SEVERANCE AGREEMENT
                               AND GENERAL RELEASE

     This SEVERANCE AGREEMENT AND GENERAL RELEASE ("Agreement") of claims, dated
December ____, 1998, is entered into by and among Harvest Restaurant Group, Inc.
(the  "Company"),  Hartan,  Inc.,  a Texas  corporation  that is a  wholly-owned
subsidiary  of  the  Company   ("Hartan"),   their   predecessors,   successors,
subsidiaries,   including  affiliates,  assigns  and  past,  present  or  future
officers,  directors,  agents, attorneys, and employees,  including the officers
and directors of their successors and assigns (hereinafter collectively referred
to as "Releasees"),  on the one hand, and William J. Gallagher ("Employee"),  on
the other hand.

                                R E C I T A L S:

     WHEREAS,  Employee  for a time was employed by and served the Company as an
officer and director;

     WHEREAS,  pursuant  to the  terms  of that  certain  Amended  and  Restated
Agreement and Plan of Merger (the "Merger  Agreement") by and among the Company,
Hartan, and TRC Acquisition Corporation, a Georgia corporation ("TRC"), TRC will
merge with and into Hartan,  with Hartan to be the surviving  corporation in the
merger, and thereby become a wholly-owned subsidiary of the Company;

     WHEREAS, in accordance with the terms of the Merger Agreement, Employee has
agreed to resign from his positions with the Company,  Hartan,  and all of their
subsidiaries, including, but not limited to, Harvest Restaurants, Inc., Cluckers
Restaurants,  Inc.,  Harvest Rotisserie on Tezel, Inc., and Red Line Food Court,
Inc. in exchange for the consideration set forth herein; and,

     WHEREAS,  the parties wish to preserve  the good will which exists  between
them, and to settle all disputes which may exist between them.

     NOW,  THEREFORE,  in consideration of the mutual promises contained herein,
and for other  good and  sufficient  consideration,  receipt  of which is hereby
acknowledged, the parties agree as follows:

                                       1.

     Employee hereby resigns his employment with the Company, Hartan, and all of
their subsidiaries,  including,  but not limited to, Harvest  Restaurants,  Inc.
("Harvest  Restaurants"),   Cluckers  Restaurants,  Inc.  ("Cluckers"),  Harvest
Rotisserie on Tezel, Inc. ("Tezel"),  and Red Line Food Court, Inc. ("Red Line")
effective  December  ____,  1998  (hereinafter  referred  to as the  "separation
date").  After the  separation  date,  Employee  will  have no right to  further

<PAGE>



employment with the Company, Hartan, Harvest Restaurants,  Cluckers,  Tezel, Red
Line, or any of their  subsidiaries;  he shall not apply for re-employment  with
the Company, Hartan, Harvest Restaurants,  Cluckers,  Tezel, Red Line, or any of
their  subsidiaries;  and  none of the  Company,  Hartan,  Harvest  Restaurants,
Cluckers, Tezel, Red Line, or any of their subsidiaries will have any obligation
to employ him. Pursuant to the Amended and Restated Agreement and Plan of Merger
by and among the Company,  Hartan,  and TRC,  Employee may serve on the Board of
Directors  of the  Company  should he be elected to the Board of  Directors  and
agree to serve.

                                       2.

     As consideration for the foregoing, Employee shall receive from Company the
following:

     (1)  A promissory  note, in substantially in the form of Exhibit A attached
          hereto (the "$50,000 Note"),  evidencing the obligation of the Company
          to pay  Employee  a  severance  payment  of  $50,000,  to be  paid  in
          installments on the following schedule:

          (a)  the Company will pay Employee a consulting  fee of $10,000 in the
               first week of January, 1999;

          (b)  the Company will pay Employee a consulting  fee of $10,000 in the
               first week of February, 1999;

          (c)  the Company  will pay Employee a fee of $30,000 on the earlier to
               occur of: (i) the date on which the  Company  receives  the final
               $2,000,000   installment  of  funding  from  the  holder  of  the
               Company's Series D Convertible  Preferred Stock; (ii) the date on
               which  the  sale  of  the  Tezel  Property   (defined  below)  is
               completed; or (iii) June 30, 1999.

     (2)  A promissory  note,  in  substantially  the form of Exhibit B attached
          hereto (the "$150,000 Note"), evidencing the obligation of the Company
          to pay  Employee a severance  payment of  $150,000,  to be paid on the
          earlier  of: (i) March 1, 1999,  or (ii) the date on which the sale of
          the Tezel Property (defined below) is completed. 

     (3)  A deed of trust, securing both the $50,000 Note and the $150,000 Note,
          on the Tezel Property in substantially  the form of Exhibit C attached
          hereto (the "Deed of Trust"). The "Tezel Property" is defined as being
          that property described on Exhibit A to the Deed of Trust. 

                                       2
<PAGE>


     (4)  Certain  furnishings and personal effects that are listed on Exhibit D
          attached hereto.

                                       3.


     Except for certain  indemnification  obligations of TRC, its successors and
assigns  set forth in Section  10.2 of the  Merger  Agreement,  Employee  hereby
forever fully releases, remises, acquits, and discharges Releasees and covenants
not to sue or  otherwise  institute  or  cause  to be  instituted  or in any way
participate  in (except at the request of the Company)  legal or  administrative
proceedings  against Releasees with respect to any matter whatsoever,  including
but not limited to any matter  arising out of or connected  with his  employment
with the Company or the  termination  of that  employment  including any and all
liabilities,  claims,  demands,  contracts,  debts,  obligations,  and causes of
action of every nature,  kind, and description,  in law,  equity,  or otherwise,
whether or not now known or ascertained, which heretofore do or may exist.

                                       4.

     Employee waives any rights he may have had or now has to pursue any and all
remedies  available  to  him  under  any  cause  of  action  against  any of the
Releasees,  including but not limited to any matter  arising out of or connected
with his employment with the Company,  including without  limitation,  claims of
wrongful discharge,  emotional distress,  defamation, breach of contract, breach
of the covenant of good faith and fair dealing,  the Employee  Retirement Income
Security  Act,  and any  other  laws and  regulations  relating  to  employment,
including any and all employment  laws of the state of Texas.  Employee  further
acknowledges  and expressly  agrees that he is waiving any and all rights he may
have had or now has to pursue  any claim of  discrimination,  including  but not
limited  to,  any claim of  discrimination  based on sex,  age,  race,  national
origin,  disability,  or on any other basis, under Title VII of the Civil Rights
Act of 1964, the Americans with  Disabilities  Act of 1990, the Equal Pay Act of
1963, the Age  Discrimination in Employment Act of 1967, the Civil Rights Act of
1866,  any other  analogous  law of the state of Texas,  and all other  laws and
regulations relating to employment.

                                       5.

     Upon  execution of this  Agreement,  the only  payments  and benefits  that
Employee  is entitled to receive  from the Company are those  specified  in this
Agreement.

                                       3
<PAGE>


                                       6.

     This Agreement  supersedes the January 1, 1998 Employment Agreement between
the parties and any other  agreements  regarding  Employee's  employment with or
furnishing  consulting  services  to the  Company  and any of its  subsidiaries,
including any agreements  with TRC regarding  employment or consulting  services
(including,  but not limited to, a letter  agreement  dated July 8, 1998 between
TRC and  Employee),  and that  Employment  Agreement and those other  agreements
regarding  Employee's  employment with or furnishing  consulting services to the
Company or any of its subsidiaries are hereby terminated.

