EXHIBIT 10.46
EXECUTION VERSION
STOCK PLEDGE AGREEMENT
(SCHLOTZSKY'S, INC.)
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement"), dated
as of December 29, 2003, is entered into by and between SCHLOTZSKY'S INC., a
Texas corporation ("Pledgor"), and NS ASSOCIATES I, LTD., a Texas limited
partnership ("Secured Party").
RECITALS
A. DFW Restaurant Transfer Corp., a Texas corporation
("Borrower"), Schlotzsky's, Inc., and Schlotzsky's Franchisor, LLC, and Secured
Party are parties to that certain Restructuring Agreement dated as of the date
hereof (the "Restructuring Agreement"), pursuant to which Borrower has issued to
Secured Party that certain amended and restated promissory note dated as of
December 15, 2003 (amending and restating that certain promissory note dated
August 30, 2002 issued by Borrower) in the original principal amount of
$23,268,000.00 (as so amended and restated, and as it may be amended, restated,
modified, replaced, renewed or extended, the "Note").
B. Pledgor has executed and delivered a continuing
guaranty dated as of August 30, 2002 (as amended or otherwise modified or
affirmed from time to time, the "Guaranty").
C. In connection with the Guaranty and in order to
induce Secured Party to enter into the Restructuring Agreement, and to secure
the obligations of Pledgor under the Note Documents, the Pledgor has agreed to
pledge to the Secured Party all Stock (as defined in the Restructuring
Agreement) owned by the Pledgor in each of its subsidiaries set for Schedule 1
attached hereto (such entities collectively, the "Pledged Companies" and,
individually, each a "Pledged Company" and all such Stock, collectively, the
"Pledged Interests").
NOW, THEREFORE, in consideration of the premises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
1. DEFINED TERMS. Capitalized terms used herein shall have the
meanings ascribed to such terms in the Restructuring Agreement (including by
reference to any other Note Document) to the extent not otherwise defined or
limited herein.
2. PLEDGE. To secure all of the Obligations (including the
Obligations that would be owed by the Pledgor to the Secured Party but for the
fact that they are unenforceable or not allowable due to the existence of an
Insolvency Proceeding involving the Pledgor), Pledgor hereby unconditionally
pledges, transfers, conveys,
STOCK PLEDGE AGREEMENT
hypothecates, grants and assigns to the Secured Party a continuing security
interest in and security title to all of the following property now owned or at
any time hereafter acquired by the Pledgor or in which the Pledgor now has, or
may acquire in the future, any right, title or interest thereto (collectively,
the "Collateral"):
(a) the Pledged Interests (including the Pledged Interests
described in Schedule 1 hereto) and all substitutions therefor
and replacements thereof, all proceeds and products thereof
and all rights relating thereto, including, without
limitation, the certificates representing any of the Pledged
Interests, all warrants, options, share appreciation rights
and other rights, contractual or otherwise, in respect thereof
and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in
respect of or in addition to, in substitution of, on account
of, or in exchange for, any or all of the Pledged Interests,
whether now owned or hereafter acquired by the Pledgor;
(b) all of the Pledgor's rights, powers and remedies (but not
the Pledgor's obligations) under the limited liability company
operating agreements of the Pledged Companies that are limited
liability companies (collectively, the "Operating Agreements")
and under the partnership agreements of the Pledged Companies
that are general or limited partnerships (collectively, the
"Partnership Agreements"), as applicable; and
(c) to the extent not otherwise included, all proceeds of any
and all of the foregoing.
The Pledgor has delivered to and deposited with the Secured Party all
certificates owned by the Pledgor representing the Pledged Interests to the
extent such Pledged Interests are represented by certificates and undated powers
endorsed in blank with respect to such certificates. In addition, the Pledgor
has delivered to the Secured Party all of the Uniform Commercial Code financing
statements, in suitable form for recording, with respect to all of the
Collateral that is not represented by certificates that are necessary to perfect
the security interest granted to the Secured Party under this Pledge Agreement
in such Collateral, and further authorizes the Secured Party at any time and
from time to time, as applicable, to prepare and file appropriate Uniform
Commercial Code financing statements with respect to all or any part of the
Collateral.
