12
0177790.01
                          THIRD AMENDED LOAN AGREEMENT
     
     
     This  Third  Amended Loan Agreement (this "Agreement"),  dated  as  of  the
_______ day of December, 1997, is entered into by and among TACO CABANA, INC., a
Delaware  corporation, TEXAS TACO CABANA, L.P., a Texas limited partnership,  TP
ACQUISITION  CORP.,  a  Texas  corporation, T.C. MANAGEMENT,  INC.,  a  Delaware
corporation, TACO CABANA MANAGEMENT, INC., a Texas corporation, COLORADO CABANA,
INC.,  a  Colorado  corporation  and TACO CABANA MULTISTATE,  INC.,  a  Delaware
corporation (collectively the "Borrower"), and INTERNATIONAL BANK OF COMMERCE, a
state banking association (the "Lender").

     For  good and valuable consideration, the receipt and sufficiency of  which
is hereby acknowledged, the parties agree as follows:

                              SECTION 1. THE LOANS.
                                        
     1.1   Loan  Commitment.   Subject to the terms and conditions  hereof,  the
Lender  agrees  to  lend and advance to Borrower, from time to  the  time  until
December 31, 1999 (the "Loan Commitment Period"), such sums as the Borrower  may
request,  but which shall not exceed, in the aggregate principal amount  at  any
one time outstanding, the amount of $25,000,000.00 ("Loan Commitment").

     1.2  The Loans.  Each borrowing under the Loan Commitment shall be referred
to herein as a "Loan", shall be deemed a separate and independent loan and shall
be  evidenced and secured as set forth below.  The loans (the "Existing  Loans")
evidenced  by  the following described promissory notes (each a "Note"  as  such
term is used and defined herein) are Loans governed by this Agreement:  (i) that
certain  real estate lien note in the original principal amount of  Ten  Million
and No/100 Dollars ($10,000,000.00) dated May 15, 1995, executed by Borrower and
being  payable  to the order of Lender; and (ii) that certain real  estate  lien
note  in  the original principal amount of Three Million Seven Hundred  Thousand
and  No/100  Dollars ($3,700,000.00) dated August 8, 1997, executed by  Borrower
and  being payable to the order of Lender.  Each Loan shall bear interest at the
lesser  of  (i) the maximum rate allowed by law, or (ii) the floating per  annum
rate equal to the New York Prime Rate.  The "New York Prime Rate" shall mean the
annual  lending  rate  of interest announced from time  to  time  by  the  Chase
Manhattan Bank, N.A., New York, New York, as its prime rate; if a prime rate  is
not  announced by Chase Manhattan Bank, N.A., then the Loans shall bear interest
at  the  annual lending rate of interest announced from time to time  by  Lender
less  one  percent  (1%) as its prime rate.  Borrower acknowledges  that  Lender
makes  no  warranty or representation that either of the prime rates charged  by
Chase  Manhattan  Bank, N.A. or Lender is more favorable than  another  rate  or
index,  or  that rates on other loans or credit facilities may not be  based  on
other  indices, or that rates on loans to other may not be made below such prime
rate.   Installments of principal and interest under each Loan shall be  payable
quarterly  and amortized under a ten (10) year period, and have a term specified
by Lender which shall not exceed seven (7) years from the date of such Loan.

     1.3  Commitment Fee.  During the Loan Commitment Period, Borrower agrees to
pay  to  Lender  a  commitment fee computed at the rate of  one-quarter  of  one
percent  (0.25%)  per  annum  on the daily average unused  amount  of  the  Loan
Commitment   during  each  Quarterly  Cycle  (as  hereinafter  defined).    Such
commitment fee shall be payable quarterly, in arrears, on the last day  of  each
March,   June,  September  and  December  during  the  Loan  Commitment  Period,
commencing  December 30, 1997 and continuing in consecutive  quarterly  payments
thereafter until the date of expiration of the Loan Commitment Period, on  which
date  any  accrued and unpaid fee computed in accordance with the provisions  of
this  Section shall be due and payable.  For purposes of this Section  1.3,  the
term  "Quarterly  Cycle" shall refer to each calendar quarter  during  the  Loan
Commitment Period.

     1.4  Replaces Prior Commitment.  This Third Amended Loan Agreement replaces
entirely that certain Second Amended Loan Agreement dated January 31, 1997  (the
"Prior  Loan  Agreement")  which governed the terms  of  a  $15,000,000.00  loan
commitment  from  Lender  to Borrower ("Prior Commitment").   The  Borrower  and
Lender  acknowledge that the Prior Commitment is null and void and of no further
force or effect.

     1.5  Revolving Loan Agreement.  The Borrower and Lender have entered into a
Second  Amended Revolving Loan Agreement of even date herewith ("Revolving  Loan
Agreement").  The term "Revolving Loan Documents" as used in this Third  Amended
Loan  Agreement shall have the meaning provided in Section 3.2 of the  Revolving
Loan Agreement.

