THIRD AMENDMENT TO CREDIT AGREEMENT


     THIS  THIRD  AMENDMENT  TO  CREDIT  AGREEMENT  (hereinafter,  as it  may be
modified,  amended or supplemented from time to time, called this  "Amendment"),
made and entered into as of January 22, 1999,  by and among AVADO  BRANDS,  INC.
f/k/a APPLE  SOUTH,  INC., a Georgia  corporation  ("Borrower");  the  financial
institutions  from time to time  party to the  "Credit  Agreement"  defined  and
described below and identified as the "Banks" therein (collectively, the "Banks"
or, individually, a "Bank"); and WACHOVIA BANK, NATIONAL ASSOCIATION, a national
banking association,  successor-by-merger to WACHOVIA BANK OF GEORGIA,  NATIONAL
ASSOCIATION,  acting  as agent  for the  Banks  (Wachovia,  when  acting in such
capacity, herein sometimes called the "Agent").

     WHEREAS,  heretofore,  Borrower,  Banks and Agent made and  entered  into a
certain  Credit  Agreement,  dated as of April 1, 1998  (which,  as amended,  is
called herein the "Credit Agreement"); and

     WHEREAS,  Borrower, Banks and Agent have agreed to amend further the Credit
Agreement in certain respects, as described more particularly below;

     NOW,  THEREFORE,  in consideration of the sum of TEN DOLLARS ($10.00),  the
foregoing premises, to induce Banks to amend the Credit Agreement and extend the
credit provided for therein, and for other good and valuable consideration,  the
sufficiency and receipt of all of which are  acknowledged,  Banks, the Agent and
Borrower agree as follows:

     1. DEFINITIONS, TERMS AND REFERENCES.

     1.1  Terms  Incorporated  by  Reference.  Capitalized  terms  used  in this
Amendment  but not  otherwise  expressly  defined  herein  shall  have  the same
meanings as given to such terms in the Credit Agreement.

     1.2 Changed Terms.

     (a) The defined term  "Applicable  Margin," set forth in Section 1.1 of the
Credit Agreement,  shall be redefined, in its entirety,  effective as of January
1, 1999, to read as follows:

     "Applicable  Margin" means:  (i) for any Base Rate Loan,  zero percent (0%)
per annum;  and (ii) for any  Euro-Dollar  Rate Loan,  two and one-fourth of one
percent (2-1/4) per annum.

     (b) The defined  term  "Stockholders'  Equity," set forth in Section 1.1 of
the Credit Agreement,  shall be redefined by adding thereto, at the end thereof,
the following:

     In determining  "Stockholders'  Equity," however,  the amount of any Equity
Forward Contracts, pending settlement, shall be excluded therefrom.

     (c) The defined term "Total  Funded  Debt," set forth in Section 1.1 of the
Credit Agreement,  shall be redefined by adding thereto, at the end thereof, the
following:

     In  determining  "Total  Funded  Debt,"  however,  the amount of any Equity
Forward Contracts, pending settlement, shall be excluded therefrom.

     1.3 New Terms.  There shall be added to Section 1.1 of the Credit Agreement
a new defined term, "Equity Forward Contract," to read as follows:

     "Equity Forward Contract" shall mean any contract, whether now or hereafter
existing,  whereby the Borrower or any of its Consolidated  Subsidiaries agrees,
directly or indirectly,  to purchase Capital Stock of the Borrower on any future
date at a fixed price.



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     2.  MINIMUM  STOCKHOLDERS'  EQUITY.  Effective  as of  September  27, 1998,
existing  Section 5.4 of the Credit  Agreement shall be deleted in its entirety,
and the following revised Section 5.4 shall replace same:

     SECTION 5.4. Minimum Stockholders' Equity.

     Stockholders'  Equity  will  at no  time  be  less  than  the  sum  of  (i)
$210,000,000, beginning with the last day of the Fiscal Quarter ended closest to
September 30, 1998.

     3. OTHER RESTAURANT  CONCEPTS.  Existing clause (xi) of Section 5.19 of the
Credit  Agreement  shall be amended  by  deleting  same,  in its  entirety,  and
replacing it with the following revised clause (xi):

     (xi)  Other  Restaurant  Concepts.  Make  investments  in other  restaurant
concepts,  besides  "Applebee's,"  so  long  as the  total  amount  of all  such
investments  made  subsequent to the Closing Date does not exceed Twelve Million
Five Hundred Thousand Dollars ($12,500,000).

     4. OTHER  ADVANCES.  Existing  clause  (xiii) to Section 5.19 of the Credit
Agreement  shall be amended by deleting same, in its entirety,  and replacing it
with the following revised clauses (xiii):

     (xiii) Other Advances. Make loans or advances to Affiliates,  shareholders,
directors,  officers or employees, in addition to those described in clauses (i)
through  (xii)  hereinabove,  in an aggregate  amount,  as to all such loans and
advances at any one time  outstanding to all such Persons,  not to exceed Twelve
Million  Dollars  ($12,000,000),  so long as, and provided that, (A) no Event of
Default  then exists and (B) each such loan or advance is repaid,  in full,  not
later than two (2) years from the date of its disbursement.

