Document:

Exhibit 10.46

 

GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT
(“Guaranty”) is made as of the 12th day of June, 2003 by
Guarantor (as hereinafter defined) for the benefit of Lender (as hereinafter
defined).

 

1.                                       Definitions.  As used in this Guaranty, the following terms shall
have the meanings indicated below:

 

(a)                                  The term “Lender” shall mean
COMMERCE NATIONAL BANK, a branch of Lubbock National Bank, a national banking
association, whose address for notice purposes is the following:

 

	
   

  	
  5300 Bee Cave
  Road

  
	
   

  	
  Austin, TX  78746

  
	
   

  	
  Attn:  Mr. Brannin Prideaux

  

 

(b)                                 The term “Borrower” shall mean the
following:

 

SCHLOTZSKY’S NAMF
FUNDING, LLC, a Delaware limited liability company

 

(c)                                  The term “Guarantor” shall mean
SCHLOTZSKY’S, INC., a Texas corporation, whose address for notice purposes is
the following:

 

	
   

  	
  203 Colorado Street

  
	
   

  	
  Austin, Texas 78701

  
	
   

  	
  Attn:  Legal Department

  

 

(d)                                 The term “Guaranteed Indebtedness”
shall mean (i) all indebtedness, obligations and liabilities of Borrower to
Lender of any kind or character, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, and regardless of whether
such indebtedness, obligations and liabilities may, prior to their acquisitions
by Lender, be or have been payable to or in favor of a third party and
subsequently acquired by Lender (it being contemplated that Lender may make
such acquisitions from third parties), including without limitation all
principal indebtedness owing by Borrower to Lender now existing or hereafter
arising under or evidenced by that one certain Promissory Note (the “Note”)
dated June 12, 2003 in the original principal amount of $4,300,000.00, executed
by Borrower and payable to the order of Lender, all indebtedness, obligations
and liabilities of Borrower to Lender now existing or hereafter arising by
note, draft, acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (ii) all
accrued but unpaid interest of any of the indebtedness described in (i) above,
(iii) all obligations of Borrower to Lender under any documents evidencing,
securing, governing and/or pertaining to all or any part of the indebtedness
and obligations described in (i), (ii) and (iii) above or the protection or
preservation of, or realization upon, the collateral securing all or any part
of such indebtedness and obligations, including without limitation all
reasonable attorneys’ fees, and (v) all renewals, extensions, modifications and
rearrangements of the indebtedness and obligations described in (i), (ii), and
(iii) and (iv) above.

 

1

 

 

2.                                       Obligations.  As an
inducement to Lender to extend or continue to extend credit and other financial
accommodations to Borrower, Guarantor, for value received, does hereby
unconditionally and absolutely guarantee the prompt and full payment and
performance of the Guaranteed Indebtedness when due or declared to be due and at
all times thereafter.

 

3.                                       Character of Obligation.

 

(a)                                  This
is an absolute, continuing and unconditional guaranty of payment and not of
collection and if at any time or from time to time there is no outstanding
Guaranteed Indebtedness, the obligations of Guarantor with respect to any and
all Guaranteed Indebtedness incurred thereafter shall not be affected.  This Guaranty and the Guarantor’s
obligations hereunder are irrevocable and, in the event of Guarantor’s death,
shall be binding upon Guarantor’s estates. 
All of the Guaranteed Indebtedness shall be conclusively presumed to
have been made or acquired in acceptance hereof.  Guarantor shall be liable, jointly and severally, with Borrower
and any other guarantor of all or any part of the Guaranteed Indebtedness.

 

(b)                                 Lender
may, at its sole discretion and without impairing its rights hereunder, (i)
apply any payments on the Guaranteed Indebtedness that Lender receives from
Borrower or any other source other than Guarantor to that portion of the
Guaranteed Indebtedness, if any, not guaranteed hereunder, and (ii) apply any
proceeds it receives as a result of the foreclosure or other realization on any
collateral for the Guaranteed Indebtedness to that portion, if any, of the
Guaranteed Indebtedness not guaranteed hereunder or to any other indebtedness
secured by such collateral.

 

(c)                                  Guarantor
agrees that its obligations hereunder shall not be released, diminished,
impaired, reduced or affected by the existence of any other guaranty or the
payment by any other guarantor of all or any part of the Guaranteed
Indebtedness and, in the event Paragraph 2 above  partially limits Guarantor’s obligations
under this Guaranty, Guarantor’s obligations hereunder shall continue until
Lender has received payment in full of the Guaranteed Indebtedness.

 

(d)                                 Guarantor’s
obligations hereunder shall not be released, diminished, impaired, reduced or
affected by, nor shall any provision contained herein be deemed to be a
limitation upon, the amount of credit which Lender may extend to Borrower, the
number of transactions between Lender and Borrower, payments by Borrower to
Lender or Lender’s allocation of payments by Borrower.

 

(e)                                  Without
further authorization from or notice to Guarantor, Lender may compromise,
accelerate, or otherwise alter the time or manner for the payment of the
Guaranteed Indebtedness, increase or reduce the rate of interest thereon, or
release or add any one or more guarantors or endorsers, or allow substitution
of or withdrawal of collateral or other security and release collateral and
other security or subordinate the same.

