**Exhibit 10.45**

 

SECURITYAGREEMENT

 

This Security Agreement (the “**SecurityAgreement**”), is dated effective as of the 8th day ofApril 2003 (the “**Effective Date**”),and is by and between ***Schlotzsky’s,Inc., a Texas corporation***(the “**Debtor**”), and ***John C. Wooley and Jeffrey J. Wooley***(collectively, the “**Secured Party**”).

 

Section I.                                              CREATION OF SECURITY INTEREST

 

The Debtor hereby grants to the Secured Party a security interest inthe Collateral described in Section II of this Security Agreementto secure performance and payment of the obligations and indebtedness of theDebtor to the Secured Party described in Section III of thisSecurity Agreement (collectively, the “**Indebtedness**”).

 

Section II.                                          COLLATERAL

 

In order to secure the payment when due of any and all Indebtedness,the Debtor hereby pledges to the Secured Party and grants to the Secured Partya security interest in and to the following properties (collectively, the “**Collateral**”):  all of the Debtor’s accounts, contract rights and generalintangibles (including without limitation payment intangibles), and allproceeds thereof, whether cash, deposit accounts, investment securities,general or payment intangibles, or otherwise; ***provided, however,*** that there is expressly excluded from theCollateral hereunder that property which has previously been pledged to areadevelopers under area developer agreements and any amounts designated asadvertising contributions under franchise agreements.

 

Section III.                                      PAYMENT OBLIGATIONS OF THE DEBTOR

 

1.                                       The Debtor shall pay to the Secured Party anysum or sums due or which may become due pursuant to that certain PromissoryNote dated of even date herewith in the original principal sum or$1,000,000.00, executed by the Debtor and payable to the order of the SecuredParty, including any renewals, extensions or rearrangments thereof (the “**Note**”), in accordance with the terms ofsuch Note and the terms of this Security Agreement as well as all otherindebtedness now due and owing the said Secured Party hereunder or under any otherdocument executed in connection with or as security for the Note.

 

2.                                       The Debtor shall account fully and faithfullyto the Secured Party for proceeds from disposition of the Collateral in anymanner and shall pay or turn over promptly in cash, negotiable instruments,drafts, assigned accounts or chattel paper all the proceeds from each sale tobe applied to the Debtor’s Indebtedness to the Secured Party, subject if otherthan cash, to final payment or collection. Application of such proceeds to Indebtedness of the Debtor shall be inthe sole discretion of the Secured Party, provided such application of proceedsis made by the Secured Party in a reasonable manner.

 

3.                                       The Debtor shall pay to the Secured Party ondemand all expenses and expenditures, including reasonable attorney’s fees andother legal expenses incurred or paid by the Secured Party in connection withthe origination of the loans evidenced by the Note and/or in 

 

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exercisingor protecting its interests, rights and remedies under this Security Agreement,plus interest thereon at the rate of interest provided for matured, unpaidamounts under the Note (the “**Default Rate**”).

 

4.                                       The Debtor shall pay immediately, withoutnotice, the entire unpaid Indebtedness of the Debtor to the Secured Partywhether created or incurred pursuant to this Security Agreement or otherwise,upon the occurrence of an Event of Default under Section V of thisSecurity Agreement.

 

Section IV.                                      THE DEBTOR’S REPRESENTATION, WARRANTIES ANDAGREEMENTS

 

1.                                       All information supplied and statements madeby the Debtor in any financial, credit or accounting statement or applicationfor credit prior to, contemporaneously with or subsequent to the execution ofthis Security Agreement are and shall be true, correct, complete, valid andgenuine.

 

2.                                       No Financing Statement covering theCollateral or its proceeds is on file in any public office; and, except for thesecurity interest granted in this Security Agreement, there is no lien, securityinterest or encumbrance in or on the Collateral.

 

3.                                       Until default, the Debtor may use theCollateral in any lawful manner not inconsistent with this Security Agreementor with the terms or conditions of any policy of insurance thereon and exceptfor accounts and contract rights may also sell the Collateral in the ordinarycourse of business.  The Secured Party’ssecurity interest shall attach to all proceeds of sales and other dispositionsof the Collateral.

