Document:

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                                                                   EXHIBIT 10.10

                                MERGER AGREEMENT

     THIS MERGER AGREEMENT is made this ___ day of _________, 1999, at
Indianapolis, Indiana by and among Global Marketing Concepts, Inc., a Kentucky
corporation, (hereinafter referred to as "Private Entity"), Jeremy N. Schell, E.
Allen Schuler, Stan Logan, Jr., James Lavelle, Jr., John Lavelle, Jonathan
Robertson, its shareholders, (hereinafter referred to as "Stockholders" or
"Shareholders"), and NetVision.com, Inc., a Delaware corporation (hereinafter
referred to as "NetVision").

                                    RECITALS

     A.   Private Entity is a Kentucky corporation, and presently owns and
          operates an Internet Service Provider ("ISP") business, operated from
          the locations, identified on SCHEDULE 3.3.5

     B.   Both NetVision, through its Board of Directors, and Private Entity,
          through its Shareholders, Jeremy N. Schell, E. Allen Schuler, Stan
          Logan, Jr., James Lavelle, Jr., John Lavelle, Jonathan Robertson,
          believe this Merger to be in the best interests of their respective
          business entities.

     C.   The entities shall merge together, with NetVision surviving the Merger
          as the new entity (hereinafter "Merged Companies") which shall be
          known as NetVision.com, Inc. Private Entity shall cease to exist as a
          separate legal entity, but shall continue to exist as a part of the
          surviving entity.

     D.   The parties intend for the transactions contemplated by this Agreement
          to be accounted for as a tax-free "reorganization" within the meaning
          of Section 368(a) of the Internal Revenue Code of 1986, as amended
          (the "Code") for federal income tax purposes.

     E.   As promptly as practicable after the satisfaction or waiver of the
          conditions set forth in Section 8 hereof and the consummation of the
          Closing referred to in Section 9 hereof, the Parties shall cause the
          Merger to be consummated by filing a Certificate of Merger with the
          Delaware Secretary of State in accordance with the relevant provisions
          of Delaware Law (the time of such filing being the "Effective Time")
          and Articles of Merger with the Kentucky Secretary of State in
          accordance with the relevant provisions of Kentucky law.

     F.   Unless otherwise agreed by NetVision and Private Entity the
          Certificate of Incorporation of NetVision as the Surviving Corporation
          shall be the Certificate of Incorporation of NetVision as in effect
          immediately prior to the Effective Time, until thereafter amended as
          provided by law and such Certificate of Incorporation.

     G.   Unless otherwise agreed by NetVision and Private Entity the By-Laws of
          NetVision as the Surviving Corporation shall be the By-Laws of
          NetVision immediately prior to the Effective Time, until thereafter
          amended as provided by law and Certificate of Incorporation and the
          By-Laws of Such Surviving Corporation.

     H.   Unless otherwise agreed by NetVision and Private Entity the directors
          and officers of NetVision immediately prior to the Effective Time
          shall continue to serve in their respective offices of the Surviving
          Corporation from and after the Effective Time, in each case until
          their resignation or removal. If, at the Effective Time, a vacancy
          shall exist on the Board of Directors or in any office of the
          Surviving Corporation, such vacancy may thereafter be filled in the
          manner provided by law and the By-Laws of the Surviving Corporation.

         NOW, THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable consideration, the receipt, adequacy and
sufficiency of which are acknowledged, the parties agree as follows:

                             SECTION 1. DEFINITIONS

         As used in this Agreement, the terms identified below in this Section
will have the meanings indicated,

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unless a different and common meaning of the term is clearly indicated by the
context.

          1.1  Agreement - means this Merger Agreement together with the
               Attachments.

          1.2  Attachments - means the Schedules and Exhibits referred to herein
               and attached hereto.

          1.3  Authorization - means any Government consent, license, permit,
               grant or other governmental authorization.

          1.4  Balance Sheet - means the most recent Balance Sheet available for
               Private Entity, a copy of which is attached hereto and marked
               SCHEDULE 1.4.

          1.5  Closing - means the Closing of the Transaction as described in
               Section 9 of this Agreement.

          1.6  Closing Date - means the date and time as set forth in Section 9,
               or such other date and time as subsequently may be agreed upon by
               the parties, in writing. Any reference herein to the Closing Date
               for the purpose of establishing a point in time, or calculating a
               period of time, means 11:59 p.m., local time on the Closing Date.

          1.7  Contract - means any voluntarily entered written or oral
               agreement or commitment that is legally binding on any person or
               entity under applicable law.

          1.8  Court Order - means any judgment, decree, injunction or order of
               any federal, state, local or foreign court that is binding on any
               person or entity or its property under applicable law.

          1.9  Intentionally left blank.

          1.10 Diminutive Error - Means any mistake, misrepresentation, failure
               to disclose, or other error, which has a net dollar value of less
               than Two Thousand Dollars. ($2000.00)

          1.11 Effective Date - means the date first above written unless
               otherwise agreed to in writing by the Parties.

          1.12 Entity - means a corporation, partnership, sole proprietorship,
               limited liability company, joint venture or other form of
               organization whether formed for the conduct of a business or
               profit seeking activity, active or passive, or not for profit.

          1.13 Financial Statements - means the Balance Sheet, as defined in
               Section 1.4, the Statement of Income and Expenses, as defined in
               Section 1.19, and Cash Flow Statements, when referred to
               collectively.

          1.14 Intellectual Property - means any trade names, trademarks,
               service marks, copyrights and work of authorship, and all
               registrations and applications for the foregoing, and all
               licenses or license rights related to or based upon the
               foregoing, software licenses and know-how licenses, trade
               secrets, fictitious names, assumed names, all industrial models
               and all United States and foreign patent rights covered by,
               disclosed in or otherwise related thereto and all registrations
               and applications therefor and all reissues, divisions,
               continuations-in-part, re-examinations and extensions thereof,
               together with the right to sue for past infringement and
               improper, unlawful or unfair use of any of the foregoing.

          1.15 Merged Assets - means the assets to be merged and transferred by
               Private Entity to NetVision in accordance with this Agreement as
               more specifically described in Section 3.3

          1.16 Parties - means NetVision.Com, Inc., Private Entity, and
               Stockholder.

          1.17 Private Entity - means Global Marketing Concepts, Inc., a
               Kentucky corporation.

          1.18 Private Entity 's Business - means the existing business
               operations (including without limitation, the goodwill and going
               concern value), labor relations, customer and supplier relations,
               and products, if any, or services, if any, of Private Entity, and
               the name Private Entity, or any derivative thereof.

          1.19 Statement of Income and Expenses - means the most recent
               Statement of Income and Expenses available for Private Entity, a
               copy of which is attached hereto and marked SCHEDULE 1.19.

          1.20 NetVision - means NetVision .com, Inc., a Delaware Corporation.

          1.21 Transaction - means the transaction contemplated by the
               Agreement, and the related Attachments.

          1.22 Year-End Balance Sheets - means the Balance Sheet for the year
               ended December 31, 1998.

          1.23 Year-End Statements of Income and Expenses - means the Statements
               of Income and Expenses of Private Entity for the year ended
               December 31, 1998.

          1.24 Year-End Financial Statements - means the Year-End Balance
               Sheets, and the Year-End Statement of Income and Expenses.

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                             SECTION 2 - THE MERGER

          2.1  Adoption of Plan of Merger. Both parties have taken all requisite
               corporate action prior to the date hereof for the purposes of
               adopting and approving this Agreement pursuant to Delaware and
               Kentucky law. Upon the closing of the transactions contemplated
               by this Agreement, NetVision shall cause a Certificate of Merger
               pursuant to this Agreement to be filed with the Secretary of
               State of Delaware and Articles of Merger to be filed with the
               Secretary of State of Kentucky, and shall cause to be filed such
               certificates, documents or instruments as are required to be
               filed in such States, any other State required, in order to
               effectuate the transactions contemplated by this Agreement.

          2.2  General. Private Entity shall be merged with and into NetVision
               effective as of the Effective Time and the separate corporate
               existence of Private Entity shall thereupon cease. The
               Certificate of Incorporation and Bylaws of NetVision as in effect
               on the Closing Date shall remain in full force and effect. The
               Merger Consideration shall be payable on the date of Closing as
               set forth below in Section 3.

          2.3  Conversion of Private Entity Shares. By operation of law and
               without any further action on the part of NetVision, Private
               Entity or the Stockholders, the Private Entity Shares shall be
               converted into a number of NetVision Shares and an amount of cash
               determined pursuant to Section 3.1 as a result of the Merger of
               the two entities. NetVision shall deliver to each Stockholder at
               the Closing and/or within a reasonable time thereafter, a share
               certificate evidencing ownership of NetVision Shares, as set
               forth in the table below, upon surrender to NetVision of the
               share certificate or certificates representing such Stockholder's
               ownership of Private Entity Shares duly endorsed for transfer or
               accompanied by properly executed stock powers.

                      SECTION 3 - SPECIFIC TERMS OF MERGER

          3.1  Merger Consideration by NetVision.

               3.1.1 At the Effective Time, by virtue of the Merger and
                     without any action on the part of NetVision, Private
                     Entity or the Stockholders, the Private Entity Shares
                     shall be converted into an aggregate merger
                     consideration equal to six hundred fifty thousand
                     dollars ($650,000). Ten Percent (10%) of said merger
                     consideration, in an amount not less than sixty-five
                     thousand dollars ($65,000) shall be paid in cash at the
                     closing. Said amount shall be payable via certified
                     check(s), wire transfers or other means of immediately
                     available funds and tendered at the Closing, as set
                     forth in the Conditions Precedent set forth below in
                     Section 8. The remainder of the merger consideration
                     shall be paid in shares of NetVision common stock
                     pursuant to Section 3.1.2 herein.

               3.1.2 The NetVision common stock shares are to be allocated to
                     the payment of the remainder of the merger consideration
                     at a rate of one (1) share of NetVision common stock per
                     Five Dollars ($5) of remaining purchase price (the
                     "Exchange Ratio"), for a total number of shares equal to
                     one hundred seventeen thousand (117,000) shares. The
                     shares of NetVision common stock are to be evidenced by
                     the issuance of stock certificates for said number of
                     shares. Said stock certificates shall be tendered at the
                     Closing, as set forth in the Conditions Precedent set
                     forth below in Section 8.

          3.2  Transfer of Stock by Private Entity. To effectuate this Merger,
               the Stockholders of Private Entity shall surrender all
               outstanding Private Entity shares to NetVision. The Share
               certificate or certificates representing such Stockholder's
               ownership of Private Entity Shares shall be duly endorsed for
               transfer or accompanied by properly executed stock powers.

          3.3  Transfer of Assets by Private Entity. In connection with the
               Merger and by operation of law, any and all assets currently held
               by Private Entity shall be transferred, surrendered or otherwise
               vested in NetVision. The following list of assets in no way
               affects the validity of the Merger Agreement,

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               nor does it limit the transfer of all assets of Private Entity in
               any way, nor does it convert this Agreement to an Asset Purchase
               Agreement. The items set forth below are for the mutual
               protection of the parties, and are intended only as a guide to
               the assets to be transferred. The Merger contemplates the
               transfer of all assets of Private Entity, whether specifically
               set forth below or not. This agreement does not contemplate the
               transfer of any personal assets of the Stockholders, as set forth
               on SCHEDULE 3.3. Any assets used in the business, not specified
               on SCHEDULE 3.3, shall be transferred to NetVision herewith.

               3.3.1 All of the Accounts Receivable of Private Entity , as of
                     the Closing Date;

               3.3.2 All inventory of Private Entity;

               3.3.3 All rights to prepaid expenses, as of the Closing Date;

               3.3.4 The motor vehicles described in SCHEDULE 3.3.4;

               3.3.5 The real property owned by Private Entity; all other fixed
                     assets owned by Private Entity and used in connection with
                     the conduct of Private Entity 's business; all right, title
                     and interest in and to all of Private Entity 's Contracts,
                     including but not limited to all Private Entity's rights to
                     any leasehold interest or improvements. SCHEDULE 3.3.5 sets
                     forth without limitation the real property owned by or used
                     in the course of Private Entity's business.

               3.3.6 Any and all of the Customers and Subscribers of Private
                     Entity, as reflected by SCHEDULE 3.3.6. Said Schedule is
                     not intended to be an exhaustive list, rather a guide for
                     the benefit of the parties. Nothing in this Section, this
                     contract, nor any attachment, restricts the transfer of all
                     current, past and prospective customers or clients of
                     Private Entity.

               3.3.7 All manuals, charts, instruction of application, files and
                     records, signs, customer and marketing-data, engineering
                     data, plans and blueprints as are used in connection with
                     Private Entity 's Business, and all documents, papers and
                     records pertaining to employees, customers and vendors in
                     connection with Private Entity 's Business, including
                     accounts receivable and trade payable records; provided,
                     however, that Private Entity may retain all corporate
                     records and minute books, all original books of account and
                     accounting data maintained by Private Entity for financial
                     reporting and tax reporting purpose;

               3.3.8 All Intellectual Property of Private Entity used in
                     connection with Private Entity's business, and including
                     all rights Private Entity has to its know-how, trade
                     secrets, processes, technology, discoveries, patented or
                     unpatented inventions and designs, formulae and procedures
                     and other intellectual property, including, but not limited
                     to, documentation relating to any of the foregoing, all
                     shop rights and the right to sue for past infringement or
                     improper, unlawful or unfair use or disclosure thereof and
                     the right to apply for patent, design or similar protection
                     therefore any where in the world;

               3.3.9 All assignable authorizations relating to or utilized in
                     connection with Private Entity's Business, including
                     without limitation, stationery and other office supplies;

              3.3.10 Any and all Private Entity's interest in and to all
                     telephone, fax and telex numbers, post office box numbers
                     and all listings pertaining to Private Entity's Business in
                     all telephone books and directories, stationery, forms,
                     labels, shipping material, catalogs, brochures, art work,
                     photographs and advertising and promotional materials. The
                     telephone, fax, telex numbers and post office box numbers
                     being identified in attached SCHEDULE 3.3.10;

              3.3.11 Rights in, to and under third-party manufacturers'
                     warranties;

              3.3.12 Claims as to which Private Entity is a judgment creditor;

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              3.3.13 The goodwill and going concern of value of Private
                     Entity's Business;

              3.3.14 All cash, bank deposits, and marketable securities.

              3.3.15 The names Global Marketing Concepts, Inc.;
                     "thoseinternetguys.com"; The Legal Network, Inc.;
                     Louisville.net, Inc.; Internet Partners, Inc.;
                     KentuckyGolf.com; or any derivative thereof.

              3.3.16 Any and all Internet registered web sites, Internet
                     addresses, domain names, e-mail registrations, web-site
                     registrations, or any other internet related license,
                     registration or technological asset used in the business,
                     including but not limited to any such items registered with
                     Internic, or the American Registry for Internet Numbers, in
                     which Private Entity holds any proprietary or leasehold
                     interest, including but not limited to the domain names
                     thoseinternetguys.com; The Legal Network, Inc.;
                     Louisville.net, Inc.; Internet Partners, Inc.;
                     KentuckyGolf.com, any derivative thereof, or any other name
                     used in connection with the ISP business contemplated
                     hereby.

          SECTION 4. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
                     OF THE STOCKHOLDERS

          4.1  Representations of Each Stockholder. Each Stockholder severally
               and not jointly represents and warrants to NetVision as follows:

               4.1.1 Title. Each Stockholder owns beneficially and of record,
                     and has full power and authority to vote and transfer,
                     free and clear of any claims, liens or encumbrances, the
                     Private Entity Shares indicated next to his name below.
                     Such shares constitute all of the Private Entity Shares
                     owned by such Stockholder.

<TABLE>
<CAPTION>

                             NAME                                   OUTSTANDING SHARES             PERCENT OWNERSHIP

                 <S>                                                      <C>                          <C>
                             JEREMY SCHELL                                  221                          46.23%

                             E. ALLEN SCHULER                               221                          46.23%

                             STAN LOGAN, JR.                                10                           2.09%

                             JAMES LAVELLE, JR.                             10                           2.09%

                             JOHN LAVELLE                                   10                           2.09%

                             JONATHAN ROBERTSON                              6                           1.26%

                                                                            478                         100.00%
</TABLE>

               4.1.2 Authority. Such Stockholder has the full legal right,
                     power and authority to enter into, execute and deliver
                     this Agreement and to perform such Stockholder's
                     obligations hereunder.

               4.1.3 This Agreement has been duly executed and delivered by
                     such Stockholder and is the valid and binding obligation
                     of such Stockholder enforceable in accordance with its
                     terms.

               4.1.4 The execution and delivery of this Agreement and the
                     consummation by such Stockholder of the transactions
                     contemplated by this Agreement will not:

                     4.1.4.1 require the further approval or consent of any
                             federal, state, county or local court or other
                             governmental or regulatory body of the approval
                             or consent of any other person; or

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                     4.1.4.2 conflict with or result in a breach or violation
                             of any of the terms and conditions of, or
                             constitute (with notice, lapse of time or both)
                             a default under or a violation of, any statute,
                             regulation, order, judgment or decree applicable
                             to any such Stockholder or any instrument,
                             contract or other agreement, including, but not
                             limited to, Covenant not to Compete, Stock Lien,
                             mortgage lien, assignment contract, or any other
                             contract to which such Stockholder is a party.

          4.2  Intentionally left blank (Moved to Section 5.27)

          4.3  Intentionally left blank (Moved to Section 5.28)

          4.4  Intentionally left blank (Moved to Section 5.29)

          4.5  Intentionally left blank (Moved to Section 5.30)

          4.6  Restricted Shares. Such Stockholder acknowledges, understands and
               agrees

               4.6.1 The NetVision Shares set forth as consideration in
                     Section 3 have not been registered with the Securities
                     and Exchange Commission (the "SEC") under the Securities
                     Act of 1933, as amended (the "Securities Act") and have
                     not been registered under any state securities law. The
                     NetVision Shares may not be resold or redistributed
                     without registration under the Securities Act and any
                     applicable state securities laws, unless an applicable
                     exemption from such registration is available.

               4.6.2 The NetVision Shares being acquired by such Stockholder
                     under this Agreement, are being acquired for such
                     Stockholder's own account, for investment purposes, not
                     for the interest of any other person, firm or entity,
                     and not with a view to or present intention of reselling
                     or distributing all or any portion of, or interest in,
                     the NetVision Shares.

               4.6.3 Such Stockholder does not have any right to compel
                     NetVision to register the NetVision Shares under the
                     Securities Act or any state securities law and such
                     Stockholder acknowledges that NetVision has no present
                     intention of registering the NetVision shares, unless as
                     specified in a Registration Rights Agreement, and then
                     only to the extent contained therein, and in the form
                     attached hereto.

               4.6.4 Such Stockholder has such knowledge and experience in
                     financial and business matters that he is capable by
                     himself of evaluating the merits and risks of his
                     investment in the NetVision Shares and of making an
                     informed investment decision.

               4.6.5 Such Stockholder has sought and received competent
                     professional accounting advice from a qualified
                     professional with regard to the tax consequences of
                     owning NetVision Shares and of this transaction in
                     general.

               4.6.6 The certificates evidencing the NetVision Shares shall
                     bear the following legend:

                     THE SHARES REPRESENTED BY THIS STOCK CERTIFIED HAVE NOT
                     BEEN REGISTERED UNDER ANY STATE SECURITIES ACT (THE
                     "STATE ACTS") OR THE SECURITIES ACT OF 1933, AS AMENDED
                     (THE "SECURITIES ACT"). THE SHARES CANNOT BE SOLD OR
                     OTHERWISE DISPOSED OF WITHOUT EITHER REGISTRATION OR AN
                     EXEMPTION FROM REGISTRATION.

          SECTION 5 - JOINT AND SEVERAL REPRESENTATIONS OF SCHELL, SCHULER
                      AND PRIVATE ENTITY

                     Schell, Schuler and Private Entity, jointly and
                     severally, represent and warrant to NetVision as follows:

          5.1  Organization and Qualification; Capitalization. Private Entity is
               a Kentucky corporation duly organized and validly existing under
               the laws of the Commonwealth of Kentucky. Private Entity has

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               the full corporate power to carry on its business as is now being
               conducted.

          5.2  The authorized capital stock and the number of shares of capital
               stock issued and outstanding for Private Entity is as follows:

                      AUTHORIZED CAPITAL STOCK:      1,000
                      ISSUED SHARES:                   478
                      OUTSTANDING SHARES:              478
                      TREASURY SHARES:                   0

          5.3  Authority. Private Entity has the full legal right, power, and
               authority to enter into, execute and deliver this Agreement and
               to perform fully its obligations hereunder.

          5.4  This Agreement has been duly executed and delivered by Private
               Entity and is the valid and binding obligation of Private Entity
               enforceable against Private Entity in accordance with its terms.

          5.5  The Board of Directors of Private Entity and the Stockholders
               have approved, and no other corporate proceedings are necessary
               to authorize, this Agreement and the consummation of the
               transactions contemplated by this Agreement.

          5.6  The execution and delivery of this Agreement and the consummation
               by Private Entity of the transactions contemplated hereby will
               not:

               5.6.1 conflict with, result in a breach of, or constitute or
                     result in a default under any of the terms, conditions
                     or provisions of the Articles of Incorporation or
                     by-laws or other governing instruments of Private Entity;

               5.6.2 require the further approval or consent of any federal,
                     state, county or local court or other governmental or
                     regulatory body, or the approval or consent of any other
                     person; or

               5.6.3 conflict with or result in any breach or violation of
                     any of the terms and conditions of, or constitute a
                     default (with notice, lapse of time or both) under, or a
                     violation of, any statute, regulation, order, judgment
                     or decree applicable to Private Entity or any
                     instrument, contract or other agreement to which Private
                     Entity is a party or to which Private Entity is bound or
                     subject, including without limitation the contracts
                     identified in Sections 5.10 and 5.26 below.

          5.7  Financial Statements/Dividends/Distributions. The balance sheets
               of Private Entity as defined in SECTION 1.4, and evidenced by
               SCHEDULE 1.4, and the related statements of income and expenses
               as defined by Section 1.19, and evidenced by SCHEDULE 1.19
               (Collectively the "Financial Statements") fairly, accurately and
               completely represent the financial position of Private Entity on
               the date of execution of this document in all material aspects,
               and the results of operations and cash flows for Private Entity
               for the years then ended.

          5.8  No dividends or other distributions have been made by Private
               Entity to the Stockholders since January 1, 1999 except for
               salaries and commissions in the ordinary course of business, or
               as set forth in SCHEDULE 5.8.

          5.9  Ownership of Operating Assets. Private Entity has good and
               marketable title to, or holds a valid lease to, (the "Operating
               Leases"), all of its office equipment, furniture, motor vehicles
               and other tangible personal property (collectively, the
               "Operating Assets") owned or used by it in its business, free and
               clear of all restrictions, liens, claims and other encumbrances
               except as set forth in SCHEDULE 5.9

          5.10 Contracts and Leases. SCHEDULE 5.10 sets forth the contracts and
               leases (including office lease) material to the operation of
               Private Entity and which have been previously delivered to
               NetVision, are valid, binding upon the parties thereto, in full
               force and effect and, except as indicated below, have not been
               amended or modified. Private Entity will cooperate in having the
               contracts and leases set forth

                                                                               7
<PAGE>

               on SCHEDULE 5.10 assigned to NetVision if requested by NetVision.
               Private Entity and NetVision acknowledge that a separate
               Agreement reflecting the assignment of the Contracts and Leases
               is not required as a result of the merger of Private Entity into
               NetVision.

          5.11 Intellectual Property Rights. To the best of Schell's and
               Schuler's knowledge Private Entity owns, or holds adequate
               licenses to, the intellectual property used in its business,
               including, without limitation, trademarks, service marks,
               copyrights, patents, and computer software and data bases, free
               and clear of all restrictions, liens, claims and other
               encumbrances, and such use does not and will not conflict with,
               infringe on, or otherwise violate any rights of others.

          5.12 Stockholders: Stockholder Benefits. The Stockholder benefits
               programs set forth in SCHEDULE 5.12 constitute the only
               Stockholder benefit programs in effect for Private Entity prior
               to the date of this Agreement.

          5.13 Employee Benefit Programs. The Employee Benefit programs set
               forth in SCHEDULE 5.13 constitute the only Employee benefit
               programs in effect for Private Entity prior to the date of the
               Agreement.

          5.14 Insurance. Private Entity has in place and in full force and
               effect, hazard and liability insurance policies with coverage
               amounts and deductibles as set forth in SCHEDULE 5.14.

          5.15 Insurance Coverage. The Stockholders and Private Entity shall
               take all action reasonably necessary to maintain, in the name and
               for the benefit of NetVision, all insurance policies of Private
               Entity, until the Closing.

          5.16 Bank Accounts. Schell, Schuler and Private Entity shall take all
               action reasonably necessary to maintain the current bank
               accounts, lock boxes and other depositories of Private Entity,
               until the Closing Date.

          5.17 Permits, Licenses and Compliance with Laws. For this Section,
               Schell, Schuler and Private Entity represent and warrant that
               they have no actual knowledge, nor any reason to know of any
               violations, and to the best of their knowledge:

               5.17.1 Private Entity maintains in full force and effect, all
                      permits, licenses and approvals from federal, state,
                      local and foreign governmental and regulatory bodies
                      required in order to carry on its business.

               5.17.2 Private Entity is in compliance in all material
                      respects with all federal, state and local laws,
                      ordinances, codes, regulations, orders, requirements,
                      standards and procedures which are applicable to its
                      business.

               5.17.3 Neither Private Entity nor any officer, director or
                      agent of Private Entity has been convicted of, charged
                      with, or to the knowledge of Private Entity, Schell, or
                      Schuler investigated for a violation of federal or
                      state law related to fraud, theft, embezzlement, breach
                      of fiduciary responsibility, or financial misconduct,
                      including but not limited any violation of the
                      Securities Act, or State Securities Law; or has been
                      subject to any order or consent decree of, or criminal
                      or civil fine or penalty imposed by, any court of
                      governmental agency.

          5.18 Litigation. Except as set forth in SCHEDULE 5.18, (the
               "Litigation Schedule") there are no claims, complaints, suits,
               actions and judicial, regulatory, arbitration or governmental
               actions, proceedings or investigations pending, or to the
               knowledge of Schell, Schuler or Private Entity threatened, or
               anticipated, including actions known, or actions that Schell,
               Schuler or Private Entity have reason to know, against Private
               Entity, or any of their respective officers, directors or agents.

          5.19 Tax Payments and Returns. Private Entity has delivered to
               NetVision true and complete copies of its federal, state and
               local income tax returns for its tax year ended December 31,
               1998. Except as set forth on Schedule 5.19, Private Entity has
               filed all tax reports and returns required to be filed by it

                                                                               8
<PAGE>

               through the date of this Agreement and has paid all taxes and
               other related charges (including interest and penalties) due or
               claimed to be due from it by foreign, federal, state or local
               taxing authorities. To the best of Schell's and Schuler's
               knowledge, no taxing authority has audited any portion or a tax
               return relating to Schell, Schuler or Private Entity, and there
               are no notices of audit, pending questions relating to, or claims
               asserted for, taxes or assessments received by or made against
               any Private Entity.

          5.20 Corporate Documents and Minute Books; Officers and Directors. The
               minutes of corporate proceedings, stock transfer records,
               Articles of Incorporation (or Certificate of Incorporation) and
               Code of Regulations (or by-laws) of Private Entity have been
               delivered to NetVision and are correct and complete, accurately
               reflect all actions and proceedings of the Stockholders and Board
               of Directors of Private Entity to date.

          5.21 Brokers/Fees. Negotiations related to this Agreement and the
               transactions contemplated hereby have been carried on by the
               Stockholders and Private Entity, and no brokerage or finders'
               fees are payable by any Stockholder or Private Entity to any
               other party in connection with this Agreement or the transactions
               contemplated hereby.

          5.22 Adverse Changes. Since, November 30, 1999, Private Entity has not
               suffered any material adverse changes in its financial condition,
               assets, liabilities or business or any material damage,
               destruction or loss to its assets, whether or not covered by
               insurance.

          5.23 Operations in the Ordinary Course. Except as set forth on
               Schedule 5.23, since November 30, 1999, Private Entity has been
               operated only in the normal and ordinary course, and has not:

               5.23.1 Issued or committed to issue any capital stock or other
                      ownership interest therein; 5.23.2 granted or committed
                      to grant any options, warrants, convertible securities
                      or other rights to subscribe for, purchase or otherwise
                      acquire any shares of its capital stock or other
                      ownership interest therein;

               5.23.3 entered into any material agreement to make capital
                      expenditures;

               5.23.4 entered into any agreement relating to the borrowing of
                      money or other contract for indebtedness, or the
                      guarantee of any obligation for the borrowing of money;

               5.23.5 entered into any material real or personal property
                      lease; or

               5.23.6 entered into, modified, or canceled any other
                      agreement, contract or commitment which is not
                      terminable at will.

          5.24 Third Party Consents. The Stockholders and Private Entity have
               obtained and delivered, or will obtain and deliver by the Closing
               Date, to NetVision the consent or approval of each third party
               whose consent or approval is required or deemed necessary by
               NetVision for the consummation of the transactions contemplated
               by this Agreement.

          5.25 Transactions with Related Parties. Except for the employment of
               the Stockholders and as set forth on Schedule 5.25, there are no
               contracts, leases, loans, commitments, transactions, arrangements
               or other understandings, oral or written, between Private Entity
               and any Related Party. For purposes of this Section, the term
               "Related Party" means (a) any Stockholder, (b) the spouse, lineal
               descendant or other family member of a Stockholder, (c) any
               corporation, partnership, trust, limited liability company, or
               other entity controlled by, or under common control with a
               Stockholder, (d) any officer, director or Stockholder of Private
               Entity, and (e) any person who is a member, partner or
               Stockholder in any relationship or similar form of business
               association with any person or entity referred to above.

