<PAGE>
                                       
                                CREDIT AGREEMENT

     THIS AGREEMENT is entered into as of June 27, 1997, by and between 
SCHLOTZSKY'S, INC., a Texas corporation ("Borrower"), and WELLS FARGO BANK 
(TEXAS), NATIONAL ASSOCIATION ("Bank").


                                    RECITAL

     Borrower has requested from Bank the credit accommodations described 
below (each, a "Credit" and collectively, the "Credits"), and Bank has agreed 
to provide the Credits to Borrower on the terms and conditions contained 
herein.

     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency 
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:


                                   ARTICLE I
                                  THE CREDITS

      SECTION 1.1.   LINE OF CREDIT.

     (a)  LINE OF CREDIT.  Subject to the terms and conditions of this 
Agreement, Bank hereby agrees to make advances to Borrower from time to time 
up to and including April 30, 2000, not to exceed at any time the aggregate 
principal amount of Twelve Million  Dollars ($12,000,000.00) ("Line of 
Credit"), the proceeds of which shall be used to finance working capital 
purposes. Borrower's obligation to repay advances under the Line of Credit 
shall be evidenced by a promissory note substantially in the form of Exhibit 
A attached hereto ("Line of Credit Note"), all terms of which are 
incorporated herein by this reference.

     (b)  BORROWING AND REPAYMENT.  Borrower may from time to time during the 
term of the Line of Credit borrow, partially or wholly repay its outstanding 
borrowings, and reborrow, subject to all of the limitations, terms and 
conditions contained herein or in the Line of Credit Note; provided however, 
that the total outstanding borrowings under the Line of Credit shall not at 
any time exceed the maximum principal amount available thereunder, as set 
forth above. 

     SECTION 1.2.   TERM COMMITMENT.

     (a)  TERM COMMITMENT.  Subject to the terms and conditions of this 
Agreement, Bank hereby agrees to make advances to Borrower from time to time 
up to and including December 30, 1997, not to exceed the aggregate principal 
amount of Three Million 

<PAGE>

Dollars ($3,000,000.00) ("Term Commitment"), the proceeds of which shall be 
used to (a) finance capital expenditures and (b) refinance existing debt, and 
which shall be converted on December 30, 1997, to a term loan, as described 
more fully below.  Borrower's obligation to repay advances under the Term 
Commitment shall be evidenced by a promissory note substantially in the form 
of Exhibit B attached hereto ("Term Commitment Note"), all terms of which are 
incorporated herein by this reference.

     (b)  BORROWING AND REPAYMENT.  Borrower may from time to time during the 
period in which Bank will make advances under the Term Commitment borrow and 
partially or wholly repay its outstanding borrowings, provided that amounts 
repaid may not be reborrowed, subject to all the limitations, terms and 
conditions contained herein; provided however, that the total outstanding 
borrowings under the Term Commitment shall not at any time exceed the maximum 
principal amount available thereunder, as set forth above.  The outstanding 
principal balance of the Term Commitment shall be due and payable in full on 
December 30, 1997; provided however, that so long as Borrower is in 
compliance on said date with all terms and conditions contained herein and in 
any other documents evidencing the Credits, Bank agrees to restructure 
repayment of said outstanding principal balance so that principal and 
interest shall be amortized over five years and shall be repaid in monthly 
installments, as set forth in the promissory note executed by Borrower on 
said date to evidence the new repayment schedule.

     (c)  PREPAYMENT.  Borrower may prepay principal on the Term Commitment 
solely in accordance with the provisions of the Term Commitment Note.

     SECTION 1.3.   INTEREST/FEES.

     (a)  INTEREST.  The outstanding principal balance of the Line of Credit 
and Term Commitment shall bear interest at the rate of interest set forth in 
the Line of Credit Note and Term Commitment Note.

     (b)  COMPUTATION AND PAYMENT.  Interest shall be computed on the basis 
of a 360-day year, actual days elapsed, unless such calculation would result 
in a usurious rate, in which case interest shall be computed on the basis of 
a 365/366-day year, as the case may be, actual days elapsed.  Interest shall 
be payable at the times and place set forth in the Line of Credit Note and 
Term Commitment Note (collectively, the "Notes").

     (c)  UNUSED COMMITMENT FEE.  Borrower shall pay to Bank a fee equal to 
one-quarter of one percent (.25%) per annum (computed on the basis of a 
360-day year, actual days elapsed) on the average daily unused amount of the 
Line Of Credit, which fee 

                                      -2-
<PAGE>

shall be calculated on a quarterly basis by Bank and shall be due and payable 
by Borrower in arrears within ten (10) days after each billing is sent by 
Bank.

     SECTION 1.4.   COLLECTION OF PAYMENTS.  Borrower authorizes Bank to 
collect all principal, interest and fees due under each Credit by charging 
Borrower's demand deposit account number ___________ with Bank, or any other 
demand deposit account maintained by Borrower with Bank, for the full amount 
thereof.  Should there be insufficient funds in any such demand deposit 
account to pay all such sums when due, the full amount of such deficiency 
shall be immediately due and payable by Borrower.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

     Borrower makes the following representations and warranties to Bank, 
which representations and warranties shall survive the execution of this 
Agreement and shall continue in full force and effect until the full and 
final payment, and satisfaction and discharge, of all obligations of Borrower 
to Bank subject to this Agreement.

     SECTION 2.1.   LEGAL STATUS.  Borrower is a corporation, duly organized 
and existing and in good standing under the laws of the state of Texas, and 
is qualified or licensed to do business (and is in good standing as a foreign 
corporation, if applicable) in all jurisdictions in which such qualification 
or licensing is required or in which the failure to so qualify or to be so 
licensed could have a material adverse effect on Borrower.

     SECTION 2.2.   AUTHORIZATION AND VALIDITY.  This Agreement, the Notes, 
and each other document, contract and instrument required hereby or at any 
time hereafter delivered to Bank in connection herewith (collectively, the 
"Loan Documents") have been duly authorized, and upon their execution and 
delivery in accordance with the provisions hereof will constitute legal, 
valid and binding agreements and obligations of Borrower or the party which 
executes the same, enforceable in accordance with their respective terms.

     SECTION 2.3.   NO VIOLATION.  The execution, delivery and performance by 
Borrower of each of the Loan Documents do not violate any provision of any 
law or regulation, or contravene any provision of the Articles of 
Incorporation or By-Laws of Borrower, or result in any breach of or default 
under any contract, obligation, indenture or other instrument to which 
Borrower is a party or by which Borrower may be bound.

                                      -3-
<PAGE>

     SECTION 2.4.   LITIGATION.  There are no pending, or to the best of 
Borrower's knowledge threatened, actions, claims, investigations, suits or 
proceedings by or before any governmental authority, arbitrator, court or 
administrative agency which could have a material adverse effect on the 
financial condition or operation of Borrower other than those disclosed by 
Borrower to Bank in writing prior to the date hereof.

     SECTION 2.5.   CORRECTNESS OF FINANCIAL STATEMENT.  The consolidated 
financial statement of Borrower and Scholtzsky's Real Estate, Inc. dated 
March 31, 1997, a true copy of which has been delivered by Borrower to Bank 
prior to the date hereof, (a) is complete and correct and presents fairly the 
financial condition of Borrower, (b) discloses all liabilities of Borrower 
that are required to be reflected or reserved against under generally 
accepted accounting principles, whether liquidated or unliquidated, fixed or 
contingent, and (c) has been prepared in accordance with generally accepted 
accounting principles consistently applied.  Since the date of such financial 
statement there has been no material adverse change in the financial 
condition of Borrower, nor has Borrower mortgaged, pledged, granted a 
security interest in or otherwise encumbered any of its assets or properties 
except in favor of Bank or as otherwise permitted by Bank in writing. 