 

4.                                       Representations and Warranties. 
Guarantor hereby represents and warrants the following to Lender:

 

(a)                                  This
Guaranty may reasonably be expected to benefit, directly or indirectly, Guarantor,
and (i) if Guarantor is a corporation, the Board of Directors of Guarantor has
determined that this Guaranty may reasonably be expected to benefit, directly
or indirectly,

 

2

 

Guarantor, or (ii) if Guarantor is a partnership, the requisite number
of its partners have determined that this Guaranty may reasonably be expected
to benefit, directly or indirectly, Guarantor; and

 

(b)                                 Guarantor
is familiar with, and has independently reviewed the books and records
regarding, the financial condition of Borrower and is familiar with the value
of any and all collateral intended to be security for the payment of all or any
part of the Guaranteed Indebtedness; provided, however, Guarantor is not
relying on such financial condition or collateral as an inducement to enter
into this Guaranty; and

 

(c)                                  Guarantor
has adequate means to obtain from Borrower on a continuing basis information
concerning the financial condition of Borrower and Guarantor is not relying on
Lender to provide such information to Guarantor either now or in the future;
and

 

(d)                                 Guarantor
has the power and authority to execute, deliver and perform this Guaranty and
any other agreements executed by Guarantor contemporaneously herewith, and the
execution, delivery and performance of this Guaranty and any other agreements
executed by Guarantor contemporaneously herewith do not and will not violate
(i) any agreement or instrument to which Guarantor is a party; (ii) any law,
rule, regulation or order of any governmental authority to which Guarantor is
subject, or (iii) its articles or certificate of incorporation or bylaws, if
Guarantor is a corporation, or its partnership agreement, if Guarantor is a
partnership; and

 

(e)                                  Neither
Lender nor any other party has made any representation, warranty or statement
to Guarantor in order to induce Guarantor to execute this Guaranty; and

 

(f)                                    The
financial statements and other financial information regarding Guarantor
heretofore and hereafter delivered to Lender are and shall be true and correct
in all material respects and fairly present the financial position of Guarantor
as of the dates thereof, and no material adverse change has occurred in the
financial condition of Guarantor reflected in the financial statements and
other financial information regarding Guarantor heretofore delivered to Lender
since the date of the last statement thereof; and

 

(g)                                 As
of the date hereof, and after giving effect to this Guaranty and the
obligations evidenced hereby, (i) Guarantor is and will be solvent, (ii) the
fair saleable value of Guarantor’s assets exceeds and will continue to exceed
its liabilities (both fixed and contingent), (iii) Guarantor is and will
continue to be able to pay its debts as they mature, and (iv) if Guarantor is
not an individual, Guarantor has and will continue to have sufficient capital
to carry on its business and all businesses in which it is about to engage.

 

5.                                       Covenants.  Guarantor
hereby covenants and agrees with Lender as follows:

 

(a)                                  Guarantor
shall not, so long as its obligations under this Guaranty continue, transfer or
pledge any material portion of its assets for less than full and adequate
consideration; and

 

3

 

(b)                                 Guarantor
shall promptly furnish to Lender at any time and from time to time such
financial statements and other financial information of Guarantor as the Lender
may require, in form and substance satisfactory to Lender; and

 

(c)                                  Guarantor
shall comply with all terms and provisions of the Loan Documents that apply to
Guarantor; and

 

(d)                                 Guarantor
shall promptly inform Lender of (i) any litigation or governmental
investigation against Guarantor or affecting any security for all or any part
of the Guaranteed Indebtedness or this Guaranty which, if determined adversely,
could reasonably be expected to have a material adverse effect upon the
financial condition of Guarantor or upon such security or might cause a default
under any of the Loan Documents, and (ii) any material adverse change in the
financial condition of Guarantor.

 

6.                                       Event of Default.  Each of the
following shall constitute an Event of Default under the Loan Documents:

 

(a)                                  The
occurrence of any event (and the expiration of any applicable cure period)
which permits the acceleration of the maturity of any indebtedness in an amount
of $250,000.00 or more owing by Guarantor to any third party under any
agreement or understanding.

 

7.                                       Consent and Waiver.

 

(a)                                  Guarantor
waives (i) promptness, diligence and notice of acceptance of this Guaranty and
notice of the incurring of any obligation, indebtedness or liability to which
this Guaranty applies or may apply and waives presentment for payment, notice
of nonpayment, protest, demand, notice of protest, notice of intent to
accelerate, notice of acceleration, notice of dishonor, diligence in
enforcement and indulgences of every kind, and (ii) the taking of any other
action by Lender, including without limitation giving any notice of default or
any other notice to, or making any demand on, Borrower, any other guarantor of
all or any part of the Guaranteed Indebtedness or any other party.

 

(b)                                 Guarantor
waives any rights Guarantor has under, or any requirements imposed by, Chapter
34 of the Texas Business and Commerce Code, as in effect on the date of this
Guaranty or as it may be amended from time to time.