          5.26 Disclosure. To the best knowledge of Schell and Schuler and to
               the best knowledge of Private Entity, no representation or
               warranty by Schell, Schuler or Private Entity, or any document,
               written statement or certificate furnished to NetVision pursuant
               to this Agreement, contains any untrue statement of material fact
               or omits to state a fact necessary in order to make the
               statements contained herein or therein not misleading.

          5.27 Private Entity Liabilities. SCHEDULE 5.27 sets forth those
               certain liabilities of Private Entity, which NetVision shall
               assume pursuant to the terms of the Merger. These liabilities are
               categorized as

                                                                               9
<PAGE>

               liabilities not incurred in the normal course of business and
               include, but are not limited by, all obligations due from Private
               Entity to its past and present Stockholders, any debt incurred to
               raise capital financing, current and past litigation claims, and
               any other debt not incurred in the Ordinary Course of Business.
               There are no additional debts of Private Entity not incurred in
               the Normal Course of Business. The payment of the SCHEDULE 5.27
               liabilities will become the obligation of NetVision from and
               after the Effective Time and shall be paid in the ordinary course
               of business.

          5.28 Private Entity Liabilities incurred in the normal course of
               business. SCHEDULE 5.28 sets forth as of the date hereof those
               other obligations of Private Entity incurred in the ordinary
               course of business and which remain due and owing as of the date
               hereof. Where exact amounts of these liabilities cannot be
               determined on the Closing Date, Private Entity shall indicate the
               estimated amount due and owing. The payment of the SCHEDULE 5.28
               liabilities will become the obligation of NetVision from and
               after the Effective Time and shall be paid in the ordinary course
               of business.

          5.29 NetVision Review and Acceptance. The closing of this transaction
               is contingent upon NetVision's review of the revised Schedules
               5.27 and 5.28 (collectively "the Liability Schedules")which the
               Private Entity shall deliver on the Closing Date. NetVision's
               acceptance of said liabilities shall not in any manner modify,
               limit, or invalidate the representations and warranties of
               Private Entity and the Stockholder as contained in the Agreement,
               including but not limited to the representations, warranties and
               indemnification specifically pertaining to the accuracy of the
               liabilities listed in the Liability Schedules. No action, or
               inaction by NetVision, or any other party, including, but not
               limited to, Private Entity or Stockholder, nor any provision in
               this contract, or any other contract, writing, agreement, oral or
               otherwise, shall in any manner modify, limit, or invalidate the
               representations, warranties and indemnification by Private Entity
               and the Stockholder with respect to the Liability Schedules.

          5.30 Tax Payments and Returns. Private Entity has filed all tax
               reports and returns required to be filed through the date of this
               Agreement and has paid all taxes and other related charges
               (including interest and penalties) due or claimed to be due from
               Private Entity, by federal, state, local or foreign taxing
               authorities, except as where indicated on SCHEDULE 5.5 and
               SCHEDULE 5.19. Schell or Schuler has no actual knowledge, nor any
               reason to know, that any taxing authority has audited any portion
               of Private Entity 's tax return, and has no actual knowledge, nor
               any reason to know, that there are any notices of audit, pending
               questions relating to, or claims asserted for, taxes or
               assessment received by or made against Private Entity.

          5.31 Indemnification. For a period commencing on the Closing Date and
               continuing for twenty-four months thereafter, Schell and Schuler,
               jointly and severally, agree to defend, hold harmless and
               indemnify NetVision or any affiliate thereof from any and all
               liabilities or claims attributable to or arising out of a breach
               of a Shareholder's or Private Entity's representations and
               warranties, including without limitation the representations and
               warranties in connection with the Liability Schedules, that in
               the aggregate exceed the Diminutive Error, made by or on behalf
               of any person, corporation, estate or other legal entity;
               provided, however, that in no event shall Schell and Schuler be
               liable for any liabilities or claims in excess of $650,000 and
               Schell and Schuler may satisfy any claim in excess of $65,000 by
               tendering cash or NetVision Shares which shall be valued at $5.00
               per share or a combination thereof. The parties hereby agree that
               the indemnification provisions contained in this Section 5.31
               shall be NetVision's sole remedy at law or in equity in
               connection with a breach of the representations and warranties
               contained in Sections 4 and 5 of this Agreement. Notwithstanding
               the language contained herein, nothing limits or restricts
               Schell's liability or Schuler's liability for acts of fraud.

          5.32 Articles of Merger. After the Closing, Schell, Schuller and
               Private Entity shall cooperate with NetVision in full and it
               shall not take any action to hinder, delay, or prevent, the
               filing of the Certificate of Merger and Articles of Merger with
               the respective Secretary of State of Delaware and Commonwealth of
               Kentucky.

             SECTION 6 - REPRESENTATIONS AND WARRANTIES OF NETVISION

                                                                              10
<PAGE>

          6.1  Organization and Good Standing. NetVision is a corporation duly
               organized, validly existing and in good standing under the laws
               of the State of Delaware, registered to conduct business in every
               jurisdiction where the failure to qualify would have an adverse
               impact on its ability to perform its obligations hereunder,
               including, the State of Indiana and the Commonwealth of Kentucky.
               NetVision has full corporate power to carry on its business as it
               is now being conducted.

          6.2  Authority. NetVision has the full legal right, power and
               authority to enter into, execute and deliver this agreement, and
               to perform its obligations under this agreement. This agreement
               has been duly executed and delivered by authorized officers of
               NetVision and is the valid and binding obligation of NetVision,
               enforceable in accordance with its terms. The execution and
               delivery of this agreement and the consummation by NetVision of
               the transactions contemplated will not:

               6.2.1 Conflict with, result in a breach of, or constitute or
                     result in a default under any of the terms, conditions
                     or provisions of the Certificate of Incorporation,
                     Articles of Incorporation, By-laws, or other governing
                     documents of NetVision.

               6.2.2 Require the further approval or consent of any federal,
                     state, county or local court, or other Government or
                     regulatory body or the approval or consent of any other
                     person.

               6.2.3 Conflict with or result in a breach or violation of any
                     of the terms and conditions of, or constitute (with
                     notice, lapse of time, or both) a default under or a
                     violation of, any statute, regulation, order, judgment
                     or decree applicable to NetVision, or any instrument,
                     contract or other agreement to which NetVision is a
                     party.

          6.3  The authorized capital stock and the number of shares of capital
               stock issued and outstanding for NetVision is as follows:

<TABLE>
<CAPTION>

                                               AUTHORIZED SHARES        ISSUED SHARES           PERCENT

                <S>                                 <C>                  <C>                   <C>
                           TELECOMM                                       2,000,100              89.997%
                           AYE.NET OWNERS                                   222,318              10.003%
                           TOTAL                     3,000,000            2,222,418             100.000%
</TABLE>

          6.4  Brokers / Fees. Negotiations related to this agreement and the
               transactions contemplated hereby have been carried on by
               NetVision and no brokerage or finders' fees are payable by
               NetVision to any other party in connection with this agreement or
               the Transactions contemplated hereby.

          6.5  Payment of Liability Schedule Indebtedness. By operation of law
               without further action by the parties, NetVision shall assume any
               and all liabilities listed on the LIABILITY SCHEDULES after the
               Effective Time of the Merger. With regard to any liability listed
               on said LIABILITY SCHEDULES, where Stockholder has personally
               guaranteed the same, NetVision agrees to indemnify and hold
               harmless the Stockholder to the extent such Stockholder is
               obligated to perform pursuant to such guaranty.

          6.6  Articles of Merger. The preparation and acceptance of a
               Certificate of Merger and Articles of Merger shall not be a
               Condition Precedent to the Closing of this Agreement. Both
               parties represent and warrant that they will cooperate with the
               other party in full and that they will not take any action to
               hinder, delay, or prevent, the filing of the Certificate of
               Merger or Articles of Merger with the respective Secretary of
               State of Delaware and Kentucky.

          6.8  Acquisition of Stock for Investment. NetVision is acquiring the
               Private Entity shares for investment and not with a view toward,
               or for sale in connection with, any distribution thereof, nor
               with any present intention of distributing or selling such shares
               of Private Entity. NetVision agrees that such shares of Private
               Entity may not be sold, transferred, offered for sale, pledged,
               hypothecated or otherwise disposed of without registration under
               the 1933 Act, as amended, except pursuant to an

                                                                              11
<PAGE>

               exemption from registration available under such Act. NetVision
               will not sell, offer to sell or solicit offers to buy any of the
               shares of Private Entity in violation of the 1933 Act or the
               securities law of any state.

          6.9  Disclosure. No representation or warranty by NetVision, or any
               document, written statement or certificate furnished to Private
               Entity or the Stockholders in connection with this Agreement,
               contains any untrue statement of material fact or omits to state
               a fact necessary in order to make the statements contained herein
               or therein not misleading.

          6.10 Indemnification. For a period commencing on the Closing Date and
               continuing for twenty-four months thereafter, NetVision agrees to
               defend, hold harmless and indemnify each of the Shareholders and
               their respective personal representatives, heirs and assigns from
               any and all liabilities or claims attributable to or arising out
               of a breach of NetVision's warranties that in the aggregate
               exceed the Diminutive Error, made by or on behalf of any person,
               corporation, estate or other legal entity; provided, however,
               that in no event shall NetVision be liable for any liabilities or
               claims in excess of $650,000, except in the event of fraud.

                            SECTION 7- MISCELLANEOUS

          7.1  Further Acts. The parties agree to perform any further acts and
               to execute and deliver any other documents, which may be
               reasonably necessary to carry out the intent and provisions of
               this Agreement.

          7.2  Assignment. None of the parties may assign any part of this
               Agreement without the prior written consent of the other parties,
               except that NetVision may assign its rights or obligations hereto
               to Telecomm Industries, so long as NetVision remains a controlled
               subsidiary thereof.

          7.3  Headings. The clause headings appearing in this Agreement have
               been inserted for the purpose of convenience and reference. They
               do not purport to, and will not be deemed to, define, limit or
               extend the scope or intent of the clauses to which they apply,
               and they will not be considered in construing the terms of this
               Agreement.

          7.4  Investigation Will Not Constitute A Waiver. No investigation, or
               lack thereof, by NetVision, or any of its agents, will be deemed
               to constitute or imply a waiver of any rights of NetVision may
               have, including any right to indemnification as the result of any
               material misrepresentation, or breach of warranty, or covenant in
               favor of NetVision as otherwise provided in this Agreement.

          7.5  Counterparts. This Agreement may be executed in several
               counterparts, each of which when so executed will be deemed to be
               an original for all purposes.

          7.6  Partial Invalidity. If any provision of this Agreement is invalid
               or is held illegal or unenforceable, then notwithstanding any
               such invalidity, illegality, or unenforceablility of such
               provision, the remainder of this Agreement will subsist and will
               be in full force and effect as though such invalid, illegal or
               unenforceable provision had been omitted form this Agreement.

          7.7  Entire Agreement. This Agreement embodies the entire agreement of
               the parties as to the subject matter herein contained. There are
               no promises, terms, conditions or obligations other than those
               contained herein; and this Agreement will supersede all previous
               communications, representations, or agreements, either verbal or
               written, between the parties hereto. Without limiting the
               foregoing, no letter, telegram, or other communication passing
               between the parties hereto, concerning any matter during the
               negotiation of this Agreement, will be deemed a part of this
               Agreement, nor will it have the effect of modifying or adding to
               this Agreement. The foregoing notwithstanding, the parties hereby
               acknowledge and agree that Private Entity and the Shareholders
               have not delivered the disclosure schedules referenced in this
               Agreement and that until the Closing of this transaction, the
               failure to disclose any information on such schedules which could
               make the representations and warranties contained herein true,
               accurate or not misleading shall not constitute a breach of this
               Agreement. Notwithstanding any other language

                                                                              12
<PAGE>

               to the contrary, for the purpose of this paragraph, the filing of
               Articles of Merger with the Kentucky Secretary of State and a
               Certificate of merger with the Delaware Secretary of State shall
               be sufficient evidence of said Closing.

          7.8  Additional Documents. Each party will execute and deliver, to
               either party, subsequent to the Closing, such other documents or
               instruments as may be reasonably necessary to effectuate the
               provisions and purpose of this Agreement. Without limitation of
               the generality of the foregoing, Private Entity will perform all
               reasonable acts to cause any licenses or permits issued to
               Private Entity to be assigned or transferred to NetVision in
               order that NetVision may conduct Private Entity 's Business
               subsequent to the Closing as herein contemplated.

          7.9  No Amendment. No amendment, modification, change or discharge of
               any term or provision of this Agreement will be valid or binding
               unless the same is in writing and signed by all the parties
               hereto. No waiver of any of the terms of this Agreement will be
               valid unless signed by the parties against whom such waiver is
               asserted.

          7.10 Gender. All terms and words used in this Agreement, regardless of
               the number and gender in which they are used, will be deemed and
               construed to include any other number, singular or plural, and
               any other gender, masculine, feminine, or neuter, as the context
               or sense of this Agreement, or any other section or clause
               herein, may require, the same as if such words had been fully and
               properly written in the required number and gender.

          7.11 Time Periods. Any action required hereunder to be taken within a
               certain number of days will be taken within that number of
               calendar days; provided, however, that if the last day for taking
               such action falls on a weekend or a holiday, the period during
               which such action may be taken will be automatically extended to
               the next business day.

          7.12 Construction. This Agreement has been prepared by the joint
               efforts of the respective attorneys for each of the parties. This
               Agreement should be interpreted fairly, and not strictly
               construed against either party.

          7.13 No Third Party Beneficiaries. The parties affirmatively state
               that they do not intend to confer any legal or contractual rights
               or benefits upon any third persons or Entities, either directly
               or incidentally, and all legal rights, duties and obligation set
               forth in this Agreement will bind and benefit only the parties
               hereto.

          7.14 Notices. Any notice or demand required or permitted to be given
               hereunder, will be in writing, signed by the party giving or
               making the same, and will be delivered by certified mail, return
               receipt requested, or by personal hand delivery, to all parties
               hereto at their respective addresses hereinafter set forth. In
               the event that delivery of any such notice or demand cannot be
               effected as aforesaid, the same may be served by any method
               authorized for the service of legal process as set forth in the
               Kentucky Rules of Civil Procedure. Any party hereto will have the
               right to change the place to which any such notice or demand, or
               other written instrument will be sent to him by similar notice
               sent in a like manner to all parties hereto. The date of mailing
               of any such offer or demand, if applicable, will be deemed to be
               the date of such offer or demand and will be effective form that
               date. The addresses of the parties to this Agreement are as shown
               herein below.

To Shareholder(s) Set Forth on SCHEDULE 7.14

To the Company:     NetVision.com, Inc.
                    8450 Westfield Blvd, Suite 100.
                    Indianapolis, IN 46240
                    Attn.: Mr. Paul Satterthwaite, CEO and Chairman of the Board
                    Attn:  Mr. Nicholas Bacon, General Counsel

          7.15 Binding. This Agreement will bind and inure to the benefit of the
               parties hereto, their respective assigns, and personal
               representatives and successors.

                                                                              13
<PAGE>

          7.16 Incorporation by Reference. All Exhibits Schedules and documents
               attached hereto will be deemed to be incorporated herein by
               reference as though fully set forth.

          7.17 Competent Professional Advice. All parties to this agreement have
               reviewed this agreement with competent legal counsel. Both
               parties have sought and obtained legal counsel and certified
               public accountants with respect to this agreement and the
               transactions contemplated therein. Both parties, therefore, enter
               this agreement, knowingly, intentionally, and intelligently.

          7.18 Professional Fees. Each Party shall bear the expense of any
               Professional Fees, including, but not limited to, Attorney fees,
               Accountant fees, or Investigative fees. However, notwithstanding
               this paragraph, in the event of a Breach of this Agreement, the
               breaching party shall be responsible for Attorney fees and costs
               of collection.

          7.19 Choice of Law. The Parties all consent to the non-exclusive
               subject matter and personal jurisdiction of the State of Indiana
               and State of Kentucky. Non-exclusive preferred venue lies in the
               Superior Court, County of Marion, State of Indiana.

          7.20 Post Closing Covenants of NetVision.

               7.20.1 NetVision shall not require the business of Private
                      Entity to relocate to the Offices of Winnet
                      Communications, Inc., a Kentucky corporation
                      ("Winnet"), until such time as Winnet has been finally
                      acquired by NetVision.

               7.20.2 Within 30 days following closing, NetVision shall use
                      its best efforts to cause each creditor or other
                      obligee of Private Entity to release any personal
                      guaranty of the Shareholders securing any debt or other
                      obligation of Private Entity as set forth on the
                      LIABILITY SCHEDULES.

               7.20.3 So long as a Shareholder or his/her spouse remains a
                      shareholder of NetVision, NetVision shall provide or
                      cause to be provided to such Shareholder or such
                      Shareholder's spouse free of any charge, two internet
                      access accounts. So long as Schuler or his spouse
                      remains a shareholder of NetVision, NetVision shall
                      provide or cause to be provided to Schuler or Schuler's
                      spouse free of any charge, eight additional internet
                      access accounts. These access accounts shall be at the
                      fastest access speeds then utilized by at least 33% of
                      the residential consumers in the Shareholder's local
                      market or such lesser speed as the Shareholder may
                      choose and shall include the most common and widely
                      used services.

                        SECTION 8 - CONDITIONS PRECEDENT

          8.1  Termination at will until Closing. Either Party may terminate
               this Agreement without liability until the transaction set forth
               herein becomes effective, as defined by satisfactory Closing set
               forth in Section 9.

          8.2  Good Faith Progress. All parties intend to Close this transaction
               as set forth below in Section 9, and will take any and all
               reasonable action to do the same. Failure or refusal to Close as
               a result of the failure to satisfy any of the following shall be
               deemed a good faith failure and as such allows a termination
               without liability.

               8.2.1 Completion and delivery of all Schedules and Exhibits as
                     referenced in this agreement by both parties, and
                     acceptance of the same by both parties.

               8.2.2 Successful completion of due diligence as performed by
                     auditors, attorneys or agents of NetVision.

               8.2.3 Execution of the mutually acceptable Non-Competition
                     Agreement by NetVision and

                                                                              14
<PAGE>

                     Schuler, in substantially the same form as attached as
                     Exhibit A.

               8.2.4 Execution of the mutually acceptable Employment
                     Agreement by Netvision and Schell, , in substantially
                     the same form as attached as Exhibit B.

               8.2.5 Execution of a mutually acceptable Registration Rights
                     Agreement by all parties, in substantially the same form
                     as attached as Exhibit C.

               8.2.6 Execution of the Document titled Checklist of Merger,
                     attached as Exhibit D. Said document has no binding
                     effect other than to reflect the parties understanding
                     regarding the necessary documentation to effectuate this
                     Merger.

               8.2.7 Execution and Delivery of Certified Corporate
                     Resolutions authorizing this Merger transaction by both
                     parties.

                               SECTION 9 - CLOSING

          9.1  Upon the Closing as set forth below, this Agreement shall become
               a legally binding, valid and enforceable Agreement, and shall
               supersede any previous Agreement executed by and between the
               Parties on the same subject matter, including but not limited to
               the Letter of Intent and any previously executed Merger
               Agreement.

          9.2  The Closing of this transaction shall be deemed an express
               representation that there have been no material changes by,
               between or among, any of the parties hereto, since the execution
               of this Merger Agreement.

          9.3  Closing Date and Time. The Closing shall take place on the 11th
               day of January, 2000 at 9:00am, or such other date and time as
               subsequently may be agreed upon by the parties, in writing. Any
               reference herein to the Closing Date for the purpose of
               establishing a point in time, or calculating a period of time,
               means 11:59 p.m., local time on the Closing Date.

          9.4  Transfer of Business. Upon the successful Closing of this
               transaction, NetVision and Private Entity shall become one
               entity, and Private Entity shall cease to exist as a valid and
               legally existing entity. Any and all business transactions, or
               activities, as contemplated by this agreement, shall be
               transferred to NetVision. In no event shall this clause, or any
               other clause in this contract, be construed to effect the
               Representations, Warranties or Indemnification as set forth by
               both parties in this agreement.

                                                                              15
<PAGE>

         IN WITNESS WHEREOF, the parties have signed this Agreement, consisting
of 16 pages. The intent of the Parties is to be legally bound thereby.

Signed in the Presence of the following, and on the date first indicated on this
agreement:

                            GLOBAL MARKETING CONCEPTS, INC.

                           By:
                              -----------------------------------
                               Jeremy N. Schell, President

                           NETVISION .COM, INC.  (NetVision)

                           By:
                              ------------------------------------
                               Paul J. Satterthwaite, CEO and
                               Chairman of the Board

                           STOCKHOLDERS

                           -------------------------
                           Jeremey N. Schell, Individually

                           -------------------------
                           E. Allen Schuler, Individually

                           -----------------------------
                           Stan Logan, Jr., Individually

                           -----------------------------
                           James Lavelle, Jr., Individually

                           -----------------------------
                           John Lavelle, Individually

                           -----------------------------
                           Jonathan Robertson, Individually

                                                                              16<PAGE>

******************************************************************************

                               SCHLOTZSKY'S, INC.

                                CREDIT AGREEMENT

                          DATED AS OF DECEMBER 7, 1999

                 WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,

                                    AS AGENT

******************************************************************************

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I

         Definitions..........................................................1
         Section 1.1       Definitions........................................1
         Section 1.2       Other Definitional Provisions.....................14

ARTICLE II

         Revolving Credit Loan...............................................14
         Section 2.1       Commitments.......................................14
         Section 2.2       Revolving Credit Notes............................15
         Section 2.3       Repayment of Revolving Credit Loan................15
         Section 2.4       Interest..........................................15
         Section 2.5       Revolving Credit Loan Borrowing Procedure.........15
         Section 2.6       Use of Proceeds...................................16
         Section 2.7       Commitment Fees...................................16
         Section 2.8       Determination of Base Rate Margin.................16
         Section 2.9       Reduction or Termination of Revolving Credit
                           Commitments.......................................17

ARTICLE III

         Term Loan...........................................................18
         Section 3.1       Term Commitments..................................18
         Section 3.2       Notes.............................................19
         Section 3.3       Repayment of Term Loan............................19
         Section 3.4       Interest..........................................19
         Section 3.5       Term Loan Borrowing Procedure.....................19
         Section 3.6       Term Loan Fee.....................................20
         Section 3.7       Use of Proceeds...................................20

ARTICLE IV

         Letter of Credit....................................................20
         Section 4.1       Letter of Credit..................................20
         Section 4.2       Presentment and Reimbursement.....................21
         Section 4.3       Payment...........................................21
         Section 4.4       Letter of Credit Fee..............................22
         Section 4.5       Obligations Absolute..............................22
         Section 4.6       Limitation of Liability...........................23

                                       -i-

<PAGE>

                                TABLE OF CONTENTS
                                   (Continued)

                                                                            Page
                                                                            ----

ARTICLE V

         Payments............................................................24
         Section 5.1       Method of Payment.................................24
         Section 5.2       Voluntary Prepayment..............................24
         Section 5.3       Mandatory Prepayments.............................25
         Section 5.4       Pro Rata Treatment................................25
         Section 5.5       Non-Receipt of Funds by the Agent.................25
         Section 5.6       Withholding Taxes.................................26
         Section 5.7       Withholding Tax Exemption.........................26
         Section 5.8       Computation of Interest...........................26
         Section 5.9       Additional Costs in Respect of Letter of Credit...27
         Section 5.10      Capital Adequacy..................................27

ARTICLE VI

         Conditions Precedent................................................28
         Section 6.1       Initial Extension of Credit.......................28
         Section 6.2       All Extensions of Credit..........................29

ARTICLE VII

         Representations and Warranties......................................30
         Section 7.1       Existence.........................................30
         Section 7.2       Financial Statements..............................30
         Section 7.3       Action; No Breach.................................31
         Section 7.4       Operation of Business.............................31
         Section 7.5       Litigation and Judgments..........................31
         Section 7.6       Rights in Properties; Liens.......................31
         Section 7.7       Enforceability....................................31
         Section 7.8       Approvals.........................................32
         Section 7.9       Debt..............................................32
         Section 7.10      Taxes.............................................32
         Section 7.11      Use of Proceeds; Margin Securities................32
         Section 7.12      ERISA.............................................32
         Section 7.13      Disclosure........................................33
         Section 7.14      Subsidiaries......................................33
         Section 7.15      Agreements........................................33

                                      -ii-

<PAGE>

                                TABLE OF CONTENTS
                                   (Continued)

                                                                            Page
                                                                            ----

         Section 7.16      Compliance with Laws..............................33
         Section 7.17      Investment Company Act............................33
         Section 7.18      Public Utility Holding Company Act................34
         Section 7.19      Environmental Matters.............................34

ARTICLE VIII

         Positive Covenants..................................................35
         Section 8.1       Reporting Requirements............................35
         Section 8.2       Maintenance of Existence; Conduct of Business.....37
         Section 8.3       Maintenance of Properties.........................37
         Section 8.4       Taxes and Claims..................................37
         Section 8.5       Insurance.........................................37
         Section 8.6       Inspection Rights.................................38
         Section 8.7       Keeping Books and Records.........................38
         Section 8.8       Compliance with Laws..............................38
         Section 8.9       Compliance with Agreements........................38
         Section 8.10      Further Assurances; Subsidiary Guaranty,
                           Subsidiary Pledge Agreement,Subsidiary Security
                           Agreement and Contribution and Indemnification
                           Agreement.........................................38
         Section 8.11      ERISA.............................................39
         Section 8.12      Year 2000 Compliance..............................39

ARTICLE IX
         Negative Covenants..................................................39
         Section 9.1       Debt..............................................40
         Section 9.2       Limitation on Liens...............................40
         Section 9.3       Mergers, Etc......................................41
         Section 9.4       Restricted Payments...............................41
         Section 9.5       Investments.......................................42
         Section 9.6       Limitation on Issuance of Capital Stock...........42
         Section 9.7       Transactions With Affiliates......................43
         Section 9.8       Disposition of Assets.............................43
         Section 9.9       Sale and Leaseback................................43
         Section 9.10      Nature of Business................................43
         Section 9.11      Environmental Protection..........................43
         Section 9.12      Accounting........................................43
         Section 9.13      Prepayment of Debt................................44

                                      -iii-
<PAGE>

                                TABLE OF CONTENTS
                                   (Continued)

                                                                            Page
                                                                            ----

ARTICLE X

         Financial Covenants.................................................44
         Section 10.1      Consolidated Working Capital......................44
         Section 10.2      Leverage Ratio....................................44
         Section 10.3      Consolidated Net Worth............................44
         Section 10.4      Fixed Charge Coverage Ratio.......................45
         Section 10.5      Capital Expenditures..............................45
         Section 10.6      Contingent Liabilities............................45

ARTICLE XI

         Default.............................................................45
         Section 11.1      Events of Default.................................45
         Section 11.2      Remedies..........................................47
         Section 11.3      Cash Collateral...................................48
         Section 11.4      Performance by the Agent..........................48

ARTICLE XII

         The Agent...........................................................49
         Section 12.1      Appointment, Powers and Immunities................49
         Section 12.2      Rights of Agent as a Lender.......................51
         Section 12.3      Sharing of Payments, Etc..........................51
         Section 12.4      Indemnification...................................52
         Section 12.5      Independent Credit Decisions......................52
         Section 12.6      Several Commitments...............................53
         Section 12.7      Successor Agent...................................53

ARTICLE XIII

         Miscellaneous.......................................................54
         Section 13.1      Expenses..........................................54
         Section 13.2      INDEMNIFICATION...................................54
         Section 13.3      Limitation of Liability...........................55
         Section 13.4      No Duty...........................................55
         Section 13.5      No Fiduciary Relationship.........................55
         Section 13.6      Equitable Relief..................................55
         Section 13.7      No Waiver; Cumulative Remedies....................55

                                      -iv-
<PAGE>

                                TABLE OF CONTENTS
                                   (Continued)

                                                                           Page
                                                                           ----

         Section 13.8      Successors and Assigns............................56
         Section 13.9      Survival..........................................58
         Section 13.10     Amendments, Etc...................................58
         Section 13.11     Maximum Interest Rate.............................59
         Section 13.12     Notices...........................................59
         Section 13.13     Governing Law; Venue; Service of Process..........60
         Section 13.14     Binding Arbitration...............................60
         Section 13.15     Counterparts......................................62
         Section 13.16     Severability......................................62
         Section 13.17     Headings..........................................62
         Section 13.18     Non-Application of Chapter 346 of Texas
                           Credit Finance Code...............................62
         Section 13.19     Construction......................................62
         Section 13.20     Independence of Covenants.........................63
         Section 13.21     Confidentiality...................................63
         Section 13.22     WAIVER OF JURY TRIAL..............................63
         Section 13.23     ENTIRE AGREEMENT..................................63

                                       -v-
<PAGE>

                                CREDIT AGREEMENT

     THIS CREDIT AGREEMENT (the  "Agreement"),  dated as of December 7, 1999, is
among SCHLOTZSKY'S, INC., a Texas corporation ("Borrower"), each of the banks or
other  lending  institutions  which is or which may from  time to time  become a
signatory hereto or any successor or assignee thereof (individually,  a "Lender"
and,  collectively,  the  "Lenders"),  and WELLS  FARGO BANK  (TEXAS),  NATIONAL
ASSOCIATION,  a national banking association,  as agent for itself and the other
Lenders (in such capacity,  together with its  successors in such capacity,  the
"Agent") and as the Issuing Bank (hereinafter defined).

                                 R E C I T A L S

     The  Borrower  has  requested  that the (i)  Lenders  extend  credit to the
Borrower in the form of revolving  credit  advances and a term loan and (ii) the
Issuing Bank keep  outstanding a standby letter of credit,  all not to exceed an
aggregate  principal  amount of Forty Million Dollars  ($40,000,000) at any time
outstanding.  The  Issuing  Bank  and the  Lenders  are  willing  to  make  such
extensions of credit to the Borrower upon the terms and  conditions  hereinafter
set forth.

     NOW THEREFORE,  in  consideration  of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:

                                    ARTICLE I

                                   Definitions

     Section 1.1  Definitions.  As used in this  Agreement,  the following terms
have the following meanings:

          "AAA" has the meaning set forth in Section 13.14(b).

