-----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, PYOS2YPxVKB9ghD7i5qHgl/7mXrLcAwsWUy1oTRGP0i5QgYlsgQdeGd9o+27J5Bm ltFlXDemtUNy/uOL+xG/iw== 0000949459-96-000247.txt : 19961203 0000949459-96-000247.hdr.sgml : 19961203 ACCESSION NUMBER: 0000949459-96-000247 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961122 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961202 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHECKERS DRIVE IN RESTAURANTS INC /DE CENTRAL INDEX KEY: 0000879554 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 581654960 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19649 FILM NUMBER: 96674938 BUSINESS ADDRESS: STREET 1: 600 CLEVELAND ST 8TH FL STREET 2: STE 1050 CITY: CLEARWATER STATE: FL ZIP: 34615 BUSINESS PHONE: 8134413500 8-K 1 CHECKERS DRIVE-IN RESTAURANTS, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): November 22, 1996 CHECKERS DRIVE-IN RESTAURANTS, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-19649 58-1654960 - ---------------------------- ------------ ------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 600 Cleveland Street, 8th Floor Clearwater, Florida 34615 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 813-441-3500 - 1 - Item 5. Other Events. ------------ Change in Primary Lender Group - ------------------------------ On November 22, 1996, Checkers Drive-In Restaurants, Inc. ("Checkers") entered into an Amended and Restated Credit Agreement (the "Restated Credit Agreement") which restructured its primary debt with its new senior secured lenders, who acquired the debt on November 14, 1996. The new lender group is led by CKE Restaurants, Inc. ("CKE") which, together with its affiliates Fidelity National Financial, Inc., William P. Foley, II, and Carl L. Karcher, acquired and holds approximately 55.8% of the approximately $35.8 million of outstanding debt due under the Restated Credit Agreement. The new lender group also includes KCC Delaware, a wholly-owned subsidiary of Giant Group, Ltd. ("Giant Group"), The Travelers Indemnity Company, Burt Sugarman, The Galileo Fund, L.P., Canpartners Investments IV, LLC, and Foothill Capital Corporation. The Galileo Fund, L.P., Canpartners Investments IV, LLC, and Foothill Capital Corporation were three of the four investment companies that previously owned all of the debt. CKE is the parent of Carl Karcher Enterprises, Inc., Casa Bonita, Incorporated and Summit Family Restaurants, Inc. Burt Sugarman is the Chairman of the Board, President and CEO of Giant Group and Chairman of the Board of Rally's Hamburgers, Inc. ("Rally's"). Giant Group and CKE (together with its affiliate Fidelity National Financial, Inc.) are controlling stockholders of Rally's. CKE and Rally's, directly or indirectly, own, franchise or license over 1400 restaurants. Pursuant to the terms of the Restated Credit Agreement, the term of the Agreement has been extended for an additional year to July 31, 1999. The interest rate on the outstanding indebtedness has been fixed at 13.0%. The principal repayment schedule has been revised to require no principal payments until the fifth period of fiscal 1997. For periods five through eleven in fiscal 1997, principal payments of $200,000 per period will be required. For periods twelve in fiscal 1997 through period three in fiscal 1998, the required principal payments will be the greater of $275,000 per period or 50% of consolidated cash flow for the previous period, and for periods four of fiscal 1998 through the end of the term of the loan, the required principal payments will be the greater of $350,000 per period or 60% of consolidated cash flow for the previous period. In addition to standard financial covenants, the Restated Credit Agreement requires Checkers to have a minimum amount of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) at the end of each period, beginning at $625,000 in the first period of fiscal 1997, $1 million in period 2, $1.25 million for periods 3 through 6, $1.3 million for periods 7 through 9, $2 million for periods 10 through 13, and $2.75 million for each period thereafter. It also limits capital expenditures to $4 million per year, unless otherwise approved by the Board of Directors of Checkers. - 2 - The new lender group agreed to eliminate a $4.0 million restructuring fee that had been demanded by the prior lending group as a condition to their restructuring of the loan, which fee had been agreed to by Checkers, as well as up to $2 million that could have been payable by Checkers under the prior loan agreement if Checkers had not made certain principal prepayments during the term of the loan. In connection with the restructuring, Checkers was required to issue warrants (the "Warrants") to the members of the new lender group to purchase an aggregate of 20 million shares of Checkers common stock for $0.75 per share, which was the approximate market price of the common stock prior to the announcement of the transfer of the debt. The Warrants are exercisable at any time until November 22, 2002. Checkers is obligated to register the common stock issuable under the Warrants within six months and to maintain such registration for the life of the Warrants. The holders of the Warrants also have other registration rights relating to the common stock to be issued under the Warrants. The Warrants contain customary antidilution provisions. The warrants to purchase 150,000 shares of Checkers common stock for $2.69 per share, which were issued in April 1995 to Checkers, prior bank lending group under the prior loan agreement, were cancelled. The new lenders also agreed to provide to Checkers a short-term revolving line of credit of up to $2.5 million and to guarantee the full subscription of a $10 million rights offering to be made by Checkers to the holders of its common stock and the holders of the Warrants, on a pro rata basis as if the Warrants had been exercised for common stock prior to the rights offering. Pursuant to the rights offering, Checkers will distribute to its stockholders and the holders of the Warrants rights to acquire shares of Checkers common stock for $10 million upon terms to be determined by the Board of Directors. The new lender group has agreed to purchase whatever shares are not purchased by Checkers' stockholders. Borrowings under the revolving line of credit will bear interest at an annual rate of 13% and will be due on the earlier of March 22, 1997, or the consummation of the rights offering. The term of the revolving line of credit can be extended by Checkers for up to three months, by issuing to the lending group for each one-month extension additional warrants to purchase 333,333 shares of Checkers common stock at an exercise price equal to 90% of the average closing price of the common stock over the 30-day period ending on the last day of the applicable period before giving effect to the extension. These additional warrants will have the same terms as the Warrants. Under the terms of the Restated Credit Agreement, Checkers can retain 50% of the proceeds from sales of assets and use the same for general corporate purposes, although sales of assets in excess of $250,000 in any transaction or series of related transactions have to be approved in advance by two-thirds in interest of the new lender group. The remaining 50% of sales proceeds must be used to pay down the indebtedness outstanding under the Restated Credit Agreement, but all payments will be applied against the payments due under the Agreement in order of their maturity. - 3 - Election of Chairman of the Board; Additions to Board of Directors - ------------------------------------------------------------------ On November 22, 1996, Checkers' Board of Directors elected Frederick E. Fisher, one of its existing Board members, as Chairman. In addition, in connection with the restructuring of its primary debt as described above, the Board increased its membership to seven and elected three new members nominated by the new lender group to fill the three vacancies. The new Board members include William P. Foley, II, Chairman and Chief Executive Officer of CKE Restaurants, Inc., Thomas Thompson, President of CKE Restaurants, Inc., and Terry Christensen, an attorney with the firm of Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, of Los Angeles, California. Mr. Christensen also serves as a director of Giant Group, Ltd. Under the terms of the Restated Credit Agreement, Checkers is obligated to maintain the number of Board seats at seven and to nominate and recommend to its stockholders for election as directors at each annual meeting nominees of the lender group so that at all times during the term of the Restated Credit Agreement nominees of the lender group will hold three of the seven Board seats. Lopez Litigation Settlement - --------------------------- On November 22, 1996, the United States District Court for the Middle District of Florida entered an Order and Final Judgment approving the previously announced settlement of the proceeding styled LOPEZ, ET AL. V. CHECKERS DRIVE-IN RESTAURANTS, INC., Case No. 94- 282-CIV-T-17C. The court certified the proceeding as a class action, with the plaintiff class comprised of all purchasers of Checkers common stock on the national securities markets between August 26, 1993 and March 15, 1994. Approximately 15 persons, who according to information filed with the court purchased an aggregate of approximately 10,000 shares of Checkers common stock during the relevant period, sought an exclusion from the class and were excluded. Pursuant to the settlement agreement, Checkers will issue warrants to the plaintiffs to purchase an aggregate of 5,100,000 shares of Checkers' common stock at a price of $1.375 per share. The warrants will terminate four years after issuance if not exercised before that date. - 4 - Item 7. Financial Statements and Exhibits. --------------------------------- (a) Financial Statements of Businesses Acquired. ------------------------------------------- None. (b) Pro Forma Financial Information. ------------------------------- None. (c) Exhibits. -------- Exhibit Number Exhibit Description ------ ------------------- 4.1 Amended and Restated Credit Agreement, dated as of November 22, 1996, between the Company, CKE Restaurants, Inc., as Agent, and the lenders listed therein. 4.2 Second Amended and Restated Security Agreement, dated as of November 22, 1996, between the Company and CKE Restaurants, Inc., as Agent. 4.3 Form of Warrant issued to lenders under the Amended and Restated Credit Agreement, dated November 22, 1996. - 5 - SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. CHECKERS DRIVE-IN RESTAURANTS, INC. By: /s/ Albert J. DiMarco ---------------------------------------- Albert J. DiMarco President and Chief Executive Officer Dated: November 29, 1996 - 6 - EXHIBIT INDEX Exhibit Number Exhibit Description ------ ------------------- 4.1 Amended and Restated Credit Agreement, dated as of November 22, 1996, between the Company, CKE Restaurants, Inc., as Agent, and the lenders listed therein. 4.2 Second Amended and Restated Security Agreement, dated as of November 22, 1996, between the Company and CKE Restaurants, Inc., as Agent. 4.3 Form of Warrant issued to lenders under the Amended and Restated Credit Agreement, dated November 22, 1996. - 7 - EX-4 2 EXHIBIT 4.1 AMENDED AND RESTATED CREDIT AGR. AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 22, 1996 among CHECKERS DRIVE-IN RESTAURANTS, INC. The Lenders Listed Herein and CKE RESTAURANTS, INC., as Agent TABLE OF CONTENTS AMENDED AND RESTATED CREDIT AGREEMENT Page ---- ARTICLE IDEFINITIONS............................1 SECTION 1.01. Definitions..........................................1 SECTION 1.02. Accounting Terms and Determinations.................12 SECTION 1.03. References..........................................13 SECTION 1.04. Use of Defined Terms................................13 SECTION 1.05. Terminology.........................................13 ARTICLE II THE CREDIT...........................13 SECTION 2.01. Syndicated Term Loans...............................13 SECTION 2.02. Commitment to Lend Revolving Participated Loans.....14 SECTION 2.03. Notes; Miscellaneous Matters........................14 SECTION 2.04. Maturity of Loans...................................16 SECTION 2.05. Interest Rates......................................16 SECTION 2.06. Intentionally Deleted...............................16 SECTION 2.07. Optional Prepayments of Syndicated Term Loan Notes..16 SECTION 2.08. Principal Payments of Notes.........................16 SECTION 2.09. Intentionally Deleted...............................18 SECTION 2.10. Intentionally Deleted...............................18 SECTION 2.11. General Provisions as to Payments...................18 SECTION 2.12. Computation of Interest and Fees....................18 SECTION 2.13. Collateral..........................................18 SECTION 2.14. Waiver and Release..................................19 i ARTICLE III CONDITIONS TO CLOSING.....................20 SECTION 3.01. Conditions to Closing...............................20 SECTION 3.02. Conditions to All Borrowings........................22 ARTICLE IV REPRESENTATIONS AND WARRANTIES.................22 SECTION 4.01. Corporate Existence and Power.......................22 SECTION 4.02. Corporate and Governmental Authorization; No Contravention....................................22 SECTION 4.03. Binding Effect......................................23 SECTION 4.04. Financial Information...............................23 SECTION 4.05. No Litigation.......................................23 SECTION 4.06. Compliance with ERISA...............................23 SECTION 4.07. Compliance with Laws; Payment of Taxes..............23 SECTION 4.08. Consolidated Subsidiaries...........................24 SECTION 4.09. Investment Company Act..............................24 SECTION 4.10. Public Utility Holding Company Act..................24 SECTION 4.11. Ownership of Property; Liens........................24 SECTION 4.12. No Default..........................................24 SECTION 4.13. Full Disclosure.....................................24 SECTION 4.14. Environmental Matters...............................25 SECTION 4.15. Capital Stock.......................................25 SECTION 4.16. Margin Stock........................................25 SECTION 4.17. Insolvency..........................................26 ARTICLE V COVENANTS............................26 SECTION 5.01. Information.........................................26 SECTION 5.02. Inspection of Property, Books and Records...........29 ii SECTION 5.03. Minimum Consolidated EBITDA.........................29 SECTION 5.04. Capital Expenditures................................29 SECTION 5.05. Intentionally Deleted...............................30 SECTION 5.06. Intentionally Deleted...............................30 SECTION 5.07. Restricted Payments.................................30 SECTION 5.08. Limitation on Indebtedness..........................30 SECTION 5.09. Loans or Advances...................................30 SECTION 5.10. Investments.........................................31 SECTION 5.11. Negative Pledge.....................................31 SECTION 5.12. Maintenance of Existence............................32 SECTION 5.13. Dissolution.........................................32 SECTION 5.14. Consolidations, Mergers and Sales of Assets.........32 SECTION 5.15. Use of Proceeds.....................................32 SECTION 5.16. Compliance with Laws; Payment of Taxes; SEC Filings.32 SECTION 5.17. Insurance...........................................33 SECTION 5.18. Change in Fiscal Year...............................33 SECTION 5.19. Maintenance of Property.............................33 SECTION 5.20. Environmental Notices...............................33 SECTION 5.21. Environmental Matters...............................33 SECTION 5.22. Environmental Release...............................33 SECTION 5.23. Transactions with Affiliates........................33 SECTION 5.24. Certain Action in respect of Permitted Subordinated Indebtedness........................................34 ARTICLE VI DEFAULTS............................34 SECTION 6.01. Events of Default...................................34 iii ARTICLE VII THE AGENT...........................36 SECTION 7.01. Appointment; Powers and Immunities..................36 SECTION 7.02. Reliance by Agent...................................37 SECTION 7.03. Defaults............................................37 SECTION 7.04. Rights of Agent as a Lender.........................38 SECTION 7.05. Indemnification.....................................38 SECTION 7.06. Payee of Note Treated as Owner......................38 SECTION 7.07. Nonreliance on Agent and Other Lenders..............38 SECTION 7.08. Failure to Act......................................39 SECTION 7.09. Resignation or Removal of Agent.....................39 ARTICLE VIII [INTENTIONALLY DELETED]...................39 ARTICLE IX MISCELLANEOUS...............................39 SECTION 9.01. Notices.............................................39 SECTION 9.02. No Waivers..........................................40 SECTION 9.03. Expenses; Documentary Taxes.........................40 SECTION 9.04. Indemnification.....................................40 SECTION 9.05. Sharing of Setoffs..................................41 SECTION 9.06. Amendments and Waivers..............................41 SECTION 9.07. No Margin Stock Collateral..........................42 SECTION 9.08. Successors and Assigns..............................42 SECTION 9.09. Confidentiality.....................................44 SECTION 9.10. Intentionally Deleted...............................44 SECTION 9.11. Obligations Several.................................44 SECTION 9.12. California Law......................................44 iv SECTION 9.13. Severability........................................44 SECTION 9.14. Interest............................................44 SECTION 9.15. Interpretation......................................45 SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction.......45 SECTION 9.17. Counterparts........................................45 v EXHIBITS -------- EXHIBIT 2.01(a) Syndicated Term Loan Note - --------------- EXHIBIT 2.01(b) Form of Warrant - --------------- EXHIBIT 2.02 Notice of Borrowing - --------------- EXHIBIT 2.03(a) Revolving Participated Loan Note - --------------- EXHIBIT 3.01(d) Form of Registration Rights Agreement - --------------- EXHIBIT 3.01(e) Form of Second Amended and Restated Security Agreement - --------------- EXHIBIT 3.01(f) Form of Amended and Restated Guaranty - --------------- EXHIBIT 3.01(g) Form of Amended and Restated Guarantor Security Agreement - --------------- EXHIBIT 3.01(h) Form of Closing Certificate - --------------- EXHIBIT 3.01(i) Form of Opinion of Counsel for the Borrower - --------------- EXHIBIT 3.01(k) Form of Insurance Certificate - --------------- EXHIBIT 5.01(a)(iii) Form of Compliance Certificate - -------------------- vi SCHEDULES --------- Schedule A Amended Credit Agreement as of July 29, 1996 - ---------- Schedule 4.04 Material Adverse Effects - ------------- Schedule 4.08 Subsidiaries - ------------- Schedule 5.08 Indebtedness - ------------- Schedule 5.09 Loans - ------------- Schedule 5.11 Liens - ------------- Schedule 5.24 Permitted Subordinated Indebtedness - ------------- vii AMENDED AND RESTATED CREDIT AGREEMENT AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") dated as of November 22, 1996, among CHECKERS DRIVE-IN RESTAURANTS, INC., the LENDERS listed on the signature pages hereof and CKE RESTAURANTS, INC., as Agent. WHEREAS, on October 28, 1993 the Borrower, Wachovia Bank of Georgia, N.A., as Agent (the "Initial Agent") and the Initial Banks (as hereinafter defined) entered into a Credit Agreement (the "Original Credit Agreement") pursuant to which the Initial Agent and the Initial Banks made certain loans to the Borrower; WHEREAS, pursuant to the agreements listed on Schedule A attached hereto, the Borrower, the Initial Agent and the Initial Banks from time to time amended and modified the Original Credit Agreement (the Original Credit Agreement as so amended and modified, the "Amended Credit Agreement"); WHEREAS, on July 29, 1996 pursuant to certain agreements, the Prior Agent (as hereinafter defined) and the Prior Lenders (as hereinafter defined) acquired all right, title and interest of the Initial Agent and the Initial Banks in, to and under the Amended Credit Agreement and the Loan Documents (as defined in the Amended Credit Agreement); WHEREAS, on November 12, 1996 pursuant to certain agreements, the Prior Agent and the Prior Lenders assigned to the Agent and the Lenders, and the Agent and the Lenders acquired, an assignment interest in, to and under the Amended Credit Agreement and the Loan Documents; WHEREAS, the Borrower has requested and, subject to the conditions set forth herein, the Agent and the Lenders have agreed to restructure the Borrower's obligations under the Amended Credit Agreement, as amended to date; and WHEREAS, this Agreement amends, restates and supersedes in its entirety the Amended Credit Agreement, as amended to date, and no term or provision of the Amended Credit Agreement shall bind the parties to this Agreement unless specifically set forth herein. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINITIONS. The terms as defined in this Section 1.01 shall, for all purposes of this Agreement and any amendment hereto (except as herein otherwise expressly provided or unless the context otherwise requires), have the meanings set forth herein: "Affiliate" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Borrower (a "Controlling Person"), (ii) any Person (other than the Borrower or a Subsidiary) which is controlled by or is under common control with a Controlling Person, or (iii) any Person (other than a Subsidiary) of which the Borrower owns, directly or indirectly, 20% or more of the common stock or equivalent equity interests, excluding existing joint ventures. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means CKE Restaurants, Inc., a Delaware corporation, in its capacity as agent for the Lenders hereunder, and its successors and permitted assigns in such capacity. "Agreement" means this Amended and Restated Credit Agreement, together with all amendments and supplements hereto and all exhibits and schedules hereto. "Amended Credit Agreement" has the meaning set forth in the recitals hereto. "Amended and Restated Security Agreement" means that certain Second Amended and Restated Security Agreement substantially in the form attached hereto as Exhibit 3.01(e), delivered by the Borrower dated as of even date herewith. "Assignee" has the meaning set forth in Section 9.08(c). "Assignment Agreement" means an Assignment Agreement executed in accordance with Section 9.08(c). "Borrower" means Checkers Drive-In Restaurants, Inc., a Delaware corporation, and its successors and its permitted assigns. "Borrowing" means (i) the restructuring of the Prior Syndicated Debt as of the Closing Date pursuant to Section 2.01(a), and (ii) any borrowing thereafter consisting of Revolving Participated Loans made to the Borrower by CKE (which Revolving Participated Loans are participated to the Lenders hereunder) pursuant to Article II. "Capital Expenditures" means for any period the sum of all capital expenditures incurred during such period by the Borrower and its Consolidated Subsidiaries, as determined in accordance with GAAP. "Capital Stock" means any nonredeemable capital stock of the Borrower or any Consolidated Subsidiary (to the extent issued to a Person other than the Borrower), whether common or preferred. "CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. ss. 9601 et. seq. and its implementing regulations and amendments. "CERCLIS" means the Comprehensive Environmental Response Compensation and Liability Inventory System established pursuant to CERCLA. 2 "Change of Control" means the occurrence of any of the following events: (a) the acquisition after the Closing Date, in one or more transactions, of "beneficial ownership" (within the meaning of Section 13(d) under the Exchange Act and the rules and regulations promulgated thereunder) by (i) any Person or entity, or (ii) any group of Persons or entities who constitute a group (within the meaning of Section 13 of the Exchange Act), in either case, of any securities of the Borrower such that, as a result of such acquisition, such Person, entity or group either (A) "beneficially owns" (within the meaning of Rule 13 under the Exchange Act), directly or indirectly 35% or more of the Borrower's then outstanding voting securities entitled to vote on the election of directors of the Borrower ("Voting Securities") (it being understood that this clause (A) shall not apply if the Lenders or their Affiliates acquire beneficial ownership of 35% or more of Borrowers than outstanding Voting Securities) or (B) otherwise has the ability to elect, directly or indirectly, a majority of the members of the Borrower's Board of Directors; (b) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Borrower (together with any new directors selected by such Board of Directors or whose nomination for election by the stockholders of the Borrower was approved by a vote of 662/3% of the directors of the Borrower then still in office who are either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors of the Borrower then in office; (c) the sale, lease, transfer or other disposition of all or substantially all of the assets of the Borrower as entirety or substantially as an entirety in one transaction or a series of related transactions; (d) the liquidation or dissolution of the Borrower; or (e) any transaction permitted under Section 5.14 which results in any of the foregoing. "Checkers Restaurant" shall mean any and all restaurants operated as a Checkers restaurant, whether owned or operated by the Borrower or any other Person. "CKE" shall mean CKE Restaurants, Inc., a Delaware corporation, and its successors and assigns. "Closing Certificate" has the meaning set forth in Section 3.01(h). "Closing Date" means the date on which all matters set forth in Section 3.01 are satisfied. "Code" means the Internal Revenue Code of 1986, as amended, or any successor Federal tax code. "Collateral" has the meaning set forth in Section 2.13. "Commitment" means, with respect to the Revolving Participated Loans to be made by CKE pursuant to Section 2.02 of this Agreement, the amount of $2,500,000. "Compliance Certificate" has the meaning set forth in Section 5.01(a)(iii). "Consolidated Cash Flow" means, for any period, Consolidated EBITDA for such period, minus (i) consolidated interest expense of the Borrower and its Consolidated Subsidiaries, to the extent such interest is paid in cash, for such period, minus (ii) the cash portion of the provision for income taxes of the Borrower and its Consolidated Subsidiaries for such period. 