 

(c)                                  Lender
may at any time, without the consent of or notice to Guarantor, without
incurring responsibility to Guarantor and without impairing, releasing,
reducing or affecting the obligations of Guarantor hereunder: (i) change the
manner, place or terms of payment of all or any part of the Guaranteed
Indebtedness, or renew, extend, modify, rearrange or alter all or any part of
the Guaranteed Indebtedness; (ii) change the interest rate accruing on any of
the Guaranteed Indebtedness (including without limitation any periodic change
in such interest rate that occurs because such Guaranteed Indebtedness accrues
interest at a variable rate which may fluctuate from time to time); (iii) sell,
exchange, release, surrender, subordinate, realize upon or otherwise deal with
in any manner and in any order any collateral for all or any part of the
Guaranteed Indebtedness or this Guaranty or setoff against all or any part of
the Guaranteed Indebtedness; (iv) neglect, delay, omit, fail or refuse to take
or prosecute any action for the collection of all or any part of the Guaranteed
Indebtedness or this Guaranty or to take or

 

4

 

prosecute any action in connection with any of the Loan Documents; (v)
exercise or refrain from exercising any rights against Borrower or others, or
otherwise act or refrain from acting; (vi) settle or compromise all or any part
of the Guaranteed Indebtedness and subordinate the payment of all or any part
of the Guaranteed Indebtedness to the payment of any obligations, indebtedness
or liabilities which may be due or become due to Lender or others; (vii) apply
any deposit balance, fund, payment, collections through process of law or otherwise
or other collateral of Borrower to the satisfaction and liquidation of the
indebtedness or obligations of Borrower to Lender not guaranteed under this
Guaranty; and (viii) apply any sums paid to Lender by Guarantor, Borrower or
others to the Guaranteed Indebtedness in such order and manner as Lender, in
its sole discretion, may determine.

 

(d)                                 Should
Lender seek to enforce the obligations of Guarantor hereunder by action in any
court or otherwise, Guarantor waives any requirement, substantive or procedural,
that (i) Lender first enforce any rights or remedies against Borrower or any
other person or entity liable to Lender for all or any part of the Guaranteed
Indebtedness, including without limitation that a judgment first be rendered
against Borrower or any other person or entity, or that Borrower or any other
person or entity should be joined in such cause, or (ii) Lender first enforce
rights against any collateral which shall ever have been given to secure all or
any part of the Guaranteed Indebtedness or this Guaranty.  Such waiver shall be without prejudice to
Lender’s right, at its option, to proceed against Borrower or any other person
or entity, whether by separate action or by joinder.

 

(e)                                  In
addition to any other waivers, agreements and covenants of Guarantor set forth
herein, Guarantor hereby further waives and releases all claims, causes of
action, defenses and offsets for any act or omission of Lender, its directors,
officers, employees, representative or agents in connection with Lender’s
administration of the Guaranteed Indebtedness, except for Lender’s willful
misconduct and gross negligence.

 

8.                                       Obligations Not Impaired.

 

(a)                                  Guarantor
agrees that its obligations hereunder shall not be released, diminished,
impaired, reduced or affected by the occurrence of any one or more of the
following events: (i) the death, disability or lack of corporate power of
Borrower, Guarantor (except as provided in Paragraph 10 herein) or any
other guarantor of all or any part of the Guaranteed Indebtedness, (ii) any
receivership, insolvency, bankruptcy or other proceedings affecting Borrower,
Guarantor or any other guarantor of all or any part of the Guaranteed
Indebtedness, or any of their respective property; (iii) the partial or total
release or discharge of Borrower or any other guarantor of all or any part of
the Guaranteed Indebtedness, or any other person or entity from the performance
of any obligation contained in any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, whether
occurring by reason of law or otherwise; (iv) the taking or accepting of any
collateral for all or any part of the Guaranteed Indebtedness or this Guaranty;
(v) the taking or accepting of any other guaranty for all or any part of the
Guaranteed Indebtedness; (vi) any failure by Lender to acquire, perfect or
continue any lien or security interest on collateral securing all or any part
of the Guaranteed Indebtedness or this Guaranty; (vii) the impairment of any
collateral securing all or any part of the Guaranteed Indebtedness or this
Guaranty; (viii) any failure by Lender to sell any collateral securing all or
any part of the Guaranteed Indebtedness or this Guaranty in a commercially
reasonable manner or as otherwise required by law; (ix) any invalidity or
unenforceability of or

 

5

 

defect or deficiency in any of the Loan Documents; or (x) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower or any other guarantor of all or any part of the
Guaranteed Indebtedness.

 

(b)                                 This
Guaranty shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of all or any part of the Guaranteed Indebtedness is
rescinded or must otherwise be returned by Lender upon the insolvency,
bankruptcy or reorganization of Borrower, Guarantor, any other guarantor of all
or any part of the Guaranteed Indebtedness, or otherwise, all as though such
payment had not been made.

 

(c)                                  In
the event Borrower is a corporation, joint stock association or partnership, or
is hereafter incorporated, none of the following shall affect Guarantor’s
liability hereunder: (i) the unenforceability of all or any part of the
Guaranteed Indebtedness against Borrower by reason of the fact that the
Guaranteed Indebtedness exceeds the amount permitted by law; (ii) the act of
creating all or any part of the Guaranteed Indebtedness is ultra vires; or
(iii) the officers or partners creating all or any part of the Guaranteed
Indebtedness acted in excess of their authority.  Guarantor hereby acknowledges that withdrawal from, or
termination of, any ownership interest in Borrower now or hereafter owned or
held by Guarantor shall not alter, affect or in any way limit the obligations
of Guarantor hereunder.

