Document:

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                                  EXHIBIT 10.41

                                                               EXECUTION VERSION

         THIS PROMISSORY NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE ENTITLED
         TO THE BENEFITS OF, AND SUBJECT TO THE TERMS SET FORTH IN, THAT CERTAIN
         SUBORDINATION AGREEMENT DATED AS OF DECEMBER 29, 2003 BY AND AMONG
         PAYEE, JOHN C. WOOLEY, JEFFREY J. WOOLEY, SCHLOTZSKY'S FRANCHISOR, LLC,
         SCHLOTSKY'S, INC., SCHLOTZSKY'S FRANCHISE OPERATIONS, LLC AND MAKER.

                      AMENDED AND RESTATED PROMISSORY NOTE

$23,268,000.00                                          AS OF DECEMBER 15, 2003

         FOR VALUE RECEIVED, the undersigned, DFW RESTAURANT TRANSFER CORP., a
Texas corporation ("Maker"), HEREBY PROMISES TO PAY to the order of NS
ASSOCIATES I, LTD., a Texas limited partnership ("Payee"), the principal sum of
TWENTY-THREE MILLION TWO HUNDRED SIXTY-EIGHT THOUSAND Dollars ($23,268,000.00)
(or such other amount as may be outstanding hereunder from time to time), plus
interest accruing on the unpaid balance thereof as herein provided.

         1.       RELATED DOCUMENTS. This Amended and Restated Promissory Note
(this "Promissory Note") is the "Note" referred to in, and the holder hereof
shall be entitled to the benefits of, that certain Restructuring Agreement dated
as of December 29, 2003 (the "Restructuring Agreement") among the Payee, the
Maker, Schlotzsky's Franchisor, LLC ("Franchisor"), and Schlotzsky's, Inc.
("SI"), to which reference is made for a description of certain security for
this Promissory Note and for a statement of additional terms and conditions
applicable to this Promissory Note, including with respect to required payment
conditions on which the indebtedness evidenced hereby (and any other
Obligations) may be declared to be immediately due and payable. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed thereto (if any) in the Restructuring Agreement. As referenced in the
Restructuring Agreement, this Promissory Note (a) amends, restates and replaces
that certain promissory note dated August 30, 2002 and issued by Maker in the
original principal amount of $23,268,000.00 to Payee, as modified prior to the
date hereof (such promissory note, as so modified, the "Original Note"), and (b)
for all purposes, shall be deemed the same instrument as the Original Note.
Payment of this Promissory Note is secured by that certain Security Agreement
dated as of August 30, 2002, between Maker and Payee. Payment of this Promissory
Note is further secured by (a) a Guaranty dated as of August 30, 2002, by SI, as
amended, (b) a Guaranty of even date herewith, executed by Franchisor, (c) a
Security

PROMISSORY NOTE - PAGE 1

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Agreement of even date herewith between Payee and Franchisor, (d) a Trademark
Security Agreement of even date herewith between Payee and Franchisor, (e) a
Stock Pledge Agreement of even date herewith between Payee and Franchisor, and
(f) a Stock Pledge Agreement of even date herewith between Payee and SI.

         2.       OUTSTANDING PRINCIPAL AND INTEREST. As of December 15, 2003
(the "Effective Date"), (a) the outstanding principal balance of this Promissory
Note (taking into account all payments having been made on the Original Note
through and including the Closing Date referenced in the Restructuring
Agreement, including the payment required to be made on December 15, 2003
pursuant to Section 4(a) below) is $18,012,099.24, and (b) the outstanding
accrued and unpaid interest on this Promissory Note (taking into account all
payments having been made on the Original Note through and including the Closing
Date referenced in the Restructuring Agreement) is $20,726.25.

         3.       INTEREST. Prior to maturity, the unpaid principal amount of
this Promissory Note shall bear interest at the following per annum rate (such
rate of interest to be referred to herein as the "Contract Rate"):

                  (a)      From the Effective Date through, and including,
                           December 14, 2004, the Contract Rate shall be three
                           percent (3%) per annum;

                  (b)      At all times after December 14, 2004, the Contract
                           Rate shall be an annual rate equal to the greater of
                           (i) Prime Rate (as in effect from time to time) plus
                           four percent (4%), and (ii) eight percent (8%).

         For purposes of this Note and the other Note Documents, "Prime Rate"
means, the rate of interest announced, from time to time, as reported in The
Wall Street Journal as the "prime rate", or in the event no such rate is
announced, then a comparable rate selected by Payee and specified in a written
notice to Maker. The Maker understands that the Prime Rate may not be the lowest
rate of interest charged to or paid by Customer of Payee or any financial
institution, that the Prime Rate is not necessarily more favorable than another
rate or index, and that rates on other loans or credit facilities may be based
on indices other than the Prime Rate.

         Accrued interest on the unpaid principal balance of this Promissory
Note shall be computed on the basis of a year consisting of 365 days, applied to
the actual number of days in each calendar month, but in no event shall such
computation result in an amount of accrued interest that would exceed accrued
interest on the unpaid principal balance hereof during the same period at the
Highest Lawful Rate.

         Notwithstanding the foregoing, if at any time the Contract Rate exceeds
the Highest Lawful Rate, as hereinafter defined, the rate of interest to accrue
on this Promissory Note as provided above shall be limited to the Highest Lawful
Rate; however, any subsequent reductions in the Contract Rate shall not reduce
the rate of interest to accrue on this Promissory Note below the Highest Lawful
Rate until the total amount of

PROMISSORY NOTE - PAGE 2

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interest accrued on this Promissory Note equals the amount that would have
accrued if the Contract Rate had at all times been in effect.

