$30,000,000
                                CREDIT AGREEMENT
                                   DATED AS OF
                                   MAY 8, 1998

                                     BETWEEN
                               APPLE SOUTH, INC.,
                                   AS BORROWER

                                       AND

                            FIRST UNION NATIONAL BANK

                                    AS LENDER















                                        1


<PAGE>
                                Table of Contents

ARTICLE 1.        DEFINITIONS..................................................6
         SECTION 1.1.      Definitions.........................................6
         SECTION 1.2.      Accounting Terms and Determinations................15
         SECTION 1.3.      References.........................................15
         SECTION 1.4.      Use of Defined Terms...............................15
         SECTION 1.5.      Terminology........................................15
ARTICLE 2.        THE CREDIT..................................................15
         SECTION 2.1.      Commitment to Lend.................................15
         SECTION 2.2.      Method of Borrowing................................16
                  2.2.1.            Notice to Bank............................16
                  2.2.2.            When Revolving Loans Made.................16
                  2.2.3.            Application of Certain Proceeds...........16
                  2.2.4.            No Borrowing Upon Default.................16
         SECTION 2.3.      Note...............................................16
                  2.3.1.            Single Note...............................16
                  2.3.2.            Endorsement to Note.......................16
         SECTION 2.4.      Maturity of Revolving Loans........................16
         SECTION 2.5.      Interest Rates.....................................16
                  2.5.1.            Base Rate Loans...........................16
                  2.5.2.            LIBOR Market Index Rate Loans.............17
                  2.5.3.            Euro-Dollar Rate Loans....................17
                  2.5.4.            Bank to Determine.........................17
                  2.5.5.            Savings Clause............................17
         SECTION 2.6.      Closing Fee........................................17
         SECTION 2.7.      Termination or Reduction of Commitment.............17
                  2.7.1.            Termination of Commitments................17
                  2.7.2.            Mandatory Reduction and Reinstatement
                                    of Commitment.............................18
         SECTION 2.8.      Optional Prepayments...............................18
         SECTION 2.9.      Mandatory Prepayments..............................18
         SECTION 2.10.     General Provisions as to Payments..................18
                  2.10.1.           Timing....................................18
                  2.10.2.           Next Banking Day..........................18
         SECTION 2.11.     Computation of Interest............................18
ARTICLE 3.        CONDITIONS TO BORROWINGS....................................19
         SECTION 3.1.      Conditions to First Borrowing......................19
                  3.1.1.            This Agreement............................19
                  3.1.2.            Note......................................19
                  3.1.3.            Opinion...................................19
                  3.1.4.            Closing Certificate.......................19
                  3.1.5.            Other Documents...........................19
                  3.1.6.            Borrowing Notice..........................19
         SECTION 3.2.      Conditions to All Borrowings.......................19
                  3.2.1.            Notice....................................19
                  3.2.2.            No Default................................19
                  3.2.3.            Truth of Representations..................19
                  3.2.4.            Not Overadvance...........................19
ARTICLE 4.        REPRESENTATIONS AND WARRANTIES..............................20
         SECTION 4.1.      Corporate Existence and Power......................20
         SECTION 4.2.      Corporate and Governmental Authorization: No 
                           Contravention......................................20
         SECTION 4.3.      Binding Effect.....................................20
         SECTION 4.4.      Financial Information: No Material Adverse Effect..21
         SECTION 4.5.      No Litigation......................................21
         SECTION 4.6.      Compliance with Laws Generally; Compliance 
                           with ERISA.........................................21
         SECTION 4.7.      Taxes    21
         SECTION 4.8.      Subsidiaries.......................................21
         SECTION 4.9.      Not a Holding Company, Public Utility, Investment
                           Company, Investment Adviser........................21
         SECTION 4.10.     Ownership of Property; Liens.......................21
         SECTION 4.11.     No Default.........................................21
         SECTION 4.12.     Full Disclosure....................................22


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<PAGE>
         SECTION 4.13.     Environmental Matters..............................22
         SECTION 4.14.     Capital Stock......................................22
         SECTION 4.15.     Margin Stock.......................................22
         SECTION 4.16.     Solvency...........................................22
         SECTION 4.17.     Possession of Franchises, Licenses, Etc............23
         SECTION 4.18.     Insurance..........................................23
ARTICLE 5.        COVENANTS...................................................23
         SECTION 5.1.      Information........................................23
                  5.1.1.            Annual Audit..............................23
                  5.1.2.            Interim Statements........................23
                  5.1.3.            Compliance Certificates...................23
                  5.1.4.            Default Notice............................24
                  5.1.5.            Proxy.....................................24
                  5.1.6.            Registration Statements...................24
                  5.1.7.            ERISA Notices.............................24
                  5.1.8.            Credit Agreements.........................24
                  5.1.9.            Other Reports.............................24
         SECTION 5.2.      Inspection of Property, Books and Records..........24
         SECTION 5.3.      Adjusted Funded Debt/Adjusted Capitalization Ratio.24
         SECTION 5.4.      Minimum Shareholders' Equity.......................25
         SECTION 5.5.      Fixed Charge Coverage Ratio........................25
         SECTION 5.6.      Negative Pledge....................................25
         SECTION 5.7.      Maintenance of Existence...........................26
         SECTION 5.8.      Dissolution........................................26
         SECTION 5.9.      Consolidation, Mergers, and Sales of Assets........26
         SECTION 5.10.     Use of Proceeds....................................26
         SECTION 5.11.     Compliance with Laws; Payment of Taxes.............27
         SECTION 5.12.     Insurance..........................................27
         SECTION 5.13.     Change is Fiscal Year..............................27
         SECTION 5.14.     Maintenance of Property............................27
         SECTION 5.15.     Environmental Notices..............................27
         SECTION 5.16.     Environmental Matters..............................27
         SECTION 5.17.     Environmental Releases.............................27
         SECTION 5.18.     Investments........................................28
                  5.18.1.           Current Assets............................28
                  5.18.2.           Capital Expenditures......................28
                  5.18.3.           Franchise Fees............................28
                  5.18.4.           Escrow Deposits...........................28
                  5.18.5.           Bank Accounts.............................28
                  5.18.6.           Surplus Cash..............................28
                  5.18.7.           Subsidiaries..............................28
                  5.18.8.           Travel Advances...........................28
                  5.18.9.           Special Life Insurance Program............29
                  5.18.10.          Reserved..................................29
                  5.18.11.          Other Restaurant Concepts.................29
                  5.18.12.          Other Investments Generally...............29
         SECTION 5.19.     Subsidiary Debt....................................29
         SECTION 5.20.     Total Funded Debt/EBITDA Ratio.....................29
         SECTION 5.21.     Year 2000 Compatibility............................30
         SECTION 5.22.     Liquidity Facility.................................30
ARTICLE 6.        DEFAULTS....................................................33
         SECTION 6.1.      Events of Default..................................30
                  6.1.1.            Non-Payment...............................30
                  6.1.2.            Failure to Observe Certain Covenants......30
                  6.1.3.            Failure to Observe Covenants Generally....30
                  6.1.4.            Misrepresentation.........................30
                  6.1.5.            Cross-Default.............................30
                  6.1.6.            Voluntary Bankruptcy......................31
                  6.1.7.            Involuntary Bankruptcy....................31
                  6.1.8.            ERISA.....................................31
                  6.1.9.            Judgments.................................31
                  6.1.10.           Tax Liens.................................32
                  6.1.11.           Change of Control.........................32
                  6.1.12.           Loss of Franchise Rights..................32
                  6.1.13.           [Intentionally Omitted]...................32
                  6.1.14.           Material Adverse Effect...................32


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<PAGE>
ARTICLE 7.        CHANGE IN CIRCUMSTANCES; COMPENSATION.......................32
         SECTION 7.1.      Basis for Determining Interest Rate Inadequate 
                           or Unfair..........................................32
         SECTION 7.2.      Illegality.........................................33
         SECTION 7.3.      Increased Cost and Reduced Return..................33
                  7.3.1.            Change of Law.............................33
                  7.3.2.            Capital Adequacy..........................34
                  7.3.3.            Notice of Determination...................34
                  7.3.4.            Assignees Covered.........................34
         SECTION 7.4.      Base Rate Loans Substituted for Affected 
                           Euro-Dollar Rate Loans.............................34
         SECTION 7.5.      Compensation.......................................34
ARTICLE 8.        MISCELLANEOUS...............................................34
SECTION 8.1.      Notices.....................................................34
         SECTION 8.2.      No Waivers.........................................35
         SECTION 8.3.      Expenses; Documentary Taxes........................35
         SECTION 8.4.      Indemnification....................................35
         SECTION 8.5.      Amendments and Waivers.............................35
         SECTION 8.6.      Successors and Assigns.............................36
                  8.6.1.            No Assignment by Borrower.................36
                  8.6.2.            Participation.............................36
                  8.6.3.            Assignments...............................36
                  8.6.4.            Disclosures...............................36
                  8.6.5.            Status of Transferee......................36
         SECTION 8.7.      Confidentiality....................................36
         SECTION 8.8.      GEORGIA LAW........................................37
         SECTION 8.9.      Interpretation.....................................37
         SECTION 8.10.     CONSENT TO JURISDICTION............................37
         SECTION 8.11.     Counterparts.......................................37
         SECTION 8.12.     Survival...........................................37
         SECTION 8.13.     Entire Agreement: Amendment; Severability..........37
         SECTION 8.14.     TIME OF THE ESSENCE................................37
         SECTION 8.15.     Arbitration........................................38
         SECTION 8.16.     Preservation and Limitation of Remedies............38
         SECTION 8.17.     Bank Not a Joint Venturer..........................38






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<PAGE>
                                    EXHIBITS

EXHIBIT A                  Form of Notice of Borrowing
EXHIBIT B                  Form of Compliance Certificate


                                    SCHEDULES

SCHEDULE 4.8      Existing Subsidiaries
SCHEDULE 5.6      Existing Permitted Liens






































                                       5
<PAGE>

                                CREDIT AGREEMENT


     THIS CREDIT  AGREEMENT,  dated as of May __, 1998,  is made  between  APPLE
SOUTH, INC., as Borrower; and FIRST UNION NATIONAL BANK, as Lender.

     The parties hereto agree as follows:


                             ARTICLE 1. DEFINITIONS

     SECTION 1.1. Definitions.

     The terms as defined in this  Section  1.1 shall for all  purposes  of this
Agreement  and any  amendment  hereto  (except  as  herein  otherwise  expressly
provided or unless the context otherwise requires),  have the meanings set forth
herein:

     "Adjusted  Capitalization"  shall be  equal to the sum at any date of:  (i)
Adjusted Funded Debt; plus (ii) Stockholders' Equity.

     "Adjusted Funded Debt" shall mean and include the sum (without duplication)
of  the  following,   at  any  date,  for  the  Borrower  and  its  Consolidated
Subsidiaries  on a  consolidated  basis:  (i) Total Funded  Debt;  plus (ii) the
present value  (discounted at ten percent (10%) per annum) of the minimum amount
of   noncancellable   operating  lease  payments  owing  by  Borrower  and  such
Subsidiaries at such date (excluding,  however, for this purpose, any such lease
payments  owing  under the DR  Holdings  Lease);  plus (iii) the  present  value
(discounted  at ten  percent  (10%) per annum) of the total  payments  of "Rent"
owing by the  Borrower  under the DR  Holdings  Lease for the  entire  remaining
"Lease Term"  (inclusive of the original term and all renewal terms,  whether or
not then effective),  with the terms "Rent" and "Lease Term" as used hereinabove
having the meanings given to such terms in the DR Holdings Lease;  plus (iv) all
Redeemable Preferred Stock.

     "Adjusted Funded Debt/Adjusted  Capitalization  Ratio" shall mean the ratio
which  (i) the  Adjusted  Funded  Debt  of the  Borrower  and  its  Consolidated
Subsidiaries  at any  date  bears  to (ii) the  Adjusted  Capitalization  of the
Borrower and its Consolidated Subsidiaries at such date.

     "Adjusted LIBOR Rate,"  applicable to any Monthly  Interest  Period,  means
that interest rate per annum  determined by the Bank to be equal to the quotient
obtained  (rounded upwards,  if necessary,  to the next higher 1/100th of 1%) by
dividing (i) the applicable  LIBOR Rate for such Monthly Interest Period by (ii)
1.00 minus the then applicable Euro-Dollar Reserve Percentage (if any).

     "Affiliate" means, as to any Person (i) any other Person that directly,  or
indirectly  through  one  or  more  intermediaries,   controls  such  Person  (a
"Controlling Person"),  (ii) any other Person which is controlled by or is under
common  control  with such Person or a  Controlling  Person,  or (iii) any other
Person of which such Person owns,  directly or indirectly,  twenty percent (20%)
or more of the common stock or equivalent equity interests.  As used herein, the
term "control" means possession,  directly or indirectly, of the power to direct
or cause the  direction  of the  management  or  policies  of a Person,  whether
through the ownership of voting securities, by contract or otherwise.

     "Agreement" means this Credit  Agreement,  together with all amendments and
modifications hereto.

     "Applebee's  Spinoff"  shall  mean  any sale or  other  disposition  by the
Borrower  of any of its  Applebee's  Neighborhood  Grill  & Bar  restaurants  to
Applebee's International,  Inc. or to other third parties, all of which sales in
the aggregate  shall result in the sale or other  disposition by the Borrower of
all,  or  substantially  all,  of  the  Applebee's   Neighborhood  Grill  &  Bar


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<PAGE>
restaurants owned by the Borrower for an aggregate amount of not less than Three
Hundred  Fifty  Million  Dollars  ($350,000,000),  of which not less than  Three
Hundred Forty Million Dollars  ($340,000,000) shall be paid in cash and not more
than Ten Million Dollars  ($10,000,000)  may be paid by the issuance of purchase
money debt to the Borrower, each payment of which shall be made in full upon the
closing of the final sale for such respective  transaction,  with all such sales
to occur as soon as practicable, but in any event on or before April 1, 1999.

     "Assignee" has the meaning set forth in Section 8.6.3.

     "Authority" has the meaning set forth in Section 7.2.

     "Bank"  means  First Union  National  Bank  (formerly  known as First Union
National Bank of Georgia),  a national banking  association  organized under the
laws of the United States of America, and its successors and permitted assigns.

     "Bank's  Address" means the address of the Bank referred to or specified in
Section 8.1.

     "Base  Rate"  means for any Base Rate Loan for any day,  the rate per annum
equal to the higher as of such day of (i) the Prime Rate,  and (ii)  one-half of
one  percent  (1/2%) per annum above the Federal  Funds  Rate.  For  purposes of
determining the Base Rate for any day,  changes in the Prime Rate or the Federal
Funds  Rate,  as the case may be,  shall be  effective  on the date of each such
change.

     "Base Rate Loan" means a Revolving  Loan made at the Base Rate  pursuant to
Section 2.1.

     "Borrower"  means  Apple  South,  Inc.,  a  Georgia  corporation,  and  its
successors and permitted assigns.

     "Borrowing" means a borrowing hereunder consisting of a Revolving Loan made
to the Borrower by the Bank  pursuant to Article II. A Borrowing is a "Base Rate
Borrowing"  if such  Revolving  Loan is a Base Rate Loan, a "LIBOR  Market Index
Rate  Borrowing" if such  Revolving  Loan is a LIBOR Market Index Rate Loan or a
"Euro-Dollar Rate Borrowing" if such Revolving Loan is a Euro-Dollar Rate Loan.

     "Capital  Stock" means any  nonredeemable  capital stock of the Borrower or
any  Consolidated  Subsidiary  (to the extent  issued to a Person other than the
Borrower), whether common or preferred.

     "Capitalized  Lease  Obligations"  shall  mean  those  liabilities  of  the
Borrower and its Consolidated Subsidiaries under any leases that are required to
be capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such liabilities  shall be the capitalized  amount of such liabilities
as determined in accordance with GAAP.

     "CERCLA" means the Comprehensive  Environmental  Response  Compensation and
Liability Act, 42 U.S.C. ss. 9601 et seq. and its  implementing  regulations and
amendments.

     "CERCLIS" means the Comprehensive  Environmental  Response Compensation and
Liability Inventory System established pursuant to CERCLA.

