<PAGE>
                                       
                                LOAN AGREEMENT


"EFFECTIVE DATE:"             ___________ __, 1999


"BORROWER:"                   ____________________


BORROWER'S ADDRESS:           ____________________


"GUARANTOR:"                  ____________________


"PRINCIPAL AMOUNT:"           $___________________


"COMPLETION DATE:"            _________ __, 1999

"PURPOSE OF INITIAL ADVANCE:" _____________________

"MORTGAGE:"                   THAT CERTAIN COMMERCIAL _____________, SECURITY
                              AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND 
                              FIXTURE FILING, DATED THE EFFECTIVE DATE AND 
                              EXECUTED BY BORROWER IN FAVOR OF LENDER, SECURING 
                              THE PAYMENT OF THE NOTE AND THE PAYMENT AND 
                              PERFORMANCE OF ALL OBLIGATIONS SPECIFIED IN SAID
                              MORTGAGE AND THIS AGREEMENT, AND EVIDENCING A 
                              VALID AND ENFORCEABLE LIEN ON THE PROPERTY SUBJECT
                              ONLY TO THE MATTERS APPROVED IN WRITING BY LENDER.

     THIS LOAN AGREEMENT (this "Agreement") dated as of the Effective Date  
is made by and between SCHLOTZSKY'S REAL ESTATE, INC., a Texas corporation 
("Lender"), whose address is 203 Colorado Street, Austin, Texas 78701, 
Attention: Accounting Department, and     Borrower with respect to a loan up 
to the Principal Amount.
                                       
                                  ARTICLE I
                                       
                                 DEFINITIONS

     For purposes of this Agreement, in addition the terms defined opn the 
first page hereof, the following terms shall have the respective meanings 
assigned to them.

     1.1. ADVANCE.  The term "Advance" shall mean a disbursement by Lender of 
any of the proceeds of the Loan.

     1.2. AFFIDAVIT OF BORROWER.  The term "Affidavit of Borrower" shall mean 
a sworn affidavit of Borrower (and such other parties as Lender may require) 
to the effect that all statements, invoices, bills, and other expenses 
incident to the acquisition of the Land and the construction of the 
Improvements incurred to a specified date, whether or not specified in the 
Approved Budget, have been paid in full, except for (a) amounts retained 
pursuant to the Construction Contract, and (b) items to be paid from the 
proceeds of the Advance then being requested or in another manner 
satisfactory to Lender.

     1.3. APPLICATION FOR ADVANCE.  The term "Application for Advance" shall 
mean a written 

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application (on AIA Document G702 or such other form acceptable to Lender) by 
Borrower (and such other parties as Lender may require) to Lender specifying 
by name, current address, and amount all parties to whom Borrower is 
obligated for labor, materials, or services supplied for the construction of 
the Improvements and all other expenses incident to the construction of the 
Improvements, requesting an Advance for the payment of such items, 
accompanied by such schedules, affidavits, releases, waivers, statements, 
invoices, bills, and other documents as Lender may reasonably request, and 
certifying that all materials purchased with the proceeds of any previous 
Advance have been incorporated into the Improvements. 

     1.4. APPROVED BUDGET.  The term "Approved Budget" shall mean the budget, 
approved by Lender in writing in Lender's sole discretion, for the costs and 
expenses to be incurred by Borrower in connection with the purchase of the 
Land and the construction of the Improvements.

     1.5. ARCHITECT.  The term "Architect" shall mean the architect approved 
by Lender in writing in Lender's sole discretion.

     1.6. BORROWER.  The term "Borrower" shall mean all parties identified as 
Borrower on the first page of this Agreement and any and all subsequent 
record or equitable owners of the Property. 

     1.7. COMPLETION DATE.  The term "Completion Date" shall mean 

the date set forth on the first page hereof.

     1.8. CONSTRUCTION CONTRACT.  The term "Construction Contract" shall mean 
the construction contract executed by Borrower and Contractor for the 
construction of the Improvements.

     1.9. CONTRACTOR.  The term "Contractor" shall mean mean the contactor 
approved by Lender in writing in Lender's sole discretion.

     1.10. EVENT OF DEFAULT.  The term "Event of Default" shall mean:

     (a)  A failure by Borrower to comply with any of the covenants, terms or 
conditions specified in this Agreement for a period of thirty (30) days after 
delivery by Lender of written notice to Borrower of such failure, provided 
that in no event shall Lender have any obligation to deliver, nor shall 
Borrower have any right to receive, more than one (1) such notice in any 
calendar year concerning a failure by Borrower to comply with the same 
covenant, term or condition;

     (b)  An inability of Borrower to satisfy any condition specified herein 
as precedent to the obligation of Lender to make an Advance after an 
Application for Advance has been submitted by Borrower to Lender;

     (c)  Any breach by Borrower of its obligations under the Construction 
Contract, or the termination of the Construction Contract;

     (d)  The failure by Borrower to complete construction of the 
Improvements and satisfy all of the conditions precedent to the Final Advance 
on or before the Completion Date; or

     (e)  The occurrence of any event of default, as defined or described in 
the Note or any of the other Loan Documents.

     1.11. FINAL ADVANCE.  The term "Final Advance" shall mean the last 
disbursement of the proceeds of the Loan.

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     1.12. GOVERNMENTAL AUTHORITY.  The term "Governmental Authority" shall 
mean the United States, the state, the county, the city, or any other 
political subdivision in which the 


























                                       3
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Property is located, and any other political subdivision, agency, or 
instrumentality exercising jurisdiction over the Property or over Borrower or 
any Guarantor.