          "Adjustment Date" has the meaning set forth in Section 2.8.

          "Advance"  means an advance of funds by the  Lenders or any of them to
     the Borrower pursuant to Article II or Article III.

          "Advance Request Form" means a certificate,  in substantially the form
     of  Exhibit  B  hereto,  properly  completed  and  signed  by the  Borrower
     requesting  the Term Loan  Advance  (one time only on the date hereof) or a
     Revolving Credit Loan Advance.

                                      -1-
<PAGE>

          "Affiliate"  means,  as to any  Person,  any  other  Person  (a)  that
     directly or indirectly, through one or more intermediaries,  controls or is
     controlled  by, or is under common  control  with,  such  Person;  (b) that
     directly or indirectly beneficially owns or holds five percent (5%) or more
     of any class of voting  stock of such  Person;  or (c) five percent (5%) or
     more of the voting  stock of which is directly or  indirectly  beneficially
     owned or held by the  Person  in  question.  The term  "control"  means the
     possession,  directly  or  indirectly,  of the  power  to  direct  or cause
     direction of the management and policies of a Person,  whether  through the
     ownership  of voting  securities,  by  contract,  or  otherwise;  provided,
     however,  in no event shall the Agent,  the  Issuing  Bank or any Lender be
     deemed an Affiliate of the Borrower or any of its Subsidiaries.

          "Agent"  has the meaning set forth in the  introductory  paragraph  of
     this Agreement.

          "Agreement" has the meaning set forth in the introductory paragraph of
     this Agreement.

          "Applicable  Lending Office" means for each Lender, the Lending Office
     of such Lender (or of an  Affiliate of such  Lender)  designated  below its
     name on the signature  pages hereof or such other office of such Lender (or
     of an  Affiliate  of such  Lender)  as such  Lender  may from  time to time
     specify to the  Borrower  and the Agent as the office by which its Advances
     are to be made and maintained.

          "Applicable Rate" means the Base Rate plus the Base Rate Margin.

          "Assignee" has the meaning set forth in Section 13.8(b).

          "Assigning Lender" has the meaning set forth in Section 13.8(b).

          "Assignment and Acceptance" means an assignment and acceptance entered
     into by a Lender and its  assignee  and  accepted by the Agent  pursuant to
     Section 13.8, in substantially the form of Exhibit D hereto.

          "Base  Rate" means as of any date of  determination,  a rate per annum
     equal to the  greater of (a) the Prime  Rate in effect on such day,  or (b)
     the sum of the  Federal  Funds Rate in effect on such day plus  one-half of
     one  percent  (0.5%).  Any  change  in the Base Rate due to a change in the
     Prime Rate or the Federal  Funds Rate shall be effective  on the  effective
     date  of  such  change  in the  Prime  Rate  or  the  Federal  Funds  Rate,
     respectively, without notice to Borrower.

          "Base Rate Margin" shall have the meaning set forth in Section 2.8.

          "Basle  Accord" means the proposals for risk-based  capital  framework
     described by the Basle  Committee on Banking  Regulations  and  Supervisory
     Practices  in its paper  entitled  "International  Convergence  of  Capital
     Measurement   and  Capital   Standards"   dated  July  1988,   as  amended,
     supplemented and otherwise modified and in effect from time to time, or any
     replacement thereof.

                                      -2-
<PAGE>

          "Benefit Arrangement" shall mean any employment, consulting, severance
     or other similar contract, arrangement or policy and each plan, arrangement
     (written or oral), program, agreement or commitment providing for insurance
     coverage  (including  without  limitation any  self-insured  arrangements),
     workers'  compensation,   disability  benefits,  supplemental  unemployment
     benefits, vacation benefits,  retirement benefits, life, health, disability
     or  accident  benefits   (including   without   limitation  any  "voluntary
     employees' beneficiary  association" as defined in Section 501(c)(9) of the
     Code   providing   for  the  same  or  other   benefits)  or  for  deferred
     compensation,  profit-sharing  bonuses,  stock options,  restricted  stock,
     phantom stock, stock appreciation rights, stock purchases or other forms of
     incentive  compensation  or  post-retirement  insurance,   compensation  or
     benefits  which  (i) is not a Plan,  (ii) is (or was  within  the  last six
     years)  entered  into,  maintained,   contributed  to  or  required  to  be
     contributed to, as the case may be, by Borrower or any ERISA Affiliate, and
     (iii) covers any current or former  employee,  director,  or  consultant of
     Borrower or any ERISA  Affiliate (with respect to their  relationship  with
     such entities).

          "Borrower" has the meaning set forth in the introductory  paragraph of
     this Agreement.

          "Borrower  Pledge  Agreement"  means  that  certain  pledge  agreement
     executed  by the  Borrower  and the  Agent in favor  of the  Agent  for the
     benefit of the Agent,  the Issuing Bank and the Lenders,  in  substantially
     the form of Exhibit F, as the same may be  amended,  restated  or  modified
     from time to time.

          "Borrower  Security  Agreement" means that certain security  agreement
     executed  by the  Borrower  and the  Agent in favor  of the  Agent  for the
     benefit of the Agent,  the Issuing Bank and the Lenders,  in  substantially
     the form of Exhibit G, as the same may be  amended,  restated  or  modified
     from time to time.

          "Business  Day"  means  any  day on  which  commercial  banks  are not
     authorized or required to close in San Francisco, California.

          "Calculation Period" has the meaning set forth in Section 2.8.

          "Capital  Expenditures" means, for any period, all expenditures of the
     Borrower  and  its  Subsidiaries  which  are  classified  as  additions  to
     property,  plant and equipment on the consolidated  statement of cash flows
     of the Borrower in accordance with GAAP, including all such expenditures so
     classified as "recurring  capital  expenditures"  and all such expenditures
     associated with Capital Lease Obligations.

                                      -3-
<PAGE>

          "Capital Lease Obligation" means, as to any Person, the obligations of
     such  Person  to pay  rent or  other  amounts  under a lease  of (or  other
     agreement conveying the right to use) real and/or personal property,  which
     obligations  are required to be  classified  and accounted for as a capital
     lease on a balance  sheet of such Person  under GAAP.  For purposes of this
     Agreement,  the  amount  of such  Capital  Lease  Obligations  shall be the
     capitalized amount thereof, determined in accordance with GAAP.

          "Code" means the Internal  Revenue Code of 1986,  as amended,  and the
     regulations promulgated and rulings issued thereunder.

          "Collateral"  means the  property  in which  liens  have been  granted
     pursuant  to the  Borrower  Pledge  Agreement  and  the  Borrower  Security
     Agreement or pursuant to any  Subsidiary  Security  Agreement or Subsidiary
     Pledge  Agreement  executed by a Subsidiary  (including in accordance  with
     Section 8.10), whether such Liens are now existing or hereafter arise.

          "Commitment Fee" has the meaning set forth in Section 2.7.

          "Commitment  Fee Rate" means one  quarter of one  percent  (0.25%) per
     annum.

          "Commitments" means, as to each Lender, such Lender's Revolving Credit
     Commitment, Term Commitment and LC Commitment.

          "Consolidated Net Income" means, at any time, the aggregate net income
     or loss of the Borrower and its  Subsidiaries  determined on a consolidated
     basis and in accordance with GAAP.

          "Consolidated  Net Worth" means,  at any particular  time, all amounts
     which, in conformity with GAAP, would be included as  stockholders'  equity
     on a consolidated balance sheet of the Borrower and the Subsidiaries.

          "Consolidated  Working Capital" means, at any time, the current assets
     of the Borrower and its  Subsidiaries  determined on a  consolidated  basis
     less  the  current   liabilities  of  the  Borrower  and  its  Subsidiaries
     determined on a consolidated  basis,  all as determined in accordance  with
     GAAP.

          "Contingent Liabilities" means, at any particular time, the contingent
     liabilities  of  the  Borrower  and  its   Subsidiaries   determined  on  a
     consolidated basis in accordance with GAAP.

          "Contribution  and  Indemnification  Agreement" means the Contribution
     and Indemnification  Agreement executed by the Borrower and the Guarantors,
     in substantially  the form of Exhibit E hereto, as the same may be amended,
     restated or modified from time to time.

                                      -4-
<PAGE>

          "Debt" means as to any Person at any time (without  duplication):  (a)
     all obligations of such Person for borrowed  money,  (b) all obligations of
     such  Person  evidenced  by  bonds,  notes,  debentures,  or other  similar
     instruments whether secured or unsecured, (c) all Capital Lease Obligations
     of such Person,  (d) all Debt or other  obligations of others Guaranteed by
     such Person,  (e) all  obligations  secured by a Lien  existing on property
     owned by such Person,  whether or not the obligations  secured thereby have
     been  assumed  by such  Person or are  non-recourse  to the  credit of such
     Person,  but excluding  those  obligations  secured by landlord's  liens or
     liens for taxes not yet due and payable, (f) all reimbursement  obligations
     of such Person  (whether  contingent or otherwise) in respect of letters of
     credit (whether drawn or undrawn),  bankers'  acceptances,  surety or other
     bonds and similar  instruments,  and (g) all  liabilities of such Person in
     respect of unfunded vested benefits under any Plan;  provided however,  the
     term "Debt"  shall not include,  except for clauses (d) and (f) above,  any
     items which are not  required  to be  reflected  as debt on the  Borrower's
     balance sheet in accordance with GAAP.

          "Debt to EBITDA Ratio" means,  for each Fiscal  Quarter,  the quotient
     determined by dividing (i) those items  described in clauses (a), (b), (c),
     (d)  and  (e)  of  the  definition  of  "Debt"  of  the  Borrower  and  its
     consolidated  Subsidiaries,  by (ii) the sum of (a) EBITDA for such  Fiscal
     Quarter plus (b) beginning with the Fiscal Quarter ending December 31, 1999
     through and including the Fiscal  Quarter  ending  September 30, 2000,  the
     annualized royalty payments made to area developers involved in the Royalty
     Buy-Backs  for the  most  recent  Fiscal  Quarter  prior  to  such  Royalty
     Buy-Backs,  less (c) any savings received by the Borrower since the closing
     of the  Royalty  Buy-Backs  as a  result  of such  Royalty  Buy-Backs  (for
     purposes  of this  calculation,  in an amount  equal to  $100,000  for each
     Fiscal Quarter).

          "Default"  means an Event of Default or the  occurrence of an event or
     condition  which with notice or lapse of time or both would become an Event
     of Default.

          "Default  Rate" means the lesser of (a) the  Maximum  Rate or, (b) the
     sum of the Base Rate in effect from day to day plus five percent (5%).

          "Deposit  and Cash  Management  Services  Obligations"  means  all the
     obligations  of the  Borrower  to a Lender to pay the fees  charged for the
     deposit and/or cash management products and services provided by any Lender
     in connection with any deposit or other accounts maintained at such Lender.

          "Dispute" has the meaning set forth in Section 13.14.

          "Dollars" and "$" mean lawful money of the United States of America.

          "EBITDA" means  Consolidated Net Income,  plus, to the extent that any
     of the following were deducted in calculating such Consolidated Net Income,
     interest  expense,  tax expenses,  and depreciation and  amortization,  but
     excluding all extraordinary items of income and loss.

                                      -5-
<PAGE>

          "Eligible Assignee" means (i) a Lender, (ii) an Affiliate of a Lender,
     and (iii) any other Person approved by the Agent, and, unless a Default has
     occurred and is  continuing  at the time any  assignment  is  effected,  in
     accordance  with  Section  13.8,  the  Borrower,  such  approval  not to be
     unreasonably withheld or delayed by the Borrower;  provided,  however, that
     neither the Borrower nor an Affiliate of the Borrower  shall  qualify as an
     Eligible Assignee.

          "Environmental Laws" means any and all federal, state, and local laws,
     regulations,   and  requirements  pertaining  to  health,  safety,  or  the
     environment, as such laws, regulations,  and requirements may be amended or
     supplemented from time to time.

          "Environmental  Liabilities" means, as to any Person, all liabilities,
     obligations, responsibilities,  Remedial Actions, losses, damages, punitive
     damages,  consequential  damages,  treble  damages,  costs,  and  expenses,
     (including,  without  limitation,  all reasonable fees,  disbursements  and
     expenses of counsel,  expert and consulting fees and costs of investigation
     and  feasibility  studies),  fines,  penalties,   sanctions,  and  interest
     incurred as a result of any claim or demand,  by any Person,  whether based
     in contract, tort, implied or express warranty, strict liability,  criminal
     or  civil  statute,  including  any  Environmental  Law,  permit,  order or
     agreement  with any  Governmental  Authority or other Person,  arising from
     environmental,  health or safety  conditions  or the Release or  threatened
     Release of a Hazardous Material into the environment.

          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
     amended   from   time  to  time,   and  the   regulations   and   published
     interpretations thereunder.

          "ERISA  Affiliate" means any corporation or trade or business which is
     a member of the same controlled  group of corporations  (within the meaning
     of  Section  414(b) of the  Code) as the  Borrower,  which is under  common
     control  (within  the  meaning  of  Section  414(c) of the  Code)  with the
     Borrower,  or which is otherwise  affiliated with the Borrower  (within the
     meaning of Section 414(m) or Section 414(o) of the Code).

          "Event of Default" has the meaning set forth in Section 11.1.

          "Exchange  Act" means the  Securities  and  Exchange  Act of 1934,  as
     amended, and the rules and regulations promulgated thereunder.

          "Existing  Credit  Agreements"  has the  meaning  set forth in Section
     6.1(m).

          "Existing Debt" means the Debt listed on Schedule 9.1.

                                      -6-
<PAGE>

          "Existing  LC  Guaranty"  means  that  certain  Amended  and  Restated
     Continuing  Guaranty executed by the Borrower in favor of the Issuing Bank,
     in substantially  the form of Exhibit J hereto, as the same may be amended,
     restated or  modified  from time to time,  pursuant  to which the  Borrower
     guaranteed  the  obligations  of the LC Account  Party  under the Letter of
     Credit.

          "Existing  TC Credit  Agreement"  has the meaning set forth in Section
     6.1(m).

          "Existing  Wells Fargo Credit  Agreement" has the meaning set forth in
     Section 6.1(m).

          "Federal  Funds Rate" means,  for any day, the rate per annum (rounded
     upwards,  if  necessary,  to the nearest  1/16 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 published  by the Federal  Reserve Bank of New York on the Business
     Day next succeeding  such day,  provided that (a) if the day for which such
     rate is to be  determined is not a Business Day, the Federal Funds Rate for
     such day  shall be such  rate on such  transactions  on the next  preceding
     Business Day as so published on the next  succeeding  Business Day, and (b)
     if such rate is not so published on such next succeeding  Business Day, the
     Federal  Funds Rate for any day shall be the average  rate charged to Wells
     Fargo Bank (Texas),  National  Association on such day on such transactions
     as determined by the Agent.

          "Fiscal  Quarter" means any three (3)-month period ending December 31,
     March 31, June 30 or September 30.

          "Fiscal Year" means each twelve  (12)-month  period ending December 31
     of each year.

          "Fixed Charge  Coverage  Ratio" means,  for each Fiscal  Quarter,  the
     quotient  determined by dividing (i) the sum of EBITDA plus rent expense in
     each case for such Fiscal  Quarter and the prior three (3) Fiscal  Quarters
     by (ii) the sum of (a) the aggregate  interest  expense and rent expense of
     the Borrower and its  consolidated  Subsidiaries,  plus (b) that portion of
     Long-Term  Debt of the  Borrower  and its  consolidated  Subsidiaries  that
     should be classified  as current in accordance  with GAAP, in each case for
     such Fiscal Quarter and the prior three (3) Fiscal Quarters.

          "Funded  Debt"  means,  at  any  particular  time,   calculated  on  a
     consolidated basis for the Borrower and the Subsidiaries in accordance with
     GAAP, all obligations for borrowed money and Capital Lease Obligations, but
     excluding all Debt subordinated to the Obligations.

                                      -7-
<PAGE>

          "GAAP" means generally accepted  accounting  principles,  applied on a
     consistent  basis,  as set forth in Opinions of the  Accounting  Principles
     Board of the American  Institute of Certified Public  Accountants and/or in
     statements  of  the  Financial  Accounting  Standards  Board  and/or  their
     respective  successors and which are applicable in the  circumstances as of
     the date in question.  Accounting  principles  are applied on a "consistent
     basis"  when the  accounting  principles  applied  in a current  period are
     comparable in all material respects to those accounting  principles applied
     in a preceding period.

          "Governmental Authority" means any nation or government,  any state or
     political   subdivision  thereof  and  any  entity  exercising   executive,
     legislative,  judicial,  regulatory,  or  administrative  functions  of  or
     pertaining to government.

          "Guarantee"  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 (a) to  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
     take-or-pay, or to maintain financial statement conditions or otherwise) or
     (b)  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 the 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  term
     "Guarantee" used as a verb has a corresponding meaning.

          "Guarantor" means each and every Subsidiary of Borrower whether now in
     existence or hereafter  created  which include but are not limited to those
     Subsidiaries listed on Schedule 7.14.

          "Guaranty"  means the joint and several  guaranty of each Guarantor in
     favor of the Agent, the Issuing Bank and the Lenders,  in substantially the
     form  of  Exhibit  C  hereto,  as  the  same  may  be  amended,   restated,
     supplemented or modified from time to time.

          "Hazardous Material" means any substance,  product,  waste, pollutant,
     material, chemical, contaminant, constituent, or other material which is or
     becomes listed, regulated, or addressed under any Environmental Law.

          "Issuing  Bank"  means,  with  respect to the Letter of Credit,  Wells
     Fargo Bank (Texas), National Association.

          "LC   Account   Party"   means   Schlotzsky's   National   Advertising
     Association, Inc., a Texas corporation.

                                      -8-
<PAGE>

          "LC  Commitment"  means,  as to each Lender,  the  obligation  of such
     Lender to fund draws under the Letter of Credit in an  aggregate  amount up
     to but not exceeding the amount set forth  opposite the name of such Lender
     in Schedule 1.1(a) hereto under the heading "LC Commitment."

          "LC Participation" means, with respect to any Lender, at any time, the
     amount of participating interest held by such Lender (or in the case of the
     Issuing Bank, other interests) in respect of the Letter of Credit.

          "Lender"  has the meaning set forth in the  introductory  paragraph of
     this Agreement.

          "Letter of Credit" has the meaning set forth in Section 4.1(a).

          "Letter of Credit  Disbursement"  means a disbursement  by the Issuing
     Bank to the  beneficiary  of the  Letter  of Credit  in  connection  with a
     drawing thereunder.

          "Letter of Credit  Liabilities" means, at any time, the sum of (i) the
     face  amount of the Letter of Credit and (ii) the  aggregate  amount of all
     Letter of Credit  Disbursements  for  which the  Issuing  Bank has not been
     reimbursed by the Borrower.

          "Leverage  Ratio"  means,  as of any Fiscal  Quarter  end the ratio of
     Funded Debt to the sum of (i) EBITDA plus (ii) the amount of the  reduction
     of the  royalty  payments  and  franchise  fee  expense  as a result of the
     Royalty Buy-Back, less (iii) any savings received by the Borrower since the
     closing of the Royalty Buy-Backs as a result of such Royalty Buy-Backs (for
     purposes  of this  calculation,  in an amount  equal to  $100,000  for each
     Fiscal  Quarter),  in each case for such Fiscal Quarter and the prior three
     (3) Fiscal Quarters.

          "Lien"  means  any  lien,  mortgage,   security  interest,  tax  lien,
     financing statement, pledge, charge, hypothecation, assignment, preference,
     priority, or other encumbrance of any kind or nature whatsoever (including,
     without  limitation,  any conditional  sale or title retention  agreement),
     whether arising by contract, operation of law, or otherwise.

          "Loan Documents" means this Agreement, the Notes, the Guaranties,  the
     Borrower Security Agreement,  the Borrower Pledge Agreement, the Subsidiary
     Security Agreement,  the Subsidiary Pledge Agreement,  the Contribution and
     Indemnification   Agreement,  the  Existing  LC  Guaranty,  and  all  other
     promissory  notes,  guaranties,  and  other  instruments,   documents,  and
     agreements  now or  hereafter  executed  and  delivered  pursuant  to or in
     connection  with  this  Agreement,  as  such  instruments,  documents,  and
     agreements may be amended,  modified,  renewed,  extended,  or supplemented
     from time to time.

          "Long-Term  Debt"  means,  at any  particular  time,  all  Debt of the
     Borrower and its  consolidated  Subsidiaries  which should be classified as
     "funded indebtedness" or "long-term indebtedness" in accordance with GAAP.

                                      -9-
<PAGE>

          "Material  Adverse Effect" means a material  adverse effect on (a) the
     business,  condition (financial or otherwise),  operations,  prospects,  or
     properties of the Borrower and the  Subsidiaries  taken as a whole,  or (b)
     the validity or  enforceability  of this Agreement or any of the other Loan
     Documents  or the rights or remedies of the Agent,  the Issuing Bank or the
     Lenders  hereunder or  thereunder.  In  determining  whether any individual
     event could  reasonably be expected to result in a Material Adverse Effect,
     notwithstanding  that  such  event  does not  itself  have such  effect,  a
     Material  Adverse Effect shall be deemed to have occurred if the cumulative
     effect of such event and all other then existing events could reasonably be
     expected to result in a Material Adverse Effect.

          "Material Debt" has the meaning set forth in Section 11.1(h).

          "Maximum Rate" means, at any time and with respect to any Lender,  the
     maximum rate of interest  under  applicable law that such Lender may charge
     the  Borrower.  The Maximum Rate shall be calculated in a manner that takes
     into account any and all fees,  payments,  and other  charges in respect of
     the Loan Documents that  constitute  interest  under  applicable  law. Each
     change in any interest rate provided for herein based upon the Maximum Rate
     resulting  from a change in the  Maximum  Rate  shall take  effect  without
     notice to the Borrower at the time of such change in the Maximum Rate.  For
     purposes of  determining  the Maximum Rate under Texas law, the  applicable
     rate ceiling  shall be the  applicable  weekly  ceiling  described  in, and
     computed in accordance with, Chapter 303 of the Texas Finance Code.

          "Monthly  Payment Date" means the first day of each calendar  month of
     each year, the first of which shall be January 1, 2000.

          "Multiemployer  Plan" means a  multiemployer  plan  defined as such in
     Section  3(37)  of  ERISA  to which  contributions  have  been  made by the
     Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.

          "Net Proceeds"  from any  disposition of assets means the amount equal
     to (a) the  aggregate  gross  proceeds  of such  disposition,  less (b) the
     following:  (i) sales or other  similar taxes paid or payable by the seller
     in  connection  with  such  disposition,  (ii)  reasonable  broker  fees in
     connection with such  disposition,  (iii)  reasonable  legal fees and other
     reasonable   expenses  payable  by  the  seller  in  connection  with  such
     disposition and (iv) the amount of any Debt secured by the assets that must
     be  repaid in  connection  with  such  disposition  so long as it is a Debt
     permitted under this Agreement.

          "Notes" means,  collectively,  the Revolving Credit Notes and the Term
     Notes.

          "Obligated  Party" means each Guarantor and any other Person who is or
     becomes party to any written  agreement that  guarantees or secures payment
     and performance of the Obligations or any part thereof.

                                      -10-
<PAGE>

          "Obligations" means all obligations,  indebtedness, and liabilities of
     the Borrower to the Agent,  the Issuing  Bank,  and the Lenders,  or any of
     them,  arising  pursuant to any of the Loan  Documents  and all Deposit and
     Cash Management  Services  Obligations,  now existing or hereafter arising,
     whether  direct,   indirect,   related,   unrelated,   fixed,   contingent,
     liquidated,  unliquidated, joint, several, or joint and several, including,
     without limitation, the obligations,  indebtedness,  and liabilities of the
     Borrower  under  this  Agreement,  the Notes and the other  Loan  Documents
     (including   without   limitation,   all  of  the   Borrower's   contingent
     reimbursement  obligations  in respect of the  Letter of  Credit),  and all
     interest  accruing  thereon  and all  attorneys'  fees and  other  expenses
     incurred in the enforcement or collection thereof.

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

          "Permitted Debt" means (a) the Obligations,  (b) Existing Debt and (c)
     Debt permitted by Section 9.1 of this Agreement.

          "Permitted  Liens"  means  Liens  permitted  by  Section  9.2 of  this
     Agreement.

          "Person"   means  any   individual,   corporation,   business   trust,
     association,   company,  partnership,   limited  liability  company,  joint
     venture, Governmental Authority, or other entity.

          "Plan" means any employee  benefit plan (within the meaning of Section
     3(3) of ERISA)  established  or  maintained  by the  Borrower  or any ERISA
     Affiliate  within the last six (6) years,  or to which the  Borrower or any
     ERISA Affiliate made  contributions  or was required to make  contributions
     during such six (6) year period, which plan is subject to the provisions of
     ERISA.

          "Prime Rate" means,  at any time,  the rate of interest per annum then
     most recently  announced by Wells Fargo Bank,  National  Association at its
     principal  office in San Francisco as its prime rate, which rate may not be
     the  lowest  rate  of  interest  charged  by  Wells  Fargo  Bank,  National
     Association to its borrowers. Each change in any interest rate provided for
     herein based upon the Prime Rate  resulting from a change in the Prime Rate
     shall take effect on the date the change is  announced by Wells Fargo Bank,
     National  Association  without  notice to the  Borrower at the time of such
     change in the Prime Rate.

          "Principal  Office" means the principal office of the Agent in Austin,
     Texas,  presently located at 111 Congress Avenue,  Suite 300, Austin, Texas
     78701.

          "Prohibited  Transaction"  means any  transaction set forth in Section
     406 or 407 of ERISA or Section  4975(c)(1) of the Code for which there does
     not exist a statutory or administrative exemption.

                                      -11-
<PAGE>

          "Quarterly Certificate" has the meaning set forth in Section 8.1(c).

          "Quarterly  Payment Date" means the first day of each January,  April,
     July and October of each year, the first of which shall be January 1, 2000.

          "Register" has the meaning set forth in Section 13.8(d).

          "Regulation  D" means  Regulation  D of the Board of  Governors of the
     Federal Reserve System as the same may be amended or supplemented from time
     to time.

          "Regulatory  Change"  means,  with  respect to any Lender,  any change
     after  the date of this  Agreement  in United  States  federal,  state,  or
     foreign laws or  regulations  (including  Regulation  D) or the adoption or
     making  after such date of any  interpretations,  directives,  or  requests
     applying to a class of lenders including such Lender of or under any United
     States federal or state,  or any foreign,  laws or regulations  (whether or
     not  having  the force of law) by any  court or  governmental  or  monetary
     authority charged with the interpretation or administration thereof.

          "Release"  means,  as to any Person,  any  release,  spill,  emission,
     leaking, pumping, injection, deposit, disposal, disbursement,  leaching, or
     migration of Hazardous  Materials into the indoor or outdoor environment or
     into  or  out  of  property  owned  by  such  Person,  including,   without
     limitation,  the  movement of  Hazardous  Materials  through or in the air,
     soil,   surface   water,   ground  water,   or  property  in  violation  of
     Environmental Laws.

          "Remedial  Action" means all actions required to (a) clean up, remove,
     treat, or otherwise  address  Hazardous  Materials in the indoor or outdoor
     environment,  (b) prevent the Release or threat of Release or minimize  the
     further  Release  of  Hazardous  Materials  so that they do not  migrate or
     endanger or threaten to endanger  public health or welfare or the indoor or
     outdoor environment, or (c) perform pre-remedial studies and investigations
     and post-remedial monitoring and care.

          "Reportable  Event"  means any of the events set forth in Section 4043
     of ERISA.

          "Required  Lenders"  means (i) at any time while no Advances or Letter
     of Credit Liabilities are outstanding,  two or more Lenders having at least
     sixty-six and two-thirds  percent  (66-2/3%) of the aggregate amount of the
     Commitments,  and (ii) at any time  while  Advances  or  Letter  of  Credit
     Liabilities are outstanding, two or more Lenders holding at least sixty-six
     and two-thirds  percent  (66-2/3%) of the outstanding  aggregate  principal
     amount of the Advances and LC Participations.

          "Revolving Credit Commitment" means, as to each Lender, the obligation
     of such Lender to make  Revolving  Credit Loan  Advances  as  described  in
     Article  II  hereunder  in an  aggregate  principal  amount at any one time
     outstanding  up to but not exceeding the amount set forth opposite the name
     of such  Lender on Schedule  1.1(a)  hereto  under the  heading  "Revolving
     Credit Commitment",  as the same may be reduced pursuant to Section 2.11 or
     terminated pursuant to Section 2.11 or 11.2.

                                      -12-
<PAGE>

          "Revolving  Credit Loan" means the revolving credit loan made or to be
     made hereunder to Borrower pursuant to Section 2.1.

          "Revolving  Credit Loan Advance"  means an Advance under the Revolving
     Credit Loan.

          "Revolving   Credit  Loan  Termination   Date"  means  8:00  A.M.  San
     Francisco,  California time on September 30, 2000, or such earlier date and
     time on which the  Revolving  Credit  Commitments  terminate as provided in
     this Agreement.

          "Revolving Credit Notes" means, collectively,  the promissory notes of
     the Borrower payable to the order of the Lenders in the aggregate principal
     amount of the Revolving Credit Loan, in  substantially  the form of Exhibit
     A-1  hereto,   and  all  extensions,   renewals,   amendments,   increases,
     restatements and modifications thereof.

          "RICO" means the Racketeer  Influenced and Corrupt Organization Act of
     1970, as amended from time to time.

          "Royalty  Buy-Backs"  means the purchase from an area developer by the
     Borrower  or any  Subsidiary  of rights  to  royalty  payments  made by the
     Borrower to such area developer, including, but not limited to, a reduction
     of an area  developer's  rights to royalty payments in conjunction with the
     reduction of all or part of the area developer's service obligations.