     SECTION 2.6.   INCOME TAX RETURNS.  Borrower has no knowledge of any 
pending assessments or adjustments of its income tax payable with respect to 
any year.

     SECTION 2.7.   NO SUBORDINATION.  There is no agreement, indenture, 
contract or instrument to which Borrower is a party or by which Borrower may 
be bound that requires the subordination in right of payment of any of 
Borrower's obligations subject to this Agreement to any other obligation of 
Borrower.

     SECTION 2.8.   PERMITS, FRANCHISES.  Borrower possesses, and will 
hereafter possess, all permits, consents, approvals, franchises and licenses 
required and rights to all trademarks, trade names, patents, and fictitious 
names, if any, necessary to enable it to conduct the business in which it is 
now engaged in compliance with applicable law.  

     SECTION 2.9.   ERISA.  Borrower is in compliance in all material 
respects with all applicable provisions of the Employee Retirement Income 
Security Act of 1974, as amended or recodified from time to time ("ERISA"); 
Borrower has not violated any provision of any defined employee pension 
benefit plan (as defined in ERISA) maintained or contributed to by Borrower 
(each, a "Plan"); no Reportable Event as defined in ERISA has occurred and is 
continuing with respect to any Plan initiated by Borrower; Borrower has met 
its minimum funding requirements under ERISA 

                                      -4-
<PAGE>

with respect to each Plan; and each Plan will be able to fulfill its benefit 
obligations as they come due in accordance with the Plan documents and under 
generally accepted accounting principles.

     SECTION 2.10.  OTHER OBLIGATIONS.  Borrower is not in default on any 
obligation for borrowed money, any purchase money obligation or any other 
material lease, commitment, contract, instrument or obligation.

     SECTION 2.11.  ENVIRONMENTAL MATTERS.  Except as disclosed by Borrower 
to Bank in writing prior to the date hereof, Borrower is in compliance in all 
material respects with all applicable federal or state environmental, 
hazardous waste, health and safety statutes, and any rules or regulations 
adopted pursuant thereto, which govern or affect any of Borrower's operations 
and/or properties, including without limitation, the Comprehensive 
Environmental Response, Compensation and Liability Act of 1980, the Superfund 
Amendments and Reauthorization Act of 1986, the Federal Resource Conservation 
and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as 
any of the same may be amended, modified or supplemented from time to time.  
None of the operations of Borrower is the subject of any federal or state 
investigation evaluating whether any remedial action involving a material 
expenditure is needed to respond to a release of any toxic or hazardous waste 
or substance into the environment. Borrower has no material contingent 
liability in connection with any release of any toxic or hazardous waste or 
substance into the environment.

                                  ARTICLE III
                                   CONDITIONS

     SECTION 3.1.   CONDITIONS OF INITIAL EXTENSION OF CREDIT.  The 
obligation of Bank to grant any of the Credits is subject to the fulfillment 
to Bank's satisfaction of all of the following conditions:

     (a)  APPROVAL OF BANK COUNSEL.  All legal matters incidental to the 
granting of each of the Credits shall be satisfactory to Bank's counsel.

     (b)  DOCUMENTATION.  Bank shall have received, in form and substance 
satisfactory to Bank, each of the following, duly executed:

     (i)  This Agreement and the Notes.
    (ii)  Corporate Resolution: Borrowing.
    (iii) Certificate of Incumbency.
    (iv)  Such other documents as Bank may require under any other Section of
          this Agreement.

                                      -5-
<PAGE>

     (c)  FINANCIAL CONDITION.  There shall have been no material adverse 
change, as determined by Bank, in the financial condition or business of 
Borrower, nor any material decline, as determined by Bank, in the market 
value of any collateral required hereunder or a substantial or material 
portion of the assets of Borrower.

     (d)  INSURANCE.  Borrower shall have delivered to Bank evidence of 
insurance coverage on all Borrower's property, in form, substance, amounts, 
covering risks and issued by companies satisfactory to Bank, and where 
required by Bank, with loss payable endorsements in favor of Bank.

     SECTION 3.2.   CONDITIONS OF EACH EXTENSION OF CREDIT.  The obligation 
of Bank to make each extension of credit requested by Borrower hereunder 
shall be subject to the fulfillment to Bank's satisfaction of each of the 
following conditions:

     (a)  COMPLIANCE.  The representations and warranties contained herein 
and in each of the other Loan Documents shall be true on and as of the date 
of the signing of this Agreement and on the date of each extension of credit 
by Bank pursuant hereto, with the same effect as though such representations 
and warranties had been made on and as of each such date, and on each such 
date, no Event of Default as defined herein, and no condition, event or act 
which with the giving of notice or the passage of time or both would 
constitute such an Event of Default, shall have occurred and be continuing or 
shall exist.

     (b)  DOCUMENTATION.  Bank shall have received all additional documents 
which may be required in connection with such extension of credit.

                                   ARTICLE IV
                             AFFIRMATIVE COVENANTS

     Borrower covenants that so long as Bank remains committed to extend 
credit to Borrower pursuant hereto, or any liabilities (whether direct or 
contingent, liquidated or unliquidated) of Borrower to Bank under any of the 
Loan Documents remain outstanding, and until payment in full of all 
obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise 
consents in writing:

     SECTION 4.1.   PUNCTUAL PAYMENTS.  Punctually pay all principal, 
interest, fees or other liabilities due under any of the Loan Documents at 
the times and place and in the manner specified therein.

     SECTION 4.2.   ACCOUNTING RECORDS.  Maintain adequate books and records 
in accordance with generally accepted accounting 

                                      -6-
<PAGE>

principles consistently applied, and permit any representative of Bank, at 
any reasonable time, to inspect, audit and examine such books and records, to 
make copies of the same, and to inspect the properties of Borrower.

     SECTION 4.3.   FINANCIAL STATEMENTS.  Provide to Bank all of the 
following, in form and detail satisfactory to Bank:

     (a)  not later than 120 days after and as of the end of each fiscal 
year, an audited consolidated financial statement of Borrower and 
Schlotzsky's Real Estate, Inc., prepared by certified public accountant, to 
include balance sheet, income statement, statement of cash flows and 10-K 
reports;

     (b)  not later than 45 days after and as of the end of each quarter, a 
consolidated financial statement of Borrower and Schlotzsky's Real Estate, 
Inc., prepared by Borrower, to include balance sheet, income statement and 
10-K reports;

     (c)  contemporaneously with each quarter financial statement of Borrower 
required hereby, a certificate of the president or chief financial officer of 
Borrower stating (a) that said financial statements are accurate and that 
there exists no Event of Default nor any condition, act or event which with 
the giving of notice or the passage of time or both would constitute an Event 
of Default and (b) showing the calculations for the covenants set forth in 
Section 4.9 below;

     (d)  from time to time such other information as Bank may reasonably 
request.

     SECTION 4.4.   COMPLIANCE.  Preserve and maintain all licenses, permits, 
governmental approvals, rights, privileges and franchises necessary for the 
conduct of its business; and comply with the provisions of all documents 
pursuant to which Borrower is organized and/or which govern Borrower's 
continued existence and with the requirements of all laws, rules, regulations 
and orders of any governmental authority applicable to Borrower and/or its 
business.

