Document:

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EXHIBIT 10.17 CREDIT AGREEMENT BETWEEN THE STEAK N SHAKE COMPANY AND FIFTH THIRD
BANK, INDIANA

                                CREDIT AGREEMENT

                                     BETWEEN

                            THE STEAK N SHAKE COMPANY

                                       AND

                       FIFTH THIRD BANK, INDIANA (CENTRAL)

                                   DATED AS OF

                                NOVEMBER 16, 2001

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                                TABLE OF CONTENTS

<Table>
<S>                                                                                                 <C>
CREDIT AGREEMENT                                                                                    Page 1

     Section 1. ACCOUNTING TERMS -- DEFINITIONS                                                     Page 1

     Section 2. THE LOAN                                                                            Page 6
             a.     The Revolving Loan                                                              Page 7
                    (i)       The Commitment -- Use of Proceeds                                     Page 7
                    (ii)      Method of Borrowing                                                   Page 7
                    (iii)     Interest on the Revolving Loan                                        Page 8
                    (iv)      Unused Fee                                                            Page 9
                    (v)       Payments of Principal                                                 Page 9
             b.     Standby Letters of Credit                                                       Page 9
             c.     Provisions Applicable to the Loan                                               Page 10
                    (i)       Procedures for Electing LIBOR-based Rates -- Certain Effects
                              of Election                                                           Page 10
                    (ii)      Calculation of Interest                                               Page 13
                    (iii)     Manner of Payment -- Application                                      Page 13
                    (iv)      Automatic Debit                                                       Page 13

     Section 3. REPRESENTATIONS AND WARRANTIES                                                      Page 14
             a.     Organization of the Company and its Subsidiaries                                Page 14
             b.     Authorization; No Conflict                                                      Page 14
             c.     Validity and Binding Nature                                                     Page 15
             d.     Financial Statements                                                            Page 15
             e.     Litigation and Contingent Liabilities                                           Page 16
             f.     Liens                                                                           Page 16
             g.     Employee Benefit Plans                                                          Page 16
             h.     Payment of Taxes                                                                Page 16
             i.     Investment Company Act                                                          Page 17
             j.     Regulation U and other Federal Regulations                                      Page 17
             k.     Hazardous Substances                                                            Page 17
             l.     Subsidiaries                                                                    Page 17

     Section 4. GUARANTIES                                                                          Page 18

     Section 5. AFFIRMATIVE COVENANTS OF THE COMPANY                                                Page 18
             a.     Corporate Existence                                                             Page 18
             b.     Reports, Certificates and Other Information                                     Page 18
                    (i)       Annual Statements                                                     Page 18
                    (ii)      Interim Statements                                                    Page 19
                    (iii)     Officer's Certificate                                                 Page 19
                    (iv)      Orders                                                                Page 19
                    (v)       Notice of Default or Litigation                                       Page 19
                    (vi)      Compliance Certificates                                               Page 20
                    (vii)     Registration Statements and Reports                                   Page 20
                    (viii)    Other Information                                                     Page 20
             c.     Books, Records and Inspections                                                  Page 20
             d.     Insurance                                                                       Page 20
             e.     Taxes and Liabilities                                                           Page 20
             f.     Compliance with Legal and Regulatory Requirements                               Page 20
             g.     Financial Covenants                                                             Page 21
                    (i)       Maximum Ratio of Funded Debt to EBITDA                                Page 21
                    (ii)      Minimum Debt Service Coverage Ratio                                   Page 21
             h.     Primary Banking Relationship                                                    Page 21
             i.     Employee Benefit Plans                                                          Page 21

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             j.     Hazardous Substances                                                            Page 22

     Section 6. NEGATIVE COVENANTS OF THE COMPANY                                                   Page 23
             a.     Other Agreements.                                                               Page 23
             b.     Liens                                                                           Page 23
             c.     Guaranties                                                                      Page 24
             d.     Loans or Advances                                                               Page 24
             e.     Mergers, Consolidations, Sales, Acquisition or Formation
                      of Subsidiaries                                                               Page 25
             f.     Margin Stock                                                                    Page 25
             g.     Judgments                                                                       Page 25
             h.     Principal Office                                                                Page 26
             i.     Hazardous Substances                                                            Page 26
             j.     Debt                                                                            Page 26

     Section 7. CONDITIONS OF LENDING                                                               Page 26
             a.     No Default                                                                      Page 26
             b.     Documents and Fees to be Furnished or Paid at Closing                           Page 27

     Section 8. EVENTS OF DEFAULT                                                                   Page 30
             a.     Nonpayment of the Loan or to Reimburse for Letters of Credit                    Page 30
             b.     Nonpayment of Other Indebtedness for Borrowed Money                             Page 30
             c.     Other Material Obligations                                                      Page 31
             d.     Bankruptcy, Insolvency, etc                                                     Page 31
             e.     Warranties and Representations                                                  Page 31
             f.     Violations of Negative and Financial Covenants                                  Page 31
                                                     ii
             g.     Noncompliance With Other Provisions of this Agreement                           Page 32

     Section 9. EFFECT OF EVENT OF DEFAULT                                                          Page 32

     Section 10. WAIVER -- AMENDMENTS                                                               Page 32

     Section 11. NOTICES                                                                            Page 33

     Section 12. COSTS, EXPENSES AND TAXES                                                          Page 34

     Section 13. SEVERABILITY                                                                       Page 34

     Section 14. CAPTIONS                                                                           Page 34

     Section 15. GOVERNING LAW -- JURISDICTION                                                      Page 34

     Section 16. PRIOR AGREEMENTS, ETC                                                              Page 35

     Section 17. SUCCESSORS AND ASSIGNS                                                             Page 35

     Section 18. WAIVER OF JURY TRIAL                                                               Page 35

     Section 19. ARBITRATION                                                                        Page 35
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Schedule I     List of Company's Locations

Exhibit "A"    Officer's Certificate

Exhibit "B"    Promissory Note (Revolving Loan) ($30,000,000.00)

Exhibit "C"    Schedule of Exceptions

Exhibit "D"    Guaranty Agreement

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                                CREDIT AGREEMENT

     THE STEAK N SHAKE COMPANY, an Indiana corporation (the "Company"), and
FIFTH THIRD BANK, INDIANA (CENTRAL), a national banking association with its
principal office in Indianapolis, Indiana (the "Bank"), agree as follows:

     SECTION 1. ACCOUNTING TERMS -- DEFINITIONS. All accounting and financial
terms used in this Agreement are used with the meanings such terms would be
given in accordance with generally accepted accounting principles except as may
be otherwise specifically provided in this Agreement. The following terms have
the meanings indicated when used in this Agreement with the initial letter
capitalized:

     a.   "ADVANCE" means a disbursement of proceeds of the Revolving Loan.

     b.   "AGREEMENT" means this Credit Agreement between the Company and the
          Bank, as it may from time to time be amended.

     c.   "APPLICABLE SPREAD" means that number of Basis Points to be taken into
          account in determining the per annum rate at which the LIBOR-based
          Rate of interest on the Revolving Loan shall be calculated and which
          shall be at all times 75 Basis Points.

     d.   "AUTHORIZED OFFICER" means the Chief Financial Officer or the
          Treasurer of the Company or such other officer whose authority to
          perform acts to be performed only by an Authorized Officer under the
          terms of this Agreement is evidenced to the Bank by a certified copy
          of an appropriate resolution of the Board of Directors of the Company.

     e.   "BASIS POINT" means one one-hundredth of a percent.

     f.   "BANK" is used as defined in the preamble.

     g.   "BANKING DAY" means a day on which the principal office of the Bank in
          the City of Indianapolis, Indiana, is open for the purpose of
          conducting substantially all of the Bank's business activities.

     h.   "CODE" means the Internal Revenue Code of 1986, as amended.

     i.   "COMMITMENT" means the agreement of the Bank to extend the Revolving
          Loan to the Company until the Revolving Loan Maturity Date, and if the
          context so requires, the term may also refer to the maximum principal
          amount which is permitted to be outstanding under the Revolving Loan
          at any time.

     j.   "COMPANY" is used as defined in the Preamble.

     k.   "EBITDA" means earnings before interest, taxes, depreciation, and
          amortization, all determined in accordance with GAAP.

     l.   "ERISA" means the Employee Retirement Income Security Act of 1974, as
          amended.

     m.   "EVENT OF DEFAULT" means any of the events described in Section 8.

     n.   "FUNDED DEBT" means the sum of the following: (i) the aggregate
          principal amount of all indebtedness for borrowed money, including,
          without limitation, the aggregate principal amount of all indebtedness
          for the deferred purchase price of property and services and the
          aggregate principal amount of all indebtedness created in and arising
          under all conditional sales and title retention agreements, plus (ii)
          the aggregate amount of all obligations under all capital leases for
          which the Company is liable as lessee, plus (iii) the aggregate
          outstanding principal balance of the Loan at the time of
          determination,

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          plus (iv) the aggregate outstanding principal balance of the Senior
          Notes at the time of determination, plus (v) all Swaps.

     o.   "GAAP" means generally accepted account principles as then in effect,
          which shall include the official interpretations thereof by the
          Financial Accounting Standards Board, consistently applied.

     p.   "GUARANTOR" and "GUARANTORS" are used as defined in Section 4.

     q.   "GUARANTY" and "GUARANTIES" are used as defined in Section 4.

     r.   "HAZARDOUS SUBSTANCE" means any hazardous or toxic substance regulated
          by any federal, state or local statute or regulation including but not
          limited to the Comprehensive Environmental Response, Compensation and
          Liability Act, the Resource Conservation and Recovery Act and the
          Toxic Substance Control Act, or by any federal, state or local
          governmental agencies having jurisdiction over the control of any such
          substance including but not limited to the United States Environmental
          Protection Agency.

     s.   "INTEREST PERIOD" means each consecutive one, two, or three month
          period for which the Company shall have selected the LIBOR-based Rate,
          effective as of the first day of each Interest Period and ending on
          the last day of each Interest Period; provided, that if any Interest
          Period is selected to end on a date for which there is no numerical
          equivalent to the date on which the Interest Period commenced, then
          the Interest Period shall end instead on the last day of such calendar
          month.

     t.   "LETTER OF CREDIT" is used as defined in Section 2(b).

     u.   "LIBOR ADVANCE" means an Advance on which interest accrues at a
          LIBOR-based Rate.

     v.   "LIBOR-BASED RATE" means that per annum rate of interest which is
          equal to the sum of the Applicable Spread plus the London Interbank
          Offered Rate.

     w.   "LOAN" means the Revolving Loan.

     x.   "LOAN DOCUMENT" means any of this Agreement, the Revolving Note, the
          Guaranties, all Reimbursement Agreements, and any other instrument or
          document which evidences or secures the Loan or Letters of Credit, or
          which expresses an agreement as to terms applicable to the Loan, and
          in the plural means any two or more of the Loan Documents, as the
          context requires.

     y.   "LONDON BUSINESS DAY" means any day other than a Saturday, Sunday, or
          a day on which banking institutions are generally authorized or
          obligated by law or executive order to close in the City of London,
          England.

     z.   "LONDON INTERBANK OFFERED RATE" means as to each Interest Period, the
          offered rate for U.S. Dollar deposits of not less than One Million and
          00/100 Dollars ($1,000,000.00) as of 11:00 a.m. City of London,
          England time two (2) London Business Days prior to the first day of
          each Interest Period as shown on the display designated as "British
          Bankers Association Interest Settlement Rates" on the Telerate System
          ("Telerate"), page 3750 or page 3740, or such other page or pages as
          may replace such pages on Telerate for the purpose of displaying such
          rate or any successor rate reporting system; provided, however, that
          if such rate is not available on the Telerate then such offered rate
          shall be otherwise independently determined by the Bank from an
          alternate, substantially similar independent source available to the
          Bank or shall be calculated by the Bank by a substantially similar
          methodology as that theretofore used to determine such offered rate in
          Telerate.

     aa.  "NOTE" means the Revolving Note.

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     bb.  "OBLIGATIONS" means all obligations of the Company in favor of the
          Bank of every type and description, direct or indirect, absolute or
          contingent, due or to become due, now existing or hereafter arising,
          including but not limited to: (i) all of such obligations on account
          of the Loan, including any Advances made pursuant to any extension of
          the Commitment beyond the initial Revolving Loan Maturity Date or
          pursuant to any other amendment of this Agreement, (ii) the obligation
          of the Company to reimburse the Bank in the amount of each drawing
          made under Letters of Credit and to pay all fees relating thereto as
          provided herein, and (iii) all other obligations arising under any
          Loan Document as amended from time to time.

     cc.  "OFFICER'S CERTIFICATE" means a certificate in the form attached
          hereto as EXHIBIT "A" signed by the chief executive officer or the
          chief financial officer of the Company, confirming that all of the
          representations and warranties contained in Section 3 of this
          Agreement are true and correct as of the date of such certificate
          except as specified therein and with the further exceptions that: (i)
          the representation contained in Section 3(d) shall be construed so as
          to refer to the latest financial statements which have been furnished
          to the Bank as of the date of any Officer's Certificate, (ii) the
          representations contained in Section 3(k) (with respect to Hazardous
          Substances) will be construed so as to apply not only to the Company,
          but also to any Subsidiaries, whether now owned or hereafter acquired,
          (iii) the representation contained in Section 3(l) shall be deemed to
          be amended to reflect the existence of any Subsidiary hereafter formed
          or acquired by the Company with the consent of the Bank, and (iv) all
          other representations will be construed to have been amended to
          conform with any changes of which the Company shall have previously
          given the Bank notice in writing. The Certificate shall further
          confirm that no Event of Default or Unmatured Event of Default shall
          have occurred and be continuing as of the date of the Certificate or
          shall describe any such event which shall have occurred and be then
          continuing and the steps being taken by the Company to correct it.

     dd.  "PERSON" means any of an individual, partnership, joint venture,
          corporation, trust, unincorporated organization, a government or any
          department or agency thereof.

     ee.  "PLAN" means an employee pension benefit plan as defined in ERISA.

     ff.  "PRIME-BASED RATE" means any variable rate at which interest may
          accrue on all or a portion of the Loan under the terms of this
          Agreement, which rate is determined by reference to the Prime Rate.

     gg.  "PRIME RATE" means the rate of interest per annum established from
          time to time by the Bank at is principal office in Indianapolis,
          Indiana, whether or not the Bank shall at times lend to borrowers at
          lower rates of interest or, if there is no such Prime Rate, then its
          base rate or such other rate as may be substituted by the Bank for the
          Prime Rate; provided that in no event shall the Prime Rate exceed the
          highest rate permitted by law.

     hh.  "PRUDENTIAL" means The Prudential Insurance Company of America, its
          successors, and assigns.

     ii.  "PRUDENTIAL AFFILIATE" means any corporation or other entity all of
          the voting stock or equivalent voting securities or interests of which
          is owned by Prudential either directly or through another Prudential
          Affiliate.

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     jj.  "PRUDENTIAL NOTE PURCHASE AGREEMENT" means that certain Note Purchase
          and Private Shelf Agreement dated as of September, 27, 1995, entered
          into by and among the Company, Prudential, and each Prudential
          Affiliate which becomes a party thereto, as amended from time to time.

     kk.  "REIMBURSEMENT AGREEMENT" is used as defined in Section 2(b).

     ll.  "REVOLVING LOAN" is used as defined in Section 2(a)(i) herein.

     mm.  "REVOLVING LOAN MATURITY DATE" means January 30, 2005.

     nn.  "REVOLVING NOTE" is used as defined in Section 2(a)(ii) herein.

     oo.  "SCHEDULE OF EXCEPTIONS" means that certain disclosure exhibit
          attached hereto as EXHIBIT "C."

     pp.  "SENIOR NOTE" means any of the Series A Notes, the Series B Notes, the
          Series C Notes, or the Shelf Notes, issued by the Company and
          purchased by Prudential or a Prudential Affiliate pursuant to the
          Prudential Note Purchase Agreement, and in the plural means all of
          them, collectively.

     qq.  "SUBORDINATED DEBT" means indebtedness of the Company which is
          subordinated to the indebtedness of the Company to the Bank on such
          terms that such indebtedness is, in the judgment of the Bank,
          functionally the equivalent of shareholders' equity in relation to the
          Company's indebtedness to the Bank.

     rr.  "SUBSIDIARY" means any corporation, partnership, joint venture or
          other business entity located in the United States of America or in
          any other country over which the Company exercises control, provided
          that it shall be conclusively presumed that the Company exercises
          control over any such entity fifty-one percent (51%) or more of the
          equity interest in which is owned by the Company, directly or
          indirectly.

     ss.  "SWAPS" means, with respect to any Person, payment obligations with
          respect to interest swaps or hedges, currency swaps or hedges and
          similar obligations obligating such Person to make payments, whether
          periodically or upon the happening of a contingency. For purposes of
          this Agreement, the amount of the obligation under any Swap shall be
          the amount determined in respect thereof as of the end of the then
          most recently ended fiscal quarter of such Person based on the
          assumption that such Swap had terminated at the end of such fiscal
          quarter, and in making such determination, if any agreement relating
          to such Swap provides for the netting of amounts payable by and to
          such Person thereunder or if any such agreement provides for the
          simultaneous payment of amounts by and to such Person, then in each
          such case, the amount of such obligation shall be the net amount so
          determined.

     tt.  "UNMATURED EVENT OF DEFAULT" means any event specified in Section 7
          which is not initially an Event of Default, but which would, if
          uncured, become an Event of Default with the giving of notice or the
          passage of time or both.

