-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GWjMJLxcGCNpnti0SSn+RUkhWkiR/qSpjf7lH4LnDOwqAmErnM3/Pif/Rx41+R45 R9V2mMsrEbTo9SXO+xErKA== 0000807882-98-000005.txt : 19980525 0000807882-98-000005.hdr.sgml : 19980525 ACCESSION NUMBER: 0000807882-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980412 FILED AS OF DATE: 19980522 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOODMAKER INC /DE/ CENTRAL INDEX KEY: 0000807882 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 952698708 STATE OF INCORPORATION: DE FISCAL YEAR END: 0929 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09390 FILM NUMBER: 98630234 BUSINESS ADDRESS: STREET 1: 9330 BALBOA AVE CITY: SAN DIEGO STATE: CA ZIP: 92123-1516 BUSINESS PHONE: 6195712121 MAIL ADDRESS: STREET 1: PO BOX 783 CITY: SAN DIEGO STATE: CA ZIP: 92112-4126 10-Q 1 FORM 10Q FOR SECOND QUARTER ENDED APRIL 12, 1998 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended April 12, 1998 Commission File No. 1-9390 -------------- ------ FOODMAKER, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 95-2698708 - ------------------------------------------------------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 9330 BALBOA AVENUE, SAN DIEGO, CA 92123 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (619) 571-2121 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Number of shares of common stock, $.01 par value, outstanding as of the close of business May 15, 1998 - 39,310,195 -1- FOODMAKER, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands) April 12, September 28, 1998 1997 ----------- ------------- ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . $ 81,590 $ 28,527 Receivables . . . . . . . . . . . . . . . . . . 13,801 10,482 Inventories . . . . . . . . . . . . . . . . . . 18,974 18,300 Prepaid expenses. . . . . . . . . . . . . . . . 42,830 42,853 --------- --------- Total current assets . . . . . . . . . . . . $ 157,195 $ 100,162 --------- --------- Property at cost. . . . . . . . . . . . . . . . . 683,293 660,076 Accumulated depreciation and amortization . . . (216,286) (201,289) --------- --------- 467,007 458,787 --------- --------- Trading area rights . . . . . . . . . . . . . . . 73,092 69,921 --------- --------- Lease acquisition costs . . . . . . . . . . . . . 17,621 18,788 --------- --------- Other assets. . . . . . . . . . . . . . . . . . . 35,556 34,100 --------- --------- TOTAL. . . . . . . . . . . . . . . . . . . . $ 750,471 $ 681,758 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt. . . . . . $ 1,547 $ 1,470 Accounts payable. . . . . . . . . . . . . . . . 33,261 39,575 Accrued expenses. . . . . . . . . . . . . . . . 147,504 134,960 Income tax liabilities. . . . . . . . . . . . . 26,298 17,208 --------- --------- Total current liabilities. . . . . . . . . . 208,610 193,213 --------- --------- Long-term debt, net of current maturities . . . . 346,524 346,191 --------- --------- Other long-term liabilities . . . . . . . . . . . 56,488 54,093 --------- --------- Deferred income taxes . . . . . . . . . . . . . . 3,782 382 --------- --------- Stockholders' equity: Common stock. . . . . . . . . . . . . . . . . . 407 405 Capital in excess of par value. . . . . . . . . 284,682 283,517 Accumulated deficit . . . . . . . . . . . . . . (135,559) (181,580) Treasury stock. . . . . . . . . . . . . . . . . (14,463) (14,463) --------- --------- Total stockholders' equity . . . . . . . . . 135,067 87,879 --------- --------- TOTAL. . . . . . . . . . . . . . . . . . . . $ 750,471 $ 681,758 ========= ========= See accompanying notes to financial statements. -2- FOODMAKER, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Twelve Weeks Ended Twenty-eight Weeks Ended ---------------------- ------------------------ April 12, April 13, April 12, April 13, 1998 1997 1998 1997 --------- --------- --------- --------- Revenues: Restaurant sales. . . . . . $ 249,505 $ 223,820 $ 574,838 $ 515,032 Distribution sales. . . . . 5,546 14,285 12,319 34,860 Franchise rents and royalties 8,029 8,035 18,963 18,705 Other . . . . . . . . . . . 46,829 853 47,563 1,879 --------- --------- --------- --------- 309,909 246,993 653,683 570,476 --------- --------- --------- --------- Costs and expenses: Costs of revenues: Restaurant costs of sales 80,592 74,596 187,265 172,793 Restaurant operating costs 132,431 115,415 302,393 265,744 Costs of distribution sales 5,368 14,299 11,940 34,650 Franchised restaurant costs 5,480 5,540 12,455 12,019 Selling, general and administrative . . . . . . 27,431 19,136 52,803 43,030 Interest expense. . . . . . 8,160 9,412 19,206 22,018 --------- --------- --------- --------- 259,462 238,398 586,062 550,254 --------- --------- --------- --------- Earnings before income taxes 50,447 8,595 67,621 20,222 Income taxes. . . . . . . . . 16,100 1,900 21,600 4,500 --------- --------- --------- --------- Net earnings. . . . . . . . . $ 34,347 $ 6,695 $ 46,021 $ 15,722 ========= ========= ========= ========= Net earnings per share: Basic . . . . . . . . . . . $ .88 $ .17 $ 1.17 $ .40 Diluted . . . . . . . . . . $ .85 $ .17 $ 1.14 $ .40 Weighted average shares outstanding: Basic . . . . . . . . . . . 39,226 38,877 39,178 38,859 Diluted . . . . . . . . . . 40,327 39,580 40,252 39,531 See accompanying notes to financial statements. -3- FOODMAKER, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Twenty-eight Weeks Ended ------------------------ April 12, April 13, 1998 1997 --------- --------- Cash flows from operations: Net earnings. . . . . . . . . . . . . . . . . . . $46,021 $15,722 Non-cash items included above: Depreciation and amortization. . . . . . . . . 22,686 21,274 Deferred income taxes. . . . . . . . . . . . . 3,400 (2,000) Increase in receivables . . . . . . . . . . . . . (3,319) (427) Decrease (increase) in inventories. . . . . . . . (674) 99 Increase in prepaid expenses. . . . . . . . . . . (850) (6,556) Increase (decrease) in accounts payable . . . . . (6,314) 5,772 Increase in other accrued liabilities . . . . . . 24,222 10,990 ------- ------- Cash flows provided by operations. . . . . . . 85,172 44,874 ------- ------- Cash flows from investing activities: Additions to property and equipment . . . . . . . (28,953) (15,629) Dispositions of property and equipment. . . . . . 3,397 1,442 Increase in trading area rights . . . . . . . . . (5,114) (1,510) Increase in other assets. . . . . . . . . . . . . (2,813) (868) ------- ------- Cash flows used in investing activities. . . . (33,483) (16,565) ------- ------- Cash flows from financing activities: Proceeds from issuance of long-term debt. . . . . 1,000 - Principal payments on long-term debt, including current maturities . . . . . . . . . (793) (1,174) Proceeds from issuance of common stock. . . . . . 1,167 372 ------- ------- Cash flows provided by (used in) financing activities . . . . . . . . . . . . 1,374 (802) ------- ------- Net increase in cash and cash equivalents . . . . . $53,063 $27,507 ======= ======= See accompanying notes to financial statements. -4- FOODMAKER, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited financial statements of Foodmaker, Inc. (the "Company") do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of financial condition and results of operations for the interim periods have been included. Operating results for any interim period are not necessarily indicative of the results for any other interim period or for the full year. The Company reports results quarterly with the first quarter having 16 weeks and each remaining quarter having 12 weeks. Certain financial statement reclassifications have been made in the prior year to conform to the current year presentation. These financial statements should be read in conjunction with the 1997 financial statements. 2. In 1998, the Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings per Share. SFAS 128 requires the presentation of basic earnings per share, computed using the weighted average number of shares outstanding during the period, and diluted earnings per share, computed using the additional dilutive effect of all common stock equivalents. The dilutive impact of stock options and warrants account for the additional weighted average shares of common stock outstanding for the Company's diluted earnings per share computation. All prior periods have been restated to conform with the provisions of SFAS 128. 3. The income tax provisions reflect the expected annual tax rate of 32% of pretax earnings in 1998 and the actual tax rate of 22% in 1997. The low effective income tax rates in each year result from the Company's ability to realize previously unrecognized tax benefits. The Company cannot determine the actual 1998 annual effective tax rate until the end of the fiscal year, thus the rate could differ from expectations. 4. Legal Proceedings During the quarter, the Company settled the litigation it filed against the Vons Companies, Inc. ("Vons") and various suppliers seeking reimbursement for all damages, costs and expenses incurred in connection with food-borne illness attributed to hamburgers served at Jack in the Box restaurants in 1993. The initial litigation was filed by the Company on February 4, 1993. Vons filed cross-complaints against the Company and others alleging certain contractual, indemnification and tort liabilities; seeking damages in unspecified amounts and a declaration of the rights and obligations of the parties. The claims of the parties were settled on February 24, 1998. Foodmaker received in its second quarter approximately $58.5 million in the settlement, of which a net of approximately $45.8 million was realized after litigation costs and before income taxes (the "Litigation Settlement"). On February 2, 1995, an action by Concetta Jorgensen was filed against the Company in the U.S. District Court in San Francisco, California alleging that restrooms at a Jack in the Box restaurant failed to comply with laws regarding disabled persons and seeking damages in unspecified amounts, punitive damages, injunctive relief, attorneys fees and prejudgment -5- interest. In an amended complaint, damages were also sought on behalf of all physically disabled persons who were allegedly denied access to restrooms at the restaurant. In February 1997, the court ordered that the action for injunctive relief proceed as a nationwide class action on behalf of all persons in the United States with mobility disabilities. The Company has reached agreement on settlement terms both as to the individual plaintiff Concetta Jorgensen and the claims for injunctive relief, and the settlement agreement has been approved by the U.S. District Court. The settlement requires the Company to make access improvements at Company-operated restaurants to comply with the standards set forth in the Americans with Disabilities Act Access Guidelines. The settlement requires compliance at 85% of the Company-operated restaurants by April 2001 and for the balance of Company-operated restaurants by October 2005. The Company has agreed to make modifications to its restaurants to improve accessibility and anticipates investing an estimated $11 million in capital improvements over the next seven years. Foodmaker has been notified by attorneys for plaintiffs that claims may be made against Jack in the Box franchisees and Foodmaker relating to locations that franchisees lease from Foodmaker which may not be in compliance with the Americans with Disabilities Act. On April 6, 1996 an action was filed by one of the Company's international franchisees, Wolsey, Ltd., in the United States District Court in San Diego, California against the Company and its directors, its international franchising subsidiary, and certain officers of the Company and others. The complaint alleges certain contractual, tort and law violations related to the franchisees' development rights in the Far East and seeks damages in excess of $38.5 million, injunctive relief, attorneys fees and costs. The Company has successfully dismissed portions of the complaint, including the single claim alleging wrongdoing by the Company's outside directors, and the claims against its current officers. Management believes the remaining allegations are without foundation and intends to vigorously defend the action. On November 5, 1996 an action was filed by the National JIB Franchisee Association, Inc. and several of the Company's franchisees in the Superior Court of California, County of San Diego in San Diego, California, against the Company and others. The lawsuit alleges that certain Company policies are unfair business practices and violate sections of the California Corporations Code regarding material modifications of franchise agreements and interfere with franchisees' right of association. It seeks injunctive relief, a declaration of the rights and duties of the parties, unspecified damages and recision of alleged material modifications of plaintiffs' franchise agreements. The complaint also alleges fraud, breach of a fiduciary duty and breach of a third party beneficiary contract in connection with certain payments that the Company received from suppliers and seeks unspecified damages, interest, punitive damages and an accounting. Management believes that its policies are lawful and that it has satisfied any obligation to its franchisees in regard to such supplier payments. On December 10, 1996, a suit was filed by the Company's Mexican licensee, Foodmex, Inc., in the United States District Court in San Diego, California against the Company and its international franchising subsidiary. Foodmex formerly operated several Jack in the Box franchise restaurants in Mexico, but its licenses were terminated by the Company for, among other reasons, chronic insolvency and failure to meet operational standards. The Foodmex suit alleges wrongful termination of its master license, breach of contract and unfair competition and seeks an injunction to prohibit termination of its license as well as unspecified monetary damages. The Company and its subsidiary counterclaimed and sought a preliminary injunction against Foodmex. On March 28, 1997 the court granted the Company's request for an -6- injunction, held that the Company was likely to prevail in its suit, and ordered Foodmex to immediately cease using the Jack in the Box marks and proprietary operating systems. On June 30, 1997, the court held Foodmex and its president in contempt of court for failing to comply with the March 28, 1997 order. On February 24, 1998, the Court issued an order dismissing Foodmex's complaint without prejudice. In March 1998, Foodmex filed a Second Amended Complaint in the United States District Court in San Diego, California alleging contractual, tort and law violations arising out of the same business relationship and seeking damages in excess of $10 million, attorneys fees and costs. The Company believes such allegations are without merit and will defend the action vigorously. On May 23, 1997, an action by Ralston Purina Company was filed against the Company in the U.S. District Court for the Eastern District of Missouri in St. Louis, Missouri alleging the Company's breach of a tax sharing agreement and unjust enrichment and seeking an accounting and damages in an amount not less than $11 million plus interest and attorneys' fees and costs. The Company believes it has meritorious defenses and intends to vigorously defend the lawsuit. The Company is also subject to normal and routine litigation. The amount of liability from the claims and actions described above cannot be determined with certainty, but in the opinion of management, the ultimate liability from all pending legal proceedings, asserted legal claims and known potential legal claims which are probable of assertion should not materially affect the results of operations and liquidity of the Company. -7- FOODMAKER, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL INFORMATION RESULTS OF OPERATIONS All comparisons under this heading between 1998 and 1997 refer to the 12-week and 28-week periods ended April 12, 1998 and April 13, 1997, respectively, unless otherwise indicated. Restaurant sales increased $25.7 million and $59.8 million, respectively, to $249.5 million and $574.8 million in 1998 from $223.8 million and $515.0 million in 1997, as both the number of Company-operated restaurants and per store average sales increased from a year ago. The average number of Company-operated restaurants for the 28-week period increased to 975 in 1998 from 886 in 1997, through the addition of new units and the acquisition of restaurants from franchisees. Per store average ("PSA") sales for comparable restaurants, which are calculated for only those restaurants open for all periods being compared, increased 2.0% and 2.4%, respectively, in 1998 compared to the same periods in 1997. PSA sales improved due to increases in both the number of transactions and the average transaction amounts. Restaurant sales improvements are attributed to the Company's two-tier marketing strategy featuring both premium sandwiches and value-priced alternatives, as well as to a popular brand-building advertising campaign that features the Company's fictional founder, "Jack". Distribution sales of food and supplies declined $8.8 million and $22.6 million, respectively, to $5.5 million and $12.3 million in 1998 from $14.3 million and $34.9 million in 1997. A distribution contract with Chi-Chi's, Inc. ("Chi-Chi's") was not renewed when it expired in May 1997; sales to Chi-Chi's restaurants were $12.5 million and $30.1 million, respectively, in 1997. Because distribution is a low-margin business, the loss of distribution revenues did not have a material impact on the results of operations or financial condition of the Company. Distribution sales to franchisees and others increased $3.7 million and $7.5 million, respectively, to $5.5 million and $12.3 million in 1998 from $1.8 million and $4.8 million in 1997. Franchise rents and royalties were consistent with a year ago at $8.0 million in the 12-week period. There was a slight increase in the 28-week period to $19.0 million in 1998 from $18.7 million in 1997. The Company receives rents and royalties averaging approximately 10% of sales at franchise- operated restaurants. In 1998, other revenues, typically interest income from investments and notes receivable, also include the net Litigation Settlement of $45.8 million as described in Note 4. Excluding this unusual item, other revenues in 1998 were $1.0 million in the 12-week period and $1.8 million in the 28-week period and varied only slightly from the $.9 million and $1.9 million in the comparable 1997 periods. Restaurant costs of sales, which include food and packaging costs, increased with restaurant sales growth and the addition of Company-operated restaurants to $80.6 million and $187.3 million, respectively, in 1998 from $74.6 million and $172.8 million in 1997. As a percent of restaurant sales, restaurant costs of sales declined to 32.3% and 32.6%, respectively, in 1998 from 33.3% and 33.5% in 1997 primarily due to favorable ingredient costs, principally beef, pork and cheese, offset partially by increased produce costs. -8- Restaurant operating costs increased principally with restaurant sales growth and the addition of Company-operated restaurants to $132.4 million and $302.4 million, respectively, in 1998 from $115.4 million and $265.7 million in 1997. As a percent of restaurant sales, such costs increased to 53.1% and 52.6%, respectively, in 1998 from 51.6% in both periods in 1997 primarily reflecting higher labor costs due to increases in the minimum wage and other operations administrative costs. Costs of distribution sales decreased to $5.4 million and $11.9 million, respectively, in 1998 from $14.3 million and $34.7 million in 1997 reflecting the decline in distribution sales. Costs of distribution sales for the 28-week period decreased as a percent of sales to 96.9% in 1998 from 99.4% in 1997, primarily due to the loss of the lower margin Chi-Chi's distribution business. In 1997 costs of distribution sales include $.4 million in expenses related to the closure of a distribution center which had been used primarily to distribute to Chi-Chi's. Franchised restaurant costs, which include rents and depreciation on properties leased to franchisees and other miscellaneous costs, were flat year to year at $5.5 million in the 12-week periods in 1998 and 1997. Costs increased slightly in the 28-week period to $12.5 million in 1998 from $12.0 million in 1997 reflecting higher international franchise-related legal expense. Selling, general and administrative expenses increased $8.3 million and $9.8 million, respectively, to $27.4 million and $52.8 million in 1998 from $19.1 million and $43.0 million in 1997. The increases were primarily caused by a non-cash charge of approximately $8 million principally resulting from the write-down of underperforming restaurants and asset write-offs associated with customer service enhancements. Advertising and local promotion costs, which were maintained at 5.3% and 5.4% in the 1998 and 1997 periods, respectively, increased with the higher restaurant sales. The Company received from suppliers cooperative advertising funds of approximately .5% of restaurant sales in each period. General, administrative and other expenses, excluding the write-offs, declined to 2.7% and 2.8% of revenues, excluding the Litigation Settlement, in 1998 from 3.3% and 3.1%, respectively, in 1997 primarily due to a decrease in legal costs and the increase in revenues. Interest expense declined $1.2 million and $2.8 million, respectively, to $8.2 million and $19.2 million in 1998 from $9.4 million and $22.0 million in 1997, principally due to a reduction in total debt outstanding. In September 1997, the Company repaid $50 million of its 9-1/4% senior notes due 1999. The 1998 tax provision reflects the expected annual tax rate of 32% of earnings before income taxes. The income tax provision for 1997 was 22% of pretax earnings. The low effective income tax rates in each year result from the Company's ability to realize previously unrecognized tax benefits. The Company cannot determine the actual 1998 annual effective tax rate until the end of the fiscal year, thus the rate could differ from expectations. Net earnings in the 12-week period increased $27.6 million or $.68 per share on a diluted basis, to $34.3 million, or $.85 per share, from $6.7 million, or $.17 per share. Net earnings in the 28-week period improved $30.3 million to $46.0 million, or $1.14 million per share, in 1998 from $15.7 million, or $.40 per share, in 1997. These increases include approximately $25.6 million, after income taxes, of unusual net earnings resulting from the Litigation Settlement offset by the aforementioned write-offs. Excluding these unusual items, earnings in 1998 were $8.7 million, or $.22 per share on a diluted basis, and $20.4 million, or $.51 per share, respectively. The increases in these earnings compared to similar periods in 1997 reflect the impact of sales growth and lower interest expense, offset by the higher effective tax rate in 1998. -9- LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased $53.1 million to $81.6 million at April 12, 1998 from $28.5 million at the beginning of the fiscal year. The cash increase reflects, among other things, cash flows from operations of $85.2 million including the $45.8 million net Litigation Settlement received in 1998 less capital expenditures and other investing activities of $33.5 million. A significant portion of this cash will be used to reduce long-term debt in the refinancing plan described hereafter. The Company's working capital deficit decreased $41.7 million to $51.4 million at April 12, 1998 from $93.1 million at September 28, 1997, primarily due to the increase in cash and cash equivalents which was partially offset by an increase in current liabilities. The Company and the restaurant industry in general maintain relatively low levels of receivables and inventories and vendors grant trade credit for purchases such as food and supplies. The Company also continually invests in its business through the addition of new units and refurbishment of existing units, which are reflected as long-term assets and not as part of working capital. On April 1, 1998, the Company entered into a new revolving bank credit agreement, which provides for a credit facility expiring in 2003 of up to $175 million, including letters of credit of up to $25 million. At April 12, 1998, the Company had no borrowings and approximately $168.5 million of unused credit under the agreement. Total debt outstanding increased slightly to $348.1 million at April 12, 1998 from $347.7 million at the beginning of the fiscal year and declined from $397.2 million at this time last year. Beginning in September 1997, the Company initiated a refinancing plan to reduce and restructure its debt. In September 1997, the Company prepaid $50 million of the 9-1/4% senior notes due 1999 using available cash. By early June 1998, the Company expects it will have redeemed at various dates the remaining $125 million of 9-1/4% senior notes and all $125 million of its 9-3/4% senior subordinated notes due 2002. In order to fund these repayments, the Company completed on April 14, 1998, a private offering of $125 million of 8-3/8% senior subordinated notes due 2008, redeemable beginning 2003. Additional funding sources include available cash, as well as bank borrowings under the new bank credit facility, as necessary. Upon completion of the refinancing plan, the Company will incur an extraordinary pretax charge of approximately $7 million relating to the debt prepaid in the plan. However, annual interest expense will be reduced by over $10 million from 1997 levels due principally to the $50 million debt repayment in September 1997 coupled with the expected additional net reduction in debt subsequent to April 12, 1998 of approximately $45 million and the lower interest rates on the new debt. The Company is subject to a number of covenants under its various debt instruments including limitations on additional borrowings, capital expenditures, lease commitments and dividend payments, and requirements to maintain certain financial ratios, cash flows and net worth. The bank credit facility is secured by a first priority security interest in certain assets and properties of the Company. In addition, certain of the Company's real estate and equipment secure other indebtedness. -10- The Company requires capital principally to grow the business through new restaurant construction, as well as to maintain, improve and refurbish existing restaurants, and for general operating purposes. The Company's primary sources of liquidity are expected to be cash flows from operations, the revolving bank credit facility, and the sale and leaseback of restaurant properties. An additional potential source of liquidity is the conversion of Company-operated restaurants to franchised restaurants. The Company requires capital principally to grow the business through new restaurant construction, as well as to maintain, improve and refurbish existing restaurants, and for general operating purposes. Based upon current levels of operations and anticipated growth, the Company expects that sufficient cash flows will be generated from operations so that, combined with other financing alternatives available, including utilization of cash on hand, bank credit facilities, the sale and leaseback of restaurants and refinancing opportunities, the Company will be able to meet all of its debt service, capital expenditure and working capital requirements. YEAR 2000 COMPLIANCE The Company has performed an assessment of its major information technology systems and expects that all necessary modifications and/or replacements will be completed prior to December 1999. Based on current expenditures and estimates, the costs of addressing this issue are not expected to have a material adverse effect on the Company's financial position, results of operations or liquidity. The potential impact of the Year 2000 issue in regards to significant vendors and suppliers cannot be reasonably estimated at this time. However, the Company could be adversely impacted if its suppliers and franchisees do not ensure Year 2000 compliance in their own systems in a timely manner. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements including, but not limited to, the Company's expectations regarding its effective tax rate, its continuing investment in new restaurants and refurbishment of existing facilities and sources of liquidity. The words "anticipates," "believes," "estimates," "seeks," "expects," "plans," "intends" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company, with respect to future events and are subject to certain risks, uncertainties and assumptions, including the following risk factors. The Company's tax provision is highly sensitive to expected earnings. As earnings expectations change, the Company's income tax provision may vary more significantly from quarter to quarter and year to year than companies which have been continuously profitable. However, the Company's effective tax rates are expected to increase in the future. There can be no assurances that growth objectives in the regional domestic markets in which the Company operates will be met or that capital will be available for refurbishment of existing facilities. In addition, among the other factors that could cause the Company's results to differ materially are: the effectiveness and cost of advertising and promotional efforts; the degree of success of the Company's product offerings; weather conditions; difficulties in obtaining ingredients and variations in ingredient costs; the Company's ability to control operating, general and administrative costs and to raise prices sufficiently to offset cost increases; competitive products and pricing and promotions; the impact of any wide-spread negative publicity; the impact on consumer eating habits of new scientific information regarding diet, nutrition and health; competition for labor; general economic conditions; changes in consumer tastes and in travel and dining-out habits; the impact on operations and the costs to comply with laws and -11- regulations and other activities of governing entities; the costs and other effects of legal claims by franchisees, customers, vendors and others, including settlement of those claims; the impact of a failure to achieve Year 2000 compliance on the part of the Company, its suppliers or its franchisees; and the effectiveness of management strategies and decisions. Additional risk factors associated with the Company's business are detailed in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. -12- PART II - OTHER INFORMATION There is no information required to be reported for any items under Part II, except as follows: Item 1. Legal Proceedings - See Note 4 to the Unaudited Consolidated Financial Statements. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Number Description 4.1 Indenture for the 8-3/8% Senior Subordinated Notes due 2008. 10.1 Revolving Credit Agreement dated as of April 1, 1998 by and between Foodmaker, Inc. and the Banks and Agents named therein. 27 Financial Data Schedule (included only with electronic filing) (b) Reports on Form 8-K A Form 8-K was filed on February 24, 1998, reporting under Item 5 thereof, the settlement of certain legal claims. A Form 8-K was filed on February 25, 1998, reporting under Item 5 thereof, a non-cash charge to earnings relating to write-offs of certain assets. -13- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in the capacities indicated. FOODMAKER, INC. By: DARWIN J. WEEKS --------------- Darwin J. Weeks Vice President, Controller and Chief Accounting Officer (Duly Authorized Signatory) Date: May 21, 1998 -14- EX-4.1 2 8 3/8% SENIOR SUBORDINATED NOTES INDENTURE Foodmaker, Inc. as Issuer and The Subsidiary Guarantors Named Herein 8 3/8% Senior Subordinated Notes due April 15, 2008 _____________ INDENTURE Dated as of April 14, 1998 _____________ First Union National Bank Trustee TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . 18 Section 1.03 Incorporation by Reference of Trust Indenture Act . . . 19 Section 1.04 Rules of Construction . . . . . . . . . . . . . . . . . 19 ARTICLE 2 THE NOTES Section 2.01 Form and Dating . . . . . . . . . . . . . . . . . . . . 20 Section 2.02 Execution and Authentication . . . . . . . . . . . . . 20 Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . 21 Section 2.04 Paying Agent to Hold Money in Trust . . . . . . . . . . 21 Section 2.05 Holder Lists . . . . . . . . . . . . . . . . . . . . . 21 Section 2.06 Transfer and Exchange . . . . . . . . . . . . . . . . . 22 Section 2.07 Replacement Notes . . . . . . . . . . . . . . . . . . . 32 Section 2.08 Outstanding Notes . . . . . . . . . . . . . . . . . . . 33 Section 2.09 Treasury Notes . . . . . . . . . . . . . . . . . . . . 33 Section 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . . 33 Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . 33 Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . 34 ARTICLE 3 REDEMPTION Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . 34 Section 3.02 Selection of Notes to Be Redeemed . . . . . . . . . . . 34 Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . 35 Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . 35 Section 3.05 Deposit of Redemption Price . . . . . . . . . . . . . . 35 Section 3.06 Notes Redeemed in Part . . . . . . . . . . . . . . . . 36 Section 3.07 Optional Redemption . . . . . . . . . . . . . . . . . . 36 Section 3.08 No Mandatory Redemption . . . . . . . . . . . . . . . . 37 ARTICLE 4 COVENANTS Section 4.01 Payment of Notes . . . . . . . . . . . . . . . . . . . 37 Section 4.02 Maintenance of Office or Agency . . . . . . . . . . . . 37 Section 4.03 Commission Reports and Reports to Holders . . . . . . . 38 Section 4.04 Compliance Certificate . . . . . . . . . . . . . . . . 38 Section 4.05 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 4.06 Stay, Extension and Usury Laws . . . . . . . . . . . . 39 Section 4.07 Limitation on Indebtedness . . . . . . . . . . . . . . 39 Section 4.08 Limitation on Senior Subordinated Indebtedness . . . . 41 Section 4.09 Limitation on Liens . . . . . . . . . . . . . . . . . . 41 Section 4.10 Limitation on Restricted Payments . . . . . . . . . . . 42 Section 4.11 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries . . . . 43 Section 4.12 Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries . . . . . . . . . . . . . . 44 Section 4.13 Additional Subsidiary Guarantees . . . . . . . . . . . 45 Section 4.14 Limitation on Transactions with Affiliates and Certain Stockholders . . . . . . . . . . . . . . . . . 45 Section 4.15 Limitation on Asset Sales . . . . . . . . . . . . . . . 46 Section 4.16 Repurchase of Notes upon a Change of Control . . . . . 47 ARTICLE 5 SUCCESSORS Section 5.01 Merger, Consolidation or Sale of Assets . . . . . . . . 47 Section 5.02 Successor Corporation Substituted . . . . . . . . . . . 48 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default . . . . . . . . . . . . . . . . . . . 48 Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . 49 Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . 50 Section 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . 50 Section 6.05 Control by Majority . . . . . . . . . . . . . . . . . . 50 Section 6.06 Limitation on Suits . . . . . . . . . . . . . . . . . . 51 Section 6.07 Rights of Holders of Notes to Receive Payment . . . . . 51 Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . 51 Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . 52 Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . 52 Section 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . 52 ARTICLE 7 TRUSTEE Section 7.01 Duties of Trustee . . . . . . . . . . . . . . . . . . . 53 Section 7.02 Rights of Trustee . . . . . . . . . . . . . . . . . . . 54 Section 7.03 Individual Rights of Trustee . . . . . . . . . . . . . 55 Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . 55 Section 7.05 Notice of Defaults . . . . . . . . . . . . . . . . . . 55 Section 7.06 Reports by Trustee to Holders of the Notes . . . . . . 55 Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . 56 Section 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . 56 Section 7.09 Successor Trustee by Merger, etc. . . . . . . . . . . . 57 Section 7.10 Eligibility; Disqualification . . . . . . . . . . . . . 57 Section 7.11 Preferential Collection of Claims Against Company . . . 58 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . 58 Section 8.02 Legal Defeasance and Discharge . . . . . . . . . . . . 58 Section 8.03 Covenant Defeasance . . . . . . . . . . . . . . . . . . 59 Section 8.04 Conditions to Legal or Covenant Defeasance . . . . . . 59 Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions . . . . . . . 60 Section 8.06 Repayment to Company . . . . . . . . . . . . . . . . . 61 Section 8.07 Reinstatement . . . . . . . . . . . . . . . . . . . . . 61 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes . . . . . . . . . . 62 Section 9.02 With Consent of Holders of Notes . . . . . . . . . . . 62 Section 9.03 Compliance with Trust Indenture Act . . . . . . . . . . 64 Section 9.04 Revocation and Effect of Consents . . . . . . . . . . . 64 Section 9.05 Notation on or Exchange of Notes . . . . . . . . . . . 64 Section 9.06 Trustee to Sign Amendments, etc. . . . . . . . . . . . 64 ARTICLE 10 SUBSIDIARY GUARANTEES Section 10.01 Subsidiary Guarantees . . . . . . . . . . . . . . . . . 64 Section 10.02 Execution and Delivery of Subsidiary Guarantees . . . . 66 Section 10.03 Subsidiary Guarantors May Consolidate, etc., on Certain Terms . . . . . . . . . . . . . . . . . . . . . 66 Section 10.04 Releases . . . . . . . . . . . . . . . . . . . . . . . 67 Section 10.05 Limitation of Subsidiary Guarantor's Liability . . . . 68 Section 10.06 Application of Certain Terms and Provisions to the Subsidiary Guarantors . . . . . . . . . . . . . . . . . 68 Section 10.07 Subordination of Subsidiary Guarantees . . . . . . . . 68 ARTICLE 11 SUBORDINATION Section 11.01 Agreement to Subordinate . . . . . . . . . . . . . . . 69 Section 11.02 Liquidation; Dissolution; Bankruptcy . . . . . . . . . 69 Section 11.03 Default on Designated Senior Indebtedness . . . . . . . 69 Section 11.04 Acceleration of Notes . . . . . . . . . . . . . . . . . 70 Section 11.05 When Distribution Must be Paid Over . . . . . . . . . . 70 Section 11.06 Notice by Company . . . . . . . . . . . . . . . . . . . 70 Section 11.07 Subrogation . . . . . . . . . . . . . . . . . . . . . . 71 Section 11.08 Relative Rights . . . . . . . . . . . . . . . . . . . . 71 Section 11.09 Subordination May Not Be Impaired by Company . . . . . 71 Section 11.10 Distribution or Notice to Representative . . . . . . . 71 Section 11.11 Rights of Trustee and Paying Agent . . . . . . . . . . 72 Section 11.12 Authorization to Effect Subordination . . . . . . . . . 72 Section 11.13 Amendments . . . . . . . . . . . . . . . . . . . . . . 72 ARTICLE 12 MISCELLANEOUS Section 12.01 Trust Indenture Act Controls . . . . . . . . . . . . . 73 Section 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 12.03 Communication by Holders of Notes with Other Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . 74 Section 12.04 Certificate and Opinion as to Conditions Precedent . . 74 Section 12.05 Statements Required in Certificate or Opinion . . . . . 74 Section 12.06 Rules by Trustee and Agents . . . . . . . . . . . . . . 75 Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders . . . . . . . . . . . . . . 75 Section 12.08 Governing Law . . . . . . . . . . . . . . . . . . . . . 75 Section 12.09 No Adverse Interpretation of Other Agreements . . . . . 75 Section 12.10 Successors . . . . . . . . . . . . . . . . . . . . . . 75 Section 12.11 Severability . . . . . . . . . . . . . . . . . . . . . 75 Section 12.12 Counterpart Originals . . . . . . . . . . . . . . . . . 75 Section 12.13 Table of Contents, Headings, Etc. . . . . . . . . . . . 75 EXHIBITS EXHIBIT A FORM OF NOTE AND SUBSIDIARY GUARANTEE EXHIBIT B FORM OF CERTIFICATE OF TRANSFER EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE INDENTURE, dated as of April 14, 1998, among Foodmaker, Inc., a Delaware corporation (the "Company"), the Subsidiary Guarantors (as defined) and First Union National Bank, as trustee (the "Trustee"). Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 8 3/8% Series A Senior Subordinated Notes due 2008 (the "Series A Notes") and the 8 3/8% Series B Senior Subordinated Notes due 2008 (the "Series B Notes" and, together with the Series A Notes, the "Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions "144A Global Note" means a global note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Accrued Bankruptcy Interest" means, with respect to any Indebtedness, all interest accruing thereon after the filing of a petition by or against the Company or any of its Subsidiaries under any Bankruptcy Law, in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in the documents evidencing or governing such Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such Bankruptcy Law. "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition from such Person by a Restricted Subsidiary and not Incurred by such Person in connection with, or in anticipation of, such Person becoming a Restricted Subsidiary or such Asset Acquisition; provided that Indebtedness of such Person which is redeemed, defeased, retired or otherwise repaid at the time of or immediately upon consummation of the transactions by which such Person becomes a Restricted Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness. "Additional Interest" means all additional interest then owing pursuant to the Registration Rights Agreement. "Adjusted Consolidated Net Income" means, for any period, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries for such period determined on a consolidated basis in conformity with GAAP; provided that the following items shall be excluded in computing Adjusted Consolidated Net Income (without duplication): (i) the net income of any Person (other than the Company or a Restricted Subsidiary), except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries by such Person during such period; (ii) solely for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of the first paragraph of Section 4.10 (and in such case, except to the extent includable pursuant to clause (i) above), the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substan- tially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries; (iii) the net income of any 2 Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income to the Company or any Restricted Subsidiary is not at the time of such determination permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis) attributable to Asset Sales; (v) except for purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of the first paragraph of Section 4.10, any amount paid as dividends on Preferred Stock of the Company or paid or accrued as dividends on Preferred Stock of any Restricted Subsidiary, in each case owned by Persons other than the Company and any of its Restricted Subsidiaries; and (vi) all extraordinary gains and extraordinary losses. "Adjusted Consolidated Net Tangible Assets" means the total amount of assets of the Company and its Restricted Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Company and its Restricted Subsidiaries (excluding intercompany items and Indebtedness having a maturity of less than 12 months from the date of the most recent quarterly or annual consolidated balance sheet of the Company but which by its terms is renewable or extendible beyond 12 months from such date at the option of the borrower) and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recent quarterly or annual consolidated balance sheet of the Company, prepared in conformity with GAAP and filed with the Commission or provided to the Trustee pursuant Section 4.03. "Affiliate" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Cedel that apply to such transfer or exchange. "Asset Acquisition" means (i) an investment by the Company or any of its Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any of its Restricted Subsidiaries; provided that such Person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such investment or (ii) an acquisition by the Company or any of its Restricted Subsidiaries of the property and assets of any Person other than the Company or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person; provided that the property and assets acquired are related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such acquisition and provided further that the acquisition of two or fewer restaurants from a single franchisee will not constitute an Asset Acquisition. 