     1.13.     GOVERNMENTAL REQUIREMENTS.  The term "Governmental 
Requirements" shall mean all laws, ordinances, rules, and regulations of any 
Governmental Authority applicable to Borrower, Guarantor, or the Property.

     1.14.     GUARANTOR.  The term "Guarantor" shall mean all parties 
identified as "Guarantor" on the first page of this Agreement.

     1.15.     GUARANTY.  The term "Guaranty" shall mean a continuing 
unconditional guaranty of the Loan executed by each Guarantor.

     1.16.     IMPROVEMENTS.  The term "Improvements" shall mean the 
Schlotzsky's Deli restaurant to be constructed on the Land, together with all 
related facilities and amenities to be developed and constructed by the 
Borrower on the Land.

     1.17.     INITIAL ADVANCE.  The term "Initial Advance" shall mean the 
advance of the Loan being made by Lender on or about the Effective Date.

     1.18.     INCIPIENT DEFAULT.  The term "Incipient Default" shall mean 
the existence of any condition or state of facts which with the giving of 
notice by Lender, the passage of time, or both, would constitute an Event of 
Default.

     1.19.     INTERIM ADVANCE.  The term "Interim Advance" shall mean each 
Advance of the proceeds of the Loan other than the Initial Advance and the 
Final Advance.

     1.20.     LAND.  The term "Land" shall mean the real property described 
on EXHIBIT A attached hereto and incorporated herein by reference.

     1.21.     LENDER.  The term "Lender" shall mean the Lender named on  the 
first page of this Agreement.

     1.22.     LOAN.  The term "Loan" shall mean the Loan by Lender to 
Borrower, in an amount not to exceed the Principal Amount, for the payment of 
the costs of labor, materials, and services supplied for the construction of 
the Improvements and all other expenses incident to the acquisition of the 
Land and the construction of the Improvements, as set forth in the Approved 
Budget or as otherwise approved by Lender in writing.

     1.23.     LOAN DOCUMENTS.  The term "Loan Documents" shall mean this 
Agreement, the Mortgage, the Note, the Guaranty, and such other instruments 
evidencing, securing, or pertaining to the Loan as shall, from time to time, 
be executed and delivered by Borrower, Guarantor, or any other party to 
Lender pursuant to this Agreement or otherwise, including, without 
limitation, each Affidavit of Borrower and each Application for Advance.

     1.24.     MORTGAGE.  The term "Mortgage" shall mean the Mortgage 
identified on the first page of this Agreement.

     1.25.     NOTE.  The term "Note" shall mean that certain Promissory Note 
dated the Effective Date, in the Principal Amount, executed by Borrower and 
payable to the order of Lender.

     1.26.     PLANS.  The term "Plans" shall mean the final working drawings 
and specifications for 

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the construction of the Improvements, as approved by Lender in its sole 
discretion.

     1.27.     PROPERTY.  The term "Property" shall mean the Land and 
Improvements and all other property constituting the "Property", as described 
in the Mortgage. 

     1.28.     RETAINAGE.  The term "Retainage" shall mean a sum of money 
equal to ten percent (10%) of the cost of all work and materials with respect 
to which each Interim Advance is requested (calculated prior to any deduction 
for Retainage applicable to prior Interim Advances).

     1.29.     SURVEY.  The term "Survey" shall mean a current, certified 
as-built survey of the Property prepared in accordance with Lender's survey 
requirements as determined by Lender in its sole discretion.

     1.30.     TITLE COMPANY.  The term "Title Company" shall mean the title 
company determined by Lender in its sole discretion.

     1.31.     TITLE POLICY. The term "Title Policy" shall mean a mortgagee 
title insurance policy in form satisfactory to Lender, in the amount of the 
Loan, insuring that the Mortgage constitutes a valid first and prior lien 
covering the Property and is subject only to those exceptions and 
encumbrances which Lender may approve (the "Permitted Exceptions"), issued by 
the Title Company; such title insurance policy shall include an adjustable 
mortgage loan endorsement and such other endorsements as Lender shall require.
                                          
                                  ARTICLE II
                                       
                             AGREEMENTS OF LENDER

     2.1. COMMITMENT OF LENDER. Subject to the conditions hereof, and 
provided that neither an Event of Default nor an Incipient Default has 
occurred, Lender will make Advances for the benefit of Borrower in accordance 
with this Agreement. Advances are to be used by Borrower for the payment of 
only those costs and expenses as set forth in the Approved Budget, and for no 
other purposes whatsoever without the express prior written approval of 
Lender. 

     2.2. INTEREST ON THE LOAN. Interest on the Loan, at the rate specified 
in the Note, shall be computed on the outstanding balance of Advances and 
shall be computed with respect to each Advance from the date such Advance is 
wire transferred or otherwise sentby Lender to or for the benefit of Borrower.

     2.3. LIMITATION ON ADVANCES. In no event shall Lender be required to 
make (a) more than three (3) Interim Advances, (b) any Advance to the extent 
it would cause the outstanding l amount of all of the Advances to be in 
excess ofthe Principal Amount, (c) more than one (1) Advance in any thirty 
(30) day period, (d) any Advance in an amount less than $100,000.00 (except 
for the Final Advance), or (e) any Advance after the Completion Date.

     2.4. INITIAL ADVANCE. Borrower acknowledges that, on or about the 
Effective Date, Lender has made the Initial Advance to Borrower. Borrower 
shall use the proceeds of the Initial Advance solely for the f Purpose of 
Initial Advance set forth on the first page hereof.

     2.5. CONDITIONS TO THE SECOND ADVANCE. As conditions precedent to the 
second Advance hereunder, in addition to all other requirements herein, 
Borrower must satisfy each of the following conditions (all of which must be 
acceptable to Lender in its sole and absolute discretion):

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     (a)  No Event of Default shall have occurred.
     



