                       SECTION 2. SECURITY AND COLLATERAL.
                                        
     2.1   Composition of the Collateral.  The Loans shall be secured  primarily
with  first  liens and security interests upon those tracts of  Borrower's  real
property  which are agreed upon between Borrower and Lender ("Security Tracts"),
together  with  the improvements, furniture, fixtures, equipment,  accounts  and
inventory  located on, attributable to or used in connection with  the  Security
Tracts,  as  specifically set out in, and together with  such  other  mortgages,
liens  and  security  interests as set out in the Loan Documents  set  forth  in
Section  3.2 below.  The security granted by the Loan Documents shall constitute
collateral  for  the  indebtedness established by the  Loans  and  as  otherwise
established  and  set  out  in  the Loan Documents  (cumulatively  the  "Secured
Indebtedness").   All  of the mortgages, liens, security interests,  and  rights
granted  to  Lender  by  the Loan Documents shall secure  any  and  all  Secured
Indebtedness.   Lender  shall  not be required to  release  any  of  the  liens,
security  interests, and rights granted or given to Lender by any  of  the  Loan
Documents  unless  and until all of the Secured Indebtedness has  been  paid  in
full.   The  Loan  Documents shall provide, and Borrower hereby agrees,  that  a
default  under  any  Loan  Document shall constitute a default  under  the  Loan
Documents  for all Loans and under each of the Revolving Loan Documents,  and  a
default  under  any of the Revolving Loan Documents shall constitute  a  default
under each of the Loan Documents.

     2.2   Priority of Liens.  The liens, security interests, and rights granted
to Lender to secure the Secured Indebtedness shall be first and prior except for
(i)  liens  for  ad  valorem taxes not yet delinquent, and  (ii)  those  matters
expressly  approved by Lender, in advance and in writing, which approval  Lender
is under no obligation to provide.

     2.3   Perfection and Preservation of Liens.  Borrower will (i) execute  and
deliver  to Lender from time to time at the request of Lender such documents  or
instruments  as Lender shall deem necessary or appropriate, and will  take  such
other  and further actions as Lender may from time to time request, in order  to
perfect, continue, protect and preserve the liens, security interests and rights
granted  to  Lender by the Loan Documents; and (ii) pay or reimburse the  Lender
for  all  costs and taxes of filing or recording the same in such public offices
as the Lender may designate.

                        SECTION 3. CONDITIONS PRECEDENT.
                                        
     The  obligation  of the Lender to make a Loan hereunder is subject  to  the
following conditions precedent:

     3.1   Certain  Events.  The following conditions precedent  must  be  fully
satisfied as of the date of any Loan:

          a.    No  Event of Default (as defined below) under this Agreement  or
any  Loan  Document, as defined below, shall have occurred, and no  event  shall
have  occurred and be continuing that, with the giving of notice or  passage  of
time, or both, would be such an Event of Default.

          b.    Lender shall have received an appraisal of the fair market value
of  the real property and improvements thereon to be granted as security for the
Loan,  in  a  form,  and  prepared by an appraiser, approved  by  Lender,  which
indicates  that the amount of the proposed Loan is no greater than  seventy-five
percent  (75%)  of  the lesser of (i) the appraised fair market  value  of  such
property, or (ii) the purchase price paid by Borrower for such property.

     3.2   Documents Required for the Closing.  Prior to any disbursement of any
Loan  (the  "Closing"),  the following documents ("Loan  Documents",  such  term
including  all  loan  documents, other than the Prior Loan  Agreement,  executed
and/or  delivered  in  connection  with the  Existing  Loans)  shall  have  been
delivered to Lender, fully executed and acknowledged where required and  all  in
form and substance acceptable to Lender:

          a.   This Agreement.

          b.   A Real Estate Lien (Promissory) Note ("Note").

          c.    A  Security Agreement between Borrower and Lender,  granting  to
Lender  a  security interest in, among other property, all of Borrower's  right,
title  and  interest,  whether  now  or hereafter  acquired,  in  all  accounts,
inventory  and equipment, and all proceeds thereof, located on, attributable  to
or used in connection with the Security Tracts.

          d.    A  Deed  of  Trust, Assignment of Rents, Security Agreement  and
Financing  Statement from Borrower to Thomas L. Travis, Trustee for the  benefit
of Lender, granting a first lien upon the real property and improvements thereon
to secure the respective Loan.

          e.    Financing Statements as Lender shall deem necessary to file from
time to time in order to perfect and preserve the security interests granted  by
the Loan Documents.

          f.   A Commitment and Policy for Mortgagee Title Insurance issued by a
title  company  acceptable  to  Lender and  for  the  aggregate  amount  of  the
respective Loan.

          g.   A survey of the real property and improvement thereon prepared by
a surveyor acceptable to Lender.

          h.    Engineering  and  other information evidencing  the  absence  of
pollution or contamination on the property being acquired and the suitability of
such property for Borrower's intended restaurant operation.

          i.   Tax Certificates evidencing that there are no ad valorem taxes or
assessments which are past due or payable.

          j.   Liability and casualty insurance coverage in an amount and issued
by carriers approved by Lender.

          k.    For the first Loan made hereunder, certified (as of the date  of
Closing)  copies  of (i) resolutions of the Borrower's board of  directors  (for
each  Borrower which is a corporation) or a consent of all general partners (for
each  Borrower which is a partnership) authorizing the execution, delivery,  and
performance of this Agreement and the Loan Documents, and each other document to
be  delivered pursuant hereto including a certification (dated the date  of  the
Closing) of the Borrower's secretary or its managing or general partner, as  the
case may be, as to the incumbency and signatures of the officers of the Borrower
signing  the  Loan  Documents, and each other document to be delivered  pursuant
hereto;  (ii)  Borrower's  bylaws,  or  partnership  agreement,  including   all
amendments  thereto; (iii) Borrower's articles of incorporation,  including  any
and  all amendments thereto; and (iv) certificates of existence and certificates
as  to  the  good standing of Borrower from applicable governmental authorities.
For  each  Loan after the first Loan, Borrower shall deliver to Lender  and  the
applicable  title  insurer  (i) a current written statement  of  the  Borrower's
corporate  secretary or managing partner, as the case may be, stating that  each
of the documents listed in this Section 3.2(k) delivered in conjunction with the
first  Loan  remains  valid,  unamended and  effective  and  applicable  to  the
particular  Loan  to be made (or, if such statement cannot truthfully  be  given
then  a current written statement of Borrower's corporate secretary stating  the
particular reasons why such statement cannot be truthfully given, together  with
any  amended  documents), and (ii) any of the documents listed in  this  Section
3.2(k)  which are required by the title insurer for a particular Loan, in  order
to issue the required mortgagees title insurance policy.

