**Exhibit 10.49**

 

**MODIFICATION, EXTENSION AND RENEWAL OFPROMISSORY NOTE**

 
| $1,000,000.00 |   | October 31, 2003 |
|---------------|--------|-----------------------|

 

For value received, the undersigned (the “Makers,” whether one ormore), promise to pay to the order of JOHN C. WOOLEY AND JEFFREY J.WOOLEY (the “Payee”), at 203 Colorado, Austin, Travis County, Texas 78701,or such other location as the Payee designates to the Makers in writing, theprincipal sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), or theoutstanding principal amount advanced hereunder, whichever is less, in legaland lawful money of the United States of America, with interest thereon fromthe date hereof through the maturity date of this Note (whether by accelerationor otherwise) (the “Maturity Date”) at the rate of six percent (6.0%) per annum(calculated on the basis of the actual number of days elapsed but computed asif each year consisted of 360 days), the interest being payable as hereinafterspecified.  After the Maturity Dateuntil paid, unpaid principal and accrued unpaid interest shall bear interest ata rate per annum equal to the lesser of (i) eighteen percent (18%), or(ii) the Maximum Lawful Rate.  As usedherein, the term “Maximum Lawful Rate” shall mean the greater of (i) the highestnon-usurious rate of interest permitted by applicable United States law, or(ii) a rate per annum equal to the applicable weekly ceiling described inChapter 303 of the Texas Finance Code, as amended, as such indicated rateceiling is in effect from time to time, but in no event greater than twenty-four(24.0%) per annum.  Unless precluded bylaw, changes in the Maximum Lawful Rate created by statute or governmentalaction during the term of this Note shall be immediately applicable to thisNote on the effective date of such changes. If the applicable law ceases to provide for a Maximum Lawful Rate, theMaximum Lawful Rate shall be equal to eighteen percent (18%) per annum, unlessthe loan evidenced by this Note is subject to Regulation Z of the Board ofGovernors of the Federal Reserve System, 12 C. F. R. §226 and is secured by adwelling, in which case the Maximum Lawful Rate shall be equal to twenty-fourpercent (24.0%) per annum.

 

Notwithstanding the foregoing, if, at any time, the rate of interestapplicable to this Note (but for the limitation thereof to the Maximum LawfulRate) exceeds the Maximum Lawful Rate, the rate of interest to accrue on thisNote shall be limited to the Maximum Lawful Rate, but any subsequent reductionsin such rate of interest applicable to this Note (but for the limitationthereof to the Maximum Lawful Rate) shall not reduce the rate of interest toaccrue on this Note below the Maximum Lawful Rate until the total amount ofinterest which would have accrued if a varying rate per annum equal to the rateof interest applicable to this Note (but for the limitation thereof to theMaximum Lawful Rate) had at all times been in effect.

 

If the Maximum Lawful Rate is increased by statute or othergovernmental action subsequent to the date hereof, then the Makers agree thatthe new Maximum Lawful Rate will be applicable hereto from the effective dateof the new Maximum Lawful Rate, unless such application is precluded by statuteor governmental action or by the general law of the jurisdiction governing thetransaction evidenced hereby.

 

----

 

This Note isin renewal, extension and modification of that one certain Modification,Renewal and Extension of Promissory Note between Maker and Payee datedeffective August 8, 2003, which renewed and extended the term of thatcertain Promissory Note in the original principal amount of $1,000,000.00between Maker and Payee dated effective April 8, 2003.  The only change the parties wish to make tothe previous note is to extend the maturity date from October 31, 2003 toJanuary 16, 2004.  The partiesintend all other terms to remain the same.

 

TERMS OF PAYMENT:

 

The accrued interest on this Note shall be due and payable in monthlyinstallments, commencing on November 8, 2003, and continuing regularlythereafter on the same day of each calendar month until January 16, 2004,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-BUSINESS DAYS:

 

If any payment hereunder falls due on a Saturday, Sunday or publicholiday on which commercial banks in Austin, Texas are permitted or required bylaw to be closed, the time for such payment shall be extended to the next dayon which the Payee is open for business, and such extension of time shall beincluded in the calculation of interest accruing and payable hereunder.

 

PREPAYMENT:

 

The Makers reserve the right to prepay this Note in any amount at anytime prior to maturity without penalty. Interest shall be calculated on the unpaid principal to the date of anyprepayment and any such prepayment shall be applied first toward the payment ofaccrued interest and next to the principal installments of this Note in theinverse order of maturity.

 

SECURITY FOR PAYMENT:

 

Payment of this Note is secured by, and this Note is entitled to thebenefits of, all security agreements, assignments, deeds of trust, mortgagesand lien instruments executed by the Makers (or any of them), or other similarinstruments, guaranties, endorsements or other agreements, executed by anyother person or entity (the “Collateral Agreements,” whether one or more) tosecure, guarantee or otherwise provide for the payment hereof, in favor of orfor the benefit of the Payee, including any previously executed and any now orhereafter executed.  Without limitingthe foregoing, the Collateral Agreements include Security Agreement dated ofeven date herewith executed by the Makers and Payee covering certain of theMakers’ personal property.

 

2

----

 

USE OF PROCEEDS:

 

This Note represents funds advanced to the Makers at the Makers’special instance and request and used to provide working capital for theMakers.

