-----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, WlmHYILHjU7gu1ITttUBLG7jrrR5Kidj0nG1kC9v4QQ+PIldablqzOL6/S/kAweB NJ0UnuO3mh5FC5J+ppPlzg== 0000892569-99-000651.txt : 19990312 0000892569-99-000651.hdr.sgml : 19990312 ACCESSION NUMBER: 0000892569-99-000651 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990225 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990311 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CKE RESTAURANTS INC CENTRAL INDEX KEY: 0000919628 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 330602639 STATE OF INCORPORATION: DE FISCAL YEAR END: 0127 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11313 FILM NUMBER: 99563397 BUSINESS ADDRESS: STREET 1: 401 CARL KARCHER WAY CITY: ANAHEIM STATE: CA ZIP: 92801 BUSINESS PHONE: 7147745796 MAIL ADDRESS: STREET 1: 1200 NORTH HARBOR BLVD 8-K 1 FORM 8-K DATED FEBRUARY 25, 1999 1 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) February 25, 1999 ----------------- CKE RESTAURANTS, INC. --------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-13192 33-0602639 -------- ------- ---------- (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 401 W. Carl Karcher Way, Anaheim, California 92801 -------------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (714) 774-5796 -------------- (Former Name or Former Address, if Changed Since Last Report) 2 ITEM 5. OTHER EVENTS. On February 25, 1999, CKE Restaurants, Inc. (the "Company") announced that it had priced a $200.0 million private placement of 10-year senior subordinated notes due 2009 with an interest rate of 9 1/8% per annum. A copy of the Company's press release is attached as Exhibit 99.1 to this Report. On March 4, 1999, the Company closed its previously announced offering of $200.0 million aggregate principal amount of 9 1/8% Senior Subordinated Notes due 2009 (the "Notes"), in a private placement conducted in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The initial purchasers of the Notes were Morgan Stanley & Co. Incorporated, BancBoston Robertson Stephens Inc., Bear Stearns & Co. Inc., U.S. Bancorp Libra, a division of U.S. Bancorp Investments, Inc., and Paribas Corporation (the "Initial Purchasers"). The Notes have not been registered under the Securities Act or applicable state securities laws, and may not be offered or sold in the United States absent registration or applicable exemption from registration requirements. The Notes were sold to the Initial Purchasers pursuant to the exemptions from registration provided by Section 4(2) of, and Rule 506 under, the Securities Act. Attached as Exhibit 4.1 to this Report is a copy of the Indenture, dated as of March 4, 1999, among the Company, its Subsidiary Guarantors and Chase Manhattan Bank and Trust Company, N.A., as trustee. The Notes were sold to the Initial Purchasers for cash for an aggregate offering price of $200.0 million and aggregate discount of $5.2 million. The net proceeds of the offering of approximately $194.8 million were used to reduce the Company's indebtedness under its amended and restated senior credit facility. On March 4, 1999, the Company also completed the amendment and restatement of its senior credit facility to provide for a $500.0 million revolving credit facility, which includes a $75.0 million letter of credit sub-facility. Attached as Exhibit 10.1 to this Report is a copy of the Second Amended and Restated Credit Agreement, dated as of March 4, 1999, among the Company, Paribas, as agent, and the Lenders party thereto. A copy of the Company's press release relating to the amended senior credit facility is attached as Exhibit 99.2 to this Report. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Not Applicable. (b) Not Applicable. (c) Exhibits. The following exhibits are filed as part of this Report. Exhibit Number Description 4.1 Indenture, dated as of March 4, 1999, by and among the Company, its Subsidiary Guarantors and Chase Manhattan Bank and Trust Company, N.A., as trustee. 10.1 Second Amended and Restated Credit Agreement, dated as of March 4, 1999, by and among the 2 3 Company, Paribas, as agent, and the Lenders party thereto. 99.1 Press Release - February 25, 1999 - CKE Restaurants, Inc. Prices Private Placement of $200.0 Million of Senior Subordinated Notes. 99.2 Press Release - March 4, 1999 - CKE Restaurants, Inc. Amends Senior Credit Facility to Provide for a $500.0 Million Revolving Line of Credit. 3 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CKE RESTAURANTS, INC. Date: March 4, 1999 By: /s/ CARL A. STRUNK -------------------------------- Carl A. Strunk, Executive Vice President and Chief Financial Officer 4 5 EXHIBIT INDEX
Sequentially Exhibit Number Description Numbered Page - -------------- ----------- ------------- 4.1 Indenture, dated as of March 4, 1999, by and among the Company, its Subsidiary Guarantors and Chase Manhattan Bank and Trust Company, N.A., as trustee. 10.1 Second Amended and Restated Credit Agreement, dated as of March 4, 1999, by and among the Company, Paribas, as agent, and the Lenders party thereto. 99.1 Press Release - February 25, 1999 - CKE Restaurants, Inc. Prices Private Placement of $200.0 Million of Senior Subordinated Notes. 99.2 Press Release - March 4, 1999 - CKE Restaurants, Inc. Amends Senior Credit Facility to Provide for a $500.0 Million Revolving Line of Credit.
EX-4.1 2 INDENTURE DATED AS OF MARCH 4, 1999 1 EXHIBIT 4.1 CKE RESTAURANTS, INC. AS ISSUER AND THE SUBSIDIARY GUARANTORS NAMED HEREIN 9 1/8% SENIOR SUBORDINATED NOTES DUE MAY 1, 2009 ------------ INDENTURE DATED AS OF MARCH 4, 1999 ------------ CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION TRUSTEE 2 CKE RESTAURANTS, INC. CROSS-REFERENCE SHEET PURSUANT TO ITEM 601(b)(4)(iv) OF REGULATION S-K
SECTION OF THE TRUST INDENTURE ACT OF 1939 INDENTURE LOCATION AND CAPTION - --------------------------- ------------------------------ 310(a)...................................... Section 7.10 (Eligibility; Disqualification) 310(b)...................................... Section 7.10 (Eligibility; Disqualification); Section 7.8 (Replacement of Trustee) 311(a) and (b).............................. Section 7.11 (Preferential Collection of Claims Against Company) 311(c)...................................... Not Applicable 312(a), (b) and (c)......................... Section 2.5 (Holder Lists); Section 12.3 (Communication by Holders of Notes with Other Holders of Notes) 3.13(a), (b), (c) and (d)................... Section 7.6 (Reports by Trustee to Holders of the Notes) 3.14(a)..................................... Section 4.3 (Commission Reports and Reports to Holders) 3.14(b)..................................... Not Applicable 3.14(c)..................................... Section 4.4 (Compliance Certificate); Section 7.2 (Rights of Trustee); Section 12.4 (Certificate and Opinion as to Conditions Precedent) 3.14(d)..................................... Not Applicable 3.14(e)..................................... Section 12.5 (Statements Required in Certificate or Opinion) 3.14(f)..................................... Section 12.4 (Certificate and Opinion as to Conditions Precedent) 3.15(a)..................................... Section 7.1 (Duties of Trustee); Section 7.2 (Rights of Trustee) 3.15(b)..................................... Section 7.5 (Notice of Defaults) 3.15(c) and (d)............................. Section 7.1 (Duties of Trustee); Section 7.2 (Rights of Trustee); Section 6.11 (Undertaking for Costs) 3.15(e)..................................... Section 6.11 (Undertaking for Costs) 3.16(a)..................................... Section 6.1 (Events of Default); Section 6.5 (Control by Majority) 3.16(b)..................................... Section 6.7 (Rights of Holders of Notes to Receive Payment) 3.16(c)..................................... Not Applicable 3.17(a)..................................... Section 6.2 (Acceleration); Section 6.8 (Collection Suit by Trustee) 317(b)...................................... Section 2.4 (Paying Agent to Hold Money in Trust) 318(a)...................................... Section 12.1 (Trust Indenture Act Controls)
3 TABLE OF CONTENTS
Page ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.......................................1 Section 1.1. Definitions.....................................................................1 Section 1.2. Other Definitions..............................................................20 Section 1.3. Incorporation By Reference of Trust Indenture Act..............................21 Section 1.4. Rules of Construction..........................................................21 ARTICLE 2. THE NOTES........................................................................22 Section 2.1. Form and Dating................................................................22 Section 2.2. Execution and Authentication...................................................23 Section 2.3. Registrar and Paying Agent.....................................................23 Section 2.4. Paying Agent To Hold Money in Trust............................................23 Section 2.5. Holder Lists...................................................................24 Section 2.6. Transfer and Exchange..........................................................24 Section 2.7. Replacement Notes..............................................................36 Section 2.8. Outstanding Notes..............................................................36 Section 2.9. Treasury Notes.................................................................36 Section 2.10. Temporary Notes...............................................................37 Section 2.11. Cancellation..................................................................37 Section 2.12. Defaulted Interest............................................................37 ARTICLE 3. REDEMPTION.......................................................................37 Section 3.1. Notices To Trustee.............................................................37 Section 3.2. Selection of Notes to Be Redeemed..............................................38 Section 3.3. Notice of Redemption...........................................................38 Section 3.4. Effect of Notice of Redemption.................................................39 Section 3.5. Deposit of Redemption Price....................................................39 Section 3.6. Notes Redeemed In Part.........................................................39 Section 3.7. Optional Redemption............................................................40 Section 3.8. No Mandatory Redemption........................................................40 ARTICLE 4. COVENANTS........................................................................40 Section 4.1. Payment of Notes...............................................................40 Section 4.2. Maintenance of Office or Agency................................................41 Section 4.3. Commission Reports and Reports to Holders......................................41 Section 4.4. Compliance Certificate.........................................................42 Section 4.5. Taxes..........................................................................42 Section 4.6. Stay, Extension And Usury Laws.................................................42 Section 4.7. Limitation On Indebtedness.....................................................43
i 4 Section 4.8. Limitation on Senior Subordinated Indebtedness.................................45 Section 4.9. Limitation on Liens............................................................45 Section 4.10. Limitation On Restricted Payments.............................................46 Section 4.11. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries......................................................48 Section 4.12. Additional Subsidiary Guarantees..............................................49 Section 4.13. Limitation on Transactions with Affiliates and Certain Stockholders...........49 Section 4.14. Limitation on Asset Sales.....................................................50 Section 4.15. Repurchase of Notes upon a Change of Control..................................51 Section 4.16. Payments for Consents.........................................................51 ARTICLE 5. SUCCESSORS.......................................................................52 Section 5.1. Merger, Consolidation or Sale of Assets........................................52 Section 5.2. Successor Corporation Substituted..............................................52 ARTICLE 6. DEFAULTS AND REMEDIES............................................................53 Section 6.1. Events Of Default..............................................................53 Section 6.2. Acceleration...................................................................54 Section 6.3. Other Remedies.................................................................55 Section 6.4. Waiver of Past Defaults........................................................55 Section 6.5. Control by Majority............................................................55 Section 6.6. Limitation on Suits............................................................56 Section 6.7. Rights of Holders of Notes to Receive Payment..................................56 Section 6.8. Collection Suit By Trustee.....................................................56 Section 6.9. Trustee May File Proofs Of Claim...............................................57 Section 6.10. Priorities....................................................................57 Section 6.11. Undertaking for Costs.........................................................58 ARTICLE 7. TRUSTEE..........................................................................58 Section 7.1. Duties of Trustee..............................................................58 Section 7.2. Rights of Trustee..............................................................59 Section 7.3. Individual Rights of Trustee...................................................60 Section 7.4. Trustee's Disclaimer...........................................................60 Section 7.5. Notice of Defaults.............................................................60 Section 7.6. Reports by Trustee To Holders of the Notes.....................................61 Section 7.7. Compensation and Indemnity.....................................................61 Section 7.8. Replacement of Trustee.........................................................62 Section 7.9. Successor Trustee by Merger, etc...............................................63 Section 7.10. Eligibility; Disqualification.................................................63 Section 7.11. Preferential Collection of Claims Against Company.............................63
ii 5 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................................63 Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance.......................63 Section 8.2. Legal Defeasance And Discharge.................................................64 Section 8.3. Covenant Defeasance............................................................64 Section 8.4. Conditions to Legal or Covenant Defeasance.....................................65 Section 8.5. Deposited Money and Government Securities to be Held In Trust; Other Miscellaneous Provisions.....................................................66 Section 8.6. Repayment to Company...........................................................67 Section 8.7. Reinstatement..................................................................67 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................................67 Section 9.1. Without Consent of Holders of Notes............................................67 Section 9.2. With Consent of Holders of Notes...............................................68 Section 9.3. Compliance with Trust Indenture Act............................................70 Section 9.4. Revocation and Effect of Consents..............................................70 Section 9.5. Notation on or Exchange of Notes...............................................70 Section 9.6. Trustee To Sign Amendments, etc................................................70 ARTICLE 10. SUBSIDIARY GUARANTEES...........................................................70 Section 10.1. Subsidiary Guarantees.........................................................70 Section 10.2. Subordination of Subsidiary Guarantee.........................................72 Section 10.3. Limitation on Subsidiary Guarantor Liability..................................72 Section 10.4. Execution and Delivery of Subsidiary Guarantee................................72 Section 10.5. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.................73 Section 10.6. Releases Following Sale of Assets.............................................73 ARTICLE 11. SUBORDINATION...................................................................74 Section 11.1. Agreement To Subordinate......................................................74 Section 11.2. Liquidation; Dissolution; Bankruptcy..........................................74 Section 11.3. Default on Designated Senior Indebtedness.....................................75 Section 11.4. Acceleration of Notes.........................................................76 Section 11.5. When Distribution Must Be Paid Over...........................................76 Section 11.6. Notice By Company.............................................................76 Section 11.7. Subrogation...................................................................77 Section 11.8. Relative Rights...............................................................77 Section 11.9. Subordination May Not Be Impaired by Company..................................77 Section 11.10. Distribution or Notice to Representative.....................................77 Section 11.11. Rights of Trustee and Paying Agent...........................................78 Section 11.12. Authorization to Effect Subordination........................................78 Section 11.13. Amendments...................................................................78
iii 6 ARTICLE 12. MISCELLANEOUS...................................................................79 Section 12.1. Trust Indenture Act Controls..................................................79 Section 12.2. Notices.......................................................................79 Section 12.3. Communication By Holders of Notes with Other Holders of Notes.................80 Section 12.4. Certificate and Opinion as to Condition's Precedent...........................80 Section 12.5. Statements Required In Certificate or Opinion.................................80 Section 12.6. Rules by Trustee and Agents...................................................81 Section 12.7. No Personal Liability of Directors, Officers, Employees and Stockholders......81 Section 12.8. Governing Law.................................................................81 Section 12.9. No Adverse Interpretation of Other Agreements.................................81 Section 12.10. Successors...................................................................81 Section 12.11. Severability.................................................................81 Section 12.12. Counterpart Originals........................................................82 Section 12.13. Table of Contents, Headings, Etc.............................................82
EXHIBITS EXHIBIT A FORM OF NOTE AND SUBSIDIARY GUARANTEE EXHIBIT B FORM OF CERTIFICATE OF TRANSFER EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE iv 7 INDENTURE, dated as of March 4, 1999, among CKE Restaurants, Inc., a Delaware corporation (the "Company"), the Subsidiary Guarantors (as defined) and Chase Manhattan Bank and Trust Company, National Association, as trustee (the "Trustee"). Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 9 1/8% Series A Senior Subordinated Notes due 2009 (the "Series A Notes") and the 9 1/8% Series B Senior Subordinated Notes due 2009 (the "Series B Notes" and together with the Series A Notes, the "Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. DEFINITIONS "144A Global Note" means a global note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition from such Person by a Restricted Subsidiary and not Incurred by such Person in connection with, or in anticipation of, such Person becoming a Restricted Subsidiary or such Asset Acquisition; provided that Indebtedness of such Person which is redeemed, defeased, retired or otherwise repaid at the time of or immediately upon consummation of the transactions by which such Person becomes a Restricted Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness. "Additional Interest" means all additional interest then owing pursuant to the Registration Rights Agreement. "Additional Notes" means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Section 2.2 and 4.9 hereof, as part of the same series as the Initial Notes. "Adjusted Consolidated Net Income" means for any period, the aggregate net income of the Company and its Restricted Subsidiaries for such period determined on a consolidated basis in conformity with GAAP; provided that the following items shall be excluded in computing Adjusted Consolidated Net Income (without duplication): (i) the net income of any Person (other than the Company or a Restricted Subsidiary), except to the extent of the amount of dividends or distributions actually paid to the Company or any of its Restricted Subsidiaries by such Person during such period; (ii) solely for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of the first paragraph of Section 4.10 (and in such case, except to the extent includable pursuant to clause (i) above), the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or 8 is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income to the Company or any Restricted Subsidiary is not at the time of such determination permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis) attributable to Asset Sales; (v) except for purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of the first paragraph of Section 4.10, the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries by any Unrestricted Subsidiary during such period; and (vi) all extraordinary gains and extraordinary losses (on an after-tax basis). "Affiliate" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; provided that the beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Cedel that apply to such transfer or exchange. "Asset Acquisition" means (i) an investment by the Company or any of its Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any of its Restricted Subsidiaries; provided that such Person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such investment or (ii) an acquisition by the Company or any of its Restricted Subsidiaries of the property and assets of any Person other than the Company or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person; provided that the property and assets acquired are related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such acquisition. "Asset Disposition" means the sale or other disposition by the Company or any of its Restricted Subsidiaries (other than to the Company or another Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of any Restricted Subsidiary of the Company or (ii) all or substantially all of the assets that constitute a division or line of business of the Company or any of its Restricted Subsidiaries. 2 9 "Asset Sale" means any sale, transfer or other disposition (including by way of merger, consolidation or sale-leaseback transaction) in one transaction or a series of related transactions by the Company or any of its Restricted Subsidiaries to any Person other than the Company or any of its Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted Subsidiary, (ii) all or substantially all of the property and assets of the Company or any of its Restricted Subsidiaries or (iii) any other property and assets of the Company or any of its Restricted Subsidiaries (other than the Capital Stock or other Investment in an Unrestricted Subsidiary) outside the ordinary course of business of the Company or such Restricted Subsidiary and, in each case, that is not governed by the provisions of this Indenture applicable to mergers, consolidations and sales of assets of the Company; provided that "Asset Sale" shall not include (a) sales or other dispositions of inventory, receivables and other current assets in the ordinary course of business, (b) sales, transfers or other dispositions of assets with a Fair Market Value not in excess of $2,000,000 in any transaction or series of related transactions, (c) sales, transfers or other dispositions of assets constituting a Restricted Payment permitted to be made under Section 4.10, (d) sales, transfers or other dispositions of property or equipment that has become worn out, obsolete or damaged or otherwise unsuitable for use in connection with the business of the Company or its Restricted Subsidiaries, (e) the sale, transfer or other disposition of any property or assets by any Restricted Subsidiary to the Company or any Subsidiary Guarantor, (f) the sale, transfer or other disposition to a franchisee of the Company or a Restricted Subsidiary, within twelve months of the acquisition thereof, of any restaurant that has been acquired by the Company or such Restricted Subsidiary from a franchisee of the Company or such Restricted Subsidiary, if the consideration received in such sale, transfer or other disposition is at least equal to the Fair Market Value of such restaurant, (g) the sale, transfer or other disposition of real property on which a restaurant is located in exchange for other real property on which a restaurant will be located, which acquired real property has a Fair Market Value at least equal to the Fair Market Value of the real property being sold, transferred or disposed of and (h) the sale of property acquired or constructed for cash consideration equal to or greater than the Fair Market Value of such property in a sale and leaseback transaction in which such property is leased to the Company or the Restricted Subsidiary that sold such property; provided, that to the extent that the proceeds from such sale are not invested in property or assets (other than current assets) of a nature or type that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries on or before the date that is 12 months following such sale, such sale shall be deemed to constitute an "Asset Sale" occurring as of such date. "Average Life" means, at any date of determination with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such debt security and (b) the amount of such principal payment by (ii) the sum of all such principal payments. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. 3 10 "Board Resolution" means a resolution duly adopted by the Board of Directors. "Business Day" means any day other than a Legal Holiday. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock. "Capitalized Lease" means, as applied to any Person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person. "Capitalized Lease Obligations" means the discounted present value of the rental obligations under a Capitalized Lease. "Cedel" means Cedel Bank, SA. "Change of Control" means such time as (i) a plan relating to the liquidation or dissolution of the Company is adopted; (ii) the liquidation or dissolution of the Company; (iii) individuals who at the beginning of any 24-month period constituted the Board of Directors of the Company (together with any new or replacement directors whose election by the Board of Directors or whose nomination by the Board of Directors for election by the Company's stockholders was approved by a vote of at least a majority of the members of the Board of Directors then still in office who either were members of the Board of Directors on the Closing Date or whose election or nomination for election was so approved) cease for any reason to constitute a majority of the members of the Board of Directors of the Company during such 24-month period; (iv) (A) any "person" or "group" (as such terms are used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than the Principals and their Related Parties, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 35% of the Voting Stock of the Company; or (B) any "person" (as defined above) or "group" (as defined above) becomes the "beneficial owner" (as defined above), directly or indirectly, of both (i) more of the Voting Stock of the Company than is at the time "beneficially owned" (as defined above) by the Principals and their Related Persons in the aggregate and (ii) more than 15% of the Voting Stock of the Company. For purposes of this definition, (i) any transfer of an equity interest of an entity that was formed for the purpose of acquiring Voting Stock of the Company will be deemed to be a transfer of such portion of such Voting Stock as corresponds to the portion of the equity of such entity that has been so transferred; and (ii) at any time that Cannae Limited Partnership ceases to be solely controlled by William P. Foley, II, Cannae Limited Partnership shall cease to be a Principal and be deemed to have become, as of such time, the "beneficial owner" (as defined above) of all Voting Stock of the Company which it then "beneficially owns" (as defined above). 4 11 "Closing Date" means the initial date on which the Notes are originally issued under this Indenture. "Commission" means the Securities and Exchange Commission. "Common Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's common equity, whether outstanding on the Closing Date or issued thereafter. "Consolidated EBITDA" means, for any period, Adjusted Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest Expense, (ii) income taxes (other than income taxes (either positive or negative) attributable to extraordinary gains or losses or sales of assets), (iii) depreciation expense, (iv) amortization expense and (v) all other non-cash items reducing Adjusted Consolidated Net Income less all non-cash items increasing Adjusted Consolidated Net Income; provided, that if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Adjusted Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries. "Consolidated Interest Expense" means, for any period, the aggregate amount of: (i) interest in respect of Indebtedness, including, without limitation, amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting; all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; the net costs associated with Interest Rate Agreements; and the foregoing to the extent it relates to Indebtedness that is Guaranteed by or secured by the assets of Company or any of its Restricted Subsidiaries); (ii) all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be accrued by the Company and its Restricted Subsidiaries during such period; (iii) all interest capitalized during such period; and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of Preferred Stock of the Company or any of its Restricted Subsidiaries, other than dividend payments on Capital Stock payable solely in Capital Stock of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP; excluding, however, (A) any amount of such interest of any Restricted Subsidiary if the net income of such Restricted Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the definition thereof) and (B) any premiums, fees and expenses (and any amortization thereof) payable in connection with the offering of the Notes or 5 12 the establishment of the Credit Agreement, all as determined on a consolidated basis in conformity with GAAP. "Consolidated Net Worth" means, at any date of determination, stockholders' equity as set forth on the most recently available quarterly or annual consolidated balance sheet of the Company and its Restricted Subsidiaries (which shall be as of a date not more than 135 days prior to the date of such computation, and which shall not take into account Unrestricted Subsidiaries except as investments), less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any of its Restricted Subsidiaries, each item to be determined in conformity with GAAP (excluding the effects of foreign currency exchange adjustments under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 52). "Corporate Trust Office" shall be at the address of the Trustee specified in Section 12.2 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means the second amended and restated credit agreement dated as of March 4, 1999, among the Company, Paribas and the lenders party thereto, together with any agreements, instruments and documents executed or delivered by the Company or any of its Subsidiaries pursuant to or in connection with such credit agreement (including without limitation any guarantees and security documents), in each case as such credit agreement or such agreements, instruments or documents may be amended (including any amendment and restatement thereof), supplemented, extended, renewed, replaced or otherwise modified from time to time, and including any agreement extending the maturity of, refinancing or otherwise restructuring (including, without limitation, the inclusion of additional borrowers thereunder that are Subsidiaries) all or any portion of the Indebtedness or commitments or letters of credit under such agreement or any successor agreement, as such agreement may be amended, renewed, extended, substituted, replaced, restated and otherwise modified from time to time, whether or not with the same agent or lenders and irrespective of any change in the terms and conditions thereof, including increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.6 hereof, in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. 6 13 "Depositary, means with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.3 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Senior Indebtedness" means (i) any Obligation under the Credit Agreement and (ii) any other Indebtedness constituting Senior Indebtedness that, at the date of determination, has commitments for or an aggregate principal amount outstanding of at least $25,000,000 and that is specifically designated by the issuer, in the instrument creating or evidencing such Senior Indebtedness as "Designated Senior Indebtedness." "Disqualified Stock" means any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the 91st day following the Stated Maturity of the Notes or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Section 4.14 and Section 4.15 and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to Section 4.14 and Section 4.15. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Offer" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Series B Notes for Series A Notes. "Fair Market Value" means the price that would be paid in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. Unless otherwise specified, all ratios and computations 7 14 contained or referred to in the Indenture shall be computed in conformity with GAAP applied on a consistent basis. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto issued in accordance with Section 2.1, 2.6(b)(iv), 2.6(d)(ii) or 2.6(f) hereof. "Global Note Legend" means the legend set forth in Section 2.6(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Government Securities" means direct obligations of, obligations fully guaranteed by, or participations in pools consisting solely of obligations of or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the option of the issuer thereof. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" means a Person in whose name a Note is registered on the Registrar's books. "Incur" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that the accrual of interest shall not be considered an Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person at any date of determination (without duplication), (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations (other than obligations described in (i) or (ii) above or (v), (vi) or (vii) below) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent 8 15 such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement), (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables, (v) all Capitalized Lease Obligations, (vi) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the Fair Market Value of such asset at such date of determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise included in this definition, obligations under Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided (A) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP, (B) that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be "Indebtedness" so long as such money is held to secure the payment of such interest and (C) that Indebtedness shall not include any liability for federal, state, local or other taxes. "Indenture" means this Indenture, as amended or supplemented from time to time. "Initial Notes" means the first $200,000,000 aggregate principal amount of Notes issued under this Indenture on the date hereof. "Initial Purchasers" means the initial purchasers under the purchase agreement, dated as of February 24, 1999, with respect to the Notes. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) , under the Securities Act, who is not also a QIB. "Interest Coverage Ratio means, on any Transaction Date, the ratio of (i) the aggregate amount of Consolidated EBITDA for the then most recent four fiscal quarters prior to such Transaction Date for which reports have been filed with the Commission or provided to the Trustee pursuant to Section 4.3 (the "Four Quarter Period") to (ii) the aggregate Consolidated Interest Expense during such Four Quarter Period. In making the foregoing calculation, (A) pro forma effect shall be given to any Indebtedness Incurred or repaid, retired, redeemed, converted or defeased during the period (the "Reference Period") commencing on the first day of the Four Quarter Period and ending on the Transaction Date (other than Indebtedness Incurred under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any 9 16 predecessor revolving credit or similar arrangement) in effect on the last day of such Four Quarter Period except to the extent any portion of such Indebtedness is projected, in the reasonable judgment of the senior management of the Company, to remain outstanding for a period in excess of 12 months from the date of the Incurrence thereof), in each case as if such Indebtedness had been Incurred or repaid on the first day of such Reference Period (and pro forma effect shall be given to the purchase of any U.S. government securities required to be purchased with the proceeds of any such Indebtedness and set aside to prefund the payment of interest on such Indebtedness at the time such Indebtedness is Incurred); (B) Consolidated Interest Expense attributable to interest on any Indebtedness or Preferred Stock (whether existing or being Incurred or issued) computed on a pro forma basis and bearing a floating interest or dividend rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period; (C) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition and to any discharge of or other relief from Indebtedness to which the Company and its continuing Restricted Subsidiaries are not liable following any Asset Disposition) and the designation of Unrestricted Subsidiaries as Restricted Subsidiaries that occur during such Reference Period as if they had occurred and such proceeds had been applied and such discharge or relief has occurred on the first day of such Reference Period; and (D) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition and to any discharge of or other relief from Indebtedness to which the Company and its continuing Restricted Subsidiaries are not liable following any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period; provided that to the extent that clause (C) or (D) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement. "Investment" in any Person means any direct or indirect advance, loan or other extension of credit (including, without limitation, by way of Guarantee or similar arrangement, but excluding advances to customers, suppliers or contractors in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Company or its Restricted Subsidiaries) or capital 10 17 contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by, such Person and shall include (i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the Fair Market Value of the Capital Stock (or any other Investment), held by the Company or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary for any reason; provided that the Fair Market Value of the Investment remaining in any Person that has ceased to be a Restricted Subsidiary shall not exceed the aggregate amount of Investments previously made in such Person valued at the time such Investments were made less the net reduction of such Investments. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.10, (i) "Investment" shall include the Fair Market Value of the assets (net of liabilities (other than liabilities to the Company or any of its Restricted Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the Fair Market Value of the assets (net of liabilities (other than liabilities to the Company or any of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be considered a reduction in outstanding Investments and (iii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer. Notwithstanding the foregoing, in no event shall any issuance of Capital Stock (other than Disqualified Stock) of the Company in exchange for Capital Stock, property or assets of another Person or any redemption or repurchase of the Notes or other Indebtedness of the Company or any Restricted Subsidiary for cash constitute an Investment by the Company in such other Person. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to give any security interest). "Moody's" means Moody's Investors Service, Inc. and its successors. "Notes" means has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture. "Notes Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. 11 18 "Net Cash Proceeds" means, (a) with respect to any Asset Sale (other than as described in clause (b) below), the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of (i) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness (other than Senior Indebtedness) or any other obligation outstanding at the time of such Asset Sale that either (A) is secured by a Lien on the property or assets sold or (B) is required to be paid as a result of such sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP and (b) with respect to any issuance or sale of Capital Stock (other than issuances to the Company or to any Wholly-Owned Restricted Subsidiary), the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney's fees, accountants' fees, underwriters' or initial purchasers' fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Obligations" means any principal, interest, premium, if any, penalties, fees, indemnifications, reimbursements, damages or other liabilities payable under the documentation governing or otherwise in respect of any Indebtedness. "Offer to Purchase" means an offer to purchase Notes by the Company from the Holders commenced by mailing a notice to the Trustee and each Holder stating: (i) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Note not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately 12 19 preceding the Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. On the Payment Date, the Company shall (i) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers' Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions for such Offer to Purchase, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations with respect to such Offer to Purchase by virtue thereof. "Offering" means the offering of the Notes by the Company. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.5 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.5 hereof. The counsel may be an employee of or counsel to the Company or any Subsidiary of the Company. "Pari Passu Indebtedness" means all Indebtedness of the Company ranking pari passu in right of payment with the Notes. 13 20 "Participating Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Participant" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Cedel). "Permitted Investment" means (i) an Investment in the Company or a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, the Company or a Restricted Subsidiary; provided that such person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such Investment; (ii) an Investment by the Company or a Restricted Subsidiary in a joint venture, in which the Company or such Restricted Subsidiary holds 50% of the outstanding equity interests, with another operator of retail facilities for the purpose of developing, acquiring or constructing properties which include restaurant operations, provided that the aggregate amount of such Investments does not exceed $50,000,000 plus the net reduction in such Investments; provided further, that (A) the consent of the Company or such Restricted Subsidiary is required for such joint venture to effect any material transactions, including the acquisition and sale of assets, incurrence of debt and significant capital commitments and (B) such joint venture will not create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction which would unreasonably restrict the ability of the joint venture to distribute to its owners the net cash flow of the joint venture; (iii) Temporary Cash Investments; (iv) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; (v) stock, obligations or securities received in satisfaction of judgments or good faith settlement of litigation, disputes or other debts; (vi) Interest Rate Agreements and Currency Agreements designed solely to protect the Company or its Restricted Subsidiaries against fluctuations in interest rates or foreign currency exchange rates; (vii) Investments in any Person the primary business of which is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries; provided that the aggregate amount of such Investments does not exceed $25,000,000 plus the net reductions in such Investments; (viii) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility, workers' compensation and other similar deposits; (ix) documented loans on commercially reasonable terms to franchisees of the Company or its Restricted Subsidiaries in the ordinary course of business of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $20,000,000 at any time outstanding; (x) Investments made as a result of the receipt of non-cash consideration from an Asset Sale that was made in compliance with Section 4.14; (xi) Investments acquired solely for Capital Stock (other than Disqualified Stock) of the Company; (xii) Advances and loans to employees in the ordinary course of business not exceeding $2,000,000 in the aggregate at any one time outstanding; (xiii) Investments in Common Stock of Rally's Hamburgers, Inc. ("Rally's") or Checkers Drive-In Restaurants, Inc. ("Checkers") which are acquired through the exercise of warrants held on the Closing Date by the Company or a Restricted Subsidiary, provided that the aggregate amount of such Investment does not exceed $11,000,000; and (xiv) Investments in the form of guarantees by the Company 14 21 or a Restricted Subsidiary of Indebtedness of a franchisee Incurred to finance the construction, purchase or remodeling of a retail unit of such franchisee or capital expenditures of such franchisee; provided that such obligations of the Company and its Restricted Subsidiary are permitted under Section 4.7. "Permitted Junior Securities" means Capital Stock of the Company or any Subsidiary Guarantor or debt securities of the Company or any Subsidiary Guarantor that are subordinated to all Senior Indebtedness (and any debt securities issued in exchange for Senior Indebtedness) to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Indebtedness pursuant to this Indenture. "Permitted Lien" means (i) Liens securing Senior Indebtedness; (ii) Liens existing on the date of this Indenture; (iii) Liens for taxes, assessments or governmental charges or claims which are not yet delinquent or which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor, (iv) statutory Liens or landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate process of law, if a reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made therefor; (v) Liens (other than any Lien imposed by the Employee Retirement Income Security Act of 1974, as amended) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (vi) attachment or judgment Liens not giving rise to a Default or an Event of Default; (vii) easements, rights-of-way, restrictions and other similar charges or encumbrances not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries; (viii) leases or subleases granted to others not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries; (ix) title defects or irregularities which do not in the aggregate materially impair the use of the property; (x) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of like nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (xi) Liens in favor of the Company or a Subsidiary Guarantor; (xii) any interest or title of a lessor under Capitalized Lease Obligations otherwise permitted under the Indenture; (xiii) Liens securing Acquired Indebtedness created prior to (and not in connection with or in contemplation of) the incurrence of such Indebtedness by the Company or any Restricted Subsidiary; provided that such Lien does not extend to any property or assets of the Company or any Subsidiary other than the assets acquired in connection with the incurrence of such Acquired Indebtedness; and (xiv) extensions, renewals or refunding of any Liens referred to in clauses (i) through (xiii) above, provided that the renewal, extension or refunding is limited to all or part of the property securing the original Lien. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such 15 22 Person's preferred or preference stock, whether outstanding on the Closing Date or issued thereafter. "Principals" means William P. Foley II and Cannae Limited Partnership so long as Cannae Limited Partnership is controlled solely by William P. Foley II. "Private Placement Legend" means the legend set forth in Section 2.6(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date of this Indenture, by and among the Company, the Subsidiary Guarantors and the Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a permanent global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Related Parties" means, with respect to any Principal: (i) any spouse, sibling, parent or lineal descendant of the Principal or any spouse of any sibling or lineal descendant; and (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of one or more Principals and/or such other Persons referred to in clause (i) above. "Representative" means the indenture trustee or other trustee, agent or representative for any Designated Senior Indebtedness. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Period" means the 40-day restricted period as defined in Regulation S. 16 23 "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Senior Indebtedness" means the following obligations of the Company or a Subsidiary Guarantor, whether outstanding on the Closing Date or thereafter Incurred: (i) all Indebtedness and all other monetary obligations (including, without limitation, expenses, fees, indemnifications, damages, principal, penalties, premiums, if any, interest (including any interest accruing subsequent to the date of the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law), reimbursement obligations under letters of credit and indemnities payable in connection therewith and other liabilities payable) of the Company or a Subsidiary Guarantor under (or in respect of) the Credit Agreement or any Interest Rate Agreement or Currency Agreement relating to or otherwise in respect of the Indebtedness under the Credit Agreement whether outstanding on the Closing Date or thereafter created, incurred or assumed and (ii) all other Indebtedness and all other monetary obligations of the Company (other than the Notes) or a Subsidiary Guarantor, including principal and interest on such Indebtedness, unless, in the case of either clause (i) or (ii) hereof, such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is subordinated in right of payment to any Senior Indebtedness of the Company or such Subsidiary Guarantor, or is subordinated in right of payment to, or pari passu with, the Notes or the Subsidiary Guarantees, as the case may be; provided that the term "Senior Indebtedness" shall not include (a) any Indebtedness of the Company or a Subsidiary Guarantor that, when Incurred, was without recourse to the Company or the Subsidiary Guarantor, as the case may be, (b) any Indebtedness of the Company to a Subsidiary or Affiliate of the Company, (c) any Indebtedness of the Company or a Subsidiary Guarantor, as the case may be, to the extent not permitted by Section 4.7 or Section 4.8, (d) any repurchase, redemption or other obligation in respect of Disqualified Stock, (e) any Indebtedness to any employee of the Company or any of its Subsidiaries, (f) any liability for taxes owed or owing by the Company or any of its Subsidiaries, (g) any Trade Payables or (h) the Company's 4 1/4% Convertible Subordinated Notes due 2004, which shall be subordinate in right of payment to the Notes. "Significant Subsidiary" means, at any date of determination, any Restricted Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements of the Company for such fiscal year. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, and its successors. 17 24 "Stated Maturity" means, (i) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (ii) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable. "Subsidiary" means, with respect to any Person: (i) any corporation, association, business trust or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person; and (ii) without limiting clause (i), any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Subsidiary Guarantees" means the Guarantee by each Subsidiary Guarantor of the Company's payment obligations under this Indenture and on the Notes, executed pursuant to the provisions of this Indenture. "Subsidiary Guarantors" means (i) each of the following Restricted Subsidiaries of the Company, which are the following entities: Carl Karcher Enterprises, Inc., a California corporation, Boston Pacific, Inc., a California corporation, CBI Restaurants, Inc., a Delaware corporation, Taco Bueno West, Inc., a Delaware corporation, Carl's Jr. Region VIII, Inc., a Delaware corporation, Taco Bueno Restaurants, Inc., a Texas corporation, Taco Bueno Equipment Company, a Texas corporation, Taco Bueno Texas, L.P., a Texas limited partnership, Hardee's Food Systems, Inc., a North Carolina corporation, Burger Chef Systems, Inc., a North Carolina corporation, HED, Inc., a North Carolina corporation, HFS Ventures, Inc., a North Carolina corporation, Hardee's at Onslow Mall, Inc., a North Carolina corporation, Central Iowa Food Systems, Inc., an Iowa corporation, Fast Food Restaurants, Inc., a Pennsylvania corporation, HFS Georgia, Inc., a Georgia corporation, 1233 Corporation, an Ohio corporation, Flagstar Enterprises, Inc., an Alabama corporation and Spardee's Realty, Inc., an Alabama corporation; and (ii) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. "Temporary Cash Investment" means any of the following: (i) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed or insured by the United States of America or any agency thereof, (ii) time deposit accounts, certificates of deposit and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50,000,000 (or the foreign currency equivalent thereof) and (unless such accounts, certificates or deposits are fully insured by the FDIC) has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) repurchase 18 25 obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P or maturing not more than 180 days after the date of execution, with a rating at the time of any investment therein of "P-2" (or higher) according to Moody's or "A-2" (or higher) by S&P, (v) securities with maturities of one year or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or Moody's and (vi) other dollar denominated securities issued by any Person incorporated in the United States rated at least "A" or the equivalent by S&P or at least "A2" or the equivalent by Moody's and in each case either (A) maturing not more than one year after the date of acquisition or (B) which are subject to a repricing arrangement (such as a Dutch auction) not more than one year after the date of acquisition (and reprices at least yearly thereafter) which the Person making the investment believes in good faith will permit such Person to sell such security at par in connection with such repricing mechanism. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Trade Payables" means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Restricted Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services including, without limitation, obligations under (or in respect of) construction contracts (to the extent such obligations do not constitute Indebtedness for borrowed money). "Transaction Date" means, with respect to the Incurrence of any Indebtedness by the Company or any of its Restricted Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "Transfer Restricted Notes" means securities that bear, or that are required to bear, the Private Placement Legend. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent global Note in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of 19 26 Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation; (B) either (I) the Subsidiary to be so designated has total assets of $1,000 or less or (II) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.10; and (C) if applicable, the Incurrence of Indebtedness and the Investment referred to in clause (A) of this proviso would be permitted under Section 4.7 and Section 4.10. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (i) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately after such designation would, if Incurred at such time, have been permitted to be Incurred (and shall be deemed to have been Incurred) for all purposes of this Indenture. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "Wholly Owned Restricted Subsidiary" means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director's qualifying shares) by such Person or one or more Wholly Owned Restricted Subsidiaries of such Person. SECTION 1.2. OTHER DEFINITIONS