          l.    Any and all other documents or instruments as may be required by
Lender.

          m.   Prior to the first Loan, and thereafter at the request of Lender,
a   true   and   complete  list  of  all  legal  actions,  claims,  proceedings,
investigations and notices thereof, against or affecting Borrower.

                   SECTION 4. REPRESENTATIONS AND WARRANTIES.
                                        
     4.1   Original.  To induce the Lender to enter into this Agreement, and  to
fund  the  Loans to be made hereunder, each Borrower represents and warrants  to
the Lender as follows:

          a.    Borrower  is  a  corporation or general partnership  or  limited
partnership,  as  applicable,  duly organized, validly  existing,  and  in  good
standing under the laws of the state under which it was organized; Borrower  has
the  lawful  power  to  own  its properties and to engage  in  the  business  it
conducts, and is duly qualified and in good standing as a foreign corporation or
foreign  partnership  in the jurisdictions wherein the nature  of  the  business
transacted by it or property owned by it makes such qualification necessary.

          b.    Borrower  is not in default with respect to any of its  existing
indebtedness,  and  the making and performance of the Loan  Documents  will  not
immediately or with the passage of time, or the giving of notice, or  both:  (i)
violate  the  charter or bylaw or partnership provisions of  Borrower,  or  (ii)
violate  any  laws  or  result in a default under any  contract,  agreement,  or
instrument to which Borrower is a party or by which Borrower or its property  is
bound.

          c.    Borrower  has the power and authority to enter into and  perform
each  of the Loan Documents to which it is a party, and to incur the obligations
herein  and  therein  provided for, and has taken all corporate  or  partnership
action  necessary to authorize the execution, delivery, and performance of  this
Agreement and such other Loan Documents.

          d.    The  Loan Documents are, and each Note when delivered  will  be,
valid, binding, and enforceable in accordance with their respective terms.

          e.   There is no pending order, notice, claim, litigation, proceeding,
or  investigation  against  or affecting Borrower, whether  or  not  covered  by
insurance,  that would materially and adversely affect the business of  Borrower
if adversely determined.

          f.     All  financial  information  given  to  Lender,  including  any
schedules  and  notes pertaining thereto, have been prepared in accordance  with
generally accepted accounting principles consistently applied, fully and  fairly
present the financial condition of Borrower at the dates thereof and the results
of'  operations for the periods covered thereby, and there have been no material
adverse  changes in the consolidated financial condition or business of Borrower
set forth therein, to the date hereof.

          g.   Except as otherwise permitted herein, Borrower has filed and paid
all  federal,  state, and local tax returns and other required reports  and  all
taxes,  assessments,  and other governmental charges that are  due  and  payable
prior to the date hereof.

          h.    Except  to  the  extent that the failure  to  comply  would  not
materially interfere with the conduct of the business of the Borrower,  Borrower
has complied, and shall comply, with all applicable laws and regulations.

          i.   No representation or warranty by the Borrower contained herein or
in  any Loan Document or certificate or other document furnished by the Borrower
contains any untrue or misleading statement of material fact or omits to state a
material  fact necessary to make such representation or warranty not  misleading
in light of the circumstances under which it was made.

          j.     Each   consent,  approval  or  authorization  of,  or   filing,
registration, or qualification required to be obtained by Borrower in connection
with  the execution and delivery of this Agreement, the Loan Documents,  or  the
undertaking or performance of any obligation hereunder or thereunder,  has  been
duly obtained.

     4.2   Survival.   All of the representations and warranties  set  forth  in
Section 4.1 shall survive until all Secured Indebtedness is satisfied in full.

                        SECTION 5. COVENANTS OF BORROWER.
                                        
     Borrower  does hereby covenant and agree with the Lender that, so  long  as
any  of  the Secured Indebtedness remains unpaid, Borrower will comply with  the
following covenants:

     5.1  Affirmative Covenants.

          a.    Taco  Cabana,  Inc. will furnish to Lender  within  one  hundred
twenty  (120)  days after the close of each fiscal year (or,  in  the  event  an
extension  of  the deadline for filing such information with the Securities  and
Exchange  Commission ("SEC") is required or authorized by the SEC,  then  within
one  hundred  eighty (180) days after the close of each fiscal year),  for  such
fiscal   year,  the  following  independently  audited  and  prepared  financial
information  for  itself and its subsidiaries prepared on a consolidated  basis:
(i)  a statement of stockholders' or partners' equity and a statement of changes
of  cash  flows;  (ii)  income  statements; and (iii)  balance  sheets;  all  in
reasonable  detail,  including  all  supporting  schedules  and  comments,   and
certified  by  an independent certified public accountant auditor,  approved  by
Lender,  to  have been prepared in accordance with generally accepted accounting
principles consistently applied.

