**Exhibit 10.48**

 

**MODIFICATION, EXTENSION AND RENEWAL OF PROMISSORY NOTE**

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

 

For valuereceived, the undersigned (the “Makers,” whether one or more), promise to payto the order of JOHN C. WOOLEY AND JEFFREY J. WOOLEY (the “Payee”),at 203 Colorado, Austin, Travis County, Texas 78701, or such otherlocation as the Payee designates to the Makers in writing, the principal sum ofONE MILLION AND NO/100 DOLLARS ($1,000,000.00), or the outstanding principalamount advanced hereunder, whichever is less, in legal and lawful money of theUnited States of America, with interest thereon from the date hereof throughthe maturity date of this Note (whether by acceleration or otherwise) (the“Maturity Date”) at the rate of six percent (6.0%) per annum (calculated on thebasis of the actual number of days elapsed but computed as if each yearconsisted 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.

 

Notwithstandingthe foregoing, if, at any time, the rate of interest applicable to this Note(but for the limitation thereof to the Maximum Lawful Rate) exceeds the MaximumLawful Rate, the rate of interest to accrue on this Note shall be limited tothe Maximum Lawful Rate, but any subsequent reductions in such rate of interestapplicable to this Note (but for the limitation thereof to the Maximum LawfulRate) shall not reduce the rate of interest to accrue on this Note below theMaximum Lawful Rate until the total amount of interest which would have accruedif a varying rate per annum equal to the rate of interest applicable to thisNote (but for the limitation thereof to the Maximum Lawful Rate) had at alltimes been in effect.

 

If the MaximumLawful Rate is increased by statute or other governmental action subsequent tothe date hereof, then the Makers agree that the new Maximum Lawful Rate will beapplicable hereto from the effective date of the new Maximum Lawful Rate,unless such application is precluded by statute or governmental action or bythe general law of the jurisdiction governing the transaction evidenced hereby.

 

This Note isin renewal, extension and modification of that one certain Promissory Note inthe original principal amount of $1,000,000.00 between Maker and Payee datedeffective April 8, 2003.  The onlychange the parties wish to make to the original note is to extend the maturitydate from August 8, 2003 to October 31, 2003. The parties intend all other terms to remain the same.

 

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TERMS OF PAYMENT:

 

The accruedinterest on this Note shall be due and payable in monthly installments,commencing on May 8, 2003, and continuing regularly thereafter on the same dayof each calendar month until October 31, 2003, when the entire amount of thisNote, principal and accrued interest then remaining unpaid, shall be due andpayable.  Interest shall be calculatedon the unpaid principal to the date each installment is paid and each suchpayment shall be credited to the discharge of the interest accrued, thereduction of principal, and other authorized charges, if any, in such mannerand order as the Payee shall determine in its sole discretion.

 

PAYMENT ON NON-BUSINESS DAYS:

 

If any paymenthereunder falls due on a Saturday, Sunday or public holiday on which commercialbanks in Austin, Texas are permitted or required by law to be closed, the timefor such payment shall be extended to the next day on which the Payee is openfor business, and such extension of time shall be included in the calculationof interest accruing and payable hereunder.

 

PREPAYMENT:

 

The Makersreserve the right to prepay this Note in any amount at any time prior tomaturity without penalty.  Interestshall be calculated on the unpaid principal to the date of any prepayment andany such prepayment shall be applied first toward the payment of accrued interestand next to the principal installments of this Note in the inverse order ofmaturity.

 

SECURITY FOR PAYMENT:

 

Payment ofthis Note is secured by, and this Note is entitled to the benefits of, allsecurity agreements, assignments, deeds of trust, mortgages and lieninstruments 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 of evendate herewith executed by the Makers and Payee covering certain of the Makers’personal property.

 

USE OF PROCEEDS:

 

This Noterepresents funds advanced to the Makers at the Makers’ special instance andrequest and used to provide working capital for the Makers.