3. OBLIGATIONS SECURED. The pledge and security interest
effectuated hereby shall secure the full and prompt payment in full when due,
whether at stated maturity, by acceleration or otherwise, and performance of all
liabilities, obligations, or undertakings owing by Pledgor to the Secured Party
of any kind or description arising out of or outstanding under, advanced or
issued pursuant to, or evidenced by the Guaranty, the Restructuring Agreement,
this Agreement, or any of the other Note Documents, irrespective of whether for
the payment of money, whether direct or indirect, absolute or contingent, due or
to become due, voluntary or involuntary, whether now existing or hereafter
arising, and including all interest, costs, fees (including attorneys' fees),
and
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expenses (including interest, costs, fees, and expenses that, but for the
provisions of the Bankruptcy Code, would have accrued irrespective of whether a
claim thereof is allowed) and any and all other amounts which Pledgor is
required to pay pursuant to any of the foregoing, by law, or otherwise (all such
all liabilities, obligations, or undertakings, collectively the "Obligations").
4. REPRESENTATIONS AND WARRANTIES REGARDING THE COLLATERAL. The
Pledgor hereby represents and warrants to the Secured Party that (i) except for
the security interest created hereby and in the other Note Documents, the
Pledgor owns the Pledged Interests indicated on Schedule 1 as being owned by it,
which Pledged Interests constitute the percentage of the issued and outstanding
Stock set forth on Schedule 1 attached hereto with respect to each of the
Pledged Companies identified thereon, free and clear of all Liens; (ii) the
Pledged Interests set forth in Schedule 1 attached hereto include all Stock of
Pledgor in each of the Pledged Companies, (iii) all of the Pledged Interests are
duly authorized, validly issued, fully paid and nonassessable; (iv) none of the
Collateral constitutes margin securities for the purposes of Regulations T, U or
X, and none of the proceeds of any loans made by the Secured Party to Pledgor
will be used to purchase or carry any margin stock); (v) the Pledgor has the
unencumbered right and power to pledge the Collateral; and (vi) all actions
necessary to perfect, establish the first priority of, or otherwise protect the
security interest of the Secured Party in the Collateral, and any proceeds
thereof, have been duly taken, except for the taking of possession by the
Secured Party of any certificates constituting Collateral hereunder that are
acquired by the Pledgor after the date hereof. Additionally, the Pledgor hereby
represents and warrants to the Secured Party that this Pledge Agreement has been
duly executed and delivered by the Pledgor and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, except
as enforcement may be limited by equitable principles, or by an Insolvency
Proceeding.
5. OPERATING AGREEMENTS AND PARTNERSHIP AGREEMENTS. Anything
herein to the contrary notwithstanding, the Pledgor shall, for so long as it
shall remain a member under any Operating Agreement or a partner under any
Partnership Agreement, remain liable under such Operating Agreement or
Partnership Agreement, as the case may be, to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with and pursuant to the terms and provisions thereof. With regard to
Collateral for which the applicable Operating Agreement or Partnership Agreement
provides that all limited liability company or partnership interests, as
applicable, issued thereunder shall be certificated, the Pledgor shall not
amend, supplement or otherwise modify (or consent to any such amendment,
supplement or modification of) the terms of such Operating Agreement or such
Partnership Agreement, as the case may be, so as to provide for the issuance of
uncertificated limited liability company or partnership interests, as
applicable, without the prior written consent of the Secured Party. With regard
to Collateral for which the applicable Operating Agreement or Partnership
Agreement, as the case may be, does not provide that all limited liability
company or partnership interests, as applicable, issued thereunder shall be
certificated, the Pledgor hereby represents and warrants to the Secured Party
that such Collateral (i) is not dealt in or traded on securities exchanges or in
securities markets, (ii) does not constitute investment company securities, and
(iii) is not held by the Pledgor in a
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securities account. In addition, the Pledgor further hereby represents and
warrants that the articles of organization, the Operating Agreements or the
Partnership Agreements or other agreements governing any of the uncertificated
Collateral do not provide that such Collateral may be certificated or that such
Collateral are securities governed by Article 8 of the Uniform Commercial Code
as in effect in any relevant jurisdiction.