                                       6
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     (b)  No Incipient Default shall have occurred which shall not have been 
cured to Lender's satisfaction.

     (c)  Borrower shall have delivered to Title Company such lien releases 
and waivers and other items as may be required by Title Company to issue the 
endorsement described in Section 2.5(e) below.

     (d)  Borrower shall have submitted to Lender an Application for Advance 
and an Affidavit of Borrower in the form required by Lender.

     (e)  The Title Policy shall be endorsed to cover the second Advance with 
no additional title exceptions objectionable to Lender and with mechanic's 
lien coverage.

     (f)  Borrower and Contractor shall have submitted to Lender an 
accounting of all costs expended to date in connection with the construction 
of the Improvements and a detailed comparison of such costs to the Approved 
Budget.

     (g)  Architect shall have certified to Lender that at least thirty 
percent (30%) of the construction of the Improvements has been completed as 
of the date of the Application for Advance.

     (h)  The maximum amount of the second Advance shall be equal to the 
difference between (i) thirty percent (30%) of the costs set forth in the 
Approved Budget for Improvements, and (ii) the Retainage applicable to the 
second Advance.

     2.6. CONDITIONS TO THE THIRD ADVANCE. As conditions precedent to the 
third Advance hereunder, in addition to all other requirements herein, 
Borrower must satisfy each of the following conditions (all of which must be 
acceptable to Lender in its sole and absolute discretion):

     (a)  No Event of Default shall have occurred.

     (b)  No Incipient Default shall have occurred which shall not have been 
cured to Lender's satisfaction.

     (c)  Borrower shall have delivered to Title Company such lien releases 
and waivers and other items as may be required by Title Company to issue the 
endorsement described in Section 2.6(e) below.

     (d)  Borrower shall have submitted to Lender an Application for Advance 
and an Affidavit of Borrower in the form required by Lender.

     (e)  The Title Policy shall be endorsed to cover the third Advance with 
no additional title exceptions objectionable to Lender and with mechanic's 
lien coverage.

     (f)  Borrower and Contractor shall have submitted to Lender an 
accounting of all costs expended to date in connection with the construction 
of the Improvements and a detailed comparison of such costs to the Approved 
Budget.

     (g)  Architect shall have certified to Lender that at least sixty 
percent (60%) of the construction of the Improvements has been completed as 
of the date of the Application for Advance.

     (h)  The maximum amount of the third Advance shall be equal to the 
difference between (i) up to sixty percent (60%) of the costs set forth in 
the Approved Budget for Improvements, and (ii) the 

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sum of (A) the amount of the second Advance, and (B) the Retainage applicable 
to the second Advance and to the third Advance.

     2.7. CONDITIONS TO THE FOURTH ADVANCE. As conditions precedent to the 
fourth Advance hereunder, in addition to all other requirements herein, 
Borrower must satisfy each of the following conditions (all of which must be 
acceptable to Lender in its sole and absolute discretion):

     (a)  No Event of Default shall have occurred.

     (b)  No Incipient Default shall have occurred which shall not have been 
cured to Lender's satisfaction.

     (c)  Borrower shall have delivered to Title Company such lien releases 
and waivers and other items as may be required by Title Company to issue the 
endorsement described in Section 2.7(e) below.

     (d)  Borrower shall have submitted to Lender an Application for Advance 
and an Affidavit of Borrower in the form required by Lender.

     (e)  The Title Policy shall be endorsed to cover the fourth Advance with 
no additional title exceptions objectionable to Lender and with mechanic's 
lien coverage.

     (f)  Borrower and Contractor shall have submitted to Lender an 
accounting of all costs expended to date in connection with the construction 
of the Improvements and a detailed comparison of such costs to the Approved 
Budget.

     (g)  Architect shall have certified to Lender that at least ninety 
percent (90%) of the construction of the Improvements has been completed as 
of the date of the Application for Advance.

     (h)  The maximum amount of the fourth Advance shall be equal to the 
difference between (i) up to ninety percent (90%) of the costs set forth in 
the Approved Budget for Improvements, and (ii) the sum of (A) the amount of 
the second Advance, (B) the amount of the third Advance and (C) the Retainage 
applicable to the second Advance, the third Advance and the fourth Advance.

     2.8. CONDITIONS TO FINAL ADVANCE. As conditions precedent to the Final 
Advance, hereunder, in addition to all other requirements herein, Borrower 
must satisfy each of the following conditions (all of which must be 
acceptable to Lender in its sole and absolute discretion):

     (a)  Borrower shall have completed the construction of the Improvements. 

     (b)  Architect shall have delivered a certification to Lender stating 
that the Improvements have been completed in accordance with the Plans and 
all Governmental Requirements and provided evidence of such completion to 
Lender. 

     (c)  Borrower shall have submitted to Lender an Application for Advance 
and an Affidavit of Borrower in the form required by Lender.

     (d)  Borrower shall have delivered to Lender or Title Company final, 
unconditional releases or waivers of mechanics' and materialmen's liens and 
receipted bills showing payment to all parties who have furnished materials 
or services or performed labor of any kind in 

                                       8
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connection with the construction of any of the Improvements including, 
without limitation, Contractor.

     (e)   The Title Policy shall be endorsed to cover the Final Advance with 
no additional title exceptions objectionable to Lender and with mechanic's 
lien coverage. 

     (f)  Borrower and Contractor shall have submitted to Lender an 
accounting of all costs expended in connection with the construction of the 
Improvements and a detailed comparison of such costs to the Approved Budget.

     (g)  Lender shall have received and approved the Survey.