 

4.                                       At the request of the Secured Party, theDebtor will maintain a special bank account with American Bank of Commerce,over which the Secured Party shall have the sole power of withdrawal.  Upon the Secured Party’s demand, the Debtorwill deposit upon receipt all checks, drafts, cash and other payments pursuantto the Debtor’s contract rights, or in payment or on account of the Debtor’saccounts.  At least once a week, theSecured Party will apply the whole or part of the funds on deposit in thespecial account against the principal or interest or both of theIndebtedness.  The Secured Party maydetermine the order and method of such application.  Any portion of funds on deposit in the special account which theSecured Party elects to not so apply may be paid over by the Secured Party tothe Debtor.

 

5.                                       The Debtor shall, at its own expense, do,make, procure, execute and deliver all acts, things, writings and assurances asthe Secured Party may at any time request to protect, assure or enforce itsinterests, rights and remedies created by, provided in or emanating from thisSecurity Agreement.

 

6.                                       The Debtor shall not sell, lend, rent, leaseor otherwise dispose of the Collateral or any interest therein except asauthorized in this Security Agreement or in writing by the Secured Party, andthe Debtor shall keep the Collateral, including the proceeds thereof, free fromunpaid charges, including taxes, and from liens, encumbrances and securityinterests other than that of the Secured Party.

 

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7.                                       The Debtor shall sign and execute alone orwith the Secured Party any Financing Statement or other document or procure anydocument and pay all connected costs, necessary to protect the securityinterest under this Security Agreement against the rights or interests of thirdpersons.

 

8.                                       The Debtor is the owner of the Collateralfree of all liens, claims and encumbrances, except as created by this SecurityAgreement.

 

Section V.                                          EVENTS OF DEFAULT

 

The Debtor shall be in default under this Security Agreement upon thehappening of any condition or event set forth below (herein called an “**Event of Default**”):

 

1.                                       The Debtor’s failure to pay when due anyIndebtedness secured by this Security Agreement and the continuance of suchfailure beyond any applicable period of grace and/or notice and cure.

 

2.                                       Default by the Debtor in punctual performanceof any of the obligations, covenants, terms or provisions contained or referredto in this Security Agreement or in any note secured hereby and the continuanceof such default beyond any applicable period of grace and/or notice and cure.

 

3.                                       Any warranty, representation or statementcontained in this Security Agreement or made or furnished to the Secured Partyby or on behalf of the Debtor in connection with this Security Agreement or toinduce the Secured Party to make a loan to the Debtor proves to have been falsein any respect when made or furnished.

 

4.                                       The Debtor’s dissolution, termination ofexistence, insolvency or business failure; the appointment of a receiver of allor any part of the property of the Debtor; an assignment for the benefit ofcreditors by the Debtor; the calling of a meeting of creditors of the Debtor;or the commencement of any proceeding under any bankruptcy or insolvency lawsby or against the Debtor or any guarantor, surety or endorser for the Debtor.

 

Section VI.                                      SECURED PARTY’S RIGHTS AND REMEDIES

 

A.                                   Rights Exclusive of Default

 

1.                                       This Security Agreement, the Secured Party’srights hereunder or the Indebtedness hereby secured may be assigned from timeto time, and in any such case the Assignee shall be entitled to all of therights, privileges and remedies granted in this Security Agreement to theSecured Party, and the Debtor will assert no claims or defenses it may haveagainst the Secured Party against the Assignee, except those granted in thisSecurity Agreement.

 

2.                                       The Secured Party may execute, sign, endorse,transfer or deliver in the name of the Debtor, notes, checks, drafts or otherinstruments for the payment of money and receipts, certificates of origin,applications for certificates of title or any other documents, necessary toevidence, perfect or realize upon the security interest and obligations createdby this Security Agreement.