         If any principal and/or interest or any installment thereof is not paid
on or before the date such installment is due Maker shall pay to Payee a late
charge equal to the lesser of (x) five percent (5%) of the payment of principal
and/or interest then due and/or interest or (y) the maximum amount permitted by
applicable law. Upon the occurrence and during the continuation of an Event of
Default, and notwithstanding any lower rate otherwise applicable under the Note
Documents, all amounts payable hereunder or under the Note Documents (including
all Obligations) shall bear interest at per annum rate equal to the lower of (a)
the Highest Lawful Rate, and (b) the Prime Rate plus 8.0% per annum (such rate,
the "Default Rate"). Notwithstanding the foregoing, so long as payment is made
within the time frame permitted under Section 12(a) of the Restructuring
Agreement (to the extent applicable to such payment), the late charge and
Default Rate shall not apply.

         Maker agrees that the maximum lawful rate of interest (the "Highest
Lawful Rate") applicable to this Promissory Note under Texas law shall be the
indicated rate ceiling as specified under Texas law; provided that, if permitted
by law, Payee may from time to time implement any ceiling under such laws and
revise the index, formula or provision of law used to compute the rate under
this Promissory Note by notice to Maker as provided in such laws; provided
further that, if any other provision of Texas, state or federal law now or
hereafter in effect and applicable hereto shall permit a greater interest rate
than the maximum rates currently in effect, the Highest Lawful Rate shall be the
highest lawful interest rate hereunder. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds such Highest
Lawful Rate, the Maker and the Payee shall, to the full extent permitted by
applicable law, exclude voluntary prepayments and the effects thereof, and
amortize, prorate, allocate and spread, in equal parts, the total amount of
interest throughout the entire contemplated term of this Promissory Note so that
the interest rate is uniform throughout the entire term of this Promissory Note.
If it is so determined that any interest in excess of such Highest Lawful Rate
is provided for, such excess shall be applied first to any other amounts not
constituting interest due or which may become due under this Promissory Note,
and the balance, if any, shall be refunded to Maker; provided, however, that in
no event shall Maker be obligated to pay, and Payee hereby waives payment of,
the amount of interest to the extent it is in excess of the amount permitted by
applicable law. By execution of the Promissory Note, Maker acknowledges that
Maker believes the loan evidenced by this Note to be non-usurious and agrees
that if, at any time, Maker should have reason to believe that such loan is in
fact usurious, Maker will give the holder of this Note notice of such condition
and Maker agrees that the holder shall have sixty (60) days in which to make
appropriate refund or other adjustment in order to correct such condition if in
fact such exists.

PROMISSORY NOTE - PAGE 3

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         4.       PAYMENTS ON NOTE.

                  (a)      Commencing on December 15, 2003 and continuing on the
fifteenth (15th) day of each month thereafter, through and including November
15, 2004, payments of principal and accrued interest in the amount of One
Hundred Twenty Thousand Dollars ($120,000) each shall be due and payable.

                  (b)      Commencing on December 15, 2004 and continuing on the
fifteenth (15th) day of each month thereafter, payments of principal and accrued
interest in the amount of Four Hundred Twenty Thousand Dollars ($420,000) each
shall be due and payable.

                  (c)      A final payment of all principal and accrued
interest, together with all other Obligations, shall be due and payable on
December 15, 2006.

         Both principal and interest are payable in lawful money of the United
States of America to Payee at 5720 LBJ Freeway, Suite 625, Dallas, Texas 75240,
or such other address as the holder hereof shall notify Maker in writing
pursuant to the Restructuring Agreement, in immediately available funds without
setoff or counterclaim. All payments with respect to this Promissory Note or any
other Note Document shall be applied as follows: first, to all costs and
expenses (including reasonable attorneys fees) incurred by Maker and
constituting Obligations; second, to all accrued and unpaid interest, premium,
if any, and fees owing to Maker constituting Obligations; and third, to the
principal amount hereof (and interest shall thereupon cease to accrue upon the
principal so credited); and the remainder to any other Obligations then due and
payable. If any payment falls on a date that is not a Business Day, such payment
shall be deemed to be due and payable on the next succeeding Business Day, and
interest shall continue to accrue on the amount thereof until paid in full. For
purposes hereof, the term "Business Day" shall mean any day that is not a
Saturday, Sunday or day on which national banks in Austin, Texas are required or
permitted to close.

         Maker may, at any time or from time to time, prepay the principal
amount outstanding hereunder, in whole or in part, without premium or penalty,
so long as any interest then accrued on the principal so prepaid has been (or is
concurrently) paid in full.

         5.       ACCELERATION. This Promissory Note is subject to acceleration
in connection with any Event of Default, and to exercise of remedies by Payee,
in each case as set forth in the Restructuring Agreement and the other Note
Documents.

         6.       REIMBURSEMENT OF COSTS. In the event this Promissory Note is
placed in the hands of an attorney for collection or if all or any part of the
indebtedness represented hereby is proved, established or collected in any court
or in any bankruptcy, receivership, debtor relief or other court proceedings,
Maker and all endorsers and each other party now or hereafter liable for payment
of this Promissory Note jointly and severally agree to pay reasonable attorneys'
fees and collection costs to the holder hereof in addition to the principal and
interest payable hereunder (all of which shall be part of the Obligations).

PROMISSORY NOTE - PAGE 4

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         7.       WAIVERS. Maker and each endorser and each other party now or
hereafter liable for payment of this Promissory Note severally waive presentment
for payment, notice of dishonor, protest, notice of protest and diligence in
collecting or bringing suit against any party liable hereon and agree to any and
all extensions, renewals, partial payments, substitutions of evidence of
indebtedness and the taking, release or substitution of any security or
collateral with or without notice before or after maturity.