     "Change of Law" shall have the meaning set forth in Section 7.2.

     "Closing Certificate" has the meaning set forth in Section 3.1.4.

     "Closing  Date"  means  the  date of this  Agreement,  as  first  inscribed
hereinabove.

     "Code"  means  the  Internal  Revenue  Code of  1986,  as  amended,  or any
successor Federal tax code.



                                       7
<PAGE>
     "Commitment"  means  $30,000,000,  as such  amount is  subject  to  further
reduction as provided in Section 2.7.

     "Compliance Certificate" has the meaning set forth in Section 5.1.3.

     "Consolidated  Net  Income,"  for any  period,  means the net income of the
Borrower and its  Consolidated  Subsidiaries  for such period,  determined  on a
consolidated  basis  in  accordance  with  GAAP,  excluding,  however,  (i)  any
extraordinary  items  and  (ii)  any  equity  interest  of the  Borrower  or any
Consolidated  Subsidiary in the unremitted earnings of any Person which is not a
Subsidiary,  in each case as  likewise  determined  on a  consolidated  basis in
accordance with GAAP.

     "Consolidated  Subsidiary" means at any date any Subsidiary or other entity
the accounts of which, in accordance with GAAP, would be consolidated with those
of the Borrower in its consolidated financial statements as of such date.

     "Controlled  Group" means all members of a controlled group of corporations
and all trades or businesses  (whether or not incorporated) under common control
which,  together  with the  Borrower,  are  treated as a single  employer  under
Section 414 of the Code.

     "Default"  means  any  condition  or event  which  constitutes  an Event of
Default  or which  with the  giving of  notice  or lapse of time or both  would,
unless cured or waived, become an Event of Default.

     "Default Rate" means,  with respect to any Revolving  Loan, on any day, the
sum of two percent (2%) per annum in excess of the interest rate  otherwise then
or thereafter  payable on such Revolving Loan, but, in any event,  not less than
two percent (2%) per annum in excess of the Base Rate.

     "Dollars" or "$" means  dollars in lawful  currency of the United States of
America.

     "Domestic  Business  Day" means any day except a Saturday,  Sunday or other
day on which  commercial  banks are not  required to be open for business in the
State of Georgia.

     "DR Holdings Lease" shall mean the Lease and Development  Agreement,  dated
as of March 2, 1995, between DR Holdings,  L.P., as lessor, and the Borrower, as
lessee,  together with Appendix "A" thereto and each "Lease Supplement"  thereto
(as defined  therein),  all "Operative  Documents" (as also defined therein) and
all amendments and modifications thereto made from time to time hereafter.

     "EBITDA"  shall  mean,  for  any  fiscal  period  of the  Borrower  and its
Consolidated  Subsidiaries,   that  amount  equal  to  the  sum,  determined  in
accordance  with GAAP,  of the  Consolidated  Net Income of the Borrower and its
Consolidated  Subsidiaries  for such period  (considered  without  regard to any
extraordinary gains or extraordinary losses), plus, without duplication,  and to
the  extent  deducted  from  revenue in  determining  Consolidated  Net  Income,
depreciation  and  amortization  expense and any other non-cash charges for such
period, interest expense for such period and taxes for such period.

     "Environmental   Authorizations"  means  all  licenses,   permits,  orders,
approvals,  notices,  registrations or other legal  prerequisites for conducting
the business of the  Borrower or any  Subsidiary  required by any  Environmental
Requirement.

     "Environmental  Authority"  means any  foreign,  federal,  state,  local or
regional  government  that exercises any form of jurisdiction or authority under
any Environmental Requirement.

     "Environmental Judgments and Orders" means all judgments, decrees or orders
arising  from or in any way  associated  with  any  Environmental  Requirements,
whether or not entered  upon consent or pursuant to written  agreements  with an


                                       8
<PAGE>
Environmental  Authority  or any  other  entity,  arising  from  or in  any  way
associated with any Environmental Requirement,  whether or not incorporated in a
judgment, decree or order.

     "Environmental   Liabilities"   means  any  liabilities   whether  accrued,
contingent  or  otherwise,  arising  from  and in any way  associated  with  any
Environmental Requirements.

     "Environmental Notices" means notice from any Environmental Authority or by
any other Person, of possible or alleged  noncompliance  with or liability under
any Environmental  Requirement,  including,  without  limitation any complaints,
citations,  demands or requests  from any  Environmental  Authority  or from any
other Person for correction of any violation of any Environmental Requirement or
any investigations concerning any violation of any Environmental Requirement.

     "Environmental   Proceedings"   means  any   judicial   or   administrative
proceedings  arising  from  or in any  way  associated  with  any  Environmental
Requirement.

     "Environmental Releases" means "releases" as defined in CERCLA or under any
applicable state or local environmental law or regulation.

     "Environmental  Requirements"  means  any  legal  requirement  relating  to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or any  Property,  including,  but not  limited to, any such  requirement  under
CERCLA or similar  state  legislation  and all  federal,  state and local  laws,
ordinances, regulations, orders, writs, decrees and common law.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time, or any successor  law. Any reference to any provision
of ERISA shall also be deemed to be a reference  to any  successor  provision or
provisions thereof.

     "Euro-Dollar  Business  Day"  means  any  Domestic  Business  Day in  which
dealings in Dollar deposits are carried out in the London interbank  Euro-Dollar
market.

     "Euro-Dollar  Rate," applicable to any Monthly Interest Period,  means that
interest rate per annum equal to the sum of (i) the Adjusted LIBOR Rate for such
Monthly Interest  Period,  plus (ii) one and one-quarter  percent (1.25%).  Each
such Euro-Dollar Rate shall remain in effect for the applicable Monthly Interest
Period and shall be  adjusted to a new  Euro-Dollar  Rate as of the first day of
the next Monthly Interest Period.

     "Euro-Dollar Rate Loan" means a Revolving Loan made at the Euro-Dollar Rate
pursuant to Section 2.1.

     "Euro-Dollar   Reserve  Percentage"  means  for  any  day  that  percentage
(expressed  as a decimal)  which is in effect on such day, as  prescribed by the
Board of  Governors  of the  Federal  Reserve  System  (or any  successor),  for
determining  the maximum  reserve  requirement  for a member bank of the Federal
Reserve System in respect of  "Eurocurrency  liabilities"  (or in respect of any
other category of liabilities  which includes deposits by reference to which the
interest  rate on  Euro-Dollar  Rate  Loans is  determined  or any  category  of
extensions of credit or other assets which includes loans by a non-United States
office of the Bank to United States residents). The Adjusted LIBOR Rate shall be
adjusted  automatically  on and as of the  effective  date of any  change in the
Euro-Dollar Reserve Percentage.

     "Event of Default" has the meaning set forth in Section 6.1.

     "Federal  Funds  Rate"  means,  for any day,  the rate per  annum  (rounded
upward,  if necessary,  to the next higher  1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal  Reserve  System  arranged  by Federal  funds  brokers  on such day,  as


                                       9
<PAGE>
published by the Federal  Reserve Bank of New York on the Domestic  Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be  determined  is not a Domestic  Business Day, the Federal Funds Rate for such
day  shall be such  rate on such  transactions  on the next  preceding  Domestic
Business Day as so published on the next succeeding  Domestic  Business Day, and
(ii) if such rate is not so published  for any day,  the Federal  Funds Rate for
such  day  shall be the  average  rate  charged  to the Bank on such day on such
transactions, as determined by the Bank.

     "Fiscal Quarter" means any fiscal quarter of the Borrower.

     "Fiscal Year" means any fiscal year of the Borrower.

     "Fixed Charge Coverage Ratio" shall mean, for any fiscal period,  the ratio
which (A) the sum of: (i) Consolidated Net Income for such period; plus (ii) the
sum  (without  duplication)  of (a) interest  expense for such  period,  (b) any
dividends paid in respect of Redeemable  Preferred Stock during such period, and
(c) any payments made (howsoever denominated or construed) in respect of any tax
deductible,  convertible  preferred stock  ("TECONS") or similar  tax-advantaged
investment  vehicles,  regardless of maturity or the timing of any redemption or
repurchase  rights  granted in regard thereto (the sum of (a), (b) and (c) above
being called,  collectively,  "Investment Costs");  plus (iii) any provision for
taxes and  operating  lease  expense;  in each case,  for the  Borrower  and its
Consolidated  Subsidiaries  for  such  period;  bears  to (B) the  sum  (without
duplication) of: (i) all Investment Costs; plus (ii) operating lease expense; in
each case, for the Borrower and its Consolidated  Subsidiaries for the same such
period; all as determined under GAAP.

     "Franchise  Rights"  shall mean all rights,  privileges  and  interests  of
Borrower  and  its  Consolidated   Subsidiaries  to  own,  operate  and  develop
franchised  restaurants as a franchisee,  whether now or hereafter existing, and
whether  with  respect  to the  operation  of any  "Applebee's"  restaurants  or
otherwise.

     "GAAP" means generally  accepted  accounting  principles applied on a basis
consistent  with those which,  in accordance with Section 1.2, are to be used in
making the calculations for purposes of determining compliance with the terms of
this Agreement.

     "Guarantee" or "Guaranty" by any Person means any obligation, contingent or
otherwise,  of such Person directly or indirectly guaranteeing any debt or other
obligation  of any other  Person and,  without  limiting the  generality  of the
foregoing, any obligation,  direct or indirect, contingent or otherwise, of such
Person  (i) to  secure,  purchase  or pay (or  advance  or supply  funds for the
purchase or payment of) such debt or other obligation (whether arising by virtue
of  partnership  arrangements,  by agreement to keep-well,  to purchase  assets,
goods, securities or services, to provide collateral security to take-or-pay, or
to maintain  financial  statement  conditions or otherwise) or (ii) entered into
for the  purpose of  assuring  in any other  manner the  obligee of such debt or
other  obligation of the payment thereof or to protect such obligee against loss
in respect  thereof (in whole or in part),  provided  that the term  "Guarantee"
shall not include  endorsements for collection or deposit in the ordinary course
of  business.  The  terms  "Guarantee"  or  "Guaranty"  used  as a  verb  has  a
corresponding meaning.

     "Hazardous Materials" includes,  without limitation, (a) solid or hazardous
waste,  as defined in the Resource  Conservation  and  Recovery Act of 1980,  42
U.S.C. ss. 6901 et seq. and its implementing  regulations and amendments,  or in
any  applicable  state or local law or regulation,  (b)  "hazardous  substance,"
"pollutant," or  "contaminant"  as defined in CERCLA,  or in applicable state or
local law or  regulation,  (c)  gasoline,  or any  other  petroleum  product  or
by-product,  including, crude oil or any fraction thereof, (d) toxic substances,
as defined in the Toxic  Substances  Control Act of 1976,  or in any  applicable
state  or  local  law  or  regulation,  and  (e)  insecticides,  fungicides,  or
rodenticides, as defined in the Federal Insecticide,  Fungicide, and Rodenticide


                                       10
<PAGE>
Act of 1975, or in any applicable state or local law or regulation, as each such
Act, statute or regulation may be amended from time to time.

     "Interest  Period"  means  with  respect  to  each  Borrowing,  the  period
commencing  on the date of such  Borrowing  and ending on the date on which such
Borrowing  is fully  paid or  converted  to a  Borrowing  of a  different  type;
provided that:

     (a) any Interest Period (other than an Interest Period determined  pursuant
to  paragraph  (b)  below)  which  would  otherwise  end on a day which is not a
Domestic Business Day shall be extended to the next succeeding Domestic Business
Day;

     (b) any Interest Period which begins before the Termination  Date and would
otherwise end after the Termination Date shall end on the Termination Date.

     "Lending  Office" means the Bank's office  located at its address set forth
on the  signature  page hereof or such other office in the United  States as the
Bank may hereafter designate as its Lending Office by notice to the Borrower.

     "LIBOR  Market  Index  Rate"  means,  for any day,  is the  rate per  annum
(rounded to the next  higher  1/100 of 1%) for 1 month U.S.  dollar  deposits as
reported on Telerate page 3750 as of 11:00 a.m., London time, on such day, or if
such day is not a London  business day, then the  immediately  preceding  London
business day (or if not so  reported,  then as  determined  by Bank from another
recognized  source or  interbank  quotation),  plus one and one quarter  percent
(1.25%).

     "LIBOR  Market  Index Rate Loan" means a  Revolving  Loan made at the LIBOR
Market Index Rate pursuant to Section 2.1.

     "LIBOR Rate" means, for any Euro-Dollar Rate Loan for each Monthly Interest
Period,  the rate per  annum  determined  on the basis of the  offered  rate for
deposits in Dollars of amounts equal or  comparable  to the principal  amount of
such  Euro-Dollar  Rate  Loan  offered  for a term  comparable  to such  Monthly
Interest Period,  which rate appears on the display designated as page "3750" of
the  Telerate  Service  (or such  other  page as may  replace  page 3750 of that
service or such other  service or  services as may be  nominated  by the British
Banker's  Association  for the purpose of displaying  London  interbank  offered
rates for U.S.  dollar  deposits),  determined  as of 10:00 A.M.,  New York City
time,  on the first day of such Monthly  Interest  Period,  provided that (i) if
more than one such offered  rate appears on such page,  the "LIBOR Rate" will be
the arithmetic average (rounded upward, if necessary, to the next higher 1/100th
of 1%) of such offered rates; (ii) if no such offered rates appear on such page,
the "LIBOR Rate" for such Monthly Interest Period will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted
by not less than two (2) major banks in New York City,  selected by the Bank, at
approximately  10:00 A.M.,  New York City time, on the first day of such Monthly
Interest Period, for deposits in Dollars offered to leading European banks for a
period comparable to such Monthly Interest Period in an amount comparable to the
principal amount of such Euro-Dollar Loan.

     "Lien" means, with respect to any asset, any mortgage, deed to secure debt,
deed of trust, lien, pledge, charge, security interest,  security title or other
preferential  arrangement,  which has the  practical  effect of  constituting  a
security  interest or  encumbrance,  or  encumbrance or servitude of any kind in
respect  of such  asset to secure or assure  payment  of a debt or a  Guarantee,
whether by  consensual  agreement  or by  operation of statute or other law. For
purposes of this  Agreement,  the Borrower or any Subsidiary  shall be deemed to
own  subject to a Lien any asset which it has  acquired or holds  subject to the
interest of a vendor or lessor under any  conditional  sale  agreement,  capital
lease or other title retention agreement relating to such asset.

     "Liquidity Agreement" shall mean the Credit Agreement, dated as of April 1,
1998,  among Wachovia,  as agent,  the Borrower and the other lenders that are a


                                       11
<PAGE>
party thereto, as amended, modified, supplemented or restated from time to time.

     "Loan Documents" means this Agreement,  the Note, any Subsidiary  Guaranty,
any other documents evidencing or relating to the Revolving Loans, and any other
document, instrument, certificate or agreement delivered in connection with this
Agreement,  the Note or the Revolving  Loans,  as such  documents,  instruments,
certificates and agreements may be amended or modified from time to time.

     "Margin Stock" means "margin stock" as defined in Regulations G, T, U or X.

     "Master Lease  Agreement"  shall mean the Master Equipment Lease Agreement,
dated  as  of  September  24,  1997,  between  First  Security  Bank,   National
Association,   as  owner  trustee,  and  Borrower,  as  lessee,  all  "Operative
Documents" (as used in such  agreement),  and all  modifications  and amendments
thereto from time to time.

     "Material Adverse Effect" means, with respect to any event, act,  condition
or occurrence of whatever  nature  (including any adverse  determination  in any
litigation,  arbitration, or governmental investigation or proceeding),  whether
singly or in conjunction with any other event or events, act or acts,  condition
or  conditions,  occurrence or  occurrences,  whether or not related,  that such
event or events,  act or acts,  condition or  conditions,  and/or  occurrence or
occurrences  results in a material  adverse change in, or has a material adverse
effect  upon,  any of (a) the  financial  condition,  operations,  business,  or
properties of the Borrower and its Consolidated  Subsidiaries  taken as a whole,
(b) the rights and remedies of the Bank under the Loan Documents, or the ability
of the Borrower to perform its obligations  under the Loan Documents to which it
is a party, as applicable,  or (c) the legality,  validity or  enforceability of
this Agreement, the Note or any Loan Document.