3 "Asset Disposition" means the sale or other disposition by the Company or any of its Restricted Subsidiaries (other than to the Company or another Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of any Restricted Subsidiary of the Company or (ii) all or substantially all of the assets that constitute a division or line of business of the Company or any of its Restricted Subsidiaries. "Asset Sale" means any sale, transfer or other disposition (including by way of merger, consolidation or sale-leaseback transaction) in one transaction or a series of related transactions by the Company or any of its Restricted Subsidiaries to any Person other than the Company or any of its Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted Subsidiary, (ii) all or substantially all of the property and assets of a division or line of business of the Company or any of its Restricted Subsidiaries or (iii) any other property and assets of the Company or any of its Restricted Subsidiaries (other than the Capital Stock or other Investment in an Unrestricted Subsidiary) outside the ordinary course of business of the Company or such Restricted Subsidiary and, in each case, that is not governed by the provisions of this Indenture applicable to mergers, consolidations and sales of assets of the Company; provided that "Asset Sale" shall not include (a) sales or other dispositions of inventory, receivables and other current assets, (b) sales, transfers or other dispositions of assets with a fair market value not in excess of $2,000,000 in any transaction or series of related transactions, (c) sales, transfers or other dispositions of assets constituting a Restricted Payment permitted to be made under Section 4.10, (d) sales or other dispositions of assets for consider- ation at least equal to the fair market value of the assets sold or disposed of, to the extent that the consideration received would satisfy clause (B) of Section 4.15, (e) sales, transfers or other dispositions of property or equipment that has become worn out, obsolete or damaged or otherwise unsuitable for use in connection with the business of the Company or its Restricted Subsidiaries, (f) the sale, transfer or other disposition of any property or assets by any Restricted Subsidiary to the Company or any Subsid- iary Guarantor, (g) the sale, transfer or other disposition of real property on which a restaurant is located in exchange for other real property on which a restaurant will be located, which acquired real property has a fair market value at least equal to the fair market value of the real property being sold, transferred or disposed of, (h) the sale, transfer or other disposition to a franschisee of the Company, within 12 months of the acquisition thereof, of any restaurant that has been acquired by the Company from a franchisee of the Company, if the consideration received in such sale, transfer or other disposition is at least equal to the consideration paid to acquire such restaurant and (j) the sale of property acquired or constructed after the date of this Indenture for cash consideration equal to or greater than the fair market value of such property in a sale and leaseback transaction in which such property is leased by the Company or the Restricted Subsidiary that sold such property; provided, that to the extent that the proceeds from such sale are not invested in property or assets of a nature or type that are used in a business similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries on or before the date that is 12 months following such sale, such sale shall be deemed to constitute an "Asset Sale" occurring as of such date. "Average Life" means, at any date of determination with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such debt security and (b) the amount of such principal payment by (ii) the sum of all such principal payments. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. 4 "Board Resolution" means a resolution duly adopted by the Board of Directors. "Business Day" means any day other than a Legal Holiday. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock. "Capitalized Lease" means, as applied to any Person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person. "Capitalized Lease Obligations" means the discounted present value of the rental obligations under a Capitalized Lease. "Cedel" means Cedel Bank, SA. "Change of Control" means such time as (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 40% of the total voting power of the Voting Stock of the Company on a fully diluted basis; or (ii) individuals who on the Closing Date constitute the Board of Directors (together with any new or replacement directors whose election by the Board of Directors or whose nomination by the Board of Directors for election by the Company's stockholders was approved by a vote of at least a majority of the members of the Board of Directors then still in office who either were members of the Board of Directors on the Closing Date or whose election or nomination for election was so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office. "Closing Date" means the date on which the Notes are originally issued under this Indenture. "Commission" means the Securities and Exchange Commission. "Common Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's equity, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of common stock. "Consolidated EBITDA" means, for any period, Adjusted Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest Expense, (ii) income taxes (other than income taxes (either positive or negative) attributable to extraordinary gains or losses or sales of assets), (iii) depreciation expense, (iv) amortization expense and (v) all other non- cash items reducing Adjusted Consolidated Net Income less all non-cash items increasing Adjusted Consolidated Net Income; provided, that if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA 5 shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Adjusted Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries. "Consolidated Interest Expense" means, for any period, the aggregate amount of interest in respect of Indebtedness (including, without limitation, amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting; all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; the net costs associated with Interest Rate Agreements; and Indebtedness that is Guaranteed or secured by the Company or any of its Restricted Subsidiaries) and all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be accrued by the Company and its Restricted Subsidiaries during such period; excluding, however, (i) any amount of such interest of any Restricted Subsidiary if the net income of such Restricted Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the definition thereof) and (ii) any premiums, fees and expenses (and any amortization thereof) payable in connection with the offering of the Notes or the establishment of the Credit Agreement, all as determined on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP. "Consolidated Net Worth" means, at any date of determination, stockholders' equity as set forth on the most recently available quarterly or annual consolidated balance sheet of the Company and its Restricted Subsidiaries (which shall be as of a date not more than 135 days prior to the date of such computation, and which shall not take into account Unrestricted Subsidiaries except as investments), less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any of its Restricted Subsidiaries, each item to be determined in conformity with GAAP (excluding the effects of foreign currency exchange adjustments under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 52). "Corporate Trust Office" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "CRC Leases" means (i) the Master Lease between CRC-I Limited Partnership, a Massachussetts limited partnership, and the Company, dated December 15, 1993, as amended and supplemented from time to time, and (ii) the Master Lease between CRC-II Limited Partnership, a Massachussetts limited partnership, and the Company, dated December 15, 1993, as amended and supplemented from time to time. "CRC Obligations" means any Obligations of the Company or any Restricted Subsidiary (i) under the CRC Leases and (ii) with respect to any Indebtedness of the CRC Subsidiaries, CRC-I Limited Partnership, a Massachussetts limited partnership, CRC-II Limited Partnership, a Massachussetts limited partnership, or FM 1993A Corp., a Delaware corporation. 6 "CRC Subsidiaries" means FM 1997 Limited Partnership, a Delaware limited partnership, and FM 1997 Corp., a Delaware corporation. "Credit Agreement" means the credit agreement dated as of April 1, 1998, among the Company and certain Subsidiaries, various financial institutions, NationsBanc Montgomery Securities LLC, as arranger, Credit Lyonnais, Los Angeles Branch, as Documentation Agent, and NationsBank of Texas, N.A., as administrative agent, together with any agreements, instru- ments and documents executed or delivered pursuant to or in connection with such credit agreement (including, without limitation, any Guarantees and security documents), in each case as such credit agreement or such agreements, instruments or documents may be amended (including any amendment and restatement thereof), supplemented, extended, renewed, replaced or otherwise modified from time to time, and including any agreement extending the maturity of, refinancing or otherwise restructuring (including, but not limited to, the inclusion of additional borrowers thereunder that are Subsidiaries of the Company) all or any portion of the Indebtedness or commitments or letters of credit under such agreement or any successor agreement, as such agreement may be amended, renewed, extended, substituted, replaced, restated and otherwise modified from time to time, whether or not with the same agent or lenders and irrespective of any change in the terms and conditions thereof, including increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder; provided that such Indebtedness may be incurred under all of the provisions of this Indenture. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Senior Indebtedness" means (i) any Indebtedness under the Credit Agreement and (ii) any other Indebtedness constituting Senior Indebtedness that, at the date of determination, has commitments for or an aggregate principal amount outstanding of at least $25,000,000 and that is specifically designated by the Issuer, in the instrument creating or evidencing such Senior Indebtedness as "Designated Senior Indebtedness." "Disqualified Stock" means any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Notes or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having 7 a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained Section 4.15 and Section 4.16 and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to Section 4.15 and Section 4.16. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Offer" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Series B Notes for Series A Notes. "Fair market value" means the price that would be paid in an arm's- length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. "Foreign Subsidiaries" means Foodmaker International (Hong Kong), Ltd. and Foodmaker Franchise Overseas, Ltd. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations contained or referred to in this Indenture shall be computed in conformity with GAAP applied on a consistent basis, except that calculations made for purposes of determining compliance with the terms of the covenants and with other provisions of this Indenture shall be made without giving effect to (i) the amortization of any expenses incurred in connection with the offering of the Notes or the establishment of the Credit Agreement (including the write-off of debt issuance costs in connection therewith), and (ii) except as otherwise provided, the amortization of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and 17. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. 8 "Government Securities" means direct obligations of, obligations fully guaranteed by, or participations in pools consisting solely of obligations of or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the option of the issuer thereof. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into in the ordinary course of business), to take-or- pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" means a Person in whose name a Note is registered on the Registrar's books. "Incur" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person at any date of determination (without duplication), (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations (other than obligations described in (i) or (ii) above or (v), (vi) or (vii) below) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement), (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables, (v) all Capitalized Lease Obligations, (vi) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise included in this definition, the CRC Obligations and obligations under Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, 9 with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided (A) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP, (B) that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be "Indebtedness" so long as such money is held to secure the payment of such interest, and (C) that Indebtedness shall not include any liability for federal, state, local or other taxes. "Indenture" means this Indenture, as amended or supplemented from time to time. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who is not also a QIB. "Interest Coverage Ratio" means, on any Transaction Date, the ratio of (i) the aggregate amount of Consolidated EBITDA for the then most recent four fiscal quarters prior to such Transaction Date for which reports have been filed with the Commission or provided to the Trustee pursuant to Section 4.03 (the "Four Quarter Period") to (ii) the aggregate Consolidated Interest Expense during such Four Quarter Period. In making the foregoing calculation, (A) pro forma effect shall be given to any Indebtedness Incurred or repaid during the period (the "Reference Period") commencing on the first day of the Four Quarter Period and ending on the Transaction Date (other than Indebtedness Incurred under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Four Quarter Period except to the extent any portion of such Indebtedness is projected, in the reasonable judgment of the senior management of the Company, to remain outstanding for a period in excess of 12 months from the date of the Incurrence thereof), in each case as if such Indebtedness had been Incurred or repaid on the first day of such Reference Period (and pro forma effect shall be given to the purchase of any U.S. government securities required to be purchased with the proceeds of any such Indebtedness and set aside to prefund the payment of interest on such Indebtedness at the time such Indebtedness is Incurred); (B) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period; (C) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition and to any discharge of or other relief from Indebtedness to which the Company and its continuing Restricted Subsidiaries are not liable following any Asset Disposition) and the designation of Unrestricted Subsidiaries as Restricted Subsidiaries that occur during such Reference Period as if they had occurred and such proceeds had been applied and such discharge or relief has occurred on the first day of such Reference Period; and (D) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition and to any discharge of or other relief from Indebtedness to which the Company and its continuing Restricted Subsidiaries are not liable following any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such 10 Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period; provided that to the extent that clause (C) or (D) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement. "Investment" in any Person means any direct or indirect advance, loan or other extension of credit (including, without limitation, by way of Guarantee or similar arrangement; but excluding advances to customers, suppliers or contractors in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Company or its Restricted Subsidiaries) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by, such Person and shall include (i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair market value of the Capital Stock (or any other Investment), held by the Company or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary, including without limitation, by reason of any transaction permitted by clause (iii) of Section 4.12; provided that the fair market value of the Investment remaining in any Person that has ceased to be a Restricted Subsidiary shall not exceed the aggregate amount of Investments previously made in such Person valued at the time such Investments were made less the net reduction of such Investments. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.10, (i) "Investment" shall include the fair market value of the assets (net of liabilities (other than liabilities to the Company or any of its Restricted Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value of the assets (net of liabilities (other than liabilities to the Company or any of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be considered a reduction in outstanding Investments and (iii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer. Notwithstanding the foregoing, in no event shall any issuance of Capital Stock (other than Disqualified Stock) of the Company in exchange for Capital Stock, property or assets of another Person or any redemption or repurchase of the Notes or other Indebtedness of the Company or any Restricted Subsidiary for cash constitute an Investment by the Company in such other Person. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or Newark, New Jersey, or Charlotte, North Carolina at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. 11 "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to give any security interest). "Moody's" means Moody's Investors Service, Inc. and its successors. "Notes Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of (i) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (A) is secured by a Lien on the property or assets sold or (B) is required to be paid as a result of such sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP and (b) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney's fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Obligations" means any principal, interest, premium, if any, penalties, fees, indemnifications, reimbursements, damages or other liabilities payable under the documentation governing or otherwise in respect of any Indebtedness. "Offer to Purchase" means an offer to purchase Notes by the Company from the Holders commenced by mailing a notice to the Trustee and each Holder stating: (i) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Note not tendered will 12 continue to accrue interest pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. On the Payment Date, the Company shall (i) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers' Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions for such Offer to Purchase, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations with respect to such Offer to Purchase by virture thereof. "Offering" means the offering of the Notes by the Company. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, the Controller, the Secretary or any Executive Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 hereof. "Old Senior Notes" means the 9 1/4% Senior Notes due 1999 of the Company. "Old Senior Subordinated Notes" means the 9 3/4% Senior Subordinated Notes due 2002 of the Company. 13 "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company or any Subsidiary of the Company. "Pari Passu Indebtedness" means all Indebtedness of the Company ranking pari passu in right of payment with the Notes. "Participating Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Participant" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Cedel). "Permitted Investment" means (i) an Investment in the Company or a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, the Company or a Restricted Subsidiary; provided that such person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash Investments; (iii) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; (iv) stock, obligations or securities received in satisfaction of judgments or good faith settlement of litigation, disputes or other debts; (v) Interest Rate Agreements and Currency Agreements designed solely to protect the Company or its Restricted Subsidiaries against fluctuations in interest rates or foreign currency exchange rates; (vi) Investments in any Person the primary business of which is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries; provided that the aggregate amount of such Investments does not exceed $25,000,000 plus the net reduction in such Investments; (vii) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility, workers' compensation and other similar deposits; (viii) Investments made as a result of the receipt of non- cash consideration from an Asset Sale that was made in compliance with Section 4.15; and (ix) documented loans on commercially reasonable terms to the Company's franchisees in the ordinary course of business of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $5,000,000 at any time outstanding. "Permitted Junior Securities" means Capital Stock of the Company or any Subsidiary Guarantor or debt securities of the Company or any Subsidiary Guarantor that are subordinated to all Senior Indebtedness (and any debt securities issued in exchange for Senior Indebtedness) to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Indebtedness pursuant to this Indenture. "Permitted Lien" means (i) Liens existing on the date of such Indenture; (ii) Liens for taxes, assessments or governmental charges or claims which are not yet delinquent or which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor, (iii) statutory Liens or landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other like Liens arising in the ordinary course 14 of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate process of law, if a reserve or other appropriate provisions, if any, as shall be required by generally accepted accounting principles shall have been made therefor; (iv) Liens (other than any Lien imposed by the Employee Retirement Income Security Act of 1974, as amended) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (v) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of like nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (vi) attachment or judgment Liens not giving rise to a Default or an Event of Default; (vii) easements, rights-of-way, restrictions and other similar charges or encumbrances not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries; (viii) leases or subleases granted to others not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries; (ix) purchase money Liens incurred to secure the purchase price of property, which Lien shall not cover any property other than that being acquired, purchased, improved or constructed, and shall not cover property purchased, acquired, constructed or improved more than 18 months before the creation of such Lien; (x) title defects or irregularities which do not in the aggregate materially impair the use of the property; (xi) any interest or title of a lessor under Capitalized Lease Obligations otherwise permitted under this Indenture; (xii) Liens securing obligations under the Credit Agreement and the other documents entered into in connection therewith, including, without limitation, Interest Rate Agreements and Currency Agreements relating thereto or otherwise in respect thereof; (xiii) Liens securing Acquired Indebtedness created prior to (and not in connection with or in contemplation of) the incurrence of such Indebtedness by the Company or any Restricted Subsidiary; provided that such Lien does not extend to any property or assets of the Company or any Subsid- iary other than the assets acquired in connection with the incurrence of such Acquired Indebtedness; (xiv) extensions, renewals or refunding of any Liens referred to in clauses (i) through (xiii) above; provided that the renewal, extension or refunding is limited to all or part of the property securing the original Lien; (xiv) Liens in addition to the foregoing provided that the amount of the obligations secured by such Liens does not exceed in the aggregate $1,000,000. "Placement Agents" mean the placement agents under the placement agreement, dated as of April 8, 1998, with respect to the Notes. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's preferred or preference stock, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of such preferred or preference stock. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date of this Indenture, by and among the Company, the Subsidiary Guarantors and the Placement Agents, as such agreement may be amended, modified or supplemented from time to time. 15 "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a permanent global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Representative" means the indenture trustee or other trustee, agent or representative for any Designated Senior Indebtedness. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Period" means the 40-day restricted period as defined in Regulation S. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Senior Indebtedness" means the following obligations of the Company or the Subsidiary Guarantors, whether outstanding on the Closing Date or thereafter Incurred: (i) all Indebtedness and all other monetary obligations (including, without limitation, expenses, fees, principal, interest, reimbursement obligations under letters of credit and indemnities payable in connection therewith) of the Company or the Subsidiary Guarantors under (or in respect of) the Credit Agreement or any Interest Rate Agreement or Currency Agreement relating to or otherwise in respect of the Indebtedness under the Credit Agreement and (ii) all other Indebtedness and all other monetary obligations of the Company or the Subsidiary Guarantors (other than the Notes, but including the CRC Obligations), including principal and interest on such Indebtedness, unless such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is pari passu with, or subordinated in right of payment to, the Notes or the Subsidiary Guarantees, as the case may be; provided that the term "Senior Indebtedness" shall not include (a) any Indebtedness of the Company or the Subsidiary Guarantors that, when Incurred, was without recourse to the Company or the Subsidiary Guarantor, as the case may be, (b) any Indebtedness of the Company to a Subsidiary of the Company, or to a joint venture in which the Company has an interest, (c) any Indebtedness of the Company or a Subsidiary Guarantor, as the case may be, to the extent not permitted by Section 4.07 or Section 4.08, (d) any repurchase, redemption or other obligation in respect of Disqualified Stock, (e) any Indebtedness to any employee of the Company or any of its Subsidiaries, (f) any liability for taxes owed or owing by the Company or any of its Subsidiaries, (g) any Trade Payables or (h) the Old Senior Subordinated Notes. Senior Indebtedness will also include interest accruing subsequent to events of bankruptcy of the Company and its Subsidiaries at the rate provided for in the document 16 governing such Senior Indebtedness, whether or not such interest is an allowed claim enforceable against the debtor in a bankruptcy case under Bankruptcy Law. "Senior Subordinated Obligations" means any principal of, premium, if any, interest, or other amounts due, on the Notes payable pursuant to the terms of the Notes or upon acceleration, including any amounts received upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise, to the extent relating to the purchase price of the Notes or amounts corresponding to such principal, premium, if any, or interest on the Notes. "Significant Subsidiary" means, at any date of determination, any Restricted Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements of the Company for such fiscal year. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, and its successors. "Stated Maturity" means, (i) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (ii) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable. "Subsidiary" means, with respect to any Person, any corporation, association, business trust or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person. "Subsidiary Guarantors" means (i) each of the following Wholly Owned Restricted Subsidiaries of the Company: CP Distribution Co., a Delaware corporation; CP Wholesale Co., a Delaware corporation; Foodmaker International Franchising, Inc., a Delaware corporation; and Jack In the Box, Inc., a New Jersey corporation; and (ii) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. "Temporary Cash Investment" means any of the following: (i) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America or any agency thereof, (ii) time deposit accounts, certificates of deposit and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50,000,000 (or the foreign currency equivalent thereof) and (unless such accounts, certificates or deposits are fully insured by the FDIC) has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund 17 distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P or maturing not more than 90 days after the date of execution, with a rating at the time of any investment therein of "P-2" (or higher) according to Moody's or "A-2" (or higher) by S&P, (v) securities with maturities of one year or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or Moody's and (vi) other dollar denominated securities issued by any Person incorporated in the United States rated at least "A" or the equivalent by S&P or at least "A2" or the equivalent by Moody's and in each case either (A) maturing not more than one year after the date of acquisition or (B) which are subject to a repricing arrangement (such as a Dutch auction) not more than one year after the date of acquisition (and reprices at least yearly thereafter) which the Person making the investment believes in good faith will permit such Person to sell such security at par in connection with such repricing mechanism. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa- 77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Trade Payables" means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Restricted Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services, including without limitation, obligations under (or in respect of) construction contracts (to the extent such obligations do not constitute Indebtedness for borrowed money). "Transaction Date" means, with respect to the Incurrence of any Indebtedness by the Company or any of its Restricted Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "Transfer Restricted Notes" means securities that bear, or that are required to bear, the Private Placement Legend. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent global Note in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the 18 name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; (ii) any Subsidiary of an Unrestricted Subsidiary; (iii) the CRC Subsidiaries; and (iv) the Foreign Subsidiaries. The Board of Directors may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation; (B) either (I) the Subsidiary to be so designated has total assets of $1,000 or less or (II) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.10; and (C) if applicable, the Incurrence of Indebtedness and the Investment referred to in clause (A) of this proviso would be permitted under Section 4.07 and Section 4.10. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (i) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately after such designation would, if Incurred at such time, have been permitted to be Incurred (and shall be deemed to have been Incurred) for all purposes of this Indenture. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "Wholly Owned" means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director's qualifying shares or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person. Section 1.02 Other Definitions Defined in Term Section ---- ---------- "Authentication Order" 2.02 "Bankruptcy Law" 6.01 "Benefitted Party" 10.01 "Company Obligations" 4.01 "Covenant Defeasance" 8.03 19 "Custodian" 6.01 "DTC" 2.03 "Guarantee Obligations" 10.01 "Legal Defeasance" 8.02 "Paying Agent" 2.03 "Payment Blockage Notice" 11.03 "Payment Date" 1.01 "Payment Default" 6.01 "Registrar" 2.03 "Restricted Payments" 4.10 Section 1.03 Incorporation by Reference of Trust Indenture Act Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them. Section 1.04 Rules of Construction Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; 20 (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the Commission from time to time. ARTICLE 2 THE NOTES Section 2.01 Form and Dating (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Notes Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Cedel Bank. Section 2.02 Execution and Authentication An Officer shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall 21 nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by an Officer (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in such Authentication Order. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 Registrar and Paying Agent The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Notes Custodian with respect to the Global Notes. Section 2.04 Paying Agent to Hold Money in Trust The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Additional Interest, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. Section 2.05 Holder Lists The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date 22 as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). Section 2.06 Transfer and Exchange (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary, (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee or (iii) upon request of the Trustee or any Holders if there shall have occurred and be continuing a Default or Event of Default with respect to the Notes. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than a Placement Agent). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either 23 (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker- dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 24 (C) such transfer is effected by a Participating Broker- Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; 25 (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.02, the Trustee shall authenticate and deliver to the Person designated in the instructions a Restricted Definitive Note in the appropriate principal amount. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Restricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 26 (C) such transfer is effected by a Participating Broker- Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Unrestricted Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.02, the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Unrestricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; 27 (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; or (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker- Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Restricted Definitive Notes so transferred or exchanged and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. 28 (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the 29 distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the sum of (A) the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (B) the principal amount of Definitive Notes exchanged or transferred for beneficial interests in Unrestricted Global Notes in connection with the Exchange Offer pursuant to Section 2.06(d)(ii) and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer (other than Definitive Notes described in clause (i)(B) immediately above). Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.02, the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. 30 (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTES, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTES, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS, OR 31 OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES," AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order. 32 (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.15 and 4.16 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same Indebtedness, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (c) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07 Replacement Notes If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. 33 Section 2.08 Outstanding Notes The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or the maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.09 Treasury Notes In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. Section 2.10 Temporary Notes Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.11 Cancellation The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. 34 Section 2.12 Defaulted Interest If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3 REDEMPTION Section 3.01 Notices to Trustee If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days (unless a shorter period is acceptable to the Trustee) but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Section 3.02 Selection of Notes to Be Redeemed If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or integral multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not an integral multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. 35 Section 3.03 Notice of Redemption At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04 Effect of Notice of Redemption Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05 Deposit of Redemption Price One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent immediately available funds sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly 36 return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06 Notes Redeemed in Part Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07 Optional Redemption The Notes will be redeemable, at the Company's option, in whole or in part, at any time or from time to time, on or after April 15, 2003 and prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each Holder's last registered address, at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the right of Holders of record on the relevant regular record date that is on or prior to the redemption date to receive interest due on an interest payment date), if redeemed during the 12-month period commencing April 15, of the years set forth below: Year Percentage ---- ---------- 2003 . . . . . . . . . . . . . . . . . . 104.188% 2004 . . . . . . . . . . . . . . . . . . 102.792% 2005 . . . . . . . . . . . . . . . . . . 101.396% 2006 and thereafter. . . . . . . . . . . 100.000% In addition, at any time prior to April 15, 2001, the Company may redeem up to 35% of the principal amount of the Notes with the proceeds of one or more sales by the Company of its Capital Stock (other than Disqualified Stock), at any time or from time to time in part, at a redemption price (expressed as a percentage of principal amount) of 108.375%, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the rights of Holders of record on the relevant regular record date that is prior to the redemption date to receive interest due on an interest payment date); provided that at least $81,250,000 aggregate principal amount of Notes remains outstanding after each such redemption; and provided further, that such redemption occurs within 90 days of the date of the closing of each such sale of Capital Stock. 37 Section 3.08 No Mandatory Redemption The Company shall not be required to make mandatory redemption payments with respect to the Notes. ARTICLE 4 COVENANTS Section 4.01 Payment of Notes The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 12:00 noon Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company's Obligations under the Notes, this Indenture and the Registration Rights Agreement are referred to herein as the "Company Obligations." The Company shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue principal at the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02 Maintenance of Office or Agency The Company shall maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office as one such office or agency of the Company in accordance with Section 2.03 hereof. 38 Section 4.03 Commission Reports and Reports to Holders Whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Subsidiary Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.04 Compliance Certificate (a) The Company shall deliver to the Trustee, within 105 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company and the Restricted Subsidiaries have kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company and the Restricted Subsidiaries are not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred and be continuing, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, within five Business Days of any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 Taxes The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment would not have a material adverse effect on the ability fo the Company and the Subsidiary Guarantors to satisfy their obligations under the Notes, the Subsidiary Guarantees and this Indenture. 