     (h)  Borrower shall have delivered to Lender an unconditional final 
certificate of occupancy with respect to the Property and copies of any other 
licenses or permits required for the operation of the Property.

     (i)  In no event shall the amount of the Final Advance exceed the 
difference between (i) the Principal Amount and (ii) the sum of the first 
four (4) Advances. The Retainage shall be disbursed with the Final Advance.

     2.9. REALLOCATION OF APPROVED BUDGET. Lender reserves the right to make 
Advances which are allocated to any of the designated items in the Approved 
Budget for such other purposes or in such different proportions as Lender 
may, in its sole reasonable discretion, deem necessary or advisable. Borrower 
may not reallocate items of cost or change the Approved Budget without the 
prior written consent of Lender. 

     2.10.     NO WAIVER.  No Advance shall constitute a waiver of any 
condition precedent to the obligation of Lender to make any further Advance 
or preclude Lender from thereafter declaring the failure of Borrower to 
satisfy such condition precedent to be an Event of Default. The making of an 
Advance shall not be deemed an approval or acceptance by Lender of any work 
or material theretofore completed, installed or delivered on the Property. In 
the event Borrower's interest in any of the Property is transferred, Lender 
may continue to make Advances to Borrower's successor in interest and all 
sums so advanced shall be deemed Advances hereunder which are evidenced and 
secured by the Loan Documents.

     2.11.     CONDITIONS PRECEDENT FOR THE BENEFIT OF LENDER.  All 
conditions precedent to the obligation of Lender to make any Advance are 
imposed hereby solely for the benefit of Lender, and no other party may 
require satisfaction of any such condition precedent or be entitled to assume 
that Lender will refuse to make any Advance in the absence of strict 
compliance with such conditions precedent. All requirements of this Agreement 
may be waived by Lender, in whole or in part, at any time. Any requirement 
herein of submission of evidence of the existence or non-existence of a fact 
shall be deemed, also, to be a requirement that the fact shall exist or not 
exist, as the case may be, and without waiving any condition or obligation of 
Borrower, Lender may at all times independently establish to its satisfaction 
such existence or non-existence. 

     2.12.     NO OBLIGATION TO MAKE ADVANCE.  Lender shall not be obligated 
to make any Advance if Lender determines that such Advance will not be 
secured by the Mortgage.

     2.13.     METHOD OF DISBURSEMENTS.  Lender shall have the right to 
disburse Advances in any manner deemed acceptable to Lender including, 
without limitation, pursuant to two party checks naming Borrower and any 
third party entitled to receive payment of any Advance.

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                                  ARTICLE III
                                          
                            AGREEMENTS OF BORROWER

     Borrower hereby, warrants, represents, covenants and agrees as follows:

     3.1. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS.  Borrower shall timely 
comply with all Governmental Requirements and deliver to Lender evidence 
thereof. Borrower assumes full responsibility for the compliance of the Plans 
and the Property with all Governmental Requirements and with sound building 
and engineering practices and, notwithstanding any approvals by Lender, 
Lender shall have no obligation or responsibility whatsoever for the Plans or 
any other matter incident to the Property or the construction of the 
Improvements.

     3.2. CONSTRUCTION OF THE IMPROVEMENTS.  The construction shall be 
prosecuted with diligence and continuity, in a good and workmanlike manner, 
and in accordance with sound building and engineering practices, all 
applicable Governmental Requirements, the Plans, the requirements herein 
contained, and the requirements of any lessee, if applicable. Borrower shall 
complete construction of the Improvements on or before the Completion Date, 
free and clear of all liens. In the event the cost for completion of the 
Improvements exceeds the amount set forth in the Approved Budget, Borrower 
shall pay any such excess.

     3.3. CORRECTION OF DEFECTS.  Borrower shall correct or cause to be 
corrected: (a) any material defect in the Improvements, (b) any material 
departure in the construction of the Improvements from the Plans, the 
requirements hereof, any Governmental Requirements or the requirements of any 
lessee, if applicable, or (c) any encroachment by any part of the 
Improvements or any other structure located on the Property on any building 
line, easement, property line, or restricted area.

     3.4. STORAGE OF MATERIALS.  Borrower shall cause all materials supplied 
for, or intended to be utilized in, the construction of the Improvements, but 
not affixed to or incorporated into the Improvements or the Property, to be 
stored on the Property or at such other location as may be approved by Lender 
in writing, with adequate safeguards to prevent loss, theft, damage, or 
commingling with other materials or projects.

     3.5. INSPECTION OF THE PROPERTY.  Borrower shall permit Lender, any 
Governmental Authority, and their agents and representatives, to enter upon 
the Property and any location where materials intended to be utilized in the 
construction of the Improvements are stored for the purpose of inspection of 
the Property and such materials at all reasonable times.

     3.6. REQUIRED NOTICES.  Borrower shall timely comply with and promptly 
furnish to Lender true and complete copies of any official notice or claim by 
any Governmental Authority pertaining to the Property. Borrower shall 
promptly notify Lender of any fire or other casualty or any notice of taking 
or eminent domain action or proceeding affecting the Property.

     3.7. APPLICATION OF ADVANCES.  Borrower shall disburse all Advances for 
payment of costs and expenses specified in the Approved Budget, and for no 
other purpose.

     3.8. DIRECT DISBURSEMENT AND APPLICATION BY LENDER.  Lender shall have 
the right, but not the obligation, to disburse and directly apply the 
proceeds of any Advance to the satisfaction of any of Borrower's obligations 
hereunder. Any Advance by Lender for such purpose shall be part of the Loan 
and shall be secured by the Loan Documents. Lender may advance and incur such 
expenses as Lender reasonably deems necessary for the completion of 
construction of the Improvements and to preserve the 

                                       10
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Property, and any other security for the Loan, and such expenses, even though 
in excess of the amount of the Loan, shall be secured by the Security 
Instruments, and payable to Lender upon demand. Lender may disburse any 
portion of any Advance at any time, and from time to time, to persons other 
than Borrower for the purposes specified in this SECTION 3.8 and the amount 
of Advances to which Borrower shall thereafter be entitled shall be 
correspondingly reduced.