          b.    Taco Cabana, Inc. will furnish to Lender within fifty (50)  days
after the close of each quarterly accounting period in each fiscal year of  each
Borrower  and  its  subsidiaries, for such quarter, prepared on  a  consolidated
basis:  (i) a statement of stockholders' or partners' equity and a statement  of
changes in financial position; (ii) income statements; and (iii) balance  sheets
as  of  the  end of such quarterly period, all in reasonable detail, Subject  to
year-end  audit  adjustments, and certified by Taco Cabana Inc.'s  secretary  to
have  been  prepared in accordance with generally accepted accounting principles
consistently applied.

          c.    Borrower will furnish to Lender such other financial  statements
or  reports as Lender may reasonably and periodically require, including without
limitation  balance  sheets  and  income statements  for  each  Borrower  on  an
individual basis.

          d.   Borrower will maintain its inventory, equipment, real estate, and
other  properties in good condition and repair (normal wear and tear  excepted);
will pay and discharge, or cause to be paid and discharged when due, the cost of
repairs  to  or maintenance of the same; and will pay or cause to  be  paid  all
rental or mortgage payments due on such real estate.  The Borrower hereby agrees
that,  in  the event Borrower fails to pay or cause to be paid any such payment,
the Lender may do so and on demand be reimbursed therefor by the Borrower.

          e.    In  addition to any requirements in the Loan Documents, Borrower
will  maintain, or cause to be maintained, public liability insurance  and  fire
and  extended coverage insurance on all assets owned by them, all in  such  form
and  amounts, and with such insurers, as are reasonable satisfactory to  Lender.
Such  policies shall contain a provision whereby they cannot be canceled  except
after  thirty (30) days' written notice to the Lender, and shall name Lender  as
an  additional  insured.  Borrower will furnish to the Lender such  evidence  of
insurance as the Lender may require.  Borrower hereby agrees that, in the  event
any Borrower fails to pay or cause to be paid the premium on any such insurance,
the Lender may do so and on demand be reimbursed therefor by the Borrower.

          f.    Borrower  will  pay  or cause to be paid  when  due  all  taxes,
assessments  or fees imposed upon it or on any of its property  or  that  it  is
required  to withhold and pay over, except when, prior to impending foreclosure,
such  taxes,  assessments  or fees are contested in good  faith  by  appropriate
proceedings, with adequate reserves therefor having been set aside on its books.

          g.    Borrower  will,  when  requested so to do,  make  available  for
inspection  by duly authorized representatives of the Lender any of their  books
and  records,  and  will  furnish  the Lender any  information  regarding  their
business affairs and financial condition within a reasonable time after  written
request therefor.

          h.    Borrower will take all necessary steps to preserve its corporate
or  partnership  existence and franchises and will comply with all  present  and
future  laws applicable to them in the operation of their respective  businesses
and all material agreements to which they are subject.

          i.    Within  ten  (10)  days  after the  Lender's  request  therefor,
Borrower will furnish the Lender with copies of federal income tax returns filed
by the Borrower.

          j.    Borrower will pay when due (or within applicable grace  periods)
all indebtedness due third parties.  If any Borrower defaults in the payment  of
any   principal  (or  installment  thereof)  of,  or  interest  on,   any   such
indebtedness,  the Lender shall have the right, but not the obligation,  to  pay
such  interest  or  principal for the account of Borrower and be  reimbursed  by
Borrower therefor on demand.

          k.    Borrower will notify the Lender immediately if it becomes  aware
of  the  occurrence of any Event of Default, as defined below, or of  any  fact,
condition, or event that, with the giving of notice or passage of time, or both,
could  become  an Event of Default hereunder, or of the failure of  Borrower  to
observe any of its undertakings hereunder.

          l.    The  Borrower's shareholders' or partners' equity (as determined
in   accordance  with  generally  accepted  accounting  principals  consistently
applied)  less  the value of any intangible assets (as determined in  accordance
with  generally accepted accounting principles consistently applied)   shall  at
all  times  equal or exceed 90% of Tangible Net Worth of Borrower and Borrower's
Subsidiaries.

          m.    All cash, cash equivalents and funds derived from operations  of
the Borrower shall be the property of the Borrower at the close of each business
day, unless such cash, cash equivalents and funds are utilized by other entities
for  the  payment  of  obligations  in compliance  with  applicable  law.   This
provision  is  not  intended to restrict Borrower's use of funds  or  usual  and
regular course of business.

          n.    Borrower  will maintain Quarterly Cash Flow (as defined)  in  an
amount equal to, or in excess of, $2,750,000.00.

     5.2  Negative Covenants.

          a.    For  so  long  as  any  Indebtedness  under  the  Loans  remains
outstanding, Borrower shall not without the prior written consent of the  holder
of the Notes:

                (1)   Permit the ratio of Consolidated Cash Flow to Consolidated
Fixed  Charges for (i) Borrower's fiscal quarter ending March, 1998 to  be  less
than 2.0:1.0; (ii) Borrower's fiscal quarter ending June, 1998 and the preceding
fiscal  quarter  of  Borrower to be less than 2.0:1.0; (iii)  Borrower's  fiscal
quarter  ending  September,  1998,  and the two  preceding  fiscal  quarters  of
Borrower  to  be  less  than  2.0:1.0; (iv)  Borrower's  fiscal  quarter  ending
December, 1998, and the three preceding fiscal quarters of Borrower to  be  less
than 2.0:1.0; and (v) thereafter, the immediately preceding four fiscal quarters
of Borrower to be less than 2.0:1.0.

