EXHIBIT 10.3
MEMBERSHIP INTEREST PLEDGE AGREEMENT
This MEMBERSHIP INTEREST PLEDGE AGREEMENT (this "Agreement") is made
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and entered into as of this ____ day of ___________ 2000, by and among Sizzler
International, Inc., a Delaware corporation (the "Company"), and FFPE Holding
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Company, Inc., a Delaware corporation (the "Pledgor").
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R E C I T A L S
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A. The Company, Pledgor, S & C Company, Inc., a California
corporation (the "Old Company"), the shareholders and certain principals of the
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Old Company, and FFPE, LLC, a Delaware limited liability company (the "New
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Company"), are parties to the LLC Membership Interest Purchase Agreement dated
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May 23, 2000 (the "Purchase Agreement"), pursuant to which the Company is
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purchasing and acquiring from Pledgor 82 units of the New Company, which units
represent 82% of the outstanding membership interests in the New Company. All
capitalized terms used herein but which are not otherwise defined shall have the
meanings given to them in the Purchase Agreement.
B. Immediately after the consummation of the transactions
contemplated by the Purchase Agreement, Pledgor shall continue to hold 18 units
of the New Company, which units represent 18% of the outstanding membership
interests in the New Company (the "Retained Units").
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C. As security for Pledgor's performance of all of its
indemnification obligations, whether joint or several, under Article VII of the
Purchase Agreement (the "Secured Obligations"), Pledgor has agreed to grant the
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Company a first priority security interest in all of the Retained Units, all on
the terms and subject to the conditions of this Agreement.
A G R E E M E N T
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In consideration of the foregoing recitals and the respective
covenants, agreements, representations and warranties contained herein, the
parties, intending to be legally bound, agree as follows:
1. Grant of Security Interest.
1.1 Pledge of Retained Units. Pledgor hereby grants in favor of
the Company a security interest in, and does hereby pledge and hypothecate to
the Company,
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and deposit with the Company, as security for the Secured Obligations, the
Retained Units. The certificate evidencing the Retained Units is accompanied by
instruments of assignment in the form attached as Attachment 1 hereto, duly
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executed in blank by Pledgor and is being delivered concurrently herewith to the
Company.
1.2 Substitution of Collateral. Pledgor shall have the right to
require the Company to release any or all of the Retained Units to Pledgor upon
such time that Pledgor has deposited in immediately available funds with the
Company an amount equal to the greater of (i) the proceeds from a permitted sale
of the Retained Units, or (ii) the Fair Value (as defined in the Warrant dated
as of the date hereof, executed by the Company in favor of FFPE Holding Company,
Inc., a Delaware corporation) of the Retained Units to be released to Pledgor
(in either case, the "Cash Deposit"). As soon as possible after Pledgor has
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made the Cash Deposit, the Company shall hold the Cash Deposit and release the
Retained Units so paid for. The Cash Deposit, together with any and all
remaining Retained Units, shall thereafter secure, or continue to secure, the
Secured Obligations. The Company shall have the same recourse against the Cash
Deposit as it would have had against the Retained Units so paid for, and Pledgor
shall have the same rights in and to the Cash Deposit as it otherwise would have
had with respect to the Retained Units so paid for.
2. Ownership Rights of Pledgor. The Company shall hold the Retained
Units for the period hereinafter specified, but all of the Retained Units shall
be registered on the books of the New Company in the name of Pledgor. All
dividends of the New Company in cash or other property declared with respect to
the Retained Units shall be paid directly to the Pledgor so long as there is no
Event of Default (as defined in Section 4, below). Any dividends in units or
other securities of the New Company or shares otherwise issuable with respect to
or as replacements of the Retained Units shall be delivered directly to the
Company to be held as a part of the pledge. Pledgor shall retain the right to
vote its Retained Units so long as there is no Event of Default.
3. Representations and Warranties of Pledgor. Pledgor represents
and warrants that its Retained Units constitute duly and validly issued, fully
paid and nonassessable units of membership interest in the New Company and are
duly and validly pledged with the Company in accordance with applicable law, and
that Pledgor will defend the Company's security interest in and to its Retained
Units against the claims and demands of all persons whomsoever relating to such
Retained Units. Pledgor further represents and warrants to the Company that at
the time its Retained Units are deposited in pledge with the Company, all of
such Retained Units shall be free and clear of all claims, mortgages, pledges,
liens, encumbrances and restrictions of every nature whatsoever, except for (a)
any encumbrances arising out of the Purchase Agreement, and
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(b) any restrictions upon sale and distribution imposed by state or federal
securities laws. These representations and warranties, and each of them, shall
be deemed to be continuing under this Agreement.