39 Section 4.06 Stay, Extension and Usury Laws The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07 Limitation on Indebtedness (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (other than the Notes and the Subsidiary Guarantees and Indebtedness existing on the Closing Date, including the Old Senior Notes and the Old Senior Subordinated Notes until redeemed); provided that the Company or any Restricted Subsidiary may Incur Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio would be greater than 2.25:1. Notwithstanding the foregoing, the Company and any Restricted Subsidiary (except as specified below) may Incur each and all of the following: (i) Indebtedness outstanding at any time in an aggregate principal amount not to exceed $185,000,000, less any amount of such Indebtedness permanently repaid as provided under Section 4.15; (ii) Indebtedness owed (A) by a Restricted Subsidiary to the Company; provided that if such Indebtedness exceeds $500,000 it shall be evidenced by a promissory note or (B) by the Company or a Restricted Subsidiary to any Restricted Subsidiary; provided that any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or another Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness (other than Indebtedness Incurred under clause (i), (ii) or (iv) of this paragraph) and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes shall only be permitted under this clause (iii) if (A) in case the Notes are refi- nanced in part or the Indebtedness to be refinanced is pari passu with the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes, (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains 40 outstanding, is expressly made subordinate in right of payment to the Notes at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes and (C) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; and provided further that in no event may Indebtedness of the Company that is pari passu with or subordinated in right of payment to the Notes be refinanced by means of any Indebtedness of any Restricted Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided in the ordinary course of business, (B) under Currency Agreements and Interest Rate Agreements; provided that such agreements (a) are designed solely to protect the Company or its Restricted Subsidiaries against fluctuations in foreign currency exchange rates or interest rates and (b) do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition; (v) Indebtedness of the Company, to the extent the net proceeds thereof are promptly (A) used to purchase Notes tendered in an Offer to Purchase made as a result of a Change in Control or (B) deposited to defease the Notes under Article 8; (vi) purchase money Indebtedness and Capitalized Lease Obligations secured by Liens described in clauses (ix) or (xi) of the definition of "Permitted Liens," provided, that the aggregate principal amount thereof incurred in any fiscal year (other than Capitalized Lease Obligations permitted under clause (vii) below), shall not exceed $15,000,000; (vii) Capitalized Lease Obligations incurred in connection with the sale of any property or assets in any sale and leaseback transaction with any Person providing for the leasing by the Company or any of its Restricted Subsidiaries of real or personal property which has been sold by the Company or such Restricted Subsidiary for fair market value in an aggregate amount not to exceed $15,000,000 in any fiscal year; (viii) Indebtedness of a franchisee assumed by the Company or any Restricted Subsidiary in connection with the purchase by the Company or such Restricted Subsidiary of restaurants operated by such franchisee and all franchise rights of such franchisee related to the purchased restaurants; provided that the aggregate principal amount of all Indebtedness permitted under this clause shall not exceed $5,000,000 at any time outstanding; 41 (ix) Indebtedness evidenced by letters of credit issued in the ordinary course of business of the Company and/or any Restricted Subsidiary to secure workers' compensation and other insurance coverage; and (x) Indebtedness, in addition to Indebtedness permitted under clauses (i) through (ix) above, in an aggregate principal amount outstanding at any time not to exceed $20,000,000 less any amount of such Indebtedness permanently repaid as provided under Section 4.15. (b) Notwithstanding any other provision of this Section 4.07, the maximum amount of Indebtedness that the Company or a Restricted Subsidiary may Incur pursuant to this Section 4.07 shall not be deemed to be exceeded, with respect to any outstanding Indebtedness, due solely to the result of fluctuations in the exchange rates of currencies. (c) For purposes of determining any particular amount of Indebtedness under this Section 4.07, (1) Indebtedness Incurred under the Credit Agreement shall first be treated as Incurred pursuant to clause (i) of the second paragraph of Section 4.07(a) to the full extent of Indebtedness permitted under such clause (it being understood that additional Indebtedness under the Credit Agreement may be incurred to the full extent permitted under any other provision of this Indenture), (2) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (3) any Liens granted pursuant to the equal and ratable provisions referred to in Section 4.09 shall not be treated as Indebtedness. For purposes of determining compliance with this Section 4.07, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses (other than Indebtedness referred to in clause (1) of the preceding sentence), the Company, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses. Section 4.08 Limitation on Senior Subordinated Indebtedness The Company shall not Incur any Indebtedness that is subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is pari passu with, or subordinated in right of payment to, the Notes and the Subsidiary Guarantors shall not Incur any Indebtedness that is subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is pari passu with, or subordinated in right of payment to, the Subsidiary Guarantees; provided that the foregoing limitation shall not apply to distinctions between categories of Senior Indebtedness of the Company or the Subsidiary Guarantors that exist by reason of any Liens or Guarantees arising or created in respect of some but not all such Senior Indebtedness. Section 4.09 Limitation on Liens The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Liens other than Permitted Liens unless the Indebtedness under the Notes and the Subsidiary Guarantees is secured on an equal and ratable basis with the Indebtedness secured. 42 Section 4.10 Limitation on Restricted Payments The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any dividend or make any distribution on or with respect to its Capital Stock (other than (x) dividends or distributions payable solely in shares of its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock and (y) pro rata dividends or distributions on Common Stock of Restricted Subsidiaries held by minority stockholders) held by Persons other than the Company or any of its Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of (A) the Company or an Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Person or (B) a Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Affiliate of the Company (other than a Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the Capital Stock of the Company, (iii) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness of the Company that is subordinated in right of payment to the Notes or (iv) make any Investment, other than a Permitted Investment, in any Person (such payments or any other actions described in clauses (i) through (iv) above being collectively "Restricted Payments") if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) a Default or Event of Default shall have occurred and be continuing, (B) the Company could not Incur at least $1.00 of Indebtedness under the first paragraph of the Section 4.07(a) or (C) the aggregate amount of all Restricted Payments (the amount, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) made after the Closing Date shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such loss) (determined by excluding income resulting from transfers of assets by the Company or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period) beginning on January 19, 1998 and ending on the last day of the last fiscal quarter preceding the Transaction Date for which reports have been filed with the Commission or provided to the Trustee pursuant to Section 4.03 plus (2) the aggregate Net Cash Proceeds received by the Company after the Closing Date from the issuance and sale permitted by this Indenture of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company, including an issuance or sale permitted by this Indenture of Indebtedness of the Company for cash subsequent to the Closing Date upon the conversion of such Indebtedness into Capital Stock (other than Disqualified Stock) of the Company, or from the issuance to a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of the Notes), plus (3) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such Investment (except, in each case, to the extent any such payment or proceeds are included in the calculation of Adjusted Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in each case, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. 43 The foregoing provision shall not be violated by reason of: (i) the payment of any dividend within 60 days after the date of declaration thereof if, at said date of declaration, such payment would comply with the foregoing paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Notes including premium, if any, and accrued and unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of the second paragraph of Section 4.07(a); (iii) the repurchase, redemption or other acquisition of Capital Stock of the Company or an Unrestricted Subsidiary (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock (other than Disqualified Stock) of the Company (or options, warrants or other rights to acquire such Capital Stock); (iv) the making of any principal payment or the repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness of the Company which is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of, a substantially concurrent offering of, shares of the Capital Stock (other than Disqualified Stock) of the Company (or options, warrants or other rights to acquire such Capital Stock); (v) payments or distributions, to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of this Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of the Company; (vi) Investments acquired in exchange for Capital Stock (other than Disqualified Stock) of the Company; (vii) payments of amounts required for any repurchase, redemption, retirement or other acquisition of any Capital Stock of the Company or any options or rights to acquire such Capital Stock of the Company owned by any director, officer or employee of the Company or its Subsidiaries pursuant to any management equity subscription agreement, stock option agreement or similar agreement, or otherwise upon the death, disability, retirement or termination of employment or departure from the Board of Directors of the Company; provided that the aggregate price paid for all such repurchased, redeemed, retired or acquired Capital Stock of the Company or options shall not exceed in the aggregate $1,000,000; or (viii) Restricted Payments in an aggregate amount not to exceed $5,000,000; provided that, except in the case of clauses (i) and (iii), no Default or Event of Default shall have occurred and be continuing or occur as a consequence of the actions or payments set forth therein. Each Restricted Payment permitted pursuant to the preceding paragraph (other than the Restricted Payment referred to in clause (ii) thereof, an exchange of Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) or (iv) thereof and an Investment referred to in clause (vi) thereof), and the Net Cash Proceeds from any issuance of Capital Stock referred to in clauses (iii) and (iv), shall be included in calculating whether the conditions of clause (C) of the first paragraph of this Section 4.10 have been met with respect to any subsequent Restricted Payments. In the event the proceeds of an issuance of Capital Stock of the Company are used for the redemption, repurchase or other acquisition of the Notes, or Indebtedness that is pari passu with the Notes, then the Net Cash Proceeds of such issuance shall be included in clause (C) of the first paragraph of this Section 4.10 only to the extent such proceeds are not used for such redemption, repurchase or other acquisition of Indebtedness. Section 4.11 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any 44 consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (iii) make loans or advances to the Company or any other Restricted Subsidiary or (iv) transfer any of its property or assets to the Company or any other Restricted Subsidiary. The foregoing provisions shall not restrict any encumbrances or restrictions: (i) existing on the Closing Date in the Credit Agreement, this Indenture or any other agreements in effect on the Closing Date, and any modifications, extensions, refinancings, renewals, substitutions or replacements of such agreements; provided that the encumbrances and restrictions in any such modifications, extensions, refinancings, renewals, substitutions or replacements are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being modified, extended, refinanced, renewed, substituted or replaced; (ii) existing under or by reason of applicable law; (iii) existing with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired; (iv) in the case of clause (iv) of the first paragraph of this Section 4.11, (A) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, (B) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture or (C) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary; (v) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary; or (vi) contained in the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was issued if (A) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant contained in such Indebtedness or agreement, (B) the encumbrance or restriction is not materially more disadvantageous to the Holders of the Notes than is customary in comparable financings (as determined by the Company) and (C) the Company determines that any such encumbrance or restriction will not materially affect the Company's ability to make principal or interest payments on the Notes. Nothing contained in this Section 4.11 shall prevent the Company or any Restricted Subsidiary from (1) creating, incurring, assuming or suffering to exist any Liens otherwise permitted in Section 4.09 or (2) restricting the sale or other disposition of property or assets of the Company or any of its Restricted Subsidiaries that secure Indebtedness of the Company or any of its Restricted Subsidiaries. Section 4.12 Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law; (iii) if, immediately after giving effect to such issuance or sale, such Restricted 45 Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under Section 4.10 if made on the date of such issuance or sale; or (iv) issuances or sales of Common Stock of a Restricted Subsidiary; provided that the Company or such Restricted Subsidiary applies the Net Cash Proceeds, if any, of any such sale in accordance with clause (A) or (B) of Section 4.15. Section 4.13 Additional Subsidiary Guarantees If the Company or any of its Restricted Subsidiaries shall acquire or create another Restricted Subsidiary after the date of this Indenture, then such newly acquired or created Restricted Subsidiary shall execute a Subsid- iary Guarantee substantially in the form of Exhibit E hereto and deliver an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee regarding the due authorization, execution and delivery of the Subsidiary Guarantee. Section 4.14 Limitation on Transactions with Affiliates and Certain Stockholders The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of the Company or with any Affiliate of the Company or any Restricted Subsidiary, except upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate. The foregoing limitation does not limit, and shall not apply to (i) transactions (A) approved by a majority of the disinterested members of the Board of Directors or (B) for which the Company or a Restricted Subsidiary delivers to the Trustee a written opinion of a nationally recognized investment banking firm stating that the transaction is fair to the Company or such Restricted Subsidiary from a financial point of view; (ii) any transaction solely between the Company and any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries; (iii) customary directors' fees, indemnification and similar arrangements, employee salaries and bonuses, employment agreements and arrangements or compensation or employee benefit arrangements (including options) in the ordinary course of business; (iv) any payments or other transactions pursuant to any tax-sharing agreement between the Company and any other Person with which the Company files a consolidated tax return or with which the Company is part of a consolidated group for tax purposes; (v) loans or advances to officers or employees of the Company or any Restricted Subsidiary made in the ordinary course of business of the Company or such Restricted Subsidiary to pay business related travel expenses or reasonable relocation costs of such officers or employees in connection with their employment by the Company or such Restricted Subsidiary; (vi) leases or repurchases of property, in each case on terms set forth in agreements as in effect on the date hereof, by the Company or any Restricted Subsidiary from CRC-I Limited Partnership, CRC-II Limited Partnership or any transferee of an estate for years from such Persons; or (vii) any Restricted Payments not prohibited by Section 4.10. Notwithstanding the foregoing, any transaction or series of related transactions covered by the first paragraph of this Section 4.14 and not covered by clauses (ii) through (vii) of this paragraph, (a) the aggregate amount of which exceeds $1,000,000 in value, must be approved or determined to be fair in the manner provided for in clause (i)(A) or (B) above and (b) 46 the aggregate amount of which exceeds $3,000,000 in value, must be determined to be fair in the manner provided for in clause (i)(B) above. Section 4.15 Limitation on Asset Sales The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the consideration received by the Company or such Restricted Subsidiary is at least equal to the fair market value of the assets sold or disposed of and (ii) at least 85% of the consideration (excluding contingent liabilities assumed by the transferee of any such assets) received consists of cash or Temporary Cash Investments or the assumption of Senior Indebtedness of the Company or a Subsidiary Guarantor; provided that the Company or such Restricted Subsidiary is irrevocably released from all liability under such Indebtedness. In the event and to the extent that the Net Cash Proceeds received by the Company or any of its Restricted Subsidiaries from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of the Company and its Subsidiaries has been filed with the Commission or provided to the Trustee pursuant to Section 4.03), then the Company shall or shall cause the relevant Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently repay Senior Indebtedness of the Company or a Subsidiary Guarantor or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i)) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraph of this Section 4.15. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this Section 4.15 totals at least $5,000,000, the Company must commence, not later than the fifteenth Business Day of such month, an Offer to Purchase to the Holders of the Notes and, to the extent required by the terms of any Pari Passu Indebtedness, an Offer to Purchase to all holders of such Pari Passu Indebtedness, the maximum principal amount of Notes and any such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds, at an offer price equal to 100% of the principal amount thereof, plus, in each case, accrued and unpaid interest and Additional Interest, if any, to the Payment Date. If the aggreage principal amount of Notes and any such Pari Passu Indebtedness tendered by holders thereof exceeds the amount of Excess Proceeds, the Notes and Pari Passu Indebtedness shall be purchased on a pro rata basis. Upon the completion of any such Offers to Purchase, the amount of Excess Proceeds shall be reset at zero. 47 Section 4.16 Repurchase of Notes upon a Change of Control The Company must commence, within 30 days of the occurrence of a Change of Control, and consummate an Offer to Purchase for all Notes then outstanding, at a purchase price equal to 101% of the principal amount thereof, plus accrued interest (if any) to the Payment Date. There can be no assurance that the Company will have sufficient funds available at the time of any Change of Control to make any debt payment (including repurchases of Notes) required by the foregoing covenant (as well as may be contained in other securities of the Company which might be outstanding at the time). The above covenant requiring the Company to repurchase the Notes will, unless consents are obtained, require the Company to repay all indebtedness then outstanding which by its terms would prohibit such Note repurchase, either prior to or concurrently with such Note repurchase. The Company will not be required to make an Offer to Purchase pursuant to this covenant if a third party makes an Offer to Purchase in compliance with this covenant and repurchases all Notes validly tendered and not withdrawn under such Offer to Purchase. ARTICLE 5 SUCCESSORS Section 5.01 Merger, Consolidation or Sale of Assets The Company will not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into the Company unless: (i) the Company shall be the continuing Person, or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or that acquired or leased such property and assets of the Company shall be a corporation organized and validly existing under the laws of the United States of America or any state or jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, all of the obligations of the Company on all of the Notes and under this Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis, the Company or any Person becoming the successor obligor of the Notes shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction; (iv) immediately after giving effect to such transaction on a pro forma basis the Company, or any Person becoming the successor obligor of the Notes, as the case may be, could Incur at least $1.00 of Indebtedness under the first paragraph of Section 4.07(a); provided that this clause (iv) shall not apply to a consolidation, merger or sale of all (but not less than all) of the assets of the Company if all Liens and Indebtedness of the Company or any Person becoming the successor obligor on the Notes, as the case may be, and its Restricted Subsidiaries outstanding immediately after such transaction would, if Incurred at such time, have been permitted to be Incurred (and all such Liens and Indebtedness, other than Liens and Indebtedness of the Company and its Restricted Subsidiaries outstanding immediately prior to the transaction, shall be deemed to have been Incurred) for all purposes of this Indenture; and (v) the Company delivers to the Trustee an Officers' Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such 48 transaction have been complied with; provided, however, that clauses (iii) and (iv) above do not apply if, in the good faith determination of the Board of Directors of the Company, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of incorporation of the Company and that any such transaction shall not have as one of its purposes the evasion of the foregoing limitations. Section 5.02 Successor Corporation Substituted Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor of the Company shall not be relieved from the obligation to pay the principal of and interest on the Notes. ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default Each of the following constitutes an Event of Default: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise, whether or not such payment is prohibited by Article 11; (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days, whether or not such payment is prohibited by Article 11; (c) default in the performance or breach of Section 5.01 or failure to make or consummate an Offer to Purchase in accordance with Section 4.15 or Section 4.16; (d) the Company or any Subsidiary Guarantor defaults in the performance of or breaches any other covenant or agreement of the Company or any Subsidiary Guarantor in this Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes; (e) there occurs with respect to any issue or issues of Indebtedness of the Company or any Significant Subsidiary having an outstanding principal amount of $5,000,000 or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or 49 shall hereafter be created, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $5,000,000 in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $5,000,000 during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect in any material respect or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (h) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any Significant Subsidiary in an involuntary case under any applicable Bankruptcy Law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (i) the Company or any Significant Subsidiary (A) commences a voluntary case under any applicable Bankruptcy Law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Section 6.02 Acceleration If an Event of Default (other than an Event of Default specified in clause (h) or (i) of Section 6.01 that occurs with respect to the Company or any Significant Subsidiary) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes, then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and 50 accrued interest (including Additional Interest) on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued interest shall be immediately due and payable; provided that any such declaration of acceleration shall not become effective until the earlier of (A) five Business Days after receipt of the acceleration notice by the Representative of the lenders under the Credit Agreement and the Company or (B) acceleration of the Indebtedness under the Credit Agreement; provided further that such acceleration shall automatically be rescinded and annulled without any further action required on the part of the Holders in the event that any and all Events of Default specified in the acceleration notice under this Indenture shall have been cured, waived or otherwise remedied as provided in this Indenture prior to the expiration of the period referred to in the preceding clauses (A) and (B). In the event of a declaration of acceleration because an Event of Default set forth in clause (e) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (e) shall be remedied or cured by the Company or the relevant Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (h) or (i) above occurs with respect to the Company or any Significant Subsidiary, the principal of, premium, if any, and accrued interest on the Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Section 6.03 Other Remedies If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 Waiver of Past Defaults The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05 Control by Majority Holders of at least a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting 51 any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines in good faith may be unduly prejudicial to the rights of other Holders of Notes not joining in the giving of such direction or that may involve the Trustee in personal liability and the Trustee may take any other action it deems proper that is not inconsistent with any such direction received from Holders of the Notes. Section 6.06 Limitation on Suits A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in aggregate principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 Rights of Holders of Notes to Receive Payment Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of the principal of, premium and Additional Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08 Collection Suit by Trustee If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Additional Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. 52 Section 6.09 Trustee May File Proofs of Claim The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10 Priorities If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Additional Interest, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11 Undertaking for Costs In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any 53 party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE Section 7.01 Duties of Trustee (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by an Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to Sections 7.01 and 7.02. 54 (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02 Rights of Trustee (a) In connection with the Trustee's rights and duties under this Indenture, the Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting under this Indenture, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) Except with respect to Section 4.01 hereof, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 6.01(a), 6.01(b) and 4.01 or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. (h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee may, in its discretion, make such further inquiry 55 or investigation into such facts or matters as it may see fit and if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company personally or by agent or attorney. Section 7.03 Individual Rights of Trustee The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the TIA) it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 Trustee's Disclaimer The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05 Notice of Defaults If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06 Reports by Trustee to Holders of the Notes Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the 12 months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the Commission and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. 56 Section 7.07 Compensation and Indemnity The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses (including reasonable attorneys' fees) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Sections 6.01(h) or 6.01(i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. Section 7.08 Replacement of Trustee A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of 57 Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 7.10 Eligibility; Disqualification There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or 58 examination by federal or state authorities and that has a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). Section 7.11 Preferential Collection of Claims Against Company The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02 Legal Defeasance and Discharge Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and Subsidiary Guarantees on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and the Subsidiary Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Subsidiary Guarantees, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes, such Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.05 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. 59 Section 8.03 Covenant Defeasance Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, the Company be released from its obligations under Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 and 5.01 hereof and the Subsidiary Guarantors shall be released from their obligations under Section 10.03(b) hereof, in each case on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes and the Subsidiary Guarantees shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(e) through 6.01(g) hereof shall not constitute Events of Default. Section 8.04 Conditions to Legal or Covenant Defeasance The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and Additional Interest, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; 60 (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. 61 The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 Repayment to Company Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, Additional Interest or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, Additional Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07 Reinstatement If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. 62 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes Notwithstanding Section 9.02 of this Indenture, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's obligations to the Holders of the Notes in the case of a merger or consolidation pursuant to Article 5 hereof; (d) to provide for additional Subsidiary Guarantors as set forth in Section 4.13 or for the release or assumption of a Subsidiary Guarantee in compliance with this Indenture; (e) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; or (f) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 With Consent of Holders of Notes Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including Sections 4.15 and 4.16 hereof), the Notes or the Subsidiary Guarantees with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). 63 Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes, except for Sections 4.15 and 4.16 hereof, which may be amended in accordance with the first paragraph of this Section 9.02; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, premium or Additional Interest, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note (other than a payment required by Sections 4.15 or 4.16 hereof); or 64 (h) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. Section 9.03 Compliance with Trust Indenture Act Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04 Revocation and Effect of Consents Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same Indebtedness as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05 Notation on or Exchange of Notes The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBSIDIARY GUARANTEES Section 10.01 Subsidiary Guarantees Subject to the provisions of this Article 10, each Subsidiary Guarantor, jointly and severally, hereby unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, that: (a) the principal of, and premium and interest and Additional Interest, if any, on the Notes shall be duly and punctually paid in full when due, whether at maturity, by 65 acceleration or otherwise, and interest on overdue principal, and premium, if any, and (to the extent permitted by law) interest on any interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee hereunder or under the Notes (including fees, expenses or other) shall be promptly paid in full or performed, all in accordance with the terms hereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise (collectively, the "Guarantee Obligations"). Failing payment when due of any Guarantee Obligation or failing performance of any other obligation of the Company to the Holders, for whatever reason, each Subsidiary Guarantor shall be obligated to pay, or to perform or to cause the performance of, the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under this Subsidiary Guarantee, and shall entitle the Trustee or the Holders of Notes to accelerate the Guarantee Obligations of each Subsidiary Guarantor hereunder in the same manner and to the same extent as the Obligations of the Company. Each Subsidiary Guarantor hereby agrees that its Guarantee Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any thereof, the entry of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives and relinquishes: (a) any right to require the Trustee, the Holders or the Company (each, a "Benefitted Party") to proceed against the Company, the Subsidiaries or any other Person or to proceed against or exhaust any security held by a Benefitted Party at any time or to pursue any other remedy in any secured party's power before proceeding against the Subsidiary Guarantors; (b) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or Persons or the failure of a Benefitted Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person or Persons; (c) demand, protest and notice of any kind (except as expressly required by this Indenture), including but not limited to notice of the existence, creation or incurring of any new or additional Indebtedness or obligation or of any action or non-action on the part of the Subsidiary Guarantors, the Company, the Subsidiaries, any Benefitted Party, any creditor of the Subsidiary Guarantors, the Company or the Subsidiaries or on the part of any other Person whomsoever in connection with any obligations the performance of which are hereby guaranteed; (d) any defense based upon an election of remedies by a Benefitted Party, including but not limited to an election to proceed against the Subsidiary Guarantors for reimbursement; (e) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (f) any defense arising because of a Benefitted Party's election, in any proceeding instituted under the Bankruptcy Law, of the application of Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any borrowing or grant of a security interest under Section 364 of the Bankruptcy Code. The Subsidiary Guarantors hereby covenant that, except as otherwise provided therein, the Subsidiary Guarantees shall not be discharged except by payment in full of all Guarantee Obligations, including the principal, premium, if any, and interest on the Notes and all other costs provided for under this Indenture or as provided in Section 8.01. If any Holder or the Trustee is required by any court or otherwise to return to either the Company or the Subsidiary Guarantors, or any trustee or similar official acting in relation to either the Company or the Subsidiary Guarantors, any amount paid by the Company or the Subsidiary Guarantors to the Trustee or such Holder, the Subsidiary Guarantees, to the 66 extent theretofore discharged, shall be reinstated in full force and effect. Each of the Subsidiary Guarantors agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guarantee Obligations hereby until payment in full of all such obligations. Each Subsidiary Guarantor agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes hereof, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guarantee Obligations, and (y) in the event of any acceleration of such obligations as provided in Article 6 hereof, such Guarantee Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purpose of the Subsidiary Guarantee. Section 10.02 Execution and Delivery of Subsidiary Guarantees To evidence the Subsidiary Guarantees set forth in Section 10.01 hereof, each of the Subsidiary Guarantors agrees that a notation of the Subsidiary Guarantees substantially in the form included in Exhibit A hereto shall be endorsed on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of the Subsidiary Guarantors by the Chairman of the Board, any Vice Chairman, the President or one of the Vice Presidents of the Subsidiary Guarantors, under a facsimile of its seal reproduced on this Indenture and attested to by an Officer other than the Officer executing this Indenture. Each of the Subsidiary Guarantors agree that the Subsidiary Guarantees set forth in this Article 10 will remain in full force and effect and apply to all the Notes notwithstanding any failure to endorse on each Note a notation of the Subsidiary Guarantees. If an Officer whose facsimile signature is on a Note no longer holds that office at the time the Trustee authenticates the Note on which the Subsidiary Guarantees are endorsed, the Subsidiary Guarantees shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantees set forth in this Indenture on behalf of the Subsidiary Guarantors. Section 10.03 Subsidiary Guarantors May Consolidate, etc., on Certain Terms (a) Nothing contained in this Indenture or in the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor, or shall prevent the transfer of all or substantially all of the assets of a Subsidiary Guarantor to the Company or another Subsidiary Guarantor. Upon any such consolidation, merger, transfer or sale, the Subsidiary Guarantee of such Subsidiary Guarantor shall no longer have any force or effect. (b) Except for a merger or consolidation in which a Subsidiary Guarantor is sold and its Subsidiary Guarantee is released in compliance with the provisions of Section 10.04, no Subsidiary Guarantor shall, in a single transaction or series of related transactions, consolidate or merge with or into (whether or not such Subsidiary Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity other than the Company 67 or another Subsidiary Guarantor unless (i) the entity or Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the Guarantee Obligations of such Subsidiary Guarantor under its Subsidiary Guarantee and this Indenture pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee; (ii) immediately after such transaction no Default or Event of Default exists; (iii) unless such merger or consolidation involves only Restricted Subsidiaries and the surviving Person is a Subsidiary Guarantor, the Company would be able to, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Interest Coverage Ratio test set forth in the first paragraph of Section 4.07; and (iv) such Subsidiary Guarantor shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel addressed to the Trustee, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or disposition and such supplemental indenture, if any, comply with this Indenture and that such supplemental indenture is enforceable. In case of any such consolidation, merger or transfer of assets and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantees endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by such Guarantor, such successor corporation shall succeed to and be substituted for such Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) The Trustee, subject to the provisions of Section 12.04 hereof, shall be entitled to receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption of Guarantee Obligations, comply with the provisions of this Section 10.03. Such Officers' Certificate and Opinion of Counsel shall comply with the provisions of Section 12.05. Section 10.04 Releases Notwithstanding Section 10.03(b), in the event of (a) a sale or other disposition of all or substantially all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all (or substantially all) of the Capital Stock of any Subsidiary Guarantor, or (b) a designation of a Subsidiary Guarantor as an Unrestricted Subsidiary, which sale or other disposition or which designation otherwise complies with the terms of this Indenture, then such Subsidiary Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all or substantially all of the Capital Stock of such Subsidiary Guarantor or in the event of a designation of such Subsidiary Guarantor as an Unrestricted Subsidiary) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor) shall be released from and relieved of any Guarantee Obligations under its Subsidiary Guarantee; provided that the Net Cash Proceeds from such sale or other disposition are applied (or are held for application) in 68 accordance with the provisions of Section 4.15 hereof. Upon delivery by the Company to the Trustee of an Officer's Certificate and Opinion of Counsel, to the effect that such sale or other disposition or that such designation was made by the Company in accordance with the provisions of this Indenture, including without limitation Sections 4.08 or 4.09 hereof, as applicable, the Trustee shall execute any documents reasonably required in order to evidence the release of any such Subsidiary Guarantor from its Guarantee Obligations under its Subsidiary Guarantee. Except as provided in Section 10.03(a), any Subsidiary Guarantor not released from its Guarantee Obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Subsidiary Guarantor under this Indenture as provided in this Article 10. Section 10.05 Limitation of Subsidiary Guarantor's Liability Each Subsidiary Guarantor, and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that the Guarantee by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law. To effectuate the foregoing intention, the Holders and such Subsidiary Guarantor hereby irrevocably agree that the Guarantee Obligations of such Subsidiary Guarantor under this Article 10 shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the Guarantee Obligations of such other Subsidiary Guarantor under this Article 10, result in the Guarantee Obligations of such Subsidiary Guarantor under the Subsidiary Guarantee of such Subsidiary Guarantor not constituting a fraudulent transfer or conveyance. Section 10.06 Application of Certain Terms and Provisions to the Subsidiary Guarantors (a) For purposes of any provision of this Indenture which provides for the delivery by any Subsidiary Guarantor of an Officers' Certificate and/or an Opinion of Counsel, the definitions of such terms in Section 1.01 shall apply to such Subsidiary Guarantor as if references therein to the Company were references to such Subsidiary Guarantor. (b) Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Notes to or on any Subsidiary Guarantor may be given or served as described in Section 12.02 as if references therein to the Company were references to such Subsidiary Guarantor. (c) Upon any demand, request or application by any Subsidiary Guarantor to the Trustee to take any action under this Indenture, such Subsidiary Guarantor shall furnish to the Trustee such certificates and opinions as are required in Section 12.04 hereof as if all references therein to the Company were references to such Subsidiary Guarantor. Section 10.07 Subordination of Subsidiary Guarantees The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee pursuant to this Article 10 is subordinated in right of payment to the prior payment in full in cash of all Senior Indebtedness of such Subsidiary Guarantor on the same basis as the Notes are subordinated to Senior Indebtedness of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or 69 retain payments by any of the Subsidiary Guarantors only at such times as they may receive and/or retain payments in respect of Notes pursuant to this Indenture, including Article 11 hereof. In the event that the Trustee receives any Subsidiary Guarantor payment at a time when the Trustee has actual knowledge that such payment is prohibited by the foregoing sentence, such Subsidiary Guarantor payment shall be paid over and delivered to the holders of the Senior Indebtedness of such Subsidiary Guarantor remaining unpaid, to the extent necessary to pay in full all such Senior Indebtedness. In the event that a Holder receives any Subsidiary Guarantor payment at a time when such payment is prohibited by the foregoing sentence, such Subsidiary Guarantor payment shall be paid over and delivered to the holders of the Senior Indebtedness of such Subsidiary Guarantor remaining unpaid, to the extent necessary to pay in full all such Senior Indebtedness. Each Holder of a Note by its acceptance thereof (a) agrees to and shall be bound by the provisions of this Section 10.07, (b) authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary and appropriate to effectuate the subordination so provided, and (c) appoints the Trustee as the Holder's attorney-in-fact for any and all such purposes. ARTICLE 11 SUBORDINATION Section 11.01 Agreement to Subordinate The Company agrees, and each Holder by accepting a Note agrees, that the payment of principal of, premium, if any and interest, including Additional Interest, on the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior payment in full in cash of all Senior Indebtedness, whether outstanding on the date hereof or hereafter incurred, and that the subordination provisions in Article 11 and Section 10.07 are for the benefit of the holders of such Senior Indebtedness. Section 11.02 Liquidation; Dissolution; Bankruptcy Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities, the holders of Senior Indebtedness will be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Indebtedness (including Accrued Bankruptcy Interest) before the Holders of Notes will be entitled to receive any payment with respect to the Notes, and until all Obligations with respect to Senior Indebtedness are paid in full in cash, any distribution to which the Holders of Notes would be entitled shall be made to the holders of Senior Indebtedness (except that Holders of Notes may receive Permitted Junior Securities and payments made from the trust described Article 8 so long as the funding of such trust did not violate the provisions of this Article 11). Section 11.03 Default on Designated Senior Indebtedness The Company also may not make any payment upon or in respect of the Notes (except in Permitted Junior Securities or from the trust described in Article 8 so long as the funding of such trust did not violate the provisions of this Article 11) if (i) a default in the payment of the principal of, 70 premium, if any, or interest on Designated Senior Indebtedness occurs and is continuing beyond any applicable period of grace or (ii) any other default occurs and is continuing with respect to Designated Senior Indebtedness that permits holders of the Designated Senior Indebtedness as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Company or the holders of any Designated Senior Indebtedness or a representative acting on behalf of such holders. Payments on the Notes may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived in writing and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived in writing or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Indebtedness has been accelerat- ed. No new period of payment blockage under clause (ii) above may be commenced unless and until 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default has been cured or waived for a period of 90 consecutive days. Section 11.04 Acceleration of Notes If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. Section 11.05 When Distribution Must be Paid Over In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Securities at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 11.