     "Monthly  Interest  Period" shall mean,  with respect to  Euro-Dollar  Rate
Borrowings, the period beginning on the first day of a calendar month and ending
on the last day of such calendar month.

     "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3)
of ERISA.

     "Note" shall mean the promissory  note,  dated of even date herewith,  from
the  Borrower  to the Bank in the  original  principal  amount  of  $30,000,000,
together  with all  amendments,  consolidations,  modifications,  renewals,  and
supplements thereto, which note evidences all of the Revolving Loans.

     "Notice of Borrowing" has the meaning set forth in Section 2.2.1.

     "Participant" has the meaning set forth in Section 8.6.2.

     "PBGC"  means  the  Pension  Benefit  Guaranty  Corporation  or any  entity
succeeding to any or all of its functions under ERISA.

     "Person"  means  an   individual,   a   corporation,   a  partnership,   an
unincorporated  association,  a  trust  or any  other  entity  or  organization,
including,  but not limited to, a  government  or  political  subdivision  or an
agency or instrumentality thereof.

     "Plan" means at any time an employee  pension benefit plan which is covered
by Title IV of ERISA or subject to the minimum  funding  standards under Section
412 of the Code and is either (i) maintained by a member of the Controlled Group
for employees of any member of the Controlled Group or (ii) maintained  pursuant
to a collective  bargaining  agreement or any other arrangement under which more
than one employer  makes  contributions  and to which a member of the Controlled
Group is then making or  accruing an  obligation  to make  contributions  or has
within the preceding five plan years made contributions.

     "Prime Rate" refers to that  interest  rate so  denominated  and set by the
Bank from time to time as an interest rate basis for borrowings.  The Prime Rate


                                       12
<PAGE>
is but one of several  interest  rate bases used by the Bank.  The Bank lends at
interest rates above and below the Prime Rate.

     "Properties" means all property owned,  leased or otherwise used,  operated
or occupied by the Borrower or any  Subsidiary,  wherever  located,  and whether
real property or personal property.

     "Purchase  Money Liens" means Liens  securing the repayment of any purchase
money debt permitted  hereunder incurred to finance the purchase of any Property
hereafter  acquired by the Borrower or any Consolidated  Subsidiary,  so long as
such Liens are  limited  solely to the  Property  so  acquired,  secure only the
purchase money debt so incurred and are terminated  upon payment in full of such
purchase money debt.

     "Redeemable Preferred Stock" of any Person means any preferred stock issued
by such  Person  which is at any time prior to the  Termination  Date either (i)
mandatorily  redeemable  (by sinking fund or similar  payments or  otherwise) or
(ii) redeemable at the option of the holder thereof.

     "Regulation D" means  Regulation D of the Board of Governors of the Federal
Reserve  System,  as in effect  from time to time,  together  with all  official
rulings and interpretations issued thereunder.

     "Regulation G" means  Regulation G of the Board of Governors of the Federal
Reserve  System,  as in effect  from time to time,  together  with all  official
rulings and interpretations issued thereunder.

     "Regulation T" means  Regulation T of the Board of Governors of the Federal
Reserve  System,  as in effect  from time to time,  together  with all  official
rulings and interpretations issued thereunder.

     "Regulation U" means  Regulation U of the Board of Governors of the Federal
Reserve  System,  as in effect  from time to time,  together  with all  official
rulings and interpretations issued thereunder.

     "Regulation X" means  Regulation X of the Board of Governors of the Federal
Reserve  System,  as in effect  from time to time,  together  with all  official
rulings and interpretations issued thereunder.

     "Revolving  Loan" means a Base Rate Loan or a Euro-Dollar Rate Loan made by
the Bank pursuant to Section 2.1.

     "Sale-Leaseback Transaction" means any sale-leaseback transaction involving
the sale of any assets or  properties  of the Borrower or any  Subsidiary to any
other  Person and the leasing  back of such asset or property by the Borrower or
any Subsidiary.

     "Senior Note  Indenture"  means the Indenture of Trust,  dated as of May 1,
1996,  between  SunTrust  Bank and the Borrower,  and  including all  applicable
covenants with respect to the Senior Notes contained in the Prospectus, dated as
of May 6, 1996, as supplemented May 23, 1996, for the Senior Notes.

     "Senior  Notes" means the  Borrower's  $125,000,000  9.75% Senior Notes due
June 1, 2006.

     "Solvent" means as to any Person,  that such Person (i) owns Property whose
fair  saleable  value is  greater  than the amount  required  to pay all of such
Person's total debts, direct or indirect,  contingent or otherwise, (ii) is able
to pay all of such  debts as and when such debts  mature  and (iii) has  capital
sufficient to carry on the business and  transactions in which it is engaged and
all business and transactions in which it is about to engage.

     "Stockholders'  Equity" means, at any time, the stockholders' equity of the
Borrower  and its  Consolidated  Subsidiaries,  as set forth or reflected on the
most recent  consolidated  balance  sheet of the Borrower  and its  consolidated


                                       13
<PAGE>
Subsidiaries  prepared in accordance  with GAAP,  but  excluding any  Redeemable
Preferred  Stock  of the  Borrower  or any  of  its  Consolidated  Subsidiaries.
Shareholders'  Equity generally would include, but not be limited to (i) the par
or stated value of all outstanding  Capital Stock,  (ii) capital surplus,  (iii)
retained earnings, and (iv) various deductions such as (A) purchases of treasury
stock,  (B) valuation  allowances,  (C)  receivables  due from an employee stock
ownership plan, and (D) employee stock ownership plan debt Guarantees.

     "Subsidiary"  means any corporation or other entity of which  securities or
other  ownership  interests  having ordinary voting power to elect a majority of
the board of directors or other Persons  performing similar functions are at the
time directly or indirectly owned by the Borrower.

     "Synthetic   Lease"  shall  mean  any  agreement,   or  series  of  related
agreements,  between  the  Borrower  and one or more  other  parties  which  are
intended to be treated, for accounting purposes,  as an operating lease with the
Borrower as lessee and, for tax purposes,  as a financing  arrangement  with the
Borrower as debtor.

     "Termination Date" has the meaning set forth in Section 2.7.1.

     "Third Parties" means all leases,  subleases,  licensees and other users of
the  Properties,  excluding those users of the Properties in the ordinary course
of the Borrower's business and on a temporary basis.

     "Total Funded Debt" shall mean that portion of the total liabilities of the
Borrower and its Consolidated Subsidiaries at any date equal to the sum (without
duplication)   of:  (i)  all  indebtedness  for  borrowed  money  at  such  date
(including,  for  this  purpose,  indebtedness  in  respect  of any  outstanding
bankers' acceptances);  plus (ii) all Capitalized Lease Obligations  outstanding
at such date;  plus  (iii) all  debts,  liabilities  and  obligations  which are
Guaranteed by the Borrower or any Consolidated  Subsidiary as of such date; plus
(iv) all debts,  liabilities or obligations at such date to any seller  incurred
to pay the  deferred  price of property or services  having a deferred  purchase
price of One Million  Dollars  ($1,000,000)  or more,  excepting,  in any event,
trade accounts  payable  arising in the ordinary course of business and purchase
options prior to their exercise; plus (v) all debts, liabilities and obligations
outstanding  at  such  date  in  respect  of  any  Synthetic  Leases,  excluding
therefrom,  however, any debts, liabilities or obligations under the DR Holdings
Lease up to a maximum thereof of Twenty-Eight Million Dollars  ($28,000,000.00),
it being  understood  and agreed  that,  subject to such  limitation,  no debts,
liabilities or obligations (including any constituting  Guaranteed  Obligations)
under the DR Holding  Lease shall be included in the  definition of Total Funded
Debt.

     "Transferee" has the meaning set forth in Section 8.6.4.

     "Unfunded Vested  Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all vested  nonforfeitable
benefits  under such Plan  exceeds (ii) the fair market value of all Plan assets
allocable to such benefits,  all determined as of the then most recent valuation
date for such  Plan,  but only to the  extent  that  such  excess  represents  a
potential  liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.

     "Unused  Commitment"  means at any date an amount  equal to the  Commitment
less the aggregate outstanding principal amount of the Revolving Loans.

     "Voluntary Store Closing" shall mean any voluntary  closing by the Borrower
or any Subsidiary of any franchised  restaurant  location in the ordinary course
of its business which does not cause, or result in, the forfeiture,  suspension,
loss, rejection, disclaimer,  impairment,  curtailment,  alteration of, or other
adverse  effect on, any  Franchise  Rights  with  respect  to the  operation  or
development of any other existing or future  franchised  restaurant  location or
locations.



                                       14
<PAGE>
     "Wachovia" means Wachovia Bank of Georgia, National Association, a national
banking association, and its successors.

     "Wachovia  Credit  Agreement"  shall mean that certain  Second  Amended and
Restated Credit Agreement dated as of March 1, 1998,  among Borrower,  Wachovia,
as  agent,  and the other  banks and  financial  institutions  that are  parties
thereto,  as the same may be amended,  restated,  and supplemented  from time to
time,  and any  loan  or  credit  agreement  executed  in  connection  with  the
refinancing of all or any substantial  portion of the  indebtedness  outstanding
under such Second Amended and Restated Credit Agreement,  as such loan or credit
agreement may be amended, restated, and supplemented from time to time.

     SECTION 1.2. Accounting Terms and Determinations.

     Unlike otherwise  specified  herein,  all terms of an accounting  character
used herein shall be interpreted,  all accounting determinations hereunder shall
be made, and all financial  statements  required to be delivered hereunder shall
be prepared in accordance with GAAP,  applied on a basis consistent  (except for
changes  concurred  with by the  Borrower's  independent  public  accountants or
otherwise  required  by a change  in GAAP)  with the then  most  recent  audited
consolidated   financial   statements  of  the  Borrower  and  its  Consolidated
Subsidiaries  delivered to the Bank; provided,  however, that upon any change in
GAAP material to Borrower occurring hereafter,  the Bank shall have the right to
require either that  conforming  adjustments be made to any financial  covenants
hereafter set forth, or the components thereof,  affected by such change or that
the  Borrower  report  its  financial  condition  based  on  GAAP  as in  effect
immediately prior to such change occurring.

     SECTION 1.3. References.

     Unless  otherwise  indicated,  references in this  Agreement to "Articles,"
"Exhibits,"  "Schedules,"  "Sections" and other  Subdivisions  are references to
articles, exhibits, schedules, sections and other subdivisions hereof.

     SECTION 1.4. Use of Defined Terms.

     All terms defined in this  Agreement  shall have the same defined  meanings
when used in any of the other Loan Documents,  unless otherwise  defined therein
or unless the context shall require otherwise.

     SECTION 1.5. Terminology.

     All  personal  pronouns  used  in  this  Agreement,  whether  used  in  the
masculine,  feminine or neuter  gender,  shall  include all other  genders;  the
singular  shall  include the plural,  and the plural shall include the singular.
Titles of Articles and Sections in this Agreement are for convenience  only, and
neither limit nor amplify the provisions of this Agreement.


                             ARTICLE 2. THE CREDIT

     SECTION 2.1. Commitment to Lend.

     The Bank agrees,  on the terms and  conditions  set forth  herein,  to make
Revolving Loans to the Borrower from time to time before the  Termination  Date;
provided that, immediately after each such Revolving Loan is made, the aggregate
principal  amount  of  Revolving  Loans  shall  not  exceed  the  amount  of the
Commitment,  as the same may be reduced  from time to time  pursuant  to Section
2.7. Each Borrowing under this Section shall be in an aggregate principal amount
of One Million  Dollars  ($1,000,000.00)  or any larger multiple of Five Hundred
Thousand  Dollars  ($500,000.00)  (except that any such  Borrowing may be in the
aggregate amount of the Unused  Commitment).  Within the foregoing  limits,  the
Borrower may borrow  under this  Section,  repay or, to the extent  permitted by
Section 2.8, prepay  Revolving Loans and reborrow under this Section at any time
or from time to time before the Termination Date.



                                       15
<PAGE>
     SECTION 2.2. Method of Borrowing.

     2.2.1.  Notice to Bank.  The Borrower shall give the Bank notice (a "Notice
of Borrowing"), which shall be substantially in the form of Exhibit A, not later
than  11:00  a.m.  (Atlanta,  Georgia  time)  on  the  day  of  each  Borrowing,
specifying:

     (1) the date of such Borrowing,

     (2) the aggregate amount of such Borrowing, and

     (3) whether such  Borrowing is to be a Base Rate Loan, a LIBOR Market Index
Rate Loan or Euro-Dollar Rate Loan.

     2.2.2.  When  Revolving  Loans  Made.  Not later  than 1:00 p.m.  (Atlanta,
Georgia time) on the date of each Borrowing,  the Bank shall (except as provided
in Section  2.2.3)  make  available  such  Borrowing,  in Federal or other funds
immediately available in Atlanta, Georgia, to the Borrower at the Bank's Address
unless the Bank determines that any applicable  condition specified in Article 3
has not been satisfied.

     2.2.3.  Application of Certain Proceeds. If the Bank makes a Revolving Loan
hereunder  on a day on which  the  Borrower  is to  repay  all or any part of an
outstanding  Revolving  Loan,  the Bank  shall  apply  the  proceeds  of its new
Revolving Loan to make such repayment and only an amount equal to the difference
(if any) between the amount being  borrowed and the amount being repaid shall be
made available to the Borrower as provided in Section 2.2.2.

     2.2.4. No Borrowing Upon Default.  Notwithstanding anything to the contrary
contained  in this  Agreement,  no  Borrowing  may be made if there  shall  have
occurred a Default, which Default shall not have been cured or waived.

     SECTION 2.3. Note.

     2.3.1.  Single Note.  The  Revolving  Loans shall be evidenced by the Note,
payable to the order of the Bank for the  account of its Lending  Office,  in an
amount equal to the original principal amount of the Commitment.

     2.3.2.  Endorsement to Note. The Bank may record and, prior to any transfer
of the Note shall,  endorse on the schedule  forming a part thereof  appropriate
notations to evidence the date,  amount and maturity of each Revolving Loan, the
date and amount of each payment of principal  made by the Borrower  with respect
thereto and whether such Revolving Loan is a Base Rate Loan or Euro-Dollar  Rate
Loan, and such schedule shall constitute rebuttable  presumptive evidence of the
principal amount owing and unpaid on the Note;  provided that the failure of the
Bank to make any such recordation or endorsement shall not affect the obligation
of the  Borrower  hereunder  or under the Note.  The Bank is hereby  irrevocably
authorized  by the  Borrower  so to endorse the Note and to attach to and make a
part of the Note a continuation of any such schedule as and when required.

     SECTION 2.4. Maturity of Revolving Loans.

     Each  Revolving  Loan  included  in any  Borrowing  shall  mature,  and the
principal  amount  thereof  shall  be due and  payable,  on the  last day of the
Interest Period applicable to such Borrowing.

     SECTION 2.5. Interest Rates.

     Subject to the terms of Section 7.1:

     2.5.1.  Base Rate  Loans.  Each Base Rate Loan shall bear  interest  on the
outstanding  principal  amount  thereof,  for  the  Interest  Period  applicable
thereto,  at a rate per annum equal to the Base Rate, as it may change from time
to time during such Interest Period.  Such interest shall be payable monthly, in
arrears,  on the tenth day after the last day of each calendar month, in respect


                                       16
<PAGE>
of interest accrued in such month (or portion  thereof),  commencing on June 10,
1998 (with the first  payment date to cover the  principal  balance  outstanding
during the period from the date hereof until May 31, 1998),  until  maturity and
thereafter on demand.  Any overdue  principal of and, to the extent permitted by
applicable  law,  overdue  interest  on any Base Rate Loan shall bear  interest,
payable  on  demand,  for each day until  paid at a rate per annum  equal to the
Default Rate.