     SECTION 4.5.   INSURANCE.  Maintain and keep in force insurance of the 
types and in amounts customarily carried in lines of business similar to that 
of Borrower, including but not limited to fire, extended coverage, public 
liability, flood, property damage and workers' compensation, with all such 
insurance carried with companies and in amounts satisfactory to Bank, and 
deliver to Bank from time to time at Bank's request schedules setting forth 
all insurance then in effect.

                                      -7-
<PAGE>

     SECTION 4.6.   FACILITIES.  Keep all properties useful or necessary to 
Borrower's business in good repair and condition, and from time to time make 
necessary repairs, renewals and replacements thereto so that such properties 
shall be fully and efficiently preserved and maintained.

     SECTION 4.7.   TAXES AND OTHER LIABILITIES.  Pay and discharge when due 
any and all indebtedness, obligations, assessments and taxes, both real or 
personal, including without limitation federal and state income taxes and 
state and local property taxes and assessments, except such (a) as Borrower 
may in good faith contest or as to which a bona fide dispute may arise, and 
(b) for which Borrower has made provision, to Bank's satisfaction, for 
eventual payment thereof in the event Borrower is obligated to make such 
payment.

     SECTION 4.8.   LITIGATION.  Promptly give notice in writing to Bank of 
any litigation pending or threatened against Borrower with a claim in excess 
of $100,000.00.

     SECTION 4.9.   FINANCIAL CONDITION.  Maintain Borrower's financial 
condition as follows using generally accepted accounting principles 
consistently applied and used consistently with prior practices (except to 
the extent modified by the definitions herein):

     (a)  Working Capital not at any time less than $12,000,000.00, with 
"Working Capital" defined as total current assets minus total current 
liabilities.

     (b)  Total Liabilities divided by Tangible Net Worth not at any time 
greater than .90 to 1.0, with "Total Liabilities" defined as the aggregate of 
current liabilities and non-current liabilities less subordinated debt, and 
with "Tangible Net Worth" defined as the aggregate of total stockholders' 
equity plus subordinated debt less any intangible assets.

     (c)  EBITDA Coverage Ratio not less than 2.0 to 1.0 as of each fiscal 
year end, with "EBITDA" defined as net profit before tax plus interest 
expense (net of capitalized interest expense), depreciation expense and 
amortization expense, and with "EBITDA Coverage Ratio" defined as EBITDA 
divided by the aggregate of total interest expense plus the prior period 
current maturity of long-term debt and the prior period current maturity of 
subordinated debt.

     (d)  EBITDA Borrowing Ratio not less than 2.0 to 1.0 as of the end of 
each fiscal quarter, with "EBITDA" as defined above and calculated as of the 
end of the preceding four fiscal quarters, and with "EBITDA Borrowing Ratio" 
defined as the outstanding principal balance of the Revolving Line of Credit 
divided by EBITDA.

                                      -8-
<PAGE>

     SECTION 4.10.  NOTICE TO BANK.  Promptly (but in no event more than five 
(5) days after the occurrence of each such event or matter) give written 
notice to Bank in reasonable detail of:  (a) the occurrence of any Event of 
Default, or any condition, event or act which with the giving of notice or 
the passage of time or both would constitute an Event of Default; (b) any 
change in the name or the organizational structure of Borrower; (c) the 
occurrence and nature of any Reportable Event or Prohibited Transaction, each 
as defined in ERISA, or any funding deficiency with respect to any Plan; or 
(d) any termination or cancellation of any insurance policy which Borrower is 
required to maintain, or any uninsured or partially uninsured loss through 
liability or property damage, or through fire, theft or any other cause 
affecting Borrower's property in excess of an aggregate of $500,000.00.

                                   ARTICLE V
                               NEGATIVE COVENANTS

     Borrower further covenants that so long as Bank remains committed to 
extend credit to Borrower pursuant hereto, or any liabilities (whether direct 
or contingent, liquidated or unliquidated) of Borrower to Bank under any of 
the Loan Documents remain outstanding, and until payment in full of all 
obligations of Borrower subject hereto, Borrower will not without Bank's 
prior written consent:

     SECTION 5.1.   USE OF FUNDS.  Use any of the proceeds of any of the 
Credits except for the purposes stated in Article I hereof.

     SECTION 5.2.   OTHER INDEBTEDNESS.  Create, incur, assume or permit to 
exist any indebtedness or liabilities resulting from borrowings, loans or 
advances, whether secured or unsecured, matured or unmatured, liquidated or 
unliquidated, joint or several, except (a) the liabilities of Borrower to 
Bank, and (b) the liabilities of Borrower existing as of the date hereof and 
listed on Exhibit C to this Agreement, and (c) other liabilities not to 
exceed an aggregate principal amount of $3,000,000.00.

     SECTION 5.3.   MERGER, CONSOLIDATION, TRANSFER OF ASSETS.  Merge into or 
consolidate with any other entity; make any substantial change in the nature 
of Borrower's business as conducted as of the date hereof; acquire all or 
substantially all of the assets of any other entity; nor sell, lease, 
transfer or otherwise dispose of all or a substantial or material portion of 
Borrower's assets except in the ordinary course of its business.

                                      -9-
<PAGE>

     SECTION 5.4.   PLEDGE OF ASSETS.  Mortgage, pledge, grant or permit to 
exist a security interest in, or lien upon, all or any portion of Borrower's 
assets now owned or hereafter acquired, except (a) any of the foregoing in 
favor of Bank, (b) any of the foregoing existing as of the date hereof and 
listed on Exhibit C to this Agreement, (c) purchase money security interests 
granted in the ordinary course of business, and (d) liens granted on the 
Borrower's real property.

                                   ARTICLE VI
                               EVENTS OF DEFAULT

     SECTION 6.1.   The occurrence of any of the following shall constitute 
an "Event of Default" under this Agreement:

     (a)  Borrower shall fail to pay when due any principal, interest, fees 
or other amounts payable under any of the Loan Documents.

     (b)  Any financial statement or certificate furnished to Bank in 
connection with, or any representation or warranty made by Borrower or any 
other party under this Agreement or any other Loan Document shall prove to be 
incorrect, false or misleading in any material respect when furnished or made.

     (c)  Any default in the performance of or compliance with any 
obligation, agreement or other provision contained herein or in any other 
Loan Document (other than those referred to in subsections (a) and (b) 
above), and with respect to any such default which by its nature can be 
cured, such default shall continue for a period of twenty (20) days from its 
occurrence.

     (d)  Any default in the payment or performance of any obligation, or any 
defined event of default, under the terms of any contract or instrument 
(other than any of the Loan Documents) pursuant to which Borrower has 
incurred any debt or other liability to any person or entity, including Bank.

     (e)  The filing of a notice of judgment lien against Borrower; or the 
recording of any abstract of judgment against Borrower in any county in which 
Borrower has an interest in real property; or the service of a notice of levy 
and/or of a writ of attachment or execution, or other like process, against 
the assets of Borrower; or the entry of a judgment against Borrower.

     (f)  Borrower shall become insolvent, or shall suffer or consent to or 
apply for the appointment of a receiver, trustee, custodian or liquidator of 
itself or any of its property, or shall generally fail to pay its debts as 
they become due, or 

                                      -10-
<PAGE>

shall make a general assignment for the benefit of creditors; Borrower shall 
file a voluntary petition in bankruptcy, or seeking reorganization, in order 
to effect a plan or other arrangement with creditors or any other relief 
under the Bankruptcy Reform Act, Title 11 of the United States Code, as 
amended or recodified from time to time ("Bankruptcy Code"), or under any 
state or federal law granting relief to debtors, whether now or hereafter in 
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy 
Code or any other applicable state or federal law relating to bankruptcy, 
reorganization or other relief for debtors is filed or commenced against 
Borrower, or Borrower shall file an answer admitting the jurisdiction of the 
court and the material allegations of any involuntary petition; or Borrower 
shall be adjudicated a bankrupt, or an order for relief shall be entered 
against Borrower by any court of competent jurisdiction under the Bankruptcy 
Code or any other applicable state or federal law relating to bankruptcy, 
reorganization or other relief for debtors.

