EXHIBIT 10.41
EXECUTION VERSION
THIS PROMISSORY NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE ENTITLED
TO THE BENEFITS OF, AND SUBJECT TO THE TERMS SET FORTH IN, THAT CERTAIN
SUBORDINATION AGREEMENT DATED AS OF DECEMBER 29, 2003 BY AND AMONG
PAYEE, XXXX X. XXXXXX, XXXXXXX X. XXXXXX, SCHLOTZSKY'S FRANCHISOR, LLC,
SCHLOTSKY'S, INC., SCHLOTZSKY'S FRANCHISE OPERATIONS, LLC AND MAKER.
AMENDED AND RESTATED PROMISSORY NOTE
$23,268,000.00 AS OF DECEMBER 15, 2003
FOR VALUE RECEIVED, the undersigned, DFW RESTAURANT TRANSFER CORP., a
Texas corporation ("Maker"), HEREBY PROMISES TO PAY to the order of NS
ASSOCIATES I, LTD., a Texas limited partnership ("Payee"), the principal sum of
TWENTY-THREE MILLION TWO HUNDRED SIXTY-EIGHT THOUSAND Dollars ($23,268,000.00)
(or such other amount as may be outstanding hereunder from time to time), plus
interest accruing on the unpaid balance thereof as herein provided.
1. RELATED DOCUMENTS. This Amended and Restated Promissory Note
(this "Promissory Note") is the "Note" referred to in, and the holder hereof
shall be entitled to the benefits of, that certain Restructuring Agreement dated
as of December 29, 2003 (the "Restructuring Agreement") among the Payee, the
Maker, Schlotzsky's Franchisor, LLC ("Franchisor"), and Schlotzsky's, Inc.
("SI"), to which reference is made for a description of certain security for
this Promissory Note and for a statement of additional terms and conditions
applicable to this Promissory Note, including with respect to required payment
conditions on which the indebtedness evidenced hereby (and any other
Obligations) may be declared to be immediately due and payable. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed thereto (if any) in the Restructuring Agreement. As referenced in the
Restructuring Agreement, this Promissory Note (a) amends, restates and replaces
that certain promissory note dated August 30, 2002 and issued by Maker in the
original principal amount of $23,268,000.00 to Payee, as modified prior to the
date hereof (such promissory note, as so modified, the "Original Note"), and (b)
for all purposes, shall be deemed the same instrument as the Original Note.
Payment of this Promissory Note is secured by that certain Security Agreement
dated as of August 30, 2002, between Maker and Payee. Payment of this Promissory
Note is further secured by (a) a Guaranty dated as of August 30, 2002, by SI, as
amended, (b) a Guaranty of even date herewith, executed by Franchisor, (c) a
Security
PROMISSORY NOTE - PAGE 1
Agreement of even date herewith between Payee and Franchisor, (d) a Trademark
Security Agreement of even date herewith between Payee and Franchisor, (e) a
Stock Pledge Agreement of even date herewith between Payee and Franchisor, and
(f) a Stock Pledge Agreement of even date herewith between Payee and SI.
2. OUTSTANDING PRINCIPAL AND INTEREST. As of December 15, 2003
(the "Effective Date"), (a) the outstanding principal balance of this Promissory
Note (taking into account all payments having been made on the Original Note
through and including the Closing Date referenced in the Restructuring
Agreement, including the payment required to be made on December 15, 2003
pursuant to Section 4(a) below) is $18,012,099.24, and (b) the outstanding
accrued and unpaid interest on this Promissory Note (taking into account all
payments having been made on the Original Note through and including the Closing
Date referenced in the Restructuring Agreement) is $20,726.25.
3. INTEREST. Prior to maturity, the unpaid principal amount of
this Promissory Note shall bear interest at the following per annum rate (such
rate of interest to be referred to herein as the "Contract Rate"):
(a) From the Effective Date through, and including,
December 14, 2004, the Contract Rate shall be three
percent (3%) per annum;
(b) At all times after December 14, 2004, the Contract
Rate shall be an annual rate equal to the greater of
(i) Prime Rate (as in effect from time to time) plus
four percent (4%), and (ii) eight percent (8%).
For purposes of this Note and the other Note Documents, "Prime Rate"
means, the rate of interest announced, from time to time, as reported in The
Wall Street Journal as the "prime rate", or in the event no such rate is
announced, then a comparable rate selected by Payee and specified in a written
notice to Maker. The Maker understands that the Prime Rate may not be the lowest
rate of interest charged to or paid by Customer of Payee or any financial
institution, that the Prime Rate is not necessarily more favorable than another
rate or index, and that rates on other loans or credit facilities may be based
on indices other than the Prime Rate.
Accrued interest on the unpaid principal balance of this Promissory
Note shall be computed on the basis of a year consisting of 365 days, applied to
the actual number of days in each calendar month, but in no event shall such
computation result in an amount of accrued interest that would exceed accrued
interest on the unpaid principal balance hereof during the same period at the
Highest Lawful Rate.
Notwithstanding the foregoing, if at any time the Contract Rate exceeds
the Highest Lawful Rate, as hereinafter defined, the rate of interest to accrue
on this Promissory Note as provided above shall be limited to the Highest Lawful
Rate; however, any subsequent reductions in the Contract Rate shall not reduce
the rate of interest to accrue on this Promissory Note below the Highest Lawful
Rate until the total amount of
PROMISSORY NOTE - PAGE 2
interest accrued on this Promissory Note equals the amount that would have
accrued if the Contract Rate had at all times been in effect.