     2.5.2.  LIBOR  Market  Index Rate Loans.  Each LIBOR Market Index Rate Loan
shall  bear  interest  on the  outstanding  principal  amount  thereof,  for the
Interest  Period  applicable  thereto,  at a rate per  annum  equal to the LIBOR
Market Index Rate, as it may change from day to day during such Interest Period.
Such interest shall be payable monthly,  in arrears,  on the tenth day after the
last day of each calendar  month,  in respect of interest  accrued in such month
(or portion  thereof),  commencing on June 10, 1998 (with the first payment date
to cover the  principal  balance  outstanding  during the  period  from the date
hereof until May 31, 1998), until maturity and thereafter on demand. Any overdue
principal of and, to the extent permitted by applicable law, overdue interest on
any LIBOR Market  Index Rate Loan shall bear  interest,  payable on demand,  for
each day until paid at a rate per annum equal to the Default Rate.

     2.5.3.  Euro-Dollar  Rate  Loans.  Each  Euro-Dollar  Rate Loan  shall bear
interest on the outstanding principal amount thereof at the Euro-Dollar Rate for
such  Monthly   Interest   Period  (or  portion   thereof  during  which  it  is
outstanding).  If a Euro-Dollar Rate Loan shall be outstanding  during more than
one  calendar  month,  the interest  rate  thereon  shall be adjusted to the new
Euro-Dollar  Rate as of the first day of the next  succeeding  Monthly  Interest
Period during which it is  outstanding.  Such interest shall be payable for each
Interest  Period  on the  tenth day  after  the last day  thereof.  Any  overdue
principal  of and,  to the extent  permitted  by law,  overdue  interest  on any
Euro-Dollar Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per  annum  equal to the  Default  Rate;  provided  that the mere
application of the Default Rate to these  Revolving Loans shall not give rise to
the breakage of an Interest Period,  but only an increased margin  applicable to
these Revolving Loans.

     2.5.4.  Bank to  Determine.  The Bank shall  determine  each  interest rate
applicable to the Revolving Loans  hereunder.  The Bank shall give prompt notice
to the Borrower by  telecopier of each rate of interest so  determined,  and its
determination thereof shall be conclusive in the absence of manifest error.

     2.5.5.  Savings Clause. In no contingency or event  whatsoever,  whether by
reason of advancement of the proceeds hereof or otherwise, shall the amount paid
or agreed to be paid to the Bank for the use,  forbearance or detention of money
advanced  hereunder  exceed the highest  lawful rate  permissible  under any law
which a court of competent jurisdiction may deem applicable hereto. In the event
that such a court  determines  that the Bank has  charged or  received  interest
hereunder  in  excess  of  the  highest   applicable   rate,   such  rate  shall
automatically be reduced to the maximum rate permitted by applicable law and the
Bank shall promptly refund to the Borrower any interest  received by the Bank in
excess of the maximum  lawful rate or, if so  requested by the  Borrower,  shall
apply such excess to the principal  balance of the Note. It is the intent hereof
that the  Borrower  not pay or contract to pay, and that the Bank not receive or
contract to receive,  directly or indirectly in any manner whatsoever,  interest
in excess of that which may be paid by the Borrower under applicable law.

     SECTION 2.6. Closing Fee.

     The  Borrower  shall pay to the Bank on the  Closing  Date a fully  earned,
non-refundable closing fee of $7,500.

     SECTION 2.7. Termination or Reduction of Commitment.

     2.7.1.  Termination of Commitments.  The Commitment  shall terminate on the
earlier  of (i)  March 1,  1999 or (ii) the  occurrence  of an Event of  Default


                                       17
<PAGE>
hereunder (the  "Termination  Date"),  and any Revolving Loans then  outstanding
(together with accrued interest  thereon) shall be due and payable on such date.
In addition to the foregoing, the Borrower shall have the right to terminate the
Commitment at any time if no Borrowings  are then  outstanding or all Borrowings
are repaid or prepaid in  accordance  with the terms of Section 2.9, as the case
may be, on or prior to such early  termination,  provided  that (i) the Borrower
shall have given at least one (1) Domestic Business Day's advance written notice
to the Bank of such  election and (ii) any such notice of  termination  shall be
irrevocable once made.

     2.7.2. Mandatory Reduction and Reinstatement of Commitment.  If at any time
the Borrower's  "Consolidated  Fixed Charge  Coverage  Ratio" (as defined in the
Senior Note Indenture) is equal to or less than 2.5:1.0, the Commitment shall be
automatically  and without  further action on the part of the Bank, the Borrower
or any other  Person,  reduced  to  $20,000,000.  At such  time as the  Borrower
provides a written  certification to the Bank that the  "Consolidated  Cash Flow
Coverage Ratio" (as defined in the Senior Note Indenture)  exceeds 2.5:1.0,  the
Commitment  shall  thereafter  be increased to  $30,000,000  without any further
action on the part of the Bank, the Borrower or any other Person.

     SECTION 2.8. Optional Prepayments.

     The Borrower  may, on any Business  Day,  upon giving notice to the Bank by
not later than 11:00 A.M.  (Atlanta,  Georgia  time) on such  Business  Day, and
making payment to the Bank, on such Business Day of any compensation required by
Section 7.5,  prepay any Borrowing in whole at any time, or from time to time in
part in  amounts  aggregating  at least One  Million  Dollars  ($1,000,000)  and
integral  multiples of Five Hundred Thousand Dollars  ($500,000),  by paying the
principal  amount to be prepaid  together with accrued  interest  thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay the
Revolving Loans.

     SECTION 2.9. Mandatory Prepayments.

     On each date,  if any, on which the  Commitment  is  terminated  or reduced
pursuant to Section  2.7,  the  Borrower  shall  repay or prepay such  principal
amount of the outstanding  Revolving  Loans, if any, as may be necessary so that
after such payment the aggregate  unpaid principal amount of the Revolving Loans
is  reduced  to zero,  in the case of any  termination,  or does not  exceed the
aggregate  amount  of  the  Commitment  as  then  reduced,  in the  case  of any
reduction,  plus,  in  each  case,  accrued  interest  thereon  to the  date  of
prepayment and any compensation required by Section 7.5.

     SECTION 2.10. General Provisions as to Payments.

     2.10.1.  Timing.  The Borrower shall make each payment of principal of, and
interest on, the Revolving Loans and of any fees hereunder,  not later than 2:00
P.M.  (Atlanta,  Georgia  time) on the date when due,  in Federal or other funds
immediately available in Atlanta, Georgia, to the Bank's Address.

     2.10.2. Next Banking Day. Whenever any payment of principal of, or interest
on,  any  Loans or of any fees  shall  be due on a day  which is not a  Domestic
Business  Day,  the date for  payment  thereof  shall  be  extended  to the next
succeeding Domestic Business Day.

     SECTION 2.11. Computation of Interest.

     Interest on the Revolving Loans shall be computed on the basis of a year of
360 days and paid for the actual number of days  elapsed,  calculated as to each
Interest  Period from and  including  the first day thereof to but excluding the
last day thereof.




                                       18
<PAGE>
                      ARTICLE 3. CONDITIONS TO BORROWINGS

     SECTION 3.1. Conditions to First Borrowing.

     The  obligation  of the  Bank to make  the  initial  Revolving  Loan on the
occasion of the first Borrowing is subject to the satisfaction of the conditions
set forth in Section 3.2 and receipt by the Bank of the following:

     3.1.1. This Agreement. A duly executed counterpart of this Agreement signed
by the Borrower;

     3.1.2.  Note.  The duly  executed  Note  complying  with the  provisions of
Section 2.3;

     3.1.3.  Opinion.  An opinion  (together  with any opinions of local counsel
relied on therein) of legal  counsel for the  Borrower,  dated as of the Closing
Date, in form and substance satisfactory to the Bank;

     3.1.4. Closing Certificate. A certificate ("Closing Certificate"), dated as
of the Closing Date, in form and substance  satisfactory to the Bank,  signed by
the chief financial  officer of the Borrower,  to the effect that (i) no Default
has occurred and is continuing  on the date of the first  Borrowing and (ii) the
representations  and warranties of the Borrower  contained in Article 4 are true
on and as of the Closing Date;

     3.1.5. Other Documents. All documents which the Bank may reasonably request
relating to the existence of the Borrower,  the corporate  authority for and the
validity of this Agreement, the Note and the other Loan Documents, and any other
matters  relevant  hereto,  all in form and substance  satisfactory to the Bank,
including,  without  limitation,  a  certificate  of incumbency of the Borrower,
signed by the Secretary or an Assistant Secretary of the Borrower, certifying as
to the names,  true  signatures and incumbency of the officer or officers of the
Borrower  authorized  to execute and deliver the Loan  Documents,  and certified
copies of the following  items:  (i) the Borrower's  Articles of  Incorporation,
(ii) the Borrower's Bylaws, (iii) a certificate of the Secretary of State of the
State of  Georgia  as to the  good  standing  of the  Borrower  in the  State of
Georgia,  and (iv) the action  taken by the Board of  Directors  of the Borrower
authorizing  the  Borrower's   execution,   delivery  and  performance  of  this
Agreement,  the Note and the other Loan  Documents  to which the  Borrower  is a
party;

     3.1.6. Borrowing Notice. A Notice of Borrowing.

     SECTION 3.2. Conditions to All Borrowings.

     The obligation of the Bank to make a Revolving Loan on the occasion of each
Borrowing is subject to the satisfaction of the following conditions:

     3.2.1. Notice. Receipt by the Bank of a Notice of Borrowing;

     3.2.2.  No  Default.  The fact  that,  immediately  before  and after  such
Borrowing, no Default shall have occurred and be continuing;

     3.2.3.  Truth of  Representations.  The fact that the  representations  and
warranties  of the Borrower  contained in Article 4 of this  Agreement  shall be
true on and as of the date of such Borrowing; and

     3.2.4. Not Overadvance.  The fact that,  immediately  after such Borrowing,
the  aggregate  outstanding  principal  amount of the  Revolving  Loans will not
exceed the amount of the Commitment.

     Each  Borrowing  hereunder  shall  be  deemed  to be a  representation  and
warranty by the Borrower on the date of such Borrowing as to the facts specified
in Sections 3.2.2, 3.2.3 and 3.2.4.




                                       19
<PAGE>
                    ARTICLE 4. REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants that:

     SECTION 4.1. Corporate Existence and Power.

     Each of the Borrower and each  Subsidiary is a corporation  duly organized,
validly  existing and in good standing under the laws of the jurisdiction of its
incorporation,  is duly  qualified  to transact  business in every  jurisdiction
where, by the nature of its business,  such qualification is necessary,  and has
all corporate powers and all governmental licenses, authorizations, consents and
approvals  required to carry on its business as now conducted,  except where the
failure to so qualify,  or obtain  such  licenses,  authorizations,  consents or
approvals could not be reasonably  expected to have or cause a Material  Adverse
Effect.

     SECTION 4.2. Corporate and Governmental Authorization: No Contravention.

     The execution, delivery and performance by the Borrower and each Subsidiary
which is party thereto of this Agreement,  the Note and the other Loan Documents
(i) are within the Borrower's and such Subsidiary's  corporate powers, (ii) have
been duly authorized by all necessary corporate action,  (iii) require no action
by or in respect of or filing with, any governmental  body,  agency or official,
(iv) do not  contravene,  or  constitute  a  default  under,  any  provision  of
applicable law or regulation or of the articles of  incorporation  or by-laws of
the Borrower or such Subsidiary or, to the best of the Borrower's knowledge,  of
any material agreement,  judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its  Subsidiaries,  and (v) do not result in
the  creation or  imposition  of any Lien on any asset of the Borrower or any of
its Subsidiaries.

     SECTION 4.3. Binding Effect.

     This  Agreement  constitutes a valid and binding  agreement of the Borrower
enforceable  in  accordance  with its  terms,  and the Note and the  other  Loan
Documents,  when executed and delivered in accordance with this Agreement,  will
constitute  valid and binding  obligations  of the Borrower and each  Subsidiary
party thereto  enforceable in accordance with their respective  terms,  provided
that the  enforceability  hereof and  thereof is subject in each case to general
principles of equity and to  bankruptcy,  insolvency  and similar laws affecting
the enforcement of creditors' rights generally.

     SECTION 4.4. Financial Information: No Material Adverse Effect.

     The audited balance sheet of the Borrower and its Consolidated Subsidiaries
as of December 31, 1997,  and the related  consolidated  audited  statements  of
income, shareholders' equity and cash flows of the Borrower and its Consolidated
Subsidiaries for the Fiscal Year then ended, copies of which have been delivered
to the Bank,  and the  unaudited  financial  statements  of the Borrower and its
Consolidated  Subsidiaries  as of and for the Fiscal  Quarter  ended  closest to
March 31, 1998, copies of which have been delivered to the Bank, fairly present,
in  conformity  with  GAAP,  the  financial  position  of the  Borrower  and its
Consolidated Subsidiaries as of such dates and the results of its operations and
cash flow for such periods stated;  provided,  that, (i) the interim  statements
remain subject to normal year-end audit  adjustments and (ii) during the term of
this Agreement after the Closing Date, future  representations as to the matters
set forth in this sentence shall be deemed to refer to the most recent financial
statements  delivered  pursuant to Sections 5.1.1 and 5.1.2.  Since December 31,
1995,  there has been no event,  act,  condition or  occurrence  having or which
could  be  expected  to have a  Material  Adverse  Effect,  except  for  matters
disclosed in the quarterly financial statements referred to above; provided that
during  the  term  of  this  Agreement   following  the  Closing  Date,   future
representations  as to  matters  set forth in this  sentence  shall be deemed to
refer to the last day of the most recent audited financial  statements delivered
by the Borrower pursuant to Section 5.1.1.



                                       20
<PAGE>
     SECTION 4.5. No Litigation.

     There is no action,  suit or proceeding pending, or to the knowledge of the
Borrower   threatened,   against  or  affecting  the  Borrower  or  any  of  its
Subsidiaries  before any court or arbitrator or any governmental body, agency or
official which could have a Material Adverse Effect or which in any manner draws
into  question  the  validity of, or could impair the ability of the Borrower to
perform its obligations under, this Agreement, the Note or any of the other Loan
Documents.

     SECTION 4.6. Compliance with Laws Generally; Compliance with ERISA.

     The Borrower and each Subsidiary are in compliance in all material respects
with applicable  laws  (including,  but not limited to, ERISA),  regulations and
similar requirements of governmental authorities (including, but not limited to,
PBGC),  non-compliance with which could have or cause a Material Adverse Effect,
except where the necessity of such  compliance is being  contested in good faith
through appropriate  proceedings.  To the best of the Borrower's knowledge,  (i)
the  Borrower  and each  member of the  Controlled  Group have  fulfilled  their
respective obligations under the minimum funding standards of ERISA and the Code
with respect to each Plan and are in  compliance  in all material  respects with
the presently applicable provisions of ERISA and the Code, and have not incurred
any  liability  to the PBGC or a Plan under Title IV of ERISA;  and (ii) neither
the  Borrower  nor any  member  of the  Controlled  Group  is or ever  has  been
obligated to contribute to any Multiemployer Plan.

     SECTION 4.7. Taxes.

     There have been filed on behalf of the  Borrower and its  Subsidiaries  all
federal,  state and local income,  excise,  property and other tax returns which
are  required to be filed by them and all taxes due  pursuant to such returns or
pursuant  to any  assessment  received  by or on behalf of the  Borrower  or any
Subsidiary have been paid,  except for amounts that either are immaterial or are
being  disputed  in good  faith and by  appropriate  proceedings.  The  charges,
accruals  and  reserves on the books of the  Borrower  and its  Subsidiaries  in
respect  of taxes or other  governmental  charges  are,  in the  opinion  of the
Borrower, adequate.

     SECTION 4.8. Subsidiaries.

     As of the Closing Date,  the Borrower has no  Subsidiaries,  except for the
Subsidiaries   set  forth  on  Schedule  4.8,  all  of  which  are  Consolidated
Subsidiaries.

     SECTION 4.9. Not a Holding  Company,  Public Utility,  Investment  Company,
Investment Adviser.

     Neither  the  Borrower  nor any  Subsidiary  is a "holding  company,"  or a
"subsidiary  company" of a "holding  company," or an  "affiliate"  of a "holding
company"  or of a  "subsidiary  company"  of a "holding  company,"  or a "public
utility,"  within the meaning of the Public Utility Holding Company Act of 1935,
as amended;  or a "public  utility" within the meaning of the Federal Power Act,
as  amended;  or  an  "investment  company"  or a  company  "controlled"  by  an
"investment  company" within the meaning of the Investment  Company Act of 1940,
as amended;  or an  "investment  adviser"  within the meaning of the  Investment
Advisers Act of 1940, as amended.