     SECTION 2. THE LOAN. Subject to all of the terms and conditions of this
Agreement, the Bank will make the Loan described in this Section to the
Company.

     a.   THE REVOLVING LOAN. The Bank will make a revolving loan to the Company
          on the following terms and subject to the following conditions:

          (i)  THE COMMITMENT -- USE OF PROCEEDS. From this date and until the
               Revolving Loan Maturity Date, the Bank agrees to make Advances
               (collectively, the "Revolving Loan") under a

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               revolving line of credit from time to time to the Company of
               amounts not exceeding in the aggregate at any time outstanding
               Thirty Million Dollars ($30,000,000.00) (the "Commitment").
               Proceeds of the Revolving Loan may be used by the Company only to
               fund general corporate purposes.

          (ii) METHOD OF BORROWING. The obligation of the Company to repay the
               Revolving Loan shall be evidenced by a promissory note (the
               "Revolving Note") of the Company in the form of EXHIBIT "B"
               attached hereto. So long as no Event of Default or Unmatured
               Event of Default shall have occurred and be continuing and until
               the Revolving Loan Maturity Date, the Company may borrow, repay
               (subject to the requirements of Section 2(c)) and reborrow under
               the Revolving Note on any Banking Day; provided, that no
               borrowing may cause the principal balance of the Loan to exceed
               the Commitment or may result in an Event of Default or an
               Unmatured Event of Default. Each Advance under the Revolving Loan
               shall be conditioned upon receipt by the Bank from the Company of
               a written confirmation from an Authorized Officer and, upon the
               request of the Bank, an Officer's Certificate. The Bank may, at
               its discretion, make a disbursement upon the oral request of the
               Company made by an Authorized Officer, or upon a request
               transmitted to the Bank by telephone facsimile ("fax") machine,
               or by any other form of written electronic communication (all
               such requests for Advances being hereafter referred to as
               "informal requests"). In so doing, the Bank may rely on any
               informal request which shall have been received by it in good
               faith from a person reasonably believed to be an Authorized
               Officer. Each informal request shall be promptly confirmed by a
               written confirmation from an Authorized Officer and, if the Bank
               so requires, an Officer's Certificate, and in all events each
               request for an Advance shall in and of itself constitute the
               representation of the Company that no Event of Default or
               Unmatured Event of Default has occurred and is continuing or
               would result from the making of the requested Advance and that
               the making of the requested Advance shall not cause the principal
               balance of the Revolving Loan to exceed the Commitment. All
               borrowings and reborrowings and all repayments shall be in
               amounts of not less than One Hundred Thousand Dollars
               ($100,000.00), except for repayment of the entire principal
               balance of the Revolving Loan. Upon receipt of a request for an
               Advance and upon compliance with any other conditions of lending
               stated in this Section, the Bank shall disburse the amount of the
               requested Advance to the Company. All Advances by the Bank and
               payments by the Company shall be recorded by the Bank on its
               books and records, and the principal amount outstanding from time
               to time, plus interest payable thereon, shall be determined by
               reference to the books and records of the Bank. The Bank's books
               and records shall be presumed PRIMA FACIE to be correct as to
               such matters.

          (iii) INTEREST ON THE REVOLVING LOAN. The principal amount of the
               Revolving Loan outstanding from time to time shall bear interest
               until maturity of the Revolving Note at a rate per annum equal to
               the Prime Rate, except that at the option of the Company,
               exercised from time to time as provided in Section 2(c)(i),
               interest may accrue prior to maturity on any

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               Advance or on the entire outstanding balance of the Revolving
               Loan as to which no LIBOR-based Rate previously elected remains
               in effect, at a LIBOR-based Rate for an Interest Period selected
               by the Company; provided, further, that an election of the
               LIBOR-based Rate for a period extending beyond the Revolving Loan
               Maturity Date shall be permitted only at the discretion of the
               Bank. After maturity, whether on the Revolving Loan Maturity Date
               or on account of acceleration upon the occurrence of an Event of
               Default, and until paid in full, the Revolving Loan shall bear
               interest at a per annum rate equal to the Prime Rate plus two
               percent (2%), except that as to any portion of the Loan for which
               the Company may have elected the LIBOR-based Rate for a period of
               time that has not expired at maturity, such portion shall, during
               the remainder of such period, bear interest at the LIBOR-based
               Rate then in effect plus two percent (2%) per annum. Accrued
               interest shall be due and payable monthly on the last Banking Day
               of each month prior to maturity. After maturity, interest shall
               be payable as accrued and without demand.

          (iv) UNUSED FEE. The Company shall pay to the Bank a facility or
               unused fee for each partial or full calendar quarter during which
               the Commitment is outstanding equal to five and one-half (5.5)
               Basis Points per annum of the average daily excess of the
               Commitment over the aggregate outstanding principal balance of
               the Revolving Loan. For purposes of calculating the unused fee,
               the aggregate amount available to be drawn under all outstanding
               Letters of Credit shall be added to the aggregate outstanding
               principal balance of the Revolving Loan for the same period.
               Unused fees for each calendar quarter shall be due and payable
               within ten (10) days following the Bank's submission of a
               statement of the amount due. Such fees may be debited by the Bank
               when due to any demand deposit account of the Company carried
               with the Bank without further authority. Such fees shall be
               calculated on the basis of a year of 360 days and actual days
               elapsed.

          (v)  PAYMENTS OF PRINCIPAL. The aggregate outstanding principal amount
               of the Revolving Loan shall be due and payable in full on the
               Revolving Loan Maturity Date.

     b.   STANDBY LETTERS OF CREDIT. At any time that the Company is entitled to
          an Advance under the Revolving Loan, the Bank shall, upon the
          application of the Company, issue for the account of the Company, a
          standby letter of credit (each a "Letter of Credit") in an amount not
          in excess of the maximum Advance that the Company would then be
          entitled to obtain under the Revolving Loan; provided, that (i) the
          total amount of Letters of Credit which are outstanding at any time
          shall not exceed Ten Million Dollars ($10,000,000.00), (ii) the
          issuance of any Letter of Credit with a maturity date beyond the
          Revolving Loan Maturity Date shall be entirely at the discretion of
          the Bank, (iii) the form of the requested Letter of Credit shall be
          satisfactory to the Bank in the reasonable exercise of the Bank's
          discretion; and (iv) the Company shall have executed an application
          and reimbursement agreement for the Letter of Credit (a "Reimbursement
          Agreement") in the Bank's standard form. While any Letter of Credit is
          outstanding, the maximum amount of Advances which may be outstanding
          under the Revolving Loan shall be reduced by the maximum amount
          available to be drawn under the Letter of Credit. The Company shall
          pay the Bank a commission for each Letter of

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          Credit issued calculated at the rate of seventy-five (75) Basis Points
          per annum of the maximum amount available to be drawn under the Letter
          of Credit. Such commissions shall be calculated on the basis of a 360
          day year and the actual number of days in the period during which the
          Letter of Credit will be outstanding. The Company shall pay the Bank's
          standard transaction fees with respect to any transactions occurring
          on account of any Letter of Credit. Commissions shall be payable when
          the related Letters of Credit are issued and transaction fees shall be
          payable upon completion of the transaction as to which they are
          charged. All such commissions and fees may be debited by the Bank to
          any deposit account of the Company carried with the Bank without
          further authority, and in any event, shall be paid by the Company
          within ten (10) days following billing.

     c.   PROVISIONS APPLICABLE TO THE LOAN. The following provisions are
          applicable to the Loan:

          (i)  PROCEDURES FOR ELECTING THE LIBOR-BASED RATE -- CERTAIN EFFECTS
               OF ELECTION. The LIBOR-based Rate may be elected only in
               accordance with the following procedures, shall be subject to the
               following conditions and the election of the LIBOR-based Rate
               shall have the following consequences in addition to other
               consequences stated in this Agreement:

               A.   The LIBOR-based Rate may be elected only for the Loan or
                    portions of the Loan in a minimum amount of $500,000.00.

               B.   The LIBOR-based Rate may not be elected at any time that an
                    Event of Default or Unmatured Event of Default has occurred
                    and is continuing.

               C.   The Company may prepay all or any portion of the principal
                    amount of a Loan bearing interest at a LIBOR-based Rate;
                    provided, that if the Company makes any such prepayment
                    other than on the last day of an Interest Period, the
                    Company shall pay all accrued interest on the principal
                    amount prepaid with such prepayment and, on demand, shall
                    reimburse the Bank and hold the Bank harmless from all
                    losses and expenses incurred by the Bank as a result of such
                    prepayment, including, without limitation, any losses and
                    expenses arising from the liquidation or reemployment of
                    deposits acquired to fund or maintain the principal amount
                    prepaid. Such reimbursement shall be calculated as though
                    the Bank funded the principal amount prepaid through the
                    purchase of U.S. Dollar deposits in the London, England
                    interbank market having a maturity corresponding to such
                    Interest Period and bearing an interest rate equal to the
                    London Interbank Offered Rate for such Interest Period,
                    whether in fact that is the case or not. The Bank's
                    determination of the amount of such reimbursement shall be
                    conclusive in the absence of manifest error.

               D.   On any Banking Day, the Company may request a quotation of
                    the LIBOR-based Rate then in effect from the Bank. As soon
                    as possible, and provided that such request is received by
                    the Bank prior to 12:00 noon, Indianapolis, Indiana time,
                    the Bank shall quote such LIBOR-based Rate before 12:00
                    noon, Indianapolis, Indiana, on the next following Banking
                    Day. The Company shall then have until the end of the
                    Banking Day on which such quotation is given or within such
                    shorter time as the Bank may specify, to exercise its option
                    to elect the LIBOR-based Rate quoted,

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                    subject to all other conditions and limitations stated in
                    this Agreement. The period for which the LIBOR-based Rate is
                    effective shall begin on the second Banking Day following
                    the day on which the quotation is given.

               E.   An election of the LIBOR-based Rate may be communicated to
                    the Bank on behalf of the Company only by an Authorized
                    Officer. Such election may be communicated by telephone, or
                    by telephone facsimile (fax) machine or any other form of
                    written electronic communication, or by a writing delivered
                    to the Bank. At the request of the Bank, the Company shall
                    confirm any election in writing and such written
                    confirmation shall be signed by an Authorized Officer. The
                    Bank shall be entitled to rely on any oral or written
                    electronic communication of an election of the LIBOR-based
                    Rate which is received by an appropriate Bank employee from
                    anyone reasonably believed in good faith by such employee to
                    be an Authorized Officer.

               F.   The Bank may elect not to quote the LIBOR-based Rate on any
                    day on which the Bank has determined that it is not
                    practical to quote such rate because of the unavailability
                    of sufficient funds to the Bank for appropriate terms at
                    rates approximating the relevant London Interbank Offered
                    Rate, or because of legal or regulatory changes which make
                    it impractical or burdensome for the Bank to lend money at a
                    LIBOR-based Rate.

               G.   If, as a result of any regulatory change, the basis of
                    taxation of payments to the Bank of the principal of or any
                    interest on any Loan bearing interest at a LIBOR-based Rate
                    or any other amounts payable hereunder in respect thereof,
                    other than taxes imposed on the overall net income of the
                    Bank, is changed, or any reserve, special deposit, or
                    similar requirement relating to any extensions of credit or
                    other assets of or any deposits with or other liabilities of
                    the Bank are imposed, modified, or deemed applicable, and
                    the Bank reasonably determines that, by reason thereof, the
                    cost to it of making, issuing, or maintaining any Loan at a
                    LIBOR-based Rate is increased by an amount deemed by it to
                    be material, then the Company shall pay promptly upon demand
                    to the Bank such additional amounts as the Bank reasonably
                    determines will compensate for such increased costs;
                    provided, however, that the Company shall not be the only
                    borrower of the Bank that is singled out from a group of
                    similarly situated borrowers of the Bank subject to this
                    type of provision that is requested to remit increased
                    costs. Any determination by the Bank of increased costs of
                    maintaining deposits made pursuant to the provisions of this
                    section shall be final, absent manifest error.

          (ii) CALCULATION OF INTEREST. Interest on a Loan shall be calculated
               by applying the ratio of the annual interest rate over a year of
               360 days, multiplied by the outstanding principal balance,
               multiplied by the actual number of days the principal balance is
               outstanding.

          (iii) MANNER OF PAYMENT - APPLICATION. All payments of principal and
               interest on the Loan shall be payable at the principal office of
               the Bank in Indianapolis, Indiana, in funds available for

                                       47
<Page>

               the Bank's immediate use in that city and no payment will be
               considered to have been made until received in such funds. All
               payments received on account of the Loan will be applied first to
               the satisfaction of any interest which is then due and payable,
               and to principal only after all interest which is due and payable
               has been satisfied.

          (iv) AUTOMATIC DEBIT. After the occurrence of an Event of Default or
               an Unmatured Event of Default, the Bank may debit when due all
               payments of principal and interest due under the terms of this
               Agreement to any deposit account of the Company carried with the
               Bank without further authority.

SECTION 3. REPRESENTATIONS AND WARRANTIES. To induce the Bank to make the Loans,
the Company represents and warrants to the Bank that:

a.   ORGANIZATION OF THE COMPANY AND ITS SUBSIDIARIES. The Company is a
     corporation organized, existing and in good standing under the laws of the
     State of Indiana, and each Subsidiary is a corporation (or, in the case of
     Steak n Shake, L.P., a limited partnership) duly organized, existing, and
     in good standing under the laws of the jurisdiction in which it is
     incorporated or created. The Company and each Subsidiary is qualified to do
     business in every jurisdiction in which: (i) the nature of the business
     conducted or the character or location of properties owned or leased, or
     the residences or activities of employees make such qualification
     necessary, and (ii) failure so to qualify might impair the title of the
     Company or the respective Subsidiary to material properties or the
     Company's or the respective Subsidiary's right to enforce material
     contracts or result in exposure of the Company or the Subsidiary to
     liability for material penalties in such jurisdiction. No jurisdiction in
     which the Company or any Subsidiary is not qualified to do business has
     asserted that the Company or such Subsidiary is required to be qualified
     therein except as disclosed on the "Schedule of Exceptions" attached hereto
     as EXHIBIT "C". The principal office of the Company is located at 36 South
     Pennsylvania Street, Suite 500, Indianapolis, Indiana 46204. The Company
     does not conduct any material operations or keep any material amounts of
     property at any other location, except as shown on Schedule I attached
     hereto. The Company has not done business under any name other than its
     present corporate name at any time during the six years preceding the date
     of this Agreement except under the name Consolidated Products, Inc. The
     exact name under which the Company is incorporated is "The Steak n Shake
     Company."

b.   AUTHORIZATION; NO CONFLICT. The execution and delivery of this Agreement,
     the borrowings hereunder, the execution and delivery of all of the other
     Loan Documents and the performance by the Company of its obligations under
     this Agreement and all of the other Loan Documents are within the Company's
     corporate powers, have been duly authorized by all necessary corporate
     action, have received any required governmental or regulatory agency
     approvals and do not and will not contravene or conflict with any provision
     of law or of the Articles of Incorporation or ByLaws of the Company or of
     any agreement binding upon the Company or its properties. The execution and
     delivery of each Guaranty and the performance by the Subsidiaries of their
     obligations under the Guaranties and all of the other Loan Documents to
     which they are parties are within the respective Subsidiary's corporate or
     limited partnership powers, as the case may be, have been duly authorized
     by all necessary corporate or

                                       48
<Page>

     partnership action, as the case may be, have received any required
     governmental or regulatory agency approvals, and do not and will not
     contravene or conflict with any provision of law or of the organizational
     documents or ByLaws or Partnership Agreement of the respective Subsidiary
     or of any agreement binding upon the respective Subsidiary or its
     properties.

c.   VALIDITY AND BINDING NATURE. This Agreement and all of the other Loan
     Documents to which it is a party are the legal, valid and binding
     obligations of the Company and the Subsidiaries, enforceable against the
     Company and the Subsidiaries in accordance with their respective terms,
     except to the extent that enforcement thereof may be limited by bankruptcy,
     insolvency, reorganization, moratorium and other laws enacted for the
     relief of debtors generally and other similar laws affecting the
     enforcement of creditors' rights generally or by equitable principles which
     may affect the availability of specific performance and other equitable
     remedies.

d.   FINANCIAL STATEMENTS. The Company has delivered to the Bank its audited
     financial statements as of September 27, 2000, for the fiscal year of the
     Company then ended and its unaudited financial statements as of September
     26, 2001, for the fiscal year then ended. Such statements have been
     prepared in accordance with generally accepted accounting principles
     consistently applied except, as to the interim statements, for the absence
     of a statement of cash flows, footnotes and adjustments normally made at
     year end which are not material in amount. Such statements present fairly
     the financial position of the Company as of the dates thereof and the
     results of its operations for the periods covered and since the date of the
     latest of such statements there has been no material adverse change in the
     financial position of the Company or in the results of its operations.

e.   LITIGATION AND CONTINGENT LIABILITIES. No litigation, arbitration
     proceedings or governmental proceedings are pending or threatened against
     the Company or any Subsidiary which would, if adversely determined,
     materially and adversely affect its respective financial position or
     continued operations. Neither the Company nor any Subsidiary has any
     material contingent liabilities not provided for or disclosed in the
     financial statements referred to in Section 3(d) or in the "Schedule of
     Exceptions" attached hereto as EXHIBIT "C."

f.   LIENS. None of the assets of the Company or any Subsidiary is subject to
     any mortgage, pledge, title retention lien, or other lien, encumbrance or
     security interest except for liens and security interests described in the
     exceptions enumerated in Section 6(b).

g.   EMPLOYEE BENEFIT PLANS. Each Plan maintained by the Company or any
     Subsidiary is in material compliance with ERISA, the Code, and all
     applicable rules and regulations adopted by regulatory authorities pursuant
     thereto, and the Company and its Subsidiaries have filed all reports and
     returns required to be filed by ERISA, the Code and such rules and
     regulations. No Plan maintained by the Company or any Subsidiary and no
     trust created under any such Plan has incurred any "accumulated funding
     deficiency" within the meaning of Section 412(c)(1) of the Code, and the
     present value of all benefits vested under each Plan did not exceed, as of
     the last annual valuation date, the value of the assets of the respective
     Plans allocable to such vested benefits. The Company has no knowledge that
     any "reportable event" as defined in ERISA has occurred with respect to any
     Plan.