Defined in Term Section ---- ---------- "Authentication Order" 2.2 "Bankruptcy Law" 6.1
20 27 "Company Obligations" 4.1 "Covenant Defeasance" 8.3 "Custodian" 6.1 "DTC" 2.3 "Event of Default" 6.1 "Guarantee Obligations" 10.1 "Legal Defeasance" 8.2 "Paying Agent" 2.3 "Payment Blockage Notice 11.3 "Payment Date" 1.1 "Payment Default" 6.1 "Registrar" 2.3 "Restricted Payments" 4.10
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them. SECTION 1.4. RULES OF CONSTRUCTION Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; 21 28 (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the Commission from time to time. ARTICLE 2. THE NOTES SECTION 2.1. FORM AND DATING (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Notes Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.6 hereof. (c) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" 22 29 of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Cedel Bank. SECTION 2.2. EXECUTION AND AUTHENTICATION An Officer shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by an Officer (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.7 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.3. REGISTRAR AND PAYING AGENT The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Notes Custodian with respect to the Global Notes. SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Additional Interest, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the 23 30 money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.5. HOLDER LISTS The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.6. TRANSFER AND EXCHANGE (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary, (ii) the Company in its sole discretion determines that any of the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee or (iii) upon request of the Trustee or any Holders if there shall have occurred and be continuing a Default or Event of Default with respect to the Notes. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.7 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.6 or Section 2.7 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.6(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.6(b), (c) or (f) hereof (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) 24 31 or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.6(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.6(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.6(f) hereof, the requirements of this Section 2.6(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.6(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.6(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and 25 32 (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.6(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or 26 33 transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof, or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, 27 34 the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.6(h) hereof, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.2, the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.6(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.6(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the 28 35 restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.6(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.6(h) hereof, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.2, the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.6(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.6(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; or (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note. 29 36 (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.6(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, 30 37 the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.6(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.6(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 31 38 (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.2, the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. 32 39 (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT (A) TO CKE RESTAURANTS, INC. OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER), AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE (OR A 33 40 SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE 2(F) ABOVE OR UPON ANY TRANSFER OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES," AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.6 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be 34 41 reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.6, 4.14 and 4.15 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same Indebtedness, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.2 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. 35 42 (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.2 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.6 to effect a registration of transfer or exchange may be submitted by facsimile. SECTION 2.7. REPLACEMENT NOTES If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Trustee and the Company may charge for their expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.8. OUTSTANDING NOTES The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.9 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or the maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.9. TREASURY NOTES In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. 36 43 SECTION 2.10. TEMPORARY NOTES Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.1 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3. REDEMPTION SECTION 3.1. NOTICES TO TRUSTEE If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. 37 44 SECTION 3.2. SELECTION OF NOTES TO BE REDEEMED If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.3. NOTICE OF REDEMPTION At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and 38 45 (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION Once notice of redemption is mailed in accordance with Section 3.3 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.5. DEPOSIT OF REDEMPTION PRICE One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent immediately available funds sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.1 hereof. SECTION 3.6. NOTES REDEEMED IN PART Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.7. OPTIONAL REDEMPTION (a) Except as set forth in clause (b) of this Section 3.7, the Company shall not have the option to redeem the Notes pursuant to this Section 3.7 prior to May 1, 2004. 39 46 Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on May 1 of the years indicated below:
YEAR PERCENTAGE - ---- ---------- 2004.................................................... 104.563% 2005.................................................... 103.042% 2006.................................................... 101.521% 2007 and thereafter..................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.7, at any time prior to May 1, 2002, the Company may redeem Notes with the net cash proceeds of one or more sales by the Company of its Capital Stock (other than Disqualified Stock) at a redemption price equal to 109.125% of the aggregate principal amount of such Notes plus accrued and unpaid interest and Additional Interest, if any; provided that at least 65% of the aggregate principal amount of the Notes remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries) and that such redemption occurs within 90 days of the date of the closing of each such sale of Capital Stock. (c) Any redemption pursuant to this Section 3.7 shall be made pursuant to the provisions of Section 3.1 through 3.6 hereof. SECTION 3.8. NO MANDATORY REDEMPTION The Company shall not be required to make mandatory redemption payments with respect to the Notes. ARTICLE 4. COVENANTS SECTION 4.1. PAYMENT OF NOTES The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 12:00 noon Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company's Obligations under the Notes, this Indenture and the Registration Rights Agreement are referred to herein as the "Company Obligations." The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under 40 47 any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY The Company shall maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office as one such office or agency of the Company in accordance with Section 2.3 hereof. SECTION 4.3. COMMISSION REPORTS AND REPORTS TO HOLDERS Whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Subsidiary Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.4. COMPLIANCE CERTIFICATE (a) The Company shall deliver to the Trustee, within 105 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Restricted Subsidiaries during the preceding fiscal year has been made 41 48 under the supervision of the signing Officers with a view to determining whether the Company and the Restricted Subsidiaries have kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company and the Restricted Subsidiaries are not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred and be continuing, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, within five Business Days of any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.5. TAXES The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment would not have a material adverse effect on the ability of the Company and the Subsidiary Guarantors to satisfy their obligations under the Notes, the Subsidiary Guarantees and this Indenture. SECTION 4.6. STAY, EXTENSION AND USURY LAWS The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.7. LIMITATION ON INDEBTEDNESS (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (other than the Notes and the Subsidiary Guarantees issued on the Closing Date and any other Indebtedness existing on the Closing Date) and the Company shall not issue any Disqualified Stock and shall not permit its Restricted Subsidiaries to issue any shares of Preferred Stock; provided that the Company or any Restricted Subsidiary may Incur Indebtedness and the Company may 42 49 issue Disqualified Stock and a Restricted Subsidiary may issue Preferred Stock if, after giving effect to the Incurrence of such Indebtedness or issuance of Disqualified Stock or issuance of Preferred Stock and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio would be greater than 2.5:1. Notwithstanding the foregoing, the Company and any Restricted Subsidiary (except as specified below) may Incur each and all of the following: (i) Indebtedness of the Company and its Subsidiaries under the Credit Agreement; provided that the aggregate principal amount of all Indebtedness outstanding under the Credit Agreement after giving effect to each such incurrence, including the principal amount of all Indebtedness incurred to refinance or replace any Indebtedness incurred pursuant to this clause (i), does not exceed $500,000,000 less (A) the aggregate amount of all permanent principal repayments, if any (which are accompanied by a corresponding permanent commitment reduction), made from time to time after the Closing Date with respect to such Indebtedness (other than repayments made in connection with a refinancing thereof) and (B) reductions in Indebtedness under the Credit Agreement resulting from the application of Asset Sale proceeds (which are accompanied by a corresponding permanent commitment reduction); (ii) Indebtedness owed (A) by a Restricted Subsidiary to the Company; provided that if such Indebtedness exceeds $1,000,000 it shall be evidenced by a promissory note or (B) by the Company or a Restricted Subsidiary to any Restricted Subsidiary; provided that any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or another Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness (other than Indebtedness Incurred under clause (i), (ii) or (iv) of this paragraph) and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes shall only be permitted under this clause (iii) if (A) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes, (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes and (C) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated 43 50 Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; and provided further that in no event may Indebtedness of the Company that is pari passu with or subordinated in right of payment to the Notes be refinanced by means of any Indebtedness of any Restricted Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided in the ordinary course of business; (B) under Currency Agreements and Interest Rate Agreements; provided that such agreements (a) are designed solely to protect the Company or its Restricted Subsidiaries against fluctuations in foreign currency exchange rates or interest rates and (b) do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition; (v) Indebtedness of the Company, to the extent the net proceeds thereof are promptly (A) used to purchase Notes tendered in an Offer to Purchase made as a result of a Change in Control or (B) deposited to defease the Notes under Article 8; (vi) Indebtedness evidenced by letters of credit issued in the ordinary course of business of the Company or any Restricted Subsidiary to secure workers' compensation and other insurance coverage; (vii) Capitalized Lease Obligations secured by Liens described in paragraph (xii) of the definition of "Permitted Liens," provided, that the aggregate principal amount thereof incurred in any fiscal year, shall not exceed $15,000,000; and (viii) Indebtedness, in addition to Indebtedness permitted under clauses (i) through (vii) above, in an aggregate principal amount outstanding at any time not to exceed $25,000,000 less any amount of such Indebtedness permanently repaid as provided under Section 4.14. (b) Notwithstanding any other provision of this Section 4.7, the maximum amount of Indebtedness that the Company or a Restricted Subsidiary may Incur pursuant to this Section 4.7 shall not be deemed to be exceeded, with respect to any outstanding Indebtedness, due solely to the result of fluctuations in the exchange rates of currencies. 44 51 (c) For purposes of determining any particular amount of Indebtedness under this Section 4.7, (1) Indebtedness Incurred under the Credit Agreement shall first be treated as Incurred pursuant to clause (i) of the second paragraph of Section 4.7(a) to the full extent of Indebtedness permitted under such clause (it being understood that additional principal amounts of Indebtedness under the Credit Agreement may be incurred to the full extent permitted under any other provision of this Indenture), (2) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (3) any Liens granted pursuant to the equal and ratable provisions referred to in Section 4.9 shall not be treated as Indebtedness. For purposes of determining compliance with this Section 4.7, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses (other than Indebtedness referred to in clause (1) of the preceding sentence), the Company, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses. SECTION 4.8. LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS The Company shall not Incur any Indebtedness that is subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is pari passu with, or subordinated in right of payment to, the Notes. No Subsidiary Guarantor shall Incur any Indebtedness that is subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is pari passu with, or subordinated in right of payment to, any Subsidiary Guarantee executed by the Subsidiary Guarantor. SECTION 4.9. LIMITATION ON LIENS The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness or trade payables on any asset now owned or hereafter acquired, except Permitted Liens, unless the Indebtedness under the Notes and the Subsidiary Guarantees are secured on an equal and ratable basis with the Indebtedness secured. SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any dividend or make any distribution on or with respect to its Capital Stock (other than (x) dividends or distributions payable solely in shares of its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock and (y) pro rata dividends or distributions on Common Stock of Restricted Subsidiaries held by minority stockholders) held by Persons other than the Company or any of its Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of (A) the Company or an Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Person or (B) a Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) 45 52 held by any Affiliate of the Company (other than a Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the Capital Stock of the Company, (iii) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness of the Company that is pari passu with or subordinated in right of payment to the Notes or the Subsidiary Guarantees or (iv) make any Investment, other than a Permitted Investment, in any Person (such payments or any other actions described in clauses (i) through (iv) above being collectively "Restricted Payments") if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) a Default or Event of Default shall have occurred and be continuing, (B) the Company could not Incur at least $1.00 of Indebtedness under the first paragraph of the Section 4.7(a) or (C) the aggregate amount of all Restricted Payments (the amount, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) made after the Closing Date shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such loss) (determined by excluding income resulting from transfers of assets by the Company or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period) beginning on November 3, 1998 and ending on the last day of the last fiscal quarter preceding the Transaction Date for which reports have been filed with the Commission or provided to the Trustee pursuant to Section 4.3; plus (2) the aggregate Net Cash Proceeds received by the Company after the Closing Date from the issuance and sale permitted by this Indenture of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company, including an issuance or sale permitted by this Indenture of Indebtedness of the Company for cash subsequent to the Closing Date upon the conversion of such Indebtedness into Capital Stock (other than Disqualified Stock) of the Company, or from the issuance to a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the 91st day following the Stated Maturity of the Notes); plus (3) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such Investment (except, in each case, to the extent any such payment or proceeds are included in the calculation of Adjusted Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in each case, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. The foregoing provision shall not be violated by reason of (i) the payment of any dividend within 60 days after the date of declaration thereof if, at said date of declaration, such payment would comply with the foregoing paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is pari passu with or subordinated in right of payment to the Notes including premium, if any, and accrued and unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of the 46 53 second paragraph of Section 4.7(a); (iii) the repurchase, redemption or other acquisition of Capital Stock of the Company or an Unrestricted Subsidiary (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock (other than Disqualified Stock) of the Company (or options, warrants or other rights to acquire such Capital Stock); (iv) the making of any principal payment or the repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness of the Company which is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of, a substantially concurrent offering of, shares of the Capital Stock (other than Disqualified Stock) of the Company (or options, warrants or other rights to acquire such Capital Stock) or upon conversion of such Indebtedness to such shares of Capital Stock; (v) payments or distributions to dissenting stockholders pursuant to applicable law pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of this Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of the Company; (vi) payments of amounts required for any repurchase, redemption, retirement or other acquisition of any Capital Stock of the Company or any options or rights to acquire such Capital Stock of the Company owned by any director, officer or employee of the Company or its Subsidiaries pursuant to any management equity subscription agreement, stock option agreement or similar agreement, or otherwise upon the death, disability, retirement or termination of employment or departure from the Board of Directors of the Company; provided that the aggregate price paid for all such repurchased, redeemed, retired or acquired Capital Stock of the Company or options shall not exceed in the aggregate $2,000,000; (vii) the payment of regular dividends of the Company payable on its Common Stock for the eight fiscal quarters following the Closing Date at a per annum rate not to exceed $.08 per share, adjusted for stock splits, reverse stock splits, dividends and distributions of Capital Stock, distributions of rights, options and warrants, reclassifications of Capital Stock and recapitalizations with respect to Capital Stock; or (viii) other Restricted Payments in an aggregate amount not to exceed $75,000,000; provided that, except in the case of clauses (i) and (iii), no Default or Event of Default shall have occurred and be continuing or occur as a consequence of the actions or payments set forth therein. Each Restricted Payment permitted pursuant to the preceding paragraph (other than the Restricted Payment referred to in clause (ii) thereof, an exchange of Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) or (iv) thereof and a Restricted Payment referred to in clause (viii) thereof which involves an Investment), and the Net Cash Proceeds from any issuance of Capital Stock referred to in clauses (iii) and (iv), shall be included in calculating whether the conditions of clause (C) of the first paragraph of this Section 4.10 have been met with respect to any subsequent Restricted Payments. In the event the proceeds of an issuance of Capital Stock of the Company are used for the redemption, repurchase or other acquisition of the Notes, or Indebtedness that is pari passu with the Notes, then the Net Cash Proceeds of such issuance shall be included in clause (C) of the first paragraph of this Section 4.10 only to the extent such proceeds are not used for such redemption, repurchase or other acquisition of Indebtedness. 47 54 SECTION 4.11. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary (ii) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (iii) make loans or advances to the Company or any other Restricted Subsidiary or (iv) transfer any of its property or assets to the Company or any other Restricted Subsidiary. The foregoing provisions shall not restrict any encumbrances or restrictions: (i) existing on the Closing Date in the Credit Agreement, this Indenture or any other agreements in effect on the Closing Date, and any modifications, extensions, refinancings, renewals, substitutions or replacements of such agreements; provided that the encumbrances and restrictions in any such modifications, extensions, refinancings, renewals, substitutions or replacements are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being modified, extended, refinanced, renewed, substituted or replaced; (ii) existing under or by reason of applicable law; (iii) existing with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired; (iv) in the case of clause (iv) of the first paragraph of this Section 4.11 (A) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, (B) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture or (C) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary; (v) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary; or (vi) contained in the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was issued if (A) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant contained in such Indebtedness or agreement (other than a covenant directly or indirectly including such encumbrance or restriction itself), (B) the encumbrance or restriction is not materially more disadvantageous to the Holders of the Notes than is customary in comparable financings and (C) the Company determines that any such encumbrance or restriction will not materially affect the Company's ability to make principal or interest payments on the Notes. Nothing contained in this Section 4.11 shall prevent the Company or any Restricted Subsidiary from (1) creating, incurring, assuming or suffering to exist any Liens otherwise permitted in Section 4.9 or (2) restricting the sale or other disposition 48 55 of property or assets of the Company or any of its Restricted Subsidiaries that secure Indebtedness of the Company or any of its Restricted Subsidiaries. SECTION 4.12. ADDITIONAL SUBSIDIARY GUARANTEES If the Company or any of its Restricted Subsidiaries shall acquire or create another Restricted Subsidiary after the date of this Indenture, then such newly acquired or created Restricted Subsidiary shall execute a Subsidiary Guarantee substantially in the form of Exhibit E hereto and deliver an Opinion of Counsel (in form and substance reasonably satisfactory to the Trustee regarding the due authorization, execution and delivery of the Subsidiary Guarantee) pursuant to which such Subsidiary shall become a Subsidiary Guarantor, on a senior subordinated basis (pursuant to subordination provisions substantially similar to those described in Article 11 and Section 10.7), of the Company's payment obligations under the Notes and the Indenture. SECTION 4.13. LIMITATION ON TRANSACTIONS WITH AFFILIATES AND CERTAIN STOCKHOLDERS The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of the Company or with any Affiliate of the Company or any Restricted Subsidiary, except upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate. The foregoing limitation does not limit, and shall not apply to (i) transactions (A) approved by a majority of the disinterested members of the Board of Directors or (B) for which the Company or a Restricted Subsidiary delivers to the Trustee a written opinion of a nationally recognized investment banking firm stating that the transaction is fair to the Company or such Restricted Subsidiary from a financial point of view; (ii) any transaction solely between the Company and any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries; (iii) customary directors' fees, indemnification and similar arrangements, employee salaries and bonuses, employment agreements and arrangements or compensation or employee benefit arrangements (including options) in the ordinary course of business; (iv) any payments or other transactions pursuant to any tax-sharing agreement between the Company and any other Person with which the Company files a consolidated tax return or with which the Company is part of a consolidated group for tax purposes; (v) loans or advances to officers or employees of the Company or any Restricted Subsidiary made in the ordinary course of business of the Company or such Restricted Subsidiary to pay business related travel expenses or reasonable relocation costs of such officers or employees in connection with their employment by the Company or such Restricted Subsidiary; (vi) any Restricted Payments not prohibited by Section 4.10; and (vii) transactions relating to or arising from service relationships or expense-sharing arrangements with Checkers, Rally's, Santa Barbara Restaurant Group, Inc., 49 56 Boston West LLC, Fidelity National Financial, Inc. and their respective subsidiaries in effect on the Closing Date, provided that such arrangements do not involve the Company or a Restricted Subsidiary providing goods and services for an amount below the Company's or such Restricted Subsidiary's incremental cost thereof. Notwithstanding the foregoing, any transaction or series of related transactions covered by the first paragraph of this Section 4.13 and not covered by clauses (ii) through (vii) of this paragraph, (a) the aggregate amount of which exceeds $2,000,000 in value, must be approved or determined to be fair in the manner provided for in clause (i)(A) or (B) above and (b) the aggregate amount of which exceeds $10,000,000 in value must be determined to be fair in the manner provided for in clause (i)(B) above. SECTION 4.14. LIMITATION ON ASSET SALES The Company shall not, and shall not permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the Company or such Restricted Subsidiary receives consideration at least equal to the Fair Market Value of the assets sold or disposed of and (ii) at least 75% of the consideration (excluding contingent liabilities assumed by the transferee of such assets) received consists of cash or Temporary Cash Investments or the assumption of Senior Indebtedness of the Company or a Subsidiary Guarantor, provided that the Company or such Restricted Subsidiary is irrevocably released from all liability under such Indebtedness. In the event and to the extent that the Company or any of its Restricted Subsidiaries receive the Net Cash Proceeds from one or more Asset Sales, then the Company shall or shall cause the relevant Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received (A) apply an amount equal to such excess Net Cash Proceeds to permanently repay (which is accompanied by a corresponding permanent commitment reduction) Senior Indebtedness of the Company or a Subsidiary Guarantor or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i) above such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraph of this Section 4.14. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this Section 4.14 totals at least $5,000,000, the Company must commence, not later than the fifteenth Business Day of such month, an Offer to Purchase to the Holders of the Notes and, to the extent required by the terms of any Pari Passu Indebtedness, an Offer to Purchase to all holders of such Pari Passu Indebtedness, the maximum principal amount of Notes and any such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds, at an offer price equal to 100% of the principal amount thereof, plus, in each case, accrued and unpaid interest and Additional Interest, 50 57 if any, to the Payment Date. If the aggregate principal amount of Notes and any such Pari Passu Indebtedness tendered by holders thereof exceeds the amount of Excess Proceeds, the Notes and Pari Passu Indebtedness shall be purchased on a pro rata basis. Upon the completion of any such Offers to Purchase, the amount of Excess Proceeds shall be reset at zero. SECTION 4.15. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL (a) Upon the occurrence of a Change of Control, the Company shall make an offer an Offer to Purchase to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the Payment Date. (b) Notwithstanding anything to the contrary in this Section 4.15, the Company shall not be required to make an Offer to Purchase upon a Change of Control if a third party makes an Offer to Purchase in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 hereof and all other provisions of this Indenture applicable to an Offer to Purchase made by the Company and purchases all Notes validly tendered and not withdrawn under such Offer to Purchase. SECTION 4.16. PAYMENTS FOR CONSENTS The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. ARTICLE 5. SUCCESSORS SECTION 5.1. MERGER, CONSOLIDATION OR SALE OF ASSETS The Company shall not consolidate with, merge with or into, or sell, convey, transfer, or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into the Company unless: (i) the Company shall be the continuing Person, or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or that acquired or leased such property and assets of the Company shall be a corporation organized and validly existing under the laws of the United States of America or any state or jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, all of the obligations of the Company on all of the Notes and under this Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis, the Company or any 51 58 Person becoming the successor obligor of the Notes shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction; (iv) immediately after giving effect to such transaction on a pro forma basis as if the transaction had occurred at the beginning of the applicable four-quarter period, the Company, or any Person becoming the successor obligor of the Notes, as the case may be, could Incur at least $1.00 of Indebtedness under the first paragraph of Section 4.7(a); and (v) the Company delivers to the Trustee an Officers' Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with. In addition, the Company may not, directly or indirectly, lease all or substantially all of its properties or assets, in one transaction or a series of related transactions, to any other Person. SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED Upon any consolidation or merger, or any sale, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.1 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein. When a successor Person assumes all of the obligations of the Company hereunder and under the Notes and agrees to be bound hereby and thereby in accordance with all of the provisions of the Indenture, the predecessor of the Company shall be released from such obligations. ARTICLE 6. DEFAULTS AND REMEDIES SECTION 6.1. EVENTS OF DEFAULT Each of the following constitutes an Event of Default: (a) default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the Notes, whether or not prohibited by Article 11; (b) default in payment when due of the principal of or premium, if any, on the Notes, whether or not prohibited by Article 11; (c) failure by the Company or any of its Subsidiaries to comply with Section 5.1, Section 4.14 or Section 4.15; 52 59 (d) failure by the Company or any of its Subsidiaries to comply with Section 4.7 or Section 4.10, which failure continues for a period of 30 days or more; (e) failure by the Company or any of its Subsidiaries for 30 days after notice to comply with any of the other agreements in this Indenture; (f) default under any Indebtedness of the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of this Indenture, if that default: (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (ii) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5,000,000 or more; (g) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5,000,000, which judgments are not paid, discharged or stayed for a period of 60 days; (h) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect in any material respect or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (i) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any Significant Subsidiary in an involuntary case under any applicable Bankruptcy Law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (j) the Company or any Significant Subsidiary (A) commences a voluntary case under any applicable Bankruptcy Law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors. 53 60 The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. SECTION 6.2. ACCELERATION If an Event of Default (other than an Event of Default specified in clause (i) or (j) of Section 6.1 that occurs with respect to the Company or any Significant Subsidiary) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued interest (including Additional Interest) on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium if any and accrued interest shall be immediately due and payable. Notwithstanding the foregoing, if an Event of Default specified in clause (i) or (j) above occurs with respect to the Company or any Significant Subsidiary, the principal of, premium, if any, and accrued interest on the Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. If an Event of Default occurs on or after May 1, 2004 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.7 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to May 1, 2004 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on May 1 of the years set forth below, as set forth below (expressed as a percentage of the principal amount of the Notes on the date of payment that would otherwise be due but for the provisions of this sentence):
YEAR PERCENTAGE ---- ---------- 1999............................................................ 109.125% 2000............................................................ 108.213% 2001............................................................ 107.300% 2002............................................................ 106.388% 2003............................................................ 105.475%
54 61 SECTION 6.3. OTHER REMEDIES If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.4. WAIVER OF PAST DEFAULTS The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.5. CONTROL BY MAJORITY Holders of at least a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines in good faith may be unduly prejudicial to the rights of other Holders of Notes not joining in the giving of such direction or that may involve the Trustee in personal liability and the Trustee may take any other action it deems proper that is not inconsistent with any such direction received from Holders of the Notes. SECTION 6.6. LIMITATION ON SUITS A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder gives to the Trustee written notice of a continuing Event of Default; 55 62 (b) the Holders of at least 25% in aggregate principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.7. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of the principal of, premium and Additional Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.8. COLLECTION SUIT BY TRUSTEE If an Event of Default specified in Section 6.1(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Additional Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and 56 63 advances of the Trustee, its agents and counsel and any other amounts due the Trustee under Section 7.7 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding . SECTION 6.10. PRIORITIES If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.7 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Additional Interest, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. 57 64 ARTICLE 7. TRUSTEE SECTION 7.1. DUTIES OF TRUSTEE (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by an Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to Sections 7.1 and 7.2. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. 58 65 (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.2. RIGHTS OF TRUSTEE (a) In connection with the Trustee's rights and duties under this Indenture, the Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting under this Indenture, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) Except with respect to Section 4.1 hereof, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 6.1(a), 6.1(b) and 4.1 or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. (h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness 59 66 or other paper or document, but the Trustee may, in its discretion, make such further inquiry or investigation into such facts or matters as it may see fit and if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company personally or by agent or attorney. SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the TIA) it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.4. TRUSTEE'S DISCLAIMER The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.5. NOTICE OF DEFAULTS If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the 12 months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the Commission and each stock exchange on which the 60 67 Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.7. COMPENSATION AND INDEMNITY The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses (including reasonable attorneys' fees) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.7) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.7 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Sections 6.1(h) or 6.1(i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. 61 68 SECTION 7.8. REPLACEMENT OF TRUSTEE A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof shall continue for the benefit of the retiring Trustee. 62 69 SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100,000,000 (including, for such purpose, the combined capital and surplus of any parent holding company) as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.1. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.2 or 8.3 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. SECTION 8.2. LEGAL DEFEASANCE AND DISCHARGE Upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.2, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and Subsidiary Guarantees on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and the Subsidiary Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Subsidiary Guarantees, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.5 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other 63 70 obligations under such Notes, such Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.5 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.2 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.2 notwithstanding the prior exercise of its option under Section 8.3 hereof. SECTION 8.3. COVENANT DEFEASANCE Upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.3, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, the Company be released from its obligations under Sections 4.3, 4.4, 4.5, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 and clauses (iii) and (iv) of Section 5.1 hereof and the Subsidiary Guarantors shall be released from their obligations under Section 10.5 hereof, with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.4 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes and the Subsidiary Guarantees shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.3 hereof, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, Sections 6.1(c) through 6.1(g) hereof shall not constitute Events of Default. SECTION 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE The following shall be the conditions to the application of either Section 8.2 or 8.3 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a 64 71 nationally recognized firm of independent public accountants, to pay the principal of, premium and Additional Interest, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.2 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.3 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.1(i) or 6.1(j) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company; and 65 72 (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.5. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS Subject to Section 8.6 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.5, the "Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.4 hereof or the principal and interest received in respect thereof. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.4 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.4 hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.6. REPAYMENT TO COMPANY Anything contained herein to the contrary notwithstanding, any money held by the Trustee or any paying agent in trust for the payment and discharge of principal of, premium, if any, Additional Interest or interest on any of the Notes which remains unclaimed for two (2) years after the date when each payment of such principal, premium, Additional Interest or interest has become payable shall be repaid within sixty (60) days of such date by the Trustee to the Company as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Holders shall look only to the Company for the payment of the principal, premium, Additional Interest or interest on such Notes. The Trustee shall not be liable to the Company or any Holder for interest on funds held by it for the payment and discharge of the principal, premium, Additional Interest or interest on any of the Notes to any Holder. The Company shall not be liable for any interest on the sums paid to it pursuant to this paragraph and shall not be regarded as a trustee of such money. 66 73 SECTION 8.7. REINSTATEMENT If the Trustee or Paying Agent is unable to apply any United States dollars or noncallable Government Securities in accordance with Section 8.2 or 8.3 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.1. WITHOUT CONSENT OF HOLDERS OF NOTES Notwithstanding Section 9.2 of this Indenture, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's obligations to the Holders of the Notes in the case of a merger or consolidation or sale, conveyance, transfer, or other disposition of all or substantially all of the Company's property and assets pursuant to Article 5 hereof; (d) to provide for additional Subsidiary Guarantors as set forth in Section 4.12 or for the release or assumption of a Subsidiary Guarantee in compliance with this Indenture; (e) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (f) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; or (g) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture. 67 74 Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.2 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.2. WITH CONSENT OF HOLDERS OF NOTES Except as provided below in this Section 9.2, the Company and the Trustee may amend or supplement this Indenture (including Sections 4.14 and 4.15 hereof), the Notes or the Subsidiary Guarantees with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to Sections 6.4 and 6.7 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as single class (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company, accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.2 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.2 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class may waive compliance in a particular instance by the 68 75 Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes, except for Sections 4.14 and 4.15 hereof, which may be amended in accordance with the first paragraph of this Section 9.2; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of, or premium or Additional Interest, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class) and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, premium or Additional Interest, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note (other than a payment required by Sections 4.14 or 4.15 hereof); or (h) make any change in Section 6.4 or 6.7 hereof or in the foregoing amendment and waiver provisions. SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same Indebtedness as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes 69 76 effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.5. NOTATION ON OR EXCHANGE OF NOTES The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive and (subject to Section 7.1) shall be fully protected in relying upon, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10. SUBSIDIARY GUARANTEES SECTION 10.1. SUBSIDIARY GUARANTEES. Subject to this Article 10, each of the Subsidiary Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Subsidiary Guarantors shall be jointly and severally obligated to pay the same immediately. Each Subsidiary Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The Subsidiary Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this 70 77 Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Subsidiary Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Subsidiary Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Subsidiary Guarantor further agrees that, as between the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purpose of this Subsidiary Guarantee. The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. SECTION 10.2. SUBORDINATION OF SUBSIDIARY GUARANTEE. The Obligations of each Subsidiary Guarantor under its Subsidiary Guarantee pursuant to this Article 10 shall be junior and subordinated to the Senior Indebtedness of such Subsidiary Guarantor on the same basis as the Notes are junior and subordinated to Senior Indebtedness of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Subsidiary Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 11 hereof. SECTION 10.3. LIMITATION ON SUBSIDIARY GUARANTOR LIABILITY. Each Subsidiary Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Subsidiary Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act 71 78 or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Subsidiary Guarantors hereby irrevocably agree that the obligations of such Subsidiary Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Subsidiary Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under this Article 10, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. SECTION 10.4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE. To evidence its Subsidiary Guarantee set forth in Section 10.1, each Subsidiary Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Subsidiary Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Subsidiary Guarantor by its President or one of its Vice Presidents. Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 10.1 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Subsidiary Guarantors. In the event that the Company creates or acquires any new Subsidiaries subsequent to the date of this Indenture, if required by Section 4.12 hereof, the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Subsidiary Guarantees in accordance with Section 4.12 hereof and this Article 10, to the extent applicable. SECTION 10.5. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Except as otherwise provided in Section 10.5, no Subsidiary Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another Person whether or not affiliated with such Subsidiary Guarantor unless: (a) subject to Section 10.5 hereof, the Person formed by or surviving any such consolidation or merger (if other than a Subsidiary Guarantor or the Company) unconditionally assumes all the obligations of such Subsidiary Guarantor, pursuant to a supplemental indenture 72 79 in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Subsidiary Guarantee on the terms set forth herein or therein; and (b) immediately after giving effect to such transaction, no Default or Event of Default exists and; (c) except in the case of a merger of a Subsidiary Guarantor with and into the Company or another Subsidiary Guarantor, the Company would be permitted by virtue of the Company's pro forma Interest Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Interest Coverage Ratio test set forth in Section 4.7. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Subsidiary Guarantor, such successor Person shall succeed to and be substituted for the Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. SECTION 10.6. RELEASES FOLLOWING SALE OF ASSETS. In the event of (i) a sale or other disposition of all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, (ii) a sale or other disposition of all of the capital stock of any Subsidiary Guarantor or (iii) the designation of any Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the Indenture, in each case to a Person that is not (either before or after giving effect to such transactions) a Restricted Subsidiary of the Company, then such Subsidiary Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Subsidiary Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.14 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.14 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of any Subsidiary Guarantor from its obligations under its Subsidiary Guarantee. 73 80 Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Subsidiary Guarantor under this Indenture as provided in this Article 10. ARTICLE 11. SUBORDINATION SECTION 11.1. AGREEMENT TO SUBORDINATE The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness (including but not limited to the payment of principal of and premium, interest and Additional Interest, if any) evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 11, to the prior payment in full in cash of all Senior Indebtedness (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Indebtedness. SECTION 11.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY Upon any distribution to creditors of the Company in a liquidation, winding up or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities: (i) the holders of Senior Indebtedness will be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness whether or not allowed or allowable as a claim in any such proceeding) before the Holders of Notes will be entitled to receive any payment or distribution of any kind (except that Holders of Notes may receive (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust previously established pursuant to Section 8.1 hereof) with respect to the Notes; and (ii) until all Obligations with respect to Senior Indebtedness (as provided in clause (i) above) are paid in full in cash, any distribution to which Holders would be entitled (whether by reason of payment, set-off, redemption or subordination provisions or otherwise) but for this Article 11 shall be made to holders of Senior Indebtedness (except that Holders of Notes may receive (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust previously established pursuant to Section 8.1 hereof), as their interests may appear. SECTION 11.3. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS (a) The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes and may not acquire from the 74 81 Trustee or any Holder any Notes for cash or property (other than (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.1 hereof) if: (i) a default in the payment of any principal of, premium, if any, or interest on or other Obligations with respect to Designated Senior Indebtedness occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Designated Senior Indebtedness; or (ii) a default, other than a payment default, on Designated Senior Indebtedness occurs and is continuing that then permits holders of the Designated Senior Indebtedness to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from the holders of any Designated Senior Indebtedness or a representative thereof. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until at least 360 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 days (it being acknowledged that any subsequent action or breach of any financial covenants for a period commencing after the date of commencement of such blockage period that, in either case would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). (b) The Company may and shall resume payments on and distributions in respect of the Notes and may acquire them: (i) in the case of a payment default, the date upon which the default is cured or waived in writing, or (ii) in the case of a default referred to in clause (ii) of Section 11.3(a) hereof, the earlier of the date upon which the default is cured or waived in writing or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Indebtedness has been accelerated, if this Article 11 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. SECTION 11.4. ACCELERATION OF NOTES If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. 75 82 SECTION 11.5. WHEN DISTRIBUTION MUST BE PAID OVER In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 11.3 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Indebtedness as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article 11, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. SECTION 11.6. NOTICE BY COMPANY The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness as provided in this Article. SECTION 11.7. SUBROGATION After all Senior Indebtedness is paid in full and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness. A distribution made under this Article to holders of Senior Indebtedness that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. SECTION 11.8. RELATIVE RIGHTS This Article defines the relative rights of Holders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and 76 83 interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. SECTION 11.9. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. SECTION 11.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 11, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. SECTION 11.11. RIGHTS OF TRUSTEE AND PAYING AGENT Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article. Only the Company or a Representative may give the notice. Nothing in this Article 11 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof. The Trustee shall be entitled to rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Indebtedness (or a Representative on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a Representative on behalf of such holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person who is a holder of Senior 77 84 Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article, and if such evidence is not furnished the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment or until such time as the Trustee shall be otherwise satisfied as to the right of such person to receive such payment. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 11.12. AUTHORIZATION TO EFFECT SUBORDINATION Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 11, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.9 hereof at least 30 days before the expiration of the time to file such claim, the agent or agents under the Credit Agreement are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 11.13. AMENDMENTS The provisions of this Article 11 shall not be amended or modified in a manner adverse to the holder of Designated Senior Indebtedness without the written consent of the holders of Designated Senior Indebtedness. ARTICLE 12. MISCELLANEOUS SECTION 12.1. TRUST INDENTURE ACT CONTROLS If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by the TIA, the imposed duties under the TIA shall control. SECTION 12.2. NOTICES Any notice or communication by the Company or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company: 78 85 CKE Restaurants, Inc. 401 W. Carl Karcher Way Anaheim, California 92801 Telephone No.: (714) 774-5796 Attn: Vice President, Finance If to the Trustee: Chase Manhattan Bank and Trust Company, National Association 101 California Street, Suite 2725 San Francisco, California 94111 Attention: Corporate Trust Department The Company or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITION'S PRECEDENT Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: 79 86 (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.5 hereof )stating that in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.5 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificate of public officials. SECTION 12.6. RULES BY TRUSTEE AND AGENTS The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 12.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No past, present or future director, officer, employee, incorporator or stockholder of the Company or the Subsidiary Guarantors, as such, shall have any liability for any Obligations of the Company or the Subsidiary Guarantors under the Notes, the Subsidiary Guarantees or this Indenture or for any claim based on, in respect of, or by reason of, such 80 87 Obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 12.8. GOVERNING LAW THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS This Indenture may not be used to interpret any other indenture loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. SUCCESSORS All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.11. SEVERABILITY In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.12. COUNTERPART ORIGINALS The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following pages] 81 88 SIGNATURES Dated as of March 4, 1999 CKE RESTAURANTS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President and Chief Financial Officer Attest: ______________________________________ (SEAL) Name: Andrew F. Puzder Title: Executive Vice President and Secretary Dated as of March 4, 1999 CARL KARCHER ENTERPRISES, INC. By: _________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary 89 Dated as of March 4, 1999 BOSTON PACIFIC, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary Dated as of March 4, 1999 CBI RESTAURANTS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary Dated as of March 4, 1999 TACO BUENO WEST, INC. By:By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary 90 Dated as of March 4, 1999 CARL'S JR. REGION VIII, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 TACO BUENO RESTAURANTS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary Dated as of March 4, 1999 TACO BUENO EQUIPMENT COMPANY By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary 91 Dated as of March 4, 1999 TACO BUENO TEXAS, L.P. By: TACO BUENO RESTAURANTS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary Dated as of March 4, 1999 HARDEE'S FOOD SYSTEMS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary 92 Dated as of March 4, 1999 BURGER CHEF SYSTEMS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 HED, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 HFS VENTURES, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary 93 Dated as of March 4, 1999 HARDEE'S AT ONSLOW MALL, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 CENTRAL IOWA FOOD SYSTEMS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary 94 Dated as of March 4, 1999 FAST FOOD RESTAURANTS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 HFS GEORGIA, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 1233 CORPORATION By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary 95 Dated as of March 4, 1999 FLAGSTAR ENTERPRISES, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 SPARDEE'S REALTY, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary 96 Dated as of March 4, 1999 CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION By:_________________________ Name: Cecil D. Bobey Title: Assistant Vice President 97 EXHIBIT A (Face of Note) CUSIP No:[ (144A)] [ (Reg. S)] [ (ISIN)] 9 1/8% [Series A][Series B] Senior Subordinated Notes due 2009 No. $200.0 million CKE RESTAURANTS, INC. promises to pay to ________________________________________ or registered assigns, the principal sum of _______________________________________ Dollars on May 1, 2009. Interest Payment Dates: May 1 and November 1 Record Dates: April 15 and October 15 Dated: March 4, 1999 CKE RESTAURANTS, INC. By:______________________________________ Name: Carl A. Strunk Title: Executive Vice President and Chief Financial Officer By:______________________________________ Name: Andrew F. Puzder Title: Executive Vice President and Secretary (SEAL) Certificate of Authentication: This is one of the [Global] Notes referred to in the within-mentioned Indenture: A-1 98 Chase Manhattan Bank and Trust Company, National Association By:_______________________________ Authorized Signatory Dated: March 4, 1999 A-2 99 (Back of Note) ___ % [Series A] [Series B] Senior Subordinated Notes due 2009 [THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.] [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](1) [THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO - ---------- 1. To be included only on Global Notes deposited with DTC as Depositary. A-3 100 EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT (A) TO CKE RESTAURANTS, INC. OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER), AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE 2(F) ABOVE OR UPON ANY TRANSFER OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES," AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.] A-4 101 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. CKE Restaurants, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 9 1/8% per annum from May 1, 1999 until maturity and shall pay the Additional Interest, if any, payable pursuant to Section 2(d) of the Registration Rights Agreement referred to below. The Company will pay interest and Additional Interest, if any, semi-annually on May 1 and November 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Due; provided, further, that the first Interest Payment Date shall be May 1, 1999. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of 12 30-day months. 2. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) and Additional Interest to the Persons who are registered Holders of Notes at the close of business on the April 15 or October 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture (as defined below) with respect to defaulted interest. The Notes will be payable as to principal, premium, interest and Additional Interest at the office or agency of the Company maintained for such purpose, or, at the option of the Company, payment of interest and Additional Interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Interest on all Global Notes. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, Chase Manhattan Bank and Trust Company, National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of March 4, 1999 ("Indenture") among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by A-5 102 reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Notes conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company initially limited to $200,000,000 in aggregate principal amount. 5. Optional Redemption. The Notes will be redeemable, at the Company's option, in whole or in part, at any time or from time to time, on or after May 1, 2004 and prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each Holder's last registered address, at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the right of Holders of record on the relevant regular record date that is on or prior to the redemption date to receive interest due on an interest payment date), if redeemed during the 12-month period commencing May 1, of the years set forth below:
YEAR PERCENTAGE ---- ---------- 2004 ........................................... 104.563% 2005 ........................................... 103.042% 2006 ........................................... 101.521% 2007 and thereafter ............................ 100.000%
In addition, at any time prior to May 1, 2002, the Company may redeem up to 35% of the principal amount of the Notes with the proceeds of one or more sales by the Company of its Capital Stock (other than Disqualified Stock), at any time or from time to time in part, at a redemption price (expressed as a percentage of principal amount) of 109.125%, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the rights of Holders of record on the relevant regular record date that is prior to the redemption date to receive interest due on an interest payment date); provided that at least 65% of the aggregate principal amount of Notes remains outstanding after each such redemption; and provided further, that such redemption occurs within 90 days of the date of the closing of each such sale of Capital Stock. 6. Mandatory Redemption. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. Offers to Purchase. (a) Change of Control. The Company must commence, within 30 days of the occurrence of a Change of Control, and consummate an Offer to Purchase for all Notes then outstanding, at a purchase price equal to 101 % of the principal amount thereof, plus accrued interest (if any) to the Payment Date. A-6 103 (b) Asset Sale. The Company shall not, and shall not permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the Company or such Restricted Subsidiary receives consideration at least equal to the Fair Market Value of the assets sold or disposed of and (ii) at least 75% of the consideration (excluding contingent liabilities assumed by the transferee of such assets) received consists of cash or Temporary Cash Investments or the assumption of Senior Indebtedness of the Company or a Subsidiary Guarantor, provided that the Company or such Restricted Subsidiary is irrevocably released from all liability under such Indebtedness. In the event and to the extent that the Company or any of its Restricted Subsidiaries receive the Net Cash Proceeds from one or more Asset Sales, then the Company shall or shall cause the relevant Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received (A) apply an amount equal to such excess Net Cash Proceeds to permanently repay (which in the case of the revolving credit facility is accompanied by a corresponding permanent commitment reduction) Senior Indebtedness of the Company or a Subsidiary Guarantor or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraph of Section 4.14 of the Indenture. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this Section 4.14 totals at least $5,000,000, the Company must commence, not later than the fifteenth Business Day of such month, an Offer to Purchase to the Holders of the Notes and, to the extent required by the terms of any Pari Passu Indebtedness, an Offer to Purchase to all holders of such Pari Passu Indebtedness, the maximum principal amount of Notes and any such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds, at an offer price equal to 100% of the principal amount thereof, plus, in each case, accrued and unpaid interest and Additional Interest, if any, to the Payment Date. If the aggregate principal amount of Notes and any such Pari Passu Indebtedness tendered by holders thereof exceeds the amount of Excess Proceeds, the Notes and Pari Passu Indebtedness shall be purchased on a pro rata basis. Upon the completion of any such Offers to Purchase, the amount of Excess Proceeds shall be reset at zero. 8. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by A-7 104 law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 9. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. 10. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class, and any existing Default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation, to provide for additional Subsidiary Guarantees as set forth in the Indenture or for the release or assumption of Subsidiary Guarantees in compliance with the Indenture, to make any change that would provide additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA or to provide for the Issuance of Additional Notes in accordance with the limitations set forth in the Indenture. 11. Defaults and Remedies. The Indenture provides that each of the following constitutes an Event of Default: (a) default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the Notes, whether or not such payment is prohibited by the provisions described below under "--Ranking"; (b) default in payment when due of the principal of or premium, if any, on the Notes, whether or not prohibited by the provisions described below under "--Ranking"; (c) failure by the Company or any of its Subsidiaries to comply with Section 5.1, Section 4.14 or Section 4.15 of the Indenture; (d) failure by the Company or any of its Subsidiaries to comply with Section 4.7 or Section 4.10 of the Indenture, which failure continues for a period of 30 days or more; (e) failure by the Company or any of its Subsidiaries for 30 days after notice to comply with any of the other agreements in the Indenture; (f) default under any Indebtedness of the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, if that default: (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (ii) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a A-8 105 Payment Default or the maturity of which has been so accelerated, aggregates $5,000,000 or more; (g) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5,000,000, which judgments are not paid, discharged or stayed for a period of 60 days; (h) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect in any material respect or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (i) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any Significant Subsidiary in an involuntary case under any applicable Bankruptcy Law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (j) the Company or any Significant Subsidiary (A) commences a voluntary case under any applicable Bankruptcy Law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors. 12. Ranking. The Notes and the Subsidiary Guarantees are subordinated in right of payment, to the extent and in the manner provided in Article 11 and Section 10.2 of the Indenture, to the prior payment in full of all Senior Indebtedness. The Company agrees, and each Holder by accepting a Note consents and agrees, to the subordination provided in the Indenture and authorizes the Trustee to give it effect. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. A director, officer, employee, incorporator or stockholder, of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), A-9 106 JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. Additional Rights of Holders of Transfer Restricted Notes. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transferred Restricted Notes shall have all the rights set forth in the Registration Rights Agreement dated as of the date of the Indenture, among the Company, the Subsidiary Guarantors and the Initial Purchasers (the "Registration Rights Agreements"). 18. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: CKE Restaurants, Inc. 401 W. Carl Karcher Way Anaheim, California 92801 Telephone No.: (714) 774-5796 Attention: Vice President, Finance 19. Governing Law. The Notes shall be governed by the laws of the state of New York. A-10 107 SUBSIDIARY GUARANTEE The Subsidiary Guarantors listed below (hereinafter referred to as the "Subsidiary Guarantors," which term includes any successors or assigns under the Indenture and any additional Subsidiary Guarantors), have irrevocably and unconditionally guaranteed the Guarantee Obligations, which include (i) the due and punctual payment of the principal of, premium, if any, and interest and Additional Interest, if any, on the 9 1/8% Senior Subordinated Notes due 2009 (the "Notes") of CKE Restaurants, Inc., a Delaware corporation (the "Company"), whether at stated maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal and premium, if any, and (to the extent permitted by law) interest on any interest or Additional Interest, if any, on the Notes, and the due and punctual performance of all other obligations of the Company, to the Holders or the Trustee all in accordance with the terms set forth in Article 10 of the Indenture and (ii) in case of any extension of time of payment or renewal of any Notes or any such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of each Subsidiary Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The obligations of each Subsidiary Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly subordinated so Senior Indebtedness of the Subsidiary Guarantor as set forth in Section 10.2 of the Indenture and reference is hereby made to such Section for the precise terms of such subordination. No stockholder, employee, officer, director or incorporator, as such, past, present or future of each Subsidiary Guarantor shall have any liability under this Subsidiary Guarantee by reason of his or its status as such stockholder, employee, officer, director or incorporator. This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each Subsidiary Guarantor and its successors and assigns until full and final payment of all of the Company's obligations under the Notes and Indenture or until released or has no further force or effect in accordance with the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Guarantee of payment and not of collectibility. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall A-11 108 have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. The Obligations of each Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law. THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. The Subsidiary Guarantees shall be governed by the laws of the state of New York. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. A-12 109 Dated as of March 4, 1999 CARL KARCHER ENTERPRISES, INC. By: _________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: _________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary Dated as of March 4, 1999 BOSTON PACIFIC, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary Dated as of March 4, 1999 CBI RESTAURANTS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary A-13 110 Dated as of March 4, 1999 TACO BUENO WEST, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary Dated as of March 4, 1999 CARL'S JR. REGION VIII, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 TACO BUENO RESTAURANTS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary A-14 111 Dated as of March 4, 1999 TACO BUENO EQUIPMENT COMPANY By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary Dated as of March 4, 1999 TACO BUENO TEXAS, L.P. By: TACO BUENO RESTAURANTS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: Robert A. Wilson Title: Senior Vice President and Secretary A-15 112 Dated as of March 4, 1999 HARDEE'S FOOD SYSTEMS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 BURGER CHEF SYSTEMS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 HED, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary A-16 113 Dated as of March 4, 1999 HFS VENTURES, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 HARDEE'S AT ONSLOW MALL, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary A-17 114 Dated as of March 4, 1999 CENTRAL IOWA FOOD SYSTEMS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 FAST FOOD RESTAURANTS, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary A-18 115 Dated as of March 4, 1999 HFS GEORGIA, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 1233 CORPORATION By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary Dated as of March 4, 1999 FLAGSTAR ENTERPRISES, INC. By: ________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary A-19 116 Dated as of March 4, 1999 SPARDEE'S REALTY, INC. By: __________________________ Name: Carl A. Strunk Title: Executive Vice President Attest: ___________________________________ (SEAL) Name: M'Liss Jones Kane Title: Secretary A-20 117 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date:____________________________ Your Signature:_______________________________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. A-21 118 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.14 or 4.15 of the Indenture, check the box below: [ ] Section 4.14 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $ __________ Date: __________ Your Signature:____________________________________ (Sign exactly as your name appears on the Note) Tax Identification No.:____________________________ Signature Guarantee. A-22 119 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(2) The following exchanges of a part of this Global Note for an interest in another Global Notes or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount of Signature of Amount of decrease in Amount of increase in this Global Note authorized officer of Principal Amount of Principal Amount of following such decrease Trustee or Note Date of Exchange this Global Note this Global Note (or increase) Custodian ---------------- --------------------- --------------------- ----------------------- ---------------------
- ---------- (2) This should be included only if the Note is issued in global form. A-23 120 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER CKE Restaurants, Inc. 401 W. Carl Karcher Way Anaheim, California 92801 Telephone No.: (714) 774-5796 Attention: General Counsel Chase Manhattan Bank and Trust Company, National Association 101 California Street, Suite 2725 San Francisco, California 94111 RE: 9 1/8% SENIOR SUBORDINATED NOTES DUE 2009 Dear Sirs: Reference is hereby made to the Indenture, dated as of March 4, 1999 (the "Indenture"), among CKE Restaurants, Inc., as issuer (the "Company"), the Subsidiary Guarantors named therein and Chase Manhattan Bank and Trust Company, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. _________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $__________ in such Note[s] or interests (the "Transfer"), to ____________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions B-1 121 on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser) and the interest transferred will be held immediately thereafter through Euroclear or Cedel. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any State of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] Such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] Such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] Such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D B-2 122 under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in a form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $100,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification and provided to the Company, which has confirmed its acceptability), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred B-3 123 beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ___________________________ [Insert Name of Transferor] By: __________________ Name: Title: Dated: _______________________ B-4 124 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ____), or (ii) [ ] Regulation S Global Note (CUSIP ____), or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ____), or (ii) [ ] Regulation S Global Note (CUSIP ____); or (iii) [ ] Unrestricted Global Note (CUSIP ____); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-5 125 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE CKE Restaurants, Inc. 401 W. Carl Karcher Way Anaheim, California 92801 Telephone No.: (714) 774-5796 Attention: General Counsel Chase Manhattan Bank and Trust Company, National Association 101 California Street, Suite 2725 San Francisco, California 94111 Re: 9 1/8% SENIOR SUBORDINATED NOTES DUE 2009 Dear Sirs: Reference is hereby made to the Indenture, dated as of March 4, 1999 (the "Indenture"), between CKE Restaurants, Inc., as issuer (the "Company"), the Subsidiary Guarantors named therein and Chase Manhattan Bank and Trust Company, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. _____________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $___________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. C-1 126 (b) [ ] Check if Exchange is from beneficial interest in a RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. C-2 127 (b) [ ] Check if Exchange is from Restricted Definitive Note to BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the: [CHECK ONE] 144A Global Note or Regulation S Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. _______________________ [Insert Name of Owner] By:___________________ Name: Title: Dated: _________________ C-3 128 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR CKE Restaurants, Inc. 401 W. Carl Karcher Way Anaheim, California 92801 Telephone No.: (714) 774-5796 Attention: General Counsel Chase Manhattan Bank and Trust Company, National Association 101 California Street, Suite 2725 San Francisco, California 94111 Re: 9 1/8% SENIOR SUBORDINATED NOTES DUE 2009 Dear Sirs: Reference is hereby made to the Indenture, dated as of March 4, 1999 (the "Indenture"), between CKE Restaurants, Inc., as issuer (the "Company"), the Subsidiary Guarantors named therein and Chase Manhattan Bank and Trust Company, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) a beneficial interest in a Global Note, or (b) a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (c) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if the proposed transfer is in respect of an aggregate principal amount of Notes of less than $100,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities D-1 129 Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Notes or beneficial interest therein acquired by us must be effected through one of the Initial Purchasers. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ___________________________________ [Insert Name of Accredited Investor] By: __________________________ Name: Title: Dated: ____________________, ____ D-2 130 EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT SUBSIDIARY GUARANTORS Supplemental Indenture (this "Supplemental Indenture"), dated as of _________, among ___________ (the "Guaranteeing Subsidiary"), a subsidiary of CKE Restaurants, Inc. (or its permitted successor) a Delaware corporation (the "Company"), the Company, the other Subsidiary Guarantors (as defined in the Indenture referred to herein) and Chase Manhattan Bank and Trust Company, National Association, as trustee under the indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of March 4, 1999 providing for the issuance of 9 1/8% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which newly-acquired or created Subsidiary Guarantors shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Agreement to Guarantee. The Guaranteeing Subsidiary irrevocably and unconditionally guarantees the Guarantee Obligations, which include (i) the due and punctual payment of the principal of, premium, if any, and interest and Additional Interest, if any, on the Notes, whether at stated maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal and premium, if any, and (to the extent permitted by law) interest on any interest and Additional Interest, if any, on the Notes, and the due and punctual performance of all other obligations of the Company, to the Holders or the Trustee all in accordance with the terms set forth in Article 10 of the Indenture, and (ii) in case of any extension of time of payment or renewal of any Notes or any such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. E-1 131 The obligations of Guaranteeing Subsidiary to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. No stockholder, employee, officer, director or incorporator, as such, past, present or future of the Guaranteeing Subsidiary shall have any liability under this Subsidiary Guarantee by reason of his or its status as such stockholder, employee, officer, director or incorporator. This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon the Guaranteeing Subsidiary and its successors and assigns until full and final payment of all of the Company's obligations under the Notes and Indenture or until released in accordance with the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Guarantee of payment and not of collectibility. The Obligations of the Guaranteeing Subsidiary under its Subsidiary Guarantee shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law. THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. 3. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 4. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 5. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. E-2 EX-10.1 3 SECOND AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 10.1 - -------------------------------------------------------------------------------- SECOND AMENDED AND RESTATED CREDIT AGREEMENT among CKE RESTAURANTS, INC., THE LENDERS NAMED HEREIN and PARIBAS As Agent DATED AS OF MARCH 4, 1999 $500,000,000 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS......................................................................1 Section 1.1 Definitions. .................................................1 SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES...........................................26 Section 2.1 Revolving Loans...............................................26 Section 2.2 Notice of Borrowing. ........................................27 Section 2.3 Disbursement of Funds. ......................................27 Section 2.4 Revolving Notes...............................................28 Section 2.5 Interest. ...................................................28 Section 2.6 Interest Periods. ...........................................30 Section 2.7 Minimum Amount of Eurodollar Loans. .........................30 Section 2.8 Conversion or Continuation. .................................30 Section 2.9 Reduction of Revolving Loan Commitments(a) ..................31 Section 2.10 Voluntary Prepayments. .....................................31 Section 2.11 Mandatory Prepayments. .....................................32 Section 2.12 Application of Prepayments. ................................34 Section 2.13 Method and Place of Payment. ...............................35 Section 2.14 Fees. ......................................................36 Section 2.15 Interest Rate Unascertainable, Increased Costs, Illegality. 36 Section 2.16 Funding Losses. ............................................38 Section 2.17 Increased Capital. .........................................39 Section 2.18 Taxes. .....................................................39 Section 2.19 Use of Proceeds. ...........................................40 Section 2.20 Collateral Security..........................................41 Section 2.21 Replacement of Certain Lenders...............................43 SECTION 3. LETTERS OF CREDIT...............................................................44 Section 3.1 Issuance of Letters of Credit, etc............................44 Section 3.2 Letter of Credit Fees.........................................45 Section 3.3 Obligation of Borrower Absolute, etc..........................46 SECTION 4. CONDITIONS PRECEDENT............................................................48 Section 4.1 Conditions Precedent to Initial Revolving Loans. ............48 Section 4.2 Conditions Precedent to All Revolving Loans...................55 SECTION 5. REPRESENTATIONS AND WARRANTIES..................................................56 Section 5.1 Corporate Status. ...........................................56 Section 5.2 Corporate Power and Authority. ...............................56 Section 5.3 No Violation. ...............................................57
3 TABLE OF CONTENTS (Continued)
Page ---- Section 5.4 Litigation. ..................................................57 Section 5.5 Financial Statements; Financial Condition; etc. .............57 Section 5.6 Solvency. ...................................................57 Section 5.7 Projections. ................................................57 Section 5.8 Material Adverse Change. ....................................58 Section 5.9 Use of Proceeds; Margin Regulations. ........................58 Section 5.10 Governmental and Other Approvals. ..........................58 Section 5.11 Security Interests and Liens. ...............................58 Section 5.12 Tax Returns and Payments. ..................................59 Section 5.13 ERISA........................................................59 Section 5.14 Investment Company Act; Public Utility Holding Company Act................................................59 Section 5.15 Closing Date Transactions. .................................60 Section 5.16 Representations and Warranties in Transaction Documents......60 Section 5.17 True and Complete Disclosure. ..............................60 Section 5.18 Corporate Structure; Capitalization..........................60 Section 5.19 Environmental Matters. .....................................61 Section 5.20 Intellectual Property. .....................................62 Section 5.21 Ownership of Property; Restaurants. ........................62 Section 5.22 No Default. ................................................62 Section 5.23 Licenses, etc. .............................................63 Section 5.24 Compliance with Law. .......................................63 Section 5.25 No Burdensome Restrictions. ................................63 Section 5.26 Brokers' Fees. .............................................63 Section 5.27 Labor Matters. .............................................63 Section 5.28 Indebtedness of the Borrower and Its Subsidiaries and Permitted Redemptions......................................63 Section 5.29 Other Agreements.............................................64 Section 5.30 Immaterial Subsidiaries......................................64 Section 5.31 Franchise Agreements and Franchisees.........................64 SECTION 6. AFFIRMATIVE COVENANTS...........................................................64 Section 6.1 Information Covenants. .......................................64 Section 6.2 Books, Records and Inspections. .............................68 Section 6.3 Maintenance of Insurance. ...................................69 Section 6.4 Taxes. ......................................................69 Section 6.5 Corporate Franchises. .......................................69 Section 6.6 Compliance with Law. ........................................69 Section 6.7 Performance of Obligations. .................................70 Section 6.8 Maintenance of Properties. ..................................70 Section 6.9 Compliance with Terms of Leaseholds. ........................70 Section 6.10 Compliance with Environmental Laws. ........................70 Section 6.11 Subsidiary Guarantors. .....................................70
4 TABLE OF CONTENTS (Continued)
Page ---- Section 6.12 Immaterial Subsidiaries......................................71 Section 6.13 [Intentionally Omitted]......................................71 Section 6.14 Year 2000....................................................71 SECTION 7. NEGATIVE COVENANTS..............................................................71 Section 7.1 Financial Covenants...........................................71 Section 7.2 Indebtedness. ...............................................74 Section 7.3 Liens. ......................................................76 Section 7.4 Restriction on Fundamental Changes............................77 Section 7.5 Sale of Assets. .............................................78 Section 7.6 Contingent Obligations........................................79 Section 7.7 Dividends.....................................................79 Section 7.8 Advances, Investments and Loans. .............................80 Section 7.9 Transactions with Affiliates. ................................86 Section 7.10 Limitation on Voluntary Payments and Modifications of Certain Documents............................................87 Section 7.11 Changes in Business. ........................................88 Section 7.12 Certain Restrictions. .......................................88 Section 7.13 Lease Obligations............................................88 Section 7.14 Hedging Agreements. ........................................90 Section 7.15 Plans. ......................................................90 Section 7.16 Fiscal Year; Fiscal Quarter. ................................90 SECTION 8. EVENTS OF DEFAULT...............................................................91 Section 8.1 Events of Default. ...........................................91 Section 8.2 Rights and Remedies...........................................95 SECTION 9. THE AGENT.......................................................................95 Section 9.1 Appointment...................................................95 Section 9.2 Delegation of Duties..........................................96 Section 9.3 Exculpatory Provisions. .....................................96 Section 9.4 Reliance by Agent.............................................96 Section 9.5 Notice of Default. ..........................................97 Section 9.6 Non-Reliance on Agent and Other Lenders. ....................97 Section 9.7 Indemnification. ............................................97 Section 9.8 Agent in its Individual Capacity..............................98 Section 9.9 Successor Agent. ............................................98 SECTION 10. MISCELLANEOUS...................................................................99 Section 10.1 Payment of Expenses, Indemnity, etc.........................99 Section 10.2 Right of Setoff............................................100 Section 10.3 Notices. .................................................100 Section 10.4 Successors and Assigns; Participation; Assignments.........100
5 TABLE OF CONTENTS (Continued)
Page ---- (g) Transfer and Exchange of Revolving Notes...................103 Section 10.5 Amendments and Waivers. ..................................103 Section 10.6 No Waiver; Remedies Cumulative. ...........................105 Section 10.7 Sharing of Payments. .....................................105 Section 10.8 Application of Collateral Proceeds.........................105 Section 10.9 Governing Law; Submission to Jurisdiction. ...............106 Section 10.10 Counterparts. ............................................107 Section 10.11 [Intentionally Omitted]....................................107 Section 10.12 Amendment and Restatement. ...............................107 Section 10.13 Reallocation of Revolving Loans............................107 Section 10.14 Headings Descriptive. ....................................109 Section 10.15 Marshalling; Recapture. ..................................109 Section 10.16 Severability. ............................................109 Section 10.17 Independence of Covenants..................................109 Section 10.18 Survival. ................................................109 Section 10.19 Domicile of Revolving Loans. .............................110 Section 10.20 Limitation of Liability. .................................110 Section 10.21 Calculations; Computations. ..............................110 Section 10.22 WAIVER OF TRIAL BY JURY. ..................................110 Section 10.23 References.................................................110
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Page ---- Schedule 1.1 -- Lenders and Revolving Loan Commitments Schedule 5.4 -- Litigation Schedule 5.7 -- Projections Schedule 5.10 -- Governmental and Other Approvals Schedule 5.11 -- Security Interests and Liens Schedule 5.13 -- ERISA Plans Schedule 5.18 -- Subsidiaries; Capital Stock Schedule 5.19 -- Environmental Matters Schedule 5.21 -- Owned and Leased Properties; Owned or Operated Restaurants Schedule 5.26 -- Brokers' Fees Schedule 5.27 -- Labor Matters Schedule 5.28 -- Indebtedness of the Borrower and Its Subsidiaries Being Repaid Schedule 5.29 -- Other Agreements Schedule 5.30 -- Immaterial Subsidiaries Schedule 5.31 -- Franchisees and Licensees Schedule 7.2 -- Existing Indebtedness Schedule 7.3 -- Existing Liens Schedule 7.6 -- Existing Contingent Obligations Schedule 7.8 -- Investments Schedule 7.17 -- Permitted Partnerships Annex 1 -- Domestic and Eurodollar Lending Offices Exhibit A -- Form of Revolving Note Exhibit B -- Form of Amended and Restated Borrower Pledge Agreement Exhibit C -- Form of Amended and Restated Borrower Security Agreement Exhibit D -- Form of Amended and Restated Guaranty Exhibit E -- Form of Amended and Restated Subsidiary Pledge Agreement Exhibit F -- Form of Amended and Restated Subsidiary Security Agreement Exhibit G -- Form of Notice of Borrowing Exhibit H-1 -- Form of Opinion of Stradling Yocca Carlson & Rauth, counsel to the Loan Parties Exhibit H-2 -- Form of Opinion of Locke Liddell & Sapp LLP, special Texas counsel to the Loan Parties Exhibit H-3 -- Form of Opinion of Kilpatrick Stockton LLP, special North Carolina counsel to the Loan Parties Exhibit H-4 -- Form of Opinion of Burr & Forman LLP, special Alabama counsel to the Loan Parties Exhibit I -- Form of Assignment Agreement
7 SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 4, 1999, among CKE Restaurants, Inc., a Delaware corporation (the "Borrower"), the Lenders (as hereinafter defined) and Paribas, acting in its capacity as agent for the Lenders. SECTION 1. DEFINITIONS. Section 1.1 Definitions. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural number the singular. "Acquiring Subsidiary" shall have the meaning provided in Section 2.20(b). "Acquisition" means any transaction, or any series of related transactions, consummated after the Closing Date, by which the Borrower or any of its Subsidiaries (i) acquires any going business or assets of any Person or division thereof (other than assets acquired by the Borrower or any of its Subsidiaries in the ordinary course of its business), whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of related transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors or a majority (by percentage or voting power) of the outstanding partnership interests of a partnership or of the outstanding equity interests of a limited liability company. "Adjusted Consolidated EBITDA" shall mean, with respect to the Borrower for any period, Consolidated EBITDA of the Borrower for such period, as adjusted to give effect to (i) the Consolidated EBITDA for such period attributable to any business or Person acquired by the Borrower or any Subsidiary during such period pursuant to a Permitted Acquisition with respect to which the conditions set forth in Section 7.8(f) have been satisfied as if such business or Person had been so acquired on the first day of such period and (ii) the Consolidated EBITDA for such period attributable to any business or Person disposed of by the Borrower or any Subsidiary during such period as if such business or Person had been so disposed of on the first day of such period; provided that the adjustments described in the foregoing clauses (i) and (ii) shall be made only in such amounts as are agreed to by the Agent and the Borrower and only if the Lenders have received audited financial statements for such business or Person being acquired or disposed of for such period or for the most recent fiscal year of such business or Person which financial statements are audited by independent certified public accountants acceptable to the Agent prior to such adjustment. "Adjusted Leverage Ratio" shall mean with respect to the Borrower on a consolidated basis with its Subsidiaries, at any date, the ratio of (a)(i) Consolidated Total Debt plus (ii) the product of (A) seven multiplied by (B) an amount equal to Consolidated Rentals 8 for the period of four (4) consecutive fiscal quarters of the Borrower (taken as one accounting period) most recently ended on or prior to such date minus rent expense attributable to Sale and Leaseback Transactions determined in accordance with GAAP for such period, to (b) Consolidated EBITDAR for the period of four (4) consecutive fiscal quarters most recently ended on or prior to such date. "Advantica" shall mean Advantica Restaurant Group, Inc., a Delaware corporation. "Affected Lender" shall have the meaning provided in Section 2.21. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to (i) vote 10% or more of the Voting Stock of such other Person or (ii) direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. No Lender shall be deemed to be an Affiliate of the Borrower as a result of its being a party to this Agreement. "Agent" shall mean Paribas (and its successors) acting in its capacity as agent for the Lenders and any successor agent appointed in accordance with Section 9.9. "Agent's Office" shall mean the office of the Agent located at Chicago, Illinois, or such other office as the Agent may hereafter designate in writing as such to the other parties hereto. "Agreement" shall mean this Second Amended and Restated Credit Agreement as the same may from time to time hereafter be modified, restated, supplemented or amended. "Applicable Margin" means, with respect to the Commitment Fee and each Eurodollar Loan, the rate of interest per annum shown below for the range of Leverage Ratio specified below:
================================================================================== Leverage Ratio Eurodollar Loans Commitment Fee - ---------------------------------------------------------------------------------- less than 1.5 to 1.0 0.750% 0.375% - ---------------------------------------------------------------------------------- 1.5 to 1.0 or greater, but less than 2.0 to 1.0 1.000% 0.375% - ---------------------------------------------------------------------------------- 2.0 to 1.0 or greater, but less than 2.5 to 1.0 1.375% 0.375% - ---------------------------------------------------------------------------------- 2.5 to 1.0 or greater, but less than 3.0 to 1.0 1.625% 0.500% - ---------------------------------------------------------------------------------- 3.0 to 1.0 or greater 1.750% 0.500% ==================================================================================