 

REPRESENTATIONS AND WARRANTIES:

 

The Makersexpressly represent and warrant to the Payee that it is a corporation dulyorganized and existing under the laws of the State of Texas; that it possessesfull power and authority to own its property and to conduct its business as nowconducted and as presently proposed to be conducted; that the execution anddelivery of this Note will not contravene any

 

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provisions of its articlesincorporation, bylaws or any other agreement relating to its form of entity;that the officer executing this Note is the legally qualified and actingofficer of said corporation and is expressly authorized to execute this Note byappropriate resolution of the Board of Directors of said corporation.

 

LIMITATION OF INTEREST:

 

All agreementsand transactions among the Makers and the Payee, whether now existing orhereafter arising, whether contained herein or in any other instrument, andwhether written or oral, are hereby expressly limited so that in no contingencyor event whatsoever, whether by reason of acceleration of the maturity hereof,late payment, prepayment, or otherwise, shall the amount of interest contractedfor, charged or received by the Payee from the Makers for the use, forbearance,or detention of the principal indebtedness or interest hereof, which remainsunpaid from time to time, exceed the Maximum Lawful Rate, it particularly beingthe intention of the parties hereto to conform strictly to the applicable usurylaws of the State of Texas (or applicable United States law to the extent thatit permits the Payee to contract for, charge or receive a greater amount ofinterest than under Texas law).  Anyinterest payable hereunder or under any other instrument relating to theindebtedness evidenced hereby that is in excess of the Maximum Lawful Rate,shall, in the event of acceleration of maturity, late payment, prepayment, orotherwise, be applied to a reduction of the unrepaid indebtedness hereunder andnot to the payment of interest, or if such excessive interest exceeds theunpaid balance of such unrepaid indebtedness, such excess shall be refunded tothe Makers.  To the extent notprohibited by applicable law, determination of the Maximum Lawful Rate shall atall times be made by amortizing, prorating, allocating and spreading in equalparts during the full term of this loan, all interest at any time contractedfor, charged or received from the Makers in connection with this loan, so thatthe actual rate of interest on account of such indebtedness is uniformthroughout the term thereof.

 

SUCCESSORS AND ASSIGNS:

 

As usedherein, the term “Payee” shall include the successors and assigns of the Payeeand any subsequent owner and holder of this Note, and the term “Makers” shallinclude co-makers, endorsers, guarantors, sureties and their respectivesuccessors and assigns.

 

DEFAULT AND COLLECTION:

 

Subject to theexpress notice and cure provisions contained in this Note, it is expresslyprovided that, upon default in the punctual payment of this Note, or any parthereof, principal or interest, as the same shall become due and payable, orupon default in the performance of or compliance with any of the terms of anyof the Collateral Agreements, or if the Payee deems the Payee insecure, eitherbecause the prospect of timely payment of this Note becomes impaired, orbecause the prospect of timely performance of any of the Collateral Agreementsbecomes impaired, at the option of the Payee, the entire indebtedness evidencedhereby shall be matured, and in the event default is made in the prompt paymentof this Note when due or declared due, and the same is placed in the hands ofan attorney 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.

 

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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 Notecontained in any of the Collateral Agreements is subject to prior compliancewith this paragraph.

 

WAIVERS AND CONSENTS:

 

Subject to theexpress notice and cure provisions contained in this Note, each of the Makerswaives presentment for payment, notice of intent to accelerate, notice ofacceleration, protest and notice of protest, dishonor and diligence incollecting and the bringing of suit against any other party, and agrees to allrenewals, extensions, partial payments, releases and substitutions of security,in whole or in part, with or without notice, before or after maturity.  The Payee may remedy any default, withoutwaiving the same, or may waive any default without waiving any prior orsubsequent default.

 

GOVERNING LAWS AND VENUE:

 

This Note isgoverned by and is to be construed and enforced in accordance with the laws ofthe State of Texas and of the United States. The Makers agree and consent to the jurisdiction of the District Courtsof Travis County, Texas, and of the United States District Court for theWestern District of Texas (Austin Division) and acknowledge that such courtsshall constitute proper and convenient forums for the resolution of any actionsamong the Makers and the Payee with respect to the subject matter hereof, andagree that such courts shall be the exclusive forums for the resolution of anyactions among the Makers and the Payee with respect to the subject matterhereof.

 

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

 

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