                                       49
<Page>

h.   PAYMENT OF TAXES. The Company and its Subsidiaries have filed all federal,
     state and local tax returns and tax related reports which the Company and
     its Subsidiaries are required to file by any statute or regulation and all
     taxes and any tax related interest payments and penalties that are due and
     payable have been paid, except for such as are being contested in good
     faith and by appropriate proceedings and as to which appropriate reserves
     have been established. Adequate provision has been made for the payment
     when due of all tax liabilities which have been incurred, but are not as
     yet due and payable.

i.   INVESTMENT COMPANY ACT. The Company is not an "investment company" or a
     company "controlled" by an "investment company" within the meaning of the
     Investment Company Act of 1940, as amended.

j.   REGULATION U AND OTHER FEDERAL REGULATIONS. The Company is not engaged
     principally, or as one of its important activities, in the business of
     extending credit for the purpose of purchasing or carrying margin stock
     within the meaning of Regulation U of the Board of Governors of the Federal
     Reserve System. Not more than twenty-five percent (25%) of the consolidated
     assets of the Company or of any Subsidiary consists of margin stock, within
     the contemplation of Regulation U, as amended.

k.   HAZARDOUS SUBSTANCES. Except as disclosed on the "Schedule of Exceptions"
     attached hereto as EXHIBIT "C," to the best knowledge of the Company after
     due inquiry and investigation; (i) there are no underground storage tanks
     of any kind on any premises owned or occupied by or under lease to the
     Company or any Subsidiary; (ii) there are no tanks, drums or other
     containers of any kind on premises owned or occupied by or under lease to
     the Company or any Subsidiary, the contents of which are unknown to the
     Company; (iii) as of the date of this Agreement, no premises owned or
     occupied by or under lease to the Company or any Subsidiary are being used
     for any activities involving the use, treatment, transportation,
     generation, storage or disposal of any Hazardous Substances in reportable
     quantities; (iv) no Hazardous Substances in reportable quantities have been
     released on any such premises nor is there any threat of release of any
     Hazardous Substances in reportable quantities on any such premises; and (v)
     as of the date of this Agreement neither the Company nor any Subsidiary is
     party to, or has been named or threatened to be named a responsible party
     in connection with, any real property or ground water contaminated or
     alleged to have been contaminated by Hazardous Substances.

l.   SUBSIDIARIES. The only Subsidiaries of the Company as of the date of this
     Agreement are Consolidated Specialty Restaurants, Inc., an Indiana
     corporation, SnS Investment Company, an Indiana corporation, Steak n Shake
     Operations, Inc., an Indiana corporation, Steak n Shake, L.P., an Indiana
     limited partnership, and SnSTM, Inc., a Delaware corporation.

SECTION 4. GUARANTIES. The Obligations shall be supported by the unconditional
guaranty of prompt payment of each of Steak n Shake Operations, Inc., Steak n
Shake, L.P., and SnS Investment Company (each a "Guarantor" and collectively,
the "Guarantors"), which shall be evidenced by a Guaranty Agreement (each a
"Guaranty" and collectively, the "Guaranties") in the form attached hereto as
EXHIBIT "D" and appropriately completed for each Guarantor.

                                       50
<Page>

SECTION 5. AFFIRMATIVE COVENANTS OF THE COMPANY. Until all Obligations of the
Company terminate or are paid and satisfied in full, and so long as the
Commitment is outstanding, the Company shall strictly observe the following
covenants:

a.   CORPORATE EXISTENCE. The Company shall preserve, and cause each Subsidiary
     to preserve, its corporate or limited partnership existence, as the case
     may be; provided, that the Bank consents to the dissolution of Consolidated
     Specialty Restaurants, Inc. upon thirty (30) days' prior written notice to
     the Bank.

b.   REPORTS, CERTIFICATES AND OTHER INFORMATION. The Company shall furnish to
     the Bank copies of the following financial statements, certificates and
     other information:

     (i)  ANNUAL STATEMENTS. As soon as available and in any event within one
          hundred twenty (120) days after the close of each fiscal year,
          consolidated financial statements of the Company and its Subsidiaries
          for such fiscal year prepared and presented in accordance with
          generally accepted accounting principles, consistently applied (except
          for changes in which the independent accountants of the Company
          concur) in each case setting forth in comparative form corresponding
          figures for the preceding fiscal year, together with the audit report,
          unqualified as to scope, of independent certified public accountants
          approved by the Bank, which approval shall not be unreasonably
          withheld, together with the management letter, if any, issued by such
          independent certified public accountants.

     (ii) INTERIM STATEMENTS. As soon as available and in any event within
          forty-five (45) days after the end of each fiscal quarter, a copy of
          the consolidated interim financial statements of the Company and its
          Subsidiaries, consisting at a minimum of:

          A.   the balance sheet as of the end of the quarter, and

          B.   a statement of income for the quarter and for the partial or full
               fiscal year ended as of the end of the quarter,

               all in reasonable detail and accompanied by the written
               representation of the chief financial officer of the Company
               that such financial statements have been prepared in
               accordance with generally accepted accounting principles
               (except that they need not include a statement of cash flows
               and footnotes and need not reflect adjustments normally made
               at year end, if such adjustments are not material in amount),
               consistently applied, (except for changes in which the
               independent accountants of the Company concur) and present
               fairly the financial position of the Company and the results
               of its operation as of the dates of such statements and for
               the fiscal periods then ended.

     (iii) OFFICER'S CERTIFICATE. Contemporaneously with the furnishing of each
          set of financial statements provided for in Sections 5(b)(i) and
          5(b)(ii), an Officer's Certificate.

     (iv) ORDERS. Prompt notice of any orders in any material proceedings to
          which the Company is a party, issued by any court or regulatory
          agency, federal or state, and if the Bank should so request, a copy of
          any such order.

     (v)  NOTICE OF DEFAULT OR LITIGATION. Immediately upon learning of the
          occurrence of an Event of Default or Unmatured Event of Default, or
          the institution of or any adverse determination in

                                       51
<Page>

          any litigation, arbitration proceeding or governmental proceeding
          which is material to the Company, or the occurrence of any event which
          could have a material adverse effect upon the Company, written notice
          thereof describing the same and the steps being taken with respect
          thereto.

     (vi) COMPLIANCE CERTIFICATES. Within forty-five (45) days following the end
          of each fiscal quarter, a certificate of the Chief Financial Officer
          or other appropriate officer of the Company demonstrating compliance
          with the financial covenants stated in Section 5(g). Such certificate
          shall relate the covenants to the quarter-end figures and shall
          otherwise be in such form and provide such detail as may be reasonably
          satisfactory to the Bank.

     (vii) REGISTRATION STATEMENTS AND REPORTS. Promptly upon filing with the
          Securities and Exchange Commission or any state securities regulatory
          authority, copies of all registration statements and all periodic and
          special reports required or permitted to be filed under federal or
          state securities laws and regulations.

     (viii) OTHER INFORMATION. From time to time such other information
          concerning the Company as the Bank may reasonably request.

c.   BOOKS, RECORDS AND INSPECTIONS. The Company shall maintain and cause each
     Subsidiary to maintain complete and accurate books and records, and permit
     access thereto by the Bank for purposes of inspection, copying and audit,
     and the Company shall permit and cause each Subsidiary to permit the Bank
     to inspect its properties and operations at all reasonable times.

d.   INSURANCE. The Company shall maintain and cause each Subsidiary to maintain
     such insurance as may be required by law and such other insurance, to such
     extent and against such hazards and liabilities, as is customarily
     maintained by companies similarly situated. The Company agrees and will
     cause each Subsidiary to agree, at the Bank's request, to name the Bank as
     additional insured on any such liability insurance policy and to provide a
     copy of any such policy to the Bank.

e.   TAXES AND LIABILITIES. The Company shall pay and cause each Subsidiary to
     pay when due all taxes, license fees, assessments and other liabilities
     except such as are being contested in good faith and by appropriate
     proceedings and for which appropriate reserves have been established.

f.   COMPLIANCE WITH LEGAL AND REGULATORY REQUIREMENTS. The Company shall
     maintain and cause each Subsidiary to maintain material compliance with the
     applicable provisions of all federal, state and local statutes, ordinances
     and regulations and any court orders or orders of regulatory authorities
     issued thereunder.

g.   FINANCIAL COVENANTS. The Company shall observe, on a consolidated basis
     with the Subsidiaries, each of the following financial covenants:

     (i)  MAXIMUM RATIO OF FUNDED DEBT TO EBITDA. For each period of four (4)
          consecutive fiscal quarters commencing with the period of four (4)
          consecutive fiscal quarters ending on December 19, 2001, maintain a
          ratio of Funded Debt to EBITDA not exceeding 1.50 to 1.00.

     (ii) MINIMUM DEBT SERVICE COVERAGE RATIO. For each period of four (4)
          consecutive fiscal quarters commencing with the period of four (4)
          consecutive fiscal quarters ending on December 19, 2001, maintain a
          debt service coverage ratio of not less than 1.20 to 1.00. For

                                       52
<Page>

          purposes of this covenant, the phrase "debt service coverage ratio"
          means the ratio of: (A) net income plus depreciation expense, plus
          amortization expense, plus interest expense, minus cash distributions
          and dividends, to (B) the sum of principal payments made on current
          maturities of long term debt, including current capital lease
          payments, plus interest expense, plus capital expenditures made during
          the period tested, minus net proceeds from sale/leaseback
          transactions, minus any net increase in the aggregate amount of the
          Senior Notes outstanding, minus any unfunded availability under the
          Prudential Note Purchase Agreement.

h.   PRIMARY BANKING RELATIONSHIP. The Company shall maintain its primary
     concentration and deposit accounts with the Bank and cause Steak n Shake
     Operations, Inc. to maintain is primary and concentration accounts with the
     Bank.

i.   EMPLOYEE BENEFIT PLANS. The Company shall maintain and shall cause any
     Subsidiary to maintain any Plan in material compliance with ERISA, the
     Code, and all rules and regulations of regulatory authorities pursuant
     thereto and shall file and shall cause any Subsidiary to file all reports
     required to be filed pursuant to ERISA, the Code, and such rules and
     regulations.

j.   HAZARDOUS SUBSTANCES. If the Company or any Subsidiary should commence the
     use, treatment, transportation, generation, storage or disposal of any
     Hazardous Substance in reportable quantities in its operations in addition
     to those noted in EXHIBIT "C" attached hereto, the Company shall
     immediately notify the Bank of the commencement of such activity with
     respect to each such Hazardous Substance. The Company shall cause and cause
     any Subsidiary to cause any Hazardous Substances which are now or may
     hereafter be used or generated in the operations of the Company or any
     Subsidiary in reportable quantities to be accounted for and disposed of in
     compliance with all applicable federal, state and local laws and
     regulations. The Company shall notify the Bank immediately upon obtaining
     knowledge that:

     (i)  any premises which have at any time been owned or occupied by or have
          been under lease to the Company or any Subsidiary are the subject of
          an environmental investigation by any federal, state or local
          governmental agency having jurisdiction over the regulation of any
          Hazardous Substances, the purpose of which investigation is to
          quantify the levels of Hazardous Substances located on such premises;
          or

     (ii) the Company or any Subsidiary has been named or is threatened to be
          named as a party responsible for the possible contamination of any
          real property or ground water with Hazardous Substances, including,
          but not limited to the contamination of past and present waste
          disposal sites.

     If the Company or any Subsidiary is notified of any event described at
     items (i) or (ii) above, the Company shall immediately engage or cause the
     Subsidiary to engage a firm or firms of engineers or environmental
     consultants appropriately qualified to determine as quickly as practical
     the extent of contamination and the potential financial liability of the
     Company or the Subsidiary with respect thereto, and the Bank shall be
     provided with a copy of any report prepared by such firm or by any
     governmental agency as to such matters as soon as any such report becomes
     available to the Company,

                                       53
<Page>

     and Company shall immediately establish reserves in the amount of the
     potential financial liability of the Company or the Subsidiary identified
     by such environmental consultants or engineers. The selection of any
     engineers or environmental consultants engaged pursuant to the requirements
     of this Section shall be subject to the approval of the Bank, which
     approval shall not be unreasonably withheld.

SECTION 6. NEGATIVE COVENANTS OF THE COMPANY. Until all Obligations of the
Company terminate or are paid and satisfied in full, and so long as the
Commitment is outstanding, the Company shall strictly observe the following
covenants:

a.   OTHER AGREEMENTS. The Company shall not enter into any agreement containing
     any provision which would be violated or breached in any material respect
     by the performance by the Company of its obligations under this Agreement
     and the other Loan Documents.

b.   LIENS. The Company shall not create or permit to exist any mortgage,
     pledge, title retention lien or other lien, encumbrance or security
     interest (all of which are hereafter referred to in this subsection as a
     "lien" or "liens") with respect to any property or assets now owned or
     hereafter acquired by it or any Subsidiary except:

     (i)  liens in favor of the Bank created pursuant to the requirements of
          this Agreement or otherwise;

     (ii) any lien or deposit with any governmental agency required or permitted
          to qualify the Company or any Subsidiary to conduct business or
          exercise any privilege, franchise or license, or to maintain
          self-insurance or to obtain the benefits of or secure obligations
          under any law pertaining to worker's compensation, unemployment
          insurance, old age pensions, social security or similar matters, or to
          obtain any stay or discharge in any legal or administrative
          proceedings, or any similar lien or deposit arising in the ordinary
          course of business;

     (iii) any mechanic's, worker's, repairmen's, carrier's, warehousemen's or
          other like liens arising in the ordinary course of business for
          amounts not yet due or for amounts that are not material to the
          overall financial condition of the Company and for the payment of
          which adequate reserves have been established, or deposits made to
          obtain the release of such liens;

     (iv) easements, licenses, minor irregularities in title or minor
          encumbrances on or over any real property which do not, in the
          judgment of the Bank, materially detract from the value of such
          property or its marketability or its usefulness in the business of the
          Company or such Subsidiary;

     (v)  liens for taxes and governmental charges which are not yet due or
          which are being contested in good faith and by appropriate proceedings
          and for which appropriate reserves have been established;

     (vi) liens created by or resulting from any litigation or legal proceeding
          which is being contested in good faith and by appropriate proceedings
          and for which appropriate reserves have been established; and

                                       54
<Page>

     (vii) those specific liens now existing described on the "Schedule of
          Exceptions" attached hereto as EXHIBIT "C."

c.   GUARANTIES. The Company shall not and shall not permit any Subsidiary to be
     a guarantor or surety of, or otherwise be responsible in any manner with
     respect to any undertaking of any other person or entity, whether by
     guaranty agreement or by agreement to purchase any obligations, stock,
     assets, goods or services, or to supply or advance any funds, assets, goods
     or services, or otherwise, except for:

     (i)  guaranties in favor of the Bank;

     (ii) guaranties by endorsement of instruments for deposit made in the
          ordinary course of business;

     (iii) guaranties given by the Company in conjunction with the sale and
          leaseback of operating restaurants by Steak n Shake Operations, Inc.,
          Steak n Shake, L.P., or SnS Investment Company; and

     (iv) those specific existing guaranties listed in the "Schedule of
          Exceptions" attached hereto as EXHIBIT "C."

d.   LOANS OR ADVANCES. The Company shall not make or permit to exist and shall
     not allow any Subsidiary to make or permit to exist any loans or advances
     to any other person or entity, except for:

     (i)  extensions of credit or credit accommodations to customers or vendors
          made by the Company or any Subsidiary in the ordinary course of its
          business as now conducted;

     (ii) extensions of credit or credit accommodations to any Subsidiary when
          made by the Company in the ordinary course of its business as now
          conducted;

     (iii) reasonable salary advances to non-executive employees, and other
          advances to agents and employees for anticipated expenses to be
          incurred on behalf of the Company or the Subsidiary in the course of
          discharging their assigned duties; and

     (iv) the specific items listed in the "Schedule of Exceptions" attached
          hereto as EXHIBIT "C."

e.   MERGERS, CONSOLIDATIONS, SALES, ACQUISITION OR FORMATION OF SUBSIDIARIES.
     The Company shall not be a party to any consolidation or to any merger and
     shall not purchase the capital stock of or otherwise acquire any equity
     interest in any other business entity. The Company shall not acquire any
     material part of the assets of any other business entity, except in the
     ordinary course of business. The Company shall not sell, transfer, convey
     or lease all or any material part of its assets, except in the ordinary
     course of business, or sell or assign with or without recourse any
     receivables. The Company shall not cause to be created or otherwise acquire
     any Subsidiaries other than those Subsidiaries in existence as of the date
     hereof.

f.   MARGIN STOCK. The Company shall not use or cause or permit the proceeds of
     the Loan to be used, either directly or indirectly, for the purpose,
     whether immediate, incidental or ultimate, of purchasing or carrying any
     margin stock within the meaning of Regulation U of the Board of Governors
     of the Federal Reserve System, as amended from time to time.

g.   JUDGMENTS. The Company shall not permit and shall not allow any Subsidiary
     to permit any uninsured judgment or monetary penalty rendered against it in
     any judicial or administrative proceeding to remain unsatisfied for a
     period in excess of forty-five (45) days unless such judgment or

                                       55
<Page>

     penalty is being contested in good faith by appropriate proceedings and
     execution upon such judgment has been stayed, and unless an appropriate
     reserve has been established with respect thereto.

h.   PRINCIPAL OFFICE. The Company shall not change and shall not permit any
     Subsidiary to change the location of its principal office unless it gives
     not less than ten (10) days prior written notice of such change to the
     Bank.

i.   HAZARDOUS SUBSTANCES. The Company shall not allow or permit to continue the
     release or threatened release of any Hazardous Substance on any premises
     owned or occupied by or under lease to the Company or any Subsidiary.

j.   DEBT. The Company shall not incur nor permit to exist any indebtedness for
     borrowed money except to the Bank and except for indebtedness to Prudential
     under the Prudential Note Purchase Agreement and those other existing
     obligations disclosed on the "Schedule of Exceptions" attached hereto as
     EXHIBIT "C." For purposes of this covenant, the phrase "indebtedness for
     borrowed money," shall be construed to include capital lease obligations in
     excess of $3,000,000.00 in the aggregate in any fiscal year of the Company.