     (g)  There shall exist or occur any event or condition which Bank in 
good faith believes impairs, or is substantially likely to impair, the 
prospect of payment or performance by Borrower of its obligations under any 
of the Loan Documents.

     (h)  The death or incapacity of Borrower.  The dissolution or 
liquidation of Borrower; or Borrower, or any of its directors, stockholders 
or members, shall take action seeking to effect the dissolution or 
liquidation of Borrower.

     (i)  Any change in ownership during the term of this Agreement of an 
aggregate of twenty-five percent (25%) or more of the common stock of 
Borrower.

     SECTION 6.2.   REMEDIES.  Upon the occurrence of any Event of Default: 
(a) all principal and accrued and unpaid interest outstanding under each of 
the Loan Documents, any term thereof to the contrary notwithstanding, shall 
at Bank's option and without notice become immediately due and payable 
without presentment, demand, or any notices of any kind, including without 
limitation notice of nonperformance, notice of protest, protest, notice of 
dishonor, notice of intention to accelerate or notice of acceleration, all of 
which are hereby expressly waived by each Borrower; (b) the obligation, if 
any, of Bank to extend any further credit under any of the Loan Documents 
shall immediately cease and terminate; and (c) Bank shall have all rights, 
powers and remedies available under each of the Loan Documents, or accorded 
by law, including without limitation the right to resort to any or all 
security for any of the Credits and to exercise any or all of the rights of a 
beneficiary or secured party pursuant to applicable law.  All rights, powers 
and remedies of Bank may be exercised at any time by Bank and from time to 
time after the 

                                      -11-
<PAGE>

occurrence of an Event of Default, are cumulative and not exclusive, and 
shall be in addition to any other rights, powers or remedies provided by law 
or equity.

                                  ARTICLE VII
                                 MISCELLANEOUS

     SECTION 7.1.   NO WAIVER.  No delay, failure or discontinuance of Bank 
in exercising any right, power or remedy under any of the Loan Documents 
shall affect or operate as a waiver of such right, power or remedy; nor shall 
any single or partial exercise of any such right, power or remedy preclude, 
waive or otherwise affect any other or further exercise thereof or the 
exercise of any other right, power or remedy.  Any waiver, permit, consent or 
approval of any kind by Bank of any breach of or default under any of the 
Loan Documents must be in writing and shall be effective only to the extent 
set forth in such writing.

     SECTION 7.2.   NOTICES.  All notices, requests and demands which any 
party is required or may desire to give to any other party under any 
provision of this Agreement must be in writing delivered to each party at the 
following address:

     BORROWER:  SCHLOTZSKY'S, INC.
                200 West Fourth Street
                Austin, TX 78701
          


     BANK:      WELLS FARGO BANK (TEXAS),
                 NATIONAL ASSOCIATION
                Central Texas RCBO - Austin         
                100 Congress, Suite 150
                Austin, TX 78701

or to such other address as any party may designate by written notice to all 
other parties.  Each such notice, request and demand shall be deemed given or 
made as follows:  (a) if sent by hand delivery, upon delivery; (b) if sent by 
mail, upon the earlier of the date of receipt or three (3) days after deposit 
in the U.S. mail, first class and postage prepaid; and (c) if sent by 
telecopy, upon receipt.

     SECTION 7.3.   COSTS, EXPENSES AND ATTORNEYS' FEES.  Borrower shall pay 
to Bank immediately upon demand the full amount of all payments, advances, 
charges, costs and expenses, including reasonable attorneys' fees (to include 
outside counsel fees and all allocated costs of Bank's in-house counsel to 
the extent permissible), expended or incurred by Bank in connection with (a) 
the negotiation and preparation of this Agreement and the other Loan 
Documents, Bank's continued administration hereof 

                                      -12-
<PAGE>

and thereof, and the preparation of any amendments and waivers hereto and 
thereto, (b) the enforcement of Bank's rights and/or the collection of any 
amounts which become due to Bank under any of the Loan Documents, and (c) the 
prosecution or defense of any action in any way related to any of the Loan 
Documents, including without limitation, any action for declaratory relief, 
whether incurred at the trial or appellate level, in an arbitration 
proceeding or otherwise, and including any of the foregoing incurred in 
connection with any bankruptcy proceeding (including without limitation, any 
adversary proceeding, contested matter or motion brought by Bank or any other 
person) relating to any Borrower or any other person or entity.

     SECTION 7.4.   SUCCESSORS, ASSIGNMENT.  This Agreement shall be binding 
upon and inure to the benefit of the heirs, executors, administrators, legal 
representatives, successors and assigns of the parties; provided however, 
that Borrower may not assign or transfer its interest hereunder without 
Bank's prior written consent.  Bank reserves the right to sell, assign, 
transfer, negotiate or grant participations in all or any part of, or any 
interest in, Bank's rights and benefits under each of the Loan Documents.  In 
connection therewith, Bank may disclose all documents and information which 
Bank now has or may hereafter acquire relating to any of the Credits, 
Borrower or its business, [any guarantor hereunder or the business of such 
guarantor,] or any collateral required hereunder.

     SECTION 7.5.   AMENDMENT.  This Agreement may be amended or modified 
only in writing signed by each party hereto.

     SECTION 7.6.   NO THIRD PARTY BENEFICIARIES.  This Agreement is made and 
entered into for the sole protection and benefit of the parties hereto and 
their respective permitted successors and assigns, and no other person or 
entity shall be a third party beneficiary of, or have any direct or indirect 
cause of action or claim in connection with, this Agreement or any other of 
the Loan Documents to which it is not a party.

     SECTION 7.7.   TIME.  Time is of the essence of each and every provision 
of this Agreement and each other of the Loan Documents.

     SECTION 7.8.   SEVERABILITY OF PROVISIONS.  If any provision of this 
Agreement shall be prohibited by or invalid under applicable law, such 
provision shall be ineffective only to the extent of such prohibition or 
invalidity without invalidating the remainder of such provision or any 
remaining provisions of this Agreement.

     SECTION 7.9.   COUNTERPARTS.  This Agreement may be executed in any number
of counterparts, each of which when executed and 

                                      -13-
<PAGE>

delivered shall be deemed to be an original, and all of which when taken 
together shall constitute one and the same Agreement.

     SECTION 7.10.  GOVERNING LAW.  This Agreement shall be governed by and 
construed in accordance with the laws of the State of Texas.