     3.9. EXPENSES.  Whether or not the transactions contemplated under this 
Agreement and the other Loan Documents shall be consummated, Borrower shall 
pay all reasonable expenses, including, without limitation, all attorney's 
fees, in connection with such transactions, including, without limitation, 
(a) the costs and expenses of preparation of this Agreement and of any other 
document or instrument Lender reasonably considers necessary or appropriate 
with respect to the Loan, (b) the costs and expenses of or incident to the 
enforcement or performance of or compliance with any of the provisions of 
this Agreement or any agreement or condition contained in any other document 
or instrument required by Lender, (c) the costs and expenses of any persons 
utilized by Lender in connection with the inspection, from time to time, of 
the construction of the Improvements, and (d) and any other reasonable costs 
and expenses related to the transactions contemplated under this Agreement.

     3.10. ADDITIONAL ACTS.  In addition to the acts recited herein and 
contemplated to be performed, executed or delivered by Borrower, Borrower 
hereby agrees, at any time, and from time to time, to perform, execute and 
deliver to Lender any and all such further acts, additional instruments, or 
further assurances as may be necessary or proper to (i) implement the intent 
of the parties under this Agreement; (ii) correct any errors in this 
Agreement or any other instrument relating thereto; (iii) assure Lender a 
valid and direct first lien and prior first perfected security interest under 
the Loan Documents or any of them on the Property; (iv) create, perfect, 
preserve, maintain and protect the liens and security interests created or 
intended to be created by the Loan Documents; and (v) provide the rights and 
remedies to Lender granted or provided for by the Loan Documents.

     3.11. INSPECTION OF BOOKS AND RECORDS.  Borrower shall permit Lender, at 
all reasonable times, to examine and copy the books and records of Borrower 
pertaining to the Loan and the Property, and all contracts, statements, 
invoices, bills, and claims for labor, materials, and services supplied for 
the construction of the Improvements.

     3.12. NO LIABILITY OF LENDER.  Lender shall have no liability, 
obligation, or responsibility whatsoever with respect to the construction of 
the Improvements except to advance the Loan pursuant to this Agreement. 
Lender shall not be obligated to inspect the Property or the construction of 
the Improvements, nor be liable for the performance or default of Borrower, 
Contractor, or any other party, or for any failure to construct, complete, 
protect, or insure the Improvements, or for the payment of costs of labor, 
materials, or services supplied for the construction of the Improvements, or 
for the performance of any obligation of Borrower whatsoever. Nothing, 
including, without limitation, any Advance or acceptance of any document or 
instrument, shall be construed as a representation or warranty, express or 
implied, to any party by Lender.

     3.13. NO CONDITIONAL SALE CONTRACTS, ETC.  No materials, equipment, or 
fixtures shall be supplied, purchased, or installed for the construction or 
operation of the Improvements pursuant to security agreements, conditional 
sale contracts, lease agreements, or other arrangements or understandings 
whereby a security interest or title is retained by any party or the right is 
reserved or accrues to any party to remove or repossess any materials, 
equipment, or fixtures intended to be utilized in the construction or 
operation of the Improvements.

     3.14. DEFENSE OF ACTIONS.  Lender may (but shall not be obligated to) 
commence, appear in, 

                                       11
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or defend any action or proceeding purporting to affect the Loan, the 
Property, or the respective rights and obligations of Lender and Borrower 
pursuant to this Agreement. Lender may (but shall not be obligated to) pay 
all reasonable expenses, including reasonable attorneys' fees and expenses 
incurred in connection with such proceedings or actions, which Borrower 
agrees to repay to Lender upon demand.

     3.15. PAYMENT OF CLAIMS.  Borrower shall promptly pay or cause to be 
paid when due all costs and expenses incurred in connection with the Property 
and the construction of the Improvements, and Borrower shall keep the 
Property free and clear of any liens, charges, or claims other than the lien 
of the Mortgage and other liens approved in writing by Lender. 

     3.16 COMPLETION DEPOSIT.  If, in the good faith judgment of Lender, it 
appears at any time or from time that the unadvanced loan proceeds will be 
insufficient to pay all costs to be incurred in connection with the 
completion of the construction of the Improvements, then Borrower shall 
immediately deposit, or shall make arrangements satisfactory to Lender to 
deposit with Lender an amount equal to such deficiency (the "Completion 
Deposit"). The Completion Deposit may be retained by Lender in a non-interest 
bearing account, need not be segregated from any of Lender's other funds and 
may be disbursed in accordance with the provisions of the Loan Documents by 
Lender before making any further advances on the Loan.