6. ADDITIONAL PLEDGED INTERESTS. In the event that, during the
term of this Pledge Agreement:
(a) any stock dividend, stock split, reclassification,
readjustment or other change is declared or made in the
capital structure of any of the Pledged Companies, or any new
Stock is issued by any of the Pledged Companies or any newly
formed Subsidiary of Pledgor, all new, substituted, and
additional shares, units or other securities issued in respect
of any of the Pledged Interests shall be issued to the Pledgor
and shall be promptly delivered to the Secured Party, together
with undated powers endorsed in blank by the Pledgor, and, to
the extent such new Stock or other securities are not
represented by certificates, such Uniform Commercial Code
financing statements with respect thereto as shall be
necessary to perfect the security interest of the Secured
Party therein. In each case, such new, substituted, and
additional shares, units and other securities shall, upon the
issuance thereof, constitute additional Pledged Interests to
be held by the Secured Party under the terms of this Pledge
Agreement; and
(b) any subscriptions, warrants or other rights or options
shall be issued in connection with any of the Pledged
Interests, all new Stock or other securities acquired through
such subscriptions, warrants, rights or options shall
thereupon constitute Pledged Interests to be held by the
Secured Party under the terms of this Pledge Agreement, and,
to the extent such Stock or other securities are represented
by certificates, such certificates shall be promptly delivered
to the Secured Party, together with undated powers endorsed in
blank by the Pledgor;
(c) any other dividend or distribution is made on account of
the Collateral, Pledgor shall immediately deliver all such
dividends or other distributions to Secured Party in the same
form received and in the same manner as the Collateral pledged
hereunder; provided, however, that so long as no Event of
Default shall have occurred and be continuing or would result
therefrom, Pledgor shall be entitled to receive and retain
cash dividends (other than dividends and other distributions
(i) in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital,
capital surplus or paid-in capital of a Pledged Company, or
(ii) in redemption of, or in exchange for, any Collateral) to
the extent not otherwise prohibited or restricted under the
Restructuring Agreement or any other Note Document.
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7. EVENTS OF DEFAULT. An "Event of Default" under this Pledge
Agreement shall occur upon any default on the obligations, terms, conditions,
representations, warranties, covenants or agreements hereunder, or an Event of
Default under the Note, the Restructuring Agreement, the Guaranty, any other
guaranty in favor of Secured Party of Borrower's obligations under the Note, or
under any agreement, instrument or document executed by Pledgor or Borrower with
or in favor of Secured Party. Pledgor hereby appoints Secured Party as its
attorney-in-fact to arrange, upon an Event of Default, for a transfer of the
Collateral on the books of Borrower to the name of Secured Party or to the name
of Secured Party's nominee.
8. VOTING RIGHTS. During the term of this Pledge Agreement, so
long as there shall not occur any Event of Default, Pledgor shall have the right
to vote the Collateral on all corporate questions for all purposes not
inconsistent with the terms of this Pledge Agreement, the Restructuring
Agreement and the other Note Documents. Upon the occurrence of an Event of
Default, Secured Party shall thereafter have, at its discretion, the option to
exercise all voting powers and other corporate rights pertaining to the
Collateral. Secured Party may, upon or at any time after the occurrence of an
Event of Default, at its option, transfer or register the Collateral or any part
thereof into its own or its nominee's name.
