Document:

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 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, 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 this

Note (whether by acceleration or 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 as if each year consisted of 360 days), the

interest being payable as hereinafter specified.  After the Maturity Date until paid, unpaid principal and accrued

unpaid 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 Lawful

Rate” shall mean the greater of (i) the highest non-usurious rate of interest

permitted by applicable United States law, or (ii) a rate per annum equal to

the applicable weekly ceiling described in Chapter 303 of the Texas Finance

Code, as amended, as such indicated rate ceiling is in effect from time to

time, but in no event greater than twenty-four (24.0%) per annum.  Unless precluded by law, changes in the

Maximum Lawful Rate created by statute or governmental action during the term

of this Note shall be immediately applicable to this Note on the effective date

of such changes.  If the applicable law

ceases to provide for a Maximum Lawful Rate, the Maximum Lawful Rate shall be

equal to eighteen percent (18%) per annum, unless the loan evidenced by this

Note is subject to Regulation Z of the Board of Governors of the Federal

Reserve System, 12 C. F. R. §226 and is secured by a dwelling, in which case

the Maximum Lawful Rate shall be equal to twenty-four percent (24.0%) per

annum.

 

Notwithstanding the 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 Maximum Lawful Rate, the rate of interest to

accrue on this Note shall be limited to the Maximum Lawful Rate, but any

subsequent reductions in such rate of interest applicable to this Note (but for

the limitation thereof to the Maximum Lawful Rate) shall not reduce the rate of

interest to accrue on this Note below the Maximum Lawful Rate until the total

amount of interest which would have accrued if a varying rate per annum equal

to the rate of interest applicable to this Note (but for the limitation thereof

to the Maximum Lawful Rate) had at all times been in effect.

 

If the Maximum Lawful Rate is increased by statute or

other governmental action subsequent to the date hereof, then the Makers agree

that the new Maximum Lawful Rate will be applicable hereto from the effective

date of the new Maximum Lawful Rate, unless such application is precluded by

statute or governmental action or by the general law of the jurisdiction

governing the transaction evidenced hereby.

 

 

TERMS OF PAYMENT:

 

The accrued interest on this Note shall be due and

payable in monthly installments, commencing on May 8, 2003, and continuing

regularly thereafter on the same day of each calendar month until August 8,

2003, when the entire amount of this Note, principal and accrued interest then

remaining unpaid, shall be due and payable. 

Interest shall be calculated on the unpaid principal to the date each

installment is paid and each such payment shall be credited to the discharge of

the interest accrued, the reduction of principal, and other authorized charges,

if any, in such manner and order as the Payee shall determine in its sole

discretion.

 

PAYMENT ON NON-BUSINESS

DAYS:

 

If any payment hereunder falls due on a Saturday,

Sunday or public holiday on which commercial banks in Austin, Texas are

permitted or required by law to be closed, the time for such payment shall be

extended to the next day on which the Payee is open for business, and such

extension of time shall be included in the calculation of interest accruing and

payable hereunder.

 

PREPAYMENT:

 

The Makers reserve the right to prepay this Note in

any amount at any time prior to maturity without penalty.  Interest shall be calculated on the unpaid

principal to the date of any prepayment and any such prepayment shall be applied

first toward the payment of accrued interest and next to the principal

installments of this Note in the inverse order of maturity.

 

SECURITY FOR PAYMENT:

 

Payment of this Note is secured by, and this Note is

entitled to the benefits of, all security agreements, assignments, deeds of

trust, 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,” whether

one 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 executed

and any now or hereafter executed. 

Without limiting the foregoing, the Collateral Agreements include

Security Agreement dated of even date herewith executed by the Makers and Payee

covering certain of the Makers’ personal property.

 

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 the Makers.

 

REPRESENTATIONS AND

WARRANTIES:

 

The Makers expressly represent and warrant to the

Payee that it is a corporation 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 conduct its business as now conducted and as presently 

 

2

 

proposed to be conducted; that the execution and delivery of this Note

will not contravene any provisions of its articles incorporation, bylaws or any

other agreement relating to its form of entity; that the officer executing this

Note is the legally qualified and acting officer of said corporation and is

expressly authorized to execute this Note by appropriate resolution of the

Board of Directors of said corporation.