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Indebtedness as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article 11, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 11.06 Notice by Company The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any 71 Obligations with respect to the Notes to violate this Article, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness as provided in this Article. Section 11.07 Subrogation After all Senior Indebtedness is paid in full and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness. A distribution made under this Article to holders of Senior Indebtedness that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. Section 11.08 Relative Rights This Article defines the relative rights of Holders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. Section 11.09 Subordination May Not Be Impaired by Company No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Section 11.10 Distribution or Notice to Representative Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 11, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. 72 Section 11.11 Rights of Trustee and Paying Agent Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article. Only the Company or a Representative may give the notice. Nothing in this Article 11 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee shall be entitled to rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Indebtedness (or a Representative on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a Representative on behalf of such holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person who is a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article, and if such evidence is not furnished the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment or until such time as the Trustee shall be otherwise satisfied as to the right of such person to receive such payment. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 11.12 Authorization to Effect Subordination Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 11, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the agent or agents under the Credit Agreement are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. Section 11.13 Amendments The provisions of this Article 11 shall not be amended or modified in a manner adverse to the holder of Designated Senior Indebtedness without the written consent of the holders of Designated Senior Indebtedness. 73 ARTICLE 12 MISCELLANEOUS Section 12.01 Trust Indenture Act Controls If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by the TIA, the imposed duties shall control. Section 12.02 Notices Any notice or communication by the Company or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company: Foodmaker, Inc. 9330 Balboa Avenue San Diego, CA 92123 Telephone No.: (619) 571-2121 Telecopier No.: (619) 571-2101 Attn: Treasurer If to the Trustee: First Union National Bank 765 Broad Street Second Floor Newark, N.J. 07102 Telephone No.: (973) 430-4468 Telecopier No.: (973) 430-2117 Attention: Corporate Trust Department The Company or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. 74 If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 12.03 Communication by Holders of Notes with Other Holders of Notes Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 12.04 Certificate and Opinion as to Conditions Precedent Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 12.05 Statements Required in Certificate or Opinion Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificate of public officials. 75 Section 12.06 Rules by Trustee and Agents The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders No past, present or future director, officer, employee, incorporator or stockholder of the Company or the Subsidiary Guarantors, as such, shall have any liability for any Obligations of the Company or the Subsidiary Guarantors under the Notes, the Subsidiary Guarantees or this Indenture or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Section 12.08 Governing Law THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. Section 12.09 No Adverse Interpretation of Other Agreements This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 12.10 Successors All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. Section 12.11 Severability In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 12.12 Counterpart Originals The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 12.13 Table of Contents, Headings, Etc. The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. 76 [Signatures on following pages] SIGNATURES Dated as of April 14, 1998 FOODMAKER, INC. By: CHARLES W. DUDDLES ------------------ Name: Charles W. Duddles Title: Executive Vice President and Chief Financial Officer Attest: LAWRENCE E. SCHAUF ------------------ (SEAL) Name: Lawrence E. Schauf Title: Executive Vice President and Secretary Dated as of April 14, 1998 CP DISTRIBUTION CO. By: CHARLES W. DUDDLES ------------------ Name: Charles W. Duddles Title: Vice President LAWRENCE E. SCHAUF ------------------ (SEAL) Name: Lawrence E. Schauf Title: Secretary Dated as of April 14, 1998 CP WHOLESALE CO. By: CHARLES W. DUDDLES ------------------ Name: Charles W. Duddles Title: Controller LAWRENCE E. SCHAUF ------------------ (SEAL) Name: Lawrence E. Schauf Title: Secretary Dated as of April 14, 1998 FOODMAKER INTERNATIONAL FRANCHISING, INC. By: CHARLES W. DUDDLES ------------------ Name: Charles W. Duddles Title: Vice President TIMOTHY PICKWELL ---------------- (SEAL) Name: Timothy Pickwell Title: Secretary Dated as of April 14, 1998 JACK IN THE BOX, INC. By: CHARLES W. DUDDLES ------------------ Name: Charles W. Duddles Title: Vice President LAWRENCE E. SCHAUF ------------------ (SEAL) Name: Lawrence E. Schauf Title: Secretary Dated as of April 14, 1998 FIRST UNION NATIONAL BANK By: LINDA J. SCHNEIDER ------------------ Name: Linda J. Schneider Title: Corporate Trust Officer EXHIBIT A (Face of Note) CUSIP No:[ (144A)] [ (Reg. S)] [ (ISIN)] 8 3/8% [Series A] [Series B] Senior Subordinated Notes due 2008 No. $__________ FOODMAKER, INC. promises to pay to or registered assigns, the principal sum of Dollars on April 15, 2008 Interest Payment Dates: April 15 and October 15 Record Dates: April 1 and October 1 Dated: A-1 FOODMAKER, INC. By: Name: Title: By: Name: Title: (SEAL) Certificate of Authentication: This is one of the [Global] Notes referred to in the within-mentioned Indenture: First Union National Bank By:______________________________ Authorized Signatory Dated: A-2 (Back of Note) 8 3/8% [Series A] [Series B] Senior Subordinated Notes due 2008 [THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.] [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](1) [THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN - --------------------------------- (1) To be included only on Global Notes deposited with DTC as Depositary. A-3 INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTES, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTES, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES," AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Foodmaker, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 8 3/8% per annum from April 14, 1998 until maturity and shall pay the Additional Interest, if any, payable pursuant to Section 2(d) of the Registration Rights Agreement referred to below. The Company will pay interest and Additional A-4 Interest, if any, semi-annually on April 15 and October 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be October 15, 1998. The Company shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate then in effect; it shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of 12 30-day months. 2. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) and Additional Interest to the Persons who are registered Holders of Notes at the close of business on the April 1 or October 1 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture (as defined below) with respect to defaulted interest. The Notes will be payable as to principal, premium, interest and Additional Interest at the office or agency of the Company maintained for such purpose, or, at the option of the Company, payment of interest and Additional Interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Interest on all Global Notes. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, First Union National Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of April 14, 1998 ("Indenture") among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Section 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. 5. Optional Redemption. The Notes will be redeemable, at the Company's option, in whole or in part, at any time or from time to time, on or after April 15, 2003 and prior to maturity, upon not less than 30 nor more than 60 days prior notice mailed by first class mail to each Holder's last registered address, at the following redemption prices (expressed in A-5 percentages of principal amount), plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the right of Holders of record on the relevant regular record date that is on or prior to the redemption date to receive interest due on an interest payment date), if redeemed during the 12-month period commencing April 15, of the years set forth below: Year Percentage ---- ---------- 2003 . . . . . . . . . . . . . . . 104.188% 2004 . . . . . . . . . . . . . . . 102.792% 2005 . . . . . . . . . . . . . . . 101.396% 2006 and thereafter. . . . . . . . 100.000% In addition, at any time prior to April 15, 2001, the Company may redeem up to 35% of the principal amount of the Notes with the proceeds of one or more sales by the Company of its Capital Stock (other than Disqualified Stock), at any time or from time to time in part, at a redemption price (expressed as a percentage of principal amount) of 108.375%, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the rights of Holders of record on the relevant regular record date that is prior to the redemption date to receive interest due on an interest payment date); provided that at least $81,250,000 aggregate principal amount of Notes remains outstanding after each such redemption; and provided further, that such redemption occurs within 90 days of the date of the closing of each such sale of Capital Stock. 6. Mandatory Redemption. The Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. Offers to Purchase. (a) Change of Control. The Company must commence, within 30 days of the occurrence of a Change of Control, and consummate an Offer to Purchase for all Notes then outstanding, at a purchase price equal to 101% of the principal amount thereof, plus accrued interest (if any) to the Payment Date. (b) Asset Sale. The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the consider- ation received by the Company or such Restricted Subsidiary is at least equal to the fair market value of the assets sold or disposed of and (ii) at least 85% of the consideration (excluding contingent liabilities assumed by the transferee of any such assets) received consists of cash or Temporary Cash Investments or the assumption of Senior Indebtedness of the Company or a Subsidiary Guarantor, provided that the Company or such Restricted Subsidiary is irrevocably released from all liability under such Indebtedness. In the event and to the extent that the Net Cash Proceeds received by the Company or any of its Restricted Subsidiaries from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of the Company and its Subsidiaries has been filed with the A-6 Commission or provided to the Holders pursuant to Section 4.03 of the Indenture), then the Company shall or shall cause the relevant Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently repay Senior Indebtedness of the Company or a Subsidiary Guarantor or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i)) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraph of Section 4.15 of the Indenture. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this covenant totals at least $5,000,000, the Company must commence, not later than the fifteenth Business Day of such month, an Offer to Purchase to the Holders of the Notes and, to the extent required by the terms of any Pari Passu Indebtedness, an Offer to Purchase to all holders of such Pari Passu Indebtedness, the maximum principal amount of Notes and any such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds, at an offer price equal to 100% of the principal amount thereof, plus, in each case, accrued and unpaid interest and Additional Interest, if any, to the Payment Date. If the aggreage principal amount of Notes and any such Pari Passu Indebtedness tendered by holders thereof exceeds the amount of Excess Proceeds, the Notes and Pari Passu Indebtedness shall be purchased on a pro rata basis. Upon the completion of any such Offers to Purchase, the amount of Excess Proceeds shall be reset at zero. 8. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 9. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. A-7 10. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes, and any existing Default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation, to provide for additional Subsidiary Guarantees as set forth in the Indenture or for the release or assumption of Subsidiary Guarantees in compliance with the Indenture to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA. 11. Defaults and Remedies. The Indenture provides that each of the following constitutes an Event of Default: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise, whether or not such payment is prohibited by the provisions described below under "Ranking"; (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days, whether or not such payment is prohibited by the provisions described below under "Ranking"; (c) default in the performance or breach of the provisions of the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the assets of the Company or the failure to make or consummate an Offer to Purchase in accordance with Section 4.15 or Section 4.16 of the Indenture; (d) the Company or any Subsidiary Guarantor defaults in the performance of or breaches any other covenant or agreement of the Company or any Subsidiary Guarantor in the Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes; (e) there occurs with respect to any issue or issues of Indebtedness of the Company or any Significant Subsidiary having an outstanding principal amount of $5,000,000 or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $5,000,000 in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders A-8 outstanding and not paid or discharged against all such Persons to exceed $5,000,000 during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect in any material respect or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (h) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any Significant Subsidiary in an involuntary case under any applicable Bankruptcy Law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (i) the Company or any Significant Subsidiary (A) commences a voluntary case under any applicable Bankruptcy Law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors. 12. Ranking. The Notes and the Subsidiary Guarantees are subordinated in right of payment, to the extent and in the manner provided in Article 11 and Section 10.07 of the Indenture, to the prior payment in full of all Senior Indebtedness. The Company agrees, and each Holder by accepting a Note consents and agrees, to the subordination provided in the Indenture and authorizes the Trustee to give it effect. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. A director, officer, employee, incorporator or stockholder, of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of A-9 survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. Additional Rights of Holders of Transfer Restricted Notes. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transferred Restricted Notes shall have all the rights set forth in the Registration Rights Agreement dated as of the date of the Indenture, among the Company, the Subsidiary Guarantors and the Placement Agents (the "Registration Rights Agreement"). 18. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Foodmaker, Inc. 9330 Balboa Avenue San Diego, CA 92123 Attention: Treasurer Telephone No.: (619) 571-2121 A-10 EX-10.1 3 REVOLVING CREDIT AGREEMENT DATED AS OF APRIL 1, 1998 $175,000,000 REVOLVING CREDIT AGREEMENT Dated as of April 1, 1998 Among FOODMAKER, INC. as Borrower -- -------- and THE FINANCIAL INSTITUTIONS NAMED HEREIN as Initial Lenders -- --------------- NATIONSBANK OF TEXAS, N.A. as Agent -- ----- NATIONSBANC MONTGOMERY SECURITIES LLC as Arranger -- -------- and CREDIT LYONNAIS LOS ANGELES BRANCH as Documentation Agent -- ------------------- TABLE OF CONTENTS ----------------- Page ---- ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . 1 Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . 1 Section 1.02. Computation of Time Periods . . . . . . . . . . . . . 22 Section 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . 22 Section 1.04. Other Definitional Provisions . . . . . . . . . . . . 22 ARTICLE II. AMOUNTS AND TERMS OF THE ADVANCES . . . . . . . . . . . . . . 23 Section 2.01. The Advances . . . . . . . . . . . . . . . . . . . . . 23 Section 2.02. Making the Advances . . . . . . . . . . . . . . . . . 23 Section 2.03. Repayment . . . . . . . . . . . . . . . . . . . . . . 27 Section 2.04. Reduction of the Revolving Commitments, Swing Line Commitment and Letter of Credit Subfacility . . . . . 27 Section 2.05. Prepayments . . . . . . . . . . . . . . . . . . . . . 28 Section 2.06. Interest . . . . . . . . . . . . . . . . . . . . . . . 30 Section 2.07. Fees . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 2.08. Increased Costs, Etc . . . . . . . . . . . . . . . . . 33 Section 2.09. Payments and Computations . . . . . . . . . . . . . . 34 Section 2.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 2.11. Sharing of Payments, Etc . . . . . . . . . . . . . . . 38 Section 2.12. Use of Proceeds . . . . . . . . . . . . . . . . . . . 39 Section 2.13. Evidence of Debt . . . . . . . . . . . . . . . . . . . 39 ARTICLE III. AMOUNTS AND TERMS OF LETTERS OF CREDIT . . . . . . . . . . . 40 Section 3.01. The Letter of Credit Subfacility . . . . . . . . . . . 40 Section 3.02. Issuance of Letters of Credit . . . . . . . . . . . . 40 Section 3.03. Drawing and Reimbursement . . . . . . . . . . . . . . 41 Section 3.04. Obligations Absolute . . . . . . . . . . . . . . . . . 42 Section 3.05. Letter of Credit Compensation . . . . . . . . . . . . 43 Section 3.06. Use of Letters of Credit . . . . . . . . . . . . . . . 43 ARTICLE IV. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . 43 Section 4.01. Conditions Precedent to Initial Borrowing . . . . . . 43 Section 4.02. Conditions Precedent to Each Borrowing and Issuance . 47 Section 4.03. Determinations Under Section 4.01 . . . . . . . . . . 48 ARTICLE V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 48 Section 5.01. Representations and Warranties of the Borrower . . . . 48 ARTICLE VI. COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . 54 Section 6.01. Affirmative Covenants . . . . . . . . . . . . . . . . 54 Section 6.02. Negative Covenants . . . . . . . . . . . . . . . . . . 58 Section 6.03. Reporting Requirements . . . . . . . . . . . . . . . . 64 Section 6.04. Financial Covenants . . . . . . . . . . . . . . . . . 66 ARTICLE VII. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . 67 Section 7.01. Events of Default . . . . . . . . . . . . . . . . . . 67 Section 7.02. Actions in Respect of the Letters of Credit Upon Default . . . . . . . . . . . . 70 ARTILCE VIII. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 8.01. Authorization and Action . . . . . . . . . . . . . . . 70 Section 8.02. Agent's Reliance, Etc . . . . . . . . . . . . . . . . 71 Section 8.03. NationsBank and Affiliates . . . . . . . . . . . . . . 71 Section 8.04. Lender Party Credit Decision . . . . . . . . . . . . . 71 Section 8.05. Indemnification . . . . . . . . . . . . . . . . . . . 72 Section 8.06. Successor Agents . . . . . . . . . . . . . . . . . . . 72 ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 9.01. Amendments, Etc; Release of Collateral . . . . . . . . 73 Section 9.02. Notices, Etc . . . . . . . . . . . . . . . . . . . . . 74 Section 9.04. Costs and Expenses . . . . . . . . . . . . . . . . . . 74 Section 9.05. Right of Set-off . . . . . . . . . . . . . . . . . . . 76 Section 9.06. Binding Effect . . . . . . . . . . . . . . . . . . . . 76 Section 9.07. Assignments and Participations . . . . . . . . . . . . 76 Section 9.08. Governing Law . . . . . . . . . . . . . . . . . . . . 79 Section 9.09. Execution in Counterparts . . . . . . . . . . . . . . 79 Section 9.10. No Liability of the Issuing Bank . . . . . . . . . . . 79 Section 9.11. Confidentiality . . . . . . . . . . . . . . . . . . . 80 Section 9.12. Waiver of Jury Trial . . . . . . . . . . . . . . . . . 80 SCHEDULES AND EXHIBITS - ---------------------- Schedules --------- Schedule I Commitments, and Applicable Lending Offices Schedule 1.01(a) Existing Letters of Credit Schedule 1.01(b) Excluded Asset Sales Schedule 1.01(c) Existing Liens Schedule 4.01(c) Surviving Debt Schedule 4.01(j) Mortgages Schedule 5.01(b) Capital Stock ii Schedule 5.01(q)(i) Existing Debt Schedule 5.01(q)(ii) Surviving Debt Schedule 5.01(r) Owned and Leased Real Property Schedule 5.01(s) Existing Investments Schedule 5.01(t) Intellectual Property Schedule 5.01(u) Other Agreements Exhibits -------- Exhibit A Form of Assignment and Acceptance Exhibit B-1 Form of Notice of Borrowing Exhibit B-2 Form of Notice of Swing Line Borrowing Exhibit C Form of Notice of Issuance Exhibit D-1 Form of Revolving Note Exhibit D-2 Form of Swing Line Note Exhibit E Form of Security Agreement Exhibit F Form of Guaranty Exhibit G Form of Opinion of Borrower's Counsel Exhibit H Form of Amendment to Guaranty Exhibit I-1 Form of Mortgage Exhibit I-2 Form of Deed of Trust Exhibit J Form of Amendment to Security Agreement Exhibit K-1 Form of Organizational Documents - Corporation Exhibit K-2 Form of Organizational Documents - Limited Partnership iii "CREDIT AGREEMENT dated as of April 1, 1998, among FOODMAKER, INC., a Delaware corporation (the "Borrower"), the financial institutions and other entities listed on the signature pages hereof as Lenders (the "Initial Lenders"), NATIONSBANC MONTGOMERY SECURITIES LLC, as arranger for the Lenders and the Issuing Banks hereunder (the "Arranger"), CREDIT LYONNAIS LOS ANGELES BRANCH, as documentation agent (the "Documentation Agent"), and NATIONSBANK OF TEXAS, N.A. ("NationsBank"), as L/C Bank (as hereinafter defined) and as agent (in such capacity, together with any successor in such capacity appointed pursuant to Article VII, the "Agent") for the Lenders and the Issuing Banks hereunder. PRELIMINARY STATEMENTS (1) The Borrower has requested, on the terms and conditions set forth herein, (a) that the Lenders make Revolving Advances (as hereinafter defined) to the Borrower from time to time in an aggregate principal amount not to exceed at any time outstanding the aggregate Revolving Commitments (as hereinafter defined) of the Lenders (less the sum of (i) the aggregate amount of Letter of Credit Obligations (as hereinafter defined) outstanding at such time, and (ii) Swing Line Advances (as hereinafter defined) outstanding from time to time), (b) that the Swing Line Lender (as hereinafter defined) makes Swing Line Advances to the Borrower from time to time in an aggregate principal amount not to exceed at any time outstanding $5,000,000 and (c) that the L/C Bank and the other Issuing Banks (as hereinafter defined) issue Letters of Credit (as hereinafter defined) for the account of the Borrower from time to time in an aggregate Available Amount (as hereinafter defined) not to exceed at any time outstanding the L/C Sublimit (as hereinafter defined). (2) Subject to the terms and conditions set forth in this Agreement, (a) the Lenders have agreed severally to make such Revolving Advances to the Borrower, (b) the Swing Line Lender has agreed to make such Swing Line Advances to the Borrower, and (c) the L/C Bank has agreed to issue such Letters of Credit for the account of the Borrower. AGREEMENT NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS Section 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Additional Mortgages" has the meaning specified in Section 6.01(k). 1 "Advance" means a Revolving Advance, a Swing Line Advance or an L/C Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 5% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Agent" has the meaning specified in the recital of parties to this Agreement. "Agent's Account" means the account of the Agent maintained by the Agent with NationsBank at its office at 901 Main Street, Dallas, Texas 75202, Account No. 1292000883, Attention: Agency Services, Reference: Foodmaker. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Applicable Margin" means with respect to any Base Rate Advances or Eurodollar Rate Advances, a percentage per annum determined by reference to the applicable Total Funded Debt to EBITDA Ratio as set forth below: Total Funded Debt LIBOR Base Rate to EBITDA Ratio Margin Margin ------------------ ------ --------- less than 1:75:1.0 0.625% 0.000% 1.75:1.0 or greater, but less 0.875% 0.000% than 2.25:1.0 2.25:1.0 or greater, but less 1.125% 0.000% than 3.00:1.0 3.00:1.0 or greater, but less 1.375% 0.250% than 3.50:1.0 3.50:1.0 or greater 1.625% 0.500% provided, however, that, notwithstanding the foregoing, for purposes of determining the Applicable Margin, the Total Funded Debt to EBITDA Ratio shall be deemed to be greater than or equal to 3.50 to 1.0 at all times when a Default has occurred and is continuing based on the Borrower's failure to deliver any financial statement or compliance certificate in the form required within five days after the date required for delivery thereof pursuant to Sections 6.03(b) or 6.03(c), as applicable. For purposes of this Agreement, any change in the Applicable Margin based on a change in the Total Funded Debt to EBITDA Ratio shall be effective three Business Days after the date of receipt by the Agent of the financial statements and compliance certificate required by Sections 6.03(b) or 6.03(c), as applicable, reflecting such change. 2 "Arranger" means NationsBanc Montgomery Securities LLC. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee, and accepted by the Agent, in accordance with Section 9.07 and in substantially the form of Exhibit A hereto. "Available Amount" of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of: (a) the rate of interest announced publicly by NationsBank from time to time as NationsBank's prime rate; and (b) 1/2 of one percent per annum above the Federal Funds Rate. "Base Rate Advance" means an Advance that bears interest as provided in Section 2.06(a). "Borrower" has the meaning set forth in the recital of parties to this Agreement. "Borrower's Account" means the account of the Borrower maintained by the Borrower with Bank of America at its office at Corporate Support Center #5693, Concord, CA 94520, Account No. 00502-15249, ABA No. 121000358. "Borrower's Form 10-K" has the meaning specified in Section 4.01(e). "Borrowing" means a Revolving Borrowing or a Swing Line Borrowing. "Business Day" means a day of the year on which banks are not required or authorized by law to close in Los Angeles, California or Dallas, Texas and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "Capital Expenditures" means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including that portion of Capitalized Leases which is capitalized on a Consolidated balance sheet of the Borrower and its Subsidiaries) that in conformity with GAAP would otherwise be classified as capital expenditures; provided, however, that Capital Expenditures shall not include expenditures in connection with any Permitted Sale-Leaseback Repurchase. "Capitalized Leases" has the meaning specified in clause (e) of the definition of Debt. "Cash Equivalents" means any of the following, to the extent owned by the Borrower free and clear of all Liens and having a maturity of not greater than 360 days from the date of issuance thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full 3 faith and credit of the Government of the United States, (b) insured certificates of deposit or bankers' acceptances of or time deposits with any commercial bank that (i) is a Lender or a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c), (iii) is organized under the laws of the United States or any State thereof and (iv) has combined capital and surplus of at least $500 million, (c) commercial paper (other than commercial paper issued by or on behalf of the Borrower or any of its Affiliates) issued by any corporation organized under the laws of any State of the United States (i) maturing no more than one year from the date of acquisition thereof and, at the time of acquisition, rated at least "Prime-1" (or the then equivalent grade) by Moody's Investors Services or "A-1" (or the then equivalent grade) by Standard & Poor's Ratings Group, or (ii) maturing not more than 90 days from the date of acquisition thereof and, at the time of acquisition, rated at least "Prime-2" (or the then equivalent grade) by Moody's Investors Services or "A-2" (or the then equivalent grade) by Standard & Poor's Ratings Group, and (d) money market accounts maintained with any commercial bank satisfying the criteria set forth in clause (b) above and (e) money market funds organized under the laws of the United States or any State thereof that invest solely in (X) any of the types of investments permitted under clauses (a) and (b) above, (Y) commercial paper maturing no more than one year from the date of acquisition thereof and, at the time of acquisition, rated at least "Prime-1" (or the then equivalent grade) by Moody's Investors Services or "A-1" (or the then equivalent grade) by Standard & Poor's Ratings Group, or (Z) any combination of the types of investments set forth in items (X) and (Y) of this clause (e). "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended or supplemented from time to time, and the regulations promulgated pursuant thereto. "Change of Control" means that either of the following events have occurred: (i) any Person or Group becomes the beneficial owner of 50% or more of the equity interests of the Borrower, on a fully diluted basis, or (ii) any Person or Group acquires the voting power necessary to elect a majority of the board of directors of the Borrower, or (iii) a "Change in Control" as defined in the indenture relating to the senior subordinated notes of the Borrower described in clause (A) of the definition of "Permitted Subordinated Debt." "Closing Date" means the date on which each of the conditions in Section 4.01 is satisfied or waived. "Collateral" means all "Collateral" referred to in the Collateral Documents and all other property that is subject to any Lien in favor of the Agent, the Lenders or the Issuing Bank. "Collateral Documents" means the Security Agreement, the Mortgages and any Additional Mortgages. "Collateral Release Date" has the meaning specified in Section 9.01(b). 4 "Collateral Release Test" means one or more of the following events: (i) the senior unsecured Debt of the Borrower shall be rated at least "Baa3" (or the then equivalent grade) by Moody's Investors Services, or (ii) the senior unsecured Debt of the Borrower shall be rated at least "BBB-" (or the then equivalent grade) by Standard & Poor's Ratings Group, or (iii) the Total Funded Debt to EBITDA Ratio shall be less than or equal to 2.00:1.00 as of the end of any two consecutive fiscal quarters; provided that, in each case, as of the date of such event, no Default or Event of Default shall have occurred and be continuing. "Commitment" means a Revolving Commitment or a Swing Line Commitment. "Commitment Fee Percentage" means a percentage per annum determined by reference to the Total Funded Debt to EBITDA Ratio as set forth below: Total Funded Debt Commitment Fee to EBITDA Ratio Percentage ------------------ -------------- less than 1:75:1.0 0.150% 1.75:1.0 or greater, but less 0.200% than 2.25:1.0 2.25:1.0 or greater, but less 0.250% than 3.00:1.0 3.00:1.0 or greater, but less 0.325% than 3.50:1.0 3.50:1.0 or greater 0.400% provided, however, that, notwithstanding the foregoing, for purposes of determining the Commitment Fee Percentage, the Total Funded Debt to EBITDA Ratio shall be deemed to be greater than or equal to 3.50 to 1.0 at all times when a Default has occurred and is continuing based on the Borrower's failure to deliver any financial statement or compliance certificate in the form required within five days after the date required for delivery thereof pursuant to Sections 6.03(b) or 6.03(c), as applicable. For purposes of this Agreement, any change in the Commitment Fee Percentage based on a change in the Total Funded Debt to EBITDA Ratio shall be effective three Business Days after the date of receipt by the Agent of the financial statements and compliance certificate required by Sections 6.03(b) and 6.03(c), as applicable, reflecting such change. "Confidential Information" means information that the Borrower furnishes to the Agent or any Lender pursuant to this Agreement, the Loan Documents and the transactions contemplated hereunder and thereunder, but does not include any such information that is or becomes generally available to the public other than as a result of a breach by the Agent or any Lender of its obligations hereunder or that is or becomes available to the Agent or such Lender from a source other than the Borrower. "Consolidated" refers to the consolidation of accounts in accordance with GAAP. 5 "Consolidated Net Income" means, for any period, the net earnings (or loss) after taxes of the Borrower and its Subsidiaries on a Consolidated basis determined for such period in conformity with GAAP. "Consolidated Net Worth" means the excess of (i) the total assets of the Borrower and its Subsidiaries determined on a Consolidated basis in accordance with GAAP, over (ii) all liabilities of the Borrower and its Subsidiaries determined on a Consolidated basis in accordance with GAAP. "Conversion", "Convert" and "Converted" each refer to a conversion of Advances of one Interest Type into Advances of the other Interest Type pursuant to Section 2.06. "CRC-I" means CRC-I Limited Partnership, a Massachusetts limited partnership. "CRC-II" means CRC-II Limited Partnership, a Massachusetts limited partnership. "CRC Excluded Debt" means (a) any Debt existing on the Closing Date of FM 1993A Corp., a Delaware corporation, CRC-I, CRC-II, FM 1997 Limited Partnership, a Delaware limited partnership, and FM 1997 Corp., a Delaware corporation, and (b) any Debt referred to in clause (a) above with respect to which any Excluded Subsidiary becomes an obligor or a co-obligor; provided, that the aggregate principal amount for all such Debt outstanding at any time shall not exceed $70,000,000; provided, further, that in determining the aggregate amount of CRC Excluded Debt outstanding for purposes of this definition, any such Debt with respect to which one or more of FM 1993A Corp., CRC-I and CRC-II are co-obligors shall be included only once with respect to such determination. "CRC Leases" means (a) the Master Lease between CRC-I and the Borrower, dated as of December 15, 1993, as amended and supplemented from time to time to the Closing Date, and (b) the Master Lease between CRC-II and the Borrower, dated as of December 15, 1993, as amended and supplemented from time to time to the Closing Date. "CRC Notes" means the 9.75% Senior Secured Notes Due November 1, 2003 issued by FM 1993A Corp., a Delaware corporation. "Currency Hedging Agreements" means currency swap agreements, currency future or option contracts and other similar agreements. "Debt" of any Person means without duplication, (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than payables to trade creditors and service providers incurred in the ordinary course of such Person's business and not overdue by more than 60 days (unless being disputed in good faith)), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default 6 are limited to repossession or sale of such property), (e) (i) all Obligations of such Person as lessee under the CRC Leases, and (ii) all Obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases including, without limitation, the CRC Leases ("Capitalized Leases"), (f) all Obligations, contingent or otherwise, of such Person under letter of credit facilities, banker's acceptance facilities or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock of or other ownership or profit interest in such Person or any other Person or any warrants, rights or options to acquire such capital stock, valued, in the case of Redeemable Preferred Stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends (other than Obligations to pay dividends upon and after declaration of dividends to the extent such dividends are permitted under Section 6.02(g)), (h) all Obligations of such Person in respect of Hedge Agreements, (i) all Debt of others referred to in clauses (a) through (h) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (j) all Debt referred to in clauses (a) through (h) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt; provided, however, that, for purposes of the definition of Debt, the Debt of Borrower and its Subsidiaries shall not include any CRC Excluded Debt. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Default Rate" has the meaning specified in Section 2.06(d). "Disclosed Litigation" has the meaning specified in Section 4.01(e). "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "EBITDA" means, for any period, (i) net income (or net loss) minus any non-recurring or extraordinary gains plus (ii) to the extent deducted in determining such net income (or net loss), the sum of (a) interest expense, (b) income tax expense, (c) depreciation expense, (d) amortization expense, and (e) non-recurring or extraordinary losses, in each case determined in accordance with GAAP for such period. 7 "Eligible Assignee" means (a) any Lender Party and any Affiliate of any Lender Party, and (b) any commercial bank, savings and loan association, savings bank, finance company, insurance company, mutual fund or other financial institution, fund or investor which has been approved in writing (or, in the case of the Borrower, deemed approved as provided below) by the Borrower and the Agent as an Eligible Assignee for purposes of this Agreement, provided that in each such case such approval shall not be unreasonably withheld, and provided, further, that if (i) the Borrower is requested in writing at any time to approve any Person as an Eligible Assignee hereunder and the Agent has not received written notice from the Borrower, within five Business Days after receipt by the Borrower of such request, that the Borrower does not approve such Person as an Eligible Assignee, the Borrower shall be deemed to have approved such Person as an Eligible Assignee, and (ii) such approval of the Borrower shall not be required if an Event of Default has occurred and is continuing. "Environmental Action" means any administrative, regulatory or judicial action, suit, demand, demand letter, claim, notice of non-compliance or violation, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law or any Environmental Permit including, without limitation, (a) any claim by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law and (b) any claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" means any federal, state or local law, rule, regulation, order, writ, judgment, injunction, decree, determination or award and any and all common law requirements, rules and bases of liability relating to the environment, health, safety or Hazardous Materials, including, without limitation, CERCLA, the Resource Conservation and Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act, the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Occupational Safety and Health Act. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" of any Person means any other Person that for purposes of Title IV of ERISA is a member of such Person's controlled group, or under common control with such Person, within the meaning of Section 414 of the Internal Revenue Code. "ERISA Event" with respect to any Person means (a) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan of such Person or any of its ERISA Affiliates unless the 30-day notice requirement with respect to such event has been waived by the PBGC; (b) the provision by the administrator of any Plan of such Person or any of its ERISA Affiliates of a notice of intent to terminate such Plan, pursuant to Section 8 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (c) the cessation of operations at a facility of such Person or any of its ERISA Affiliates in the circumstances described in Section 4062(e) of ERISA; (d) the withdrawal by such Person or any of its ERISA Affiliates from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (e) the failure by such Person or any of its ERISA Affiliates to make a payment to a Plan required under Section 302(f)(1) of ERISA; (f) the adoption of an amendment to a Plan of such Person or any of its ERISA Affiliates requiring the provision of security to such Plan, pursuant to Section 307 of ERISA; or (g) the institution by the PBGC of proceedings to terminate a Plan of such Person or any of its ERISA Affiliates, pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that could constitute grounds for the termination of, or the appointment of a trustee to administer, such Plan. "Eurocurrency Liabilities" has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "Eurodollar Rate" means, for any Eurodollar Rate Advance for any Interest Period therefor, an interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the rate per annum obtained by dividing (a) the rate per annum appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If for any reason the rate described in the foregoing clause (a) is not available at the time of determination of the Eurodollar Rate for any Eurodollar Rate Advances for any Interest Period, the term "Eurodollar Rate" shall mean, for any such Eurodollar Rate Advances for any such Interest Period therefor, an interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the rate per annum obtained by dividing (i) the rate per annum appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period (provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates) by (ii) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. "Eurodollar Rate Advance" means an Advance that bears interest as provided in Section 2.06(b). 9 "Eurodollar Rate Reserve Percentage" means, for any Interest Period for any Eurodollar Rate Advance, the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 7.01. "Excluded Asset Sale" means one or more of the following: (i) the sale of inventory, equipment and other goods in the ordinary course of business of the Borrower and its Subsidiaries; (ii) the sale of inventory, equipment, other goods and other assets to franchisees of the Borrower in the ordinary course of business of the Borrower and its Subsidiaries and consistent with past practice of the Borrower excluding properties listed on Part I of Schedule 4.01(j); (iii) the sale of any property or assets, excluding properties listed on Part I of Schedule 4.01(j), pursuant to a Permitted Sale-Leaseback Transaction; (iv) the sale, lease, transfer or disposal of any asset or assets by the Borrower or any of its wholly-owned Subsidiaries to the Borrower or any of its wholly-owned Solvent Subsidiaries (other than an Excluded Subsidiary or an Inactive Subsidiary); (v) the sale or other disposition of obsolete or worn out equipment or other assets in the ordinary course of business of the Borrower and its Subsidiaries; (vi) the sale, lease, transfer or disposal of properties listed on Schedule 1.01(b), as amended from time to time in accordance herewith; (vii) the sale, lease, transfer or disposal of any property listed on Part I of Schedule 4.01(j); provided, however, that, at all times prior to the Collateral Release Date, such sale, lease, transfer or disposal of properties shall constitute an Excluded Asset Sale if and only if the Borrower shall prior to such sale add to Part I of Schedule 4.01(j) an equivalent number of sites, the real estate of each having a value not less than that of the property for which it is being substituted and the Agent shall have received prior to or contemporaneously with such sale (a) evidence satisfactory to the Agent that deeds of trust, trust deeds and/or mortgages have been or will be contemporaneously duly recorded in all filing or recording offices that the Agent may deem necessary or desirable in order to create a valid first and subsisting Lien on the property described therein in favor of the Agent for the benefit of the Lender Parties and that all filing and recording taxes and fees have been or will be contemporaneously paid, and (b) revised versions of Schedule 1.01(b) and Part I of Schedule 4.01(j), reflecting such deletions and additions and marked to show the date of such revisions; (viii) the sale, lease, transfer or disposal of assets having a fair market value not exceeding $5,000,000 in the aggregate for the Borrower and its Subsidiaries in any fiscal year of the Borrower; provided, however, that for purposes of clause (viii) no sale, lease, transfer or disposal of assets having a fair market value of less than $100,000 shall be included in any aggregation of sales, leases, transfers and disposals thereunder; or (ix) the sale or other disposition to a franchisee of the Borrower of (a) any restaurant that has been acquired by the Borrower from a franchisee of the Borrower or (b) any other restaurant owned or leased by the Borrower, provided that in each fiscal year of the Borrower the aggregate value of such restaurants of the Borrower sold or otherwise disposed of pursuant to this clause (ix) during such fiscal year does not exceed the aggregate value of restaurants acquired by the Borrower from its franchisees during such fiscal year. 10 "Excluded Subsidiaries" means (a) FM 1997 Limited Partnership, a Delaware limited partnership, (b) FM 1997 Corp., a Delaware corporation and (c) any other special purpose Subsidiary of the Borrower created or to be created solely for (i) the purpose of such Subsidiary's purchase of estates for years from CRC-I or CRC-II and (ii) purposes ancillary thereto; provided, that such estates for years constitute direct or indirect security for the CRC Notes. "Existing Credit Agreement" means that certain Amended and Restated Revolving Credit Agreement, dated as of March 15, 1996, among the Borrower, the banks named therein, Credit Lyonnais New York Branch, as agent, collateral agent and swing line bank, and Union Bank, as issuing bank, as amended, supplemented or otherwise modified to the date hereof. "Existing Letters of Credit" means the letters of credit described on Schedule 1.01(a) issued under the Existing Credit Agreement. "Existing Senior Note Indenture" means that certain Indenture, dated as of March 1, 1992, between the Borrower and the trustee named therein, as amended by First Supplemental Indenture, dated as of July 28, 1997, pursuant to which the Existing Senior Notes were issued. "Existing Senior Notes" means the 9.25% Senior Notes of the Borrower Due 1999, issued pursuant to the Existing Senior Note Indenture. "Existing Senior Subordinated Note Indenture" means that certain Indenture, dated as of March 1, 1992, between the Borrower and the trustee named therein, pursuant to which the Existing Senior Subordinated Notes were issued. "Existing Senior Subordinated Notes" means the 9.75% Senior Subordinated Notes of the Borrower Due 2002, issued pursuant to the Existing Senior Subordinated Note Indenture. "Existing Warrants" means the warrants to purchase not more than 100,000 shares of the Borrower's common stock issued and outstanding on the Closing Date under that certain Warrant Purchase Agreement, dated as of December 8, 1988. "Facility" means the Revolving Facility, the Letter of Credit Facility or the Swing Line Facility. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. 11 "Foreign Subsidiary" means any "controlled foreign corporation" within the meaning of Section 957(a) of the Internal Revenue Code as to which the Borrower or any of its Subsidiaries is a "United States shareholder" as defined in Section 951(b) of the Internal Revenue Code. "Funded Debt" of any Person means, without duplication, (A) Debt of such Person referred to in clauses (a), (c) and (e) of the definition of "Debt", and (B) to the extent that the underlying guaranteed Debt would be Debt of the types referred to in clause (A) of this definition, Debt of such Person referred to in clause (i) of the definition of "Debt". "GAAP" has the meaning specified in Section 1.03. "Group" has the meaning specified in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as in effect on the date hereof. "Guarantor" means each present and future direct or indirect Subsidiary of the Borrower, other than the Excluded Subsidiaries and any Foreign Subsidiary. "Guaranty" has the meaning specified in Section 4.01(h)(ix), and includes any amendment to Guaranty delivered hereunder. "Hazardous Materials" means (a) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and radon gas, (b) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any Environmental Law and (c) any other substance exposure to which is regulated under any Environmental Law. "Headquarters Property" means the real property and improvements located at 9330 Balboa Avenue, San Diego, California. "Hedge Agreements" means Interest Rate Contracts and Currency Hedging Agreements. "Inactive Foreign Subsidiaries" means Foodmaker Franchising Overseas Limited, a British Virgin Islands corporation, and Foodmaker International (Hong Kong), Ltd., a Hong Kong corporation. "Inactive Subsidiaries" means CP Distribution Co., a Delaware corporation, CP Wholesale Co., a Delaware corporation, Foodmaker International Franchising, a Delaware corporation, Jack In The Box, Inc., a New Jersey corporation, and the Inactive Foreign Subsidiaries. 12 "Indemnified Party" has the meaning specified in Section 9.04(b). "Information Memorandum" means the information memorandum dated March 1998 used by the Agent in connection with the syndication of the Commitments. "Initial Lenders" has the meaning specified in the recital of parties to this Agreement. "Insufficiency" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, computed using assumptions required by the PBGC. "Interest Period" has the meaning specified in Section 2.06(b). "Interest Rate Contracts" means interest rate swap, cap or collar agreements, interest rate future or option contracts and other similar agreements. "Interest Type" refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Investment" in any Person means any loan or advance to such Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities of such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any arrangement pursuant to which the investor incurs Debt of the types referred to in clauses (i) and (j) of the definition of "Debt" in respect of such Person; provided, however, that the term "Investment" shall not include any of (a) advances to customers, suppliers, franchisees or contractors in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Borrower or its Subsidiaries, (b) any obligations of the Borrower or its Subsidiaries with respect to any CRC Excluded Debt or (c) any Permitted Refinancing. "Issue" means, with respect to any Letter of Credit, either issue such Letter of Credit, extend the expiry of such Letter of Credit (other than any such extension occurring pursuant to the terms of such Letter of Credit), renew such Letter of Credit (other than any such renewal occurring pursuant to the terms of such Letter of Credit), or increase the amount of such Letter of Credit, and the terms "Issued", "Issuing", and "Issuance" shall have corresponding meanings. "Issuing Bank" means the L/C Bank and any other Revolving Lender that is a commercial bank, acting through a domestic branch, as issuer of a Letter of Credit. 13 "Lender Party" means any Lender or any Issuing Bank. "Lenders" means the Initial Lenders and each Eligible Assignee that shall become a party hereto pursuant to Section 9.07. "L/C Advance" means a payment made by an Issuing Bank under a Letter of Credit. "L/C Bank" means NationsBank in its capacity as an Issuing Bank. "L/C Cash Collateral Account" has the meaning specified in Section 7.02. "L/C Related Documents" has the meaning specified in Section 3.04(a). "L/C Sublimit" means $25,000,000 as such amount may be reduced pursuant to Section 2.04. "Letter of Credit" means any letter of credit issued hereunder. "Letter of Credit Agreement" has the meaning specified in Section 3.02(a). "Letter of Credit Facility" means the amount of Letters of Credit the Issuing Banks may elect to issue pursuant to Section 3.01. "Letter of Credit Obligations" means, as of any date of determination with respect to any Letter of Credit, the sum of (a) the then outstanding Available Amount of such Letter of Credit, and (b) the aggregate amount of the Unreimbursed Letter of Credit Liability thereunder. "Letter of Credit Subfacility" has the meaning specified in Section 3.01. "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means this Agreement, the Notes, the Guaranty, the Collateral Documents and each Letter of Credit Agreement. "Loan Parties" means the Borrower, the Guarantors and any other Subsidiary of the Borrower that is, from time to time, a party to a Loan Document (including pursuant to Section 6.01(l) hereof). "Margin Stock" has the meaning specified in Regulation U. 14 "Material Adverse Change" means any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or any Lender Party under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party. "Mortgage" has the meaning specified in Section 4.01(h)(viii). "Mortgage Policy" has the meaning specified in Section 4.01(h)(viii). "Multiemployer Plan" of any Person means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which such Person or any of its ERISA Affiliates is making or accruing an obligation to make contributions, or has within any of the preceding six plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" of any Person means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of such Person or any of its ERISA Affiliates and at least one Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Cash Proceeds" means, with respect to any sale, lease, transfer or other disposition of any asset or the sale or issuance of any Debt or capital stock, any securities convertible into or exchangeable for capital stock or any warrants, rights or options to acquire capital stock by any Person, the aggregate amount of cash received from time to time by or on behalf of such Person in connection with such transaction after deducting therefrom only (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal fees, finder's fees and other similar fees and commissions and (b) the amount of taxes payable in connection with or as a direct result of such transaction and (c) the amount of any Debt secured by a Lien on such asset that, by the terms of such transaction, is required to be repaid upon such disposition, in each case with respect to the foregoing clauses (a) and (c) to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid to a Person that is not an Affiliate and are properly attributable to such transaction or to the asset that is the subject thereof; provided, however, that Net Cash Proceeds shall not include any such cash received by or on behalf of such Person with respect to (i) the Existing Warrants or (ii) any securities convertible into or exchangeable for capital stock issued to any officer, director, employee or consultant of such Person or any warrants, rights or options to acquire capital stock issued to any officer, director, employee or consultant of such Person to the extent permitted under 6.02(g). "Note" means a Revolving Note or a Swing Line Note. 15 "Notice of Borrowing" means a notice in substantially the form of Exhibit B-1. "Notice of Issuance" means a notice in substantially the form of Exhibit C. "Notice of Swing Line Borrowing" means either (a) a notice substantially in the form of Exhibit B-2, or (b) notice by teletransmission or telephonic notice of the information required by Exhibit B-2. "Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 7.01(f). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party. "Other Taxes" has the meaning specified in Section 2.10(b). "PBGC" means the Pension Benefit Guaranty Corporation. "Permitted CRC Transaction" shall mean any transaction under which (i) the Borrower or any Excluded Subsidiary purchases from CRC-I, CRC-II or any Excluded Subsidiary (whether existing as of the Closing Date or formed after the Closing Date) some or all of the estates for years owned as of the Closing Date by any of CRC-I, CRC-II or any Excluded Subsidiary or (ii) the Borrower or any Excluded Subsidiary is or becomes a party to any CRC Lease (whether by assignment, novation or otherwise). "Permitted Encumbrances" means: (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as applicable, in conformity with GAAP; (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days or which are being contested in good faith by appropriate proceedings; (c) Liens, pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (d) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially 16 interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (e) attachment or judgment Liens not giving rise to a Default or Event of Default; and (f) leases or subleases granted to others not interfering with the ordinary conduct of business of the Borrower or any of its Subsidiaries. "Permitted Liens" means: (a) Permitted Encumbrances; (b) Liens in favor of a trustee in an indenture relating to the Borrower's public Debt to the extent such Liens secure customary compensation and reimbursement obligations of such trustee under such indenture; (c) Liens arising in connection with obligations under Capitalized Leases permitted hereunder, provided that no such Liens shall cover or extend to assets other than assets subject to such Capitalized Leases and the proceeds thereof; (d) any mortgage, encumbrance or other Lien upon, or security interest in, any property hereafter acquired by the Borrower or its Subsidiaries, created contemporaneously with such acquisition to secure or provide for the payment or financing of any part of the purchase price thereof, or the assumption of any Lien upon, or security interest in, any such property hereafter acquired existing at the time of such acquisition, or the acquisition of any such property subject to any Lien without the assumption thereof or any Permitted Refinancing thereof; provided, that (A) the Debt secured by any such Lien shall not exceed $5,000,000 individually or $15,000,000 in the aggregate in any fiscal year of the Borrower and (B) each such Lien shall attach only to the property so acquired and fixed improvements thereon; (e) existing Liens (not attaching to any Collateral) on properties of the Borrower or its Subsidiaries constituting direct or indirect security for the CRC Notes and existing Liens (not attaching to any Collateral) pursuant to the CRC Leases; (f) existing Liens (not attaching to any Collateral) with respect to sale- leaseback transactions consummated by the Borrower prior to the Closing Date; and (g) Liens existing on the date hereof described on Schedule 1.01(c) and other Liens existing on the date hereof securing Debt in an aggregate principal amount not to exceed $10,000,000 at any time outstanding. "Permitted Refinancing" shall mean any refinancing of existing Debt (other than the Existing Senior Notes) in which (a) the principal amount of Debt resulting from such refinancing does not exceed the sum of (i) the principal amount of Debt so refinanced plus (ii) customary fees and expenses incurred in connection with such refinancing, (b) the maturity of the Debt resulting from such refinancing does not occur sooner than the maturity of the Debt so refinanced, (c) (i) Debt ranking subordinate to the Advances and Letter of Credit Obligations is replaced with other subordinated Debt which constitutes Permitted Subordinated Debt, (ii) Debt ranking pari passu with the Advances and Letter of Credit Obligations is replaced with either subordinated Debt which constitutes Permitted Subordinated Debt or pari passu Debt and (iii) Debt secured by a Permitted Lien is replaced by Debt with no greater security than the Debt being replaced, and (d) the direct obligors therefor do not change. "Permitted Sale-Leaseback Repurchase" means any repurchase by the Borrower or any of its Subsidiaries of a restaurant formerly sold by the Borrower or any of its Subsidiaries to a third party and at such time leased back to the Borrower or such Subsidiary; provided, however, that if the restaurant subject thereto is not re-sold by the Borrower or any such Subsidiary to a third party within twenty-four (24) months of such repurchase then (a) such repurchase as of the end of such twenty-fourth (24th) month shall cease to 17 qualify as a Permitted Sale-Leaseback Repurchase and (b) the amount of such repurchase shall constitute a Capital Expenditure deemed to be made in its entirety on the last day of such twenty-four (24) month period. "Permitted Sale-Leaseback Transaction" means any sale and leaseback transaction with any Person providing for the leasing by the Borrower or any of its Subsidiaries of real or personal property which has been sold by the Borrower or such Subsidiary for fair value for cash consideration only to such Person in an aggregate amount of gross proceeds for all such sales in any period set forth below not to exceed the amount set forth below for such period: Fiscal Year Ending In Amount ----------- ------------ 1998 $90,000,000 1999 $100,000,000 2000 $120,000,000 2001 $150,000,000 2002 $150,000,000 2003 $150,000,000 "Permitted Subordinated Debt" means (A) senior subordinated notes of the Borrower due 2008 issued on terms and conditions substantially as set forth in the Offering Memorandum dated March 27, 1998 and in the draft indenture relating thereto delivered to the Lender Parties prior to the date hereof (with no changes to clause (i) of the second paragraph of Section 4.07(a) of such draft indenture), and (B) any other Debt of any Loan Party that (i) is subordinated to the Obligations of the Loan Parties under the Loan Documents on terms and conditions satisfactory to the Required Lenders, (ii) requires no scheduled principal payments prior to, and has a final maturity date at least 12 months after, the Termination Date, determined as of the date of incurrence, and (iii) otherwise contains terms and conditions reasonably satisfactory to the Required Lenders. "Person" means an individual, partnership, limited liability company, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Preferred Stock" means, with respect to any corporation, capital stock issued by such corporation that is entitled to a preference or priority over any other capital stock issued by such corporation upon any distribution of such corporation's assets, whether by dividend or upon liquidation. "Projections" means the Projected Financial Data and Assumptions contained in Section IX of the Information Memorandum. "Pro Rata Share" of any amount means, with respect to any Lender at any time, the product of (a) a fraction the numerator of which is such Lender's 18 Revolving Commitment (without giving effect to any termination thereof pursuant to Section 7.01) at such time and the denominator of which is the Revolving Facility (without giving effect to any termination of Commitments pursuant to Section 7.01) at such time times (b) such amount. "Redeemable" means, with respect to any capital stock, Debt or other right or Obligation, any such right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder. "Redemption Amount" means $125,000,000, which represents the amount payable by, or on behalf of, the Borrower in order to redeem, repurchase or repay 100% of the Borrower's Existing Senior Notes; provided that, for purposes of determining the Unused Revolving Commitment of each Revolving Lender, the Redemption Amount shall be reduced on each Redemption Deposit Date by an amount equal to the aggregate principal amount of Existing Senior Notes to be redeemed on the related Redemption Date (but only to the extent such aggregate principal amount is deposited with the trustee under, and in accordance with, the Existing Senior Note Indenture). "Redemption Date" means a date specified in a Redemption Notice as a date on which Existing Senior Notes are to be redeemed by the Borrower. "Redemption Deposit Date" means the last date on which the Redemption Amount or any portion thereof is required to be deposited by the Borrower with the trustee or paying agent under the Existing Senior Note Indenture pursuant to Section 3.04 of the Existing Senior Note Indenture in order to redeem Existing Senior Notes on any Redemption Date. "Redemption Notice" means a notice of redemption pursuant to which the Borrower (or the trustee under the Existing Senior Note Indenture on behalf of the Borrower) has given irrevocable notice (pursuant to Sections 3.03 and 3.05 of the Existing Senior Note Indenture) to the holders of the Existing Senior Notes that Existing Senior Notes are to be redeemed by the Borrower on the Redemption Date specified therein. "Register" has the meaning specified in Section 9.07(c). "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Lenders" means at any time Lender Parties owed or holding more than 50% of the sum of (a) the aggregate principal amount of the Advances outstanding at such time and (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, or, if no such principal amount and no Letters of Credit are outstanding at such time, Lenders holding more than 50% of the aggregate Commitments under all the Facilities at such time. For purposes of this definition, the Available Amount of each Letter of Credit and the aggregate principal amount of all outstanding Swing Line Advances shall be considered to be owed to the Revolving Lenders ratably in accordance with their respective Revolving Commitments. 19 "Revolving Advance" has the meaning specified in Section 2.01(a). "Revolving Borrowing" means a borrowing consisting of simultaneous Revolving Advances of the same Interest Type made by the Revolving Lenders. "Revolving Commitment" means, (i) with respect to any Revolving Lender listed on Schedule I, the amount set forth opposite such Lender's name on Schedule I under the caption "Revolving Commitment," (ii) with respect to any Revolving Lender not listed on Schedule I hereto, the amount set forth in the Assignment and Acceptance pursuant to which such Person became a Revolving Lender hereunder, or (iii) if any of such Lenders has entered into one or more Assignments and Acceptances, the amount set forth for such Lender in the Register maintained by the Agent pursuant to Section 9.07(c) as such Lender's "Revolving Commitment", in the case of each of the foregoing clauses (i), (ii) and (iii), as such amount may be reduced at or prior to such time pursuant to Section 2.04. "Revolving Commitment Termination Date" means March 30, 2003. "Revolving Facility" means, at any time, the aggregate amount of the Revolving Lenders' Revolving Commitments at such time. "Revolving Lender" means any Lender that has a Revolving Commitment. "Revolving Note" means a promissory note of the Borrower payable to the order of any Revolving Lender, in substantially the form of Exhibit D-1 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Advances made by such Lender. "Security Agreement" has the meaning specified in Section 4.01(h)(vii). "Single Employer Plan" of any Person means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of such Person or any of its ERISA Affiliates and no Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. 20 "Subsidiary" of any Person means any corporation, partnership, limited liability company, joint venture, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) (b) the interest in the capital or profits of such partnership, limited liability company or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Surviving Debt" has the meaning specified in Section 4.01(c). "Surviving Debt Agreement" means any agreement or instrument setting forth the terms and conditions of any Surviving Debt. "Swing Line Advance" means an advance by a Swing Line Lender to the Borrower pursuant to Section 2.01(b). "Swing Line Borrowing" means a borrowing consisting of simultaneous Swing Line Advances made by the Swing Line Lender. "Swing Line Commitment" means, with respect to the Swing Line Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Swing Line Commitment" or, if such Lender has entered into one or more Assignments and Acceptances with respect to the Swing Line Commitment, the amount set forth for the Swing Line Lender in the Register maintained by the Agent pursuant to Section 9.07(c) as such Lender's "Swing Line Commitment", in each case as such amount may be reduced at or prior to such time pursuant to Section 2.04. "Swing Line Facility" means, at any time, the aggregate amount of the Swing Line Lender's Swing Line Commitment at such time. "Swing Line Lender" means NationsBank and any assignee of the Swing Line Commitment which assumes such Swing Line Commitment in accordance with the terms of Section 9.07. "Taxes" has the meaning specified in Section 2.10(a). "Termination Date" means the earlier of March 31, 2003 and the date of termination in whole of the Revolving Commitments pursuant to Section 2.04 or 7.01. "Total Funded Debt to EBITDA Ratio" means the ratio of (i) Funded Debt of the Borrower and its Subsidiaries on a Consolidated basis, to (ii) Consolidated EBITDA of the Borrower and its Subsidiaries, in each case for the period of the then most recently ended period of four consecutive fiscal quarters of the Borrower. 21 "Unreimbursed Letter of Credit Liability" means, as of any date of determination with respect to any Letter of Credit, the aggregate amount of all L/C Advances which have been made by, and not reimbursed to, the Issuing Bank under such Letter of Credit. "Unused Revolving Commitment" means, with respect to any Revolving Lender at any time, (a) such Lender's Revolving Commitment at such time, minus (b) the sum of (i) the aggregate principal amount of all Revolving Advances of such Lender outstanding at such time, plus (ii) such Lender's Pro Rata Share of the aggregate Letter of Credit Obligations outstanding at such time, plus, (iii) such Lender's Pro Rata share of all Swing Line Advances outstanding at such time, plus (iv) such Lender's Pro Rata Share of the Redemption Amount in effect at such time. "Unused Swing Line Commitment" means, with respect to the Swing Line Lender at any time, the lesser of (i) the remainder of (a) such Lender's Swing Line Commitment at such time, minus (b) the aggregate principal amount of all Swing Line Advances made by such Lender and outstanding at such time, and (ii) the aggregate Unused Revolving Commitments at such time. "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. "Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA. "Withdrawal Liability" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. Section 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". Section 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 5.01(f) ("GAAP"). Section 1.04. Other Definitional Provisions. References to Sections and subsections shall be to Sections and subsections, respectively, of this Agreement unless otherwise specified. The term "including" means including without limitation. 22 ARTICLE II. AMOUNTS AND TERMS OF THE ADVANCES Section 2.01. The Advances. (a) Revolving Advances. Each Revolving Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a "Revolving Advance") to the Borrower from time to time on any Business Day during the period from the Closing Date until the Revolving Commitment Termination Date in an amount for each such Advance not to exceed such Lender's Unused Revolving Commitment on such Business Day after giving effect to any repayment of Swing Line Advances made or to be made with the proceeds thereof pursuant to a designation therefor set forth by the Borrower in a Notice of Borrowing for such Borrowing or pursuant to a Notice of Borrowing given by the Agent in accordance with Section 2.02(f). Each Revolving Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Revolving Advances made by the Lenders ratably according to their respective Revolving Commitments. Within the limits of each Revolving Lender's Unused Revolving Commitment in effect from time to time, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.05 and reborrow under this Section 2.01(a). (b) Swing Line Advances. The Swing Line Lender agrees, on the terms and conditions hereinafter set forth, to make advances (each a "Swing Line Advance") to the Borrower from time to time on any Business Day during the period from the Closing Date until the Termination Date in an amount not to exceed the Swing Line Lender's Unused Swing Line Commitment on such Business Day. Each Swing Line Borrowing shall consist of Base Rate Advances and shall be in an amount equal to $1,000,000 or an integral multiple of $500,000 in excess thereof. Immediately upon the making of each Swing Line Advance by the Swing Line Lender, the Swing Line Lender shall be deemed to have sold and transferred to each Lender, and each Lender shall be deemed to have purchased and received from the Swing Line Lender, in each case irrevocably and without any further action by any party, an undivided interest and participation in such Swing Line Advance and the Obligations of the Borrower under this Agreement in respect thereof in an amount equal to such Lender's Pro Rata Share of such Swing Line Advance; provided, however, that (i) no Lender shall be required to fund its participation in any such Swing Line Advance until demand therefor is made by the Agent pursuant to Section 2.02(f)(ii) hereof, and (ii) no Lender shall be entitled to share in any payments of principal or interest in respect of its participation in any such Swing Line Advance except to the extent set forth in Section 2.02(f)(ii) hereof with respect to any such participation which has been funded by such Lender as provided therein. Within the limits of the Swing Line Lender's Unused Swing Line Commitment in effect from time to time, the Borrower may borrow under this Section 2.01(b), prepay pursuant to Section 2.05 and reborrow under this Section 2.01(b). Section 2.02. Making the Advances.(a) Initial Borrowings. The initial Borrowings hereunder shall be made on the Closing Date and shall be made on notice received by the Agent from the Borrower (pursuant to a Notice of Borrowing) not later than 12:00 noon (Dallas, Texas time) (or such later time as the Agent may agree) on the Business Day immediately preceding the Closing 23 Date. Such Notice of Borrowing shall be irrevocable upon receipt by the Agent. Each Lender shall, before 12:00 noon (Dallas, Texas time) on the Closing Date, make available for the account of its Applicable Lending Office to the Agent such Lender's ratable share of such Borrowings by depositing same day funds in the Agent's Account. (b) Subsequent Revolving Borrowings. Each Revolving Borrowing occurring after the Closing Date shall be made on notice received by the Agent from the Borrower (pursuant to a Notice of Borrowing) not later than 12:00 noon. (Dallas, Texas time) (a) on the Business Day prior to the date of such Borrowing if such Borrowing consists of Base Rate Advances, and (b) on the third Business Day prior to the date of such Borrowing if such Borrowing consists of Eurodollar Rate Advances. Each such Notice of Borrowing shall be irrevocable upon receipt by the Agent and, in the case of any Notice of Borrowing for Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified by such Notice of Borrowing the applicable conditions set forth in this Section 2.02 or Article IV, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as a part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (c) Swing Line Borrowings. Each Swing Line Borrowing shall be made on notice received by the Agent from the Borrower (pursuant to a Notice of Swing Line Borrowing) not later than 1:30 p.m. (Dallas, Texas time) on the date of such Borrowing. Each such Notice of Swing Line Borrowing shall be irrevocable upon receipt by the Agent. (d) Advances by Lenders. If the Agent receives a Notice of Borrowing, or a Notice of Swing Line Borrowing (or if the Agent gives a Notice of Borrowing pursuant to Section 2.02(f)) the Agent shall promptly on the Business Day prior to the date of such Borrowing or, if such Borrowing consists of Eurodollar Rate Advances, the third Business Day prior to the date of such Borrowing) give each Lender notice of such Notice of Borrowing or Notice of Swing Line Borrowing. Each Lender shall (i) before 12:00 noon (Dallas, Texas time) on the date of such Borrowing in the case of any Revolving Borrowing to be made on such date, or (ii) before 4:00 p.m. (Dallas, Texas time) on the date of such Borrowing in the case of a Swing Line Borrowing, make available for the account of its Applicable Lending Office to the Agent such Lender's ratable portion of such Borrowing by depositing same day funds in the Agent's Account. Unless the Agent shall have received written notice from a Revolving Lender prior to the date of any Revolving Borrowing hereunder that such Lender will not make available to the Agent such Lender's ratable portion of such Borrowing, the Agent may assume that such Lender has made such ratable portion available to the Agent on the date of such Borrowing in accordance with the terms hereof and the Agent may, in reliance upon such assumption, but shall not be required to, make available to or for the account of the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent and the Agent makes such ratable portion available to the Borrower, such Lender and the Borrower, without prejudice to any rights or remedies that the Borrower may have against such Lender, severally agree to repay to the Agent forthwith on demand such corresponding amount 24 together with interest thereon, for each day from the date such amount is made available to or for the account of the Borrower until the date such amount is repaid to the Agent, at (A) in the case of the Borrower, the interest rate applicable at the time to the Advances comprising such Borrowing, and (B) in the case of such Lender, the Federal Funds Rate. If such Lender shall pay to the Agent such amount, such amount so paid shall constitute such Lender's Advance as part of the relevant Borrowing for purposes of this Agreement and, to the extent that the Borrower previously paid such amount to the Agent, the Agent will refund to the Borrower such amount so paid, but without interest. (e) Disbursement of Advances. Upon fulfillment of the applicable conditions set forth in Article IV (which fulfillment the Agent may assume in the absence of actual knowledge, or notice received from the Borrower or the Required Lenders, to the contrary), the Agent will make funds for any Borrowing available to the Borrower by crediting the Borrower's Account (or to such other accounts as may be designated from time to time in writing by the Borrower to the Agent and approved by the Agent in writing (such approval not to be unreasonably withheld)), subject to the Agent's receipt of funds from the Lenders, and provided that the Agent shall first make a portion of such funds equal to any outstanding L/C Advance under any Letter of Credit, and any interest accrued and unpaid thereon to and as of such date, available to the applicable Issuing Bank for reimbursement of such L/C Advance and payment of such interest. (f) Settlement of Swing Line Advances. (i) The Agent may, and upon request by the Swing Line Lender the Agent shall, at any time and from time to time, give to the Revolving Lenders and the Borrower a Notice of Borrowing for a Borrowing of Revolving Advances which are Base Rate Advances on behalf of the Borrower, in each case in an amount equal to the aggregate amount of Swing Line Advances then owing by the Borrower (or such lesser amount as the Agent or the Swing Line Lender shall specify), and the proceeds of which are to be used to prepay such Swing Line Advances on the date of such Borrowing. Upon receipt of any such Notice of Borrowing, each Lender (other than the Swing Line Lender) shall (subject to Section 2.02(f)(iv)), on or before the time specified by the Agent (which in no event shall be earlier than 11:00 a.m. nor later than 4:00 p.m. (Dallas, Texas time) on the Business Day following the date on which such Notice of Borrowing is given), make available for the account of its Applicable Lending Office to the Agent such Lender's Pro Rata Share of such Borrowing by depositing same day funds in the Agent's Account. Notwithstanding any contrary provision of this Agreement, (A) the proceeds of any such Borrowing shall be distributed by the Agent to the Swing Line Lender (subject to Section 2.02(f)(iv)) as a prepayment of all or a portion of the then outstanding Swing Line Advances, and (B) the outstanding Swing Line Advances of the Swing Line Lender, in an amount equal to the Swing Line Lender's Pro Rata Share of the aggregate amount of the Swing Line Advances to be prepaid on such date, shall be deemed to be prepaid with the proceeds of a Revolving Advance made by the Swing Line Lender and such portion of the Swing Line Advances deemed to be so prepaid shall no longer be outstanding as Swing Line Advances but shall be outstanding as Revolving Advances made by the Swing Line Lender. 