                                       7.

     Employee agrees to maintain in strict confidence and not to use or disclose
any Trade  Secrets of the  Company at any time,  for so long as the  information
remains a Trade Secret.  As provided by Georgia  statutes,  "Trade Secret" shall
mean any information (including,  but not limited to, technical or non-technical
data, a formula,  a pattern,  a compilation,  a program,  a device,  a method, a
technique, a drawing, a process, financial data, financial plans, product plans,
or a list of actual or potential  customers)  that: (i) derives  economic value,
actual or potential,  from not being  generally  known to, and not being readily
ascertainable  by proper means by, other persons who can obtain  economic  value
from  its  disclosure  or use;  and  (ii) is the  subject  of  efforts  that are
reasonable under the circumstances to maintain its secrecy.

                                       8.

     In addition,  Employee  agrees to maintain in strict  confidence and not to
use or  disclose  any  Confidential  Information  of the Company for a period of
twelve (12) months from the date of this Agreement.  "Confidential  Information"
shall mean any  internal,  non-public  information  (other  than  Trade  Secrets
already addressed above) concerning the Company's financial position and results
of operations (including revenues,  margins,  assets, net income, etc.); pricing
structure;  annual and  long-range  business  plans;  product or service  plans;
marketing plans and methods;  training,  educational and administrative manuals;
customer and supplier  information and purchase  histories;  and employee lists.
The  provisions  of Sections 7 and 8 above shall be  sufficient to protect Trade
Secrets and  Confidential  Information of third parties  provided to the Company
under an obligation of secrecy.

                                       9.

     If any provision of this Agreement is found to be  unenforceable,  it shall
not affect the  enforceability  of the remaining  provisions and the Court shall
enforce all remaining provisions to the extent permitted by law.

                                      10.

     This  Agreement  shall  bind  and  benefit  Employee's  heirs,   executors,
administrators,  successors,  assigns,  and each of them; it shall also bind and
benefit the Company and its successors and assigns.

                                       4
<PAGE>

                                      11.

     This  Agreement  shall be deemed to have been  entered into in the state of
Texas and shall be construed and interpreted in accordance with the laws of that
state.

                                      12.

     Any notice Employee is required to provide to the Company  pursuant to this
Agreement shall be made via certified mail,  return receipt requested or Federal
Express,  signature  required,  in the manner set forth  below.  Notice  will be
effective upon the date of receipt by the Company.  In addition,  Employee shall
send a copy of the notice to Wade H.  Stribling,  Esq.,  at the  address  listed
below,  at the same time and by the same method of  delivery as to the  Company.
However, the copy to Mr. Stribling shall not constitute notice to the Company.

NOTICE TO COMPANY:        Mr. Clyde E. Culp, III
                          2662 Holcomb Bridge Road
                          Suite 320
                          Alpharetta, Georgia  30022


COPY TO MR. STRIBLING:    Wade H. Stribling, Esq.
                          Nelson Mullins Riley & Scarborough, L.L.P.
                          First Union Plaza
                          Suite 1400
                          999 Peachtree Street, N.E.
                          Atlanta, Georgia 30309

                                      13.

     The parties have read and  understand  the  foregoing  Agreement,  and they
affix their signatures hereto voluntarily and without coercion. Employee further
acknowledges  that he has been  advised to consult  with an  attorney of his own
choosing  concerning the waivers  contained in and the terms of this  Agreement,
and that the  waivers  he has made and the terms he has  agreed  to  herein  are
knowing,  conscious,  and with full appreciation  that he is forever  foreclosed
from pursuing any of the rights so waived




        [The remainder of this page has been left blank intentionally.] .
   




                                       5
<PAGE>

 


                                             Employee:


Dated:                        , 1998         /s/ William J. Gallagher 
      -----------------------                -----------------------------------
                                             William J. Gallagher


                                             Harvest Restaurant Group, Inc.



Dated:                        , 1998         By: /s/ Joe Fazzone   
      -----------------------                  ---------------------------------
                                               Name: Joe Fazzone
                                               Title:  CFO


                                             Hartan, Inc.



Dated:                        , 1998         By: /s/ Joe Fazzone  
       ----------------------                  ---------------------------------
                                               Name: Joe Fazzone
                                               Title:  Secretary

                                       6
<PAGE>

                                    EXHIBIT A
                                    ---------


                              REAL ESTATE LIEN NOTE
                              ---------------------

Date:               December      , 1998

Maker:              Harvest Restaurant Group, Inc. and Hartan, Inc.

Payee:              William J. Gallagher

Place for Payment:  1250 NE Loop 410, Ste. 335, San Antonio, Bexar County, Texas
                    78209

Principal Amount:   FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00)

Annual Interest Rate on Unpaid
Principal from Date of Funding:      Zero Percent (0.00%) per annum.

Annual Interest Rate on Matured, Unpaid Amounts:

     All matured and unpaid  principal  and interest  shall bear interest at the
     maximum rate of interest  permitted by applicable  United States Federal or
     Texas State Law (to the extent not  pre-empted  by federal  law, if any) as
     may be applicable to this Note.

Terms of Payment (principal and interest):

     One  payment  of  principal  in the amount of  $10,000.00  shall be due and
     payable (i) on January 4, 1999 and (ii) on  February  1, 1999.  Thereafter,
     the unpaid  principal  balance of this Note shall be due and payable on the
     earlier  to occur of (i) the sale by  Maker of the  property  described  on
     Exhibit "A" attached hereto and made a part hereof for all purposes or (ii)
     the Final Funding (as defined  below),  but in no event later than June 30,
     1999. For purposes  hereof,  the sale of the property means the closing and
     funding and the receipt by Maker from the purchaser of the sales  proceeds.
     The "Final  Funding" shall mean the receipt by Maker of the funds described
     in Section  1.2.1(d)  of the  Amended and  Restated  Agreement  and Plan of
     Merger by and among Harvest Restaurant Group,  Inc.,  Hartan,  Inc. and TRC
     Acquisition Corporation, dated as of December ___ , 1998.

Security for Payment:

     Payment of this Note is secured by a Deed of Trust to ROBERT A.  ROSENTHAL,
     Trustee,  covering  certain  property set out and  described on Exhibit "A"
     attached hereto and made a part hereof for all purposes.

Maker  promises  to pay to the  order of  Payee at the  place  for  payment  and
according  to the terms of payment the  principal  amount  plus  interest at the
rates  stated  above.  All unpaid  amounts  shall be due by the final  scheduled
payment date.

For purposes of the Note,  (i) Grantor shall be in default for failure to make a
payment  hereunder if Grantor  does not make such  payment  within five (5) days
after Grantor  receives  written notice  advising  Grantor that  Beneficiary has
failed to receive  Grantor's  payment  as and when the same  became due and (ii)
Grantor  shall be in default  under any of the terms of the Deed of Trust or any


                                        1

<PAGE>


other Loan  Documents  if, within  twenty (20) days after  Grantor's  receipt of
written  notice  from  Beneficiary  advising  Grantor of the terms  which are in
violation, Grantor has not fulfilled or satisfied such terms (the number of days
set forth in (i) and (ii) above referred to as the "Cure Period").  For purposes
of this  subparagraph  "written notice" means notice as described in the Deed of
Trust as well as notice by facsimile transmission which shall be deemed received
upon Beneficiary's receipt of written confirmation to that effect.