                (2)  Permit Consolidated Net Worth at any time to be  less  than
the Minimum Consolidated Net Worth (as defined below) then in effect;

                (3) Permit the ratio of Debt to Tangible Net Worth to be greater
than 0.1.0:1.00 at any time; or

                (4)  Permit  the ratio of Intangible Assets to Consolidated  Net
Worth to be greater than 0.55: 1.0 at any time; or

                (5)  Incur Capital Expenditures: (i) in excess of $20,000,000.00
during the 1997 fiscal year of Borrower; (ii) in excess of $25,000,000.00 during
the  1998  fiscal year of Borrower; or (iii) in excess of $30,000,000.00  during
the 1999 fiscal year of Borrower.

     For purposes of subsections 5.1(l) and (n), and this subsection 5.2(a), the
following terms shall have the following meanings:

     "Capital Expenditures" as to Borrower shall mean the aggregate amount  paid
or  accrued  by  Borrower and its Subsidiaries for the rental,  lease,  purchase
(including by way of the acquisition of securities of another person or entity),
construction  or use of any property the value or cost of which,  in  accordance
with  generally accepted accounting principles consistently applied would appear
on Borrower's balance sheet in the category of property, plant or equipment.

     "Consolidated  Cash  Flow" for any period shall mean the  consolidated  net
income of the Borrower and all Subsidiaries for such period (after having  taken
into  account  the  effects of income tax), plus (without duplication)  interest
expense,  depreciation,  amortization and all other  non-cash  charges,  all  as
determined   in   accordance  with  generally  accepted  accounting   principles
consistently applied.

     "Consolidated  Fixed  Charges" for any period shall mean  (i)  consolidated
interest expense, and obligations under capitalized leases for such period, plus
(ii)  matured debt and any additional debt maturing within one year of the  date
of  determination, plus (iii) dividends and distributions to partners in respect
of  their  partnership interest, for the Borrower and all Subsidiaries,  all  as
determined   in   accordance  with  generally  accepted  accounting   principles
consistently applied.

     "Consolidated Net Worth" shall mean consolidated shareholders' or partners'
equity  of  the  Borrower and all Subsidiaries as determined in accordance  with
generally accepted accounting principles consistently applied.

     "Debt"  means,  with  respect to the Borrower and its  Subsidiaries,  on  a
consolidated  basis:  (i) indebtedness for borrowed money or  for  the  deferred
purchase price of property or services, (ii) obligations as lessee under  leases
which  shall  have  been  or should be, in accordance  with  generally  accepted
accounting  principles,  recorded  as capital leases,  (iii)  obligations  under
direct  or  indirect  guaranties in respect of, and obligations  (contingent  or
otherwise)  to purchase or otherwise acquire, or otherwise to assure a  creditor
against  loss in respect of, indebtedness or obligations of others of the  kinds
referred  to  in clause (i) or (ii) above, and (iv) liabilities  in  respect  of
unfunded  vested  benefits  under plans covered by  Title  IV  of  the  Employee
Retirement Income Security Act of 1974, as amended.

     "Intangible   Assets"  means,  with  respect  to  the  Borrower   and   its
Subsidiaries,  on  a  consolidated  basis,  goodwill,  organizational  expenses,
trademarks, tradenames, and any other items which are treated as intangibles  in
conformity with generally accepted accounting principles consistently applied.

     "Minimum   Consolidated  Net  Worth"  means,  during  any  calendar   year,
$38,000,000.00  minus  the amount paid by Borrower in any  allowed  purchase  of
capital stock consummated pursuant to Section 5.25b,plus 50% of the consolidated
net  income  of  Borrower (as determined in accordance with  generally  accepted
accounting   principles,  consistently  applied)  for  the   period   commencing
January  1, 1997, to December 31 of the calendar year immediately prior  to  the
calendar year in which the determination of Minimum Tangible Net Worth is  being
made.

     "Quarterly  Cash  Flow" shall mean for any fiscal quarter of  Borrower  the
consolidated net income of Borrower and its Subsidiaries for such period  (after
having  taken into account the effects of income tax) plus (without duplication)
interest expense, depreciation, amortization and all other non-cash charges, all
as  determined  in  accordance  with generally  accepted  accounting  principles
consistently applied.

     "Subsidiaries" means all corporations or partnerships of which at least 99%
of the partnership interests, or of the shares of stock of every class of which,
outstanding at the time as of which any determination is being made, is owned by
the  Borrower, either directly or through a Subsidiary.  "Subsidiary" means each
of the Subsidiaries.

     "Tangible  Net  Worth"  means,  with  respect  to  the  Borrower  and   its
Subsidiaries, on a consolidated basis, Consolidated Net Worth less the value  of
any  intangible  assets  as  determined in accordance  with  generally  accepted
accounting principles consistently applied.

          b.    No  Borrower  shall  change its name,  enter  into  any  merger,
consolidation,  reorganizations or recapitalization, or reclassify  its  capital
stock  without the prior written consent of Lender, which consent shall  not  be
unreasonably  withheld,  except that Borrower shall  be  permitted  to  purchase
common  stock  of  Borrower in an aggregate amount not to  exceed  $3,000,000.00
during the term of this Agreement.

          c.    No Borrower shall sell, transfer, lease, or otherwise dispose of
all,  or  (except in the ordinary course of business) any material part of,  its
assets, without the prior written consent of Lender, which consent shall not  be
unreasonably withheld.

          d.    No Borrower shall mortgage, pledge, grant, or permit to exist  a
security interest in or lien upon any of the security given for the Loans, other
than  pursuant to the Loan Documents and Revolving Loan Documents and  statutory
liens in the ordinary course of its business.