3 "Consolidated EBITDA" means, for any period, Consolidated Net Income for such period, plus (i) consolidated interest expense of the Borrower and its Consolidated Subsidiaries for such period, plus (ii) provision for income taxes of the Borrower and its Consolidated Subsidiaries for such period, plus (iii) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash charges (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period) of the Borrower and its Consolidated Subsidiaries to the extent that such depreciation, amortization and other non-cash charges were deducted in computing Consolidated Net Income for such period, minus (iv) non-cash items increasing consolidated revenues of the Borrower and its Consolidated Subsidiaries in determining Consolidated Net Income for such period, in each case on a consolidated basis and determined in accordance with GAAP. "Consolidated Net Income" means, for any period, the aggregate of the Net Income of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP, but excluding therefrom (i) extraordinary items, (ii) any gains or losses from the sale of any assets of the Borrower or its Subsidiaries, (iii) the net income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that net income is not permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders, or is not permitted without prior governmental approval (that has not been obtained), and (iv) the income or loss from any entity in which the Borrower's or its Subsidiary's, as applicable, investment is classified pursuant to GAAP as a minority interest. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. "Default" has the meaning set forth in Section 6.01. "Default Rate" means a rate per annum equal to the sum of the then applicable interest rate on the Loans plus two percent (2%). "Dollars" or "$" means dollars in lawful currency of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in The State of California are authorized by law to close. "Environmental Authority" means any foreign, federal, state, local or regional government that exercises any form of jurisdiction or authority under any Environmental Requirement. 4 "Environmental Authorizations" means all licenses, permits, orders, approvals, notices, registrations or other legal prerequisites for conducting the business of the Borrower or any Wholly Owned Subsidiary required by any Environmental Requirement. "Environmental Judgments and Orders" means all judgments, decrees or orders arising from or in any way associated with any Environmental Requirements, whether or not entered upon consent or written agreements with an Environmental Authority or other entity arising from or in any way associated with any Environmental Requirement. "Environmental Liabilities" means any liabilities, whether accrued, contingent or otherwise, arising from and in any way associated with any Environmental Requirements. "Environmental Notices" means notice from any Environmental Authority, of possible or alleged noncompliance with or liability under any Environmental Requirement, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any, violation of any Environmental Requirement or any investigations concerning any violation of any Environmental Requirement. "Environmental Proceedings" means any judicial or administrative proceedings arising from or in any way associated with any Environmental Requirement. "Environmental Releases" means releases as defined in CERCLA or under any applicable state or local environmental law or regulation. "Environmental Requirements" means any legal requirement relating to health, safety or the environment and applicable to the Borrower, any Wholly Owned Subsidiary or the Properties, including but not limited to any such requirement under CERCLA or similar state legislation and all federal, state and local laws, ordinances, regulations, orders, writs, decrees and common law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor law. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof. "Event of Default" has the meaning set forth in Section 6.01. "Fiscal Quarter" means any fiscal quarter of the Borrower, it being understood that each of the first three fiscal quarters of each Fiscal Year consists of three Reporting Periods and the final fiscal quarter consists of four Reporting Periods. "Fiscal Year" means any fiscal year of the Borrower consisting of the 52 or 53 week period generally ending on the Monday closest to December 31. "GAAP" means generally accepted accounting principles applied on a basis consistent with those which, in accordance with Section 1.02, are to be used in making the calculations for purposes of determining compliance with the terms of this Agreement. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other 5 obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantors" means, individually and collectively, (i) InnerCityFoods Leasing Company, a Delaware corporation, (ii) InnerCityFoods Restaurant Company, Inc., a Delaware corporation, (iii) InnerCityFoods Joint Venture Company, a Delaware corporation, and (iv) any other Person delivering a Guaranty to the Agent, together with each of their respective successors and permitted assigns. "Guaranty" means, individually and collectively, (i) those certain Amended and Restated Guaranty Agreements, substantially in the form of Exhibit 3.01(f) hereto, executed and delivered by the Guarantors, jointly and severally, to the Agent, for the ratable benefit of each of the Lenders, together with all amendments and modifications thereto and (ii) any other guaranty agreement delivered to the Agent for the purpose of providing a Guarantee of any of the Borrower's or the Guarantors' obligations under any of the Loan Documents, together with all amendments and modifications thereto. "Guarantor Security Agreements" means those certain Amended and Restated Security Agreements, substantially in the form of Exhibit 3.01(g) hereto, executed and delivered by the Guarantors to the Agent, for the ratable benefit of each of the Lenders, together with all respective amendments and any modifications thereto. "Hazardous Materials" includes, without limitation, (a) solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. ss. 6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (b) "hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, including, crude oil or any fraction thereof or (d) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Indebtedness" shall have the meaning set forth in Section 5.08. "Initial Agent" means Wachovia Bank of Georgia, N.A., a national banking association organized under the laws of the United States of America, in its capacity as agent for the Initial Banks under the Amended Credit Agreement. 6 "Initial Banks" mean collectively Wachovia Bank of Georgia, N.A., Barnett Bank of Pinellas County, The Boatmen's National Bank of St. Louis, PNC Bank, Kentucky, Inc., NBD Bank and First Alabama Bank. "Interest Period" means the period commencing on the last day of each Reporting Period and ending on the same date of the following Reporting Period; provided that: (a) any Interest Period (other than an Interest Period determined pursuant to paragraph (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; (b) the first Interest Period shall commence on November 26, 1996 and shall end on December 30, 1996; and (c) any Interest Period which begins before the Termination Date and would otherwise end after the Termination Date shall end on the Termination Date. "Investment" means any investment in any Person, whether by means of purchase or acquisition of obligations or securities of such Person, capital contribution to such Person, loan or advance to such Person, making of a time deposit with such Person, Guarantee or assumption of any obligation of such Person or otherwise. "Lender" means each Person listed on the signature pages hereof (other than the Borrower and Guarantors) and its successors and assigns. "Lending Office" means, as to each Lender, its office located at its address set forth on the signature pages hereof or identified on the signature pages hereof as its Lending Office or such other office as such Lender may hereafter designate as its Lending Office by notice to the Borrower and the Agent. "Lien" means, with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, or encumbrance or servitude of any kind in respect of such asset to secure or assure payment of a Indebtedness or a Guarantee, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease (as determined under GAAP) or other title retention agreement relating to such asset. Provided, however, an operating lease (as determined under GAAP) shall not constitute a Lien. "Loan" means a Syndicated Term Loan or a Revolving Participated Loan and "Loans" means Syndicated Term Loans or Revolving Participated Loans or both. "Loan Documents" means this Agreement, the Notes, the Warrants, the Guaranty, the Security Agreements, the Post-Closing Collateral Documents, the Registration Rights Agreement, the Mortgage Documents and any other document evidencing, relating to or securing the obligations of the Borrower hereunder, and any other document or instrument delivered from time to time in connection 7 with this Agreement, the Notes, the Warrants or the obligations of the Borrower hereunder, as such documents and instruments may be amended, modified or supplemented from time to time. "Margin Stock" means "margin stock" as defined in Regulations G, T, U or X. "Material Adverse Effect" means, with respect to any event, act, condition or occurrence arising after the Closing Date, or if arising on or before the Closing Date, not disclosed to the Lenders in writing (such written disclosures to include, without limitation, the Borrower's most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q previously delivered to the Lenders) on or before the Closing Date, of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding that is not a judgment giving rise to a Default under Section 6.01(j)), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the financial condition, operations, business, properties or prospects of the Borrower and its Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the Agent and the Lenders under the Loan Documents, or (c) the legality, validity or enforceability of any Loan Document. In making any determination of a Material Adverse Effect, all relevant circumstances known to the Lenders shall be considered, including, without limitation, insurance proceeds receivable, opinions of counsel, the merits of any relevant claim, subrogation rights, and contribution rights available to the Borrower. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "NTDT Note" means the promissory note of the Borrower held by Nashville Twin Drive- Thru Partners, L.P. ("NTDT"), the outstanding principal amount of which was $1,126,162 as of September 9, 1996. "Net Income" means, as applied to any Person for any period, the aggregate amount of net income of such Person, after taxes, for such period, as determined in accordance with GAAP. "Net Proceeds" means the cash proceeds received by the Borrower in respect to the issuance of Capital Stock in connection with the exercise of subscription rights distributed (including any such rights exercised by the Lenders as required hereunder) pursuant to the Rights Offering, after deducting therefrom reasonable and customary costs and expenses incurred by the Borrower directly in connection with such issuance. "Notes" means (i) the Syndicated Term Loan Notes, and (ii) the Revolving Participated Loan Note, together with all amendments, consolidations, modifications, renewals, and supplements to, and replacements of, items (i) and (ii) above. "Notice of Borrowing" has the meaning set forth in Section 2.02. "Original Credit Agreement" has the meaning set forth in the recitals hereto. "Participant" has the meaning set forth in Section 9.08(b). 8 "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Subordinated Indebtedness" means the Indebtedness identified on SCHEDULE 5.24 hereto. "Person" means an individual, a corporation, a partnership, an unincorporated association, a trust or any other entity or organization, including, but not limited to, a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five (5) plan years made contributions. "Post-Closing Collateral" has the meaning set forth in Section 2.13(a). "Post-Closing Collateral Documents" has the meaning set forth in Section 2.13(a). "Prior Agent" means The Galileo Fund, L.P., a Massachusetts limited partnership, in its capacity a agent for the Prior Lenders under the Amended Credit Agreement. "Prior Lenders" means collectively The Galileo Fund, L.P., Canpartners Investments IV, LLC, Foothill Capital Corporation and Pearl Street, L.P. "Prior Revolving Participated Loan Note" means the Revolving Participated Loan dated October 2, 1995 of the Borrower in favor of Wachovia Bank of Georgia, N.A. in the original principal amount of $2,000,000. "Prior Syndicated Debt" means the loans, interest, and other obligations of the Borrower to the Lenders outstanding on the Closing Date under the "Loans" as defined in the Amended Credit Agreement. "Prior Syndicated Term Loan Notes" means, collectively (i) the Amended and Restated Syndicated Term Loan Note dated as of April 12, 1995 of the Borrower in favor of Wachovia Bank of Georgia, N.A. in the original principal amount of $12,031,250, (ii) the Amended and Restated Syndicated Term Loan Note dated as of April 12, 1995 of the Borrower in favor of Barnett Bank of Pinellas County in the original principal amount of $7,218,750, (iii) the Amended and Restated Syndicated Term Loan Note dated as of April 12, 1995 of the Borrower in favor of The Boatmen's National Bank of St. Louis in the original principal amount of $4,812,500, (iv) the Amended and Restated Syndicated Term Loan Note dated as of April 12, 1995 of the Borrower in favor of NBD Bank in the original principal amount of $4,812,500, (v) the Amended and Restated Syndicated Term Loan Note dated as of April 12, 1995 of the Borrower in favor of PNC Bank, Kentucky, Inc. 9 in the original principal amount of $4,812,500 and (vi) the Amended and Restated Syndicated Term Loan Note dated as of April 12, 1995 of the Borrower in favor of First Alabama Bank in the original principal amount of $4,812,500. "Prior Warrant Agreements" means, individually and collectively, the Warrant Agreements dated as of April 15, 1995 executed and delivered by the Borrower to the Initial Banks, and having been subsequently assigned to the Prior Lenders and re-assigned to the Lenders. "Pro Rata Share" means, with respect to each Lender identified below, the percentage interest set forth opposite the name of such Lender: Lender Percentage Interest ------ ------------------- CKE Restaurants, Inc. 36.75214 KCC Delaware 14.24501 Fidelity National Financial, Inc. 10.54131 The Travelers Indemnity Company 8.54701 The Galileo Fund, L.P. 5.69801 Foothill Capital Corporation 5.69801 Canpartners Investments IV, LLC 5.69801 William P. Foley II 5.69800 Burt Sugarman 3.56125 Carl Leo Karcher 2.84900 Stephen Mahood 0.71225 -------- Total 100.00000% "Properties" means all real property owned, leased or otherwise used or occupied by the Borrower or any Consolidated Subsidiary, wherever located. "Rall-Folks Notes" means the promissory notes of the Borrower held by Rall-Folks, Inc. ("Rall-Folks"), the aggregate outstanding principal amount of which was $1,788,000 as of September 9, 1996. "RDG Note" means the promissory note of the Borrower held by Restaurant Development Group, Inc. ("RDG"), the outstanding principal amount of which was approximately $1,693,000 as of September 9, 1996. "Registration Rights Agreement" means the Registration Rights Agreement, in the form of EXHIBIT 3.01(d) hereto, executed and delivered by the Borrower to Lenders. "Regulation G" means Regulation G of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. 10 "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Released Parties" has the meaning set forth in Section 2.14 hereof. "Reporting Period" means, with respect to any Fiscal Year, each consecutive 4 week period beginning on the first day of such Fiscal Year. "Required Lenders" means at any time Lenders having at least 662/3% of the aggregate outstanding principal amount of the Syndicated Term Loan Notes. "Restricted Payment" means (i) any dividend or other distribution on any shares of the Borrower's capital stock (except dividends payable solely in shares of its capital stock) or (ii) any cash payment on account of the purchase, redemption, retirement or acquisition (excluding therefrom any nominal amount of cash paid in lieu of fractional shares of Capital Stock issued in the ordinary course of business) of (a) any shares of the Borrower's capital stock (except shares acquired upon the conversion thereof into other shares of its capital stock) or (b) any option, warrant or other right to acquire shares of the Borrower's capital stock. "Retail Building" means any removable restaurant building owned by the Borrower and operated under the "Checkers" trade name and all related equipment and moveable site improvements. "Revolving Lenders" means CKE and KCC Delaware. "Revolving Participated Loan" means a Loan made by CKE pursuant to Section 2.02. "Revolving Participated Loan Note" means the amended and restated promissory note of the Borrower, substantially in the form of Exhibit 2.03(b), evidencing the obligation of the Borrower to repay the Revolving Participated Loans, together with all amendments, consolidations, modifications, renewals and supplements thereto. "Rights Guaranty" means the commitment of CKE, KCC Delaware and Fidelity National Financial, Inc. pursuant to Section 2.03(d). "Rights Offering" means the distribution by the Borrower to each holder of Common Stock of the Borrower (it being understood that, for purposes of the Rights Offering, the Warrants will be deemed to have been exercised and the shares of Common Stock of the Borrower issuable on exercise of the Warrants shall be deemed to be issued and outstanding and held of record by the Lenders on the record date established for such distribution) of rights to purchase shares of Common Stock of the Borrower, at any price as may be determined by the Borrower up to the average closing price for such common stock for the ten 11 trading days prior to the effective date of the registration statement covering such shares, the Net Proceeds of which shall be not less than $10,000,000. "Security Agreements" means the Guarantor Security Agreements and the Amended and Restated Security Agreement. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower, and any partnership in which the Borrower or any Consolidated Subsidiary is a general partner. "Syndicated Term Loans" means the Loans made by the Lenders pursuant to Section 2.01(a). "Syndicated Term Loan Notes" means the amended and restated promissory notes of the Borrower, substantially in the form of EXHIBIT 2.03(a), evidencing the obligation of the Borrower to repay the Syndicated Term Loans, together with all amendments, consolidations, modifications, renewals, and supplements thereto. "Termination Date" means (i) with respect to the Revolving Participated Loan Commitment and the Revolving Participated Loans, unless extended by the Borrower pursuant to Section 2.03(e), upon the earlier to occur of (I) March 22, 1997 or (II) consummation of the issuance of shares of Capital Stock as a result of the full subscription of rights in the Rights Offering, and (ii) with respect to the Syndicated Term Loans, July 31, 1999. "Transferee" has the meaning set forth in Section 9.08(d). "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all vested nonforfeitable benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. "Warrants" mean the warrants to purchase shares of Borrower's Common Stock in the form attached hereto as Exhibit 2.01(b) to be issued to the Lenders on the Closing Date pursuant to Section 2.01(a). "Wholly Owned Subsidiary" means any Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent (except for changes with which the Borrower's independent public accountants concur or that are otherwise 12 required by a change in GAAP) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Lenders except for any change in which the Borrower's independent public accountants concur or is required by GAAP, in determining compliance with any of the provisions of this Agreement or any of the other Loan Documents: (i) the Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, or (ii) the Required Lenders shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 5.01 hereof, shall mean the financial statements referred to in Section 4.04). SECTION 1.03. REFERENCES. Unless otherwise indicated, references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other Subdivisions are references to articles, exhibits, schedules, sections and other subdivisions hereof. SECTION 1.04. USE OF DEFINED TERMS. All terms defined in this Agreement shall have the same defined meanings when used in any of the other Loan Documents, unless otherwise defined therein or unless the context shall require otherwise. SECTION 1.05. TERMINOLOGY. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. ARTICLE II THE CREDITS SECTION 2.01. SYNDICATED TERM LOANS. (a) Each Lender severally agrees, subject to the terms and conditions set forth herein and based on the representations and warranties set forth herein, to restructure the Borrower's obligations hereunder as provided herein. All Syndicated Term Loans shall earn interest at the rate of 13.00% per annum. In consideration for the restructuring of the Borrower's obligations hereunder, the Commitment and the Rights Guaranty, on the Closing Date, the Borrower shall grant to the Lenders, in proportion to each Lender's Pro Rata Share of the Prior Syndicated Debt, warrants for the purchase of an aggregate of 20,000,000 shares of the Borrower's Common Stock at an exercise price of $.75 each, which warrants may be exercised in accordance with and subject to the terms and conditions of the Warrants. Effective as of the Closing Date, the Prior Warrant Agreements shall be terminated and of no further force or effect. (b) On the Closing Date, subject to satisfaction of the terms and conditions set forth in Article III herein, each Lender severally agrees to deliver to the Borrower the Prior Syndicated Term Loan Notes and the Agent 13 agrees to deliver to the Borrower the Prior Revolving Participated Loan Note, in exchange for (i) a Syndicated Term Loan Note in the principal amount of such Lender's Pro Rata Share of the Prior Syndicated Debt, (ii) a participation interest in the Revolving Participated Loan in an amount equal to such Lender's Pro Rata Share of the Revolving Participated Loan Note, and (iii) warrant certificates representing a number of Warrants equal to such Lender's Pro Rata Share of the Warrants issuable pursuant to Section 2.01(a). SECTION 2.02. COMMITMENT TO LEND REVOLVING PARTICIPATED LOANS. CKE shall from time to time on or after December 3, 1996 and through and including the Termination Date applicable to Revolving Participated Loans, upon the written request of the Borrower in the form of notice attached hereto as Exhibit 2.02 (the "Notice of Borrowing"), and on the terms and conditions set forth herein, make Revolving Participated Loans to the Borrower in an aggregate principal amount at any time not to exceed an amount equal to $2,500,000 through and including the Termination Date, which Revolving Participated Loans shall be evidenced by the Revolving Participated Loan Note (in the original stated principal amount of $2,500,000) dated as of the Closing Date. Each Revolving Participated Loan Borrowing under this Section 2.02 shall be in an aggregate principal amount of $500,000 or any larger multiple of $250,000. Within the foregoing limits, the Borrower may borrow under this Section 2.02, repay and reborrow under this Section 2.02 at any time before the Termination Date applicable to Revolving Participated Loans. All Revolving Participated Loans shall earn interest at the rate of 13.00% per annum. CKE shall notify each Revolving Lender of each Revolving Participated Loan Borrowing, and each Revolving Lender other than CKE shall, on the date of each Revolving Participated Loan Borrowings, purchase a participating interest in Revolving Participated Loans in an amount equal to the same proportion of such Revolving Participated Loans as such other Revolving Lender's Pro Rata Share bears to the aggregate Pro Rata Shares of the Revolving Lenders. On the date of each such Revolving Participated Loan Borrowing, each Revolving Lender will immediately transfer to CKE, in immediately available funds, the amount of its participation. Whenever, at any time after CKE has received from any such Revolving Lender its participating interest in a Revolving Participated Loan, the Agent receives any payment on account thereof, the Agent will distribute to such Revolving Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Revolving Lender's participating interest was outstanding and funded; provided, however, that in the event that such payment received by the Agent is required to be returned, such Revolving Lender will return to the Agent any portion thereof previously distributed by the Agent to it. Each Revolving Lender's obligation to purchase such participating interests shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which