                           [SIGNATURE PAGE TO FOLLOW]

PROMISSORY NOTE - PAGE 5

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         8.       GOVERNING LAW. This Promissory Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas.

                                            MAKER:

                                            DFW RESTAURANT TRANSFER CORP.

                                            By: /s/ JEFFREY J. WOOLEY
                                                ----------------------------
                                            Name: Jeffrey J. Wooley
                                            Title: Senior Vice President

                  [SIGNATURE PAGE TO AMENDED AND RESTATED NOTE]<PAGE>

                                  EXHIBIT 10.42

                                                               EXECUTION VERSION

                                    GUARANTY

                         (SCHLOTZSKY'S FRANCHISOR, LLC)

                  This GUARANTY (this "Guaranty"), dated as of December 29,
2003, is executed and delivered by SCHLOTZSKY'S FRANCHISOR, LLC, a Delaware
limited liability company ("Guarantor"), in favor of NS ASSOCIATES I, LTD., a
Texas limited partnership ("Lender"), in light of the following:

                                    RECITALS

                  A.       DFW Restaurant Transfer Corp., a Texas corporation
("Borrower"), and the Lender entered into an Amended and Restated Option
Agreement, dated as of February 7, 2001, amended by an Amendment to Amended and
Restated Option Agreement, effective June 1, 2002 (as so amended, the "Option
Agreement"), pursuant to which the Lender granted DFW an option to acquire the
Lender's rights under that certain Amended and Restated Area Developer
Agreement, dated August 31, 1996, amended from time to time (as so amended, the
"Lender ADA"), between Schlotzsky's, Inc., a Texas corporation ("SI") and the
Lender.

                  B.       DFW exercised its option under the Option Agreement
and in connection therewith, among other things, (i) DFW, the Lender and SI
entered into a Security Agreement, dated as of August 30, 2002 (as amended or
otherwise modified from time to time, the "Security Agreement"), (ii) DFW issued
a promissory note, dated August 30, 2002, for the benefit of the Lender in the
original principal amount of $23,268,000.00 (as amended or otherwise modified
from time to time, including as described in Recital E below, the "Note"), (iii)
SI guaranteed the payment of the Note pursuant to a Guarantee of Payment dated
as of August 30, 2002 (as amended or otherwise modified from time to time, the
"SI Guaranty").

                  C.       The Lender required, as a condition to the acceptance
of the Note that DFW's obligations thereunder be secured by a pledge of (i) the
rights to be acquired by DFW under the Lender ADA, including without limitation,
DFW's right to receive the royalties paid to the Developer under all Unit
Franchise Agreements for Restaurants situated in the Development Area, as such
terms are defined in the Lender ADA; and (ii) all rights under certain
Assignments from SI to Lender (including Assignments dated August 27, 1999,
September 13, 2000, February 7, 2001, May 15, 2001, August 10, 2001, January 25,
2002 and April 30, 2002), pursuant to which SI assigned to the Lender its right
to receive a portion of the royalties payable pursuant to the Franchise
Agreements for the restaurants described in each of the respective Assignments
or listed in an exhibit thereto.

                  D.       Pursuant to a Contribution Agreement, dated as of
June 7, 2003 (the "Contribution Agreement"), between SI and Guarantor, a wholly
owned subsidiary of SI, effective as of that date SI irrevocably contributed,
transferred and conveyed to Guarantor, absolutely and not as collateral
security, all of SI's right, title and interest in, to and under the Conveyed
Assets (as defined in the Contribution Agreement) (such contribution, the
"Contribution to Guarantor");

                  E.       Concurrently herewith, Lender, Borrower, Guarantor
and SI are entering into a Restructuring Agreement (the "Restructuring
Agreement"), pursuant to which, among

<PAGE>

other things, Lender is agreeing to modify the terms of payment of the amount
currently outstanding under the Note and Borrower is issuing an amended and
restated version of the Note.

                  F.       Lender did not approve the Contribution to Guarantor,
and has further reserved its rights and claims relating thereto. In order to
induce Lender to (a) consent to such Contribution to Guarantor, and (b) enter
into the Restructuring Agreement or provide other financial accommodations
heretofore or hereafter extended by Lender to Borrower, Guarantor has agreed to
guaranty the Guarantied Obligations.

                  H.       Guarantor is a Subsidiary of SI and an Affiliate of
Borrower, and will benefit by virtue of the financial accommodations from Lender
to Borrower.

                  I.       The obligations of Guarantor hereunder are secured by
security interests granted to the Lender by the Guarantor pursuant to that
certain Security Agreement of even date herewith (the "Security Agreement"),
that certain Trademark Security Agreement of even date herewith between the
Guarantor and the Lender (the "Trademark Security Agreement"), and that certain
Pledge Agreement of even date herewith between the Guarantor and the Lender (the
"Pledge Agreement").

                  NOW, THEREFORE, in consideration of the foregoing, Guarantor
hereby agrees in favor Lender, as follows:

         1.       Definitions and Construction.

                  (a)      Definitions. Capitalized terms used herein and not
                           otherwise defined herein shall have the meanings
                           ascribed to them in the Restructuring Agreement. The
                           following terms, as used in this Guaranty, shall have
                           the following meanings:

                           "Bankruptcy Code" means title 11 of the United States
         Code, as in effect from time to time.

                           "Borrower" has the meaning set forth in the recitals
         to this Guaranty.

