creditors; or (3) the board of directors of any Loan Party adopts any
resolution or otherwise authorizes action to approve any of the actions referred
to in this subsection 8.1(H); or
 
(I) Liens.  Any lien, levy or assessment is filed or recorded with respect to or
otherwise imposed upon all or any part of the Collateral or the assets of
Borrower or any of its Subsidiaries by the United States or any department or
instrumentality thereof or by any state, county, municipality or other
governmental agency (other than Permitted Encumbrances) and such lien, levy or
assessment is not stayed, vacated, paid or discharged within fifteen (15) days;
or
 
(J) Judgment and Attachments.  Any money judgment, writ or warrant of
attachment, or similar process involving (1) an amount in any individual case in
excess of $75,000 or (2) an amount in the aggregate at any time in excess of
$100,000 (in either case not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against any
Loan Party or any of their respective assets and remains undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days, but in any
event not later than five (5) days prior to the date of any proposed sale
thereunder; or
 
 
 
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(K) Dissolution.  Any order, judgment or decree is entered against any Loan
Party decreeing the dissolution or split up of such Loan Party and such order
remains undischarged or unstayed for a period in excess of thirty (30) days, but
in any event not later than five (5) days prior to the date of any proposed
dissolution or split up; or
 
(L) Solvency.  Any Loan Party ceases to be solvent (as represented by Borrower
in subsection 4.14) or admits in writing its present or prospective inability to
pay its debts as they become due; or
 
(M) Injunction.  Any Loan Party is enjoined, restrained or in any way prevented
by the order of any court or any administrative or regulatory agency from
conducting all or any material part of its business and such order continues for
thirty (30) days or more; or
 
(N) Invalidity of Loan Documents.  Any of the Loan Documents for any reason,
other than a partial or full release in accordance with the terms thereof,
ceases to be in full force and effect or is declared to be null and void, or any
Loan Party denies that it has any further liability under any Loan Documents to
which it is party, or gives notice to such effect; or
 
(O) Failure of Security.  Agent, on behalf of itself and Lenders, does not have
or ceases to have a valid and perfected first priority security interest in the
Collateral (subject to Permitted Encumbrances), in each case, for any reason
other than the failure of Agent or any Lender to take any action within its
control; or
 
(P) Damage, Strike, Casualty.  Any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo, condemnation, act of God or public enemy, or other
casualty which causes, in each case, for more than thirty (30) consecutive days
beyond the coverage period of any applicable business interruption insurance,
the cessation or substantial curtailment of revenue producing activities at any
facility of Borrower or any of its Subsidiaries if any such event or
circumstance could reasonably be expected to have a Material Adverse Effect; or
 
(Q) Licenses and Permits.  The loss, suspension or revocation of, or failure to
renew, any license or permit now held or hereafter acquired by any Loan Party,
if such loss, suspension, revocation or failure to renew would reasonably be
expected to have a Material Adverse Effect; or
 
(R) Forfeiture.  There is filed against any Loan Party any civil or criminal
action, suit or proceeding under any federal or state racketeering statute
(including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not dismissed
within one hundred twenty (120) days; and (2) could reasonably be expected to
result in the confiscation or forfeiture of any material portion of the
Collateral; or
 
(S) Employee Benefit Plans.  (i) There shall occur one or more ERISA Events
which individually or in the aggregate results in or would reasonably be
expected to result in liability of any Loan Party or any of their respective
ERISA Affiliates in excess of $100,000 during the term hereof; or (ii) there
exists any fact or circumstance that reasonably could be expected to result in
the imposition of a Lien or security interest under Section 412(n), 430(k) of
the IRC or under ERISA; or
 
 
 
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8.2 Suspension of Commitments.  Upon the occurrence of any Event of Default, the
Agent may or upon demand by Requisite Lenders shall, without notice or demand,
immediately cease making additional Loans and the Commitments shall be
suspended.
 
8.3 Acceleration.  Upon the occurrence of any Event of Default described in the
foregoing subsections 8.1(G) or 8.1(H), all Obligations under the Loan Documents
shall automatically become immediately due and payable, and Borrower shall be
required immediately to deposit cash collateral for the Letter of Credit Reserve
as set forth in clause (b) of the next sentence, in each case, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by Borrower, and the Commitments shall thereupon
terminate.  Upon the occurrence and during the continuance of any other Event of
Default, Agent may, and upon demand by Requisite Lenders shall, by written
notice to Borrower, (a) declare all or any portion of the Obligations under the
Loan Documents to be, and the same shall forthwith become, immediately due and
payable and the Commitments shall thereupon terminate, and (b) demand that
Borrower immediately deposit with Agent an amount equal to one hundred five
percent (105%) of the Letter of Credit Reserve and deposit the prepayment of
fees payable under subsection 2.3(D) with respect to such Lender Letters of
Credit for the full remaining terms of such Lender Letters of Credit; provided,
however, if any of such Lender Letters of Credit are terminated, the unearned
portion of such prepaid fee attributable to such Lender Letter of Credit shall
be refunded to Borrower.
 
8.4 Remedies.  If any Event of Default shall have occurred and be continuing, in
addition to and not in limitation of any other rights or remedies available to
Agent and Lenders at law or in equity, Agent may, and shall upon the request of
Requisite Lenders, exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the UCC (whether or
not the UCC applies to the affected Collateral) and may also (a) require
Borrower to, and Borrower hereby agrees that it will, at its expense and upon
request of Agent forthwith, assemble all or part of the Collateral as directed
by Agent and make it available to Agent at a place to be designated by Agent
which is reasonably convenient to both parties; (b) withdraw all cash in the
Deposit Accounts which are maintained by Agent or which are subject to a deposit
account control agreement after the date of this Agreement and apply such monies
in payment of the Obligations in the manner provided in subsection 8.7; and (c)
without notice or demand or legal process, enter upon any premises of Borrower
and take possession of the Collateral.  Borrower agrees that, to the extent
notice of sale of the Collateral or any part thereof shall be required by law,
at least ten (10) days notice to Borrower of the time and place of any public
disposition or the time after which any private disposition (which notice shall
include any other information required by law) is to be made shall constitute
reasonable notification.  At any disposition of the Collateral (whether public
or private), if permitted by law, Agent or any Lender may bid (which bid may be,
in whole or in part, in the form of cancellation of indebtedness) for the
purchase, lease, or licensing of the Collateral or any portion thereof for the
account of Agent or such Lender.  Agent shall not be obligated to make any
disposition of Collateral regardless of notice of disposition having been
given.  Borrower shall remain liable for any deficiency.  Agent may adjourn any
public or private disposition from time to time by announcement at the time and
place fixed therefor, and such disposition may, without further notice, be made
at the time and place to which it was so adjourned.  Agent is not obligated to
make any representations or warranties in connection with any disposition of the
Collateral.  To the extent permitted by law, Borrower hereby specifically waives
all rights of redemption, stay or appraisal, which it has or may have under any
law now existing or hereafter enacted.  Agent shall not be required to proceed
against any Collateral but may proceed against Borrower directly.
 
 
 
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8.5 Appointment of Attorney-in-Fact.  Borrower hereby constitutes and appoints
Agent as Borrower’s attorney-in-fact with full authority in the place and stead
of Borrower and in the name of Borrower, Agent or otherwise, from time to time
in Agent’s discretion while an Event of Default is continuing to take any action
and to execute any instrument that Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including: (a) to ask, demand,
collect, sue for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any of the Collateral;
(b) to enforce the obligations of any Account Debtor or other Person obligated
on the Collateral and enforce the rights of Borrower with respect to such
obligations and to any property that secures such obligations; (c) to file any
claims or take any action or institute any proceedings that Agent may deem
necessary or desirable for the collection of or to preserve the value of any of
the Collateral or otherwise to enforce the rights of Agent and Lenders with
respect to any of the Collateral; (d) to pay or discharge taxes or Liens levied
or placed upon or threatened against the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by
Agent in its sole discretion, and such payments made by Agent to become
Obligations, due and payable immediately without demand; (e) to sign and endorse
any invoices, freight or express bills, bills of lading, storage or warehouse
receipts, assignments, verifications and notices in connection with Accounts,
Chattel Paper or General Intangibles and other Documents relating to the
Collateral; and (f) generally to take any act required of Borrower under Section
4 or Section 5 of this Agreement, and to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Agent were the absolute owner thereof for all purposes,
and to do, at Agent’s option and Borrower’s expense, at any time or from time to
time, all acts and things that Agent deems necessary to protect, preserve or
realize upon the Collateral.  Borrower hereby ratifies and approves all acts of
Agent made or taken pursuant to this subsection 8.5.  The appointment of Agent
as Borrower’s attorney and Agent’s rights and powers are coupled with an
interest and are irrevocable, so long as any of the Commitments hereunder shall
be in effect and until payment in full, in cash, of all Obligations (other than
contingent indemnity obligations that are not yet due and payable) and
termination of all Commitments hereunder shall be in effect and until
indefeasible payment in full, in cash, of all Obligations and termination of all
Lender Letters of Credit.
 