such Revolving Lender or any other Person may have against CKE requesting such purchase or any other Persons for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the termination of the Commitments; (iii) any adverse change in the condition (financial or otherwise) of the Borrower, or any other Person; (iv) any breach of this Agreement by the Borrower or any other Revolving Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. SECTION 2.03. NOTES; MISCELLANEOUS MATTERS. (a) The Syndicated Term Loans of each Lender shall be evidenced by the Syndicated Term Loan Notes payable to the order of such Lender for the 14 account of its Lending Office in an amount equal to the original principal amount of such Lender's Pro Rata Share of the Prior Syndicated Debt. The Revolving Participated Loan shall be evidenced by the Revolving Participated Loan Note payable to the order of CKE in the original principal amount of $2,500,000. (b) The Borrower hereby represents, warrants, ratifies and confirms that the Prior Syndicated Debt in the aggregate outstanding principal amount of $35,818,098.88 as of the Closing Date (which consists of an aggregate principal amount of $34,718,098.88 of "Syndicated Term Loans" as defined under the Amended Credit Agreement, an aggregate principal amount of $1,000,000 of "Revolving Participated Loans" as defined under the Amended Credit Agreement, and an aggregate principal amount of $100,000 with respect to the "Extension Fee" as defined under the Amended Credit Agreement (more specifically, the Eleventh Amendment Agreement dated July 29, 1996 identified on Schedule A attached hereto)) as evidenced by the Syndicated Term Loan Notes remains in full force and effect without novation and is payable in accordance with its terms, without defense, offset, recoupment or counterclaim. The Borrower also represents and warrants that the fair market value of the Collateral exceeds the aggregate principal amount of the Loans. CKE shall record with respect to the Revolving Participated Loan Note on the schedule forming a part thereof appropriate notations to evidence the date, amount and maturity of each Revolving Participated Loan made by it, the date and amount of each payment of principal made by the Borrower with respect thereof and, such schedule shall constitute rebuttable presumptive evidence of the principal amount owing and unpaid on the Revolving Participated Loan Note; provided that the failure of CKE to make any such recordation or endorsement shall not affect the obligation of the Borrower hereunder or under the Revolving Participated Loan Note or the ability of CKE to assign such Revolving Participated Loan Note. CKE is hereby irrevocably authorized by the Borrower so to endorse the Revolving Participated Loan Note and to attach to and make a part of the Revolving Participated Loan Note a continuation of any such schedule as and when required. (c) Intentionally Deleted. --------------------- (d) The Borrower shall prepare and file with the Securities and Exchange Commission, and use its best efforts to be declared effective under the Securities Act of 1933, as amended, a registration statement relating to the shares of Common Stock of the Borrower to be issued in a Rights Offering, and to distribute rights to purchase Common Stock pursuant thereto to Borrower's stockholders and the holders of the Warrants as of a record date which is, within 60 days after the Closing Date. Each of CKE, Fidelity National Financial, Inc. and KCC Delaware hereby agrees, severally and not jointly, to purchase from the Company an aggregate number of shares of Borrower Common Stock equal to the excess, if any, of the maximum number of shares of Borrower Common Stock issuable upon the exercise in full of all subscription rights distributed in such Rights Offering remaining after subtracting from the maximum number of shares of Borrower Common Stock issuable upon the exercise of all subscription rights so distributed and exercised by Persons other than the Lenders and their Affiliates. The obligations of the foregoing Lenders to purchase shares shall be allocated among them in accordance with their relative Pro Rata Shares. (e) The Borrower shall have the right, on notice to the Agent, to extend the Termination Date applicable to the Revolving Participated Loan for three (3) successive one (1)- month periods; provided, that for each such extension the Borrower shall issue to the Revolving 15 Lenders, pro rata in accordance with each Revolving Lender's interests in the Revolving Participated Loan, additional warrants to purchase 333,333 shares of Common Stock of the Borrower upon the first day of each such one-month extension period at an exercise price equal to 90% of the average closing price of Borrower's Common Stock, as reported on the NASDAQ National Market, over the 30 day period ending on the last day of the applicable Termination Date (before giving effect to such extension). The terms of the warrants shall be identical to the Warrants. (f) Upon the closing, the Borrower shall take all corporate actions necessary to elect to the Board of Directors of the Borrower three (3) designees of the Lenders, and such Board of Directors shall consist of seven (7) Persons, of whom three (3) Persons shall have been designated by the Lenders. At each election of directors from and after the Closing Date, the Borrower shall nominate for election to its Board of Directors and recommend to its stockholders the election of three (3) designees of the Lenders to the Board of Directors. No change in the actual number of directors of the Borrower shall be made without the prior written consent of the Required Lenders. SECTION 2.04. MATURITY OF LOANS. Except for mandatory prepayments of the Loans required by this Agreement, the Syndicated Term Loans and the Revolving Participated Loans shall mature, and the principal amount thereof, if any, together with all accrued but unpaid interest thereon, if any, shall be due and payable on the applicable Termination Date without notice to or demand upon the Borrower. SECTION 2.05. INTEREST RATES. (a) Each Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to 13.00%. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of and, to the extent permitted by applicable law, overdue interest on any Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (b) After the occurrence and during the continuance of a Default, the principal amount of the Loans (and, to the extent permitted by applicable law, all accrued interest thereon) shall, at the election of the Required Lenders, bear interest at the Default Rate. SECTION 2.06. INTENTIONALLY DELETED. SECTION 2.07. OPTIONAL PREPAYMENTS OF SYNDICATED TERM LOAN NOTES. The Borrower may, upon at least one Domestic Business Day's notice to the Lenders, prepay the Syndicated Term Loan Notes by an aggregate amount of at least $500,000 or any larger multiple of $500,000, without premium or penalty. SECTION 2.08. PRINCIPAL PAYMENTS OF NOTES. (a) Scheduled Principal Payments. On the last day of each of the following Reporting Periods, the Borrower shall pay the principal amount of the Syndicated Term Loans equal to the greater of the following amounts: 16 Amount Equal to the Greater of ----------------- Reporting Periods x or y ------ ---- From the Closing Date through Reporting Period 4 in Fiscal Year 1997 (n/a) (n/a) For Reporting Periods 5 through 11 in Fiscal Year 1997 $200,000 (n/a) For Reporting Period 12 in Fiscal 1997 through Reporting Period 3 in Fiscal Year 1998 $275,000 50% of Consolidated Cash Flow for the previous Reporting Period For Reporting Period 4 in Fiscal Year 1998 and for all Reporting Periods thereafter $350,000 60% of Consolidated Cash Flow for the previous Reporting Period As used in this Section 2.08(a), Consolidated Cash Flow shall exclude the portion of Consolidated Cash Flow attributable to any Person other than a Wholly Owned Subsidiary that is not received by the Borrower or any Guarantor. (b) MANDATORY PRINCIPAL PAYMENTS UPON SALES OF ASSETS. Except to the extent otherwise provided in this Section 2.08(b), all proceeds (whenever received, whether at closing or as a result of payments under any promissory note, net however of prorated property taxes and reasonable transactional costs incurred with respect to such closing) payable to and received by Borrower or any Guarantor from the sale of assets (except for sales of inventory in the ordinary course of business) owned by the Borrower and/or its Consolidated Subsidiaries permitted by Section 5.14 hereof shall be paid to the Lenders and shall be applied against the outstanding principal payments required to be paid under Section 2.08(a) in order of maturity. Notwithstanding foregoing, provided no Default exists, the Borrower may retain fifty percent (50%) the of such net proceeds of asset sales and may use the portion so retained for general corporate purposes (other than dividends, distributions or loans). Nothing herein shall be construed to permit the Borrower to sell any of its assets other than as expressly authorized by this Agreement. (c) PREPAYMENT AT ELECTION OF LENDERS UPON CHANGE OF CONTROL. Upon the occurrence of a Change of Control (which Change of Control the parties agree shall not occur from the election of representatives of the Lenders to the Borrower's Board of Directors on the Closing Date pursuant to this Agreement or 17 any additional stock purchased by Lenders or their Affiliates), each Lender shall have the right to require the Borrower to prepay the Notes at a prepayment price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of prepayment. Within five Domestic Business Days following any Change of Control, the Borrower will mail a notice thereof to each Lender, with a copy to the Agent (a "Change of Control Notice"). Any Lender, by written notice to the Borrower within 30 days following receipt of such Change of Control Notice, may elect prepayment of its Notes and the Borrower shall prepay such Notes at the price specified above no later than 30 days thereafter. (d) PREPAYMENT UPON RIGHTS OFFERING. Upon the consummation of the issuance and sale of Capital Stock in connection with a Rights Offering, the Borrower shall prepay the entire principal amount of the Revolving Participated Loans, plus accrued and unpaid interest, if any, thereon to the date of prepayment. SECTION 2.09. INTENTIONALLY DELETED. SECTION 2.10. INTENTIONALLY DELETED. SECTION 2.11. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall make each payment of principal of, and interest on, the Syndicated Term Loans and of fees hereunder not later than 11:00 A.M. (Eastern Standard Time) on the date when due, in Federal or other funds immediately available, to the Agent at its address referred to in Section 9.01. The Borrower shall make each payment of principal of, and interest on, the Revolving Syndicated Term Loan not later than 11:00 A.M. (Eastern Standard Time) on the date when due, in Federal or other funds immediately available, to the Agent. (b) Whenever any payment of principal of, or interest on, the Loans or of fees hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. SECTION 2.12. COMPUTATION OF INTEREST AND FEES. Interest on Loans shall be computed on the basis of a year of 360 days and a month of 30 days. All fees payable hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.13. COLLATERAL. (a) In addition to the collateral security granted by the Borrower and the Guarantors under the Security Agreements the Borrower shall (and shall cause each of the Guarantors to), at the sole cost and expense of the Borrower (subject to the limitations described in subsection 2.13(c) below), grant to the Agent and do all things requested to maintain, for the ratable benefit of the Lenders to secure all obligations of the Borrower hereunder (including, without limitation, the Syndicated Term Loan Notes and the Revolving Participated Loan Note), a continuing, blanket and general lien upon and security interest and title in and to all real property, equipment, inventory, general intangibles, personal property and assets of the Borrower and the Guarantors, or other assets as the Required Lenders shall designate in their reasonable discretion (the "Post-Closing Collateral") and shall deliver (or cause to be delivered) to the 18 Agent such duly executed security agreements, security deeds, mortgages, deeds of trust, estoppels, subordination agreements, pledge agreements, stock powers, Uniform Commercial Code financing statements, title certificates, affidavits, and other documents, as are reasonably necessary or desirable in the judgment of the Required Lenders to perfect first priority liens (as such first priority may be available) against the Post-Closing Collateral (collectively, the "Post- Closing Collateral Documents"). (b) The Borrower shall (and shall cause each of the Guarantors to), after an Event of Default, at the sole cost and expense of the Borrower, deliver (or cause to be delivered) to the Agent such appraisals, surveys, title searches, title policies, environmental audits and other documents, all of which shall be satisfactory to the Required Lenders in all respects, as are deemed reasonably necessary or desirable by the Required Lenders in connection with the Collateral. (c) The Borrower agrees to pay up to $200,000 of costs and expenses incurred by the Agent and the Lenders in connection with the actions contemplated by this Section 2.13, including, without limitation, all filing fees, lien search fees, intangible taxes (whether incurred before or after payment in full of the Loans), documentary stamp taxes (whether incurred before or after payment in full of the Loans), surveys, environmental surveys, and title reports. All such documentation shall be reasonable and customary and in form and substance satisfactory to the Agent and the Lenders in their discretion. The Borrower hereby irrevocably appoints the Agent as the Borrower's attorney-in-fact to (i) deliver and record in the appropriate filing office any instrument contemplated or required hereby (including, without limitation, the relevant security deeds, mortgages, deeds of trust, and Uniform Commercial Code financing statements) and to pay the related recording expenses and (ii) from time to time in the Agent's discretion, to take any other action which the Agent may deem reasonably necessary or advisable to accomplish the purposes of this Section 2.13 with respect to the Collateral. SECTION 2.14. WAIVER AND RELEASE. THROUGH THE DATE OF THIS AGREEMENT, THE BORROWER AND EACH GUARANTOR HEREBY KNOWINGLY AND VOLUNTARILY, FOREVER RELEASES, ACQUITS AND DISCHARGES THE AGENT AND THE LENDERS (BUT NOT ANY OF THE PRIOR LENDERS), THEIR DIRECTORS, OFFICERS, PARTNERS, TRUSTEES, BENEFICIARIES, EMPLOYEES, AGENTS, CONTROLLING PERSONS AND SHAREHOLDERS (COLLECTIVELY, THE "RELEASED PARTIES") (A) FROM AND OF ANY AND ALL CLAIMS ARISING FROM ACTS OR OMISSIONS OF ANY OF THE RELEASED PARTIES OR THE PRIOR LENDERS, THEIR DIRECTORS, OFFICERS, PARTNERS, TRUSTEES, BENEFICIARIES, EMPLOYEES, AGENTS, CONTROLLING PERSONS AND SHAREHOLDERS (COLLECTIVELY, THE "PRIOR LENDER PARTIES") THAT MAY HAVE OCCURRED PRIOR TO THE CLOSING DATE THAT ANY OF THE RELEASED PARTIES OR ANY OF THE PRIOR LENDER PARTIES (1) IS IN ANY WAY RESPONSIBLE FOR THE PAST, CURRENT OR FUTURE CONDITION OR DETERIORATION OF THE BUSINESS OPERATIONS AND/OR FINANCIAL CONDITION OF THE BORROWER, OR (2) BREACHED ANY AGREEMENT TO LOAN MONEY OR MAKE OTHER FINANCIAL ACCOMMODATIONS AVAILABLE TO THE BORROWER OR TO FUND ANY OPERATIONS OF THE BORROWER AT ANY TIME, AND (B) FROM AND OF ANY AND ALL OTHER CLAIMS, DAMAGES, LOSSES, ACTIONS, COUNTERCLAIMS, SUITS, JUDGMENTS, OBLIGATIONS, 19 LIABILITIES, DEFENSES, AFFIRMATIVE DEFENSES, SETOFFS, AND DEMANDS OF ANY KIND OR NATURE WHATSOEVER, IN LAW OR IN EQUITY, WHETHER PRESENTLY KNOWN OR UNKNOWN, WHICH THE BORROWER OR ANY GUARANTOR MAY HAVE HAD, NOW HAVE, OR WHICH IT CAN, SHALL OR MAY HAVE FOR, UPON, OR BY REASON OF ANY MATTER, COURSE OR THING WHATSOEVER RELATING TO, ARISING OUT OF, BASED UPON, OR IN ANY MANNER CONNECTED WITH, ANY TRANSACTION, EVENT, CIRCUMSTANCE, ACTION, FAILURE TO ACT, OR OCCURRENCE OF ANY SORT OR TYPE, WHETHER KNOWN OR UNKNOWN, WHICH OCCURRED, EXISTED, WAS TAKEN, PERMITTED, BEGUN, OR OTHERWISE RELATED OR CONNECTED TO OR WITH ANY OR ALL OF THE LOANS, THIS AGREEMENT, THE AMENDED CREDIT AGREEMENT, ANY OR ALL OF THE LOAN DOCUMENTS, AND/OR ANY DIRECT OR INDIRECT ACTION OR OMISSION OF ANY OF THE RELEASED PARTIES OR THE PRIOR LENDER PARTIES ARISING FROM ACTS OR OMISSIONS OF THE RELEASED PARTIES OR THE PRIOR LENDER PARTIES THAT MAY HAVE OCCURRED PRIOR TO THE CLOSING DATE. THE BORROWER FURTHER AGREES THAT FROM AND AFTER THE DATE HEREOF, IT WILL NOT ASSERT TO ANY PERSON OR ENTITY THAT ANY DETERIORATION OF THE BUSINESS OPERATIONS OR FINANCIAL CONDITION OF THE BORROWER WAS CAUSED BY ANY BREACH OR WRONGFUL ACT OF ANY OF THE RELEASED PARTIES OR THE PRIOR LENDER PARTIES OCCURRING PRIOR TO THE DATE HEREOF. It is the intention of the parties that the foregoing shall be effective as a full and final accord and satisfactory release of each and every matter specifically or generally referred to above. In furtherance of this intention, the parties acknowledge that each is familiar with Section 1542 of the California Civil Code, which provides as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. The parties hereto waive and relinquish any right and benefits which they each may have under said Section 1542. The parties acknowledge that they may hereafter discover facts in addition to or different from those which they now know or believe to be true with respect to the Action or the subject matter of this Agreement, but it is their intention to fully, finally and forever settle and release any and all matters, disputes and differences, known or unknown, suspected or unsuspected, which do now exist, may exist or heretofore have existed between them. ARTICLE III CONDITIONS TO CLOSING SECTION 3.01. CONDITIONS TO CLOSING. The obligation of each Lender to make a Syndicated Term Loan or of CKE to make a Revolving Participated Loan on the occasion of the first Borrowing, and to restructure the obligations hereunder, is subject to the satisfaction of the conditions set forth below and receipt by the Agent of the documents, instruments, agreements and certificates set forth 20 below (in sufficient number of counterparts (except as to the Notes and the Warrants) for delivery of a counterpart to each Lender and retention of one counterpart by the Agent): (a) from each of the parties hereto of either (i) a duly executed counterpart of this Agreement signed by such party or (ii) a facsimile transmission stating that such party has duly executed a counterpart of this Agreement and sent such counterpart to the Agent; (b) duly executed originals of the Syndicated Term Loan Notes and the Revolving Participated Loan; (c) duly executed originals of the Warrants; (d) duly executed Registration Rights Agreement; (e) duly executed Amended and Restated Security Agreement; (f) duly executed Guaranty by each of the Guarantors; (g) duly executed Guarantor Security Agreements; (h) a certificate (the "Closing Certificate") substantially in the form of EXHIBIT 3.01(h)), dated as of the Closing Date, signed by a principal financial officer of the Borrower, to the effect that (i) no Default has occurred and is continuing, and (ii) the representations and warranties of the Borrower contained in Article IV are true on and as of the Closing Date; (i) an opinion letter (together with any opinions of local counsel relied on therein) of Shumaker, Loop & Kendrick, counsel for the Borrower, dated as of the Closing Date, substantially in the form of EXHIBIT 3.01(i) and covering such additional matters relating to the transactions contemplated hereby as the Agent or any Lender may reasonably request; (j) all documents which the Agent or any Lender may reasonably request relating to the existence of the Borrower and the Guarantors, the corporate authority for and the validity of this Agreement, the Notes, the Warrant Agreements and the other Loan Documents and any other matters relevant hereto, or thereto, all in form and substance reasonably satisfactory to the Agent, including, without limitation, a certificate of incumbency of each of the Borrower and the Guarantors, signed by the Secretary or an Assistant Secretary of the Borrower and the Guarantors, certifying as to the names, true signatures and incumbency of the officer or officers, respectively, of the Borrower and the Guarantors authorized to execute and deliver the Loan Documents, and certified copies of the following items, for the Borrower and each of the Guarantors, respectively: (i) Certificate/Articles of Incorporation, (ii) Bylaws, (iii) a certificate of the Secretary of State of the state of incorporation of each as to the good standing of each as a corporation in that state, and (iv) the action taken by the Board of Directors authorizing the execution, delivery and performance of this Agreement, the Notes, the Warrants and the other Loan Documents to which the Borrower or any of the Guarantors is a party; (k) a list in the form of EXHIBIT 3.01(k) hereto certified by the principal financial officer of the Borrower, of all insurance required by 21 Section 5.17 showing the insurer, the face amount and the nature of coverage, and the Agent as a loss payee (or beneficiary, as the case may be) under each policy then in force; (l) all mortgages and security interests securing the Borrower's obligations hereunder (and the Guarantors' obligations under the Guaranties) shall be duly perfected and validly recorded; and (m) there shall not have occurred any material adverse change in the condition (financial or otherwise), operation, properties, assets, liabilities, earnings or prospects of the Borrower or the Guarantors since September 9, 1996. SECTION 3.02. CONDITIONS TO ALL BORROWINGS. The obligation of CKE to make a Revolving Participated Loan on the occasion of each Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Agent of a Notice of Borrowing; (b) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; (c) the fact that the representations and warranties of the Borrower contained in Article IV of this Agreement shall be true on and as of the date of such Borrowing; and (d) the fact that, immediately after such Borrowing, the aggregate outstanding principal amount of the Revolving Participated Loans will not exceed the amount of the Commitment. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the truth and accuracy of the facts specified in paragraphs (b), (c) and (d) of this Section; provided that such Borrowing shall not be deemed to be such a representation and warranty to the effect set forth in Section 4.04(b) as to any event, act or condition having a Material Adverse Effect which has theretofore been disclosed in writing by the Borrower to the Lenders if the aggregate outstanding principal amount of the Loans immediately after such Borrowing will not exceed the aggregate outstanding principal amount thereof immediately before such Borrowing. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, except where the failure to qualify could not reasonably be expected 22 to have or cause a Material Adverse Effect, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have any license, authorization, consent or approval could not reasonably be expected to have or cause a Material Adverse Effect. SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by the Borrower of this Agreement, the Notes, the Warrant Agreements and the other Loan Documents delivered as of the Closing Date (i) are within the Borrower's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of or filing with, any governmental body, agency or official, (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other material instrument binding upon the Borrower or any Guarantor, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower or any Guarantor other than Liens created or imposed pursuant to the Loan Documents. SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and binding agreement of the Borrower enforceable in accordance with its terms, the Notes, the Warrant Agreements and the other Loan Documents, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms, provided that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally, and to standards of good faith and commercial reasonableness. SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of January 1, 1996, and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended, reported on by KPMG Peat Marwick, and the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries of September 9, 1996, and the related consolidated statements of operations and cash flows for the Fiscal Quarter then ended, copies of which have been delivered to each of the Lenders, fairly present, in conformity with GAAP, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such dates and their consolidated results of operations and cash flows for such periods stated. (b) Since September 9, 1996 and excepted as disclosed in Schedule 4.04 attached hereto, there has been no event, act, condition or occurrence having a Material Adverse Effect. SECTION 4.05. NO LITIGATION. Except as disclosed as Schedule 4.05, there is no action, suit or proceeding pending, or to the knowledge of the Borrower threatened, against or affecting the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which could reasonably be expected to have or cause a Material Adverse Effect. SECTION 4.06. COMPLIANCE WITH ERISA. 23 (a) The Borrower and each member of the Controlled Group have fulfilled their obligations in all material respects under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any liability to the PBGC or a Plan under Title IV of ERISA. (b) Neither the Borrower nor any member of the Controlled Group is or ever has been obligated to contribute to any Multiemployer Plan. SECTION 4.07. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. The Borrower and its Consolidated Subsidiaries are in compliance with all applicable laws, regulations and similar requirements of governmental authorities, except where such compliance is being contested in good faith through appropriate proceedings and except where the failure to comply could not reasonably be expected to have or cause a Material Adverse Effect. There have been filed on behalf of the Borrower and its Consolidated Subsidiaries all Federal and state income, excise, property and other tax returns which are required to be filed by them and all taxes due pursuant to such returns or pursuant to any assessment received by or on behalf of the Borrower or any Consolidated Subsidiary have been paid. There have been filed on behalf of the Borrower and its Consolidated Subsidiaries all local income, excise, property and other tax returns that are required to be filed by them and all taxes due pursuant to the returns or any assessment received by Borrower or any Consolidated Subsidiary have been paid, except to the extent that unfiled tax returns and unpaid taxes could not reasonably be expected to have or cause a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower and its Consolidated Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate, except for any changes in taxes which are imposed retroactively. SECTION 4.08. CONSOLIDATED SUBSIDIARIES. Each of the Borrower's Consolidated Subsidiaries is a corporation or other business entity duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have any license, authorization, consent, or approval could not reasonably be expected to have or cause a Material Adverse Effect. The Borrower has no Subsidiaries except for those Subsidiaries listed on Schedule 4.08, which accurately sets forth each such Subsidiary's complete name and jurisdiction of incorporation. SECTION 4.09. INVESTMENT COMPANY ACT. Neither the Borrower nor any of its Consolidated Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.10. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor any of its Consolidated Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. SECTION 4.11. OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and its Consolidated Subsidiaries has title to its properties sufficient for the conduct of its business, and none of such property is subject to any Lien except as permitted in Section 5.11. 24 SECTION 4.12. NO DEFAULT. Except as disclosed in the Forms 10K, 10Q and 8K of Borrower filed with the Securities and Exchange Commission, neither the Borrower nor any of its Consolidated Subsidiaries is in default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound which could have or cause a Material Adverse Effect and no Default or Event of Default has occurred and is continuing. SECTION 4.13. FULL DISCLOSURE. All written information heretofore furnished by the Borrower to the Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Agent or any Lender will be, true, accurate and complete in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. The Borrower has disclosed to the Lenders in writing any and all facts which could have or cause a Material Adverse Effect. SECTION 4.14. ENVIRONMENTAL MATTERS. (a) Neither the Borrower nor any Consolidated Subsidiary is subject to any Environmental Liability which could have or cause a Material Adverse Effect as the Environmental Liability becomes due and neither the Borrower nor any Consolidated Subsidiary has been designated as a potentially responsible party under CERCLA or under any state statute similar to CERCLA. None of the Properties has been identified on any current or proposed (i) National Priorities List under 40 C.F.R. ss. 300, (ii) CERCLIS list or (iii) any list arising from a state statute similar to CERCLA. (b) No Hazardous Materials are being used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed or otherwise handled at, or shipped or transported to or from the Properties except in material compliance with Environmental Requirements. No Hazardous Materials are present at, on, in or under the Properties, or, to the best of the knowledge of the Borrower, at or from any adjacent site or facility (except for Hazardous Materials, such as cleaning solvents, pesticides and other materials used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed, or otherwise handled in minimal amounts in the ordinary course of business in compliance with all applicable Environmental Requirements) in such quantities that the cost to monitor, investigate, and/or remediate the Hazardous Materials in compliance with Environmental Requirements could not reasonably be expected to have or cause a Material Adverse Effect. (c) The Borrower, and each of its Consolidated Subsidiaries, is in compliance with all Environmental Requirements in connection with the operation of the Properties and the Borrower's, and each of its Consolidated Subsidiary's respective businesses, except where the potential Environmental Liability could not reasonably be expected to have or cause a Material Adverse Effect. SECTION 4.15. CAPITAL STOCK. All Capital Stock, debentures, bonds, notes and all other securities of the Borrower and its Consolidated Subsidiaries presently issued and outstanding are validly and properly issued in accordance with all applicable laws, including but not limited to, the "Blue Sky" laws of 25 all applicable states and the federal securities laws. The issued shares of Capital Stock of the Borrower's Wholly Owned Subsidiaries are owned by the Borrower free and clear of any Lien or adverse claim. At least a majority of the issued shares of capital stock of each of the Borrower's Subsidiaries other than Wholly Owned Subsidiaries is owned by the Borrower free and clear of any Lien or adverse claim. SECTION 4.16. MARGIN STOCK. Neither the Borrower nor any of its Consolidated Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock, and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, or be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation X. SECTION 4.17. INSOLVENCY. After giving effect to the execution and delivery of this Agreement, the Notes and the other Loan Documents, the Borrower will not be "insolvent," within the meaning of such term as defined in ss. 101 of Title 11 of the United States Code or Section 2 of the Uniform Fraudulent Transfer Act, or any other applicable state law pertaining to fraudulent transfers, as amended from time to time, or be unable to pay its debts generally as such debts become due, or have an unreasonably small capital to engage in any business or transaction, whether current or contemplated. ARTICLE V COVENANTS The Borrower agrees that, so long as any amount payable hereunder or under any Note remains unpaid: SECTION 5.01. INFORMATION. (a) The Borrower will deliver to each of the Lenders: (i) as soon as available and in any event within 120 days after the end of each Fiscal Year, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of operations, stockholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified by KPMG Peat Marwick or other independent public accountants of nationally recognized standing, with such certification to be free of exceptions and qualifications not acceptable to the Required Lenders; (ii) as soon as available and in any event within 45 days after the end of each of the first 3 Fiscal Quarters of each Fiscal Year, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related statements of operations and statements of cash flows for such 26 Fiscal Quarter and for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by the chief financial officer or the chief accounting officer of the Borrower, except to the extent that interim financial statements on Form 10-Q do not require footnotes and other disclosures that would otherwise be required by GAAP; (iii) simultaneously with the delivery of each set of financial statements referred to in paragraphs (i) and (ii) above and at the end of each Reporting Period, a certificate, substantially in the form of EXHIBIT 5.01(a)(iii) (a "Compliance Certificate"), of the chief financial officer or the chief accounting officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.03 through 5.11, inclusive, and 5.14 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (iv) simultaneously with the delivery of each set of annual financial statements referred to in paragraph (a)(i) above, a statement of the firm of independent public accountants which reported on such statements to the effect that nothing has come to their attention to cause them to believe that any Default existed on the date of such financial statements, or, if any Default then exists, setting forth the details thereof, and a copy of the audit report and/or management letter provided by such accountants to the Borrower; (v) within 5 Domestic Business Days after the Borrower has knowledge of the occurrence of any Default, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (vi) promptly upon the mailing thereof to the stockholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; and (vii) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Borrower shall have filed with the Securities and Exchange Commission. 27 (b) Upon the request of the Agent or any Lender, the Borrower will deliver to each of the Lenders: (i) if and when any member of the Controlled Group (A) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (B) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (C) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; and (ii) as soon as available and in any event within 25 days after the end of each of the first 12 Reporting Periods of each Fiscal Year, a consolidated statement of income and balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such Reporting Period and for the portion of the Fiscal Year ended at the end of such Reporting Period, setting forth in each case in comparative form the figures for the corresponding Reporting Period and the corresponding portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by the chief financial officer or the chief accounting officer of the Borrower, except to the extent that interim financial statements do not require footnotes and that such financial statements are subject to normal year-end adjustments; (iii) promptly upon receipt or obtaining knowledge thereof, any and all bona fide offers or expressions of interest (whether verbal or written, solicited or unsolicited) to merge with or to acquire all or any part of the assets or capital stock of the Borrower; (iv) within 25 days after the end of each Reporting Period, a variance report which reconciles the performance of the Borrower for the immediately preceding Reporting Period to the projected budget of the Borrower for such period; (v) within 25 days after the end of each Reporting Period, an accounts payable schedule for the Borrower; (vi) within 25 days after the end of each fiscal quarter of the Borrower, a written schedule of all fee simple and leased properties of the Borrower as of such date; 28 (vii) within 25 days after the end of each Reporting Period, a written schedule of the revenues, profit contributions and other operating and financial information with respect to each Checkers Restaurant, on an individual and regional basis; (viii)within 5 days after the end of each calendar week, written weekly sales reports with respect to each Checkers Restaurant, on an individual and regional basis; (ix) within 25 days after the end of each Reporting Period, a written summary of the Borrower's advertising and promotional activities, including a summary of amounts expended in connection therewith and a cost/benefit analysis of such expenditures; and (x) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as may be reasonably requested. SECTION 5.02. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower will (i) keep, and cause each Consolidated Subsidiary to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities; and (ii) permit, and cause each Wholly Owned Subsidiary to permit, representatives of any Lender at the Borrower's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants. The Borrower agrees to cooperate and assist in such visits and inspections, in each case at such reasonable times and as often as may reasonably be desired. SECTION 5.03. MINIMUM CONSOLIDATED EBITDA. For each three consecutive Reporting Period cycle ending with the Reporting Period listed below, Consolidated EBITDA shall not be less than the amounts listed below: Reporting Period Amount ($) ---------------- ---------- Fiscal Year 1996: N/A Fiscal Year 1997: Reporting Period 1 625,000 Reporting Period 2 1,000,000 Reporting Period 3 1,250,000 Reporting Period 4 1,250,000 Reporting Periods 5-6 1,250,000 Reporting Periods 7-9 1,300,000 Reporting Periods 10-13 2,000,000 Fiscal Year 1998: Reporting Periods 1-13 2,750,000 29 Reporting Period Amount ($) ---------------- ---------- Fiscal Year 1999: Reporting Periods 1 through 2,750,000 the Reporting Period in which the Termination Date occurs. SECTION 5.04. CAPITAL EXPENDITURES. Capital Expenditures shall not exceed (a) $1,500,000 for the period from September 16, 1996 through the end of Fiscal Year 1996, and (b) $4,000,000 for any Fiscal Year thereafter (unless otherwise approved by the Borrower's Board of Directors). SECTION 5.05. INTENTIONALLY DELETED. SECTION 5.06. INTENTIONALLY DELETED. SECTION 5.07. RESTRICTED PAYMENTS. The Borrower will not declare or make any Restricted Payments other than Restricted Payments made for the purpose of purchasing any redeemable warrants issued in a rights offering. SECTION 5.08. LIMITATION ON INDEBTEDNESS. Neither the Borrower nor any of its Subsidiaries will create, incur, assume, or become, be or remain liable in any manner in respect of, or allow to exist, any Indebtedness (which term shall include: all indebtedness, obligations and liabilities which in accordance with generally accepted accounting principles would be reflected on the balance sheet of the Borrower as a liability; all indebtedness, obligations and liabilities, whether or not assumed by Borrower or any Subsidiary, secured by any mortgage, pledge or lien existing on property owned by the Borrower or any Subsidiary; and all amounts representing rental payments which, in accordance with generally accepted accounting principles, would be classified as a liability on its balance sheet), except for: (a) the Notes and any other obligations owed to the Lenders under this Agreement or otherwise; (b) Indebtedness of the Borrower existing as of the date of this Agreement which is specifically disclosed in SCHEDULE 5.08 attached hereto; (c) Indebtedness representing trade debt, wages, employee benefits, advance payments on sales contracts and other indebtedness incurred in the ordinary course of business; (d) Indebtedness existing as of the date of this Agreement secured by liens permitted by subsection (a) of Section 5.11; (e) Liabilities for taxes, assessments, governmental charges, liens or claims described in Section 5.16 hereof to the extent that payment thereof is not required by such Section 5.16; and (f) Indebtedness in respect of final judgments for the payment of money not in excess of $10,000 in the aggregate at any time outstanding (excluding sums covered by insurance) remaining unsatisfied and in effect for any period of less than thirty (30) days or in respect of which a stay of execution shall have been obtained pending an appeal or proceeding for review. 30 SECTION 5.09. LOANS OR ADVANCES. Neither the Borrower nor any Guarantor shall make loans or advances to any Person except (without duplication): (a) loans or advances to employees not exceeding $50,000 in the aggregate principal amount outstanding at any time, in each case made in the ordinary course of business and consistent with practices existing on the Closing Date; (b) deposits required by government agencies or public utilities; (c) loans, advances or monetary capital contributions from the Borrower or a Guarantor to any Guarantor, or from any Guarantor to the Borrower; (d) loans in existence on the Closing Date not exceeding a total aggregate principal amount of $53,957,868 outstanding as described on Schedule 5.09 attached hereto, which are evidenced by legally enforceable promissory notes and subject to the Lenders' perfected Liens and shall be delivered to the Agent; and (e) loans or advances consented to by the Required Lenders in connection with asset sales under Section 5.14 or loans or advances in connection with asset sales which do not require the consent of the Required Lenders; provided that after giving effect to the making of any loans, advances or deposits permitted by this Section, the Borrower will be in full compliance with all the provisions of this Agreement. SECTION 5.10. INVESTMENTS. Neither the Borrower nor any Guarantor shall make Investments in any Person except as permitted by Section 5.09 and except Investments (i) in direct obligations of the United States Government maturing within one year, (ii) in certificates of deposit issued by a commercial bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc., (iii) in commercial paper rated A1 or the equivalent thereof by Standard & Poor's Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within 6 months after the date of acquisition, (iv) in tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc, and (v) not in excess of $150,000 individually. SECTION 5.11. NEGATIVE PLEDGE. Neither the Borrower nor any Wholly Owned Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement and identified on SCHEDULE 5.11; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Consolidated Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset; (d) any Lien on any asset of any corporation existing at the time such corporation is merged with or into the Borrower or a Consolidated Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Consolidated Subsidiary and not created in contemplation of such acquisition; 31 (f) Liens securing Indebtedness owing by any Subsidiary to the Borrower; (g) any Lien arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing paragraphs of this Section, PROVIDED that (i) such Indebtedness is not secured by any additional assets, and (ii) the amount of such Indebtedness secured by any such Lien is not increased or, if increased, the excess of the amount of the Indebtedness secured by any such lien over the amount of the Indebtedness so refinanced extended, renewed, or refunded shall be tendered to the Agent as a prepayment of the Syndicated Term Loans; (h) Liens incidental to the conduct of its business or the ownership of its assets which (i) do not secure Indebtedness and (ii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (i) any Lien on Margin Stock; (j) Liens in favor of the Lenders created under the Loan Documents; and (k) Liens incurred by Borrower in the ordinary course of business for items not past due and payable, including mechanics' and materialmen's liens and deposits and charges for workers' compensation and liens for taxes and assessments not past due and payable. SECTION 5.12. MAINTENANCE OF EXISTENCE. The Borrower shall, and shall cause each Subsidiary to, maintain its corporate existence and carry on its business in substantially the same manner and in substantially the same fields as such business is now carried on and maintained. SECTION 5.13. DISSOLUTION. Neither the Borrower nor any of its Wholly Owned Subsidiaries shall suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any shares of its own stock or that of any Wholly Owned Subsidiary, except through corporate reorganization to the extent permitted by Section 5.14. SECTION 5.14. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Borrower will not, nor will it permit any Wholly Owned Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise transfer all or any substantial part of its assets to, any other Person, or discontinue or eliminate any business line or segment; PROVIDED, HOWEVER, that if no Default has occurred and is continuing (i) the Borrower may merge with another Person if (A) such Person was organized under the laws of the United States of America or one of its states, (B) the Borrower is the corporation surviving such merger, and (C) immediately after giving effect to such merger, no Default shall have occurred and be continuing, (ii) Subsidiaries of the Borrower may merge with one another or, if the Borrower is the surviving corporation, the Borrower, and (iii) the foregoing limitation on the sale, lease or other transfer of assets and on the discontinuation or elimination of a business line or segment shall not prohibit the Borrower from selling or permitting the sale of assets owned by the Borrower and its Subsidiaries for not less than 85% (or a lesser percentage as may be consented to by the Required Lenders in writing) of their book value PROVIDED that any such sale or sales, in any single transaction or series of related transactions, in excess of $250,000 shall be consented to in writing in advance by the Required Lenders (other than sales of used buildings to franchisees to be operated by such franchisees as Checkers Restaurants). 32 SECTION 5.15. USE OF PROCEEDS. No portion of the proceeds of the Loans will be used by the Borrower or any Subsidiary (i) in connection with, whether directly or indirectly, any tender offer for, or other acquisition of, stock of any corporation with a view towards obtaining control of such other corporation, (ii) directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose in violation of any applicable law or regulation. SECTION 5.16. COMPLIANCE WITH LAWS; Payment of Taxes; SEC Filings. The Borrower will, and will cause each of its Wholly Owned Subsidiaries and each member of the Controlled Group to, comply with applicable laws (including but not limited to ERISA), regulations and similar requirements of governmental authorities (including but not limited to PBGC) in all material respects, except where the necessity of such compliance is being contested in good faith through appropriate proceedings. The Borrower will, and will cause each of its Wholly Owned Subsidiaries to, pay promptly before past due all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become or remain a lien against the property of the Borrower or any Wholly Owned Subsidiary, except liabilities being contested in good faith and against which, if requested by the Agent, the Borrower will set up reserves in accordance with GAAP. The Borrower will timely file all reports with the Securities and Exchange Commission (including Forms 10K, 10Q and 8K) required to be filed under, and will otherwise comply in all respects with, applicable securities laws. SECTION 5.17. INSURANCE. The Borrower will maintain, and will cause each of its Wholly Owned Subsidiaries to maintain (either in the name of the Borrower or in such Subsidiary's own name), with financially sound and reputable insurance companies, insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business, and as required by the other Loan Documents. SECTION 5.18. CHANGE IN FISCAL YEAR. The Borrower will not change its Fiscal Year without the consent of the Required Lenders. SECTION 5.19. MAINTENANCE OF PROPERTY. The Borrower shall, and shall cause each Wholly Owned Subsidiary to, maintain all of its properties and assets in good condition, repair and working order, except for ordinary wear and tear and loss by casualty. SECTION 5.20. ENVIRONMENTAL NOTICES. The Borrower shall furnish to the Lenders and the Agent prompt written notice of all Environmental Liabilities, pending, threatened or anticipated Environmental Proceedings, Environmental Notices, Environmental Judgments and Orders, and Environmental Releases at, on, in, under or in any way affecting the Properties or any adjacent property, and all facts, events, or conditions that could lead to any of the foregoing. SECTION 5.21. ENVIRONMENTAL MATTERS. The Borrower and its Wholly Owned Subsidiaries will not, and will not permit any Third Party to, use, produce, manufacture, process, treat, recycle, generate, store, dispose of, manage at, or otherwise handle, or ship or transport to or from the Properties any Hazardous Materials except for Hazardous Materials such as cleaning solvents, pesticides and other similar materials used, produced, manufactured, processed, treated, 33 recycled, generated, stored, disposed, managed, or otherwise handled in minimal amounts in the ordinary course of business in compliance with all applicable Environmental Requirements. SECTION 5.22. ENVIRONMENTAL RELEASE. The Borrower agrees that upon the occurrence of an Environmental Release at or on any of the Properties it will act immediately to investigate the extent of, and to take appropriate remedial action to eliminate, such Environmental Release, whether or not ordered or otherwise directed to do so by any Environmental Authority. SECTION 5.23. TRANSACTIONS WITH AFFILIATES. Excluding any transactions otherwise permitted by this Agreement, neither the Borrower nor any of its Wholly Owned Subsidiaries shall enter into, or be a party to (and the Borrower shall use its best efforts to cause any other Subsidiary to not enter into or be a party to), any transaction with any Affiliate of the Borrower or such Subsidiary (which Affiliate is not the Borrower or a Subsidiary), except (i) such transactions between and/or among the Borrower and its Wholly Owned Subsidiaries which are permitted by law, consistent with its past practices, in the ordinary course of business and pursuant to reasonable terms which are no less favorable to Borrower or such Wholly Owned Subsidiary than would be obtained in a comparable arm's length transaction with a Person which is not an Affiliate or (ii) such transactions as are otherwise fully disclosed to the Agent and the Lenders and consented to in writing in advance by the Required Lenders. SECTION 5.24. CERTAIN ACTION IN RESPECT OF PERMITTED SUBORDINATED INDEBTEDNESS. The Borrower shall not amend, modify or otherwise change in any respect having an adverse effect on the Borrower's financial condition or results of operations or otherwise disadvantageous in any respect to the Agent or the Lenders any of the terms or conditions of any Permitted Subordinated Indebtedness (including, without limitation, any terms or conditions relating to the payment of principal, interest or fees in connection therewith), or any other document evidencing, securing or relating to any Permitted Subordinated Indebtedness; PROVIDED, HOWEVER, that notwithstanding the foregoing the Borrower shall be