                           "Guarantied Obligations" means, with respect to
         Guarantor: the due and punctual payment of all present or future
         principal of, and interest (including, any and all interest which, but
         for the application of the provisions of the Bankruptcy Code, would
         have accrued on such amounts irrespective of whether a claim therefor
         is allowed) on, any and all premium on, and any and all fees, costs,
         indemnities and expenses incurred in connection with or on, the
         Indebtedness owed by Borrower to Lender pursuant to the terms of the
         Note and the other Note Documents.

                           "Guarantor" has the meaning set forth in the preamble
         to this Guaranty.

                           "Guaranty" has the meaning set forth in the preamble
         to this Guaranty.

                           "Indebtedness" means any and all obligations
         (including the Obligations), indebtedness, or liabilities of any kind
         or character owed by Borrower and arising directly or indirectly out of
         or in connection with the Note or the other Note Documents, including
         all such obligations, indebtedness, or liabilities, whether for
         principal, interest

                                      -2-
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                  (including any and all interest which, but for the application
                  of the provisions of the Bankruptcy Code, would have accrued
                  on such amounts irrespective of whether a claim therefor is
                  allowed), premium, reimbursement obligations, fees, costs,
                  expenses (including reasonable attorneys fees), or indemnity
                  obligations, whether heretofore, now, or hereafter made,
                  incurred, or created, whether voluntarily or involuntarily
                  made, incurred, or created, whether secured or unsecured (and
                  if secured, regardless of the nature or extent of the
                  security), whether absolute or contingent, liquidated or
                  unliquidated, or determined or indeterminate, whether Borrower
                  is liable individually or jointly with others.

                           "Lender" has the meaning set forth in the preamble to
                  this Guaranty.

                           "Note" has the meaning set forth in the recitals to
                  this Guaranty.

                           "Note Documents" means the Note, the Restructuring
                  Agreement, the Security Agreement and any other agreement now
                  existing or hereafter entered into by Borrower or any other SI
                  Party (as defined in the Restructuring Agreement) and the
                  Lender in connection with the Note.

                           "Person" means natural persons, corporations, limited
                  liability companies, limited partnerships, general
                  partnerships, limited liability partnerships, joint ventures,
                  trusts, land trusts, business trusts, or other organizations,
                  irrespective of whether they are legal entities, and
                  governments and agencies and political subdivisions thereof.

                           "Restructuring Agreement" has the meaning set forth
                  in the recitals to this Guaranty.

                           "Solvent" means, with respect to any Person on a
                  particular date, that, at fair valuations, the sum of such
                  Person's assets is greater than all of such Person's debts.

                           "Voidable Transfer" has the meaning set forth in
                  Section 9 of this Guaranty.

                       (b) Construction. Unless the context of this Guaranty
                           clearly requires otherwise, references to the plural
                           include the singular, references to the singular
                           include the plural, the terms "include" and
                           "including" are not limiting, and the term "or" has,
                           except where otherwise indicated, the inclusive
                           meaning represented by the phrase "and/or." The words
                           "hereof," "herein," "hereby," "hereunder," and other
                           similar terms in this Guaranty refer to this Guaranty
                           as a whole and not to any particular provision of
                           this Guaranty. Section, subsection, clause, schedule
                           and exhibit references herein are to this Guaranty
                           unless otherwise specified. All of the exhibits or
                           schedules attached to this Guaranty shall be deemed
                           incorporated herein by reference. Any reference in
                           this Guaranty to any of the following documents
                           includes any and all alterations, amendments,
                           changes, extensions, modifications, renewals,
                           replacements, substitutions, joinders, and
                           supplements thereto or thereof, as applicable
                           (subject to any restrictions on such alterations,
                           amendments, changes, extensions, modifications,
                           renewals, replacements, substitutions, joinders, and
                           supplements set forth therein): the Note; the
                           Restructuring Agreement; this Guaranty; and the other
                           Note Documents. Neither this Guaranty nor any

                                      -3-
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                           uncertainty or ambiguity herein shall be construed or
                           resolved against Lender or Guarantor, whether under
                           any rule of construction or otherwise. On the
                           contrary, this Guaranty has been reviewed by
                           Guarantor, Lender, and their respective counsel, and
                           shall be construed and interpreted according to the
                           ordinary meaning of the words used so as to fairly
                           accomplish the purposes and intentions of Lender and
                           Guarantor. Any reference herein to the payment in
                           full of the Guarantied Obligations shall mean the
                           payment in full in cash of all Guarantied
                           Obligations. Any reference herein to any Person shall
                           be construed to include such Person's successors and
                           assigns. Any requirement of a writing contained
                           herein shall be satisfied by the transmission of a
                           Record and any Record transmitted shall constitute a
                           representation and warranty as to the accuracy and
                           completeness of the information contained therein.
                           The captions and headings are for convenience of
                           reference only and shall not affect the construction
                           of this Guaranty.

         2.       Guarantied Obligations. Guarantor, jointly and severally with
                  each other guarantor with respect to the Obligations
                  (including SI), hereby irrevocably and unconditionally
                  guaranties to Lender, as and for its own debt, until payment
                  in full thereof has been made, (a) the payment of the
                  Guarantied Obligations, in each case when and as the same
                  shall become due and payable, whether at maturity, pursuant to
                  a mandatory prepayment requirement, by acceleration, or
                  otherwise; it being the intent of Guarantor that the guaranty
                  set forth herein shall be a guaranty of payment and not a
                  guaranty of collection; and (b) the punctual and faithful
                  performance, keeping, observance, and fulfillment by Borrower
                  of all of the agreements, conditions, covenants, and
                  obligations of Borrower contained in the Note and under each
                  of the other Note Documents.