8.6 Limitation on Duty of Agent and Lenders with Respect to Collateral.  Beyond
the safe custody thereof, Agent and each Lender shall have no duty with respect
to any Collateral in its possession (or in the possession of any agent or
bailee) or with respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto.  Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Agent accords its own property.  Neither Agent
nor any Lender shall be liable or responsible for any loss or damage to any of
the Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any warehouse, carrier, forwarding agency, consignee, broker or
other agent or bailee selected by Borrower or selected by Agent in good faith.
 
 
 
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8.7 Application of Proceeds.  Notwithstanding anything to the contrary contained
in this Agreement, upon the occurrence and during the continuance of an Event of
Default, (a) Borrower irrevocably waives the right to direct the application of
any and all payments at any time or times thereafter received by Agent from or
on behalf of Borrower, and Agent shall have the continuing and exclusive right
to apply and to reapply any and all payments received at any time or times after
the occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Agent may deem advisable notwithstanding any
previous application by Agent and (b) in the absence of a specific determination
by Agent with respect thereto, the proceeds of any sale of, or other realization
upon, all or any part of the Collateral shall be applied: first, to all fees,
costs and expenses incurred by or owing to Agent and then any Lender with
respect to this Agreement, the other Loan Documents or the Collateral; second,
to accrued and unpaid interest on the Obligations (including any interest which
but for the provisions of any bankruptcy or insolvency law would have accrued on
such amounts); third, to the principal amounts of the Obligations outstanding
(other than Obligations owed to any Lender under an Interest Rate Agreement) and
provide cash collateralization of the Letter of Credit Reserve in accordance
with subsection 8.3, pro rata based on each Lender's Pro Rata Share thereof;
and  fourth, to any other Obligations or other obligations or indebtedness of
Borrower owing to Agent or any Lender under the Loan Documents, any Interest
Rate Agreement or any Bank Products Agreement.  Any balance remaining shall be
delivered to Borrower or to whomever may be lawfully entitled to receive such
balance or as a court of competent jurisdiction may direct.
 
8.8 License of Intellectual Property.  Borrower hereby assigns, transfers and
conveys to Agent, for the benefit of Agent and Lenders, effective upon the
occurrence and during the continuance of any Event of Default hereunder, the
non-exclusive right and license to use all Intellectual Property (with respect
to Trademarks, subject to reasonable quality control) owned or used by Borrower
together with any goodwill associated therewith, all to the extent necessary to
enable Agent to realize on the Collateral and any successor or assign to enjoy
the benefits of the Collateral.  This right and license shall inure to the
benefit of all successors, assigns and transferees of Agent and its successors,
assigns and transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise.  Such right and license is granted free of charge and, does not
require the consent of any other person.
 
8.9 Waivers; Non-Exclusive Remedies.  No failure on the part of Agent or any
Lender to exercise, and no delay in exercising and no course of dealing with
respect to, any right under this Agreement or the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise by Agent
or any Lender of any right under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right.  The rights in this Agreement and the other Loan Documents are cumulative
and shall in no way limit any other remedies provided by law.
 
 
 
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SECTION 9 AGENT
 
9.1 Agent.
 
(A) Appointment.  Each Lender hereto and, upon obtaining an interest in any
Loan, any participant, transferee or other assignee of any Lender irrevocably
appoints, designates and authorizes F&M Bank as Agent to take such actions or
refrain from taking such action as its agent on its behalf and to exercise such
powers hereunder and under the other Loan Documents as are delegated by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto.  Neither the Agent nor any of its directors, officers, employees or
agents shall be liable for any action so taken.  The provisions of this
subsection 9.1 are solely for the benefit of Agent and Lenders and neither
Borrower nor any other Loan Party shall have any rights as a third party
beneficiary of any of the provisions hereof.  In performing its functions and
duties under this Agreement and the other Loan Documents, Agent shall act solely
as agent of Lenders and does not assume and shall not be deemed to have assumed
any obligation toward or relationship of agency or trust with or for Borrower or
any other Loan Party.  Agent may perform any of its duties hereunder, or under
the Loan Documents, by or through its agents or employees.
 
(B) Nature of Duties.  Agent shall have no duties, obligations or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents.  The duties of Agent shall be mechanical and administrative in
nature.  Agent shall not have by reason of this Agreement a fiduciary, trust or
agency relationship with or in respect of any Lender, Borrower or any other Loan
Party.  Nothing in this Agreement or any of the Loan Documents, express or
implied, is intended to or shall be construed to impose upon Agent any
obligations in respect of this Agreement or any of the Loan Documents except as
expressly set forth herein or therein.  Each Lender shall make its own appraisal
of the credit worthiness of Borrower, and shall have independently taken
whatever steps it considers necessary to evaluate the financial condition and
affairs of Borrower, and Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto (other than as expressly required
herein), whether coming into its possession before the Closing Date or at any
time or times thereafter.  If Agent seeks the consent or approval of any Lenders
to the taking or refraining from taking any action hereunder, then Agent shall
send notice thereof to each Lender.  Agent shall promptly notify each Lender any
time that the Requisite Lenders have instructed Agent to act or refrain from
acting pursuant hereto.
 
(C) Rights, Exculpation, Etc.  Neither Agent nor any of its officers, directors,
employees or agents shall be liable to any Lender for any action taken or
omitted by them hereunder or under any of the Loan Documents, or in connection
herewith or therewith, except that Agent shall be liable to the extent of its
own gross negligence or willful misconduct as determined by a court of competent
jurisdiction.  Agent shall not be liable for any apportionment or distribution
of payments made by it in good faith and if any such apportionment or
distribution is subsequently determined to have been made in error, the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them).  Neither Agent nor any of
its agents or representatives
 
 
 
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shall be responsible to any Lender for any recitals, statements, representations
or warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, or sufficiency of this Agreement or any of the
Loan Documents or the transactions contemplated thereby, or for the financial
condition of any Loan Party.  Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of any Loan Party, or the existence or possible existence of any
Default or Event of Default.  Agent may at any time request instructions from
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Loan Documents Agent is permitted or required to take
or to grant, and if such instructions are promptly requested, Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the Loan
Documents until it shall have received such instructions from Requisite Lenders
or all or such other portion of the Lenders as shall be prescribed by this
Agreement.  Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or refraining from
acting under this Agreement or any of the other Loan Documents in accordance
with the instructions of Requisite Lenders in the absence of an express
requirement for a greater percentage of Lender approval hereunder for such
action.
 
(D) Reliance.  Agent shall be under no duty to examine, inquire into, or pass
upon the validity, effectiveness or genuineness of this Agreement, any other
Loan Document, or any instrument, document or communication furnished pursuant
hereto or in connection herewith.   Agent shall be entitled to rely, and shall
be fully protected in relying, upon any written or oral notices, statements,
certificates, orders or other documents or any telephone message or other
communication (including any writing, fax, telecopy or telegram) believed by it
in good faith to be genuine and correct and to have been signed, sent or made by
the proper Person, and with respect to all matters pertaining to this Agreement
or any of the Loan Documents and its duties hereunder or thereunder.  Agent
shall be entitled to rely upon the advice of legal counsel, independent
accountants, and other experts selected by Agent in its sole discretion.
 
(E) Indemnification.  Lenders will reimburse and indemnify Agent for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, attorneys’
fees and expenses), advances or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against Agent in any way
relating to or arising out of this Agreement or any of the Loan Documents or any
action taken or omitted by Agent under this Agreement or any of the Loan
Documents, in proportion to each Lender’s Pro Rata Share, but only to the extent
that any of the foregoing is not promptly reimbursed by Borrower; provided,
however, no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements resulting from Agent’s gross negligence or
willful misconduct as determined by a final non-appealable judgment by a court
of competent jurisdiction.  If any indemnity furnished to Agent for any purpose
shall, in the opinion of Agent, be insufficient or become impaired, Agent may
call for additional indemnity and cease, or not commence, to do the acts
indemnified against, even if so directed by Lenders or Requisite Lenders, until
such additional indemnity is furnished.  The obligations of Lenders under this
subsection 9.1(E) shall survive the payment in full of the Obligations and the
termination of this Agreement.
 
 
 
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(F) The F&M Bank & Trust Company Individually.  With respect to its Commitments
and the Loans made by it, The F&M Bank & Trust Company shall have and may
exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender.  The terms “Lenders” or “Requisite Lenders” or any similar terms shall,
unless the context clearly otherwise indicates, include The F&M Bank & Trust
Company in its individual capacity as a Lender or one of the Requisite
Lenders.  The F&M Bank & Trust Company, either directly or through strategic
affiliations, may lend money to, acquire equity or other ownership interests in,
provide advisory services to and generally engage in any kind of banking, trust
or other business with any Loan Party as if it were not acting as Agent pursuant
hereto and without any duty to account therefor to Lenders.  The F&M Bank &
Trust Company, either directly or through strategic affiliations, may accept
fees and other consideration from any Loan Party for services in connection with
this Agreement or otherwise without having to account for the same to Lenders.
 