permitted to convert the Permitted Subordinated Indebtedness evidenced by the Rall-Folks Notes, the RDG Note and the NTDT Note into common stock of the Borrower on the terms and conditions specified in Borrower's Quarterly Report on Form 10-Q for the period ended September 9, 1996. ARTICLE VI DEFAULTS SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events (each, a "Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay any interest on any Loan within 5 Domestic Business Days after such interest shall become due, or shall fail to pay any fee or other amount payable hereunder within 5 Domestic Business Days after such fee or other amount becomes due; or (b) the Borrower shall fail to observe or perform any covenant contained in: (i) Section 5.01 (except Section 5.01(a)(v)) and such failure shall continue for 15 Business Days after the earlier to occur of (x) written 34 notice thereof has been given to the Borrower by the Agent at the request of any Lender or (y) the Borrower obtains knowledge of any such failure; or (ii) Sections 5.01(a)(v), 5.02(ii), 5.03 to 5.15, inclusive, Sections 5.18, 5.23 or 5.24; or (c) the Borrower shall fail to observe or perform any covenant or agreement contained or incorporated by reference in this Agreement (other than those covered by paragraph (a) or (b) above) and such failure shall not have been cured within 30 days after the earlier to occur of (i) written notice thereof has been given to the Borrower by the Agent at the request of any Lender or (ii) the Borrower otherwise becomes aware of any such failure; or (d) any representation, warranty, certification or statement made by the Borrower in Article IV of this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect or misleading in any material respect when made (or deemed made); or (e) the Borrower (other than Indebtedness described in Section 5.08(c) and Indebtedness described in Section 5.08(e) which is not delinquent and for which adequate reserves have been established by the Borrower) or any Wholly Owned Subsidiary shall fail to make any payment in respect of Indebtedness outstanding in an aggregate amount in excess of $500,000 (other than the Notes) when due or within any applicable grace period; or (f) any event or condition shall occur which results in the acceleration of the maturity of Indebtedness of the Borrower or any Wholly Owned Subsidiary outstanding in an aggregate amount in excess of $500,000 (including, without limitation, any required mandatory prepayment or "put" of such Indebtedness to the Borrower or any Wholly Owned Subsidiary) or enables (or, with the giving of notice or lapse of time or both, would enable) the holders of such Indebtedness or any Person acting on such holders' behalf to accelerate the maturity thereof (including, without limitation, any required mandatory prepayment or "put" of such Indebtedness to the Borrower or any Wholly Owned Subsidiary); or (g) the Borrower or any Wholly Owned Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Wholly Owned Subsidiary (with the exception of Checkers of Chicago, Inc.) seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Wholly Owned Subsidiary under the federal bankruptcy laws as now or hereafter in effect; or 35 (i) the Borrower or any member of the Controlled Group shall fail to pay when due any material amount which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; or the Borrower or any other member of the Controlled Group shall enter into, contribute or be obligated to contribute to, terminate or incur any withdrawal liability with respect to, a Multiemployer Plan; (j) one or more final, nonappealable judgments or orders for the payment of money in an aggregate amount in excess of $1,000,000 shall be rendered against the Borrower or any Wholly Owned Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (k) a federal tax lien for a claimed amount in excess of $100,000 shall be filed against the Borrower under Section 6323 of the Code or a lien of the PBGC shall be filed against the Borrower under Section 4068 of ERISA and in either case such lien shall remain undischarged for a period of 25 days after the date of filing; or (l) except as a result of the election of representatives of Lenders to Borrower's Board of Directors on the Closing Date pursuant to this Agreement or any additional stock purchases by Lenders, as of any date a majority of the Board of Directors of the Borrower consists of individuals who were not either (A) directors of the Borrower as of the corresponding date of the previous year, (B) selected or nominated to become directors by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A), or (C) selected or nominated to become directors by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A) and individuals described in clause (B); or (m) (i) any default by the Borrower or any of the Guarantors under any of the Loan Documents shall exist after the satisfaction of any applicable grace, notice or cure periods, if any, (ii) any Loan Documents (including, without limitation, the Guaranty) shall cease to be enforceable, or (iii) any Guarantor or the Borrower shall assert that any Loan Document (including, without limitation, the Guaranty) shall cease to be enforceable then, and in every such event (an "Event of Default"), the Agent shall if requested by the Required Lenders, by notice to the Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or additional notice of any kind, all of which are hereby waived by the Borrower together with interest at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default; provided that if any Event of Default specified in paragraph (g) or (h) above occurs with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or the Lenders, the Notes (together with accrued interest thereon) shall become 36 immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower together with interest thereon at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default. Notwithstanding the foregoing, the Agent shall have available to it all other remedies at law or equity, and shall, subject to the provisions of Article VII, exercise any one or all of them at the request of the Required Lenders. ARTICLE VII THE AGENT SECTION 7.01. APPOINTMENT; POWERS AND IMMUNITIES. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Agent: (a) shall have no duties or responsibilities except as expressly set forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee for any Lender; (b) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any Lender under, this Agreement or any other Loan Document, or for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by the Borrower to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Loan Document except to the extent requested by the Required Lenders, and then only on terms and conditions reasonably satisfactory to the Agent, and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Loan Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or wilful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The provisions of this Article VII are solely for the benefit of the Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and under the other Loan Documents, the Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower. The duties of the Agent shall be ministerial and administrative in nature, and the Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Lender. SECTION 7.02. RELIANCE BY AGENT. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telefax, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants or other experts selected by the Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and 37 thereunder in accordance with instructions signed by the Required Lenders, and such instructions of the Required Lenders in any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. SECTION 7.03. DEFAULTS. The Agent shall not be deemed to have knowledge of the occurrence of a Default or an Event of Default unless the Agent has received notice from a Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or an Event of Default, the Agent shall give prompt notice thereof to the Lenders. The Agent shall (subject to Section 9.06) take such action hereunder with respect to such Default or Event of Default as shall be directed by the Required Lenders, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. SECTION 7.04. RIGHTS OF AGENT AS A LENDER. CKE and its successors and assigns, in its capacity as a Lender hereunder, shall have the same rights, powers and obligations hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include CKE in its individual capacity. The Agent may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower (and any of its Affiliates) as if it were not acting as the Agent, and the Agent may accept fees and other consideration from the Borrower (in addition to any agency fees and arrangement fees heretofore or hereinafter agreed to between the Borrower and the Agent) for services in connection with this Agreement or any other Loan Document or otherwise without having to account for the same to the Lenders. SECTION 7.05. INDEMNIFICATION. Each Lender severally agrees to indemnify the Agent, to the extent the Agent shall not have been reimbursed by the Borrower, in an amount equal to its Pro Rata Share, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless an Event of Default has occurred and is continuing, the normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or any such other documents; PROVIDED, HOWEVER that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or wilful misconduct of the Agent. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. SECTION 7.06. PAYEE OF NOTE TREATED AS OWNER. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Agent and the provisions of Section 9.08(c) have been satisfied. Any requests, authority or consent of any Person who at the time of making such 38 request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor or replacement thereof. SECTION 7.07. NONRELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. The Agent shall not be required to keep itself informed as to the performance or observance by the Borrower of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower or any other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder or under the other Loan Documents, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or any other Person (or any of their Affiliates) which may come into the possession of the Agent. SECTION 7.08. FAILURE TO ACT. Except for action expressly required of the Agent hereunder or under the other Loan Documents, the Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Lenders of their indemnification obligations under Section 7.05 against any and all liability and expense which may be incurred by the Agent by reason of taking, continuing to take, or failing to take any such action. SECTION 7.09. RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Lenders and the Borrower, and the Agent may be removed at any time with or without cause by the Required Lenders. If a Lender which is serving as Agent assigns all of its rights and interests hereunder pursuant to Section 9.08 hereof, such assignment shall operate as, and shall be deemed notice to the other Lenders and to the Borrower of, the Agent's resignation. Upon any such resignation or removal, the Required Lenders or their respective assignees shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders or their respective assignees and shall have accepted such appointment within 30 days after the retiring Agent's notice of resignation, the Required Lenders' removal of the retiring Agent, or the retiring Agent's notice of assignment, then the Retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. Notwithstanding the foregoing, if each Lender shall assign all of its respective rights and interests hereunder pursuant to Section 9.08 hereof to the assignee or assignees, then such assignee or assignees, or their respective designee, shall automatically be deemed to be, and shall have all of the powers, rights and privileges of, the Agent as of the effective date of such assignment unless and until the Required Lenders remove such assignee or assignees as Agent and appoint a Successor Agent as provided above. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII 39 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder. ARTICLE VIII [INTENTIONALLY DELETED] ARTICLE IX MISCELLANEOUS ------------- SECTION 9.01. NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telecopier or similar writing) and shall be given to such party at its address or telecopier number set forth on the signature pages hereof or such other address or telecopier number as such party may hereafter specify for the purpose by notice to each other party. Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in this Section and the appropriate confirmation is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. NO WAIVERS. No failure or delay by the Agent or any Lender in exercising any right, power or privilege hereunder or under any Note or other Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. EXPENSES; DOCUMENTARY TAXES. The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Lenders and the Agent and of special counsel for the Prior Lenders and the Prior Agent, in connection with the preparation of this Agreement and the other Loan Documents (including all of such fees and disbursements of special counsel for the Prior Lenders and the Prior Agent which were incurred up to the Closing Date in connection with prior amendments, extensions, waivers and other actions relating to the Amended Credit Agreement and the other Loan Documents (as defined in the Amended Credit Agreement)), any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default or alleged Default hereunder or thereunder and (ii) if a Default occurs, all out-of-pocket expenses incurred by the Agent and the Lenders, including fees and disbursements of counsel, in connection with such Default and collection and other enforcement proceedings resulting therefrom, including out-of-pocket expenses incurred in enforcing this Agreement and the other Loan Documents. The Borrower shall pay all of the expenses described in clause (i) of this Section on or within 90 days following consummation of the Rights Offering, or on May 31, 1996, if the Rights Offering is not consummated on or prior to such date. The Borrower shall indemnify the Agent and each Lender against any transfer taxes, documentary taxes, assessments 40 or charges made by any Authority by reason of the execution and delivery of this Agreement or the other Loan Documents. SECTION 9.04. INDEMNIFICATION. The Borrower shall indemnify the Agent, the Lenders and each affiliate thereof and their respective directors, officers, partners, trustees, beneficiaries, controlling persons, shareholders, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from (i) any actual or proposed use by the Borrower of the proceeds of any extension of credit by any Lender hereunder, or (ii) breach by the Borrower of this Agreement (including, without limitation, representations, warranties and covenants relating to environmental matters) or any other Loan Document, or (iii) any acts or omissions of any of the Prior Lenders that may have occurred prior to the Closing Date or any and all claims that any of the Prior Lenders (A) is in any way responsible for the past, current or future condition or deterioration of the business operations and/or financial condition of the Borrower, or (B) breached any agreement to loan money or make other financial accommodations available to the Borrower or to fund any operations of the Borrower at any time, and from and of any and all other claims, damages, losses, actions, counterclaims, suits, judgments, obligations, liabilities, defenses, affirmative defenses, setoffs, and demands of any kind or nature whatsoever, in law or in equity, whether presently known or unknown, which the Borrower or any Guarantor may have had, now have, or which it can, shall or may have for, upon, or by reason of any matter, course or thing whatsoever relating to, arising out of, based upon, or in any manner connected with, any transaction, event, circumstance, action, failure to act, or occurrence of any sort or type, whether known or unknown, which occurred, existed, was taken, permitted, begun, or otherwise related or connected to or with any or all of the Loans, this Agreement, the Amended Credit Agreement, any or all of the Loan Documents, and/or any direct or indirect action or omission of any of the Lender Parties arising from acts or omissions of the Lender Parties that may have occurred prior to the closing date, or (iv) from any investigation, litigation (including, without limitation, any actions taken by the Agent or any of the Lenders to enforce this Agreement or any of the other Loan Documents) or other proceeding (including, without limitation, any threatened investigation or proceeding) relating to the foregoing, and the Borrower shall reimburse the Agent and each Lender, and each affiliate thereof and their respective directors, officers, employees and agents, upon demand for any expenses (including, without limitation, legal fees) incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or wilful misconduct of the Person to be indemnified. SECTION 9.05. SHARING OF SETOFFS. Each Lender agrees that if it shall, by exercising any right of setoff or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest owing with respect to the Notes held by it which is greater than the proportion received by any other Lender in respect of the aggregate amount of all principal and interest owing with respect to the Notes held by such other Lender, the Lender receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Lenders owing to such other Lenders, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Lenders owing to such other Lenders shall be shared by the Lenders pro rata; PROVIDED that (i) nothing in this Section shall impair the right of any Lender to exercise any right of setoff or counterclaim it may have and to apply the 41 amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes, and (ii) if all or any portion of such payment received by the purchasing Lender is thereafter recovered from such purchasing Lender, such purchase from each other Lender shall be rescinded and such other Lender shall repay to the purchasing Lender the purchase price of such participation to the extent of such recovery together with an amount equal to such other Lender's ratable share (according to the proportion of (x) the amount of such other Lender's required repayment to (y) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of setoff or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.06. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement, the Notes or any other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders (and, if the rights or duties of the Agent are affected thereby, by the Agent); PROVIDED that, no such amendment or waiver shall, unless signed by all Lenders, (i) change the Pro Rata Share of any Lender or subject any Lender to any additional obligation, (ii) change the principal of or rate of interest on any Syndicated Term Loan or any fees or other amounts payable hereunder, (iii) change the date fixed for any payment of principal or interest on any Syndicated Term Loan or the amount of principal or interest due on any date fixed for the payment thereof, (iv) change the percentage of Lenders which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement, (v) release or substitute all or a substantial portion of the collateral (if any) held as security for the Borrower's obligations hereunder, or (vi) release any Guarantee given to support payment of the Borrower's obligations hereunder. (b) The Borrower will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement unless each Lender shall be informed thereof by the Borrower and shall be afforded an opportunity of considering the same and shall be supplied by the Borrower with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Agreement shall be delivered by the Borrower to each Lender forthwith following the date on which the same shall have been executed and delivered by the requisite percentage of Lenders. The Borrower will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any Lender (in its capacity as such) as consideration for or as an inducement to the entering into by such Lender of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to all such Lenders. SECTION 9.07. NO MARGIN STOCK COLLATERAL. Each of the Lenders represents to the Agent and each of the other Lenders that it in good faith is not, directly or indirectly (by negative pledge or otherwise), relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. 42 SECTION 9.08. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that the Borrower may not assign or otherwise transfer any of its rights under this Agreement. (b) Any Lender (or successor or assignee of any Lender) may at any time sell to one or more Persons (each a "Participant") participating interests in any Loan owing to such Lender, any Note held by such Lender, or any other interest of such Lender hereunder. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. In no event shall a Lender that sells a participation be obligated to the Participant to take or refrain from taking any action hereunder except that such Lender may agree that it will not (except as provided below), without the consent of the Participant, agree to (i) the change of any date fixed for the payment of principal of or interest on the related loan or loans, (ii) the change of the amount of any principal, interest or fees due on any date fixed for the payment thereof with respect to the related loan or loans, (iii) the change of the principal of the related loan or loans, (iv) any change in the rate at which either interest is payable thereon or (if the Participant is entitled to any part thereof) fee is payable hereunder from the rate at which the Participant is entitled to receive interest or fee (as the case may be) in respect of such participation, (v) the release or substitution of all or any substantial part of the collateral (if any) held as security for the Borrower's obligations hereunder, or (vi) the release of any Guarantee given to support payment of the Borrower's obligations hereunder. Each Lender selling a participating interest in any Syndicated Term Loan, Note, or other interest under this Agreement shall provide the Borrower and the Agent with written notification stating that such sale has occurred and identifying the Participant and the interest purchased by such Participant. (c) Any Lender or assignee of any Lender (in either case, a "Transferor") may at any time assign to one or more banks or other financial institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement, the Notes and the other Loan Documents (but in no event shall such assignment of any portion of the principal balance of any Note (other than the Revolving Participated Loan Note) be less than either (i) the entire principal amount of such Note, or (ii) $2,000,000), and such Assignee shall assume all rights and obligations of the Transferor hereunder pursuant to an agreement executed by such Assignee, such Transferor and the Agent in form and substance satisfactory to the Agent (an "Assignment Agreement"). Upon (a) execution of the Assignment Agreement by such Transferor, such Assignee and the Agent, (b) payment by such Assignee to such Transferor of an amount equal to the purchase price agreed between such Transferor and such Assignee, and (c) payment of a processing and recordation fee of $2,000 to the Agent, such Assignee shall for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this Agreement to the same extent as if it were an original party hereto with a Pro Rata Share as set forth in the Assignment Agreement, and the Transferor shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by the Borrower, the Lenders or the Agent shall be required. Upon the 43 consummation of any transfer to an Assignee pursuant to this paragraph (c), the Transferor, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note (or Notes) is (are) issued to such Assignee. (d) Subject to the provisions of Section 9.09, the Borrower authorizes each Lender to disclose to any Participant, Assignee or other transferee (each a "Transferee") and any prospective Transferee who has agreed in writing to be bound by Section 9.09 any and all financial information in such Lender's possession concerning the Borrower which has been delivered to such Lender by the Borrower pursuant to this Agreement or which has been delivered to such Lender by the Borrower in connection with such Lender's credit evaluation prior to entering into this Agreement. (e) Intentionally Deleted. --------------------- (f) Anything in this Section 9.08 to the contrary notwithstanding, any Lender may assign and pledge all or any portion of the Syndicated Term Loans and/or obligations owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Syndicated Term Loans and/or obligations made by the Borrower to the assigning and/or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Syndicated Term Loans and/or obligations to the extent of such payment. No such assignment shall release the assigning and/or pledging Lender from its obligations hereunder. SECTION 9.09. CONFIDENTIALITY. Each Lender agrees to keep any information delivered or made available by the Borrower to it which is clearly indicated to be confidential information, confidential from anyone other than persons employed or retained by such Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Borrower's obligations hereunder provided, that, such individuals shall be subject to the agreement contained in this Section 9.09; PROVIDED, HOWEVER that nothing herein shall prevent any Lender from disclosing such information (i) to any other Lender, (ii) upon the order of any court or administrative agency after notice to the Borrower, (iii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Lender after notice to the Borrower, (iv) which has been publicly disclosed by Borrower, (v) to the extent reasonably required in connection with any litigation to which the Agent, any Lender or their respective Affiliates may be a party, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Lender's legal counsel and independent auditors and (viii) to any actual or proposed Participant, Assignee or other Transferee of all or part of its rights hereunder, provided that such proposed Participant, Assignee or other Transferee agrees in writing to be bound by this Section. SECTION 9.10. INTENTIONALLY DELETED. SECTION 9.11. OBLIGATIONS SEVERAL. The obligations of each Lender hereunder are several, and no Lender shall be responsible for the obligations or commitment of any other Lender hereunder. Nothing contained in this Agreement and no action taken by the Lenders pursuant hereto shall be deemed to constitute 44 the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement or any other Loan Document and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. SECTION 9.12. CALIFORNIA LAW. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of California. SECTION 9.13. SEVERABILITY. In case any one or more of the provisions contained in this Agreement, the Notes or any of the other Loan Documents should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby and shall be enforced to the greatest extent permitted by law. SECTION 9.14. INTEREST. In no event shall the amount of interest due or payable hereunder or under the Notes exceed the maximum rate of interest allowed by applicable law, and in the event any such payment is inadvertently made to any Lender by the Borrower or inadvertently received by any Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify such Lender in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Lenders not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under applicable law. SECTION 9.15. INTERPRETATION. No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision. SECTION 9.16. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. The Borrower and each of the Lenders and the Agent irrevocably (a) waives any and all right to trial by jury in any legal proceeding arising out of this Agreement, any of the other Loan Documents, or any of the transactions contemplated hereby or thereby, (b) submits to the nonexclusive personal jurisdiction in the State of California, the courts thereof and the United States District Courts sitting therein, for the enforcement of this Agreement, the Notes and the other Loan Documents, (c) waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of California for the purpose of litigation to enforce this Agreement, the Notes or the other Loan Documents, and (d) agrees that service of process may be made upon it in the manner prescribed in Section 9.01 for the giving of notice to the Borrower. Nothing herein contained, however, shall prevent the Agent from bringing any action or exercising any rights against any security and against the Borrower personally, and against any assets of the Borrower, within any other state or jurisdiction. SECTION 9.17. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 45 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