2 9 The Leverage Ratio shall be calculated as of the end of each fiscal quarter of the Borrower, commencing with the fiscal quarter ending November 2, 1998, and shall be reported to the Agent pursuant to the Closing Compliance Certificate with respect to the first calculation and pursuant to a Compliance Certificate delivered by the Borrower in accordance with Section 6.1(e) hereof with respect to each subsequent calculation. On the Closing Date with respect to the first calculation and not later than two (2) Business Days after receipt by the Agent of each Compliance Certificate delivered by the Borrower in accordance with Section 6.1(e) for each fiscal quarter or fiscal year of the Borrower, as applicable, with respect to each subsequent calculation, the Agent shall determine the Leverage Ratio for the applicable period and shall promptly notify the Borrower and the Lenders of such determination and of any change in each Applicable Margin resulting therefrom. Each Applicable Margin shall be adjusted (upwards or downwards, as appropriate), if necessary, based on the Leverage Ratio as of the end of the fiscal quarter immediately preceding the date of determination; provided however that for the period commencing on the Closing Date and ending on the date which occurs six (6) months after the Closing Date, if the Leverage Ratio is less than 2.5 to 1.0, the Applicable Margin with respect to Eurodollar Loans shall be 1.50% per annum and with respect to Commitment Fees shall be 0.50% per annum. The adjustment, if any, to the Applicable Margin shall be effective as to all Eurodollar Loans and Commitment Fees commencing on the third (3rd) Business Day after the receipt by the Agent of such quarterly or annual financial statements delivered in accordance with Sections 6.1(a) and 6.1(b) and such related Compliance Certificate of the Borrower delivered in accordance with Section 6.1(e) and shall be effective from and including the third (3rd) Business Day after the date the Agent receives such Compliance Certificate to but excluding the third (3rd) Business Day after the date on which the next Compliance Certificate is required to be delivered pursuant to Section 6.1(e); provided, however, that, in the event that the Borrower shall fail at any time to furnish to the Lenders such financial statements and any such Compliance Certificate required to be delivered pursuant to Sections 6.1(a), 6.1(b) and 6.1(e), for purposes of determining the Applicable Margin, the Leverage Ratio shall be deemed to be greater than or equal to 3.0 to 1.0 at all times until the third (3rd) Business Day after such time as all such financial statements and each such Compliance Certificate are so received by the Agent and the Lenders. Each determination of the Leverage Ratio and each Applicable Margin by the Agent in accordance with this definition shall be conclusive and binding on the Borrower and the Lenders absent manifest error. 3 10 "Asset Disposition" shall mean any conveyance, sale, lease, license, transfer or other disposition by the Borrower or any of its Subsidiaries subsequent to the Closing Date of any asset (including by way of (i) a sale and leaseback transaction, (ii) the sale or other transfer of any of the capital stock of any Subsidiary of the Borrower or any of its Subsidiaries and (iii) any total or partial loss, destruction or condemnation of any asset), but excluding (A) sales of inventory in the ordinary course of business, (B) licenses of intellectual property to franchisees in the ordinary course of business, (C) the sale or other disposition of assets with a fair market value not in excess of $1,000,000 in respect of any transaction or series of related transactions, but only to the extent that the aggregate fair market value of all assets subject to Asset Dispositions of the Borrower and its Subsidiaries in any fiscal year does not exceed $2,000,000, (D) leases and subleases of real and personal property of the Borrower or any of its Subsidiaries to any of their respective franchisees in the ordinary course of business and consistent with past practices, and (E) sales, transfers or other dispositions of any property or assets by the Borrower or any of its wholly-owned Subsidiaries to the Borrower or any of its wholly-owned Domestic Subsidiaries provided that all documents or opinions required to be delivered to the Agent pursuant to Section 2.20 have been delivered to the Agent and the Borrower has provided the Agent with written notice of such sale, transfer or other disposition at least ten (10) days prior to the date of any such sale, transfer or other disposition and provided further that the Agent and Lenders shall not be deemed to have released their security interest in any such property or assets. "Assignee" shall have the meaning provided in Section 10.4(c). "Assignment Agreement" shall have the meaning provided in Section 10.4(d). "Authorized Officer" of any Person shall mean any of the President, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, any Senior Vice President, any Executive Vice President, any Vice President, the Controller, the Treasurer or Assistant Treasurer of such Person, acting singly. "Bankruptcy Code" shall mean Title 11 of the United States Code entitled "Bankruptcy", as amended from time to time, and any successor statute or statutes. "Base Rate" shall mean, at any particular date, the higher of (i) the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York, New York from time to time as its "base rate" changing as and when such base rate changes and (ii) the Federal Funds Rate plus 0.50%. The base rate is not intended to be the lowest rate of interest charged by Morgan Guaranty Trust Company of New York in connection with extensions of credit to debtors. "Base Rate Loans" shall mean Revolving Loans made and/or being maintained at a rate of interest based upon the Base Rate. 4 11 "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrower Pledge Agreement" shall mean a pledge agreement substantially in the form of the Amended and Restated Borrower Pledge Agreement set forth as Exhibit B hereto duly executed and delivered to the Agent by the Borrower, as the same may be amended, restated, modified or supplemented from time to time. "Borrower Security Agreement" shall mean a security agreement substantially in the form of the Amended and Restated Borrower Security Agreement set forth as Exhibit C hereto duly executed and delivered to the Agent by the Borrower, as the same may be amended, restated, modified or supplemented from time to time. "Borrowing" shall mean the incurrence of one Type of Revolving Loan from all the Lenders on a given date (or resulting from conversions or continuations on a given date) having, in the case of Eurodollar Loans, the same Interest Period. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in Chicago, Los Angeles or New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks for U.S. dollar deposits in the relevant London interbank Eurodollar market. "Capital Expenditures" shall mean, for any period, all expenditures (whether paid in cash or accrued as a liability, including the portion of Capitalized Leases of the Borrower and its Subsidiaries originally incurred during such period that is capitalized on the consolidated balance sheet of the Borrower and its Subsidiaries) by the Borrower and its Subsidiaries during such period that, in conformity with GAAP, are included in "capital expenditures", "additions to property, plant or equipment" or comparable items in the consolidated financial statements of the Borrower and its Subsidiaries (excluding any expenditures for assets that would be included in "capital expenditures," "additions to property, plant or equipment" or in comparable items in the consolidated financial statements of the Borrower and its Subsidiaries in conformity with GAAP which assets are acquired in a Permitted Acquisition). "Capital Stock" shall mean any and all shares of, or interests or participations in, corporate stock (or other instruments or securities evidencing ownership). 5 12 "Capitalized Lease" shall mean with respect to any Person, (i) any lease of property, real or personal, the obligations under which are capitalized on the consolidated balance sheet of such Person, and (ii) any other such lease of such Person to the extent that the then present value of the minimum rental commitment thereunder should, in accordance with GAAP, be capitalized on a balance sheet of the lessee. "Capitalized Lease Obligations" with respect to any Person, shall mean at any time of determination all obligations of such Person under or in respect of Capitalized Leases of such Person. "Cash Collateralize" shall mean the pledge and deposit with or delivery to the Agent, for the benefit of the Agent, the Issuing Bank and the Lenders, cash or deposit account balances pursuant to documentation in form and substance reasonably satisfactory to the Agent and the Issuing Bank; such documentation shall irrevocably authorize the Agent to apply such cash collateral to reimbursement of the Issuing Bank for draws under Letters of Credit as and when occurring, and in all cases to payment of other Obligations as and when due. Cash collateral shall be maintained in blocked deposit accounts at the Agent or a Lender. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than 360 days from the date of acquisition, (ii) time deposits and certificates of deposit of any Lender or any domestic commercial bank of recognized standing having capital and surplus in excess of $100,000,000 with maturities of not more than 180 days from the date of acquisition, (iii) fully secured repurchase obligations with a term of not more than 7 days for underlying securities of the types described in clause (i) entered into with any bank meeting the qualifications specified in clause (ii) above, and (iv) commercial paper issued by the parent corporation of any Lender or any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 and commercial paper rated at least A-1 or the equivalent thereof by Standard & Poor's Ratings Group or at least P-1 or the equivalent thereof by Moody's Investor Services, Inc. and in each case maturing within 180 days after the date of acquisition. "Closing Compliance Certificate" shall have the meaning provided in Section 4.1(p). "Closing Date" shall mean March 4, 1999. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. "Collateral" shall mean all property and interests in property now owned or hereafter acquired in or upon which a Lien has been or is purported or intended to have been 6 13 granted to the Agent or any Lender or any Interest Rate Hedge Provider under any of the Security Documents. "Commitment Fees" shall have the meaning provided in Section 2.14(b). "Commitment Reduction Date" shall have the meaning provided in Section 2.9(b). "Compliance Certificate" shall have the meaning provided in Section 6.1(e). "Consents" shall have the meaning provided in Section 4.1(v). "Consolidated Cash Interest Expense" shall mean, for any period, Consolidated Interest Expense for such period minus the amount of such Consolidated Interest Expense for such period not paid or payable in cash. "Consolidated EBITDA" shall mean, for any Person during any period, the sum of (i) Consolidated Net Income for such period plus (ii) to the extent deducted in the calculation of Consolidated Net Income for such period, Consolidated Interest Expense for such period plus (iii) to the extent deducted in the calculation of Consolidated Net Income for such period, federal and state income taxes for such period, plus (iv) to the extent deducted in the calculation of Consolidated Net Income for such period, depreciation and amortization expense for such period, plus (v) to the extent deducted in the calculation of Consolidated Net Income for such period, all extraordinary losses for such period, minus (vi) to the extent included in the calculation of Consolidated Net Income for such period, all extraordinary gains for such period, all determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP. "Consolidated EBITDAR" shall mean, during any period (i) Adjusted Consolidated EBITDA for the Borrower and its Subsidiaries for such period plus (ii) to the extent deducted in the calculation of Consolidated Net Income of the Borrower and its Subsidiaries for such period, Consolidated Rentals for such period. "Consolidated Interest Expense" shall mean, for any Person and for any period, the total interest expense (including, without limitation, interest expense attributable to Capitalized Leases in accordance with GAAP) of such Person and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" shall mean for any Person and for any period the net income (or loss) of such Person and its Subsidiaries on a consolidated basis for such period (taken as a single accounting period) as determined in accordance with GAAP minus (or plus) income (or losses) attributable to Investments of the Borrower or any of its Subsidiaries which 7 14 Investments are accounted for under the equity method of accounting to the extent no cash is received with respect to any such income (or no cash is paid with respect to any such loss) plus (or minus) any federal or state income tax expense (or benefit) attributable to such income (or losses) from such Investments. "Consolidated Rentals" shall mean, for the Borrower and its Subsidiaries for any period, the aggregate rent expense for the Borrower and its Subsidiaries for such period, as determined on a consolidated basis in accordance with GAAP. "Consolidated Tangible Net Worth" shall mean, at any time, the excess of (i) the total assets of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP minus goodwill and any other items that are classified as intangibles in accordance with GAAP, minus (ii) all liabilities of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Total Debt" shall mean, at any time, all Indebtedness of the Borrower and its Subsidiaries (other than undrawn amounts under letters of credit issued for the account of the Borrower or any of its Subsidiaries) as determined on a consolidated basis, including, without limitation, all Sale and Leaseback Debt. "Contingent Obligation" as to any Person shall mean any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Controlling Stockholders" shall mean (i) William P. Foley II, (ii) Cannae Limited Partnership, a Nevada Limited Partnership, (iii) Fidelity National Financial, Inc., a Delaware corporation and (iv) any other Person that, directly or indirectly, controls, is 8 15 controlled by or is under common control with any of the foregoing. For purposes of this definition, the term "control" (including the terms "controlled by" and "under common control with") of a Person means the possession, directly or indirect, of (A) the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise or (B) the power to vote 51% or more of the Voting Stock of such Person. No Lender shall be deemed to be a Controlling Stockholder as a result of its being a party to this Agreement. "Conversion" shall have the meaning provided in Section 2.20(b). "Convertible Subordinated Note Indenture" shall mean that certain Indenture between the Borrower and Chase Manhattan Bank and Trust Company, N.A., as trustee, dated as of March 13, 1998, as the same may be amended, restated, supplemented or otherwise modified in accordance with the terms of this Agreement. "Convertible Subordinated Notes" shall mean the Convertible Subordinated Notes issued by the Borrower pursuant to the Convertible Subordinated Note Indenture, in the original aggregate principal amount of $197,225,000, as the same may be amended, restated, supplemented or otherwise modified in accordance with the terms of this Agreement; provided that such Convertible Subordinated Notes shall at all times be subordinated in respect of the Obligations on subordination terms contained in the Convertible Subordinated Note Indenture. "Credit Exposure" shall have the meaning provided in Section 10.4(b). "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Default Rate" shall have the meaning provided in Section 2.5(c). "Dividends" shall have the meaning provided in Section 7.7. "Domestic Lending Office" shall mean, as to any Lender, the office of such Lender designated as such on Annex I, or such other office designated by such Lender from time to time by written notice to the Agent and the Borrower. "Domestic Subsidiary" shall mean any wholly-owned Subsidiary of the Borrower that is organized under the laws of a state of the United States of America, and which is a party to the Subsidiary Security Agreement, the Guaranty and, if required pursuant to Section 2.20, a Subsidiary Pledge Agreement. 9 16 "Environmental Affiliate" shall mean, with respect to any Person, any other Person whose liability for any Environmental Claim such Person has or may have retained, assumed or otherwise become liable for (contingently or otherwise), either contractually or by operation of law. "Environmental Approvals" shall mean any permit, license, approval, ruling, variance, exemption or other authorization required under applicable Environmental Laws. "Environmental Claim" shall mean, with respect to any Person, any notice, claim, demand or similar communication (written or oral) by any other Person alleging potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from (i) the presence, or release into the environment, of any Material of Environmental Concern at any location, whether or not owned by such Person or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "Environmental Laws" shall mean all federal, state, local and foreign laws and regulations relating to pollution or protection of human health, safety or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern. "Equity Interests" shall mean Capital Stock and warrants, options or other rights to acquire Capital Stock. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. Section references to ERISA are to ERISA, as in effect at the Closing Date and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Controlled Group" means a group consisting of any ERISA Person and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control with such Person that, together with such Person, are treated as a single employer under regulations of the PBGC. "ERISA Person" shall have the meaning set forth in Section 3(9) of ERISA for the term "person." "ERISA Plan" means (i) any Plan that (x) is not a Multiemployer Plan and (y) has Unfunded Benefit Liabilities in excess of $2,000,000 and (ii) any Plan that is a Multiemployer Plan. 10 17 "Eurocurrency Reserve Requirements" shall mean, with respect to each day during an Interest Period for Eurodollar Loans, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Federal Reserve Board or other governmental authority or agency having jurisdiction with respect thereto for determining the maximum reserves (including, without limitation, basic, supplemental, marginal and emergency reserves) for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D) maintained by a member bank of the Federal Reserve System. "Eurodollar Base Rate" shall mean, with respect to each day during an Interest Period for Eurodollar Loans, the rate per annum (rounded upwards to the nearest whole multiple of one-sixteenth of one percent) equal to the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurodollar Loan comprising part of such Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period. The Eurodollar Base Rate for any Interest Period for each Eurodollar Loan comprising part of the same Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.6. "Eurodollar Lending Office" shall mean, as to any Lender, the office of such Lender designated as such on Annex I, or such other office designated by such Lender from time to time by written notice to the Agent and the Borrower. "Eurodollar Loans" shall mean Revolving Loans made and/or being maintained at a rate of interest provided in Section 2.5(b). "Eurodollar Rate" shall mean with respect to each day during an Interest Period for Eurodollar Loans, a rate per annum determined for such day in accordance with the following formula (rounded upwards to the nearest whole multiple of 1/100th of one percent): Eurodollar Base Rate -------------------- 1.00 - Eurocurrency Reserve Requirements "Event of Default" shall have the meaning provided in Section 8. "Excluded Resales" shall mean any sale by the Borrower or any of its Subsidiaries of a Restaurant of the Borrower or such Subsidiary so long as (i) such Restaurant was acquired by the Borrower or such Subsidiary from a franchisee with the intent of reselling such Restaurant and (ii) such sale occurs within twelve (12) months of the acquisition of such Restaurant by the Borrower or such Subsidiary. 11 18 "Existing Debt" shall have the meaning provided in Section 4.1(r)(ii). "Existing Letter of Credit" shall mean the Letter of Credit No. LASB-221686 issued by Bank of America National Trust and Savings Association for the account of Carl Karcher Enterprises, Inc., as the same may be amended, supplemented, modified, renewed or extended subject to Section 3.1(g) of this Agreement. "Existing Property Sale and Leaseback Transaction" shall have the meaning provided in Section 7.13(a). "Existing Reimbursement Agreement" shall mean the Reimbursement Agreement, dated as of September 23, 1994 between Carl Karcher Enterprises, Inc. and Bank of America National Trust and Savings Association, as amended by Amendment No. One dated as of July 15, 1997, Amendment No. Two dated as of December 19, 1997, and Amendment No. Three dated as of April 1, 1998, and as the same may be amended, restated or otherwise modified from time to time; provided, however, that no such amendment, restatement or modification shall, without the prior written consent of the Required Lenders, (i) result in an increase of the maximum face amount of the Existing Letter of Credit or (ii) modify any provision thereof relating to the fees payable thereunder. "Federal Funds Rate" shall mean, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Federal Reserve Board" shall mean the Board of Governors of the Federal Reserve System as constituted from time to time. "Fee Letter" shall mean that certain fee letter entered into between the Borrower and the Agent dated as of March 4, 1999, as amended, from time to time. "Fees" shall mean all amounts payable pursuant to Section 2.14. "FEI" shall mean Flagstar Enterprises, Inc., an Alabama corporation and any successor entity permitted pursuant to the terms of this Agreement. 12 19 "FEI Acquisition" shall mean the acquisition of FEI and its Subsidiaries and the other transactions contemplated by the FEI Acquisition Documents. "FEI Acquisition Documents" shall mean the FEI Purchase Agreement and all agreements and instruments executed and delivered in connection therewith. "FEI Guaranties" shall mean guaranties of obligations of FEI that the Borrower incurs pursuant to Section 6.12(a) of the FEI Purchase Agreement. "FEI Purchase Agreement" shall mean the Stock Purchase Agreement among Advantica, Spartan Holdings, Inc., a New York corporation, FEI and the Borrower, dated as of February 18, 1998, together with all schedules and exhibits referred to therein, each as previously delivered to the Agent and the Lenders, without giving effect to any amendment, modification or waiver of any material term thereof effected without the written consent of the Required Lenders. "Final Maturity Date" shall mean February 28, 2004. "Fixed Charges" shall mean, without duplication, with respect to the Borrower and its Subsidiaries for any period, (i) all Consolidated Cash Interest Expense (excluding in respect of Capitalized Leases of the Borrower and its Subsidiaries) for such period, plus (ii) scheduled payments due in such period for principal of the Revolving Loans (including only such payments made due to scheduled reductions in the Revolving Loan Commitments during such period) and other permitted Indebtedness, plus (iii) all federal and state income taxes paid in cash by the Borrower or any of its Subsidiaries for such period, plus (iv) all scheduled amortization during such period (including principal and interest) of Capitalized Leases under which the Borrower or any of its Subsidiaries is the lessee plus (v) the aggregate rent expense determined in accordance with GAAP for such period attributable to Sale and Leaseback Transactions, all determined on a consolidated basis for the Borrower and its Subsidiaries for such period. "Franchise Agreements" shall mean any and all agreements that create a franchise or license to which the Borrower or any of its Subsidiaries is a party (as franchisee, licensee, franchisor or licensor) relating to the operation or development of any Restaurant or Restaurants, including such franchise and/or license agreements to which any of Borrower or any of its Subsidiaries is a party as of the Closing Date and such franchise and/or license agreements entered into from time to time after the Closing Date by the Borrower or any of its Subsidiaries and shall include all other rights under such agreements regardless of their nature. "Franchisee Construction Debt" shall have the meaning provided in Section 7.2(j). 13 20 "GAAP" shall mean (i) for purposes of determining compliance with the covenants set forth in Section 7 hereof, United States generally accepted accounting principles as in effect on the Closing Date and consistent with those utilized in the preparation of the financial statements referred to in Section 5.5 and (ii) for all other purposes, United States generally accepted accounting principles as in effect as of the date of determination. "Guarantor" shall mean each Subsidiary of the Borrower that shall be required by the terms of this Agreement to enter into a Guaranty from time to time. "Guaranty" shall mean a guaranty substantially in the form of the Amended and Restated Guaranty set forth as Exhibit D hereto duly executed and delivered to the Agent for itself, the Lenders and any Interest Rate Hedge Providers by each Subsidiary of the Borrower (other than Immaterial Subsidiaries which are not Subordinated Guarantors), as the same may be amended, restated, modified or supplemented from time to time. "Hardee's" shall mean Hardee's Food Systems, Inc., a North Carolina corporation or any successor entity permitted pursuant to the terms of this Agreement. "Hardee's Acquisition Documents" shall mean the Hardee's Purchase Agreement and all agreements and instruments executed and delivered in connection therewith including, without limitation, the Seller Agreement. "Hardee's Purchase Agreement" shall mean the Stock Purchase Agreement among Imasco, Hardee's and the Borrower, dated April 27, 1997, together with all schedules and exhibits referred to therein, each in the form previously delivered to the Agent and the Lenders, without giving effect to any amendment, modification or waiver of any material term thereof effected without the written consent of the Required Lenders. "Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended. "Hedging Agreements" shall mean any interest rate protection agreements (including, without limitation, any interest rate swaps, caps, floors, collars, options, futures and similar agreements) and swaps (including, without limitation, any caps, floors, collars, options, futures and similar agreements) relating to currencies, commodities or securities, and similar agreements. "Imasco" shall mean IMASCO Holdings, Inc., a Delaware corporation. "Immaterial Investments" shall mean, at any time, (a) any Investment owned by the Borrower or any Subsidiary consisting of Capital Stock of any Person that is not a Subsidiary of the Borrower and which, when added to all other Investments held by the 14 21 Borrower and/or its Subsidiaries consisting of Capital Stock of such Person does not exceed $1,000,000 at any one time outstanding and (b) any Investment owned by the Borrower or any Subsidiary consisting of an Instrument payable by any Person that is not a Subsidiary of the Borrower and which, when added to all other Investments held by the Borrower and/or its Subsidiaries consisting of Instruments payable by such Person does not exceed $2,000,000 at any one time outstanding. "Immaterial Subsidiaries" shall mean any Subsidiary of the Borrower with assets of less than $1,500,000 (as determined in accordance with GAAP), which is designated by the Borrower as an Immaterial Subsidiary on Schedule 5.30 or pursuant to Section 6.12; provided that the aggregate amount of assets of all Subsidiaries designated as Immaterial Subsidiaries shall not at any time exceed $10,000,000 (as determined in accordance with GAAP). "Indebtedness" of any Person shall mean, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than trade payables on terms of 90 days or less incurred in the ordinary course of business of such Person), (ii) all indebtedness of such Person evidenced by a note, bond, debenture, acceptance or similar instrument, (iii) the principal component of all Capitalized Lease Obligations of such Person, (iv) the face amount of all letters of credit issued for the account of such Person and, without duplication, all unreimbursed amounts drawn thereunder, and all obligations of such Person, contingent or otherwise, under acceptances or similar facilities, (v) all indebtedness of any other Person secured by any Lien on any property owned by such Person, whether or not such indebtedness has been assumed in an amount equal to the lesser of the fair market value at such date of such property subject to such Lien securing such Indebtedness and the amount of the Indebtedness secured by such Lien, (vi) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (vii) all Contingent Obligations of such Person, (viii) all payment obligations, whether absolute or contingent, matured or unmatured, present or future, due or to become due, now existing or hereafter arising, of such Person under any Hedging Agreements, (ix) all Redeemable Stock, (x) all Sale and Leaseback Debt and (xi) all indebtedness and other obligations of the types specified in clauses (i) through (x) above of any joint venture or partnership for which such Person is liable. "Indemnitee" shall have the meaning provided in Section 10.1(c). "Initial Debt Issuance" shall have the meaning provided in Section 4.1(q). "INS" shall mean the United States Immigration and Naturalization Service or any governmental body succeeding to its functions. 15 22 "Instrument" shall have the meaning ascribed thereto in the UCC. "Interest Period" shall have the meaning provided in Section 2.6. "Interest Rate Agreements" shall mean any and all interest rate protection agreements, including, without limitation, any interest rate swaps, caps, collars, floors and similar agreements. "Interest Rate Hedge Providers" shall mean any Lender that provides an Interest Rate Agreement to the Borrower as permitted pursuant to Section 7.14(a) and that executes and delivers an agency agreement, in form and substance satisfactory to the Agent. "Investment" of a Person shall mean any loan, advance, extension of credit or commitment to make any such loan, advance or extension of credit (other than accounts receivable arising in the ordinary course of business), deposit account or contribution of capital by such Person to any other Person or any investment in, or purchase or other acquisition (whether by purchase, merger, consolidation or otherwise) of, the stock, partner ship interests, notes, bonds, debentures or other securities, including options and warrants, of, or other ownership interests in, any other Person made by such Person (whether for cash, property, services, securities or otherwise). "Issue" shall mean, with respect to any Letter of Credit, to issue or to extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding meanings. "Issuing Bank" shall mean Paribas (and its successors), in its capacity as issuer of one or more Letters of Credit hereunder. "L/C Amendment Application" shall mean an application form for amendment of outstanding Letters of Credit as shall at any time be in use at the Issuing Bank, as the Issuing Bank shall request. "L/C Application" shall mean an application form for issuance of Standby Letters of Credit or Trade Letters of Credit, as appropriate, as shall at any time be in use at the Issuing Bank, as the Issuing Bank shall request. "L/C Commitment" shall mean the commitment of the Issuing Bank to Issue, and the commitment of the Lenders severally to participate in, Letters of Credit from time to time Issued or outstanding under Section 3, in an aggregate amount not to exceed on any date the amount of $75,000,000, provided, that the L/C Commitment is part of the Total Revolving Loan Commitment, rather than a separate, independent commitment. 16 23 "L/C Obligations" shall mean at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit then outstanding, plus (b) the amount of all unreimbursed drawings under all Letters of Credit. "L/C Related Documents" shall mean the Letters of Credit, the L/C Applications, the L/C Amendment Applications and any other document relating to any Letter of Credit, including any of the Issuing Bank's standard form documents for standby or commercial letter of credit issuances, as appropriate. "Lenders" shall mean the persons listed on Schedule 1.1 hereto and the persons which from time to time become a party hereto in accordance with Section 10.4(d). "Letters of Credit" shall mean any letters of credit Issued by the Issuing Bank pursuant to Section 3. "Leverage Ratio" shall mean, with respect to the Borrower on a consolidated basis with its Subsidiaries, at any date, the ratio of (a) Consolidated Total Debt of the Borrower and its Subsidiaries to (b) (i) Adjusted Consolidated EBITDA of the Borrower and its Subsidiaries for the period of four (4) consecutive fiscal quarters most recently ended on or prior to such date plus (ii) to the extent deducted in the calculation of Consolidated Net Income of the Borrower and its Subsidiaries for such period, all rent expense determined in accordance with GAAP for such period attributable to Sale and Leaseback Transactions, all determined on a consolidated basis for the Borrower and its Subsidiaries for such period. "Lien" shall mean any mortgage, deed of trust, pledge, charge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement of any kind or nature whatsoever, whether or not filed, recorded or otherwise perfected under applicable law, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same effect as any of the foregoing and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction, domestic or foreign. "Liquidating Distribution" shall mean any extraordinary, liquidating or other distribution in return of capital with respect to any Equity Interest of any Person (other than a Subsidiary of any Domestic Subsidiary) owned by a Loan Party which Equity Interest is pledged pursuant to any of the Security Documents. "Loan Documents" shall mean this Agreement, the Revolving Notes, the Guaranty, each Letter of Credit, each L/C Related Document, the Fee Letter, the Security Documents, each Interest Rate Agreement permitted to be entered into pursuant to Section 7.14(a) and all other documents, instruments and agreements executed and/or delivered in 17 24 connection herewith or therewith or required or contemplated hereunder or thereunder, as the same may be amended, restated, modified or supplemented and in effect from time to time. "Loan Party" shall mean and include the Borrower and each Guarantor. "Margin Stock" shall have the meaning provided such term in Regulation U of the Federal Reserve Board. "Material Adverse Effect" shall mean a material adverse effect upon (i) the business, operations, properties, assets, performance, prospects or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, or (ii) the ability of any Loan Party to perform, or of the Agent or any of the Lenders to enforce, any of such Loan Party's material Obligations under any Loan Document to which it is or is to be a party. "Material Leases" shall have the meaning provided in Section 6.9. "Materials of Environmental Concern" shall mean and include chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products, asbestos and radioactive materials. "Multiemployer Plan" shall mean a Plan which is a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA. "Net Debt Proceeds" means all cash proceeds received by the Borrower or any of its Subsidiaries from the incurrence of, or the issuance of any instruments relating to, any Indebtedness (other than (i) Indebtedness borrowed by the Borrower under this Agreement, (ii) Indebtedness permitted to be incurred pursuant to Section 7.2(g), (iii) Indebtedness permitted to be incurred pursuant to Section 7.2(i), and (iv) Indebtedness permitted to be incurred pursuant to Section 7.2(m) with respect to Sale and Leaseback Transactions), in each case net of reasonable and customary underwriting fees and discounts, brokerage commissions and other similar reasonable and customary costs and expenses directly attributable to such issuance or incurrence. "Net Equity Proceeds" shall mean all cash proceeds received by the Borrower or any of its Subsidiaries from any capital contribution or the issuance of any Equity Interests or other equity securities of the Borrower or any of its Subsidiaries (other than the issuance of common stock (A) of the Borrower issued to employees, consultants or directors of the Borrower or any of its Subsidiaries pursuant to an employee stock option or purchase plan approved by the Board of Directors of the Borrower or (B) of any Subsidiary of the Borrower to the Borrower or any wholly-owned Subsidiary of the Borrower), net of any reasonable and customary brokerage commissions, underwriting fees and discounts and any other similar reasonable and customary costs or expenses directly attributable to such issuance. 18 25 "Net Sale Proceeds" shall mean, with respect to (a) any Asset Disposition, all proceeds in the form of cash or cash equivalents received by the Borrower or any of its Subsidiaries from or in respect of such Asset Disposition (including any cash proceeds received as income or other proceeds of any noncash proceeds of such Asset Disposition and including any insurance payment or condemnation award in respect of any assets of the Borrower or any of its Subsidiaries) and (b) any Liquidating Distribution, all proceeds in the form of cash or cash equivalents received by the Borrower or any of its Subsidiaries from or in respect of any Liquidating Distribution, in the case of the foregoing clauses (a) and (b), net of (i) reasonable and customary expenses incurred or reasonably expected to be incurred in connection with such Asset Disposition or Liquidating Distribution, (ii) any income, franchise, transfer or other tax payable by the Borrower or such Subsidiary in connection with such Asset Disposition or Liquidating Distribution and (iii) any Indebtedness secured by a Lien on such property or assets and required to be repaid as a result of such Asset Disposition, in each case with respect to the foregoing clause (i) to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash or cash equivalents, actually paid to a Person that is not an Affiliate and are properly attributable to such transaction or to the asset that is the subject thereof; provided, however, that Net Sale Proceeds shall not include any such proceeds from Excluded Resales. "New Property Sale and Leaseback Transaction" shall have the meaning provided in Section 7.13(a). "New Subordinated Note Indenture" shall mean that certain Indenture among the Borrower, certain Subsidiaries of the Borrower, and Chase Manhattan Bank and Trust Company, National Association, as trustee, dated as of March 4, 1999, as the same may be amended, restated, supplemented or otherwise modified in accordance with the terms of this Agreement. "New Subordinated Notes" shall mean the Senior Subordinated Notes issued by the Borrower pursuant to the New Subordinated Note Indenture, in a maximum principal amount not to exceed $287,500,000 in the aggregate, of which $200,000,000 will be issued as of the Closing Date at the rate of 91/8% and due 2009 (the "Original Notes") and of which up to an additional $87,500,000 may be issued at the Borrower's option at any time after the Closing Date on terms no less favorable to the Borrower than the terms of the Original Notes and with a maturity date of February 28, 2005, or thereafter, as the same may be amended, restated, supplemented or otherwise modified in accordance with the terms of this Agreement; provided that such New Subordinated Notes shall at all times be subordinated in respect of the Obligations on subordination terms contained in the New Subordinated Note Indenture; provided, further, that the term "New Subordinated Notes" shall include any notes or instruments exchanged for then outstanding New Subordinated Notes pursuant to the New Subordinated Note Indenture. 19 26 "Non-Utilization Fee" shall have the meaning provided in Section 2.14(c). "Notice of Borrowing" shall have the meaning provided in Section 2.2(a). "Notice of Conversion or Continuation" shall have the meaning provided in Section 2.8(b). "Obligations" shall mean all obligations, liabilities and indebtedness of every kind, nature and description of the Borrower and the other Loan Parties from time to time owing to the Agent or any Lender or any Indemnitee under or in connection with this Agreement or any other Loan Document, whether direct or indirect, primary or secondary, joint or several, absolute or contingent, due or to become due, now existing or hereafter arising and however acquired and shall include, without limitation, all principal and interest on the Revolving Loans and, to the extent chargeable under any Loan Document, all charges, expenses, fees and attorney's fees. "Original Credit Agreement" shall mean that certain Amended and Restated Credit Agreement dated as of April 1, 1998 among the Borrower, the lenders party thereto and Paribas, as Agent, as amended prior to the Closing Date. "Participant" shall have the meaning provided in Section 10.4(b). "Paydown Amount" shall have the meaning provided in Section 2.11(b). "Payment Date" shall mean the fifteenth day of each March, June, September and December of each year. "PBGC" shall mean the Pension Benefit Guaranty Corporation established under ERISA, or any successor thereto. "Permitted Acquisition" shall mean any Acquisition by the Borrower or any of its Subsidiaries that has been approved by the board of directors (or other governing body, if applicable) of the Person which is the subject of such Acquisition so long as the Person acquired in connection therewith is engaged primarily in, or the assets or business acquired in connection therewith relate primarily to, the food service business. "Permitted Redemption" shall mean the redemption and repurchase on or after October 23, 1998 by the Borrower of Convertible Subordinated Notes for a purchase price not to exceed $85,000,000 in the aggregate, provided that (i) the purchase price paid by the Borrower for such Convertible Subordinated Notes shall be made at a discount equal to no less than 15% of the par value of such Convertible Subordinated Notes in the aggregate, (ii) no 20 27 redemption or repurchase shall occur on or after July 23, 1999 and (iii) any such Convertible Subordinated Notes that are redeemed and repurchased shall be delivered to the "trustee" under the Convertible Subordinated Note Indenture for cancellation and shall not be reissued. "Permitted Restaurant Acquisition" shall mean a Permitted Acquisition of a Carl's Jr. or a Hardee's Restaurant by the Borrower or any of its Subsidiaries from a franchisee. "Permitted Subordinated Debt" shall mean Indebtedness of the Borrower or any Subsidiary of the Borrower incurred after the Closing Date, (A) with respect to which no principal payments are due prior to the date which is one year and one day after the Final Maturity Date and (B) which is subordinated as to exercise of remedies and in right of payment to the Borrower's Obligations and such Subsidiary's Obligations, respectively, under the Loan Documents on, and is otherwise subject to, terms and conditions (including, without limitation, terms in respect of maturities, covenants, defaults and remedies and interest rates) approved in writing by the Agent and in any event shall not include Indebtedness issued pursuant to the Subordinated Notes. "Person" shall mean and include any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any government or political subdivision or agency, department or instrumentality thereof. "Plan" means any employee benefit plan covered by Title IV of ERISA, the funding requirements of which: (i) were the responsibility of the Borrower or a member of its ERISA Controlled Group at any time within the six years immediately preceding the Closing Date, (ii) are currently the responsibility of the Borrower or a member of its ERISA Controlled Group, or (iii) hereafter become the responsibility of the Borrower or a member of its ERISA Controlled Group, including any such plans as may have been, or may hereafter be, terminated for whatever reason. "Prepayment" shall have the meaning provided in Section 7.10. "Pro Rata Share" as to any Lender shall mean the percentage obtained by dividing (A) such Lender's Revolving Loan Commitment (or the aggregate outstanding 21 28 principal balance of such Lender's Revolving Loans and all L/C Obligations in which such Lender has an interest, if the Revolving Loan Commitments have been terminated pursuant to the terms of this Agreement) by (B) the Total Revolving Loan Commitment (or the aggregate outstanding principal balance of the Revolving Loans and all L/C Obligations, if the Revolving Loan Commitments have been terminated pursuant to the terms of this Agreement). "Purchasing Lenders" shall have the meaning provided in Section 10.4(d). "Rate Hedging Obligations" shall mean any and all obligations of any Loan Party to any Interest Rate Hedge Provider under Interest Rate Agreements permitted pursuant to Section 7.14(a). "Redeemable Stock" means any Equity Interest which, by its terms, or upon the happening of any event matures, is mandatorily redeemable or repurchaseable (other than for Capital Stock not constituting Redeemable Stock), in whole or in part, prior to one year and one day after the Final Maturity Date, or is, by its terms or upon the happening of any event, required to be redeemed or repurchased, redeemable or repurchaseable at the option of the holder thereof, in whole or in part, at any time prior to one year and one day after the Final Maturity Date. "Reduction Amount" shall have the meaning provided in Section 2.11(b). "Reference Banks" shall mean Paribas and its successors, Wells Fargo Bank N.A., U.S. National Bank Association and BankBoston, N.A. "Regulation D" shall mean Regulation D of the Federal Reserve Board as from time to time in effect and any successor to all or any portion thereof. "Related Businesses" shall mean any Persons (other than individuals) engaged primarily in, or the assets or business of which relate primarily to, the food service business. "Replacement Lender" shall have the meaning provided in Section 2.21. "Reportable Event" has the meaning set forth in Section 4043(b) of ERISA (other than a Reportable Event as to which the provision of 30 days notice to the PBGC is waived under applicable regulations), or is the occurrence of any of the events described in Section 4068(f) or 4063(a) of ERISA. "Required Holders" shall mean William P. Foley II and C. Thomas Thompson. "Required Lenders" shall mean all Lenders whose Pro Rata Shares, in the aggregate, are greater than 50%. 22 29 "Restaurant" shall mean any quick service restaurant. "Revolving Loan Commitment" shall mean at any time, for any Lender, the amount set forth opposite such Lender's name on Schedule 1.1 hereto under the heading "Revolving Loan Commitment," as such amount may be reduced from time to time pursuant to the terms of this Agreement. "Revolving Loans" shall have the meaning provided in Section 2.1(a). "Revolving Note" shall have the meaning provided in Section 2.4(a). "Sale and Leaseback Debt" shall mean, at any date, with respect to all Sale and Leaseback Transactions of the Borrower and its Subsidiaries, the product of (A) seven (7.0) and (B) the aggregate annual rent expense for the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP for the period of four fiscal quarters commencing on the first day of the next fiscal quarter attributable to such Sale and Leaseback Transactions, whether or not actually paid. "Sale and Leaseback Transactions" shall mean Existing Property Sale and Leaseback Transactions and New Property Sale and Leaseback Transactions in each case permitted to be entered into by the Borrower or any of its Subsidiaries pursuant to Section 7.13(a). "Secured Parties" shall have the meaning provided in the Borrower Security Agreement and the Subsidiary Security Agreement. "Security Documents" shall mean and include the Borrower Security Agreement, the Subsidiary Security Agreement, the Guaranty, the Borrower Pledge Agreement, the Subsidiary Pledge Agreements and all other security agreements, pledge agreements, assignments and similar agreements executed in connection with the Loan Documents. "Seller Agreement" shall mean that certain Indemnification Agreement dated as of July 14, 1997 between Imasco and the Borrower, as amended in accordance with Section 7.10(b)(i). "Solvent" as to any Person shall mean that (i) the sum of the assets of such Person, both at a fair valuation and at present fair salable value, will exceed its liabilities, including contingent liabilities, (ii) such Person will have sufficient capital with which to conduct its business as presently conducted and as proposed to be conducted and (iii) such Person has not incurred debts, and does not intend to incur debts, beyond its ability to pay such debts as they mature. For purposes of this definition, "debt" means any liability on a 23 30 claim, and "claim" means (x) a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or (y) a right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. With respect to any such contingent liabilities, such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represents the amount which can reasonably be expected to become an actual or matured liability. "Standby Letter of Credit" shall mean any standby letter of credit issued by the Issuing Bank pursuant to Section 3 and which is not a Trade Letter of Credit. "Subordinated Debt Documents" shall mean the Subordinated Notes and the Subordinated Note Indentures. "Subordinated Guarantor" shall mean each Subsidiary of the Borrower that guarantees any Indebtedness or other obligations of the Borrower or any Subsidiary of the Borrower under or with respect to any of the New Subordinated Notes. "Subordinated Note Indentures" shall mean the Convertible Subordinated Note Indenture and the New Subordinated Note Indenture. "Subordinated Notes" shall mean the Convertible Subordinated Notes and the New Subordinated Notes. "Subsidiary" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned or controlled by such Person directly or indirectly through one or more Subsidiaries and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person, directly or indirectly through one or more Subsidiaries, is either a general partner or has a more than 50% equity interest at the time. Unless otherwise expressly provided, all references to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Subsidiary Pledge Agreement" shall mean each pledge agreement substantially in the form of the Amended and Restated Subsidiary Pledge Agreement set forth as Exhibit E hereto duly executed and delivered to the Agent by each Subsidiary of the Borrower which owns any equity interest of any Person, as the same may be amended, restated, modified or supplemented from time to time. 24 31 "Subsidiary Security Agreement" shall mean a security agreement substantially in the form of the Amended and Restated Subsidiary Security Agreement set forth as Exhibit F hereto duly executed and delivered to the Agent by each Subsidiary of the Borrower (other than Immaterial Subsidiaries), as the same may be amended, restated, modified or supplemented from time to time. "Surviving Debt" shall have the meaning provided in Section 4.1(r). "Termination Event" shall mean (i) a Reportable Event, or (ii) the initiation of any action by the Borrower, any member of the Borrower's ERISA Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan or the treatment of an amendment to an ERISA Plan as a termination under ERISA, or (iii) the institution of proceedings by the PBGC under Section 4042 of ERISA to terminate an ERISA Plan or to appoint a trustee to administer any ERISA Plan. "Total Revolving Loan Commitment" shall have the meaning set forth in Section 2.1(a). "Trade Letter of Credit" shall mean any Letter of Credit that is issued pursuant to Section 3 for the benefit of a supplier of inventory to the Borrower or any of its Subsidiaries to effect payment for such inventory. "Transaction Costs" shall mean all costs and expenses paid or payable by any Loan Party relating to the Transactions including, without limitation, investment banking fees, financing fees, advisory fees, appraisal fees, legal fees and accounting fees. "Transaction Documents" shall mean the Loan Documents and the Subordinated Debt Documents. "Transactions" shall mean the Initial Debt Issuance and each of the transactions contemplated by the Transaction Documents. "Transferee" shall have the meaning provided in Section 10.4(e). "Type" shall mean any type of Revolving Loan determined with respect to the interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan. "Unfunded Benefit Liabilities" means with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefit liabilities under such Plan as defined in Section 4001(a)(16) of ERISA, 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 25 32 Plan (on the basis of assumptions prescribed by the PBGC for the purpose of Section 4044 of ERISA). "Unused Portion" shall mean at any time with respect to the Revolving Loans, the amount by which the Total Revolving Loan Commitment in effect at such time exceeds the sum of (i) the aggregate principal amount of the Revolving Loans outstanding at such time and (ii) the aggregate amount of L/C Obligations outstanding at such time. "Voting Stock" shall mean capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES. Section 2.1 Revolving Loans. (a) Subject to and upon the terms and conditions herein set forth, each Lender severally and not jointly agrees, at any time and from time to time on and after the Closing Date and prior to the Final Maturity Date, to make revolving loans (collectively, "Revolving Loans") to the Borrower, which Revolving Loans shall not exceed in aggregate principal amount at any time outstanding (i) the Revolving Loan Commitment of such Lender at such time minus (ii) such Lender's Pro Rata Share of the L/C Obligations at such time; provided that at no time shall the aggregate outstanding principal amount of the Revolving Loans of all of the Lenders plus the L/C Obligations of all of the Lenders exceed the Total Revolving Loan Commitment. The sum of the Revolving Loan Commitments of all of the Lenders (the "Total Revolving Loan Commitment") on the Closing Date shall be $500,000,000. The Revolving Loans of each Lender made on the Closing Date shall be initially made as a Base Rate Loan or a Eurodollar Loan (subject to the other terms of this Agreement, including without limitation, Section 2.2 and Section 2.16) and may thereafter be maintained at the option of the Borrower as a Base Rate Loan or a Eurodollar Loan, in accordance with the provisions hereof. (b) Revolving Loans may be voluntarily prepaid pursuant to Section 2.10, and, subject to the other provisions of this Agreement, any amounts so prepaid may be reborrowed. Each Lender's Revolving Loan Commitment shall expire (provided the Revolving Loan Commitments have not already expired pursuant to Section 2.1(a) hereof), and each Revolving Loan shall mature on, the Final Maturity Date, without further action on the part of the Lenders or the Agent. (c) Any Borrowing of Base Rate Loans shall be in the aggregate minimum amount of $1,000,000 or any integral multiple of $500,000 in excess thereof. 26 33 Section 2.2 Notice of Borrowing. (a) Whenever the Borrower desires to borrow Revolving Loans hereunder, it shall give the Agent at the Agent's Office prior to 12:00 Noon, Chicago time, on the Business Day of such borrowing by telex, facsimile or telephonic notice (promptly confirmed in writing) of each Base Rate Loan, and at least three Business Days' prior telex, facsimile or telephonic notice (promptly confirmed in writing) of each Eurodollar Loan to be made hereunder. Each such notice shall be in the form of Exhibit G hereto (a "Notice of Borrowing") shall be irrevocable and shall specify (i) the aggregate principal amount of the requested Revolving Loans, (ii) the date of Borrowing (which shall be a Business Day), and (iii) whether such Revolving Loans shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be applicable thereto (provided, that no Eurodollar Loans may be requested or made when any Default or Event of Default has occurred and is continuing). (b) Promptly after receipt of a Notice of Borrowing, the Agent shall provide each Lender with a copy thereof and inform each Lender as to its Pro Rata Share of the Revolving Loans requested thereunder. Section 2.3 Disbursement of Funds. (a) No later than 2:00 P.M., Chicago time, on the date specified in each Notice of Borrowing, each Lender will make available its Pro Rata Share of the Revolving Loans requested to be made on such date, in U.S. dollars and immediately available funds, at the Agent's Office. After the Agent's receipt of the proceeds of such Revolving Loans, the Agent will make available to the Borrower by depositing in the Borrower's account at the Agent's Office the aggregate of the amounts so made available in the type of funds actually received. (b) Unless the Agent shall have been notified by any Lender prior to the date of a Borrowing that such Lender does not intend to make available to the Agent its portion of the Revolving Loans to be made on such date, the Agent may assume that such Lender has made such amount available to the Agent on such date and the Agent in its sole discretion may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Lender and the Agent has made such amount available to the Borrower, the Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Borrower and the Borrower shall immediately repay such corresponding amount to the Agent. The Agent shall also be entitled to recover from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent, at a rate per annum equal to the then applicable rate of interest, calculated in accordance with Section 2.5, for the respective Revolving Loans. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have 27 34 against any Lender as a result of any default by such Lender hereunder. Notwithstanding anything contained herein or in any other Loan Document to the contrary, the Agent may apply all funds and proceeds of Collateral available for the payment of any Obligations first to repay any amount owing by any Lender to the Agent as a result of such Lender's failure to fund its Revolving Loans hereunder. Section 2.4 Revolving Notes. (a) The Borrower's obligation to pay the principal of, and interest on, each Lender's Revolving Loans shall be evidenced by a promissory note (as the same may be amended, restated, supplemented or otherwise modified from time to time, a "Revolving Note") duly executed and delivered by the Borrower substantially in the form of Exhibit A hereto in a principal amount equal to such Lender's Revolving Loan Commitment, with blanks appropriately completed in conformity herewith. Each Revolving Note issued to a Lender shall (x) be payable to the order of such Lender, (y) be dated the Closing Date or the date such Revolving Note was issued, and (z) mature on the Final Maturity Date. (b) Each Lender is hereby authorized, at its option, either (i) to endorse on the schedule attached to its Revolving Note (or on a continuation of such schedule attached to such Revolving Note and made a part thereof) an appropriate notation evidencing the date and amount of each Revolving Loan evidenced thereby and the date and amount of each principal and interest payment in respect thereof, or (ii) to record such Revolving Loans and such payments in its books and records. Such schedule or such books and records, as the case may be, shall constitute prima facie evidence of the accuracy of the information contained therein. Section 2.5 Interest. (a) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Base Rate Loan from the date of the making of such Revolving Loan until such Revolving Loan shall be paid in full at a rate per annum which shall be equal to the Base Rate in effect from time to time, such rate to change as and when the Base Rate changes, such interest to be computed on the basis of a 365 or 366-day year, as the case may be, and paid for the actual number of days elapsed, subject to the provisions of clause (c) of this Section 2.5. (b) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan from the date of the making of such Revolving Loan until such Revolving Loan shall be paid in full at a rate per annum which shall be equal to the sum of (i) the Applicable Margin plus (ii) the relevant Eurodollar Rate, such interest to be computed on the basis of a 360-day year and paid for the actual number of days elapsed, subject to the provisions of clause (c) of this Section 2.5. (c) In the event that, and for so long as, any Event of Default shall have occurred and be continuing, the outstanding principal amount of all Revolving Loans and, to 28 35 the extent permitted by law, overdue interest in respect of all Revolving Loans, shall bear interest at a rate per annum (the "Default Rate") equal to the sum of two percent (2%) plus the Base Rate in effect from time to time, and shall be payable on demand. (d) Interest on each Revolving Loan shall accrue from and including the date of the Borrowing thereof to but excluding the date of any repayment thereof (provided that any Revolving Loan borrowed and repaid on the same day shall accrue one day's interest) and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on each Payment Date, commencing on March 15, 1999, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable to such Revolving Loan and, in the case of an Interest Period of six months, on the date occurring three months from the first day of such Interest Period and on the last day of such Interest Period, and (iii) in the case of all Revolving Loans, on any prepayment or conversion (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. Each determination by the Agent of an interest rate hereunder shall, except for manifest error, be final, conclusive and binding for all purposes. (e) Each Reference Bank agrees to furnish to the Agent timely information for the purpose of determining each Eurodollar Base Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.5(b), and the rate, if any, furnished by each Reference Bank for the purpose of determining the interest rate under Section 2.5(b). (f) If fewer than two Reference Banks furnish timely information to the Agent for determining the Eurodollar Base Rate for any Eurodollar Loan, (i) the Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Loan, (ii) each such Eurodollar Loan will automatically, on the last day of the then existing Interest Period therefor, convert into a Base Rate Loan (or if such Revolving Loan is then a Base Rate Loan, will continue as a Base Rate Loan), and (iii) the obligation of the Lenders to make, or to convert Revolving Loans into, Eurodollar Loans shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing suspension no longer exist. 29 36 Section 2.6 Interest Periods. (a) The Borrower shall, in each Notice of Borrowing or Notice of Conversion or Continuation in respect of the making of, conversion into or continuation of a Eurodollar Loan, select the interest period (each an "Interest Period") applicable to such Eurodollar Loan, which Interest Period shall, at the option of the Borrower, be either a one-month, two-month, three-month or six-month period, provided that: (i) the initial Interest Period for any Eurodollar Loan shall commence on the date of the making of such Revolving Loan (including the date of any conversion from a Base Rate Loan) and each Interest Period occurring thereafter in respect of such Revolving Loan shall commence on the date on which the next preceding Interest Period expires; (ii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided, however, that if any Interest Period would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iv) no Interest Period in respect of any Revolving Loan shall extend beyond the Final Maturity Date. (b) If upon the expiration of any Interest Period, the Borrower has failed to elect a new Interest Period to be applicable to the respective Eurodollar Loan as provided above, the Borrower shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. Section 2.7 Minimum Amount of Eurodollar Loans. All borrowings, conversions, continuations, payments, prepayments and selection of Interest Periods hereunder shall be made or selected so that, after giving effect thereto, (i) the aggregate principal amount of any Borrowing comprised of Eurodollar Loans shall not be less than $3,000,000 or an integral multiple of $500,000 in excess thereof, and (ii) there shall be no more than twenty (20) Borrowings comprised of Eurodollar Loans outstanding at any time. Section 2.8 Conversion or Continuation. (a) Subject to the other provisions hereof, the Borrower shall have the option (i) to convert at any time all or any part of outstanding Base Rate Loans which comprise part of the same Borrowing to Eurodollar Loans, 30 37 (ii) to convert all or any part of outstanding Eurodollar Loans which comprise part of the same Borrowing to Base Rate Loans, on the expiration date of the Interest Period applicable thereto, or (iii) to continue all or any part of outstanding Eurodollar Loans which comprise part of the same Borrowing as Eurodollar Loans for an additional Interest Period, on the expiration of the Interest Period applicable thereto; provided that no Revolving Loan may be continued as, or converted into, a Eurodollar Loan when any Default or Event of Default has occurred and is continuing. (b) In order to elect to convert or continue a Revolving Loan under this Section 2.8, the Borrower shall deliver an irrevocable notice thereof (a "Notice of Conversion or Continuation") to the Agent no later than 12:00 Noon, Chicago time, (i) on the Business Day of the proposed conversion date in the case of a conversion to a Base Rate Loan and (ii) at least three Business Days in advance of the proposed conversion or continuation date in the case of a conversion to, or a continuation of, a Eurodollar Loan. A Notice of Conversion or Continuation shall specify (w) the requested conversion or continuation date (which shall be a Business Day), (x) the amount of the Revolving Loan to be converted or continued, (y) whether a conversion or continuation is requested, and (z) in the case of a conversion to, or a continuation of, a Eurodollar Loan, the requested Interest Period. Promptly after receipt of a Notice of Conversion or Continuation under this Section 2.8(b), the Agent shall provide each Lender with a copy thereof. Section 2.9 Reduction of Revolving Loan Commitments. (a) Upon at least three Business Day's prior irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Agent (which notice the Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, without premium or penalty, to permanently reduce each Lender's Pro Rata Share of all or part of the Total Revolving Loan Commitment, provided that any such partial reduction shall be in the minimum aggregate amount of $1,000,000 or any integral multiple of $500,000 in excess thereof. (b) Commencing on the first Payment Date following the second anniversary of the Closing Date, and on each Payment Date thereafter (each a "Commitment Reduction Date"), each Lender's Revolving Loan Commitment shall be permanently reduced by such Lender's Pro Rata Share of the lesser of (X) $12,500,000 and (Y) the Total Revolving Loan Commitment on each such Commitment Reduction Date. Concurrently with each such reduction, the Borrower shall make such payments and provide such cash collateralization as may be required by Section 2.11(e) and Section 2.11(f). Section 2.10 Voluntary Prepayments. The Borrower shall have the right to prepay the Revolving Loans in whole or in part from time to time on the following terms and conditions: (i) the Borrower shall give the Agent written notice (or telephonic notice promptly confirmed in writing), which notice shall be irrevocable, of its intent to prepay the Revolving Loans, at least three Business Days prior to a prepayment of Eurodollar Loans and on the Business Day of a prepayment of Base Rate Loans, which notice shall specify the amount of 31 38 such prepayment and what Types of Revolving Loans are to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing(s) pursuant to which made, and which notice the Agent shall promptly transmit to each of the Lenders, and (ii) each prepayment shall be in an aggregate principal amount of $1,000,000 or any integral multiple of $500,000 in excess thereof; provided that if any prepayment of Eurodollar Loans is made pursuant to this Section 2.10 on a day which is not the last day of the Interest Period applicable thereto, the Borrower shall pay to each Lender all amounts due in connection with such prepayment pursuant to Section 2.16. Section 2.11 Mandatory Prepayments. (a) Upon the consummation of any Asset Disposition (other than any Sale and Leaseback Transaction of the Borrower or any of its Subsidiaries permitted pursuant to Section 7.13(a)) after March 1, 1998, or upon receipt by any Loan Party of any Liquidating Distribution after March 1, 1998, in each case within three hundred sixty (360) days after the Borrower or any of its Subsidiaries receives any Net Sale Proceeds with respect to any such Asset Disposition or Liquidating Distribution, the Borrower shall prepay the outstanding Revolving Loans in an amount equal to 100% of the amount of such Net Sale Proceeds, in accordance with the provisions of Section 2.12; provided, however, that such Net Sale Proceeds which the Borrower or such Subsidiary shall, within three hundred sixty (360) days after the receipt thereof, use to reinvest in the business of the Borrower or its Subsidiaries in non-current assets as permitted by the terms of this Agreement, shall not be included in determining the aggregate Net Sale Proceeds pursuant to this sentence for such period; provided further that, if an Event of Default shall have occurred and be continuing on the date such Net Sale Proceeds are received by the Borrower or any of its Subsidiaries or at any time during such applicable three hundred sixty day period, then the Borrower shall prepay the outstanding Revolving Loans in an amount equal to 100% of such Net Sale Proceeds (or, if any portion of such proceeds shall have been reinvested prior to the occurrence of such Event of Default, 100% of such remaining amount of Net Sale Proceeds not so reinvested) on the later of the date such Net Sale Proceeds are received by the Borrower or any of its Subsidiaries or the date of the occurrence of such Event of Default in accordance with the provisions of Section 2.12. (b) Upon the consummation of any Asset Disposition which constitutes the sale portion of a Sale and Leaseback Transaction permitted pursuant to Section 7.13(a) after March 1, 1998, (1) within thirty (30) days after the Borrower or any of its Subsidiaries receives any Net Sale Proceeds with respect to any such Asset Disposition that constitutes an Existing Property Sale and Leaseback Transaction, the Borrower shall prepay the outstanding Revolving Loans in an amount equal to the lesser of (x) 25% of the amount of such Net Sale Proceeds (without giving effect to any amounts reinvested in the business of the Borrower or its Subsidiaries during such 30 day period, notwithstanding anything to the contrary contained herein) and (y) the then outstanding Obligations under the Revolving Loans (the "Paydown Amount") in accordance with the provisions of Section 2.12 and (2) within five hundred forty (540) days after the Borrower or any of its Subsidiaries receives any Net Sale Proceeds with 32 39 respect to any Asset Disposition, the Borrower shall prepay the outstanding Revolving Loans in an amount equal to the lesser of (x) 100% of such Net Sale Proceeds and (y) the then outstanding Obligations under the Revolving Loans (in each case, less the Paydown Amount to the extent paid) (the "Reduction Amount"), in accordance with the provisions of Section 2.12; provided, however, that such Net Sale Proceeds which the Borrower or such Subsidiary shall, within five hundred forty (540) days after the receipt thereof, use to reinvest in the business of the Borrower or its Subsidiaries in non-current assets as permitted by the terms of this Agreement, shall not be included in determining the aggregate Net Sale Proceeds with respect to the sale portion of Sale and Leaseback Transactions permitted pursuant to Section 7.13(a) for such period; provided further that, if an Event of Default shall have occurred and be continuing on the date such Net Sale Proceeds are received by the Borrower or any of its Subsidiaries or at any time during such applicable five hundred forty (540) day period, then the Borrower shall prepay the outstanding Revolving Loans in an amount equal to 100% of such Net Sale Proceeds (or, if any portion of such proceeds shall have been reinvested prior to the occurrence of such Event of Default, 100% of such remaining amount of Net Sale Proceeds not so reinvested) on the later of the date such Net Sale Proceeds are received by the Borrower or any of its Subsidiaries or the date of the occurrence of such Event of Default in accordance with the provisions of Section 2.12. (c) On each date on which the Borrower or any of its Subsidiaries receives any Net Equity Proceeds, the Borrower shall prepay the outstanding Revolving Loans in an amount equal to (i) 50% of such Net Equity Proceeds if both (A) the Leverage Ratio as of the end of the fiscal quarter immediately preceding such date as to which financial statements are required to have been delivered pursuant to Section 6.1(a) and 6.1(b), as applicable, on a pro forma basis after giving effect to any prepayment made by the Borrower pursuant to clause (ii)(A) of this Section 2.11(c), is less than 2.0 to 1.0 and (B) no Default or Event of Default has occurred or is continuing as a result of the Borrower's failure to deliver any financial statement or Compliance Certificate as and when required pursuant to Section 6.1(a), 6.1(b) or 6.1(e), as applicable and (ii) 75% of such Net Equity Proceeds if either (A) the Leverage Ratio as of the end of the fiscal quarter immediately preceding such date as to which financial statements are required to have been delivered pursuant to Section 6.1(a) or 6.1(b), as applicable, is greater than or equal to 2.0 to 1.0 (but only until the Leverage Ratio is less than 2.0 to 1.0, at which time clause (i) of this Section 2.11(c) shall apply (unless clause (ii)(B) of this Section 2.11(c) shall then be applicable)) or (B) any Default or Event of Default has occurred and is continuing as a result of the Borrower's failure to deliver any financial statement or Compliance Certificate as and when required pursuant to Section 6.1(a), 6.1(b) or 6.1(e), as applicable, in each case in accordance with the provisions of Section 2.12. (d) On each date on which the Borrower or any of its Subsidiaries receives any Net Debt Proceeds, becomes or remains liable with respect to Indebtedness with respect to Capitalized Leases in excess of $130,000,000 in the aggregate at any one time outstanding for the Borrower and its Subsidiaries, or assumes any Indebtedness in connection 33 40 with a Permitted Acquisition pursuant to Section 7.2(l), the Borrower shall prepay the outstanding Revolving Loans in an amount equal to 100% of such Net Debt Proceeds, 100% of the amount by which the aggregate amount of Indebtedness of the Borrower and its Subsidiaries with respect to Capitalized Leases exceeds $130,000,000 on such date or 100% of the aggregate principal amount of any such Indebtedness assumed in connection with a Permitted Acquisition, respectively, in accordance with the provisions of Section 2.12. (e) On each day on which the Total Revolving Loan Commitment is reduced pursuant to Section 2.9, the Borrower shall prepay the Revolving Loans to the extent, if any, that the outstanding principal amount of the Revolving Loans exceeds such reduced Total Revolving Loan Commitment. (f) If at any time and for any reason the aggregate principal amount of Revolving Loans plus the L/C Obligations then outstanding are greater than the Total Revolving Loan Commitment, the Borrower shall immediately prepay the Revolving Loans in an amount equal to such excess. In addition, to the extent at any time and for any reason, the Total Revolving Loan Commitment minus the aggregate principal amount of Revolving Loans then outstanding, is less than the amount of L/C Obligations outstanding at such time, the Borrower shall Cash Collateralize the L/C Obligations in an amount equal to the amount by which such L/C Obligations exceed the amount equal to the difference between the Total Revolving Loan Commitment and such aggregate principal amount of Revolving Loans. (g) Nothing in this Section 2.11 shall be construed to constitute the Lenders' consent to any transactions referred to in Sections 2.11(a), 2.11(b), 2.11(c) or 2.11(d) above which transaction is not expressly permitted by the terms of this Agreement. Section 2.12 Application of Prepayments. (a) All prepayments of the Revolving Loans required by clauses (a) through (d) of Section 2.11 shall be applied first, to prepay the Revolving Loans until such Revolving Loans shall have been repaid in full, together with accrued and unpaid interest thereon, and second, to Cash Collateralize the then outstanding Letters of Credit and, third, to all other outstanding Obligations. If (i) at the time of any prepayment of the principal amount of the Revolving Loans pursuant to clause (c) or clause (d) of Section 2.11, either (A) the Leverage Ratio as of the end of the fiscal quarter immediately preceding such date as to which financial statements are required to have been delivered pursuant to Section 6.1(a) or 6.1(b), as applicable, is greater than or equal to 2.0 or (B) any Default has occurred and is continuing as a result of the Borrower's failure to deliver any financial statement or Compliance Certificate as and when required pursuant to Section 6.1(a), 6.1(b) or 6.1(e), as applicable, then simultaneously with any prepayment of the principal amount of the Revolving Loans pursuant to the preceding sentence, each Lender's Revolving Loan Commitment shall be permanently reduced by such Lender's Pro Rata Share of such prepayment, (ii) at the time of any prepayment of the principal amount of the Revolving Loans pursuant to clause (c) or clause (d) of Section 2.11, both (A) the Leverage Ratio as 34 41 of the end of the fiscal quarter immediately preceding such date as to which financial statements are required to have been delivered pursuant to Section 6.1(a) and 6.1(b), as applicable, is less than 2.0 and (B) no Default has occurred or is continuing as a result of the Borrower's failure to deliver any financial statement or Compliance Certificate as and when required pursuant to Section 6.1(a), 6.1(b) or 6.1(e), as applicable, then, any Revolving Loans repaid pursuant to the preceding sentence may be reborrowed, subject to the other terms of this Agreement, and (iii) any prepayment of the principal amount of the Revolving Loans is required pursuant to clause (a) of Section 2.11, then simultaneously with any such prepayment of the principal amount of the Revolving Loans each Lender's Revolving Loan Commitment shall be permanently reduced by such Lender's Pro Rata Share of such prepayment. (b) If any prepayment of the principal amount of the Revolving Loans is required pursuant to clause (b) of Section 2.11: (i) if no Paydown Amount was required to be paid pursuant to Section 2.11(b)(1), then simultaneously with the payment of the Reduction Amount each Lender's Revolving Loan Commitment shall be permanently reduced by such Lender's Pro Rata Share of such payment; and (ii) if a Paydown Amount was required to be paid pursuant to Section 2.11(b)(1) and a Reduction Amount is required to be paid pursuant to Section 2.11(b)(2), then simultaneously with the payment of the Reduction Amount each Lender's Revolving Loan Commitment shall be permanently reduced by such Lender's Pro Rata Share of such payment plus such Lender's Pro Rata Share of the Paydown Amount required to be so paid. Section 2.13 Method and Place of Payment. (a) Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Revolving Notes shall be made to the Agent for the account of the Lenders entitled thereto not later than 2:00 P.M., Chicago time, on the date when due and shall be made in lawful money of the United States of America in immediately available funds at the Agent's Office, and any funds received by the Agent after such time shall, for all purposes hereof (including the following sentence), be deemed to have been paid on the next succeeding Business Day. Except as otherwise specifically provided herein, the Agent shall thereafter cause to be distributed on the date of receipt thereof to each Lender in like funds its Pro Rata Share of payments so received. (b) Whenever any payment to be made hereunder or under any Revolving Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. 35 42 (c) All payments made by the Borrower hereunder and under the other Loan Documents shall be made irrespective of, and without any reduction for, any setoff or counterclaims. Section 2.14 Fees. (a) The Borrower agrees to pay the fees in the amounts and on the dates specified in the Fee Letter. (b) The Borrower agrees to pay to the Agent for the account of each Lender a commitment fee (the "Commitment Fee") for each day computed at the per annum rate equal to the Applicable Margin (determined for the Commitment Fee in accordance with the definition of Applicable Margin) multiplied by each such Lender's Pro Rata Share of the average daily Unused Portion, from and including the Closing Date to the Final Maturity Date. (c) Upon the consummation of any Sale and Leaseback Transaction by the Borrower or any of its Subsidiaries pursuant to Section 7.13(a), in the event that the Borrower uses less than seventy-five percent (75%) of the proceeds of any such Sale and Leaseback Transaction to prepay the Revolving Loans and to permanently reduce each Lender's Revolving Loan Commitment pursuant to Section 2.12 hereof within 30 days of receipt of such proceeds by the Borrower or any such Subsidiary of the Borrower, the Borrower agrees to pay to the Agent for the account of each Lender a non-utilization fee (the "Non-Utilization Fee"). The Non-Utilization Fee for each day shall be computed at the rate per annum of 0.125% multiplied by each such Lender's Pro Rata Share of the Unused Portion; provided that the Non-Utilization Fee shall only be payable for each quarterly period ending on a Payment Date during which the average daily Unused Portion exceeds 70% of the Total Revolving Loan Commitment in effect at such time, and shall be paid in addition to the Commitment Fee. (d) The Commitment Fee shall accrue from and including the Closing Date to but excluding the Final Maturity Date. The Non-Utilization Fee shall accrue for each quarterly period as described in clause (c) of this Section 2.14 until the Final Maturity Date. Accrued fees under this Section 2.14 shall be payable on the Closing Date and payable quarterly in arrears on each Payment Date, commencing April 15, 1999, and on the Final Maturity Date or such earlier date, if any, on which the Revolving Loan Commitment shall terminate in accordance with the terms hereof. The Commitment Fee, the Non-Utilization Fee and all other fees due under the Loan Documents (collectively the "Fees") shall be calculated on the basis of a 360-day year for the actual number of days elapsed. Section 2.15 Interest Rate Unascertainable, Increased Costs, Illegality. (a) In the event that the Agent, in the case of clause (i) below, or any Lender, in the case of clauses (ii) and (iii) below, shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): 36 43 (i) on any date for determining the Eurodollar Rate for any Interest Period, that by reason of any changes arising after the Closing Date affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of the Eurodollar Rate; or (ii) at any time, that the relevant Eurodollar Rate applicable to any of its Revolving Loans shall not represent the effective pricing to such Lender for funding or maintaining a Eurodollar Loan, or such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder in respect of any Eurodollar Loan, in any such case because of (x) any change since the Closing Date in any applicable law or governmental rule, regulation, guideline or order or any interpretation thereof and including the introduction of any new law or governmental rule, regulation, guideline or order (such as for example but not limited to a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D of the Federal Reserve Board to the extent included in the computation of the Eurodollar Rate), whether or not having the force of law and whether or not failure to comply therewith would be unlawful, and/or (y) other circumstances affecting such Lender or the interbank Eurodollar market or the position of such Lender in such market; or (iii) at any time, that the making or continuance by it of any Eurodollar Loan has become unlawful by compliance by such Lender in good faith with any law or governmental rule, regulation, guideline or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) or has become impracticable as a result of a contingency occurring after the Closing Date which materially and adversely affects the interbank Eurodollar market; then, and in any such event, the Agent or such Lender shall, promptly after making such determination, give notice (by telephone promptly confirmed in writing) to the Borrower and (if applicable) the Agent of such determination (which notice the Agent shall promptly transmit to each of the other Lenders). Thereafter (x) in the case of clause (i) above, the Borrower's right to request Eurodollar Loans shall be suspended, and any Notice of Borrowing or Notice of Conversion or Continuation given by the Borrower with respect to any Borrowing of Eurodollar Loans which has not yet been made shall be deemed cancelled and rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such Lender, upon such Lender's delivery of a written demand therefor to the Borrower with a copy to the Agent, such additional amounts (in the form of an increased rate of interest, or a different method of calculating interest, or otherwise, as such Lender in its sole discretion shall determine) as shall be required to compensate such Lender for such increased costs or reduction in amounts 37 44 received or receivable hereunder and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in clause (b) below as promptly as possible and, in any event, within the time period required by law. The written demand provided for in clause (y) shall demonstrate in reasonable detail the calculation of the amounts demanded and shall, absent manifest error, be final and conclusive and binding upon all of the parties hereto. (b) In the case of any Eurodollar Loan or requested Eurodollar Loan affected by the circumstances described in clause (a)(ii) above, the Borrower may, and in the case of any Eurodollar Loan affected by the circumstances described in clause (a)(iii) above the Borrower shall, either (i) if any such Eurodollar Loan has not yet been made but is then the subject of a Notice of Borrowing or a Notice of Conversion or Continuation, be deemed to have cancelled and rescinded such notice, or (ii) if any such Eurodollar Loan is then outstanding, require the affected Lender to convert each such Eurodollar Loan into a Base Rate Loan at the end of the applicable Interest Period or such earlier time as may be required by law, in each case by giving the Agent notice (by telephone promptly confirmed in writing) thereof on the Business Day that the Borrower was notified by the Lender pursuant to clause (a) above; provided, however, that all Lenders whose Eurodollar Loans are affected by the circumstances described in clause (a) above shall be treated in the same manner under this clause (b). (c) In the event that the Agent determines at any time following its giving of notice based on the conditions described in clause (a)(i) above that none of such conditions exist, the Agent shall promptly give notice thereof to the Borrower and the Lenders, whereupon the Borrower's right to request Eurodollar Loans from the Lenders and the Lenders' obligation to make Eurodollar Loans shall be restored. (d) In the event that a Lender determines at any time following its giving of a notice based on the conditions described in clause (a)(iii) above that none of such conditions exist, such Lender shall promptly give notice thereof to the Borrower and the Agent, whereupon the Borrower's right to request Eurodollar Loans from such Lender and such Lender's obligation to make Eurodollar Loans shall be restored. Section 2.16 Funding Losses. The Borrower shall compensate each Lender, upon such Lender's delivery of a written demand therefor to the Borrower, with a copy to the Agent (which demand shall set forth the basis for requesting such amounts and shall, absent manifest error, be final and conclusive and binding upon all of the parties hereto), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by such Lender in connection with the liquidation or reemployment of deposits or funds required by it to make or carry its Eurodollar Loans), that such Lender sustains: (i) if for any reason (other than a default by such Lender) a Borrowing of, or conversion from or into, or a continuation of, Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion or Continuation (whether or not rescinded, cancelled or withdrawn or deemed rescinded, cancelled or withdrawn, 38 45 pursuant to Section 2.15(a) or 2.15(b) or otherwise), (ii) if any prepayment or repayment (including, without limitation, payment after acceleration) or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of the Interest Period applicable thereto, (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower, or (iv) as a consequence of any default by the Borrower in repaying its Eurodollar Loans or any other amounts owing hereunder in respect of its Eurodollar Loans when required by the terms of this Agreement. Calculation of all amounts payable to a Lender under this Section 2.16 shall be made on the assumption that such Lender has funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of such Eurodollar Loan with a maturity equivalent to the Interest Period applicable to such Eurodollar Loan, and through the transfer of such Eurodollar deposit from an offshore office of such Lender to a domestic office of such Lender in the United States of America, provided that each Lender may fund its Eurodollar Loans in any manner that it in its sole discretion chooses and the foregoing assumption shall only be made in order to calculate amounts payable under this Section 2.16. Section 2.17 Increased Capital. If any Lender shall have determined that compliance with any applicable law, rule, regulation, guideline, request or directive (whether or not having the force of law) of any governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital or assets of such Lender or any Person controlling such Lender as a consequence of its commitments or obligations hereunder, then from time to time, upon such Lender's delivering a written demand therefor to the Agent and the Borrower (with a copy to the Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or Person for such reduction. Section 2.18 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority excluding, in the case of the Agent and each Lender, net income and franchise taxes imposed on the Agent or such Lender by the jurisdiction under the laws of which the Agent or such Lender is organized or any political subdivision or taxing authority thereof or therein, or by any jurisdiction in which such Lender's Domestic Lending Office or Eurodollar Lending Office, as the case may be, is located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld from any amounts payable to the Agent or any Lender hereunder or under the Revolving Notes, the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Revolving Notes. Whenever 39 46 any Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Agent or any Lender as a result of any such failure. The agreements in this Section 2.18 shall survive the termination of this Agreement and the payment of the Revolving Notes and all other Obligations. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (including each Purchasing Lender that becomes a party to this Agreement pursuant to Section 10.4) agrees that, prior to the first date on which any payment is due to it hereunder, it will deliver to the Borrower and the Agent (i) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, certifying in each case that such Lender is entitled to receive payments under this Agreement and the Revolving Notes payable to it, without deduction or withholding of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax. Each Lender which delivers to the Borrower and the Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the preceding sentence further undertakes to deliver to the Borrower and the Agent two further copies of the said letter and Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such letter or form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent letter and form previously delivered by it to the Borrower, and such extensions or renewals thereof as may reasonably be requested by the Borrower, certifying in the case of a Form 1001 or 4224 that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such letter or form with respect to it and such Lender advises the Borrower that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. Section 2.19 Use of Proceeds. The proceeds of the Revolving Loans shall be used to refinance Indebtedness under the Original Credit Agreement and for the Borrower's working capital and general corporate purposes which shall include, but not be limited to, Restaurant renovations and Permitted Acquisitions. 40 47 Section 2.20 Collateral Security. (a) As security for the payment of the Obligations, the Borrower shall cause to be granted to the Agent, for the ratable benefit of the Lenders, a first priority perfected Lien on and security interest in all of the following, whether now or hereafter existing or acquired subject only to the Liens permitted to be incurred pursuant to Section 7.3 hereof: (i) all of the shares of capital stock (or other equity interests of each Subsidiary if such Subsidiary is not a corporation) of each Subsidiary of the Borrower now or hereafter directly or indirectly owned by the Borrower and all proceeds thereof, all as more specifically described in the Borrower Pledge Agreement and the Subsidiary Pledge Agreements; (ii) certain of the assets of the Borrower and all proceeds thereof, all as more specifically described in the Borrower Security Agreement; and (iii) certain of the assets of each Subsidiary now or hereafter directly or indirectly owned by the Borrower and all proceeds thereof, all as more specifically described in the Subsidiary Security Agreement. To the extent the Agent for the benefit of the Lenders does not have a first priority perfected security interest in any assets of the Borrower or any other Loan Party required to be pledged as described above which is of the type described in the Borrower Security Agreement, the Borrower Pledge Agreement, the Subsidiary Pledge Agreement or the Subsidiary Security Agreement, the Borrower will grant, and cause each other Loan Party to grant, to the Agent for itself and the benefit of the Lenders a first priority perfected security interest in such assets subject only to the Liens permitted pursuant to Section 7.3 hereof. In connection with any sales of assets permitted hereunder, the Agent will release and terminate the liens and security interests granted under the Security Documents with respect to such assets and no further consent of the Lenders will be required with respect to any such release. (b) Concurrently with the consummation of any Permitted Acquisition or any other acquisition of any asset (whether by purchase, merger, contribution, license or otherwise) which is of the type described in the Borrower Security Agreement, the Subsidiary Security Agreement, the Borrower Pledge Agreement or the Subsidiary Pledge Agreement by the Borrower or any Subsidiary of the Borrower (other than a Subsidiary which, after giving effect to any such acquisition, is an Immaterial Subsidiary, except as otherwise provided in Section 6.11 or any Security Document) (an "Acquiring Subsidiary") or the formation of any new Subsidiary (other than a Subsidiary which, after giving effect to any such acquisition, is an Immaterial Subsidiary, except as otherwise provided in Section 6.11 or any Security Document) of the Borrower or upon an Immaterial Subsidiary ceasing to qualify or be designated as an Immaterial Subsidiary (conversion from the status of an Immaterial Subsidiary to a Subsidiary which is not an Immaterial Subsidiary is hereinafter referred to as a "Conversion"), the Borrower shall (i) in the case of a Permitted Acquisition of stock or other equity interest or any other acquisition of stock or other equity interest (whether by purchase, merger, contribution, license or otherwise) by the Borrower or any 41 48 such Acquiring Subsidiary of the Borrower or the formation of such a new Subsidiary or a Conversion: (A) deliver or cause to be delivered to the Agent all of the certificates representing the capital stock (or other equity interest if such equity interests are represented by a certificate or certificates) of such new Subsidiary which is being acquired or formed or converted (or Investment if such Investment is not an Immaterial Investment), beneficially owned by the Borrower or such Acquiring Subsidiary, as additional collateral for the Obligations, to be held by the Agent in accordance with the terms of the Borrower Pledge Agreement or a Subsidiary Pledge Agreement, as the case may be; and (B) cause such Acquiring Subsidiary (which is not already a party thereto) or new Subsidiary which is being acquired or formed or converted to deliver to the Agent (1) duly executed counterpart signature pages to each of the Guaranty, and the Subsidiary Security Agreement, in the forms attached respectively thereto as Annex I, together with the authorization to the Agent and the Lenders to attach such signature pages to the Guaranty and the Subsidiary Security Agreement, respectively, the effect of which shall be that as of the date set forth on such signature pages such Acquiring Subsidiary or such new or converted Subsidiary, as the case may be, shall become a party to each such agreement and be bound by the terms thereof and any revisions to the schedules to the Subsidiary Security Agreement necessary in connection therewith, (2) if such new or converted Subsidiary owns any capital stock or other equity interest or if such Acquiring Subsidiary is not already a party to a Subsidiary Pledge Agreement, a Subsidiary Pledge Agreement duly executed by such new or converted Subsidiary or such Acquiring Subsidiary, as the case may be, or if such new or converted Subsidiary owns any copyrights, trademarks, patents or other intellectual property, such additional Security Documents as requested by the Agent, (3) such Uniform Commercial Code financing statements as shall be required to perfect the security interest of the Agent and the Lenders in the Collateral being pledged by such new Subsidiary pursuant to the Subsidiary Security Agreement, and (4) ten (10) days prior written notice of any such Permitted Acquisition, other acquisition, formation or Conversion. (ii) in the case of a Permitted Acquisition of assets or any other acquisition of assets (including equity interests of a Person other than a corporation) (whether by purchase, merger, contribution, license or other wise) by the Borrower or any such Acquiring Subsidiary which is of the type described in the Borrower Security Agreement or the Subsidiary Security Agreement or the formation of such a new Subsidiary or a Conversion into a Person which in either case is not a corporation, deliver or cause to be delivered by the Borrower or such Acquiring Subsidiary acquiring such assets or forming such new Subsidiary, (A) such Uniform Commercial Code financing statements as shall be required to perfect the security interest of the Agent and the Lenders 42 49 in the assets being so acquired, (B) if such assets include copyrights, trademarks, patents or other intellectual property, such additional Security Documents as requested by the Agent, (C) any additional instruments or documents evidencing the security interest of the Agent reasonably required by the Agent and (D) ten (10) days prior written notice of any such Permitted Acquisition, other acquisition, formation or Conversion; and (iii) in any case (A) provide such other documentation, including, without limitation, one or more opinions of counsel reasonably satisfactory to the Agent, articles of incorporation, by-laws and resolutions, which in the reasonable opinion of the Agent is necessary or advisable in connection with such Permitted Acquisition or formation of such new Subsidiary or other acquisition (whether by purchase, merger, contribution or other wise) or Conversion, (B) cause any newly formed or acquired Immaterial Subsidiary which is or is to become a Subordinated Guarantor, to execute and deliver a counterpart to the Guaranty, and (C) if, as a result of the consummation of any transaction or transactions, there is a significant change in the information provided by the Borrower on Schedule 5.18, promptly provide the Agent with a new schedule which reflects the then current corporate structure of the Borrower and its Subsidiaries certified by an Authorized Officer of the Borrower. Section 2.21 Replacement of Certain Lenders. If a Lender ("Affected Lender") shall have requested compensation from the Borrower under Sections 2.15, 2.17 or 2.18 to recover Taxes or other additional costs incurred by such Lender which are not being incurred generally by the other Lenders, or delivered a notice pursuant to Section 2.15(a)(iii) claiming that such Lender is unable to extend Eurodollar Loans to the Borrower for reasons not generally applicable to the other Lenders, then, in any such case, so long as no Default or Event of Default exists, the Borrower may make written demand on such Affected Lender (with a copy to the Agent) for the Affected Lender to assign, and such Affected Lender shall assign pursuant to one or more duly executed assignment and acceptance agreements in substantially the form of Exhibit I thirty (30) Business Days after the date of such demand, to one or more financial institutions that comply with the provisions of Section 10.4(c) and 10.4(d) (and that are reasonably acceptable to the Agent) which the Borrower shall have engaged for such purpose ("Replacement Lender"), all of such Affected Lender's rights and obligations under this Agreement and the other Loan Documents (including its Revolving Loan Commitment, all Revolving Loans owing to it, all of its participation interests in outstanding Letters of Credit, and its obligation to participate in additional Letters of Credit hereunder) in accordance with Section 10.4(c) and 10.4(d). Further, with respect to any such assignment, the Affected Lender shall have concurrently received, in cash, all amounts due and owing to such Affected Lender hereunder or under any other Loan Document, including the aggregate outstanding principal amount of the Revolving Loans owed to such Lender, together with accrued interest thereon through the date of such assignment from the Replacement Lender, 43 50 amounts payable under Sections 2.15, 2.17 and 2.18 with respect to such Affected Lender and compensation payable under Section 2.14; provided that upon such Affected Lender's replacement, such Affected Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17, 2.18 and 10.1 accruing with respect to such Affected Lender prior to the date such Affected Lender is replaced, as well as to any fees accrued for its account hereunder prior to being replaced and not yet paid, and shall continue to be obligated under Section 9.7. SECTION 3. LETTERS OF CREDIT. Section 3.1 Issuance of Letters of Credit, etc. (a) Subject to the terms and conditions hereof, at any time and from time to time from the Closing Date through the day prior to the Final Maturity Date, the Issuing Bank shall issue such Letters of Credit for the account of the Borrower or any Subsidiary of the Borrower which is a party to the Guaranty as Borrower may request by an L/C Application; provided that, giving effect to such Letter of Credit, (x) the sum of the L/C Obligations then outstanding plus the then outstanding aggregate principal amount of the Revolving Loans shall not exceed the Total Revolving Loan Commitment and (y) the aggregate L/C Obligations then outstanding shall not exceed the L/C Commitment. Unless all the Lenders and the Issuing Bank otherwise consent in writing, the term of any Letter of Credit shall not exceed 12 months. No Letter of Credit shall expire by its terms after the Final Maturity Date. No Letter of Credit shall be issued except in the ordinary course of business of the Borrower or any of its Subsidiaries or in connection with Permitted Acquisitions with respect to which the conditions set forth in Section 7.8(f) have been satisfied, each Letter of Credit shall be used solely (a) to support obligations of the Borrower and its Subsidiaries not prohibited hereunder, other than Indebtedness for borrowed money (except that Letters of Credit may support the obligations of the Borrower and its Subsidiaries in respect of the industrial revenue bond identified on Schedule 7.2), and (b) for the purposes described in the definition of "Trade Letter of Credit". (b) The Borrower shall submit the L/C Application for the Issuance of any Letter of Credit to the Issuing Bank at least five Business Days prior to the date when required. Upon Issuance of a Letter of Credit, the Issuing Bank shall promptly notify the Lenders of the amount and terms thereof. (c) Upon the Issuance of a Letter of Credit, each Lender that has made a Revolving Loan Commitment shall be deemed to have purchased a pro rata participation, from the Issuing Bank in an amount equal to that Lender's Pro Rata Share, in the Letter of Credit. Without limiting the scope and nature of each Lender's participation in any Letter of Credit, to the extent that the Issuing Bank has not been reimbursed by Borrower for any payment to a beneficiary of a Letter of Credit in respect of a drawing under such Letter of Credit made by the Issuing Bank under any Letter of Credit, each Lender shall, pro rata according to its Pro Rata Share, reimburse the Issuing Bank promptly upon demand for the amount of such 44 51 payment. The obligation of each Lender to so reimburse the Issuing Bank shall be absolute and unconditional and shall not be affected by the occurrence of a Default, Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of Borrower to reimburse the Issuing Bank for the amount of any payment made by the Issuing Bank under any Letter of Credit together with interest as hereinafter provided. (d) Upon the making of any payment with respect to any Letter of Credit by the Issuing Bank, Borrower shall be deemed to have submitted a Notice of Borrowing for a Revolving Loan consisting of a Base Rate Loan in the amount of such payment, and the Agent shall without notice to or the consent of Borrower cause Revolving Loans to be made by the Lenders in an aggregate amount equal to the amount paid by the Issuing Bank on that Letter of Credit, but not exceeding the Total Revolving Loan Commitment minus the then outstanding principal amount of Revolving Loans and minus all other then outstanding L/C Obligations, and for this purpose, the conditions precedent set forth in Section 4 hereof shall not apply. The proceeds of such Revolving Loans shall be paid to the Issuing Bank to reimburse it for the payment made by it under the Letter of Credit. Promptly following any Revolving Loans made under this Section 3.1(d), the Agent shall notify Borrower thereof. (e) To the extent that any Revolving Loans made pursuant to Section 3.1(d) are insufficient to reimburse the Issuing Bank in full, Borrower agrees to pay to the Issuing Bank with respect to each Letter of Credit, within one Business Day after demand therefor, a principal amount equal to any payment made by the Issuing Bank under that Letter of Credit, together with interest on such amount from the date of any payment made by the Issuing Bank through the date of payment by Borrower at the Default Rate. The principal amount of any such payment made by Borrower to the Issuing Bank shall be used to reimburse the Issuing Bank for the payment made by it under the Letter of Credit. Each Lender that has reimbursed the Issuing Bank pursuant to Section 3.1(d) for its Pro Rata Share of any payment made by the Issuing Bank under a Letter of Credit shall thereupon acquire a pro rata participation, to the extent of such reimbursement, in the claim of the Issuing Bank against Borrower under this Section 3.1(e). (f) The Issuance of any supplement, modification, amendment, renewal or extension to or of any Letter of Credit shall be treated in all respects the same as the Issuance of a new Letter of Credit. (g) Notwithstanding anything to the contrary contained in the Original Credit Agreement, as of the Closing Date, the Existing Letter of Credit shall not be deemed to be a Letter of Credit under and as defined in this Agreement. Section 3.2 Letter of Credit Fees. Borrower shall pay (i) a letter of credit fee to the Agent equal to a per annum rate equal to the then effective Applicable Margin for Eurodollar Loans times the stated amount of each Standby Letter of Credit for the term of each 45 52 such Letter of Credit for the account of the Lenders who have made Revolving Loan Commitments, according to their respective Pro Rata Shares, in each case payable quarterly in arrears on each Payment Date, commencing on March 15, 1999, and (ii) a letter of credit fee to the Agent equal to 0.50% of the stated amount of each Trade Letter of Credit as of the date of Issuance thereof, payable for the account of the Lenders who have made Revolving Loan Commitments, according to their respective Pro Rata Shares, in each case payable quarterly in arrears on each Payment Date, commencing on March 15, 1999. Upon (A) the issuance of each Letter of Credit, Borrower shall also pay to the Agent for the account of the Issuing Bank an amount equal to the greater of (i) $500 or (ii) 0.125% of the stated amount of such Letter of Credit as an issuance fee; (B) the amendment of each Letter of Credit, Borrower shall pay to the Agent for the account of the Issuing Bank the amendment fees, in each case, as the Issuing Bank normally charges in connection with a Letter of Credit and activity pursuant thereto, in either case which fees shall be solely for the account of the Issuing Bank; and (C) the incurrence of any reasonable out-of-pocket costs and expenses in connection with the maintenance of any Letter of Credit, Borrower shall pay to the Agent for the account of the Issuing Bank the amount of such out-of-pocket costs and expenses so incurred. Section 3.3 Obligation of Borrower Absolute, etc. (a) The obligation of Borrower to pay to the Issuing Bank the amount of any payment made by the Issuing Bank under any Letter of Credit shall be absolute, unconditional and irrevocable. Without limiting the foregoing, such obligation of Borrower shall not be affected by any of the following circumstances: (1) any lack of validity or enforceability of the Letter of Credit, this Agreement or any other agreement or instrument relating thereto; (2) any amendment or waiver of or any consent to departure from the Letter of Credit, this Agreement or any other agreement or instrument relating thereto; (3) the existence of any claim, setoff, defense or other rights which the Borrower or any Subsidiary of the Borrower may have at any time against the Issuing Bank, any Lender, the Agent, any beneficiary of the Letter of Credit (or any Persons for whom any such beneficiary may be acting) or any other Person, whether in connection with the Letter of Credit, this Agreement or any other agreement or instrument relating thereto, or any unrelated transactions; (4) any demand, statement or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in 46 53 any respect whatsoever so long as any such document appeared to comply with the terms of the Letter of Credit; (5) payment by the Issuing Bank in good faith under the Letter of Credit against presentation of a draft or any accompanying document which does not strictly comply with the terms of the Letter of Credit; (6) the existence, character, quality, quantity, condition, packing, value or delivery of any property purported to be represented by documents presented in connection with any Letter of Credit or for any difference between any such property and the character, quality, quantity, condition or value of such property as described in such documents; (7) the time, place, manner, order or contents of shipments or deliveries of property as described in documents presented in connection with any Letter of Credit or the existence, nature and extent of any insurance relative thereto; (8) the solvency or financial responsibility of any party issuing any documents in connection with a Letter of Credit; (9) any failure or delay in notice of shipments or arrival of any property; and (10) any other circumstances whatsoever. (b) As among the Borrower, the Lenders, the Issuing Bank and the Agent, the Borrower assumes all risks of the acts and omissions of, or misuse of such Letter of Credit by, the beneficiary of any Letter of Credit. In furtherance and not in limitation of the foregoing, subject to the provisions of the Letter of Credit applications and Letter of Credit reimbursement agreements executed by the Borrower at the time it requests any Letter of Credit, the Agent, the Issuing Bank and the Lenders shall not be responsible; (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of the Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or 47 54 the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for the failure of the beneficiary of a Letter of Credit to comply duly with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, or other similar form of teletransmission or otherwise; (v) for errors in interpretation of technical trade terms; (vi) for any loss or delay in the transmission or other wise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of a Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Agent, the Issuing Bank and the Lenders including, without limitation, any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority. None of the above shall affect, impair, or prevent the vesting of any of the Issuing Bank's rights or powers hereunder. (c) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Bank under or in connection with Letters of Credit issued by it or any related certificates shall not, in the absence of gross negligence or willful misconduct, put the Issuing Bank under any resulting liability to the Borrower or relieve the Borrower of any of its obligations hereunder to any such Person. (d) The Issuing Bank shall be entitled to the protection accorded to the Agent pursuant to Section 9, mutatis mutandis. SECTION 4. CONDITIONS PRECEDENT. Section 4.1 Conditions Precedent to Initial Revolving Loans. The obligation of each Lender to make its initial Revolving Loans and of the Issuing Bank to Issue any Letter of 48 55 Credit on the Closing Date is subject to the satisfaction on the Closing Date of the following conditions precedent: (a) Loan Documents. (i) Credit Agreement. The Borrower shall have exe- cuted and delivered this Agreement to the Agent. (ii) Revolving Notes. The Borrower shall have executed and delivered to each of the Lenders the appropriate Revolving Notes in the amount, maturity and as otherwise provided herein. (iii) Borrower Security Agreement. The Borrower shall have executed and delivered to the Agent the Borrower Security Agreement. (iv) Subsidiary Security Agreement. Each Subsidiary of the Borrower (other than any such Subsidiary which is an Immaterial Subsidiary) shall have duly executed and delivered to the Agent the