 

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B.                                     Rights in Event of Default

 

1.                                       Upon the occurrence of an Event of Default,and at any time thereafter the Secured Party may declare all obligationssecured hereby immediately due and payable and shall have the rights andremedies of a Secured Party under the Texas Business and Commerce Code,including without limitation thereto, the right to sell, lease or otherwisedispose of any or all of the Collateral and the right to take possession of theCollateral.  Unless the Collateral isperishable or threatens to decline speedily in value or is of a typecustomarily sold on a recognized market, the Secured Party will send the Debtorreasonable notice of the time and place of any public sale thereof or of thetime after which any private sale or other disposition thereof is to bemade.  The requirement of sendingreasonable notice shall be met if such notice is mailed, postage prepaid, tothe Debtor at 203 Colorado, Austin, Texas  78703,Attention:  Chief Financial Officer (with a required copy to GeneralCounsel at the same address) at least ten (10) days before the time of thesale or disposition.  Expenses ofretaking, holding, preparing for sale, selling or the like shall include theSecured Party’s reasonable attorney’s fees and legal expenses, and the Debtoragrees to pay such expenses, plus interest thereon at the Default Rate.  The Debtor shall remain liable for anydeficiency.

 

2.                                       The Secured Party may remedy any default andmay waive any default without waiving any other prior or subsequent default.

 

3.                                       The Secured Party may notify the accountdebtors or obligors of any accounts, chattel paper, negotiable instruments orother evidences of indebtedness remitted by the Debtor to the Secured Party asproceeds to pay the Secured Party directly.

 

4.                                       The Secured Party may demand, sue for,collect or make any compromise or settlement with reference to the Collateralas the Secured Party, in its sole discretion, chooses.

 

5.                                       The remedies of the Secured Party hereunderare cumulative, and the exercise of any one or more of the remedies providedfor herein shall not be construed as a waiver of any of the other remedies ofthe Secured Party.

 

Section VI.                                      ADDITIONAL AGREEMENTS

 

1.                                        The term “Debtor” as used in this instrumentshall be construed as singular or plural to correspond with the number ofpersons executing this instrument as the Debtor.  The pronouns used in this instrument are in the masculine genderbut shall be construed as feminine or neuter as occasion may require.  “Secured Party” and “Debtor”, as used inthis instrument, include the heirs, executors or administrators, successors,representatives, receivers, trustees and assigns of those parties.

 

2.                                       If more than one person executes thisinstrument as the Debtor, their obligations under this instrument shall bejoint and several.

 

3.                                       The section headings appearing in thisinstrument have been inserted for convenience only and shall be given nosubstantive meaning or significance whatever in 

 

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construingthe terms and provisions of this instrument. Terms used in this instrument which are defined in the Texas UniformCommercial Code are used with the meanings as therein defined.

 

4.                                       The law governing this secured transactionshall be that of the State of Texas in force at the date of this instrument.

 

5.                                       All property acquired by the Debtor after thedate hereof, which by the terms hereof is required or intended to be subjectedto the lien of this Security Agreement, shall, immediately upon the acquisitionthereof and without further mortgage, conveyance or assignment, become subjectto the lien of this Security Agreement as fully as though now owned by theDebtor and specifically described herein. Nevertheless, the Debtor will do all such further acts and execute,acknowledge and deliver all such further conveyances, mortgages, financingstatements and assurances as the Secured Party shall reasonably require foraccomplishing the purposes of this Security Agreement.

 

6.                                       Actions hereunder by the Secured Party shallrequire the unanimous approval of all the persons comprising the “SecuredParty” hereunder.

 

EXECUTED to be EFFECTIVE AS OF, but not necessarily on, the EffectiveDate.

 
| DEBTOR:                                      |               | SECURED  PARTY:        |
|----------------------------------------------|--------------------|------------------------|
|                                         |               |                   |
| Schlotzsky’s,  Inc.,                    |               |                   |
| a  Texas corporation                         |               |                   |
|                                         |
|                                         |
| By:                                          |               | /s/  RICHARD H. VALADE |   |   | /s/  JOHN C. WOOLEY |   |
| Richard  H. Valade, Executive Vice President | John  C. Wooley    |
|                                         |
|                                         |
|                                         |
|                                         |               | /s/  JEFFREY J. WOOLEY |   |
|                                         | Jeffrey  J. Wooley |
|                                              |                    |                        |  |  |  |  |  |

 

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