CHECKERS DRIVE-IN RESTAURANTS, INC. By: /s/ Albert J. DiMarco -------------------------------------- Name: Albert J. DiMarco Title: President & Chief Executive Officer 600 Cleveland Street Suite 1050 Clearwater, Florida 34615 Attention: Chief Financial Officer Telecopier number: (813) 443-7047 Telephone number: (813) 441-3500 CKE RESTAURANTS, INC., as Agent and as a Lender By: /s/ W. P. Foley II ---------------------------------------- Name: W. P. Foley II Tile: 1200 North Harbor Boulevard Anaheim, California 92801 Attention: Telecopier No.: (714)__________ Telephone No.: (714)__________ KCC DELAWARE By: /s/ Terry Christensen ----------------------------------------- Name: Terry Christensen Title: ________________________ ________________________ Attention: Telecopier No.: ( )____________ Telephone No.: ( )____________ 46 FIDELITY NATIONAL FINANCIAL, INC. By: /s/ Andrew Puzder ----------------------------------------- Name: Andrew Puzder Title: ________________________ ________________________ Attention: Telecopier No.: ( )____________ Telephone No.: ( )____________ THE TRAVELERS INDEMNITY COMPANY By: /s/ Emil J. Molinaro, Jr. ----------------------------------------- Name: Emil J. Molinaro, Jr. Title: ________________________ ________________________ Attention: Telecopier No.: ( )____________ Telephone No.: ( )____________ /s/ William P. Foley II -------------------------------------------- Name: William P. Foley II Attention: Telecopier No.: ( )____________ Telephone No.: ( )____________ /s/ Burt Sugarman -------------------------------------------- Name: Burt Sugarman ________________________ ________________________ Attention: Telecopier No.: ( )____________ Telephone No.: ( )____________ 47 /s/ M'Liss Kane as proxy for Carl Leo Karcher -------------------------------------------- Name: Carl Leo Karcher ________________________ ________________________ Attention: Telecopier No.: ( )____________ Telephone No.: ( )____________ /s/ M'Liss Kane as proxy for Stephen Mahood -------------------------------------------- Name: Stephen Mahood ________________________ ________________________ Attention: Telecopier No.: ( )____________ Telephone No.: ( )____________ THE GALILEO FUND, L.P. By: DDJ Galileo, LLC, its General Partner By: /s/ Illegible --------------------------------------- Name: Title: 141 Linden Street Suite 4 Wellesley, MA 02181 Attention: Robert L. Hockett Telecopier number: (617) 283-8555 Telephone number: (617) 283-8518 48 FOOTHILL CAPITAL CORPORATION By: /s/ Karen S. Sandler --------------------------------------- Name: Karen S. Sandler Title: 1111 Santa Monica Blvd. Suite 1500 Los Angeles, CA 90025 Attention: Dennis Ascher Telecopier number: (310) 479-0461 Telephone number: (310) 996-7156 CANPARTNERS INVESTMENTS IV, LLC By: /s/ Joshua S. Friedman ---------------------------------------- Name: Joshua S. Friedman Title: c/o Canyon Partners 9665 Wilshire Boulevard Suite 200 Beverly Hills, CA 90212 Attention: Scott Imbach Telecopier number: (310) 247-2701 Telephone number: (310) 247-2700 49
SCHEDULE A ----------
AMENDED CREDIT AGREEMENT AS OF JULY 29, 1996 1. Amended and Restated Credit Agreement dated as of April 12, 1995 among Checkers Drive-In Restaurants, Inc., the Prior Agent and the Prior Banks 2. Amendment Agreement dated as of July 26, 1995 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 3. Second Amendment Agreement dated as of October 2, 1995 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 4. Third Amendment Agreement dated as of January 2, 1996 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 5. Fourth Amendment Agreement dated as of January 31, 1996 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 6. Fifth Amendment Agreement dated as of February 29, 1996 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 7. Sixth Amendment Agreement dated as of March 8, 1996 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 8. Seventh Amendment Agreement dated as of March 11, 1996 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 9. Eighth Amendment Agreement dated as of March 13, 1996 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 10. Ninth Amendment Agreement dated as of March 15, 1996 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 11. Tenth Amendment Agreement dated as of May 29, 1996 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 12. Eleventh Amendment Agreement dated as of July 29, 1996 among the Borrower, the Guarantors, the Prior Agent and the Prior Banks 50
EX-4 3 EXHIBIT 4.2 AMENDED SECURITY AGREEMENT SECOND AMENDED AND RESTATED SECURITY AGREEMENT ---------------------------------------------- THIS SECOND AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement") is made as of the 22nd day of November, 1996, by and among CHECKERS DRIVE-IN RESTAURANTS, INC., a Delaware corporation (the "Borrower") and CKE RESTAURANTS, INC., as "Agent" for the ratable benefit of the "Lenders" under the Amended and Restated Credit Agreement referred to below. Terms defined in the Amended and Restated Credit Agreement shall have the same meaning under this assignment except as otherwise provided. RECITALS: --------- A. The Borrower, certain banks (the "Initial Banks") and Wachovia Bank of Georgia, N.A. (the "Initial Agent"), acting for itself and as agent for the Initial Banks, executed and delivered that certain Credit Agreement, dated as of October 28, 1993 (the "Original Credit Agreement"). B. The Borrower, the Initial Banks and the Initial Agent executed and delivered that certain Security Agreement dated as of March 10, 1995 (the "Original Security Agreement"), whereby the Borrower granted a security interest in the Collateral (as defined in the Original Security Agreement) in order to secure the Obligations (as defined in the Original Security Agreement). C. Concurrently with, and as a condition to, the execution and delivery of amendments to the Original Credit Agreement, dated as of April 12, 1995 (the Original Credit Agreement as so amended and as subsequently amended or otherwise modified, the "Amended Credit Agreement"), the Borrower, the Initial Banks and the Initial Agent agreed to amend and restate, as of April 12, 1995, the Amended Security Agreement to grant a security interest in the Collateral (as defined below) in order to secure certain additional Obligations (as defined below) of the Borrower (such amended and restated Original Security Agreement is referred to herein as the "Amended and Restated Security Agreement"). D. On November 12, 1996, pursuant to certain agreements, the Lenders and the Agent acquired all right, title and interest of the Banks (as defined in the original Credit Agreement), in, to and under the Amended Credit Agreement, the Original Security Agreement and the other Loan Documents (as defined in the Amended Credit Agreement). E. Concurrently herewith, the Borrower, the Lenders and the Agent executed and delivered that certain Amended and Restated Credit Agreement, dated as of even date herewith (as amended, supplemented or otherwise modified from time to time hereafter, the "Amended and Restated Credit Agreement") pursuant to which the Lenders have restructured the Borrower's obligations under the Amended Credit Agreement. F. As a condition, among others, to the Agent and the Lenders executing and delivering the Amended and Restated Credit Agreement, the Borrower has agreed to execute and deliver this Agreement in order to secure (i) the Syndicated Term Loan Notes (ii) the Revolving Participated Loan Note, and (iii) all of the other Obligations. AGREEMENTS: ----------- NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which the parties hereto acknowledge, the parties hereto agree that the Amended and Restated Security Agreement is amended and restated in its entirety as follows: DEFINITIONS ----------- As used in this Agreement, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the following meanings (capitalized terms not otherwise defined herein shall have the meaning set forth therefor in the Amended and Restated Credit Agreement): "Account" individually and "Accounts" collectively mean all of the Borrower's right, title and interest in and to all presently existing or hereafter acquired or created accounts, accounts receivable, contract rights, documents of title, notes, drafts, instruments, acceptances, chattel paper, securities, leases and writings evidencing a monetary obligation or a security interest in or a lease of goods; all rights to receive the payment of money or other consideration under present or future contracts (including, without limitation, all rights to receive payments under presently existing or hereafter acquired or created letters of credit), or by virtue of merchandise sold or leased, services rendered, loans and advances made or other considerations given, by or set forth in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof; all rights under or arising out of present or future contracts, agreements or general interests in merchandise which gave rise to any or all of the foregoing, including all goods; all claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise; all collateral security of any kind (including real property) given by any person with respect to any of the foregoing; all returned, rejected or repossessed goods, the sale or lease of which shall have given or shall give rise to an any of the foregoing and all cash and non-cash proceeds and products of all such goods; and all proceeds (cash and non-cash) of the foregoing. "Collateral" shall mean all of the Borrower's Accounts, Equipment, General Intangibles, Inventory and other personal property, all whether now owned or existing or hereafter acquired or created, together with any and all cash and non-cash proceeds (including, without limitation, insurance proceeds) and products thereof. "Default Rate" has the meaning set forth therefor in the Amended and Restated redit Agreement. 2 "Enforcement Costs" mean all reasonable expenses, charges, costs and fees whatsoever (including, without limitation, reasonable attorney's fees and expenses) of any nature whatsoever paid or incurred by or on behalf of the Agent in connection with (a) the collection or enforcement of any or all of the Obligations or this Agreement (including, without limitation, attorneys fees incurred prior to the institution of any suit or other proceeding), (b) the creation, perfection, collection, maintenance, preservation, defense, protection, realization upon, disposition, sale or enforcement of all or any part of the Collateral, (c) the monitoring, inspection, administration, processing, servicing of any or all of the Obligations and/or the Collateral, (d) the preparation of this Agreement and the preparation and review of lien and record searches, reports, certificates, appraisals, environmental surveys, and/or other documents or information relating from time to time to the taking, perfection, inspection, preservation, protection and/or release of a Lien on the Collateral, the value of the Collateral, or otherwise relating to the Agent's rights and remedies under this Agreement or with respect to the Collateral, and (e) all filing and/or recording taxes or fees and all stamp and other taxes and fees payable or determined to be payable in connection with the execution and delivery of this Agreement and any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees, the Borrower hereby agreeing to indemnify and save the Agent harmless from and against such liabilities. "Equipment" shall mean all of the Borrower's right, title and interest in and to all equipment, machinery, computers, chattels, tools, parts, machine tools, moveable restaurant buildings and all related equipment and moveable site improvements, furniture, furnishings, fixtures and supplies of every nature, presently existing or hereafter acquired or created and wherever located, together with all accessions, additions, fittings, accessories, special tools, and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary for the operation and use of such personal property, whether or not the same shall be deemed to be affixed to real property, and all rights under or arising out of present or future contracts relating to the foregoing and all proceeds (cash and non-cash) of the foregoing. "Event of Default" has the meaning described in Article 4. "Franchise Agreements" means the franchise agreements of the Borrower as franchisor, with the franchisees, all as described on EXHIBIT A attached hereto and made a part hereof and any such additional franchise agreements executed from time to time. "Franchise Rights of Payment" means all rights of payment the Borrower may have from time to time under all of its Franchise Agreements in effect from time to time. "General Intangibles" shall mean all of the Borrower's right, title and interest in and to all general intangibles, of every nature, whether presently existing or hereafter acquired or created, including, without limitation, all of the Franchise Agreements, all of the Franchise Rights of Payment, all books, correspondence, credit files, records, computer programs, computer tapes, cards and other papers and documents in the possession or control of the Borrower, claims (including without limitation all claims for income tax and other refunds), choses in action, judgments, patents, patent licenses, trademarks, trademark licenses, licensing agreements, rights in 3 intellectual property, goodwill (including all goodwill of the Borrower's business symbolized by and associated with any and all trademarks, trademark licenses, copyrights and/or service marks), franchises, royalty payments, contractual rights, literary rights, copyrights, service names, service marks, logos, trade secrets, all amounts received as an award in or settlement of a suit in damages, deposit accounts, interests in joint ventures or general or limited partnerships, and all proceeds (cash and non-cash) of the foregoing. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Inventory" means all of the Borrower's right, title and interest in and to all now owned and hereafter acquired inventory, goods, merchandise and other personal property furnished under any contract of service or intended for sale or lease, including, without limitation, all raw materials, work-in-progress, finished goods and materials and supplies of any kind, nature or description which are used or consumed in the Borrower's business or are or might be used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, merchandise and other personal property and all documents of title or documents representing the same and all proceeds, (cash and non-cash) of the foregoing. "Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, or decrees of any Governmental Authority or political subdivision or agency thereof, or any court or similar entity established by any thereof. "Lien" means any mortgage, deed of trust, deed to secure debt, grant, pledge, security interest, assignment, encumbrance, judgment, financing statement, lien or charge of any kind, whether perfected or unperfected, avoidable or unavoidable, consensual or non-consensual including, without limitation, any conditional sale or other title retention agreement, filed or unfiled tax liens, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction, excluding the precautionary filing of any financing statement by any lessor in a true lease transaction, by any bailor in a true bailment transaction or by any consignor in a true consignment transaction under the Uniform Commercial Code of any jurisdiction or the agreement to give any financing statement by any lessee in a true lease transaction, by any bailee in a true bailment transaction or by any consignee in a true consignment transaction. "Loan Documents" has the meaning set forth therefor in the Amended and Restated Credit Agreement and as used herein, shall include the Amended and Restated Credit Agreement. "Loans" means (i) the Syndicated Term Loan Notes, and (ii) the Revolving articipated Loan Note. "Obligations" means all debts, obligations, and liabilities of the Borrower to the Lenders of any nature whatsoever and whenever arising (whether now or hereafter existing and whether before or after the commencement of a proceeding under the Bankruptcy Code) relating to the Loans and pursuant to the Loan Documents, regardless of whether such debts, obligations and liabilities be direct, indirect, primary, secondary, joint, several, joint and several, fixed 4 or contingent; and any and all renewals, restatements, amendments, replacements, extensions and rearrangements of any such debts, obligations and liabilities including, without limitation, the principal of, and interest on, loans and advances and on each of the Notes. "Person" shall mean and include an individual, a corporation, a partnership, a joint venture, a trust, an unincorporated association, a government or political subdivision or agency thereof or any other entity. ARTICLE 1 COLLATERAL SECTION 1.1 GRANT OF SECURITY INTEREST. As security for the Obligations, the Borrower hereby assigns, pledges and grants to the Agent for the ratable benefit of the Lenders (whether as a holder of Syndicated Term Loan Notes or Revolving Participated Loan Note), and agrees that the Agent shall have a perfected and continuing security interest in, all of the Borrower's Collateral, whether now owned or existing or hereafter acquired or arising, together with any and all cash and non-cash proceeds and products thereof. The Borrower further agrees that the Agent shall have in respect thereof all of the rights and remedies of a secured party under the Uniform Commercial Code of the State of California as well as those provided in this Agreement. SECTION 1.2 RELEASE. The Agent shall have no obligation to release and/or terminate this Agreement, except upon both the performance of this Agreement and the payment and/or performance of all Obligations and the expiration and termination of any and all commitments or obligations (whether or not conditional) of the Agent, on behalf of the Lenders, to re-advance amounts or otherwise allow Obligations which would be secured thereby. ARTICLE 2 REPRESENTATIONS AND WARRANTIES SECTION 2.1 REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent, and shall be deemed to represent and warrant at the time each of the Obligations not existing on the date of this Agreement is requested and again at the time each of those Obligations is incurred, as follows: 2.1.1 PLACE(S) OF BUSINESS AND LOCATION OF COLLATERAL. The Borrower warrants that the address of the Borrower's chief executive offices and the address of all other locations of the Collateral are set forth on Exhibit B attached hereto and made a part hereof. 2.1.2 BUSINESS NAMES AND ADDRESSES. The Borrower has not conducted business under any name other than "CHECKERS DRIVE-IN RESTAURANTS, INC". 5 2.1.3 GOOD STANDING. The Borrower is a corporation, duly organized and existing, in good standing, under the laws of the jurisdiction of its incorporation, and has the corporate power to own its property and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where the failure to so qualify would not have a material adverse effect on Borrower. 2.1.4 CORPORATE AUTHORITY. The Borrower has full power and authority to enter into and to perform its obligations under this Agreement, all of which have been duly authorized by all proper and necessary corporate action. No consent or approval of shareholders of, or lenders to, the Borrower and no consent, approval, filing or registration with or notice to any Governmental Authority on the part of the Borrower is required as a condition to the validity of this Agreement or the performance by the Borrower of its obligations under this Agreement. 2.1.5 BINDING AGREEMENTS. This Agreement constitutes the valid and legally binding agreement of the Borrower and is enforceable against the Borrower in accordance with its terms, provided that the enforceability hereof is subject to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally, and to standards of good faith and commercial reasonableness. 2.1.6 NO CONFLICTS. There is no statute, regulation, rule, order or judgment, no charter, by-law or preference stock provision of the Borrower, and except for permitted liens under Section 5.11 of the Amended and Restated Credit Agreement, no provision of any mortgage, indenture, contract or other agreement binding on the Borrower or affecting its properties, which would prohibit, or cause a default under or in any way prevent the execution, delivery, or carrying out of the terms of this Agreement. 2.1.7 TITLE TO COLLATERAL. The Borrower has good and marketable title to its properties and assets which are included among the Collateral. Such properties and assets are subject to no Lien of any kind, except for the Liens in existence as of the date of this Agreement, Liens of the Agent pursuant to this Agreement or as may be permitted otherwise by the Amended and Restated Credit Agreement, and the Borrower has legal, enforceable and uncontested rights to use freely such property and assets. 2.1.8 RECITALS. The Recitals to this Agreement are true, accurately reflect the matters discussed and are hereby incorporated into and made a part of this Agreement. SECTION 2.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in or made under or in connection with this Agreement shall survive the execution of this Agreement and the incurring of any particular Obligation. 6 ARTICLE 3 COVENANTS AND AGREEMENTS OF THE BORROWER SECTION 3.1 COVENANTS. So long as any of the Obligations (or commitments therefor) shall be outstanding hereunder, the Borrower agrees with the Agent as follows: 3.1.1 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE, COMPLIANCE WITH LAWS, ETC. The Borrower will (i) do or cause to be done all things necessary to preserve and to keep in full force and effect its corporate existence and material rights and its franchises, trade names, patents, trademarks and permits which are necessary for the continuance of its business, and (ii) comply with all applicable Laws and observe the valid requirements of Governmental Authorities, the noncompliance with or the nonobservance of which might materially interfere with the performance of its obligations hereunder, or with the Agent's interest in the Collateral. 3.1.2 CERTAIN NOTICES. The Borrower will notify the Agent not less than thirty (30) days prior to (i) any change in the name or corporate structure under which the Borrower conducts its business the opening of any new place of business or the closing of any existing place of business; and (ii) any change in the location of the places where the Collateral, or any part thereof, or the books and records concerning the Collateral, or any part thereof, are kept. 3.1.3 MAINTENANCE OF THE COLLATERAL; INSURANCE. The Borrower will maintain the Collateral in good working order, saving and excepting ordinary wear and tear, and will not permit anything to be done to the Collateral which may materially impair the value thereof. The Agent, or agents designated by the Agent, shall be permitted to enter the premises of the Borrower and examine, audit and inspect the Collateral at any reasonable time and from time to time without notice after an Event of Default. The Borrower will promptly furnish to the Agent all such additional information regarding the Collateral as the Agent may from time to time request in the exercise of its discretion. With respect to the insurance required to be obtained by the Borrower under the Amended and Restated Credit Agreement, the Borrower will obtain from such insurers a certificate confirming that the Agent, for itself and the other Lenders, is an additional insured with loss payable to the Agent as its respective interest may appear on the Collateral and with a specific endorsement to each such insurance policy pursuant to which the insurer agrees to give the Agent at least thirty (30) days written notice before any alteration or cancellation of such insurance policy. 