4. Default
4.1 Rights of Secured Party upon Default. Upon an Event of
Default, The Company may, without demand or other notice of any kind, at its
option:
(a) Disposal of Retained Units. Sell, lease, or otherwise
dispose of the Retained Units at a public or private sale, with or without
having such Retained Units at the place of sale, and upon terms and in such
manner as the Company may reasonably determine and the Company may purchase the
Retained Units at any such public sale and credit bid all or any part of the
Secured Obligations then outstanding; provided, however, that notwithstanding
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any provision to the contrary in the Uniform Commercial Code, as adopted in the
State of California, the Company shall give Pledgor not less than 10 business
days notice of the date on which any public sale or private sale will be held;
and
(b) Business and Commerce Code Remedies. Exercise all the
rights and remedies afforded a secured party by the Uniform Commercial Code, as
adopted in the State of California.
4.2 Events of Default. An "Event of Default" shall occur with
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respect to Pledgor upon the happening of any of the following events:
(a) Breach of Obligations. A breach or default under
Article VII of the Purchase Agreement;
(b) Default Under this Agreement. Any material breach by
Pledgor under this Agreement which is not cured within 30 days after written
notice from the Company specifying the same;
(c) Attachment. The levy of, or any attachment, execution
or other process against, the Retained Units owned by Pledgor, which is not
released within 90 days after the levy thereof; or
(d) Bankruptcy. The general assignment for the benefit of
the Company, or the filing of any petition in bankruptcy or for relief under the
provisions of the Federal Bankruptcy Act, by or against Pledgor or the Company,
unless such petition is
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dismissed within 90 days after such petition is filed; or the appointment of a
receiver by any court, whether permanent or temporary, for all or substantially
all of Pledgor's (or the New Company's) property, unless such receiver is
removed within 90 days after such receiver is appointed.
5. Covenants of Pledgor. Until this Agreement has been terminated
pursuant to Section 6, below, Pledgor covenants and agrees that it shall:
(a) Information Affecting Retained Units. Promptly notify the
Company of any attachment or other legal process levied against any of the
Retained Units and any information received by Pledgor relative to the Retained
Units which may in any way affect the value of such Retained Units or the rights
and remedies of the Company in respect thereto;
(b) Execution of Documents. Execute any and all documents and
do all other things reasonably requested by the Company as necessary or
appropriate to perfect the security interest in the Retained Units. Pledgor
hereby appoints the Company as Pledgor's attorney-in-fact to do, at the
Company's option and at Pledgor's expense, all acts and things which the Company
may reasonably deem necessary or desirable to perfect and continue the
perfection and priority of the security interest hereby created; and
(c) Sales or Encumbrances. Not sell, convey, retire or
otherwise dispose of all or any of the Retained Units or any interest therein,
beneficial or otherwise, or create, incur or permit to exist any pledge,
mortgage, lien, charge, encumbrance, or any security interest whatsoever in or
with respect to any of the Retained Units or the proceeds thereof, other than
that created hereby, without on or before the effective time of such sale paying
all outstanding amounts of the secured indebtedness.
6. Termination; Return of Retained Units. The pledge of the
Retained Units shall terminate upon the satisfaction or termination, whichever
is the first to occur, of all of the Secured Obligations; provided, however,
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immediately prior to any purchase of Retained Units by the Company from Pledgor
pursuant to that certain Put Option Agreement (▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇), the
pledge of the Retained Units so purchased shall terminate. Upon a termination of
the pledge created hereby, this Agreement and all provisions hereof shall
terminate and the Company shall return all of the Retained Units, as well as
such incidental property and cash as are then held in pledge by The Company
which have not been used or applied toward the payment or satisfaction of such
liabilities.
7. Miscellaneous.
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7.1 Remedies Cumulative. The remedies provided herein in favor
of the Company shall not be deemed exclusive but shall be cumulative and shall
be in addition to all of the remedies in favor of The Company existing at law or
in equity.
7.2 Execution of Endorsements, Assignments. Upon the occurrence
of a Default, the Company shall have the right for and in the name, place and
stead of Pledgor to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Retained Units.
7.3 Waiver of Rights, Modification of Agreement. No delay on
the part of the Company in exercising any of the Company's options, powers or
rights, or the partial or single exercise thereof, shall constitute a waiver
thereof. No provision of this Agreement may be changed, waived, modified or
varied in any manner orally, but only by an instrument in writing signed by the
party against whom enforcement of the change, waiver, modification or variation
is sought.
7.4 Notices. All notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed to have been
duly given in the manner set forth in the Credit Agreement.
7.5 Successors; Agreement Binding Upon Successors. This
Agreement is binding upon and shall inure to the benefit of the parties and
their respective heirs, executors, administrators, successors or assigns.
7.6 Applicable Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the internal laws of the State of California.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date first above written.
"PLEDGOR" "PLEDGEE":
FFPE HOLDING COMPANY, INC., SIZZLER INTERNATIONAL, INC.,
a Delaware corporation a Delaware corporation
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By: By:
Title: Title:
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