 

9.                                       Actions Against Guarantor.  In the event
of a default in the payment or performance of all or any part of the Guaranteed
Indebtedness when such Guaranteed Indebtedness becomes due, whether by its
terms, by acceleration or otherwise, Guarantor shall, without notice or demand,
promptly pay the amount due thereon to Lender, in lawful money of the United
States, at Lender’s address set forth in Subparagraph 1(a) above.  One or more successive or concurrent actions
may be brought against Guarantor, either in the same action in which Borrower
is sued or in separate actions, as often as Lender deems advisable.  The exercise by Lender of any right or
remedy under this Guaranty or under any other agreement or instrument, at law,
in equity or otherwise, shall not preclude concurrent or subsequent exercise of
any other right or remedy.  The books
and records of Lender shall be admissible as evidence in any action or
proceeding involving this Guaranty and shall be prima facie evidence of
the payments made on, and the outstanding balance of, the Guaranteed
Indebtedness.

 

10.                                 Payment by Guarantor.  Whenever
Guarantor pays any sum which is or may become due under this Guaranty, written
notice must be delivered to Lender contemporaneously with such payment.  Such notice shall be effective for purposes
of this paragraph when contemporaneously with such payment Lender receives such
notice either by: (a) personal delivery to the address and designated
department of Lender identified in Subparagraph 1(a) above, or (b)
United States mail, certified or registered, return receipt requested, postage
prepaid, addressed to Lender at the address shown in Subparagraph 1(a)
above.  In the absence of such notice to
Lender by Guarantor in compliance with the provisions hereof, any sum received
by Lender on account of the Guaranteed Indebtedness shall be conclusively
deemed paid by Borrower.

 

11.                                 Death of Guarantor.  In the event
of the death of Guarantor, the obligations of the deceased Guarantor under this
Guaranty shall continue as an obligation against his estate as to (a) all of
the Guaranteed Indebtedness that is outstanding on the date of the Guarantor’s
death, and any renewals or extension thereof, and (b) all loans, advances and
other extensions of credit

 

6

 

made to or for the account of Borrower on or after the date of
Guarantor’s death pursuant to an obligation of Lender under a commitment or
agreement described in Subparagraph 1(d) above and made to or with
Borrower prior to the date of Guarantor’s death.  The terms and conditions of this Guaranty, including without
limitation the consents and waivers set forth in Paragraph 7
hereof, shall remain in effect with respect to the Guaranteed Indebtedness
described in the preceding sentence in the same manner as if Guarantor had not
died.

 

12.                                 Notice of Sale.  In the event
that Guarantor is entitled to receive any notice under the Uniform Commercial
Code, as it exists in the state governing any such notice, of the sale or other
disposition of any collateral securing all or any part of the Guaranteed
Indebtedness or this Guaranty, reasonable notice shall be deemed given when
such notice is deposited in the United States mail, postage prepaid, at the
address for Guarantor set forth in Subparagraph 1(c) above, ten
(10) days prior to the date any public sale, or after which any private sale,
of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.

 

13.                                 Waiver by Lender.  No delay on
the part of Lender in exercising any right hereunder or failure to exercise the
same shall operate as a waiver of such right. 
In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by an officer of Lender, and
then only in the specific instance and for the purpose given.

 

14.                                 Successors and Assigns.  This
Guaranty is for the benefit of Lender, it successors and assigns.  This Guaranty is binding upon Guarantor and
Guarantor’s heirs, executors, administrators, personal representatives and
successors, including without limitation any person or entity obligated by
operation of law upon the reorganization, merger, consolidation or other change
in the organizational structure of Guarantor.

 

15.                                 Costs and Expenses.  Guarantor
shall pay on demand by Lender all costs and expenses, including without
limitation all reasonable attorneys’ fees, incurred by Lender in connection
with the preparation, administration, enforcement and/or collection of this
Guaranty.  This covenant shall survive
the payment of the Guaranteed Indebtedness.

 

16.                                 Severability.  If any
provision of this Guaranty is held by a court of competent jurisdiction to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable, shall not impair or invalidate the remainder of this
Guaranty and the effect thereof shall be confined to the provision held to be
illegal, invalid or unenforceable.

 

17.                                 No Obligation.  Nothing
contained herein shall be construed as an obligation on the part of Lender to
extend or continue to extend credit to Borrower.

 

18.                                 Amendment.  No
modification or amendment of any provision of this Guaranty, nor consent to any
departure by Guarantor therefrom, shall be effective unless the same shall be
in writing and signed by an officer of Lender, and then shall be effective only
in the specific instance and for the purpose for which given.

 

19.                                 Cumulative Rights.  All rights
and remedies of Lender hereunder are cumulative of each other and every other
right or remedy which Lender may otherwise have at law or in equity or under
any instrument or agreement, and the exercise of one or more of such rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
any other rights

 

7

 

or remedies.  This Guaranty,
whether general, specific and/or limited, shall be in addition to and cumulative
of, and not in substitution, novation or discharge of, any and all prior or
contemporaneous guaranty agreements by Guarantor in favor of Lender or assigned
to Lender by others.

 

20.                                 Governing Law, Venue.  This
Guaranty is intended to be performed in the State of Texas.  Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall govern the validity, construction, enforcement and interpretation
of this Guaranty.  In the event of a
dispute involving this Guaranty or any other instruments executed in connection
herewith, the undersigned irrevocably agrees that venue for such dispute shall
lie in any court of competent jurisdiction in Travis County, Texas.