     SECTION 4.10. Ownership of Property; Liens.

     The Borrower owns  Properties,  or interests in Properties,  sufficient for
the conduct of its business;  and none of such Properties is subject to any Lien
except as permitted in Section 5.7.

     SECTION 4.11. No Default.



                                       21
<PAGE>
     Neither the Borrower  nor any of its  Subsidiaries  is in default  under or
with respect to any agreement,  instrument or undertaking to which it is a party
or by  which it or any of its  Property  is bound  which  could  have or cause a
Material Adverse Effect. No Default has occurred and is continuing.

     SECTION 4.12. Full Disclosure.

     All written information and, to the best of the Borrower's  knowledge,  all
other information, heretofore furnished by the Borrower to the Bank for purposes
of or in connection with this Agreement or any transaction  contemplated  hereby
is, and all such  information  hereafter  furnished  by the Borrower to the Bank
will be,  true,  accurate  and  complete in every  material  respect or based on
reasonable  estimates  on the date as of which  such  information  is  stated or
certified.  The Borrower has  disclosed to the Bank in writing any and all facts
which could reasonably be expected to have or cause a Material Adverse Effect.

     SECTION 4.13. Environmental Matters.

     To the best of the Borrower's  knowledge,  (i) neither the Borrower nor any
Subsidiary is subject to any Environmental Liability which could have or cause a
Material  Adverse  Effect and neither the Borrower nor any  Subsidiary  has been
designated  as a potentially  responsible  party under CERCLA or under any state
statute similar to CERCLA.  None of the Properties located in the United States,
owned by either the Borrower or a Subsidiary, has been identified on any current
or proposed (A) National  Priorities  List under 40 C.F.R.  ss. 300, (B) CERCLIS
list or (C) any list arising from a state statute similar to CERCLA; (ii) to the
best of the Borrower's knowledge,  no Hazardous Materials have been or are being
used, produced,  manufactured,  processed, treated, recycled, generated, stored,
disposed of,  managed or otherwise  handled at, or shipped or  transported to or
from the  Properties  or are otherwise  present at, in or under the  Properties,
owned or operated by either the Borrower or a Subsidiary, or, to the best of the
knowledge of the Borrower, at or from any adjacent site or facility,  except for
Hazardous Materials,  such as cleaning solvents,  pesticides and other materials
used, produced,  manufactured,  processed, treated, recycled, generated, stored,
disposed of, managed, or otherwise handled in the ordinary course of business in
compliance with all applicable Environmental Requirements; and (iii) to the best
of the Borrower's knowledge, the Borrower and its Subsidiaries are in compliance
with all  Environmental  Requirements in connection with the ownership,  use and
operation of the Properties and the Borrower's and such Subsidiary's  respective
businesses.

     SECTION 4.14. Capital Stock.

     All Capital Stock, debentures, bonds, notes and all other securities of the
Borrower and its  Subsidiaries  presently issued and outstanding are validly and
properly  issued in  accordance  with all  applicable  laws,  including  but not
limited  to,  the  "Blue  Sky" laws of all  applicable  states  and the  federal
securities laws.

     SECTION 4.15. Margin Stock.

     Neither the Borrower nor any of its Subsidiaries is engaged principally, or
as one of its  important  activities,  in the business of purchasing or carrying
any Margin Stock, and no part of the proceeds of any Revolving Loan will be used
to  purchase  or carry any  Margin  Stock or to extend  credit to others for the
purpose of purchasing  or carrying any Margin Stock,  or be used for any purpose
which violates,  or which is inconsistent with the provisions of, Regulations G,
T, U or X.

     SECTION 4.16. Solvency.

     After giving effect to the execution and delivery of the Loan Documents and
the making of the  Revolving  Loans under this  Agreement,  the Borrower will be
Solvent.



                                       22
<PAGE>
     SECTION 4.17. Possession of Franchises, Licenses, Etc.

     The  Borrower  and its  Subsidiaries  possess  to the extent  material  all
franchises,  certificates,  licenses,  permits  and  other  authorizations  from
governmental  and  political  subdivisions  or regulatory  authorities,  and all
patents,  trademarks,  service  marks,  trade  names,  copyrights,   franchises,
licenses and other rights that are  necessary  for  ownership,  maintenance  and
operation of any of their respective material Properties and assets, and neither
the Borrower nor any of its Subsidiaries is in violation of any thereof,  which,
individually  or in the  aggregate,  would  or might  have or  cause a  Material
Adverse Effect.  Without  limiting the generality of the foregoing,  and, in any
event, the Borrower and its Subsidiaries  possess all Franchise Rights necessary
for the  ownership,  operation  and  development  of its (or  their)  franchised
restaurant  business as  conducted,  or  contemplated  to be  conducted,  by the
Borrower and such Subsidiaries,  including,  without limitation,  in the case of
"Applebee's"  restaurants,  franchise agreements for each franchised  restaurant
location and  exclusive  development  rights for each  designated  area in which
franchised restaurants are located or contemplated to be located.

     SECTION 4.18. Insurance.

     The Borrower and each of its Subsidiaries  maintains adequate insurance on,
and in respect of the ownership  and  operation  of, its  Properties in at least
such amounts and against at least such risks as are usually  insured  against in
the same general areas by companies of established repute engaged in the same or
similar business.


                              ARTICLE 5. COVENANTS

     The Borrower agrees that, so long as the Bank has any Commitment  hereunder
or any amount payable hereunder or under the Note remains unpaid:

     SECTION 5.1. Information.

     The Borrower will deliver to the Bank:

     5.1.1.  Annual  Audit.  As soon as available and in any event within ninety
(90) days after the end of each Fiscal Year, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Year and
the related  consolidated  statements of income,  shareholders'  equity and cash
flows for such Fiscal Year,  setting forth in each case in comparative  form the
figures for the  previous  fiscal year,  all  certified  by  independent  public
accountants of nationally  recognized  standing,  with such  certification to be
free  of  any  material  exceptions  and  qualifications;   provided  that,  the
information  required  by  this  paragraph  may  be  satisfied  by  delivery  of
information pursuant to Section 5.1.5 or Section 5.1.6.

     5.1.2.  Interim  Statements.  As soon as available  and in any event within
fifty (50) days after the end of each of the first three (3) Fiscal  Quarters of
each  Fiscal  Year,  a  consolidated  balance  sheet  of the  Borrower  and  its
Consolidated  Subsidiaries  as of the end of such Fiscal Quarter and the related
statement  of income and  statement  of cash flows for such  quarter and for the
portion of the Fiscal Year ended at the end of such  quarter,  setting  forth in
each case in comparative form the figures for the corresponding  quarter and the
corresponding  portion of the previous  Fiscal Year,  all certified  (subject to
normal  year-end   adjustments)  as  to  fairness  of  presentation,   GAAP  and
consistency by the chief financial officer of the Borrower;  provided,  that the
information  required  by  this  paragraph  may  be  satisfied  by  delivery  of
information pursuant to Section 5.1.5 or Section 5.1.6.

     5.1.3.  Compliance  Certificates.  Simultaneously with the delivery of each
set  of  financial  statements  referred  to in  Sections  5.1.1  and  5.1.2,  a
certificate,   substantially   in  the  form  of   Exhibit   B  (a   "Compliance
Certificate"),  of the chief financial officer of the Borrower (i) setting forth


                                       23
<PAGE>
in reasonable detail the calculations required to establish whether the Borrower
was in compliance  with the  requirements of Sections 5.3, 5.4, 5.5, and 5.18 on
the date of such  financial  statements  and (ii)  stating  whether  any Default
exists on the date of such certificate and, if any Default then exists,  setting
forth  the  details  thereof  and the  action  which the  Borrower  is taking or
proposes to take with respect thereto;

     5.1.4.  Default  Notice.  Promptly,  (and,  in any event,  within  five (5)
Domestic  Business  Days) after the Borrower  becomes aware of the occurrence of
any  Default,  a  certificate  of the chief  financial  officer of the  Borrower
setting  forth  details  thereof and the action  which the Borrower is taking or
proposes to take with respect thereto;

     5.1.5. Proxy.  Promptly upon the mailing thereof to the shareholders of the
Borrower  generally,  copies  of all  financial  statements,  reports  and proxy
statements so mailed;

     5.1.6. Registration Statements. Promptly upon the filing thereof, copies of
all registration  statements and annual,  quarterly or monthly reports which the
Borrower shall have filed with the Securities and Exchange Commission;

     5.1.7.  ERISA Notices.  If and when any member of the Controlled  Group (i)
gives or is  required  to give  notice to the PBGC of any  reportable  event (as
defined in Section  4043 of ERISA)  with  respect to any Plan under  Title IV of
ERISA, or knows that the plan administrator of any Plan has given or is required
to give  notice  of any such  reportable  event,  a copy of the  notice  of such
reportable event given or required to be given to the PBGC; (ii) receives notice
of complete or partial  withdrawal  liability  under Title IV of ERISA, a coy of
such notice;  or (iii) receives  notice from the PBGC under Title IV of ERISA of
an intent to  terminate or appoint a trustee to  administer  any Plan, a copy of
such notice; and

     5.1.8. Credit Agreements.  Promptly upon the occurrence thereof, (x) notice
of any "default" or "event of default"  under, or amendment of, (i) the Wachovia
Agreement,  (ii) the Master Lease Agreement,  the (iii) Liquidity Agreement,  or
(iv) the Senior Notes or the Senior Note Indenture pursuant to which such Senior
Notes were issued and (y) notice that the Borrower's  "Consolidated Fixed Charge
Coverage  Ratio"  (as  defined  in the Senior  Note  Indenture)  does not exceed
2.5:1.0.

     5.1.9.  Other  Reports.  From  time to  time  such  additional  information
regarding  the   financial   position  or  business  of  the  Borrower  and  its
Subsidiaries as the Bank may reasonably request.

     SECTION 5.2. Inspection of Property, Books and Records.

     The Borrower will keep, and require each  Subsidiary to keep,  proper books
of record and account in which full, true and correct entries in conformity with
GAAP (or,  in the case of any  non-domestic  Subsidiary,  such other  accounting
standards,  rules,  regulations and practices applicable to businesses operating
in the locality in which each such Person operates);  and permit, and cause each
Subsidiary to permit, representatives of the Bank at the Bank's expense prior to
the occurrence of a Default and at the  Borrower's  expense after the occurrence
and  during  the  continuance  of a Default  to visit and  inspect  any of their
respective  Properties,  to  examine  and  make  abstracts  from  any  of  their
respective books and records and to discuss their respective  affairs,  finances
and accounts with their respective  officers,  employees and independent  public
accounts.  The  Borrower  agrees to  cooperate  and  assist in such  visits  and
inspections in each case at such reasonable times and as often as may reasonably
be desired.

     SECTION 5.3. Adjusted Funded Debt/Adjusted Capitalization Ratio.

     The Adjusted Funded Debt/Adjusted Capitalization Ratio will not at any time
exceed .65:1. 


                                       24
<PAGE>
SECTION 5.4. Minimum Shareholders' Equity.

     Stockholders'  Equity  will  at no  time  be  less  than  the  sum  of  (i)
$180,000,000,  as of the Fiscal  Quarter  ended closes to December 31, 1996 (the
"Base Fiscal Quarter"), plus (ii) fifty percent (50%) of Consolidated Net Income
(if positive)  for each Fiscal  Quarter  subsequent to the Base Fiscal  Quarter;
plus, without duplication,  (iii) seventy-five percent (75%) of any net proceeds
received  by  Borrower  from any  offering  of  equity  securities  (other  than
Redeemable  Preferred  Stock) by Borrower  subsequent to the Closing Date; plus,
without  duplication,  (iv)  seventy-five  percent  (75%)  of any  net  proceeds
received by Borrower from any  conversion of debt into equity  subsequent to the
Closing Date; plus, without  duplication,  (v) seventy-five percent (75%) of any
adjustment  to equity due to any pooling of interests  occurring  subsequent  to
December 31, 1996; plus, without duplication, (vi) seventy-five percent (75%) of
any increase in Stockholders'  Equity resulting from the issuance or exchange of
any equity securities in furtherance of any acquisition constituting a permitted
investment under Section 5.18.

     SECTION 5.5. Fixed Charge Coverage Ratio.

     Borrower's  Fixed  Charge  Coverage  Ratio,  measured on a rolling four (4)
Fiscal Quarters' basis as of the end of such Fiscal Quarter, commencing with the
Fiscal Quarter  ending closest to December 31, 1997,  shall be (i) not less than
1.80:1.0 for the Fiscal Quarter  ending closest to December 31, 1997,  March 31,
1998 and June 30,  1998,  (ii) not less than  1.90:1.0  for the  Fiscal  Quarter
ending  closest to September 30, 1998 and (iii) 2.0:1.0 for each Fiscal  Quarter
ending thereafter.

     SECTION 5.6. Negative Pledge.

     The  Borrower  will not, nor will the Borrower  permit any  Subsidiary  to,
create,  assume or suffer to exist any Lien on any asset now owned or  hereafter
acquired by it,  except:  (i) those Liens,  if any,  described on Schedule  5.6,
concerning  existing  debt of the Borrower,  to be set forth and described  more
particularly  therein,  together  with any Lien arising out of the  refinancing,
extension,  renewal or refunding of any debt secured by any such Lien,  provided
that such debt is not secured by any additional  assets,  and the amount of such
debt secured by any such Lien is not  increased;  (ii) Liens  incidental  to the
conduct of its  business or the  ownership  of its  Properties  which (A) do not
secure debt and (B) do not in the aggregate materially detract from the value of
its  Properties  or  materially  impair the use thereof or the  operation of its
business,  including, without limitation,  easements, rights of way, restrictive
covenants,  zoning  and  other  similar  restrictions  on real  property;  (iii)
materialmen's,  mechanics',  warehousemen's,  carriers',  landlords'  and  other
similar statutory Liens which secure debt or other obligations that are not past
due,  or, if past due are being  contested  in good faith by the Borrower or the
appropriate  Subsidiary  by  appropriate  proceedings;  (iv) Liens for taxes not
delinquent  or  taxes  being   contested  in  good  faith  and  by   appropriate
proceedings;  (v) pledges or deposits in connection with worker's  compensation,
unemployment  insurance and other social security legislation;  (vi) deposits to
secure  performance  of bids,  trade  contracts,  leases,  statutory  grants  of
security and rights of setoff in accounts,  securities and other Properties held
at banks or financial  institutions to secure the payment or reimbursement under
overdraft,  letter of credit,  acceptance  and other credit  facilities;  (viii)
rights of setoff,  banker's  liens and other similar  rights  arising  solely by
operation  of law;  (ix)  Purchase  Money  Liens;  (x)  Liens on any  Properties
acquired by Borrower or any  Subsidiary  subsequent  to the Closing Date, to the
extent that (A) such Liens are existing at the time of acquisition, (B) the debt
secured  thereby is not  secured by any other  Properties  of  Borrower  or such
Subsidiary  except  the  acquired  Properties,  (C) the  amount  of such debt so
secured thereby is not increased at or subsequent to the acquisition and (D) the
total amount of all such debt secured by all such acquired  Properties  does not
exceed at any time, in aggregate  amount,  fifteen percent (15%) of Tangible Net
Worth; together with any Lien arising out of the refinancing, extension, renewal
or refunding of any debt  secured by any such Lien,  provided  that such debt is
not secured by any additional  assets and the amount of such debt secured by any
such Lien is not increased;  (xi) capital leases made in the ordinary  course of


                                       25
<PAGE>
business (but excluding, however,  Sale-Leaseback Transactions to the extent not
permitted by Section 5.9) in which there is no provision for title to the leased
Property to pass to the Borrower or such  Subsidiary  at the  expiration  of the
lease term or as to which no bargain purchase option exists; and (xii) rights of
lessors in respect of  Properties  leased to the  Borrower  or its  Subsidiaries
under operating leases.

     SECTION 5.7. Maintenance of Existence.