(G) Successor Agent.
 
(1) Resignation.  Agent may resign from the performance of all its agency
functions and duties hereunder at any time by giving at least thirty (30)
Business Days’ prior written notice to Borrower and the Lenders.  Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment as provided below.
 
(2) Appointment of Successor.  Upon any such notice of resignation pursuant to
subsection 9.1(G)(1) above, Requisite Lenders shall appoint a successor Agent
which, unless an Event of Default has occurred and is continuing, shall be
reasonably acceptable to Borrower.  If a successor Agent shall not have been so
appointed within said thirty (30) Business Day period, the retiring Agent, upon
notice to Borrower, shall then appoint a successor Agent who shall serve as
Agent until such time, if any, as Requisite Lenders appoint a successor Agent as
provided above.
 
(3) Successor Agent.  Upon the acceptance of any appointment as Agent under the
Loan Documents by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under the Loan Documents.  After any retiring Agent’s
resignation as Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent.
 
(H) Collateral Matters.
 
(1) Release of Collateral.  Lenders hereby irrevocably authorize Agent, at its
option and in its discretion, to release any Lien granted to or held by Agent
upon any Collateral (a) upon termination of the Commitments hereunder and upon
payment in full, in cash, of all Obligations (other than contingent
indemnification obligations to the extent no claims giving rise thereto have
been asserted); or (b) constituting property being sold or disposed of if
Borrower certifies to Agent that the sale or disposition is made in compliance
with the provisions of this Agreement (and Agent may rely in good faith
conclusively on any such certificate, without further inquiry).  In addition,
with the consent of Requisite Lenders, Agent may release Liens granted to or
held by Agent upon any Collateral having a book value of not greater than ten
percent (10%) of the total book value of all Collateral, as determined by Agent,
either in a single transaction or in a series of related transactions; provided,
however, in no event will Agent, acting under the authority granted to it
pursuant to this sentence, release during any calendar year Liens granted to or
held by Agent upon any Collateral having a total book value in excess of twenty
percent (20%) of the total book value of all Collateral, as determined by Agent.
 
 
 
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(2) Confirmation of Authority; Execution of Releases.  Without in any manner
limiting Agent’s authority to act without any specific or further authorization
or consent by Lenders (as set forth in subsection 9.1(H)(1) above), each Lender
agrees to confirm in writing, upon request by Agent or Borrower, the authority
to release any Collateral conferred upon Agent under clauses (a) and (b) of
subsection 9.1(H)(1).  To the extent Agent agrees to release any Lien granted to
or held by Agent as authorized under subsection 9.1(H)(1), (a) Agent is hereby
irrevocably authorized by Lenders to, execute such documents as may be necessary
to evidence the release of the Liens granted to Agent, for the benefit of Agent
and Lenders, upon such Collateral; provided, however, that Agent shall not be
required to execute any such document on terms which, in Agent’s opinion, would
expose Agent to liability or create upon Agent any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (b) Borrower shall provide at least ten (10) Business Days prior written
notice of any request for any document evidencing such release of the Liens and
Borrower agrees that any such release shall not in any manner discharge, affect
or impair the Obligations or any Liens granted to Agent on behalf of Agent and
Lenders upon (or obligations of any Loan Party, in respect of) all interests
retained by any Loan Party, including, without limitation, the proceeds of any
sale, all of which shall continue to constitute part of the property covered by
this Agreement or the Loan Documents.
 
(3) Absence of Duty.  Agent shall have no obligation whatsoever to any Lender or
any other Person to assure that the property covered by this Agreement or the
Loan Documents exists or is owned by Borrower or is cared for, protected or
insured or has been encumbered or that the Liens granted to Agent on behalf of
Agent and Lenders herein or pursuant hereto have been properly or sufficiently
or lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent in this Agreement
or in any of the Loan Documents, it being understood and agreed that in respect
of the property covered by this Agreement or the Loan Documents or any act,
omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its discretion, given Agent’s own interest in property covered
by this Agreement or the Loan Documents as one of the Lenders and that Agent
shall have no duty or liability whatsoever to any of the other Lenders;
provided, however, that Agent shall exercise the same care which it would in
dealing with loans for its own account.
 
(I) Agency for Perfection.  Agent and each Lender hereby appoint each other
Lender as agent for the purpose of perfecting Agent’s security interest in
assets which, in accordance with the Uniform Commercial Code in any applicable
jurisdiction, can be perfected by possession or Control.  Should any Lender
(other than Agent) obtain possession of any such assets, such Lender shall
notify Agent thereof, and, promptly upon Agent’s request therefor, shall deliver
such assets to Agent or in accordance with Agent’s instructions.  The Agent may
file such proofs of claim or documents as may be necessary or advisable in order
to have the claims of the Agent and the Lenders (including any claim for the
reasonable
 
 
 
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compensation, expenses, disbursements and advances of the Agent and the Lenders,
their respective agents, financial advisors and counsel), allowed in any
judicial proceedings relative to Borrower and/or its Subsidiaries, or any of
their respective creditors or property, and shall be entitled and empowered to
collect, receive and distribute any monies, securities or other property payable
or deliverable on any such claims.  Any custodian in any judicial proceedings
relative to Borrower and/or its Subsidiaries is hereby authorized by each Lender
to make payments to the Agent and, in the event that the Agent shall consent to
the making of such payments directly to the Lenders, to pay to the Agent any
amount due for the reasonable compensation, expenses, disbursements and advances
of the Agent, its agents, financial advisors and counsel, and any other amounts
due the Agent.  Nothing contained in this Agreement or the other Loan Documents
shall be deemed to authorize the Agent to authorize or consent to or accept or
adopt on behalf of any Lender any plan of reorganization, arrangement,
adjustment or composition affecting the Loans, or the rights of any holder
thereof, or to authorize the Agent to vote in respect of the claim of any Lender
in any such proceeding, except as specifically permitted herein.
 
(J) Exercise of Remedies.  Each Lender agrees that it will not have any right
individually to enforce or seek to enforce this Agreement or any Loan Document
or to realize upon any collateral security for the Obligations, unless
instructed to do so by Agent, it being understood and agreed that such rights
and remedies may be exercised only by Agent.
 
9.2 Notice of Default.  Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default except with respect to
defaults in the payment of principal, interest and fees required to be paid to
Agent for the account of Lenders, unless Agent shall have received written
notice from a Lender or Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a “notice of
default”.  Agent will notify each Lender of its receipt of any such notice.
 
9.3 Action by Agent.  Agent shall take such action with respect to any Default
or Event of Default as may be requested by Requisite Lenders in accordance with
Section 8.  Unless and until Agent has received any such request, Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to any Default or Event of Default as it shall deem advisable or in
the best interests of Lenders.
 
9.4 Amendments, Waivers and Consents.
 
(A) Percentage of Lenders Required.  Except as otherwise provided herein or in
any of the other Loan Documents, no amendment, modification, termination or
waiver of any provision of this Agreement or any other Loan Document, or consent
to any departure by any Loan Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Requisite Lenders (or, Agent,
if expressly set forth herein or in any of the other Loan Documents) and the
applicable Loan Party; provided however, (1) no amendment, modification,
termination, waiver or consent shall be effective, unless in writing and signed
by all Lenders, to do any of the following: (a) waiver of the conditions set
forth in subsection 3.1, the satisfaction of which is required in connection
with the making of any Loans on the Closing Date; (b) amend the definition of
the term “Requisite Lenders” or the percentage of Lenders which shall be
required for Lenders to take any action
 
 
 
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hereunder; (c) amend or waive this subsection 9.4 or the definitions of the
terms used in this subsection 9.4 insofar as the definitions affect the
substance of this subsection 9.4; (d) increase the percentage contained in the
definition of Borrowing Base; (e) release Collateral (except if the sale,
disposition or release of such Collateral is permitted under subsection 7.3 or
subsection 9.1 or under any other Loan Document); (f) release any Guarantor from
the Guaranty except as expressly provided in the Loan Documents; or (g) consent
to the assignment, delegation or other transfer by any Loan Party of any of its
rights and obligations under any Loan Document; and (2) no amendment,
modification, termination, waiver or consent shall be effective, unless in
writing and signed by each Lender that would be affected thereby, to do any of
the following (a) increase any of the Commitments; (b) reduce the principal of
or the rate of interest on any Loan or reduce the fees payable with respect to
any Loan or Lender Letter of Credit; or (c) extend the maturity date for any
Loan, the Termination Date or the scheduled due date for all or any portion of
principal of the Loans or any interest or fees due hereunder; provided, further,
that no amendment, modification, termination, waiver or consent affecting the
rights or duties of Agent under this Section 9 or under any Loan Document shall
in any event be effective, unless in writing and signed by Agent, in addition to
the Lenders required to take such action.  Any amendment, modification,
termination, waiver or consent effected in accordance with this Section 9 shall
be binding upon each Lender or future Lender and, if signed by a Loan Party, on
such Loan Party.
 