On default in the payment of this Note or in the  performance  of any obligation
described herein or in any instrument securing or collateral to it (collectively
the "Loan Documents"), this Note and all obligations in all instruments securing
or collateral to it shall become immediately due at the election of Payee. Maker
and each  surety,  endorser,  and  guarantor  waive  all  demands  for  payment,
presentations for payment,  notices of intention to accelerate maturity,  notice
of acceleration, protests, and notices of protest.

If this  Note or any  instrument  securing  or  collateral  to it is given to an
attorney for collection or enforcement,  or if suit is brought for collection or
enforcement,  or if it is collected or enforced through probate,  bankruptcy, or
other judicial proceeding, then Maker shall pay Payee reasonable attorney's fees
of at least twelve percent  (12.0%) on the amount of principal and interest then
owing.

Nothing in this Note shall authorize the collection of interest in excess of the
highest rate allowed by law.

Maker  reserves the right to prepay this Note in any amount at any time prior to
maturity without penalty. Prepayments shall be applied toward the payment of the
installments of principal last maturing hereon,  but interest shall  immediately
cease upon amounts of principal prepaid hereon.

Each Maker,  if there is more than one, is responsible  for the entire amount of
this Note.

The terms  Maker and Payee and other  nouns and  pronouns  include the plural if
more than one. The terms Maker and Payee also include  their  respective  heirs,
personal representatives, and assigns.

The failure of any holder hereof to exercise its rights  hereunder  upon any act
or acts of  default  shall not act as a waiver  thereof,  nor as a waiver of any
subsequent act or acts of default.

The Maker  warrants and  represents  to the Payee and all other  holders of this
Note  that all  loans  evidenced  by this  Note  are and  will be for  business,
commercial, investment or other similar purposes and not primarily for personal,
family,  household or agricultural use, as such terms are used in Chapter One of
Title 79, Texas Revised Civil Statutes, 1925, as amended.

The Payee reserves the right, in its sole  discretion,  with notice to the Maker
or any other person, to sell participations or assign its interest,  or both, in
all or any part of this Note or any loan evidenced by this Note.

This Note and the Loan Documents embody the entire  agreement and  understanding
between the Payee and the Maker and other  parties  with respect to the loans to
be evidenced by this Note and supersede all prior  conflicting  or  inconsistent
agreements,  consents and  understandings  relating to such subject matter.  The
Maker  acknowledges  and agrees  that there are no oral  agreements  between the
Maker and the Payee which have not been  incorporated  in this Note and the Loan
Documents.

                                        2

<PAGE>



This Note shall be governed by and construed in accordance  with applicable law.
Since it is the  intention  of the  parties  hereto to  strictly  conform to the
applicable  usury laws,  all  agreements  between  Maker and Payee,  whether now
existing or hereafter  arising and whether written or oral, are hereby expressly
limited so that in no event,  whether by reason of  acceleration  of maturity of
this Note or otherwise,  shall the amount paid or agreed to be paid to the Payee
for the use, forbearance or detention of money hereunder or otherwise exceed the
maximum amount  permissible  under applicable law. If the applicable law is ever
revised,  repealed  or  judicially  interpreted  so as to  render  usurious  any
consideration called for, contracted for, charged,  taken,  reserved or received
with respect to this Note,  the security  documents,  the loan evidenced by this
Note, or any other agreement between the parties or their affiliates,  or if the
fulfillment of any provision hereof or any note, deed of trust,  loan agreement,
or other document,  evidencing or securing the indebtedness evidenced hereby, at
the  time  of  performance  of  such  provision  shall  be  due,  shall  involve
transcending  the limit of  validity  prescribed  by law,  then  ipso  facto the
obligation to be fulfilled  shall be reduced to the limit of such validity;  and
if Lender shall ever receive  anything of value deemed interest under applicable
law which would exceed  interest at the highest  lawful rate, an amount equal to
any excess of interest shall be applied to the reduction of the principal amount
owing on this Note or amounts owed  pursuant to other loan  documents and not to
the  payment of  interest,  or if such  excess of  interest  exceeds  the unpaid
balance  of  principal  of this Note or  amounts  owed  pursuant  to other  loan
documents,  such excess  shall be refunded to the Maker.  All  interest  paid or
agreed to be paid to Payee shall, to the extent  permitted by applicable law, be
amortized,  prorated,  allocated,  and spread  throughout  the full  stated term
(including  any renewal or extension) of such  indebtedness  or until payment in
full,  whichever  is longer,  so that the amount of  interest on account of such
indebtedness  does not exceed the  maximum  permitted  by  applicable  law.  The
provision of this  paragraph  shall  control all existing and future  agreements
between Maker and Payee.

THIS LOAN IS PAYABLE IN FULL AT MATURITY.  MAKER MUST REPAY THE ENTIRE PRINCIPAL
BALANCE  OF THIS  LOAN AND  UNPAID  INTEREST  THEN  DUE.  THE  PAYEE IS UNDER NO
OBLIGATION  TO  REFINANCE  THE LOAN AT THAT  TIME.  MAKER  WILL,  THEREFORE,  BE
REQUIRED TO MAKE  PAYMENT OUT OF OTHER  ASSETS THAT MAKER MAY OWN, OR MAKER WILL
HAVE TO FIND A LENDER,  WHICH MAY BE THE PAYEE MAKER HAS THIS LOAN WITH, WILLING
TO LEND MAKER THE MONEY.  IF MAKER  REFINANCES  THIS LOAN AT MATURITY  MAKER MAY
HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN
EVEN IF MAKER OBTAINS REFINANCING FROM THE SAME PAYEE. THE PAYEE MAY CONSIDER AN
APPLICATION TO REFINANCE THE PRINCIPAL BALANCE AT THE TIME PAYMENT IS DUE ON THE
SAME BASIS AS ALL OTHER NEW MORTGAGE LOAN APPLICATIONS.

MAKER:

HARTAN, INC.                                HARVEST RESTAURANT GROUP, INC.


By: /s/ William Gallagher                   By: /s/ William Gallagher
Name: William Gallagher                     Name: William Gallagher
Title: CEO                                  Title: CEO



                                        3

<PAGE>


                                    EXHIBIT A

                              PROPERTY DESCRIPTION
                              --------------------

Lot 4, Block 1, New City Block 18829, Great Northwest, Unit 91-A, an addition to
the City of San  Antonio,  Bexar  County,  Texas,  according  to the map or plat
thereof,  recorded  in Volume  9516,  Page 108,  Deed and Plat  Records of Bexar
County, Texas.




                                        4

<PAGE>


                                    EXHIBIT B
                                    ---------


                              REAL ESTATE LIEN NOTE
                              ---------------------

Date:               December      , 1998

Maker:              Harvest Restaurant Group, Inc. and Hartan, Inc.

Payee:              William J. Gallagher

Place for Payment:  1250 NE Loop 410, Ste. 335, San Antonio, Bexar County, Texas
                    78209

Principal Amount:   ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00)

Annual Interest Rate on Unpaid
Principal from Date of Funding:     Zero Percent (0.00%) per annum.

Annual Interest Rate on Matured, Unpaid Amounts:

     All matured and unpaid  principal  and interest  shall bear interest at the
     maximum rate of interest  permitted by applicable  United States Federal or
     Texas State Law (to the extent not  pre-empted  by federal  law, if any) as
     may be applicable to this Note.