 

LIMITATION OF INTEREST:

 

All agreements and transactions among the Makers and

the Payee, whether now existing or hereafter arising, whether contained herein

or in any other instrument, and whether written or oral, are hereby expressly

limited so that in no contingency or event whatsoever, whether by reason of

acceleration of the maturity hereof, late payment, prepayment, or otherwise,

shall the amount of interest contracted for, charged or received by the Payee

from the Makers for the use, forbearance, or detention of the principal

indebtedness or interest hereof, which remains unpaid from time to time, exceed

the Maximum Lawful Rate, it particularly being the intention of the parties hereto

to conform strictly to the applicable usury laws of the State of Texas (or

applicable United States law to the extent that it permits the Payee to

contract for, charge or receive a greater amount of interest than under Texas

law).  Any interest payable hereunder or

under any other instrument relating to the indebtedness evidenced hereby that

is in excess of the Maximum Lawful Rate, shall, in the event of acceleration of

maturity, late payment, prepayment, or otherwise, be applied to a reduction of

the unrepaid indebtedness hereunder and not to the payment of interest, or if

such excessive interest exceeds the unpaid balance of such unrepaid

indebtedness, such excess shall be refunded to the Makers.  To the extent not prohibited by applicable

law, determination of the Maximum Lawful Rate shall at all times be made by

amortizing, prorating, allocating and spreading in equal parts during the full

term of this loan, all interest at any time contracted for, charged or received

from the Makers in connection with this loan, so that the actual rate of

interest on account of such indebtedness is uniform throughout the term

thereof.

 

SUCCESSORS AND ASSIGNS:

 

As used herein, the term “Payee” shall include the

successors and assigns of the Payee and any subsequent owner and holder of this

Note, and the term “Makers” shall include co-makers, endorsers, guarantors,

sureties and their respective successors and assigns.

 

3

 

DEFAULT AND COLLECTION:

 

Subject to the express notice

and cure provisions contained in this Note, it is expressly provided that, upon

default in the punctual payment of this Note, or any part hereof, principal or

interest, as the same shall become due and payable, or upon default in the

performance of or compliance with any of the terms of any of the Collateral

Agreements, or if the Payee deems the Payee insecure, either because the

prospect of timely payment of this Note becomes impaired, or because the

prospect of timely performance of any of the Collateral Agreements becomes

impaired, at the option of the Payee, the entire indebtedness evidenced hereby

shall be matured, and in the event default is made in the prompt payment of

this Note when due or declared due, and the same is placed in the hands of an

attorney for collection, or suit is brought on the same, or the same is

collected through probate, bankruptcy or other judicial proceedings, then the

Makers jointly and severally agree and promise to pay all reasonable attorney’s

fees, court costs and collection costs incurred by the Payee.

 

NOTICE AND CURE RIGHTS:

 

In the event of any default under the Collateral

Agreements or this Note, the Makers and each Guarantors named below shall be

entitled 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 such

default prior to the Payee’s being entitled to exercise any remedy which may

arise due to the occurrence of such default, other than the right to withhold

making further advances of funds during the period any such default remains

uncured.  However, nothing herein shall

obligate the Payee to give the Makers more than one (1) notice of default

during any ninety (90) day period.  The

provisions of this paragraph shall control over any inconsistent provision in

any of the Collateral Agreements; and any right to accelerate the maturity of

this Note contained in any of the Collateral Agreements is subject to prior

compliance with this paragraph.

 

WAIVERS AND CONSENTS:

 

Subject to the express notice and cure provisions

contained in this Note, each of the Makers waives presentment for payment,

notice of intent to accelerate, notice of acceleration, protest and notice of

protest, dishonor and diligence in collecting and the bringing of suit against

any other party, and agrees to all renewals, 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, without waiving the same, or may waive any

default without waiving any prior or subsequent default.