     SECTION 7.11.  SAVINGS CLAUSE.  It is the intention of the parties to 
comply strictly with applicable usury laws.  Accordingly, notwithstanding any 
provision to the contrary in the Loan Documents, in no event shall any Loan 
Documents require the payment or permit the payment, taking, reserving, 
receiving, collection or charging of any sums constituting interest under 
applicable laws that exceed the maximum amount permitted by such laws, as the 
same may be amended or modified from time to time (the "Maximum Rate").  If 
any such excess interest is called for, contracted for, charged, taken, 
reserved or received in connection with any Loan Documents, or in any 
communication by  or any other person to Borrower or any other person, or in 
the event that all or part of the principal or interest hereof or thereof 
shall be prepaid or accelerated, so that under any of such circumstances or 
under any other circumstance whatsoever the amount of interest contracted 
for, charged, taken, reserved or received on the amount of principal actually 
outstanding from time to time under the Loan Documents shall exceed the 
Maximum Rate, then in such event it is agreed that: (i) the provisions of 
this paragraph shall govern and control; (ii) neither Borrower nor any other 
person or entity now or hereafter liable for the payment of any Loan 
Documents shall be obligated to pay the amount of such interest to the extent 
it is in excess of the Maximum Rate; (iii) any such excess interest which is 
or has been received by Bank, notwithstanding this paragraph, shall be 
credited against the then unpaid principal balance hereof or thereof, or if 
any of the Loan Documents has been or would be paid in full by such credit, 
refunded to Borrower; and (iv) the provisions of each of the Loan Documents, 
and any other communication to Borrower, shall immediately be deemed reformed 
and such excess interest reduced, without the necessity of executing any 
other document, to the Maximum Rate.  The right to accelerate the maturity of 
the Loan Documents does not include the right to accelerate, collect or 
charge unearned interest, but only such interest that has otherwise accrued 
as of the date of acceleration.  Without limiting the foregoing, all 
calculations of the rate of interest contracted for, charged, taken, reserved 
or received in connection with any of the Loan Documents which are made for 
the purpose of determining whether such rate exceeds the Maximum Rate shall 
be made to the extent permitted by applicable laws by amortizing, prorating, 
allocating and spreaing during the period of the full term of such Loan 
Documents, including all prior and subsequent renewals and extensions hereof 
or thereof, all interest at any time contracted for, charged, taken, reserved 
or received by Bank.  The terms of 

                                      -14-
<PAGE>

this paragraph shall be deemed to be incorporated into each of the other Loan 
Documents.

     To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes 
is relevant to Bank for the purpose of determining the Maximum Rate, Bank 
hereby elects to determine the applicable rate ceiling under such Article by 
the indicated (weekly) rate ceiling from time to time in effect, subject to 
Bank's right subsequently to change such method in accordance with applicable 
law, as the same may be amended or modified from time to time.

     SECTION 7.12.  RIGHT OF SETOFF; DEPOSIT ACCOUNTS.  Upon and after the 
occurrence of an Event of Default, (a) Borrower hereby authorizes Bank, at 
any time and from time to time, without notice, which is hereby expressly 
waived by each Borrower, and whether or not Bank shall have declared the 
Credits to be due and payable in accordance with the terms hereof, to set off 
against, and to appropriate and apply to the payment of, Borrower's 
obligations and liabilities under the Loan Documents (whether matured or 
unmatured, fixed or contingent, liquidated or unliquidated), any and all 
amounts owing by Bank to Borrower (whether payable in U.S. dollars or any 
other currency, whether matured or unmatured, and in the case of deposits, 
whether general or special (except trust and escrow accounts), time or demand 
and however evidenced), and (b) pending any such action, to the extent 
necessary, to hold such amounts as collateral to secure such obligations and 
liabilities and to return as unpaid for insufficient funds any and all checks 
and other items drawn against any deposits so held as Bank, in its sole 
discretion, may elect.  Borrower hereby grants to Bank a security interest in 
all deposits and accounts maintained with Bank and with any other financial 
institution to secure the payment of all obligations and liabilities of 
Borrower to Bank under the Loan Documents.

     SECTION 7.13.  BUSINESS PURPOSE.  Borrower represents and warrants that 
the Credits are for a business, commercial, investment, agricultural or other 
similar purpose and not primarily for a personal, family or household use.

     SECTION 7.14.  ARBITRATION.

     (a)  ARBITRATION.  Upon the demand of any party, any Dispute shall be 
resolved by binding arbitration (except as set forth in (e) below) in 
accordance with the terms of this Agreement.  A "Dispute" shall mean any 
action, dispute, claim or controversy of any kind, whether in contract or 
tort, statutory or common law, legal or equitable, now existing or hereafter 
arising under or in connection with, or in any way pertaining to, any of the 
Loan Documents, or any past, present or future extensions of credit and other 
activities, transactions or obligations of any kind related directly or 
indirectly to any of the Loan Documents, including without limitation, any of 
the foregoing arising in 

                                      -15-
<PAGE>

connection with the exercise of any self-help, ancillary or other remedies 
pursuant to any of the Loan Documents.  Any party may by summary proceedings 
bring an action in court to compel arbitration of a Dispute.  Any party who 
fails or refuses to submit to arbitration following a lawful demand by any 
other party shall bear all costs and expenses incurred by such other party in 
compelling arbitration of any Dispute.

     (b)  GOVERNING RULES.  Arbitration proceedings shall be administered by 
the American Arbitration Association ("AAA") or such other administrator as 
the parties shall mutually agree upon in accordance with the AAA Commercial 
Arbitration Rules.  All Disputes submitted to arbitration shall be resolved 
in accordance with the Federal Arbitration Act (Title 9 of the United States 
Code), notwithstanding any conflicting choice of law provision in any of the 
Loan Documents.  The arbitration shall be conducted at a location in Texas 
selected by the AAA or other administrator.  If there is any inconsistency 
between the terms hereof and any such rules, the terms and procedures set 
forth herein shall control.  All statutes of limitation applicable to any 
Dispute shall apply to any arbitration proceeding.  All discovery activities 
shall be expressly limited to matters directly relevant to the Dispute being 
arbitrated.  Judgment upon any award rendered in an arbitration may be 
entered in any court having jurisdiction; provided however, that nothing 
contained herein shall be deemed to be a waiver by any party that is a bank 
of the protections afforded to it under 12 U.S.C. Section 91 or any similar 
applicable state law.

     (c)   NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE.  No 
provision hereof shall limit the right of any party to exercise self-help 
remedies such as setoff, foreclosure against or sale of any real or personal 
property collateral or security, or to obtain provisional or ancillary 
remedies, including without limitation injunctive relief, sequestration, 
attachment, garnishment or the appointment of a receiver, from a court of 
competent jurisdiction before, after or during the pendency of any 
arbitration or other proceeding.  The exercise of any such remedy shall not 
waive the right of any party to compel arbitration hereunder.

     (d)  ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS.  Arbitrators must be 
active members of the Texas State Bar with expertise in the substantive laws 
applicable to the subject matter of the Dispute.  Arbitrators are empowered 
to resolve Disputes by summary rulings in response to motions filed prior to 
the final arbitration hearing.  Arbitrators (i) shall resolve all Disputes in 
accordance with the substantive law of the state of Texas, (ii) may grant any 
remedy or relief that a court of the state of Texas could order or grant 
within the scope hereof and such ancillary relief as is necessary to make 
effective any award, and (iii) shall have the power to award recovery of all 

                                      -16-
<PAGE>

costs and fees, to impose sanctions and to take such other actions as they 
deem necessary to the same extent a judge could pursuant to the Federal Rules 
of Civil Procedure, the Texas Rules of Civil Procedure or other applicable 
law.  Any Dispute in which the amount in controversy is $5,000,000 or less 
shall be decided by a single arbitrator who shall not render an award of 
greater than $5,000,000 (including damages, costs, fees and expenses).  By 
submission to a single arbitrator, each party expressly waives any right or 
claim to recover more than $5,000,000.  Any Dispute in which the amount in 
controversy exceeds $5,000,000 shall be decided by majority vote of a panel 
of three arbitrators; provided however, that all three arbitrators must 
actively participate in all hearings and deliberations.  