If any principal and/or interest or any installment thereof is not paid
on or before the date such installment is due Maker shall pay to Payee a late
charge equal to the lesser of (x) five percent (5%) of the payment of principal
and/or interest then due and/or interest or (y) the maximum amount permitted by
applicable law. Upon the occurrence and during the continuation of an Event of
Default, and notwithstanding any lower rate otherwise applicable under the Note
Documents, all amounts payable hereunder or under the Note Documents (including
all Obligations) shall bear interest at per annum rate equal to the lower of (a)
the Highest Lawful Rate, and (b) the Prime Rate plus 8.0% per annum (such rate,
the "Default Rate"). Notwithstanding the foregoing, so long as payment is made
within the time frame permitted under Section 12(a) of the Restructuring
Agreement (to the extent applicable to such payment), the late charge and
Default Rate shall not apply.
Maker agrees that the maximum lawful rate of interest (the "Highest
Lawful Rate") applicable to this Promissory Note under Texas law shall be the
indicated rate ceiling as specified under Texas law; provided that, if permitted
by law, Payee may from time to time implement any ceiling under such laws and
revise the index, formula or provision of law used to compute the rate under
this Promissory Note by notice to Maker as provided in such laws; provided
further that, if any other provision of Texas, state or federal law now or
hereafter in effect and applicable hereto shall permit a greater interest rate
than the maximum rates currently in effect, the Highest Lawful Rate shall be the
highest lawful interest rate hereunder. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds such Highest
Lawful Rate, the Maker and the Payee shall, to the full extent permitted by
applicable law, exclude voluntary prepayments and the effects thereof, and
amortize, prorate, allocate and spread, in equal parts, the total amount of
interest throughout the entire contemplated term of this Promissory Note so that
the interest rate is uniform throughout the entire term of this Promissory Note.
If it is so determined that any interest in excess of such Highest Lawful Rate
is provided for, such excess shall be applied first to any other amounts not
constituting interest due or which may become due under this Promissory Note,
and the balance, if any, shall be refunded to Maker; provided, however, that in
no event shall Maker be obligated to pay, and Payee hereby waives payment of,
the amount of interest to the extent it is in excess of the amount permitted by
applicable law. By execution of the Promissory Note, Maker acknowledges that
Maker believes the loan evidenced by this Note to be non-usurious and agrees
that if, at any time, Maker should have reason to believe that such loan is in
fact usurious, Maker will give the holder of this Note notice of such condition
and Maker agrees that the holder shall have sixty (60) days in which to make
appropriate refund or other adjustment in order to correct such condition if in
fact such exists.
PROMISSORY NOTE - PAGE 3
4. PAYMENTS ON NOTE.
(a) Commencing on December 15, 2003 and continuing on the
fifteenth (15th) day of each month thereafter, through and including November
15, 2004, payments of principal and accrued interest in the amount of One
Hundred Twenty Thousand Dollars ($120,000) each shall be due and payable.
(b) Commencing on December 15, 2004 and continuing on the
fifteenth (15th) day of each month thereafter, payments of principal and accrued
interest in the amount of Four Hundred Twenty Thousand Dollars ($420,000) each
shall be due and payable.
(c) A final payment of all principal and accrued
interest, together with all other Obligations, shall be due and payable on
December 15, 2006.
Both principal and interest are payable in lawful money of the United
States of America to Payee at 0000 XXX Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000,
or such other address as the holder hereof shall notify Maker in writing
pursuant to the Restructuring Agreement, in immediately available funds without
setoff or counterclaim. All payments with respect to this Promissory Note or any
other Note Document shall be applied as follows: first, to all costs and
expenses (including reasonable attorneys fees) incurred by Maker and
constituting Obligations; second, to all accrued and unpaid interest, premium,
if any, and fees owing to Maker constituting Obligations; and third, to the
principal amount hereof (and interest shall thereupon cease to accrue upon the
principal so credited); and the remainder to any other Obligations then due and
payable. If any payment falls on a date that is not a Business Day, such payment
shall be deemed to be due and payable on the next succeeding Business Day, and
interest shall continue to accrue on the amount thereof until paid in full. For
purposes hereof, the term "Business Day" shall mean any day that is not a
Saturday, Sunday or day on which national banks in Austin, Texas are required or
permitted to close.
Maker may, at any time or from time to time, prepay the principal
amount outstanding hereunder, in whole or in part, without premium or penalty,
so long as any interest then accrued on the principal so prepaid has been (or is
concurrently) paid in full.
5. ACCELERATION. This Promissory Note is subject to acceleration
in connection with any Event of Default, and to exercise of remedies by Payee,
in each case as set forth in the Restructuring Agreement and the other Note
Documents.
6. REIMBURSEMENT OF COSTS. In the event this Promissory Note is
placed in the hands of an attorney for collection or if all or any part of the
indebtedness represented hereby is proved, established or collected in any court
or in any bankruptcy, receivership, debtor relief or other court proceedings,
Maker and all endorsers and each other party now or hereafter liable for payment
of this Promissory Note jointly and severally agree to pay reasonable attorneys'
fees and collection costs to the holder hereof in addition to the principal and
interest payable hereunder (all of which shall be part of the Obligations).
PROMISSORY NOTE - PAGE 4
7. WAIVERS. Maker and each endorser and each other party now or
hereafter liable for payment of this Promissory Note severally waive presentment
for payment, notice of dishonor, protest, notice of protest and diligence in
collecting or bringing suit against any party liable hereon and agree to any and
all extensions, renewals, partial payments, substitutions of evidence of
indebtedness and the taking, release or substitution of any security or
collateral with or without notice before or after maturity.
[SIGNATURE PAGE TO FOLLOW]
PROMISSORY NOTE - PAGE 5
8. GOVERNING LAW. This Promissory Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas.
MAKER:
DFW RESTAURANT TRANSFER CORP.
By: /s/ XXXXXXX X. XXXXXX
----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
[SIGNATURE PAGE TO AMENDED AND RESTATED NOTE]