3.1.4 DEFENSE OF TITLE AND FURTHER ASSURANCES. At its expense the Borrower will defend the title to the Collateral (or any part thereof), and promptly upon request execute, acknowledge and deliver any financing statement, renewal, affidavit, deed, assignment, continuation statement, security agreement, certificate, notice to financial intermediary, or other document the Agent may require in order to perfect, preserve, maintain, continue, protect and/or extend the Lien or security interest granted to the Agent under this Agreement and its priority. The Borrower will from time to time do whatever the Agent may request by way of obtaining, executing, delivering, and/or filing financing statements, landlord's or mortgagee's waivers, and other notices and amendments and renewals thereof and the Borrower will take any and all steps and observe such formalities as the Agent may request, in order to create and 7 maintain a valid Lien upon, pledge of, or security interest in, the Collateral subject to no other liens or claims. The Borrower agrees that a copy of a fully executed financing statement shall be sufficient to satisfy for all purposes the requirements of a financing statement as set forth in Article 9 of the applicable Uniform Commercial Code. 3.1.5 SECURITY, ETC. The Borrower agrees that the Agent may at any time take such steps as the Agent deems reasonably necessary to protect the Agent's interest in, and to preserve the Collateral, whether at the business premises of the Borrower or elsewhere. 3.1.6 OTHER LIENS. The Borrower will not permit any Liens on or with respect to all or any part of the Collateral, other than those Liens in favor of the Agent, Liens for taxes not yet delinquent, and Liens permitted by the Amended and Restated Credit Agreement. 3.1.7 LOCATION OF COLLATERAL. Except as expressly permitted elsewhere in this Agreement or except as permitted by the Amended and Restated Credit Agreement, without the prior written consent of the Agent, the Borrower will not transfer, or permit the transfer, to another location of any of the Collateral or the books and records related to any of the Collateral. Not withstanding the foregoing, Borrower may from time to time transfer restaurant units from one location to another without the prior consent of Agent. 3.1.8 DISPOSITION OF COLLATERAL. Without the prior written consent of the Agent or except as permitted by the Amended and Restated Credit Agreement, the Borrower will not sell, discount, allow credits or allowances, transfer, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral. Unless, with respect to any of the foregoing actions which are not permitted (and not prohibited) by the Amended and Restated Credit Agreement, such action is in the ordinary course of business consistent with past practices. 3.1.9 FRANCHISE AGREEMENTS. Without the prior written consent of the Agent, the Borrower will not amend or otherwise modify the Franchise Agreements, other than amendments or modifications made in the ordinary course of business which would not have a material adverse effect on the Borrower. The Borrower shall enforce its rights and remedies against its franchisees in accordance with the terms of the Franchise Agreements in the ordinary course of business. The Borrower shall maintain at all times all of its franchises, Franchise Agreements and other General Intangibles relating thereto in full force and effect. ARTICLE 4 DEFAULT AND RIGHTS AND REMEDIES SECTION 4.1 EVENTS OF DEFAULT. The occurrence of one or more of the following events shall be "Events of Default" under this Agreement, and the terms "Event of Default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: 8 4.1.1 The Borrower shall fail to make any payment when due and such failure shall continue beyond any applicable grace period under any of the Obligations. 4.1.2 Any representation or warranty made herein or in any report, certificate, opinion (including any opinion of counsel for the Borrower), financial statement or other instrument furnished in connection with the Loan Documents or the Obligations, shall prove to have been false or misleading when made in any material respect. 4.1.3 Other than failure to pay the Obligations as set forth in 4.1.1 above, the Borrower shall fail to duly and promptly perform, comply with or observe the terms, covenants, conditions and agreements set forth in this Agreement (and such failure shall continue uncured for 30 days after notice thereof) or in any of the other Loan Documents, or an "Event of Default" shall occur under any of the Loan Documents, and such "Event of Default" is not cured within any applicable grace period provided therein. SECTION 4.2 RIGHTS AND REMEDIES, ETC. 4.2.1 GENERAL RIGHTS AND REMEDIES. If any Event of Default shall occur hereunder, then in each and every such case, the Agent may, at its option exercised from time to time, at any time thereafter while such Event of Default is continuing do any one or more of the following: (a) declare without notice to the Borrower the unpaid principal amount of all or any of the Obligations (with accrued interest thereon) to be immediately due and payable, whereupon the same shall forthwith become due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives; and/or (b) exercise any rights and remedies available to the Agent under this Agreement and applicable Laws. 4.2.2 ENFORCEMENT COSTS; APPLICATION OF PROCEEDS. Subject to the limitations on certain Enforcement Costs set forth in Section 2.13(c) of the Amended and Restated Credit Agreement, the Borrower agrees to pay to the Agent all Enforcement Costs paid or incurred by the Agent. All Enforcement Costs which are required to be paid by the Borrower, together with interest thereon from the date incurred or advanced until paid in full at a per annum rate of interest equal at all times to the Default Rate and shall be paid by the Borrower to the Agent whenever demanded by the Agent. Any proceeds of the collection of the Obligations or of the sale or other disposition of the Collateral will be applied by the Agent first to the payment of the Enforcement Costs, second to the payment of the Syndicated Term Loans, and third to the payment of the Revolving Participated Loan Note, and any balance of such proceeds (if any) will be applied by the Agent to the payment of the remaining Obligations (whether then due or not), if any, at such time or times and in such order and manner of application as the Agent may from time to time in its sole discretion determine. If the sale or other disposition of the Collateral fails to satisfy all of the Obligations, the Borrower shall remain 9 liable to the Agent for any deficiency. Any surplus from the sale or disposition of the Collateral shall be paid to the Borrower or to any other party entitled thereto or shall otherwise be paid over in a manner permitted by law, less all Enforcement Costs related to any such payment. 4.2.3 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL. In addition to all other rights and remedies provided hereunder or as shall exist at law or in equity from time to time, during the continuance of an Event of Default the Agent may without notice to the Borrower (except to the extent required by applicable Laws) endorse the name of the Borrower upon any items of payment relating to the Collateral or on any proof of claim in any bankruptcy proceeding against an account debtor and any other obligor with respect to the Collateral. 4.2.4 UNIFORM COMMERCIAL CODE AND OTHER REMEDIES. Upon the occurrence of an Event of Default (and in addition to all of its rights, powers and remedies under this Agreement), the Agent shall have all of the rights and remedies of a secured party under the California Uniform Commercial Code and other applicable laws. Upon demand by the Agent, the Borrower shall assemble the Collateral and make it available to the Agent, at a place reasonably convenient for such purpose as designated by the Agent. The Agent or its agents may enter upon the Borrower's premises to take possession of the Collateral, to remove it, to render it unusable, or to sell or otherwise dispose of it. Any written notice of the sale, disposition or other intended action by the Agent with respect to the Collateral which is sent by regular mail, postage prepaid, to the Borrower at the address set forth for notices herein, or such other address of the Borrower which may from time to time be shown on the Agent's records, at least ten (10) days prior to such sale, disposition or other action, shall constitute reasonable notice to the Borrower. ARTICLE 5 MISCELLANEOUS SECTION 5.1 COURSE OF DEALING; AMENDMENT. No course of dealing between the Borrower and the Agent shall be effective to amend, modify or change any provision of this Agreement and this Agreement may not be amended, modified, or changed in any respect except by an agreement in writing signed by the Agent and the Borrower. The Agent shall have the right at all times to enforce the provisions of this Agreement in strict accordance with the terms hereof and thereof, notwithstanding any conduct or custom on the part of the Agent in refraining from so doing at any time or times. The failure or delay of the Agent at any time or times to enforce its rights under such provisions, strictly in accordance with the same, shall not be construed as having created a custom in any way or manner contrary to specific provisions of this Agreement or as having in any way or manner modified or waived the same. SECTION 5.2 WAIVER, CUMULATIVE REMEDIES. Subject to the rights of the Lenders under the Amended and Restated Credit Agreement, the Agent may on behalf of the Lenders: 10 (a) at any time and from time to time, execute and deliver to the Borrower a written instrument waiving, on such terms and conditions as the Agent, may specify in such written instrument, any of the requirements of this Agreement or any Event of Default and its consequences, provided, that any such waiver shall be for such period and subject and limited to such conditions as shall be specified in any such instrument and to the instance for which the waiver is given. In the case of any such waiver, the Borrower and the Agent, shall be restored to their former positions prior to such Event of Default and shall have the same rights as they had hereunder. The rights, powers and remedies provided in this Agreement are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as the Agent, shall determine, and are in addition to, and not exclusive of, rights, powers and remedies provided by applicable Laws. (b) after an Event of Default proceed against the Borrower and/or the Collateral with or without proceeding against any Person obligated under any of the Obligations. (c) after an Event of Default proceed against the Borrower with or without proceeding under any of the Loan Documents or any other agreement. (d) without reducing or impairing the obligation of the Borrower and without notice, release or compromise with any guarantor or other Person liable for all or any part of the Obligations. (e) without reducing or impairing the obligations of the Borrower and without notice thereof: (i) fail to perfect the Lien in any or all Collateral or to release any or all of the Collateral or to accept substitute Collateral, (ii) allow all or any Obligations to arise after the date of this Agreement, (iii) waive any provision of this Agreement, (iv) exercise or fail to exercise rights of set-off or other rights, (v) accept partial payments or extend from time to time the maturity of all or any part of the Obligations, and (vi) take or fail to take any action under this Agreement or against any one or more Persons obligated under the Obligations. The Borrower hereby waives and releases all claims and defenses against the Agent and/or the Lenders, respectively, with respect to the payment of the or enforcement of the Obligations and the Agent's rights in the Collateral on account of any of the foregoing. SECTION 5.3 NOTICES. All notices, requests and demands to or upon the parties to this Agreement shall be deemed to have been given or made when so given or made in accordance with Section 9.01 of the Amended and Restated Credit Agreement. SECTION 5.4 MANAGEMENT AND ADMINISTRATION BY AGENT. The Agent shall not have any duty to the Borrower to pay for insurance, taxes, or other charges incurred in the custody, preservation, use or operation of, or in connection with the management of, any Collateral on which a Lien is granted in connection with this Agreement; provided, however, that the Agent may (in its sole discretion) pay such expenses. All such payments shall part of the Obligations and shall bear interest payable on demand by the Borrower from the date paid or incurred until paid in full at the Default Rate. 11 SECTION 5.5 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. The Borrower (a) and each of the Lenders and the Agent irrevocably waives any and all right to trial by jury in any legal proceeding arising out of this Agreement to the extent permitted by law, (b) submits to the nonexclusive personal jurisdiction in the State of California, the courts thereof and the United States District Courts sitting therein, for the enforcement of this Agreement, (c) waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of California for the purpose of litigation to enforce this Agreement, and (d) agrees that service of process may be made upon it in the manner prescribed in Section 9.01 of the Amended and Restated Credit Agreement for the giving of notice to the Borrower. Nothing herein contained, however, shall prevent the Agent from bringing any action or exercising any rights against any security and against the Borrower personally, and against any assets of the Borrower, within any other state or jurisdiction. SECTION 5.6 SEVERABILITY. In case one or more provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions contained herein shall remain effective and binding on the parties thereto and shall not be affected or impaired thereby. SECTION 5.7 ASSIGNMENT, ETC. The Agent shall have the right to divulge to any actual or potential purchaser, assignee, transferee or participant of the Collateral and/or the Obligations, or any part thereof all information, reports, financial statements and documents obtained in connection with this Agreement or otherwise as the same may be permitted under the Amended and Restated Credit Agreement. SECTION 5.8 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Agent 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 Agent. SECTION 5.9 APPLICABLE LAW. THE BORROWER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, AS IF THIS AGREEMENT HAD EACH BEEN EXECUTED, DELIVERED, ADMINISTERED AND PERFORMED SOLELY WITHIN THE STATE OF CALIFORNIA. SECTION 5.10 DEFINITIONAL PROVISIONS. Unless otherwise defined herein, as used in this Agreement and in any certificate, report or other document made or delivered pursuant hereto, accounting terms not otherwise defined herein, and accounting terms only partly defined herein, to the extent not defined, shall have the respective meanings given to them under generally accepted United States accounting principles consistently applied to the Borrower. Unless otherwise defined herein, all terms used herein which are defined by the California Uniform Commercial Code shall have the same meanings as assigned to them by the California Uniform Commercial Code unless and to the extent varied by this Agreement. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, subsection, schedule and exhibit references are references to articles, 12 sections or subsections of, or schedules or exhibits to, as the case may be, this Agreement unless otherwise specified. The captions, headings and titles to this Agreement and its sections, subsections and other parts are only for the convenience of the parties and are not part of this Agreement. As used herein, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neuter gender shall include all genders, as the context may require. Reference to this Agreement or to any one or more of the instrument, agreement or document previously, simultaneously or hereafter executed and delivered by the Borrower, any guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or otherwise in connection with any of the Obligations and/or in connection with this Agreement shall mean the same as the foregoing may from time to time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified. 13 IN WITNESS WHEREOF, the Borrower has executed and delivered this Agreement under seal as of the day and year first written above. CHECKERS DRIVE-IN RESTAURANTS, INC. (BORROWER) By: /s/ Albert J. DiMarco (Seal) ---------------------- Name: Albert J. DiMarco Title: President 14 ACCEPTED AND AGREED TO ON BEHALF OF THE LENDERS AS OF THE DATE FIRST WRITTEN ABOVE: CKE RESTAURANTS, INC. for itself and as Agent for the Lenders By: /s/ W. P. Foley II (Seal) -------------------------- Name: W. P. Foley II Title: 15 EXHIBIT B --------- The Borrower's chief executive office is located at 600 Cleveland Street, Suite 1050 Clearwater, Florida 34615. In addition to the Borrower's chief executive office listed above, the Collateral is also located at the following addresses: See Attached Schedule 1. 16 EXHIBIT A --------- Franchise Agreements: 17 EXHIBIT A TO FINANCING STATEMENT -------------------------------- Description of Collateral ------------------------- This Financing Statement covers the following types (or items) of property of the Debtor, including, without limitation, all proceeds of any insurance policies covering all or any part of such property (as such terms are defined below): all of the Debtor's Accounts, Equipment, General Intangibles, and Inventory, all whether now owned or existing or hereafter acquired or created, together with any and all cash and non-cash proceeds (including, without limitation, insurance proceeds) and products thereof. "Account" individually and "Accounts" collectively mean all of the Debtor's right, title and interest in and to all presently existing or hereafter acquired or created accounts, accounts receivable, contract rights, documents of title, notes, drafts, instruments, acceptances, chattel paper, securities, leases and writings evidencing a monetary obligation or a security interest in or a lease of goods; all rights to receive the payment of money or other consideration under present or future contracts (including, without limitation, all rights to receive payments under presently existing or hereafter acquired or created letters of credit), or by virtue of merchandise sold or leased, services rendered, loans and advances made or other considerations given, by or set forth in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof; all rights under or arising out of present or future contracts, agreements or general interests in merchandise which gave rise to any or all of the foregoing, including all goods; all claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise; all collateral security of any kind (including real property) given by any person with respect to any of the foregoing; all returned, rejected or repossessed goods, the sale or lease of which shall have given or shall give rise to an any of the foregoing and all cash and non-cash proceeds and products of all such goods; and all proceeds (cash and non-cash) of the foregoing. "Equipment" shall mean all of the Debtor's right, title and interest in and to all equipment, machinery, computers, chattels, tools, parts, machine tools, moveable restaurant buildings and all related equipment and moveable site improvements, furniture, furnishings, fixtures and supplies of every nature, presently existing or hereafter acquired or created and wherever located, together with all accessions, additions, fittings, accessories, special tools, and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary for the operation and use of such personal property, whether or not the same shall be deemed to be affixed to real property, and all rights under or arising out of present or future contracts relating to the foregoing and all proceeds (cash and non-cash) of the foregoing. "Franchise Agreements" means all franchise agreements of the Borrower as franchisor, with the franchisees, executed from time to time. "Franchise Rights of Payment" means all rights of payment the Debtor may have from time to time under all of its Franchise Agreements in effect from time to time. "General Intangibles" shall mean all of the Debtor's right, title and interest in and to all general intangibles, of every nature, whether presently existing or hereafter acquired or created, including, without limitation, all of the Franchise Agreements, all of the Franchise Rights of Payment, all books, correspondence, credit files, records, computer programs, computer tapes, cards and other papers and documents in the possession or control of the Debtor, claims (including without limitation all claims for income tax and other refunds), choses in action, judgments, patents, patent licenses, trademarks, trademark licenses, licensing agreements, rights in intellectual property, goodwill (including all goodwill of the Debtor's business symbolized by and associated with any and all trademarks, trademark licenses, copyrights and/or service marks), franchises, royalty payments, contractual rights, literary rights, copyrights, service names, service marks, logos, trade secrets, all amounts received as an award in or settlement of a suit in damages, deposit accounts, interests in joint ventures or general or limited partnerships, and all proceeds (cash and non-cash) of the foregoing. "Inventory" means all of the Debtor's right, title and interest in and to all now owned and hereafter acquired inventory, goods, merchandise and other personal property furnished under any contract of service or intended for sale or lease, including, without limitation, all raw materials, work-in-progress, finished goods and materials and supplies of any kind, nature or description which are used or consumed in the Debtor's business or are or might be used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, merchandise and other personal property and all documents of title or documents representing the same and all proceeds, (cash and non-cash) of the foregoing. 19 EX-4 4 EXHIBIT 4.3 FORM OF WARRANT Exhibit 4.3 [FORM OF WARRANT] THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), NOR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT AND THE SECURITIES LAW. THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND COMPLIANCE WITH THE SECURITIES LAW OF ANY STATE OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION AND COMPLIANCE ARE NOT REQUIRED. Warrant to Purchase _________ Shares of Common Stock As Herein Described WARRANT TO PURCHASE COMMON STOCK OF CHECKERS DRIVE-IN RESTAURANTS, INC. This is to certify that, for value received,________ or registered assigns (in each case, the "Holder"), is entitled to purchase, subject to the provisions of this Warrant, from Checkers Drive-In Restaurants, Inc., a Delaware corporation (the "Company"), at any time during the period from the date hereof (the "Commencement Date") to 5:00 p.m., California time, on November 22, 2002 (the "Expiration Date"), at which time this Warrant shall expire and become void, ________ shares ("Warrant Shares") of the Company's Common Stock (the "Common Stock"). This Warrant shall be exercisable at $.75 per share (the "Exercise Price"). The number of shares of Common Stock to be received upon exercise of this Warrant and the Exercise Price shall be adjusted from time to time as set forth below. This Warrant also is subject to the following terms and conditions: 1. Exercise of Warrant. ------------------- 1.1 EXERCISE AND PAYMENT. This Warrant may be exercised in whole or in part at any time from and after the date hereof and before the Expiration Date, but if such date is a day on which federal or state chartered banking institutions located in the State of California are authorized to close, then on the next succeeding day which shall not be such a day. Exercise shall be by presentation and surrender to the Company at its principal office, or at the office of any transfer agent designated by the Company, of (i) this Warrant, (ii) the attached exercise form properly executed, and (iii) either (A) a bank check for the Exercise Price for the number of Warrant Shares specified in the exercise form, or (B) cancellation of indebtedness of the Company to the Holder in an amount equal to the Exercise Price for the number of Warrant Shares specified in the exercise form, provided that such cancellation of indebtedness shall be applied against the payments next due thereunder or (C) any combination of the consideration specified in the foregoing clauses (A) and (B). If this Warrant is exercised in part only, the Company or its transfer agent shall, upon surrender of the Warrant, execute and deliver a new Warrant evidencing the rights of the Holder to purchase the remaining number of Warrant Shares purchasable hereunder. Upon receipt by the Company of this Warrant in proper form for exercise, accompanied by payment as aforesaid, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Holder. 