          "Subsidiary"means  any corporation (or other entity) of which at least
     a  majority  of  the  outstanding  shares  of  stock  (or  other  ownership
     interests)  having by the terms  thereof  ordinary  voting power to elect a
     majority  of the board of  directors  (or similar  governing  body) of such
     corporation (or other entity)  (irrespective  of whether or not at the time
     stock (or other ownership  interests) of any other class or classes of such
     corporation  (or other  entity)  shall have or might have  voting  power by
     reason of the  happening  of any  contingency)  is at the time  directly or
     indirectly  owned  or  controlled  by the  Borrower  or one or  more of the
     Subsidiaries or by the Borrower and one or more of the Subsidiaries.

          "Subsidiary  Pledge  Agreement"  means that certain  pledge  agreement
     executed  by each  Subsidiary  and the  Agent in favor of the Agent for the
     benefit of the Agent,  the Issuing Bank and the Lenders,  in  substantially
     the form of Exhibit H, as the same may be amended,  restated,  supplemented
     or modified from time to time.

                                      -13-
<PAGE>

          "Subsidiary  Security Agreement" means that certain security agreement
     executed  by each  Subsidiary  and the  Agent in favor of the Agent for the
     benefit of the Agent,  the Issuing Bank and the Lenders,  in  substantially
     the form of Exhibit I, as the same may be amended,  restated,  supplemented
     or modified from time to time.

          "Term  Commitment"  means,  as to each Lender,  the obligation of such
     Lender  to make an  advance  of funds  under  Section  3.1 in an  aggregate
     principal  amount up to but not exceeding the amount set forth opposite the
     name of such  Lender in Schedule  1.1(a)  hereto  under the  heading  "Term
     Commitment",  as the same may be terminated  pursuant to Section 11.2.  The
     aggregate  amount of the Term  Commitments  of all  Lenders  equals  Twenty
     Million Dollars ($20,000,000).

          "Term Loan" means,  as to any Lender,  the Advance made by such Lender
     pursuant to Section 3.1.

          "Term Notes" means, collectively, the promissory notes of the Borrower
     payable to the order of the Lenders in the  aggregate  principal  amount of
     the Term Loan,  in  substantially  the form of Exhibit A-2 hereto,  and all
     extensions, renewals, amendments, increases, restatements and modifications
     thereto.

          "Termination  Date" means 8:00 A.M. San Francisco,  California time on
     December  1,  2004,  or such  earlier  date  and  time on  which  the  Term
     Commitments terminate as provided in this Agreement.

          "UCC" means the Uniform  Commercial  Code as in effect in the State of
     Texas.

     Section 1.2 Other  Definitional  Provisions.  All definitions  contained in
this  Agreement  are equally  applicable to the singular and plural forms of the
terms  defined.  The words  "hereof",  "herein",  and  "hereunder"  and words of
similar import  referring to this  Agreement  refer to this Agreement as a whole
and  not to  any  particular  provision  of  this  Agreement.  Unless  otherwise
specified,  all Article and Section  references  pertain to this Agreement.  All
accounting  terms  not  specifically   defined  herein  shall  be  construed  in
accordance  with GAAP.  Terms used herein  that are  defined in the UCC,  unless
otherwise defined herein, shall have the meanings specified in the UCC.

                                   ARTICLE II

                              Revolving Credit Loan

     Section  2.1  Commitments.  Subject  to the  terms and  conditions  of this
Agreement,  each Lender  severally  agrees to make one or more Revolving  Credit
Loan  Advances  to the  Borrower  from time to time from the date  hereof to but
excluding the Revolving Credit Loan  Termination Date in an aggregate  principal
amount  at any time  outstanding  up to but not  exceeding  the  amount  of such
Lender's  Revolving  Credit  Commitment  as then in  effect,  provided  that the
aggregate  amount of all Revolving  Credit Loan Advances at any time outstanding
shall not exceed the  Revolving  Credit  Commitments.  Subject to the  foregoing
limitations,  and the other terms and provisions of this Agreement, the Borrower
may borrow,  repay,  and reborrow  hereunder the amount of the Revolving  Credit
Commitments by means of Revolving  Credit Loan Advances.  Revolving  Credit Loan
Advances  made by each  Lender  shall be made and  maintained  at such  Lender's
Applicable Lending Office.

                                      -14-
<PAGE>

     Section 2.2 Revolving Credit Notes. The obligation of the Borrower to repay
each Lender for Revolving  Credit Loan Advances made by such Lender and interest
thereon shall be evidenced by a Revolving  Credit Note executed by the Borrower,
payable to the order of such Lender,  in the  principal  amount of such Lender's
Revolving Credit Commitment and dated the date hereof.

     Section 2.3 Repayment of Revolving  Credit Loan.  The Borrower  shall repay
the outstanding  principal  amount of the Revolving Credit Loan on the Revolving
Credit Loan Termination Date.

     Section 2.4 Interest.  The unpaid  principal amount of the Revolving Credit
Loan shall bear  interest  at a varying  rate per annum equal from day to day to
the lesser of (a) the Maximum Rate, or (b) the  Applicable  Rate. If at any time
the  Applicable  Rate for any  Revolving  Credit Loan  Advance  shall exceed the
Maximum Rate,  thereby  causing the interest  accruing on such Revolving  Credit
Loan Advance to be limited to the Maximum Rate, then any subsequent reduction in
the Applicable Rate for such Revolving  Credit Loan Advance shall not reduce the
rate of interest on such  Revolving  Credit Loan Advance  below the Maximum Rate
until the aggregate  amount of interest  accrued on such  Revolving  Credit Loan
Advance equals the aggregate amount of interest which would have accrued on such
Revolving  Credit Loan Advance if the  Applicable  Rate had at all times been in
effect.  Accrued and unpaid interest on the Revolving Credit Loan Advances shall
be due and payable on each Monthly Payment Date and on the Revolving Credit Loan
Termination Date.  Notwithstanding the foregoing, upon the occurrence and during
the continuance of a Default, the outstanding principal amounts of all Revolving
Credit Loan  Advances  and (to the fullest  extent  permitted  by law) any other
amounts  payable by the Borrower  under any Loan Document shall bear interest at
the Default Rate at the Required  Lenders' option  beginning upon the occurrence
of such Default or such later date as selected by the Required Lenders. Interest
payable at the Default Rate shall be payable from time to time on demand.

     Section 2.5 Revolving Credit Loan Borrowing  Procedure.  The Borrower shall
provide to the Agent a telephone request of each requested Revolving Credit Loan
Advance not later than 11:00 A.M. San Francisco, California time on the Business
Day that is at least one (1)  Business  Day  before the  requested  date of each
Revolving  Credit  Loan  Advance,  which  telephone  request  shall be  promptly
confirmed by delivery of a written  Advance  Request  Form via  facsimile to the
Agent not later than 1:00 P.M. on the same date of such telephone request, which
Advance  Request Form shall  specify:  (a) the requested  date of such Revolving
Credit Loan Advance  (which shall be a Business  Day) and (b) the amount of such
Revolving Credit Loan Advance;  provided,  however,  with respect to the initial
requested  Revolving  Credit  Loan  Advance  which  will  be the  date  of  this
Agreement,  Borrower  shall  give the Agent  such  Advance  Request  Form on the
requested  date of such initial  Revolving  Credit Loan Advance.  Each Revolving
Credit  Loan  Advance  shall be in a minimum  principal  amount of Five  Hundred
Thousand  Dollars  ($500,000) or in greater  increments of One Hundred  Thousand
Dollars ($100,000). The Borrower shall not request, and the Lenders shall not be
obligated  to make,  more than four (4)  Revolving  Credit  Loan  Advances  each
calendar month.  The Agent shall notify each Lender of the contents of each such
notice promptly. Not later than 11:00 A.M. San Francisco, California time on the
date specified for each  Revolving  Credit Loan Advance  hereunder,  each Lender
will  make  available  to the  Agent  at the  Principal  Office  in  immediately
available  funds,  for the account of the  Borrower,  its pro rata share of each
Revolving  Credit  Loan  Advance.  After the  Agent's  receipt of such funds and
subject to the other terms and conditions of this Agreement, the Agent will make
each Revolving  Credit Loan Advance  available to the Borrower by depositing the
same, in immediately  available funds, in an account of the Borrower (designated
by the Borrower)  maintained with the Agent at the Principal Office. All notices
by the Borrower under this Section shall be  irrevocable  and shall be given not
later than 9:00 A.M. San Francisco, California time on the day which is not less
than the number of Business Days specified above for such notice.

                                      -15-
<PAGE>

     Section 2.6 Use of Proceeds. The proceeds of Revolving Credit Loan Advances
shall be used by the  Borrower to  refinance  the  indebtedness  of the Borrower
pursuant to the Existing Wells Fargo Credit  Agreement,  for working  capital in
the ordinary course of business and other general corporate purposes.

     Section 2.7 Commitment  Fees.  The Borrower  agrees to pay to the Agent for
the  account of the Lenders a  Commitment  Fee (herein so called) on the average
daily unused amount of each Lender's  Revolving Credit Commitment for the period
from and  including  the date of this  Agreement to and  including the Revolving
Credit Loan  Termination  Date, at the Commitment  Fee Rate,  based on a 360 day
year and the actual number of days elapsed.  The accrued Commitment Fee shall be
payable in arrears on each  Quarterly  Payment Date and on the Revolving  Credit
Loan Termination Date.

     Section 2.8  Determination of Base Rate Margin.  The Base Rate Margin shall
be defined and determined as follows:

          "Base Rate Margin" shall mean (i) during the period  commencing on the
     date hereof and ending on but not including the first Adjustment Date, zero
     percent (0%) per annum, and (ii) during each period, from and including one
     Adjustment  Date to but  excluding  the  next  Adjustment  Date  (herein  a
     "Calculation  Period"),  the percent per annum set forth in the table below
     in this Section 2.8 under the heading "Base Rate Margin"  opposite the Debt
     to EBITDA Ratio calculated for the completed four (4) Fiscal Quarters which
     immediately preceded the beginning of the applicable Calculation Period.

                                      -16-
<PAGE>

                  ===========================================================
                        Debt to EBITDA Ratio               Base Rate Margin
                        --------------------               ----------------
                  Greater than or equal to 4.0 to 1.0                 0%
                  -----------------------------------------------------------
                  Greater than 3.0 to 1.0 but less
                  than 4.0 to 1.0                                 -0.25%
                  -----------------------------------------------------------
                  Greater than 2.0 to 1.0 but less
                  than or equal to 3.0 to 1.0                     -0.50%
                  -----------------------------------------------------------
                  Less than or equal to 2.0 to 1.0                -0.75%
                  ===========================================================

          Upon delivery of the Quarterly  Certificate pursuant to Section 8.1(c)
     commencing  with such  Quarterly  Certificate  delivered  at the end of the
     Fiscal  Quarter  ending on December  31,  1999,  the Base Rate Margin shall
     automatically  be adjusted as set forth in the table above,  such automatic
     adjustment to take effect as of the first Business Day after the receipt by
     the Agent of the related Quarterly Certificate (each such Business Day when
     the Base Rate Margin is adjusted pursuant to this sentence or below, herein
     an  "Adjustment  Date").  If the Borrower  fails to deliver such  Quarterly
     Certificate  which so sets forth the Debt to EBITDA Ratio within the period
     of  time   required  by  Section   8.1(c),   the  Base  Rate  Margin  shall
     automatically be adjusted to the highest applicable percentage set forth in
     the grid above,  such  automatic  adjustment to take effect as of the first
     Business  Day after  the last day on which the  Borrower  was  required  to
     deliver the applicable  Quarterly  Certificate  in accordance  with Section
     8.1(c) and to remain in effect until  subsequently  adjusted in  accordance
     herewith upon the delivery of a Quarterly Certificate.

     Section 2.9 Reduction or Termination of Revolving Credit Commitments.

                  (a) Optional. The Borrower shall have the right to terminate
         in whole or reduce in part the unused portion of the Revolving Credit
         Commitments upon at least five (5) Business Days prior notice (which
         notice shall be irrevocable) to the Agent and each Lender specifying
         the effective date thereof, whether a termination or reduction is being
         made, and the amount of any partial reduction, provided that each
         partial reduction shall be in the amount of Five Million Dollars
         ($5,000,000) or an integral multiple thereof, and the Borrower shall
         simultaneously prepay the amount by which the unpaid principal amount
         of the Revolving Credit Loan Advances exceeds the Revolving Credit
         Commitments (after giving effect to such notice) plus accrued and
         unpaid interest on the principal amount so prepaid. The Revolving
         Credit Commitments may not be reinstated after they have been
         terminated or reduced.

                                      -17-
<PAGE>

          (b) Mandatory.

               (i) On the date the  Borrower or any  Subsidiary  receives  funds
          from  mortgages  on  restaurants  owned by the  Borrower or any of its
          Subsidiaries,  the Revolving Credit Commitments shall automatically be
          reduced by the amount of such funds  received,  and the Borrower shall
          simultaneously  prepay the amount by which the unpaid principal amount
          of the  Revolving  Credit Loan Advances  exceeds the Revolving  Credit
          Commitments  (after giving effect to such  reduction) plus accrued and
          unpaid interest on the principal amount so prepaid.

               (ii)  Upon  receipt  of the Net  Proceeds  from  the  sale of any
          restaurants  or stores  owned by the Borrower or any  Subsidiary,  the
          Revolving  Credit  Commitments  shall  automatically be reduced by the
          amount of the Net  Proceeds,  and the  Borrower  shall  simultaneously
          prepay  the  amount  by  which  the  unpaid  principal  amount  of the
          Revolving   Credit  Loan  Advances   exceeds  the   Revolving   Credit
          Commitments  (after giving effect to such  reduction) plus accrued and
          unpaid interest on the principal amount so prepaid.

               (iii) Upon receipt by the Agent of the report in accordance  with
          Section 8.1(l), the Revolving Credit  Commitments shall  automatically
          be reduced by an amount equal to the difference between $5,000,000 and
          the money actually used to finance the Royalty  Buy-Backs as reflected
          on such  report,  and the  Borrower  shall  simultaneously  prepay the
          amount by which the unpaid  principal  amount of the Revolving  Credit
          Loan Advances exceeds the Revolving Credit  Commitments  (after giving
          effect to such  reduction)  plus  accrued  and unpaid  interest on the
          principal amount so prepaid.

               (iv) On March 31, 2000, the Revolving  Credit  Commitments  shall
          automatically  be reduced by the amount equal to Five Million  Dollars
          ($5,000,000) less the amount of any reductions in the Revolving Credit
          Commitments  as of such date  pursuant to clauses (i),  (ii) and (iii)
          above,  and the  Borrower  shall  simultaneously  prepay the amount by
          which  the  unpaid  principal  amount  of the  Revolving  Credit  Loan
          Advances exceeds the Revolving Credit Commitments (after giving effect
          to such  reduction)  plus accrued and unpaid interest on the principal
          amount so prepaid.

                                   ARTICLE III

                                    Term Loan

     Section 3.1 Term  Commitments.  Subject to the terms and conditions of this
Agreement,  each Lender  severally  agrees to make an Advance to the Borrower in
the amount of its Term Commitment on the Closing Date.

                                      -18-
<PAGE>

     Section 3.2 Notes.  The Term Loan made by a Lender  shall be evidenced by a
single  promissory note of the Borrower in substantially the form of Exhibit A-2
hereto,  payable to the order of such Lender in a principal  amount equal to its
Term Commitment as originally in effect and otherwise duly completed.

     Section 3.3 Repayment of Term Loan. The Borrower shall pay to the Agent for
the account of the Lenders the outstanding  principal amount of the Term Loan as
follows:

          (a) Fifty-nine (59) consecutive monthly  installments shall be due and
     payable  on each  Monthly  Payment  Date  commencing  January  1,  2000 and
     continuing until and including  November 1, 2004, each installment to be in
     an  amount  equal to Three  Hundred  Thirty-Three  Thousand  Three  Hundred
     Thirty-Three and 33/100 Dollars ($333,333.33); and

          (b)  One  (1)  final  installment  in the  amount  of all  outstanding
     principal of the Term Loan due and payable on the Termination Date.

     Section 3.4 Interest.  The unpaid  principal  amount of the Term Loan shall
bear interest at a varying rate per annum equal from day to day to the lesser of
(a) the Maximum Rate, or (b) the Applicable  Rate. If at any time the Applicable
Rate for the Term Loan shall  exceed  the  Maximum  Rate,  thereby  causing  the
interest  accruing on the Term Loan to be limited to the Maximum Rate,  then any
subsequent  reduction in the Applicable  Rate for the Term Loan shall not reduce
the rate of interest on the Term Loan below the Maximum Rate until the aggregate
amount of  interest  accrued  on the Term Loan  equals the  aggregate  amount of
interest which would have accrued on the Term Loan if the Applicable Rate had at
all times been in effect.  Accrued and unpaid interest on the Term Loan shall be
due and  payable  on each  Monthly  Payment  Date and on the  Termination  Date.
Notwithstanding the foregoing, upon the occurrence and during the continuance of
a  Default,  the  outstanding  principal  amounts  of the Term  Loan (and to the
fullest extent permitted by law) any other amounts payable by the Borrower under
any Loan  Document  shall bear  interest  at the  Default  Rate at the  Required
Lenders' option beginning upon the occurrence of such Default or such later date
as selected by the Required Lenders.  Interest payable at the Default Rate shall
be payable from time to time on demand.

     Section 3.5 Term Loan  Borrowing  Procedure.  The  Borrower  shall give the
Agent notice by means of an Advance  Request Form of the requested  Term Loan on
the  requested  date of the Term Loan which will be the date of this  Agreement.
The Agent shall notify each Lender of the contents of such notice promptly.  Not
later than 11:00 A.M., San Francisco,  California time on the date specified for
the Term Loan,  each Lender will make  available  to the Agent at the  Principal
Office in immediately available funds, for the account of the Borrower,  its pro
rata share of the Term Loan. After the Agent's receipt of such funds and subject
to the other terms and  conditions  of this  Agreement,  the Agent will make the
Term Loan  available  to the Borrower by  depositing  the same,  in  immediately
available  funds,  in an account of the Borrower  (designated  by the  Borrower)
maintained  with the Agent at the Principal  Office.  The notice by the Borrower
under this Section shall be  irrevocable  and shall be given not later than 9:00
A.M., San Francisco, California time on the requested date of the Term Loan.

                                      -19-
<PAGE>

     Section  3.6 Term Loan  Fee.  The  Borrower  shall pay to the Agent for the
account  of the  Lenders a term loan fee in an  amount  equal to Fifty  Thousand
Dollars  ($50,000),  which term loan fee shall be due and payable as of the date
hereof.

     Section 3.7 Use of Proceeds. The proceeds of the Term Loan shall be used by
the  Borrower to refinance  the  indebtedness  of the  Borrower  pursuant to the
Existing TC Credit Agreement and to provide financing for Royalty Buy-Backs.

                                   ARTICLE IV

                                Letter of Credit

     Section 4.1 Letter of Credit.

          (a) Subject to the terms and conditions of this Agreement, the Issuing
     Bank agrees to keep  outstanding  on the date hereof the standby  letter of
     credit  for the  account of the LC  Account  Party  which was issued by the
     Issuing Bank and which is further described on Schedule 1.1(b) (the "Letter
     of Credit").  The Borrower has  guaranteed  the full and prompt payment and
     performance of the  obligations of the LC Account Party under the Letter of
     Credit  pursuant to the Existing LC Guaranty.  Notwithstanding  anything to
     the contrary contained in this Agreement, the Issuing Bank shall not extend
     the  expiration  date of the  Letter of Credit  without  the prior  written
     consent of all of the Lenders.

          (b) Without any further  action on the part of the Issuing Bank or any
     of the Lenders in respect  thereof,  the Issuing Bank hereby grants to each
     Lender  and  each  Lender   hereby   acquires   from  the  Issuing  Bank  a
     participation  in the  Letter of Credit  and the  related  Letter of Credit
     Liabilities,  effective upon the date hereof without  recourse or warranty,
     equal to such  Lender's  pro rata  share  (based  on the  Revolving  Credit
     Commitments) of the Letter of Credit and Letter of Credit  Liabilities.  In
     furtherance   of  the   foregoing,   each  Lender  hereby   absolutely  and
     unconditionally  agrees to pay to the Issuing Bank, as and when required by
     Section  4.3,  such  Lender's  pro rata  share  of each  Letter  of  Credit
     Disbursement.  Each Lender  acknowledges  and agrees that its obligation to
     acquire  participations  pursuant to this Section  4.1(b) in respect of the
     Letter of Credit is absolute and unconditional and shall not be affected by
     any circumstance  whatsoever,  including without  limitation the occurrence
     and  continuance  of any Default,  and that each such payment shall be made
     without any offset, abatement,  withholding,  or reduction whatsoever. This
     agreement to grant and acquire  participations  is an agreement between the
     Issuing Bank and the Lenders,  and neither  Borrower,  the LC Account Party
     nor the  beneficiary  of the  Letter of Credit  shall be  entitled  to rely
     thereon.  Borrower agrees that each Lender purchasing a participation  from
     the Issuing  Bank  pursuant to this  Section  4.1(b) may  exercise  all its
     rights to payment  against  Borrower  pursuant to the  Existing LC Guaranty
     including the right of setoff,  with respect to such participation as fully
     as if such  Lender  were the direct  creditor  of Borrower in the amount of
     such participation.

                                      -20-
<PAGE>

          (c) The Issuing Bank agrees with each Lender that it shall transfer to
     such  Lender,  without any offset,  abatement,  withholding,  or  reduction
     whatsoever,   such  Lender's  proportionate  share  of  any  payment  of  a
     reimbursement  obligation  of Borrower  with  respect to a Letter of Credit
     Disbursement,  including interest payments made to the Issuing Bank on such
     Letter of Credit  Disbursement,  based on the  proportion  that the payment
     made by such Lender to the Issuing Bank in respect of the principal  amount
     of such Letter of Credit  Disbursement  bears to the outstanding  principal
     amount of such Letter of Credit Disbursement.

     Section 4.2 Presentment and Reimbursement. (a) Promptly upon receipt of any
documents  purporting  to  represent  a demand for  payment  under the Letter of
Credit,  the Issuing Bank shall give notice to Borrower of the receipt  thereof,
which notice may be telephonic. If the Issuing Bank shall have determined that a
demand  for  payment  under the  Letter of Credit  appears  on its face to be in
conformity  with the terms and  conditions of the Letter of Credit,  the Issuing
Bank shall give  notice to  Borrower,  which  notice may be  telephonic,  of the
receipt and amount of such drawing and the date on which payment thereon will be
made. If Borrower shall not have discharged in full by 8:00 A.M., San Francisco,
California  time on the date of such  payment,  its  obligation to reimburse the
Issuing Bank  pursuant to the Existing LC Guaranty in the amount of such drawing
under the  Letter of  Credit,  then the  amount  of such  drawing  for which the
Issuing Bank shall not have been  reimbursed by Borrower or the LC Account Party
shall be paid by Borrower to the Issuing Bank or, to the extent the Issuing Bank
shall have received  payments with respect to such drawing from the Lenders,  to
the Issuing Bank for the account of the Lenders,  within three (3) Business Days
after the date of such  drawing,  together  with  interest on such amount at the
Default  Rate from the date of payment by the  Issuing  Bank to the  beneficiary
under the  Letter of Credit  (each  such  payment  made  after  8:00  A.M.,  San
Francisco,  California time on such due date to be deemed to be made on the next
succeeding Business Day). The obligations of Borrower under this Section 4.2 and
the Existing LC Guaranty shall be  unconditional,  absolute,  and irrevocable in
all respects.

     Section  4.3  Payment.  If the Issuing  Bank shall pay any draft  presented
under the Letter of Credit and if neither the Borrower nor the LC Account  Party
shall have  discharged in full its respective  reimbursement  obligation by 8:00
A.M.,  San  Francisco,  California  time on the date of such  Letter  of  Credit
Disbursement,  then the  Issuing  Bank shall as  promptly  as  practicable  give
telephonic (which shall be promptly confirmed in writing) or facsimile notice to
each Lender of the date of such  payment and the amount of such payment and each
Lender shall pay to the Issuing Bank, in immediately  available funds, not later
than 1:00 P.M., San Francisco,  California time on the date of such payment (or,
if Issuing Bank shall notify the Lenders of such  payment  after 9:00 A.M.,  San
Francisco,  California  time,  then not later than 10:00  A.M.,  San  Francisco,
California  time on the next  succeeding  Business Day), an amount equal to such
Lender's pro rata share of such drawing;  provided that, if any Lender shall for
any reason fail to pay the Issuing Bank its pro rata share of the drawing on the
date of such payment,  the Issuing Bank shall itself fund such Lender's pro rata
share while retaining the right to proceed against such Lender for reimbursement
therefor.  In the event that the  Issuing  Bank  shall fund a Lender's  pro rata
share of a drawing, the amount so funded shall bear interest at a rate per annum
equal to the  Federal  Funds Rate and shall be payable  by such  Lender  when it
reimburses  the Issuing  Bank for  funding  its pro rata part (with  interest to
accrue from and  including the date of such funding to and excluding the date of
reimbursement).  In the event  that a Lender,  after  notice,  pays its pro rata
share of a drawing  hereunder  and such payment is not required to fund a Letter
of Credit Disbursement, the Issuing Bank shall return such payment to the Lender
with  interest  calculated  at a rate per annum equal to the Federal  Funds Rate
(with  interest to accrue  from and  including  the date of such  funding to and
excluding  the date of  return).  The  obligation  of each  Lender to pay to the
Issuing  Bank such  Lender's  pro rata part of any  drawing  under the Letter of
Credit shall be absolute and unconditional under any and all circumstances,  and
such obligations shall be several and not joint.

                                      -21-
<PAGE>

     Section  4.4  Letter of Credit  Fee.  The  Agent has  received  (i) for the
account of the Issuing  Bank, a  nonrefundable  issuing fee of $325,  and (ii) a
nonrefundable letter of credit fee of $49,675,  which letter of credit fee shall
be paid by the Agent to each  Lender  other than the  Issuing  Bank in an amount
equal to (a) the  quotient of such  Lender's LC  Commitment  divided by the face
amount of the Letter of Credit,  multiplied by (b) the quotient of the number of
days beginning as of the date hereof  through and including the expiration  date
of the Letter of  Credit,  divided  by the  number of days  beginning  as of the
actual  issuance  date  of the  Letter  of  Credit  through  and  including  the
expiration  date of the Letter of Credit  with the  remainder  of such letter of
credit fee to be paid to the Issuing Bank. In addition,  the Borrower shall pay,
or shall cause to be paid,  to the Issuing  Bank,  solely for its own account as
issuer of the Letter of Credit,  nonrefundable  fronting,  amendment,  transfer,
negotiation  and other fees as determined in accordance  with the Issuing Bank's
current fee policy, a copy of which has been provided to the Borrower.

     Section 4.5  Obligations  Absolute.  The obligations of Borrower under this
Agreement  and the  other  Loan  Documents  (including  without  limitation  the
obligation  of Borrower to reimburse the Issuing Bank for draws under the Letter
of Credit)  shall be  absolute,  unconditional,  and  irrevocable,  and shall be
performed  strictly in accordance with the terms of this Agreement and the other
Loan Documents under all circumstances whatsoever,  including without limitation
the following circumstances:

          (a) Any lack of validity or  enforceability of the Letter of Credit or
     any other Loan Document;

          (b) Any  amendment or waiver of or any consent to  departure  from any
     Loan Document;

          (c) The  existence  of any claim,  set-off,  counterclaim,  defense or
     other rights which Borrower,  any Obligated  Party, the LC Account Party or
     any other Person may have at any time against any beneficiary of the Letter
     of Credit,  the Issuing Bank, any Lender,  the Agent,  or any other Person,
     whether in connection with this Agreement or any other Loan Document or any
     unrelated transaction;

                                      -22-
<PAGE>

          (d) Any statement, draft, or other document presented under the Letter
     of Credit proving to be forged, fraudulent, invalid, or insufficient in any
     respect or any statement  therein being untrue or inaccurate in any respect
     whatsoever;

          (e)  Payment by the  Issuing  Bank under the Letter of Credit  against
     presentation  of a draft or other  document  which does not comply with the
     terms of the Letter of Credit; or

          (f) Any other  circumstance  or happening  whatsoever,  whether or not
     similar to any of the foregoing.

     Section 4.6 Limitation of Liability. Borrower assumes all risks of the acts
or omissions of the  beneficiary of the Letter of Credit with respect to its use
of the Letter of Credit.  Neither the Issuing Bank, the Lenders,  the Agent, nor
any of their officers or directors shall have any responsibility or liability to
Borrower,  the LC Account  Party or any other Person for: (a) the failure of any
draft to bear any  reference or adequate  reference to the Letter of Credit,  or
the failure of any  documents  to  accompany  any draft at  negotiation,  or the
failure of any Person to surrender or to take up the Letter of Credit or to send
documents apart from drafts as required by the terms of the Letter of Credit, or
the failure of any Person to note the amount of any  instrument on the Letter of
Credit, each of which requirements, if contained in the Letter of Credit itself,
it is  agreed  may be  waived  by  the  Issuing  Bank,  (b)  errors,  omissions,
interruptions,  or delays in transmission  or delivery of any messages,  (c) the
validity or genuineness of any draft or other  document,  or any  endorsement(s)
thereon, even if any such draft, document or endorsement should in fact prove to
be in any and all  respects  invalid,  fraudulent,  or forged  or any  statement
therein is untrue or inaccurate  in any respect,  (d) the payment by the Issuing
Bank to the  beneficiary  of the Letter of Credit  against  presentation  of any
draft or other  document  that does not  comply  with the terms of the Letter of
Credit,  or (e) any other  circumstance  whatsoever in making or failing to make
any  payment  under the Letter of Credit in good  faith.  Borrower  shall have a
claim  against  the  Issuing  Bank,  and the  Issuing  Bank  shall be  liable to
Borrower,  to the extent of any direct, but not consequential,  damages suffered
by Borrower which Borrower proves in a final nonappealable  judgment were caused
by (i) the Issuing Bank's willful  misconduct or gross negligence in determining
whether  documents  presented under the Letter of Credit complied with the terms
thereof or (ii) the Issuing Bank's willful or grossly  negligent  failure to pay
under the  Letter of  Credit  after  presentation  to it of  documents  strictly
complying  with the terms and  conditions  of the Letter of Credit.  The Issuing
Bank may accept  documents  that  appear on their  face to be in order,  without
responsibility   for  further   investigation,   regardless  of  any  notice  or
information to the contrary.