Terms of Payment (principal and interest):

     The unpaid  principal  balance of this Note shall be due and payable on the
     earlier  to  occur of (i)  March  1,  1999 or (ii) the sale by Maker of the
     property  described on Exhibit "A"  attached  hereto and made a part hereof
     for all purposes. For purposes of this Note, the sale of the property means
     the closing and funding, and the receipt by Maker from the purchaser of the
     sales proceeds.

Security for Payment:

     Payment of this Note is secured by a Deed of Trust to ROBERT A.  ROSENTHAL,
     Trustee,  covering  certain  property set out and  described on Exhibit "A"
     attached hereto and made a part hereof for all purposes.

Maker  promises  to pay to the  order of  Payee at the  place  for  payment  and
according  to the terms of payment the  principal  amount  plus  interest at the
rates  stated  above.  All unpaid  amounts  shall be due by the final  scheduled
payment date.

For purposes of the Note,  (i) Grantor shall be in default for failure to make a
payment  hereunder if Grantor  does not make such  payment  within five (5) days
after Grantor  receives  written notice  advising  Grantor that  Beneficiary has
failed to receive  Grantor's  payment  as and when the same  became due and (ii)
Grantor  shall be in default  under any of the terms of the Deed of Trust or any
other Loan  Documents  if, within  twenty (20) days after  Grantor's  receipt of
written  notice  from  Beneficiary  advising  Grantor of the terms  which are in
violation, Grantor has not fulfilled or satisfied such terms (the number of days
set forth in (i) and (ii) above referred to as the "Cure Period").  For purposes
of this  subparagraph  "written notice" means notice as described in the Deed of
Trust as well as notice by facsimile transmission which shall be deemed received
upon Beneficiary's receipt of written confirmation to that effect.

                                        1

<PAGE>



On default in the payment of this Note or in the  performance  of any obligation
described herein or in any instrument securing or collateral to it (collectively
the "Loan Documents"), this Note and all obligations in all instruments securing
or collateral to it shall become immediately due at the election of Payee. Maker
and each  surety,  endorser,  and  guarantor  waive  all  demands  for  payment,
presentations for payment,  notices of intention to accelerate maturity,  notice
of acceleration, protests, and notices of protest.

If this  Note or any  instrument  securing  or  collateral  to it is given to an
attorney for collection or enforcement,  or if suit is brought for collection or
enforcement,  or if it is collected or enforced through probate,  bankruptcy, or
other judicial proceeding, then Maker shall pay Payee reasonable attorney's fees
of at least twelve percent  (12.0%) on the amount of principal and interest then
owing.

Nothing in this Note shall authorize the collection of interest in excess of the
highest rate allowed by law.

Maker  reserves the right to prepay this Note in any amount at any time prior to
maturity without penalty. Prepayments shall be applied toward the payment of the
installments of principal last maturing hereon,  but interest shall  immediately
cease upon amounts of principal prepaid hereon.

Each Maker,  if there is more than one, is responsible  for the entire amount of
this Note.

The terms  Maker and Payee and other  nouns and  pronouns  include the plural if
more than one. The terms Maker and Payee also include  their  respective  heirs,
personal representatives, and assigns.

The failure of any holder hereof to exercise its rights  hereunder  upon any act
or acts of  default  shall not act as a waiver  thereof,  nor as a waiver of any
subsequent act or acts of default.

The Maker  warrants and  represents  to the Payee and all other  holders of this
Note  that all  loans  evidenced  by this  Note  are and  will be for  business,
commercial, investment or other similar purposes and not primarily for personal,
family,  household or agricultural use, as such terms are used in Chapter One of
Title 79, Texas Revised Civil Statutes, 1925, as amended.

The Payee reserves the right, in its sole  discretion,  with notice to the Maker
or any other person, to sell participations or assign its interest,  or both, in
all or any part of this Note or any loan evidenced by this Note.

This Note and the Loan Documents embody the entire  agreement and  understanding
between the Payee and the Maker and other  parties  with respect to the loans to
be evidenced by this Note and supersede all prior  conflicting  or  inconsistent
agreements,  consents and  understandings  relating to such subject matter.  The
Maker  acknowledges  and agrees  that there are no oral  agreements  between the
Maker and the Payee which have not been  incorporated  in this Note and the Loan
Documents.

This Note shall be governed by and construed in accordance  with applicable law.
Since it is the  intention  of the  parties  hereto to  strictly  conform to the
applicable  usury laws,  all  agreements  between  Maker and Payee,  whether now
existing or hereafter  arising and whether written or oral, are hereby expressly
limited so that in no event,  whether by reason of  acceleration  of maturity of
this Note or otherwise,  shall the amount paid or agreed to be paid to the Payee
for the use, forbearance or detention of money hereunder or otherwise exceed the
maximum amount  permissible  under applicable law. If the applicable law is ever
revised,  repealed  or  judicially  interpreted  so as to  render  usurious  any


                                        2

<PAGE>


consideration called for, contracted for, charged,  taken,  reserved or received
with respect to this Note,  the security  documents,  the loan evidenced by this
Note, or any other agreement between the parties or their affiliates,  or if the
fulfillment of any provision hereof or any note, deed of trust,  loan agreement,
or other document,  evidencing or securing the indebtedness evidenced hereby, at
the  time  of  performance  of  such  provision  shall  be  due,  shall  involve
transcending  the limit of  validity  prescribed  by law,  then  ipso  facto the
obligation to be fulfilled  shall be reduced to the limit of such validity;  and
if Lender shall ever receive  anything of value deemed interest under applicable
law which would exceed  interest at the highest  lawful rate, an amount equal to
any excess of interest shall be applied to the reduction of the principal amount
owing on this Note or amounts owed  pursuant to other loan  documents and not to
the  payment of  interest,  or if such  excess of  interest  exceeds  the unpaid
balance  of  principal  of this Note or  amounts  owed  pursuant  to other  loan
documents,  such excess  shall be refunded to the Maker.  All  interest  paid or
agreed to be paid to Payee shall, to the extent  permitted by applicable law, be
amortized,  prorated,  allocated,  and spread  throughout  the full  stated term
(including  any renewal or extension) of such  indebtedness  or until payment in
full,  whichever  is longer,  so that the amount of  interest on account of such
indebtedness  does not exceed the  maximum  permitted  by  applicable  law.  The
provision of this  paragraph  shall  control all existing and future  agreements
between Maker and Payee.

THIS LOAN IS PAYABLE IN FULL AT MATURITY.  MAKER MUST REPAY THE ENTIRE PRINCIPAL
BALANCE  OF THIS  LOAN AND  UNPAID  INTEREST  THEN  DUE.  THE  PAYEE IS UNDER NO
OBLIGATION  TO  REFINANCE  THE LOAN AT THAT  TIME.  MAKER  WILL,  THEREFORE,  BE
REQUIRED TO MAKE  PAYMENT OUT OF OTHER  ASSETS THAT MAKER MAY OWN, OR MAKER WILL
HAVE TO FIND A LENDER,  WHICH MAY BE THE PAYEE MAKER HAS THIS LOAN WITH, WILLING
TO LEND MAKER THE MONEY.  IF MAKER  REFINANCES  THIS LOAN AT MATURITY  MAKER MAY
HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN
EVEN IF MAKER OBTAINS REFINANCING FROM THE SAME PAYEE. THE PAYEE MAY CONSIDER AN
APPLICATION TO REFINANCE THE PRINCIPAL BALANCE AT THE TIME PAYMENT IS DUE ON THE
SAME BASIS AS ALL OTHER NEW MORTGAGE LOAN APPLICATIONS.