(B) Specific Purpose or Intent.  Each amendment, modification, termination,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.  No amendment, modification,
termination, waiver or consent shall be required for Agent to take additional
Collateral.
 
(C) Failure to Give Consent; Replacement of Non-Consenting Lender.  In the event
Agent requests the consent of a Lender and does not receive a written consent or
denial thereof within ten (10) Business Days after such Lender’s receipt of such
request, then such Lender will be deemed to have denied the giving of such
consent.  If, in connection with any proposed amendment, modification,
termination or waiver of any of the provisions of this Agreement requiring the
consent or approval of any Lenders, the consent of Requisite Lenders is obtained
but the consent of one or more other Lenders whose consent is required is not
obtained, then Borrower shall have the right, so long as all such non-consenting
Lenders are either replaced or prepaid as described in clauses (1) or (2) below,
to either (1) replace the non-consenting Lenders with one or more Replacement
Lenders pursuant to subsection 2.11(A), as if such Lender were an Affected
Lender thereunder, but only so long as each such Replacement Lender consents to
the proposed amendment, modification, termination or waiver, or (2) prepay in
full the Obligations of the non-consenting Lenders and terminate the
non-consenting Lenders’ Commitments pursuant to subsection 2.11(B), as if such
Lender were an Affected Lender thereunder.
 
Notwithstanding anything in this subsection 9.4, Agent and Borrower, without the
consent of either Requisite Lenders or all Lenders, may execute amendments to
this Agreement and the Loan Documents, which consist solely of the making of
typographical corrections.
 
 
 
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9.5 Assignments and Participations in Loans.
 
(A) Assignments.  Each Lender may assign its rights and delegate its obligations
under this Agreement to an Eligible Assignee; provided, however, (1) such Lender
(other than F&M Bank) shall first obtain the written consent of Agent, (2) the
amount of Commitments and Loans of the assigning Lender being assigned shall in
no event be less than the lesser of (a) $500,000 (pro rata among the Loans and
Commitments) or (b) the entire amount of the Commitments and Loans of such
assigning Lender, (3) the parties to such assignment shall execute and deliver
to Agent for acceptance and recording a Assignment and Acceptance Agreement
together with (i) a processing and recording fee of $3,500 payable by the
assigning Lender to Agent and (ii) each of the Notes originally delivered to the
assigning Lender (if any) and (4) so long as no Event of Default shall then
exist and be continuing, no such assignment shall cause there to be more than
one (1) Lender (excluding any affiliates of such Lender) without the express
written consent of Borrower, which consent may be withheld in Borrower’s sole
discretion.  The administrative fee referred to in clause (3) of the preceding
sentence shall not apply to an assignment of a security interest in all or any
portion of a Lender’s rights under this Agreement or the other Loan Documents,
as described in clause (1) of subsection 9.5(D) below. Upon receipt of all of
the foregoing, Agent shall notify Borrower of such assignment and Borrower shall
comply with its obligations under the last sentence of Section 2.1(E).  In the
case of an assignment authorized under this subsection 9.5, the assignee shall
be considered to be a “Lender” hereunder and Loan Parties hereby acknowledge and
agree that any assignment will give rise to a direct obligation of Loan Parties
to the permitted assignee.  The assigning Lender shall be relieved of its
obligations to make Loans hereunder with respect to the assigned portion of its
Commitment.  Notwithstanding any provision to the contrary, any Lender (an
“Assigning Lender”) may assign to one or more wholly owned special purpose
funding vehicles (each, an “SPV”) all or any portion of its funded Loans
(without the corresponding Commitment), without the consent of any Person or the
payment of a fee, by execution of a written assignment agreement in a form
agreed to by such Assigning Lender and such SPV, and may grant any such SPV the
option, in such SPV’s sole discretion, to provide the Borrower all or any part
of any Loans that such Assigning Lender would otherwise be obligated to make
pursuant to this Agreement.  Such SPV shall have all the rights which a Lender
making or holding such Loans would have under this Agreement, but no
obligations.  The Assigning Lender shall remain liable for all its original
obligations under this Agreement, including its Commitment (although the unused
portion thereof shall be reduced by the principal amount of any Loans held by an
SPV).  Notwithstanding such assignment, the Agent and Borrower may deliver
notices to the Assigning Lender (as agent for the SPV) and not separately to the
SPV unless the Agent and Borrower are requested in writing by the SPV to deliver
such notices separately to it.   The Borrower shall, at the request of any
Assigning Lender, execute and deliver to such Person as such Assigning Lender
may designate, a Note in the amount of such Assigning Lender's original Note (if
any), to evidence the Loans of such Assigning Lender and related SPV.
 
(B) Participations.  Each Lender may sell participations in all or any part of
any Loans or Commitments made by it to another Person; provided, however, such
Lender shall first obtain the prior written consent of Agent, which consent
shall not be unreasonably withheld.  All amounts payable by Borrower hereunder
shall be determined as if that Lender had not sold such participation and the
holder of any such participation shall not be entitled to require such Lender to
take or omit to take any action hereunder except action directly effecting (1)
any reduction in the principal amount or an interest rate on any Loan in which
such holder participates; (2) any extension of the maturity date for any Loan,
the Termination Date or the date fixed for any payment of interest or principal
payable with respect to any Loan in which such holder participates; and (3) any
release of substantially all of the Collateral.  Borrower hereby acknowledges
and agrees that the participant under each participation shall for purposes of
subsections 2.9, 9.6 and 10.2 be considered to be a “Lender”.
 
 
 
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(C) No Relief of Obligations; Cooperation.  Except as otherwise provided in
subsection 9.5(A) no Lender shall, as between Borrower and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans or other Obligations owed to such Lender.  Each Lender may
furnish any information concerning Borrower and its Subsidiaries in the
possession of that Lender from time to time to Eligible Assignees and
participants (including prospective assignees and participants).  Borrower
agrees that it will use its best efforts to assist and cooperate with Agent and
any Lender in any manner reasonably requested by Agent or such Lender to effect
the sale of a participation or an assignment permitted under subsection 9.5(A).
 
(D) Security Interests; Assignment to Affiliates.  Notwithstanding any other
provision set forth in this Agreement, any Lender may at any time following
written notice to Agent (1) pledge the Obligations held by it or create a
security interest in all or any portion of its rights under this Agreement or
the other Loan Documents in favor of any Person; provided, however  (a) no such
pledge or grant of security interest to any Person shall release such Lender
from its obligations hereunder or under any other Loan Document and (b) the
acquisition of title to such Lender’s Obligations pursuant to any foreclosure or
other exercise of remedies by such Person shall be subject to the provisions of
this Agreement and the other Loan Documents in all respects including, without
limitation, any consent required by subsection 9.5(A); and (2) subject to
complying with the provisions of subsection 9.5(A), assign its rights and
delegate its obligations under this Agreement to an Eligible Assignee which is a
Subsidiary of such Lender or its parent company, to one or more other Lenders,
or to a Related Fund.  For purposes of this paragraph, a “Related Fund” shall
mean, with respect to any Lender, a fund or other investment vehicle that
invests in commercial loans and is managed by such Lender or by the same
investment advisor that manages such Lender or by an affiliate of such
investment advisor.
 
(E) Recording of Assignments.  Agent shall maintain at its office in Dallas,
Texas a copy of each Assignment and Acceptance Agreement delivered to it and a
register for the recordation of the names and addresses of Lenders, and the
commitments of, and principal amount of the Loans owing to each Lender pursuant
to the terms hereof from time to time (the “Register”).  The entries in the
Register shall be presumptive evidence of the amounts due and owing to Lender in
the absence of manifest error.  Borrower, Agent and each Lender may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement.  The Register shall be
available for inspection by Borrower and any Lender, at any reasonable time upon
reasonable prior notice.
 
9.6 Set Off and Sharing of Payments.  In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default each
Lender is hereby authorized by Borrower at any time or from time to time, with
reasonably prompt subsequent notice to Borrower (any prior or contemporaneous
notice being hereby expressly waived) to set off and to appropriate and to apply
any and all (a) balances held by such Lender at any of its offices for the
account of Borrower or any of its Subsidiaries (regardless of whether such
balances are then due to Borrower or its Subsidiaries), and (b) other property
at any time held or owing by
 
 
 
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such Lender to or for the credit or for the account of Borrower or any of its
Subsidiaries, against and on account of any of the Obligations; except that no
Lender shall exercise any such right without the prior written consent of
Agent.  Any Lender exercising its right to set off shall purchase for cash (and
the other Lenders shall sell) interests in each of such other Lender’s Pro Rata
Share of the Obligations as would be necessary to cause all Lenders to share the
amount so set off with each other Lender  in accordance with their respective
Pro Rata Shares.  Borrower agrees, to the fullest extent permitted by law, that
any Lender may exercise its right to set off with respect to amounts in excess
of its Pro Rata Share of the Obligations and upon doing so shall deliver such
amount so set off to Agent for the benefit of Agent and of all Lenders in
accordance with their Pro Rata Shares.
 