                                      -23-
<PAGE>

                                    ARTICLE V

                                    Payments

     Section  5.1 Method of  Payment.  Except as  provided  in  Article  IV, all
payments of  principal,  interest,  and other amounts to be made by the Borrower
under this Agreement and the other Loan Documents  shall be made to the Agent at
the Principal Office for the account of each Lender's  Applicable Lending Office
in Dollars and in immediately  available funds,  without setoff,  deduction,  or
counterclaim,  not later than 11:00 A.M., San Francisco,  California time on the
date on which such  payment  shall become due (each such payment made after such
time on such due date to be  deemed  to have  been  made on the next  succeeding
Business  Day).  The Borrower  shall,  at the time of making each such  payment,
specify to the Agent the sums payable by the Borrower  under this  Agreement and
the other  Loan  Documents  to which such  payment is to be applied  (and in the
event that the  Borrower  fails to so  specify,  or if an Event of  Default  has
occurred and is continuing,  the Agent may apply such payment to the Obligations
in such  order and  manner as it may elect in its sole  discretion,  subject  to
Section 5.4 hereof).  Each payment received by the Agent under this Agreement or
any other Loan  Document  for the account of a Lender shall be paid by the Agent
to such Lender, in immediately available funds, for the account of such Lender's
Applicable Lending Office within one (1) Business Day following receipt thereof.
Whenever any payment under this  Agreement or any other Loan  Document  shall be
stated to be due on a day that is not a Business  Day,  such payment may be made
on the next  succeeding  Business Day, and such  extension of time shall in such
case  be  included  in the  computation  of the  payment  of  interest  and  the
Commitment Fee, as the case may be.

     Section 5.2 Voluntary  Prepayment.  The Borrower may, upon at least one (1)
Business Days prior notice to the Agent, voluntarily prepay the Revolving Credit
Loan Advances in whole at any time or from time to time in part without  premium
or penalty but with accrued  interest to the date of prepayment on the amount so
prepaid,  provided  that (a) each partial  prepayment  shall be in the principal
amount of Five Hundred Thousand Dollars  ($500,000) or greater increments of One
Hundred Thousand Dollars  ($100,000) and (b) Borrower may not voluntarily prepay
the  Revolving  Credit  Loan  Advances  more than three (3) times each  calendar
month.  The Borrower may,  upon at least one (1) Business  Day's prior notice to
the Agent, voluntarily prepay the Term Loan in whole at any time or from time to
time in part without premium or penalty but with accrued interest to the date of
prepayment on the amount so prepaid,  provided that (a) each partial  prepayment
shall be in the principal amount of Five Hundred Thousand Dollars  ($500,000) or
greater increments of One Hundred Thousand Dollars ($100,000),  (b) each partial
prepayment  shall be applied in inverse  order of maturity to the last  maturing
installments of principal,  and (c) Borrower may not voluntarily prepay the Term
Loan more than one (1) time each calendar month;  All notices under this Section
shall be irrevocable  and shall be given not later than 9:00 A.M. San Francisco,
California,  time on the day which is not less than the number of Business  Days
specified above for such notice.

                                      -24-
<PAGE>

     Section 5.3 Mandatory Prepayments.

          (a) If at any  time the  amount  equal  to the  outstanding  principal
     amount of all Revolving  Credit Loan Advances  exceeds the aggregate amount
     of the Revolving Credit Commitments, the Borrower shall promptly prepay the
     outstanding Revolving Credit Loan Advances by the amount of the excess.

          (b) After any reduction in the Revolving Credit  Commitments  pursuant
     to  Section  2.9,  the  Borrower  shall  promptly  prepay  the  outstanding
     Revolving  Credit  Loan  Advances  by the  amount by which the  outstanding
     principal  amount  of  the  Revolving  Credit  Loan  Advances  exceeds  the
     aggregate amount of the Revolving Credit Commitments, as reduced.

     Section 5.4 Pro Rata  Treatment.  Except to the extent  otherwise  provided
herein:  (a) each  Revolving  Credit Loan  Advance  shall be made by the Lenders
under  Section 2.1,  each payment of the  Commitment  Fee under Section 2.7, the
Term Loan shall be made by the Lenders under Section 3.1 and each payment of the
Letter of Credit fee under  Section 4.4 (except as  provided  therein)  shall be
made for the account of the Lenders,  and each  termination  or reduction of the
Revolving Credit Commitments under Section 2.9 shall be applied to the Revolving
Credit  Commitments  of the  Lenders,  pro  rata  according  to  the  respective
Revolving Credit Commitments; (b) any and all other monies received by the Agent
from any source other than pursuant to any of clause (a) hereinabove (including,
without limitation, from the Borrower, any Guarantor or the LC Account Party) to
be applied against the Obligations shall be for the pro rata benefit and account
of the Lenders based upon each Lender's aggregate  outstanding  Revolving Credit
Loan  Advances,  Term Loan and LC  Participations  to the aggregate  outstanding
Revolving Credit Loan Advances,  Term Loan and LC Participations of all Lenders;
provided  however,  if no Advances are  outstanding and so long as the Letter of
Credit is outstanding,  any remaining amounts shall be retained as Collateral in
an amount equal to one hundred and ten percent (110%) of the available amount to
be drawn under the Letter of Credit; and (c) the Lenders shall purchase from the
Issuing Bank pursuant to Section 4.1  participations in the Letter of Credit and
the related Letter of Credit  Liabilities,  pro rata in accordance with their LC
Commitments.

     Section 5.5 Non-Receipt of Funds by the Agent.  Unless the Agent shall have
been  notified by a Lender or the Borrower  (the  "Payor")  prior to the date on
which such Lender is to make  payment to the Agent  hereunder or the Borrower is
to make a payment to the Agent for the account of one or more of the Lenders, as
the case may be (such payment being herein called the "Required Payment"), which
notice shall be effective  upon receipt,  that the Payor does not intend to make
the  Required  Payment to the  Agent,  the Agent may  assume  that the  Required
Payment has been made and may, in reliance upon such  assumption  (but shall not
be required to), make the amount thereof available to the intended  recipient on
such date and,  if the Payor has not in fact made the  Required  Payment  to the
Agent, (a) the recipient of such payment shall, on demand,  pay to the Agent the
amount made  available to it together  with  interest  thereon in respect of the
period  commencing  on the date such amount was so made  available  by the Agent
until the date the Agent  recovers  such amount at a rate per annum equal to (i)
if recovered  from a Lender,  at the Federal Funds Rate for such period and (ii)
if  recovered  from  the  Borrower,  the  rate  of  interest  applicable  to the
respective  Advance, as determined pursuant to Sections 2.4, 3.4 and 4.2 and (b)
Agent shall be  entitled  to offset  against any and all sums to be paid to such
recipient, the amount calculated in accordance with the foregoing clause (a).

                                      -25-
<PAGE>

     Section 5.6 Withholding Taxes. All payments by the Borrower of principal of
and interest on the Advances and in  reimbursement  of draws under the Letter of
Credit and of all fees and other  amounts  payable  under any Loan  Document are
payable  without  deduction  for or on account of any  present or future  taxes,
duties or other charges  levied or imposed by the United States of America or by
the  government of any  jurisdiction  outside the United States of America or by
any  political  subdivision  or taxing  authority of or in any of the  foregoing
through withholding or deduction with respect to any such payments.  If any such
taxes,  duties or other charges are so levied or imposed,  the Borrower will pay
additional  interest or will make  additional  payments in such  amounts so that
every net payment of  principal of and interest on the Advances and of all other
amounts  payable by it under any Loan Document,  after  withholding or deduction
for or on account of any such present or future taxes,  duties or other charges,
will not be less than the amount  provided for herein or therein,  provided that
the Borrower  shall have no  obligation  to pay such  additional  amounts to any
Lender to the extent that such  taxes,  duties,  or other  charges are levied or
imposed by reason of the failure of such Lender to comply with the provisions of
Section 5.7. The Borrower shall furnish  promptly to the Agent for  distribution
to each affected Lender,  as the case may be, official  receipts  evidencing any
such withholding or reduction.

     Section 5.7 Withholding Tax Exemption. Each Lender that is not incorporated
under the laws of the United States of America or a state thereof agrees that it
will  deliver to the  Borrower  and the Agent two (2) duly  completed  copies of
United States Internal  Revenue Service Form 1001 or 4224,  certifying in either
case that such Lender is entitled to receive  payments  from the Borrower  under
any Loan Document without  deduction or withholding of any United States federal
income  taxes.  Each  Lender  which  so  delivers  a Form  1001 or 4224  further
undertakes  to deliver to Borrower  and the Agent two (2)  additional  copies of
such form (or a  successor  form) on or before  the date  such form  expires  or
becomes  obsolete or after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such  amendments  thereto or extensions
or renewals thereof as may be reasonably requested by the Borrower or the Agent,
in each case  certifying  that such Lender is entitled to receive  payments from
the Borrower  under any Loan Document  without  deduction or  withholding of any
United  States  federal  income  taxes,   unless  an  event  (including  without
limitation any change in treaty,  law or  regulation)  has occurred prior to the
date on which any such delivery  would  otherwise be required  which renders all
such forms  inapplicable or which would prevent such Lender from duly completing
and  delivering  any such form with  respect to it and such  Lender  advises the
Borrower and the Agent that it is not capable of receiving such payments without
any deduction or withholding of United States federal income tax.

     Section 5.8 Computation of Interest. Interest on the Advances and all other
amounts  payable by the Borrower  hereunder  shall be computed on the basis of a
year of 360 days and the actual number of days elapsed  (including the first day
but excluding the last day) unless such  calculation  would result in a usurious
rate, in which case  interest  shall be calculated on the basis of a year of 365
or 366 days, as the case may be.

                                      -26-
<PAGE>

     Section 5.9 Additional Costs in Respect of Letter of Credit. If as a result
of any Regulatory Change there shall be imposed,  modified, or deemed applicable
any tax,  reserve,  special  deposit,  or  similar  requirement  against or with
respect to or  measured by  reference  to the Letter of Credit  issued,  and the
result  shall  be to  increase  the  cost  to the  Issuing  Bank of  issuing  or
maintaining the Letter of Credit or reduce any amount  receivable by the Issuing
Bank  hereunder in respect of the Letter of Credit  (which  increase in cost, or
reduction  in  amount  receivable,  shall be the  result of the  Issuing  Bank's
reasonable allocation of the aggregate of such increases or reductions resulting
from such event),  then, upon demand by the Issuing Bank, the Borrower agrees to
pay,  or shall  cause to be paid,  to the  Issuing  Bank,  from  time to time as
specified by the Issuing Bank, such additional amounts as shall be sufficient to
compensate the Issuing Bank for such increased costs or reductions in amount.  A
statement as to such  increased  costs or reductions  in amount  incurred by the
Issuing Bank, submitted by the Issuing Bank to the Borrower, shall be conclusive
as to the amount thereof,  provided that the determination  thereof is made on a
reasonable basis.

     Section 5.10 Capital Adequacy.  If after the date hereof,  any Lender shall
have determined that the adoption or implementation after the date hereof of any
applicable  law,  rule, or regulation  regarding  capital  adequacy  (including,
without limitation, any law, rule, or regulation implementing the Basle Accord),
or any change therein,  or any change in the  interpretation  or  administration
thereof by any central  bank or other  Governmental  Authority  charged with the
interpretation or administration  thereof,  or compliance by such Lender (or its
parent) with any guideline,  request,  or directive  regarding  capital adequacy
(whether  or not  having  the  force  of  law)  of any  central  bank  or  other
Governmental  Authority (including,  without limitation,  any guideline or other
requirement  implementing  the Basle  Accord),  has or would  have the effect of
reducing  the rate of return on such  Lender's  (or its  parent's)  capital as a
consequence of its obligations hereunder or the transactions contemplated hereby
to a level below that which such Lender (or its parent)  could have achieved but
for  such   adoption,   implementation,   change  or  compliance   (taking  into
consideration  such Lender's  policies  with respect to capital  adequacy) by an
amount deemed by such Lender to be material,  then from time to time, within ten
(10) Business  Days after demand by such Lender (with a copy to the Agent),  the
Borrower  shall pay to such  Lender  such  additional  amount or amounts as will
compensate such Lender (or its parent) for such reduction. A certificate of such
Lender claiming compensation under this Section in reasonable detail and setting
forth the  additional  amount or  amounts  to be paid to it  hereunder  shall be
conclusive,  provided  that the  determination  thereof is made on a  reasonable
basis. In determining such amount or amounts, such Lender may use any reasonable
averaging and attribution methods. With respect to each demand by a Lender under
this Section  5.10,  no Lender shall have the right to demand  compensation  for
amounts  attributable to any reduction in such Lender's rate of return occurring
at any time  before the date  which is three (3)  months  prior to the date such
Lender gives such demand for compensation to the Borrower.

                                      -27-
<PAGE>

                                   ARTICLE VI

                              Conditions Precedent

     Section 6.1 Initial  Extension of Credit.  The obligation of each Lender to
make its initial  Advance is subject to the condition  precedent  that the Agent
shall have  received on or before the day of such Advance all of the  following,
each dated (unless  otherwise  indicated) the date hereof, in form and substance
satisfactory to the Agent:

          (a) Resolutions. Resolutions of the Board of Directors of the Borrower
     and each  Guarantor  certified by its  Secretary or an Assistant  Secretary
     which  authorize  the  execution,  delivery,  and  performance  of the Loan
     Documents to which it is or is to be a party.

          (b) Incumbency  Certificate.  A certificate of incumbency certified by
     the Secretary or an Assistant  Secretary of the Borrower and each Guarantor
     certifying the names of each of its officers (i) who are authorized to sign
     the Loan  Documents to which such Person is or is to be a party  (including
     the certificates  contemplated herein) together with specimen signatures of
     such  officers and (ii) who will,  until  replaced by other  officers  duly
     authorized for that purpose,  act as the  representative of such Person for
     the  purposes  of  signing  documentation  and  giving  notices  and  other
     communications  in  connection  with this  Agreement  and the  transactions
     contemplated hereby.

          (c)  Articles  of  Incorporation.   The  articles  or  certificate  of
     incorporation of the Borrower and each Guarantor certified by the Secretary
     of State of the state of its incorporation and dated a current date.

          (d) Bylaws. The bylaws of the Borrower and each Guarantor certified by
     the Secretary or an Assistant Secretary.

          (e)  Governmental   Certificates.   Certificates  of  the  appropriate
     government officials of the state of incorporation of the Borrower and each
     Guarantor  as to its  existence  and  good  standing  and  certificates  of
     appropriate  government  officials  of each state in which the Borrower and
     the Guarantor is required to qualify to do business,  as to the  Borrower's
     and each such Guarantor's qualification to do business and good standing in
     such state, all dated a current date.

          (f) Notes. The Notes executed by the Borrower.

          (g) Guaranty. A Guaranty executed by each Guarantor.

          (h) Collateral Documents and Collateral. The Borrower Pledge Agreement
     and  the  Borrower  Security  Agreement  executed  by  the  Borrower;   the
     Subsidiary Pledge Agreement and the Subsidiary  Security Agreement executed
     by each  Guarantor;  certificates  representing  the  capital  stock of the
     Subsidiaries  pledged  pursuant to the Borrower Pledge  Agreement  together
     with undated stock powers duly executed in blank; certificates representing
     the capital stock of the  Subsidiaries  pledged  pursuant to the Subsidiary
     Pledge Agreement together with undated stock powers duly executed in blank;
     UCC, tax and judgment Lien search reports listing all documentation on file
     against Borrower and each Guarantor in the office of the Secretary of State
     of Texas and  Secretary of State of Georgia and executed  documentation  as
     Agent may deem  necessary  to  perfect or  protect  its  Liens,  including,
     without limitation, financing statements under the UCC.

                                      -28-
<PAGE>

          (i) Termination of Liens. Duly executed UCC-3  termination  statements
     and such other  documentation as shall be necessary to terminate or release
     all Liens on the  property of the Borrower  and the  Guarantors  other than
     those permitted by Section 9.2.

          (j) Contribution  and  Indemnification  Agreement.  A Contribution and
     Indemnification Agreement executed by the Borrower and the Guarantors.

          (k) Opinion of Counsel.  A favorable  opinion of legal  counsel to the
     Borrower and each Guarantor  satisfactory  to the Agent, as to such matters
     as the Agent or the Required Lenders may reasonably request.

          (l) Attorneys' Fees and Expenses. Evidence that the costs and expenses
     (including  attorneys'  fees)  referred to in Section  13.1,  to the extent
     incurred, shall have been paid in full by the Borrower.

          (m)  Termination  Agreements.  Termination  agreements  confirming the
     prior  credit  facilities  provided  pursuant  to (i) that  certain  Credit
     Agreement  dated as of June 27,1997,  by and between the Borrower and Wells
     Fargo Bank  (Texas),  National  Association,  as the same has been amended,
     restated or modified  from time to time (the  "Existing  Wells Fargo Credit
     Agreement"),  and (ii) that  certain  Credit  Agreement  (the  "Existing TC
     Credit  Agreement")  dated April 9, 1999,  by and between the  Borrower and
     Texas Capital  Bank,  National  Association,  as the same has been amended,
     restated or modified from time to time  (collectively,  the Existing  Wells
     Fargo Credit Agreement and the Existing TC Credit Agreement are referred to
     as the "Existing Credit Agreements"),  shall be terminated and paid in full
     effective as of the date hereof.

          (n)  Existing LC Guaranty.  The  Existing LC Guaranty  executed by the
     Borrower.

     Section 6.2 All Extensions of Credit. The obligation of each Lender to make
any  Advance  (including  the  initial  Advance)  is  subject  to the  following
additional conditions precedent:

          (a) Advance Request Form. The Agent shall have received, in accordance
     with Section 2.5 and 3.5, an Advance Request Form executed by an authorized
     officer of the Borrower;

                                      -29-
<PAGE>

          (b) No  Default  or Event of  Default.  No Default or Event of Default
     shall have occurred and be continuing, or would result from such Advance.

          (c)  Representations  and Warranties.  All of the  representations and
     warranties  contained in Article VII hereof and in the other Loan Documents
     shall be true and correct in all material respects on and as of the date of
     such Advance with the same force and effect as if such  representations and
     warranties  had been made on and as of such date  except to the extent such
     representations and warranties speak to a specific date;

          (d) No Material Adverse Effect. Neither any Material Adverse Effect or
     any material  adverse change in the financial or capital markets shall have
     occurred since the date of the most recent financial  statements  delivered
     to the Agent and the Lenders pursuant to Section 8.1 hereof; and

          (e)  Additional  Documentation.  The Agent  shall have  received  such
     additional  approvals,  opinions,  or  documents  as the Agent or its legal
     counsel, Winstead Sechrest & Minick P.C., may request.

Each  request  for an Advance  by the  Borrower  hereunder  shall  constitute  a
representation  and warranty by the Borrower that the  conditions  precedent set
forth in Sections 7.2(b),  7.2(c) and 7.2(d) have been satisfied (both as of the
date of such request and, unless the Borrower otherwise notifies the Agent prior
to the date of such Advance, as of the date of such Advance).

                                   ARTICLE VII

                         Representations and Warranties

     To induce the Agent,  the Issuing Bank,  and the Lenders to enter into this
Agreement,  the Borrower represents and warrants to the Agent, the Issuing Bank,
and the Lenders that:

     Section  7.1  Existence.   The  Borrower  and  each  Subsidiary  (a)  is  a
corporation  (or other  entity as set forth on  Schedule  7.14) duly  organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation or organization;  (b) has all requisite power and authority to own
its  assets  and  carry  on its  business  as now  being  or as  proposed  to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of its business makes such qualification necessary.  Each of the Borrower
and each Guarantor have the power and authority to execute, deliver, and perform
its obligations under the Loan Documents to which it is or may become a party.

     Section 7.2 Financial  Statements.  The Borrower has delivered to the Agent
audited  consolidated  financial statements of the Borrower and its Subsidiaries
as  at  and  for  the  fiscal  year  ended  December  31,  1998,  and  unaudited
consolidated  financial  statements of the Borrower and its Subsidiaries for the
nine-month  period ended September 30, 1999. Such financial  statements are true
and  correct,  have been  prepared  in  accordance  with  GAAP,  and  fairly and
accurately  present,  on a consolidated  basis,  the financial  condition of the
Borrower and its Subsidiaries as of the respective  dates indicated  therein and
the results of operations for the respective  periods indicated  therein.  As of
the date  hereof,  neither  the  Borrower  nor any of its  Subsidiaries  has any
material  contingent  liabilities,  liabilities  for taxes,  unusual  forward or
long-term commitments,  or unrealized or anticipated losses from any unfavorable
commitments except as referred to or reflected in such financial statements, and
there has been no Material  Adverse  Effect since the effective date of the most
recent financial statements referred to in this Section.

                                      -30-
<PAGE>

     Section 7.3 Action; No Breach. The execution,  delivery, and performance by
the  Borrower  and each  Guarantor  of the Loan  Documents to which it is or may
become a party, and compliance with the terms and provisions  hereof and thereof
have been duly  authorized by all  requisite  action on the part of the Borrower
and each  Guarantor  and do not and will not (a)  violate or conflict  with,  or
result in a breach of, or require any consent,  other than such  consents  which
have been  obtained and copies of which have been  provided to the Agent,  under
(i) the articles of  incorporation  or bylaws or the  applicable  organizational
documents of the Borrower or any Guarantor,  (ii) any  applicable  law, rule, or
regulation  or any  order,  writ,  injunction,  or  decree  of any  Governmental
Authority  or  arbitrator,  or (iii) any  agreement or  instrument  to which the
Borrower or any of the  Guarantors  is a party or by which any of them or any of
their  property is bound or subject,  or (b) constitute a default under any such
agreement or  instrument,  or result in the creation or  imposition  of any Lien
upon any of the revenues or assets of the Borrower or any Guarantor.

     Section  7.4   Operation  of  Business.   The  Borrower  and  each  of  its
Subsidiaries possess all licenses,  permits,  franchises,  patents,  copyrights,
trademarks,  and  tradenames,  or rights  thereto,  necessary  to conduct  their
respective  businesses  substantially as now conducted and as presently proposed
to be  conducted  except where such  failure  would not have a Material  Adverse
Effect,  and the Borrower and each of its  Subsidiaries  are not in violation of
any valid  rights of others with  respect to any of the  foregoing  except where
such failure would not have a Material Adverse Effect.

     Section  7.5  Litigation  and   Judgments.   There  is  no  action,   suit,
investigation,  or  proceeding  before  or  by  any  Governmental  Authority  or
arbitrator pending,  or to the knowledge of the Borrower,  threatened against or
affecting the Borrower or any Subsidiary,  that is reasonably expected to have a
Material  Adverse  Effect.  As of the  date  hereof,  there  are no  outstanding
judgments against the Borrower or any Subsidiary.

     Section 7.6 Rights in Properties;  Liens.  The Borrower and each Subsidiary
have  good  and  indefeasible  title to or valid  leasehold  interests  in their
respective  properties and assets, real and personal,  including the properties,
assets, and leasehold interests reflected in the financial  statements described
in Section 7.2, and none of the properties,  assets,  or leasehold  interests of
the Borrower or any  Subsidiary  is subject to any Lien,  except as permitted by
Section 9.2.

     Section 7.7  Enforceability.  The Loan Documents to which the Borrower or a
Guarantor is a party,  when delivered,  shall  constitute the legal,  valid, and
binding   obligations  of  the  Borrower  or  such  Guarantor,   as  applicable,
enforceable against the Borrower or such Guarantor, as applicable, in accordance
with their respective  terms,  except as limited by bankruptcy,  insolvency,  or
other laws of general  application  relating to the  enforcement  of  creditors'
rights and general principles of equity.

                                      -31-
<PAGE>

     Section 7.8 Approvals.  No authorization,  approval,  or consent of, and no
filing or  registration  with, any  Governmental  Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower of
this  Agreement and by the Borrower or any Guarantor of the other Loan Documents
to which the Borrower or such Guarantor, as applicable, is or may become a party
or for the validity or enforceability thereof.

     Section 7.9 Debt. The Borrower and the Subsidiaries have no Debt, except as
permitted by Section 9.1.

     Section 7.10 Taxes.  The Borrower  and each  Subsidiary  have filed all tax
returns (federal,  state, and local) required to be filed, including all income,
franchise,  employment,  property,  and sales tax returns,  and have paid all of
their respective liabilities for taxes,  assessments,  governmental charges, and
other levies that are due and payable  other than those being  contested in good
faith by appropriate  proceedings diligently pursued for which adequate reserves
have been  established.  The Borrower knows of no pending  investigation  of the
Borrower  or any  Subsidiary  by any  taxing  authority  or of any  pending  but
unassessed tax liability of the Borrower or any Subsidiary.

     Section 7.11 Use of Proceeds;  Margin Securities.  Neither the Borrower nor
any Subsidiary is engaged principally, or as one of its important activities, in
the  business  of  extending  credit for the purpose of  purchasing  or carrying
margin  stock  (within  the  meaning of  Regulations  T, U, or X of the Board of
Governors  of the Federal  Reserve  System),  and no part of the proceeds of any
Advance will be used to purchase or carry any margin  stock or to extend  credit
to others for the purpose of purchasing or carrying margin stock.

     Section 7.12 ERISA.  The Borrower,  each Subsidiary,  ERISA Affiliate,  and
each Plan are in compliance with all applicable provisions of ERISA and the Code
except for events of noncompliance that will not have a Material Adverse Effect.
Each Benefit  Arrangement is in compliance with all applicable laws,  including,
without  limitation,  the Code, except for events of noncompliance that will not
have a Material  Adverse  Effect.  Neither a  Reportable  Event nor a Prohibited
Transaction has occurred or is continuing with respect to any Plan. No notice of
intent to terminate a Plan has been filed, nor has any Plan been terminated.  No
circumstances  exist which  constitute  grounds  entitling the PBGC to institute
proceedings to terminate,  or appoint a trustee to  administer,  a Plan, nor has
the PBGC  instituted  any such  proceedings.  Neither the Borrower nor any ERISA
Affiliate has completely or partially  withdrawn from a Multiemployer  Plan. The
Borrower and each ERISA  Affiliate have met their minimum  funding  requirements
under ERISA with  respect to all of their  Plans,  and no  "accumulated  funding
deficiency"  (for which an excise tax is due or would be due in the absence of a
waiver) as defined in  Section  412 of the Code or Section  302(a)(2)  of ERISA,
whichever may apply, has been incurred with respect to any Plan,  whether or not
waived. The present value of all benefits under each Plan do not exceed the fair
market value of all Plan assets  allocable  to such  benefits,  determined  on a
termination  basis  as of the  most  recent  valuation  date of the  Plan and in
accordance with ERISA. Neither the Borrower nor any ERISA Affiliate has incurred
any  liability  to the PBGC under  ERISA.  Neither  the  Borrower  nor any ERISA
Affiliate is subject to any lien  imposed  under  Section  412(n) of the Code or
Section 302(f) or 4068 of ERISA,  whichever may apply, with respect to any Plan.
Neither the Borrower nor any ERISA Affiliate is required to provide  security to
a Plan under Section  401(a)(29) of the Code. Neither the Borrower nor any ERISA
Affiliate has engaged in a transaction described in Section 4069 of ERISA.

                                      -32-
<PAGE>

     Section  7.13  Disclosure.  All  factual  information  (taken  as a  whole)
furnished by or on behalf of the  Borrower in writing to the Agent,  the Issuing
Bank or any Lender (including,  without limitation, all information contained in
the Loan Documents) for purposes of or in connection  with this  Agreement,  the
other Loan Documents or any transaction  contemplated  herein or therein is, and
all other such factual  information (taken as a whole) hereafter furnished by or
on behalf of the Borrower to the Agent, the Issuing Bank or any Lender,  will be
true  and  accurate  in all  material  respects  on the  date as of  which  such
information  is dated or certified  and not  incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in any
material  respect at such time in light of the  circumstances  under  which such
information was provided.

     Section  7.14  Subsidiaries.  As of the date  hereof,  the  Borrower has no
Subsidiaries  other than those listed on Schedule 7.14 hereto, and Schedule 7.14
(a) sets forth the type of each Subsidiary  listed  thereon,  (b) sets forth the
jurisdiction  of  incorporation  or  organization  of each  Subsidiary,  and the
percentage of the Borrower's  ownership of the outstanding voting stock or other
ownership interests of each Subsidiary, and with respect to each Subsidiary that
is a corporation,  the authorized,  issued and outstanding capital stock of such
Subsidiary.  All of the outstanding  capital stock of each corporate  Subsidiary
has been  validly  issued,  is fully paid,  and is  nonassessable.  There are no
outstanding  subscriptions,  options, warrants, calls, or rights to acquire, and
no outstanding securities or instruments  convertible into, capital stock of any
Subsidiary except as listed on Schedule 7.14.

     Section 7.15  Agreements.  Except as disclosed in the financial  statements
provided to the Agent,  the Issuing  Bank,  and each Lender prior to the date of
this  Agreement,  neither  the  Borrower  nor any  Subsidiary  is a party to any
indenture,  loan,  or credit  agreement,  or to any lease or other  agreement or
instrument,  or subject to any  charter or  corporate  restriction.  Neither the
Borrower nor any  Subsidiary is in default in the  performance,  observance,  or
fulfillment of any of the obligations, covenants, or conditions contained in any
agreement or instrument material to its business to which it is a party.

     Section 7.16 Compliance with Laws.  Neither the Borrower nor any Subsidiary
is in  violation  of  any  law,  rule,  regulation,  order,  or  decree  of  any
Governmental Authority or arbitrator.

     Section  7.17  Investment   Company  Act.  Neither  the  Borrower  nor  any
Subsidiary  is an  "investment  company"  within the  meaning of the  Investment
Company Act of 1940, as amended.