SECTION 7. CONDITIONS OF LENDING. The obligation of the Bank to make any Advance
or to issue any Letter of Credit shall be subject to fulfillment of each of the
following conditions precedent:

a.   NO DEFAULT. No Event of Default or Unmatured Event of Default shall have
     occurred and be continuing, and the representations and warranties of the
     Company contained in Section 3 shall be true and correct as of the date of
     this Agreement and as of the date of each Advance, except that after the
     date of this Agreement: (i) the representations contained in Section 3(d)
     will be construed so as to refer to the latest financial statements
     furnished to the Bank by the Company pursuant to the requirements of this
     Agreement, (ii) the representations contained in Section 3(k) (with respect
     to Hazardous Substances) will be construed so as to apply not only to the
     Company, but also to any Subsidiaries, (iii) the representation contained
     in Section 3(l) will be construed so as to except any Subsidiary which may
     hereafter be formed or acquired by the Company with the consent of the
     Bank, and (iv) all other representations will be construed to have been
     amended to conform with any changes of which the Bank shall previously have
     been given notice in writing by the Company.

b.   DOCUMENTS AND FEES TO BE FURNISHED OR PAID AT CLOSING. The Bank shall have
     received contemporaneously with the execution of this Agreement, the
     following, each duly executed, currently dated and in form and substance
     satisfactory to the Bank:

     (i)  The Revolving Note.

     (ii) The Schedule of Exceptions duly complete by the Company.

     (iii) The Guaranties duly executed by the Guarantors.

     (iv) A certified copy of a Resolution of the Board of Directors of the
          Company authorizing the execution, delivery and performance,
          respectively, of this Agreement and the other Loan Documents provided
          for in this Agreement to which the Company is a party.

     (v)  A certificate of the Secretary of the Board of Directors of the
          Company certifying the names of the officer or officers authorized to
          sign this Agreement and the other Loan Documents

                                       56
<Page>

          provided for in this Agreement to which the Company is a party,
          together with a sample of the true signature of each such officer.

     (vi) A copy of the file-marked Articles of Incorporation of the Company
          certified as complete and correct as of a recent date by the Secretary
          of State of Indiana and a copy of the By-Laws of the Company,
          certified as complete and correct by the Secretary of the Board of
          Directors of the Company.

     (vii) A currently dated Certificate of Existence of the Company issued by
          the Secretary of State of Indiana, and a Certificate of Existence of
          the Company issued by the Secretary of State for each State in which
          the Company conducts business.

     (viii) A certified copy of a Resolution of the Board of Directors of Steak
          n Shake Operations, Inc. authorizing the execution, delivery and
          performance, respectively, of its Guaranty and the other Loan
          Documents provided for in this Agreement to which Steak n Shake
          Operations, Inc. is a party.

     (ix) A certificate of the Secretary of the Board of Directors of Steak n
          Shake Operations, Inc. certifying the names of the officer or officers
          authorized to sign its Guaranty and the other Loan Documents provided
          for in this Agreement to which Steak n Shake Operations, Inc. is a
          party, together with a sample of the true signature of each such
          officer.

     (x)  A copy of the file-marked Articles of Incorporation of Steak n Shake
          Operations, Inc. certified as complete and correct as of a recent date
          by the Secretary of State of Indiana and a copy of the By-Laws of
          Steak n Shake Operations, Inc. certified as complete and correct by
          the Secretary of the Board of Directors of Steak n Shake Operations,
          Inc.

     (xi) A currently dated Certificate of Existence of Steak n Shake
          Operations, Inc. issued by the Secretary of State of Indiana, and a
          Certificate of Existence of Steak n Shake Operations, Inc. issued by
          the Secretary of State for each State in which Steak n Shake
          Operations, Inc. conducts business.

     (xii) A certified copy of a Resolution of the Board of Directors of SnS
          Investment Company authorizing the execution, delivery and
          performance, respectively, of its Guaranty and the other Loan
          Documents provided for in this Agreement to which SnS Investment
          Company is a party.

     (xiii) A certificate of the Secretary of the Board of Directors of SnS
          Investment Company certifying the names of the officer or officers
          authorized to sign its Guaranty and the other Loan Documents provided
          for in this Agreement to which SnS Investment Company is a party,
          together with a sample of the true signature of each such officer.

     (xiv) A copy of the file-marked Articles of Incorporation of SnS Investment
          Company certified as complete and correct as of a recent date by the
          Secretary of State of Indiana and a copy of the By-Laws of SnS
          Investment Company certified as complete and correct by the Secretary
          of the Board of Directors of SnS Investment Company.

     (xv) A currently dated Certificate of Existence of SnS Investment Company
          issued by the Secretary of State of Indiana, and a Certificate of
          Existence of SnS Investment Company

                                       57
<Page>

          issued by the Secretary of State for each State in which SnS
          Investment Company conducts business.

     (xvi) A certified copy of a Resolution of the Board of Directors of the
          General Partner of Steak n Shake, L.P. authorizing the execution,
          delivery and performance, respectively, of its Guaranty and the other
          Loan Documents provided for in this Agreement to which Steak n Shake,
          L.P. is a party.

     (xvii) A certificate of the Secretary of the Board of Directors of the
          General Partner of Steak n Shake, L.P. certifying the names of the
          officer or officers authorized to sign its Guaranty and the other Loan
          Documents provided for in this Agreement to which Steak n Shake, L.P.
          is a party, together with a sample of the true signature of each such
          officer.

     (xviii) A copy of the file-marked Certificate of Limited Partnership of
          Steak n Shake, L.P. certified as complete and correct as of a recent
          date by the Secretary of State of Indiana and a copy of the Limited
          Partnership Agreement of Steak n Shake, L.P. certified as complete and
          correct by the Secretary of the Board of Directors of the General
          Partner of Steak n Shake, L.P.

     (xix) A currently dated Certificate of Existence of Steak n Shake, L.P.
          issued by the Secretary of State of Indiana, and a Certificate of
          Existence of Steak n Shake, L.P. issued by the Secretary of State for
          each State in which Steak n Shake, L.P. conducts business.

     (xx) A copy of the file-marked Articles of Incorporation of SnSTM, Inc.
          certified as complete and correct as of a recent date by the Secretary
          of State of Delaware and a copy of the By-Laws of SnSTM, Inc.
          certified as complete and correct by the Secretary of the Board of
          Directors of SnSTM, Inc.

     (xxi) A currently dated Certificate of Good Standing of SnSTM, Inc. issued
          by the Secretary of State of Delaware.

     (xxii) The opinion of counsel for the Company and the Guarantors addressed
          to the Bank to the effect that the representations stated in Sections
          3(a), 3(b), 3(c), 3(i), 3 (j) and 3(l) are correct. Such opinion shall
          be in such form as may be reasonably acceptable to the Bank.

     (xxiii) Certificates evidencing the existence of all insurance required
          under the terms of this Agreement or any other Loan Documents.

     (xxiv) The results of UCC lien searches for each of the Company and its
          Subsidiaries in all jurisdictions in which they own any assets showing
          no liens of record.

     (xxv) Such other documents as the Bank may reasonably require.

     (xxvi) Payment of the fees of legal counsel for the Bank incurred in
          connection with the drafting, negotiation, and execution of this
          Agreement and the other Loan Documents which shall be the sole
          responsibility of the Company.

SECTION 8. EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:

a.   NONPAYMENT OF THE LOAN OR TO REIMBURSE FOR LETTERS OF CREDIT. Default in
     the payment when due of any amount payable under the terms of the Note or
     otherwise payable to the Bank or any other holder

                                       58
<Page>

     of the Note under the terms of this Agreement or to promptly reimburse the
     Bank in the amount of any drawing under a Letter of Credit as required
     under the applicable Reimbursement Agreement.

b.   NONPAYMENT OF OTHER INDEBTEDNESS FOR BORROWED MONEY. Default by the Company
     or any Subsidiary in the payment when due, whether by acceleration or
     otherwise, of any other material indebtedness for borrowed money, or
     default in the performance or observance of any obligation or condition
     with respect to any such other indebtedness if the effect of such default
     is to accelerate the maturity of such other indebtedness or to permit the
     holder or holders thereof, or any trustee or agent for such holders, to
     cause such indebtedness to become due and payable prior to its scheduled
     maturity, unless the Company or the affected Subsidiary is contesting the
     existence of such default in good faith and by appropriate proceedings.

c.   OTHER MATERIAL OBLIGATIONS. Subject to the expiration of any applicable
     grace period, default by the Company in the payment when due, or in the
     performance or observance of any material obligation of, or condition
     agreed to by the Company or any Subsidiary with respect to any material
     purchase or lease of goods, securities or services except only to the
     extent that the existence of any such default is being contested in good
     faith and by appropriate proceedings and that appropriate reserves have
     been established with respect thereto.

d.   BANKRUPTCY, INSOLVENCY, ETC. The Company or any Subsidiary admitting in
     writing its inability to pay its debts as they mature or an administrative
     or judicial order of dissolution or determination of insolvency being
     entered against the Company or any Subsidiary; or the Company or any
     Subsidiary applying for, consenting to, or acquiescing in the appointment
     of a trustee or receiver for the Company or such Subsidiary or any property
     thereof, or the Company or any Subsidiary making a general assignment for
     the benefit of creditors; or, in the absence of such application, consent
     or acquiescence, a trustee or receiver being appointed for the Company or
     any Subsidiary or for a substantial part of its property and not being
     discharged within sixty (60) days; or any bankruptcy, reorganization, debt
     arrangement, or other proceeding under any bankruptcy or insolvency law, or
     any dissolution or liquidation proceeding being instituted by or against
     the Company or any Subsidiary, and, if involuntary, being consented to or
     acquiesced in by the Company or such Subsidiary or remaining for sixty (60)
     days undismissed.

e.   WARRANTIES AND REPRESENTATIONS. Any warranty or representation made by the
     Company in this Agreement proving to have been false or misleading in any
     material respect when made, or any schedule, certificate, financial
     statement, report, notice, or other writing furnished by the Company to the
     Bank proving to have been false or misleading in any material respect when
     made or delivered.

f.   VIOLATIONS OF NEGATIVE AND FINANCIAL COVENANTS. Failure by the Company to
     comply with or perform any covenant stated in Section 5(g) or Section 6 of
     this Agreement.

g.   NONCOMPLIANCE WITH OTHER PROVISIONS OF THIS AGREEMENT. Failure of the
     Company to comply with or perform any covenant or other provision of this
     Agreement or any Loan Document or to perform any other Obligation (which
     failure does not constitute an Event of Default under any of the preceding

                                       59
<Page>

     provisions of this Section 8) and continuance of such failure for thirty
     (30) days after notice thereof to the Company from the Bank.

SECTION 9. EFFECT OF EVENT OF DEFAULT. If any Event of Default described in
Section 8(d) shall occur, maturity of the Loan shall immediately be accelerated
and the Note and the Loan evidenced thereby, and all other indebtedness and any
other payment Obligations of the Company to the Bank shall become immediately
due and payable, and the Commitment and any further obligation to issue Letters
of Credit shall immediately terminate, all without notice of any kind. When any
other Event of Default has occurred and is continuing, the Bank or any other
holder of the Note may accelerate payment of the Loan and declare the Note and
all other payment Obligations due and payable, whereupon maturity of the Loan
shall be accelerated and the Note and the Loan evidenced thereby, and all other
payment Obligations shall become immediately due and payable and the Commitment
and any further obligation to issue Letters of Credit shall immediately
terminate, all without notice of any kind. The Bank or such other holder shall
promptly advise the Company of any such declaration, but failure to do so shall
not impair the effect of such declaration. Upon the occurrence of any Event of
Default, in addition to the remedies heretofore provided, the Bank may require
that the Company deposit with the Bank the undrawn amount of each issued and
outstanding Letter of Credit, which deposited amount the Bank shall apply to
reimburse itself in the amount thereafter drawn under such outstanding Letters
of Credit, with any amounts remaining thereafter applied to the payment of such
remaining Obligations as the Bank in its sole discretion may determine. The
remedies of the Bank specified in this Agreement or in any other Loan Document
shall not be exclusive, and the Bank may avail itself of any other remedies
provided by law as well as any equitable remedies available to the Bank.

SECTION 10. WAIVER -- AMENDMENTS. No delay on the part of the Bank, or any
holder of the Notes in the exercise of any right, power or remedy shall operate
as a waiver thereof, nor shall any single or partial exercise by any of them of
any right, power or remedy preclude any other or further exercise thereof, or
the exercise of any other right, power or remedy. No amendment, modification or
waiver of, or consent with respect to any of the provisions of this Agreement or
the other Loan Documents or otherwise of the Obligations shall be effective
unless such amendment, modification, waiver or consent is in writing and signed
by the Bank.

SECTION 11. NOTICES. Any notice given under or with respect to this Agreement to
the Company or the Bank shall be in writing and, if delivered by hand or sent by
overnight courier service, shall be deemed to have been given when delivered
and, if mailed, shall be deemed to have been given five (5) days after the date
when sent by registered or certified mail, postage prepaid, and addressed to the
Company or the Bank (or other holder of the Notes) at its address shown below,
or at such other address as any such party may, by written notice to the other
party to this Agreement, have designated as its address for such purpose. The
addresses referred to are as follows:

     As to the Company:  The Steak n Shake Company
                         36 south Pennsylvania Street, Suite 500
                         Indianapolis, Indiana 46204
                         Attention: James W. Bear, Senior Vice President
                           and Chief Financial Officer

                                       60
<Page>

                         Telephone: (317) 633-4100

                         with copy to:  Mary E. Ham, Vice President, Secretary
                                          and General Counsel
                                        The Steak n Shake Company
                                        36 South Pennsylvania Street
                                        Indianapolis, Indiana 46204
                                        Telephone: (317) 633-4100

     As to the Bank:     Fifth Third Bank, Indiana (Central)
                         251 North Illinois, Suite 1000
                         Indianapolis, Indiana 46204
                         Attention: Andrew M. Cardimen, Vice President
                         Telephone: (317) 383-2440

                         with copy to:  Madalyn S. Kinsey, Esquire
                                        Kroger, Gardis & Regas, L.L.P.
                                        Bank One Center/Circle, Suite 900
                                        111 Monument Circle
                                        Indianapolis, Indiana 46204-5175
                                        Telephone: (317) 264-6836 Ext. 926

SECTION 12. COSTS, EXPENSES AND TAXES. The Company shall pay or reimburse the
Bank on demand for all reasonable out-of-pocket costs and expenses of the Bank
including reasonable attorneys' fees and legal expenses incurred by it in
connection with the drafting, negotiation, execution, and delivery of this
Agreement and the other Loan Documents, and in connection with the enforcement,
or restructuring in the nature of a workout, of this Agreement or any other Loan
Document. The Company shall also reimburse the Bank for expenses incurred by the
Bank in connection with any audit of the books and records or physical assets of
the Company conducted pursuant to any right granted to the Bank under the terms
of this Agreement or any other Loan Document. Such reimbursement shall include,
without limitation, reimbursement of the Bank for its overhead expenses
reasonably allocated to such audits. In addition, the Company shall pay or
reimburse the Bank for all expenses incurred by the Bank in connection with the
perfection of any security interests or mortgage liens granted to the Bank by
the Company and for any stamp or similar documentary or transaction taxes which
may be payable in connection with the execution or delivery of this Agreement or
any other Loan Document or in connection with any other instruments or documents
provided for herein or delivered or required in connection herewith including,
without limitation, expenses incident to any lien or title search or title
insurance commitment or policy. All obligations provided for in this Section
shall survive termination of this Agreement.