9.7 Disbursement of Funds.  Agent may, on behalf of Lenders, disburse funds to
Borrower for Loans requested.  Each Lender shall reimburse Agent on demand for
all funds disbursed on its behalf by Agent, or if Agent so requests, each Lender
will remit to Agent its Pro Rata Share of any Loan or Revolving Advance before
Agent disburses same to Borrower.  If Agent elects to require that each Lender
make funds available to Agent prior to a disbursement by Agent to Borrower,
Agent shall advise each Lender by telephone, telex, fax or telecopy of the
amount of such Lender’s Pro Rata Share of the Loan requested by Borrower no
later than 1:00 p.m. Dallas, Texas time on the Funding Date applicable thereto,
and each such Lender shall pay Agent such Lender’s Pro Rata Share of such
requested Loan, in same day funds, by wire transfer to Agent’s Account on such
Funding Date.
 
9.8 Settlements, Payments and Information.
 
(A) Loan Principal and Interest Payments.  Provided that such Lender has made
all payments required to be made by it under this Agreement, payments of
principal, interest and fees of the Loans will be settled on the date of
receipt.
 
(B) Return of Payments.
 
(1) Recovery after Non-Receipt of Expected Payment.  If Agent pays an amount to
a Lender under this Agreement in the belief or expectation that a related
payment has been or will be received by Agent from Borrower and such related
payment is not received by Agent, then Agent will be entitled to recover such
amount from such Lender without set-off, counterclaim or deduction of any kind
together with interest thereon, for each day from and including the date such
amount is made available by Agent to such Lender to but excluding the date of
repayment to Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by Agent in accordance with banking industry rules on interbank
compensation.
 
(2) Recovery of Returned Payment.  If Agent determines at any time that any
amount received by Agent under this Agreement must be returned to Borrower or
paid to any other Person pursuant to any requirement of law, court order or
otherwise, then, notwithstanding any other term or condition of this Agreement,
Agent will not be required to distribute any portion thereof to any Lender.  In
addition, each Lender will repay to Agent on demand any portion of such amount
that Agent has distributed to such Lender, together with interest at such rate,
if any, as Agent is required to pay to Borrower or such other Person, without
set-off, counterclaim or deduction of any kind.
 
 
 
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9.9 Discretionary Advances.  Notwithstanding anything contained herein to the
contrary, at any time after and during the continuance of a Default or Event of
Default, Agent may, in its sole discretion, make Revolving Advances (any such
advance, a “Protective Advance”) in excess of the limitations set forth in the
Borrowing Base but not in excess of the  Revolving Loan Commitment for the
purpose of preserving or protecting the Collateral or for incurring any costs
associated with collection or enforcing rights or remedies against the
Collateral, or incurred in any action to enforce this Agreement or any other
Loan Document.
 
Upon Agent’s making of any Revolving Advances under this subsection 9.9, each of
the Lenders shall be deemed to have irrevocably, unconditionally and immediately
purchased from Agent a participation in such Revolving Advances in an amount
equal to such Lender’s Pro Rata Share of the Revolving Loan Commitment
multiplied by the total amount of such Revolving Loans outstanding under this
subsection 9.9.  Each Lender shall effect such purchase by making available the
amount of such Lender’s participation in such Revolving Loans in U.S. Dollars in
immediately available funds to Agent’s Account.  In the event any Lender fails
to make available to Agent when due the amount of such Lender’s participation in
such Revolving Loans, Agent shall be entitled to recover such amount on demand
from such Lender together with interest at the Federal Funds Effective
Rate.  Each such purchase by a Lender shall be made without recourse to Agent,
without representation or warranty of any kind, and shall be effected and
evidenced pursuant to documents reasonably acceptable to Agent.  The obligations
of the Lenders under this subsection 9.9 shall be absolute, irrevocable and
unconditional, shall be made under all circumstances and shall not be affected,
reduced or impaired for any reason whatsoever.
 
9.10 Titles.  Any Lender after the Closing Date that is identified on the facing
page or signature page of this Agreement or in any amendment hereto or as
designated with consent of the Agent in any assignment agreement as Lead
Arranger, Documentation Agent, Syndications Agent or any similar titles, shall
not have any right, power, obligation, liability, responsibility or duty under
this Agreement as a result of such title other than those applicable to all
Lenders as such.  Without limiting the foregoing, the Lenders so identified
shall not have or be deemed to have any fiduciary relationship with any Lender
as a result of such title.  Each Lender acknowledges that it has not relied, and
will not rely, on the Lender so identified in deciding to enter into this
Agreement or in taking or not taking action hereunder.
 
SECTION 10 MISCELLANEOUS
 
10.1 Expenses and Attorneys’ Fees.  Whether or not the transactions contemplated
hereby shall be consummated, Borrower agrees to promptly pay all fees, costs and
expenses incurred in connection with any matters contemplated by or arising out
of this Agreement or the other Loan Documents including the following, and all
such fees, costs and expenses shall be part of the Obligations, payable on
demand and secured by the Collateral: (a) reasonable fees, costs and expenses
incurred by Agent (including attorneys’ fees and expenses, the allocated costs
of Agent’s internal legal staff and fees of environmental consultants,
accountants and other professionals retained by Agent) incurred in connection
with the
 
 
 
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examination, review, due diligence investigation, documentation and closing of
the financing arrangements evidenced by the Loan Documents; (b) reasonable fees,
costs and expenses incurred by Agent (including attorneys’ fees and expenses,
the allocated costs of Agent’s internal legal staff and fees of environmental
consultants, accountants and other professionals retained by Agent) incurred in
connection with the review, negotiation, preparation, documentation, execution,
syndication and administration of the Loan Documents, the Loans, and any
amendments, waivers, consents, forbearances and other modifications relating
thereto or any subordination or intercreditor agreements, including reasonable
documentation charges assessed by Agent for amendments, waivers, consents and
any other documentation prepared by Agent’s internal legal staff; (c) reasonable
fees, costs and expenses (including attorneys’ fees and allocated costs of
internal legal staff) incurred by Agent or any Lender in creating, perfecting
and maintaining perfection of Liens in favor of Agent, on behalf of Agent and
Lenders; (d) reasonable fees, costs and expenses incurred by Agent in connection
with forwarding to Borrower the proceeds of Loans including Agent’s or any
Lenders’ standard wire transfer fee; (e) reasonable fees, costs, expenses and
bank charges, including bank charges for returned checks, incurred by Agent or
any Lender in establishing, maintaining and handling lock box accounts, blocked
accounts or other accounts for collection of the Collateral; (f) reasonable
fees, costs, expenses (including attorneys’ fees and allocated costs of internal
legal staff) of Agent or any Lender and costs of settlement incurred in
collecting upon or enforcing rights against the Collateral or incurred in any
action to enforce this Agreement or the other Loan Documents or to collect any
payments due from Borrower or any other Loan Party under this Agreement or any
other Loan Document or incurred in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement, whether
in the nature of a “workout” or in connection with any insolvency or bankruptcy
proceedings or otherwise.
 
10.2 Indemnity.  In addition to the payment of expenses pursuant to subsection
10.1, whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to indemnify, pay and hold each of Agent, and each Lender, their
permitted successors and assigns, and the officers, directors, employees,
agents, consultants, auditors, persons engaged by Agent, or any Lender, to
evaluate or monitor the Collateral, affiliates and attorneys of each of Agent,
and each Lender and such holders (collectively called the “Indemnitees”)
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) that may be
imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Agreement or the other Loan Documents, the
consummation of the transactions contemplated by this Agreement, the statements
contained in the commitment letters, if any, delivered by Agent, or any Lender,
Agent’s, and each Lender’s agreement to make the Loans hereunder, the use or
intended use of the proceeds of any of the Loans or the exercise of any right or
remedy hereunder or under the other Loan Documents (the “Indemnified
Liabilities”); provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of any Indemnitee as determined by a final
non-appealable judgment by a court of competent jurisdiction.
 
 
 
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10.3 Notices.  Unless otherwise specifically provided herein, all notices shall
be in writing addressed to the respective party as set forth below and may be
personally served, faxed, telecopied or sent by overnight courier service or
United States mail and shall be deemed to have been given: (a) if delivered in
person, when delivered; (b) if delivered by fax or telecopy, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. Dallas, Texas
time or, if not, on the next succeeding Business Day; (c) if delivered by
overnight courier, two (2) days after delivery to such courier properly
addressed; or (d) if by U.S. Mail, four (4) Business Days after depositing in
the United States mail, with postage prepaid and properly addressed.  If to
 

 
Borrower:
Pizza Inn Holdings, Inc.
   
3551 Plano Parkway
   
The Colony, Texas  75056
   
Attn: Jerry Trojan, CFO
   
Fax/Telecopy No.: (___) ___-____
       
With a copy to:
McGuire, Craddock & Strother, P.C.
   