 

21.                                 Compliance with Applicable Usury Laws. 
Notwithstanding any other provision of this Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of
the Guaranteed Indebtedness, Guarantor and Lender by its acceptance hereof
agree that Guarantor shall never be required or obligated to pay interest in
excess of the maximum non-usurious interest rate as may be authorized by
applicable law for the written contracts which constitute the Guaranteed
Indebtedness.  It is the intention of
Guarantor and Lender to confirm strictly to the applicable laws which limit
interest rates, and any of the aforesaid contracts for interest, if and to the
extent payable by Guarantor, shall be held to be subject to reduction to the
maximum non-usurious interest rate allowed under said law.

 

22.                                 Gender.  Within this
Guaranty, words of any gender shall be held and construed to include the other
gender.

 

23.                                 Captions.  The headings
in this Guaranty are for convenience only and shall not define or limit the
provisions hereof.

 

24.                                 Right of Revocation.  Guarantor
understands and agrees that Guarantor may revoke this Guaranty at any time with
respect to indebtedness or obligations of Borrower incurred after the effective
date of the revocation by giving Lender written notice that Guarantor will not
be liable hereunder for any indebtedness or obligations of Borrower incurred on
or after the effective date of such revocation.  Such revocation shall be deemed to be effective on the 5th  day following written acknowledgement by an officer
of the Lender that the Lender received written notice of revocation delivered
either by:  (a) personal delivery to the
address and designated department of Lender identified in Subparagraph 1(a)
above, or (b) United States mail, registered or certified, return receipt
requested, postage prepaid, addressed to Lender at the address shown in Subparagraph
1(a) above.  Notwithstanding such
revocation, Guarantor shall remain liable on its obligations hereunder until
payment in full to Lender of (a) all of the Guaranteed Indebtedness that is
outstanding on the effective date of such revocation, and any renewals and
extensions thereof, including interest thereon and fees and expenses related
thereto, that have accrued or been incurred after the effective date of such
revocation, and (b) all loans, advances and other extensions of credit made to
or for the account of Borrower on or after the effective date of such
revocation pursuant to the obligation of Lender under a commitment or agreement
made to or with Borrower prior to the effective date of such revocation.  The terms and conditions of this Guaranty,
including without limitation the consents and waivers set forth in Paragraph
7 hereof, shall remain in effect with respect to the Guaranteed
Indebtedness described in the preceding sentence in the same manner as if such
revocation had not been made by Guarantor.

 

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EXECUTED as of the
date first above written.

 

	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  SCHLOTZSKY’S, INC.

  
	
   

  	
  a Texas corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN C.
  WOOLEY

  	
   

  
	
   

  	
   

  	
  John C. Wooley,
  President

  	
   

  

 

9Exhibit
10.47

 

EQUIPMENT FINANCE AGREEMENT

 

American Express Business
Finance Corporation (“Secured Party”)

600 Travis Street, Suite
1300

Houston, TX  77002

PHONE  800-745-9292        FAX 
866-878-7866

 

Agreement Number:  412209/809094

 

	
  A. Debtor:

  	
  Supplier:

  	
   

  
	
  Schlotzsky’s Inc.

  	
  See attached invoice(s)
  or equipment list for Supplier information

  	
   

  
	
  203 Colorado Street

  	
   

  	
   

  
	
  Austin, TX 78701

  	
   

  	
   

  
	
  (512) 236-3620

  	
   

  	
   

  

 

B.                                    Collateral
(Quantity, Description & Serial No.)

See attached invoice(s)  or
equipment list (“Collateral”)

Location:
203 Colorado Street, Sustin, TX  78701

 

C.                                    Schedule
of Payments:

 

	
  Initial Term (In Months):

  	
  60

  
	
  Total Number of Payments:

  	
  60

  
	
  Amount of Each Payment ($):

  	
  10,186.11

  
	
  Total Initial Payment ($):

  	
  10,586.11

  
	
  First ($):

  	
  10,186.11

  
	
  Last ($):

  	
  0.00

  
	
  Doc. Fee ($):

  	
  200.00

  
	
  Deposit ($):

  	
  0.00

  

 