     5. STOCK  PURCHASES.  There  shall be added to Article  5,  Covenants,  the
following additional Section 5.21:

     5.21 Stock  Purchases,  Etc. The Borrower will not, and will not permit any
Consolidated  Subsidiary of the  Borrower,  to purchase any Capital Stock of the
Borrower,  whether  in a  "spot"  transaction,  pursuant  to an  Equity  Forward
Contract or  otherwise,  except in respect of shares of Capital  Stock which are
subject to Equity Forward Contracts pending  settlement as of December 31, 1998;
nor will  Borrower  enter into, or permit any  Consolidated  Subsidiary to enter
into, any Equity Forward Contract or amend or modify any Equity Forward Contract
in effect on December 31, 1998 so as to increase the amount of, or price of, any
shares of Capital Stock which are subject to Equity  Forward  Contracts  pending
settlement as of December 31, 1998.

     6. DEBT PREPAYMENTS. There shall also be added to Article 5, Covenants, the
following additional Section 5.22:

     5.22 Prepayment of Senior Debt. The Borrower will not prepay,  and will not
permit any Consolidated Subsidiary to prepay, the principal amount of any of the
Borrower's  9-3/4% Senior Notes, due 2006,  heretofore issued by the Borrower in
the aggregate principal amount of $125,000,000.

     7.  EFFECTIVE  DATE;  CONDITIONS  TO  EFFECTIVENESS.  Except  as  otherwise
expressly set forth herein,  all amendments to the Credit  Agreement made herein
shall become effective as of the date hereof;  provided,  however,  that (a) the
following  shall have been executed  and/or  delivered to the Agent on or before
such  date,  in form and  substance  satisfactory  to the Banks,  to-wit:  (i) a
Secretary's (or Assistant  Secretary's)  Certificate for the Borrower;  and (ii)
this  Amendment;  and (b) the fees prescribed in Section 9 below shall have been
remitted to the Banks and the Agent.

     8. EFFECT OF AMENDMENT.  Except as set forth expressly herein, all terms of
the Credit Agreement, as amended hereby, and the other Loan Documents,  shall be
and  remain in full  force and effect  and shall  constitute  the legal,  valid,


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binding and  enforceable  obligations  of  Borrower  to Banks and Agent.  To the
extent any terms and conditions in any of the Loan Documents shall contradict or
be in  conflict  with any terms or  conditions  of the Credit  Agreement,  after
giving effect to this  Amendment,  such terms and  conditions  are hereby deemed
modified  and amended  accordingly  to reflect the terms and  conditions  of the
Credit  Agreement  as modified  and amended  hereby.  It is not  intended by the
parties that this Amendment constitute, and this Amendment shall not constitute,
a novation or accord and satisfaction.

     9. AMENDMENT FEE. In consideration of, and to induce, their entry into this
Amendment,  the Borrower shall remit (i) to each of the Banks on the date hereof
its share of an amendment fee of $50,000,  each such Bank's share to be pro rata
based on the amounts of its  respective  Commitment,  and (ii) to Agent a fee in
the amount  described in Agent's  supplemental fee letter of even date herewith,
addressed to the Borrower.

     10.  RESTATEMENT OF  REPRESENTATIONS  AND  WARRANTIES.  To induce Banks and
Agent to enter into this Amendment (A) Borrower  hereby restates and renews each
and  every  representation  and  warranty  heretofore  made by it  under,  or in
connection  with,  the  execution  and  delivery of, the Credit  Agreement;  (B)
Borrower  hereby  restates,  ratifies  and  reaffirms  each and  every  term and
condition set forth in the Credit Agreement,  as amended hereby, and in the Loan
Documents,  as amended hereby,  and in the Loan  Documents,  effective as of the
date  hereof;  and (C)  Borrower  hereby  certifies  that no Event of Default or
Default Condition has occurred and is continuing.

     11.  GOVERNING LAW. This  Amendment  shall be governed by, and construed in
accordance  with,  the laws of the State of Georgia and all  applicable  federal
laws of the United States of America.

     12. COSTS AND  EXPENSES.  Borrower  agrees to pay all costs and expenses of
Agent  incurred in  connection  with the  preparation,  execution,  delivery and
enforcement  of  this  Amendment  and  all  other  Loan  Documents  executed  in
connection herewith, including the reasonable fees and out-of-pocket expenses of
Agent's counsel.

     13. LOAN DOCUMENT.  This Amendment shall constitute a Loan Document for all
purposes of the Credit Agreement, and be governed accordingly.

     IN WITNESS WHEREOF, Borrower, the Agent, and each Bank have set their hands
as of the day and year first above written.

                            "BORROWER"

                            AVADO BRANDS, INC. f/k/a
                                APPLE SOUTH, INC.

                            By:_________________________________
                            Name:____________________________
                            Title:_____________________________

                            Attest:______________________________
                            Name:________________________
                            Title:_________________________

                            "BANKS"

                            WACHOVIA BANK, NATIONAL
                            ASSOCIATION, as the Agent and as a Bank

                            By:________________________________
                               W. Tompkins Rison, Vice President

      


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                            SUNTRUST BANK, ATLANTA

                            By:_________________________________
                            Name:____________________________
                            Title:_____________________________

                            By:_________________________________
                            Name:____________________________
                            Title:_____________________________

                            COOPERATIEVE CENTRALE
                            RAIFFEISEN-BOERENLEENBANK B.A.,
                            "RABOBANK NEDERLAND," NEW YORK BRANCH

                            By:_________________________________
                            Name:____________________________
                            Title:_____________________________

                            By:_________________________________
                            Name:____________________________
                            Title:_____________________________

                            BANKBOSTON, N.A.

                            By:_________________________________
                            Name:____________________________
                            Title:_____________________________

                            COMERICA BANK

                            By:_________________________________
                            Name:____________________________
                            Title:_____________________________












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