9. REMEDIES UPON DEFAULT.
9.1 In addition to the other remedies provided for
herein, in the other Note Documents, or otherwise available under applicable
law, upon and after an Event of Default, the Secured Party may: (i) exercise in
respect to the Collateral, any one or more of the rights and remedies available
under the Texas Uniform Commercial Code and other applicable law; and (ii) sell
or otherwise assign, give an option or options to purchase or dispose of and
deliver the Collateral (or contract to do so), or any part thereof, in one or
more parcels at public or private sale or sales, at any exchange, broker's board
or at any of Secured Party's offices or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash, on
credit or for future delivery without assumption of any credit risk, free of any
claim or right of whatsoever kind (including any right or equity of redemption)
of Pledgor, which claim, right and equity are hereby expressly waived and
released. Secured Party shall have the right to the extent permitted by
applicable law, upon any such sale or sales, public or private, to purchase the
whole or any part of the Collateral so sold; provided, however, Pledgor shall
not receive any net proceeds, if any, of any such credit sale or future delivery
until cash proceeds are actually received by Secured Party (which cash proceeds
shall be applied by Secured Party to the Obligations) and after all Obligations
have been paid in full. In case of any sale of all or any part of the Collateral
on credit or for future delivery, the Collateral so sold may be retained by
Secured Party until the selling price is paid by the purchaser thereof, but
Secured Party shall not incur any liability in case of the failure of such
purchaser to pay for the Collateral so sold and, in case of such failure, the
Collateral may again be sold as herein provided.
9.2 Any notice required to be given by Secured Party of a
sale of the Collateral, or any part thereof, or of any other intended action by
Secured Party, which
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occurs not less than ten (10) days prior to such proposed action, shall
constitute commercially reasonable and fair notice to Pledgor thereof. No
notification need be given to Pledgor if it has signed, after the occurrence of
an Event of Default, a statement renouncing or modifying any right to
notification of sale or other intended disposition.
9.3 Secured Party shall not be obligated to make any sale
or other disposition of the Collateral, or any part thereof unless the terms
thereof shall, in its sole discretion, be satisfactory to it. Secured Party may,
if it deems it reasonable, postpone or adjourn the sale of any of the
Collateral, or any part thereof, from time to time by an announcement at the
time and place of such sale or by announcement at the time and place of such
postponed or adjourned sale, without being required to give a new notice of
sale. Pledgor agrees that Secured Party has no obligation to preserve rights
against prior parties to the Collateral.
9.4 Pledgor acknowledges and agrees that Secured Party
may comply with limitations or restrictions in connection with any sale of the
Collateral in order to avoid any violation of applicable law or in order to
obtain any required approval of the sale or of the purchase thereof by any
governmental regulatory authority or official and, without limiting the
generality of the foregoing, Pledgor acknowledges and agrees that Secured Party
may be unable to effect a public sale of any or all the Collateral by reason of
certain prohibitions contained in the federal securities laws and applicable
state securities laws, but may be compelled to resort to one or more private
sales thereof to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Pledgor
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the seller than if such sale were a public sale.
Notwithstanding any such circumstances, Pledgor acknowledges and agrees that
such compliance shall not result in any such private sale for such reason alone
being deemed to have been made in a commercially unreasonable manner. Secured
Party shall not be liable or accountable to Pledgor for any discount allowed by
reason of the fact that the Collateral is sold in compliance with any such
limitation or restriction. Secured Party shall not be under any obligation to
delay a sale of any of the Collateral for the period of time necessary to permit
the issuer of such securities to register such securities for public sale under
the federal securities laws, or under applicable state securities laws, even if
the issuer desires, requests or would agree to do so.