D.                                    DISCLAIMER OF WARRANTIES AND CLAIMS:
 LIMITATION OF REMEDIES.  THERE ARE NO WARRANTIES BY OR ON BEHALF OF
SECURED PARTY AND NEITHER THE SUPPLIER NOR ANY OTHER PARTY IS SECURED PARTY’S
AGENT. DEBTOR ACKNOWLEDGES AND AGREES BY ITS SIGNATURE BELOW AS FOLLOWS:  (A) SECURED PARTY MAKES NO WARRANTIES EITHER
EXPRESS OR IMPLIED AS TO THE CONDITION OF THE COLLATERAL, ITS MERCHANTABILITY,
ITS FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE, ITS DESIGN, ITS
CONDITION, ITS CAPACITY, ITS QUALITY, OR WITH RESPECT TO ANY CHARACTERISTICS OF
THE COLLATERAL; (B) DEBTOR ACCEPTS COLLATERAL “AS IS” AND WITH ALL FAULTS;  (C) DEBTOR ACKNOWLEDGES THAT THE COLLATERAL
WILL BE USED SOLELY FOR COMMERCIAL OR BUSINESS PURPOSES; (D) IF THE COLLATERAL
IS NOT PROPERLY INSTALLED, DOES NOT OPERATE AS REPRESENTED OR WARRANTED BY THE
SUPPLIER OR MANUFACTURER, OR IS UNSATISFACTORY FOR ANY REASON, REGARDLESS OF
CAUSE OR CONSEQUENCE, DEBTOR’S ONLY REMEDY, IF ANY, SHALL BE AGAINST THE
SUPPLIER OR MANUFACTURER OF THE COLLATERAL AND NOT AGAINST SECURED PARTY; (E)
DEBTOR SHALL HAVE NO REMEDY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES AGAINST
SECURED PARTY; AND (F) NO DEFECT, DAMAGE OR UNFITNESS OF THE COLLATERAL FOR ANY
PURPOSE SHALL RELIEVE DEBTOR OF THE OBLIGATION TO MAKE PAYMENTS OR RELIEVE
DEBTOR OF ANY OTHER OBLIGATION UNDER THIS AGREEMENT.

 

E.                                      Amendments:
No term or provision of this Agreement may be amended, altered, waived or
discharged except by a written instrument signed by all parties to this Agreement.

 

THIS
AGREEMENT, THE TERMS OF WHICH HAVE BEEN FREELY NEGOTIATED BY EACH PARTY, IS
SUBJECT TO THE TERMS AND CONDITIONS ON THE REVERSE SIDE OR FOLLOWING PAGE WHICH
ARE MADE A PART HEREOF AND WHICH DEBTOR AND SECURED PARTY ACKNOWLEDGE THEY HAVE
READ AND ACCEPTED.

 

THIS IS
A NON-CANCELABLE AGREEMENT.

 

	
  Secured Party:

  	
  American Express
  Business Finance Corporation

  	
  Debtor:

  	
  Schlotzsky’s, Inc.

  
	
  By:

  	
  /s/
  M.A. OWEN

  	
   

  	
  By:

  	
  /s/
  JOHN C. WOOLEY

  	
   

  
	
  Title:

  	
  Team Leader

  	
  Print Name:

  	
  John
  C. Wooley

  
	
   

  	
   

  	
  Title:

  	
  CEO and President

  
						

 

Certificate
of acceptance: The undersigned Debtor certifies to Secured
Party that all items of Collateral referred to above or on the attachment(s)
hereto have been received and irrevocably accepted by the Debtor and were at
the time of receipt in good order and condition and acceptable to use.  Debtor approves payment by Secured Party to
the Supplier.  Debtor hereby certifies
that Secured Party has fully and satisfactorily performed all covenants and
conditions to be performed by it under the Agreement.  Debtor agrees to enforce, in its own name,
all warranties, agreements or representations, if any, which may be made by the
Supplier in respect to the Collateral.

 

	
   

  	
  /s/
  JOHN C. WOOLEY

  
	
   

  	
  Signature

  	
  Date

  

 

REQUEST
FOR ELECTRONIC PAYMENT

Please
attach a voided check from the account to be debited

 

The undersigned hereby
authorizes and requests Secured Party to initiate electronic debit entries (and
credit entries and adjustments for any debit entries in error) or affect a
charge by any other commercially accepted practice to the account indicated
below in the financial institution named below (“Depository”).  The undersigned hereby authorizes and
requests the Depository to honor the debit and/or credit entries initiated by
Secured Party.  This authorization is for
payments due under the referenced Agreement. This authority is to remain in
force until such time as all amounts due under the Agreement are paid in full
or until Secured Party and Depository have received written notification from
the undersigned terminating this authorization in such time and manner as to
afford Secured Party and Depository a reasonable opportunity to act on it.

 

	
  Customer Name
  Printed:  Schlotzsky’s, Inc.

  	
  Agreement Number:  412209/809094

  
	
  Depository Name and
  Branch:

  	
   

  	
   

  	
  Account Number:

  	
   

  
	
  Depository Address
  (city & state):

  	
   

  	
   

  	
   

  
	
  Depository Telephone
  Number:

  	
   

  	
   

  	
  Customer Signature:

  	
   

  
								

 

1

 

TERMS
AND CONDITIONS

 

Agreement Number:  412209/809094

 

1.                                      Definitions;
Reports:  The words “you” and “your” refer to the
DEBTOR, its successors and assigns, as shown on the reverse side or preceding
page, as applicable (the “first page”). 
The words “we”, “us” and “our” refer to the SECURED PARTY, its
successors and assigns, as shown on the first page. You authorize us and our
designees to obtain investigative credit reports, regarding you and each
guarantor, from a credit bureau or a credit agency and to investigate the
references given on any statement or data obtained and to share such reports
with others.

 

2.                                      Acceptance:
We agree to lend to you, and you agree to borrow from us, an amount for the
purchase of: equipment, items, products, software, services, and other personal
property described or referenced on the first page (“Collateral”), for the term
shown on the first page (“Initial Term”), which shall commence on the
commencement of Secured Party’s billing cycle following the funding of the loan
evidenced by the Agreement (the “Loan”). 
We shall have no obligations hereunder until we accept and sign this Agreement
at our offices.  If this Agreement is
executed by you and thereafter sent to us by facsimile transmission, then until
such time as we have received the Agreement with your manual signature thereon,
such facsimile transmission shall constitute, upon acceptance and execution by
us in our offices, the original Agreement and chattel paper and shall be
admissible for all purposes as the original Agreement.  You agree to promptly forward to us the
Agreement with your manual signature thereon and upon receipt by us, the
Agreement with your manual signature thereon shall constitute the chattel paper
in lieu of such facsimile transmission.