                                      -33-
<PAGE>

     Section 7.18 Public Utility Holding  Company Act.  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 a "public  utility" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.

     Section 7.19 Environmental Matters. Except for those matters which will not
have a Material Adverse Effect:

          (a)  The  Borrower,  each  Subsidiary,  and  all of  their  respective
     properties,  assets,  and  operations  are  in  full  compliance  with  all
     Environmental  Laws.  The  Borrower  is not aware of, nor has the  Borrower
     received  notice  of,  any past,  present,  or future  conditions,  events,
     activities, practices, or incidents which may interfere with or prevent the
     compliance  or continued  compliance  of the Borrower and the  Subsidiaries
     with all Environmental Laws;

          (b) The  Borrower  and each  Subsidiary  have  obtained  all  permits,
     licenses,   and   authorizations   that  are  required   under   applicable
     Environmental  Laws,  and all such  permits  are in good  standing  and the
     Borrower and the  Subsidiaries  are in compliance with all of the terms and
     conditions of such permits;

          (c) No Hazardous  Materials  exist on,  about,  or within or have been
     used, generated, stored, transported,  disposed of on, or Released from any
     of the  properties  or assets of the  Borrower or any  Subsidiary.  The use
     which the  Borrower and the  Subsidiaries  make and intend to make of their
     respective  properties  and assets will not result in the use,  generation,
     storage,  transportation,   accumulation,   disposal,  or  Release  of  any
     Hazardous Material on, in, or from any of their properties or assets except
     in compliance with Environmental Laws;

          (d) Neither the Borrower nor any of the  Subsidiaries nor any of their
     respective currently or previously owned or leased properties or operations
     is subject to any  outstanding  or threatened  order from or agreement with
     any  Governmental  Authority  or other Person or subject to any judicial or
     docketed  administrative  proceeding  with respect to (i) failure to comply
     with  Environmental  Laws, (ii) Remedial Action, or (iii) any Environmental
     Liabilities arising from a Release or threatened Release;

          (e) There  are no  conditions  or  circumstances  associated  with the
     currently or  previously  owned or leased  properties  or operations of the
     Borrower or any of the  Subsidiaries  that could  reasonably be expected to
     give rise to any Environmental Liabilities;

          (f) Neither the Borrower nor any of the  Subsidiaries  is a treatment,
     storage,  or  disposal  facility  requiring  a permit  under  the  Resource
     Conservation  and  Recovery  Act, 42 U.S.C.  ss. 6901 et seq.,  regulations
     thereunder or any  comparable  provision of state law. The Borrower and the
     Subsidiaries are in compliance with all applicable financial responsibility
     requirements of all Environmental Laws;

                                      -34-
<PAGE>

          (g)  Neither the  Borrower  nor any of the  Subsidiaries  has filed or
     failed to file any  notice  required  under  applicable  Environmental  Law
     reporting a Release; and

          (h) No Lien arising  under any  Environmental  Law has attached to any
     property or revenues of the Borrower or the Subsidiaries.

                                  ARTICLE VIII

                               Positive Covenants

     The Borrower  covenants and agrees that, as long as the  Obligations or any
part thereof are  outstanding  or any Lender has any Commitment  hereunder,  the
Borrower will perform and observe the following positive covenants:

     Section 8.1 Reporting Requirements. The Borrower will furnish to the Agent,
the Issuing Bank, and each Lender:

          (a) Annual  Financial  Statements.  As soon as  available,  and in any
     event  within one  hundred  twenty  (120) days after the end of each Fiscal
     Year of the Borrower and the  Subsidiaries,  beginning with the Fiscal Year
     ending December 31, 1999, a copy of the annual audited financial statements
     of the Borrower and the Subsidiaries for such fiscal year containing,  on a
     consolidated  and  consolidating  basis,  balance  sheets and statements of
     income,  retained earnings, and cash flow as at the end of such Fiscal Year
     and for the  12-month  period then  ended,  in each case  setting  forth in
     comparative  form  the  figures  for  the  preceding  Fiscal  Year,  all in
     reasonable detail and audited and certified by independent certified public
     accountants of recognized  standing  acceptable to the Agent, to the effect
     that such report has been prepared in accordance with GAAP;

          (b) Prepared Form 10-K Report. As soon as available,  and in any event
     within one hundred  twenty  (120) days after the end of each Fiscal Year of
     the Borrower and the  Subsidiaries,  beginning  with the Fiscal Year ending
     December 31,  1999,  a copy of the annual  report on the Form 10-K as filed
     with the Securities and Exchange Commission, all as prepared by independent
     certified  public  accountants  of  recognized  standing  acceptable to the
     Agent, together with all exhibits, schedules, and annexes attached thereto;

          (c)  Quarterly  Certificate.  As soon as  available,  and in any event
     within  forty-five  (45) days,  after the end of each Fiscal Quarter of the
     Borrower and the  Subsidiaries,  beginning  with the Fiscal  Quarter ending
     December 31, 1999, a certificate (the "Quarterly Certificate") of the chief
     financial  officer of the  Borrower  (i)  stating  that to the best of such
     officer's  knowledge,  no Default has occurred and is  continuing,  or if a
     Default  has  occurred  and is  continuing,  a  statement  as to the nature
     thereof and the action that is proposed to be taken with  respect  thereto,
     and (ii)  showing in  reasonable  detail  the most  recent  Fiscal  Quarter
     calculations demonstrating compliance with Article X;

                                      -35-
<PAGE>

          (d) Form 10-Q Report.  As soon as  available,  and in any event within
     forty-five  (45) days after the end of each Fiscal Quarter  (except for the
     Fiscal  Quarter  ending as of the end of a Fiscal Year) of the Borrower and
     the Subsidiaries,  beginning with the Fiscal Quarter ending March 31, 2000,
     a copy of the  quarterly  report on Form 10-Q as filed with the  Securities
     and Exchange Commission,  together with all exhibits, schedules and annexes
     attached thereto;

          (e) Projections. As soon as available, and in any event not later than
     the first day of each  December of each year,  beginning  December 1, 2000,
     projections of  consolidated  financial  statements of the Borrower and its
     Subsidiaries for the upcoming Fiscal Year;

          (f) Management  Letters.  Promptly upon receipt thereof, a copy of any
     management letter or written report provided in lieu of a management letter
     submitted to the Borrower or any Subsidiary by independent certified public
     accountants  with  respect  to  the  business,   condition   (financial  or
     otherwise),  operations,  prospects,  or  properties of the Borrower or any
     Subsidiary;

          (g) Notice of  Litigation.  Promptly after the  commencement  thereof,
     notice of all  actions,  suits,  and  proceedings  before any  Governmental
     Authority or arbitrator  affecting the Borrower or any Subsidiary which, if
     determined  adversely to the Borrower or such Subsidiary,  could reasonably
     be expected to have a Material Adverse Effect;

          (h) Notice of Default. As soon as possible and in any event within ten
     (10) days after the Borrower  knows of the  occurrence of each  Default,  a
     written  notice  setting  forth the details of such  Default and the action
     that the Borrower has taken and proposes to take with respect thereto;

          (i) ERISA  Reports.  Promptly  after the  filing or  receipt  thereof,
     copies of all reports,  including  annual  reports,  and notices  which the
     Borrower or any ERISA Affiliate files with or receives from the PBGC or the
     U.S.  Department  of Labor under ERISA;  and as soon as possible and in any
     event within five (5) days after the Borrower or any ERISA  Affiliate knows
     or has reason to know that any Reportable  Event or Prohibited  Transaction
     has  occurred  with respect to any Plan or that the PBGC or the Borrower or
     any  Subsidiary  or any ERISA  Affiliate has  instituted or will  institute
     proceedings under Title IV of ERISA to terminate any Plan, a certificate of
     the chief financial officer of the Borrower setting forth the details as to
     such Reportable Event or Prohibited Transaction or Plan termination and the
     action that the Borrower proposes to take with respect thereto;

          (j) Notice of Material Adverse Effect.  As soon as possible and in any
     event  within  ten (10) days  after the  Borrower  knows of the  occurrence
     thereof,  written notice of any matter that could reasonably be expected to
     have a Material Adverse Effect;

                                      -36-
<PAGE>

          (k) Proxy  Statements,  Etc.  As soon as  available,  one copy of each
     financial statement, report, notice or proxy statement sent by the Borrower
     or any  Subsidiary  to its  stockholders  generally  and  one  copy of each
     regular, periodic or special report,  registration statement, or prospectus
     filed by the Borrower or any Subsidiary with any securities exchange or the
     Securities and Exchange Commission or any successor agency;

          (l)  Buy-Back  Report.  As soon as  available,  and in any event on or
     before January 15, 2000, a report detailing (i) the prices and terms of all
     Royalty  Buy-Backs  which have been  completed  and closed as of such date,
     (ii) the amount of cash payments paid by the Borrower and the  Subsidiaries
     in connection with such Royalty  Buy-Backs,  and (iii) the amount of seller
     financing  received by the Borrower and the Subsidiaries in connection with
     such Royalty Buy-Backs; and

          (m) General Information.  Promptly,  such other information concerning
     the Borrower or any  Subsidiary as the Agent or any Lender may from time to
     time reasonably request.

     Section 8.2  Maintenance  of Existence;  Conduct of Business.  The Borrower
will  preserve  and  maintain,  and will cause each  Subsidiary  to preserve and
maintain,  its  corporate  (or  partnership)  existence  and all of its  leases,
privileges, licenses, permits, franchises,  qualifications,  and rights that are
necessary or desirable in the ordinary conduct of its business, except where the
failure  to do so does  not and will not have a  Material  Adverse  Effect.  The
Borrower will conduct,  and will cause each Subsidiary to conduct,  its business
in an orderly and efficient  manner in accordance  with good business  practices
customary  in the  industry  in which  the  Borrower  and the  Subsidiaries  are
engaged.

     Section 8.3  Maintenance of Properties.  The Borrower will maintain,  keep,
and preserve, and cause each Subsidiary to maintain,  keep, and preserve, all of
its  properties  (tangible  and  intangible)  necessary  or useful in the proper
conduct of its business in good working order and condition  (ordinary  wear and
tear  excepted),  except where the failure to do so does not and will not have a
Material Adverse Effect.

     Section 8.4 Taxes and Claims. The Borrower will pay or discharge,  and will
cause each  Subsidiary  to pay or  discharge,  at or before  maturity  or before
becoming delinquent (a) all taxes, levies, assessments, and governmental charges
imposed  on it or its  income or  profits  or any of its  property,  and (b) all
lawful claims for labor, material, and supplies,  which, if unpaid, might become
a Lien upon any of its property;  provided,  however,  that neither the Borrower
nor any  Subsidiary  shall  be  required  to pay or  discharge  any  tax,  levy,
assessment,  or  governmental  charge which is being  contested in good faith by
appropriate proceedings diligently pursued, and for which adequate reserves have
been established.

     Section 8.5 Insurance.  The Borrower will maintain,  and will cause each of
the  Subsidiaries to maintain,  insurance with  financially  sound and reputable
insurance  companies  in such  amounts  and  covering  such  risks as is usually
carried  by  corporations  engaged  in similar  businesses  and  owning  similar
properties in the same general areas in which the Borrower and the  Subsidiaries
operate,  provided  that in any event the Borrower  will maintain and cause each
Subsidiary to maintain workmen's  compensation  insurance,  property  insurance,
comprehensive  general  liability  insurance and products  liability  insurance,
satisfactory to the Agent.

                                      -37-
<PAGE>

     Section  8.6  Inspection  Rights.  At any time and from  time to time,  the
Borrower will permit, and will cause each Subsidiary to permit,  representatives
of the Agent and each Lender to examine,  copy, and make extracts from its books
and records,  and, upon reasonable notice so long as no Default has occurred and
is continuing, to visit and inspect its properties, and to discuss its business,
operations,   and  financial  condition  with  its  officers,   employees,   and
independent certified public accountants.

     Section 8.7 Keeping Books and Records. The Borrower will maintain, and will
cause each  Subsidiary to maintain,  proper books of record and account in which
full,  true,  and correct  entries in conformity  with GAAP shall be made of all
dealings and transactions in relation to its business and activities.

     Section 8.8 Compliance with Laws. The Borrower will comply,  and will cause
each Subsidiary to comply,  in all material  respects with all applicable  laws,
rules,  regulations,  orders,  and  decrees  of any  Governmental  Authority  or
arbitrator.

     Section 8.9 Compliance with Agreements.  The Borrower will comply, and will
cause each Subsidiary to comply,  in all material  respects with all agreements,
contracts,  and  instruments  binding  on  it or  affecting  its  properties  or
business.

     Section 8.10 Further  Assurances;  Subsidiary  Guaranty,  Subsidiary Pledge
Agreement,  Subsidiary  Security Agreement and Contribution and  Indemnification
Agreement.  The Borrower  will,  and will cause each  Subsidiary to, execute and
deliver such further  agreements and instruments and take such further action as
may be  reasonably  requested  by the  Agent to  carry  out the  provisions  and
purposes of this Agreement and the other Loan  Documents.  Without  limiting the
foregoing,  upon the creation or  acquisition  of any  Subsidiary,  the Borrower
shall (a)  provide  written  notice of such event to the Agent  within  five (5)
Business  Days  following  the date the Borrower has  knowledge  thereof and (b)
cause each such  wholly-owned,  Domestic  Subsidiary  (hereinafter  defined)  to
execute  and  deliver  supplements  to  the  Guaranty,   the  Subsidiary  Pledge
Agreement,   the   Subsidiary   Security   Agreement,   the   Contribution   and
Indemnification Agreement, and such other documentation as the Agent may request
to cause  such  wholly-owned,  Domestic  Subsidiary  to  evidence  or  otherwise
implement  the pledge of  Collateral  for, and the guaranty of, the  Obligations
contemplated by the Guaranty,  the Subsidiary Pledge  Agreement,  the Subsidiary
Security  Agreement,  or the Contribution and  Indemnification  Agreement within
thirty (30) calendar days following the date the Borrower has knowledge thereof.
If any  Subsidiary  is created or acquired  after the date hereof,  the Borrower
shall execute and deliver to the Agent (a) an amendment to Schedule 7.14 to this
Agreement  (which only needs the  signature  of the Agent to be effective if the
only  change is the  addition of the new  Subsidiary),  (b) the  Borrower  shall
execute and deliver to the Agent an amendment to the Borrower  Pledge  Agreement
pledging  as  Collateral  thereunder  (1) all the  stock of or  other  ownership
interests in the new Subsidiary  owned by Borrower if the Subsidiary is directly
owned by the Borrower and is domestically organized ("Domestic  Subsidiary") and
(2) all,  but not more than  sixty-six  percent  (66%) of the total  outstanding
stock of or other ownership interests in the new Subsidiary owned by Borrower if
the  Subsidiary  is  directly  owned  by the  Borrower  and is not  domestically
organized  ("Foreign  Subsidiary"),  (c) the then  existing  Subsidiaries  shall
execute and deliver to the Agent an amendment to the Subsidiary Pledge Agreement
pledging  as  Collateral  thereunder  (1) all the  stock of or  other  ownership
interests in the new Subsidiary owned by the then existing  Subsidiaries if such
new  Subsidiary  is  directly  owned by any other  Subsidiary  and is a Domestic
Subsidiary and (2) all, but not more than  sixty-six  percent (66%) of the total
outstanding stock of or other ownership interests in the new Subsidiary owned by
the then existing  Subsidiaries if such new Subsidiary is a Foreign  Subsidiary,
(d)  the  Borrower  and  the  then  existing   Subsidiaries  shall  deliver  the
certificates  representing  such stock or other  ownership  interests in the new
Subsidiary  to the  Agent  together  with  undated  stock or other  powers  duly
executed in blank,  and (e) any other  documents which would have otherwise been
required to be delivered to the Agent,  the Issuing Bank and the Lenders if such
Subsidiary had been a Subsidiary as of the date hereof.

                                      -38-
<PAGE>

     Section  8.11  ERISA.  The  Borrower  will  comply,  and  will  cause  each
Subsidiary  and  each  ERISA  Affiliate  to  comply,  with all  minimum  funding
requirements, and all other material requirements of ERISA, if applicable, so as
not to give rise to any liability  thereunder which could reasonably be expected
to have a Material Adverse Effect.

     Section  8.12 Year 2000  Compliance.  Borrower  shall and shall  cause each
Subsidiary to, perform all acts reasonably necessary to ensure that (i) Borrower
and each  Subsidiary and any business in which Borrower or a Subsidiary  holds a
substantial  interest,  and (ii) all  customers,  suppliers and vendors that are
material  to  Borrower's  and  each  Subsidiary's  business,  become  Year  2000
Compliant  in a timely  manner.  Such acts shall  include,  without  limitation,
performing a  comprehensive  review and assessment of all of Borrower's and each
Subsidiary's  systems  and  adopting  a  detailed  plan,  for  the  remediation,
monitoring and testing of such systems.  As used in this  paragraph,  "Year 2000
Compliant"  shall mean, in regard to any entity,  that all  software,  hardware,
firmware,  equipment,  goods or systems  utilized by or material to the business
operations or financial  condition of such entity,  will  properly  perform date
sensitive  functions  before,  during and after the year 2000.  Borrower  shall,
immediately  upon  request,  provide to the Agent such  certifications  or other
evidence of Borrower's and each  Subsidiary's  compliance with the terms of this
paragraph as the Agent may from time to time require.

                                   ARTICLE IX
                               Negative Covenants

     The Borrower  covenants and agrees that, as long as the  Obligations or any
part thereof are  outstanding  or any Lender has any Commitment  hereunder,  the
Borrower will perform and observe the following negative covenants:

                                      -39-
<PAGE>

     Section 9.1 Debt. The Borrower will not incur, create, assume, or permit to
exist, and will not permit any Subsidiary to incur, create, assume, or permit to
exist, any Debt, except:

          (a) Debt to the  Lenders  and the  Issuing  Bank  pursuant to the Loan
     Documents;

          (b) Debt listed on Schedule 9.1;

          (c)  Debt  not to  exceed  $1,000,000  in the  aggregate  at any  time
     outstanding secured by purchase money Liens permitted by Section 9.2; and

          (d) Intercompany Debt among the Borrower and the wholly-owned domestic
     Subsidiaries;  provided that the  obligations  of each obligor of such Debt
     shall be subordinated in right of payment to the Obligations from and after
     such time as any portion of the  Obligations  shall  become due and payable
     (whether at stated  maturity,  by acceleration or otherwise) and shall have
     such other terms and provisions as the Agent may reasonably require.

     Section 9.2  Limitation  on Liens.  The  Borrower  will not incur,  create,
assume, or permit to exist, and will not permit any Subsidiary to incur, create,
assume,  or permit  to exist,  any Lien  upon any of its  property,  assets,  or
revenues, whether now owned or hereafter acquired, except:

          (a) Liens  disclosed  on Schedule 9.2 hereto and Liens in favor of the
     Agent for the  benefit  of the  Agent,  the  Issuing  Bank and the  Lenders
     pursuant to the Loan Documents;

          (b) Liens for taxes, assessments,  or other governmental charges which
     are not delinquent or which are being contested in good faith and for which
     adequate reserves have been established;

          (c) Liens of mechanics, materialmen, warehousemen, carriers, landlords
     or other similar statutory Liens securing  obligations that are not yet due
     and are incurred in the ordinary course of business;

          (d) Liens  resulting  from good faith  deposits to secure  payments of
     workmen's  compensation or other social security  programs or to secure the
     performance  of tenders,  statutory  obligations,  surety and appeal bonds,
     bids,  contracts  (other than for  payment of Debt),  or leases made in the
     ordinary course of business;

          (e) Purchase money Liens securing  Permitted Debt described in Section
     9.1;  provided  that,  the Debt secured by any such Lien encumbers only the
     asset so purchased;

          (f) Encumbrances  consisting of minor easements or other  restrictions
     on the use of real property that do not  (individually or in the aggregate)
     materially affect the value of the assets encumbered  thereby or materially
     impair the ability of the Borrower or the  Subsidiaries  to use such assets
     in their  respective  businesses,  and none of  which  is  violated  in any
     material respect by existing or proposed structures or land use;

                                      -40-
<PAGE>

          (g) Liens  arising  from  filing UCC  financing  statements  regarding
     leases not prohibited by this Agreement; and

          (h) Encumbrances  consisting of zoning restrictions on the use of real
     property that would not have a Material Adverse Effect.

Neither  Borrower nor any  Subsidiary  shall enter into or assume any  agreement
(other than the Loan  Documents)  prohibiting  the creation or assumption of any
Lien upon its  properties  or assets  whether now owned or  hereafter  acquired;
provided that in connection  with the creation of purchase money Liens permitted
hereby,  the  Borrower or the  Subsidiary  may agree that it will not permit any
other Liens to encumber the assets subject to such purchase money Lien. Further,
Borrower will not and will not permit any Subsidiaries directly or indirectly to
create or otherwise cause or suffer to exist to become  effective any consensual
encumbrance  or restriction of any kind on the ability of any Subsidiary to: (i)
pay  dividends  or make  any  other  distribution  on any of such  Subsidiaries'
capital stock owned by Borrower or any  Subsidiary of Borrower;  (ii) subject to
subordination  provisions pay any Debt owed to Borrower or any other Subsidiary;
(iii)  make loans or  advances  to  Borrower  or any other  Subsidiary;  or (iv)
transfer any of its properties or assets to Borrower or any other Subsidiary not
restricted hereby.

     Section 9.3 Mergers,  Etc.  The Borrower  will not, and will not permit any
Subsidiary  to become a party to a merger or  consolidation,  or to  purchase or
otherwise  acquire all or a  substantial  part of the  business or assets of any
Person or any shares or other  equity  interest of any Person other than the new
Subsidiaries  to be  formed  as more  specifically  described  on  Schedule  9.3
(whether  or not  certificated),  or wind-up,  dissolve,  or  liquidate  itself;
provided that, (i) a Subsidiary may wind-up, dissolve or liquidate if no Default
exists or would result  therefrom and its assets are  transferred to Borrower or
another  Subsidiary;  (ii) any  Subsidiary  may merge with and into  Borrower if
Borrower  is the  surviving  entity  and  no  Default  exists  or  would  result
therefrom;  (iii) any Subsidiary may merge with and into any such  Subsidiary if
such  Subsidiary  is the  surviving  entity,  no Default  exists or would result
therefrom  and  Section  8.10 is  complied  with;  and  (iv) the  Borrower  or a
Subsidiary may make investments permitted under Section 9.5 hereof.

     Section 9.4 Restricted Payments. The Borrower will not, and will not permit
any Subsidiary, to directly or indirectly declare, order, pay, make or set apart
any sum for (a) any  dividend  or other  distribution,  direct or  indirect,  on
account  of any  shares of any class of stock or other  equity  interest  of the
Borrower or any Subsidiary  now or hereafter  outstanding;  (b) any  redemption,
conversion,  exchange,  retirement, sinking fund or similar payment, purchase or
other acquisition for value,  direct or indirect,  of any shares of any class of
stock or other equity  interest of Borrower or any  Subsidiary  now or hereafter
outstanding;  provided  however,  Borrower or any  Subsidiary  may  purchase any
shares  or  other  equity   interest  of  the   Borrower  or  such   Subsidiary,
respectively,  in an aggregate  amount not to exceed  $1,000,000,  so long as no
Default has occurred and is  continuing or would result from such  purchase;  or
(c) any payment made to retire,  or to obtain the surrender of, any  outstanding
warrants,  options or other  rights to  acquire  shares of any class of stock or
other  equity  interest  of the  Borrower  or any  of  the  Subsidiaries  now or
hereafter  outstanding  except that the  Subsidiaries  of the Borrower may make,
declare and pay  dividends  and make other  distributions  with respect to their
common stock.

                                      -41-
<PAGE>

     Section 9.5  Investments.  The Borrower will not make,  and will not permit
any  Subsidiary  to make or permit to remain  outstanding,  any  advance,  loan,
extension of credit, or capital  contribution to or investment in any Person, or
purchase or own any stock, bonds, notes, debentures,  or other securities of any
Person, or be or become a joint venturer with or partner of any Person, except:

          (a) readily  marketable  direct  obligations  of the United  States of
     America or any agency thereof with  maturities of one year or less from the
     date of acquisition;

          (b) fully insured  certificates of deposit with maturities of one year
     or less  from  the  date  of  acquisition  issued  by any  commercial  bank
     operating  in the United  States of America  having  capital and surplus in
     excess of Fifty Million Dollars ($50,000,000);

          (c) commercial  paper of a domestic  issuer if at the time of purchase
     such paper is rated in one of the two highest rating categories of Standard
     and Poor's Corporation or Moody's Investors Service, Inc.;

          (d) investments in Subsidiaries existing on the date of this Agreement
     and investments in the new  Subsidiaries to be formed as more  specifically
     described on Schedule 9.3;

          (e) loans to Schlotzsky's National Advertising  Association,  Inc. not
     to exceed  $7,000,000 in the aggregate at any time outstanding and loans to
     Schlotzsky's N.A.M.F.,  Inc. not to exceed $500,000 in the aggregate at any
     time  outstanding;  provided  that such loans are  evidenced by  promissory
     notes,  which original  promissory notes shall be endorsed and delivered to
     the Agent in accordance with the Loan Documents;

          (f) loans and advances to employees as more specifically  described on
     Schedule  9.5(f) and any additional  loans to employees so long as (i) such
     loans to any one employee  shall not exceed $50,000 in the aggregate at any
     time  outstanding  and (ii) the  aggregate  outstanding  amount of all such
     additional loans shall not exceed $150,000 at any time; and

          (g) investments as described on Schedule 9.5(g).

     Section 9.6 Limitation on Issuance of Capital Stock.  The Borrower will not
permit any of its Subsidiaries to, at any time issue, sell, assign, or otherwise
dispose of (a) any of its capital stock (or any  equivalent  interest  therein),
(b) any securities  exchangeable  for or convertible into or carrying any rights
to acquire any of its capital stock (or any equivalent interest therein), or (c)
any option,  warrant, or other right to acquire any of its capital stock (or any
equivalent interest therein).

                                      -42-
<PAGE>

     Section 9.7 Transactions With Affiliates. The Borrower will not enter into,
and will not permit any  Subsidiary to enter into, any  transaction,  including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate of the Borrower or such Subsidiary, except in
the  ordinary  course of and  pursuant  to the  reasonable  requirements  of the
Borrower's or such  Subsidiary's  business and upon fair and reasonable terms no
less  favorable to the Borrower or such  Subsidiary  than would be obtained in a
comparable  arm's-length  transaction  with a  Person  not an  Affiliate  of the
Borrower or such Subsidiary,  it being expressly  provided that (a) compensation
granted to officers of the Borrower or such Subsidiary by the Board of Directors
or a committee  thereof will not be considered a violation of this provision and
(b) the granting of a long-term license of foreign Trademarks by the Borrower or
any Subsidiary to any new  Subsidiary  described on Schedule 9.3 at less than an
arm's-length  negotiated  price  will  not be  considered  a  violation  of this
provision.

     Section 9.8  Disposition  of Assets.  The  Borrower  will not sell,  lease,
assign,  transfer, or otherwise dispose (collectively  "Dispositions") of any of
its assets, or permit any Subsidiary to do so with any of its assets, except for
Dispositions  in the  ordinary  course of  business,  and except as described on
Schedule 9.8.

     Section 9.9 Sale and Leaseback.  The Borrower will not, and will not permit
any Subsidiary to, enter into any arrangement  with any Person pursuant to which
it leases from such Person real or personal  property  that has been or is to be
sold or transferred, directly or indirectly, by it to such Person.

     Section 9.10 Nature of Business. The Borrower will not, and will not permit
any  Subsidiary  to, engage in any business  other than the  businesses in which
they are  engaged  on the date  hereof  and  businesses  related  or  incidental
thereto.

     Section 9.11 Environmental Protection.  The Borrower will not, and will not
permit any of its Subsidiaries to, (a) use any of their respective properties or
assets for the handling, processing, storage, transportation, or disposal of any
Hazardous  Material,  (b)  generate  any  Hazardous  Material,  (c)  conduct any
activity  that is  likely  to  cause a  Release  or  threatened  Release  of any
Hazardous  Material,  or (d) otherwise  conduct any activity or use any of their
respective  properties or assets,  in each case described in clauses (a) through
(d) above in any  manner  that is likely to  violate  any  Environmental  Law or
create  any  Environmental  Liabilities  for  which the  Borrower  or any of its
Subsidiaries would be responsible.

     Section 9.12 Accounting.  The Borrower will not, and will not permit any of
its  Subsidiaries  to,  change its Fiscal Year or make any change in  accounting
treatment or reporting  practices,  except as permitted by GAAP and disclosed to
the Agent.

                                      -43-
<PAGE>

     Section  9.13  Prepayment  of Debt.  Except  for  refinancings  of any Debt
existing as of the date hereof under like or better  terms,  the  Borrower  will
not,  and will not  permit  any  Subsidiary  to,  prepay  any  Debt  except  the
Obligations.

                                    ARTICLE X

                               Financial Covenants

     The Borrower  covenants and agrees that, as long as the  Obligations or any
part thereof are  outstanding  or any Lender has any Commitment  hereunder,  the
Borrower will perform and observe the following financial covenants:

     Section 10.1 Consolidated Working Capital. As of the last day of any Fiscal
Quarter,  the Borrower will for the  applicable  Fiscal Quarter end indicated in
the table below  maintain a  Consolidated  Working  Capital of not less than the
amount set forth in the table below:

        ===================================================================
                               Period                  Minimum Consolidated
                                                          Working Capital
        -------------------------------------------------------------------
        Fiscal Quarter ending September 30, 1999            $12,000,000
        -------------------------------------------------------------------
        Fiscal Quarter ending December 31, 1999             $15,000,000
        -------------------------------------------------------------------
        Fiscal Quarter ending March 31, 2000                $15,000,000
        -------------------------------------------------------------------
        Fiscal Quarter ending June 30, 2000                 $20,000,000
        -------------------------------------------------------------------
        Fiscal Quarter ending September 30, 2000            $25,000,000
        and thereafter
        ===================================================================

     Section 10.2 Leverage Ratio. As of the last day of any Fiscal Quarter,  the
Borrower  will during the  periods  indicated  maintain a Leverage  Ratio of not
greater  than  (a)  3.50 to 1.00  from the date  hereof  through  and  including
December 31, 1999,  (b) 3.00 to 1.00 from January 1, 2000 through and  including
September 30, 2000,  (c) 2.75 to 1.00 from October 1, 2000 through and including
September 30, 2001, (d) 2.50 to 1.00 thereafter.