SECTION 13. SEVERABILITY. If any provision of this Agreement or any other Loan
Document is determined to be illegal or unenforceable, such provision shall be
deemed to be severable from the balance of the provisions of this Agreement or
such Document and the remaining provisions shall be enforceable in accordance
with their terms.

SECTION 14. CAPTIONS. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.

SECTION 15. GOVERNING LAW -- JURISDICTION. Except as may otherwise be expressly
provided in any other Loan Document, this Agreement and all other Loan Documents
are made under and will be

                                       61
<Page>

governed in all cases by the substantive laws of the State of Indiana,
notwithstanding the fact that Indiana conflicts of law rules might otherwise
require the substantive rules of law of another jurisdiction to apply. The
Company consents to the jurisdiction of any state or federal court located
within Marion County, Indiana, and waives personal service of any and all
process upon the Company. All service of process may be made by messenger, by
certified mail, return receipt requested, or by registered mail directed to the
Company at the address stated in Section 11. The Company waives any objection
which the Company may have to any proceeding commenced in a federal or state
court located within Marion County, Indiana, based upon improper venue or FORUM
NON CONVENIENS. Nothing contained in this Section shall affect the right of the
Bank to serve legal process in any other manner permitted by law.

SECTION 16. PRIOR AGREEMENTS, ETC. This Agreement supersedes all previous
agreements and commitments made by the Bank and the Company with respect to the
Loans and all other subjects of this Agreement, including, without limitation,
any oral or written proposals or commitments made or issued by the Bank.

SECTION 17. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents
shall be binding upon and shall inure to the benefit of the Company and the Bank
and their respective successors and assigns, provided that the Company's rights
under this Agreement shall not be assignable without the prior written consent
of the Bank.

SECTION 18. WAIVER OF JURY TRIAL. THE COMPANY AND THE BANK (BY ITS ACCEPTANCE
HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE ( WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) BETWEEN THE COMPANY AND THE BANK ARISING OUT OF OR
IN ANY WAY RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE
FINANCING EVIDENCED BY THIS AGREEMENT.

SECTION 19. ARBITRATION. BANK AND THE COMPANY AGREE THAT UPON THE WRITTEN DEMAND
OF EITHER PARTY, WHETHER MADE BEFORE OR AFTER THE INSTITUTION OF ANY LEGAL
PROCEEDINGS, BUT PRIOR TO THE RENDERING OF ANY JUDGMENT IN THAT PROCEEDING, ALL
DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR
CLASS IN NATURE, ARISING FROM THIS AGREEMENT, OR ANY LOAN DOCUMENT OR OTHERWISE,
INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE RESOLVED BY
BINDING ARBITRATION PURSUANT TO THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION
ASSOCIATION ("AAA"). ANY ARBITRATION PROCEEDING HELD PURSUANT TO THIS
ARBITRATION PROVISION SHALL BE CONDUCTED IN THE CITY NEAREST THE COMPANY'S
ADDRESS HAVING AN AAA REGIONAL OFFICE, OR AT ANY OTHER PLACE SELECTED BY MUTUAL
AGREEMENT OF THE PARTIES. NO ACT TO TAKE OR DISPOSE OF ANY COLLATERAL SHALL
CONSTITUTE A WAIVER OF THIS ARBITRATION AGREEMENT OR BE PROHIBITED BY THIS
ARBITRATION AGREEMENT.

THIS ARBITRATION PROVISION SHALL NOT LIMIT THE RIGHT OF EITHER PARTY DURING ANY
DISPUTE TO SEEK, USE, AND EMPLOY ANCILLARY OR PRELIMINARY RIGHTS AND/OR

                                       62
<Page>

REMEDIES, JUDICIAL OR OTHERWISE, FOR THE PURPOSES OF REALIZING UPON, PRESERVING,
PROTECTING, FORECLOSING UPON OR PROCEEDING UNDER FORCIBLE ENTRY AND DETAINER FOR
POSSESSION OF ANY REAL OR PERSONAL PROPERTY, AND ANY SUCH ACTION SHALL NOT BE
DEEMED AN ELECTION OF REMEDIES. SUCH REMEDIES INCLUDE, WITHOUT LIMITATION,
OBTAINING INJUNCTIVE RELIEF OR A TEMPORARY RESTRAINING ORDER, INVOKING A POWER
OF SALE UNDER ANY DEED OF TRUST OR MORTGAGE; OBTAINING A WRIT OF ATTACHMENT OR
IMPOSITION OF A RECEIVERSHIP; OR EXERCISING ANY RIGHTS RELATING TO PERSONAL
PROPERTY, INCLUDING EXERCISING THE RIGHT OF SETOFF, OR TAKING OR DISPOSING OF
SUCH PROPERTY WITH OR WITHOUT JUDICIAL PROCESS PURSUANT TO THE UNIFORM
COMMERCIAL CODE. ANY DISPUTES, CLAIMS, OR CONTROVERSIES CONCERNING THE
LAWFULNESS OR REASONABLENESS OF ANY ACT, OR EXERCISE OF ANY RIGHT OR REMEDY,
CONCERNING ANY COLLATERAL, INCLUDING ANY CLAIM TO RESCIND, REFORM, OR OTHERWISE
MODIFY ANY AGREEMENT RELATING TO THE COLLATERAL, SHALL ALSO BE ARBITRATED;
PROVIDED, HOWEVER THAT NO ARBITRATOR SHALL HAVE THE RIGHT OR THE POWER TO ENJOIN
OR RESTRAIN ANY ACT OF ANY PARTY. JUDGMENT UPON ANY AWARD RENDERED BY ANY
ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE STATUTE OF
LIMITATIONS, ESTOPPEL, WAIVER, LACHES AND SIMILAR DOCTRINES WHICH WOULD
OTHERWISE BE APPLICABLE IN AN ACTION BROUGHT BY A PARTY SHALL BE APPLICABLE IN
ANY ARBITRATION PROCEEDING, AND THE COMMENCEMENT OF AN ARBITRATION PROCEEDING
SHALL BE DEEMED THE COMMENCEMENT OF ANY ACTION FOR THESE PURPOSE. THE FEDERAL
ARBITRATION ACT (TITLE 9 OF THE UNITED STATES CODE) SHALL APPLY TO THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT OF THIS ARBITRATION PROVISION.

Dated as of November 16, 2001.

                              THE STEAK N SHAKE COMPANY, an Indiana corporation

                              By:
                                   ---------------------------------------------
                                   James W. Bear, Senior Vice President and
                                   Chief Financial Officer

                              FIFTH THIRD BANK, INDIANA (CENTRAL), a national
                              banking association

                              By:
                                   ---------------------------------------------
                                   Andrew M. Cardimen, Vice President

                                       63
<Page>

                              SCHEDULE OF EXHIBITS

Schedule I     -    List of Locations

Exhibit "A"    -    Officer's Certificate

Exhibit "B"    -    Promissory Note (Revolving Loan)($30,000,000.00)

Exhibit "C"    -    Schedule of Exceptions

Exhibit "D"    -    Guaranty Agreement

                                       64
<Page>

SCHEDULE I

LIST OF LOCATIONS

003 614 West Raab Road, Normal, IL 61761
005 1248 West Washington Street, East Peoria, IL 61611
006 920 South Main Street, Forsythe, IL 62535
007 2250 South Mount Zion Road, Decatur, IL 62527
011 1709 South Neil Street, Champaign, IL 61820
014 521 West Main Street, Peoria, IL 61606
015 3229 North University, Peoria, IL 61604
016 1066 North Henderson Street, Galesburg, IL 61401
017 3205 Court Street, Pekin, IL 61554
020 1330 East Pershing, Decatur, IL 62526
021 7715 North University, Peoria, IL 61614
023 3810 West Washington Street, Indianapolis, IN 46241
024 5360 North Keystone Avenue, Indianapolis, IN 46220
025 2935 South Madison Avenue, Indianapolis, IN 46225
029 7230 Woodland Drive, Indianapolis, IN 46278
030 8601 Pendleton Pike, Indianapolis, IN 46226
031 7930 East Washington Street, Indianapolis, IN 46219
032 7960 US 31 South, Indianapolis, IN 46227
033 5635 West 38th Street, Indianapolis, IN 46254
034 635 East Carmel Drive, Carmel, IN 46032
035 6360 East 82nd Street, Indianapolis, IN 46250
036 1501 East 86th Street, Indianapolis, IN 46240
038 1104 Brentwood, St. Louis, MO 63117
044 9550 Natural Bridge Road, St. Louis, MO 63134
045 3549 North Lindbergh, St. Louis, MO 63074
047 12895 New Halls Ferry, Florissant, MO 63033
048 2221 First Capitol Drive, St. Charles, MO 63302
049 10459 Page Avenue, St. Louis, MO 63132
050 11035 Bellefontaine Road, St. Louis, MO 63138
051 80 Homer Adams Boulevard, Alton, IL 62002
052 12607 Dorsett Road, Maryland Heights, MO 63043
053 4298 Chippewa Street, St. Louis, MO 63116
054 6622 Chippewa Street, St. Louis, MO 63109
055 7350 Gravois Avenue, St. Louis, MO 63116
056 1253 Hampton Avenue, St. Louis, MO 63139
057 9860 Manchester Road, St. Louis, MO 63119
059 1300 Lemay Ferry Road, St. Louis, MO 63127
060 5828 South Lindbergh, St. Louis, MO 63123
061 8609 Watson Road, St. Louis, MO 63119
064 13849 Manchester Road, St. Louis, MO 63011
065 7310 South Lindbergh Boulevard, St. Louis, MO 63125
066 7606 Manchester Road, St. Louis, MO 63143
067 4320 West Main Street, Belleville, IL 62223
068 10860 Lincoln Trail, Fairview Heights, IL 62208
070 1000 International Speedway, Daytona Beach, FL 32114
072 818 South Orlando Avenue, Winter Park, FL 32789
073 2820 East Colonial Drive, Orlando, FL 32803
076 2315 South Dale Mabry Highway, Tampa, FL 33609

                                       65
<Page>

077 819 East Memorial Boulevard, Lakeland, FL 33801
080 1610 SW 13th Street, Gainesville, FL 32601
082 1450 East Fowler Avenue, Tampa, FL 33612
084 106 Cortez Road, East, Bradenton, FL 34203
094 9770 Montgomery Road, Cincinnati, OH 45242
098 11470 Princeton Pike, Cincinnati, OH 45246
126 5917 East Hillsborough Avenue, Tampa, FL 33610
127 13426 Olive Boulevard, Chesterfield, MO 63017
142 5827 East 71st Street, Indianapolis, IN 46220
144 3201 North Vermilion, Danville, IL 61832
145 3615 South Reed Road, Kokomo, IN 46902
146 295 East Altamonte Drive, Altamonte Springs, FL 32701
147 443 North Semoran Boulevard, Winter Park, FL 32789
148 2 North Sagamore Parkway, Lafayette, IN 47904
149 1402 West Brandon Boulevard, Brandon, FL 33511
151 809 Havendale Boulevard, Winter Haven, FL 33880
153 10220 West Florissant, Dellwood, MO 63136
154 3064 Crossroads, Arnold, MO 63010
159 8640 North Michigan Road, Indianapolis, IN 46268
160 1523 South Kirkwood, St. Louis, MO 63127
162 325 South Veterans Parkway, Normal, IL 61761
163 408 South Gilbert Street, Danville, IL 61832
164 4501 South Emerson Avenue, Indianapolis, IN 46203
165 3350 N. Morrison Road, Muncie, IN 47304
166 300 South College Mall Road, Bloomington, IN 47401
167 999 Veteran's Boulevard, Festus, MO 63028
168 3909 Mexico Road, St. Charles, MO 63376
169 606 North Bluff, Collinsville, IL 62234
170 1211 Keller Drive, Effingham, IL 62401
171 1305 Locke Road, Bourbonnais, IL 60914
172 130 North 44th Street, Mt. Vernon, IL 62864
173 5303 Coldwater Road, Ft. Wayne, IN 46825
174 2775 Herman Darlage Drive, Columbus, IN 47201
175 76 South Highway Drive, Fenton, MO 63088
176 12490 St. Charles Road, Bridgeton, MO 63044
177 7700 South Orange Blossom Trail, Orlando, FL 32809
178 7510 West 63rd Street, Overland Park, KS 66202
179 13621 East 40th Highway, Independence, MO 64055
201 2724 West DeYoung Street, Marion, IL 62959
202 5131 Hinkleville Road, Paducah, KY 42001
203 2900 South Third Street, Terre Haute, IN 47802
204 2010 North Prospect Avenue, Champaign, IL 61821
205 1365 East Main Street, Carbondale, IL 62901
206 5036 North Big Hollow, Peoria, IL 61615
207 201.2 South Larkin Avenue, Joliet, IL 60436
208 1802 South Veterans Parkway, Bloomington, IL 61701
210 2675 Plainfield Road, Joliet, IL 60435
211 2009 North Kenyon Road, Urbana, IL 61802
212 1400 Broadway East, Mattoon, IL 61938
213 10001 Wylie Drive, Bloomington, IL 61704
214 4240 Venture Drive, Peru, IL 61354
215 5229 Elmore Avenue, Davenport, IA 52808

                                       66
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216 3821 41st Avenue, Moline, IL 61265
217 312 North U.S. 41, Schererville, IN 46375
218 2380 Sycamore, DeKalb, IL 60115
219 16110 Harlem Avenue, Tinley Park, IL 60477
220 7561 East State Street, Rockford, IL 61108
221 290 Randall Road, Elgin, IL 60123
222 1919 North College Avenue, Bloomington, IN 47404
223 6243 West Washington Street, Indianapolis, IN 46241
224 14909 US 31 North, Carmel, IN 46032
225 1315 Ireland Road, South Bend, IN 46614
226 5415 Grape Road, Mishawaka, IN 46545
227 7485 Foltz Drive, Florence, KY 41042
228 3250 Cassopolis Street, Elkhart, IN 46514
229 5825 Scatterfield Road, Anderson, IN 46013
230 6019 Illinois Road, Ft. Wayne, IN 46804
231 247 West Smith Valley Road, Greenwood, IN 46142
232 1917 Pipestone Road, Benton Harbor, MI 49022
233 10701 East Washington Street, Indianapolis, IN 46229
234 2288 North Park Drive, Holland, MI 49423
235 5901 National Road, Richmond, IN 47374
236 5809 Franklin Road, Michigan City, IN 46360
237 1185 Gravois Road, Fenton, MO 63026
238 5885 Suemandy Drive, St. Peters, MO 63376
239 2382 Troy Road, Edwardsville, IL 62025
240 16051 Manchester Road, Ellisville, MO 63011
241 5990 Beckley Road, Battle Creek, MI 49017
242 2101 Liberty Drive, Bloomington, IN 47403
243 103 North SR 135, Greenwood, IN 46142
244 518 Essex Drive, Kokomo, IN 46901
245 3170 Town Boulevard, Middletown, OH 45044
246 2655 Airport Road, Jackson, MI 49201
247 4025 Elkhart Road, Goshen, IN 46526
248 5342 South Westnedge Avenue, Portage, MI 49008
249 4310 Southport Crossing Drive, Indianapolis, IN 46237
250 831 Clepper Lane, Cincinnati, OH 45245
251 6208 Cambridge Way, Plainfield, IN 46168
252 5308 Fields Ertel Road, Cincinnati, OH 45249
253 3226 Telegraph Road, St. Louis, MO 63125
254 1640 East Tipton Street, Seymour, IN 47274
255 2403 North Post Drive, Indianapolis, IN 46219
256 1460 Jungerman Road, St. Peters, MO 63376
257 7876 Tylersville Square Drive, West Chester, OH 45045
258 101 West Maryland Street, Indianapolis, IN 46225
259 3488 Alpine Avenue, NW, Walker, MI 49544
260 1779 West Main Street, Troy, OH 45373
261 8157 East 96th Street, Indianapolis, IN 46256
262 2998 Highway K, O'Fallon, MO 63366
263 681 Sycamore Street, Sullivan, MO 63080
264 10625 East US 36, Avon, IN 46123
265 1485 West Main Street, Hamilton, OH 45013
266 200 Meijer Way, Lafayette, IN 47904
267 8311 Old Troy Pike, Huber Heights, OH 45424