 

4

 

GOVERNING LAWS AND VENUE:

 

This Note is governed by

and is to be construed and enforced in accordance with the laws of the State of

Texas and of the United States.  The

Makers agree and consent to the jurisdiction of the District Courts of Travis

County, Texas, and of the United States District Court for the Western District

of Texas (Austin Division) and acknowledge that such courts shall constitute

proper and convenient forums for the resolution of any actions among the Makers

and the Payee with respect to the subject matter hereof, and agree that such

courts shall be the exclusive forums for the resolution of any actions among

the 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

  
	

   

  	

   

  	

   

  

 

5Exhibit 10.45

 

SECURITY

AGREEMENT

 

This Security Agreement (the “Security

Agreement”), is dated effective as of the 8th day of

April 2003 (the “Effective Date”),

and is by and between Schlotzsky’s,

Inc., a Texas corporation (the “Debtor”), and John C. Wooley and Jeffrey J. Wooley

(collectively, the “Secured Party”).

 

Section I.                                              CREATION OF SECURITY INTEREST

 

The Debtor hereby grants to the Secured Party a security interest in

the Collateral described in Section II of this Security Agreement

to secure performance and payment of the obligations and indebtedness of the

Debtor to the Secured Party described in Section III of this

Security Agreement (collectively, the “Indebtedness”).

 

Section II.                                          COLLATERAL

 

In order to secure the payment when due of any and all Indebtedness,

the Debtor hereby pledges to the Secured Party and grants to the Secured Party

a security interest in and to the following properties (collectively, the “Collateral”):  all of the Debtor’s accounts, contract rights and general

intangibles (including without limitation payment intangibles), and all

proceeds thereof, whether cash, deposit accounts, investment securities,

general or payment intangibles, or otherwise; provided, however,  that there is expressly excluded from the

Collateral hereunder that property which has previously been pledged to area

developers under area developer agreements and any amounts designated as

advertising contributions under franchise agreements.

 

Section III.                                      PAYMENT OBLIGATIONS OF THE DEBTOR

 

1.                                       The Debtor shall pay to the Secured Party any

sum or sums due or which may become due pursuant to that certain Promissory

Note dated of even date herewith in the original principal sum or

$1,000,000.00, executed by the Debtor and payable to the order of the Secured

Party, including any renewals, extensions or rearrangments thereof (the “Note”), in accordance with the terms of

such Note and the terms of this Security Agreement as well as all other

indebtedness now due and owing the said Secured Party hereunder or under any other

document executed in connection with or as security for the Note.

 

2.                                       The Debtor shall account fully and faithfully

to the Secured Party for proceeds from disposition of the Collateral in any

manner and shall pay or turn over promptly in cash, negotiable instruments,

drafts, assigned accounts or chattel paper all the proceeds from each sale to

be applied to the Debtor’s Indebtedness to the Secured Party, subject if other

than cash, to final payment or collection. 

Application of such proceeds to Indebtedness of the Debtor shall be in

the sole discretion of the Secured Party, provided such application of proceeds

is made by the Secured Party in a reasonable manner.

 

3.                                       The Debtor shall pay to the Secured Party on

demand all expenses and expenditures, including reasonable attorney’s fees and

other legal expenses incurred or paid by the Secured Party in connection with

the origination of the loans evidenced by the Note and/or in 

 

1

 

exercising

or protecting its interests, rights and remedies under this Security Agreement,

plus interest thereon at the rate of interest provided for matured, unpaid

amounts under the Note (the “Default Rate”).

 

4.                                       The Debtor shall pay immediately, without

notice, the entire unpaid Indebtedness of the Debtor to the Secured Party

whether created or incurred pursuant to this Security Agreement or otherwise,

upon the occurrence of an Event of Default under Section V of this

Security Agreement.

 

Section IV.                                      THE DEBTOR’S REPRESENTATION, WARRANTIES AND

AGREEMENTS

 

1.                                       All information supplied and statements made

by the Debtor in any financial, credit or accounting statement or application

for credit prior to, contemporaneously with or subsequent to the execution of

this Security Agreement are and shall be true, correct, complete, valid and

genuine.

 

2.                                       No Financing Statement covering the

Collateral or its proceeds is on file in any public office; and, except for the

security interest granted in this Security Agreement, there is no lien, security

interest or encumbrance in or on the Collateral.

 

3.                                       Until default, the Debtor may use the

Collateral in any lawful manner not inconsistent with this Security Agreement

or with the terms or conditions of any policy of insurance thereon and except

for accounts and contract rights may also sell the Collateral in the ordinary

course of business.  The Secured Party’s

security interest shall attach to all proceeds of sales and other dispositions

of the Collateral.