 

REPRESENTATIONS AND WARRANTIES:

 

The Makers expressly represent and warrant to the Payee that it is acorporation duly organized and existing under the laws of the State of Texas;that it possesses full power and authority to own its property and to conductits business as now conducted and as presently proposed to be conducted; thatthe execution and delivery of this Note will not contravene any provisions ofits articles incorporation, bylaws or any other agreement relating to its formof entity; that the officer executing this Note is the legally qualified andacting officer of said corporation and is expressly authorized to execute thisNote by appropriate resolution of the Board of Directors of said corporation.

 

LIMITATION OF INTEREST:

 

All agreements and transactions among the Makers and the Payee, whethernow existing or hereafter arising, whether contained herein or in any otherinstrument, and whether written or oral, are hereby expressly limited so thatin no contingency or event whatsoever, whether by reason of acceleration of thematurity hereof, late payment, prepayment, or otherwise, shall the amount ofinterest contracted for, charged or received by the Payee from the Makers forthe use, forbearance, or detention of the principal indebtedness or interesthereof, which remains unpaid from time to time, exceed the Maximum Lawful Rate,it particularly being the intention of the parties hereto to conform strictlyto the applicable usury laws of the State of Texas (or applicable United Stateslaw to the extent that it permits the Payee to contract for, charge or receivea greater amount of interest than under Texas law).  Any interest payable hereunder or under any other instrumentrelating to the indebtedness evidenced hereby that is in excess of the MaximumLawful Rate, shall, in the event of acceleration of maturity, late payment,prepayment, or otherwise, be applied to a reduction of the unrepaidindebtedness hereunder and not to the payment of interest, or if such excessiveinterest exceeds the unpaid balance of such unrepaid indebtedness, such excessshall be refunded to the Makers.  To theextent not prohibited by applicable law, determination of the Maximum LawfulRate shall at all times be made by amortizing, prorating, allocating andspreading in equal parts during the full term of this loan, all interest at anytime contracted for, charged or received from the Makers in connection withthis loan, so that the actual rate of interest on account of such indebtednessis uniform throughout the term thereof.

 

3

----

 

SUCCESSORS AND ASSIGNS:

 

As used herein, the term “Payee” shall include the successors andassigns of the Payee and any subsequent owner and holder of this Note, and theterm “Makers” shall include co-makers, endorsers, guarantors, sureties andtheir respective successors and assigns.

 

DEFAULT AND COLLECTION:

 

Subject to the express notice and cure provisions contained in thisNote, it is expressly provided that, upon default in the punctual payment ofthis Note, or any part hereof, principal or interest, as the same shall becomedue and payable, or upon default in the performance of or compliance with anyof the terms of any of the Collateral Agreements, or if the Payee deems thePayee insecure, either because the prospect of timely payment of this Notebecomes impaired, or because the prospect of timely performance of any of theCollateral Agreements becomes impaired, at the option of the Payee, the entireindebtedness evidenced hereby shall be matured, and in the event default ismade in the prompt payment of this Note when due or declared due, and the sameis placed in the hands of an attorney for collection, or suit is brought on thesame, or the same is collected through probate, bankruptcy or other judicialproceedings, then the Makers jointly and severally agree and promise to pay allreasonable attorney’s fees, court costs and collection costs incurred by thePayee.

 

NOTICE AND CURE RIGHTS:

 

In the event of any default under the Collateral Agreements or thisNote, the Makers and each Guarantors named below shall be entitled to receivewritten notice of any such default and a period of fifteen (15) days after suchnotice is sent by the Payee within which to cure such default prior to thePayee’s being entitled to exercise any remedy which may arise due to theoccurrence of such default, other than the right to withhold making furtheradvances of funds during the period any such default remains uncured.  However, nothing herein shall obligate thePayee to give the Makers more than one (1) notice of default during any ninety(90) day period.  The provisions of thisparagraph shall control over any inconsistent provision in any of theCollateral Agreements; and any right to accelerate the maturity of this Note containedin any of the Collateral Agreements is subject to prior compliance with thisparagraph.

 

WAIVERS AND CONSENTS:

 

Subject to the express notice and cure provisions contained in thisNote, each of the Makers waives presentment for payment, notice of intent toaccelerate, notice of acceleration, protest and notice of protest, dishonor anddiligence in collecting and the bringing of suit against any other party, andagrees to all renewals, extensions, partial payments, releases andsubstitutions of security, in whole or in part, with or without notice, beforeor after maturity.  The Payee may remedyany default, without waiving the same, or may waive any default without waivingany prior or subsequent default.

 

4

----

 

GOVERNING LAWS AND VENUE:

 

This Note is governed by and is to be construed and enforced inaccordance with the laws of the State of Texas and of the United States.  The Makers agree and consent to thejurisdiction of the District Courts of Travis County, Texas, and of the UnitedStates District Court for the Western District of Texas (Austin Division) andacknowledge that such courts shall constitute proper and convenient forums forthe resolution of any actions among the Makers and the Payee with respect tothe subject matter hereof, and agree that such courts shall be the exclusiveforums for the resolution of any actions among the Makers and the Payee withrespect to the subject matter hereof.

 
|   | Schlotzsky’s,  Inc.,  a Texas corporation |
|--------|------------------------------------------------|
|   |                                           |
|   |                                           |   |
|   | By:                                            | /s/ JOYCE CATES |
|   |                                           | Joyce Cates, |
|   |                                           | Senior Vice President - Franchise Operations |

 

5

----