                                         MAKER:

                                         HARVEST RESTAURANT GROUP, INC.


                                         By: /s/ William Gallagher
                                         Name: William Gallagher
                                         Title: CEO


                                         HARTAN, INC.


                                         By: /s/ William Gallagher
                                         Name: William Gallagher
                                         Title:CEO


                                        3

<PAGE>


                                    EXHIBIT A

                              PROPERTY DESCRIPTION
                              --------------------

Lot 4, Block 1, New City Block 18829, Great Northwest, Unit 91-A, an addition to
the City of San  Antonio,  Bexar  County,  Texas,  according  to the map or plat
thereof,  recorded  in Volume  9516,  Page 108,  Deed and Plat  Records of Bexar
County, Texas.




                                        4

<PAGE>

                                    EXHIBIT C
                                    ---------

                        HARVEST RESTAURANT GROUP, INC. to
                              WILLIAM J. GALLAGHER

                                  DEED OF TRUST

THE STATE OF TEXAS          ss.
                            ss.        KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF BEXAR             ss.

     THAT  HARVEST  RESTAURANT  GROUP,   INC.,  of  BEXAR  COUNTY,   TEXAS  (the
"Grantor"),  for the purpose of securing the indebtedness hereinafter described,
and in  consideration  of the sum of TEN DOLLARS ($10.00) to him in hand paid by
the Trustee hereinafter named, the receipt of which is hereby acknowledged,  and
for the further consideration of the uses, purposes and trusts,  hereinafter set
forth has GRANTED, SOLD and CONVEYED, and by these presents does GRANT, SELL and
CONVEY  unto ROBERT A.  ROSENTHAL,  Trustee,  of Bexar  County,  Texas,  and his
substitutes or successors,  all of the following described property (the "Land")
situated in BEXAR COUNTY, TEXAS, to wit:

     See Exhibit "A" attached hereto and made a part hereof for all purposes,

and all improvements  (the  "Improvements")  now or hereafter  situated thereon,
inclusive  of all goods  which are or are to become  fixtures  now or  hereafter
located in and about  such  improvements,  including,  without  limitation,  all
heating,  air-conditioning,  ventilating,  plumbing,  electrical  fixtures,  and
wiring,  replacements  thereof  and  additions  thereto,  all of  which  Grantor
represents  and  agrees are and will be a part of and  affixed to said land,  as
well as all  rights  which  are  appurtenant  (the  Land  and  the  Improvements
collectively referred to as the "Property").

TO HAVE AND TO HOLD the above  described  property,  together  with the  rights,
privileges and appurtenances thereto belonging unto the said Trustee, and to his
substitutes  or successors  forever.  And Grantor does hereby bind himself,  his
heirs,  executors,  administrators and assigns to warrant and forever defend the
said premises unto the said Trustee,  his  substitutes or successors and assigns
forever,  against the claim, or claims,  of all persons  claiming by, through or
under Grantor or to claim the same or any part thereof.

This  conveyance,  however,  is made in TRUST to secure  the  payment of two (2)
certain  Real  Estate  Lien Notes (the  "Notes")  of even date  herewith  in the
principal sum of (i) ONE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($150,000.00)
and (ii) FIFTY  THOUSAND  AND NO/100  DOLLARS  ($50,000.00),  each  executed  by
Hartan, Inc. and Grantor,  payable to the order of WILLIAM J. GALLAGHER,  in the
City of San Antonio, Bexar County, Texas, as therein provided;  bearing interest
as therein stipulated,  providing for acceleration of maturity and for attorneys
fees, as well as (i) all renewals, extensions,  modifications and rearrangements
of and  substitutions  for the  Notes,  (ii)  any and all  sums,  together  with
interest  accruing  thereon  as  herein  provided,  which  may  be  advanced  by
Beneficiary to and/or owed by Grantor or Hartan,  Inc. under and pursuant to the


                                        1

<PAGE>


terms of this instrument and (iii) all  obligations and  indebtedness of Grantor
or any other person or entity under any document or instrument  now or hereafter
evidencing or securing  payment or  performance  of all or any part of the Notes
(the Notes and the  indebtedness  described  in items (i),  (ii) and (iii) above
sometimes referred to as the "Indebtedness").

For purposes of the Note,  (i) Grantor shall be in default for failure to make a
payment  hereunder if Grantor  does not make such  payment  within five (5) days
after Grantor  receives  written notice  advising  Grantor that  Beneficiary has
failed to receive  Grantor's  payment  as and when the same  became due and (ii)
Grantor  shall be in default  under any of the terms of the Deed of Trust or any
other Loan  Documents  if, within  twenty (20) days after  Grantor's  receipt of
written  notice  from  Beneficiary  advising  Grantor of the terms  which are in
violation, Grantor has not fulfilled or satisfied such terms (the number of days
set forth in (i) and (ii) above referred to as the "Cure Period").  For purposes
of this  subparagraph  "written notice" means notice as described in the Deed of
Trust as well as notice by facsimile transmission which shall be deemed received
upon Beneficiary's receipt of written confirmation to that effect.

Should  Grantor  do and  perform  all of the  covenants  and  agreements  herein
contained and make prompt payment of the indebtedness hereby secured as the same
shall become due and payable,  then this  conveyance  shall become null and void
and of no further  force and  effect,  and the liens  herein and hereby  created
shall  at  Grantor's  expense  be  released  by the  owner  and  holder  thereof
(hereinafter called "Beneficiary", whether one or more).

The Grantor covenants and agrees as follows:

     (a) To the best of Grantor's knowledge,  that it is lawfully seized of said
property,  and has the right to convey the same; that said property is free from
all liens and encumbrances, except as herein provided.

     (b) To protect  the title and  possession  of said  property  to the extent
Grantor  owns the  property  and to pay when due all taxes and  assessments  now
existing or hereafter  levied or assessed  upon said  property,  or the interest
therein created by this instrument, and to the extent this lien is a first lien,
to preserve and  maintain  the liens hereby  created as first and prior liens on
said property including any improvements hereafter made a part of the realty.

     (c) To keep the  improvements on said property in good repair and condition
(normal wear and tear  excepted)  and not to permit or commit any waste  thereof
and to keep said  buildings  occupied so as not to impair the insurance  carried
thereon.

     (d) To obtain and  maintain an  insurance  policy with  coverage  including
fire, extended coverage,  including windstorm coverage,  vandalism and malicious
mischief,  and any other hazard or hazards as may  reasonably  be required  from
time to time by  Beneficiary,  upon all  improvements  now standing or hereafter
created  upon  said  property,  from the date of this  Deed of Trust  until  the
indebtedness  secured herein is paid in full,  said insurance to be in an amount
at least equal to one hundred  percent  (100%) of the  replacement  costs of the


                                        2

<PAGE>


improvements  when  issued  and  renewed  in such form and with  such  Insurance
Company or Companies as may be reasonably approved by Beneficiary and to deliver
to Beneficiary the notices of such insurance  having attached thereto a standard
mortgage clause to protect  Beneficiary;  to deliver  renewals of such policy or
policies to Beneficiary at least ten (10) days before any such insurance  policy
shall expire;  any proceeds which Beneficiary may receive under any such policy,
or  policies,  may be  applied  by  Beneficiary  at its  option,  to reduce  the
indebtedness  hereby  secured,  whether then matured or to mature in the future,
and in such manner as Beneficiary  may elect,  or Beneficiary may permit Grantor
to use said proceeds to repair or replace all improvements  damaged or destroyed
and covered by said policy.