         3.       Continuing Guaranty. This Guaranty includes Guarantied
                  Obligations arising under successive transactions continuing,
                  compromising, extending, increasing, modifying, releasing, or
                  renewing the Guarantied Obligations, changing the interest
                  rate, payment terms, or other terms and conditions thereof, or
                  creating new or additional Guarantied Obligations after prior
                  Guarantied Obligations have been satisfied in whole or in
                  part. To the maximum extent permitted by law, Guarantor hereby
                  waives any right to revoke this Guaranty as to future
                  Indebtedness. If such a revocation is effective
                  notwithstanding the foregoing waiver, Guarantor acknowledges
                  and agrees that (a) no such revocation shall be effective
                  until written notice thereof has been received by Lender, (b)
                  no such revocation shall apply to any Guarantied Obligations
                  in existence on such date (including any subsequent
                  continuation, extension, or renewal thereof, or change in the
                  interest rate, payment terms, or other terms and conditions
                  thereof), (c) no such revocation shall apply to any Guarantied
                  Obligations made or created after such date to the extent made
                  or created pursuant to a legally binding commitment of Lender
                  in existence on the date of such revocation, (d) no payment by
                  Guarantor, Borrower, or from any other source, prior to the
                  date of such revocation shall reduce the maximum obligation of
                  Guarantor hereunder, and (e) any payment by Borrower or from
                  any source other than Guarantor subsequent to the date of such
                  revocation shall first be applied to that portion of the
                  Guarantied Obligations as to which the revocation is effective
                  and which are not, therefore, guarantied hereunder, and to the
                  extent so applied shall not reduce the maximum obligation of
                  Guarantor hereunder.

                                      -4-
<PAGE>

         4.       Performance Under this Guaranty. In the event that Borrower
                  fails to make any payment of any Guarantied Obligations, on or
                  before the due date thereof, or if Borrower shall fail to
                  perform, keep, observe, or fulfill any other obligation under
                  the Note or any other Note Document in the manner provided
                  therein, as applicable, Guarantor immediately shall cause such
                  payment to be made or each of such obligations to be
                  performed, kept, observed, or fulfilled.

         5.       Primary Obligations. This Guaranty is a primary and original
                  obligation of Guarantor, is not merely the creation of a
                  surety relationship, and is an absolute, unconditional, and
                  continuing guaranty of payment and performance which shall
                  remain in full force and effect without respect to future
                  changes in conditions. Guarantor hereby agrees that it is
                  directly, jointly and severally with any other guarantor of
                  the Guarantied Obligations, liable to Lender, that the
                  obligations of Guarantor hereunder are independent of the
                  obligations of Borrower or any other guarantor, and that a
                  separate action may be brought against Guarantor, whether such
                  action is brought against Borrower or any other guarantor or
                  whether Borrower or any other guarantor is joined in such
                  action. Guarantor hereby agrees that its liability hereunder
                  shall be immediate and shall not be contingent upon the
                  exercise or enforcement by Lender of whatever remedies they
                  may have against Borrower or any other guarantor, or the
                  enforcement of any lien or realization upon any security
                  Lender may at any time possess. Guarantor hereby agrees that
                  any release which may be given by Lender to Borrower or any
                  other guarantor shall not release Guarantor. Guarantor
                  consents and agrees that Lender shall be under no obligation
                  to marshal any property or assets of Borrower or any other
                  guarantor in favor of Guarantor, or against or in payment of
                  any or all of the Guarantied Obligations.

         6.       Waivers.

                  (a)      To the fullest extent permitted by applicable law,
                           Guarantor hereby waives: (i) notice of acceptance
                           hereof; (ii) notice of any loans or other financial
                           accommodations made or extended under the Note, or
                           the creation or existence of any Guarantied
                           Obligations; (iii) notice of the amount of the
                           Guarantied Obligations, subject, however, to
                           Guarantor's right to make inquiry of Lender to
                           ascertain the amount of the Guarantied Obligations at
                           any reasonable time; (iv) notice of any adverse
                           change in the financial condition of Borrower or of
                           any other fact that might increase Guarantor's risk
                           hereunder; (v) notice of presentment for payment,
                           demand, protest, and notice thereof as to any
                           instrument among the Note Documents; (vi) notice of
                           any Event of Default under the Note or any other Note
                           Document; and (vii) all other notices (except if such
                           notice is specifically required to be given to
                           Guarantor under this Guaranty or any other Note
                           Documents to which Guarantor is a party) and demands
                           to which Guarantor might otherwise be entitled.

                  (b)      To the fullest extent permitted by applicable law,
                           Guarantor hereby waives the right by statute or
                           otherwise to require Lender, to institute suit
                           against Borrower or to exhaust any rights and
                           remedies which Lender has or may have against
                           Borrower. In this regard, Guarantor agrees that it is
                           bound to the payment of each and all Guarantied
                           Obligations, whether now existing or hereafter
                           arising, as fully as if the Guarantied Obligations
                           were directly owing

                                      -5-
<PAGE>

                           to Lender, or its Affiliates, as applicable, by
                           Guarantor. Guarantor further waives any defense
                           arising by reason of any disability or other defense
                           (other than the defense that the Guarantied
                           Obligations shall have been performed and paid in
                           full) of Borrower or by reason of the cessation from
                           any cause whatsoever of the liability of Borrower in
                           respect thereof.