 

3.                                      Security
Interest: You hereby grant to us a security interest under the Uniform
Commercial Code (“UCC”) in the property described or referenced as Collateral
and all accessions and additions thereto and replacements thereof and all
proceeds and products of the foregoing (collectively, the “Collateral” and
individually an “Item” or “Item of Collateral”).  Such security interest is granted to secure payment and
performance by you of your obligations hereunder and under any other present or
future agreement with us.

 

4.                                      Payments:
You promise to pay us the payments shown on the same page, in advance,
commencing as of the first day of the Initial Term and continuing on the first
day of each (each, a “Payment) month in which a payment is due (each day a
Payment is due hereunder a “Payment Date”), without need of an invoice;
provided, as indicated in the Schedule of Payments, the payments included in
the Total Initial Payment shall be paid upon your execution of this
Agreement.  We reserve the right to
adjust the payment shown in the Schedule of Payments, by up to 10% to reflect
changes in the final amounts paid to the Supplier or amount borrowed.  Any such adjustment shall be reflected on a
subsequent invoice to be sent to you within 30 days.  If the contemplated transaction is not consummated, the Total
Initial Payment may be retained, by us, as partial compensation for costs and expenses
incurred in preparation for the transaction. 
On second Payment Date in addition to the Payment due on such date you
agree to pay us an amount equal to 1/30th of the Payment Amount for
each day from and including the date the loan is funded to but excluding the
first day of the Interim Term.  Your
obligation to make payments and pay other amounts hereunder is absolute and
unconditional and not subject to abatement, reduction or set-off for any reason
whatsoever. The Initial Term shall continue for the number of months indicated
on the first page. The Deposit shown on the first page shall not bear interest
and we may apply the Deposit to cure any default, in which event you will
promptly restore the Deposit to its full amount.  After all of the obligations under this Agreement are fully paid
and performed, any remaining balance of the Deposit shall be refunded to
you.  Provided that no event of default
has occurred or is continuing, Lessee may terminate this EFA at any time on or
before the 30th day following the date of this Addendum by making a
cash payment in the amount of $494,712.03; or terminate this EFA 30 days after
but before the 60th day following the date of this Addendum by
making a cash payment in the amount of $489,371.18; or terminate this EFA after
the 60th day but before the 90th day following the date
of this Addendum by making a cash payment in the amount of $483,976.92.

 

5.                                      Location:
You agree to maintain records showing the location of each item of
Collateral.  You shall report such
location to us upon our request.  Your
failure, to maintain records showing the location of each item of Collateral
and/or to report the location of each item of Collateral shall constitute a
default.

 

6.                                      Maintenance;
Installation: You are responsible for installing and keeping the Collateral
in good working order. You shall not make any alterations, additions or
improvements to the Collateral, which detract from its economic value or
functional utility.  All additions and
improvements made to the Collateral shall be deemed accessions thereto, and
shall not be removed if removal would impair the Collateral’s economic value or
functional utility.  If the Collateral
is damaged or lost, you agree to continue making scheduled payments unless you
pay the Casualty Value pursuant to Section 13.

 

7.                                      Insurance:  You agree to keep the Collateral fully
insured against loss until this Agreement is paid in full and to have us named
as loss payee. You also agree to obtain a general public liability insurance
policy, with minimum limits of $100,000/$300,000 for bodily injury and $50,000
for property damage,  from anyone who is
acceptable to us. You agree to provide us with certificates or other evidence
of insurance acceptable to us, before the Initial Term begins, and during the
term.  If at any time you have failed to
deliver to us a valid certificate of insurance reflecting such insurance as
being in effect, then we will have the right, but no obligation, to have such
insurance protecting us placed for the term of the Agreement at your expense;
and if so placed, we will add to your payment and you will pay us our costs of
obtaining such insurance and any customary charges or fees of ours or our
designee associated with such insurance together with interest thereon at the maximum
rate permitted by applicable law.

 

8.                                      Taxes
and Fees: You agree to pay when due or reimburse us for all taxes, fees,
fines and penalties relating to use or ownership of the Collateral or to this
Agreement, including documentary stamp taxes, now or hereafter imposed, levied
or assessed by any federal, state or local government or agency.  If any federal, state, county or local
government or agency requires any taxes, charges or fees to be paid in advance,
and we pay such taxes, charges or fees, we reserve the right to adjust the
payment shown in the Schedule of Payments, to reflect the payment of such
taxes, charges or fees.  Any such
adjustment shall be reflected on a subsequent invoice to be sent to you within
30 days.