Subsidiary Security Agreement. (v) Borrower Pledge Agreement. The Borrower shall have executed and delivered to the Agent the Borrower Pledge Agreement. (vi) Subsidiary Pledge Agreements. Each Subsidiary of the Borrower that owns any Equity Interest in any Person as of the Closing Date (other than an equity interest in Boston West, L.L.C. and other than in an Immaterial Subsidiary) shall have duly executed and delivered to the Agent a Subsidiary Pledge Agreement. (vii) Guaranty. Each Subsidiary of the Borrower (other than any Immaterial Subsidiary that is not a Subordinated Guarantor) shall have executed and delivered to the Agent the Guaranty. (b) Opinions of Counsel. The Agent shall have received (A) a legal opinion, dated the Closing Date, from Stradling Yocca Carlson & Rauth, counsel to the Loan Parties, substantially in the form set forth as Exhibit H-1 hereto, (B) legal opinions, dated the Closing Date, from Locke Liddell & Sapp LLP, special Texas counsel to the Loan Parties substantially in the form of Exhibit H-2 hereto, Kilpatrick Stockton LLP, special North Carolina and Georgia counsel to the Loan Parties substantially in the form of Exhibit H-3 hereto, and Burr & Forman LLP, special Alabama counsel to the Loan Parties substantially in the form of Exhibit H-4 hereto, and (C) such other legal opinions, each dated the Closing 49 56 Date, from local counsel to the Loan Parties as requested by the Agent with respect to such matters as requested by the Agent and in form and substance satisfactory to the Agent. (c) Corporate Documents. The Agent shall have received the Certificate of Incorporation, partnership agreement or other similar organizational document of each of the Loan Parties as amended, modified or supplemented to the Closing Date, (other than in the case of a general partnership) certified to be true, correct and complete by the appropriate Secretary of State as of a date not more than ten Business Days prior to the Closing Date, together with a good standing certificate from such Secretary of State and a good standing certificate from the Secretaries of State (or the equivalent thereof) of each other State in which each of them is required to be qualified to transact business, each to be dated a date not more than ten Business Days prior to the Closing Date and a bring-down good standing certificate or telephonic confirmation from the appropriate Secretary of State in each jurisdiction of incorporation of each Loan Party dated the Closing Date. (d) Certified Resolutions, etc. The Agent shall have received a certificate of the Secretary or Assistant Secretary of each of the Loan Parties or of a general partner in the case of each Loan Party which is a partnership and dated the Closing Date certifying (i) the names and true signatures of the incumbent officers of such Person authorized to sign the applicable Loan Documents, (ii) the By-Laws of such Person as in effect on the Closing Date, (iii) the resolutions of such Person's Board of Directors approving and authorizing the execution, delivery and performance of all Transaction Documents executed by such Person, and (iv) that there have been no changes in the Certificate of Incorporation of such Person since the date of the most recent certification thereof by the appropriate Secretary of State or, in the case of a partnership or other similar entity, the partnership agreement or other similar organizational document. (e) Transaction Documents. The Agent shall have received copies of the Transaction Documents (other than the Loan Documents) and any amendments, waivers or supplements thereto, certified as of the Closing Date by the President or Vice President, of the Borrower to be true, correct and complete copies of such documents, which documents shall be in form and substance satisfactory to the Agent. The Agent shall have received copies of all documents relating to existing Indebtedness for borrowed money or evidenced by a note, bond, debenture, acceptance or similar instrument of the Borrower and its Subsidiaries that shall be outstanding in each case in a principal amount in excess of $2,000,000 on and after the Closing Date, including, without limitation, terms of amortization, interest, premiums, fees, expenses, maturity, amendments, covenants, events of default and remedies, certified as of the Closing Date as such by the President or Vice President of the Borrower. (f) Process Agent. Each Loan Party shall have appointed an agent satisfactory to the Agent for service of process in connection with any action or proceeding 50 57 arising under or relating to the Loan Documents, and such agent shall have accepted such appointment in writing. (g) Officer's Certificate. The Agent and the Lenders shall have received a certificate of the President or Vice President of the Borrower, dated the Closing Date, certifying that (i) the Transaction Documents (other than the Loan Documents) are in full force and effect and no material term or condition thereof has been amended from the form thereof delivered to the Agent, or waived, except as disclosed to the Agent or its counsel prior to the execution of this Agreement, (ii) each of the Loan Parties and, to the best of his or her knowledge, the other parties to the Transaction Documents, have performed or complied in all material respects with all agreements and conditions contained in such Transaction Documents and any agreements or documents referred to therein required to be performed or complied with by each of them on or before the Closing Date and no material condition to closing by the Borrower or any of its Subsidiaries and set forth therein has been waived, (iii) subject to the foregoing, neither any Loan Party nor, to the best of his or her knowledge, any such other party is in default in the performance or compliance with any of the material terms or provisions thereof, except to the extent that performance thereof or compliance therewith or default has been waived with the prior written consent of the Lenders, (iv) all of the represen- tations and warranties of the Borrower and each other Loan Party contained in the Transaction Documents are true and correct, (v) after giving effect to the execution and delivery of the Transaction Documents by each of the Loan Parties and consummation of the Transactions thereunder, no Default or Event of Default shall have occurred and be continuing and (vi) since January 31, 1998, no event or change has occurred that has caused or evidences a Material Adverse Effect. (h) Solvency Certificate. The Agent shall have received a certificate signed by the Chief Financial Officer of the Borrower containing conclusions that the Borrower and its Subsidiaries are Solvent before and after giving effect to the Transactions. (i) Insurance. The Agent shall have received a certificate of insurance demonstrating insurance coverage in respect of each of the Loan Parties of types, in amounts, with insurers and with other terms reasonably satisfactory to the Agent. (j) Lien Search Reports. The Agent shall have received satisfactory reports of UCC, tax lien, judgment and litigation searches with respect to the Borrower and each of the other Loan Parties in each of the locations requested by the Agent. (k) UCC-1 Financing Statements. The Agent shall have received originals of each UCC-1 financing statement (i) duly executed by an Authorized Officer of the Borrower as debtor naming the Agent as secured party and filed in the jurisdictions set forth in Schedule I to the Borrower Security Agreement and (ii) duly executed by an Authorized 51 58 Officer of each other Loan Party as debtor naming the Agent as secured party and filed in the appropriate jurisdictions set forth in Schedule I to the Subsidiary Security Agreement. (l) Pro Forma Balance Sheet. The Agent shall have received a pro forma consolidated balance sheet of the Borrower and its Subsidiaries, dated as of November 2, 1998, giving effect to the Transactions and the payment or accrual of all estimated Transaction Costs, certified by the chief financial officer of the Borrower. (m) [Intentionally Deleted] (n) Pledged Collateral. The Agent shall have received (i) the original stock, membership interest or partnership interest certificates evidencing the Pledged Stock (as defined in the Borrower Pledge Agreement and each Subsidiary Pledge Agreement) pursuant to the Borrower Pledge Agreement and each Subsidiary Pledge Agreement (other than certificates representing any shares of Pledged Stock of any Immaterial Subsidiary and any shares of Pledged Stock which evidence an Immaterial Investment), together with undated stock powers or similar instruments of assignment duly executed in blank in connection therewith and (ii) each original Instrument pursuant to the Borrower Pledge Agreement and each Subsidiary Pledge Agreement (other than any Instrument evidencing an Immaterial Investment). (o) Corporate Structure. The corporate structure of the Loan Parties shall be satisfactory to the Lenders and the Agent shall have received a corporate structure chart with respect to the Borrower and all of its Subsidiaries (certified by an Authorized Officer of the Borrower). (p) Closing Compliance Certificate. The Agent shall have received a certificate of the chief financial officer of the Borrower setting forth the calculations required to establish the Leverage Ratio calculated as of the end of the fiscal quarter of the Borrower ending November 2, 1998 (the "Closing Compliance Certificate"). (q) Funded Debt and Capitalization. The Total Revolving Loan Commitment minus the aggregate principal amount of the Revolving Loans outstanding on the Closing Date after the Borrowings of the initial Revolving Loans hereunder minus the amount of any L/C Obligations then outstanding including any Letters of Credit to be issued on the Closing Date shall equal at least $100,000,000. The Agent shall have received evidence satisfactory to it that the Borrower shall have received cash proceeds from the issuance of the New Subordinated Notes, net of all brokerage commissions, underwriting fees, discounts and Transaction Costs related to the issuance of the New Subordinated Notes, in an aggregate amount not less than $95,000,000 (the "Initial Debt Issuance"), and that such net cash proceeds have been applied to the payment of outstanding obligations under the Original Credit Agreement. 52 59 (r) Existing Indebtedness. The Agent shall have received evidence satisfactory to the Agent and the Lenders that, after giving effect to the consummation of the Transactions, (i) the Borrower and its Subsidiaries shall not be liable for or have outstanding any Indebtedness which is of the type of Indebtedness which would appear as a liability on (or would be required to appear as a liability on) the consolidated balance sheet of the Borrower (and not of the type required solely to be included in the footnotes thereto) and which Indebtedness shall include, without limitation, Indebtedness for borrowed money and Capitalized Lease Obligations, other than (A) the Revolving Loans outstanding hereunder as contemplated by Section 4.1(q) and (B) Indebtedness permitted under Section 7.2 (but excluding Indebtedness described in Section 7.2(a)) (collectively, the "Surviving Debt"), the aggregate outstanding principal amount of which shall not exceed $490,000,000 as of the Closing Date, and (ii) the Borrower and each of its Subsidiaries shall have paid in full all other Indebtedness of the Borrower and each of its Subsidiaries existing prior to the making of the initial Revolving Loans hereunder (all of the foregoing Indebtedness described in the foregoing clause (i) and (ii) referred to collectively as "Existing Debt"). The Agent shall be satisfied that the execution and delivery of, and the performance by each of the Borrower and its Subsidiaries of its respective obligations under, each Transaction Document to which it is a party and consummation of the Transactions does not violate, conflict with or cause a default under any document or instrument evidencing Existing Debt, other than Existing Debt being repaid on the Closing Date. The Agent shall have received (i) payoff and lien termination and release agreements, in form and substance satisfactory to the Agent, from each creditor of the Borrower and its Subsidiaries with respect to Existing Debt other than Surviving Debt, and (ii) such Form UCC-3 (or its equivalent), intellectual property lien releases in recordable form in all applicable jurisdictions, and other lien and mortgage release and termination agreements, evidence of release of federal and state tax liens, all in form and substance satisfactory to the Agent, as the Agent shall request, duly executed by the appropriate Person in favor of which such Liens were granted. (s) Environmental Matters. The Agent shall (i) be satisfied that neither the Borrower nor any of its Subsidiaries nor any other Loan Party is subject to any present or contingent liability deemed material by the Agent in its reasonable judgment in connection with any past or present treatment, storage, recycling, disposal or release or threatened release, at any property location regardless of whether owned or operated by the Borrower or any of its Subsidiaries or any other Loan Party, of any Materials of Environmental Concern or in connection with any Environmental Law or other health or safety laws or regulations, and that their operations taken as a whole comply in all material respects (in the Agent's reason able judgment) with all Environmental Laws or other health or safety laws or regulations, (ii) be satisfied that neither the Borrower nor any of its Subsidiaries, nor any other Loan Party nor any property owned or operated by any such Person is the subject of any federal or state investigation evaluating whether any remedial action, involving a material expenditure (in the opinion of the Agent) is needed to respond to any release or other presence of Materials of Environmental Concern and (iii) have received a list of all of the properties operated, owned or 53 60 leased by the Borrower and each of its Subsidiaries as to which Phase I environmental audit reports have been completed within ten (10) years prior to the Closing Date and have received copies of those Phase I audit reports which identify, or which recommend a subsequent Phase II investigation as to, any material environmental health or safety violations, hazards or potential liabilities relating to the properties and business of the Borrower and each of its Subsidiaries, the other Loan Parties (if applicable) and each of their Environmental Affiliates of which the Borrower or any of its Subsidiaries have knowledge. (t) Funds Flow Instructions. The Agent and the Lenders shall have received detailed instructions satisfactory to them describing the funds flow in connection with the Transactions on the Closing Date. (u) Fees and Expenses. The Agent shall have received, for its account and for the account of each Lender, as applicable, all Fees and other fees and expenses due and payable hereunder and under the other Loan Documents on or before the Closing Date, including, without limitation, the reasonable fees and expenses accrued through the Closing Date, of Skadden, Arps, Slate, Meagher & Flom (Illinois) and any other counsel retained by the Agent. (v) Consents, Licenses, Approvals; Compliance with Laws. All consents, licenses, orders, permits, authorizations, validations, certificates, filings and approvals (collectively, "Consents"), if any, required in connection with the execution, delivery and performance by the Borrower or any of its Subsidiaries, and the validity and enforceability of the Transaction Documents, or in connection with any of the Transactions, including, without limitation, all shareholder Consents and all Consents required by any federal, state, local regulatory or governmental authority including, without limitation, all Consents required pursuant to the Hart-Scott-Rodino Act, shall have been obtained or made and shall be in full force and effect and copies thereof shall in each case have been delivered to the Agent. The Borrower shall have delivered to the Agent such evidence as the Agent shall have requested, evidencing compliance by the Borrower, its Subsidiaries and the other Loan Parties with all applicable laws, rules and regulations before and after giving effect to the Transactions (including, without limitation, all applicable corporate and securities laws and all ERISA, environmental and health and safety laws, rules and regulations). (w) Management Contracts. The Borrower shall deliver to the Agent and each Lender copies of each written agreement that it or any of its Subsidiaries has or contemplates entering into with its officers or other members of management as requested by the Agent certified by an officer of the Borrower, and each such contract shall be satisfactory in form and substance to the Agent. (x) Franchise Agreements. The Borrower shall deliver to the Agent copies of representative forms of Franchise Agreements, which represent the various forms of 54 61 all Franchise Agreements to which the Borrower or any of its Subsidiaries as of the Closing Date is the franchisor or licensor in each case certified by the general counsel of the Borrower. (y) No Material Adverse Change. No event, act or condition shall have occurred after January 31, 1998 that has had a Material Adverse Effect. (z) Litigation. The Agent shall have received a list of all material actions, suits, governmental investigations, arbitrations and proceedings pending against the Borrower or any of its Subsidiaries and the loss analyses with respect thereto. (aa) Additional Matters. The Agent shall have received such other certificates, opinions, documents and instruments relating to the Transactions as may have been reasonably requested by the Agent or any Lender, and all corporate and other proceedings and all other documents (including, without limitation, all documents referred to herein and not appearing as exhibits hereto) and all legal matters in connection with the Transactions shall be satisfactory in form and substance to the Lenders. Section 4.2 Conditions Precedent to All Revolving Loans. The obligation of each Lender to make any Revolving Loan (including the initial Revolving Loans made on the Closing Date) and of the Issuing Bank to issue any Letter of Credit is subject to the satisfaction on the date such Revolving Loan is made or such Letter of Credit is Issued of the following conditions precedent: (a) Representations and Warranties. The representations and warranties contained herein and in the other Loan Documents (other than representations and warranties which expressly speak only as of a different date) shall be true and correct in all material respects on such date both before and after giving effect to the making of such Revolving Loans or the Issuance of such Letter of Credit. (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date either before or after giving effect to the making of such Revolving Loans or the Issuance of such Letter of Credit. (c) No Injunction. No law or regulation shall have been adopted, no order, judgment or decree of any governmental authority shall have been issued, and no litigation shall be pending or threatened, which in the reasonable judgment of the Lenders would enjoin, prohibit or restrain, or impose or result in the imposition of any material adverse condition upon, the making or repayment of the Revolving Loans, the Issuance of such Letter of Credit or the reimbursement of any amounts with respect thereto or the consummation of the Transactions. 55 62 (d) No Material Adverse Change. No event, act or condition shall have occurred after January 31, 1998 which, in the judgment of the Required Lenders, has had or could have a Material Adverse Effect. (e) Notice of Borrowing or Issuance. The Agent or the Issuing Bank shall have received a fully executed Notice of Borrowing or L/C Application, as appropriate, in respect of the Revolving Loans to be made or Letters of Credit to be Issued, respectively, on such date. The acceptance of the proceeds of each Revolving Loan and of the Issuance of each Letter of Credit shall constitute a representation and warranty by the Borrower to the Agent and each of the Lenders that all of the conditions required to be satisfied under this Section 4 in connection with the making of such Revolving Loan or the Issuance of such Letter of Credit have been satisfied. All of the Revolving Notes, certificates, agreements, legal opinions and other documents and papers referred to in this Section 4, unless otherwise specified, shall be delivered to the Agent for the account of each of the Lenders and, except for the Revolving Notes, in sufficient counterparts for each of the Lenders, and shall be satisfactory in form and substance to the Agent and each Lender in its sole discretion. SECTION 5. REPRESENTATIONS AND WARRANTIES. In order to induce the Lenders to enter into this Agreement and to make the Revolving Loans and to induce the Issuing Bank to issue Letters of Credit, the Borrower makes the following representations and warranties, which shall survive the execution and delivery of this Agreement and the Revolving Notes and the making of the Revolving Loans and the Issuance of the Letters of Credit: Section 5.1 Corporate Status. Each Loan Party (i) is duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has the corporate or other requisite power and authority to own its property and assets and to transact the business in which it is engaged or presently proposes to engage and (iii) has duly qualified and is authorized to do business and is in good standing as a foreign corporation in every jurisdiction in which it owns or leases real property or in which the nature of its business requires it to be so qualified, except in the case of clause (iii), where the failure to so qualify, individually or in the aggregate, could not have a Material Adverse Effect. Section 5.2 Corporate Power and Authority. Each Loan Party has the corporate or other requisite power and authority to execute, deliver and carry out the terms and provisions of each of the Transaction Documents to which it is a party and has taken all necessary corporate or other requisite action to authorize the execution, delivery and performance 56 63 by it of such Transaction Documents. Each Loan Party has duly executed and delivered each such Transaction Document, and each such Transaction Document constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. Section 5.3 No Violation. Neither the execution, delivery or performance by any Loan Party of the Transaction Documents to which it is a party, nor compliance by it with the terms and provisions thereof nor the consummation of the Transactions, (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality or (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the property or assets of any Loan Party pursuant to the terms of any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Loan Party is a party or by which it or any of its property or assets is bound or to which it may be subject, or (iii) will violate any provision of the Certificate of Incorporation or By-Laws (or other relevant formation documents) of any Loan Party. Section 5.4 Litigation. There are no actions, suits, governmental investigations, arbitrations or proceedings pending or threatened (i) with respect to any of the Transactions or the Transaction Documents, (ii) except as set forth on Schedule 5.4, the Hardee's Acquisition Documents, or (iii) that could, individually or in the aggregate, result in a Material Adverse Effect. Section 5.5 Financial Statements; Financial Condition; etc. Each of the financial statements delivered pursuant to Sections 4.1(l) and 4.1(p) were prepared in accordance with GAAP consistently applied and fairly present the financial condition and the results of operations of the entities covered thereby on the dates and for the periods covered thereby, except as disclosed in the notes thereto and, with respect to interim financial statements, subject to normally recurring year-end adjustments. No Loan Party has any material liability (contingent or otherwise) not reflected in such financial statements or in the notes thereto. Section 5.6 Solvency. On the Closing Date and at all times after the Closing Date, after giving effect to the Transactions, each Loan Party is and will be Solvent. Section 5.7 Projections. The projections set forth on Schedule 5.7 have been prepared on the basis of the assumptions accompanying them, and such projections and assumptions, as of the date of preparation thereof and as of the Closing Date, are reasonable and represent the Borrower's good faith estimate of its future financial performance, it being understood that nothing contained in this Section shall constitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. 57 64 Section 5.8 Material Adverse Change. Since January 31, 1998, there has occurred no event, act, condition or liability which has had, or could have, a Material Adverse Effect. Section 5.9 Use of Proceeds; Margin Regulations. All proceeds of each Revolving Loan, and each Letter of Credit, will be used by the Borrower only in accordance with the provisions of Section 2.19. No part of the proceeds of any Revolving Loan, or any Letter of Credit, will be used by the Borrower to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Revolving Loan, nor the Issuance of any Letter of Credit, nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulations T, U or X of the Federal Reserve Board. Following the application of the proceeds of each Revolving Loan, less than 25% of the value (as determined by any reasonable method) of the assets of the Borrower and its Subsidiaries (on a consolidated and an unconsolidated basis) have been and will continue to be, represented by Margin Stock. Section 5.10 Governmental and Other Approvals. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, or any other Person, is required to authorize, or is required in connection with (i) the execution, delivery and performance of any Transaction Document or the consummation of any of the Transactions or (ii) the legality, validity, binding effect or enforceability of any Transaction Document or the exercise by the Agent or any Lender of any of its rights under any Loan Document, except those listed on Schedule 5.10 that have already been duly made or obtained and remain in full force and effect and except for the filing of financing statements pursuant to the Security Documents. All applicable waiting periods including, without limitation, those under the Hart-Scott-Rodino Act in connection with each Permitted Acquisition and the other transactions contemplated thereby have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them. Section 5.11 Security Interests and Liens. The Security Documents create, as security for the Obligations, valid and enforceable security interests in and Liens on all of the Collateral, in favor of the Agent for the ratable benefit of the Lenders, and subject to no other Liens (other than Liens expressly permitted by Section 7.3 hereof). Upon the satisfaction of the conditions precedent described in Sections 4.1(k) and 4.1(n), such security interests in and Liens on the Collateral shall be superior to and prior to the rights of all third parties (except as disclosed on Schedule 5.11), and no further recordings or filings are or will be required in connection with the creation, perfection or enforcement of such security interests and Liens, other than the filing of continuation statements in accordance with applicable law. 58 65 Section 5.12 Tax Returns and Payments. Each Loan Party has filed all tax returns required to be filed by it and has paid all taxes and assessments payable by it which have become due, other than (i) those not yet delinquent or those that are reserved against in accordance with GAAP which are being diligently contested in good faith by appropriate proceedings or (ii) where the failure to so pay has not resulted and could not reasonably be expected to result in liability in excess of $1,000,000 in the aggregate for all of the Loan Parties. Section 5.13 ERISA. Neither the Borrower nor any of its Subsidiaries have any Plans other than those listed on Schedule 5.13. No accumulated funding deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) or Reportable Event has occurred with respect to any Plan. There are no Unfunded Benefit Liabilities under any Plan. The Borrower and each member of its ERISA Controlled Group have complied with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and is not in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan. The aggregate potential total withdrawal liability, and the aggregate potential annual withdrawal liability payments of the Borrower and the members of its ERISA Controlled Group as determined in accordance with Title IV of ERISA as if the Borrower and the members of its ERISA Controlled Group had completely withdrawn from all Multiemployer Plans is not greater than $2,000,000. To the best knowledge of the Borrower and each member of its ERISA Controlled Group, no Multiemployer Plan is or is likely to be in reorganization (as defined in Section 4241 of ERISA or Section 418 of the Code) or is insolvent (as defined in Section 4245 of ERISA). No material liability to the PBGC (other than required premium payments), the Internal Revenue Service, any Plan or any trust established under Title IV of ERISA has been, or is expected by the Borrower or any member of its ERISA Controlled Group to be, incurred by the Borrower or any member of its ERISA Controlled Group. Neither the Borrower nor any member of its ERISA Controlled Group has any contingent liability with respect to any post-retirement benefit under any "welfare plan" (as defined in Section 3(1) of ERISA), other than liability for continuation coverage under Part 6 of Title I of ERISA and other than contingent liabilities under Hardee's Retiree Medical Insurance Plan, and the aggregate present value of all post-retirement benefit liabilities of the Borrower and its Subsidiaries under Hardee's Retiree Medical Insurance Plan as of the Closing Date does not exceed $4,800,000. No lien under Section 412(n) of the Code or 302(f) of ERISA or requirement to provide security under Section 401(a)(29) of the Code or Section 307 of ERISA has been or is reasonably expected by the Borrower or any member of its ERISA Controlled Group to be imposed on the assets of the Borrower or any member of its ERISA Controlled Group. Section 5.14 Investment Company Act; Public Utility Holding Company Act. No Loan Party is (x) an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, (y) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of 59 66 either a "holding company" or a "subsidiary company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (z) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money. Section 5.15 Closing Date Transactions. On the Closing Date and immediately prior to the making of the initial Revolving Loans hereunder, the Transactions (other than the making of the Revolving Loans) intended to be consummated on the Closing Date will have been consummated in accordance with the terms of the relevant Transaction Documents and in accordance with all applicable laws. All consents and approvals of, and filings and registrations with, and all other actions by, any Person required in order to make or consum- mate such Transactions have been obtained, given, filed or taken and are or will be in full force and effect. Section 5.16 Representations and Warranties in Transaction Documents. All representations and warranties made by any Loan Party in the Transaction Documents (other than the Loan Documents), and, to the best of the Borrower's knowledge, all representations made by each other Person in such Transaction Documents, are true and correct in all material respects. None of such representations and warranties is inconsistent in any material respect with the representations and warranties of any Loan Party made herein or in any other Loan Document. Section 5.17 True and Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of any Loan Party in writing to the Agent or any Lender on or prior to the Closing Date, for purposes of or in connection with this Agreement or any of the Transactions is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of any Loan Party in writing to the Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is dated or furnished and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time. As of the Closing Date, there are no facts, events or conditions known to any Loan Party which, individually or in the aggregate, have or could be expected to have a Material Adverse Effect. Section 5.18 Corporate Structure; Capitalization. Schedule 5.18 hereto sets forth as of the Closing Date, the jurisdiction of incorporation or organization of the Borrower, each of its Subsidiaries, each other Loan Party and each Subsidiary of such Loan Party, the number of authorized and issued shares of capital stock or other outstanding equity interests of the Borrower and each of its Subsidiaries and of each other Loan Party and each Subsidiary of such Loan Party, the par value thereof and (other than with respect to the Borrower) the registered owner(s) thereof. All of such stock has been duly and validly issued and is fully paid and non-assessable and (except for the stock of the Borrower) is, together with all such other equity interests, owned by such Loan Party free and clear of all Liens. Except for the Convertible Subordinated Notes or as disclosed in Schedule 5.18, neither any Loan Party nor 60 67 any such Subsidiary has outstanding any securities convertible into or exchangeable for its capital stock nor does any Loan Party or any such Subsidiary have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, warrants or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. Section 5.19 Environmental Matters. (a) (i) Each of the Loan Parties and their Environmental Affiliates are in compliance with all applicable Environmental Laws except where noncompliance, individually or in the aggregate, could not have a Material Adverse Effect, (ii) each of the Loan Parties and their Environmental Affiliates have all Environmental Approvals required to operate their businesses as presently conducted or as reasonably anticipated to be conducted except where the failure to obtain any such Environmental Approval, individually or in the aggregate, could not have a Material Adverse Effect, (iii) none of the Loan Parties nor any of their Environmental Affiliates has received any communication (written or oral), whether from a governmental authority, citizens group, employee or otherwise, that alleges that such Loan Party or Environmental Affiliate is not in full compliance with all Environmental Laws and where such noncompliance, individually or in the aggregate, could have a Material Adverse Effect, and (iv) to the Borrower's best knowledge after due inquiry, there are no circumstances that may prevent or interfere with such full compliance in the future except where such noncompliance, individually or in the aggregate, could not have a Material Adverse Effect. (b) There is no Environmental Claim pending or threatened against any Loan Party or its Environmental Affiliate, which, individually or in the aggregate, could have a Material Adverse Effect. (c) There are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge or disposal of any Material of Environmental Concern, that could form the basis of any Environmental Claims against any of the Loan Parties or any of their Environmental Affiliates, which Environmental Claims, individually or in the aggregate, could have a Material Adverse Effect. (d) Schedule 5.19 sets forth a list of all of the properties operated, owned or leased by the Borrower and each of its Subsidiaries as to which Phase I environmental audit reports have been completed as of the Closing Date and the Borrower has delivered copies of those Phase I audit reports which identify, or which recommend a subsequent Phase II investigation as to, any material environmental, health or safety violations, hazards or potential liabilities relating to the properties and business of the Borrower, each of its Subsidiaries, the other Loan Parties (if applicable) and each of their Environmental Affiliates of which the Borrower or any of its Subsidiaries have knowledge. 61 68 (e) The Borrower has caused to be completed Phase I audit reports with respect to each property owned, operated or leased by the Borrower or any of its Subsidiaries, upon which a business or operation other than a Restaurant has been conducted at any time during the six (6) years immediately preceding the Closing Date and with respect to which a Phase I audit report had not been completed in the eleven (11) year period immediately preceding the Closing Date. The Borrower has delivered all such Phase I audit reports to the Agent which were obtained pursuant to the preceding sentence which identified, or which recommended a subsequent Phase II investigation as to, any material environmental, health or safety violations, hazards or potential liabilities relating to the properties and business of any Loan Party or any of their Environmental Affiliates. Section 5.20 Intellectual Property. Each of the Loan Parties owns or has the valid right to use all patents, trademarks, service marks, trade names, copyrights, trade secrets and other intangible rights, free and clear of all Liens, which are used in or necessary for the operation of its business, and Schedule V to the Borrower Security Agreement and Schedule V to the Subsidiary Security Agreement together set forth a complete and accurate list thereof with respect to each Loan Party as of the Closing Date, including all applications and registrations thereof and all license agreements to or from third parties relating thereto (the "Intellectual Property"). Each Loan Party is the record owner of all registrations and applications which it owns and all registrations for Intellectual Property are valid and enforceable. To the best of each Loan Party's knowledge, no service, product, process, method, substance, part or other material presently offered, sold or employed by any Loan Party infringes upon or dilutes any patent, trademark, service mark, trade name, copyright, license or other right of any other Person, and no such claims have been made by any other Person against any Loan Party. There is no pending or, to the best of each Loan Party's knowledge, threatened claim or litigation against or affecting any Loan Party contesting its rights to own or use any Intellectual Property or the validity or enforceability thereof. Section 5.21 Ownership of Property; Restaurants. Schedule 5.21 sets forth all the real property owned or leased by the Loan Parties as of the Closing Date and identifies the street address, the current owner (and current record owner, if different) and whether such property is leased or owned. The Loan Parties have good and marketable fee simple title to or valid leasehold interests in all of such real property and good title to all of their personal property subject to no Lien of any kind except Liens permitted hereby. Schedule 5.21 also sets forth a list of each Restaurant and the street address thereof which is owned or operated as of the Closing Date by any Loan Party or any of its Subsidiaries. The Loan Parties enjoy peaceful and undisturbed possession under all of their respective leases. Section 5.22 No Default. No Loan Party is in default under or with respect to any Transaction Document or any other agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound in any respect which could result in a Material Adverse Effect. No Default or Event of Default exists. 62 69 Section 5.23 Licenses, etc. The Loan Parties have obtained and hold in full force and effect, all franchises, licenses, permits, certificates, authorizations, qualifications, accreditations, easements, rights of way and other rights, consents and approvals which are necessary for the operation of their respective businesses as presently conducted. Section 5.24 Compliance with Law. Each Loan Party is in compliance with all laws, rules, regulations, orders, judgments, writs and decrees except where such non-compliance, individually or in the aggregate, could not have a Material Adverse Effect. Section 5.25 No Burdensome Restrictions. No Loan Party is a party to any agreement or instrument or subject to any other obligation or any charter or corporate restriction or any provision of any applicable law, rule or regulation which, individually or in the aggregate, could have a Material Adverse Effect. Section 5.26 Brokers' Fees. Except as set forth on Schedule 5.26, none of the Loan Parties has any obligation to any Person in respect of any finder's, brokers, investment banking or other similar fee in connection with any of the Transactions. Section 5.27 Labor Matters. Except as set forth on Schedule 5.27, there are no collective bargaining agreements or Multiemployer Plans covering the employees of the Borrower, any of its Subsidiaries or any of the other Loan Parties, and none of such Persons has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years. No proceedings are pending against the Borrower or any of its Subsidiaries before the INS which could reasonably be expected to have a Material Adverse Effect. Section 5.28 Indebtedness of the Borrower and Its Subsidiaries and Permitted Redemptions. Set forth on Schedule 5.28 hereto is a complete and accurate list of all Indebtedness of the Borrower and each of its Subsidiaries existing as of the Closing Date (other than Surviving Debt), showing the principal amount outstanding thereunder as of the Closing Date. As of the Closing Date, the Borrower and its Subsidiaries have redeemed or repurchased Convertible Subordinated Notes for an aggregate purchase price of $31,179,980, and the par value of all Convertible Subordinated Notes so redeemed or repurchased is $38,000,000 as of the Closing Date. Section 5.29 Other Agreements. Schedule 5.29 sets forth a complete and accurate list as of the Closing Date of (i) all joint venture and partnership agreements to which the Borrower or any of its Subsidiaries is a party, and (ii) all covenants not to compete restricting the Borrower or any of its Subsidiaries to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries is bound. 63 70 Section 5.30 Immaterial Subsidiaries. The Subsidiaries of the Borrower designated as Immaterial Subsidiaries on the Closing Date are set forth on Schedule 5.30. The assets of each Subsidiary of the Borrower designated as an Immaterial Subsidiary by the Borrower do not exceed $1,500,000 and the assets of all of the Subsidiaries of the Borrower designated as Immaterial Subsidiaries by the Borrower do not in the aggregate exceed $10,000,000, in each case as determined in accordance with GAAP. Section 5.31 Franchise Agreements and Franchisees. None of the Franchise Agreements to which the Borrower or any of its Subsidiaries is a party as a franchisor or a licensor prohibit or restrict in any manner the assignment of such Franchise Agreement to the Agent for the benefit of the Secured Parties or require any consent of any Person in connection with any such assignment. Schedule 5.31 sets forth a complete and accurate list of each Person who is a franchisee or licensee of the Borrower or any of its Subsidiaries as of the Closing Date. SECTION 6. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that until all of the Revolving Loan Commitments of each of the Lenders have terminated, each of the Letters of Credit has expired or been terminated, and the Obligations are paid in full: Section 6.1 Information Covenants. The Borrower will furnish to the Agent, with sufficient copies for each Lender: (a) Quarterly Financial Statements. Within 45 days after the close of each of the first three (3) quarterly accounting periods in each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarterly period and the related consolidated statements of income and cash flow for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and in each case setting forth comparative figures for the related periods in the prior fiscal year. (b) Annual Financial Statements. Within 90 days after the close of each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and cash flow for such fiscal year, setting forth comparative figures for the preceding fiscal year and, with respect to such consolidated financial statements, certified without qualification by KPMG LLP or other independent certified public accountants of recognized national standing reasonably acceptable to the Agent and the Required Lenders and indicating that its audit of the consolidated financial statements of the Borrower was conducted in accordance with generally accepted auditing standards. 64 71 (c) Management Letters. Promptly after the Borrower's receipt thereof, a copy of any "management letter" or other material report received by the Borrower from its certified public accountants. (d) Budgets. Within 60 days after the first day of each fiscal year of the Borrower, a budget and financial forecast of results of operations and sources and uses of cash (in form reasonably satisfactory to the Agent) prepared by the Borrower for such fiscal year, accompanied by a written statement of the assumptions used in connection therewith, together with a certificate of the chief financial officer of the Borrower to the effect that such budget and financial forecast and, to the best of his knowledge, assumptions, are reasonable and represent the Borrower's good faith estimate of its future financial requirements and performance. The financial statements required to be delivered pursuant to clauses (a) and (b) above shall be accompanied by a comparison of the actual financial results set forth in such financial statements to those contained in the forecasts delivered pursuant to this clause (d) together with an explanation of any material variations from the results anticipated in such forecasts. (e) Officer's Certificates. At the time of the delivery of the financial statements under clauses (a) and (b) above, a certificate of the chief financial officer of the Borrower which certifies (x) that such financial statements fairly present the financial condition and the results of operations of the Borrower and its Subsidiaries on the dates and for the periods indicated, subject, in the case of interim financial statements, to normally recurring year-end adjustments, and that such financial statements were prepared in accordance with GAAP and (y) that such officer has reviewed the terms of the Loan Documents and has made, or caused to be made under his or her supervision, a review in reasonable detail of the business and condition of the Borrower and its Subsidiaries during the accounting period covered by such financial statements, and that as a result of such review such officer has concluded that no Default or Event of Default has occurred during the period commencing at the beginning of the accounting period covered by the financial statements accompanied by such certificate and ending on the date of such certificate or, if any Default or Event of Default has occurred, specifying the nature and extent thereof and, if continuing, the action the Borrower proposes to take in respect thereof (the "Compliance Certificate"). Such certificate shall set forth the calculations required to establish whether the Borrower was in compliance with the provisions of Sections 6.11, 6.12, 7.1, 7.2, 7.3, 7.7, 7.8 and 7.18 during and as at the end of the accounting period covered by the financial statements accompanied by such certificate. (f) Notice of Default. Promptly and in any event within one Business Day after any Loan Party obtains knowledge thereof, notice (i) of the occurrence of any Default or Event of Default together with a certificate of an Authorized Officer of the Borrower specifying the nature and period of existence thereof and the Borrower's proposed response thereto, (ii) that any holder of Indebtedness of the Borrower or any Subsidiary of the Borrower having an outstanding principal balance exceeding $5,000,000 has given any written notice to the Borrower or any Subsidiary of the Borrower or taken any other action with 65 72 respect to a claimed default or event or condition of the type referred to in Section 8.1(d) specifying (A) the nature and period of existence of any such claimed default, condition or event, (B) the notice given or action taken by such Person in connection therewith, and (C) the Borrower's proposed response thereto and (iii) of the occurrence of any default or event of default under any Subordinated Debt Document specifying (A) the nature and period of existence of any such default, condition or event, (B) any notice given or action taken by any holder or trustee thereunder in connection therewith, and (C) the Borrower's proposed response thereto. (g) Notice of Litigation. Promptly after (i) the occurrence thereof, notice of the institution of, or any material development in, any action, suit, litigation, proceeding, investigation or arbitration, before any court or arbitrator or any governmental or administrative body, agency or official, against the Borrower, any of its Subsidiaries or any material property of any thereof which, individually or in the aggregate, could have a Material Adverse Effect, or (ii) actual knowledge thereof, notice of the threat of any such action, suit, proceeding, investigation or arbitration. (h) ERISA. (i) As soon as possible and in any event within 10 days after the Borrower or any member of its ERISA Controlled Group knows, or has reason to know, that: (A) any Termination Event with respect to a Plan has occurred or will occur, or (B) any condition exists with respect to a Plan which presents a material risk of termination of the Plan or imposition of an excise tax or other liability on the Borrower or any member of its ERISA Controlled Group, or (C) the Borrower or any member of its ERISA Controlled Group has applied for a waiver of the minimum funding standard under Section 412 of the Code or Section 302 of ERISA, or (D) the Borrower or any member of its ERISA Controlled Group has engaged in a "prohibited transaction," as defined in Section 4975 of the Code or as de- scribed in Section 406 of ERISA, that is not exempt under Sec- tion 4975 of the Code and Section 408 of ERISA, or 66 73 (E) the aggregate present value of the Unfunded Benefit Liabilities under all Plans has in any year increased by $500,000 or to an amount in excess of $2,000,000, or (F) any condition exists with respect to a Multiemployer Plan which presents a material risk of a partial or complete withdrawal (as described in Section 4203 or 4205 of ERISA) by the Borrower or any member of its ERISA Controlled Group from a Multiemployer Plan, or (G) the Borrower or any member of its ERISA Controlled Group is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan, or (H) a Multiemployer Plan is in "reorganization" (as defined in Section 418 of the Code or Sec- tion 4241 of ERISA) or is "insolvent" (as defined in Section 4245 of ERISA), or (I) the potential withdrawal liability (as determined in accordance with Title IV of ERISA) of the Borrower and the members of its ERISA Controlled Group with respect to all Multiemployer Plans has in any year increased by $500,000 or to an amount in excess of $2,000,000, or (J) there is an action brought against the Borrower or any member of its ERISA Controlled Group under Section 502 of ERISA with respect to its failure to comply with Section 515 of ERISA, a certificate of the president or chief financial officer of the Borrower setting forth the details of each of the events described in clauses (A) through (J) above as applicable and the action which the Borrower or the applicable member of its ERISA Controlled Group proposes to take with respect thereto, together with a copy of any notice or filing from the PBGC or which may be required by the PBGC or other agency of the United States government with respect to each of the events described in clauses (A) through (J) above, as applicable. (ii) As soon as possible and in any event within two Business Days after the receipt by the Borrower or any member of its ERISA Controlled Group of a demand letter 67 74 from the PBGC notifying the Borrower or such member of its ERISA Controlled Group of its final decision finding liability and the date by which such liability must be paid, a copy of such letter, together with a certificate of the president or chief financial officer of the Borrower setting forth the action which the Borrower or such member of its ERISA Controlled Group proposes to take with respect thereto. (i) SEC Filings. Promptly upon transmission thereof, copies of all regular and periodic financial information, proxy materials and other information, regular, periodic and special reports and registration statements, if any, which any Loan Party shall file with the Securities and Exchange Commission or any governmental agencies substituted therefore or which any Loan Party shall send to its stockholders. (j) Environmental. Promptly and in any event within two Business Days after the existence of any of the following conditions, a certificate of an Authorized Officer of the Borrower specifying in detail the nature of such condition and the applicable Loan Party's or Environmental Affiliate's proposed response thereto: (i) the receipt by any Loan Party or any of its Environmental Affiliates of any communication (written or oral), whether from a governmental authority, citizens group, employee or otherwise, that alleges that such Loan Party or Environmental Affiliate is not in compliance with applicable Environmental Laws and such noncompliance, individually or in the aggregate, could have a Material Adverse Effect, (ii) any Loan Party or any of its Environmental Affiliates shall obtain actual knowledge that there exists any Environmental Claim pending or threatened against such Loan Party or such Environmental Affiliate, which, individually or in the aggregate, could have a Material Adverse Effect, or (iii) any release, emission, discharge or disposal of any Material of Environmental Concern that could form the basis of any Environmental Claim against any Loan Party or any of their Environmental Affiliates, which Environmental Claim, individually or in the aggregate could have a Material Adverse Effect. (k) Creditor Reports. Promptly after the furnishing thereof, copies of any statement or report furnished to any other holder of the securities of any Loan Party or of any of its Subsidiaries pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lenders pursuant to any other clause of this Section 6.1. (l) Other Information. From time to time, such other information or documents (financial or otherwise) as any Lender may reasonably request. Section 6.2 Books, Records and Inspections. The Borrower shall, and shall cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law shall be made of all 68 75 dealings and transactions in relation to its business and activities. The Borrower shall, and shall cause each of its Subsidiaries to, permit officers and designated representatives of any Lender to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, and to examine the books of record and account of the Borrower or any of its Subsidiaries, and discuss the affairs, finances and accounts of the Borrower or any of its Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants, all upon reasonable notice and at such reasonable times as such Lender may desire; provided that no such prior notice shall be required if an Event of Default has occurred and is continuing. Section 6.3 Maintenance of Insurance. The Borrower shall, and shall cause each of its Subsidiaries to, (a) maintain with financially sound and reputable insurance companies insurance on itself and its properties in at least such amounts and against at least such risks