     Except as permitted in Section  5.9,  the Borrower  shall,  and shall cause
each Subsidiary to,  maintain its corporate  existence and carry on its business
in substantially  the same manner and in  substantially  the same fields as such
business is now carried on and  maintained.  Without  limiting the generality of
the foregoing,  the Borrower shall, and shall cause each Subsidiary to, maintain
at all times in full force and  effect all  Franchise  Rights  necessary  to the
ownership,  operation and  development  of all  franchised  restaurant  business
conducted,   or  contemplated  to  be  conducted,   by  the  Borrower  and  such
Subsidiaries,  except with respect to Voluntary  Store  Closings and except with
respect to any Applebee's Spinoff.

     SECTION 5.8. Dissolution.

     Neither the  Borrower  nor any of its  Subsidiaries  shall suffer or permit
dissolution or liquidation  either in whole or in part, except through corporate
reorganization to the extent permitted by Section 5.9.

     SECTION 5.9. Consolidation, Mergers, and Sales of Assets.

     The Borrower will not, nor will it permit any Subsidiary  to,  consolidated
or  merge  with or  into,  or  sell,  lease  or  otherwise  transfer  all or any
substantial part of its assets to, any other Person, or discontinue or eliminate
any business line or segment,  provided,  however, that, subject at all times to
Section  5.18,  the Borrower or any  Subsidiary  may merge with  another  Person
(which is not the Borrower or such  Subsidiary) if (i) such Person was organized
under the laws of the United  States of  America  or one of its states  (ii) the
Borrower or such  Subsidiary (as the case may be) is the  corporation  surviving
such merger and (iii) immediately after giving effect to such merger, no Default
or Event of Default shall have occurred and be  continuing;  provided,  further,
that any  Subsidiaries  of the Borrower may (i) merge or  consolidate  with each
other or with the Borrower (so long as the Borrower is the corporation surviving
such  merger),  or (ii)  sell  assets  to each  other  or to the  Borrower;  and
provided,  further, that the Borrower may, upon giving at least two (2) Business
Days' written notice to the Lender thereof, consummate an Applebee's Spinoff, if
made on the terms set forth within the definition thereof, and provided that the
Net Cash  Proceeds  therefrom,  to the extent  not used to repay,  in full or in
part, the  indebtedness  of Borrower then existing under the Wachovia  Agreement
are used  either  (i) to make an  optional  prepayment  of any  Borrowings  then
outstanding hereunder,  or (ii) to make investments permitted under Section 5.18
or (iii) for working capital in Borrower's business; but for no other purposes.

     SECTION 5.10. Use of Proceeds.

     The  proceeds of Revolving  Loans will be used by the  Borrower  solely for
working  capital  purposes,  and for no other  purposes.  Without  limiting  the
generality of the foregoing,  no portion of the proceeds of the Revolving  Loans
will be  used by the  Borrower  (i) in  connection  with,  whether  directly  or
indirectly,  any  tender  offer  for,  or  other  acquisition  of,  stock of any
corporation with a view towards obtaining control of such other corporation if a
majority or controlling  interest of the officers,  directors or shareholders of
such  corporation  shall be opposed to such  acquisition  by the Borrower,  (ii)
directly or  indirectly,  for the  purpose,  whether  immediate,  incidental  or
ultimate,  of purchasing or carrying any Margin Stock,  or (iii) for any purpose
in  violation  of  any  term  of  this  Agreement  or of any  applicable  law or
regulation.



                                       26
<PAGE>
     SECTION 5.11. Compliance with Laws; Payment of Taxes.

     The Borrower will, and will cause each of its  Subsidiaries and each member
of the Controlled Group to, comply in all material respects with applicable laws
(including but not limited to ERISA),  regulations  and similar  requirements of
governmental  authorities  (including but not limited to PBGC), except where the
necessity  of  such   compliance  is  being  contested  in  good  faith  through
appropriate  proceedings.  The  Borrower  will,  and  will  cause  each  of  its
Subsidiaries  to,  pay  promptly  when due all taxes,  assessments  governmental
charges,  claims for  labor,  supplies,  rent and other  obligations  which,  if
unpaid,  might  become  a Lien  against  the  Property  of the  Borrower  or any
Subsidiary,  except liabilities being contested in good faith and against which,
if requested by the Bank,  the Borrower will set up reserves in accordance  with
GAAP.

     SECTION 5.12. Insurance.

     The Borrower  will  maintain,  and will cause each of its  Subsidiaries  to
maintain (either in the name of the Borrower or in such  Subsidiary's own name),
with financially sound and reputable insurance  companies,  insurance on, and in
respect of the  ownership  and  operation  of, its  Properties  in at least such
amounts and against at least such risks as are  usually  insured  against in the
same  general area by companies  of  established  repute  engaged in the same or
similar business.

     SECTION 5.13. Change is Fiscal Year.

     The  Borrower  will not change its Fiscal  Year  without the consent of the
Bank.

     SECTION 5.14. Maintenance of Property.

     The Borrower shall, and shall cause each Subsidiary to, maintain all of its
Properties in good condition,  repair and working order,  ordinary wear and tear
excepted.

     SECTION 5.15. Environmental Notices.

     The Borrower shall furnish to the Bank, promptly after the Borrower becomes
aware  thereof,  written  notice  of  all  Environmental  Liabilities,  pending,
threatened  Environmental  Proceedings,   Environmental  Notices,  Environmental
Judgements and Orders and  Environmental  Releases,  at, on, in, under or in any
way affecting the Properties or any adjacent property and all facts,  events, or
conditions that could reasonably be expected to lead to any of the foregoing.

     SECTION 5.16. Environmental Matters.

     The  Borrower  will  not,  and will not  permit  any Third  Party to,  use,
produce,  manufacture,  process,  treat, recycle,  generate,  store, dispose of,
manage at, or otherwise  handled or ship or transport to or from the  Properties
any  Hazardous  Materials  except  for  Hazardous  Materials  such  as  cleaning
solvents,  pesticides and other similar materials used, produced,  manufactured,
processed, treated, recycled, generated, stored, disposed, managed, or otherwise
handled in the ordinary  course of business in  compliance  with all  applicable
Environmental Requirements.

     SECTION 5.17. Environmental Releases.

     The Borrower  agrees that upon the occurrence of an  Environmental  Release
(except for any Environmental  Release which (x) occurred in compliance with all
Environmental  Requirements  and (y) could not reasonably be expected to have or
cause a Material  Adverse  Effect),  it will act  immediately to investigate the
extent  of,  and  to  take  appropriate  remedial  action  to  eliminate,   such
Environmental Release,  whether or not ordered or otherwise directed to do so by
any Environmental Authority.



                                       27
<PAGE>
     SECTION 5.18. Investments.

     The Borrower will not make (nor will the Borrower  permit any Subsidiary to
make) any  investment in any Person or Property  (which term  "investment,"  for
purposes hereof, shall mean and include, without limitation,  the acquisition of
any property,  the issuance,  acquisition or exchange of any capital stock, debt
or other obligations or security to, from or with any Person,  and the making of
any loan,  advance,  extension  of credit,  credit  accommodation,  Guarantee or
capital contribution to or on behalf of any Person),  provided,  however,  that,
notwithstanding  the foregoing,  the Borrower (or any Subsidiary) may, from time
to time, undertake the following,  without the necessity of obtaining the Bank's
prior written consent thereto:

     5.18.1.  Acquire  current  assets for use in, or arising from,  the sale of
goods or services in the ordinary  course of its business  (including,  for this
purpose, but without limitation, credit card receivables);

     5.18.2. Make capital expenditures in the ordinary course of its business;

     5.18.3.  Pay  franchisee  fees  and  royalties  to its  franchisors  in the
ordinary course of its business;

     5.18.4.  Make or maintain escrow deposits for the payment of taxes,  rents,
utilities, insurance or like matters in the ordinary course of its business;

     5.18.5.  Make and maintain  deposits of cash in demand deposit  accounts of
banks in the ordinary course of its business,  and make  endorsements of checks,
drafts or other instruments in connection therewith;

     5.18.6.  Consistent at all times with the Borrower's  internal Statement of
Investment Policy,  invest surplus cash in (A) obligations of, or guaranteed by,
the United States of America or any agency thereof, (B) short-term  certificates
of deposit issued by, and time deposits  with,  the Bank or any other  financial
institution  domiciled  in the United  States of America with assets of at least
$500,000,000,  (C) short-term  commercial paper rated at lest "A1" by Standard &
Poors or "P1" by  Moody's,  and (D)  fixed or  adjustable  rate  corporate  debt
securities  with a credit rating of at least double A (Aa/AA) by either  Moody's
or  Standard  & Poors,  provided  that any  fixed  rate debt  securities  have a
maturity of one year or less;

     5.18.7. Make investments in those Consolidated Subsidiaries of the Borrower
which are wholly-owned, directly or indirectly, by the Borrower, in the ordinary
course of, and pursuant to the  reasonable  requirements  of, the Borrower's and
such Subsidiaries' respective businesses,  provided that the aggregate amount of
such investments  which may be outstanding at any one time hereafter,  as to all
such Subsidiaries,  shall not exceed, in any event, (A) ten percent (10%) of the
consolidated  total assets of Borrower and its Consolidated  Subsidiaries at any
time prior to December 30, 1997, and (B) seven and one-half  percent (7-1/2%) of
the consolidated  total assets of Borrower and its Consolidated  Subsidiaries on
or at any time after  December 31, 1997, but prior to the  Termination  Date; it
being  understood  and  agreed  that (a)  there  shall  be  excluded  from  such
calculation  any  investment  deemed made by the  Borrower in DF&R  Restaurants,
Inc., a Texas  corporation which is a wholly-owned,  Consolidated  Subsidiary of
the  Borrower,  pursuant to the  accounting  for the prior  acquisition  of such
corporation  by the  Borrower  as a pooling  of  interests;  (b) there  shall be
deducted in any event from the amount of investments in  Subsidiaries  which may
be made pursuant to this clause (vii) the aggregate amount of Capitalized  Lease
Obligations of all Subsidiaries  which are at any time outstanding;  and (c) the
provisions of this clause (vii) henceforth shall be the exclusive means by which
the  Borrower  (or any  Subsidiary)  may make  investments  in any  Subsidiaries
(whether  or  not  wholly-owned  Subsidiaries)  and  shall  override  any  other
provisions of this Section 5.18 (including,  particularly, clauses (x), (xi) and
(xii) below) which may be construed otherwise to permit such investments.

     5.18.8.  Make travel and similar advances to employees from time to time in
the


                                       28
<PAGE>
ordinary course of business.

     5.18.9.  The Borrower may invest up to Eight Hundred Fifty Thousand Dollars
($850,000) per Fiscal Year in the making of annual premiums payable on the split
dollar joint survivor life insurance program implemented,  or to be implemented,
covering  the lives of Tom E. DuPree,  Jr. and his spouse Anne  DuPree,  with an
initial death benefit of Fifty Million Dollars ($50,000,000), provided, however,
that (i) such  investments  are made over a period not to exceed ten (10) Fiscal
Years and (ii) Borrower  maintains at all times during the  effective  period of
the program a security  interest in policy  proceeds and cash values of policies
issued  as part of the  program  equal  in  amount  to not  less  than  its then
cumulative premium investments;

     5.18.10. (10) Reserved

     5.18.11.  Make investments in new restaurant concepts, so long as the total
amount of each such investment (either  considered  individually or as part of a
series of related, concurrent investments), does not exceed ten percent (10%) of
Borrower's  consolidated total assets immediately before such investment (or the
last in a series of related, concurrent investments) is made; or

     5.18.12. Make other investments,  not described in clauses (i) through (xi)
above,  provided that all such investments,  in the aggregate,  do not exceed at
any one time ten percent (10%) of Stockholders' Equity.

     The  Borrower  shall  notify  the  Bank  from  time to  time,  but not less
frequently than quarterly,  or at any time at the Bank's request,  of the nature
and amount of any  investments  made  pursuant to clauses  (xi) and (xii) hereof
which,  individually or in the aggregate,  exceed One Hundred  Thousand  Dollars
($100,000).

     Notwithstanding   anything  in  this  Section  5.18  to  the  contrary,  no
Subsidiary  shall be required to comply with, and Borrower shall not be required
to cause any Subsidiary to comply with, any part of clause (vii), (xi) and (xii)
of this Section 5.18 to the extent it would cause a violation of any term of the
Senior Notes or the Senior Note Indenture.

     SECTION 5.19.Subsidiary Debt

     Except solely to the extent expressly  permitted in clause (vii) of Section
5.18 of this Agreement, the Borrower will not permit any Consolidated Subsidiary
of the Borrower which is a wholly-owned Subsidiary,  directly or indirectly,  of
the  Borrower,  to create,  incur or suffer to exist any of the  following:  (i)
indebtedness for borrowed funds; (ii) Capitalized Lease  Obligations,  provided,
however, that DF&R Restaurants,  Inc. and its Subsidiaries may incur Capitalized
Lease  Obligations  in an  aggregate  amount not to exceed Ten  Million  Dollars
($10,000,000)  at any  one  time  outstanding;  (iii)  Guarantees;  (iv)  debts,
liabilities or obligations to any seller  incurred to pay the deferred  purchase
price of property or services  having a deferred  purchase  price of One Million
Dollars  ($1,000,000) or more,  excepting,  in any event, trade accounts payable
arising in the ordinary  course of business and purchase  options prior to their
exercise;  and (v) debts,  liabilities  or  obligations  in respect of Synthetic
Leases.

     SECTION 5.20.Total Funded Debt/EBITDA Ratio

     The  ratio  which  (i)  the  Total  Funded  Debt  of the  Borrower  and its
Consolidated Subsidiaries at the end of any Fiscal Quarter,  commencing with the
Fiscal  Quarter ended closest to December 31, 1997,  bears to (ii) EBITDA of the
Borrower and its Consolidated Subsidiaries, measure on a rolling four (4) Fiscal
Quarters' basis as of the end of such Fiscal Quarter,  shall be (i) no more than
3.8:1.0 for the Fiscal  Quarters  ending  closest to December 31, 1997 and March
31,  1998  and  (ii) no more  than  3.50:1.0  for  each  Fiscal  Quarter  ending
thereafter. In computing EBITDA in respect of the foregoing ratio, (a) any asset
or stock dispositions by the Borrower consisting of the sale of a business line,


                                       29
<PAGE>
segment or other  group of related  stores  (including,  particularly,  for this
purpose,  the  Applebee's  Spinoff)  occurring  within a Fiscal Quarter shall be
accounted for by reducing EBITDA by the individual  EBITDA  attributable to each
store  within  such group for such Fiscal  Quarter  and the three (3)  preceding
Fiscal  Quarters;  and (b) any  asset  or  stock  acquisitions  by the  Borrower
consisting of the purchase of a business line, segment or other group of related
stores  occurring  within a Fiscal  Quarter shall be accounted for by increasing
EBITDA by the individual EBITDA attributable to each store within such group for
such Fiscal  Quarter and for the three (3) preceding  Fiscal  Quarters;  in each
instance,  on  an  historical  basis,  in a  matter  which  the  Borrower  shall
determine, but subject to prior review with, and approval by, the Lender.

     SECTION 5.21.Year 2000 Compatibility

     Borrower  shall take all action  necessary to assure that  Borrower and its
Subsidiaries  computer based systems are able to operate and effectively process
data  including  dates on and after January 1, 2000, and at the request of Bank,
Borrower shall provide to Bank assurances  acceptable to Bank of Borrower's Year
2000 compatibility.

     SECTION 5.22.Liquidity Facility

     The  Borrower  shall  maintain  at all  times,  in  addition  to its senior
revolving credit facility under the Wachovia Agreement,  a liquidity facility in
a principal  amount of at least  $100,000,000,  with a maturity  date no earlier
than July 1, 1999, on an unsecured basis and with  representations,  warranties,
covenants and defaults that are no more  restrictive  than the  representations,
warranties, covenants and defaults set forth in this Agreement.