 

9.                                      Personal
Property:  The Collateral will be
and shall remain personal property and, if requested by us, you will obtain
real property waivers satisfactory to us. 
You shall keep the Collateral free from any and all liens and
encumbrances.  You shall give us
immediate notice of any attachment or other judicial process, liens or
encumbrances affecting the Collateral. You hereby authorize us and appoint us
as your attorney-in-fact with the power of attorney to file this Agreement and
any financing statement(s) or security agreement(s) with respect to the
Collateral in any state in the United States. You further authorize us to file
this Agreement and such financing statements or security agreements without
your signature thereon. If your signature on any financing statement is
required by law, you shall execute such supplemental instruments and financing
statements we deem to be necessary and advisable and shall otherwise cooperate
to defend our title by filing or otherwise. 
You also agree to pay us on demand filing, registration and releasing
fees prescribed by the UCC or other law. 
Any Collateral that is subject to title registration laws shall be
titled and registered as directed by us.

 

10.                               Default;
Remedies: If you do not pay when due or if you breach or fail to perform
any of your other covenants and promises under this Agreement or any other
agreement entered into by you and held or serviced by us or if you declare
bankruptcy or insolvency or if you terminate your entity existence or take any
actions regarding the cessation or winding up of your business affairs, you
will be in default. If you are in default, at our election, we can accelerate
and require that you pay, as reasonable liquidated damages for loss of bargain,
the “Accelerated Balance”.  The
Accelerated Balance will be equal to the total of (i) accrued and unpaid
amounts, and (ii) the remaining payments. We can also pursue any of the
remedies available to us under the UCC or any other law. In addition, you agree
to pay our reasonable attorneys’ fees and actual costs including repossession
and collection costs, and all non-sufficient funds charges and similar charges.

 

11.                               Late
Charge:  If any part of a payment is
late, you agree to pay a late charge equal to the lesser of (a) the greater of
10% of the payment or $25.00 or (b) the maximum amount permitted by applicable
law.

 

12.                               Assignment;
Inspection:  YOU HAVE NO
RIGHT TO SELL, TRANSFER, ASSIGN, LEASE OR ENCUMBER THE COLLATERAL OR THIS
AGREEMENT.  We may sell, transfer,
assign, or encumber this Agreement.  You
agree that if we sell, transfer, assign, or encumber this Agreement, the
assignee will have the rights and benefits that we assign to the assignee and
will not have to perform any of our obligations.  You agree that the rights of the assignee will not be subject to
any claims, defenses or set-offs that you may have against us.  We and our agents and representatives shall
have the right at any time during regular business hours to inspect the
Collateral and for that purpose to have access to the location of the Collateral.

 

13.                              Risk of
Loss:  You hereby assume and
shall bear the entire risk of loss, theft, damage and destruction of the
Collateral from any cause whatsoever and no loss, theft, damage or destruction
of the Collateral shall relieve you of the obligation to make scheduled
payments or any other obligation under this Agreement, and this Agreement shall
remain in full force and effect except as provided below.  You shall promptly notify us in writing of
such loss, theft, damage or destruction. 
If damage of any kind occurs to any item of Collateral, you, at our
option, shall at your expense (a) place the item in good repair, condition or
working order, or (b) if the Collateral cannot be repaired or is lost, stolen
or suffers a constructive loss under an insurance policy covering the
Collateral, pay to us the “Casualty Value.” 
The Casualty Value will be equal to the total of (i) accrued and unpaid
amounts, and (ii) the remaining payments discounted to present value using the
Federal Funds rate as of the date of payment.

 

14.                               Choice
of Law; Consent to Jurisdiction; Venue:  This Agreement shall be
interpreted, and all rights and liabilities of the parties hereto and
thereunder shall be determined and governed as to validity, interpretation,
enforcement and effect, by the laws of the State of California.  Without limiting the right of Secured
Party to bring any action or proceeding against Debtor in the courts of other
jurisdictions, Debtor hereby irrevocably submits to the jurisdiction of any
State or Federal court located in California or in any other state where
Secured Party has an office.  Secured
Party and Debtor expressly waive any right to a trial by Jury.

 

15.                               Miscellaneous:  During the term of this Agreement, you agree
to provide us with all financial statements and copies of federal or state tax
returns as we may reasonably request. 
If we supply you with labels, you shall label any and all items of
Collateral and shall keep the same affixed in a prominent place.  If any provision hereof or any remedy herein
provided is found to be invalid under any applicable law, such provision shall
be inapplicable and deemed omitted, but the remaining provisions hereof,
including remaining default remedies, shall be given effect in accordance with
the manifest intent hereof.  You agree
that any delay or failure to enforce our rights under this Agreement does not
prevent us from enforcing any rights at a later time. You agree that the terms
and conditions indicated above and on the first page are a complete and
exclusive statement of our agreement and they may be modified only by written
agreement signed by all of the parties hereto and not by course of performance.
You agree that the original of this Agreement may be microfilmed or
electronically duplicated and a photostatic copy of such microfilm or
electronic duplication may be introduced in lieu of the original thereof and
without further foundation. The parties hereto expressly waive the secondary
evidence rule. You acknowledge receipt of a copy of this Agreement.  You agree that this Agreement will be
binding upon your successors, assigns, heirs and legal representatives.  You agree that our waiver of any provision
hereunder shall not constitute a waiver of any other matter. It is the express
intent of the parties not to violate any applicable usury laws or to exceed the
maximum amount of interest permitted to be charged or collected by applicable
law, and any such excess payment will be applied to the payments in inverse
order of maturity, and any remaining excess will be refunded to you.

 

2

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