     (e)  JUDICIAL REVIEW.  Notwithstanding anything herein to the contrary, 
in any arbitration in which the amount in controversy exceeds $25,000,000, 
the arbitrators shall be required to make specific, written findings of fact 
and conclusions of law.  In such arbitrations (i) the arbitrators shall not 
have the power to make any award which is not supported by substantial 
evidence or which is based on legal error, (ii) an award shall not be binding 
upon the parties unless the findings of fact are supported by substantial 
evidence and the conclusions of law are not erroneous under the substantive 
law of the state of Texas, and (iii) the parties shall have in addition to 
the grounds referred to in the Federal Arbitration Act for vacating, 
modifying or correcting an award the right to judicial review of (A) whether 
the findings of fact rendered by the arbitrators are supported by substantial 
evidence, and (B) whether the conclusions of law are erroneous under the 
substantive law of the state of Texas.  Judgment confirming an award in such 
a proceeding may be entered only if a court determines the award is supported 
by substantial evidence and not based on legal error under the substantive 
law of the state of Texas.

     (f)  MISCELLANEOUS.  To the maximum extent practicable, the AAA, the 
arbitrators and the parties shall take all action required to conclude any 
arbitration proceeding within 180 days of the filing of the Dispute with the 
AAA.  No arbitrator or other party to an arbitration proceeding may disclose 
the existence, content or results thereof, except for disclosures of 
information by a party required in the ordinary course of its business, by 
applicable law or regulation, or to the extent necessary to exercise any 
judicial review rights set forth herein.  If more than one agreement for 
arbitration by or between the parties potentially applies to a Dispute, the 
arbitration provision most directly related to the Loan Documents or the 
subject matter of the Dispute shall control.  This arbitration provision 
shall survive termination, amendment or expiration of any of the Loan 
Documents or any relationship between the parties.

                                      -17-
<PAGE>

NOTICE:  THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS 
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT 
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, 
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO 
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be 
executed as of the day and year first written above.

                                       WELLS FARGO BANK (TEXAS),
SCHLOTZSKY'S, INC.                       NATIONAL ASSOCIATION


By:                                    By: 
    -------------------------              --------------------------
    John C. Wooley                         Keith Smith
    Chief Executive Officer                Vice President

<PAGE>
                                       
                     FIRST AMENDMENT TO CREDIT AGREEMENT


     THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered 
into as of September 26, 1997, by and between SCHLOTZSKY'S, INC., a Texas 
corporation ("Borrower"), and WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION 
("Bank").

                                   RECITALS

     WHEREAS, Borrower is currently indebted to Bank pursuant to the terms 
and conditions of that certain Credit Agreement between Borrower and Bank 
dated as of June 27, 1997, as amended from time to time ("Credit Agreement").

     WHEREAS, Bank and Borrower have agreed to certain changes in the terms 
and conditions set forth in the Credit Agreement and have agreed to amend the 
Credit Agreement to reflect said changes.

     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency 
of which are hereby acknowledged, the parties hereto agree that the Credit 
Agreement shall be amended as follows:

     1.  The following is hereby added to the Credit Agreement as Section 
1.1(c):

     (c)  FRANCHISEE NOTE SUBFEATURE.  (i)  As a subfeature under the Line
     of Credit, Bank agrees from time to time during the term thereof to
     make loans (each a "Franchisee Loan" and collectively, the "Franchisee
     Loans") to certain franchisees or area distributors (each a
     "Franchisee") of Borrower to finance the payment of leasehold
     improvements to Borrower.  Such loans will be evidenced by promissory
     notes (each a "Franchisee Note" and collectively, "Franchisee Notes")
     in the form attached hereto as Exhibit "C"; provided however, that the
     aggregate amount of all outstanding Franchisee Notes shall not at any
     time exceed Four Million Dollars ($4,000,000.00).  Each Franchisee
     Loan shall be in a minimum amount of Two Hundred Thousand Dollars
     ($200,000.00). The aggregate principal amount of all Franchisee Notes
     shall be reserved under the Line of Credit and shall not be available
     for borrowings thereunder.  

     (ii)  Each Franchisee Note shall be issued for a term of one hundred
     eighty (180) days, and may be renewed one (1) time for another one
     hundred eighty days upon payment of the fee required by Section 1.3(d)
     of this 

<PAGE>

     Agreement; provided however, that no Franchisee Note, or renewal thereof,
     shall have an expiration date subsequent to the maturity date of the Line 
     of Credit.  Each Franchisee Note shall be subject to the additional terms 
     and conditions of this agreement or other document, if any, required by 
     Borrower in connection with the issuance thereof (each a "Franchisee Note 
     Agreement" and collectively, "Franchisee Note Agreements").

     (iii)  Borrower acknowledges and agrees that the agreements and other
     provisions of this Agreement and the guaranty of all Franchisee Loans
     by Borrower are material inducements to Bank's decision whether to
     make any Franchisee Loan.  Borrower agrees to guarantee and does
     hereby unconditionally guarantee the payment of all Franchisee Loan
     amounts, including future Franchisee Loans, until all such
     indebtedness is fully and finally paid.  Borrower agrees that all of
     the terms and provisions of the Guaranty of Franchise Note  form
     (attached hereto as Exhibit "D" and incorporated herein for all
     purposes) shall be and are hereby incorporated by reference as the
     terms and provisions of this guarantee by Borrower of the Franchisee
     Loan amounts.

     (iv)  Borrower represents and warrants that the persons whose names
     are signed as borrowers with respect to Franchisee Loans shall be
     franchisees or area distributors of Borrower, their signatures shall
     be genuine, and their authority and competence to execute all
     Franchisee Loan documents shall be genuine and legally sufficient. 
     Borrower agrees to assure that all provisions of the Franchisee Note
     and funding conditions are adequately explained to each Franchisee
     borrower, agrees to not make any misrepresentations in connection with
     the execution of any note or loan documents, and agrees not to make or
     purport to make any representations on behalf of Bank or enter into
     any oral agreements with any borrower that might be construed as
     having been made by or on behalf of Bank.  Bank may, from time to
     time and in its sole discretion, revise the form of the note and other
     documents used for Franchisee Loans.  Borrower agrees to maintain a
     deposit account with Bank which shall be used for the funding of
     Franchisee Loans; all advances may be funded by Bank into said deposit
     account, with Borrower being responsible for promptly making such
     funds available to the Franchisee borrowers.  Borrower shall maintain
     reliable records of all Franchisee Loans and the balances of such
     loans.  Borrower agrees that when a Franchisee Loan is to be paid off,
     Borrower 

                                     -20-
<PAGE>

     shall be responsible for identifying each specific Franchisee Loan to be 
     paid off, obtaining the correct payoff quote for each such loan, and 
     delivering the correct sum to Bank to accomplish the full payment of such 
     Franchisee Loans.

     (v)   The obligation of the Bank to make any Franchisee Loan shall be
     conditioned upon Bank's receipt of (A) an executed Franchisee Note,
     with all blanks filled in, (B) an executed Guaranty of Franchisee
     Note in the form attached hereto as Exhibit "D" with all blanks filled
     in, and (C) a completed and executed corporate resolution of Borrower
     authorizing the Guaranty of the applicable Franchise Note.  Borrower
     will review and approve all executed Franchisee Loan documents before
     submitting them to Bank.  Borrower will not change the form of such
     documents without Bank's prior written consent.

     (vi)  Borrower agrees to promptly pay the outstanding indebtedness of
     any Franchisee Loan under any circumstance by which the amount of any
     Franchisee Loan becomes due and payable, including without limitation,
     upon maturity if not renewed, or by acceleration after default.  In
     addition, Borrower agrees to purchase all Franchisee Loans or pay to
     Bank all Franchisee Loan amounts within 10 days of Bank's request for
     same upon the occurrence of an Event of Default under this Agreement.