     3.17 AUTOMATIC CASH HANDLING ARRANGEMENT.  Borrower shall execute and 
deliver to Lender, from time to time at Lender's request, forms to authorize 
Lender to withdraw monies from Borrower's bank account under an electronic 
funds transfer, automatic cash handling, or similar arrangement, as such 
monies are due and payable under the Note or the other Loan Documents.  
Borrower shall cause sufficient funds to be available in such bank account to 
allow Lender to withdraw amounts on and after the due date therefor.
                                          
                                  ARTICLE IV
                                          
                        RIGHTS AND REMEDIES OF LENDER

     4.1. RIGHTS OF LENDER.  Upon the occurrence of an Event of Default, 
Lender shall have the right, in addition to any other right or remedy of 
Lender, but not the obligation, in its own name or in the name of Borrower, 
to (a) enter into possession of the Property, (b) perform all work necessary 
to complete the construction of the Improvements substantially in accordance 
with the Plans (as they may be changed by Lender if it deems a change in the 
Plans to be beneficial), Governmental Requirements, and the requirements of 
any lessee, if applicable, (c) employ watchmen and other safeguards to 
protect the Property, and (d) disburse funds for the payment of costs and 
expenses incurred by Lender in connection with the foregoing. Without 
limitation of the foregoing, and without any liability to Borrower 
whatsoever, Lender shall have the right to disburse such sums to contractors, 
engineers, architects, suppliers and other third parties (including Architect 
and Contractor) as Lender may deem necessary to complete the construction of 
the Improvements. Borrower hereby irrevocably appoints Lender as the 
attorney-in-fact of Borrower, with full power of substitution, and in the 
name of the Borrower, if Lender elects to do so, upon the occurrence of an 
Event of Default, to (i) use such sums as are necessary, including any 
proceeds of the Loan, make such changes or corrections in the Plans, and 
employ such architects, engineers, and contractors as may be required for the 
purpose of completing the construction of the Improvements substantially in 
accordance with the Plans (as they may be changed by Lender if it deems a 
change in the Plans to be beneficial) and Governmental Requirements, (ii) 
execute all applications and certificates in the name of Borrower which may 
be required for completion of construction of the Improvements, (iii) endorse 
the name of Borrower on any checks or drafts representing proceeds of the 
insurance policies or other checks or instruments 

                                       12
<PAGE>

payable to Borrower with respect to the Property, (iv) do every act with 
respect to the construction of the Improvements which Borrower may do, and 
(v) prosecute or defend any action or proceeding incident to the Property. 
Lender shall have no obligation to undertake any of the foregoing actions, 
and if Lender should do so, it shall have no liability to Borrower for the 
sufficiency or adequacy of any such actions taken by Lender. Borrower's 
appointment of Lender as Borrower's attorney-in-fact is coupled with an 
interest and will survive any disability of Borrower.

     4.2. CESSATION OF ADVANCES.  During the existence of an Incipient 
Default, Lender may suspend any futher Advances.  Upon the occurrence of an 
Event of Default, the obligation of Lender to disburse the Loan and all other 
obligations of Lender hereunder shall, at Lender's option, immediately 
terminate.

     4.3. FUNDS OF LENDER.  Any funds of Lender used for any purpose referred 
to in this Article IV shall constitute Advances secured by the Loan Documents 
and shall bear interest at the rate specified in the Note to be applicable 
after default or maturity thereunder.

     4.4. NO WAIVER OR EXHAUSTION.  No waiver by Lender of any of its rights 
or remedies hereunder, in the other Loan Documents, or otherwise, shall be 
considered a waiver of any other or subsequent right or remedy of Lender; no 
delay or omission in the exercise or enforcement by Lender of any rights or 
remedies shall ever be construed as a waiver of any right or remedy of 
Lender; and no exercise or enforcement of any such rights or remedies shall 
ever be held to exhaust any right or remedy of Lender.

     4.5. OTHER REMEDIES.  After the occurrence of an Event of Default, in 
addition to the rights and remedies described in this Agreement, Lender shall 
have the right to exercise any and all rights and remedies provided in the 
Loan Documents or otherwise available at law or in equity. 
                                          
                                  ARTICLE V
                                          
                         DISCLAIMERS AND INDEMNITIES

     5.1  EXCULPATION.

     (a)  Lender has no liability or obligation whatsoever or howsoever in 
connection with the construction or completion of the Improvements or work 
performed thereon, and has no obligation except to advance the Loan proceeds 
as herein agreed, and Lender is not obligated to inspect the Improvements; 
nor is Lender liable and under no circumstances whatsoever shall Lender be or 
become liable for the performance or default of any contractor or 
subcontractor, or for any failure to construct, complete, protect or insure 
the Improvements, or any part thereof, or for the payment of any cost or 
expense incurred in connection therewith, or for the performance or 
non-performance of any obligation of Borrower or Guarantor to Lender or to 
any other person, firm or entity without limitation; and nothing, including 
without limitation, any disbursement of Loan proceeds or acceptance of any 
document or instrument, shall be construed as a representation or warranty, 
express or implied, on Lender's part. Further, Borrower shall be solely 
responsible for all aspects of Borrower's business and conduct in connection 
with the construction, completion and rearrangement of the Improvements, 
including, but not limited to:

     (i)  Supervision of the work of construction;

     (ii) The qualifications, financial condition and performance of all 
architects, engineers, contractors, subcontractors and material suppliers and 
consultants;

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<PAGE>

     (iii) Conformance of the work of construction and the Improvements to 
the requirements of all applicable public and private restrictions and 
requirements and to the requirements of this Agreement;

     (iv) The quality and suitability of all materials and workmanship; and

     (v)  The accuracy of all requests for the disbursement of Loan proceeds 
and the proper application of disbursed Loan proceeds.

     (b)  Lender shall have no obligation to supervise, inspect or inform 
Borrower or any third party of any aspect of the work or construction of the 
Improvements or any other matter referred to above. Any inspection or review 
made by Lender shall be made for the purpose of determining whether or not 
the obligations of Borrower under this Agreement are being properly 
discharged, and neither Borrower nor any third party shall be entitled to 
rely upon any such inspection or review.

     (c)  Lender owes no duty of care to Borrower or any third person to 
protect against or inform Borrower or any third person of the existence of 
negligent, faulty, inadequate or defective design or construction of the 
Improvements.