25 (ii) In addition to the right of the Swing Line Lender to require a Borrowing under Section 2.02(f)(i), the Swing Line Lender may at any time and from time to time request (by notice to the Agent and the Borrower) the Agent to, and upon receipt of such request the Agent shall, make demand on each Lender for payment of its participation in each Swing Line Advance then outstanding, and upon receipt of any such demand each Lender shall (subject to Section 2.02(f)(iv)) promptly fund such participation by paying to the Agent, for the ratable account of the Swing Line Lender (subject to Section 2.02(f)(iv)), the amount of such participation in same day funds. With respect to each such participation in the Swing Line Advance which is funded by any Lender, the Swing Line Lender shall promptly pay to the Agent, and the Agent shall promptly pay to such Lender, in lawful money of the United States and in the kind of funds so received, an amount equal to such Lender's ratable share of all payments received by the Swing Line Lender in respect of (A) the principal of such Swing Line Advance, and (B) interest on such Swing Line Advance for the period from and after the date on which such participation was funded. If any payment received by the Swing Line Lender on account of the Swing Line Advance and distributed to any Lender as a participant under the preceding sentence is thereafter recovered from the Swing Line Lender in connection with any bankruptcy or insolvency proceeding relating to the Borrower or otherwise, each Lender which received such distribution shall, upon demand by the Swing Line Lender through the Agent, repay to the Swing Line Lender such Lender's ratable share of the amount so recovered together with such Lender's ratable share (according to the proportion of (1) the amount of such Lender's required prepayment to (2) the total amount so recovered) of any interest or other amount paid or payable by the Swing Line Lender in respect of the total amount so recovered. The Borrower agrees that any Lender purchasing a participation in the Swing Line Advance from the Swing Line Lender hereunder may, to the fullest extent permitted by law, exercise all its rights of payment with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. (iii) Anything contained herein to the contrary notwithstanding (but subject to Section 2.02(f)(iv) below), the obligation of each Lender to make any Revolving Advance pursuant to Section 2.02(f)(i) or to fund its participation in any Swing Line Advances pursuant to Section 2.02(f)(ii) shall be absolute and unconditional and shall not be subject to any conditions set forth in Article IV hereof or otherwise affected by any circumstance including, without limitation, (A) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender or any Loan Party; (B) the occurrence or continuance of a Default or Event of Default; (C) any adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party; (D) any breach of any Loan Document by the Borrower, any other Loan Party or any other Lender Party; or (E) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (iv) Notwithstanding Section 2.02(f)(iii) above, if at the time that any Lender is required to make any Revolving Advance or fund any participation pursuant to Section 2.02(f)(i) or (ii) above, the Borrower would not otherwise be entitled to obtain a Borrowing as a result of the failure of any of the conditions set forth in Article IV hereof, the obligation of each Lender to make any such Revolving Advance or to fund any such participation with respect to any 26 Swing Line Advance owing to the Swing Line Lender shall be subject to the condition that at least one of the following is true: (A) the Swing Line Lender shall have believed in good faith that all conditions under Article IV to the making of such Swing Line Advance were satisfied at the time such Swing Line Advance was made, or (B) such Lender shall have had actual knowledge, by receipt of the statements required pursuant to Section 6.03 or otherwise, that any such condition had not been satisfied and failed to notify the Swing Line Lender and the Agent in writing that it had no obligation to make Revolving Advances until such condition was satisfied (which notice shall be effective as of the date of receipt by the Swing Line Lender and the Agent), or (C) the satisfaction of any such condition not satisfied shall have been waived by the Required Lenders prior to or at the time such Swing Line Advance was made. Anything contained in this Section 2.02(f) to the contrary notwithstanding, the amount to be distributed by the Agent to the Swing Line Lender under this Section 2.02(f) shall be reduced to the extent that any Lender shall refuse to fund its portion of any Revolving Advance or participation with respect to the Swing Line Lender as a result of the failure of the conditions set forth above. (v) The Borrower irrevocably authorizes (A) the Agent to give any Notice of Borrowing pursuant to Section 2.02(f)(i) (with a copy to the Borrower), (B) the Lenders to make the Revolving Advances pursuant to such Notice of Borrowing, and (C) the Agent to distribute the proceeds thereof as provided herein. (g) Nature of Lenders' Obligations. The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. Section 2.03. Repayment. (a) Revolving Advances. The Borrower shall repay to each Lender (in accordance with the provisions of Section 2.09(a)) on the Revolving Commitment Termination Date the aggregate principal amount of all Revolving Advances owing to such Lender outstanding on the Revolving Commitment Termination Date. (b) L/C Advances. The Borrower shall repay each L/C Advance as provided in Section 3.03. (c) Swing Line Advances. The Borrower shall repay to the Swing Line Lender (in accordance with the provisions of Section 2.09(a)) on the Termination Date the aggregate principal amount of all Swing Line Advances owing to such Lender outstanding on the Termination Date. Section 2.04. Reduction of the Revolving Commitments, Swing Line Commitment and Letter of Credit Subfacility. (a) Optional Reductions. The Borrower shall have the right, upon at least three Business Days' notice to the Agent, to terminate in whole or reduce 27 ratably in part the unused portions of the respective Revolving Commitments of the Revolving Lenders; provided, however, that (i) each partial reduction shall be in an amount of $5,000,000 or any multiple of $1,000,000 in excess thereof, and (ii) the aggregate amount of the Revolving Commitments shall not be reduced pursuant to this Section 2.04 to an amount less than the sum of (A) the aggregate principal amount of all Revolving Advances then outstanding, (B) the aggregate amount of all Letter of Credit Obligations then outstanding, and (C) the aggregate principal amount of all Swing Line Advances then outstanding. (b) Mandatory Reductions. The Revolving Facility shall be automatically and permanently reduced on a pro rata basis on each date on which prepayment thereof is required to be made (or would be required to be made if any Revolving Advances were then outstanding) pursuant to Section 2.05(b)(iii) in an amount equal to the Net Cash Proceeds received by the Borrower or any of its Subsidiaries in the transaction giving rise to such required prepayment. Each such reduction of the Revolving Facility shall be made ratably among the Revolving Lenders in accordance with their Revolving Commitments. (c) Reduction of Swing Line Commitment. The Swing Line Commitment of the Swing Line Lender shall be (i) terminated automatically and simultaneously upon any termination in whole of the Revolving Commitments, and (ii) reduced by an amount equal to the amount by which, as a result of any partial reduction of the Revolving Commitments of the Lenders, the aggregate Revolving Commitments of the Lenders are reduced below $5,000,000. (d) Reduction of the Letter of Credit Subfacility. The Letter of Credit Subfacility shall be (i) terminated automatically and simultaneously upon any termination in whole of the Revolving Commitments, and (ii) reduced by an amount equal to the amount by which, as a result of any partial reduction of the Revolving Commitments of the Lenders, the aggregate Revolving Commitments of the Lenders are reduced below $25,000,000 (any such reduction of the Letter of Credit Subfacility to be effective automatically and simultaneously with any such reduction of the Revolving Commitments). Section 2.05. Prepayments (a) Optional Prepayments. The Borrower may, upon prior notice to the Agent (which may be given on the date of prepayment in the case of prepayment of Swing Line Advances, and which shall be given at least one Business Day in advance in the case of prepayment of Revolving Advances which consist of Base Rate Advances and three Business Days in advance in the case of prepayment of Revolving Advances which are Eurodollar Rate Advances, stating the proposed date and aggregate principal amount of the prepayment and Interest Type of Advances to be prepaid (and if such notice is given the Borrower shall), prepay in whole or in part the outstanding principal of Advances of such Interest Type, together with in the case of any prepayment of Eurodollar Rate Advances, interest thereon to the date of such prepayment on the principal amounts prepaid (plus, in the case of prepayment of Eurodollar Rate Advances prior to the end of the applicable Interest Period, any additional amount for which the Borrower shall be obligated pursuant to Section 9.04(c)); provided, however, that each partial prepayment shall be in an aggregate principal amount of (i) in the case of any 28 Eurodollar Rate Advance, $5,000,000 or an integral multiple of $1,000,000 in excess thereof, and (ii) in the case of any Base Rate Advance, $1,000,000 or an integral multiple of $1,000,000 in excess thereof. (b) Mandatory Prepayments (i) Excess Advances. If, at any time, the then outstanding aggregate principal amount of all Revolving Advances shall exceed the aggregate amount of the Revolving Commitments of the Lenders at such time minus the sum of (i) the aggregate amount of the Letter of Credit Obligations then outstanding and (ii) the aggregate principal amount of the Swing Line Advances then outstanding, the Borrower shall immediately prepay, for the ratable account of the Lenders, the outstanding principal amount of Revolving Advances in an aggregate amount equal to such excess. If, at any time, the then outstanding aggregate amount of all Swing Line Advances shall exceed either (i) the Swing Line Commitment of the Swing Line Lender, or (ii) the aggregate amount of the Revolving Commitments of the Lenders minus the sum of (A) the aggregate amount of the Letter of Credit Obligations then outstanding, and (B) the aggregate principal amount of the Revolving Advances then outstanding, the Borrower shall thereupon prepay, for the account of the Swing Line Lender, the outstanding principal amount of Swing Line Advances in an aggregate amount equal to such excess. (ii) Incomplete Settlement. If any Lender shall for any reason fail to fund any participation in any Swing Line Advances, or fail to make any Revolving Advance to be made by it pursuant to Section 2.02(f), the Borrower shall, on demand by the Agent, prepay the Swing Line Advances then outstanding in an amount equal to such amount. (iii) Net Cash Proceeds. The Borrower shall, on the date of receipt by the Borrower or any of its Subsidiaries of the Net Cash Proceeds from (A) the sale, lease, transfer or other disposition of any assets of the Borrower or any of its Subsidiaries (including the sale by the Borrower or any of its Subsidiaries of the capital stock of any of their respective Subsidiaries but excluding Excluded Asset Sales), and (B) the incurrence or issuance by the Borrower or any of its Subsidiaries of any Debt not permitted under Section 6.02(b) (it being understood that the provisions of this Section 2.05(b)(iii) shall not be construed to permit the incurrence of Debt otherwise prohibited by Section 6.02(b)) prepay the aggregate principal amount of outstanding Revolving Advances in an amount equal to the amount of such Net Cash Proceeds. Each such prepayment of the Revolving Advances shall be paid ratably to each Lender in accordance with the provisions of Section 2.09(a). Notwithstanding any contrary provision hereof, the Net Cash Proceeds from the issuance or incurrence of Permitted Subordinated Debt shall not be subject to mandatory prepayment pursuant to this Section. (iv) L/C Cash Collateral. If, at any time, the aggregate Available Amount of all Letters of Credit then outstanding exceeds the L/C Sublimit in effect at such time, the Borrower shall immediately pay to the Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in such account to equal the amount of such excess. 29 (c) Interest Payable on Amounts Prepaid. All prepayments of Eurodollar Rate Advances under this Section 2.05 shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. Section 2.06. Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance from the date of such Advance until such principal is paid in full at the applicable rate set forth below. (a) Interest on Base Rate Advances. Except to the extent that the Borrower shall elect to pay interest on all or any part of any Advance made or to be made to the Borrower under Section 2.01 for any Interest Period pursuant to subsections (b) and (c) of this Section 2.06, the Borrower shall pay interest on the unpaid principal amount of each Advance, from the date of such Advance until such principal amount is paid in full, payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing June 30, 1998 and on the Revolving Commitment Termination Date, at a fluctuating interest rate per annum equal, subject to Section 2.06(d), to the sum of the Base Rate in effect from time to time plus the Applicable Margin for Base Rate Advances in effect from time to time. (b) Interest Periods for Eurodollar Rate Advances. The Borrower may, pursuant to Section 2.06(c), elect to have the interest on the principal amount of all or any portion of any Advances made or to be made to the Borrower under Section 2.01, in each case ratably according to the respective outstanding principal amounts of Advances owing to each Lender (each such principal amount owing to a Lender as to which such election has been made being a "Eurodollar Rate Advance" owing to such Lender) determined and payable for a specified period (an "Interest Period" for such Eurodollar Rate Advance) in accordance with subsection (c) below, provided, however, that the Borrower may not (i) make any such election with respect to any Swing Line Advances, or (ii) have more than five Eurodollar Rate Advances owing to any Lender outstanding at any one time. Each Interest Period shall be one, two, three, or six months, at the Borrower's election pursuant to subsection (c) below, provided, however, that: (i) the first day of an Interest Period for any Eurodollar Rate Advance shall be either the last day of any then current Interest Period for such Advance or, if there shall be no then current Interest Period for such Advance, any Business Day; (ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, however, that if such extension would cause the last day of such Interest Period to occur in the next following month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iii) whenever the first day of any Interest Period occurs on a day of the month for which there is no numerically corresponding day in 30 the calendar month that succeeds such initial calendar month by the number of months equal to the number of months of such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. (c) Interest on Eurodollar Rate Advances. The Borrower may from time to time, on the condition that no Event of Default has occurred and is continuing, and subject to the provisions of Sections 2.06(b) and 2.06(e), elect to pay interest on all or any portion of any Advances during any Interest Period therefor at a rate per annum equal to the sum of the Eurodollar Rate for such Interest Period for such Advances plus the Applicable Margin for Eurodollar Rate Advances in effect from time to time, by notice, specifying the amount of the Advances as to which such election is made (which amount shall aggregate at least $5,000,000 or any multiple of $1,000,000 in excess thereof) and the first day and duration of such Interest Period, received by the Agent before 12:00 noon (Dallas, Texas time) three Business Days prior to the first day of such Interest Period. If the Borrower has made such election for Eurodollar Rate Advances for any Interest Period, the Borrower shall pay interest on the unpaid principal amount of such Eurodollar Rate Advances during such Interest Period, payable in arrears on the last day of such Interest Period and, in the case of any Interest Period which is longer than three months, on each three month anniversary of the first day of such Interest Period, in each case at a rate equal, subject to Section 2.06(d), to the sum of the Eurodollar Rate for such Interest Period for such Eurodollar Rate Advances plus the Applicable Margin for Eurodollar Rate Advances in effect from time to time during such Interest Period. On the last day of each Interest Period for any Eurodollar Rate Advance, the unpaid principal balance thereof shall automatically become and bear interest as a Base Rate Advance, except to the extent that the Borrower has elected to pay interest on all or any portion of such amount for a new Interest Period commencing on such day in accordance with this Section 2.06(c). Each notice by the Borrower under this Section 2.06(c) shall be irrevocable upon receipt by the Agent, and the Borrower shall indemnify each Lender against any out-of-pocket loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified by such notice the applicable conditions set forth in this Section 2.06(c) or Article IV, including, without limitation, any out-of-pocket loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund any such Eurodollar Rate Advance when such Eurodollar Rate Advance, as a result of such failure, is not made or does not become effective. (d) Default Interest. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall, at the dates set forth herein for the payment of interest and upon demand, (i) pay interest on all Base Rate Advances and any other amounts owing hereunder not paid when due (other than then outstanding Eurodollar Rate Advances) at a rate per annum (the "Default Rate") equal at all times to the rate otherwise applicable to Base Rate Advances plus 2.00% per annum, and (ii) pay interest on each then outstanding Eurodollar Rate Advance at a rate per annum equal at all times to the rate otherwise applicable to such Eurodollar Rate Advance plus 2.00% per annum. 31 (e) Suspension of Eurodollar Rate Advances. (i) Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrower through the Agent, (i) each Eurodollar Rate Advance made by such Lender will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of such Lender to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended (and such Lender shall make its portion of any Borrowing available as a Base Rate Advance) until the Agent shall notify the Borrower that such Lender has determined that the circumstances causing such suspension no longer exist; provided, however, that, before making any such demand, such Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. (ii) Other Circumstances. If, with respect to any Eurodollar Rate Advances, (A) the Administrative Agent shall determine in good faith (which determination shall be conclusive) that the Eurodollar Rate cannot be determined in accordance with the definition thereof, or (B) the Required Lenders notify the Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Lenders of making, funding or maintaining their Eurodollar Rate Advances for such Interest Period, the Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower that such Lenders have determined that the circumstances causing such suspension no longer exist. (iii) Suspension on Event of Default. Upon the occurrence and during the continuance of any Event of Default, (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to convert Advances into, Eurodollar Rate Advances shall be suspended. Section 2.07. Fees. (a) Commitment Fees. The Borrower agrees to pay to the Agent a commitment fee on the average daily amount of each Lender's Revolving 32 Commitment less the sum of (i) Revolving Advances made by such Lender and outstanding from time to time, (ii) such Lender's Pro Rata Share of the aggregate Letter of Credit Obligations outstanding from time to time, and (iii) in the case of the Swing Line Lender only, such Lender's Pro Rata Share of any Swing Line Advances, for the account of such Lender, from the Closing Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Revolving Commitment Termination Date, at the rate per annum equal to the Commitment Fee Percentage in effect from time to time, payable in arrears on the last Business Day of each March, June, September and December, commencing June 30, 1998 and, and on the Revolving Commitment Termination Date. (b) Agent's Fees. The Borrower agrees to pay to the Agent, for its own account, (i) the fees in the amounts and at the times set forth in the letter dated February 10, 1998 from NationsBank and the Arranger, to the Borrower, and agreed to and accepted by the Borrower on February 10, 1998, and (ii) such other fees as may from time to time be agreed between the Borrower and the Agent. (c) Absolute Obligation. The Borrower's obligation hereunder to pay the fees referred to in this Section 2.07 shall be absolute and unconditional and shall survive the making and repayment of Advances, the termination of all Letter of Credit Obligations and the termination of this Agreement. All fees which are due or become due pursuant to this Section 2.07 are nonrefundable. Section 2.08. Increased Costs, Etc. (a) Increased Costs. If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), in any case occurring on or after the Closing Date, there shall be any increase in the cost to any Lender Party of agreeing to make or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or maintaining Letters of Credit (or of agreeing to purchase or purchasing participations therein) or of agreeing to make or of making or maintaining L/C Advances (or of agreeing to purchase or purchasing participations therein), then the Borrower shall from time to time, upon demand by such Lender Party (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost; provided, however, that, before making any such demand, each Lender Party agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. A certificate as to the amount of such increased cost, submitted to the Borrower by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error. 33 (b) Capital Requirements. If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), in any case occurring on or after the Closing Date, there shall be any increase in the amount of capital required or expected to be maintained by such Lender Party or any corporation controlling such Lender Party as a result of or based upon the existence of such Lender Party's commitment to lend or to issue or purchase participations in Letters of Credit hereunder and other commitments of such type or the issuance or maintenance of the Letters of Credit (or similar contingent obligations), then, upon demand by such Lender Party (with a copy of such demand to the Agent), the Borrower shall pay to the Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party's commitment to lend or to issue Letters of Credit hereunder or to the issuance or maintenance of any Letters of Credit. A certificate as to such amounts submitted to the Borrower by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error. (c) Limitations on Borrower's Compensation Obligations. Notwithstanding any other provision of this Agreement to the contrary, the Borrower shall not be obligated to make any payment to any Lender Party pursuant to this Section 2.08 in respect of any amounts or costs accruing in or allocable to any period prior to the 90th day preceding written demand by such Lender Party for payment therefor (unless such amounts or costs prior to such 90th day period result from the retroactive effect of any of the events described in the foregoing Sections 2.08(a) or 2.08(b) giving rise to such written demand and which occurred during such 90 day period). Section 2.09. Payments and Computations. (a) Payments by Borrower. The Borrower shall make each payment hereunder and under any other Loan Document to which it is a party, irrespective of and without condition or deduction for any counterclaim, defense, recoupment or setoff, in lawful money of the United States and in same day funds delivered to the Agent not later than 1:00 p.m. (Dallas, Texas time) on the day when due by deposit of such funds to the Agent's Account. Any payment so delivered to the Agent after 1:00 p.m. (Dallas, Texas time) on any Business Day, or on any day which is not a Business Day, shall be deemed received by the Agent on the next succeeding Business Day. The Agent will promptly after receipt of each payment cause to be distributed like funds relating to the payment of principal, interest, commitment fees or letter of credit fees ratably to each Lender for the account of its Applicable Lending Office, and like funds relating to the payment of any other amount payable to any Lender or any Issuing Bank (including payments with respect to Letters of Credit and payments for the account of any Lender under Sections 2.08, 2.10 or 9.04(c)) to such Lender for the account of its Applicable Lending Office or to such Issuing Bank, in each case to be applied in accordance with, and subject to, the terms of this Agreement, including Section 2.09(e) below. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register 34 pursuant to Section 9.07(c), from and after the effective date specified in such Assignment and Acceptance, the Agent shall make all payments hereunder and under any other Loan Document in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) Computations. All computations of interest in respect of Base Rate Advances (and in respect of any other amount payable hereunder other than interest in respect of Eurodollar Rate Advances and Letter of Credit fees and commissions) and all computations in respect of commitment fees shall be made by the Agent on the basis of a year of 365 days or 366 days, as applicable, and all computations of interest in respect of Eurodollar Rate Advances and all computations in respect of Letter of Credit fees and commissions shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable; provided that if any Advance is repaid on the same day on which it is made, one day's interest shall be paid on such Advance. Each determination by the Agent of an interest rate, fee, commission or discount rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (c) Payments Assumed. Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders or any Issuing Bank hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, but shall not be required to, cause to be distributed to each Lender or such Issuing Bank on such due date an amount equal to the amount then due to such Lender or such Issuing Bank. If and to the extent that the Borrower shall not have so made such payment in full to the Agent, each Lender and Issuing Bank shall repay to the Agent forthwith on demand such amount distributed to such Lender or Issuing Bank together with interest thereon, for each day from the date such amount is distributed to such Lender or Issuing Bank until the date such Lender or Issuing Bank repays such amount to the Agent, at the Federal Funds Rate. (d) Application of Payments Specified by the Borrower. Except as otherwise specified herein, so long as no Event of Default has occurred and is continuing, all payments shall be applied as instructed by the Borrower (except that, unless the Agent otherwise consents, outstanding Swing Line Advances shall be prepaid before prepayment of any Revolving Advances) if such instructions are received by the Agent prior to or contemporaneously with receipt of funds therefor. (e) Application of Payments Not Otherwise Specified. If the Agent receives funds for application to the Advances or any Letter of Credit Obligations or other Obligations of the Borrower under the Loan Documents under circumstances for which the Loan Documents do not specify the Advances or the Facility or the Obligations to which, or the manner in which, such funds are to be applied, the Agent may elect to distribute such funds first, to the Issuing Banks ratably in payment of the principal of and interest on any outstanding L/C Advances, second, to the payment of the outstanding Swing Line Advances and 35 interest thereon, third, to each Lender ratably in accordance with such Lender's proportionate share of all Advances (other than Swing Line Advances) then outstanding, in repayment or prepayment of such of the outstanding Advances (other than Swing Line Advances), and for application to such principal installments, as the Agent may direct, and thereafter ratably to the Lenders in repayment or prepayment of any other Obligations of the Borrower then outstanding under the Loan Documents as the Agent shall direct, provided that if an Event of Default has occurred and is continuing and the Revolving Commitments of the Lenders and the Swing Line Commitment of the Swing Line Lender have been terminated in full, the Agent shall distribute any payments and any proceeds of any collection, sale or other realization or liquidation of any Collateral first, to the payment of all costs and expenses of the Agent under the Loan Documents, second, to the Issuing Banks ratably in payment of the principal of and interest on any outstanding L/C Advances, third, to the payment of the outstanding Swing Line Advances and interest thereon, and fourth, to each Lender ratably in accordance with such Lender's proportionate share of the principal amount of all Advances (other than Swing Line Advances) and Letter of Credit Obligations then outstanding, in payment or prepayment of such Obligations owed to such Lender under the Loan Documents, and for application to such principal installments (if applicable) as the Agent shall direct. (f) Payments on Business Days. Whenever any payment hereunder or under any other Loan Document shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest and commitment and other fees; provided, however, if such extension would cause payment of interest on or principal of any Eurodollar Rate Advance to be made in the next following month, such payment shall be made on the next preceding Business Day. (g) Certain Terms. The terms "pay", "paid" or "payment" under this Agreement shall include prepay, prepaid or prepayment, respectively, under this Agreement, and the term "due" under this Agreement shall include due by reason of a mandatory prepayment (including upon an actual or deemed entry of an order for relief with respect to the Borrower or any Guarantor under the Federal Bankruptcy Code or upon acceleration). Section 2.10. Taxes. (a) Withholding Taxes. Subject to Section 2.10(f), any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.09, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and the Agent, net income taxes that are imposed by the United States and franchise taxes and net income taxes that are imposed on such Lender Party or the Agent by the state or foreign jurisdiction under the laws of which such Lender Party or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender Party, franchise taxes and net income taxes that are imposed on such Lender Party by the state or foreign jurisdiction of such Lender Party's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, 36 deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender Party or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.10) such Lender Party or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) Other Taxes. In addition, the Borrower shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) Indemnification. Subject to Section 2.10(f), the Borrower shall indemnify each Lender Party and the Agent for the full amount of Taxes and Other Taxes, and for the full amount of taxes imposed by any jurisdiction on amounts payable under this Section 2.10, paid by such Lender Party or the Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or the Agent (as the case may be) makes written demand therefor. (d) Evidence of Payment. Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Agent, at its address referred to in Section 9.02, the original receipt of payment thereof or a certified copy of such receipt. In the case of any payment hereunder or under the Notes by the Borrower through an account or branch outside the United States or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Agent, at such address, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Foreign Lenders and Issuing Banks. Each Lender Party organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender, and on the date of the Assignment and Acceptance pursuant to which it became a Lender Party in the case of each other Lender Party, and from time to time thereafter upon the reasonable request in writing by the Borrower or the Agent (but only so long thereafter as such Lender Party remains lawfully able to do so), provide the Agent and the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or is entitled to a reduced rate of United States withholding tax on payments under this Agreement or the Notes. If the form provided by a Lender Party at the time 37 such Lender Party first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender Party assignee becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent and only to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this Section 2.10(e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form 1001 or 4224, that the Lender Party reasonably considers to be confidential, the Lender Party shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. (f) Failure to Provide Forms. For any period with respect to which a Lender Party has failed to provide the Borrower with the appropriate form described in Section 2.10(e) (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under Section 2.10(e)), such Lender Party shall not be entitled to indemnification under Section 2.10(a) or Section 2.10(c) with respect to Taxes imposed by the United States; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender Party shall reasonably request to assist such Lender Party to recover such Taxes. (g) Change of Applicable Lending Office. Any Lender Party claiming any additional amounts payable pursuant to this Section 2.10 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Eurodollar Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. (h) Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.10 shall survive the payment in full of principal and interest hereunder and under the Notes. Section 2.11. Sharing of Payments, Etc. If any Lender Party shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) (a) on account of Obligations due and payable to such Lender Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender Party at such time to (ii) the aggregate amount of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time) of payments on account of the 38 Obligations due and payable to all Lender Parties hereunder and under the Notes at such time obtained by all the Lender Parties at such time or (b) on account of Obligations owing (but not due and payable) to such Lender Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender Party at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time) of payments on account of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time obtained by all the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such participations in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each other Lender Party shall be rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such other Lender Party's ratable share (according to the proportion of (i) the purchase price paid to such Lender Party to (ii) the aggregate purchase price paid to all Lender Parties) of such recovery together with an amount equal to such Lender Party's ratable share (according to the proportion of (i) the amount of such other Lender Party's required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. The Borrower agrees that any Lender Party so purchasing a participation from another Lender Party pursuant to this Section 2.11 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such participation. Section 2.12. Use of Proceeds. The proceeds of the Advances shall be available (and the Borrower agrees that it shall use such proceeds) to repay in full all amounts outstanding under the Existing Credit Agreement, to redeem the Existing Senior Notes, to provide working capital for, and finance capital expenditures by, the Borrower and its Subsidiaries and, subject to the provisions of this Agreement and the other Loan Documents, for other general corporate purposes of the Borrower and its Subsidiaries. Section 2.13. Evidence of Debt. (a) Maintenance of Accounts by Lenders. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (b) Maintenance of Accounts by Agent. The Register maintained by the Agent pursuant to Section 9.07(c) shall include a control account, and a subsidiary account for each Lender Party, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Interest Type of the Advances comprising such Borrowing and any Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered 39 to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender Party hereunder, and (iv) the amount of any sum received by the Agent from the Borrower hereunder and each Lender Party's share thereof. The entries made in the Register shall be conclusive and binding for all purposes, absent manifest error. ARTICLE III. AMOUNTS AND TERMS OF LETTERS OF CREDIT Section 3.01. The Letter of Credit Subfacility. The Borrower may request any Lender, on the terms and conditions hereinafter set forth, to Issue, and any such Lender may, if in its sole discretion it elects to do so, and the L/C Bank shall, if no other Lender elects to do so, Issue standby Letters of Credit for the account of the Borrower from time to time on any Business Day during the period after the Closing Date until 30 days prior to the Revolving Commitment Termination Date (a) in an aggregate Available Amount for all Letters of Credit (including the Existing Letters of Credit) not to exceed at any time $25,000,000 (the "Letter of Credit Subfacility"), and (b) in an Available Amount for each such Letter of Credit not to exceed the Unused Revolving Commitments of the Lenders on such Business Day. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than 30 days before the Termination Date and one year after the date of issuance thereof (but a Letter of Credit may, by its terms, be renewable annually with the consent of the Issuing Bank). As of the Closing Date, each Existing Letter of Credit shall constitute, for all purposes of this Agreement and the other Loan Documents, a Letter of Credit issued and outstanding hereunder and shall, for purposes of Section 3.05, be deemed to be Issued hereunder on the Closing Date. Within the limits of the Letter of Credit Subfacility, and subject to the limits referred to above, the Borrower may request the Issuance of one or more Letters of Credit under this Section 3.01, repay amounts due resulting from L/C Advances thereunder pursuant to Section 3.03, and request the Issuance of one or more additional Letters of Credit under this Section 3.01. Section 3.02. Issuance of Letters of Credit. (a) Notice of Issuance. Each Letter of Credit shall be Issued pursuant to a Notice of Issuance, which must be received by the Agent and the Issuing Bank not later than 12:00 noon (Dallas, Texas time) on the third Business Day prior to the date of the proposed Issuance of such Letter of Credit (or such shorter period as may be acceptable to the applicable Issuing Bank). Each such Notice of Issuance shall specify the requested (i) date of such Issuance (which shall be a Business Day), (ii) Available Amount of such Letter of Credit, (iii) expiration date of such Letter of Credit, (iv) name and address of the beneficiary of such Letter of Credit, and (v) form of such Letter of Credit, and shall be accompanied by such customary application and agreement for letter of credit of the Issuing Bank (a "Letter of Credit Agreement") as the Issuing Bank may specify to the Borrower for use in connection with such requested Letter of Credit. 40 (b) Conditions to Issuance. If (i) the requested form of such Letter of Credit is acceptable to the Agent and the Issuing Bank in the reasonable discretion of each, (ii) in the case of any Issuing Bank other than the L/C Bank, such Issuing Bank elects in its sole discretion to Issue the requested Letter of Credit, and (iii) such Issuing Bank has not received notice from the Agent or the Required Lenders that the Issuance of such Letter of Credit is not authorized because such Issuance would not comply with the requirements of clause (a) or (b) of Section 3.01 or one or more of the conditions set forth in Section 4.02 has not been satisfied, then such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Section 4.02 (which fulfillment such Issuing Bank may assume in the absence of actual knowledge, or notice received from the Borrower, the Agent or the Required Lenders, to the contrary) and subject to the provisions of this Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 9.02 or as otherwise agreed upon with the Borrower in connection with such Issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern. (c) Reports by Issuing Banks. Each Issuing Bank shall furnish to the Agent (i) on the fifth Business Day of each month a written report summarizing Issuance and expiration dates of Letters of Credit Issued by such Issuing Bank during the preceding month and L/C Advances during such month under all Letters of Credit Issued by such Issuing Bank, and (ii) two Business Days prior to the last Business Day of each March, June, September and December, a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit Issued by such Issuing Bank. Section 3.03. Drawing and Reimbursement. The Borrower agrees to reimburse the Issuing Bank under each Letter of Credit, within one Business Day after it has notice of any L/C Advance by such Issuing Bank thereunder, for the principal amount of such L/C Advance, and shall pay to such Issuing Bank, on demand, interest on the unreimbursed principal of such L/C Advance at a rate per annum equal to (a) from the date of such L/C Advance to the first Business Day after notice thereof has been given to the Borrower, the rate applicable to Base Rate Advances in effect from time to time, and (b) from and after such first Business Day, the Default Rate. If the Borrower shall fail to so reimburse the Issuing Bank within one Business Day after the Borrower receives notice that any such L/C Advance has been made, then upon demand by the Issuing Bank, and whether or not a Default has occurred and is continuing or any conditions set forth in Section 4.02 are satisfied, each Revolving Lender shall purchase from such Issuing Bank, and such Issuing Bank shall sell and assign to each Revolving Lender, such Lender's Pro Rata Share of such outstanding L/C Advance as of the date of such purchase, by making available for the account of such Issuing Bank, by deposit to the Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such L/C Advance to be purchased by such Lender. Each Revolving Lender agrees to purchase its Pro Rata Share of an outstanding L/C Advance on (A) the Business Day on which demand therefor is made by the Issuing Bank which made such L/C Advance, provided notice of such demand is given not later than 12:00 noon (Dallas, Texas time) on such Business Day, or (B) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by an Issuing Bank to any Lender of a portion of an L/C Advance, such Issuing Bank represents and 41 warrants to such Lender that such Issuing Bank is the legal and beneficial owner of such interest being assigned by it, but makes no other representation or warranty and assumes no responsibility with respect to such L/C Advance, the Loan Documents or any Loan Party. Section 3.04. Obligations Absolute. The Obligations of the Borrower under Article III of this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances (it being understood that any such payment by the Borrower is without prejudice to, and does not constitute a waiver of, any rights the Borrower might have or might acquire as a result of the payment by the Issuing Bank of any draft or the reimbursement by the Borrower thereof): (a) any lack of validity or enforceability of this Agreement, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (this Agreement and all of the other foregoing being collectively referred to herein as the "L/C Related Documents"); (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (c) the existence of any claim, set-off, defense or other right that the Borrower or any of its Subsidiaries may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (d) any statement or any other document presented under a 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; (e) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (f) any exchange, release or non-perfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or (g) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. 