          Upon the occurrence of an Event of Default, any and all
     obligations of Bank relating to the Franchisee Loans shall immediately
     terminate and, at Bank's option, Bank may demand that within ten (10)
     days all Franchisee Notes be paid in full by Borrower or that all
     Franchisee Loans be purchased from Bank by Borrower without recourse
     for the full outstanding balance of all indebtedness under such
     Franchisee Loans, except that in the case of an Event of Default of a
     type involving insolvency, such demand shall be understood as
     occurring automatically, without the necessity of any action by Bank.  

          If, after default and demand as specified above, Borrower fails
     to timely pay or purchase all Franchisee Loans, including all matured
     and unmatured Franchisee Notes, then Bank may advance under the Line
     of Credit the full amount of the Franchisee Loans to effect the
     payment or purchase of such Franchisee Loans by Borrower, and such
     sums (plus interest thereon as it accrues) shall be deemed to be an
     advance under the 

                                     -21-
<PAGE>

     Line of Credit and due and payable as provided therefor. 

     (vii)  Borrower agrees to keep Franchisee Loan documentation,
     guaranties and other forms safe and secure.  Borrower agrees that
     Borrower nor any employee of Borrower, are agents of Bank, and that
     they are not authorized or empowered to act for or on behalf of Bank
     in any respect.  Their actions with respect to the loan application,
     documentation and funding process are performed for or on behalf of
     themselves and/or Franchisee borrowers.

     (viii)  INDEMNIFICATION.  BORROWER AGREES TO INDEMNIFY BANK AND HOLD
     BANK HARMLESS OF AND FROM ANY AND ALL CLAIMS, CAUSES OF ACTION,
     LIABILITIES AND DAMAGES, INCLUDING ATTORNEY'S FEES, WHICH MAY BE
     ASSERTED AGAINST BANK OR BANK'S OFFICERS, DIRECTORS, EMPLOYEES,
     AGENTS, ATTORNEYS, PARENT CORPORATION OR AFFILIATES BY ANY FRANCHISEE
     IN CONNECTION WITH ANY FRANCHISEE LOAN, EXCEPTING ONLY CLAIMS DUE
     SOLELY TO GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT OF BANK.

     2.  The following is hereby added to the Credit Agreement as
Section 1.3(d):

     (d)  FRANCHISEE LOAN FEES.  (i)  Borrower shall pay to Bank a fee upon
     the making of each Franchisee Loan equal to one percent (1.00%) of the
     face amount thereof.  Such fee shall be due and payable immediately
     upon the making of each Franchisee Loan. (ii)  Borrower shall pay to
     Bank fees upon the renewal of  each Franchisee Loan equal to one-half
     of one percent (0.50%) of the face amount thereof.  Such fee shall be
     due and payable immediately upon the renewal of each Franchisee Loan. 

     3.  The following is hereby added to the Credit Agreement as
Section 6.1(j):

     (j)  The nonpayment of any Franchisee Loan within five (5) days of its
     maturity.  A Franchisee Loan may be paid by renewal only once and then
     only upon compliance with the conditions of any such renewals set
     forth herein.

     4.  Annexes "I", and "II" hereto are hereby added to the Credit Agreement
as Exhibits "C", and "D" respectively.

                                     -22-
<PAGE>

     5.  Except as specifically provided herein, all terms and conditions of 
the Credit Agreement remain in full force and effect, without waiver or 
modification.  All terms defined in the Credit Agreement shall have the same 
meaning when used in this Amendment.  This Amendment and the Credit Agreement 
shall be read together, as one document.

     6.  Borrower hereby remakes all representations and warranties contained 
in the Credit Agreement and reaffirms all covenants set forth therein.  
Borrower further certifies that as of the date of this Amendment there exists 
no Event of Default as defined in the Credit Agreement, nor any condition, 
act or event which with the giving of notice or the passage of time or both 
would constitute any such Event of Default.

NOTICE:  THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS 
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT 
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, 
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO 
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be 
executed as of the day and year first written above.

                                       WELLS FARGO BANK (TEXAS),
SCHLOTSZKY'S, INC.                       NATIONAL ASSOCIATION


By:                                    By: 
    ---------------------------            ------------------------------
    John C. Wooley                         Keith Smith
    Chief Executive Officer                Vice President

<PAGE>
                                       
                     SECOND AMENDMENT TO CREDIT AGREEMENT

     THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered 
into as of April 7, 1998, by and between SCHLOTZKY'S, INC., a Texas 
corporation ("Borrower"), and WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION 
("Bank").
                                       
                                    RECITALS

     WHEREAS, Borrower is currently indebted to Bank pursuant to the terms 
and conditions of that certain Credit Agreement between Borrower and Bank 
dated as of June 27, 1997, as amended by that certain First Amendment to 
Credit Agreement between Borrower and Bank dated as of September 26, 1997 
(collectively, the "Credit Agreement").

     WHEREAS, Bank and Borrower have agreed to certain changes in the terms 
and conditions set forth in the Credit Agreement and have agreed to amend the 
Credit Agreement to reflect said changes.

     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency 
of which are hereby acknowledged, the parties hereto agree that the Credit 
Agreement shall be amended as follows:

     1.  Section 1.1(c) of the Credit Agreement is deleted in its entirety 
and the following is substituted therefor:

     (c)  FRANCHISEE NOTE SUBFEATURE.  (i)  As a subfeature under the Line
     of Credit, Bank agrees from time to time during the term thereof to
     make loans to certain franchisees or area distributors (each a
     "Franchisee") of Borrower.  Such loans shall be for the purpose of
     financing (A) the payment to Borrower by a franchisee or an area
     distributor for leasehold improvements (the "Leasehold Loans"), or (B)
     construction of new restaurants and the purchase of furniture,
     fixtures and equipment related thereto by a franchisee (the
     "Construction Loans").  Each Leasehold Loan will be evidenced by a
     promissory note (each a "Leasehold Note" and collectively, "Leasehold
     Notes") in the form attached hereto as Exhibit "C-1".  Each
     Construction Loan will be evidenced by a promissory note (each a
     "Construction Note" and collectively, "Construction Notes") in the
     form attached hereto as Exhibit "C-2" (the Leasehold Notes and the
     Construction Notes, each a "Franchisee Note" and collectively, the
     "Franchisee Notes"); provided however, that the aggregate amount of

<PAGE>

     all outstanding Franchisee Notes shall not at any time exceed Twelve
     Million Dollars ($12,000,000.00). 

          Each Franchisee Loan shall be in a minimum amount of Two Hundred
     Thousand Dollars ($200,000.00). The aggregate principal amount of all
     Franchisee Notes shall be reserved under the Line of Credit and shall
     not be available for borrowings thereunder.  

     2.  Section 1.1(c) of the Credit Agreement is deleted in its entirety 
and the following is substituted therefor:

     Borrower specifically acknowledges and agrees that Bank has made no
     investigation as to the creditworthiness of any Franchisee and that
     Bank would make no Franchisee Loan without the guarantee of such loans
     by Borrower.   Borrower represents and warrants that Borrower has
     established adequate means of obtaining from each Franchisee on a
     continuing basis financial and other information pertaining to such
     Franchisee's financial condition.  Borrower agrees to keep adequately
     informed from such means of any facts, events or circumstances which
     might in any way affect Borrower's risks hereunder or under any
     related Guaranty of Franchisee Note, and Borrower further agrees that
     Bank shall have no obligation to disclose to Borrower any information
     or material about any Franchisee that is acquired by Bank in any
     manner.

