**Exhibit 10.44**

 

**PROMISSORY NOTE**

| $1,000,000.00 |   | April 8, 2003 |
|---------------|--------|---------------|

 

For value received, the undersigned (the “Makers,”whether one or more), promise to pay to the order of JOHN C. WOOLEY ANDJEFFREY J. WOOLEY (the “Payee”), at 203 Colorado, Austin, TravisCounty, Texas 78701, or such other location as the Payee designates to theMakers in writing, the principal sum of ONE MILLION AND NO/100 DOLLARS($1,000,000.00), or the outstanding principal amount advanced hereunder,whichever is less, in legal and lawful money of the United States of America,with interest thereon from the date hereof through the maturity date of thisNote (whether by acceleration or otherwise) (the “Maturity Date”) at the rateof six percent (6.0%) per annum (calculated on the basis of the actual numberof days elapsed but computed as if each year consisted of 360 days), theinterest being payable as hereinafter specified.  After the Maturity Date until paid, unpaid principal and accruedunpaid interest shall bear interest at a rate per annum equal to the lesser of(i) eighteen percent (18%), or (ii) the Maximum Lawful Rate.  As used herein, the term “Maximum LawfulRate” shall mean the greater of (i) the highest non-usurious rate of interestpermitted by applicable United States law, or (ii) a rate per annum equal tothe applicable weekly ceiling described in Chapter 303 of the Texas FinanceCode, as amended, as such indicated rate ceiling is in effect from time totime, but in no event greater than twenty-four (24.0%) per annum.  Unless precluded by law, changes in theMaximum Lawful Rate created by statute or governmental action during the termof this Note shall be immediately applicable to this Note on the effective dateof such changes.  If the applicable lawceases to provide for a Maximum Lawful Rate, the Maximum Lawful Rate shall beequal to eighteen percent (18%) per annum, unless the loan evidenced by thisNote is subject to Regulation Z of the Board of Governors of the FederalReserve System, 12 C. F. R. §226 and is secured by a dwelling, in which casethe Maximum Lawful Rate shall be equal to twenty-four percent (24.0%) perannum.

 

Notwithstanding the foregoing, if, at any time, therate of interest applicable to this Note (but for the limitation thereof to theMaximum Lawful Rate) exceeds the Maximum Lawful Rate, the rate of interest toaccrue on this Note shall be limited to the Maximum Lawful Rate, but anysubsequent reductions in such rate of interest applicable to this Note (but forthe limitation thereof to the Maximum Lawful Rate) shall not reduce the rate ofinterest to accrue on this Note below the Maximum Lawful Rate until the totalamount of interest which would have accrued if a varying rate per annum equalto the rate of interest applicable to this Note (but for the limitation thereofto the Maximum Lawful Rate) had at all times been in effect.

 

If the Maximum Lawful Rate is increased by statute orother governmental action subsequent to the date hereof, then the Makers agreethat the new Maximum Lawful Rate will be applicable hereto from the effectivedate of the new Maximum Lawful Rate, unless such application is precluded bystatute or governmental action or by the general law of the jurisdictiongoverning the transaction evidenced hereby.

 

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TERMS OF PAYMENT:

 

The accrued interest on this Note shall be due andpayable in monthly installments, commencing on May 8, 2003, and continuingregularly thereafter on the same day of each calendar month until August 8,2003, when the entire amount of this Note, principal and accrued interest thenremaining unpaid, shall be due and payable. Interest shall be calculated on the unpaid principal to the date eachinstallment is paid and each such payment shall be credited to the discharge ofthe interest accrued, the reduction of principal, and other authorized charges,if any, in such manner and order as the Payee shall determine in its solediscretion.

 

PAYMENT ON NON-BUSINESSDAYS:

 

If any payment hereunder falls due on a Saturday,Sunday or public holiday on which commercial banks in Austin, Texas arepermitted or required by law to be closed, the time for such payment shall beextended to the next day on which the Payee is open for business, and suchextension of time shall be included in the calculation of interest accruing andpayable hereunder.

 

PREPAYMENT:

 

The Makers reserve the right to prepay this Note inany amount at any time prior to maturity without penalty.  Interest shall be calculated on the unpaidprincipal to the date of any prepayment and any such prepayment shall be appliedfirst toward the payment of accrued interest and next to the principalinstallments of this Note in the inverse order of maturity.

 

SECURITY FOR PAYMENT:

 

Payment of this Note is secured by, and this Note isentitled to the benefits of, all security agreements, assignments, deeds oftrust, mortgages and lien instruments executed by the Makers (or any of them),or other similar instruments, guaranties, endorsements or other agreements,executed by any other person or entity (the “Collateral Agreements,” whetherone or more) to secure, guarantee or otherwise provide for the payment hereof,in favor of or for the benefit of the Payee, including any previously executedand any now or hereafter executed. Without limiting the foregoing, the Collateral Agreements includeSecurity Agreement dated of even date herewith executed by the Makers and Payeecovering certain of the Makers’ personal property.

 

USE OF PROCEEDS:

 

This Note represents funds advanced to the Makers atthe Makers’ special instance and request and used to provide working capitalfor the Makers.