                  (c)      To the fullest extent permitted by applicable law,
                           Guarantor hereby waives: (i) any rights to assert
                           against Lender, any defense (legal or equitable),
                           set-off, counterclaim, or claim which Guarantor may
                           now or at any time hereafter have against Borrower or
                           any other party liable to Lender; (ii) any defense,
                           set-off, counterclaim, or claim, of any kind or
                           nature, arising directly or indirectly from the
                           present or future lack of perfection, sufficiency,
                           validity, or enforceability of the Guarantied
                           Obligations or any security therefor; (iii) any
                           defense arising by reason of any claim or defense
                           based upon an election of remedies by Lender; (iv)
                           the benefit of any statute of limitations affecting
                           Guarantor's liability hereunder or the enforcement
                           thereof, and any act which shall defer or delay the
                           operation of any statute of limitations applicable to
                           the Guarantied Obligations shall similarly operate to
                           defer or delay the operation of such statute of
                           limitations applicable to Guarantor's liability
                           hereunder.

                  (d)      Until such time as all of the Guarantied Obligations
                           have been paid in full: (i) Guarantor hereby waives
                           and postpones any right of subrogation Guarantor has
                           or may have as against Borrower with respect to the
                           Guarantied Obligations; (ii) in addition, Guarantor
                           hereby waives and postpones any right to proceed
                           against Borrower or any other Person, now or
                           hereafter, for contribution, indemnity,
                           reimbursement, or any other suretyship rights and
                           claims (irrespective of whether direct or indirect,
                           liquidated or contingent), with respect to the
                           Guarantied Obligations; and (iii) in addition,
                           Guarantor also hereby waives and postpones any right
                           to proceed or to seek recourse against or with
                           respect to any property or asset of Borrower.

                  (e)      WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER
                           OR OTHER PROVISION SET FORTH IN THIS GUARANTY,
                           GUARANTOR WAIVES ALL RIGHTS AND DEFENSES ARISING OUT
                           OF AN ELECTION OF REMEDIES BY LENDER, EVEN THOUGH
                           THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL
                           FORECLOSURE WITH RESPECT TO SECURITY FOR A GUARANTIED
                           OBLIGATION, HAS DESTROYED GUARANTOR'S RIGHTS OF
                           SUBROGATION AND REIMBURSEMENT AGAINST BORROWER.

                  (f)      Without affecting the generality of this Section,
                           Guarantor hereby also agrees to the following
                           waivers:

                                    (1)      Guarantor agrees that the Lender's
                  right to enforce this Guaranty is absolute and is not
                  contingent upon the genuineness, validity or enforceability of
                  any of the Note Documents. Guarantor agrees that Lender's
                  rights under this Guaranty shall be enforceable even if
                  Borrower had no liability at the time of execution of the Note
                  Documents or later ceases to be liable.

                                      -6-
<PAGE>

                                    (2)      Guarantor agrees that Lender's
                  rights under the Note Documents will remain enforceable even
                  if the amount secured by the Note Documents is larger in
                  amount and more burdensome than that for which Borrower is
                  responsible. The enforceability of this Guaranty against
                  Guarantor shall continue until all sums due under the Note
                  Documents have been paid in full and shall not be limited or
                  affected in any way by any impairment or any diminution or
                  loss of value of any security or collateral for Borrower's
                  obligations under the Note Documents, from whatever cause, the
                  failure of any security interest in any such security or
                  collateral or any disability or other defense of Borrower, any
                  other guarantor of Borrower's obligations under the Note
                  Documents, any pledgor of collateral for any person's
                  obligations to Lender or any other person in connection with
                  the Note Documents.

                                    (3)      Guarantor waives all benefits and
                  defenses it may have under any applicable law which would
                  otherwise require Lender to (A) proceed against Borrower, any
                  guarantor of Borrower's obligations under the Note Documents,
                  any other pledgor of collateral for any person's obligations
                  to Lender or any other person in connection with the
                  Guarantied Obligations, (B) proceed against or exhaust any
                  other security or collateral Lender may hold, or (C) pursue
                  any other right or remedy for Guarantor's benefit, and agrees
                  that Lender may exercise its right under this Guaranty without
                  taking any action against Borrower, any other guarantor of
                  Borrower's obligations under the Note Documents, any pledgor
                  of collateral for any person's obligations to Lender or any
                  other person in connection with the Guarantied Obligations,
                  and without proceeding against or exhausting any security or
                  collateral Lender holds.

         7.       Releases. Guarantor consents and agrees that, without notice
                  to or by Guarantor and without affecting or impairing the
                  obligations of Guarantor hereunder, Lender may, by action or
                  inaction, compromise or settle, extend the period of duration
                  or the time for the payment, or discharge the performance of,
                  or may refuse to, or otherwise not enforce, or may, by action
                  or inaction, release all or any one or more parties to, any
                  one or more of the terms and provisions of the Note or any of
                  the other Note Documents or may grant other indulgences to
                  Borrower in respect thereof, or may amend or modify in any
                  manner and at any time (or from time to time) any one or more
                  of the Note or any of the other Note Documents, or may, by
                  action or inaction, release or substitute any other guarantor,
                  if any, of the Guarantied Obligations, or may enforce,
                  exchange, release, or waive, by action or inaction, any
                  security for the Guarantied Obligations or any other guaranty
                  of the Guarantied Obligations, or any portion thereof.