          e.    Borrower  shall not furnish the Lender with any  certificate  or
other  document that will contain any untrue statement of material fact or  that
will  omit to state a material fact necessary to make it not misleading in light
of the circumstances under which it was furnished.

          f.    No  Borrower shall transfer, alienate, sell, assign, or encumber
any of its capital stock or partnership interests in any Subsidiary.

          g.     No  Borrower  shall  incur,  create,  assume,  or  permit   any
indebtedness  other  than (i) under the Revolving Loan Documents  and  the  Loan
Documents; (ii) obligations under leases for real or personal property  used  in
Borrower's business; (iii) loans between Borrowers; (iv) loans between Borrowers
and  nonborrower  Subsidiaries not exceeding the aggregate principal  amount  of
$100,000.00  without  the  consent of the Lender, which  consent  shall  not  be
unreasonably  withheld; (v) normal accruals and trade accounts payable  incurred
in  the  ordinary  course of business, or otherwise become liable,  directly  or
indirectly,  as  guarantor  or  otherwise for any  obligation  (other  than  the
endorsement of commercial paper for deposit or collection in the ordinary course
of business and guaranties of affiliate transactions made in the ordinary course
of business).

          h.    Borrower  shall not make any loans or advances to  any  officer,
shareholder,  director, or employee of Borrower or of any Subsidiary  which,  at
any time, exceed the outstanding aggregate principal amount of $300,000.00.

                               SECTION 6. DEFAULT.
                                        
     6.1  Events of Default.  The occurrence of any one or more of the following
events shall constitute an "Event of Default" hereunder:

          a.    Any installment of principal and/or interest on the Loans or any
other  sums due by Borrower under the Loan Documents shall not be paid when  due
and payable.

          b.    Any  Borrower  shall breach any of the affirmative  or  negative
covenants  contained herein and the breach is not cured within five  days  after
written notice of the breach is given by the Lender to the Borrower.

          c.   Any Borrower shall fail to perform, keep or otherwise observe any
other   obligation,  term,  provision,  covenant,  warranty  or   representation
contained  herein or in any of the Loan Documents and such failure is not  cured
within  five days after written notice of the breach is given by the  Lender  to
the Borrower.

          d.    Any financial statement or report, representation, warranty,  or
certificate  made  or furnished by any Borrower to the Lender  hereunder  or  in
connection  with  this  Agreement, any Loan or any Loan  Documents,  or  in  any
separate statement or document to be delivered under the Loan Documents  to  the
Lender,  shall  be  materially false, incorrect,  or  incomplete  when  made  or
furnished.

          e.    Any Borrower shall admit its inability to pay its debts as  they
mature,  or  shall  make an assignment for the benefit of  its  or  any  of  its
creditors.

          f.    Proceedings  in  bankruptcy, or for  the  dissolution,  full  or
partial  liquidation or reorganization of any Borrower, or for the  readjustment
of  any of their respective debts, under the Bankruptcy Code, as amended, or any
part  thereof, or under any other laws, whether state or federal, for the relief
of debtors, now or hereafter existing, shall be commenced by Borrower.

          g.    If an application is made by any Borrower for the appointment of
a  receiver, trustee, or custodian for Borrower or for any substantial  part  of
their  respective  assets,  or  any  Borrower  shall  discontinue  business   or
materially change the nature of its business.

          h.    If a receiver, trustee, or custodian shall be appointed for  any
Borrower or for any part of their respective assets, and shall not be discharged
within 30 days of such appointment.

          i.    If  all  or  any of any borrower's assets are attached,  seized,
subjected  to a writ, or are levied upon, or come within the possession  of  any
receiver, trustee, custodian or assignee for the benefit of creditors.

          j.   If any Borrower is permanently enjoined, restrained or in any way
prevented  by  court  order from conducting any material part  of  its  business
affairs.

          k.    If a notice of lien, levy or assessment is filed of record  with
respect  to  all  or  any  of  Borrower's assets by the  United  States  or  any
department,  agency  or  instrumentality  thereof,  or  by  any  state,  county,
municipality or other governmental agency, or if any taxes or debts owing at any
time  or times hereafter to any one or more of them becomes a lien, upon all  or
any material portion of Borrower's assets.

          l.    A  judgment creditor of any Borrower shall obtain possession  of
any  of  the collateral securing repayment of the Loans by any means, including,
but without limitation, levy, distraint, replevin, or self-help.

          m.    Any  Event of Default occurs under the terms of any of the  Loan
Documents or under the terms of any of the Revolving Loan Documents.

          n.    Any  Borrower shall dissolve, liquidate, or otherwise  terminate
its existence, or take any action to effect such termination.

          o.    Any  Borrower  shall  suffer  a  final  judgment  in  excess  of
$250,000.00, and shall not discharge the same within thirty (30) days.

          p.    Any Borrower furnishes the Lender with any certificate or  other
document  that contains any untrue statement of material fact or that  omits  to
state  a  material  fact necessary to make it not misleading  in  light  of  the
circumstances under which it was furnished.

          q      Any  material nonborrower Subsidiary shall have failed  to  pay
when  due  all  taxes, assessments or fees imposed upon it  or  on  any  of  its
property or that it is required to withhold and pay over, except when, prior  to
impending  foreclosure, such taxes, assessments or fees are  contested  in  good
faith  by  appropriate proceedings, with adequate reserves therefor having  been
set aside on its books.

          r.    Any  material nonborrower Subsidiary fails to take all necessary
steps  to  preserve  its corporate or partnership existence and  franchises,  or
fails  to  comply  with  all present and future laws applicable  to  it  in  the
operation of its business and all material agreements to which it is subject.

          s.    Lender,  at  its discretion and after five days  written  notice
given  to  Borrower,  deems itself to be adversely affected and/or  insecure  by
reason  of  any  material change in any of Borrower's (including  any  endorsers
and/or  guarantors)  net  worth, or by reason of any other  material  change  of
condition whether or not described herein.