 

4.                                       At the request of the Secured Party, the

Debtor will maintain a special bank account with American Bank of Commerce,

over which the Secured Party shall have the sole power of withdrawal.  Upon the Secured Party’s demand, the Debtor

will deposit upon receipt all checks, drafts, cash and other payments pursuant

to the Debtor’s contract rights, or in payment or on account of the Debtor’s

accounts.  At least once a week, the

Secured Party will apply the whole or part of the funds on deposit in the

special account against the principal or interest or both of the

Indebtedness.  The Secured Party may

determine the order and method of such application.  Any portion of funds on deposit in the special account which the

Secured Party elects to not so apply may be paid over by the Secured Party to

the Debtor.

 

5.                                       The Debtor shall, at its own expense, do,

make, procure, execute and deliver all acts, things, writings and assurances as

the Secured Party may at any time request to protect, assure or enforce its

interests, rights and remedies created by, provided in or emanating from this

Security Agreement.

 

6.                                       The Debtor shall not sell, lend, rent, lease

or otherwise dispose of the Collateral or any interest therein except as

authorized in this Security Agreement or in writing by the Secured Party, and

the Debtor shall keep the Collateral, including the proceeds thereof, free from

unpaid charges, including taxes, and from liens, encumbrances and security

interests other than that of the Secured Party.

 

2

 

7.                                       The Debtor shall sign and execute alone or

with the Secured Party any Financing Statement or other document or procure any

document and pay all connected costs, necessary to protect the security

interest under this Security Agreement against the rights or interests of third

persons.

 

8.                                       The Debtor is the owner of the Collateral

free of all liens, claims and encumbrances, except as created by this Security

Agreement.

 

Section V.                                          EVENTS OF DEFAULT

 

The Debtor shall be in default under this Security Agreement upon the

happening of any condition or event set forth below (herein called an “Event of Default”):

 

1.                                       The Debtor’s failure to pay when due any

Indebtedness secured by this Security Agreement and the continuance of such

failure beyond any applicable period of grace and/or notice and cure.

 

2.                                       Default by the Debtor in punctual performance

of any of the obligations, covenants, terms or provisions contained or referred

to in this Security Agreement or in any note secured hereby and the continuance

of such default beyond any applicable period of grace and/or notice and cure.

 

3.                                       Any warranty, representation or statement

contained in this Security Agreement or made or furnished to the Secured Party

by or on behalf of the Debtor in connection with this Security Agreement or to

induce the Secured Party to make a loan to the Debtor proves to have been false

in any respect when made or furnished.

 

4.                                       The Debtor’s dissolution, termination of

existence, insolvency or business failure; the appointment of a receiver of all

or any part of the property of the Debtor; an assignment for the benefit of

creditors by the Debtor; the calling of a meeting of creditors of the Debtor;

or the commencement of any proceeding under any bankruptcy or insolvency laws

by or against the Debtor or any guarantor, surety or endorser for the Debtor.

 

Section VI.                                      SECURED PARTY’S RIGHTS AND REMEDIES

 

A.                                   Rights Exclusive of Default

 

1.                                       This Security Agreement, the Secured Party’s

rights hereunder or the Indebtedness hereby secured may be assigned from time

to time, and in any such case the Assignee shall be entitled to all of the

rights, privileges and remedies granted in this Security Agreement to the

Secured Party, and the Debtor will assert no claims or defenses it may have

against the Secured Party against the Assignee, except those granted in this

Security Agreement.

 

2.                                       The Secured Party may execute, sign, endorse,

transfer or deliver in the name of the Debtor, notes, checks, drafts or other

instruments for the payment of money and receipts, certificates of origin,

applications for certificates of title or any other documents, necessary to

evidence, perfect or realize upon the security interest and obligations created

by this Security Agreement.