         8.       No Election. Lender shall have the right to seek recourse
                  against Guarantor to the fullest extent provided for herein
                  and no election by Lender to proceed in one form of action or
                  proceeding, or against any party, or on any obligation, shall
                  constitute a waiver of Lender's right to proceed in any other
                  form of action or proceeding or against other parties unless
                  Lender has expressly waived such right in writing.
                  Specifically, but without limiting the generality of the
                  foregoing, no action or proceeding by Lender under any
                  document or instrument evidencing the Guarantied Obligations
                  shall serve to diminish the liability of Guarantor under this
                  Guaranty

                                      -7-
<PAGE>

                  except to the extent that Lender finally and unconditionally
                  shall have realized payment in full of the Guarantied
                  Obligations by such action or proceeding.

         9.       Revival and Reinstatement. Guarantor hereby represents and
                  warrants to Lender that, both before and after giving effect
                  to this Guaranty and to the execution and delivery by
                  Guarantor of each Note Document to which it is a party, (a)
                  each of Guarantor and each of its subsidiaries is Solvent, and
                  (b) no transfer of property is being made by Guarantor or its
                  subsidiaries and no obligation is being incurred by Guarantor
                  or its subsidiaries in connection with the transactions
                  contemplated by this Guaranty or the other Note Documents with
                  the intent to hinder, delay, or defraud either present or
                  future creditors of Guarantor or its subsidiaries. If the
                  incurrence or payment of the Guarantied Obligations or the
                  obligations of Guarantor under this Guaranty by Guarantor or
                  the transfer by Guarantor to Lender of any property of
                  Guarantor should for any reason subsequently be declared to be
                  void or voidable under any state or federal law relating to
                  creditors' rights, including provisions of the Bankruptcy Code
                  relating to fraudulent conveyances, preferences, and other
                  voidable or recoverable payments of money or transfers of
                  property (collectively, a "Voidable Transfer"), and if Lender
                  is required to repay or restore, in whole or in part, any such
                  Voidable Transfer, or elects to do so upon the reasonable
                  advice of its counsel, then, as to any such Voidable Transfer,
                  or the amount thereof that Lender is required or elects to
                  repay or restore, and as to all reasonable costs, expenses,
                  and attorneys' fees of Lender related thereto, the liability
                  of Guarantor automatically shall be revived, reinstated, and
                  restored and shall exist as though such Voidable Transfer had
                  never been made.

         10.      Excess Funding. The Guarantor hereby agrees that if any other
                  guarantor of Borrower shall become an Excess Funding Guarantor
                  (as defined below) by reason of the payment by such other
                  guarantor of any Guarantied Obligations, the Guarantor shall,
                  on demand of such Excess Funding Guarantor (but subject to the
                  next sentence), pay to such Excess Funding Guarantor an amount
                  equal to the Guarantor's Pro Rata Share (as defined below and
                  determined, for this purpose, without reference to the
                  properties, debts and liabilities of such Excess Funding
                  Guarantor) of the Excess Payment (as defined below) in respect
                  of such Guarantied Obligations. The payment obligation of the
                  Guarantor to any Excess Funding Guarantor under this Section
                  10 shall be subordinate and subject in right of payment to the
                  prior payment in full of the obligations of the Guarantor
                  under the other provisions of this Guaranty, and such Excess
                  Funding Guarantor shall not have the right hereunder to
                  exercise any right or remedy with respect to such excess until
                  payment and satisfaction in full of all such obligations. To
                  the extent that Guarantor should have any similar rights
                  against any other guarantor, such rights to receive payment
                  from such other guarantor shall be subordinate and subject in
                  right of payment to the prior payment in full of the
                  obligations of such other guarantor under the other provisions
                  of its respective guaranty in favor of Lender, and Guarantor
                  shall not exercise any right or remedy with respect to such
                  rights to payment until payment and satisfaction in full of
                  all such obligations. For purposes of this Section 10, (i)
                  "Excess Funding Guarantor" shall mean, in respect of any
                  Guarantied Obligations, a guarantor of Borrower that has paid
                  an amount in excess of its Pro Rata Share of such

                                      -8-
<PAGE>

                  Guarantied Obligations, (ii) "Excess Payment" shall mean, in
                  respect of any Guarantied Obligations, the amount paid by an
                  Excess Funding Guarantor in excess of its Pro Rata Share of
                  such Guarantied Obligations and (iii) "Pro Rata Share" shall
                  mean, for any guarantor of Borrower, the ratio (expressed as a
                  percentage) of (x) the amount by which the aggregate present
                  fair saleable value of all properties of such guarantor
                  (excluding any shares of stock of any other guarantor) exceeds
                  the amount of all the debts and liabilities of such guarantor
                  (including contingent, subordinated, unmatured and
                  unliquidated liabilities, but excluding the obligations of
                  such guarantor hereunder and any obligations of any other
                  guarantor that have been guaranteed by such guarantor) to (y)
                  the amount by which the aggregate fair saleable value of all
                  properties of the Borrower and all of the properties of
                  Borrower's guarantors exceeds the amount of all the debts and
                  liabilities (including contingent, subordinated, unmatured and
                  unliquidated liabilities, but excluding the obligations of the
                  Borrower and the Guarantor hereunder) of the Borrower and all
                  of the Borrower's guarantors.

         11.      Financial Condition of Borrower. Guarantor represents and
                  warrants to Lender and that it is currently informed of the
                  financial condition of Borrower and of all other circumstances
                  which a diligent inquiry would reveal and which bear upon the
                  risk of nonpayment of the Guarantied Obligations. Guarantor
                  further represents and warrants to Lender that it has read and
                  understands the terms and conditions of the Note and the other
                  Note Documents. Guarantor hereby covenants that it will
                  continue to keep itself informed of Borrower's financial
                  condition, the financial condition of other guarantors, if
                  any, and of all other circumstances which bear upon the risk
                  of nonpayment or nonperformance of the Guarantied Obligations.