     (e) To  promptly  and  faithfully  comply  with,  conform  to, and obey all
present and future judicial decisions,  statutes,  rulings, rules,  regulations,
permits,  certificates  or ordinances of any  governmental  authority in any way
applicable  to  Grantor  or the  property  including,  but not  limited  to, the
ownership,  use,  operation,  occupancy,  possession,  maintenance,  alteration,
repair  or  reconstruction  thereof,  whether  or  not  same  shall  necessitate
structural changes in,  improvements to, or interfere with the use and enjoyment
of the Property.

     (f) In the  event  Grantor  shall  fail to  keep  the  improvements  on the
Property  hereby  conveyed in good repair and  condition  (normal  wear and tear
excepted),  or to pay promptly when due all taxes and  assessments as aforesaid,
or to  preserve  the prior  lien of this  Deed of Trust  herein  created  on the
Property herein described or to keep the buildings and improvements  insured, as
aforesaid,  or to deliver the policy,  or policies,  of insurance or the renewal
thereto to Beneficiary,  then  Beneficiary may at its option,  but without being
required to do so, make such repairs,  pay such taxes and assessments,  purchase
any tax title thereon, remove any prior liens, and prosecute or defend any suits
in relation to the  preservation  of the prior lien of this Deed of Trust herein
created on the Property,  or insure and keep insured the improvements thereon in
an amount not to exceed that above stipulated; and any sums which may be so used
and paid  out by  Beneficiary  and all sums  paid  for  insurance  premiums,  as
aforesaid,  including the costs,  expenses and attorney's  fees paid in any suit
affecting  the Property when  necessary to protect the liens hereof,  shall bear
interest  from the dates of such  payments  at the rate  stated in the Notes and
shall be paid by Grantor to Beneficiary  upon demand,  at the place at which the
above-described Notes are payable, and shall be deemed a part of the debt hereby
secured and recoverable as such in all respects.

     (g) That in the  event  of the  default  continues  in the  payment  of any
installment, principal or interest, of the Notes hereby secured after expiration
of all  applicable  cure periods,  in accordance  with the terms hereof,  or any
breach of the  covenants  herein  contained  to be  performed  by Grantor  after
expiration  of  applicable  cure  periods,  then  and  in  any  of  such  events
Beneficiary may elect,  Grantor hereby expressly waiving  presentment and demand
for payment,  to declare the entire principal  indebtedness  hereby secured with
all interest  accrued thereon and all other sums hereby secured  immediately due
and payable, and in the event of default in the payment of said debt when due or
declared due, it shall  thereupon,  or any time  thereafter,  be the duty of the
Trustee, or his successor or substitute as hereinafter  provided, at the request
of the Beneficiary (which request is hereby conclusively  presumed),  to enforce


                                        3

<PAGE>


this trust;  and after  advertising the time, place and terms of the sale of the
above  described  and conveyed  Property,  then subject to the lien hereof,  and
mailing and filing notices as required by Section  51.002,  Texas Property Code,
as then amended,  and otherwise  complying  with that statute or any  subsequent
statute specifying the procedure for conducting non-judicial  foreclosure sales,
the Trustee shall sell the above  described  Property,  then subject to the lien
hereof,  at public auction in accordance  with such notices on the first Tuesday
in any month  between the hours of ten o'clock A.M. and four o'clock  P.M.,  but
not  later  than  three (3) hours  after the time of the sale  specified  in the
Notice of Sale, to the highest  bidder for cash,  selling all of the Property as
an entirety or in such  parcels as the  Trustee  acting may elect,  and make due
conveyance to the purchaser or  purchasers,  with limited  warranty  binding the
Grantor, its heirs and assigns; and out of the money arising from such sale, the
Trustee acting shall first pay all expenses of advertising  said sale and making
the conveyance,  including a commission of five percent (5.0%) to himself, which
commission  shall be due and owing in addition to the  Attorney's  fees provided
for in said  Notes,  and then to  Beneficiary  the  full  amount  of  principal,
interest, Attorney's fees and other charges due and unpaid on said Notes and all
other indebtedness  secured hereby,  rendering the balance of the sale price, if
any, to Grantor,  his heirs or assigns;  and the recitals in the  conveyance  to
said purchaser or purchasers shall be full and conclusive  evidence of the truth
of the  matters  therein  stated,  and all  prerequisites  to said sale shall be
presumed  to have  been  performed,  and  such  sale  and  conveyance  shall  be
conclusive against Grantor, his heirs and assigns.

It is agreed that in the event a foreclosure hereunder shall be commenced by the
Trustee, or his substitute or successor,  Beneficiary may at any time before the
sale of the  Property  direct the  Trustee to  abandon  said sale,  and may then
institute  suit for the  collection of said Notes,  and for  foreclosure  of the
liens  herein  created;  and it is further  agreed  that if  Beneficiary  should
institute  suit for the collection  thereof,  and for a foreclosure of the liens
herein  created,  that he may at any time before entry of final judgment in said
suit  dismiss  the  same,  and  require  the said  Trustee,  his  substitute  or
successor,  to sell the  Property  in  accordance  with the power of sale herein
granted.

Beneficiary shall have the right to purchase at any sale of the Property,  if it
is the  highest  bidder,  and to have the amount for which the  Property is sold
credited on the debt then owing.

Beneficiary in any event is hereby  authorized to appoint a substitute  trustee,
or a successor trustee, to act instead of the Trustee named herein without other
formality than the designation in writing of a substitute or successor  trustee,
and the authority  hereby  conferred  shall extend to the  appointment  of other
successor and substitute  trustees  successively  until the indebtedness  hereby
secured has been paid in full, or until the Property is sold  hereunder and each
substitute  and successor  trustee shall succeed to all of the rights and powers
of the original trustee named herein.

In the event of a sale of the Property herein described, or any portion thereof,
under the  terms of the power of sale  herein  created,  Grantor,  his heirs and
assigns,  shall  forthwith  upon the making of such sale  surrender  and deliver
possession  of the Property so sold to the  purchaser  at such sale,  and in the
event of their failure to do so they shall  thereupon  from and after the making
of such sale be, and continue as, tenants at will of such purchaser,  and in the
event of Grantor's failure to surrender  possession of the Property upon demand,


                                        4

<PAGE>


the purchaser, his heirs or assigns, shall be entitled to institute and maintain
an action for  forcible  detainer  of the  Property  in the Justice of the Peace
Court in the Justice  Precinct in which the Property,  or any part  thereof,  is
situated.

It is agreed that the lien hereby  created shall take  precedence  over and be a
prior lien to any other lien of any character  (other than those liens currently
on the Property), whether vendor's,  materialmen's or mechanic's lien, hereafter
created on the above described Property.