 

3

 

B.                                     Rights in Event of Default

 

1.                                       Upon the occurrence of an Event of Default,

and at any time thereafter the Secured Party may declare all obligations

secured hereby immediately due and payable and shall have the rights and

remedies of a Secured Party under the Texas Business and Commerce Code,

including without limitation thereto, the right to sell, lease or otherwise

dispose of any or all of the Collateral and the right to take possession of the

Collateral.  Unless the Collateral is

perishable or threatens to decline speedily in value or is of a type

customarily sold on a recognized market, the Secured Party will send the Debtor

reasonable notice of the time and place of any public sale thereof or of the

time after which any private sale or other disposition thereof is to be

made.  The requirement of sending

reasonable notice shall be met if such notice is mailed, postage prepaid, to

the Debtor at 203 Colorado, Austin, Texas  78703,

Attention:  Chief Financial Officer (with a required copy to General

Counsel at the same address) at least ten (10) days before the time of the

sale or disposition.  Expenses of

retaking, holding, preparing for sale, selling or the like shall include the

Secured Party’s reasonable attorney’s fees and legal expenses, and the Debtor

agrees to pay such expenses, plus interest thereon at the Default Rate.  The Debtor shall remain liable for any

deficiency.

 

2.                                       The Secured Party may remedy any default and

may waive any default without waiving any other prior or subsequent default.

 

3.                                       The Secured Party may notify the account

debtors or obligors of any accounts, chattel paper, negotiable instruments or

other evidences of indebtedness remitted by the Debtor to the Secured Party as

proceeds to pay the Secured Party directly.

 

4.                                       The Secured Party may demand, sue for,

collect or make any compromise or settlement with reference to the Collateral

as the Secured Party, in its sole discretion, chooses.

 

5.                                       The remedies of the Secured Party hereunder

are cumulative, and the exercise of any one or more of the remedies provided

for herein shall not be construed as a waiver of any of the other remedies of

the Secured Party.

 

Section VI.                                      ADDITIONAL AGREEMENTS

 

1.                                        The term “Debtor” as used in this instrument

shall be construed as singular or plural to correspond with the number of

persons executing this instrument as the Debtor.  The pronouns used in this instrument are in the masculine gender

but shall be construed as feminine or neuter as occasion may require.  “Secured Party” and “Debtor”, as used in

this instrument, include the heirs, executors or administrators, successors,

representatives, receivers, trustees and assigns of those parties.

 

2.                                       If more than one person executes this

instrument as the Debtor, their obligations under this instrument shall be

joint and several.

 

3.                                       The section headings appearing in this

instrument have been inserted for convenience only and shall be given no

substantive meaning or significance whatever in 

 

4

 

construing

the terms and provisions of this instrument. 

Terms used in this instrument which are defined in the Texas Uniform

Commercial Code are used with the meanings as therein defined.

 

4.                                       The law governing this secured transaction

shall be that of the State of Texas in force at the date of this instrument.

 

5.                                       All property acquired by the Debtor after the

date hereof, which by the terms hereof is required or intended to be subjected

to the lien of this Security Agreement, shall, immediately upon the acquisition

thereof and without further mortgage, conveyance or assignment, become subject

to the lien of this Security Agreement as fully as though now owned by the

Debtor and specifically described herein. 

Nevertheless, the Debtor will do all such further acts and execute,

acknowledge and deliver all such further conveyances, mortgages, financing

statements and assurances as the Secured Party shall reasonably require for

accomplishing the purposes of this Security Agreement.

 

6.                                       Actions hereunder by the Secured Party shall

require the unanimous approval of all the persons comprising the “Secured

Party” hereunder.

 

EXECUTED to be EFFECTIVE AS OF, but not necessarily on, the Effective

Date.

 

	

  DEBTOR:

  	

   

  	

  SECURED

  PARTY:

  
	

   

  	

   

  	

   

  
	

  Schlotzsky’s,

  Inc.,

  	

   

  	

   

  
	

  a

  Texas corporation

  	

   

  	

   

  
	

   

  
	

   

  
	

  By:

  	

   

  	

  /s/

  RICHARD H. VALADE

  	

   

  	

   

  	

  /s/

  JOHN C. WOOLEY

  	

   

  
	

  Richard

  H. Valade, Executive Vice President

  	

  John

  C. Wooley

  
	

   

  
	

   

  
	

   

  
	

   

  	

   

  	

  /s/

  JEFFREY J. WOOLEY

  	

   

  
	

   

  	

  Jeffrey

  J. Wooley

  
								

 

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