                              ARTICLE 6. DEFAULTS

     SECTION 6.1.Events of Default

     If one or more of the  following  events  ("Events of Default")  shall have
occurred and be continuing:

     6.1.1.  The  Borrower  (i) shall fail to pay when due any  principal of any
Revolving  Loan or (ii) shall fail to pay any  interest  on any  Revolving  Loan
within five (5) Domestic  Business Days after such interest shall become due, or
(iii) shall fail to pay any fee or other amount  payable  hereunder or under any
Loan  Document  within five (5) Domestic  Business  Days after such fee or other
amount becomes due; or

     6.1.2. The Borrower shall fail to observe or perform any covenant contained
in Sections 5.3 through 5.8, 5.9, 5.10, 5.11, 5.14, or 5.18, inclusive; or

     6.1.3.  The  Borrower  shall fail to observe or  perform  any  covenant  or
agreement  contained or incorporated by reference in this Agreement  (other than
those covered by Sections  6.1.1 and 6.1.2) and such failure shall not have been
cured  within ten (10) days after the  earlier  to occur of (i)  written  notice
thereof has been given to the Borrower by the Bank or (ii) an executive,  senior
financial or accounting  officer of the Borrower  otherwise becomes aware of any
such failure; or

     6.1.4. Any representation, warranty, certification or statement made by the
Borrower  in  Article  IV of this  Agreement  or in any  certificate,  financial
statement or other document  delivered pursuant to this Agreement shall prove to
have been  incorrect or misleading in any material  respect when made (or deemed
made); or

     6.1.5.  The  Borrower or any  Subsidiary  shall fail to make any payment in
respect of the Wachovia Credit Agreement, the Master Lease Agreement, the Senior
Notes,  the  Liquidity  Agreement  or any other debt,  liability  or  obligation
outstanding  individually  or in  the  aggregate  with  all  other  such  debts,
liabilities or


                                       30
<PAGE>
obligations,  equal to or in excess of Five Hundred Thousand Dollars ($500,000),
other than the Note,  when due or within any  applicable  grace  period;  or any
event or condition shall occur which results in the acceleration of the maturity
of the debt  evidenced  by the  Wachovia  Credit  Agreement,  the  Master  Lease
Agreement,  the Senior Notes,  the  Liquidity  Agreement or any other such debt,
liability  or  obligation   outstanding   of  the  Borrower  or  any  Subsidiary
individually  or in the  aggregate  with all other such  debts,  liabilities  or
obligations equal to or in excess of Five Hundred Thousand Dollars ($500,000) or
the  mandatory  prepayment  or purchase of the debt  evidenced  by the  Wachovia
Credit  Agreement,  the Master Lease Agreement,  the Senior Notes, the Liquidity
Agreement or any such other debt,  liability or  obligation  by the Borrower (or
its  designee)  or such  Subsidiary  (or its  designee)  individually  or in the
aggregate with all other such debts,  liabilities or obligations  equal to or in
excess  of Five  Hundred  Thousand  Dollars  ($500,000)  prior to the  scheduled
maturity thereof,  or enables (or, with the giving of notice or lapse of time or
both, would enable) Wachovia (as agent under the Wachovia Credit Agreement), the
"Owner  Trustee"  (as used in the Master  Lease  Agreement),  or any assignee or
agent on behalf of such Owner Trustee, the holders of the Senior Notes, Wachovia
(as agent under the Liquidity  Agreement) or the holders of any such other debt,
liability or obligation  individually  or in the  aggregate  with all other such
debts, liabilities or obligations equal to or in excess of Five Hundred Thousand
Dollars  ($500,000) or any Person  acting on such holders'  behalf to accelerate
the maturity  thereof or require the mandatory  prepayment  or purchase  thereof
prior to the scheduled maturity thereof,  without regard to whether such holders
or other Person shall have exercised or waived their right to do so; or

     6.1.6.  The Borrower or any  Subsidiary  shall commence a voluntary case or
other  proceeding  seeking  liquidation,  reorganization  or other  relief  with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or  hereafter  in  effect  or  seeking  the  appointment  of a  trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial part of its Property,  or shall consent to any such relief or to the
appointment of or taking  possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the  benefit  of  creditors,  or shall fail  generally  to pay its debts as they
become  due,  or  shall  take  any  corporate  action  to  authorize  any of the
foregoing; or

     6.1.7. An involuntary case or other  proceeding shall be commenced  against
the Borrower or any  Subsidiary  seeking  liquidation,  reorganization  or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the  appointment of a trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial part of its Property,  and such involuntary case or other proceeding
shall remain  undismissed  and  unstayed for a period of sixty (60) days;  or an
order for relief shall be entered  against the Borrower or any Subsidiary  under
the federal bankruptcy laws as now or hereafter in effect; or

     6.1.8. The Borrower or any member of the Controlled Group shall fail to pay
when due any  material  amount  which it shall have become  liable to pay to the
PBGC or to a Plan under  Title IV of ERISA;  or notice of intent to  terminate a
Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member
of the  Controlled  Group,  any plan  administrator  or any  combination  of the
foregoing;  or the PBGC shall institute  proceedings  under Title IV of ERISA to
terminate or to cause a trustee to be appointed to  administer  any such Plan or
Plans or a  proceeding  shall be  instituted  by a fiduciary of any such Plan or
Plans to enforce  Section 515 or 4219(c)(5) of ERISA and such  proceeding  shall
not have been dismissed within thirty (30) days thereafter; or a condition shall
exist  by  reason  of which  the  PBGC  would  be  entitled  to  obtain a decree
adjudicating that any such Plan or Plans must be terminated; or

     6.1.9.  One or more  judgments  or orders  for the  payment  of money in an
aggregate  amount  equal  to or  greater  than  Five  Hundred  Thousand  Dollars
($500,000)  shall be rendered  against the Borrower or any  Subsidiary  and such
judgment or order shall continue unsatisfied and unstayed for a period of thirty
(30) days; or



                                       31
<PAGE>
     6.1.10.  A federal  tax Lien  shall be filed  against  the  Borrower  under
Section  6323 of the Code or a Lien of the  PBGC  shall  be  filed  against  the
Borrower or any  Subsidiary  under Section 4068 of ERISA and in either case such
Lien shall remain  undischarged  for a period of thirty (30) days after the date
of filing; or

     6.1.11. Tom E. DuPree, Jr. shall cease to own and control, beneficially and
with power to vote, at least fifteen percent (15%) of the outstanding  shares of
the  voting  common  stock of the  Borrower;  or any Person  (other  than Tom E.
DuPree,  Jr.) or two or more  Persons  acting in  concert  shall  have  acquired
beneficial  ownership  (within the meaning of Rule 13d-3 of the  Securities  and
Exchange Commission under the Securities Exchange Act of 1934) of twenty percent
(20%)  or more of the  outstanding  shares  of the  voting  common  stock of the
Borrower;  or as of any  date,  a  majority  of the  Board of  Directors  of the
Borrower  consists  of  individuals  who were not  either (A)  directors  of the
Borrower as of the  corresponding  date of the  previous  year,  (B) selected or
nominated to become directors by a Board of Directors of the Borrower of which a
majority  consisted of  individuals  described in clause (A), or (C) selected or
nominated to become directors by the Board of Directors of the Borrower of which
a majority  consisted of  individuals  described  in clause (A) and  individuals
described in clause (B); or

     6.1.12.  If any of the Franchise Rights of the Borrower or its Subsidiaries
shall be forfeited,  suspended, lost, rejected, disclaimed,  impaired, curtailed
or  otherwise  adversely  altered or affected in any manner,  in whole or in any
material  part,  for  any  reason  whatsoever,  whether  or not  related  to the
Borrower's or such  Subsidiary's  performance  of its duties and  obligations as
franchisee  at any time  hereafter  except with respect to any  Voluntary  Store
Closing; or there shall occur any default by the Borrower or any such Subsidiary
in the payment,  performance or observance of any terms, covenants or conditions
of any franchise or development  agreements  giving rise to the existence and/or
continuation of any such Franchise Rights, and any grace or cure period relative
thereto  granted therein shall have expired without such default being waived or
cured; or

     6.1.13. .13. [Intentionally Omitted]

     6.1.14.  The occurrence of any event, act,  occurrence,  or condition which
the Bank determines either does or has a reasonable  probability of causing,  or
resulting in, a Material Adverse Effect;

     then,  and in every  such  event,  the Bank may by notice  to the  Borrower
terminate the Commitment and it shall thereupon terminate, and (ii) by notice to
the Borrower  declare the Note (together with accrued  interest  thereon) to be,
and the  Note  shall  thereupon  become,  immediately  due and  payable  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby  waived by the  Borrower,  together  with  interest at the  Default  Rate
accruing on the principal  amount  thereof from and after the date of such Event
of Default; provided that if any Event of Default specified in Sections 6.1.6 or
6.1.7 above occurs with respect to the Borrower or any  Subsidiary,  without any
notice to the  Borrower  or any other  acts by the Bank,  the  Commitment  shall
thereupon  terminate and the Note (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind,  all of which are hereby  waived by the  Borrower,  together
with  interest  thereon at the Default  Rate  accruing on the  principal  amount
thereof  from and after the date of such Event of Default.  Notwithstanding  the
foregoing,  the Bank shall have  available  to it all other  remedies  at law or
equity, and may exercise any one or all of them at its discretion.


                ARTICLE 7. CHANGE IN CIRCUMSTANCES; COMPENSATION

     SECTION 7.1.Basis for Determining Interest Rate Inadequate or Unfair

     If on or prior to the first day of any Interest Period, the Bank determines
that  deposits in Dollars (in the  applicable  amounts) are not being offered in


                                       32
<PAGE>
the relevant  market for such Interest  Period,  or the Bank determines that the
Adjusted  LIBOR Rate, as determined by the Bank,  will not adequately and fairly
reflect the cost to the Bank of funding the relevant  Euro-Dollar Rate Loans for
such Interest Period,  then, the Bank shall forthwith give notice thereof to the
Borrower,  whereupon until the Bank notifies the Borrower that the circumstances
giving rise to such  suspensions no longer exist, the obligations of the Bank to
make the  Euro-Dollar  Rate Loans  specified in such notice shall be  suspended.
Unless the Borrower  notifies the Bank at least two (2) Domestic  Business  days
before  the date of any  Borrowing  of such  Euro-Dollar  Rate Loans for which a
Notice of Borrowing  has  previously  been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing.

     SECTION 7.2.Illegality

     If, after the date  hereof,  the adoption of any  applicable  law,  rule or
regulation,  or any  change  therein,  or any  change in the  interpretation  or
administration thereof by any governmental authority, central bank or comparable
agency  charged  with the  interpretation  or  administration  thereof (any such
agency being referred to as an "Authority"  and any such event being referred to
as a "Change of Law"),  or compliance  by the Bank (or its Lending  Office) with
any  request  or  directive  (whether  or not  having  the  force of law) of any
Authority  shall make it  unlawful  or  impossible  for the Bank (or its Lending
Office) to make,  maintain or fund its  Euro-Dollar  Rate Loans,  the Bank shall
forthwith give notice thereof to the Borrower, whereupon until the Bank notifies
the Borrower  that the  circumstances  giving rise to such  suspension no longer
exist,  the  obligation  of the Bank to make  Euro-Dollar  Rate  Loans  shall be
suspended.  If the Bank shall  determine  that it may not  lawfully  continue to
maintain and fund any of its outstanding  Euro-Dollar Rate Loans to maturity and
shall so specify in such notice,  the Borrower shall immediately  prepay in full
the then outstanding  principal  amount of each Euro-Dollar Rate Loan,  together
with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar
Rate Loan,  the Borrower  shall borrow,  pursuant to Section  2.2.2, a Base Rate
Loan in an equal  principal  amount (on which  interest and  principal  shall be
payable contemporaneously with the related Euro-Dollar Rate Loans), and the Bank
shall make such a Base Rate Loan.

     SECTION 7.3.Increased Cost and Reduced Return

     7.3.1. If after the date hereof,  a Change of Law or compliance by the Bank
(or its Lending Office) with any request or directive (whether or not having the
force  of law) of any  Authority  either:  (i)  shall  subject  any Bank (or its
Lending  Office) to any tax,  duty or other charge with respect to the Revolving
Loans,  the Note or its obligation to make Revolving  Loans, or shall change the
basis  of  taxation  of  payments  to the Bank (or its  Lending  Office)  of the
principal of or interest on the  Revolving  Loans or any other amounts due under
this  Agreement  in respect of the  Revolving  Loans or its  obligation  to make
Revolving Loans (except for changes in the rate of tax on the overall net income
of the Bank or its  Lending  Office  imposed  by the  jurisdiction  in which the
Bank's principal  executive office or Lending Office is located);  or (ii) shall
impose,  modify or deem  applicable any reserve,  special  deposit  insurance or
similar  requirement  (including,  without  limitation,  any  such  requirements
imposed by the Board of Governors of the Federal Reserve  System,  but excluding
any such requirement  included in an applicable  Euro-Dollar Reserve Percentage)
against assets of,  deposits with or for the account of, or credit  extended by,
the Bank (or its  Lending  Office);  or (iii)  shall  impose on the Bank (or its
Lending  Office) or the London  Interbank  Market  any other  similar  condition
affecting  the Revolving  Loans,  the Note or its  obligation to make  Revolving
Loans;  and the result of any of the  foregoing  is to increase  the cost to the
Bank (or its Lending  Office) of making or maintaining any Revolving Loan, or to
reduce the amount of any such received or receivable by the Bank (or its Lending
Office)  under this  Agreement  or under the Note with  respect  thereto,  by an
amount deemed by the Bank to be material,  then,  within fifteen (15) days after
demand by the Bank the Borrower shall pay to the Bank such additional  amount or
amounts as will compensate the Bank for such increased cost or reduction.



                                       33
<PAGE>
     7.3.2.  If the Bank shall have  determined  that after the date  hereof the
adoption of any applicable law, rule or regulation  regarding  capital adequacy,
or any change therein,  or any change in the  interpretation  or  administration
thereof,  or compliance by the Bank (or its Lending  Office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any  Authority,  has or would have the effect of reducing  the rate of return on
the Bank's capital as a consequence of its obligations  hereunder to a adoption,
change or compliance (taking into consideration the Bank's policies with respect
to capital adequacy),  by an amount deemed by the Bank to be material, then from
time to time,  within  fifteen (15) days after demand by the Bank,  the Borrower
shall pay to the Bank such  additional  amount or amounts as will compensate the
Bank for such reduction.

     7.3.3.  The Bank will promptly notify the Borrower of any event of which it
has knowledge,  occurring after the date hereof,  which will entitle the Bank to
compensation  pursuant to this  Section and will  designate a different  Lending
Office if such  designation  will  avoid the need for,  or reduce the amount of,
such  compensation  and will not,  in the  judgment  of the Bank,  be  otherwise
disadvantageous  to the Bank,  in any respect  deemed  material  by the Bank.  A
certificate  of the Bank  claiming  compensation  under this Section and setting
forth the  additional  amount or  amounts  to be paid to it  hereunder  shall be
conclusive in the absence of manifest  error.  In determining  such amount,  the
Bank may use any reasonable averaging and attribution methods.

     7.3.4.  The provisions of this Section 7.3 shall be applicable with respect
to any  Assignee  or other  Transferee  (excluding  any  Participants),  and any
calculations   required  by  such  provisions  shall  be  made  based  upon  the
circumstances of such Assignee or other Transferee.

     SECTION 7.4.Base Rate Loans Substituted for Affected Euro-Dollar Rate Loans

     If (i) the  obligation  of the Bank to make or  maintain  Euro-Dollar  Rate
Loans has been  suspended  pursuant to Section 7.2 or (ii) any Bank has demanded
compensation  under Section 7.3.1,  and the Borrower shall, by at least five (5)
Euro-Dollar  Business  Days'  prior  notice  to the Bank have  elected  that the
provisions of this Section shall apply to the Bank,  then,  unless and until the
Bank notifies the Borrower that the circumstances giving rise to such suspension
or demand for  compensation no longer apply: (i) all Revolving Loans which would
otherwise be made by the Bank as Euro-Dollar  Rate Loans,  shall be made instead
as Base Rate Loans and (ii) after  each of the  Euro-Dollar  Rate Loans has been
repaid, all payments of principal which would otherwise be applied to repay such
Euro-Dollar Rate Loans shall be applied to repay its Base Rate Loans instead.