It is further agreed that if Grantor,  its heirs,  successors or assigns,  while
the owner of the herein described Property,  should commit an act of bankruptcy,
or  authorize  the filing of a  voluntary  petition in  bankruptcy  which is not
dismissed  within sixty (60) days,  or should an act of  bankruptcy be committed
and  involuntary  proceedings  instituted or threatened,  or should the Property
herein  conveyed be taken over by a Receiver for Grantor,  his heirs or assigns,
the Notes herein  described  shall,  at the option of  Beneficiary,  immediately
become due and payable and the acting  Trustee may then proceed to sell the same
under the provisions hereof.

                                   ARBITRATION

Except  for  "Core   Proceedings"  under  the  United  States  Bankruptcy  Code,
Beneficiary  and  Grantor  agree to submit to binding  arbitration  all  claims,
disputes and controversies  between or among them, whether in tort,  contract or
otherwise (and their respective  employees,  officers,  directors,  attorney and
other agents)  arising out of or relating to in any way (i) the loan and related
loan and  security  documents  which are the subject of this  Agreement  and its
negotiations,   execution,   collateralization,    administration,    repayment,
modification,   extension,  substitution,  formation,  inducement,  enforcement,
default or termination;  or (ii) requests for additional credit. Any arbitration
proceeding  will (i)  proceed in San  Antonio,  Texas;  (ii) be  governed by the
Federal  Arbitration  Act  (Title 9 of the  United  States  Code);  and (iii) be
conducted in accordance  with the Commercial  Arbitration  Rules of the American
Arbitration Association ("AAA").

The  Arbitration  requirement  does not limit  the right of either  party to (i)
foreclose against real or personal property collateral;  (ii) exercise self-help
remedies  relating to  collateral  or proceeds of  collateral  such as setoff or
repossession;  or (iii) obtain provisional  ancillary remedies such as replevin,
injunctive relief,  attachment or the appointment of a receiver,  before, during
or after the pendency of any  arbitration  proceeding.  This  exclusion does not
constitute  a waiver of the right or  obligation  of either  party to submit any
dispute to arbitration, including those arising from the exercise of the actions
detailed in sections (i), (ii) and (iii) of this paragraph.

Any arbitration proceeding will be before a single arbitrator selected according
to the Commercial Arbitration Rules of the AAA. The arbitrator will be a neutral
attorney who has  practiced in the area of  commercial  law for a minimum of ten
years. The arbitrator will determine whether or not an issue is arbitratable and
will give  effect to the  statutes  of  limitation  in  determining  any  claim.
Judgment upon the award  rendered by the  arbitrator may be entered in any court
having jurisdiction.

                                        5

<PAGE>



     1. Motion  Practice:  In any  arbitration  proceeding the  arbitrator  will
decide (by documents only or with a hearing at the arbitrator's  discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication.

     2. Discovery: In any arbitration proceeding discovery will be permitted and
will be governed by the Texas Rules of Civil  Procedure.  All discovery  must be
completed  no later than 20 days before the hearing  date and within 180 days of
the  commencement of arbitration  proceedings.  Any requests for an extension of
the  discovery  periods,  or any  discovery  disputes,  will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential  for the  party's  presentation  and  that no  alternative  means  for
obtaining information is available.

     3. Payment of Arbitration  Costs and Fees: The arbitrator shall award costs
and expenses of the arbitration  proceeding in accordance with the provisions of
the loan agreement, promissory notes and/or other loan documents.

It is  agreed  that an  extension,  or  extensions,  may be made of the  time of
payment of all, or any part, of the  indebtedness  hereby secured,  and that any
part of the above  described  Property  may be  released  for the  liens  hereby
created without altering or affecting the priority of the said liens in favor of
any junior  encumbrancer,  mortgagee or purchaser,  or any person  acquiring any
interest in the Property  herein  conveyed,  or any part  thereof,  it being the
intention  of the Parties  hereto to preserve  the liens  hereby  created on the
Property  herein  described  and  all  improvements  thereon,  and  that  may be
hereafter  constructed  thereon,  first and  superior  to any liens  that may be
placed on the  Property,  or that may be fixed,  given or  imposed by law on the
Property  after  the  execution  of this  instrument  notwithstanding  any  such
extension  of the time of payment,  or the release of a portion of the  Property
from said liens.

In the event any portion of the indebtedness herein described cannot be lawfully
secured  by the  liens  herein  given  and  created  upon the  herein  described
Property,  it is agreed that the first payments made on said indebtedness  shall
be applied to the discharge of that portion of said indebtedness.

Beneficiary  shall be  entitled  to  receive  any and all sums  which may become
payable to Grantor for  condemnation of the Property,  or any part thereof,  for
public or  quasi-public  use, or by virtue of private sale in lieu thereof,  and
any sums which may be awarded or become payable to Grantor for damages caused by
public works or construction  on or near the Property.  All such sums are hereby
assigned  to  Beneficiary,  who may,  after  deducting  therefrom  all  expenses
actually incurred,  including  attorney's fees, release same to Grantor or apply
the same to the  reduction  of the  indebtedness  hereby  secured,  whether then
matured or to mature in the future, or on any money obligation hereunder, as and
in such manner as Beneficiary may elect.  Beneficiary shall not be, in any event
or  circumstances,  liable or  responsible  for failure to collect,  or exercise
diligence in the collection of, any such sums.

                                        6

<PAGE>



Nothing herein or in said Notes contained shall ever entitle  Beneficiary,  upon
the arising of any  contingency  whatsoever,  to receive or collect  interest in
excess of the  highest  rate  allowed  by the  applicable  law on the  principal
indebtedness hereby secured or on any money obligation hereunder and in no event
shall Grantor be obligated to pay interest thereon in excess of such rate.

The failure of the Beneficiary to exercise its rights  hereunder with respect to
any one event or events of default by Grantor shall not act as a waiver  thereof
nor as a waiver of any subsequent act or acts of default by Grantor.

If, without the prior written consent of Beneficiary,  which consent will not be
unreasonably  withheld,  all or any part of the Property or an interest therein,
or if a beneficial interest in the borrower (if borrower is not a natural person
or persons, but is a corporation,  partnership,  trust or other legal entity) is
sold, transferred, assigned or conveyed in any way (including a contract of sale
or a  contract  of  deed),  or if  the  herein  described  Property  is  further
mortgaged,  pledged or encumbered,  without Beneficiary's prior written consent,
the Beneficiary may, at Beneficiary's option, declare all of the sums secured by
this Deed of Trust to be immediately due and payable and exercise any and all of
the rights,  remedies and  recourses  provided  herein or in any other  document
securing  the  indebtedness,  and the  exercise  of such  option  may be made by
Beneficiary  at any time until the  expiration of one (1) year after the receipt
by  Beneficiary  of  written  notice of such  sale,  lease,  other  disposition,
encumbrance or change in ownership.  However, this option shall not be exercised
by  Beneficiary  if exercise is prohibited by federal law as of the date of this
security agreement.

                            ENVIRONMENTAL PROVISIONS

Grantor  represents,  warrants and covenants that Grantor will keep the property
in substantially the same condition and in compliance with all laws, ordinances,
rules  and  regulations,   including  all  applicable   environmental  laws  and
regulations.  Grantor  covenants  that  Grantor will not dispose of or otherwise
release onto the property any hazardous  substance or solid waste as those terms
are  defined  under any federal or state law and in the event of any spill on or
contamination  of the  property,  Grantor  will  promptly  take  all  reasonable
measures  necessary  to remedy the  situation  and restore  the  property to its
condition prior to the contamination.