 

REPRESENTATIONS ANDWARRANTIES:

 

The Makers expressly represent and warrant to thePayee that it is a corporation duly organized and existing under the laws ofthe State of Texas; that it possesses full power and authority to own itsproperty and to conduct its business as now conducted and as presently 

 

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proposed to be conducted; that the execution and delivery of this Notewill not contravene any provisions of its articles incorporation, bylaws or anyother agreement relating to its form of entity; that the officer executing thisNote is the legally qualified and acting officer of said corporation and isexpressly authorized to execute this Note by appropriate resolution of theBoard of Directors of said corporation.

 

LIMITATION OF INTEREST:

 

All agreements and transactions among the Makers andthe Payee, whether now existing or hereafter arising, whether contained hereinor in any other instrument, and whether written or oral, are hereby expresslylimited so that in no contingency or event whatsoever, whether by reason ofacceleration of the maturity hereof, late payment, prepayment, or otherwise,shall the amount of interest contracted for, charged or received by the Payeefrom the Makers for the use, forbearance, or detention of the principalindebtedness or interest hereof, which remains unpaid from time to time, exceedthe Maximum Lawful Rate, it particularly being the intention of the parties heretoto conform strictly to the applicable usury laws of the State of Texas (orapplicable United States law to the extent that it permits the Payee tocontract for, charge or receive a greater amount of interest than under Texaslaw).  Any interest payable hereunder orunder any other instrument relating to the indebtedness evidenced hereby thatis in excess of the Maximum Lawful Rate, shall, in the event of acceleration ofmaturity, late payment, prepayment, or otherwise, be applied to a reduction ofthe unrepaid indebtedness hereunder and not to the payment of interest, or ifsuch excessive interest exceeds the unpaid balance of such unrepaidindebtedness, such excess shall be refunded to the Makers.  To the extent not prohibited by applicablelaw, determination of the Maximum Lawful Rate shall at all times be made byamortizing, prorating, allocating and spreading in equal parts during the fullterm of this loan, all interest at any time contracted for, charged or receivedfrom the Makers in connection with this loan, so that the actual rate ofinterest on account of such indebtedness is uniform throughout the termthereof.

 

SUCCESSORS AND ASSIGNS:

 

As used herein, the term “Payee” shall include thesuccessors and assigns of the Payee and any subsequent owner and holder of thisNote, and the term “Makers” shall include co-makers, endorsers, guarantors,sureties and their respective successors and assigns.

 

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DEFAULT AND COLLECTION:

 

Subject to the express noticeand cure provisions contained in this Note, it is expressly provided that, upondefault in the punctual payment of this Note, or any part hereof, principal orinterest, as the same shall become due and payable, or upon default in theperformance of or compliance with any of the terms of any of the CollateralAgreements, or if the Payee deems the Payee insecure, either because theprospect of timely payment of this Note becomes impaired, or because theprospect of timely performance of any of the Collateral Agreements becomesimpaired, at the option of the Payee, the entire indebtedness evidenced herebyshall be matured, and in the event default is made in the prompt payment ofthis Note when due or declared due, and the same is placed in the hands of anattorney for collection, or suit is brought on the same, or the same iscollected through probate, bankruptcy or other judicial proceedings, then theMakers jointly and severally agree and promise to pay all reasonable attorney’sfees, court costs and collection costs incurred by the Payee.

 

NOTICE AND CURE RIGHTS:

 

In the event of any default under the CollateralAgreements or this Note, the Makers and each Guarantors named below shall beentitled to receive written notice of any such default and a period of fifteen(15) days after such notice is sent by the Payee within which to cure suchdefault prior to the Payee’s being entitled to exercise any remedy which mayarise due to the occurrence of such default, other than the right to withholdmaking further advances of funds during the period any such default remainsuncured.  However, nothing herein shallobligate the Payee to give the Makers more than one (1) notice of defaultduring any ninety (90) day period.  Theprovisions of this paragraph shall control over any inconsistent provision inany of the Collateral Agreements; and any right to accelerate the maturity ofthis Note contained in any of the Collateral Agreements is subject to priorcompliance with this paragraph.

 

WAIVERS AND CONSENTS:

 

Subject to the express notice and cure provisionscontained in this Note, each of the Makers waives presentment for payment,notice of intent to accelerate, notice of acceleration, protest and notice ofprotest, dishonor and diligence in collecting and the bringing of suit againstany other party, and agrees to all renewals, extensions, partial payments,releases and substitutions of security, in whole or in part, with or withoutnotice, before or after maturity.  ThePayee may remedy any default, without waiving the same, or may waive anydefault without waiving any prior or subsequent default.

 

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GOVERNING LAWS AND VENUE:

 

This Note is governed byand is to be construed and enforced in accordance with the laws of the State ofTexas and of the United States.  TheMakers agree and consent to the jurisdiction of the District Courts of TravisCounty, Texas, and of the United States District Court for the Western Districtof Texas (Austin Division) and acknowledge that such courts shall constituteproper and convenient forums for the resolution of any actions among the Makersand the Payee with respect to the subject matter hereof, and agree that suchcourts shall be the exclusive forums for the resolution of any actions amongthe Makers and the Payee with respect to the subject matter hereof.

 

|   |   | Schlotzsky’s, Inc., |
|--------|--------|--------------------------|
|   |   | a Texas corporation      |
|   |   |                     |
|   |   |                     |
|   |   | By:                      |   | /s/ RICHARD H. VALADE |   |
|   |   | Richard H. Valade,       |
|   |   | Executive Vice President |
|   |   |                     |

 

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