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Membership Interest Pledge Agreement

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Sectors: Retail
Governing Law: California , View California State Laws
Effective Date: January 01, 2000
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EXHIBIT 10.3


MEMBERSHIP INTEREST PLEDGE AGREEMENT


This MEMBERSHIP INTEREST PLEDGE AGREEMENT (this "Agreement") is made
--------- and entered into as of this ____ day of ___________ 2000, by and among Sizzler International, Inc., a Delaware corporation (the "Company"), and FFPE Holding
------- Company, Inc., a Delaware corporation (the "Pledgor").
-------


R E C I T A L S
---------------


A. The Company, Pledgor, S & C Company, Inc., a California corporation (the "Old Company"), the shareholders and certain principals of the
----------- Old Company, and FFPE, LLC, a Delaware limited liability company (the "New
--- Company"), are parties to the LLC Membership Interest Purchase Agreement dated - ------- May 23, 2000 (the "Purchase Agreement"), pursuant to which the Company is
------------------ 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").
--------------


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
------------------- 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
- - - - - - - - -


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,


-1-


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
------------ 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
------------ 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 hereina
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