     SECTION 7.5.Compensation

     Upon the request of the Bank, delivered to the Borrower, the Borrower shall
pay to the Bank such  amount or  amounts  as shall  compensate  the Bank for any
actual out of pocket loss,  cost or expense  incurred by the Bank (in connection
with the relevant Interest Period) as a result of: (i) any payment or prepayment
(whether  pursuant to Section 7.2 or otherwise) of a Euro-Dollar  Rate Loan on a
date other than the last day of an  Interest  Period for such  Euro-Dollar  Rate
Loan; or (ii) any failure by the Borrower to prepay a  Euro-Dollar  Rate Loan on
the date for such  prepayment  specified  in the relevant  notice of  prepayment
hereunder;  or (iii) any failure by the  Borrower to borrow a  Euro-Dollar  Rate
Loan on the date for the Euro-Dollar  Borrowing of which such  Euro-Dollar  Rate
Loan  is a part  specified  in the  applicable  Notice  of  Borrowing  delivered
pursuant to Section 2.2.


                            ARTICLE 8. MISCELLANEOUS

     SECTION 8.1.Notices

     All notices,  requests and other  communications  to any party hereunder or
under any Loan Document shall be in writing (including bank wire,  telecopier or


                                       34
<PAGE>
similar  writing) and shall be given to such party at its address or  telecopier
number  set  forth on the  signature  pages  hereof  or such  other  address  or
telecopier  number as such party may hereafter specify for the purpose by notice
to the other party. Each such notice,  request or other  communication  shall be
effective (i) if given by  telecopier,  when such telecopy is transmitted to the
telecopier number specified in this Section and the appropriate  confirmation is
received, (ii) if given by mail, seventy-two (72) hours after such communication
is  deposited  in the United  States  mails with first  class  postage  prepaid,
addressed as aforesaid or (iii) if given by any other means,  when  delivered at
the address  specified in this Section;  provided that notices to the Bank under
Article 2 shall not be effective until received.

     SECTION 8.2.No Waivers

     No failure or delay by the Bank in exercising any right, power or privilege
hereunder  or under any Note  shall  operate as a waiver  thereof  nor shall any
single or  partial  exercise  thereof  preclude  any other or  further  exercise
thereof or the exercise of any other right,  power or privilege.  The rights and
remedies  herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

     SECTION 8.3.Expenses; Documentary Taxes

     The  Borrower  shall  pay  (i)  all  out-of-pocket  expenses  of the  Bank,
including fees and  disbursements of special counsel for the Bank, in connection
with the preparation of this Agreement and the other Loan Documents,  any waiver
or consent  hereunder or thereunder  or any  amendment  hereof or thereof or any
Default or alleged Default hereunder or thereunder and (ii) if a Default occurs,
all   out-of-pocket   expenses   incurred  by  the  Bank,   including  fees  and
disbursements  of counsel  (including  a  reasonable  allocation  of the cost of
internal  counsel),  in connection  with such Default and  collection  and other
enforcement  proceedings resulting therefrom,  including  out-of-pocket expenses
incurred in enforcing this  Agreement,  the Note and other Loan  Documents.  The
Borrower shall indemnify the Bank against any transfer taxes, documentary taxes,
assessments  or charges  made by any  Authority by reason of the  execution  and
delivery of this Agreement, the Note or the other Loan Documents.

     SECTION 8.4.Indemnification

     The Borrower shall indemnify the Bank and each affiliate  thereof and their
respective directors, officers, employees and agents from, and hold each of them
harmless against,  any and all losses,  liabilities,  claims or damages to which
any of them may become subject, insofar as such losses,  liabilities,  claims or
damages  arise out of or result from any actual or proposed  use by the Borrower
of the proceeds of any  extension  of credit by the Bank  hereunder or breach by
the Borrower of this Agreement,  the Note or any other Loan Document or from any
investigation,   litigation  or  other  proceeding   (including  any  threatened
investigation or proceeding)  relating to the foregoing,  and the Borrower shall
reimburse the Bank, and each affiliate  thereof and their respective  directors,
officers, employees and agents, upon demand for any expenses (including, without
limitation,  legal fees) incurred in connection with any such  investigation  or
proceeding;  but  excluding  any such losses,  liabilities,  claims,  damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified.  The indemnification  provisions  (including,  without
limitation, provisions for default interest, to the extent that this Section 8.4
might be construed as duplicating  the Borrower's  obligation to pay interest at
the Default  Rate as required  elsewhere  in this  Agreement)  set forth in this
Section  8.4 are meant to be without  duplication  of any other  indemnification
provisions set forth in this Agreement.

     SECTION 8.5.Amendments and Waivers

     Any provision of this  Agreement,  the Note or any other Loan Documents may
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed by the Borrower and the Bank.



                                       35
<PAGE>
     SECTION 8.6.Successors and Assigns

     8.6.1. The provisions of this Agreement shall be binding upon and insure to
the benefit of the parties hereto and their  respective  successors and assigns;
provided  that the  Borrower  may not assign or  otherwise  transfer  any of its
rights under this Agreement.

     8.6.2 The Bank may,  without the consent of the Borrower,  at any time sell
to one or more Persons  (each a  "Participant")  participating  interests in any
Revolving Loan, the Note, the Commitment  hereunder or any other interest of the
Bank  hereunder.  In the event of any such  sale by the Bank of a  participating
interest to a Participant,  the Bank's  obligations  under this Agreement  shall
remain unchanged,  the Bank shall remain solely  responsible for the performance
thereof,  the Bank shall  remain the holder of the Note for all  purposes  under
this Agreement, and the Borrower shall continue to deal solely and directly with
the Bank in  connection  with the  Bank's  rights  and  obligations  under  this
Agreement. The Bank, if it sells a participating interest in the Revolving Loan,
Note, Commitment or other interest under this Agreement,  shall, within ten (10)
Domestic  Business  Days  of  such  sale,  provide  the  Borrower  with  written
notification stating that such sale has occurred and identifying the Participant
and the interest purchased by such Participant.  The Bank and the Borrower agree
that each  Participant  shall be  entitled  to the  benefits  of  Article 7 with
respect to its  participation in Revolving Loans  outstanding from time to time,
but only to the extent that the Bank would have been entitled  thereto  pursuant
to the terms of this Agreement.

     8.6.3.  The Bank may at any time  assign to one or more banks or  financial
institutions  (each an "Assignee")  all, or a proportionate  part of all, of its
rights and  obligations  under this  Agreement  and the Note,  and such Assignee
shall assume all such rights and obligations.

     8.6.4.  Subject to the  provisions of Section 8.7, the Borrower  authorizes
the Bank to disclose to any  Participant,  Assignee or other  transferee (each a
"Transferee")  and any  prospective  Transferee  any and all  information in the
Bank's  possession  concerning the Borrower which has been delivered to the Bank
by the Borrower  pursuant to this  Agreement or which has been  delivered to the
Bank by the Borrower in connection  with the Bank's credit  evaluation  prior to
entering into this Agreement.

     8.6.5. No Transferee shall be entitled to receive any greater payment under
Section 7.3 than the Bank would have been  entitled to receive  with  respect to
the rights  transferred,  unless such transfer is made with the Borrower's prior
written  consent or by reason of the  provisions of Section 7.2 or 7.3 requiring
the Bank to designate a different Lending Office under certain  circumstances or
at a time when the  circumstances  giving rise to such  greater  payment did not
exist.

     SECTION 8.7.Confidentiality

     The Bank agrees to exercise its best efforts  (and,  in any event,  with at
least  the same  degree  of care as it  ordinarily  exercises  with  respect  to
confidential  information  of its  other  customers)  to  keep  any  information
delivered  or  made  available  by  the  Borrower  to  it,  including,   without
limitation,   information  obtained  by  the  Bank  by  reason  of  a  visit  or
investigation by any Person  contemplated in Section 5.2,  confidential from any
one other than persons  employed or retained by the Bank who are or are expected
to become engaged in evaluating,  approving,  structuring or  administering  the
Revolving  Loans;  provided,  however that nothing herein shall prevent the Bank
from  disclosing   such   information  (i)  upon  the  order  of  any  court  or
administrative  agency, (ii) upon the request or demand of any regulatory agency
or authority  having  jurisdiction  over the Bank, (iii) which has been publicly
disclosed  other  than by an act or  omission  of the Bank  except as  permitted
herein, (iv) to the extent reasonably required in connection with any litigation
(with respect to this Agreement,  any of the other Loan Documents, in connection
with any of the  foregoing,  or any other  obligations  of the  Borrower  or any


                                       36
<PAGE>
Subsidiary  owing  to the  Bank) to which  the Bank or its  Affiliates  may be a
party, (v) to the extent reasonably  required in connection with the exercise of
any remedy hereunder,  (vi) to the Bank's legal counsel and independent auditors
and (vii) to any actual or proposed Participant, Assignee or other Transferee of
all or part of its rights  hereunder  which has agreed in writing to be bound by
the provisions of this Section 8.7.

     SECTION 8.8.GEORGIA LAW

     THIS  AGREEMENT,  EACH NOTE AND EACH OTHER LOAN DOCUMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF GEORGIA.

     SECTION 8.9.Interpretation

     No provision of this Agreement or any of the other Loan Documents  shall be
construed  against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or dictated such provision.

     SECTION 8.10.CONSENT TO JURISDICTION

     THE  BORROWER  AND THE BANK  IRREVOCABLY  (A)  SUBMITS TO THE  NONEXCLUSIVE
PERSONAL JURISDICTION IN THE STATE OF GEORGIA, THE COURTS THEREOF AND THE UNITED
STATES DISTRICT COURTS SITTING  THEREIN,  FOR THE ENFORCEMENT OF THIS AGREEMENT,
THE NOTE AND THE OTHER LOAN  DOCUMENTS,  (B) WAIVE ANY AND ALL  PERSONAL  RIGHTS
UNDER THE LAW OF ANY  JURISDICTION  TO OBJECT ON ANY BASIS  (INCLUDING,  WITHOUT
LIMITATION, INCONVENIENCE OF FORUM) TO JURISDICTION OR VENUE WITHIN THE STATE OF
GEORGIA FOR THE PURPOSE OF LITIGATION TO ENFORCE THIS AGREEMENT, THE NOTE OR THE
OTHER LOAN DOCUMENTS, AND (C) AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT
IN THE  MANNER  PRESCRIBED  IN  SECTION  8.1 FOR THE  GIVING  OF  NOTICE  TO THE
BORROWER.  NOTHING  HEREIN  CONTAINED,  HOWEVER,  SHALL  PREVENT  THE BANK  FROM
BRINGING ANY ACTION OR  EXERCISING  ANY RIGHTS  AGAINST ANY SECURITY AND AGAINST
THE  BORROWER  PERSONALLY,  AND AGAINST ANY ASSETS OF THE  BORROWER,  WITHIN ANY
OTHER STATE OR JURISDICTION.

     SECTION 8.11.Counterparts

     This Agreement may be signed in any number of  counterparts,  each of which
shall be an  original,  with the same  effect as if the  signatures  thereto and
hereto were upon the same instrument.

     SECTION 8.12.Survival

     All representations, warranties and covenants made herein shall survive the
execution and delivery of all of the Loan Documents. The terms and provisions of
this Agreement  shall continue in full force and effect until the payment of the
Note and termination of the Commitment.

     SECTION 8.13.Entire Agreement: Amendment; Severability

     This  Agreement  shall  constitute the entire  agreement  among the parties
hereto with respect to the subject matter hereof. Neither this Agreement nor any
provision  hereof may be changed,  waived,  discharged,  modified or  terminated
orally,  but only by an instrument in writing in accordance with Section 8.5. If
any  provision of any of the Loan  Documents or the  application  thereof to any
party thereto or circumstances  shall be invalid or unenforceable to any extent,
the remainder of such Loan Documents and the  application of such  provisions to
any other party thereto or circumstances shall not be affected thereby and shall
be enforced to the greatest extent permitted by law.

     SECTION 8.14.TIME OF THE ESSENCE

     TIME IS OF THE  ESSENCE  IN THIS  AGREEMENT,  THE NOTE AND THE  OTHER  LOAN
DOCUMENTS.



                                       37
<PAGE>
     SECTION 8.15.Arbitration

     Upon demand of any party hereto,  whether made before or after  institution
of any judicial  proceeding,  any dispute,  claim or controversy arising out of,
connected  with,  or  relating  to  this  Agreement  and  other  Loan  Documents
("Disputes")  between or among  parties to this  Agreement  shall be resolved by
binding arbitration as provided herein.  Institution of a judicial proceeding by
a party does not waive the right of that party to demand arbitration  hereunder.
Disputes may include, without limitation, tort claims,  counterclaims,  disputes
as to  whether a matter is  subject  to  arbitration,  claims  brought  as class
actions,  claims arising from Loan Documents  executed in the future,  or claims
arising out of or connected with the transaction reflected by this Agreement.

     Arbitration  shall  be  conducted  under  and  governed  by the  Commercial
Financial Disputes  Arbitration Rules (the "Arbitration  Rules") of the American
Arbitration  Association  (the  "AAA")  and  Title  9  of  the  U.S.  Code.  All
arbitration  hearings  shall be  conducted  in the city in which  the  office of
Lender first stated above is located. The expedited procedures set forth in Rule
51 et seq. of the  Arbitration  Rules shall be applicable to claims of less than
$1,000,000.  All applicable statutes of limitation shall apply to any Dispute. A
judgment  upon the award may be entered in any court  having  jurisdiction.  The
panel from which all  arbitrators  are  selected  shall be comprised of licensed
attorneys.  The single  arbitrator  selected for expedited  procedure shall be a
retired judge from the highest court of general jurisdiction,  state or federal,
of the estate  where the  hearing  will be  conducted  or if such  person is not
available  to  serve,  the  single  arbitrator  may  be  a  licensed   attorney.
Notwithstanding  the  foregoing,  this  arbitration  provision does not apply to
disputes under or related to swap agreements.

     SECTION 8.16.Preservation and Limitation of Remedies

     Notwithstanding  the preceding  binding  arbitration  provisions,  Bank and
Borrower agree to preserve, without diminution,  certain remedies that any party
hereto may employ or exercise  freely,  independently  or in connection  with an
arbitration  proceeding  or after an  arbitration  action is  brought.  Bank and
Borrower shall have the right to proceed in any court of proper  jurisdiction or
by self-help to exercise or prosecute the following remedies, as applicable; (i)
all rights to foreclose  against any real or personal property or other security
by exercising a power of sale granted under Loan  Documents or under  applicable
law or by judicial  foreclosure and sale,  including a proceeding to confirm the
sale;  (ii) all rights of self-help  including  peaceful  possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief,  sequestration,  garnishment,  attachment,  appointment  of receiver and
filing  an  involuntary  bankruptcy  proceeding;  and (iv)  when  applicable,  a
judgment by  confession  of judgment.  Preservation  of these  remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute.

     Bank and  Borrower  agree that they shall not have a remedy of  punitive or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or  exemplary  damages they have now or which may arise in the
future in  connection  with any  Dispute  whether  the  Dispute is  resolved  by
arbitration or judicially.

     SECTION 8.17.Bank Not a Joint Venturer

     Neither  this  Agreement  nor any  agreements,  instruments,  documents  or
transactions  contemplated  hereby (including the Loan Documents),  shall in any
respect  be  interpreted,  deemed or  construed  as making the Bank a partner or
joint  venturer  with the  Borrower or as creating any similar  relationship  or
entity.


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<PAGE>
     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed,  under seal, by their respective  authorized officers,  as of the
day and year first above written.

                            "BORROWER"

                            APPLE SOUTH, INC. (SEAL)
                           
                            By:
                            Title:______________________________

                            Attest:
                            Title:_______________________________

                            Apple South, Inc.
                            Corporate Headquarters
                            Hancock at Washington
                            Madison, Georgia 30650
                            Attn:    Erich J. Booth,
                            Chief Financial Officer
                            Telecopier Number: (706) 342-4057


                            "BANK"
                             FIRST UNION NATIONAL BANK

                             By:
                             Title:

                             Lending Office:
                             First Union National Bank
                             999 Peachtree Street, N.E.
                             12th Floor
                             Atlanta, Georgia 30309
                             Attention: Georgia Corporate Banking
                             Telecopier Number: 404/225-4255






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