     Section  10.3  Consolidated  Net  Worth.  As of the last day of any  Fiscal
Quarter,  beginning  with the Fiscal  Quarter  ending  December  31,  1999,  the
Borrower  will  maintain  Consolidated  Net Worth in an amount not less than (a)
Seventy-Seven  Million  Dollars  ($77,000,000)  plus  (b)  an  amount  equal  to
seventy-five  percent (75%) of  Consolidated  Net Income (not less than zero (0)
dollars [$0.00]) for the immediately preceding Fiscal Quarter.

                                      -44-
<PAGE>

     Section 10.4 Fixed Charge  Coverage Ratio. As of the last day of any Fiscal
Quarter,  the Borrower will during the periods indicated maintain a Fixed Charge
Coverage Ratio for the preceding four (4) Fiscal Quarters then ended of not less
than (a) 1.50 to 1.00 from the date hereof  through and including  September 30,
2000 and (b) thereafter 1.75 to 1.00.

     Section 10.5 Capital Expenditures. Beginning January 1, 2000, Borrower will
not permit the  aggregate  amount of Capital  Expenditures  of Borrower  and the
Subsidiaries to exceed Six Million Dollars ($6,000,000) during any Fiscal Year.

     Section 10.6 Contingent  Liabilities.  Borrower will not permit at any time
the aggregate  amount of Contingent  Liabilities  to exceed  Forty-Five  Million
Dollars ($45,000,000).

                                   ARTICLE XI

                                     Default

     Section 11.1 Events of Default.  Each of the  following  shall be deemed an
"Event of Default":

          (a) The Borrower shall fail to pay (i) when due any principal  payable
     under any Loan  Document or any part  thereof,  and (ii)  within  three (3)
     Business  Days of the due date any  interest,  fees  payable  or any  other
     Obligation under the Loan Documents or any part thereof.

          (b) Any representation or warranty made or deemed made by the Borrower
     or any Obligated  Party (or any of their  respective  officers) in any Loan
     Document or in any  certificate,  report,  notice,  or financial  statement
     furnished at any time in  connection  with this  Agreement  shall be false,
     misleading,  or erroneous  in any  material  respect when made or deemed to
     have been made.

          (c) The Borrower  shall fail to perform,  observe,  or comply with any
     covenant,  agreement,  or term  contained  in  Section  8.1,  Article IX or
     Article X of this  Agreement;  or the Borrower or any Obligated Party shall
     fail to perform,  observe, or comply with any other covenant,  agreement or
     term  contained in this  Agreement or any other Loan  Document  (other than
     covenants to pay the  Obligations),  and such failure shall  continue for a
     period of fifteen (15) days.

          (d)  The  Borrower,  any  Subsidiary,  or any  Obligated  Party  shall
     commence a voluntary  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 a  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
     generally  fail to pay its  debts  as they  become  due or  shall  take any
     corporate action to authorize any of the foregoing.

                                      -45-
<PAGE>

          (e) An involuntary proceeding shall be commenced against the Borrower,
     any Subsidiary, or any Obligated Party 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 for it or a substantial part of its property, and such involuntary
     proceeding shall remain undismissed and unstayed for a period of sixty (60)
     days.

          (f) The Borrower, any Subsidiary, or any Obligated Party shall fail to
     discharge  within a period of  thirty  (30)  days  after  the  commencement
     thereof any attachment, sequestration, or similar proceeding or proceedings
     involving  an  aggregate  amount in excess of Two  Hundred  Fifty  Thousand
     Dollars ($250,000) against any of its assets or properties.

          (g) A final  judgment or judgments  for the payment of money in excess
     of Two Hundred Fifty Thousand Dollars  ($250,000) in the aggregate shall be
     rendered  by  a  court  or  courts   against  the  Borrower,   any  of  its
     Subsidiaries,  or any Obligated  Party and the same shall not be discharged
     (or provision shall not be made for such discharge), or a stay of execution
     thereof  shall not be  procured,  within  thirty (30) days from the date of
     entry  thereof and the  Borrower or the  relevant  Subsidiary  or Obligated
     Party shall not,  within  said  period of thirty (30) days,  or such longer
     period  during which  execution of the same shall have been stayed,  appeal
     therefrom and cause the execution thereof to be stayed during such appeal.

          (h) The Borrower, any Subsidiary, or any Obligated Party shall fail to
     pay when due any  principal of or interest on any Material Debt (other than
     the  Obligations),  or the  maturity  of any  such  Debt  shall  have  been
     accelerated,  or any such Debt shall have been required to be prepaid prior
     to the stated  maturity  thereof,  or any event  shall have  occurred  that
     permits  any holder or holders of such Debt or any Person  acting on behalf
     of such holder or holders to accelerate the maturity thereof or require any
     such  prepayment.  For purposes of this clause (h) the term "Material Debt"
     means Debt owed by the Borrower or any Subsidiary  the principal  amount of
     which exceeds Two Hundred Fifty Thousand Dollars ($250,000).

          (i) This  Agreement  or any other Loan  Document  shall cease to be in
     full force and effect or shall be declared null and void or the validity or
     enforceability  thereof  shall be contested or  challenged by the Borrower,
     any Subsidiary, any Obligated Party or any of their respective shareholders
     (other than shareholders of the Borrower), or the Borrower or any Obligated
     Party shall deny that it has any further  liability or obligation under any
     of the Loan Documents.

                                      -46-
<PAGE>

          (j) Any of the  following  events shall occur or exist with respect to
     the  Borrower  or any  ERISA  Affiliate:  (i)  any  Prohibited  Transaction
     involving  any Plan;  (ii) any  Reportable  Event with respect to any Plan;
     (iii)  the  filing  under  Section  4041 of ERISA of a notice  of intent to
     terminate  any Plan or the  termination  of any  Plan;  (iv)  any  event or
     circumstance that might constitute  grounds entitling the PBGC to institute
     proceedings  under Section 4042 of ERISA for the termination of, or for the
     appointment of a trustee to administer, any Plan, or the institution by the
     PBGC of any such proceedings;  or (v) complete or partial  withdrawal under
     Section  4203,  4204 or  4205 of  ERISA  from a  Multiemployer  Plan or the
     reorganization,  insolvency,  or termination of any Multiemployer Plan; and
     in each case above, such event or condition, together with all other events
     or conditions, if any, have subjected or could in the reasonable opinion of
     Required Banks subject the Borrower to any tax, penalty, or other liability
     to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any combination
     thereof) which in the aggregate  exceed or could  reasonably be expected to
     exceed Two Hundred Fifty Thousand Dollars ($250,000).

          (k) Any Person or group of related  Persons  for  purposes  of Section
     13(d) of the  Exchange  Act  acquires  after  the date  hereof  "beneficial
     ownership"  (within the meaning of Section  13(d) of the  Exchange  Act) in
     excess  of  thirty-three  percent  (33%) of the total  voting  power of all
     classes of capital stock then  outstanding  of Borrower  entitled  (without
     regard  to the  occurrence  of any  contingency)  to vote in  elections  of
     directors of Borrower.

          (l)  The  Borrower  or  any  of its  Subsidiaries,  or  any  of  their
     properties,  revenues,  or assets,  shall become the subject of an order of
     forfeiture,  seizure, or divestiture  (whether under RICO or otherwise) and
     the same shall not have been  discharged (or  provisions  shall not be made
     for such discharge) within thirty (30) days from the date of entry thereof.

          (m) Any Material Adverse Effect shall occur.

     Section 11.2 Remedies.

          (a) If any Event of Default shall occur and be  continuing,  the Agent
     may (and if directed by Required Lenders,  shall) do any one or more of the
     following:

               (i)  Acceleration.  Declare  all  outstanding  principal  of  and
          accrued and unpaid interest on the Notes,  all  outstanding  Letter of
          Credit Disbursements,  and all other obligations of the Borrower under
          the Loan  Documents  immediately  due and payable,  and the same shall
          thereupon become immediately due and payable,  without notice, demand,
          presentment,  notice of dishonor,  notice of  acceleration,  notice of
          intent to accelerate,  protest,  or other formalities of any kind, all
          of which are hereby expressly waived by the Borrower.

               (ii)  Termination of Commitments.  Terminate the Revolving Credit
          Commitments and Term Loan Commitments without notice to the Borrower.

                                      -47-
<PAGE>

               (iii) Judgment. Reduce any claim to judgment.

               (iv) Foreclosure. Foreclose or otherwise enforce any Lien granted
          to the Agent for the  benefit  of  itself,  the  Issuing  Bank and the
          Lenders  to secure  payment  and  performance  of the  Obligations  in
          accordance with the terms of the Loan Documents.

               (v) Rights.  Exercise any and all rights and remedies afforded by
          the laws of the  State of Texas or any other  jurisdiction,  by any of
          the Loan Documents, by equity, or otherwise.

         Provided, however, that upon the occurrence of an Event of Default
         under Subsection (d) or (e) of Section 11.1, the Revolving Loan
         Commitments and Term Loan Commitments of all of the Lenders shall
         automatically terminate, and the outstanding principal of and accrued
         and unpaid interest on the Notes and all other obligations of the
         Borrower under the Loan Documents shall thereupon become immediately
         due and payable without notice, demand, presentment, notice of
         dishonor, notice of acceleration, notice of intent to accelerate,
         protest, or other formalities of any kind, all of which are hereby
         expressly waived by the Borrower.

          (b) If an Event of Default shall have occurred and be continuing, each
     Lender is  hereby  authorized  at any time and from  time to time,  without
     notice to the Borrower  (any such notice being hereby  expressly  waived by
     the  Borrower),  to set off and  apply  any and all  deposits  (general  or
     special,  time or demand,  provisional or final) at any time held and other
     indebtedness  at any time owing by such  Lender to or for the credit or the
     account  of the  Borrower  against  any and all of the  obligations  of the
     Borrower now or hereafter  existing  under this  Agreement,  such  Lender's
     Note, or any other Loan Document,  irrespective of whether or not the Agent
     or such  Lender  shall have made any demand  under this  Agreement  or such
     Lender's Note or such other Loan Document and although such obligations may
     be unmatured.  Each Lender agrees  promptly to notify the Borrower  (with a
     copy  to  the  Agent  and  to  each  Lender)  after  any  such  setoff  and
     application, provided that the failure to give such notice shall not affect
     the  validity of such setoff and  application.  The rights and  remedies of
     each  Lender  hereunder  are in  addition  to  other  rights  and  remedies
     (including,  without limitation,  other rights of setoff) which such Lender
     may have.

     Section 11.3 Cash  Collateral.  If an Event of Default  shall have occurred
and be  continuing  the  Borrower  shall,  if requested by the Agent or Required
Lenders,  pledge  to the  Agent as  security  for the  Obligations  an amount in
immediately  available  funds  equal to the then  outstanding  Letter  of Credit
Liabilities,  such  funds to be held in a cash  collateral  account at the Agent
without any right of withdrawal by the Borrower.

     Section  11.4  Performance  by the  Agent.  If the  Borrower  shall fail to
perform  any  covenant or  agreement  in  accordance  with the terms of the Loan
Documents,  the Agent may,  at the  direction  of Required  Lenders,  perform or
attempt to perform such covenant or agreement on behalf of the Borrower. In such
event, the Borrower shall, at the request of the Agent,  promptly pay any amount
reasonably  expended  by the  Agent  or the  Lenders  in  connection  with  such
performance  or  attempted  performance  to the Agent at the  Principal  Office,
together with  interest  thereon at the Default Rate from and including the date
of such  expenditure to but excluding the date such expenditure is paid in full.
Notwithstanding the foregoing, it is expressly agreed that neither the Agent nor
any Lender shall have any liability or responsibility for the performance of any
obligation  of the  Borrower  under  this  Agreement  or any of the  other  Loan
Documents.

                                      -48-
<PAGE>

                                   ARTICLE XII

                                    The Agent

     Section 12.1 Appointment,  Powers and Immunities.  In order to expedite the
various transactions contemplated by this agreement, the Lenders and the Issuing
Bank hereby irrevocably appoint and authorize Wells Fargo Bank (Texas), National
Association  to act as their  Agent  hereunder  and under each of the other Loan
Documents.  Wells  Fargo Bank  (Texas),  National  Association  consents to such
appointment  and agrees to perform the duties of the Agent as specified  herein.
The  Lenders and the Issuing  Bank  authorize  and direct the Agent to take such
action in their name and on their behalf under the terms and  provisions  of the
Loan  Documents  and to  exercise  such  rights  and  powers  thereunder  as are
specifically  delegated  to or required of the Agent for the Lenders  and/or the
Issuing Bank, together with such rights and powers as are reasonably  incidental
thereto.  The Agent is hereby expressly authorized to act as the Agent on behalf
of itself, the other Lenders and the Issuing Bank:

          (a) To receive on behalf of each of the Lenders  and the Issuing  Bank
     any payment of principal,  interest, fees or other amounts paid pursuant to
     this  Agreement  and the Notes and to  distribute to each Lender and/or the
     Issuing  Bank its share of all  payments  so  received  as provided in this
     Agreement;

          (b) To receive all documents and items to be furnished  under the Loan
     Documents;

          (c) To act as nominee for and on behalf of the Lenders and the Issuing
     Bank in and under the Loan Documents;

          (d) To  arrange  for the means  whereby  the  Advances  are to be made
     available to the Borrower;

          (e) To  distribute  to the Lenders and the Issuing  Bank  information,
     requests,  notices,  payments,  prepayments,   documents  and  other  items
     received from the Borrower, the other Obligated Parties, and other Persons;

                                      -49-
<PAGE>

          (f) To  execute  and  deliver  to the  Borrower,  the other  Obligated
     Parties, and other Persons, all requests, demands, approvals,  notices, and
     consents received from the Lenders and the Issuing Bank;

          (g) To the extent  permitted  by the Loan  Documents,  to  exercise on
     behalf of each  Lender and the  Issuing  Bank all rights  and  remedies  of
     Lenders and the Issuing Bank upon the occurrence of any Event of Default;

          (h) To serve as liaison between the Lenders,  the Issuing Bank and the
     Borrower with respect to future negotiations, amendments and waivers of the
     terms of this Agreement and  transmittal  of copies of such  amendments and
     waivers for signature to each Lender and the Issuing Bank;

          (i) To receive  signed  copies of this  Agreement,  future  amendments
     hereto,  waivers of any terms hereof, and related documents  comprising the
     Loan  Documents,  and provide  appropriate  signed or  reproduction  copies
     thereof to each Lender, the Issuing Bank and the Borrower;

          (j) To forward to each Lender and the Issuing  Bank copies of all Loan
     Documents  and opinions  furnished to Agent under this  Agreement or any of
     the other Loan Documents;

          (k) To receive notices of Defaults, copies of which shall be forwarded
     to all Lenders and the Issuing Bank, and any waivers of Defaults under this
     Agreement and forward copies thereof to all Lenders and the Issuing Bank;

          (l) To advise each Lender and the Issuing Bank of all notices received
     or furnished by Agent hereunder;

          (m) To  take  such  other  actions  as may be  requested  by  Required
     Lenders; and

          (n) To accept,  execute, and deliver any and all security documents as
     the secured party.

     Neither  the  Agent  nor  any  of  its  Affiliates,   officers,  directors,
employees,  attorneys,  or agents  shall be liable to the Lenders for any action
taken or omitted to be taken by any of them hereunder or otherwise in connection
with this Agreement or any of the other Loan  Documents  except for its or their
own gross negligence or willful  misconduct.  Without limiting the generality of
the  preceding  sentence,  the  Agent (i) may treat the payee of any Note as the
holder  thereof until the Agent  receives  written  notice of the  assignment or
transfer  thereof  signed by such payee and in form  satisfactory  to the Agent;
(ii) shall have no duties or  responsibilities  except those expressly set forth
in this Agreement and the other Loan Documents,  and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Lender or
the Issuing  Bank;  (iii) shall not be required to initiate  any  litigation  or
collection  proceedings hereunder or under any other Loan Document except to the
extent  requested  by Required  Lenders;  (iv) shall not be  responsible  to the
Lenders or the Issuing Bank for any  recitals,  statements,  representations  or
warranties  contained  in this  Agreement  or any other  Loan  Document,  or any
certificate or other document referred to or provided for in, or received by any
of them under,  this  Agreement  or any other Loan  Document,  or for the value,
validity, effectiveness, enforceability, or sufficiency of this Agreement or any
other Loan Document or any other document  referred to or provided for herein or
therein  or for any  failure by any  Person to  perform  any of its  obligations
hereunder or thereunder;  (v) may consult with legal counsel  (including counsel
for the Borrower), independent public accountants, and other experts selected by
it and shall not be liable for any  action  taken or omitted to be taken in good
faith by it in  accordance  with the  advice of such  counsel,  accountants,  or
experts;  and (vi)  shall  incur no  liability  under or in  respect of any Loan
Document by acting upon any notice, consent, certificate, or other instrument or
writing  believed by it to be genuine and signed or sent by the proper  party or
parties.  As to any matters not expressly  provided for by this  Agreement,  the
Agent shall in all cases be fully  protected in acting,  or in  refraining  from
acting,  hereunder in accordance with  instructions  signed by Required Lenders,
and such instructions of Required Lenders and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders; provided, however, that
the Agent shall not be required  to take any action  which  exposes the Agent to
personal  liability  or which is  contrary to this  Agreement  or any other Loan
Document or applicable law.

                                      -50-
<PAGE>

     Section 12.2 Rights of Agent as a Lender.  With respect to its Commitments,
the Advances  made by it and the Notes  issued to it, Wells Fargo Bank  (Texas),
National  Association in its capacity as a Lender  hereunder shall have the same
rights and powers  hereunder  as any other  Lender and may  exercise the same as
though it were not  acting as the  Agent,  and the term  "Lender"  or  "Lenders"
shall,  unless  the  context  otherwise  indicates,  include  the  Agent  in its
individual capacity. The Agent and its Affiliates may (without having to account
therefor  to any Lender)  accept  deposits  from,  lend money to, act as trustee
under  indentures of, provide merchant banking services to, and generally engage
in any kind of business with the Borrower,  any of its  Subsidiaries,  any other
Obligated Party, and any other Person who may do business with or own securities
of the Borrower, any Subsidiary, or any other Obligated Party, all as if it were
not acting as the Agent and without any duty to account therefor to the Lenders.

     Section  12.3  Sharing of  Payments,  Etc. If any Lender  shall  obtain any
payment of any  principal  of or interest  on any Advance  made by it under this
Agreement or payment of any other  obligation under the Loan Documents then owed
by the  Borrower,  any other  Obligated  Party or the LC  Account  Party to such
Lender,  whether  voluntary,  involuntary,  through the exercise of any right of
set-off,  banker's lien,  counterclaim or similar right, or otherwise, in excess
of its pro rata share  (calculated  (i)  pursuant  to Section  4.4 in respect of
letter of credit fees, and (ii) for all other of the Obligations on the basis of
the unpaid principal of and interest on the Revolving Credit Loan, the Term Loan
and LC Participations  held by it), such Lender shall promptly purchase from the
other Lenders  participations  in the Obligations owed to them hereunder in such
amounts, and make such other adjustments from time to time as shall be necessary
to cause such purchasing Lender to share the excess payment ratably with each of
the other Lenders in accordance with its pro rata portion thereof.  To such end,
all of the Lenders shall make appropriate  adjustments  among themselves (by the
resale of participations sold or otherwise) if all or any portion of such excess
payment is  thereafter  rescinded or must  otherwise  be restored.  The Borrower
agrees,  to the fullest extent it may  effectively do so under  applicable  law,
that  any  Lender  so  purchasing  a  participation   in  the  Advances  and  LC
Participations  made by the other  Lenders may  exercise  all rights of set-off,
banker's   lien,   counterclaim,   or  similar   rights  with  respect  to  such
participation as fully as if such Lender were a direct holder of Advances to, or
Letter of Credit Disbursements for the account of, the Borrower in the amount of
such  participation.  Nothing  contained  herein  shall  require  any  Lender to
exercise any such right or shall affect the right of any Lender to exercise, and
retain the  benefits  of  exercising,  any such right with  respect to any other
indebtedness or obligation of the Borrower.

                                      -51-
<PAGE>

     Section 12.4  Indemnification.  THE LENDERS  HEREBY AGREE TO INDEMNIFY  THE
AGENT AND THE ISSUING BANK FROM AND HOLD THE AGENT AND THE ISSUING BANK HARMLESS
AGAINST (TO THE EXTENT NOT REIMBURSED  UNDER SECTIONS 13.1 AND 13.2, BUT WITHOUT
LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SECTIONS 13.1 AND 13.2),  RATABLY
IN  ACCORDANCE  WITH  THEIR  RESPECTIVE  COMMITMENTS,  ANY AND ALL  LIABILITIES,
OBLIGATIONS,  LOSSES,  DAMAGES,  PENALTIES,  ACTIONS,  JUDGMENTS,  DEFICIENCIES,
SUITS, COSTS, EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES), AND DISBURSEMENTS
OF ANY KIND OR  NATURE  WHATSOEVER  WHICH MAY BE  IMPOSED  ON,  INCURRED  BY, OR
ASSERTED  AGAINST  THE  AGENT AND THE  ISSUING  BANK IN ANY WAY  RELATING  TO OR
ARISING OUT OF ANY OF THE LOAN  DOCUMENTS  OR ANY ACTION  TAKEN OR OMITTED TO BE
TAKEN BY THE AGENT AND THE  ISSUING  BANK UNDER OR IN RESPECT OF ANY OF THE LOAN
DOCUMENTS;  PROVIDED, FURTHER, THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF
THE  FOREGOING TO THE EXTENT  CAUSED BY THE AGENT'S OR THE ISSUING  BANK'S GROSS
NEGLIGENCE OR WILLFUL  MISCONDUCT.  WITHOUT LIMITING ANY OTHER PROVISION OF THIS
SECTION, EACH LENDER AGREES TO REIMBURSE THE AGENT AND THE ISSUING BANK PROMPTLY
UPON DEMAND FOR ITS PRO RATA SHARE  (CALCULATED ON THE BASIS OF THE COMMITMENTS)
OF ANY AND ALL OUT-OF-POCKET  EXPENSES  (INCLUDING  REASONABLE  ATTORNEYS' FEES)
INCURRED BY THE AGENT AND THE ISSUING BANK IN CONNECTION  WITH THE  PREPARATION,
EXECUTION,  DELIVERY,  ADMINISTRATION,  MODIFICATION,  AMENDMENT OR  ENFORCEMENT
(WHETHER THROUGH  NEGOTIATIONS,  LEGAL  PROCEEDINGS,  OR OTHERWISE) OF, OR LEGAL
ADVICE IN RESPECT OF RIGHTS OR  RESPONSIBILITIES  UNDER, THE LOAN DOCUMENTS,  TO
THE  EXTENT  THAT  THE  AGENT OR THE  ISSUING  BANK IS NOT  REIMBURSED  FOR SUCH
EXPENSES BY THE BORROWER.

     Section 12.5 Independent  Credit Decisions.  Each Lender agrees that it has
independently  and without  reliance on the Agent, the Issuing Bank or any other
Lender,   and  based  on  such  documents  and  information  as  it  has  deemed
appropriate,  made its own credit analysis of the Borrower and decision to enter
into this Agreement and that it will,  independently  and without  reliance upon
the Agent,  the Issuing Bank or any other Lender,  and based upon such documents
and information as it shall deem  appropriate at the time,  continue to make its
own analysis and decisions in taking or not taking  action under this  Agreement
or any of the other Loan  Documents.  The Agent  shall not be  required  to keep
itself  informed as to the  performance  or  observance  by the  Borrower or any
Obligated  Party of this  Agreement or any other Loan Document or to inspect the
properties  or books of the  Borrower,  any  Obligated  Party or the LC  Account
Party. Except for notices, reports and other documents and information expressly
required  to be  furnished  to the  Lenders  and the  Issuing  Bank by the Agent
hereunder or under the other Loan  Documents,  neither the Agent nor the Issuing
Bank shall have any duty or responsibility to provide any Lender with any credit
or other financial  information  concerning the affairs,  financial condition or
business of the Borrower, any Obligated Party or the LC Account Party (or any of
their  Affiliates)  which may come into the possession of the Agent, the Issuing
Bank or any of their Affiliates.

                                      -52-
<PAGE>

     Section 12.6 Several Commitments.  The Commitments and other obligations of
the  Lenders  under this  Agreement  are  several.  The default by any Lender in
making an Advance in accordance with its Commitment  shall not relieve the other
Lenders of their obligations  under this Agreement.  In the event of any default
by any  Lender  in  making  any  Advance,  each  nondefaulting  Lender  shall be
obligated  to make its Advance but shall not be  obligated to advance the amount
which the defaulting Lender was required to advance hereunder. In no event shall
any  Lender be  required  to advance  an amount or  amounts  which  shall in the
aggregate  exceed such Lender's  Commitment.  No Lender shall be responsible for
any act or omission of any other Lender.

     Section 12.7 Successor Agent.  Subject to the appointment and acceptance of
a successor Agent as provided below,  the Agent may resign at any time by giving
notice  thereof to the Lenders,  the Issuing Bank and the Borrower and the Agent
may be removed at any time with or without cause by Required  Lenders.  Upon any
such  resignation or removal,  Required Lenders will have the right to appoint a
successor  Agent. If no successor Agent shall have been so appointed by Required
Lenders and shall have accepted such  appointment  within thirty (30) days after
the retiring  Agent's giving of notice of  resignation or the Required  Lenders'
removal of the retiring  Agent,  then the  retiring  Agent may, on behalf of the
Lenders  and the  Issuing  Bank,  appoint a  successor  Agent,  which shall be a
commercial  bank organized under the laws of the United States of America or any
State  thereof and having  combined  capital and surplus of at least One Hundred
Million  Dollars  ($100,000,000).  Upon the  acceptance  of its  appointment  as
successor  Agent,  such successor  Agent shall  thereupon  succeed to and become
vested  with all  rights,  powers,  privileges,  immunities,  and  duties of the
resigning  or  removed  Agent,  and the  resigning  or  removed  Agent  shall be
discharged  from its duties and  obligations  under this Agreement and the other
Loan  Documents.  After  any  Agent's  resignation  or  removal  as  Agent,  the
provisions  of this  Article  XII shall  continue  in effect for its  benefit in
respect  of any  actions  taken  or  omitted  to be taken by it while it was the
Agent.  After the retiring  Agent's  resignation or removal  hereunder as Agent,
each reference  herein to a place of giving of notice or delivery to Agent shall
be deemed to refer to the  principal  office  of the  successor  Agent as it may
specify to each party hereto.

                                      -53-
<PAGE>

                                  ARTICLE XIII

                                  Miscellaneous

     Section 13.1 Expenses. The Borrower hereby agrees to pay on demand: (a) all
reasonable  costs and expenses of the Agent and the Issuing  Bank in  connection
with the preparation, negotiation, execution, and delivery of this Agreement and
the other Loan Documents and any and all  amendments,  modifications,  renewals,
extensions, and supplements thereof and thereto, including,  without limitation,
the reasonable  fees and expenses of legal counsel for the Agent and the Issuing
Bank, (b) all costs and expenses of the Agent,  the Issuing Bank and the Lenders
in  connection  with any Default and the  enforcement  of this  Agreement or any
other Loan Document,  including,  without  limitation,  the fees and expenses of
legal counsel for the Agent, the Issuing Bank and the Lenders, (c) all transfer,
stamp, documentary,  or other similar taxes,  assessments,  or charges levied by
any Governmental Authority in respect of this Agreement or any of the other Loan
Documents, (d) all costs, expenses,  assessments,  and other charges incurred in
connection  with any  filing,  registration,  recording,  or  perfection  of any
security  interest or Lien, if any,  contemplated by this Agreement or any other
Loan  Document,  and (e) all other costs and expenses  incurred by the Agent and
the Issuing Bank in connection with this Agreement or any other Loan Document.

     Section 13.2  INDEMNIFICATION.  THE BORROWER HEREBY AGREES TO INDEMNIFY THE
AGENT,  THE ISSUING  BANK AND EACH LENDER AND EACH  AFFILIATE  THEREOF AND THEIR
RESPECTIVE OFFICERS, DIRECTORS,  EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLD
EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS,  DISBURSEMENTS,  COSTS, AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS'  FEES) TO WHICH ANY OF THEM MAY  BECOME  SUBJECT  WHICH  DIRECTLY  OR
INDIRECTLY  ARISE FROM OR RELATE TO (a) THE  NEGOTIATION,  EXECUTION,  DELIVERY,
PERFORMANCE,  ADMINISTRATION,  OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS,  (b)
ANY OF THE  TRANSACTIONS  CONTEMPLATED BY THE LOAN DOCUMENTS,  (c) ANY BREACH BY
THE  BORROWER OF ANY  REPRESENTATION,  WARRANTY,  COVENANT,  OR OTHER  AGREEMENT
CONTAINED IN ANY OF THE LOAN DOCUMENTS,  (d) THE PRESENCE,  RELEASE,  THREATENED
RELEASE,  DISPOSAL,  REMOVAL,  OR CLEANUP OF ANY HAZARDOUS  MATERIAL LOCATED ON,
ABOUT,  WITHIN,  OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF THE BORROWER OR
ANY SUBSIDIARY, (e) THE USE OR PROPOSED USE OF THE LETTER OF CREDIT, (f) ANY AND
ALL TAXES, LEVIES, DEDUCTIONS, AND CHARGES IMPOSED ON THE ISSUING BANK OR ANY OF
THE ISSUING BANK'S CORRESPONDENTS IN RESPECT OF THE LETTER OF CREDIT, OR (g) ANY
INVESTIGATION,  LITIGATION, OR OTHER PROCEEDING,  INCLUDING, WITHOUT LIMITATION,
ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING RELATING TO ANY OF
THE FOREGOING AND ANY LEGAL PROCEEDING  RELATING TO ANY COURT ORDER,  INJUNCTION
OR OTHER PROCESS OR DECREE  RESTRAINING  OR SEEKING TO RESTRAIN THE ISSUING BANK
FROM  PAYING  ANY  AMOUNT  UNDER THE  LETTER OF  CREDIT.  WITHOUT  LIMITING  ANY
PROVISION  OF THIS  AGREEMENT OR OF ANY OTHER LOAN  DOCUMENT,  IT IS THE EXPRESS
INTENTION OF THE PARTIES  HERETO THAT EACH PERSON TO BE  INDEMNIFIED  UNDER THIS
SECTION SHALL BE INDEMNIFIED  FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES,  CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,  DISBURSEMENTS,  COSTS, AND
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM
THE SOLE OR CONTRIBUTORY  NEGLIGENCE OF SUCH PERSON; PROVIDED HOWEVER, NO PERSON
SHALL  BE  INDEMNIFIED  HEREUNDER  FOR  ITS  OWN  GROSS  NEGLIGENCE  OR  WILLFUL
MISCONDUCT.