     6.2   Remedies.  Upon the occurrence of an Event of Default, Lender, at its
option, may:

          a.    Terminate any obligation to make any further Loans  and  declare
the  entire  principal  balance of the Secured Indebtedness  and  all  interest,
unpaid  accrued  and  earned thereon to be immediately due and  payable  without
demand  for payment, presentment for payment, notices of intention to accelerate
maturity,  notices  of election to accelerate maturity, protest  and  notice  of
protest  or  any  other  notice whatsoever, all of which  are  hereby  expressly
waived.

          b.    Enforce or avail itself of any and all rights and remedies given
to it by any or all of the Loan Documents.

          c.   Enforce or avail itself of all rights and remedies allowed by all
applicable laws.

                         SECTION 7. INTEREST LIMITATION.
                                        
     7.1   Limitation.  Interest on the debt evidenced by the Notes or otherwise
in  connection with the Loans shall not exceed the maximum amount of nonusurious
interest that may be contracted for, taken, reserved, charged, or received under
law;  any  interest in excess of that maximum amount shall be  credited  on  the
principal  of the debt or, if that has been paid, refunded.  On any acceleration
or  required  or  permitted  prepayment,  any  such  excess  shall  be  canceled
automatically as of the acceleration or prepayment or, if already paid, credited
on  the  principal of the debt or, if the principal of the debt has  been  paid,
refunded.   This  provision overrides other provisions in  this  and  all  other
instruments  concerning the debt.  All sums paid or agreed to be  paid  for  the
use,  forbearance or detention of the indebtedness of Borrower to Lender  shall,
to the extent permitted by applicable law, be amortized, prorated, allocated and
spread  throughout the full stated term of such indebtedness  until  payment  in
full so that the rate or amount of interest on account of such indebtedness does
not  exceed  the  maximum rate of interest allowed by law for so  long  as  such
indebtedness  is outstanding, and to the extent that TEX. REV. CIV.  STAT.  Ann.
Art.  5069-1.04, as amended, is applicable to such indebtedness,  the  quarterly
rate  ceiling  from  time  to time in effect under such  article  shall  be  the
applicable ceiling.  This provision overrides other provisions in this  and  all
other instruments concerning the debt.

                            SECTION 8. MISCELLANEOUS.
                                        
     8.1   No  Permanent  Waivers.  No waiver at any time of the  provisions  or
conditions  of  this  Agreement or of any of the other Loan Documents  shall  be
construed  as  a waiver of any of the other provisions or conditions  hereof  or
thereof  nor  be  construed  as  a right to a subsequent  waiver  or  any  other
provisions or conditions.

     8.2   Severability.  Unenforceability for any reason against any person  or
persons  of  any provision of this Loan Agreement, or of any of the  other  Loan
Documents  or other Agreements between Borrower and the Lender, shall not  limit
or impair the operation or validity of any other provisions of this Agreement or
any of the other Loan Documents.

     8.3   Descriptive Headings and Defined Terms.  The descriptive headings  of
the various sections and subsection of this Agreement and the Loan Documents and
any  schedule, agreement or other instrument, executed with reference hereto are
inserted for convenience of reference only, do not constitute a part of any such
document  and  no  inference is to be drawn from such  headings.   Whenever  the
context shall require, words of any gender shall be deemed to include the  other
gender  and either the singular or the plural shall include the other, including
with respect to terms defined herein.

     8.4   Further  Assurance.   From time to time, Borrower  will  execute  and
deliver to the Lender such additional documents and will provide such additional
information as the Lender may reasonably require to carry out the terms of  this
Agreement and be informed of the Borrower's status and affairs.

     8.5   Enforcement and Waiver by the Lender.  All rights and remedies of the
Lender  are cumulative and concurrent, and the exercise of one right  or  remedy
shall  not  be  deemed a waiver or release of any other right  or  remedy.   The
Lender  shall  have  the right at all times to enforce the  provisions  of  this
Agreement and the Loan Documents in strict accordance with the terms hereof  and
thereof,  notwithstanding any conduct or custom on the part  of  the  Lender  in
refraining from so doing at any time or times.  The failure of the Lender at any
time  or  times  to  enforce  its  rights under  such  provisions,  strictly  in
accordance with the same, shall not be construed as having created a  custom  in
any way or manner contrary to specific provisions of this Agreement or such Loan
Documents or as having in any way or manner modified or waived the same.

     8.6   Expenses  of  the  Lender.  The Borrower will,  on  demand,  pay,  or
reimburse the lender, for all reasonable expenses, including the reasonable fees
and  expenses  of  legal  counsel for the Lender,  incurred  by  the  Lender  in
connection  with  the preparation, administration, amendment,  modification,  or
enforcement  of  this Agreement and the Loan Documents, and  the  collection  or
attempted collection of any and all Notes.  All reasonable costs, including  but
not  limited  to  reasonable  attorney's fees  of  Borrower,  Lender,  or  other
interested  parties, other professional fees, appraiser's and  surveyor's  fees,
taxes and all expenses of all kinds incurred in connection with the Loans, shall
be  borne by Borrower, and Borrower agrees to indemnify the Lender and  save  it
harmless  from  the payment, defense and/or expense of any claim or  demand  for
such fees, costs, taxes and expenses.