2501 N. Harwood, Suite 1800
   
Dallas, Texas  75201
   
Attn: Steven D. Davidson
   
Fax/Telecopy No.:  (214) 954-6868
       
If to Agent or to F&M Bank:
The F&M Bank & Trust Company
   
3811 Turtle Creek Boulevard, Suite 1700
   
Dallas, TX 75219
   
Attn:  Portfolio Manager
(Pizza Inn)
   
Fax/Telecopy No.:  (214) 780-2080
       
With a copy to:
Patton Boggs LLP
   
2000 McKinney Avenue, Suite 1700
   
Dallas, Texas 75201
   
Attn:  Scott C. Wallace
   
Fax/Telecopy No.:  (214) 758-1550
 

 

If to any Lender:  Its address indicated on the signature page hereto, in an
Assignment and Acceptance Agreement or in a notice to Agent and Borrower or to
such other address as the party addressed shall have previously designated by
written notice to the serving party, given in accordance with this subsection
10.3.
 
10.4 Survival of Representations and Warranties and Certain Agreements.  All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the making of the Loans
hereunder.  Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrower, Agent, and Lenders set forth in
subsections 9.1(E), 10.1, 10.2, 10.6, 10.11, 10.14, and 10.15 shall survive the
payment of the Loans and the termination of this Agreement.
 
 
 
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10.5 Indulgence Not Waiver.  No failure or delay on the part of Agent, any
Lender or any holder of any Note in the exercise of any power, right or
privilege hereunder or under any Note shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
 
10.6 Marshaling; Payments Set Aside.  Neither Agent nor any Lender shall be
under any obligation to marshal any assets in favor of any Loan Party or any
other party or against or in payment of any or all of the Obligations.  To the
extent that any Loan Party makes a payment or payments to Agent and/or any
Lender or Agent and/or any Lender enforces its security interests or exercises
its rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
 
10.7 Entire Agreement.  This Agreement and the other Loan Documents embody the
entire agreement among the parties hereto and supersede all prior commitments,
agreements, representations, and understandings, whether written or oral,
relating to the subject matter hereof, and may not be contradicted or varied by
evidence of prior, contemporaneous, or subsequent oral agreements or discussions
of the parties hereto.
 
10.8 Severability.  The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents.
 
10.9 Lenders’ Obligations Several; Independent Nature of Lenders’ Rights
.  The obligation of each Lender hereunder is several and not joint and neither
Agent nor any Lender shall be responsible for the obligation or Commitment of
any other Lender hereunder.  In the event that any Lender at any time should
fail to make a Loan as herein provided, the Lenders, or any of them, at their
sole option, may make the Loan that was to have been made by the Lender so
failing to make such Loan.  Nothing contained in any Loan Document and no action
taken by Agent or any Lender pursuant hereto or thereto shall be deemed to
constitute Lenders to be a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and, provided Agent fails or refuses
to exercise any remedies against Borrower after receiving the direction of the
Requisite Lenders, each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
 
10.10 Headings.  Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
 
 
 
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10.11 APPLICABLE LAW.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
ANY CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF
THE LAWS OF ANY OTHER JURISDICTION.
 
10.12 Successors and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns, provided, however, Borrower may not assign its rights or obligations
hereunder without the written consent of Lenders.
 
10.13 No Fiduciary Relationship; No Duty; Limitation of Liabilities.
 
(A) No Fiduciary Relationship.  No provision in this Agreement or in any of the
other Loan Documents and no course of dealing between the parties shall be
deemed to create any fiduciary duty by Agent or any Lender to Borrower.
 
(B) No Duty.  All attorneys, accountants, appraisers, and other professional
Persons and consultants retained by Agent or any Lender shall have the right to
act exclusively in the interest of Agent or such Lender and shall have no duty
of disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to Borrower or any of Borrower’s shareholders or any
other Person.
 
(C) Limitation of Liabilities.  Neither Agent nor any Lender, nor any affiliate,
officer, director, shareholder, employee, attorney, or agent of Agent or any
Lender shall have any liability with respect to, and Borrower hereby waives,
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by Borrower
in connection with, arising out of, or in any way related to, this Agreement or
any of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents.  Borrower hereby waives, releases,
and agrees not to sue Agent or any Lender or any of Agent’s or any Lender’s
affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
 
10.14 CONSENT TO JURISDICTION.  EACH PARTY HERETO HEREBY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF TEXAS AND OF THE COURT OF APPEALS OF THE STATE OF TEXAS SITTING IN
DALLAS COUNTY (INCLUDING ITS APPELLATE DIVISION), AND OF ANY OTHER APPELLATE
COURT IN THE STATE OF TEXAS, FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  BORROWER HEREBY ALSO SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ALL FEDERAL AND STATE COURTS SITTING IN ANY
STATE IN WHICH A BORROWER OR OTHER LOAN PARTY OWNS PROPERTY OR OPERATES ITS
BUSINESS.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
 
 
 
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10.15 WAIVER OF JURY TRIAL.  BORROWER, AGENT AND EACH LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  BORROWER, AGENT AND
EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY
ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  BORROWER, AGENT AND EACH LENDER
WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY
WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS.
 
10.16 Construction.  Borrower, Agent and each Lender each acknowledge that it
has had the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with its legal
counsel.  This Agreement and the other Loan Documents shall be construed as if
jointly drafted by Borrower, Agent and each Lender
 
10.17 Counterparts; Effectiveness.  This Agreement and any amendments, waivers,
consents, or supplements may be executed via telecopier or facsimile
transmission in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
 
10.18 Confidentiality.  Agent and each Lender agree to exercise their best
efforts to keep confidential any non-public information delivered pursuant to
the Loan Documents and identified as such by Borrower and not to disclose such
information to Persons other than to: its respective affiliates, officers,
directors and employees; or its potential assignees or participants; or Persons
employed by or engaged by Agent, a Lender or a Lender’s permitted assignees or
participants including, without limitation, attorneys, auditors, professional
consultants, rating agencies and portfolio management services.  The
confidentiality provisions contained in this subsection shall not apply to
disclosures (a) required to be made by Agent or any Lender to any regulatory or
governmental agency or pursuant to legal process or (b) consisting of general
portfolio information that does not identify Borrower.  The obligations of Agent
and Lenders under this subsection 10.18 shall supersede and replace the
obligations of Agent and Lenders under any confidentiality agreement in respect
of this financing executed and delivered by Agent or any Lender prior to the
date hereof.  In no event shall Agent or any Lender be obligated or required to
return any materials furnished by Borrower.
 
 
 
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Notwithstanding the foregoing, and notwithstanding any other express or implied
agreement or understanding to the contrary, each of the parties hereto and their
respective employees, representatives, and other agents are authorized to
disclose the tax treatment and tax structure of these transactions to any and
all persons, without limitation of any kind.  Each of the parties hereto may
disclose all materials of any kind (including opinions or other tax analyses)
insofar as they relate to the tax treatment and tax structure of the
transactions contemplated by the Loan Documents.  This authorization does not
extend to disclosure of any other information including (without limitation) (a)
the identities of participants or potential participants in the transactions (b)
the existence or status of any negotiations, (c) any pricing or other financial
information or (d) any other term or detail not related to the tax treatment and
tax structure of the transactions contemplated by the Loan Documents.  The
confidentiality provisions contained in this Agreement shall not prohibit
disclosures to any trustee, administrator, collateral manager, servicer, backup
servicer, lender, rating agency or secured party of any SPV in connection with
the evaluation, administration, servicing of, or the reporting on, the assets or
securitization activities of such SPV.
 
10.19 Publication.  Borrower consents to the publication by Agent of a tombstone
or similar advertising material relating to the financing transactions
contemplated by this Agreement; provided, however, Agent shall provide a draft
of any such tombstone or similar advertising material to Borrower for review
prior to the publication thereof.  Agent and Lenders reserve the right to
provide industry trade organizations information necessary and customary for
inclusion in league table measurements.
 
10.20 USA PATRIOT ACT.  Each Lender and Agent (for itself and not on behalf of
any Lender) hereby notifies Borrower that pursuant to the requirements of the
USA PATRIOT Act, it is required to obtain, verify and record information that
identifies Borrower, which information includes the name and address of Borrower
and other information that will allow such Lender or Agent, as applicable, to
identify Borrower in accordance with the USA PATRIOT Act.
 
10.21 Certifications From Lenders and Participants; USA PATRIOT ACT.  Each
Foreign Lender that is not excepted from the certification requirement contained
in Section 313 of the USA PATRIOT Act and the applicable regulations because it
is both (i) an affiliate of a depository institution or foreign bank that
maintains a physical presence in the United States or foreign country, and (ii)
subject to supervision by a banking authority regulating such affiliated
depository institution or foreign bank shall deliver to the Agent the
certification, or, if applicable, recertification, certifying that such Lender
is not a “shell” and certifying to other matters as required by Section 313 of
the USA PATRIOT Act and the applicable regulations: (1) within 10 days after the
Closing Date, and (2) as such other times as are required under the USA PATRIOT
Act.
 