     5.2  ROLE OF LENDER.  Any term or condition hereof or of any of the 
other Loan Documents to the contrary notwithstanding, Lender shall not have, 
and by its execution and acceptance of this Agreement hereby expressly 
disclaims, any obligation or responsibility for the management, conduct or 
operation of the Improvements or business and affairs of Borrower or of 
Guarantor, and any term or condition hereof or of any of the Loan Documents, 
permitting Lender to disburse funds, whether from the proceeds of the Loan or 
otherwise, or to take or refrain from taking any action with respect to 
Borrower, the Guarantor, the Improvements or any other collateral, shall be 
deemed to be solely to permit Lender to audit and review the management, 
operation and conduct of the business and affairs of Borrower and of 
Guarantor, and to maintain and preserve the security given by Borrower to 
Lender, and may not be relied upon by any other person. Further, Lender shall 
not have, has not assumed, and by its execution and acceptance of this 
Agreement hereby expressly disclaims any liability or responsibility for the 
payment or performance of any indebtedness or obligation of Borrower or of 
Guarantor and no term or condition hereof or of any of the other Loan 
Documents, shall be construed otherwise.

     5.3  INDEMNITY.

      (a) BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS 
LENDER, ITS AFFILIATES, AND EACH OF THEIR RESPECTIVE (INCLUDING SUCH 
AFFILIATES') OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS, SHAREHOLDERS 
AND CONSULTANTS (INCLUDING, WITHOUT LIMITATION, THOSE RETAINED IN CONNECTION 
WITH THE SATISFACTION OR ATTEMPTED SATISFACTION OF ANY OF THE CONDITIONS SET 
FORTH HEREIN) OF EACH OF THE FOREGOING (COLLECTIVELY, "INDEMNITEES") FROM AND 
AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, 
ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY 
KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES 
AND DISBURSEMENTS OF COUNSEL FOR SUCH INDEMNITEES IN CONNECTION WITH ANY 
INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING, WHETHER OR NOT SUCH 
INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO OR SUCH PROCEEDING SHALL HAVE 
ACTUALLY BEEN INSTITUTED), IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH 
INDEMNITEES (WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL AND WHETHER BASED ON 
ANY FEDERAL, STATE, OR LOCAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT 
EQUITABLE CAUSE, OR ON CONTRACT, TORT OR OTHERWISE), ARISING FROM OR 
CONNECTED (i) WITH THE FAILURE OF BORROWER TO FULLY AND TIMELY PAY THE LOAN 
AND EACH PORTION THEREOF (WHETHER SUCH LIABILITIES, OBLIGATIONS, LOSSES, 

                                       14
<PAGE>

DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES OR 
DISBURSEMENTS ARISE BY REASON OF ANY PAST, PRESENT OR FUTURE GUARANTY OF ALL 
OR ANY PORTION OF THE LOAN WHICH MAY AT ANY TIME BE EXECUTED AND DELIVERED BY 
ANY INDEMNITEE, OR OTHERWISE), (ii) WITH THE PAST, PRESENT, OR FUTURE 
OPERATIONS OF BORROWER, ANY AFFILIATE OR ANY PREDECESSORS IN INTEREST, (iii) 
WITH THE PAST, PRESENT OR FUTURE ENVIRONMENTAL CONDITION OF THE LAND, OR (iv) 
IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN 
DOCUMENTS, OR ANY ACT, EVENT OR TRANSACTION OR ALLEGED ACT, EVENT OR 
TRANSACTION RELATING OR ATTENDANT THERETO, INCLUDING IN CONNECTION WITH, OR 
AS A RESULT, IN WHOLE OR IN PART, OF NY NEGLIGENCE OF LENDER, OR THE USE OR 
INTENDED USE OF THE PROCEEDS OF THE LOAN HEREUNDER, OR IN CONNECTION WITH ANY 
INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY, OR ARISING FROM THE 
VIOLATION OR ALLEGED VIOLATION OF ANY GOVERNMENTAL REQUIREMENTS BUT EXCLUDING 
ANY CLAIM OR LIABILITY THAT ARISES AS THE RESULT OF (A) THE GROSS NEGLIGENCE 
OR WILLFUL MISCONDUCT OF ANY INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY 
A COURT OF COMPETENT JURISDICTION, AND (B) THE ACT, OMISSION, EVENT OR 
CIRCUMSTANCES (INCLUDING, WITHOUT LIMITATION, A VIOLATION OF ANY GOVERNMENTAL 
REQUIREMENTS) TAKEN, OR CAUSED, SOLELY BY LENDER AT ANY TIME AFTER LENDER 
TAKES POSSESSION OF, OR OTHERWISE FORECLOSES UPON, THE LAND, AND EXCLUDING 
MATTERS RAISED BY ANY SHAREHOLDERS OF LENDER AGAINST LENDER OR ITS MANAGEMENT 
(COLLECTIVELY, "INDEMNIFIED MATTERS"). EACH INDEMNITEE SHALL BE A THIRD PARTY 
BENEFICIARY OF THE PROVISIONS OF THIS SECTION 5.3 AND SHALL BE ENTITLED TO 
ENFORCE THE PROVISIONS HEREOF, WHICH PROVISIONS MAY NOT BE AMENDED TO AFFECT 
THE RIGHTS OF ANY INDEMNITEE WITHOUT THE JOINDER OF SUCH INDEMNITEE.