                                       67
<Page>

268 1236 West SR 32, Lebanon, IN 46052
269 2856 Center Drive, Beavercreek Towne Center, Fairborn, OH 45324
270 3509 Highway 98 North, Lakeland, FL 33809
271 3800 SW College Road, Ocala, FL 34474
272 4325 West Lake Mary Boulevard, Lake Mary, FL 32746
273 120 Williamson Boulevard, Ormond Beach, FL 32174
274 768 East State Road 44, Wildwood, FL 34785
275 1651 West New Haven Avenue, West Melbourne, FL 32909
276 790 Merritt Island Causeway, Merritt Island, FL 32952
277 8115 Red Bug Lake Road, Oviedo, FL 32765
278 40 Town Center Circle, Sanford, FL 32771
279 927 Saxon Boulevard, Orange City, FL 32763
280 7101 West Colonial Boulevard, Orlando, FL 32818
281 12163 South Apopka Vineland Road, Orlando, FL 32836
282 1 Cypress Edge Drive, Palm Coast, FL 32137
283 4500 South Highway 17-92, Casselberry, FL 32707
284 10555 Ulmerton Road, Largo, FL 33771
285 4313 West Vine Street, Kissimmee, FL 34726
286 2700 South Semoran Boulevard, Orlando, FL 32822
288 11306 Causeway Boulevard, Brandon, FL 33511
289 18627 US 19, Clearwater, FL 33764
290 2624 South Western Avenue, Marion, IN 46953
291 6050 Howdershell Road, Hazelwood, MO 63042
292 1567 West Fifth Street, Eureka, MO 63025
293 5371 West Main Street, Kalamazoo, MI 49009
294 1080 El Jobean Road, Port Charlotte, FL 33948
295 6380 Wilmington Pike, Bellbrook, OH 45459
297 14646 Manchester Road, Ballwin, MO 63011
298 109 Regency Park, O'Fallon, IL 62269
301 8420 Springboro Road, Miamisburg, OH 45342
302 4360 Kenowa Boulevard, Grandville, MI 49418
303 5477 Clyde Park Avenue, Wyoming, MI 49509
304 9116 US 19 North, Port Richey, FL 34668
305 1681 Wells Road, Orange Park, FL 32073
306 4305 Commercial Way, Spring Hill, FL 34606
307 4480 Park Street, St. Petersburg, FL 33709
308 1620 North SR 59, Naperville, IL 60563
310 9560 Regency Square Blvd. N, Jacksonville, FL 32225
311 1825 Barrington Road, Hoffman Estates, IL 60194
312 2819 C Wilma Rudolph Boulevard, Clarksville, TN 37043
313 719 Myatt Drive, Madison, TN 37115
314 2490 SR 580, Clearwater, FL 33761
315 5401 Meijer Drive, Ft. Wayne, IN 46835
316 12035 East Colonial, Orlando, FL 32826
317 275 East Army Trail Road, Glendale Heights, IL 60139
318 1251 Strongbow Center Drive, Valparaiso, IN 46383
319 2000 North Carothers Road, Franklin, TN 37067
320 9150 North Main Street, Englewood, OH 45415
321 4550 28th Street, SE, Kentwood, MI 49505
322 4333 Fox Valley Center Drive, Aurora, IL 60504
324 14965 Old Hickory Boulevard, Nashville, TN 37211
325 5000 B Old Hickory Boulevard, Hermitage, TN 37076
326 2600 NW Federal Highway, Stuart, FL 34994
327 1100 Evansway Court, Columbus, OH 43228
329 6070 Gurnee Mills Circle East, Gurnee Mills, IL 60031
331 4297 Cattlemen Road, Sarasota, FL 34232
332 10650 US Highway 441, Leesburg, FL 34788
333 10181 Colerain Avenue, Cincinnati, OH 45251
334 2001 Colby Taylor Drive, Richmond, KY 40476
335 3906 South Florida Avenue, Lakeland, FL 33813

                                       68
<Page>

336 335 Leonardwood Drive, Frankfort, KY 40602
337 3505 29th. Avenue S.W., Cedar Rapids, IA 52404
338 1940 94th Court, Vero Beach, FL 32966
339 2100 Richmond Road, McHenry, IL 60050
340 720 West 81st Street, Merrillville, IN 46410
341 3714 SW 42nd Street, Gainesville, FL 32608
342 16902 Clover Road, Noblesville, IN 46060
343 4120 Ellsworth Road, Ypsilanti, MI 48197
344 211 North Randall Road, Lake in the Hills, IL 60102
346 1851 Newman Road, Okemos, MI 48864
347 1520 Ogden Avenue, Downer's Grove, IL 60515
349 3111 South Neider Road, Lawrence, KS 66047
350 8101 Dr. Martin Luther King, St. Petersburg, FL 33702
351 4429 Old Union Road, Tifton, GA 31794
352 980 North St. Augustine Road, Valdosta, GA 31603
353 718 North Westover Road, Albany, GA 31705
354 3394 Capitol Circle, NE, Tallahassee, FL 32308
355 1401 Capitol Circle, NW, Tallahassee, FL 32304
356 2999 Watson Boulevard, Warner Robbins, GA 31099
357 155 Tom Hill Senior Boulevard, Macon, GA 31210
358 1601 Bradley Park Drive, Columbus, GA 31904
359 800 SW Clark Lane, Blue Springs, MO 64015
360 304 SE M-291, Lee's Summit, MO 64063
361 1760 US Highway 1, South, St. Augustine, FL 32084
362 2441 South Hamilton Road, Columbus, OH 43232
363 1410 Flammang, Waterloo, IA 50702
364 10421 Touhy Avenue, Rosemont, IL 60018
365 2806 Commerce Drive, Coralville, IA 52241
366 540 Edgewood Boulevard, Lansing, MI 48911
367 6200 Lake Worth Road, Greenacres, FL 33463
368 115 Stander Avenue, Mansfield, OH 44903
369 3012 Deerfield Road, Janesville, WI 53545
370 9500 NE Barry Road, Kansas City, MO 64157
371 5500 Durand Avenue, Racine, WI 53401
374 2001 Zeier Road, Madison, WI 53707
375 1832 Alysheba Way, Lexington, KY 40509
376 201 East Euclid Avenue, Mt. Prospect, IL 60056
377 1780 Hill Road North, Pickerington, OH 43147
378 5426 Target Drive, Nashville, TN 37013
379 13800 Lakeside Circle, Sterling Heights, MI 48313
380 2091 Old Fort Parkway, Murfreesboro, TN 37129
382 3000 West Boynton Road, Boynton Beach, FL 33436
383 5488 Cleveland Avenue, Columbus, OH 43231
384 16203 North Dale Mabry Highway, Tampa, FL 33624

                                       69
<Page>

386 4047 Morse Crossing, Columbus, OH 43219
387 4620 Milan Road, Sandusky, OH 44870
388 12541 W. Sunrise Blvd., Sunrise, FL 33323
389 3115 East Hammons Boulevard, Joplin, MO 64804
390 811 South Caraway, Jonesboro, AR 72401
391 5021 Warden Road, North Little Rock, AR 72116
392 5995 Sawmill Road, Columbus, OH 43017
395 2057 Airport Boulevard, Pensacola, FL 32505
396 1684 Home Avenue, Akron, OH 44310
397 1700 Georgesville Sq Dr, Columbus, OH 43228
398 5960 East Main Street, Columbus, OH 43213
399 1881 Polaris Parkway, Columbus, OH 43240
401 1918 North High Street, Columbus, OH 43210
402 10330 Cascade Crossing, Brooklyn, OH 44144
403 17200 South Middlebelt Road, Livonia, MI 48152
404 4000 Medina Road (Suite 200), Copley, OH 44333
405 2200 Mall Drive, East, Waterford, MI 48329
406 5395 Monroe Street, Toledo, OH 43623
407 6075 Emerald Parkway, Columbus, OH 43016
411 9431 Phillips Highway, Jacksonville, FL 32256
412 1721 NE Pine Island Road, Cape Coral, FL 33909
413 3420 Mercer University Drive, Macon, GA 31204
414 3635 Data Point Court, Columbus, OH 43221
415 12209 South Strang Line Road, Olathe, KS 66062
416 6880 Ridge Road, Parma, OH 44129
418 1700.1 Broad Avenue, Findlay, OH 45840
419 3892 Baldwin Road, Auburn Hills, MI 48326
420 450 Mt. Zion Road, Florence, KY 41042
421 2141 South Reynolds Road, Toledo, OH 43614
424 1680 S. Orange Blossom Trail, Apopka, FL 32703
425 9530 Diamond Center Drive, Mentor, OH 44060
426 6737 Darter Court, Ft. Pierce, FL 34945
427 1095 Highway 28, Milford, OH 45150
428 135 North Naperville Road, Bolingbrook, IL 60440
429 1233 Omniplex Drive, Forest Park, OH 45240
430 2081 Marion-Mt. Gilead Road, Marion, OH 43302
431 500 East Emory Road, Powell, TN 37849
432 7811 Kingston Pike, Knoxville, TN 37922
433 13133 South Orange Blossom Trail, Orlando, FL 32837
434 1901 McKee Street, Batavia, IL 60510
435 3125 Government Boulevard, Mobile, AL 36606
437 5180 NE 24th Street, Ocala, FL 34471
438 23350 Allen Road, Woodhaven, MI 48183
439 4094 Pearl Rd., Medina, OH 44256
440 1741 Bechtle Road, Springfield, OH 45504
441 914 Zane Street, Zanesville, OH 43701
443 5300 Abbe Road, Elyria, OH 44035
444 861 Eads Parkway, Lawrenceburg, IN 47025
445 6836 Atlanta Highway, Montgomery, AL 36117
446 3835 Race Road, Cincinnati, OH 45211
447 1125 Interstate Drive, Cookeville, TN 38501
448 51170 Gratiot Avenue, Chesterfield, MI 48051

                                       70
<Page>

449 12921 Sheldon Road, Tampa, FL 33625
450 1134 Pearce Boulevard, Wentzville, MO 63385
451 655 Schillinger Road, South, Mobile, AL 36695
454 3354 Montgomery Hwy, Dothan, AL 36303
455 1415 SW Wanamaker Road, Topeka, KS 66604
459 1487 Victor Road, Lancaster, OH 43130
460 3165 Elida Road, Lima, OH 45805
461 3960 East Boulevard Service Rd., Montgomery, AL 36117
462 17509 N. Palms Village Place, Tampa, FL 33602
463 2313 Cobbs Ford Road, Prattville, AL 36066
466 170 S.W. Commerce Blvd., Lake City, FL 32025
469 2720 Spring Avenue, SW, Decatur, AL 35603
471 320 W. North Avenue, West Chicago, IL 60185
472 3615 N. Ridge East, Ashtabula, OH 44004
477 2005 August Drive, Ontario, OH 44906
478 17312 Chesterfield Airport Rd., Chesterfield, MO 63005
479 8701 SW 157th Avenue, Miami, FL 33193
480 499 Congaree Rd., Greenville, SC 29607
481 4666 Dressler Rd., NW, Canton, OH 44718
482 889 North Bridge Street, Chillicothe, OH 45601
486 340 Columbiana Drive, Columbia, SC 29212
489 6786 Applewood Blvd., Boardman, OH 44512
496 17325 Lorain Avenue, Cleveland, OH 44111
501 50840 Valley Frontage Rd., St. Clairsville, OH 43950

                                       71
<Page>

To:  FIFTH THIRD BANK, INDIANA (CENTRAL)
     251 North Illinois, Suite 1000
     INDIANAPOLIS, INDIANA 46204

                              OFFICER'S CERTIFICATE

     I represent that I am the (chief financial officer or treasurer) of THE
STEAK N SHAKE COMPANY, an Indiana corporation (the "Company").

     In support of an application for a Revolving Loan Advance and pursuant to
the terms of that certain Credit Agreement entered into between the Company and
FIFTH THIRD BANK, INDIANA (CENTRAL), a national banking association (the "Bank")
dated as of November 16, 2001 (as amended, the "Credit Agreement"), I certify to
the Bank that:

     1.   Each of the representations contained in Sections 3(a) through 3(c),
          inclusive, and 3(e) through 3(l), inclusive, of the Credit Agreement
          are true and correct as of this date.

     2.   The financial statements of the Company as of             ,     ,
          for the fiscal year then ended, and the financial statements as of
                     ,      , and for the partial fiscal year then ended,
          present fairly the financial condition of the Company and the
          results of its operations as of the dates of such statements and
          for the fiscal periods then ended, and since the date of the latest
          of such statements there has been no material adverse change in its
          financial position or its operations.

     3.   No Event of Default or Unmatured Event of Default, as those terms are
          defined in the Credit Agreement, has occurred and is continuing.

                                        ----------------------------------------

                                        ----------------------------------------
                                                (Printed Name and Title)

                                             of THE STEAK N SHAKE COMPANY,
                                             an Indiana corporation

                                   Exhibit "A"
                                Page 1 of 1 pages

                                       72
<Page>

                                 PROMISSORY NOTE
                                (REVOLVING LOAN)

                                        Indianapolis, Indiana
$30,000,000.00                          Dated: November 16, 2001
                                        Final Maturity: January 30, 2005

     On or before January 30, 2005 ("Final Maturity"), THE STEAK N SHAKE
COMPANY, an Indiana corporation (the "Maker") promises to pay to the order of
FIFTH THIRD BANK, INDIANA (CENTRAL), a national banking association (the "Bank")
at the principal office of the Bank at Indianapolis, Indiana, the principal sum
of Thirty Million and 00/100 Dollars ($30,000,000.00) or so much of the
principal amount of the Loan represented by this Note as may be disbursed by the
Bank under the terms of the Credit Agreement described below, and to pay
interest on the unpaid principal balance outstanding from time to time as
provided in this Note.

     This Note evidences indebtedness (the "Loan") incurred or to be incurred by
the Maker under a revolving line of credit extended to the Maker by the Bank
under a Credit Agreement dated the date of this Note. All references in this
Note to the Credit Agreement shall be construed as references to that Agreement
as it may be amended from time to time. The Loan is referred to in the Credit
Agreement as the "Revolving Loan." Subject to the terms and conditions of the
Credit Agreement, the proceeds of the Loan may be advanced and repaid and
re-advanced until Final Maturity. The principal amount of the Loan outstanding
from time to time shall be determined by reference to the books and records of
the Bank on which all Advances under the Loan and all payments by the Maker on
account of the Loan shall be recorded. Such books and records shall be deemed
PRIMA FACIE to be correct as to such matters.

     The terms "Advance" and "Banking Day" are used in this Note as defined in
the Credit Agreement.

     Interest on the unpaid principal balance of the Loan outstanding from time
to time prior to and after maturity will accrue at the rate or rates provided in
the Credit Agreement. Prior to maturity, accrued interest shall be due and
payable on the last Banking Day of each month commencing on the last Banking Day
of the month in which this Note is executed. After maturity, interest shall be
due and payable as accrued and without demand. Interest will be calculated by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding.

     The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, at Final Maturity. Reference is made to
the Credit Agreement for provisions requiring prepayment of principal under
certain circumstances. Principal may be prepaid, but only as provided in the
Credit Agreement.

     If any installment of interest due under the terms of this Note is not paid
when due, then the Bank or any subsequent holder of this Note may, subject to
the terms of the Credit Agreement, at its option and without notice, declare the
entire principal amount of the Note and all accrued interest immediately due and
payable. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of this Note upon the happening of other "Events of
Default" as defined therein.

     If any installment of interest due under the terms of this Note prior to
maturity is not paid in full within ten (10) days when due, then the Bank at its
option and without prior notice to the Maker, may assess a late payment fee in
an amount equal to the greater of $20.00 or five percent (5%) of the amount past
due. Each late payment fee assessed shall be due and payable on the earlier of
the next regularly scheduled interest payment date or the maturity of this Note.
Waiver by the Bank of any late payment fee assessed, or the failure of the Bank
in any instance to assess a late payment fee shall not be construed as a waiver
by the Bank of its right to assess late payment fees thereafter.

                                   Exhibit "B"
                                Page 1 of 2 pages

                                       73
<Page>

     All payments on account of this Note shall be applied first to expenses of
collection, next to any late payment fees which are due and payable, next to
interest which is due and payable, and only after satisfaction of all such
expenses, fees and interest, to principal.

     The Maker and any endorsers severally waive demand, presentment for payment
and notice of nonpayment of this Note, and each of them consents to any renewals
or extensions of the time of payment of this Note without notice.

     All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.

     This Note is made under and will be governed in all cases by the
substantive laws of the State of Indiana, notwithstanding the fact that Indiana
conflicts of law rules might otherwise require the substantive rules of law of
another jurisdiction to apply.

                              THE STEAK N SHAKE COMPANY, an Indiana corporation

                              By:
                                   ---------------------------------------
                                   JAMES W. BEAR, SENIOR VICE PRESIDENT
                                   and Chief Financial Officer

                                   Exhibit "B"
                                Page 2 of 2 pages

                                       74
<Page>

                             SCHEDULE OF EXCEPTIONS

     This Schedule is a part of the Credit Agreement between THE STEAK N SHAKE
COMPANY, an Indiana corporation (the "Company"), and FIFTH THIRD BANK, INDIANA
(CENTRAL), a national banking association (the "Bank") dated as of the date of
this Schedule. The Company hereby certifies to the Bank as follows:

     1.   ORGANIZATION OF THE COMPANY AND ITS SUBSIDIARIES. No jurisdiction in
          which the Company or any Subsidiary is not qualified to do business
          has asserted that the Company or such Subsidiary is required to be
          qualified therein except for

          ----------------------------------------------------------------------

     2.   LITIGATION AND CONTINGENT LIABILITIES. There are no exceptions to the
          representations contained in Section 3(e) with respect to litigation
          and contingent liabilities, except the following:

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

     3.   HAZARDOUS SUBSTANCES. There are no exceptions to the representation
          contained in Section 3(k), except the following:

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

     4.   LIENS. There are no "liens" (as defined in Section 6(b)) on any
          property of the Company except for liens of the types described in
          items (i) through (vi) of the enumeration contained in Section 6(b),
          and except for the following:

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

     5.   GUARANTIES. The Company is not a guarantor or surety of, or otherwise
          responsible in any manner with respect to any undertaking of any other
          person or entity, except for the items of the type described in items
          (i) through (iii) of the enumeration contained in Section 6(c), and
          except for the following:

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

     6.   LOANS AND ADVANCES. The Company does not have outstanding any loans or
          advances to any person or entity except for items of a type described
          in items (i) through (iii) of the enumeration contained in Section
          6(d), and except for the following:

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

     7.   INDEBTEDNESS AND CAPITAL LEASES. The Company presently has no
          indebtedness for borrowed money nor is the Company a lessee under any
          capital lease except for such obligations to the Bank, and except for
          the following:

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

                                   Exhibit "C"
                                Page 1 of 2 pages

                                       75
<Page>

Dated as of November 16, 2001.