9.5 Any cash held by Secured Party as Collateral and all
cash proceeds received by Secured Party in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral may, in the
discretion of Secured Party, be held by Secured Party as Collateral for the
Obligations and/or then or at any time thereafter applied, without any
marshalling of rights, remedies or assets, and after payment of any amounts
payable to Secured Party hereunder and, after deducting all reasonable costs and
expenses of every kind in connection with the care, safekeeping, collection,
sale, delivery or otherwise of any or all of the Collateral or in any way
relating to the rights of Secured Party hereunder (including attorneys' fees and
disbursements), to the payment of reduction of the Obligations. Any surplus of
such cash or cash proceeds held by Secured
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Party and remaining after payment in full of all the Obligations shall be paid
over to Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.
10. TERM. This Pledge Agreement shall remain in full force and
effect until Pledgor has satisfied all of the Obligations in full. At the
expiration of the term of this Pledge Agreement, Secured Party shall return to
Pledgor all stock certificates and other documents relating to this Pledge
Agreement, together with any further documents necessary to establish that the
within pledge is terminated.
11. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, shall be given in the form and manner
and to the addresses set forth in the Restructuring Agreement.
12. SUCCESSORS. This Pledge Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however, that Pledgor may not assign this Pledge Agreement or any
rights or duties hereunder without the Secured Party's prior written consent and
any prohibited assignment shall be absolutely void. No consent to assignment by
the Secured Party shall release Pledgor from its Obligations. The Secured Party
may assign this Pledge Agreement and its rights and duties hereunder and no
consent or approval by Pledgor is required in connection with any such
assignment.
13. AMENDMENTS; WAIVERS.
13.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Pledge Agreement or any other Note Document, and no consent
with respect to any departure by Pledgor therefrom, shall be effective unless
the same shall be in writing and signed by the Secured Party and Pledgor and
then any such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
13.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by
Secured Party to exercise any right, remedy, or option under this Pledge
Agreement, any other Note Document, or any present or future supplement hereto
or thereto, or in any other agreement between or among Pledgor and Secured
Party, or delay by Secured Party in exercising the same, will operate as a
waiver thereof. No waiver by Secured Party will be effective unless it is in
writing, and then only to the extent specifically stated. No waiver by Secured
Party on any occasion shall affect or diminish Secured Party's rights thereafter
to require strict performance by Pledgor of any provision of this Pledge
Agreement. Secured Party's rights under this Pledge Agreement and the other Note
Documents will be cumulative and not exclusive of any other right or remedy
which Secured Party may have.
14. FURTHER ASSURANCES. Pledgor covenants and agrees that: (i) it
will execute and deliver, or cause to be executed and delivered, all such other
stock powers, proxies, instruments and documents as Secured Party may reasonably
request from time
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to time in order to carry out the provisions and purposes hereof; (ii) it will
take all such other action, as Secured Party may reasonably request from time to
time in order to carry out the provisions and purposes hereof; (iii) the
Collateral will remain free and clear of all security interests and liens
throughout the term hereof; and (iv) it will forward to Secured Party,
immediately upon receipt, copies of any information or documents received by
Pledgor in connection with the Collateral. For purposes of defining security
interest perfection, Pledgor further agrees that any Collateral which is in
transit to Secured Party shall be deemed to be in Secured Party's possession.
Pledgor shall cause each Pledged Company that is a general or limited
partnership, limited liability company or other equivalent or similar entity, to
execute and deliver to Secured Party an Acknowledgment and Agreement in
substantially the form of Annex 1 hereto.
15. CHOICE OF LAW; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS PLEDGE AGREEMENT, THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE
PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO
SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
(b) PLEDGOR AND SECURED PARTY HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS PLEDGE AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. PLEDGOR AND SECURED PARTY REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS PLEDGE AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
16. GENERAL PROVISIONS.
16.1 EFFECTIVENESS. This Pledge Agreement shall be binding
and deemed effective when executed by Pledgor and the Secured Party.
16.2 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
16.3 INTERPRETATION. Neither this Pledge Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against the
Secured Party or Pledgor, whether under any rule of construction or otherwise.
On the contrary, this Pledge Agreement has been reviewed by all parties and
shall be construed and interpreted
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according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of all parties hereto.