     (b)  IN ADDITION, BORROWER SHALL PERIODICALLY, UPON REQUEST, REIMBURSE 
EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL EXPENSES (INCLUDING 
THE COST OF ANY INVESTIGATION AND PREPARATION) INCURRED IN CONNECTION WITH 
ANY INDEMNIFIED MATTER. THE REIMBURSEMENT, INDEMNITY AND CONTRIBUTION 
OBLIGATIONS UNDER THIS SECTION SHALL BE IN ADDITION TO ANY LIABILITY WHICH 
BORROWER MAY OTHERWISE HAVE, SHALL EXTEND UPON THE SAME TERMS AND CONDITIONS 
TO EACH INDEMNITEE, AND SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF ANY 
SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF BORROWER, LENDER, 
AND ALL OTHER INDEMNITEES. THE OBLIGATIONS OF THE BORROWER UNDER THIS SECTION 
5.3 SHALL SURVIVE (i) THE EXECUTION OF THIS AGREEMENT AND (ii) ANY 
TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE LOAN.
                                       
                                  ARTICLE VI
                                       
                         GENERAL TERMS AND CONDITIONS

     6.1  NOTICES.  All notices, demands, requests, and other communications 
required or permitted hereunder shall be in writing and shall be deemed to 
have been given and received when presented personally or forty-eight (48) 
hours after being deposited in a regularly maintained receptacle for the 
United States Postal Service, postage prepaid, registered or certified, 
return receipt requested, addressed to Borrower or Lender, as the case may 
be, at the respective addresses set forth on the first page of this 
Agreement, or such other address as Borrower or Lender may from time to time 
designate by written notice to the other as herein required.

     6.2  MODIFICATIONS.  No provision of this Agreement or the other Loan 
Documents may be modified, waived, or terminated except by instrument in 
writing executed by the party against whom a modification, waiver, or 
termination is sought to be enforced.

     6.3  SEVERABILITY.  In case any of the provisions of this Agreement 
shall for any reason be held to be invalid, illegal, or unenforceable, such 
invalidity, illegality, or unenforceability shall not affect any other 
provision hereof, and this Agreement shall be construed as if such invalid, 
illegal, or unenforceable provision had never been contained herein.

                                       15
<PAGE>

     6.4  ELECTION OF REMEDIES.  Lender shall have all of the rights and 
remedies granted in the Loan Documents and available at law or in equity, and 
these same rights and remedies shall be cumulative and may be pursued 
separately, successively, or concurrently against Borrower, any Guarantor, or 
any property covered by the Loan Documents at the sole discretion of 



















                                       16
<PAGE>

Lender. The exercise of, or failure to exercise, any of the same shall not 
constitute a waiver or release thereof or of any other right or remedy, and 
the same shall be nonexclusive.

     6.5  FORM AND SUBSTANCE. All documents, certificates, insurance 
policies, and other items required under this Agreement to be executed or 
delivered to Lender shall be in form and substance satisfactory to Lender.

     6.6  CONTROLLING AGREEMENT. All agreements between Borrower and Lender, 
whether now existing or hereafter arising and whether written or oral, are 
hereby limited so that in no contingency, whether by reason of demand or 
acceleration of the maturity of the Note or otherwise, shall the interest 
contracted for, charged, received, paid or agreed to be paid to Lender exceed 
the maximum amount permissible under applicable law. If, from any 
circumstance whatsoever, interest would otherwise be payable to Lender in 
excess of the maximum lawful amount, the interest payable to Lender shall be 
reduced to the maximum amount permitted under applicable law; and if, from 
any circumstance whatsoever, Lender shall ever receive anything of value 
deemed interest by applicable law in excess of the maximum lawful amount, an 
amount equal to any excessive interest shall be applied to the reduction of 
the principal of the Loan and not to the payment of interest, or if such 
excessive interest exceeds the unpaid balance of principal of the Loan, such 
excess shall be refunded to Borrower. All interest paid or agreed to be paid 
to Lender shall, to the extent permitted by applicable law, be amortized, 
prorated, allocated and spread throughout the full period until payment in 
full of the principal so that the interest on the Loan for such full period 
shall not exceed the maximum amount permitted by applicable law. This section 
shall control all agreements between Borrower and Lender.

     6.7  NO THIRD PARTY BENEFICIARY. This Agreement is for the sole benefit 
of Lender, its successors and assigns, and Borrower, its permitted successors 
and assigns, and is not for the benefit of any third party, except as 
specifically provided in Section 5.3 hereof.

     6.8  NUMBER AND GENDER. Whenever used herein the singular number shall 
include the plural and the singular, and the use of any gender shall be 
applicable to all genders. The duties, covenants, obligations, and warranties 
of Borrower in this Agreement shall be joint and several obligations of 
Borrower, and of each Borrower (if more than one person or entity is 
identified as Borrower on the first page hereof).

     6.9  CAPTIONS. The captions, headings, and arrangements used in this 
Agreement are for convenience only and do not in any way affect, limit, 
amplify, or modify the terms and provisions hereof.

     6.10 APPLICABLE LAW. This Agreement and the Loan Documents shall be 
governed by and construed in accordance with the laws of the Applicable State 
and the laws of the United States applicable to transactions within such 
state. 

                                       17
<PAGE>

     6.11 SUCCESSORS AND ASSIGNS. The covenants and agreements herein 
contained shall bind, and the rights hereunder shall inure to, the respective 
heirs, successors and permitted assigns of Lender and Borrower.

EXECUTED AND DELIVERED as of the Effective Date.

LENDER:

SCHLOTZSKY'S REAL ESTATE, INC.

a Texas corporation

By:                           
   --------------------------------
Name:                              
     ------------------------------
Title:                             
      -----------------------------


BORROWER:
                              

-----------------------------------





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<PAGE>

                                       
                                  EXHIBIT A
                                          
                             DESCRIPTION OF LAND
                                          
                                          

















                                       19