     8.7   Notices.   Any  notices or consents required  or  permitted  by  this
Agreement  shall  be  in  writing and shall be deemed given  when  delivered  in
person,      or      upon     deposit     in     the     U.S.      Mail,      if

sent   by  certified  mail,  postage  prepaid,  return  receipt  requested,   as
follows, unless such address is changed by written notice hereunder:

               a.   If to Borrower:
               
                    Taco Cabana, Inc.
                    Texas Taco Cabana, L.P.
                    TP Acquisition Corp.
                    T.C. Management, Inc.
                    Taco Cabana Management, Inc.
                    Taco Cabana Multistate, Inc.
                    Colorado Cabana, Inc.
                    8918 Tesoro Drive, Suite 200
                    San Antonio, Texas 78217
               
               
               b.   If to the Lender:
               
                    International Bank of Commerce
                    130 East Travis
                    San Antonio, Texas  78205
                    Attention:  Mr. Steve E. Edlund
     
     
     8.8   RELEASE  BY  THE  BORROWER.   TO  THE  MAXIMUM  EXTENT  PERMITTED  BY
APPLICABLE  LAWS,  BORROWER  RELEASES THE LENDER AND  ITS  DIRECTORS,  OFFICERS,
ATTORNEYS, AGENTS, AND EMPLOYEES FROM ALL CLAIMS, CAUSES, DAMAGES, LIABILITY AND
RELATED EXPENSES ARISING OUT OF ANY ACT OR OMISSION ON THE PART OF ANY OF  THEM,
WITH  REGARD  TO  THIS  AGREEMENT, WHICH DOES NOT INVOLVE FRAUD,  BAD  FAITH  OR
NEGLIGENCE BY LENDER OR ITS DIRECTORS, OFFICERS, ATTORNEYS, AGENTS OR EMPLOYEES.

     8.9   Governing  Law.   This  Agreement  is  made  and  accepted,  and  the
obligations of the parties set forth herein shall be performable, in the  County
of Bexar and State of Texas, and this Agreement and all the Loan Documents shall
be  governed by, and construed in accordance with the laws of the State of Texas
except  to  the  extent that such laws may be preempted by laws  of  the  United
States  of America.  The parties hereby agree that this Agreement and the  Loans
to be made pursuant hereto shall not be  subject to the provisions of Chapter 15
of the Texas Credit Code.

     8.10  Lender's  Relationship to Other.  Lender is not a  partner  or  joint
venturer in any manner whatsoever with any Borrower.

     8.11 Waiver, Modification.  Neither this Agreement nor any provision hereof
may  be  changed,  waived,  discharged or terminated  orally,  but  only  by  an
instrument  in  writing  signed by the party against  whom  enforcement  of  the
change, waiver, discharge or termination is sought.

     8.12  Cumulative Remedies.  The right and remedies of the Lender under  the
Loan Documents shall be cumulative and the exercise, or partial exercise, of any
such  right  or  remedy shall not preclude the exercise of any  other  right  or
remedy.

     8.13  Binding Effect.  This Loan Agreement shall be binding upon and  inure
to  the  benefit  of  Borrower and Lender and their  respective  successors  and
assigns,  provided  that  no  Borrower may  assign  its  rights  or  obligations
hereunder.  If more than one party executes this Agreement a Borrower, the  term
"Borrower" shall mean and refer to each such party, jointly and severally.

     8.14  Survival  of  Agreement.  The provisions thereof  shall  survive  the
execution of all instruments herein mentioned, and shall continue in full  force
until  the  Secured Indebtedness is paid in full and shall prevail  and  control
over any conflicting provision contained elsewhere in the Loan Documents.

     8.15  Entire  Agreement.  The Loan Documents embody  the  entire  agreement
between  the parties and supersedes all prior agreements and understandings,  if
any,  relating  to the subject matter hereof.  There are no oral  agreements  or
understandings  between  the  parties  which  are  not  evidenced  by  the  Loan
Documents.

     8.16  Subsidiaries.   Except  where otherwise specified  herein,  the  term
"Subsidiary" shall mean every entity of which more than fifty percent  (50%)  of
the outstanding voting stock or other ownership interests shall, at the time  of
determination, be owned directly or indirectly by the named Borrower or  through
one or more intermediaries of Borrower.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

WITNESS:                        BORROWER:

                                TACO CABANA, INC.


                                By:
Name:                           Name:
                                Title:


                                TEXAS TACO CABANA, L.P., a Texas
                                limited partnership

                                By:     Taco Cabana Management, Inc., a Texas
                                   Corporation, General Partner


                                   By:
Name:                              Name:
                                   Title:


                                TP ACQUISITION CORP.


                                By:
Name:                           Name:
                                Title:


                                T.C. MANAGEMENT, INC.


                                By:
Name:                           Name:
                                Title:


                                TACO CABANA MANAGEMENT, INC.


                                By:
Name:                           Name:
                                Title:


                                TACO CABANA MULTISTATE, INC.


                                By:
Name:                           Name:
                                Title:


                                COLORADO CABANA, INC.


                                By:
Name:                           Name:
                                Title:


                                LENDER:

                                INTERNATIONAL BANK OF COMMERCE


                                By:
Name:                                 Steve E. Edlund,
                                      Executive Vice President