1.2 NET ISSUE EXERCISE. Notwithstanding any provisions in this Warrant to the contrary, in lieu of exercising this Warrant for cash, the Holder shall have the right, upon its written request delivered or transmitted to the Company together with this Warrant, to exchange this Warrant, in whole or in part at any time or from time to time on or prior to the Expiration Date, for the number of shares of Common Stock designated by such Holder less the number of shares having an aggregate fair market value (determined as set forth in Section 3 hereof) on the date of such exchange equal to the aggregate Exercise Price the Holder would have paid to the Company to purchase such designated number of Warrant Shares, and, if a balance of purchasable Warrant Shares remains after such exchange, the Company shall execute and deliver to the Holder a new Warrant evidencing the right of the Holder to purchase such balance of Warrant Shares. No payment of any cash or other consideration shall be required. Such exchange shall be effective upon the date of receipt by the Company of the original Warrant surrendered for cancellation and a written request from the Holder that the exchange pursuant to this Subsection be made, or at such later date as may be specified in such request. 2. RESERVATION OF SHARES. The Company shall, at all times until the expiration of this Warrant, reserve for issuance and delivery upon exercise of this Warrant the number of Warrant Shares which shall be required for issuance and delivery upon exercise of this Warrant. The Company covenants that the shares of Common Stock issuable on exercise of the Warrant shall be duly and validly issued and fully paid and non-assessable and free of liens, charges and all taxes with respect to the issue thereof, and that upon issuance, such shares shall be listed on each national securities exchange, if any, on which the other shares of outstanding Common Stock of the Company are then listed. 3. FRACTIONAL INTERESTS. The Company shall not issue any fractional shares or script representing fractional shares upon the exercise or exchange of this Warrant. With respect to any fraction of a share resulting from the exercise or exchange hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current fair market value per share of Common Stock (herein, the "Market Price Per Share"), determined as follows: (a) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such an exchange or is listed on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), the current fair market value shall be the average of the per share closing sales prices of the Common Stock on such exchange or NASDAQ for the 20 consecutive trading days ending on the last trading day prior to the date of exercise of this Warrant; 2 (b) If the Common Stock is not so listed or admitted to unlisted trading privileges or quoted on NASDAQ, the current fair market value shall be the average of the mean of the bid and asked prices reported for the 20 consecutive trading days ending on the last trading day prior to the date of the exercise of this Warrant (i) by NASDAQ, or (ii) if reports are unavailable under clause (i) above, by the National Quotation Bureau Incorporated; or (c) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current fair market value shall be an amount, not less than book value, determined in such reasonable manner as may be prescribed by the Company's Board of Directors in good faith. 4. NO RIGHTS AS STOCKHOLDERS. This Warrant shall not entitle the Holder to any rights as a stockholder of the Company, either at law or in equity. The rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. Nothing herein concerning the rights or privileges of the Holder hereof shall give rise to any liability of such Holder for the purchase price of any Warrant Shares or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 5. Adjustments. ----------- 5.1 SUBDIVISION OR COMBINATION OF SHARES. If the Company is recapitalized through the subdivision or combination of its outstanding shares of Common Stock into a larger or smaller number of shares, the number of Warrant Shares shall be increased or reduced, as of the record date for such recapitalization, in the same proportion as the increase or decrease in the outstanding shares of Common Stock, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all of the Warrant Shares issuable hereunder immediately after the record date for such recapitalization shall equal the aggregate amount so payable immediately before such record date. 5.2 DIVIDENDS IN COMMON STOCK OR SECURITIES CONVERTIBLE INTO COMMON STOCK. If the Company declares a dividend or distribution on Common Stock payable in Common Stock or securities convertible into Common Stock, the number of shares of Common Stock for which this Warrant may be exercised shall be increased, as of the record date for determining which holders of Common Stock shall be entitled to receive such dividend, in proportion to the increase in the number of outstanding shares (and shares of Common Stock issuable upon conversion of all such securities convertible into Common Stock) of Common Stock as a result of such dividend, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all the Warrant Shares issuable hereunder immediately after the record date for such dividend shall equal the aggregate amount so payable immediately before such record date. 5.3 DISTRIBUTIONS OF OTHER SECURITIES OR PROPERTY. (a) OTHER SECURITIES. If the Company distributes to holders of its Common Stock, other than as part of its dissolution or liquidation or the winding up of its affairs, any of its securities (other than Common Stock or securities convertible into Common Stock) or any evidence of indebtedness, then in each case, the number of Warrant Shares thereafter purchasable upon exercise of this Warrant shall be determined by multiplying the number of Warrant Shares theretofore purchasable by a fraction, of which the numerator shall be the then 3 Market Price Per Share of Common Stock (as determined pursuant to Section 3) on the record date mentioned below in this Section 5.3(a), and of which the denominator shall be the then Market Price Per Share of Common Stock on such record date, less the then fair value (as determined by the Board of Directors of the Company in good faith) of the portion of the shares of the Company's capital stock or evidences of indebtedness distributable with respect to each share of Common Stock. Such adjustment shall be made whenever any such distribution is made, and shall become effective retroactively as of the record date for the determination of shareholders entitled to receive such distribution. (b) PROPERTY. If the Company distributes to the holders of its Common Stock, other than as a part of its dissolution or liquidation or the winding up of its affairs, any of its assets (including cash), the Exercise Price per Warrant Share shall be reduced, without any further action by the parties hereto, by the Per Share Value (as hereinafter defined) of the dividend or distribution. For the purposes of this Section 5.3(b), the "Per Share Value" of any dividend or distribution other than cash shall be equal to the fair market value of such non-cash distribution divided by the number of shares of Common Stock outstanding and securities convertible into Common Stock as determined in good faith by the Board of Directors of the Company; for dividends or distributions of cash, the Per Share Value thereof shall be the cash distributed per share of Common Stock. 5.4 RIGHTS OFFERING. If the Company offers rights or warrants to the holders of Common Stock which entitle them to subscribe to or purchase additional Common Stock or securities convertible into Common Stock then: (a) If the price per share (together with the value of the consideration, if any, paid for such rights or warrants) is lower on the record date referred to below than the then Market Price Per Share of Common Stock, the number of Warrant Shares thereafter purchasable upon the exercise of the Warrant shall be determined by multiplying the number of Warrant Shares immediately theretofore purchasable upon exercise of the Warrant by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the then Market Price Per Share of Common Stock. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective retroactively as of the record date for the determination of shareholders entitled to receive such rights or warrants. (b) If, however, the price per share (together with the value of the consideration, if any, paid for such rights or warrants) is not lower on such record date than the then Market Price Per Share of Common Stock, the Company shall give written notice of any such proposed offering to the Holder at least fifteen days prior to the proposed record date in order to permit the Holder to exercise this Warrant on or before such record date. There shall be no adjustment in the number of shares of Common Stock for which this Warrant may be exercised, or in the Exercise Price, by virtue of any such distribution. (c) There shall be no adjustment in the number of shares of Common Stock for which this Warrant may be exercised, or in the Exercise Price, by virtue of this Section 5.4 in connection with the Rights Offering contemplated by the Credit Agreement (as defined in Section 14 below); provided, 4 however, that the distribution of such rights offering is completed by June 22, 1997. 5.5 MERGER, SALE OF ASSETS. If at any time while this Warrant, or any portion thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of the Company's properties and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 5. The foregoing provisions of this Section 5.5 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. In all events, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. 5.6 RECLASSIFICATION. If the Company, at any time while this Warrant, or any portion thereof, remains outstanding and unexpired by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 5. 5.7 LIQUIDATION, ETC. If the Company shall, at any time before the expiration of this Warrant, dissolve, liquidate or wind up its affairs, or otherwise declare a dividend, or make a distribution to the holders of its Common Stock generally, whether in cash, property or assets of any kind, including any dividend payable in stock or securities of any other issuer owned by the Company (excluding regularly payable cash dividends declared from time to time by the Company's Board of Directors or any dividend or distribution referred to in Section 5.2 or Section 5.3), the Exercise Price shall be reduced, without any further action by the parties hereto, by the Per Share Value (as hereinafter defined) of the dividend. For purposes of this Section 5.7, the "Per Share Value" of a cash dividend or other distribution shall be the dollar amount of the distribution on each share of Common Stock and the "Per Share Value" of 5 any dividend or distribution other than cash shall be equal to the fair market value of such non-cash distribution on each share of Common Stock as determined in good faith by the Board of Directors of the Company. 5.8 Dilutive Issuances. ------------------ (a) Upon each issuance (or deemed issuance as provided below) by the Company of any shares of Common Stock (the "Additional Stock") after the date hereof, other than "Excluded Stock" (as defined below), for a consideration per share less than the Exercise Price in effect immediately prior to the issuance, the Exercise Price in effect immediately prior to each issuance shall forthwith be adjusted to a price determined by multiplying the Exercise Price by a fraction, (x) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such Additional Stock plus the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of shares of Additional Stock so issued would purchase at the Exercise Price in effect immediately prior to such issuance, and (y) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance of Additional Stock plus the number of shares of such Additional Stock so issued. For the purpose of the above calculation, the number of shares of Common Stock outstanding immediately prior to such issuance of Additional Stock shall be calculated on a fully diluted basis, as if all convertible securities had been fully converted into shares of Common Stock immediately prior to such issuance, and any outstanding options, warrants or other rights for the purchase of shares of stock or convertible securities had been fully exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Common Stock if so convertible) as of such date, but not including in such calculation any additional shares of Common Stock issuable with respect to convertible securities, or outstanding options, warrants or other rights for the purchase of shares of stock or convertible securities, solely as a result of the adjustment of the respective conversion or exercise prices (or other conversion ratios) resulting from the issuance of the Additional Stock causing the adjustment in question. (b) In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof. (c) In the case of the issuance of the Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined in good faith by the Board of Directors irrespective of any accounting treatment. (d) In the case of the issuance of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of this Section 5.8: (i) The aggregate maximum number of shares of Common Stock deliverable upon exercise (whether or not then exercisable) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration, if any, received by 6 the Company upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights for the Common Stock covered thereby. (ii) The aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange (whether or not then convertible or exchangeable) for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities or the exercise of any related options or rights. (iii) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Company upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Exercise Price, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities. (iv) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Exercise Price, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. (v) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to subparagraphs (i) and (ii) above shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subparagraphs (iii) or (iv) above. (e) The term "Excluded Stock" shall mean: (i) shares of Common Stock issued or issuable upon exercise of the Warrant or the Warrants containing terms substantially identical to this Warrant issued to the other Lenders (as that term is defined in that certain Amended and Restated Credit Agreement dated of even date herewith, between CKE Restaurants, Inc., for itself and as agent, and the Company); (ii) shares of Common Stock issued or issuable in a public offering registered under the Securities Act; 7 (iii) shares of Common Stock or related options exercis- able for such Common Stock issued to employees, officers, and directors of, and consultants, customers, and vendors to, the Company, pursuant to an arrangement approved by the Board of Directors of the Company; (iv) shares of Common Stock issued pursuant to a trans- action described in Sections 5.1, 5.2, 5.4 or 5.6 above; and (v) shares of Common Stock issued or issuable in con- nection with the acquisition by the Company of all of the outstanding voting stock or substantially all of the assets of another entity. 5.9 ADJUSTMENT OF EXERCISE PRICE. Whenever the number of Warrant Shares purchasable upon the exercise of the Warrant is adjusted, the Exercise Price with respect to the Warrant Shares shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of Warrant Shares purchasable upon the exercise of the Warrant immediately prior to such adjustment, and of which the denominator shall be the number of Warrant Shares so purchasable immediately thereafter. 5.10 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares purchasable upon the exercise of the Warrant or the Exercise Price of the Warrant Shares is adjusted as provided herein, the Company shall mail to the Holder a notice of such adjustment or adjustments, prepared and signed by the Chief Financial Officer or Secretary of the Company, which sets forth the number of Warrant Shares purchasable upon the exercise of the Warrant and the Exercise Price of such Warrant Shares after such adjustment, a brief statement of the facts requiring such adjustment, and the computation by which such adjustment was made. 5.11 LIMITATION ON ADJUSTMENTS. No adjustment in the number of Warrant Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent in the number of Warrant Shares purchasable upon the exercise of this Warrant; provided, however, that any adjustments which by reason of this paragraph 5.11 are not required to be made shall be carried forward and taken into account in any subsequent adjustment or in any subsequent exercise in whole or in part of the Warrant. 6. NOTICES TO HOLDER. So long as this Warrant shall be outstanding (a) if the Company shall pay any dividends or make any distribution upon the Common Stock otherwise than in cash or (b) if the Company shall offer generally to the holders of Common Stock the right to subscribe to or purchase any shares of any class of Common Stock or securities convertible into Common Stock or any similar rights or (c) if there shall be any capital reorganization of the Company in which the Company is not the surviving entity, recapitalization of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or other transfer of all or substantially all of the property and assets of the Company, or voluntary or involuntary dissolution, liquidation or winding up of the Company, then in such event, the Company shall cause to be mailed to the Holder, at least twenty days prior to the relevant date described below (or such shorter period as is reasonably possible if twenty days is not reasonably possible), a notice containing a description of the proposed action and stating the date or expected date on which a record of the Company's stockholders is to be taken for the purpose of any such dividend, distribution of rights, or such reclassification, 8 reorganization, consolidation, merger, conveyance, lease or transfer, dissolution, liquidation or winding up is to take place, the effect of the action, to the extent such effect may be known on the date of such notice on the Exercise Price and the kind and amount of shares of stock or other securities or property deliverable on the exercise of the Warrant, and the date or expected date, if any is to be fixed, as of which the holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such event. All such notices shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery, and (ii) in the case of mailing, on the third business day following the date of such mailing. 7. Transfer or Loss of Warrant. --------------------------- 7.1 TRANSFER. This Warrant may be transferred, exercised, exchanged or assigned ("transferred"), in whole or in part, subject to the provisions of this Section 7.1. The Holder shall have the right to transfer all or a part of this Warrant and all or part of the Warrant Shares to its officers, directors or to its parent or subsidiary corporations. The Company shall register on its books any permitted transfer of the Warrant, upon surrender of same to the Company with a written instrument of transfer duly executed by the registered Holder or by a duly authorized attorney. Upon any such registration of a transfer, new Warrant(s) shall be issued to the transferee(s) and the surrendered Warrant shall be cancelled by the Company. A Warrant may also be exchanged, at the option of the Holder, for one or more new Warrants representing the aggregate number of Warrant Shares evidenced by the Warrant surrendered. This Warrant and the Warrant Shares or any other securities ("Other Securities") received upon exercise of this Warrant or the conversion of the Warrant Shares shall be subject to restrictions on transferability unless registered under the Securities Act of 1933, as amended (the "Securities Act"), or unless an exemption from registration is available. Until this Warrant and the Warrant Shares are so registered, this Warrant and any certificate for Warrant Shares issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Company, stating that this Warrant or the Warrant Shares may not be sold, transferred or otherwise disposed of unless, in the opinion of counsel satisfactory to the Company, which may be counsel to the Company, that the Warrant or the Warrant Shares may be transferred without such registration. This Warrant and the Warrant Shares may also be subject to restrictions on transferability under applicable state securities or blue sky laws. Until the Warrant and the Warrant Shares are registered under the Securities Act, the Holder shall reimburse the Company for its expenses, including attorneys' fees, incurred in connection with any transfer or assignment, in whole or in part, of this Warrant or any Warrant Shares. 7.2 COMPLIANCE WITH LAWS. Until this Warrant or the Warrant Shares are registered under the Securities Act, the Company may require, as a condition of transfer of this Warrant or the Warrant Shares that the transferee (who may be the Holder in the case of an exchange) represent that the securities being transferred are being acquired for investment purposes and for the transferee's own account and not with a view to or for sale in connection with any distribution of the security. The Company may also require that the transferee provide written information adequate to establish that the transferee is an "accredited investor" within the meaning of Regulation D issued under the Securities Act, or otherwise meets all qualifications necessary to comply with exemptions to the Securities Act and Securities Laws, all as determined by counsel to the Company. 9 7.3 LOSS OF WARRANT. Upon receipt by the Company of evidence reasonably satisfactory to it of loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of reasonable satisfactory indemnification, or, in the case of mutilation, upon surrender of this Warrant, the Company will execute and deliver, or instruct the Transfer Agent to execute and deliver, a new Warrant of like tenor and date, any such lost, stolen or destroyed Warrant thereupon shall become void. 8. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or otherwise, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times, in good faith, take all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. 9. NOTICES. Notices and other communications to be given to the Holder shall be deemed sufficiently given if delivered by hand, or two business days after mailing if mailed by registered or certified mail, postage prepaid, addressed in the name and at the address of such Holder appearing on the records of the Company. Notices or other communications to the Company shall be deemed to have been sufficiently given if delivered by hand or two business days after mailing if mailed by registered or certified mail, postage prepaid, to the Company at: 600 Cleveland Street, Suite 800 Clearwater, Florida 34615 Either party may change the address to which notices shall be given by notice pursuant to this Section 9. 10. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware. 11. REGISTRATION RIGHTS. Upon exercise of this Warrant, the Holder shall have and be entitled to exercise rights of registration pursuant to that certain Registration Rights Agreement dated of even date herewith. 12. COMPLIANCE WITH SECURITIES LAWS. The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired solely for the Holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. All shares of Common Stock issued upon exercise hereof shall be stamped or imprinted with a legend substantially the same as the legend imprinted on the face of this Warrant. 13. COMPLIANCE WITH H-S-R ACT. The Company covenants and agrees that it will make any and all filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and any and all rules promulgated thereunder, as from time to time may be amended, that may be necessary or required for issuance and delivery of the Warrant Shares upon exercise of this Warrant. 10 14. CONDITION TO EXERCISE. Notwithstanding anything herein to the contrary, the Holder shall not be entitled to exercise this Warrant if (a) CKE Restaurants, Inc. ("CKE") shall then be in breach of its obligations under the Amended and Restated Credit Agreement, dated as of even date herewith, by and among the Company, CKE, as Agent, and the Lenders identified therein (the "Credit Agreement"), to make a Revolving Participated Loan (as such term is defined in the Credit Agreement) and such breach shall not have been cured, or (b) CKE, KCC Delaware and Fidelity National Financial, Inc. shall then be in breach of their obligations under Section 2.03(d) of the Credit Agreement to purchase shares of Common Stock of the Company in connection with a Rights Offering (as defined in the Credit Agreement) if such Rights Offering shall have been timely made by the Company as provided in the Credit Agreement, and such breach shall not have been cured. IN WITNESS WHEREOF, the Company has executed this Warrant as of November 22, 1996. CHECKERS DRIVE-IN RESTAURANTS, INC. By: _______________________________________ Its: _________________________________ 11 Annex A [FORM OF EXERCISE] (To be executed upon exercise of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase______ shares of Common Stock and herewith tenders payment for such shares of Common Stock to the order of Checkers Drive-In Restaurants, Inc. in the amount of $__________. The undersigned requests that a certificate for such shares of Common Stock be registered in the name of , whose address is ____________________________. If such number of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of the shares of Common Stock be registered in the name of _______________________, whose address is _______________________, and that such Warrant Certificate be delivered to _____________________, whose address is _____________________________. Dated: Signature:__________________________________ (Signature must conform in all respects to name of Holder as specified on the face of the Warrant Certificate.) ____________________________________ (Insert Social Security or Taxpayer Identification Number of Holder.) 12 -----END PRIVACY-ENHANCED MESSAGE-----