10.22 Texas Specific Provisions.
 
(A) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.  THERE ARE NO
UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
 
 
 
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(B) To the extent that either Chapter 303 or 306, or both, of the Texas Finance
Code, as amended from time to time, apply in determining the maximum interest
rate permissible under this Agreement, Agent and Lenders hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to its or their right subsequently to change such method
in accordance with applicable law, as the same may be amended or modified from
time to time.
 
(C) The provisions of Chapter 346 (other than opt-out provisions of Section
346.004) of the Texas Finance Code (as said chapter may now exist or may be
hereinafter amended or succeeded) shall not apply to the indebtedness or the
transactions contemplated the Loan Documents.
 
(D) Borrower hereby irrevocably waives any rights under the Deceptive Trade
Practices-Consumer Protection Act, § 17.41 et seq. Texas Business & Commerce
Code (as said law may now exist or may be hereinafter amended or succeeded), a
law that gives consumers special rights and protections.  After consultation
with an attorney of Borrower’s own selection, Borrower voluntarily consents to
this waiver.  Borrower expressly warrants and represents that it (a) is not in a
significantly disparate bargaining position relative to Agent or any Lender, and
(b) has been represented by legal counsel in connection with the transactions
contemplated by this Agreement and the other Loan Documents.
 
(E) Borrower hereby irrevocably waives all rights or benefits arising in favor
of such person under Chapter 43 of the Texas Civil Practice and Remedies Code
and Sections 51.003 through 51.005 of the Texas Property Code (as said chapter
and sections may now exist or may be hereinafter amended or succeeded).
 
(F) IT IS THE INTENTION OF BORROWER, AND BORROWER HEREBY AGREES, THAT EACH
INDEMNITY CONTAINED IN THIS AGREEMENT OR IN ANY OF THE OTHER LOAN DOCUMENTS
SHALL INCLUDE ALL MATTERS THAT IN WHOLE OR IN PART ARE CAUSED BY, OR ARISE OUT
OF, THE NEGLIGENCE OR STRICT LIABILITY OF ANY PERSON TO BE INDEMNIFIED UNDER OR
IN CONNECTION WITH ANY SUCH INDEMNITY.
 
10.23 Joint and Several Liability.
 
(A) Each Borrower is accepting joint and several liability hereunder and under
the other Loan Documents in consideration of the financial accommodations to be
provided by Agent and Lenders under this Agreement, for the mutual benefit,
directly and indirectly, of each Borrower and in consideration of the
undertakings of the other Borrowers to accept joint and several liability for
the Obligations.
 
(B) Each Borrower, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance
of all of the Obligations (including, without limitation, any Obligations
arising under this Subsection 10.23), it being the intention of the parties
hereto that all the Obligations shall be the joint and several obligations of
each Borrower without preferences or distinction among them.
 
 
 
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(C) If and to the extent that any Borrower shall fail to make any payment with
respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event the
other Borrowers will make such payment with respect to, or perform, such
Obligation.
 
(D) The Obligations of each Borrower under the provisions of this
Subsection 10.23 constitute the absolute and unconditional, full recourse
Obligations of each Borrower enforceable against each Borrower to the full
extent of its properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstances whatsoever.
 
(E) Except as otherwise expressly provided in this Agreement, each Borrower
hereby waives notice of acceptance of its joint and several liability, notice of
the occurrence of any Default, Event of Default, or of any demand for any
payment under this Agreement, notice of any action at any time taken or omitted
by the Agent or the Lenders under or in respect of any of the Obligations, any
requirement of diligence or to mitigate damages and, generally, to the extent
permitted by applicable law, all demands, notices and other formalities of every
kind in connection with this Agreement (except as otherwise provided in this
Agreement). Each Borrower hereby assents to, and waives notice of, any extension
or postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
the Agent or the Lenders at any time or times in respect of any default by any
Borrower in the performance or satisfaction of any term, covenant, condition or
provision of this Agreement, any and all other indulgences whatsoever by the
Agent or the Lenders in respect of any of the Obligations, and the taking,
addition, substitution or release, in whole or in part, at any time or times, of
any security for any of the Obligations or the addition, substitution or
release, in whole or in part, of any Borrower. Without limiting the generality
of the foregoing, each Borrower assents to any other action or delay in acting
or failure to act on the part of the Agent or any Lender with respect to the
failure by any Borrower to comply with any of its respective Obligations,
including, without limitation, any failure strictly or diligently to assert any
right or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder, which might, but for the provisions of this
Subsection 10.23 afford grounds for terminating, discharging or relieving any
Borrower, in whole or in part, from any of its Obligations under this
Subsection 10.23, it being the intention of each Borrower that, so long as any
of the Obligations hereunder remain unsatisfied, the Obligations of each
Borrower under this Subsection 10.23 shall not be discharged except by
performance and then only to the extent of such performance. The Obligations of
each Borrower under this Subsection 10.23 shall not be diminished or rendered
unenforceable by any winding up, reorganization, arrangement, liquidation,
reconstruction or similar proceeding with respect to any Agent or any Lender.
 
(F) Each Borrower represents and warrants to Agent and the Lenders that such
Borrower is currently informed of the financial condition of the Borrowers and
of all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations. Each Borrower further represents
and warrants to the Agent and the Lenders that such Borrower has read and
understands the terms and conditions of the Loan Documents. Each Borrower hereby
covenants that such Borrower will continue to keep informed of Borrowers’
financial condition, the financial condition of other guarantors, if any, and of
all other circumstances which bear upon the risk of nonpayment or nonperformance
of the Obligations.
 
 
 
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(G) Each Borrower waives all rights and defenses arising out of an election of
remedies by the Agent or any Lender, even though that election of remedies, such
as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the Agent’s or such Lender’s rights of subrogation and
reimbursement against such Borrower.
 
(H) The provisions of this Subsection 10.23 are made for the benefit of the
Agent, Lenders and their respective successors and permitted assigns, and may be
enforced by it or them from time to time against any or all Loan Parties as
often as occasion therefor may arise and without requirement on the part of the
Agent, any Lender, successor or assign first to marshal any of its or their
claims or to exercise any of its or their rights against any Borrower or to
exhaust any remedies available to it or them against any Borrower or to resort
to any other source or means of obtaining payment of any of the Obligations
hereunder or to elect any other remedy. The provisions of this Subsection 10.23
shall remain in effect until all of the Obligations shall have been paid in full
or otherwise fully satisfied. If at any time, any payment, or any part thereof,
made in respect of any of the Obligations, is rescinded or must otherwise be
restored or returned by the Agent or any Lender upon the insolvency, bankruptcy
or reorganization of any Borrower, or otherwise, the provisions of this
Subsection 10.23 will forthwith be reinstated in effect, as though such payment
had not been made.
 
(I) Each Borrower hereby agrees that it will not enforce any of its rights of
contribution or subrogation against any other Borrower with respect to any
liability incurred by it hereunder or under any of the other Loan Documents, any
payments made by it to the Agent or the Lenders with respect to any of the
Obligations or any collateral security therefor until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against any other Borrower with respect to any payments to any Agent or
Lender hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.
 
(J) Each Borrower hereby agrees that, after the occurrence and during the
continuance of any Default or Event of Default, the payment of any amounts due
with respect to the indebtedness owing by any Borrower to any other Borrower is
hereby subordinated to the prior payment in full in cash of the Obligations.
Each Borrower hereby agrees that after the occurrence and during the continuance
of any Default or Event of Default, such Borrower will not demand, sue for or
otherwise
 
 
 
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attempt to collect any indebtedness of any other Borrower owing to such Borrower
until the Obligations shall have been paid in full in cash. If, notwithstanding
the foregoing sentence, such Borrower shall collect, enforce or receive any
amounts in respect of such indebtedness, such amounts shall be collected,
enforced and received by such Borrower as trustee for Agent, and such Borrower
shall deliver any such amounts to Agent for application to the Obligations.
 
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Witness the due execution hereof by the respective duly authorized officers of
the undersigned as of the date first written above.
 

 
BORROWERS:
     
PIZZA INN, INC.
         
By:           _________________________________
 
Name:      _________________________________                
 
Title:        _________________________________   
         
PIE FIVE PIZZA COMPANY, INC.
         
By:           _________________________________
 
Name:      _________________________________                
 
Title:        _________________________________   

 

 
 

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THE F&M BANK & TRUST COMPANY, as Agent and sole Lender
         
By:           _________________________________
 
Name:      _________________________________                
 
Title:        _________________________________   
             
Revolving Loan Commitment:
  $2,000,000  
Term Loan A Commitment:
  $2,000,000  
Term Loan B Commitment
  $6,000,000

 

 
 

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Rider A
 
REPORTING RIDER
 
This Reporting Rider is attached and made a part of that certain Loan and
Security Agreement, dated as of August 28, 2012 and entered into among Borrower,
Agent and Lenders.
 