         12.      Payments; Application. All payments to be made hereunder by
                  Guarantor shall be made in lawful money of the United States
                  of America at the time of payment, shall be made in
                  immediately available funds, and shall be made without
                  deduction (whether for taxes or otherwise) or offset. All
                  payments made by Guarantor hereunder shall be applied as
                  follows: first, to all reasonable costs and expenses
                  (including reasonable attorneys fees) incurred by Lender in
                  enforcing this Guaranty or in collecting the Guarantied
                  Obligations; second, to all accrued and unpaid interest,
                  premium, if any, and fees owing to Lender constituting
                  Guarantied Obligations; and third, to the balance of the
                  Guarantied Obligations.

         13.      Attorneys Fees and Costs. Guarantor agrees to pay, on demand,
                  all reasonable attorneys fees and all other reasonable costs
                  and expenses which may be incurred by Lender in the
                  enforcement of this Guaranty or in any way arising out of, or
                  consequential to, the protection, assertion, or enforcement of
                  the Guarantied Obligations (or any security therefor),
                  irrespective of whether suit is brought.

         14.      Notices. All notices and other communications hereunder shall
                  be in writing and shall be mailed, sent or delivered in
                  accordance with the Restructuring Agreement.

         15.      Cumulative Remedies. No remedy under this Guaranty, under the
                  Note, or any other Note Document is intended to be exclusive
                  of any other remedy, but each and every remedy shall be
                  cumulative and in addition to any and every other remedy given
                  under this Guaranty, under the Note, or any other Note
                  Document, and those provided by law. No delay or omission by
                  Lender to exercise any right under this Guaranty shall impair
                  any such right nor be construed to be a waiver thereof. No
                  failure on the part of Lender to exercise, and no delay in
                  exercising, any right under this Guaranty

                                      -9-
<PAGE>

                  shall operate as a waiver thereof; nor shall any single or
                  partial exercise of any right under this Guaranty preclude any
                  other or further exercise thereof or the exercise of any other
                  right.

         16.      Severability of Provisions. Any provision of this Guaranty
                  which is prohibited or unenforceable under applicable law
                  shall be ineffective to the extent of such prohibition or
                  unenforceability without invalidating the remaining provisions
                  hereof.

         17.      Entire Agreement; Amendments. This Guaranty constitutes the
                  entire agreement between Guarantor and Lender pertaining to
                  the subject matter contained herein. This Guaranty may not be
                  altered, amended, or modified, nor may any provision hereof be
                  waived or noncompliance therewith consented to, except by
                  means of a writing executed by Guarantor and Lender. Any such
                  alteration, amendment, modification, waiver, or consent shall
                  be effective only to the extent specified therein and for the
                  specific purpose for which given. No course of dealing and no
                  delay or waiver of any right or default under this Guaranty
                  shall be deemed a waiver of any other, similar or dissimilar,
                  right or default or otherwise prejudice the rights and
                  remedies hereunder.

         18.      Successors and Assigns. This Guaranty shall be binding upon
                  Guarantor and its successors and assigns and shall inure to
                  the benefit of the successors and assigns of Lender; provided,
                  however, Guarantor shall not assign this Guaranty or delegate
                  any of its duties hereunder without Lender's prior written
                  consent and any unconsented to assignment shall be absolutely
                  void. In the event of any assignment or other transfer of
                  rights by Lender, the rights and benefits herein conferred
                  upon Lender shall automatically extend to and be vested in
                  such assignee or other transferee.

         19.      No Third Party Beneficiary. This Guaranty is solely for the
                  benefit of Lender and each of its successors and assigns and
                  may not be relied on by any other Person.

         20.      CHOICE OF LAW; JURY TRIAL WAIVER

                  THE VALIDITY OF THIS GUARANTY, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS

                  GUARANTOR AND LENDER EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. GUARANTOR AND LENDER REPRESENT THAT EACH SUCH PARTY HAS
REVIEWED THIS WAIVER AND EACH SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.

                                      -10-
<PAGE>

         21.      Agreement to be Bound. Guarantor hereby agrees to be bound by
                  each and all of the terms and provisions of the Restructuring
                  Agreement. Without limiting the generality of the foregoing,
                  by its execution and delivery of this Guaranty, Guarantor
                  hereby: (a) makes to Lender each of the representations and
                  warranties set forth in the Restructuring Agreement applicable
                  to Guarantor, and such representations and warranties are
                  incorporated herein by this reference, mutatis mutandis; and
                  (b) agrees and covenants for the benefit of Lender (i) to do,
                  or cause to be done, each of the things set forth in the
                  Restructuring Agreement that it is obligated to do thereunder
                  (or that Borrower or SI agrees and covenants to cause it or
                  its Subsidiaries to do), and (ii) to not do each of the things
                  set forth in the Restructuring Agreement that it covenants to
                  not do or permit its Subsidiaries to do (or that Borrower or
                  SI agrees and covenants to cause it or its Subsidiaries not to
                  do), and in each case and such agreements and covenants are
                  incorporated herein by this reference, mutatis mutandis.

                           [Signature page to follow]

                                      -11-
<PAGE>

                  IN WITNESS WHEREOF, the undersigned has executed and delivered
this Guaranty as of the date first written above.

                                           SCHLOTZSKY'S FRANCHISOR, LLC,
                                           a Delaware limited liability company

                                           By: /s/ JEFFREY J. WOOLEY
                                               ---------------------------------
                                           Name: Jeffrey J. Wooley
                                           Title: Senior Vice President

                          [SIGNATURE PAGE TO GUARANTY]

                                       S-1

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