16.4 SEVERABILITY OF PROVISIONS. Each provision of this
Pledge Agreement shall be severable from every other provision of this Pledge
Agreement for the purpose of determining the legal enforceability of any
specific provision.
16.5 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Pledge
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Pledge Agreement by telefacsimile shall be equally as effective as
delivery of an original executed counterpart of this Pledge Agreement. Any party
delivering an executed counterpart of this Pledge Agreement by telefacsimile
also shall deliver an original executed counterpart of this Pledge Agreement but
the failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Pledge Agreement.
16.6 INTEGRATION. This Pledge Agreement, together with the
other Note Documents, reflects the entire understanding of the parties with
respect to the transactions contemplated hereby and shall not be contradicted or
qualified by any other agreement, oral or written, before the date hereof.
[signature page to follow]
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IN WITNESS WHEREOF, this Pledge Agreement is executed as of
the day and year first above written.
"PLEDGOR"
SCHLOTZSKY'S, INC.,
a Texas corporation
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------
Title: Senior Vice President
"SECURED PARTY"
NS ASSOCIATES I, LTD.
By: NS Associates, Inc.
Its: General Partner
By: /s/ XXXXXX XXXXXXXXX
------------------------------
Xxxxxx Xxxxxxxxx
President
[SIGNATURE PAGE TO SI STOCK PLEDGE AGREEMENT]
SCHEDULE 1
TO
STOCK PLEDGE AGREEMENT
PLEDGED INTERESTS
NUMBER OF CLASS OF PERCENTAGE OF
JURISDICTION OF SHARES/ PLEDGED CLASS CERTIFICATE
PLEDGOR'S NAME PLEDGED COMPANY FORMATION UNITS INTERESTS REPRESENTED NO(S).
------------------ ------------------------ --------------- --------- ------------ ------------- -----------
Schlotzsky's, Inc. Schlotzsky's Franchisor, Delaware N/A Membership 100% N/A
LLC Interests
Schlotzsky's, Inc. DFW Restaurant Corp. Texas 1,000 Common Stock 100% 01
ACKNOWLEDGMENT AND AGREEMENT
TO STOCK PLEDGE AGREEMENT
(SCHLOTZSKY'S FRANCHISOR, LLC)
Schlotzsky's Franchisor, LLC (the "Pledged Company") hereby (i)
acknowledges receipt of a fully executed copy of the foregoing Stock Pledge
Agreement, dated as of December 29, 2003 (the "Pledge Agreement"; capitalized
terms used herein without definition have the meanings provided therein), made
by Schlotzsky's, Inc., as Pledgor, in favor of NS Associates I, Ltd.; (ii)
consents and agrees to the pledge by the Pledgor of the Collateral pursuant to
the Pledge Agreement and to all of the other terms and provisions of the Pledge
Agreement; (iii) represents and warrants that it has no knowledge, prior to
giving effect to this acknowledgment, of any lien, restriction or adverse claim
of any kind to which any interests of the Pledgor or the Secured Party is
subject; (iv) irrevocably waives any breach or default under the Operating
Agreement for the Pledged Company as a result of the execution, delivery and
performance by the Pledgor and the Secured Party of the Pledge Agreement; (v)
advises the Pledgor and the Secured Party that a pledge of the Pledged Interests
set forth on Schedule 1 to the Pledge Agreement has been registered on the books
of the Pledged Company and in the name of the Secured Party and agrees to so
register any additional interests pledged pursuant to the Pledge Agreement, and
(vi) consents and agrees to any transfer of the Collateral pursuant to the
Pledge Agreement.
IN WITNESS WHEREOF, a duly authorized officer of the undersigned has
executed and delivered this Acknowledgment and Consent this 29th day of
December, 2003.
"PLEDGED COMPANY"
SCHLOTZSKY'S FRANCHISOR, LLC,
a Delaware limited liability company
By: /s/ XXXXXXX X. XXXXXX
------------------------------
Title: Senior Vice President