                              THE STEAK N SHAKE COMPANY, an Indiana corporation

                              By:   ----------------------------------
                                    James W. Bear, Senior Vice President
                                    and Chief Financial Officer

                                   Exhibit "C"
                                Page 2 of 2 pages

                                       76
<Page>

CAPITAL LEASE EXPIRATIONS

<Table>
<Caption>
  PERIOD       YEAR          STORE      ADDRESS
  ------       ----          -----      -------
<S>            <C>           <C>        <C>
     5         2002           126       5917 East Hillsborough, Tampa, FL
     8         2002            15       3229 North University, Peoria, IL
    13         2002           142       5827 East 71st Street, Indianapolis, IN
     8         2003            50       11050 Bellefontaine, St. Louis, MO
     9         2003            29       2960 West 71st Street, Indianapolis, IN
     9         2003            30       8601 Pendleton Pike, Indianapolis, IN
     9         2003            34       635 East Carmel Drive, Carmel, IN
     3         2004            65       7310 South Lindbergh, St. Louis, MO
     5         2005            51       80 Homer Adams Parkway, Alton, IL
    10         2005           154       3064 Crossroads, Arnold, MO
    13         2005           981       1700 West Washington, Bloomington, IL
     4         2006           178       7510 West 63rd Street, Overland Park, KS
     4         2006           179       13621 East 40th Highway, Independence, MO
    12         2008            38       1104 Brentwood Boulevard, Richmond Heights, MO
</Table>

DFL EXPIRATIONS

<Table>
  PERIOD       YEAR          STORE      ADDRESS
  ------       ----          -----      -------
<S>            <C>           <C>        <C>
     3         2002          122        3232 Bardstown Road, Louisville, KY
     3         2002          123        1901 Algonquin, Chicago, IL
     3         2002          125        844 Roosevelt, Lombard, IL
     6         2002          130        6010 S. Cass Ave, Westmont, IL
     6         2002          135        806 East Southmore, Houston, TX
     7         2002          137        600 West Plainfield Road, Chicago, IL
    13         2002          134        1005 Bay Area Boulevard, Houston, TX
</Table>

                                       77
<Page>

                               GUARANTY AGREEMENT

     This undertaking and agreement (this "Guaranty") is made by           ,
[an Indiana corporation\an Indiana limited partnership] (the "Guarantor"), in
favor of FIFTH THIRD BANK, INDIANA (CENTRAL), a national banking association
(the "Bank") in consideration of the loans described in this Guaranty made or
to be made by the Bank to THE STEAK N SHAKE COMPANY, an Indiana corporation
(the "Borrower"). This Guaranty is on the following terms:

     1.   BACKGROUND OF THIS GUARANTY -- CERTAIN DEFINITIONS. The Bank and the
Borrower are parties to a Credit Agreement dated the date of this Guaranty (the
"Credit Agreement") under the terms of which the Bank has agreed to extend a
revolving line of credit in the maximum aggregate outstanding principal amount
of $30,000,000.00 (referred to in the Credit Agreement as the "Revolving Loan")
to the Borrower subject to the fulfillment of certain conditions, one of which
is the execution and delivery by the Guarantor of this Guaranty. This Guaranty
is made by the Guarantor in consideration of the agreement of the Bank to make
the Revolving Loan (the "Loan"). All defined terms used in this Guaranty and
which are not specifically defined herein are used as defined in the Credit
Agreement. The term "Obligations" as used in this Guaranty means all of the
obligations of the Borrower in favor of the Bank of every type and description,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, including but not limited to the Borrower's obligation to
repay the principal of, interest on and expenses of collection of the Loan as
provided in the Credit Agreement and the other Loan Documents, including any
Advances under the Revolving Loan made after this date and after the initial
Revolving Loan Maturity Date pursuant to any extension or extensions of the
Revolving Loan Maturity Date, and all other obligations incurred pursuant to the
terms of the Credit Agreement and any other Loan Document including any
obligations arising on account of any amendment to or extension of the Credit
Agreement or any other Loan Document. The term "Default" means an "Event of
Default" as defined in the Credit Agreement.

     2.   THE GUARANTY. The Guarantor guarantees the full and prompt payment of
all of the Obligations when due, whether at scheduled maturity or at maturity by
virtue of acceleration on account of a Default. The Guarantor further agrees to
pay to the Bank an amount equal to all expenses, including reasonable attorneys'
fees, paid or incurred by the Bank after Default in endeavoring to enforce this
Guaranty.

Notwithstanding any other provision of this Guaranty, the Guarantor's liability
hereunder shall be limited to the lesser of the following amounts minus, in
either case, One Dollar ($1.00):

     a.   the lowest amount which would render this Guaranty a fraudulent
          transfer under Section 548 of the Bankruptcy Code of 1978, as amended,
          or

     b.   if this Guaranty is subject to the Uniform Fraudulent Transfer Act
          (the "UFTA") or the Uniform Fraudulent Conveyance Act (the "UFCA") or
          any similar or analogous statute or rule of law, then the lowest
          amount which would render this Guaranty a fraudulent conveyance under
          the UFTA, the UFCA, or any such similar or analogous statute or rule
          of law.

The amount of the limitation imposed upon the Guarantor's liability under the
terms of the preceding sentence shall be subject to redetermination as of each
date a "transfer" is deemed to have been made on account of this Guaranty under
applicable law. The Guarantor acknowledges that information concerning the
Guarantor's financial condition is under the control of the Guarantor and is
more readily available to the Guarantor than to the Bank, and for that reason
the Guarantor agrees that should the Guarantor claim that the amount of its
liability under this Guaranty is less than the full amount of the Obligations
because of the provisions of this paragraph, then the burden of proving the
facts which would result in such limitation shall be upon the Guarantor.

     3.   FINANCIAL INFORMATION. As long as this Guaranty is in effect the
Guarantor shall furnish to the Bank the following:

     a.   CERTIFICATES REGARDING SOLVENCY. At such times as the Bank may
          reasonably require, a "Certificate Regarding Solvency" in the form
          attached "Annex."

                                  Exhibit "D"
                                Page 1 of 6 pages

                                       78
<Page>

     b.   OTHER INFORMATION. Such other information relating to the financial
          condition of the Guarantor as the Bank may reasonably require.

     4.   GUARANTY ABSOLUTE. This Guaranty shall be absolute, continuing and
unconditional, irrespective of the irregularity, invalidity or unenforceability
of any other Loan Document and shall not be affected or impaired by any failure,
negligence or omission on the part of the Bank to realize upon and protect any
collateral for any of the Obligations. This Guaranty shall remain in full force
and effect until all of the Obligations have been satisfied in full and the
Commitment of the Bank to make Advances under the Revolving Loan has expired.
The Bank may from time to time, without notice to the Guarantor and without
affecting the Guarantor's liability under this Guaranty:

     a.   obtain a security interest in any property to secure any of the
          Obligations;

     b.   obtain the primary or secondary liability of any party or parties in
          addition to the Borrower and the Guarantor with respect to any of the
          Obligations;

     c.   extend or renew any of the Obligations for any period beyond their
          original due dates;

     d.   release or compromise the liability of any other party or parties
          which are now or may hereafter become primarily or secondarily liable
          with respect to any of the Obligations;

     e.   release any security interest which the Bank now has or may hereafter
          obtain in any property securing any of the Obligations and permit any
          substitution or exchange of any such property;

     f.   proceed against the Guarantor for payment of the Obligations, whether
          or not the Bank shall have resorted to any property securing any of
          the Obligations or shall have proceeded against the Borrower or any
          other party primarily or secondarily liable with respect to any of the
          Obligations;

     g.   amend the terms of the Credit Agreement from time to time in any
          particulars; or

     h.   extend loans and other credit accommodations to the Borrower in
          addition to the Revolving Loan and increase the maximum amount which
          may be loaned to the Borrower under the Revolving Loan.

     5.   ASSIGNMENT AND PARTICIPATIONS. The Bank may, without notice to the
Borrower or the Guarantor, sell or otherwise assign all or any portion of the
Obligations and any participations therein, and upon any such sale or
assignment, the transferee shall have the right to enforce this Guaranty to the
extent of the transferee's interest directly against the Guarantor as fully as
if the transferee were specifically named in the Guaranty as the holder of such
interest, but the Bank shall have the unimpaired right to enforce this Guaranty
for the benefit of the Bank and for the benefit of any participant in respect of
whose participation the Bank has retained such right.

     6.   SUBROGATION WAIVER. In order to induce the Bank to make the Loan in
reliance, in part, upon this Guaranty, notwithstanding the fact that the
Guarantor is an "insider" with respect to the Borrower, as the term "insider" is
defined in the Bankruptcy Code, the Guarantor waives for itself, its legal
representatives and assigns any right of indemnity, reimbursement or
contribution from the Borrower or any other person obligated with respect to any
of the Obligations (any such other person being referred to hereafter in this
paragraph as a "Co-Obligor") or from the property of the Borrower or from the
property of any Co-Obligor, and the Guarantor further waives any right of
subrogation to the rights of the Bank against the Borrower or any Co-Obligor or
the property of the Borrower or any Co-Obligor which would otherwise arise by
virtue of any payment made by the Guarantor to the Bank on account of this
Guaranty, whether any such right of indemnity, reimbursement, contribution or
subrogation would otherwise arise by virtue of contract, whether express or
implied, with any person or as a matter of law or

                                   Exhibit "D"
                                Page 2 of 6 pages

                                       79
<Page>

equity, and the Guarantor undertakes on behalf of itself, its legal
representatives and assigns that neither the Guarantor nor the Guarantor's legal
representatives or assigns will attempt to exercise or accept the benefits of
any such right and should the Guarantor or the Guarantor's legal representative
or assigns receive any payment or distribution of money or other property on
account of such right notwithstanding the provisions of this paragraph, such
money or other property shall be held in trust by the recipient for the Bank and
shall immediately be delivered to the Bank for application to the Obligations in
the same form as received, with the addition only of such endorsements or
assignments as may be necessary to perfect the title of the Bank thereto.

     7.   OTHER WAIVERS. The Guarantor waives: (i) notice of the acceptance of
this Guaranty, (ii) notice of the existence and creation of all or any of the
Obligations, (iii) notice of nonpayment of any of the Obligations and (iv)
diligence by the Bank in collection of the Obligations and the protection of or
realization upon any collateral for the Obligations.

     8.   REINSTATEMENT. If any amount which is paid to the Bank by the Borrower
or any other party and which is applied by the Bank to the satisfaction of any
of the Obligations, is returned by the Bank to the Borrower or such other party
or a trustee in Bankruptcy or other legal representative of the Borrower or such
other party by virtue of a claim that such payment constituted a voidable
preference under the Bankruptcy Code or under any state insolvency law, whether
such amount is returned under court order or pursuant to settlement of the claim
of preference, then this Guaranty shall be reinstated as to such amount as
though such payment to the Bank had never been made and notwithstanding any
intervening return or cancellation of any note or other instrument or agreement
evidencing the reinstated Obligations.

     9.   SUBORDINATION. All obligations of the Borrower to the Guarantor (the
"Junior Obligations") are and shall hereafter be subordinate and inferior in
right of payment to all of the Obligations. Notwithstanding any provision to the
contrary contained in any promissory note or any other agreement between the
Borrower and the Guarantor with respect to the Junior Obligations, the Borrower
shall not make and shall not be required to make any payment on account of the
principal of or interest on the Junior Obligations until the Obligations have
been paid in full and the Bank has no further obligation to make additional
advances to the Borrower under the Revolving Loan, including advances made
pursuant to any extension of the term of the Revolving Loan. In the event of the
liquidation of the Borrower or the distribution of any of its assets or the
securities of any successor on account of any liquidation, bankruptcy,
receivership, reorganization, assignment for the benefit of creditors or similar
proceeding, the Guarantor shall not be entitled to any payment or distribution
on account of any Junior Obligation until all Obligations have been satisfied in
full.

     10.  MISCELLANEOUS. This Guaranty shall be binding upon the Guarantor, upon
the Guarantor's legal representatives, successors and assigns. If any provision
of this Guaranty is determined to be illegal or unenforceable, such provision
shall be deemed to be severable from the balance of the provisions of this
Guaranty and the remaining provisions shall be enforceable in accordance with
their terms.

     11.  CHOICE OF LAW. This Guaranty is made under and will be governed in all
cases by the substantive laws of the State of Indiana, notwithstanding the fact
that Indiana conflicts of law rules might otherwise require the substantive
rules of law of another jurisdiction to apply.

     12.  [CORPORATE] AUTHORITY. In order to induce the Bank to accept this
Guaranty and to make the Loan to the Borrower, the Guarantor represents and
warrants to the Bank that: (i) the Guarantor is a [corporation\limited
partnership] organized, existing and in good standing under the laws of the
State of [Indiana]; (ii) execution and delivery of this Guaranty are within the
Guarantor's [corporate] powers, have been duly authorized by all necessary
[corporate] action and do not contravene or conflict with any provision of law
or of the [Articles of Incorporation or By-laws\Certificate of Limited
Partnership or the Limited Partnership Agreement] of

                                   Exhibit "D"
                                Page 3 of 6 pages

                                       80
<Page>

the Guarantor or of any agreement binding upon the Guarantor or its properties,
and (iii) this Guaranty is the legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms.

     13.  ARBITRATION. BANK AND THE GUARANTOR AGREE THAT UPON THE WRITTEN DEMAND
OF EITHER PARTY, WHETHER MADE BEFORE OR AFTER THE INSTITUTION OF ANY LEGAL
PROCEEDINGS, BUT PRIOR TO THE RENDERING OF ANY JUDGMENT IN THAT PROCEEDING, ALL
DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR
CLASS IN NATURE, ARISING FROM THIS AGREEMENT, OR ANY LOAN DOCUMENT OR OTHERWISE,
INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE RESOLVED BY
BINDING ARBITRATION PURSUANT TO THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION
ASSOCIATION ("AAA"). ANY ARBITRATION PROCEEDING HELD PURSUANT TO THIS
ARBITRATION PROVISION SHALL BE CONDUCTED IN THE CITY NEAREST THE GUARANTOR'S
ADDRESS HAVING AN AAA REGIONAL OFFICE, OR AT ANY OTHER PLACE SELECTED BY MUTUAL
AGREEMENT OF THE PARTIES. NO ACT TO TAKE OR DISPOSE OF ANY COLLATERAL SHALL
CONSTITUTE A WAIVER OF THIS ARBITRATION AGREEMENT OR BE PROHIBITED BY THIS
ARBITRATION AGREEMENT.

     THIS ARBITRATION PROVISION SHALL NOT LIMIT THE RIGHT OF EITHER PARTY DURING
ANY DISPUTE TO SEEK, USE, AND EMPLOY ANCILLARY OR PRELIMINARY RIGHTS AND/OR
REMEDIES, JUDICIAL OR OTHERWISE, FOR THE PURPOSES OF REALIZING UPON, PRESERVING,
PROTECTING, FORECLOSING UPON OR PROCEEDING UNDER FORCIBLE ENTRY AND DETAINER FOR
POSSESSION OF ANY REAL OR PERSONAL PROPERTY, AND ANY SUCH ACTION SHALL NOT BE
DEEMED AN ELECTION OF REMEDIES. SUCH REMEDIES INCLUDE, WITHOUT LIMITATION,
OBTAINING INJUNCTIVE RELIEF OR A TEMPORARY RESTRAINING ORDER, INVOKING A POWER
OF SALE UNDER ANY DEED OF TRUST OR MORTGAGE; OBTAINING A WRIT OF ATTACHMENT OR
IMPOSITION OF A RECEIVERSHIP; OR EXERCISING ANY RIGHTS RELATING TO PERSONAL
PROPERTY, INCLUDING EXERCISING THE RIGHT OF SETOFF, OR TAKING OR DISPOSING OF
SUCH PROPERTY WITH OR WITHOUT JUDICIAL PROCESS PURSUANT TO THE UNIFORM
COMMERCIAL CODE. ANY DISPUTES, CLAIMS, OR CONTROVERSIES CONCERNING THE
LAWFULNESS OR REASONABLENESS OF ANY ACT, OR EXERCISE OF ANY RIGHT OR REMEDY,
CONCERNING ANY COLLATERAL, INCLUDING ANY CLAIM TO RESCIND, REFORM, OR OTHERWISE
MODIFY ANY AGREEMENT RELATING TO THE COLLATERAL, SHALL ALSO BE ARBITRATED;
PROVIDED, HOWEVER THAT NO ARBITRATOR SHALL HAVE THE RIGHT OR THE POWER TO ENJOIN
OR RESTRAIN ANY ACT OF ANY PARTY. JUDGMENT UPON ANY AWARD RENDERED BY ANY
ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE STATUTE OF
LIMITATIONS, ESTOPPEL, WAIVER, LACHES AND SIMILAR DOCTRINES WHICH WOULD
OTHERWISE BE APPLICABLE IN AN ACTION BROUGHT BY A PARTY SHALL BE APPLICABLE IN
ANY ARBITRATION PROCEEDING, AND THE COMMENCEMENT OF AN ARBITRATION PROCEEDING
SHALL BE DEEMED THE COMMENCEMENT OF ANY ACTION FOR THESE PURPOSE. THE FEDERAL
ARBITRATION ACT (TITLE 9 OF THE UNITED STATES CODE) SHALL APPLY TO THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT OF THIS ARBITRATION PROVISION.