It is expressly understood and agreed that should Grantor, his heirs or assigns,
fail to pay any other indebtedness,  or any part thereof, principal or interest,
as the same shall become due and payable after  expiration  of  applicable  cure
periods,  which may be secured by a prior lien or liens on the  property  herein
described, the indebtedness hereby secured, at the option of the holder thereof,
shall become due and payable.

This  Deed of Trust  shall be  governed  by and  construed  in  accordance  with
applicable  law.  Since it is the  intention  of the parties  hereto to strictly
conform to the  applicable  usury  laws,  all  agreements  between  Grantor  and
Beneficiary,  whether now existing or hereafter  arising and whether  written or
oral,  are hereby  expressly  limited so that in no event,  whether by reason of
acceleration  of  maturity of the Notes or  otherwise,  shall the amount paid or


                                        7

<PAGE>


agreed to be paid to the Lender for the use,  forbearance  or detention of money
hereunder or otherwise  exceed the maximum amount  permissible  under applicable
law. If the applicable law is ever revised,  repealed or judicially  interpreted
so as to render usurious any consideration  called for, contracted for, charged,
taken,  reserved or received with respect to the Notes, the security  documents,
the loan evidenced by the Notes, or any other  agreement  between the parties or
their  affiliates,  or if the fulfillment of any provision  hereof or any notes,
deed of trust,  loan agreement,  or other  document,  evidencing or securing the
indebtedness  evidenced  hereby,  at the time of  performance  of such provision
shall be due,  shall involve  transcending  the limit of validity  prescribed by
law,  then ipso facto the  obligation  to be  fulfilled  shall be reduced to the
limit of such  validity;  and if Lender  shall ever  receive  anything  of value
deemed interest under  applicable law which would exceed interest at the highest
lawful rate,  an amount equal to any excess of interest  shall be applied to the
reduction of the principal amount owing on the Notes or amounts owed pursuant to
other loan  documents  and not to the payment of interest,  or if such excess of
interest  exceeds the unpaid  balance of  principal of the Notes or amounts owed
pursuant to other loan documents,  such excess shall be refunded to the Grantor.
All  interest  paid or agreed to be paid to  Beneficiary  shall,  to the  extent
permitted by  applicable  law, be  amortized,  prorated,  allocated,  and spread
throughout  the full stated term  (including  any renewal or  extension) of such
indebtedness or until payment in full,  whichever is longer,  so that the amount
of  interest  on  account  of such  indebtedness  does not  exceed  the  maximum
permitted by applicable  law. The provision of this paragraph  shall control all
existing and future agreements between Grantor and Beneficiary.

Upon the  occurrence  and  during  the  continuance  of any  Event  of  Default,
Beneficiary  is hereby  authorized  at any time and from  time to time,  without
notice to Grantor (any such notice being  expressly  waived by Grantor),  to set
off and apply all deposits (general or special,  time or demand,  provisional or
final)  at any  time  held  and  other  indebtedness  at any  time  owing by the
Beneficiary  to or for the credit or the account of Grantor  against any and all
of the  obligations  of Grantor now or hereafter  existing  pursuant to the Loan
Documents,  irrespective  of whether or not the  Beneficiary  agrees promptly to
notify Grantor after any such setoff and application,  provided that the failure
to give such notice shall not affect the validity of such setoff and application
or  create  any  liability  on the part of the  Beneficiary.  The  rights of the
Beneficiary  under this  section are in addition  to other  rights and  remedies
(including,  without  limitation,  other rights of setoff) which the Beneficiary
may have.

Grantor  expressly  represents  that this  Deed of Trust  and the  Notes  hereby
secured  are  given  for and  represent  the sum of  $150,000.00  and the sum of
$50,000.00  advanced by Beneficiary to the Grantor herein,  the payment of which
is hereby  secured,  in payment of the purchase price of the Property,  and this
Deed  of  Trust  is  given  as  additional  security  for  the  payment  of said
indebtedness.

Since this loan is payable in full at maturity  (as set forth in the Real Estate
Lien Note),  Grantor recognizes that it must repay the full remaining  principal
balance of the loan and any  accrued but unpaid  interest at that time.  Grantor
acknowledges  and agrees that William J.  Gallagher has not agreed to and has no
duty to extend or modify the maturity of the Notes.  While William J.  Gallagher
may agree to extend or modify the  maturity  of this loan or to make a new loan,


                                        8

<PAGE>


he is under no obligation to do so. Grantor will, therefore, be required to make
payable  out of  other  assets  that it owns  or it will  have to find a  lender
willing to lend it money.  Grantor  realizes that if it refinances  this loan at
maturity,  it may  have  to pay  some  or all  of  the  closing  costs  normally
associated  with a new  loan  even if this  loan is  obtained  from  William  J.
Gallagher.

The plural  reference  to any party shall  include the singular and the singular
reference  to any party  shall  include  the plural.  All of the  covenants  and
agreements  herein  undertaken to be performed by and the rights  conferred upon
the  respective  parties  shall be binding  upon and inure to the benefit of not
only said parties  respectively,  but also their  respective  heirs,  executors,
administrators, grantees, successors and assigns.

THIS WRITTEN DEED OF TRUST  REPRESENTS THE FINAL  AGREEMENT  BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENT OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL  AGREEMENTS  BETWEEN
THE PARTIES.

     EXECUTED this, the 23rd day of December, 1998.

                                          GRANTOR:

                                          HARVEST RESTAURANT GROUP, INC.

                                          By: /s/ William Gallagher
                                          Name: William Gallagher
                                          Title: CEO


                                 ACKNOWLEDGMENT

STATE OF TEXAS             ss.
                           ss.
COUNTY OF BEXAR            ss.

     This  instrument  was  acknowledged  before me on the 23rd day of December,
1998 by William J.  Gallagher,  Chief  Executive  Officer of Harvest  Restaurant
Group, Inc., a Texas corporation, on behalf of said corporation.

                          
                                              /s/
                                              ----------------------------------
                                                 Notary Public, State of Texas




                                        9

<PAGE>


PLEASE RETURN TO:

William J. Gallagher
1250 NE Loop 410, Ste. 335
San Antonio, Texas 78209


PREPARED BY:

Robert A. Rosenthal, Esq.
Rosenberg, Tuggey, Agather
  Rosenthal & Rodriguez
A Professional Corporation
140 E. Houston St., 2nd Floor
San Antonio, Texas  78205

                                       10

<PAGE>


                                    EXHIBIT A

                              PROPERTY DESCRIPTION
                              --------------------

Lot 4, Block 1, New City Block 18829, Great Northwest, Unit 91-A, an addition to
the City of San  Antonio,  Bexar  County,  Texas,  according  to the map or plat
thereof,  recorded  in Volume  9516,  Page 108,  Deed and Plat  Records of Bexar
County, Texas.



                                       11

<PAGE>

                                    EXHIBIT D
                                    ---------



List of furniture located at the corporate offices of Harvest  Restaurant Group,
Inc. in San Antonio, Texas:

     1.   Pipe  clamped  desk with  chair,  located  in the  office  of  William
          Gallagher;

     2.   Pipe  clamped  files and  storage,  located  in the  office of William
          Gallagher;

     3.   Pipe clamped conference table with deck chairs;

     4.   One desk with chair;

     5.   Bookcase;

     6.   Three file cabinets;

     7.   Harvest prints.