                                      -54-
<PAGE>

     Section 13.3 Limitation of Liability.  None of the Agent, the Issuing Bank,
any Lender, or any Affiliate,  officer, director,  employee,  attorney, or agent
thereof  shall have any  liability  with  respect  to, and the  Borrower  hereby
waives,  releases,  and agrees  not to sue any of them  upon,  any claim for any
special, indirect,  incidental, or consequential damages suffered or incurred by
the Borrower in connection with,  arising out of, or in any way related to, this
Agreement  or  any of  the  other  Loan  Documents,  or any of the  transactions
contemplated by this Agreement or any of the other Loan Documents.

     Section 13.4 No Duty. All  attorneys,  accountants,  appraisers,  and other
professional Persons and consultants retained by the Agent, the Issuing Bank and
the  Lenders  shall have the right to act  exclusively  in the  interest  of the
Agent,  the Issuing  Bank and the Lenders and shall have no duty of  disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to the Borrower or any of the  Borrower's  shareholders  or any other
Person.

     Section  13.5 No  Fiduciary  Relationship.  The  relationship  between  the
Borrower  and each of the Issuing  Bank and the Lenders is solely that of debtor
and  creditor,  and neither the Agent,  the Issuing  Bank nor any Lender has any
fiduciary  or  other  special  relationship  with the  Borrower,  and no term or
condition  of any of the Loan  Documents  shall be  construed  so as to deem the
relationship between the Borrower and any of the Issuing Bank and the Lenders to
be other than that of debtor and creditor.

     Section 13.6 Equitable  Relief.  The Borrower  recognizes that in the event
the Borrower  fails to pay,  perform,  observe,  or discharge  any or all of the
Obligations,  any remedy at law may prove to be inadequate  relief to the Agent,
the Issuing Bank and the Lenders.  The Borrower therefore agrees that the Agent,
the Issuing Bank and the Lenders,  if the Agent, the Issuing Bank or the Lenders
so request,  shall be entitled to temporary and permanent  injunctive  relief in
any such case without the necessity of proving actual damages.

     Section 13.7 No Waiver;  Cumulative Remedies. No failure on the part of the
Agent,  the Issuing Bank or any Lender to exercise  and no delay in  exercising,
and no course of dealing with respect to, any right,  power,  or privilege under
this  Agreement  shall  operate  as a waiver  thereof,  nor shall any  single or
partial exercise of any right, power, or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any other right, power,
or  privilege.  The rights and remedies  provided for in this  Agreement and the
other Loan Documents are cumulative and not exclusive of any rights and remedies
provided by law.

                                      -55-
<PAGE>

     Section 13.8 Successors and Assigns.

          (a) This  Agreement  shall be binding upon and inure to the benefit of
     the  parties  hereto  and their  respective  successors  and  assigns.  The
     Borrower  may not  assign or  transfer  any of its  rights  or  obligations
     hereunder  without the prior written consent of the Agent, the Issuing Bank
     and all of the Lenders.  Any Lender may sell  participations to one or more
     banks or other  institutions  in or to all or a portion  of its  rights and
     obligations  under this Agreement and the other Loan Documents  (including,
     without  limitation,  all or a portion of its  Commitments and the Advances
     owing to it and the LC Participations held by it); provided,  however, that
     (i) such  Lender's  obligations  under  this  Agreement  and the other Loan
     Documents  (including,  without  limitation,  its Commitments) shall remain
     unchanged, (ii) such Lender shall remain solely responsible to the Borrower
     for the performance of such obligations, (iii) such Lender shall remain the
     holder  of its  Notes  and LC  Participations  for  all  purposes  of  this
     Agreement,  (iv) the  Borrower  shall  continue to deal solely and directly
     with such Lender in connection  with such Lender's  rights and  obligations
     under this  Agreement  and the other Loan  Documents,  and (v) such  Lender
     shall not sell a participation that conveys to the participant the right to
     vote or give or withhold  consents  under this  Agreement or any other Loan
     Document,  other than the right to vote upon or consent to (A) any increase
     of such Lender's Commitments, (B) any reduction of the principal amount of,
     or  interest  to be paid on, the  Advances  and LC  Participations  of such
     Lender,  (C) any reduction of any commitment fee or other amount payable to
     such Lender under any Loan Document,  or (D) any  postponement  of any date
     for the  payment of any amount  payable  in respect of the  Advances  or LC
     Participations of such Lender.

          (b) The Borrower  and each of the Issuing  Bank and the Lenders  agree
     that any Lender (the  "Assigning  Lender") may at any time assign to one or
     more Eligible  Assignees all, or a proportionate part of all, of its rights
     and  obligations   under  this  Agreement  and  the  other  Loan  Documents
     (including,  without  limitation,  its  Commitments  and  Advances  and  LC
     Participations) (each an "Assignee"); provided, however, that (i) each such
     assignment shall be of a consistent,  and not a varying,  percentage of all
     of the Assigning  Lender's rights and obligations  under this Agreement and
     the other Loan  Documents,  (ii) except in the case of an assignment of all
     of a Lender's  rights and  obligations  under this  Agreement and the other
     Loan Documents, the amount of the Commitments of the Assigning Lender being
     assigned  pursuant  to each  assignment  (determined  as of the date of the
     Assignment  and  Acceptance  with respect to such  assignment)  shall in no
     event be less  than  Three  Million  Dollars  ($3,000,000),  and  (iii) the
     parties to each such assignment  shall execute and deliver to the Agent for
     its acceptance and recording in the Register, an Assignment and Acceptance,
     together  with the Note subject to such  assignment,  and a processing  and
     recordation fee of Three Thousand  Dollars  ($3,000).  Upon such execution,
     delivery,  acceptance,  and  recording,  from and after the effective  date
     specified in each Assignment and Acceptance,  which effective date shall be
     at least five (5)  Business  Days after the  execution  thereof,  or, if so
     specified in such Assignment and Acceptance, the date of acceptance thereof
     by the Agent,  (x) the  assignee  thereunder  shall be a party  hereto as a
     "Lender" and, to the extent that rights and obligations hereunder have been
     assigned to it pursuant to such Assignment and Acceptance,  have the rights
     and obligations of a Lender  hereunder and under the Loan Documents and (y)
     the  Assigning  Lender  shall,  to the extent that  rights and  obligations
     hereunder  have  been  assigned  by it  pursuant  to  such  Assignment  and
     Acceptance,  relinquish  its rights and be  released  from its  obligations
     under this Agreement and the other Loan  Documents  (and, in the case of an
     Assignment  and  Acceptance  covering  all or the  remaining  portion of an
     Assigning  Lender's rights and obligations  under the Loan Documents,  such
     Assigning Lender shall cease to be a party thereto).

                                      -56-
<PAGE>

          (c) By executing  and  delivering an Assignment  and  Acceptance,  the
     Assigning Lender and the Assignee thereunder confirm to and agree with each
     other and the other parties  hereto as follows:  (i) other than as provided
     in  such  Assignment  and  Acceptance,   such  Assigning  Lender  makes  no
     representation  or warranty and assumes no  responsibility  with respect to
     any statements,  warranties,  or  representations  made in or in connection
     with  the  Loan  Documents  or  the  execution,   legality,  validity,  and
     enforceability, genuineness, sufficiency, or value of the Loan Documents or
     any other  instrument or document  furnished  pursuant  thereto;  (ii) such
     Assigning  Lender  makes no  representation  or  warranty  and  assures  no
     responsibility with respect to the financial condition of the Borrower, any
     Obligated Party or the LC Account Party or the performance or observance by
     the  Borrower  or any  Obligated  Party of its  obligations  under the Loan
     Documents;  (iii) such assignee confirms that it has received a copy of the
     other Loan  Documents,  together  with copies of the  financial  statements
     referred to in Section 7.2 and such other  documents and  information as it
     has deemed  appropriate  to make its own credit  analysis  and  decision to
     enter  into  such  Assignment  and  Acceptance;  (iv) such  assignee  will,
     independently  and without reliance upon the Agent, the Issuing Bank or any
     Lender  and  based on such  documents  and  information  as it  shall  deem
     appropriate  at the time,  continue  to make its own  credit  decisions  in
     taking or not  taking  action  under  this  Agreement  and the  other  Loan
     Documents; (v) such assignee confirms that it is an Eligible Assignee; (vi)
     such  assignee  appoints  and  authorizes  the Agent to take such action as
     agent on its behalf and exercise  such powers under the Loan  Documents are
     as delegated to the Agent by the terms  thereof,  together with such powers
     as are reasonably  incidental thereto;  and (vii) such assignee agrees that
     it will perform in accordance with their terms all of the obligations which
     by the terms of the Loan  Documents are required to be performed by it as a
     Lender.

          (d) The Agent shall  maintain at its  Principal  Office a copy of each
     Assignment  and  Acceptance  delivered to and accepted by it and a register
     for the  recordation  of the names and  addresses  of the  Lenders  and the
     Commitments  of,  and  principal  amount of the  Advances  owing to, and LC
     Participations held by, each Lender from time to time (the "Register"). The
     entries in the Register  shall be conclusive  and binding for all purposes,
     absent manifest error,  and the Borrower,  the Agent,  the Issuing Bank and
     the Lenders may treat each Person whose name is recorded in the Register as
     a Lender hereunder for all purposes under the Loan Documents.  The Register
     shall be  available  for  inspection  by the  Borrower,  any  Lender or the
     Issuing Bank at any reasonable  time and from time to time upon  reasonable
     prior notice.

                                      -57-
<PAGE>

          (e) Upon its receipt of an Assignment  and  Acceptance  executed by an
     assigning Lender and assignee representing that it is an Eligible Assignee,
     together with any Notes  subject to such  assignment,  the Agent shall,  if
     such  Assignment and Acceptance has been completed and is in  substantially
     the form of Exhibit E hereto,  (i) accept such  Assignment and  Acceptance,
     (ii) record the information  contained  therein in the Register,  and (iii)
     give  prompt  written  notice  thereof  to the  Borrower.  Within  five (5)
     Business  Days  after its  receipt of such  notice,  the  Borrower,  at its
     expense,  shall  execute  and  deliver  to the  Agent in  exchange  for the
     surrendered  Notes, new Notes to the order of such Eligible  Assignee in an
     amount equal to the  Commitments  assumed by it pursuant to such Assignment
     and Acceptance  and, if the assigning  Lender has retained a Commitment,  a
     new Note (or Notes) to the order of the assigning Lender in an amount equal
     to the  Commitments  retained by it hereunder  (each such  promissory  note
     shall  constitute  a "Note" for purposes of the Loan  Documents).  Such new
     Notes shall be in an aggregate  principal amount of the surrendered  Notes,
     shall be dated the effective date of such  Assignment and  Acceptance,  and
     shall  otherwise  be in  substantially  the  form of  Exhibits  A-1 and A-2
     hereto.

          (f) Any Lender may, in connection with any assignment or participation
     or proposed assignment or participation pursuant to this Section,  disclose
     to the assignee or participant  or proposed  assignee or  participant,  any
     information  relating to the Borrower,  its  Subsidiaries or the LC Account
     Party  furnished  to such  Lender  by or on  behalf  of the  Borrower,  its
     Subsidiaries or the LC Account Party.

     Section 13.9 Survival.  All  representations  and  warranties  made in this
Agreement  or  any  other  Loan  Document  or in  any  document,  statement,  or
certificate  furnished  in  connection  with this  Agreement  shall  survive the
execution and delivery of this  Agreement and the other Loan  Documents,  and no
investigation  by the Agent, the Issuing Bank or any Lender or any closing shall
affect the representations and warranties or the right of the Agent, the Issuing
Bank or any Lender to rely upon them.  Without  prejudice to the survival of any
other  obligation of the Borrower  hereunder,  the  obligations  of the Borrower
under Article V and Sections 13.1 and 13.2 shall survive  repayment of the Notes
and termination of the Commitments and the Letter of Credit.

     Section 13.10  Amendments,  Etc. No amendment or waiver of any provision of
this  Agreement,  the Notes, or any other Loan Document to which the Borrower or
any Obligated Party is a party, nor any consent to any departure by the Borrower
or Obligated Party  therefrom,  shall in any event be effective  unless the same
shall be agreed or  consented  to by Required  Lenders  and the  Borrower or the
Obligated  Party,  as  applicable,  and each  such  waiver or  consent  shall be
effective only in the specific  instance and for the specific  purpose for which
given; provided, that no amendment,  waiver, or consent shall, unless in writing
and signed by all of the Lenders and the Borrower, do any of the following:  (a)
increase  Commitments  of the Lenders or subject  the Lenders to any  additional
obligations;  (b) reduce the principal of, or interest on, the Notes or any fees
or other amounts payable hereunder;  (c) postpone any date fixed for any payment
of principal of, or interest on, the Notes or Letter of Credit  Disbursements or
any fees or other amounts  payable  hereunder;  (d) waive any of the  conditions
specified in Article VI; (e) change the percentage of the  Commitments or of the
aggregate unpaid  principal amount of the Notes or Letter of Credit  Liabilities
or the number of Lenders  which shall be required for the Lenders or any of them
to take any action under this Agreement;  (f) change any provision  contained in
this Section 13.10;  (g) release the Borrower from any of its obligations  under
this  Agreement or the other Loan  Documents or release any  Guarantor  from its
obligations  under its Guaranty and (h) release any Collateral.  Notwithstanding
anything to the contrary  contained in this Section,  no amendment,  waiver,  or
consent  shall be made (a) with respect to Article XII hereof  without the prior
written  consent of the Agent,  or (b) with respect to Article IV hereof without
the prior written consent of the Issuing Bank.

                                      -58-
<PAGE>

     Section 13.11 Maximum  Interest  Rate. No provision of this Agreement or of
any other Loan Document  shall require the payment or the collection of interest
in excess of the maximum  amount  permitted by applicable  law. If any excess of
interest in such respect is hereby  provided for, or shall be  adjudicated to be
so provided,  in any Loan  Document or otherwise  in  connection  with this loan
transaction, the provisions of this Section shall govern and prevail and neither
the  Borrower  nor the  sureties,  guarantors,  successors,  or  assigns  of the
Borrower  shall be  obligated to pay the excess  amount of such  interest or any
other  excess sum paid for the use,  forbearance,  or  detention  of sums loaned
pursuant hereto. In the event any Lender ever receives,  collects, or applies as
interest  any such sum,  such  amount  which  would be in excess of the  maximum
amount  permitted by applicable  law shall be applied as a payment and reduction
of  the  principal  of  the  indebtedness  evidenced  by the  Notes  and  the LC
Participations; and, if the principal of the Notes and the LC Participations has
been paid in full, any remaining excess shall forthwith be paid to the Borrower.
In determining  whether or not the interest paid or payable  exceeds the Maximum
Rate, the Borrower and each Lender shall, to the extent  permitted by applicable
law, (a) characterize any non-principal  payment as an expense,  fee, or premium
rather than as  interest,  (b)  exclude  voluntary  prepayments  and the effects
thereof,  and (c) amortize,  prorate,  allocate,  and spread in equal or unequal
parts the total amount of interest  throughout the entire  contemplated  term of
the indebtedness  evidenced by the Notes and LC  Participations so that interest
for the entire term does not exceed the Maximum Rate.

     Section 13.12 Notices. All notices and other communications provided for in
this  Agreement  and the other Loan  Documents  to which the Borrower is a party
shall be given or made by telex, telegraph,  telecopy,  cable, or in writing and
telexed,  telecopied,  telegraphed,  cabled,  mailed by  certified  mail  return
receipt  requested,  or delivered to the intended  recipient at the "Address for
Notices"  specified below its name on the signature pages hereof,  or, as to any
party at such other  address as shall be designated by such party in a notice to
each other party given in  accordance  with this  Section.  Except as  otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly  given  when  transmitted  by  telex  or  telecopy,  subject  to  telephone
confirmation of receipt, or delivered to the telegraph or cable office,  subject
to telephone  confirmation of receipt,  or when personally  delivered or, in the
case of a mailed notice, when duly deposited in the mails, in each case given or
addressed as  aforesaid;  provided,  however,  notices to the Agent  pursuant to
Article II and to the Issuing Bank pursuant to Article IV shall not be effective
until received by the Agent or the Issuing Bank, as applicable.

                                      -59-
<PAGE>

     Section 13.13  Governing  Law;  Venue;  Service of Process.  This Agreement
shall be governed by and construed in  accordance  with the laws of the State of
Texas and the  applicable  laws of the United States of America.  This Agreement
has been entered into in Travis County,  Texas,  and it shall be performable for
all purposes in Travis County,  Texas.  Subject to Section 13.14,  any action or
proceeding  against the  Borrower  under or in  connection  with any of the Loan
Documents may be brought in any state or federal court in Travis County,  Texas.
The Borrower hereby irrevocably (a) submits to the nonexclusive  jurisdiction of
such courts, and (b) waives any objection it may now or hereafter have as to the
venue of any such  action or  proceeding  brought  in any such court or that any
such court is an inconvenient forum. The Borrower agrees that service of process
upon it may be made by certified or registered mail,  return receipt  requested,
at its address  specified or  determined in  accordance  with the  provisions of
Section 13.12. Nothing herein or in any of the other Loan Documents shall affect
the right of the Agent,  the Issuing Bank or any Lender to serve  process in any
other manner permitted by law or shall limit the right of the Agent, the Issuing
Bank or any Lender to bring any action or  proceeding  against  the  Borrower or
with respect to any of its property in courts in other jurisdictions. Subject to
Section 13.14,  any action or proceeding by the Borrower  against the Agent, the
Issuing Bank or any Lender  shall be brought  only in a court  located in Travis
County, Texas.

     Section 13.14 Binding 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 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.
     ss.91 or any similar applicable state law.

                                      -60-
<PAGE>

          (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 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.

                                      -61-
<PAGE>

          (f)  Miscellaneous.  To the maximum extent  practicable,  the AAA, the
     arbitrators  and the parties shall take all action required to conclude any
     arbitration  proceedings  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  regulations,  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  provisions 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.

     Section 13.15  Counterparts.  This Agreement may be executed in one or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

     Section 13.16 Severability. Any provision of this Agreement held by a court
of competent  jurisdiction  to be invalid or  unenforceable  shall not impair or
invalidate  the  remainder of this  Agreement  and the effect  thereof  shall be
confined to the provision held to be invalid or illegal.

     Section 13.17 Headings.  The headings,  captions,  and arrangements used in
this Agreement are for convenience only and shall not affect the  interpretation
of this Agreement.

     Section 13.18  Non-Application of Chapter 346 of Texas Credit Finance Code.
The  provisions of Chapter 346 of the Texas Finance Code  (Vernon's  Texas Civil
Statutes) are  specifically  declared by the parties hereto not to be applicable
to this  Agreement  or any of the other Loan  Documents  or to the  transactions
contemplated hereby.

     Section 13.19 Construction.  The Borrower,  the Agent, the Issuing Bank and
each Lender  acknowledges that each of them has had the benefit of legal counsel
of its own choice and has been afforded an  opportunity to review this Agreement
and the other Loan  Documents with its legal counsel and that this Agreement and
the other Loan Documents shall be construed as if jointly drafted by the parties
hereto.

                                      -62-
<PAGE>

     Section 13.20 Independence of Covenants.  All covenants  hereunder shall be
given  independent  effect so that if a  particular  action or  condition is not
permitted  by any of such  covenants,  the fact that it would be permitted by an
exception to, or be otherwise  within the limitations of, another covenant shall
not avoid the  occurrence of a Default if such action is taken or such condition
exists.

     Section 13.21 Confidentiality.  The Agent and each Lender (each, a "Lending
Party") agrees to keep confidential any information  furnished or made available
to it by the Borrower  pursuant to this Agreement  that is marked  confidential;
provided that nothing  herein shall  prevent any Lending  Party from  disclosing
such  information (a) to any other Lending Party or any affiliate of any Lending
Party,  or any officer,  director,  employee,  agent,  or advisor of any Lending
Party or affiliate of any Lending  Party,  (b) to any other Person if reasonably
incidental to the  administration of the credit facility provided herein, (c) as
required by any law,  rule,  or  regulation,  (d) upon the order of any court or
administrative  agency,  (e) upon the request or demand of any regulatory agency
or  authority,  (f) that is or  becomes  available  to the  public or that is or
becomes available to any Lending Party other than as a result of a disclosure by
any Lending Party  prohibited  by this  Agreement,  (g) in  connection  with any
litigation to which such Lending Party or any of its  affiliates may be a party,
(h) to the extent  necessary in connection with the exercise of any remedy under
this  Agreement  or any other  Loan  Document,  and (i)  subject  to  provisions
substantially  similar  to those  contained  in this  Section,  to any actual or
proposed participant or assignee.

     Section  13.22  WAIVER OF JURY TRIAL.  TO THE FULLEST  EXTENT  PERMITTED BY
APPLICABLE  LAW,  EACH OF THE PARTIES  HERETO HEREBY  IRREVOCABLY  AND EXPRESSLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,  PROCEEDING,  OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT,  TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY OF THE  LOAN  DOCUMENTS  OR THE  TRANSACTIONS  CONTEMPLATED  THEREBY  OR THE
ACTIONS OF THE  AGENT,  THE  ISSUING  BANK,  OR ANY  LENDER IN THE  NEGOTIATION,
ADMINISTRATION, OR ENFORCEMENT THEREOF.

     Section 13.23 ENTIRE  AGREEMENT.  THIS AGREEMENT,  THE NOTES, AND THE OTHER
LOAN  DOCUMENTS  REFERRED  TO HEREIN  REPRESENT  THE FINAL  AGREEMENT  AMONG THE
PARTIES  HERETO  AND MAY NOT BE  CONTRADICTED  OR VARIED BY  EVIDENCE  OF PRIOR,
CONTEMPORANEOUS,  OR SUBSEQUENT  ORAL  AGREEMENTS OR  DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

                  [Remainder of Page Intentionally Left Blank]

                                      -63-
<PAGE>

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

                                   BORROWER:

                                   SCHLOTZSKY'S, INC.

                                   By:  __________________________________
                                        Name: ____________________________
                                        Title: ___________________________

                                   Address for Notices:

                                   203 Colorado Street
                                   Austin, Texas 78701
                                   Fax No.:       (512)  236-3740
                                   Telephone No.: (512)  236-3600
                                   Attention:     Chief Financial Officer

                                   AGENT, ISSUING BANK AND LENDER:

                                   WELLS FARGO BANK (TEXAS), NATIONAL
                                      ASSOCIATION

                                   By:  __________________________________
                                        Keith Smith
                                        Vice President

                                   Address for Notices:

                                   111 Congress Avenue, Suite 300
                                   Austin, TX 78701
                                   Fax No.: (512) 344-7318
                                   Telephone No.: (512) 344-7011
                                   Attention:        Keith Smith

                                      -64-
<PAGE>

                                  with a copy to:
                                  Winstead, Sechrest & Minick, P.C.
                                  5400 Renaissance Tower
                                  1201 Elm Street
                                  Dallas, Texas  75270
                                  Fax No.:  (214) 745-5390
                                  Telephone No.:  (214) 745-5265
                                  Attention:  T. Randall Matthews, Esq.

                                  OTHER LENDERS:

                                  FROST NATIONAL BANK

                                  By:  __________________________________
                                       Name: ____________________________
                                       Title: ___________________________

                                  Address for Notices:

                                  2728 North Harwood, Suite 100
                                  Dallas, Texas 75201
                                  Fax No.:  (214) 515-4955
                                  Telephone No.: (214)  515-4907
                                  Attention:        Shannon Bettis

                                      -65-
<PAGE>

                                  TEXAS CAPITAL BANK,
                                  NATIONAL ASSOCIATION

                                  By:  __________________________________
                                       Name: ____________________________
                                       Title: ___________________________

                                  Address for Notices:

                                  2100 McKinney Avenue, Suite 900
                                  Dallas, Texas 75201
                                  Fax No.:  (214) 932-6604
                                  Telephone No.:  (214) 932-6675
                                  Attention:  Tim Monter

                                      -66-
<PAGE>

                                INDEX TO EXHIBITS
                                -----------------

Exhibits:         Description of Exhibit:
---------         -----------------------

A-1               Form of Revolving Credit Note
A-2               Form of Term Note
B                 Advance Request Form
C                 Form of Guaranty
D                 Form of Assignment and Acceptance
E                 Form of Contribution and Indemnification Agreement
F                 Form of Borrower Pledge Agreement
G                 Form of Borrower Security Agreement
H                 Form of Subsidiary Pledge Agreement
I                 Form of Subsidiary Security Agreement
J                 Form of Existing LC Guaranty

                               INDEX TO SCHEDULES
                               ------------------

Schedules:        Description of Schedule:
----------        ------------------------

1.1(a)            Commitments
1.1(b)            Letter of Credit
7.14              List of Subsidiaries
9.1               Existing Debt
9.2               Existing Liens
9.3               New Subsidiaries
9.5(f)            Employee Loans
9.5(g)            Investments
9.8               Disposition of Assets

<PAGE>

                                 SCHEDULE 1.1(a)

                                   Commitments

--------------------------------------------------------------------------------
               Lender       Term Commitment    Revolving Credit          LC
                                                  Commitment         Commitment
--------------------------------------------------------------------------------
Wells Fargo Bank (Texas),     $10,000,000         $7,500,000         $2,500,000
National Association
--------------------------------------------------------------------------------
Frost National Bank           $ 6,500,000         $4,875,000         $1,625,000
--------------------------------------------------------------------------------
Texas Capital Bank,            $3,500,000         $2,625,000         $ 875,000
National Association
--------------------------------------------------------------------------------

<PAGE>

                                 SCHEDULE 1.1(b)

                                Letter of Credit

Irrevocable Letter of Credit No. NZS317942,  dated February 11, 1999, as amended
on September  30, 1999, in the amount of Five Million  Dollars (US  $5,000,000),
issued by Wells  Fargo Bank  (Texas),  National  Association  for the account of
Schlotzsky's National Advertising  Association,  Inc. for the benefit of Western
International Media Corporation and expiring September 30, 2000.

<PAGE>

                                  SCHEDULE 7.14

                              List of Subsidiaries

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                               Percentage of Ownership (and,
                                                                 if corporation, amount of          Outstanding
                                     Type and State of             authorized, issued and        Options, Warrants,
          Subsidiary                   Organization                  outstanding stock)                etc.
---------------------------------------------------------------------------------------------------------------------
<S>                             <C>                         <C>                                 <C>
                                                            Borrower - 100% common stock         N/A
RAD Acquisition Corp.           Texas corporation           1,000 authorized, issued and
                                                            outstanding shares of common
                                                            stock
---------------------------------------------------------------------------------------------------------------------
                                                            Borrower - 100% common stock         N/A
Schlotzsky's Real Estate,       Texas corporation           1,000 authorized, issued and
Inc.                                                        outstanding shares of common
                                                            stock
---------------------------------------------------------------------------------------------------------------------
                                                            Borrower - 100% common stock         N/A
Schlotzsky's Restaurants,       Texas corporation           1,000 authorized, issued and
Inc.                                                        outstanding shares of common
                                                            stock
---------------------------------------------------------------------------------------------------------------------
                                                            Borrower - 100% common stock         N/A
DFW Restaurant Transfer         Texas corporation           100,000 authorized shares of
Corp.                                                       common stock
                                                            1,000 issued and outstanding
                                                            shares of common stock
---------------------------------------------------------------------------------------------------------------------
                                                            Borrower - 100% common stock         N/A
Schlotzsky's Brand, Inc.        Texas corporation           1,000,000 authorized shares of
                                                            common stock
                                                            1,000 issued and outstanding
                                                            shares of common stock
---------------------------------------------------------------------------------------------------------------------
                                                            Borrower - 100% common stock         N/A
Schlotzsky's Equipment          Texas corporation           1,000,000 authorized shares of
Corporation                                                 common stock
                                                            1,000 issued and outstanding
                                                            shares of common stock
---------------------------------------------------------------------------------------------------------------------
                                                            Schlotzsky's Real Estate, Inc. -     N/A
SREI Turnkey                    Texas limited liability     100% membership interest
Development, L.L.C.             company
---------------------------------------------------------------------------------------------------------------------
                                                            Schlotzsky's Restaurants, Inc. -     N/A
56th & 6th, Inc.                Texas corporation           100% common stock
                                                            1,000 authorized, issued and
                                                            outstanding shares of common
                                                            stock
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                  SCHEDULE 9.1

                                  Existing Debt

<PAGE>

                                  SCHEDULE 9.2

                                 Existing Liens

<PAGE>

                                  SCHEDULE 9.3

                                New Subsidiaries

<PAGE>

                                 SCHEDULE 9.5(f)

                            Employee Promissory Notes

<PAGE>

                                 SCHEDULE 9.5(g)

                                   Investments

<PAGE>

                                  SCHEDULE 9.8

                                  Dispositions

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