     3.  Section 4.9(d) of the Credit Agreement is deleted in its entirety 
and the following is substituted therefor:

          (d)  EBITDA Borrowing Ratio not less than 2.0 to 1.0 as of the
     end of each fiscal quarter, with "EBITDA" as defined above and
     calculated as of the end of the preceding four fiscal quarters, and
     with "EBITDA Borrowing Ratio" defined as the outstanding principal
     balance of the Revolving Line of Credit plus the aggregate principal
     amount of funded and unfunded portions of Franchisee Loans divided by
     EBITDA.

     4.  Exhibit "C" is hereby deleted in its entirety, and Annexes "I" and 
"II" hereto are substituted therefor as Exhibits C-1 and C-2, respectively.
     
     5.  Except as specifically provided herein, all terms and conditions of 
the Credit Agreement remain in full force and effect, without waiver or 
modification.  All terms defined in the Credit Agreement shall have the same 
meaning when used in this Amendment.  This Amendment and the Credit Agreement 
shall be read together, as one document.

                                     -25-
<PAGE>

     6.  Borrower hereby remakes all representations and warranties contained 
in the Credit Agreement and reaffirms all covenants set forth therein.  
Borrower further certifies that as of the date of this Amendment there exists 
no Event of Default as defined in the Credit Agreement, nor any condition, 
act or event which with the giving of notice or the passage of time or both 
would constitute any such Event of Default.

NOTICE:  THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS 
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT 
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, 
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO 
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be 
executed as of the day and year first written above.

                                       WELLS FARGO BANK (TEXAS),
SCHLOTZKY'S, INC.                       NATIONAL ASSOCIATION


By:                                    By: 
    -----------------------------          ---------------------------
    John C. Wooley                         Keith Smith
    Chief Executive Officer                Vice President


<PAGE>
                                       
                      THIRD AMENDMENT TO CREDIT AGREEMENT

     THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered 
into as of December 28, 1998, by and between Schlotzsky's, Inc., a Texas 
corporation ("Borrower"), and WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION 
("Bank").

                                    RECITALS

     WHEREAS, Borrower is currently indebted to Bank pursuant to the terms 
and conditions of that certain Credit Agreement between Borrower and Bank 
dated as of June 27, 1997, as amended from time to time ("Credit Agreement").

     WHEREAS, Bank and Borrower have agreed to certain changes in the terms 
and conditions set forth in the Credit Agreement and have agreed to amend the 
Credit Agreement to reflect said changes.

     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency 
of which are hereby acknowledged, the parties hereto agree that the Credit 
Agreement shall be amended as follows:

     1.  Section 1.1(a) is hereby amended (a) by deleting "April 30, 2000" as 
the last day on which Bank will make advances under the Line of Credit, and 
by substituting for said date "December 15, 2001," and (b) by deleting 
"Twelve Million Dollars ($12,000,000.00)" as the maximum principal amount 
available under the Line of Credit, and by substituting for said amount  
"Fifteen Million Dollars ($15,000,000.00)," with such changes to be effective 
upon the execution and delivery to Bank of a promissory note substantially in 
the form of Exhibit A attached hereto (which promissory note shall replace 
and be deemed the Line of Credit Note defined in and made pursuant to the 
Credit Agreement) and all other contracts, instruments and documents required 
by Bank to evidence such change.

     1.  Section 1.1(c) is hereby amended by deleting "Twelve Million Dollars 
($12,000,000.00)" as the maximum amount available for Franchisee loans under 
the subfeature therefor under the Line of Credit, and by substituting for 
said amount "Ten Million Dollar ($10,000,000.00)," with such change to be 
effective upon the execution and delivery to Bank of this Amendment and all 
other contracts, instruments and documents required by Bank to evidence such 
change.

<PAGE>

     2.  Section 1.3 is hereby deleted in its entirety, and the following 
substituted therefor:

                    "SECTION 1.2.  LOAN.
          
               (a)  LOAN.  Subject to the terms and conditions of this
          Agreement, Bank hereby agrees to make a loan to Borrower in
          the principal amount of Five Million Dollars ($5,000,000.00)
          ("Loan"), the proceeds of which shall be used for capital
          expenditures.  Borrower's obligation to repay the Loan shall
          be evidenced by a promissory note substantially in the form
          of Exhibit B attached hereto ("Loan Note"), all terms of
          which are incorporated herein by this reference.  Bank's
          commitment to grant the Loan shall terminate on January 22,
          1999.
          
               (b)  REPAYMENT.  The outstanding principal balance of
          the Loan shall be due and payable in full on March 31, 1999.
          
               (c)  PREPAYMENT.  Borrower may prepay principal on the
          Loan solely in accordance with the provisions of the Loan
          Note."

     3.  Sections 1.3(a) and (b) are hereby deleted in their entirety, and 
the following substituted therefor:

               "(a) INTEREST.  The outstanding principal balances of
          the Line of Credit, the Leasehold Loans, the Construction
          Loans and the Loan shall bear interest at the rates of
          interest set forth in the Line of Credit Note, the
          Franchisee Notes and the Loan Note.
          
               (b)  COMPUTATION AND PAYMENT.  Interest shall be
          computed on the basis of a 360-day year, actual days
          elapsed, unless such calculation would result in a usurious
          rate, in which case interest shall be computed on the basis
          of a 365/366-day year, as the case may be, actual days
          elapsed.  Interest shall be payable at the times and place
          set forth in the Line of Credit Note, the Franchisee 

                                     -28-
<PAGE>

          Notes and the Loan Note (collectively, the "Notes").
           
     4.  The following is hereby added to the Credit Agreement as Section 1.4:

          "SECTION 1.4.  COLLATERAL.

               As security for all indebtedness of Borrower to Bank
          subject hereto, Borrower hereby grants to Bank security
          interests of first priority in all Borrower's accounts
          receivables, other right to payment and general intangibles.
          
               All of the foregoing shall be evidenced by and subject
          to the terms of such security agreements, financing
          statements, deeds of trust and other documents as Bank shall
          reasonably require, all in form and substance satisfactory
          to Bank.  Borrower shall reimburse Bank immediately upon
          demand for all costs and expenses incurred by Bank in
          connection with any of the foregoing security, including
          without limitation, filing and recording fees and costs of
          appraisals, audits and title insurance."

     5.  Except as specifically provided herein, all terms and conditions of 
the Credit Agreement remain in full force and effect, without waiver or 
modification.  All terms defined in the Credit Agreement shall have the same 
meaning when used in this Amendment.  This Amendment and the Credit Agreement 
shall be read together, as one document.

     6.  Borrower hereby remakes all representations and warranties contained 
in the Credit Agreement and reaffirms all covenants set forth therein.  
Borrower further certifies that as of the date of this Amendment there exists 
no Event of Default as defined in the Credit Agreement, nor any condition, 
act or event which with the giving of notice or the passage of time or both 
would constitute any such Event of Default.

NOTICE:  THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS 
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT 
BETWEEN THE PARTIES AND MAY NOT BE 

                                     -29-
<PAGE>

CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL 
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN 
THE PARTIES RELATING TO THE INDEBTEDNESS.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be 
executed as of the day and year first written above.

                                       WELLS FARGO BANK (TEXAS),
SCHLOTZSKY'S, INC.                      NATIONAL ASSOCIATION


By:                                    By: 
    -----------------------------          -------------------------------
    John C. Wooley                         Keith Smith
    Chief Executive Officer                Vice President




                                     -30-