A. Annual Financial Statements.  Furnish Agent as soon as available but in any
event within one hundred twenty (120) days after the end of each fiscal year of
Loan Parties, audited financial statements of the Loan Parties (or Parent) on a
consolidated basis including, but not limited to, statements of income and
stockholders’ equity and cash flow from the beginning of the current fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail with a comparison of the figures
for the prior fiscal year and reported upon without qualification by Borrower’s
Accountants.
 
B. Quarterly Financial Statements.  Furnish Agent as soon as available but in
any event within forty-five (45) days after the end of each fiscal quarter, an
unaudited balance sheet of Loan Parties on a consolidated and consolidating
basis and unaudited statements of income and stockholders’ equity and cash flow
of Loan Parties (or Parent) reflecting results of operations from the beginning
of the fiscal year to the end of such quarter and for such quarter, prepared on
a basis consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of Loan Parties. Each such
balance sheet, statement of income and stockholders’ equity and statement of
cash flow shall set forth a comparison of the figures for (w) the current fiscal
period and (x) the current year-to-date with the figures for (y) the same fiscal
period and year-to-date period of the immediately preceding fiscal year and (z)
the Projections for such fiscal period and year-to-date period delivered
pursuant to paragraph (M) hereof.
 
C. Compliance Certificate.  Furnish Agent as soon as available but in any event
within forty-five (45) days after the end of each fiscal quarter and one hundred
twenty (120) days after each fiscal year, a Compliance Certificate, together
with copies of the calculations and work-up employed to determine the Loan
Parties’ compliance or noncompliance with the financial covenants set forth in
the Financial Covenants Rider.
 
D. Borrowing Base Certificate.  Deliver to Agent, on the last day of each month
or the first Business Day thereafter (or more frequently if required by Agent),
a Borrowing Base Certificate (which shall be calculated as of the last day of
the preceding monthly period).
 
E. Collateral Reports.  Deliver to Agent on or before the thirtieth (30th) day
of each month as and for the prior month (a) accounts receivable agings, (b)
accounts payable agings and (c) Inventory reports.  In addition, each Loan Party
shall deliver to Agent at such intervals as Agent may reasonably require:  (i)
confirmatory assignment schedules, (ii) copies of customer’s invoices, (iii)
evidence of shipment or delivery and (iv) such further schedules, documents
and/or information regarding the Collateral as Agent may reasonably require
including, without limitation, trial balances and test verifications.  Agent
shall have the right to confirm and verify all Accounts by any manner and
through any medium it considers advisable and do whatever it may deem reasonably
necessary to protect its interest hereunder.  All such reports shall be in form
and substance reasonably satisfactory to Agent, and delivered to Agent from time
to time solely for Agent’s convenience in maintaining records of the Collateral,
and any Loan Party’s failure to deliver any of such items to Agent shall not
affect, terminate, modify or otherwise limit Agent’s Lien with respect to the
Collateral.
 
 
 
 

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F. Disclosure of Material Matters.  Promptly upon learning thereof, report to
Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral.
 
G.  Government Accounts.  Notify Agent promptly if any of its Accounts that, in
the aggregate, are in excess of $25,000 arise out of contracts between any Loan
Party and the United States, any state, or any department, agency or
instrumentality of any of them.
 
H. Material Occurrences.  Promptly notify Agent in writing upon the occurrence
of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any Loan
Party as of the date of such statements; (c) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the IRC, could subject any Loan
Party to a tax imposed by Section 4971 of the IRC; (d) each and every default by
any Loan Party which might result in the acceleration of the maturity of any
Indebtedness in excess of $25,000, including the names and addresses of the
holders of such Indebtedness with respect to which there is a default existing
or with respect to which the maturity has been or could be accelerated, and the
amount of such Indebtedness; and (e) any other development in the business or
affairs of any Loan Party which could reasonably be expected to have a Material
Adverse Effect; in each case describing the nature thereof and the action Loan
Parties propose to take with respect thereto.
 
I. Litigation.  Promptly notify Agent in writing of any litigation, suit or
administrative proceeding affecting any Loan Party, whether or not the claim is
covered by insurance, which in any such case could reasonably be expected to
have a Material Adverse Effect.
 
J. Other Reports.  Furnish Agent as soon as available, but in any event within
ten (10) days after the issuance thereof, with copies of such financial
statements, reports and returns as each Loan Party shall send to its
stockholders generally in their capacities as such.
 
K. Additional Information.  Furnish Agent with such additional information as
Agent shall reasonably request in order to enable Agent to determine whether the
terms, covenants, provisions and conditions of this Agreement and the Notes (if
any) have been complied with by Loan Parties including, without limitation and
without the necessity of any request by Agent, (a) copies of all environmental
audits and reviews in the possession or under the reasonable control of the
Borrower, (b) at least thirty (30) days prior thereto, notice of any Loan
Party’s opening of any new office or place of business or any Loan Party’s
closing of any existing office or place of business, and (c) promptly upon any
Loan Party’s learning thereof, notice of any labor dispute to which any Loan
Party may become a party, any strikes or walkouts relating to any of its plants
or other facilities, and the expiration of any labor contract to which any Loan
Party is a party or by which any Loan Party is bound.
 
 
 
 

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L. Projected Operating Budget.  Furnish Agent, no later than forty-five (45)
days after the beginning of each Loan Party’s fiscal year commencing with fiscal
year ending June 26, 2013, the Projections, including month by month projected
operating budget and cash flow of Loan Parties on a consolidated and
consolidating basis for such fiscal year (including an income statement for each
month and a balance sheet as at the end of the last month in each fiscal
quarter) and for the next three (3) fiscal years, year by year, such Projections
to be accompanied by a certificate signed by the President or Chief Financial
Officer of each Loan Party to the effect that such Projections have been
prepared in good faith and on the basis of assumptions believed to be reasonable
when made.
 
M. Notice of Suits, Adverse Events.  Furnish Agent with prompt notice of (i) any
lapse or other termination of any consent issued to any Loan Party by any
Governmental Authority or any other Person that is material to the operation of
any Loan Party’s business, (ii) any refusal by any Governmental Authority or any
other Person to renew or extend any such consent; and (iii) copies of any
periodic or special reports filed by any Loan Party with any Governmental
Authority or Person, if such reports indicate any material change in the
business, operations, affairs or condition of any Loan Party, or if copies
thereof are requested by Agent or any Lender, and (iv) copies of any material
notices and other communications from any Governmental Authority or Person which
specifically relate to any Loan Party.
 
N. ERISA Notices and Requests.  (i) Promptly upon becoming aware of the
occurrence of or forthcoming occurrence of any ERISA Event, a written notice
specifying the nature thereof, what action Borrower, any of its Subsidiaries or
any of their respective ERISA Affiliates has taken, is taking or proposes to
take with respect thereto and, when known, any action taken or threatened by the
IRS, the Department of Labor or the PBGC with respect thereto; and (ii) with
reasonable promptness, copies of (1) each Schedule B (Actuarial Information) to
the annual report (Form 5500 Series) filed by Borrower, any of its Subsidiaries
or any of their respective ERISA Affiliates with the IRS with respect to each
Pension Plan; (2) all notices received by Borrower, any of its Subsidiaries or
any of their respective ERISA Affiliates from a Multiemployer Plan sponsor
concerning an ERISA Event; and (3) copies of such other documents or
governmental reports or filings relating to any Employee Benefit Plan as Agent
shall reasonably request.
 
O. Additional Documents.  Execute and deliver to Agent, upon request, such
documents and agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.
 
P. Environmental Reports.  Furnish Agent, concurrently with the delivery of the
financial statements referred to in paragraphs (A) and (B) hereof, with a
certificate signed by the President of each Loan Party stating, to the best of
his knowledge, that each Loan Party is in compliance in all material respects
with all federal, state and local laws relating to environmental protection and
control and occupational safety and health.  To the extent any Loan Party is not
in compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action Loan Party will
implement in order to achieve full compliance.
 
 
 
 
 

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Rider B

FINANCIAL COVENANTS RIDER
 
This Financial Covenants Rider is attached and made a part of that certain Loan
and Security Agreement, dated as of August 28, 2012 and entered into among
Borrower, Agent and Lenders.
 
A.           Total Debt to EBITDA Ratio.  Borrower shall not permit its Total
Debt to EBITDA Ratio as of the last day of the end of each fiscal quarter then
ending to be greater than 3.00:1.00 commencing with the fiscal quarter ending
September 30, 2012.
 
B.           Senior Funded Debt to EBITDA Ratio.  Borrower shall not permit its
Senior Funded Debt to EBITDA Ratio as of the last day of each fiscal quarter
then ending to be greater than 2.25:1.00 commencing with the fiscal quarter
ending September 30, 2012.
 
C.           Fixed Charge Coverage Ratio.  Borrower shall not permit its Fixed
Charge Coverage Ratio as of the last day of each fiscal quarter then ending to
be less than 1.50:1.00 commencing with the fiscal quarter ending September 30,
2012.
 
 
 
 
 
 
 

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