as are customarily insured against in the same general area by companies engaged in the same or a similar business similarly situated, which insurance shall in any event not provide for materially less coverage than the insurance in effect on the Closing Date and (b) furnish to each Lender from time to time, upon written request, the policies under which such insurance is issued, certificates of insurance and such other information relating to such insurance as such Lender may request. Section 6.4 Taxes. (a) The Borrower shall pay or cause to be paid, and shall cause each of its Subsidiaries to pay or cause to be paid, when due, all taxes, charges and assessments and all other lawful claims required to be paid by the Borrower or such Subsidiaries, except as contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves have been established with respect thereto in accordance with GAAP. (b) The Borrower shall not, and shall not permit any of its Subsidiaries to, file or consent to the filing of any consolidated tax return with any Person (other than the Borrower and its Subsidiaries). Section 6.5 Corporate Franchises. Except as permitted by Section 7.4 below, the Borrower shall, and shall cause each of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its patents, trademarks, servicemarks, tradenames, copyrights, franchises, licenses, permits, certificates, authorizations, qualifications, accreditations, easements, rights of way and other rights, consents and approvals except where the failure to so preserve any of the foregoing (other than existence) could not, individually or in the aggregate, result in a Material Adverse Effect. Section 6.6 Compliance with Law. The Borrower shall, and shall cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, statutes, regulations, decrees and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of their business and the ownership of their property, including, without limitation, ERISA and all Environmental Laws. 69 76 Section 6.7 Performance of Obligations. The Borrower shall, and shall cause each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, indenture, security agreement, debt instrument, lease, undertaking and contract by which it or any of its properties is bound or to which it is a party, except where the failure to perform such obligations individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. Section 6.8 Maintenance of Properties. The Borrower shall, and shall cause each of its Subsidiaries to, ensure that its respective properties useful in its respective business are kept in good repair, working order and condition, normal wear and tear excepted. Section 6.9 Compliance with Terms of Leaseholds. The Borrower shall and shall cause each of its Subsidiaries to (a) make all payments and otherwise perform all obligations in respect of all leases of the Borrower and each of its Subsidiaries of real property, (b) keep all such leases that are useful or material in the conduct of the business of the Borrower and its Subsidiaries (such useful or material leases are hereinafter referred to as the "Material Leases") in full force and effect, (c) not allow such Material Leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, and (d) notify the Agent of any default by any party with respect to such Material Leases and cooperate with the Agent in all respects to cure any such default. Section 6.10 Compliance with Environmental Laws. The Borrower shall, and shall cause each of its Subsidiaries and all lessees and other Persons occupying its properties to (a) comply in all material respects, with all Environmental Laws and Environmental Approvals applicable to its respective operations and properties; (b) obtain and renew all Environmental Approvals necessary for its respective operations and properties; and (c) conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Materials of Environmental Concern from any of its respective properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances, unless the Borrower or any of its Subsidiaries is subject to an order issued by any governmental authority requiring the Borrower or such Subsidiary to undertake any such cleanup, removal, remedial or other action, in which case this proviso shall not apply. Section 6.11 Subsidiary Guarantors. The Borrower shall cause each of its Subsidiaries now or hereafter existing, formed or acquired (other than any Immaterial Subsidiaries) to at all times be and remain a party to the Guaranty, the Subsidiary Security Agreement and, if any such Subsidiary owns any Equity Interests in any Person (other than in Boston West, L.L.C. and other than in an Immaterial Subsidiary), a Subsidiary Pledge 70 77 Agreement. The Borrower shall cause each of its Immaterial Subsidiaries which is a Subordinated Guarantor to at all times be and remain a party to the Guaranty so long as each such Immaterial Subsidiary is a Subordinated Guarantor. The Borrower shall cause to be delivered to the Agent a legal opinion in form and substance reasonably satisfactory to the Agent with respect to any Subsidiary entering into the Guaranty after the Closing Date. Section 6.12 Immaterial Subsidiaries. If (i) the assets of any Subsidiary of the Borrower then designated as an Immaterial Subsidiary shall at any time exceed $1,500,000, then the Borrower shall immediately provide notice to the Agent thereof, and such Subsidiary shall immediately be deemed automatically to no longer be an Immaterial Subsidiary or (ii) the aggregate amount of assets of all Subsidiaries of the Borrower so designated as Immaterial Subsidiaries shall at any time exceed $10,000,000, then the Borrower shall immediately provide notice to the Agent thereof and notice of which of such previously designated Immaterial Subsidiaries shall no longer be deemed to be Immaterial Subsidiaries so that the aggregate amount of assets of all such Subsidiaries so designated as Immaterial Subsidiaries does not exceed $10,000,000; provided that the Borrower may from time to time designate additional Subsidiaries of the Borrower as Immaterial Subsidiaries so long as the assets of any such Subsidiary do not exceed $1,500,000 and so long as the aggregate amount of assets of all such Subsidiaries so designated as Immaterial Subsidiaries does not exceed $10,000,000 (in each case as determined in accordance with GAAP). At such time as any Subsidiary that was an Immaterial Subsidiary is no longer an Immaterial Subsidiary, the Borrower shall thereafter comply with the terms of this Agreement with respect to such Subsidiary relating to or affecting Subsidiaries that are not Immaterial Subsidiaries (in addition to those terms relating to or affecting the Borrower's Subsidiaries generally), including, without limitation, the requirements of Section 6.11 and Section 2.20. Section 6.13 [Intentionally Omitted]. Section 6.14 Year 2000. The Borrower will use its reasonable best efforts to insure that any computer systems and/or software used in the operation of the Borrower's or any of its Subsidiaries' businesses is modified or replaced to the extent necessary to prevent or avoid any Material Adverse Effect as a result of the commencement of the year "2000." SECTION 7. NEGATIVE COVENANTS. The Borrower covenants and agrees that until all of the Revolving Loan Commitments of each Lender have terminated, each of the Letters of Credit has expired or been terminated, and the Obligations are paid in full: 71 78 Section 7.1 Financial Covenants. (a) Leverage Ratio. The Borrower shall not permit the Leverage Ratio at any time during each of the fiscal quarters of the Borrower ending during each of the periods listed below to exceed the ratio set forth opposite such period: Period Ratio ------ ----- Closing Date through Jan. 31, 2000 3.00 to 1.00 Feb. 1, 2000 through Jan. 29, 2001 2.75 to 1.00 Each fiscal year of the Borrower thereafter 2.50 to 1.00 (b) Interest Coverage Ratio. The Borrower shall not permit the ratio of Adjusted Consolidated EBITDA of the Borrower to the sum of (i) Consolidated Interest Expense of the Borrower plus (ii) one-third (1/3) multiplied by the aggregate rent expense of the Borrower and its Subsidiaries attributable to Sale and Leaseback Transactions determined in accordance with GAAP on a consolidated basis for each period of four consecutive fiscal quarters of the Borrower (taken as one accounting period) as determined on the last day of each fiscal quarter of the Borrower ending during each period set forth below, to be less than the ratio set forth opposite such period: Period Ratio ------ ----- Closing Date through Jan. 31, 2000 4.50 to 1.00 Each fiscal year of the Borrower thereafter 5.00 to 1.00 (c) Fixed Charge Coverage Ratio. The Borrower shall not permit the ratio of (i) Adjusted Consolidated EBITDA of the Borrower plus, to the extent deducted in the calculation of Consolidated Net Income of the Borrower and its Subsidiaries for such period, all rent expense determined in accordance with GAAP for such period attributable to Sale and Leaseback Transactions, all determined on a consolidated basis for the Borrower and its Subsidiaries for such period, to (ii) Fixed Charges of the Borrower for the period of four consecutive fiscal quarters of the Borrower (taken as one accounting period) as determined on the last day of each fiscal quarter of the Borrower to be less than 1.75 to 1.00. (d) Minimum Consolidated EBITDA. The Borrower shall not permit Adjusted Consolidated EBITDA of the Borrower for the period of four consecutive fiscal quarters of the Borrower (taken as one accounting period) as determined on the last day of each fiscal quarter of the Borrower ending during each period set forth below to be less than the amount set forth opposite such period: Period Amount ------ ------ Closing Date through Jan. 31, 2000 $220,000,000 Feb. 1, 2000 through Jan. 29, 2001 $240,000,000 Each fiscal year of the Borrower thereafter $260,000,000 72 79 (e) Adjusted Leverage Ratio. The Borrower shall not permit the Adjusted Leverage Ratio to exceed at any time during each fiscal quarter of the Borrower ending during any period listed below, the ratio set forth opposite such period: Period Ratio ------ ----- Closing Date through Jan. 31, 2000 4.25 to 1.00 Feb. 1, 2000 through Jan. 29, 2001 4.00 to 1.00 Each fiscal year of the Borrower thereafter 3.75 to 1.00 (f) Capital Expenditures. The Borrower shall not make or incur and shall not permit any of its Subsidiaries to make or incur any Capital Expenditures, except Capital Expenditures of the Borrower and its Subsidiaries in an aggregate amount not in excess of $325,000,000 in each fiscal year of the Borrower; provided that in the event that the Leverage Ratio exceeds 2.75 to 1.00 at any time during such fiscal year then (A) if the aggregate amount of Capital Expenditures made or incurred by the Borrower and its Subsidiaries exceeds $200,000,000 with respect to such fiscal year as of the first date the Leverage Ratio exceeds 2.75 to 1.00 during such fiscal year, the Borrower shall not make, incur or commit to be made or incurred, or permit any of its Subsidiaries to make, incur or commit to be made or incurred any additional Capital Expenditures during the remainder of such fiscal year (other than additional Capital Expenditures made or incurred pursuant to contractual commitments to make or incur such Capital Expenditures in such fiscal year entered into by the Borrower or any of its Subsidiaries prior to the first date that the Leverage Ratio exceeds 2.75 to 1.00); and (B) if the aggregate amount of Capital Expenditures made or incurred by the Borrower and its Subsidiaries does not exceed $200,000,000 as of the first date the Leverage Ratio exceeds 2.75 to 1.00 during such fiscal year, the Borrower shall not make, incur or commit to be made or incurred and shall not permit any of its Subsidiaries to make, incur or commit to be made or incurred any Capital Expenditures with respect to such fiscal year in an aggregate amount in excess of $200,000,000 in such fiscal year (other than additional Capital Expenditures made or incurred pursuant to contractual commitments to make or incur such Capital Expenditures in such fiscal year entered into by the Borrower or any of its Subsidiaries prior to the first date that the Leverage Ratio exceeds 2.75 to 1.00); and provided further that if the aggregate amount of Capital Expenditures made or incurred during such fiscal year of the Borrower is less than the amount (as reduced, if applicable) permitted to be made or incurred pursuant to this clause (f), then the maximum amount for the following fiscal year of the Borrower (but not any subsequent fiscal year of the Borrower) shall be increased by the amount of such difference. 73 80 (g) Consolidated Tangible Net Worth. The Borrower shall not permit its Consolidated Tangible Net Worth at any time to be less than the sum of (i) $250,000,000, plus (ii) 50% of cumulative Consolidated Net Income of the Borrower and its Subsidiaries for all fiscal quarters of the Borrower ended after January 31, 1999 in which Consolidated Net Income is positive (and without any deduction for any fiscal quarter in which Consolidated Net Income is negative), plus (iii) 100% of the Net Equity Proceeds of any equity offering by the Borrower. Section 7.2 Indebtedness. The Borrower shall not, and shall not permit any of its Subsidiaries to, create, incur, assume, suffer to exist or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness other than the following provided that none of the creation, incurrence, assumption or existence of any of the following result in or cause a violation or breach of, or default under, any Subordinated Debt Document: (a) Indebtedness hereunder and under the other Loan Documents; (b) Indebtedness outstanding on the Closing Date and set forth on Schedule 7.2 hereto (without duplication of any other Indebtedness permitted by the other provisions of this Section 7.2); (c) Indebtedness permitted under Sections 7.6(a), 7.6(b), 7.6(d) and 7.6(e); (d) Indebtedness of the Borrower of the type described in clause (vii) of the definition of Indebtedness to the extent permitted under Section 7.14; (e) Indebtedness with respect to (i) purchase money Indebtedness incurred solely to finance Capital Expenditures permitted under Section 7.1(f) and any extensions, renewals, refundings or refinancings thereof, not in excess of $5,000,000 in the aggregate at any one time outstanding for all such purchase money Indebtedness and all extensions, renewals, refundings and refinancings thereof and (ii) Capitalized Leases permitted under Section 7.13 and any extensions, renewals, refundings or refinancings thereof so long as the terms of any such Indebtedness with respect to Capitalized Leases is permitted under Section 7.13; provided that (A) any such Indebtedness incurred pursuant to this clause (e) and any such extensions, renewals, refundings or refinancings thereof shall not exceed 85% of the lesser of the purchase price or the fair market value of the asset so financed, (B) at the time of such incurrence, no Default or Event of Default has occurred and is continuing or would result from such incurrence, and (C) such Indebtedness has a scheduled maturity and is not due on demand; (f) any extensions, renewals, refundings and refinancings of the Indebtedness described in clause (b) above, so long as the terms of any such extension, 74 81 renewal, refunding or refinancing Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are otherwise permitted by the Loan Documents; provided further that the principal amount of such Indebtedness shall not be increased above the principal amount thereof outstanding immediately prior to such extension, renewal, refunding or refinancing, and the direct and contingent obligors therefor shall not be changed, as a result of or in connection with such extension, renewal, refunding or refinancing; (g) Indebtedness of any Domestic Subsidiary of the Borrower owed to the Borrower or to any Domestic Subsidiary of the Borrower; (h) (i) unsecured Permitted Subordinated Debt provided that the aggregate principal amount of such Indebtedness shall not exceed $25,000,000 minus the amount of any Indebtedness incurred by the Borrower or any of its Subsidiaries pursuant to Section 7.2(h)(ii) at any one time outstanding and (ii) other Permitted Subordinated Debt in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding incurred in connection with a Permitted Acquisition with respect to which all of the conditions set forth in Section 7.8(f) have been satisfied and incurred to pay all or part of the purchase price thereof which Permitted Subordinated Debt, if secured, is secured only by Liens permitted pursuant to Section 7.3(i); (i) Indebtedness of the Borrower incurred pursuant to (i) the Convertible Subordinated Notes in an aggregate principal amount not to exceed $159,225,000 and (ii) the New Subordinated Notes in an aggregate original principal amount not to exceed $287,500,000 at any time outstanding; in each case less all repayments, redemptions, prepayments, purchases, defeasances or acquisitions for value with respect thereto; (j) unsecured Indebtedness of the Borrower or any of its Subsidiaries consisting of guarantees of Indebtedness of a franchisee incurred to finance a remodeling, construction or purchase of a retail unit of such franchisee or capital expenditures of such franchisee ("Franchisee Construction Debt"); provided that (i) the amount of the obligations of the Borrower and its Subsidiaries under or with respect to such guarantees shall not exceed $40,000,000 in the aggregate outstanding at any time; (ii) the amount of the obligations of the Borrower and its Subsidiaries under or with respect to guarantees of more than 20% of the principal amount of the Franchisee Construction Debt of a franchisee shall not exceed $5,000,000 in the aggregate outstanding at any time; and (iii) except for the guarantees described in the foregoing clause (ii), the amount of the obligations of the Borrower and its Subsidiaries under or with respect to guarantees of Franchisee Construction Debt of any franchisee shall not exceed 20% of the Franchisee Construction Debt of such franchisee; (k) unsecured Indebtedness of the Borrower or any of its Subsidiaries owing to former franchisees and representing the deferred purchase price (or a deferred portion of such purchase price) payable by the Borrower or such Subsidiary to such former franchisee 75 82 in connection with the purchase by the Borrower or such Subsidiary of one or more retail outlets from such former franchisee in an aggregate principal amount for all such Indebtedness not to exceed $5,000,000 at any one time outstanding; (l) Indebtedness of any entity acquired pursuant to a Permitted Acquisition with respect to which all of the conditions set forth in Section 7.8(f) have been satisfied, which Indebtedness (i) is existing prior to such Permitted Acquisition, (ii) is assumed by the Borrower or any Subsidiary of the Borrower in connection with any such Permitted Acquisition and (iii) is not incurred in contemplation of such Permitted Acquisition; provided that the aggregate principal amount of all such Indebtedness shall not exceed $20,000,000 at any time outstanding; and (m) Indebtedness with respect to Sale and Leaseback Transactions permitted under Section 7.13(a). Section 7.3 Liens. The Borrower shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist, directly or indirectly, any Lien on any of its property now owned or hereafter acquired, other than the following provided that none of the creation, incurrence, assumption or existence of any of the following result in the creation or imposition of a Lien under any Subordinated Debt Document: (a) Liens existing on the Closing Date and set forth on Schedule 7.3 hereto; (b) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are being maintained in accordance with GAAP; (c) Statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by Law (other than any Lien imposed by ERISA or pursuant to any Environmental Law) created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate bonds have been posted; (d) Liens (other than any Lien imposed by ERISA or pursuant to any Environmental Law) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (e) Easements, rights-of-way, zoning and similar restrictions and other similar charges or encumbrances not interfering with the ordinary conduct of the business of 76 83 the Borrower or any of its Subsidiaries and which do not detract materially from the value of the property to which they attach or impair materially the use thereof by the Borrower or any of its Subsidiaries or materially adversely affect the security interests of the Agent or the Lenders therein; (f) Liens granted to the Agent for the benefit of the Lenders pursuant to the Security Documents securing the Obligations; (g) Liens created pursuant to Capitalized Leases and to secure other purchase-money Indebtedness permitted pursuant to Section 7.2(e), provided that such Liens are only in respect of the property or assets subject to, and secure only, the respective Capitalized Lease or other purchase-money Indebtedness; (h) Liens arising out of the replacement, extension or renewal of any Lien permitted by clause (a) above upon or in the same property theretofore subject thereto in connection with the refunding, refinancing, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Indebtedness secured thereby permitted pursuant to Section 7.2(f); (i) Liens securing Permitted Subordinated Debt permitted pursuant to Section 7.2(h)(ii) provided that (i) such Liens are only in respect of the assets acquired in the applicable Permitted Acquisition, (ii) the Obligations are secured by valid first priority perfected Liens on such assets and the Liens permitted pursuant to this Section 7.3(i) are second in priority to the Liens on such assets securing the Obligations and (iii) the rights and remedies of any holder of such Liens are subordinated to the rights and remedies of the Agent and the Lenders on terms approved in writing by the Agent; (j) Liens securing Indebtedness (other than Permitted Subordinated Debt) of the Borrower and its Subsidiaries in an aggregate principal amount not to exceed $25,000,000; and (k) Liens of a lessor covering only specific property leased by the Borrower or any of its Subsidiaries subject to operating leases entered into by the Borrower or any of its Subsidiaries as a lessee in the ordinary course of business; and (l) Liens of a lessor covering only specific property leased by the Borrower or any of its Subsidiaries subject to a Sale and Leaseback Transaction permitted by Section 7.13(a) entered into by the Borrower or any of its Subsidiaries as a lessee. Section 7.4 Restriction on Fundamental Changes. (a) The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any merger or consolidation, or liquidate, wind-up or dissolve (or suffer any 77 84 liquidation or dissolution), discontinue its business or convey, lease, sell, transfer or otherwise dispose of, in one transaction or series of transactions, all or any substantial part of its business or property, whether now or hereafter acquired, except (i) as otherwise permitted under Section 7.5, (ii) any wholly-owned Subsidiary of the Borrower may merge into or convey, sell, lease or transfer all or substantially all of its assets to, the Borrower or any other Domestic Subsidiary of the Borrower, provided, that in any such merger involving the Borrower, the Borrower shall be the surviving corporation and any such Subsidiary merging into the Borrower or any such Domestic Subsidiary shall be Solvent, (iii) any Solvent Person acquired by the Borrower or a Subsidiary of the Borrower in a Permitted Acquisition permitted hereunder may merge with the Borrower or any wholly-owned Subsidiary of the Borrower, provided, that in any such merger, the Borrower or such wholly-owned Subsidiary shall be the surviving corporation, provided, that in each case, (A) any such wholly-owned Subsidiary of the Borrower which is the surviving corporation of any such merger or to which any business or property is so transferred shall be a party to the Guaranty and the Subsidiary Security Agreement and if required by Section 2.20, a Subsidiary Pledge Agreement, (B) the Borrower shall give the Agent at least ten (10) days prior written notice of any such sale, merger or other transfer, (C) the Agent and Lenders shall not be deemed to have released their security interest in any assets so transferred or in any Subsidiary or the assets of any Subsidiary so merged and (D) no Default or Event of Default shall have occurred or be continuing or would occur after giving effect thereto or as a result thereof. (b) Borrower shall not and shall not permit any of its Subsidiaries to, amend its certificate of incorporation or by-laws (or other relevant formation document) in any manner adverse to the interests of the Agent or the Lenders. Section 7.5 Sale of Assets. The Borrower shall not, and shall not permit any of its Subsidiaries to, make, consummate or effect any Asset Disposition (or agree to do so at any future time) with respect to all or any part of its property or assets, except: (a) the sale of any asset by the Borrower or any of its Subsidiaries (other than a bulk sale of inventory and a sale of receivables (other than delinquent accounts for collection purposes only) and other than a sale of any capital stock of Carl Karcher Enterprises, Inc., Hardee's or FEI) so long as (i) the purchase price paid to the Borrower or such Subsidiary for such asset shall be no less than the fair market value of such asset at the time of such sale, (ii) the purchase price for such asset shall be paid to the Borrower or such Subsidiary solely in cash (except for non-cash consideration in the form of promissory notes maturing not later than 3 years after the date of issuance and in an aggregate principal amount for all such promissory notes not to exceed $10,000,000 at any one time outstanding) and Cash Equivalents, (iii) the aggregate fair market value of such asset and all other assets sold by the Borrower and its Subsidiaries during the same fiscal year of the Borrower pursuant to this clause (a) shall not exceed 10% of the total assets of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP provided that both (A) Excluded 78 85 Resales and (B) Sale and Leaseback Transactions entered into by the Borrower or any of its Subsidiaries pursuant to Section 7.13(a), shall not be included in the calculation of such percentage, (iv) the Borrower shall prepay the Revolving Loans pursuant to, and in accordance with, Section 2.11 in an aggregate principal amount equal to the Net Sale Proceeds received by the Borrower or such Subsidiary from the sale, transfer or other disposition of such asset and (v) no Default or Event of Default has occurred and is continuing or would result from such asset sale; and (b) so long as no Default or Event of Default shall occur and be continuing, the grant of any option or other right to purchase any asset in a transaction which would be permitted under the provisions of the preceding clause (a); and (c) [Intentionally Omitted]; and (d) sale of the capital stock or assets of Boston Pacific, Inc. and Boston West, L.L.C. so long as (i) the purchase price paid in connection therewith shall be at least the fair market value thereof at the time of such sale and (ii) any and all consideration received by the Borrower in connection therewith that constitutes Collateral is pledged to the Agent for the benefit of the Lenders pursuant to a validly executed Security Document. Section 7.6 Contingent Obligations. The Borrower shall not, and shall not permit any of its Subsidiaries to, create or become or be liable with respect to any Contingent Obligation, except: (a) pursuant to the Guaranty or the Security Documents; (b) Contingent Obligations which are in existence on the Closing Date and which are set forth on Schedule 7.6; (c) Contingent Obligations permitted pursuant to Section 7.2(j); (d) pursuant to the FEI Guaranties; and (e) guarantees by Subsidiaries of the Borrower pursuant to the New Subordinated Note Indenture of obligations of the Borrower under the New Subordinated Notes, provided that such guarantees shall at all times be subordinated in respect of the Obligations on subordination terms contained in the New Subordinated Note Indenture. Section 7.7 Dividends. The Borrower shall not, and shall not permit any of its Subsidiaries to, declare or pay any dividends, or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase, defease or otherwise acquire, directly or 79 86 indirectly, any shares of any class of its Capital Stock now or hereafter outstanding (or any options, rights or warrants issued with respect to its Capital Stock), or set aside any funds for any of the foregoing purposes (all the foregoing "Dividends"), except that: (a) Dividends may be made to the Borrower or any of its wholly-owned Subsidiaries by any of its wholly-owned Subsidiaries; and (b) So long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Borrower may: (i) declare and deliver dividends and distributions payable only in common stock of the Borrower; and (ii) declare and pay cash dividends to its stockholders and purchase, redeem, retire or otherwise acquire shares of its own outstanding capital stock for cash during any fiscal year of the Borrower if after giving effect thereto the aggregate amount of such dividends, purchases, redemptions, retirements and acquisitions paid or made during such fiscal year would be less than the amount of (A) 30% of Consolidated Net Income of the Borrower for each fiscal year of the Borrower (commencing with the fiscal year ending January 26, 1998) up to and including the fiscal year immediately preceding the year in which such dividend, purchase, redemption, retirement or acquisition is paid or made, less (B) the aggregate amount of any sinking fund payments, payments, prepayments, redemptions, defeasances, and purchases or acquisitions for value paid pursuant to Section 7.10(d) during such fiscal year (excluding, however, the aggregate amount of payments made in connection with the Permitted Redemption), less (C) the aggregate amount of all such dividends, purchases, redemptions, retirements and acquisitions paid and made by the Borrower after January 26, 1998 through and including the end of such immediately preceding fiscal year; and (c) So long as no Default or Event of Default shall have occurred and be continuing, any Subsidiary of the Borrower that is not a wholly-owned Subsidiary of the Borrower may declare and pay cash dividends to the extent, and only to the extent, of any cumulative positive net income (after deducting any negative net income) of such Subsidiary arising after the date such Subsidiary became a Subsidiary of the Borrower so long as such dividends are payable to all of its equity holders on a ratable basis. Section 7.8 Advances, Investments and Loans. The Borrower shall not, and shall not permit any of its Subsidiaries to, make or suffer to exist, directly or indirectly any Investments (including, without limitation, loans and advances to the Borrower or any of its Subsidiaries, and other Investments in Subsidiaries of the Borrower), or commitments therefor, 80 87 or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or make any Acquisition of any interest in any Person, except that the following shall be permitted provided that none of the making, existence or creation of or becoming or remaining a partner in, any of the following will not result in or cause a violation or breach of, or default under, any Subordinated Debt Document: (a) Investments set forth on Schedule 7.8; (b) Investments by the Borrower and its Subsidiaries in Subsidiaries of the Borrower outstanding on the Closing Date, additional Investments (other than loans and advances) by the Borrower or any Subsidiary of the Borrower in any Domestic Subsidiary of the Borrower which Subsidiary is Solvent and is a party to the Guaranty, and additional Investments by the Borrower or any wholly-owned Subsidiary of the Borrower consisting of loans and advances to wholly-owned Domestic Subsidiaries of the Borrower to the extent permitted by Section 7.2(g); (c) loans and advances by the Borrower and its Subsidiaries to their employees in the ordinary course of its business not exceeding $2,000,000 in the aggregate at any one time outstanding; (d) the Borrower and its Subsidiaries may acquire and hold Cash Equivalents; (e) Investments consisting of promissory notes permitted to be received as consideration in connection with Asset Dispositions permitted under Section 7.5(a); (f) Permitted Acquisitions, provided that, in the case of each Permitted Acquisition, the conditions referred to in clauses (i) through (ix) below are satisfied on or prior to the date of such Permitted Acquisition (it being understood that, for purposes of clause (ii) below, the phrase "the Borrower and its Subsidiaries" and the phrase "Consolidated" shall be deemed to include the Person (and its Subsidiaries, if any, to be acquired) or assets to be acquired as though such Person (and its Subsidiaries, if any, to be acquired) or assets were a Subsidiary of the Borrower): (i) the Person or assets to be acquired satisfy the criteria set forth in either the definition of "Permitted Acquisition" or the definition of "Permitted Restaurant Acquisitions" contained in Section 1; (ii) in the case of Permitted Acquisitions other than Permitted Restaurant Acquisitions, the Borrower shall have delivered to the Agent a certificate of the chief financial officer of the Borrower, in form and substance satisfactory to the Agent, demonstrating: 81 88 (1) compliance by the Borrower and its Subsidiaries with the covenants set forth in Section 7.1, on a pro forma basis after giving effect to such Acquisition, for a period of four consecutive fiscal quarters after the date of such Acquisition, and (2) on a pro forma basis after giving effect to such Acquisition, as at the last day of the fiscal quarter ended immediately preceding the date of consummation of such Acquisition for which financial statements have been delivered to the Lenders pursuant to Section 6.1(a), for the period of four consecutive fiscal quarters of the Borrower (taken as one accounting period) then ended, that: (A) the Leverage Ratio shall be less than 2.5 to 1.0, (B) the Adjusted Leverage Ratio shall be less than 3.75 to 1.0, and (C) the Consolidated EBITDA of the Person and any of its Subsidiaries, if any, to be acquired, for the twelve-month period most recently ended shall be a positive number; (iii) in the case of Permitted Acquisitions that are Permitted Restaurant Acquisitions, the Borrower shall have delivered to the Agent a certificate of the chief financial officer of the Borrower, in form and substance satisfactory to the Agent, demonstrating: (1) compliance by the Borrower and its Subsidiaries with the covenants set forth in Section 7.1, on a pro forma basis after giving effect to such Acquisition, for a period of four consecutive fiscal quarters after the date of such Acquisition, and (2) on a pro forma basis after giving effect to such Acquisition, as at the last day of the fiscal quarter ended immediately preceding the date of consummation of such Acquisition for which financial statements have been delivered to the Lenders pursuant to Section 6.1(a), for the period of four consecutive fiscal quarters of the Borrower (taken as one accounting period) then ended, that: 82 89 (A) if the aggregate amount of cash consideration paid and Indebtedness incurred or assumed in connection with all Permitted Restaurant Acquisitions occurring after April 1, 1998 after giving effect to such Acquisition is less than or equal to $75,000,000, the Leverage Ratio shall be less than 2.75 to 1.00, (B) if the aggregate amount of cash consideration paid and Indebtedness incurred or assumed in connection with all Permitted Restaurant Acquisitions occurring after April 1, 1998 after giving effect to such Acquisition is greater than $75,000,000, the Leverage Ratio shall be less than 2.5 to 1.0, (C) if the aggregate amount of cash consideration paid and Indebtedness incurred or assumed in connection with all Permitted Restaurant Acquisitions occurring after April 1, 1998 after giving effect to such Acquisition is less than or equal to $75,000,000, the Adjusted Leverage Ratio shall be less than 4.25 to 1.0, (D) if the aggregate amount of cash consideration paid and Indebtedness incurred or assumed in connection with all Permitted Restaurant Acquisitions occurring after April 1, 1998 after giving effect to such Acquisition is greater than $75,000,000, the Adjusted Leverage Ratio shall be less than 3.75 to 1.0, and (E) the Consolidated EBITDA of the Person and any of its Subsidiaries, if any, to be acquired, for the twelve-month period most recently ended shall be a positive number; (iv) the representations and warranties contained in each Loan Document are correct in all material respects on and as of the date of such Acquisition, after giving effect to such Acquisition, as though made on and as of such date, other than any such representations and warranties that by their terms are specifically made as of a date other than such date; (v) no event has occurred and is continuing on the date of such Acquisition, or would result from such Acquisition, that constitutes a Default or an Event of Default; 83 90 (vi) the Total Revolving Loan Commitment minus the aggregate principal amount of the Revolving Loans outstanding on the date of such Permitted Acquisition, minus the amount of any L/C Obligations outstanding on the date of such Permitted Acquisition shall equal at least $25,000,000; (vii) all Consents and waiting periods described in clause (viii)(3)(D) below shall have been obtained or expired; and (viii) the Borrower or such Subsidiary of the Borrower making such Acquisition shall furnish or cause to be furnished to the Agent and the Lenders the following: (1) Certified copies of the resolutions of the Board of Directors of the Borrower and, if any Subsidiary of the Borrower will participate in the applicable Acquisition, of such Subsidiary (in each case, to the extent resolutions of the Board of Directors of the Borrower or such Subsidiary are required or advisable pursuant to applicable law or the Borrower's or such Subsidiary's charter documents) and of all documents evidencing other necessary corporate action or other Consents, if any, with respect to such Acquisition; (2) Such other financial, business and other information regarding the Person or assets to be acquired, as the case may be, as the Agent or the Required Lenders through the Agent shall have reasonably requested, including, without limitation, actual and pro forma financial statements and projections relating to such Person or assets; (3) In the case of each Permitted Acquisition, to the extent that such Acquisition consists of the acquisition by the Borrower or any of its Subsidiaries of stock, partnership or other Equity Interests of any Person (or assets in the case of clause (A) below): (A) All documents required to be delivered pursuant to Section 2.20 and Section 6.11; (B) A copy of the charter or other organizational document of such Person and each amendment thereto, if any, certified by the Secretary of State of its jurisdiction of organization, as of a date reasonably near the date of such Borrowing, as being a true and correct copy thereof; 84 91 (C) An officer's certificate signed on behalf of such Person by an appropriate officer of such Per- son, certifying as to (i) the absence of any amendment to the charter or other organizational document of such Person since the date of the Secretary of State's certificate referred to in clause (B) above, (ii) a true and correct copy of the by-laws or similar organizational document of such Person, (iii) a true and correct copy of the resolutions adopted by the Board of Directors or equivalent body of such Person approving the documents or instruments to be delivered under this Section 7.8(f) to which such Person is a party and the matters contemplated thereby, (iv) the incumbency and specimen signatures of the officers of such Person executing the documents and instruments to be delivered under this Section 7.8(f) to which such Person is a party, and (v) the due organization and good standing of such Person as a Person organized under the laws of its jurisdiction of organization; (D) Evidence satisfactory to the Agent and the Lenders that the Borrower, its Subsidiaries and the Person being acquired has made and obtained all necessary governmental and other Consents required in order to consummate such Acquisition and that all applicable waiting periods with respect to such Acquisition including, without limitation, those under the Hart-Scott-Rodino Act have expired without any action having been taken by any competent authority restraining, pre- venting or imposing materially adverse conditions upon the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them; and (ix) the total consideration, contingent or otherwise, for the Acquisition of the Person being acquired does not exceed, in the aggregate, $200,000,000 in value (including, without limitation, securities, instruments, or promissory notes tendered or executed in connection with such acquisition), of which no more than $100,000,000 shall consist of cash and/or Indebtedness incurred or assumed; (g) Investments in Related Businesses other than joint ventures, provided that the amount of such Investments made after the Closing Date shall not exceed $100,000,000 in the aggregate less the aggregate amount of any Investments made pursuant to clause (j) of this Section 7.8; provided that the Borrower or any of its Subsidiaries may 85 92 reinvest the proceeds received from the liquidation of any such Investments in Investments in Related Businesses permitted to be made pursuant to this clause (g) in an amount equal to the lesser of (i) the amount of the proceeds received from the Borrower or such Subsidiary from the liquidation of such Investment and (ii) the original amount paid by the Borrower or such Subsidiary for such Investment; provided, further, that the Borrower and its Subsidiaries shall promptly deliver to the Agent all Capital Stock and Instruments evidencing such Investments in Related Businesses that are required to be delivered to the Agent pursuant to the Security Documents; (h) Investments received as consideration in connection with Asset Dispositions permitted under paragraphs (c) and (d) of Section 7.5; (i) Investments in Capital Stock of Checkers Drive-In Restaurants, Inc. and Rally's Hamburgers, Inc., in an aggregate amount not to exceed $11,000,000, which Capital Stock was acquired through the exercise of warrants, options and similar rights owned by the Borrower; and (j) Investments by the Borrower or a Subsidiary of the Borrower in a joint venture which is a Person organized under the laws of a state of the United States of America for whose Indebtedness neither the Borrower nor any Subsidiary of the Borrower is liable, in which the Borrower or such Subsidiary holds 50% of the outstanding equity interests with another operator of retail facilities for the purpose of developing, acquiring or constructing properties which include restaurant operations; provided that the aggregate amount of the such Investments made after the Closing Date does not exceed $50,000,000; provided further that the Borrower or any of its Subsidiaries may reinvest the proceeds received from the liquidation of any such Investments in Investments in joint ventures permitted to be made pursuant to this clause (j) in an amount equal to the lesser of (i) the amount of the proceeds received from the Borrower or such Subsidiary from the liquidation of such Investment and (ii) the original amount paid by the Borrower or such Subsidiary for such Investment; and provided, further, that (i) the consent of the Borrower or such Subsidiary must be required for such joint venture to effect any material transactions, including the acquisition and sale of assets, incurrence of Indebtedness and significant capital commitments; and (ii) such joint venture will not create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction which would unreasonably restrict the ability of the joint venture to distribute to its owners the net cash flow of the joint venture. Section 7.9 Transactions with Affiliates. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate, other than on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would be obtain able at the time in a comparable arm's-length transaction with a Person other than an Affiliate. 86 93 Section 7.10 Limitation on Voluntary Payments and Modifications of Certain Documents. The Borrower shall not, and shall not permit any of its Subsidiaries to: (a) make any sinking fund payment or voluntary or optional payment or prepayment on or redemption, defeasance, purchase or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) or exchange of any Indebtedness (other than Indebtedness permitted to be incurred pursuant to Section 7.2(i)) other than (i) the Indebtedness hereunder and under the other Loan Documents and (ii) regularly scheduled or required repayments of Indebtedness permitted pursuant to Section 7.2; provided that the Borrower may, and may permit any of its Subsidiaries to, prepay, redeem, defease, purchase or acquire or exchange any (collectively, a "Prepayment") Surviving Debt (other than Indebtedness permitted to be incurred pursuant to Section 7.2(i)) or Indebtedness assumed in connection with a Permitted Acquisition which Indebtedness is permitted pursuant to Section 7.2(l)) in each case only if on the date of such Prepayment (x) no event or condition has occurred and is continuing, or would result from such Prepayment, that constitutes a Default or an Event of Default, and (y) after giving effect to such Prepayment, the Total Revolving Loan Commitment minus the aggregate principal amount of the Revolving Loans outstanding on the date of such Prepayment minus the amount of any L/C Obligations outstanding on the date of such Prepayment shall equal at least $10,000,000; or (b) amend, modify or waive, or permit the amendment, modification or waiver of (i) (A) any provision of the Seller Agreement or any material provision of any other Transaction Document (other than the Loan Documents and other than the Subordinated Debt Documents) or other Hardee's Acquisition Document or (B) any provision of the Existing Letter of Credit or the Existing Reimbursement Agreement in any manner the effect of which is to increase the maximum face amount of the Existing Letter of Credit or to change any provision of the Existing Letter of Credit or the Existing Reimbursement Agreement relating to the letter of credit fees payable thereunder, respectively, or (ii) any term or provision of (A) the Surviving Debt (other than Indebtedness permitted to be incurred pursuant to Section 7.2(h) or Section 7.2(i)) in any way that would be materially adverse to the Lenders or (B) the Permitted Subordinated Debt or the Subordinated Debt Documents; or (c) make any payment in violation of any subordination terms of any Indebtedness of the Borrower or any of its Subsidiaries; or (d) make or offer to make any sinking fund payment, payment, prepayment, redemption, defeasance, purchase or acquisition for value (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) or otherwise segregate funds with respect to the Subordinated Notes (other than (i) in connection with the Permitted Redemption, (ii) regularly scheduled semi-annual interest payments required to be made in cash and (iii) 87 94 conversions of the Convertible Subordinated Notes into common stock of the Borrower) to the extent that the aggregate amount of all such sinking fund payments, payments, prepayments, redemptions, defeasances, and purchases or acquisitions for value would exceed the sum of (A) 30% of the Consolidated Net Income of the Borrower for each fiscal year of the Borrower (commencing with the fiscal year ending January 26, 1998 up to and including the fiscal year immediately preceding the year in which sinking fund payment, payment, prepayments redemption, defeasances, purchase or acquisition is made, less (B), together with the aggregate amount of all dividends, purchases, redemptions, retirements and acquisitions paid or made pursuant to Section 7.7(b)(ii), less (C) the aggregate amount of all such sinking fund payments, payments, prepayments, redemptions, defeasances, and purchases or acquisitions for value paid and made by the Borrower after January 26, 1998 through and including the end of such immediately preceding fiscal year. Section 7.11 Changes in Business. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any business which is substantially different from that conducted by the Borrower or such Loan Party, as the case may be, on the Closing Date after giving effect to the Transactions. Section 7.12 Certain Restrictions. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into or permit to exist any agreement, instrument or other document which directly or indirectly restricts the ability of the Borrower or any of its Subsidiaries to (a) enter into amendments, modifications or waivers of the Loan Documents, (b) sell, transfer or otherwise dispose of its assets, (c) create, incur, assume or suffer to exist any Lien upon any of its property, (d) create, incur, assume, suffer to exist or otherwise become liable with respect to any Indebtedness, (e) make loans or advances to the Borrower, or (f) pay any Dividend or repay any Indebtedness owed to the Borrower or any of its Subsidiaries; provided that Capitalized Leases or agreements governing purchase money Indebtedness which contain restrictions of the types referred to in clauses (b) or (c) with respect to the property covered thereby shall be permitted; provided further that the foregoing shall not apply to restrictions in effect on the Closing Date contained in agreements governing Surviving Debt (other than Indebtedness arising under the Subordinated Notes) and, if such Indebtedness is renewed, extended or refinanced, restrictions in the agreements governing the renewed, extended or refinanced Indebtedness (as successive renewals, extensions and refinancings thereof) if such restrictions are no more restrictive in any material respect than those contained in the agreements governing the Indebtedness being renewed, extended or refinanced and if such renewals, extensions and refinancings are permitted pursuant to Section 7.2(f). Section 7.13 Lease Obligations. The Borrower shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any obligations as lessee (a) for the rental or hire of real or personal property in connection with any sale and leaseback transaction, except 88 95 (i) the Borrower and its Subsidiaries may sell real property or equipment owned by the Borrower or any of its Subsidiaries on the Closing Date and simultaneously with such sale become liable with respect to any operating lease involving such property (each, an "Existing Property Sale and Leaseback Transaction"), and (ii) the Borrower and its Subsidiaries may sell real property which the Borrower or any of its Subsidiaries acquires after the Closing Date for the purpose of building a Restaurant which the Borrower or such Subsidiary intends to own and operate, and simultaneously with such sale become liable with respect to any operating lease involving such property if such sale and leaseback occurs on or before the date which is twelve (12) months after the date of acquisition by the Borrower or one of its Subsidiaries of such real property (each, a "New Property Sale and Leaseback Transaction"), provided that: (1) with respect to Existing Property Sale and Leaseback Transactions, the greater of (A) the aggregate proceeds of all such Existing Property Sale and Leaseback Transactions and (B) the aggregate fair market value of all such property sold and leased back pursuant to such Existing Property Sale and Leaseback Transactions by the Borrower and its Subsidiaries, does not exceed $205,000,000 on a consolidated basis; (2) with respect to New Property Sale and Leaseback Transactions, the greater of (A) the aggregate proceeds of all such New Property Sale and Leaseback Transactions by the Borrower and it Subsidiaries and (B) the aggregate fair market value of all such property sold and leased back pursuant to such New Property Sale and Leaseback Transactions by the Borrower and its Subsidiaries does not exceed $15,000,000 in the aggregate in any fiscal year of the Borrower; (3) an Affiliate of the Borrower or any of its Subsidiaries is not a party to any Sale and Leaseback Transaction (except to the extent that the Borrower or any of its Subsidiaries is the lessee); (4) the Agent is provided with fully executed documentation of each such Existing Property Sale and Leaseback Transaction on or prior to the closing date of such transaction; (5) no Default or Event of Default exists on the closing date of any such Existing Property Sale and Leaseback Transaction or would result therefrom and the Borrower shall deliver to the Agent prior to the closing date of such transaction an officer's certificate of the chief financial officer of the Borrower certifying thereto; and 89 96 (6) the term of each such operating lease shall not be less than fifteen (15) years; or (b) for the rental or hire of other real or personal property of any kind under leases or agreements to lease including Capitalized Leases except for leases (including Capitalized Leases) entered into for fair market value in the ordinary course of business of the Borrower and its Subsidiaries. Section 7.14 Hedging Agreements. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into or remain liable under any Hedging Agreement, except (a) Interest Rate Agreements with one or more of the Lenders pursuant to which the Borrower and its Subsidiaries have hedged their reasonably estimated interest rate exposure and (b) Hedging Agreements relating to commodities pursuant to which the Borrower and its Subsidiaries have hedged their reasonably estimated commodity price exposure. Section 7.15 Plans. The Borrower shall not, nor shall it permit any member of its ERISA Controlled Group to, take any action which would increase the aggregate present value of the Unfunded Benefit Liabilities under all Plans to an amount in excess of $2,000,000. Section 7.16 Fiscal Year; Fiscal Quarter. The Borrower shall not, and shall not permit any of its Subsidiaries to, change its fiscal year or any of its fiscal quarters. Section 7.17 Partnerships. The Borrower shall not, and shall not permit any of its Subsidiaries to, become or remain a general partner in any general or limited partner ship, or permit any of its Subsidiaries to do so, except for any Subsidiary which is a corporation and the sole assets of which consist of its interest in such partnership and except with respect to the partnerships described on Schedule 7.17. Section 7.18 Excluded Resales. The Borrower shall not, and shall not permit any of its Subsidiaries to, acquire, purchase, hold or own any Restaurants which the Borrower or any such Subsidiaries acquire from a franchisee with the intent of reselling to the extent the aggregate amount of Restaurants owned or held by the Borrower and its Subsidiaries would exceed $20,000,000 at any one time outstanding, such amount to be measured by the purchase price paid by the Borrower or any such Subsidiaries for such Restaurants. Section 7.19 Designated Senior Indebtedness. The Borrower shall not designate, create or permit to exist any (a) Designated Senior Indebtedness (as defined in the Convertible Subordinated Note Indenture) and (b) Designated Senior Indebtedness (as defined in the New Subordinated Note Indenture), in each case other than obligations arising under the Loan Documents. 