42 Section 3.05. Letter of Credit Compensation. (a) The Borrower shall pay to the Agent: (i) for the account of the Issuing Bank which Issues a Letter of Credit, an issuance fee in an amount equal to 1/8 of 1% per annum of the average daily Available Amount of such Letter of Credit outstanding from time to time: and (ii) for the account of each Lender, a letter of credit fee with respect to each Letter of Credit, in each case in an amount equal to a rate per annum equal to the Applicable Margin for Eurodollar Rate Advances in effect from time to time on such Lender's Pro Rata Share of the average daily Available Amount of such Letter of Credit outstanding from time to time. The letter of credit and issuance fees payable under this Section 3.05(a) shall be payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing June 30, 1998, and on the Revolving Commitment Termination Date. For purposes of computing any fees under this Section 3.05(a), the determination of the maximum amount available to be drawn under a Letter of Credit at any time shall assume strict compliance with all conditions for drawing. Any fees paid pursuant to this Section 3.05(a) are nonrefundable. (b) The Borrower shall pay to each Issuing Bank, for its own account and on demand, such other commissions, issuance fees, transfer fees and other fees, charges and expenses in connection with the Issuance, amendment, transfer, cancellation or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree; provided that in no event shall any Issuing Bank require, after giving effect to the amounts payable to it pursuant to Section 3.05(a) above (in the case of the Issuance of any Letter of Credit), more than the standard fees, charges and expenses which it normally charges in connection with such matters. Section 3.06. Use of Letters of Credit. Any Letters of Credit Issued hereunder shall be used solely to support Obligations of the Borrower and its Subsidiaries not prohibited hereunder. ARTICLE IV. CONDITIONS OF LENDING Section 4.01. Conditions Precedent to Initial Borrowing. The obligation of each Lender Party to make an Advance on the occasion of the initial Borrowing is subject to the following conditions precedent: (a) The Lender Parties shall be satisfied with the corporate and legal structure and capitalization of each Loan Party and each of its Subsidiaries, including the terms and conditions of the charter, bylaws and each class of capital stock of each Loan Party and each such Subsidiary and of each agreement or instrument relating to such structure or capitalization. 43 (b) The Borrower (or the trustee under the Existing Senior Note Indenture on behalf of the Borrower) shall have mailed a Redemption Notice in respect of Existing Senior Notes in an aggregate principal amount of $75,000,000 to the holders of the Existing Senior Notes, and the Agent shall have been provided with a copy of such Redemption Notice. (c) The Lender Parties shall (i) be satisfied that all Funded Debt, other than the Debt identified on Schedule 4.01(c) and the Existing Senior Notes ("Surviving Debt"), has been prepaid, redeemed or defeased in full or otherwise satisfied and extinguished, and (ii) shall have received satisfactory evidence (including, without limitation, a duly executed payoff letter, UCC termination statements and real property reconveyances) that all liens and security interests granted pursuant to, or in connection with, the Existing Credit Agreement and the Security Documents (as defined in the Existing Credit Agreement) shall be terminated or released contemporaneously with the initial Borrowing. (d) There shall have occurred no Material Adverse Change since September 28, 1997. (e) There shall exist no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of their Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) could have a Material Adverse Effect other than the matters disclosed in the Annual Report of the Borrower (the "Borrower's Form 10-K") for the fiscal year ended September 28, 1997 filed with the Securities and Exchange Commission and the matters disclosed in the preliminary offering memorandum dated March 27, 1998 relating to the senior subordinated notes of the Borrower described in clause (A) of the definition of "Permitted Subordinated Debt" (the "Disclosed Litigation") or (ii) purports to affect the legality, validity or enforceability of this Agreement, any Note, any other Loan Document, or the consummation of the transactions contemplated hereby, and there shall have been no adverse change in the status, or financial effect on the Borrower and its Subsidiaries, taken as a whole, of the Disclosed Litigation from that disclosed in the Borrower's Form 10-K. (f) The Lenders, the Agent and the Arranger shall have completed a due diligence investigation of the Borrower and its Subsidiaries in scope, and with results, satisfactory to the Lenders, the Agent and the Arranger, and nothing shall have come to the attention of the Lenders, the Agent or the Arranger during the course of such due diligence investigation to lead them to believe that the Information Memorandum was or has become misleading, incorrect or incomplete in any material respect, without limiting the generality of the foregoing, the Lenders, the Agent and the Arranger shall have been given such access to the management, records, books of account, contracts and properties of the Borrower and its Subsidiaries as they shall have requested. (g) The Borrower shall have paid all accrued fees and expenses of the Agent and the Lender Parties (including, to the extent invoiced, the accrued fees and expenses of counsel to the Agent). (h) The Agent shall have received on or before the day of the initial Borrowing the following, each dated such day (unless otherwise specified), in 44 form and substance satisfactory to the Agent (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender Party: (i) The Notes to the order of each Lender, as appropriate. (ii) Certified copies of the resolutions of the Board of Directors of the Borrower authorizing this Agreement, the Notes, and of each other Loan Party approving each Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Notes, and each other Loan Document. (iii) A copy of the charter of the Borrower and each other Loan Party and each amendment thereto, certified (as of a date reasonably near the date of the initial Borrowing) by the Secretary of the State of the State in which each such Person is organized as being a true and correct copy thereof (except in the case of Jack In The Box, Inc., in which case such certification shall be provided in a certificate of the Secretary of Jack In The Box, Inc.). (iv) A copy of a certificate of the Secretary of State of the State in which each such Person is organized, dated reasonably near the date of the initial Borrowing, listing the charter of the Borrower and each other Loan Party and each amendment thereto on file in such office and certifying that (A) such amendments are the only amendments to the Borrower's, or such other Loan Party's charter on file in such office, (B) the Borrower and each other Loan Party have paid all franchise taxes to the date of such certificate and (C) the Borrower and each other Loan Party are duly incorporated and in good standing under the laws of such State. (v) A certificate of the Borrower and each other Loan Party signed on behalf of the Borrower and such other Loan Party by its President, any Vice President, Chief Financial Officer or Treasurer and its Secretary or any Assistant Secretary, dated the date of the initial Borrowing (the statements made in which certificate shall be true on and as of the date of the initial Borrowing), certifying as to (A) the absence of any amendments to the charter of the Borrower or such other Loan Party since the date of the Secretary of State's certificate (or the Secretary's certificate in the case of Jack In The Box, Inc.) referred to in Section 4.01(i)(iv), (B) a true and correct copy of the bylaws of the Borrower and such other Loan Party as in effect on the date of the initial Borrowing, (C) the due incorporation and good standing of the Borrower and such other Loan Party as a corporation organized under the laws of the State of its jurisdiction of incorporation, and the absence of any proceeding for the dissolution or liquidation of the Borrower or such other Loan Party, (D) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the date of the initial Borrowing and (E) the absence of any event occurring and continuing, or resulting from the initial Borrowing, that constitutes a Default. (vi) A certificate of the Secretary or an Assistant Secretary of the Borrower and each other Loan Party certifying the names and true 45 signatures of the officers of the Borrower and such other Loan Party authorized to sign this Agreement, the Notes, and each other Loan Document to which they are or are to be parties and the other documents to be delivered hereunder and thereunder. (vii) A security agreement in substantially the form of Exhibit E (as amended from time to time in accordance with its terms, the "Security Agreement"), duly executed by the Borrower and the Inactive Subsidiaries (other than the Inactive Foreign Subsidiaries), together with: (A) certificates representing the Pledged Shares referred to therein accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt referred to therein indorsed in blank, (B) duly executed financing statements in appropriate form for filing under the Uniform Commercial Code in all jurisdictions that the Agent may deem necessary or desirable in order to perfect the Liens created by the Security Agreement, covering the Collateral described in the Security Agreement, (C) evidence of the insurance required by the terms of the Security Agreement, and (D) evidence that all other action that the Agent may deem necessary or desirable in order to perfect and protect the Liens created by the Security Agreement has been taken. (viii) Deeds of trust, trust deeds and mortgages in substantially the form of Exhibit I-1 and I-2 and covering the properties (other than the Headquarters Property) listed on Part I of Schedule 4.01(j) (as amended from time to time in accordance with their terms, the "Mortgages"), duly executed by the Borrower in appropriate form for filing in all filing or recording offices that the Agent may deem necessary or desirable in order to create a valid and subsisting Lien subject only to Permitted Liens on the property described therein in favor of the Agent for the benefit of the Lender Parties, together with: (A) with respect to the six properties identified on Part II of Schedule 4.01(j) (other than the Headquarters Property), a commitment from First American Title Insurance Company to issue American Land Title Association Lender's Extended Coverage title insurance policies (the "Mortgage Policies") in form and substance, with endorsements and in amount acceptable to the Agent, issued, coinsured and reinsured by title insurers acceptable to the Agent, insuring the Mortgages covering the six properties listed on Part II of Schedule 4.01(j) (other than the Headquarters Property) to be valid and subsisting Liens with the priority set forth in the applicable Mortgage Policy on the property described therein, free and clear of all defects (including, but not limited to, mechanics' and materialmen's Liens) and encumbrances, excepting only Permitted Liens, and providing for such other affirmative insurance (including 46 endorsements for future advances under the Loan Documents and for mechanics' and materialmen's Liens) and such coinsurance and direct access reinsurance as the Agent may deem necessary or desirable, (B) such consents and agreements of third parties under existing deeds of trust (other than the existing deed of trust with respect to the Headquarters Property), as the Agent may deem necessary or desirable, and (C) evidence that all other action that the Agent may deem necessary or desirable in order to create valid first and subsisting Liens on the property described in the Mortgages has been taken. (ix) A guaranty in substantially the form of Exhibit F (as amended from time to time in accordance with its terms, the "Guaranty"), duly executed by the Guarantors. (x) Such financial, business and other information regarding each Loan Party and their Subsidiaries as the Lender Parties shall have requested, including, without limitation, information as to possible contingent liabilities, tax matters, environmental matters, obligations under ERISA and Welfare Plans, collective bargaining agreements and other arrangements with employees, annual financial statements dated September 26, 1996 and September 28, 1997 respectively, interim financial statements dated the end of the most recent fiscal quarter for which financial statements are available (or, in the event the Lender Parties' due diligence review reveals material changes since such financial statements, as of a later date within 45 days of the day of the initial Borrowing), and the Projections. (xi) Evidence of insurance naming the Agent as insured and loss payee with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is satisfactory to the Lender Parties. (xii) A favorable opinion of Gibson, Dunn & Crutcher, LLP, counsel for the Borrower and the other Loan Parties, in substantially the form of Exhibit G hereto and as to such other matters as any Lender Party through the Agent may reasonably request. (xiii) A favorable opinion of Latham & Watkins, counsel for the Agent, in form and substance satisfactory to the Agent. Section 4.02. Conditions Precedent to Each Borrowing and Issuance. The obligation of each Lender to make an Advance (other than an L/C Advance and other than a Revolving Advance made by a Revolving Lender pursuant to Section 2.02(f)) on the occasion of each Borrowing (including the initial Borrowing), and the right of the Borrower to request a Swing Line Borrowing or the issuance of Letters of Credit, shall be subject to the further conditions precedent that on the date of such Borrowing or issuance the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Swing Line Borrowing or Notice of Issuance and the 47 acceptance by the Borrower of the proceeds of such Borrowing or of such Letter of Credit shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or issuance such statements are true): (i) the representations and warranties contained in each Loan Document are correct on and as of the date of such Borrowing or issuance, before and after giving effect to such Borrowing or issuance and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date of such Borrowing or issuance; and (ii) no event has occurred and is continuing, or would result from such Borrowing or issuance or from the application of the proceeds therefrom, that constitutes a Default. Section 4.03. Determinations Under Section 4.01. For purposes of determining compliance with the conditions specified in Section 4.01, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the initial Borrowing specifying its objection thereto and such Lender Party shall not have made available to the Agent such Lender Party's ratable portion of such Borrowing. ARTICLE V. REPRESENTATIONS AND WARRANTIES Section 5.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) Incorporation, Qualification, Corporate Power and Authority. Each Loan Party (i) is a corporation duly organized, validly existing and good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not reasonably be expected to have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Capital Stock. Set forth on Schedule 5.01(b) hereto is a complete and accurate list, as of the date hereof, of all Subsidiaries of each Loan Party, showing as of the date hereof (as to each such Subsidiary), the jurisdiction of its incorporation, the number of shares of each class of capital stock authorized and outstanding, the percentage of the outstanding shares of each such class owned (directly or indirectly) by such Loan Party and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights. All of the outstanding capital stock of all of such Subsidiaries has been validly issued, is fully paid and non-assessable (except to the extent such concepts are not applicable to a Foreign Subsidiary) 48 and is owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens, except those created by the Collateral Documents. Each such Subsidiary (except to the extent such concepts are not applicable to a Foreign Subsidiary) (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not reasonably be expected to have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (c) Authorization; No Conflict or Violation; Compliance with Laws. The execution, delivery and performance by each Loan Party of this Agreement, the Notes, and each other Loan Document to which it is or is to be a party, and the consummation of the transactions contemplated hereby and thereby (including the redemption of the Existing Senior Notes as contemplated hereby), are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Party's charter or by-laws, (ii) violate any law (including, without limitation, the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created by the Collateral Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. Neither any Loan Party nor any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which is reasonably likely to have a Material Adverse Effect. (d) Approvals and Consents. All authorizations, consents, approvals, registrations, filings, notices, exemptions and licenses with or from, or other actions, by any governmental authority or regulatory body or any third party which are necessary for the borrowing hereunder, the grant of security interests in and liens on the Collateral, the execution and delivery of the Loan Documents, the redemption of the Existing Senior Notes as contemplated hereby, the performance by the Loan Parties of their respective obligations hereunder and thereunder and the exercise by the Agent or the Lender Parties of their remedies hereunder and thereunder have been effected, obtained or taken and are in full force and effect, except for those that may be necessary in connection with the perfection or protection of liens granted pursuant to the Collateral Documents. (e) Enforceability. This Agreement has been, and each of the Notes, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This Agreement is, and 49 each of the Notes and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights or remedies of creditors generally and the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law. (f) Financial Statements. (i) The Consolidated balance sheet of the Borrower and its Subsidiaries as at September 28, 1997, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of KPMG Peat Marwick, independent public accountants, and the Consolidated balance sheet of the Borrower and its Subsidiaries as at January 18, 1998, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the 16 weeks then ended, duly certified by the chief financial officer or chief accounting officer of the Company, copies of which have been furnished to the Agent, fairly present, subject, in the case of said balance sheet as at January 18, 1998, and said statement of income and cash flows for the 16 weeks then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the period ended on such dates, all in accordance with GAAP applied on a consistent basis, and since September 28, 1997, there has been no Material Adverse Change. (ii) The Projections delivered to the Lenders pursuant to Section 4.01(h)(x) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in the light of conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Borrower's best estimate of its future financial performance. (g) Disclosure. Neither the Information Memorandum nor any other information, exhibit or report furnished by any Loan Party to the Agent or any Lender Party in connection with the negotiation of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein taken as a whole not misleading. (h) Litigation. There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of their Subsidiaries, including any Environmental Action, pending or threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect other than the Disclosed Litigation or (ii) purports to affect the legality, validity or enforceability of this Agreement, any Note, or any other Loan Document or the consummation of the transactions contemplated hereby or thereby and there has been no adverse change in the status, or financial effect on any Loan Party or any of their Subsidiaries, of the Disclosed Litigation from that disclosed in the Borrower's Form 10-K. (i) Use of Proceeds. 50 (i) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no 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 any Margin Stock. (ii) Following application of the proceeds of each Advance, not more than 25 percent of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a Consolidated basis) subject to the provisions of Section 5.02(a) or 5.02(e) or subject to any restriction contained in any agreement or instrument between the Borrower and any Lender Party or any Affiliate of any Lender Party relating to Debt and within the scope of Section 6.01(e) will be Margin Stock. (j) Pension Plans. (i) Each Loan Party and its ERISA Affiliates has fulfilled the obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in substantial compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. Neither any Loan Party nor any of its ERISA Affiliates has incurred any material liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. (ii) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan of any Loan Party or any of its ERISA Affiliates that has resulted in or is reasonably likely to result in a material liability of any Loan Party or any of its ERISA Affiliates. (iii) Schedule B (Actuarial Information) to the 1996 annual report (Form 5500 Series) for each Plan of any Loan Party or any of its ERISA Affiliates, copies of which have been filed with the Internal Revenue Service and furnished to the Lender Parties, and each subsequent Schedule B (Actuarial Information) provided to the Lender Parties pursuant to Section 6.03(g), is complete and accurate and fairly presents the funding status of such Plan, as of the time it was given, and no Loan Party is aware of any events or conditions since the date of such report that would create a material adverse change in the funding status of such Plan. (iv) Neither any Loan Party nor any of its ERISA Affiliates contributes to, is obligated to contribute to, has contributed to or has been obligated to contribute to any Multiemployer Plan. (v) The aggregate Insufficiency of all Plans of the Loan Parties and their ERISA Affiliates (excluding any Plans which do not have any Insufficiency) does not exceed $18,254,000 (the amount of the Insufficiency on the Closing Date) plus $4,000,000. 51 (vi) The aggregate annualized cost (including, without limitation, the cost of insurance premiums) with respect to post-retirement benefits under Welfare Plans for which the Loan Parties and their Subsidiaries are liable does not exceed $750,000. (k) No Adverse Conditions. Neither the business nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that would be reasonably likely to have a Material Adverse Effect. (l) Compliance with Environmental Laws. (i) The operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all Environmental Laws, all necessary Environmental Permits have been obtained and are in effect for the operations and properties of each Loan Party and its Subsidiaries, each Loan Party and its Subsidiaries are in compliance in all material respects with all such Environmental Permits, and no circumstances exist that would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. (ii) None of the properties of any Loan Party or any of its Subsidiaries is listed or proposed for listing on the National Priorities List under CERCLA or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the Environmental Protection Agency or any analogous state list of sites requiring investigation or cleanup or is adjacent to any such property, and no underground storage tanks, as such term is defined in 42 U.S.C. 6991, are located on any property of any Loan Party or any of its Subsidiaries. (iii) Neither any Loan Party nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous Materials to any location that is listed or proposed for listing on the National Priorities List under CERCLA or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the Environmental Protection Agency or any analogous state list, Hazardous Materials have not been generated, used, treated, handled, stored or disposed of on, or released or transported to or from, any property of any Loan Party or any of its Subsidiaries, except for limited quantities required in connection with the normal operation and maintenance of such properties and used or stored at such properties in compliance with all Environmental Laws and Environmental Permits, and all other wastes generated at any such properties have been disposed of in compliance with all Environmental Laws and Environmental Permits. (m) No Burdensome Agreements. Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease 52 or other agreement or instrument or subject to any charter or corporate restriction that would be reasonably likely to have a Material Adverse Effect. (n) Tax Information. (i) Each Loan Party and each of its Subsidiaries has filed, has caused to be filed or has been included in all tax returns (Federal, state, local and foreign) required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties. (ii) As of the date hereof, there are no adjustments to the state, local and foreign tax liability of the Borrower and its Subsidiaries proposed by any state, local or foreign taxing authorities (other than amounts arising from adjustments to Federal income tax returns). No issues have been raised by such taxing authorities that, in the aggregate, would be reasonably likely to have a Material Adverse Effect. (o) No Investment Company. Neither any Loan Party nor any of its Subsidiaries is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated hereby, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (p) Solvency. Each Loan Party is, individually and together with its Subsidiaries, Solvent. (q) Debt of the Borrower and its Subsidiaries. (i) Set forth on Schedule 5.01(q)(i) hereto is a complete and accurate list, as of the date hereof, of all existing Funded Debt (other than Surviving Debt), showing as of the date hereof the principal amount outstanding thereunder; the aggregate principal amount of all other Debt (other than Surviving Debt) as of the date hereof does not exceed $50,000; (ii) Set forth on Schedule 4.01(c) hereto is a complete and accurate list of all Surviving Debt, showing as of the date hereof the principal amount outstanding thereunder. (r) Owned Real Property. (i) Set forth on Schedule 5.01(r) hereto is a complete and accurate list of all real property owned in fee as of the date hereof by any Loan Party or any of their Subsidiaries, showing as of the date hereof the street address, county or other relevant jurisdiction, book value thereof, and state thereof. Borrower has good, record, marketable and 53 insurable fee simple title to such real property, free and clear of all Liens, other than Liens of the types described in clauses (a), (b) and (e) inclusive, of the definition of Permitted Liens. (ii) Set forth on Schedule 5.01(r) hereto is a complete and accurate list of all leases of real property under which any Loan Party or any of their Subsidiaries is the lessee, showing as of the date hereof the street address and state thereof. Each Loan Party or such Subsidiary has a valid leasehold interest in such leases of real property, free and clean of all Liens, other than Liens of the types described in clauses (a) and (b), inclusive, of the definition of Permitted Liens. To the best knowledge of the Loan Parties and their Subsidiaries, each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms. (s) Investments. Set forth on Schedule 5.01(s) hereto is a complete and accurate list of all Investments held by any Loan Party or any of their Subsidiaries, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof. (t) Intellectual Property. Set forth on Schedule 5.01(t) hereto is a complete and accurate list of all patents, trademarks, trade names, service marks and copyrights, and all applications therefor and licenses thereof, of each Loan Party or any of their Subsidiaries, showing as of the date hereof the jurisdiction in which registered, the registration number, the date of registration and the expiration date. (u) Other Agreements. Schedule 5.01(u) sets forth a complete and accurate list as of the date hereof of (i) all joint venture and partnership agreements to which the Borrower or any of its Subsidiaries is a party, and (ii) all covenants not to compete restricting the Borrower or any of its Subsidiaries to which the Borrower or any of its Subsidiaries is a part or by which the Borrower or any of its Subsidiaries is bound. (v) Inactive Subsidiaries. The book value of all property and other assets of the Inactive Subsidiaries (other than the Inactive Foreign Subsidiaries), as of the date hereof, does not exceed $100,000 in the aggregate. The fair market value of all property and other assets of the Inactive Foreign Subsidiaries, as of the date hereof, does not exceed $100,000 in the aggregate. ARTICLE VI. COVENANTS OF THE BORROWER Section 6.01. Affirmative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, the Borrower will, unless the Required Lenders shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970. 54 (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, all taxes, assessments and governmental charges or levies imposed upon it or upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom in respect of which the amount of the underlying tax, assessment, charge or claim is more than $1,000,000 attaches to its property and becomes enforceable against its other creditors. (c) Compliance with Environmental Laws. Comply, and cause each of its Subsidiaries and use its best efforts to cause all lessees and other Persons occupying its properties to comply, in all material respects, with all Environmental Laws and Environmental Permits applicable to its operations and properties; obtain and renew all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (d) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. (e) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries (except for the Inactive Subsidiaries) to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 6.02(d) and provided further, neither the Borrower nor any of its Subsidiaries shall be required to preserve any right or franchise if the Board of Directors of the Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Subsidiary or the Lender Parties. (f) Visitation Rights. At any reasonable time and from time to time and with reasonable prior notice, permit the Agent or any of the Lender Parties or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances 55 and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants. (g) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time. (h) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (i) Compliance with Terms of Leaseholds. Make all payments and otherwise perform all obligations in respect of all leases of real property, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or canceled, except in each case, where the failure to do so could not reasonably be expected to have a Material Adverse Effect. (j) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate, other than (i) payments for management advisory services not to exceed $375,000 in the aggregate, (ii) transactions permitted under Section 6.02(g), (iii) the CRC Leases and (iv) any Permitted CRC Transaction. (k) Additional Loan Parties; Additional Collateral. At all times prior to the Collateral Release Date, substantially concurrently with the formation or acquisition of any Subsidiary (other than an Excluded Subsidiary or a Foreign Subsidiary) of the Borrower, the Borrower shall (i) cause such Subsidiary to guarantee all Obligations of the Borrower hereunder and under the Notes by executing and delivering to the Agent an amendment to Guaranty in substantially the form of Exhibit H, (ii) cause such Subsidiary to execute and deliver to the Agent, an amendment to the Security Agreement, in substantially the form of Exhibit J (whereby such Subsidiary shall grant a Lien on those of its assets described in the Security Agreement), (iii) promptly pledge to the Agent or cause to be pledged to the Agent all of the outstanding capital stock of such Subsidiary owned by any Loan Party to secure such Loan Party's Obligations under the Loan Documents, (iv) with respect to any real property in which such Subsidiary has a fee simple ownership interest, cause such Subsidiary to execute and deliver such deeds of trust, trust deeds and mortgages ("Additional Mortgages") in appropriate form for filing in all filing or recording offices that the Agent may deem necessary or desirable to create a valid first and subsisting Lien on the property described therein in favor of the Agent for the benefit of the Lender Parties, (v) promptly take, and cause such Subsidiary and each other Loan Party to take all action necessary or (in the reasonable opinion of the Agent or the Required Lenders) desirable to perfect and protect the Liens intended to be created by the Collateral Documents, as amended pursuant to this Section 6.01(k), and (vi) promptly 56 deliver to the Agent such opinions of counsel, if any, as the Agent or the Required Lenders may reasonably require with respect to the foregoing (including opinions as to enforceability and perfection of security interests). At all times prior to the Collateral Release Date, substantially concurrently with the formation or acquisition of any Excluded Subsidiary or Foreign Subsidiary of any Loan Party, such Loan Party shall promptly pledge to the Agent or cause to be pledged to the Agent all of the outstanding capital stock of such Subsidiary (or, if such Subsidiary is a Foreign Subsidiary, 65% of such capital stock) owned by such Loan Party to secure such Loan Party's obligations under the Loan Documents. In addition to the foregoing, upon the acquisition by the Borrower or any other Loan Party (other than an Excluded Subsidiary) on or after the date hereof and prior to the Collateral Release Date of any fee simple ownership interest in any real property and, with respect to any real property subject to any CRC Lease, if the granting of such a Lien shall be permitted under, and shall not cause a default or event of default under, the transaction documents relating to the CRC Notes and the CRC Excluded Debt (including without limitation the CRC Leases, the mortgages on the properties subject to the CRC Leases executed by the Borrower, and the indenture relating to the CRC Notes), (i) the applicable Loan Party shall promptly execute and deliver such Additional Mortgages in appropriate form for filing in all filing or recording offices that the Agent may deem necessary or desirable to create a valid first and subsisting Lien on such real property in favor of the Agent for the benefit of the Lender Parties, (ii) the Borrower shall promptly take, and cause each Loan Party to take all action necessary or (in the reasonable opinion of the Agent or the Required Lenders) desirable to perfect and protect the Liens intended to be created by the Additional Mortgages, and (iii) promptly deliver to the Agent such opinions of counsel, if any, as the Agent or the Required Lenders may reasonably require with respect to the foregoing (including opinions as to enforceability and perfection of security interests); provided, however, that the obligations of the Borrower and the other Loan Parties as set forth in this sentence shall not apply to (X) real properties owned by the Borrower on the Closing Date (other than the CRC Properties) and (Y) real properties acquired by the Borrower pursuant any Permitted Sale-Leaseback Repurchase (for as long as it constitutes a Permitted Sale-Leaseback Repurchase) or Permitted Sale-Leaseback Transactions. In addition to the foregoing and notwithstanding any contrary provision hereof or of any other Loan Document, the Borrower shall execute and deliver to the Agent an Additional Mortgage of not less than second priority with respect to the Headquarters Property (subject only to the deed of trust encumbering such property on the date hereof and with no increase in the principal amount of Debt secured thereby) and shall cause to be delivered to the Agent a policy of title insurance with respect thereto, in form and substance, with endorsements and in amount acceptable to the Agent, in each case at the Borrower's sole cost and expense and not later than 60 days after the date hereof. (l) Redemption of Existing Senior Notes. The Borrower shall (i) on or before April 15, 1998, redeem $75,000,000 in aggregate principal amount of the Existing Senior Notes, (ii) on or before June 1, 1998, redeem all outstanding Existing Senior Notes, (iii) on or before October 1, 1998, redeem all outstanding Existing Senior Subordinated Notes, and (iv) in each case, provide the Agent with evidence satisfactory to the Agent of such redemption. 57 (m) Excluded Subsidiaries. Within 60 days of payment in full of the CRC Notes, the Borrower shall, with respect to each Excluded Subsidiary, (i) file, or shall cause to be filed, with the appropriate governmental authority a petition for the dissolution of such Excluded Subsidiary, or (ii) cause such Excluded Subsidiary to be merged with and into the Borrower; provided, in the case of clause (ii), such Excluded Subsidiary is Solvent and has no material liabilities as of the date of such merger. (n) Organizational Documents. The Borrower shall ensure that the organizational documents of each Excluded Subsidiary formed or organized on or after the Closing Date are substantially in the form of the organizational documents attached hereto as (i) Exhibit K-1, with respect to any such Excluded Subsidiary that is a corporation, and (ii) Exhibit K-2, with respect to any such Excluded Subsidiary that is a limited partnership; provided that with respect to any such Excluded Subsidiary that is neither a corporation nor a limited partnership, the Borrower shall ensure that the organizational documents of such Excluded Subsidiary contain substantially the terms and conditions set forth in Exhibits K-1 and K-2 with only such conforming changes as are necessary to reflect that such Excluded Subsidiary is a general partnership, limited liability company, joint venture or trust, as applicable. Section 6.02. Negative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, the Borrower will not, at any time, without the written consent of the Required Lenders or, if required under Section 9.01, of all of the Lenders. (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its assets or properties of any character (including, without limitation, accounts and the capital stock of the Borrower and any of its Subsidiaries) whether now owned or hereafter acquired, excluding, however, from the operation of the foregoing restrictions the following: (i) Liens created by the Loan Documents; (ii) Permitted Liens; (iii) Liens granted by any Excluded Subsidiary permitted by the organizational documents of such Excluded Subsidiary; (iv) Liens granted by the Borrower or any of its Subsidiaries with respect to any Permitted Sale-Leaseback Repurchase, so long as each such Lien shall attach only to the property acquired with respect to such Permitted Sale-Leaseback Repurchase; (v) Liens arising in connection with Permitted Sale-Leaseback Transactions provided that, with respect to each Permitted Sale-Leaseback Transaction, such Liens extend only to the property subject to such Permitted Sale-Leaseback Transaction; and 58 (vi) the replacement, extension or renewal of any Permitted Encumbrance, Permitted Lien or any Lien permitted by clauses (i), (ii), (iii), (iv) or (v) above upon or in the same property theretofore subject thereto; or the replacement, extension or renewal (without increase in the amount, or change in any direct or contingent obligor) of the Debt secured by any Permitted Encumbrance, Permitted Lien or any Lien permitted by clauses (i), (ii), (iii), (iv) or (v) above. (b) Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt other than: (i) in the case of the Borrower, (A) Debt under the Loan Documents; (B) Permitted Subordinated Debt; (C) Debt in respect of Hedge Agreements entered into in order to manage existing or anticipated interest rate or exchange rate risks and not for speculative purposes and subordinated to the rights of the Lender Parties hereunder in a manner that is acceptable to the Required Lenders in an aggregate notional amount not to exceed $50,000,000 at any time outstanding; (ii) in the case of any of its Subsidiaries (other than any Excluded Subsidiary or any Inactive Foreign Subsidiary), (A) Debt owed to the Borrower or to a wholly-owned Subsidiary of the Borrower; and (iii) in the case of the Borrower and any of its Subsidiaries, (A) Debt secured by Permitted Liens described in clause (c) or (d) of the definition of Permitted Liens; provided, however, that the principal amount of any such Debt incurred during any fiscal year shall not exceed $15,000,000; (B) the Surviving Debt; (C) Debt consisting of Capitalized Leases entered into pursuant to Permitted Sale-Leaseback Transactions; (D) Debt of the Borrower in an aggregate principal amount not to exceed $20,000,000 incurred with respect to any Permitted Sale- Leaseback Repurchase; (E) Debt of any Excluded Subsidiary permitted by the organizational documents of such Excluded Subsidiary; 59 (F) Debt consisting of a Permitted Refinancing; (G) additional unsecured Debt of the Borrower and its Subsidiaries not to exceed $25,000,000 at any time outstanding; and (H) indorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; provided, however, that notwithstanding any contrary provision hereof or of any other Loan Document, the Borrower shall not incur any Indebtedness (as defined in the indenture relating to the senior subordinated notes of the Borrower described in clause (A) of the definition of "Permitted Subordinated Debt"), other than Debt under the Loan Documents, in reliance upon clause (i) of the second paragraph of Section 4.07(a) of such indenture or in reliance on any corresponding provision of any Permitted Refinancing thereof. (c) Lease Obligations. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any obligations as lessee under any transaction that is not a Capitalized Lease for the rental or hire of real or personal property in connection with any sale and leaseback transaction other than (i) the CRC Leases or (ii) Permitted Sale-Leaseback Transactions. (d) Mergers, Etc. Merge into or consolidate with any Person or permit any Person to merge into it, or permit any of its Subsidiaries to do so, except as contemplated by Section 6.01(m) and except that (i) any wholly-owned Solvent Subsidiary (other than an Excluded Subsidiary) of the Borrower may merge into or consolidate with any other wholly-owned Solvent Subsidiary (other than an Excluded Subsidiary) of the Borrower provided that, in the case of any such consolidation, the Person formed by such consolidation shall be a Subsidiary of the Borrower, and (ii) any of the Borrower's wholly-owned Subsidiaries (other than an Excluded Subsidiary) that is Solvent may merge into the Borrower. (e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets or grant any option or other right to purchase, lease or otherwise acquire any assets except (i) in a transaction authorized by Section 6.02(d), (ii) Excluded Asset Sales, (iii) any Permitted CRC Transaction and (iv) so long as no Default shall occur and be continuing, the grant of any option or other right to purchase any asset in a transaction which would be permitted under the provisions of the next preceding clauses (i), (ii) and (iii). (f) Investments in Other Persons. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person other than (i) Investments by the Borrower and its Subsidiaries in their Subsidiaries outstanding on the date hereof and additional investments in wholly-owned Subsidiaries that are Loan Parties (other than Inactive Subsidiaries); 60 (ii) Investments by the Borrower and its Subsidiaries in Excluded Subsidiaries and Inactive Subsidiaries; provided, however, that the aggregate Investment by the Borrower and its Subsidiaries in all Excluded Subsidiaries and Inactive Subsidiaries shall not exceed $3,000,000; (iii) loans and advances to officers and employees of the Borrower and its Subsidiaries in the ordinary course of the business of the Borrower and its Subsidiaries as presently conducted in an aggregate principal amount not to exceed $2,000,000 at any time outstanding; (iv) Investments by the Borrower and its Subsidiaries in Cash Equivalents and in Hedge Agreements permitted under Section 6.02(b)(i)(C); (v) advances in connection with purchases of equipment and inventory in the ordinary course of business of the Borrower and its Subsidiaries as presently conducted, required deposits in connection with leases and otherwise in the ordinary course of business as presently conducted in an aggregate principal amount not to exceed $10,000,000 at any time outstanding and Capital Expenditures otherwise permitted hereunder; (vi) Investments in joint ventures in an aggregate amount at any time outstanding not to exceed $4,000,000, subject to Section 6.02(o); (vii) loans and advances to Jack In The Box franchisees in the ordinary course of business of the Borrower and its Subsidiaries consistent with past practice in an aggregate amount at any one time outstanding not to exceed $5,000,000; (viii) Investments consisting of Permitted Sale-Leaseback Repurchases; (ix) Investments consisting of the assumption of up to $5,000,000 in Debt of the Borrower's franchisees in connection with any purchase of a restaurant and related assets and assumption of related liabilities from a franchisee of the Borrower; (x) Investments consisting of Permitted CRC Transactions; and (xi) Investments by any Excluded Subsidiary permitted by the organizational documents of such Excluded Subsidiary; and (xii) other Investments in an aggregate amount invested not to exceed $5,000,000. (g) Dividends, Etc. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding, return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or 61 securities to its stockholders as such or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock, or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of the Borrower or any warrants, rights or options to acquire such capital stock or to issue or sell any capital stock or any warrants, rights or options to acquire such capital stock, except that, so long as no Default shall have occurred and be continuing, the Borrower may (i) declare and deliver dividends and distributions payable only in (and to the holders of) common stock of the Borrower, (ii) the Borrower may issue any stock or stock options or warrants or derivative rights in respect thereof (including, without limitation, stock options, restricted stock, stock appreciation rights and phantom stock) pursuant to any employee benefit plan or program or compensation plan for officers, employees, directors and consultants, including, without limitation, employee stock purchase plans, qualified or non-qualified plans of deferred compensation, 401(K) plans, or similar programs for officers, employees, directors and consultants, (iii) the Borrower and its Subsidiaries may enter into any merger or consolidation permitted under Section 6.02(d) and may sell or otherwise dispose of assets to the extent permitted by Section 6.02(e), (iv) the Borrower may declare and deliver dividends and distributions payable in cash to the holders of common stock of the Borrower in an amount up to $10,000,000 per fiscal year, provided that at the time of declaration thereof and after any such payment, the Borrower would not be in Default hereunder; and (v) the Borrower may acquire capital stock of the Borrower, provided that the aggregate purchase price for any such capital stock in any fiscal year shall not exceed $10,000,000 and that at the time of and immediately after any such acquisition, the Borrower would not be in Default hereunder. (h) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof. (i) Corporate Organization. (A) Create any Subsidiaries (other than Excluded Subsidiaries) not in existence on the date hereof; or (B) amend, or permit any of its Subsidiaries (whether or not existing on the date hereof) to amend, its certificate or articles of incorporation, bylaws or other organizational or charter documents. (j) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required by generally accepted accounting principles. (k) Prepayments, Etc. of Debt. (i) Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner the CRC Excluded Debt or any Debt other than (A) the prepayment of the Advances in accordance with the terms of this Agreement, (B) regularly scheduled or required repayments or redemptions of Surviving Debt, (C) the redemption of the Existing Senior Notes as contemplated hereby and (D) the redemption of the Existing Senior Subordinated Notes following the issuance of the senior subordinated notes described in clause (A) of the definition of "Permitted Subordinated Debt"; (ii) make any payment in violation of any subordination terms of any Debt; or (iii) amend, modify or change in any manner any term or condition of any Surviving Debt or Permitted Subordinated Debt in a manner adverse to the Agent or the Lenders, or permit any of its Subsidiaries to do any of the foregoing other than to prepay any Debt payable to the Borrower. 62 (l) Payment Restrictions Affecting Certain Subsidiaries. Enter into, or permit any of its Subsidiaries (other than any Excluded Subsidiary) to enter into, any agreement, instrument or other document which directly or indirectly prohibits or restricts in any manner, or would have the effect of prohibiting or restricting in any manner, the ability of any of the Borrower's Subsidiaries (other than any Excluded Subsidiary) to (i) pay dividends or make any other distributions in respect of its capital stock or any other equity interest or participation in its profits owned by the Borrower or any of its Subsidiaries, or pay or repay any Debt owed to the Borrower or any of its Subsidiaries, (ii) make loans or advances to the Borrower, or (iii) transfer any of its properties or assets to the Borrower or any of its Subsidiaries; provided, however, that the foregoing provisions shall not restrict any encumbrances or restrictions: (A) existing on the Closing Date in any agreements in effect on the Closing Date, and any modifications, extensions, refinancings, renewals, substitutions or replacements of such agreements, provided that the encumbrances and restrictions in any such modifications, extensions, refinancings, renewals, substitutions or replacements are no less favorable in any material respect to the Lender Parties than those encumbrances or restrictions that are then in effect and that are being modified, extended, refinanced, renewed, substituted or replaced; (B) existing under or by reason of applicable law; (C) existing with respect to any Person or the property or assets of such Person acquired by the Borrower or any Subsidiary thereof, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired, and any modifications, extensions, refinancings, renewals, substitutions or replacements of such agreements, provided that the encumbrances and restrictions in any such modifications, extensions, refinancings, renewals, substitutions or replacements are no less favorable in any material respect to the Lender Parties than those encumbrances or restrictions that are then in effect and that are being modified, extended, refinanced, renewed, substituted or replaced; and (D) in the case of clause (iii) above, (X) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, (Y) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Subsidiary thereof (other than any Excluded Subsidiary) not otherwise prohibited hereby or (Z) arising or agreed to in the ordinary course of business, not relating to any Debt, and that do not, individually or in the aggregate, detract from the value of property or assets of the Borrower or any Subsidiary thereof (other than any Excluded Subsidiary) in any manner material to the Borrower or any Subsidiary thereof (other than any Excluded Subsidiary). Nothing contained in this Section 6.02(l) shall prevent the Borrower or any Subsidiary thereof from (1) creating, incurring, assuming or suffering to exist any Liens otherwise permitted by Section 6.02(a) or (2) restricting the sale or other disposition of property or assets of the Borrower or its Subsidiaries that secure Debt of the Borrower or any of its Subsidiaries to the extent such Liens and such Debts are permitted hereunder. (m) Negative Pledge. From and after the Collateral Release Date, enter into or permit any of its Subsidiaries (other than any Excluded Subsidiary) to enter into any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets other than any agreement (i) in favor of the Agent and the Lender Parties or (ii) in connection with any Surviving Debt and any Debt of a Subsidiary outstanding on the date 63 such Subsidiary first becomes a Subsidiary; provided that this Section 6.02(m) shall not apply to restrictions under Capitalized Leases with respect to the property subject thereto or to Debt secured by Liens of the type described in clause (d) of the definition of Permitted Liens, provided such restrictions are by their terms effective only against the assets subject to such Liens. (n) Partnerships. Become a general partner in any general or limited partnership (other than an Excluded Subsidiary), or permit any of its Subsidiaries (other than an Excluded Subsidiary) to become a general partner in any general or limited partnership, other than any Subsidiary the sole assets of which consist of its interest in such partnership. Section 6.03. Reporting Requirements. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, the Borrower will, unless the Required Lenders shall otherwise consent in writing, furnish (or, in the case of the items set forth in Section 6.03(g), make available) to the Lender Parties: (a) Default Notice. As soon as possible and in any event within two days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer or treasurer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto (b) Quarterly Financials. As soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, Consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and duly certified (subject to year-end audit adjustments) by the chief financial officer or chief accounting officer of the Borrower as having been prepared in accordance with GAAP, together with (i) a certificate of said officer stating that the representations and warranties in Section 5.01 are true and correct in all material respects as of the date of such certificate and that 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 the Borrower has taken and proposes to take with respect thereto and (ii) a schedule in form satisfactory to the Agent of the computations used by the Borrower in determining compliance with the covenants contained in Sections 6.02(a), (b), (c), (e), (f) and (g) and Sections 6.04(a) through (e) inclusive. (c) Annual Financials. As soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such year for the Borrower and its Subsidiaries, including therein Consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal year and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case accompanied by an opinion acceptable to the Required Lenders of KPMG Peat Marwick or other independent public accountants of recognized standing acceptable to the Required Lenders, together with (i) a certificate of the chief 64 financial officer or chief accounting officer of the Borrower stating that the representations and warranties in Section 5.01 are true and correct in all material respects as of the date of such certificate, 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 the Borrower has taken and proposes to take with respect thereto, and (ii) a schedule in form satisfactory to the Agent of the computations used by the chief financial officer of the Borrower in determining, as of the end of such financial year, compliance with the covenants contained in Sections 6.02(a), (b), (c), (e), (f) and (g) and Sections 6.04(a) through (e) inclusive. (d) Annual Forecasts. As soon as available and in any event no later than 30 days following the end of each fiscal year of the Borrower, forecasts prepared by management of the Borrower, in form satisfactory to the Agent, of income statements and cash flow statements for each four week period for the fiscal year following such fiscal year then ended and a projected year-end balance sheet and on an annual basis for each fiscal year thereafter until the Termination Date. (e) ERISA Events. Promptly and in any event within ten days after any Loan Party or any of its ERISA Affiliates knows or has reason to know that any ERISA Event with respect to any Loan Party or any of its ERISA Affiliates has occurred, a statement of the chief financial officer of the Borrower describing such ERISA Event and the action, if any, that such Loan Party or such ERISA Affiliate has taken and proposes to take with respect thereto. (f) Plan Terminations. Promptly and in any event within ten days after receipt thereof by any Loan Party or any of its ERISA Affiliates, copies of each notice from the PBGC stating its intention to terminate any Plan of any Loan Party or any of its ERISA Affiliates or to have a trustee appointed to administer any such Plan. (g) Plan Annual Reports. Promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan of each Loan Party or any of its ERISA Affiliates. (h) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(e), and promptly after the occurrence thereof, notice of any significant adverse change in the status or the financial effect on any Loan Party or any of their Subsidiaries of the Disclosed Litigation from that disclosed in the Borrower's Form 10-K; provided, that such notice would not, in the opinion of counsel to the Borrower, constitute a waiver of the attorney-client privilege with respect to any matter related to such litigation. (i) Press Releases; Securities Reports. Concurrently with the sending or filing thereof, copies of all (i) press releases, (ii) proxy statements, financial statements and reports that any Loan Party or any of its Subsidiaries sends to its stockholders, and (iii) regular, periodic and special reports, and all registration statements, that any Loan Party or any of its 65 Subsidiaries files with the Securities and Exchange Commission (including any reports on Forms 10-K or 10-Q) or any governmental authority that may be substituted therefor, or with any national securities exchange. (j) Creditor Reports. Promptly after the furnishing thereof, copies of any statement or report furnished to any other holder of the securities of any Loan Party or of any of its Subsidiaries pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lender Parties pursuant to any other clause of this Section 6.03. (k) Environmental Conditions. Promptly after the occurrence thereof, notice of any condition or occurrence on any property of any Loan Party or any of its Subsidiaries that results in a material noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit or would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or such property that could have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. (l) Other Information. Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as any Lender Party may from time to time reasonably request. Section 6.04. Financial Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, the Borrower will, unless the Required Lenders otherwise consent in writing: (a) Net Worth. Maintain a Consolidated Net Worth of not less than an amount equal to the sum of: (i) $90,045,000, plus, (ii) 50% of the Consolidated Net Income arising or otherwise attributable to periods commencing on or after January 18, 1998, plus (iii) 100% of the Net Cash Proceeds of the sale or issuance by the Borrower or any of its Subsidiaries of any capital stock, any securities convertible into or exchangeable for such capital stock or any warrants, rights or options to acquire such capital stock, plus (iv) 100% of the excess of Consolidated total assets over Consolidated total liabilities of or attributable to any Person or business acquired or formed on or after the Closing Date. (b) Fixed Charge Coverage Ratio. Maintain, for each period of four consecutive fiscal quarters ending as of the last day of any fiscal quarter, a ratio of Consolidated EBITDA plus rental expense under leases of real or personal, or mixed, property during such period to the sum of (i) interest expense of the Borrower and its Subsidiaries on, and amortization of debt discount in respect of, all Debt during such period plus (ii) rental expense of the Borrower and its Subsidiaries under leases of real or personal, or mixed, property during such period plus (iii) principal amounts of all Debt payable during such period by the Borrower and its Subsidiaries of not less than 1.25:1.00 at any time. 66 (c) Funded Debt to EBITDA Ratio. Maintain as at the end of any period of four consecutive fiscal quarters ending during a test period set forth below a ratio of Funded Debt of the Borrower and its Subsidiaries on a Consolidated basis to Consolidated EBITDA of not more than the amount set forth below for each period set forth below: Fiscal Quarter Ending On Ratio ----------------------- --------- Closing Date through and including July 11, 1999 3.75:1.00 July 12, 1999 through and including July 8, 2001 3.50:1.00 July 9, 2001 through and including the Termination Date 3.00:1.00 provided, however, that, notwithstanding anything to the contrary herein, at any time on or after the Collateral Release Date, the Borrower will maintain a ratio of Funded Debt of the Borrower and its Subsidiaries on a Consolidated basis to Consolidated EBITDA of not greater than 3.00:1.00 at any time. (d) Capital Expenditures. Not make, or permit any of its Subsidiaries to make, any Capital Expenditures that would cause the aggregate of all such Capital Expenditures made by the Borrower and its Subsidiaries in any period set forth below to exceed the amount set forth below for such period: Fiscal Year Amount ----------- ------------ 1998 $115,000,000 1999 $125,000,000 2000 $140,000,000 2001 $160,000,000 2002 $166,000,000 2003 $166,000,000 The Borrower and its Subsidiaries may carry forward to the next succeeding fiscal year only (but not to subsequent fiscal years) the amount by which the actual Capital Expenditures of the Borrower and its Subsidiaries in any fiscal year are less than the Capital Expenditures amount set forth above as permitted in such fiscal year; provided, however, that the maximum amount that may be carried forward to the next succeeding fiscal year shall be $10,000,000. ARTICLE VII. EVENTS OF DEFAULT Section 7.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: 67 (a) the Borrower shall fail to pay any principal of any Advance when the same becomes due and payable; or any Loan Party shall fail to make any interest or any other payment under any Loan Document within three days after such interest or other amount becomes due and payable; or (b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or (c) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 6.02 or 6.04; or (d) any Loan Party shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 10 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender Party; or (e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Debt that is outstanding in a principal or notional amount of at least $5,000,000 in the aggregate (but excluding Debt outstanding hereunder) of such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder thereof to cause, such Debt to mature; or any such Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (f) any Loan Party or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or any Loan Party or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or (g) any judgment or order for the payment of money in excess of $5,000,000 (to the extent not paid or fully covered by insurance) shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 60 consecutive days 68 during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (h) any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that could have a Material Adverse Effect, and there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (i) any provision of any Loan Document after delivery thereof pursuant to Section 4.01 shall for any reason cease to be valid and binding on or enforceable against any Loan Party to it, or any such Loan Party shall so state in writing; or (j) any Collateral Document after delivery thereof pursuant to Section 4.01 shall, after the making of all appropriate filings or notifications necessary to create a perfected Lien thereon, for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected Lien with the priority required by the applicable Collateral Document on the Collateral purported to be covered thereby; or (k) a Change of Control shall occur; or (l) any ERISA Event shall have occurred with respect to a Plan of any Loan Party or any of its ERISA Affiliates and the liability of the Loan Parties and their ERISA Affiliates related to such ERISA Event and any and all other ERISA Events which shall have occurred and then exist with respect to any Plans of the Loan Parties and their ERISA Affiliates exceeds (i) $18,254,000 (the amount of the Insufficiency on the Closing Date) plus $4,000,000 to the extent such liability relates to the Insufficiency of the Plans, or (ii) $2,000,000 in all other circumstances; or (m) any Loan Party or any of its ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan of any Loan Party or any of its ERISA Affiliates that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Loan Parties and their ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $2,000,000 or requires payments exceeding $1,000,000 per annum; or (n) any Loan Party or any of its ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan of any Loan Party or any of its ERISA Affiliates that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Loan Parties and their ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $2,000,000, 69 then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances and of the any Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Loan Party or any of its Subsidiaries under the Federal Bankruptcy Code, (x) the obligation of each Lender Party to make Advances and of the Issuing Bank to issue Letters of Credit shall automatically be terminated and (y) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. Section 7.02. Actions in Respect of the Letters of Credit Upon Default. If any Event of Default shall have occurred and be continuing, the Agent may, irrespective of whether it is taking any of the actions described in Section 7.01 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Agent on behalf of the Lender Parties in same day funds at the Agent's office designated in such demand, for deposit to a non-interest bearing account established by the Agent for such purposes or for purposes of Section 2.05(b)(iv) (the "L/C Cash Collateral Account"), an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding (and the Borrower hereby grants to the Agent, for the ratable benefit of the Agent and each Lender Party, a continuing security interest in all amounts at any time on deposit in the L/C Cash Collateral Account to secure all Letter of Credit Obligations from time to time outstanding and all other Obligations hereunder). If at any time the Agent determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Agent and the Lender Parties or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Agent determines to be free and clear of any such right and claim. ARTICLE VIII. THE AGENT Section 8.01. Authorization and Action. Each Lender Party hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes, the Agent shall not 70 be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lender Parties and all holders of Notes; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement or applicable law. The Agent agrees to give to each Lender Party prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. Section 8.02. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (i) may treat the payee of any Note as the holder thereof until the Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07; (ii) may consult with legal counsel (including counsel for any Loan Party), 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; (iii) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations made in or in connection with the Loan Documents; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or to inspect the property (including the books and records) of any Loan Party; (v) shall not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant hereto or thereto; 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 (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. Section 8.03. NationsBank and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, NationsBank shall have the same rights and powers under the Loan Documents as any other Lender Party and may exercise the same as though it were not the Agent; and the terms "Lender", "Lenders", "Lender Party" or "Lender Parties" shall, unless otherwise expressly indicated, include NationsBank in its individual capacity. NationsBank and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of its Subsidiaries and any Person who may do business with or own securities of any Loan Party or any such Subsidiary, all as if NationsBank were not the Agent and without any duty to account therefor to the Lender Parties. Section 8.04. Lender Party Credit Decision. Each Lender Party acknowledges that it has, independently and without reliance upon the Agent or any other Lender Party and based on the financial statements referred to in Section 5.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this 71 Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon the Agent or any other Lender Party 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. Section 8.05. Indemnification. Each Lender Party severally agrees to indemnify the Agent and the Arranger (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party's ratable share of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent or the Arranger in any way relating to or arising out of the Loan Documents or any action taken or omitted by the Agent or the Arranger under the Loan Documents; provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's or the Arranger's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender Party agrees to reimburse each of the Agent and the Arranger promptly upon demand for its ratable share of any costs and expenses payable by the Borrower under Section 9.04, to the extent that the Agent and the Arranger are not promptly reimbursed for such costs and expenses by the Borrower. For purposes of this Section 8.05, the Lender Parties' respective ratable shares of any amount shall be determined, at any time, according to the sum of (a) the aggregate principal amount of the Advances (other than L/C Advances) outstanding at such time and owing to the respective Lender Parties, (b) their respective Pro Rata Shares of the aggregate Letter of Credit Obligations outstanding at such time, plus (c) their respective Unused Revolving Commitments at such time. The failure of any Lender Party to reimburse the Agent or the Arranger promptly upon demand for its ratable share of any amount required to be paid by the Lender Parties to the Agent or the Arranger as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse the Agent or the Arranger, as applicable, for its ratable share of such amount, but no Lender Party shall be responsible for the failure of any other Lender Party to reimburse the Agent or the Arranger for such other Lender Party's ratable share of such amount. Section 8.06. Successor Agents. The Agent may resign at any time by giving written notice thereof to the Lender Parties and the Borrower and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 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 Lender Parties, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent and upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens 72 granted or purported to be granted by the Collateral Documents, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. ARTICLE IX. MISCELLANEOUS Section 9.01. Amendments, Etc; Release of Collateral. (a) Amendments. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders (and, in the case of any such amendment, the Borrower), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (a) no amendment, waiver or consent shall, unless in writing and signed by all the Lender Parties, do any of the following at any time: (i) waive any of the conditions specified in Section 4.02 or, in the case of the initial Borrowing, 4.01, (ii) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes that shall be required for the Lender Parties or any of them to take any action hereunder, (iii) release all or substantially all of the Collateral (except pursuant to Section 9.01(b)) or release any Guarantor from its obligations under the Guaranty or (iv) amend this Section 9.01 or amend Section 2.05, and (b) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender that has a Commitment under the Facility affected by such amendment, waiver or consent, (i) increase the Commitments of such Lender or subject such Lender to any additional obligations, (ii) reduce the principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender, or (iii) postpone any date fixed for any payment of principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender or the Issuing Bank, as the case may be, in addition to the Lenders required above to take such action, affect the rights or obligations of the Swing Line Lender or of the Issuing Bank, as the case may be, under this Agreement; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note. (b) Release of Collateral. Anything contained in this Agreement or any of the other Loan Documents to the contrary notwithstanding, upon delivery of a certificate of the chief financial officer of the Borrower certifying that one or more of the Collateral Release Tests has been satisfied and the written request of the Borrower, the Collateral Documents shall be terminated, and all collateral pledged under the Collateral Documents shall be released, without further action on the part of the Agent or any Lender Party (the date of such release, the "Collateral Release Date"). Any release of collateral pledged 73 under the Collateral Documents in accordance with the provisions of this Section 9.01(b) shall be deemed to be a release of such pledged collateral upon the approval thereof by all of the Lender Parties for purposes of the Loan Documents. In connection with any such release, the Agent shall, upon request, at the Borrower's expense, execute all such further documents and instruments as may be reasonably requested by the Borrower in order to more fully evidence or effect such release. Section 9.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy, telex or cable communication) and mailed, telegraphed, telecopied, telexed, cabled or delivered, if to the Borrower, at its address at Foodmaker, Inc., 9330 Balboa Avenue, San Diego, California 92123-1516, Telecopier No. (619) 571-2101, Attn: Treasurer, with a courtesy copy to the Borrower at Telecopier No. (619) 277-9791, Attn: Treasurer and a courtesy copy to Andrew E. Bogen, Gibson, Dunn & Crutcher LLP, 333 South Grand Ave., Los Angeles, CA 90071; if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at 901 Main Street, Dallas, Texas 75202, Telecopier No.: (214) 508-2118, Attn: Donna Cornell, Agency Services, with a copy to NationsBank, 444 South Flower Street, Suite 4100, Los Angeles, California 90071-2901, Telecopier No. (213) 624-5815, Attn: George V. Hausler; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed, telecopied, telexed or cabled, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier, confirmed by telex answerback or delivered to the cable company, respectively, except that notices and communications to the Agent pursuant to Article II, III, IV or VIII shall not be effective until received by the Agent. Section 9.03. No Waiver; Remedies. No failure on the part of any Lender Party or the Agent to exercise, and no delay in exercising, any right hereunder, under any Note or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 9.04. Costs and Expenses. (a) The Borrower agrees to pay on demand (i) all reasonable costs and expenses of the Agent and the Arranger in connection with the preparation, execution, delivery, syndication, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses and (B) the reasonable fees and expenses of counsel for the Agent and the Arranger with respect thereto, with respect to advising each of the Agent and the Arranger as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to 74 a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto) and (ii) all costs and expenses of the Agent, the Arranger, each Lender and each Issuing Bank in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise (including, without limitation, the reasonable fees and expenses of counsel for the Agent, the Arranger and each Lender Party with respect thereto). (b) The Borrower agrees to indemnify and hold harmless the Agent, the Arranger, each Lender, each Issuing Bank and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) this Agreement or any other Loan Document, the actual or proposed use of the proceeds of any Advance or of any Letter of Credit issued hereunder or any of the transactions contemplated hereby (including the redemption of the Existing Senior Notes as contemplated hereby) or by the other Loan Documents, or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, in each case whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. The Borrower also agrees not to assert any claim against the Agent, the Arranger, any Lender Party, any of their affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to any of the transactions contemplated herein or in any other Loan Document or the actual or proposed use of the proceeds of the Advances. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or conversion pursuant to Section 2.05 or 2.06, acceleration of the maturity of the Notes pursuant to Section 7.01, or for any other reason, or by an Eligible Assignee to a Lender Party other than on the last day of the Interest Period for such Advance upon an assignment of rights and obligations under this Agreement pursuant to a demand by the Borrower pursuant to Section 9.07(a), the Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional out-of- pocket losses, costs or expenses that it may reasonably incur as a result of such payment, including, without limitation, any out-of-pocket loss, cost or 75 expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance. (d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Agent or any Lender Party, in its sole discretion and the Borrower shall reimburse the Agent or such Lender Party on demand for any amounts so paid with interest thereon at the Default Rate from the date of such payment until so reimbursed. Section 9.05. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 7.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 7.01, each Lender Party and each of is Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise 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 Party or such Affiliate 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 and the Note or Notes held by such Lender Party, irrespective of whether such Lender Party shall have made any demand under this Agreement or such Note or Notes and although such obligations may be unmatured. Each Lender Party agrees promptly to notify the Borrower after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender Party and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender Party and its Affiliates may have. Section 9.06. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Agent and when the Agent shall have been notified by each Bank that such Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender Party and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties. Section 9.07. Assignments and Participations. (a) Each Lender Party may and, if demanded by the Borrower (which demand may only be made within 30 days after a demand by such Lender Party pursuant to Section 2.08(a), 2.08(b) or 2.10 upon at least 10 Business Days' notice to such Lender Party and the Agent), will assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations under and in respect of all of the Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender Party or an assignment of all 76 of a Lender Party's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender Party being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000, (iii) each such assignment shall be to an Eligible Assignee, (iv) each such assignment made as a result of a demand by the Borrower pursuant to this Section 9.07(a) shall be arranged by the Borrower after consultation with the Agent and shall be either an assignment of all of the rights and obligations of the assigning Lender Party under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender Party under this Agreement, (v) no Lender Party shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section 9.07(a) unless and until such Lender Party shall have received one or more payments from either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender Party, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender Party under this Agreement, and (vi) 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 any Note or Notes subject to such assignment and a processing and recordation fee of $3,500. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto 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 Party hereunder and (y) the Lender Party assignor thereunder 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, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender Party's rights and obligations under this Agreement, such Lender Party shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender Party assignor thereunder 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 Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any other Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 5.01 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 77 without reliance upon the Agent, such assigning Lender Party or any other Lender Party 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; (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 to exercise such powers and discretion under the Loan Documents as are delegated to the Agent by the terms hereof, together with such powers and discretion 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 this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be. (c) The Agent shall maintain at its address referred to in Section 9.02 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 Lender Parties and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender Party 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 and the Lender Parties may treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee, together with any Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit A hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it under a Facility pursuant to such Assignment and Acceptance and, if the assigning Lender Party has retained a Commitment hereunder under such Facility, a new Note to the order of the assigning Lender Party in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit D-1 or D-2 hereto, as applicable. (e) Each Lender Party may sell participations in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender Party's obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agent and the other Lender 78 Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party's rights and obligations under this Agreement, and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, release all or substantially all of the Collateral (other than pursuant to Section 9.01(b)) or release any Guarantor from its obligations under the Guaranty. (f) Any Lender Party may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender Party by or on behalf of the Borrower; provided, however, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Lender Party. (g) Notwithstanding any other provision set forth in this Agreement, any Lender Party may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. Section 9.08. Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA. Section 9.09. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. Section 9.10. No Liability of the Issuing Bank. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank against presentation of documents that do not comply with the terms of a Letter 79 of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) the Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, 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. Section 9.11. Confidentiality. Except as may be required to enforce the rights and duties established hereunder and under the other Loan Documents (including establishing and maintaining the perfection and priority of the security interests in the Collateral), neither the Agent nor any Lender Party shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) to the Agent's or such Lender Party's Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process and (c) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking. Section 9.12. Waiver of Jury Trial. EACH OF THE BORROWER, THE AGENT, THE ISSUING BANK AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES, ANY LETTER OF CREDIT OR THE ACTIONS OF THE AGENT OR ANY LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. 80 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. FOODMAKER, INC. By: HAROLD L. SACHS --------------- Name: Harold L. Sachs --------------- Title: Treasurer --------------- NATIONSBANK OF TEXAS, N.A., as Agent By: GEORGE V. HAUSLER ----------------- Name: George V. Hausler ----------------- Title: Vice President ----------------- CREDIT LYONNAIS LOS ANGELES BRANCH, as Documentation Agent By: DIANNE M. SCOTT --------------- Name: Dianne M. Scott --------------- Title: Vice President and Manager -------------------------- Issuing Bank ------------ NATIONSBANK OF TEXAS, N.A., as L/C Bank By: GEORGE V. HAUSLER ----------------- Name: George V. Hausler ----------------- Title: Vice President ----------------- Initial Lenders --------------- NATIONSBANK OF TEXAS, N.A., as Initial Lender By: GEORGE V. HAUSLER ----------------- Name: George V. Hausler ----------------- Title: Vice President ----------------- CREDIT LYONNAIS LOS ANGELES BRANCH, as Initial Lender By: DIANNE M. SCOTT --------------- Name: Dianne M. Scott --------------- Title: Vice President and Manager -------------------------- ROYAL BANK OF CANADA, as Initial Lender By: JOHN LUSTGARTEN --------------- Name: John Lustgarten --------------- Title: Manager --------------- UNION BANK OF CALIFORNIA, N.A., as Initial Lender By: ANN M. YASUDA ------------- Name: Ann M. Yasuda ------------- Title: Vice President -------------- U.S. BANK NATIONAL ASSOCIATION, as Initial Lender By: JANET JORDAN ------------ Name: Janet Jordan ------------ Title: Vice President -------------- BANK ONE, TEXAS, N.A., as Initial Lender By: WYATT DICKSON ------------- Name: Wyatt Dickson ------------- Title: Assistant Vice President ------------------------ CIBC INC., as Initial Lender By: CHRISTOPHER KLECZKOWSKI ----------------------- Name: Christopher Kleczkowski ----------------------- Title: Executive Director ----------------------- CIBC Oppenheimer Corp., AS AGENT THE FUJI BANK, LTD., LOS ANGELES AGENCY, as Initial Lender By: MASAHITO FUKUDA --------------- Name: Masahito Fukuda --------------- Title: Joint General Manager --------------------- SANWA BANK CALIFORNIA, as Initial Lender By: LARRY D. HART ------------- Name: Larry D. Hart ------------- Title: Vice President -------------- NATEXIS BANQUE - BFCE, as Initial Lender By: IAIN A. WHYTE ------------- Name: Iain A. Whyte ------------- Title: Vice President -------------- JOAN M. FARRELL --------------- Joan M. Farrell --------------- Assistant Vice President ------------------------ EX-27 4 ARTICLE 5 FDS FOR FISCAL YEAR 1997 SECOND QUARTER 10-Q
5 FISCAL YEAR THRU SECOND QUARTER CONTAINS 28 WEEKS 1000 6-MOS SEP-27-1998 SEP-29-1997 APR-12-1998 81,590 0 9,943 3,043 18,974 157,195 683,293 216,286 750,471 208,610 346,524 407 0 0 134,660 750,471 587,157 653,683 199,205 514,053 0 0 19,206 67,621 21,600 46,021 0 0 0 46,021 1.17 1.14
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