90 97 Section 7.20 Instruments. The Borrower shall not permit any of its Subsidiaries to own or hold, directly or beneficially, any Instrument if such Subsidiary is not a party to a legal, valid and binding Subsidiary Pledge Agreement. SECTION 8. EVENTS OF DEFAULT Section 8.1 Events of Default. Each of the following events, acts, occurrences or conditions shall constitute an Event of Default under this Agreement, regardless of whether such event, act, occurrence or condition is voluntary or involuntary or results from the operation of law or pursuant to or as a result of compliance by any Person with any judgment, decree, order, rule or regulation of any court or administrative or governmental body: (a) Failure to Make Payments. The Borrower shall (i) default in the payment when due of any principal of the Revolving Loans or (ii) default, and such default shall continue unremedied for two (2) or more Business Days, in the payment when due of any interest on the Revolving Loans or in the payment when due of any Fees or any other amounts owing hereunder. (b) Breach of Representation or Warranty. Any representation or warranty made by any Loan Party herein or in any other Loan Document or in any certificate or statement delivered pursuant hereto or thereto shall prove to be false or misleading in any material respect on the date as of which made or deemed made. (c) Breach of Covenants. (i) The Borrower shall fail to perform or observe any agreement, covenant or obligation arising under Section 6.1(f) or Section 7. (ii) The Borrower shall fail to perform or observe any agreement, covenant or obligation arising under this Agreement (except those described in subsections (a), (b) and (c)(i) above), and such failure shall continue for thirty (30) days. (iii) Any Loan Party shall fail to perform or observe any agreement, covenant or obligation arising under any provision of the Loan Documents other than this Agreement, which failure shall continue after the end of the applicable grace period, if any, provided therein. (d) Default Under Other Agreements. Any Loan Party or any of its Subsidiaries shall default in the payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) of any amount owing in respect of any Indebtedness of such Loan Party or any of its Subsidiaries (other than the Obligations) in the 91 98 aggregate principal amount of $5,000,000 or more; or any Loan Party or any of its Subsidiaries shall default in the performance or observance of any obligation or condition with respect to any such Indebtedness or any other event shall occur or condition shall exist, if the effect of such default, event or condition is to accelerate the maturity or cause a mandatory redemption of any such Indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders, to accelerate the maturity or require a redemption or other repurchase thereof of any such Indebtedness, or any such Indebtedness shall become or be declared to be due and payable prior to its stated maturity other than as a result of a regularly scheduled payment; or any such Indebtedness shall be declared to be due and payable, or shall be required to be prepaid, redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to its stated maturity other than as a result of a regularly scheduled payment. (e) Bankruptcy, etc. (i) Any Loan Party or any of its Subsidiaries shall commence a voluntary case concerning itself under the Bankruptcy Code; or (ii) an involuntary case is commenced against any Loan Party or any of its Subsidiaries and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of any Loan Party or any of its Subsidiaries or any Loan Party or any of its Subsidiaries commences any other proceedings under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to any Loan Party or any of its Subsidiaries or there is commenced against any Loan Party or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or (iv) any order of relief or other order approving any such case or proceeding is entered; or (v) any Loan Party or any of its Subsidiaries is adjudicated insolvent or bankrupt; or (vi) any Loan Party or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or (vii) any Loan Party or any of its Subsidiaries makes a general assignment for the benefit of creditors; or (viii) any Loan Party or any of its Subsidiaries shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or (ix) any Loan Party or any of its Subsidiaries shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or (x) any Loan Party or any of its Subsidiaries shall by any act or failure to act consent to, approve of or acquiesce in any of the foregoing; or (xi) any corporate action is taken by any Loan Party or any of its Subsidiaries for the purpose of effecting any of the foregoing. (f) ERISA. (i) Any Termination Event shall occur, or (ii) any Plan shall incur an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, or (iii) the Borrower or a member of its ERISA Controlled Group shall have engaged in a transaction which is prohibited under Section 4975 of the Code or Section 406 of ERISA which could result in the imposition of liability in 92 99 excess of $2,000,000 on the Borrower or any member of its ERISA Controlled Group, or (iv) the Borrower or any member of its ERISA Controlled Group shall fail to pay when due an amount which it shall have become liable to pay to the PBGC, any Plan or a trust established under Title IV of ERISA, or (v) a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that an ERISA Plan must be terminated or have a trustee appointed to administer any ERISA Plan, or (vi) the Borrower or a member of its ERISA Controlled Group suffers a partial or complete withdrawal from a Multiemployer Plan or is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan, or (vii) a proceeding shall be instituted against the Borrower or any member of its ERISA Controlled Group to enforce Section 515 of ERISA and such proceeding shall remain undismissed for 180 days, or (viii) any other event or condition shall occur or exist with respect to any Plan which could subject the Borrower or any member of its ERISA Controlled Group to any tax, penalty or other liability in excess of $2,000,000 or (ix) the aggregate present value of all post-retirement benefit liabilities of the Borrower and its Subsidiaries under any "welfare plan" (as defined in Section 3(1) of ERISA), including, without limitation, Hardee's Retiree Medical Insurance Plan, exceeds $20,000,000. (g) Security Documents. Any of the Security Documents shall for any reason cease to be in full force and effect, or shall cease to give the Agent for the benefit of the Lenders the Liens, rights, powers and privileges purported to be created thereby including, without limitation, a perfected first priority security interest in, and Lien on, any material part of the Collateral in accordance with the terms thereof or the Borrower or any of the Borrower's Subsidiaries party to any Security Document seeks to repudiate its respective obligations thereunder and the Liens created thereby are rendered, or the Borrower or any such Subsidiary of the Borrower seeks to render such Liens, invalid and unperfected. (h) Guaranty. The Guaranty or any provision thereof shall cease to be in full force and effect, or any Guarantor or any Person acting by or on behalf of a Guarantor shall deny or disaffirm all or any portion of such Guarantor's obligations under such Guaranty. (i) Change of Control. (i) Any Person or two or more Persons acting in concert other than the Controlling Stockholders shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of the Borrower (or other securities convertible into such Voting Stock) representing 20% or more of the combined voting power of all Voting Stock of the Borrower; or (ii) during any period of up to 24 consecutive months, commencing after the Closing Date, individuals who at the beginning of such 24-month period were directors of the Borrower shall cease for any reason to constitute a majority of the board of directors of the Borrower; or (iii) any Person or two or more Persons acting in concert other than the Controlling Stockholders shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, the power to exercise control over Voting Stock of the 93 100 Borrower (or other securities convertible into such securities representing 20% or more of the combined voting power of all Voting Stock of the Borrower); or (iv) at any time from and after July 15, 1997, until July 15, 1999, the Required Holders shall fail to own and control at least 1,000,000 shares of Voting Stock (as adjusted for stock splits, dividends or reclassifications); provided that the number of shares of Voting Stock of the Borrower deemed owned and controlled by William P. Foley II ("Mr. Foley") shall, for purposes of the preceding clause (iv), include (A) the number of shares of Voting Stock (as adjusted for stock splits, dividends or reclassifications) owned and controlled by Cannae Limited Partnership, a Nevada Limited Partnership, but only to the extent of Mr. Foley's pro rata interest (based on Mr. Foley's interest in such partnership) in such Voting Stock owned and controlled by such partnership and (B) the number of shares of Voting Stock of the Borrower issuable upon the exercise of options then owned and controlled and exercisable by Mr. Foley; or (v) a Change in Control as defined in the New Subordinated Note Indenture shall have occurred. (j) Judgments. One or more judgments or decrees or awards in an aggregate amount of $5,000,000 or more shall be entered by a court or courts of competent jurisdiction or in any arbitration proceeding against any Loan Party or any of its Subsidiaries and (i) any such judgments or decrees or awards shall not be stayed, discharged, paid, bonded or vacated within 30 days or (ii) enforcement proceedings shall be commenced by any creditor on any such judgment or decree or award. (k) Environmental Matters. (i) Any Environmental Claim shall have been asserted against any Loan Party or any Environmental Affiliate thereof which, if determined adversely, could have a Material Adverse Effect, (ii) any release, emission, discharge or disposal of any Material of Environmental Concern shall have occurred, and such event could form the basis of an Environmental Claim against any Loan Party or any Environmental Affiliate thereof which, if determined adversely, could have a Material Adverse Effect, or (iii) any Loan Party or its Environmental Affiliate shall have failed to obtain any Environmental Approval necessary for the management, use, control, ownership, or operation of its business, property or assets or any such Environmental Approval shall be revoked, terminated, or otherwise cease to be in full force and effect, in each case, if the existence of such condition could have a Material Adverse Effect. (l) Ownership of Certain Assets. The Borrower and/or its Subsidiaries shall (1) cease for any reason to own and operate (whether or not the Borrower or any such Subsidiary shall own or lease the real property on which any such Restaurant is located) (A) less than 1800 Restaurants or (B) less than 425 Carl's Jr. Restaurants, or (2) sell, convey or otherwise transfer or dispose of any material intellectual property or license agreement owned by or licensed to the Borrower or any of its Subsidiaries or any material license agreement to which the Borrower or any of its Subsidiaries is a party other than (A) a sale, conveyance or other transfer (other than a Lien) to a Domestic Subsidiary, (B) licenses pursuant to Franchise 94 101 Agreements pledged to the Agent pursuant to the Security Documents and (C) any Asset Disposition permitted by the terms of any of the Loan Documents. Section 8.2 Rights and Remedies. Upon the occurrence of any Event of Default described in Section 8.1(e), the Revolving Loan Commitments shall automatically and immediately terminate and the unpaid principal amount of and any and all accrued interest on the Revolving Loans and any and all accrued Fees and other Obligations shall automatically become immediately due and payable, with all additional interest from time to time accrued thereon and without presentation, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and notice of acceleration), all of which are hereby expressly waived by Borrower, and the obligation of each Lender to make any Revolving Loan hereunder shall thereupon terminate; and upon the occurrence and during the continuance of any other Event of Default, the Agent shall at the request, or may with the consent, of the Required Lenders, by written notice to Borrower, (i) declare that the Revolving Loan Commitments are terminated, whereupon the Revolving Loan Commitments and the obligation of each Lender to make any Revolving Loan hereunder shall immediately terminate, (ii) require the Borrower to Cash Collateralize the L/C Obligations in an amount equal to the maximum aggregate amount that is, or at any time thereafter may become, available for drawing under any outstanding Letters of Credit (whether or not any beneficiary shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letters of Credit), and (iii) declare the unpaid principal amount of and any and all accrued and unpaid interest on the Revolving Loans and any and all accrued Fees and other Obligations to be, and the same shall thereupon be, immediately due and payable with all additional interest from time to time accrued thereon and without presentation, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and notice of acceleration), all of which are hereby expressly waived by Borrower. SECTION 9. THE AGENT Section 9.1 Appointment. Each Lender hereby irrevocably designates and appoints Paribas as the Agent of such Lender under this Agreement and each other Loan Document, and each such Lender irrevocably authorizes Paribas as the Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and each other Loan Document, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Agent shall be read into this Agreement or otherwise exist against the Agent. The provisions 95 102 of this Section 9 are solely for the benefit of the Agent and the Lenders and no Loan Party shall have any rights as a third party beneficiary or otherwise under any of the provisions hereof. In performing its functions and duties hereunder and under the other Loan Documents, the Agent shall act solely as the agent of the Lenders and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for any Loan Party or any of their respective successors and assigns. Section 9.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement or the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Section 9.3 Exculpatory Provisions. The Agent shall not be (i) liable for any action lawfully taken or omitted to be taken by it or any Person described in Section 9.2 under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or any other Loan Document or for any failure of any Loan Party to perform their obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. This Section is intended solely to govern the relationship between the Agent, on the one hand, and the Lenders, on the other. Section 9.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Revolving Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to any Loan Party), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Revolving Note as the owner thereof for all purposes unless the Agent shall have received an executed Assignment Agreement in respect thereof. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to 96 103 take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Revolving Notes. Section 9.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Agent has received notice from a Lender or the Borrower referring to this Agreement, describing 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, the Agent shall promptly give notice thereof to the Lenders. Subject to the provisions of Section 10.5, the Agent shall take such action 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 the Agent shall deem advisable and in the best interests of the Lenders. Section 9.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly acknowledges that neither the Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including, without limitation, any review of the affairs of any Loan Party, shall be deemed to constitute any representation or warranty by the Agent. Each Lender represents and warrants to the Agent that it has, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Loan Parties and made its own decision to make its Revolving Loans hereunder and enter into this Agreement. Each Lender also represents 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 credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, prospects, financial and other condition and creditworthiness of the Loan Parties. Except for notices, reports and other documents expressly required under the Loan Documents to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, prospects, financial and other condition or creditworthiness of the Loan Parties which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. Section 9.7 Indemnification. The Lenders agree to indemnify the Agent and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the 97 104 Loan Parties and without limiting the obligation of the Loan Parties to do so), ratably according to their Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for the Agent or such Person in connection with any investigative, administrative or judicial proceed- ing commenced or threatened, whether or not the Agent or such Person shall be designated a party thereto) that may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Agent or such Person as a result of, or arising out of, or in any way related to or by reason of, any of the Transactions or the Hardee's Acquisition or the execution, delivery or performance of any Loan Document or any other Transaction Document or any Hardee's Acquisition Document (but excluding any such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or such Person as finally determined by a court of competent jurisdiction); provided that to the extent indemnification payments made by the Lenders pursuant to this Section 9.7 are subsequently recovered from or for the account of the Borrower, the Agent shall promptly refund such previously paid indemnification payments to the Lenders. Section 9.8 Agent in its Individual Capacity. The Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Loan Parties as though the Agent were not the Agent hereunder. With respect to Revolving Loans made or renewed by it and any Revolving Note issued to it, the Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. Section 9.9 Successor Agent. The Agent may resign as Agent upon 30 days' notice to the Borrower and the Lenders. If the Agent shall resign as Agent under this Agreement, then the Required Lenders during such 30-day period shall appoint from among the Lenders a successor agent, whereupon such successor agent shall succeed to the rights, powers and duties of the Agent and the term "Agent" shall mean such successor agent, effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Revolving Notes. Notwithstand- ing anything herein to the contrary, so long as no Event of Default has occurred and is continuing, each such successor agent shall be subject to approval by the Borrower, which approval shall not be unreasonably withheld or delayed. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 9 and Section 10.1 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 98 105 SECTION 20. MISCELLANEOUS Section 20.2 Payment of Expenses, Indemnity, etc. The Borrower shall: (a) whether or not the transactions hereby contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Agent in connection with the negotiation, preparation, execution and delivery of the Loan Documents, the commitment letter related thereto and the Fee Letter, the syndication of the Revolving Loans and the closing of the Transactions and the documents and instruments referred to therein, in connection therewith, the creation, perfection or protection of the Agent's Liens in the Collateral (including, without limitation, fees and expenses for lien searches and filing and recording fees and, including, without limitation, fees and expenses incurred in connection with the transactions contemplated by Section 2.20), and any amendment, waiver or consent relating to any of the Loan Documents (including, without limitation, as to each of the foregoing, the reasonable fees and disbursements of Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel to the Agent and any other attorneys and legal assistants retained by the Agent and allocated costs of internal counsel and legal assistants) and of the Agent and each Lender in connection with the preservation of rights under, and enforcement of, the Loan Documents and the documents and instruments referred to therein or in connection with any restructuring or rescheduling of the Obligations (including, without limitation, the reasonable fees and disbursements of counsel for the Agent and for each of the Lenders); (b) pay, and hold the Agent and each of the Lenders harmless from and against, any and all present and future stamp, excise and other similar taxes with respect to the foregoing matters and hold the Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (c) indemnify the Agent and each Lender, and each of their Affiliates and their officers, directors, employees, representatives, attorneys and agents (each an "Indemnitee") from, and hold each of them harmless against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitee) that may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, asserted against or incurred by any Indemnitee as a result of, or arising out of, or in any way related to or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) any of the Transactions or the Hardee's Acquisition or the execution, delivery or performance of any Loan Document or any other Transaction Document or any Hardee's Acquisition Document (including, without limitation, any actual or proposed use by the Borrower or any Subsidiary of the Borrower of the proceeds of any Revolving Loan or Letter of Credit), (ii) any violation by any Loan Party or its Environmental Affiliate of any applicable Environmental Law, (iii) 99 106 any Environmental Claim arising out of the management, use, control, ownership or operation of property or assets by any of the Loan Parties or any of their Environmental Affiliates, including, without limitation, all on-site and off-site activities involving Materials of Environmental Concern, (iv) the breach of any environmental representation or warranty set forth in Section 5.19, (v) the grant to the Agent and the Lenders of any Lien in any property or assets of any of the Loan Parties or any stock or other equity interest in any of the Loan Parties, and (vi) the exercise by the Agent and the Lenders of their rights and remedies (including, without limitation, foreclosure) under any agreements creating any such Lien (but excluding, as to any Indemnitee, any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements incurred solely by reason of the gross negligence or willful misconduct of such Indemnitee as finally determined by a court of competent jurisdiction). The Borrower's obligations under this Section shall survive the termination of this Agreement and the payment of the Obligations. Section 10.2 Right of Setoff. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Loan Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special, time or demand, provisional or final) and any other indebtedness at any time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of any Loan Party against and on account of the Obligations of the Loan Parties to such Lender under this Agreement or under any of the other Loan Documents, including, without limitation, all interests in Obligations purchased by such Lender pursuant to Section 9.7, and all other claims of any nature or description arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. Section 10.3 Notices. Except as otherwise expressly provided herein, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy, telex, or cable communication), and shall be deemed to have been duly given or made when delivered by hand, or five days after being deposited in the United States mail, postage prepaid, or, in the case of telex notice, when sent, answerback received, or, in the case of telecopy notice, when sent, or, in the case of a nationally recognized overnight courier service, one Business Day after delivery to such courier service, addressed, in the case of each party hereto, at its address specified opposite its signature below or on the appropriate Assignment Agreement, or to such other address as may be designated by any party in a written notice to the other parties hereto, provided that notices and communications to the Agent shall not be effective until received by the Agent. 100 107 Section 10.4 Successors and Assigns; Participation; Assignments. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agent, all future holders of the Revolving Notes and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. No Lender may participate, assign or sell any of its Credit Exposure (as defined in clause (b) below) except as required by operation of law, in connec- tion with the merger, consolidation or dissolution of any Lender or as provided in this Section 10.4. (b) Participation. Any Lender may at any time sell to one or more Persons (each a "Participant") participating interests in any Revolving Loan owing to such Lender, any Revolving Note held by such Lender, any Revolving Loan Commitment of such Lender and or any other interest of such Lender hereunder (in respect of any such Lender, its "Credit Exposure"). Notwithstanding any such sale by a Lender of participating interests to a Participant, such Lender's rights and 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 Revolving Note for all purposes under this Agreement (except as expressly provided below), 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. The Borrower agrees that if any Obligations are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence and during the continuance of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Revolving Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or any Revolving Note, provided that such right of setoff shall be subject to the obligations of such Participant to share with the Lenders, and the Lenders agree to share with such Participant, as provided in Section 10.7. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17, provided that no Participant shall be entitled to receive any greater amount pursuant to such sections than the transferor Lender would have been entitled to receive in respect of the amount of the participating interest transferred by such transferor Lender to such Participant had no such transfer occurred. Each Lender agrees that any agreement between such Lender and any such Participant in respect of such participating interest shall not restrict such Lender's right to agree to any amendment, supplement, waiver or modification to this Agreement or any other Loan Document, except where the result of any of the foregoing would be to extend the final maturity of any Obligation or any regularly scheduled installment thereof or reduce the rate or extend the time of payment of interest thereon or reduce the principal amount thereof or release all or substantially all of the Collateral (except as expressly provided in the Loan Documents). 101 108 (c) Assignments. Any Lender may, in accordance with applicable law, at any time assign to any Lender or any affiliate thereof or, with the consent of the Agent, which consent shall not be unreasonably withheld, to any other Person (each an "Assignee") all or any part of its Credit Exposure; provided, that in the case of any such assignment to a Person that is not another Lender or an affiliate of the assigning Lender, each such assignment shall be (i) for a Credit Exposure not less than $5,000,000 and (ii) to an Assignee approved in writing by the Agent, which approval shall not be unreasonably withheld. Such consent of the Agent shall be substantially in the form attached as Schedule II to Exhibit I hereto. The Borrower, the Agent and the Lenders agree that to the extent of any assignment the Assignee shall be deemed to have the same rights and benefits under the Loan Documents and the same rights of setoff and obligation to share pursuant to Section 10.7 as it would have had if it were a Lender hereunder; provided that the Borrower and the Agent shall be entitled to continue to deal solely and directly with the assignor Lender in connection with the interests so assigned to the Assignee unless and until such Assignee becomes a Purchasing Lender pursuant to clause (d) below. (d) Assignments to Purchasing Lenders. Any Lender may at any time and from time to time assign to one or more Persons ("Purchasing Lenders") all or any part of its Credit Exposure pursuant to a supplement to this Agreement, substantially in the form of Exhibit I hereto (an "Assignment Agreement"), executed by such Purchasing Lender, such transferor Lender and the Agent. Upon (i) such execution of such Assignment Agreement, (ii) delivery to the Agent of a notice of assignment substantially in the form of Schedule I to Exhibit I hereto (a "Notice of Assignment") with a copy to the Borrower, together with any consent required pursuant to Section 10.4(c) above, (iii) payment by such Purchasing Lender to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Purchasing Lender and (iv) payment of a $4,000 fee to the Agent for processing of such assignment, such assignment shall become effective on the effective date specified in such Assignment Agreement, which effective date shall be at least five (5) Business Days after delivery of such Notice of Assignment to the Agent, such transferor Lender shall be released from its obligations hereunder to the extent of such assignment and such Purchasing Lender 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, and no further consent or action by the Borrower, the Lenders or the Agent shall be required. Such Assignment Agreement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender as a Lender and the resulting adjustment of the Revolving Loan Commitments, if any, arising from the purchase by such Purchasing Lender of all or a portion of the Credit Exposure of such transferor Lender. (e) Disclosure of Information. The Borrower authorizes each Lender to disclose to any Participant, Assignee or Purchasing Lender (each, a "Transferee") and any prospective Transferee any and all financial and other information in such Lender's possession 102 109 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 of the Borrower prior to entering into this Agreement. (f) Regulation A. Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Revolving Loans and its Revolving Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (g) Transfer and Exchange of Revolving Notes. Promptly after the consummation of any transfer to a Purchasing Lender pursuant hereto, the transferor Lender, the Agent and the Borrower shall make appropriate arrangements so that any Revolving Notes held by such transferor Lender shall be surrendered to the Borrower for cancellation, one or more replacement Revolving Notes in exchange therefor shall be issued to such transferor Lender, and one or more new Revolving Notes shall be issued to such Purchasing Lender, in each case in notional amounts reflecting such transfer. Each such new Revolving Note shall be payable to the Purchasing Lender and shall be substantially in the form of Exhibit A. Section 10.5 Amendments and Waivers. (a) Neither this Agreement, any Revolving Note, any other Loan Document to which the Borrower or any other Loan Party is a party nor any terms hereof or thereof may be amended, supplemented, modified or waived except in accordance with the provisions of this Section. The Required Lenders and the Borrower (or such other Loan Party, as the case may be) may, from time to time, enter into written amendments, supplements, modifications or waivers for the purpose of adding, deleting, changing or waiving any provisions to this Agreement, the Revolving Notes, or the other Loan Documents to which the Borrower or such other Loan Party is a party, provided, that no such amendment, supplement, modification or waiver shall (i) extend the Final Maturity Date or extend the time for payment of any installment, fee or required prepayment of any Obligations or reduce the rate or extend the time of payment of interest on any Obligations, or reduce the principal amount of any Obligations or reduce any fee payable to the Lenders hereunder, or release all or substantially all of the Collateral (except as expressly contemplated by the Loan Documents) or change the amount of any Revolving Loan Commitment of any Lender, or amend, modify or waive any provision of this Section 10.5 or the definition of Required Lenders, or consent to or permit the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or any other Loan Document, or modify any provision hereof providing for the pro rata sharing of payments, in each case without the written consent of all the Lenders, (ii) release (A) Carl Karcher Enterprises, Inc., FEI or any Subsidiary of FEI, Hardee's or any Subsidiary of Hardee's (other than any such Subsidiary which is an Immaterial Subsidiary), from the Guaranty and the other applicable Security Documents (including the release of such 103 110 Loan Party's stock certificates from the Borrower Pledge Agreement or the Subsidiary Pledge Agreement, as applicable), in each case without the written consent of all of the Lenders or (B) any other Subsidiary of the Borrower from the Guaranty and the other applicable Security Documents (including the release of such Loan Party's stock certificates from the Borrower Pledge Agreement or the Subsidiary Pledge Agreement, as applicable) in each case without the written consent of those Lenders whose Pro Rata Shares, in the aggregate, are greater than 66-2/3%; provided that the release from the Guaranty and the other applicable Security Documents (including the release of such Loan Party's stock certificates from the Borrower Pledge Agreement or the Subsidiary Pledge Agreement, as applicable) of (1) Boston Pacific Inc. and CBI Restaurants, Inc. and each Subsidiary of CBI Restaurants, Inc. in existence on or after July 15, 1997, and (2) any Subsidiary of the Borrower (other than a Subsidiary of Hardee's or of FEI) with assets of less than $10,000,000 (as determined in accordance with GAAP) shall not require the consent of any of the Lenders in any of the foregoing circumstances if (x) such Subsidiary (a "Sold Guarantor") is being released from the Guaranty because all or a portion of the assets of such Sold Guarantor are being sold or otherwise disposed of in an Asset Disposition or the Equity Interests of such Sold Guarantor are being sold or otherwise disposed of or an issuance of Equity Interests of such Sold Guarantor is commenced, and immediately after giving effect to such sale, other disposition or issuance of Equity Interests and as a result of such sale, other disposition or issuance of Equity Interests, such Sold Guarantor is no longer a Subsidiary of the Borrower and (y) any such Asset Disposition or sale, other disposition or issuance of Equity Interests is otherwise permitted and commenced in accordance with the terms of this Agreement (and the Agent is hereby authorized by the Lenders to execute and deliver to the Borrower all such documents evidencing any such release) or (iii) amend, modify or waive any provision of Section 9 or any other provision of any Loan Document if the effect thereof is to affect the rights or duties of the Agent, without the written consent of the then Agent. Any such amendment, supplement, modification or waiver shall apply to each of the Lenders equally and shall be binding upon the Borrower, the Lenders, the Agent and all future holders of the Revolving Notes. In the case of any waiver, the Borrower, the Lenders and the Agent shall be restored to their former position and rights hereunder and under the outstanding Revolving Notes, and any Default or Event of Default waived shall be deemed to be cured and not continuing, but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. (b) Each of the Lenders agrees that in the event that such Lender is requested to consent to any amendment, supplement, modification or waiver of any term or condition of or with respect to this Agreement or any other Loan Document, the effectiveness of which requires the consent of all of the Lenders pursuant to the first proviso of Section 10.5(a) hereof, and such Lender shall fail or refuse to give such consent, such Lender (the "Affected Lender") shall be obliged, at the request of the Borrower and with the consent of the Agent, to assign all of its rights and obligations hereunder to (i) another Lender or (ii) another qualified financial institution nominated by the Agent and reasonably acceptable to the Borrower (the "Replacement Lender"), and willing to participate in this Agreement through the 104 111 Final Maturity Date in the place of such Affected Lender; provided that the Affected Lender receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such Lender's Pro Rata Share of all unpaid principal and interest owing to the Lenders and all accrued but unpaid fees and other costs and expenses payable with respect to its Pro Rata Share. The Agent shall give written notice to the Borrower of any such assignment. Section 10.6 No Waiver; Remedies Cumulative. No failure or delay on the part of the Agent or any Lender or any holder of a Revolving Note in exercising any right, power or privilege hereunder or under any other Loan Document and no course of dealing between any Loan Party and the Agent or any Lender or the holder of any Revolving Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof of the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Agent or any Lender or the holder of any Revolving Note would otherwise have. No notice to or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent, the Lenders or the holder of any Revolving Note to any other or further action in any circumstances without notice or demand. Section 10.7 Sharing of Payments. Each of the Lenders agrees that if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Loan Documents, or otherwise) which is applicable to the payment of any Obligations, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in such Obligations owing to such Lenders in such amount as shall result in a proportional participation by all of the Lenders in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Section 10.8 Application of Collateral Proceeds. The Agent shall, unless otherwise specified at the direction of the Required Lenders which direction shall be consistent with the last sentence of this Section 10.8, apply all proceeds of Collateral in the following order: (A) first, to pay Obligations in respect of any fees, expense reimbursements or indemnities then due to the Agent; 105 112 (B) second, to pay Obligations in respect of any fees, expenses, reimbursements or indemnities then due to the Lenders and the Issuer; (C) third, to pay interest due in respect of the Revolving Loans and L/C Obligations; (D) fourth, to the ratable payment of principal outstanding on the Revolving Loans, Obligations for unreimbursed drawings under all Letters of Credit and net termi- nation amounts payable in respect of Rate Hedging Obligations (with the order of application to the installments of any particular Revolving Loan, Obligation for any unreimbursed drawing under any Letter of Credit or net termination amount payable in respect of Rate Hedging Obligation to be determined by the Agent in its sole discretion); (E) fifth, to provide required cash collateral if any pursuant to Section 8.2; and (F) sixth, to the ratable payment of all other Obligations. The order of priority set forth in this Section 10.8 and the related provisions of this Agreement are set forth solely to determine the rights and priorities of the Agent and the Lenders as among themselves. The order of priority set forth in clauses (B) through (F) of this Section 10.8 may at any time and from time to time be changed with the consent of 100% of the Lenders without necessity of notice to or consent of or approval by the Borrower, or any other Person. The order of priority set forth in clause (A) of this Section 10.8 may be changed only with the prior written consent of the Agent. Section 10.9 Governing Law; Submission to Jurisdiction. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW). (b) Any legal action or proceeding with respect to this Agreement or any other Loan Document and any action for enforcement of any judgment in respect thereof may be brought in the courts of the State of Illinois or of the United States of America for the 106 113 Northern District of Illinois, and, by execution and delivery of this Agreement, the Borrower hereby accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and appellate courts. The Borrower irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, the Borrower at its address set forth opposite its signature below. The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Loan Document brought in the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing herein shall affect the right of the Agent, any Lender or any holder of a Revolving Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction. Section 10.10 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Section 10.11 [Intentionally Omitted]. Section 10.12 Amendment and Restatement. This Agreement amends and restates in its entirety the Original Credit Agreement. Upon the effectiveness of this Agreement, the terms and provisions of the Original Credit Agreement shall, subject to this Section 10.12, be superseded hereby. Notwithstanding the amendment and restatement of the Original Credit Agreement by this Agreement, the Borrower shall continue to be liable to the Lenders party to the Original Credit Agreement and the Agent with respect to agreements on the part of the Borrower under the Original Credit Agreement to indemnify any of such Lenders or the Agent in connection with events or conditions arising or existing prior to the Closing Date, including, but not limited to, those events and conditions set forth in Section 10 thereof. This Agreement is given in substitution for the Original Credit Agreement. Upon the effectiveness of this Agreement, each reference to the Original Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection therewith shall mean and be a reference to this Agreement. This Agreement amends, restates and supersedes only the Original Credit Agreement. This Agreement is not a novation. Nothing contained herein or in any of the other Loan Documents, unless expressly herein or therein stated to the contrary, is intended to amend, modify or otherwise affect any other instrument, document or agreement executed and/or delivered in connection with the Original Credit Agreement. 107 114 Section 10.13 Reallocation of Revolving Loans. (a) As of the Closing Date, (i) the Pro Rata Share of each Lender shall be immediately adjusted based upon the application of the definition of "Pro Rata Share" with respect to each Lender's new Revolving Loan Commitment as of the Closing Date after giving effect to this Agreement; (ii) each Lender listed on the signatures pages of this Agreement that was not a party to the Original Credit Agreement shall become a party to this Agreement; and (iii) each Lender that was a party to the Original Credit Agreement whose Pro Rata Share becomes 0% after giving effect to this Agreement shall, upon the occurrence thereof and the reallocation of Revolving Loans in accordance with the terms of Section 10.13(b) and receipt by such Lender of repayment of any Term Loans (as defined in the Original Credit Agreement) made by such Lender and interest accrued thereon, cease to be a Lender party to this Agreement, and all accrued fees and other amounts payable under the Original Credit Agreement for the account of such Lender shall be due and payable on such date; provided, however, that the provisions of Sections 2.16, 2.17, 2.18, 2.19, 9.7 and 10.1 shall continue to inure to the benefit of such Lender. (b) As of the Closing Date, (i) each Lender that, as a result of the adjustment of its Pro Rata Share, is to have a greater principal amount of Revolving Loans outstanding than such Lender had outstanding immediately prior to giving effect to this Agreement shall, if requested by the Agent, deliver to the Agent immediately available funds to cover such Revolving Loans (and the Agent shall, to the extent of the funds so received and the funds received from any Lenders that are not parties to the Original Credit Agreement, disburse funds to each Lender that, as a result of such adjustment of the Pro Rata Shares, is to have a lesser principal amount outstanding than such Lender had outstanding under the Original Credit Agreement); and (ii) immediately prior to giving effect to this Agreement, each Lender that is not a party to the Original Credit Agreement shall deliver to the Agent immediately available funds to cover its Revolving Loans that will equal such Lender's Pro Rata Share of the aggregate amount of Obligations outstanding under this Agreement immediately after giving effect to this Agreement. 108 115 (c) The principal amounts of Revolving Loans outstanding under the Original Credit Agreement immediately prior to giving effect to this Agreement to each Lender that is a party thereto shall be deemed to be Revolving Loans made by that Lender hereunder (as reallocated pursuant to this Section 10.13(b)). Each Letter of Credit issued under the Original Credit Agreement (other than the Existing Letter of Credit) and outstanding immediately prior to giving effect to this Agreement shall be deemed to be a Letter of Credit hereunder. Section 10.14 Headings Descriptive. The headings of the several Sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. Section 10.15 Marshalling; Recapture. Neither the Agent nor any Lender shall be under any obligation to marshall any assets in favor of any Loan Party or any other party or against or in payment of any or all of the Obligations. To the extent any Lender receives any payment by or on behalf of any Loan Party, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to such Loan Party or its estate, trustee, receiver, custodian or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof which has been paid, reduced or satisfied by the amount so repaid shall be reinstated by the amount so repaid and shall be included within the liabilities of such Loan Party to such Lender as of the date such initial payment, reduction or satisfaction occurred. Section 10.16 Severability. In case any provision in or obligation under this Agreement or the Revolving Notes or the other Loan Documents shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. Section 10.17 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default or Event of Default if such action is taken or condition exists. Section 10.18 Survival. All indemnities set forth herein including, without limitation, in Sections 2.15, 2.16, 2.17, 2.18, 9.7 and 10.1 shall survive the execution and delivery of this Agreement and the Revolving Notes and the making and repayment of the Revolving Loans hereunder. 109 116 Section 10.19 Domicile of Revolving Loans. Each Lender may transfer and carry its Revolving Loans at, to or for the account of any branch office, subsidiary or affiliate of such Lender. Section 10.20 Limitation of Liability. No claim may be made by any Loan Party or any other Person against the Agent or any Lender or the Affiliates, directors, officers, employees, attorneys or agent of any of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement or any other Transactions or the Hardee's Acquisition, or any act, omission or event occurring in connection therewith; and each Loan Party hereby waives, releases and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 10.21 Calculations; Computations. The financial statements to be furnished to the Agent and the Lenders pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved and consistent with GAAP as used in the preparation of the financial statements referred to in Section 5.5, and, except as otherwise specifically provided herein, all computations determining compliance with Section 7.1 hereof shall utilize GAAP. Section 10.22 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING HEREUNDER OR THEREUNDER. Section 10.23 References. Unless otherwise expressly specified herein, all references to "Article," "Section,""Schedule," or "Exhibit" shall mean articles and sections of, and schedules and exhibits to, this Agreement. 110 117 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. CKE RESTAURANTS, INC. By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 401 W. Carl Karcher Way Anaheim, CA 92801 Attn: General Counsel Telephone: (714) 774-5796 Telecopy: (714) 520-4485 118 PARIBAS, as Agent and as a Lender By: ------------------------------- Print Name: Clark King Title: Director By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 227 W. Monroe Street Suite 3300 Chicago, IL 60606 Attn: Telephone: (312) 853-6000 Telecopy: (312) 853-6020 with a copy to: Maureen B. Keating Paribas 787 Seventh Avenue New York, NY 10019-6016 Telephone: (212) 841-2286 Telecopy: (212) 841-2275 119 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. By: -------------------------------- Print Name: ------------------------- Title: ------------------------------ By: -------------------------------- Print Name: ------------------------- Title: ------------------------------ Address: 4 Embarcadero Center Suite 630 San Francisco, CA 94111 Attn: James F. McCann Telephone: (415) 788-1371 x227 Telecopy: (415) 781-0622 120 BANK LEUMI USA By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 8383 Wilshire Blvd. Suite 400 Beverly Hills, CA 90211 Attn: Jacques Delvoye Telephone: (323) 966-4727 Telecopy: (323) 655-3573 121 BANK UNITED By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 3200 Southwest Freeway Suite 1900 Houston, TX 77027 Attn: Phil Green Telephone: (713) 543-6949 Telecopy: (713) 543-6651 122 BANKBOSTON, N.A. By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 100 Federal Street 01-09-05 Boston, MA 02110 Attn: J. Nicholas Cole Telephone: (617) 434-2174 Telecopy: (617) 434-0637 123 CALIFORNIA BANK & TRUST (f/k/a Sumitomo Bank of California) By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 20100 Magnolia Street P.O. Box 5820 Huntington Beach, CA 92646 Attn: Sajeda Simjee Telephone: (714) 965-5524 Telecopy: (714) 968-4959 124 CENTURA BANK By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 131 N. Church Street P.O. Box 1220 Rocky Mount, NC 27802 Attn: Lowry D. Perry Telephone: (252) 454-4433 Telecopy: (252) 454-4040 125 FIRST AMERICAN NATIONAL BANK By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 4th and Union Street Nashville, TN 37237-0310 Attn: Stephen G. Arnold Telephone: (615) 736-6223 Telecopy: (615) 748-2485 126 FIRST BANK & TRUST By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 4301 MacArthur Blvd. Newport Beach, CA 92660 Attn: Bala Balkrishna Telephone: (949) 475-6318 Telecopy: (949) 475-8445 127 MANUFACTURERS BANK By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 515 South Figueroa Street Los Angeles, CA 90071 Attn: Gregory J. Hall Telephone: (213) 489-6291 Telecopy: (213) 489-6252 128 NATIONAL BANK OF KUWAIT By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 299 Park Avenue New York, NY 10171 Attn: Jeffrey J. Ganter Telephone: (212) 303-9868 Telecopy: (212) 319-8269 129 SANWA BANK, LIMITED By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 601 S. Figueroa Street, W5-4 Los Angeles, CA 90017 Attn: Toshiko Boyd Telephone: (213) 896-7176 Telecopy: (213) 623-4912 130 U.S. BANK NATIONAL ASSOCIATION By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 555 S.W. Oak Street, PL-4 Portland, OR 97204 Attn: Janet E. Jordan Telephone: (503) 275-5871 Telecopy: (503) 275-5428 131 WELLS FARGO BANK, NATIONAL ASSOCIATION By: ------------------------------- Print Name: ------------------------ Title: ----------------------------- Address: 2030 Main Street Suite 900 Irvine, CA 92614 Attn: Sandra Martin Telephone: (949) 251-4156 132 Schedule 1.1 to Credit Agreement ---------------- LENDERS AND REVOLVING LOAN COMMITMENTS Name of Lender Revolving Loan Commitment - -------------- ------------------------- Paribas EX-99.1 4 PRESS RELEASE-FEBRUARY 25, 1999 1 EXHIBIT 99.1 NEWS RELEASE CONTACTS: Loren Pannier Senior Vice President, Investor Relations 714.778.7109 CKE RESTAURANTS, INC. PRICES PRIVATE PLACEMENT OF $200.0 MILLION OF SENIOR SUBORDINATED NOTES ANAHEIM, Calif. - February 25, 1999 - CKE Restaurants, Inc. (NYSE:CKR) today announced that it has priced a $200.0 million private placement of 10-year senior subordinated notes due 2009, with a coupon of 9 1/8 percent. The notes are non-callable for the first five years. The offering is expected to close on March 4, 1999. Net proceeds are expected to be approximately 194.8 million. The Company intends to use the proceeds to repay a portion of the indebtedness outstanding under its senior credit facility. The securities offered have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws, and may not be offered or sold in the United States absent registration or applicable exemption from registration requirements. CKE Restaurants, Inc., through its subsidiaries, franchisees and licensees, operates 852 Carl's Jr. quick-service restaurants, primarily located in California, Oklahoma, Arizona, Nevada, Oregon, Colorado and Mexico; 2,813 Hardee's quick-service restaurants in 34 states and 10 foreign countries and 111 Taco Bueno quick-service restaurants in Texas and Oklahoma. EX-99.2 5 PRESS RELEASE-MARCH 4, 1999 1 EXHIBIT 99.2 NEWS RELEASE CONTACTS: Loren Pannier Senior Vice President, Investor Relations 714.778.7109 CKE RESTAURANTS, INC. AMENDS SENIOR CREDIT FACILITY TO PROVIDE FOR A $500.0 MILLION REVOLVING LINE OF CREDIT ANAHEIM, Calif. - March 4, 1999 - CKE Restaurants, Inc. (NYSE:CKR) today announced that it has completed the amendment and restatement of its senior credit facility, led by Paribas, to provide for a $500.0 million revolving credit facility, which includes a $75.0 million letter of credit sub-facility. The facility will be reduced after two years by at least $50.0 million each year, and will mature in February 2004. As a result of the amendment and the closing today of the previously announced $200.0 million senior subordinated note offering, available borrowing capacity under the senior credit facility is approximately $300.0 million. "We are very pleased to have successfully completed both the $200.0 million note offering and the amendment of our senior credit facility," said William P. Foley II, chairman and chief executive officer of CKE Restaurants, Inc. "The addition of this layer of long-term debt to our balance sheet, along with the increased borrowing availability on our senior credit facility will, ensure funding of the conversion of existing Hardee's restaurants to our `Star Hardee's' format." CKE previously announced it was moving forward with remodeling of its Hardee's restaurants at a rate of five to seven restaurants per week. The Star Hardee's format includes charbroiling, limited table service and the addition of some popular Carl's Jr. menu items. "We are excited by the roll-out because in restaurants that have been remodeled, we are seeing sales increases of at least 10 percent above pre-conversion levels," said Tom Thompson, president and chief operating officer of CKE Restaurants, Inc. CKE Restaurants, Inc., through its subsidiaries, franchisees and licensees, operates 852 Carl's Jr. quick-service restaurants, primarily located in California, Oklahoma, Arizona, Nevada, Oregon, Colorado and Mexico; 2,813 Hardee's quick-service restaurants in 34 states and 10 foreign countries and 111 Taco Bueno quick-service restaurants in Texas and Oklahoma. -----END PRIVACY-ENHANCED MESSAGE-----