                                   Exhibit "D"
                                Page 4 of 6 pages

                                       81
<Page>

     Dated as of November 16, 2001

                                        By:
                                             -----------------------------------

                                             -----------------------------------
                                                        (Printed name and title)

STATE OF _____________        )
                              ) SS:
COUNTY OF ____________        )

     Before me the undersigned, a Notary Public in and for said County and
State, personally appeared ________________________, the of __________________,
a(n) _________________________, who as such authorized officer acknowledged the
execution of the foregoing Guaranty Agreement on behalf of said
_______________________ this ___ day of November, 2001.

                                   Signature:
                                             -----------------------------------

                                   Printed:
                                             -----------------------------------
                                                       Notary Public

My Commission Expires:
                         --------------
My County of Residence:
                         --------------

                                   Exhibit "D"
                                Page 5 of 6 pages

                                       82
<Page>

                                      ANNEX

                         CERTIFICATE REGARDING SOLVENCY

     ___________________, [an Indiana corporation\an Indiana limited
partnership] (the "Guarantor"), by its duly authorized officer, makes the
following representations to FIFTH THIRD BANK, INDIANA (CENTRAL), a national
banking association (the "Bank") and acknowledges that the Bank is entitled to
rely and will rely upon these representations, in providing certain financial
accommodations to THE STEAK N SHAKE COMPANY, an Indiana corporation, pursuant to
a certain Credit Agreement dated as of November 16, 2001 (the "Credit
Agreement").

     1.   The assets of the Guarantor at a "fair valuation" within the meaning
          of the Bankruptcy Code of 1978, as amended, (the "Code") are worth
          approximately $_____________ as of this date.

     2.   The liabilities of the Guarantor, including without limitation
          contingent liabilities to the extent appropriate for consideration in
          determining whether the Guarantor is "insolvent", within the meaning
          of the Code, but excluding the Guarantor's contingent liability under
          the Guaranty Agreement (the "Guaranty") required to be given by the
          Guarantor under the terms of the Credit Agreement, total approximately
          $_____________ as of ____________________, 200_, the end of the last
          fiscal quarter of the Guarantor.

     3.   The Guarantor is not insolvent within the meaning of the Code, after
          taking into account its contingent liability under the Guaranty.

     4.   After taking into account its contingent liability under the Guaranty,
          the Guarantor has sufficient capital for the operation of its business
          as presently conducted and at the level of operations contemplated for
          the foreseeable future. The minimum amount of capital required to
          support the Guarantor's operations at the level planned for the
          foreseeable future is $_________________.

     5.   The Guarantor is currently paying its debts as they become due in the
          ordinary course of its business. After taking into account its
          contingent liability under the Guaranty, the Guarantor believes that
          it will be able to continue to pay its debts as they become due in the
          ordinary course of its business.

Dated as of ___________________, 200_.

                                        By:  -----------------------------------

                                             -----------------------------------
                                                   (Printed name and title)

                                   Exhibit "D"
                                Page 6 of 6 pages

                                       83<Page>

===============================================================================
                                                                    EXHIBIT 4.1
                                                                 EXECUTION COPY

                                  CINERGY CORP.

                                       AND

                                FIFTH THIRD BANK,

                                     TRUSTEE

                                ----------------

                          SECOND SUPPLEMENTAL INDENTURE

                          DATED AS OF DECEMBER 18, 2001

                                       TO

                                    INDENTURE

                         DATED AS OF SEPTEMBER 12, 2001

                                ----------------

                        SENIOR DEFERRABLE NOTES DUE 2007

===============================================================================

<Page>

         SECOND SUPPLEMENTAL INDENTURE, dated as of December 18, 2001 (this
"Second Supplemental Indenture"), between CINERGY CORP., a Delaware corporation
(the "Company") having its principal office at 139 East Fourth Street,
Cincinnati, Ohio 45202, and FIFTH THIRD BANK, an Ohio banking corporation, as
Trustee (the "Trustee") under the Indenture dated as of September 12, 2001
between the Company and the Trustee (the "Indenture").

                             Recitals of the Company

         The Company has executed and delivered the Indenture to the Trustee to
provide for the issuance from time to time of its unsecured debentures, notes or
other evidences of indebtedness (the "Securities"), to be issued in one or more
series as provided in the Indenture.

         Pursuant to the terms of the Indenture, the Company desires to provide
for the establishment of a series of Securities, to be known as its "Senior
Deferrable Notes due 2007" (herein called the "Senior Deferrable Notes"), in
this Second Supplemental Indenture.

         All things necessary to make this Second Supplemental Indenture a valid
agreement of the Company have been done.

         CC Funding Trust I, a Delaware statutory business trust (the "Trust"),
has offered to the public up to $316,250,000 in aggregate liquidation amount of
its preferred securities (the "Preferred Securities") which, together with
purchase contracts issued by the Company which obligate the holder to purchase a
specified number of shares of common stock, par value $0.01 per share, of the
Company, are being offered to the public in the form of units (the "FELINE
PRIDES") and, in connection therewith, the Company has agreed to purchase up to
$9,782,000 in aggregate liquidation amount of the Trust's common securities (the
"Common Securities" and together with the Preferred Securities, the "Trust
Securities"), each representing an undivided beneficial interest in the assets
of the Trust, and the Trust proposes to invest the proceeds from such offerings
in up to $326,032,000 in aggregate principal amount of the Senior Deferrable
Notes

         Now, Therefore, This Second Supplemental Indenture Witnesseth:

         For and in consideration of the premises and the purchase of the Senior
Deferrable Notes by the Trust, it is mutually agreed, for the equal and
proportionate benefit of the Trust and any other future holders of the Senior
Deferrable Notes (the "Holders"), as follows:

                                   ARTICLE ONE
                                   DEFINITIONS

              Section 101. DEFINITION OF TERMS. UNLESS THE CONTEXT OTHERWISE
REQUIRES:

                     (a) any term defined anywhere in this Second Supplemental
Indenture has the same meaning throughout;

<Page>

                     (b) any term not defined herein that is defined in the
Indenture has the same meaning when used in this Second Supplemental Indenture;

                     (c) any term not defined herein or in the Indenture that is
defined in Amended and Restated Declaration of Trust, dated December 18, 2001
(the "Declaration") of the Trust, has the same meaning when used in this Second
Supplemental Indenture;

                     (d) the term "Business Day," as used in the Indenture and
this Second Supplemental Indenture with respect to the Senior Deferrable Notes,
shall mean any day other than a Saturday or Sunday or a day on which banking
institutions in the City of New York, New York, or Cincinnati, Ohio, are
authorized or required by law or executive order to remain closed, or a day on
which the Trustee or the Property Trustee is closed for business.

                                  ARTICLE TWO
                TERMS AND ISSUANCE OF THE SENIOR DEFERRABLE NOTES

                     Section 201. ISSUE OF SENIOR DEFERRABLE NOTES. A series of
Securities which shall be designated the "Senior Deferrable Notes due 2007"
shall be executed, authenticated and delivered in accordance with the provisions
of, and shall in all respects be subject to, the terms, conditions and covenants
of the Indenture and this Second Supplemental Indenture (including the forms of
Senior Deferrable Note set forth as Exhibits A and B hereto). The Senior
Deferrable Notes will constitute unsecured and unsubordinated indebtedness of
the Company and will rank equally with all other existing or future unsecured
and unsubordinated indebtedness of the Company. The aggregate principal amount
of Senior Deferrable Notes of the series created hereby which may be
authenticated and delivered under the Indenture shall not, except as permitted
by the provisions of the Indenture, exceed $326,032,000. The Senior Deferrable
Notes shall be initially issued in certificated form to the Trust (the "Initial
Senior Deferrable Notes") and shall be substantially in the Form of Exhibit B
hereto. The terms of such Senior Deferrable Notes are herein incorporated by
reference and made part of this Second Supplemental Indenture.

              Section 202. MATURITY. Unless a Tax Event Redemption occurs or the
Senior Deferrable Notes are repurchased by the Company at the Holders' option
following a Failed Remarketing as described in Section 205(b), the entire
principal amount of the Senior Deferrable Notes will mature and become due and
payable, together with any accrued and unpaid interest thereon, on February 16,
2007 (the "Maturity Date").

              Section 203. GLOBAL SENIOR DEFERRABLE NOTES. In the event of an
involuntary or voluntary liquidation and dissolution of the Trust (other than in
connection with a Tax Event Redemption):

                     (a)    If the Preferred Securities are held in book-entry
form, the Initial Senior Deferrable Notes may be presented to the Trustee by the
Property Trustee, along with written certification by the Property Trustee that
the Preferred Securities are held in book-entry form, in exchange for a Global
Security in the form of Exhibit A in an aggregate principal

                                       2
<Page>

amount equal to all Outstanding Senior Deferrable Notes (a "Global Senior
Deferrable Note"). The securities depositary for the Global Senior Deferrable
Note will be The Depository Trust Company (the "Depositary"). The Global Senior
Deferrable Note will be registered in the name of the Depositary or its nominee,
and delivered by the Trustee to the Depositary or a custodian appointed by the
Depositary for crediting to the accounts of its participants pursuant to the
instructions of the Property Trustee. The Company upon any such presentation
shall execute a Global Senior Deferrable Note in such aggregate principal amount
and deliver the same to the Trustee for authentication and delivery in
accordance with the Indenture and this Second Supplemental Indenture. Payments
on the Senior Deferrable Notes issued as a Global Senior Deferrable Note will be
made to the Depositary or its nominee.

                     (b)    If any Preferred Securities are held in non
book-entry certificated form ("Non-Book-Entry Preferred Securities"), the
Initial Senior Deferrable Notes may be presented to the Trustee by the Property
Trustee, along with written identification by the Property Trustee of the
certificates representing such Non-Book Entry Preferred Securities and of the
liquidation amount thereof, and such Non Book-Entry Preferred Securities will be
deemed to represent beneficial interests in Senior Deferrable Notes presented to
the Trustee by the Property Trustee having an aggregate principal amount equal
to the aggregate liquidation amount of the Non-Book-Entry Preferred Securities
until the certificates representing such Non-Book-Entry Preferred Securities are
presented to the Securities Registrar for transfer or reissuance, at which time
such certificates will be canceled and a Senior Deferrable Note registered in
the name of the holder of the Non-Book Entry Preferred Security or the
transferee of the holder of such Non-Book Entry Preferred Security, as the case
may be, with an aggregate principal amount equal to the aggregate liquidation
amount of the Non-Book Entry Preferred Security canceled will be executed by the
Company and delivered to the Trustee for authentication and delivery in
accordance with the Indenture and this Second Supplemental Indenture. On issue
of such Senior Deferrable Notes, Senior Deferrable Notes with an equivalent
aggregate principal amount that were presented by the Property Trustee to the
Trustee will be deemed to have been canceled.

              Section 204. INTEREST.

                     (a)    Each Senior Deferrable Note will bear interest at
the rate of 6.9% per annum from December 18, 2001 to but excluding February 16,
2005, and at the Reset Rate (which shall not be lower than 6.9% per annum nor
higher than the maximum rate permitted by applicable law) thereafter, payable
quarterly in arrears on February 16, May 16, August 16 and November 16 of each
year, commencing February 16, 2002 (the "Interest Payment Dates") to the Holder
in whose name such Senior Deferrable Note is registered at the close of business
on the Business Day preceding such Interest Payment Date.

                     (b)    The record dates for the payment of interest on the
Senior Deferrable Notes on any Interest Payment Date, shall be (i) as long as
the Senior Deferrable Notes are represented by a Global Senior Deferrable Note
or the Initial Senior Deferrable Notes, the Business Day preceding each Interest
Payment Date or (ii) if the Senior Deferrable Notes are

                                       3
<Page>

issued pursuant to Section 203(b) above, the fifteenth Business Day prior to
each Interest Payment Date.

                     (c)    The interest rate on the Senior Deferrable Notes
outstanding on and after the Remarketing Date will be reset to the Reset Rate,
and interest will accrue on the Senior Deferrable Notes at the Reset Rate from
and including February 16, 2005 (the "Reset Date"). The Company will cause the
Reset Agent to provide the Reset Rate to the Trustee on or prior to the Reset
Date.

                     (d)    The amount of interest payable on the Senior
Deferrable Notes for any period will be computed (i) for any full quarterly
period on the basis of a 360-day year of twelve 30-day months and (ii) for any
period shorter than a full quarterly period, on the basis of a 30-day month and,
for any period less than a month, on the basis of the actual number of days
elapsed per 30-day month. In the event that any date on which interest is
payable on the Senior Deferrable Notes is not a Business Day, then payment of
the interest payable on such date will be made on the next day that is a
Business Day (and without interest or other payment in respect of any such
delay), except that, if such Business Day is in the next calendar year, then
such payment will be made on the preceding Business Day.

              Section 205. REDEMPTION.

                     (a)    If a Tax Event occurs and is continuing, the Company
may, at its option and upon not less than 30 nor more than 60 days' notice to
the Holders of the Senior Deferrable Notes, redeem the Senior Deferrable Notes
in whole (but not in part) within 90 days following the occurrence of such Tax
Event, at a price equal to, for each Senior Deferrable Note, the Redemption
Amount, plus any accrued and unpaid interest including compound interest if any
to the Tax Event Redemption Date (as defined below). If the Company elects to
exercise such an option to redeem the Senior Deferrable Notes upon a Tax Event,
(i) the Company shall certify in writing to the Trustee the occurrence of a Tax
Event and the applicable Redemption Amount; (ii) the aggregate Redemption
Amount, plus any accrued and unpaid interest including compound interest if any
to the Tax Event Redemption Date (as defined below), shall be paid prior to
12:00 noon, New York City time, on the date of redemption (the "Tax Event
Redemption Date") by check or wire transfer in immediately available funds at
such place and to such account as may be designated by each such Holder,
PROVIDED that the Company shall have deposited with the Trustee an amount
sufficient to pay the aggregate Redemption Amount, plus any accrued and unpaid
interest including compound interest if any to the Tax Event Redemption Date, by
9:00 a.m. on the Tax Event Redemption Date; (iii) the Company shall appoint a
Quotation Agent in connection with a Tax Event Redemption; and (iv) such
redemption shall otherwise be in accordance with the provisions of Article 11 of
the Indenture.

                     (b)    If a Failed Remarketing has occurred, each Holder of
Senior Deferrable Notes will have the right to deliver the Senior Deferrable
Notes to the Company for redemption at a price per Senior Deferrable Note equal
to $50 plus any accrued and unpaid interest (the "Put Price"). If any Holder of
Senior Deferrable Notes elects to exercise such right to have the Company redeem
the Senior Deferrable Notes, (i) the Holder shall give written notice

                                       4
<Page>

of such election not less than three Business Days prior to April 1, 2005; (ii)
the aggregate Put Price shall be paid prior to 12:00 noon, New York City time,
on April 1, 2005 (the "Repurchase Date") by check or wire transfer in
immediately available funds at such place and to such account as may be
designated by each such Holder, PROVIDED that the Company shall have deposited
with the Trustee an amount sufficient to pay the aggregate Put Price by 9:00
a.m. on the Repurchase Date; and (iii) such redemption shall otherwise be in
accordance with Article 11 of the Indenture.

                     (c)    Unless the Company defaults in its obligation to pay
the Redemption Amount, plus any accrued and unpaid interest including compound
interest or the Put Price, on and after the Tax Event Redemption Date or the
Repurchase Date, as the case may be, interest shall cease to accrue on the
Senior Deferrable Notes so redeemed.

                     (d)    Except as provided in Section 205(a) or (b), the
Company will have no right to redeem the Senior Deferrable Notes.

                     (e)    The Senior Deferrable Notes will not be subject to a
sinking fund provision.

                     (f)    The Company will have no right to satisfy and
discharge any of its obligations on the Senior Deferrable Notes by making, or
causing to be made, any deposit of money or Government Obligations provided for
by Section 401 of the Indenture.

              Section 206. EVENTS OF DEFAULT. So long as the Senior Deferrable
Notes are held by the Property Trustee, it shall be an Event of Default with
respect to the Senior Deferrable Notes if the Trust shall have voluntarily or
involuntarily dissolved, wound up its business or otherwise terminated its
existence except in connection with (i) the distribution of the Senior
Deferrable Notes held by the Property Trustee to the holders of the Preferred
Securities and Common Securities in liquidation of their interests in the Trust;
(ii) the redemption of all of the outstanding Preferred Securities and Common
Securities or (iii) a consolidation, conversion, amalgamation, merger or other
transaction involving the Trust that is permitted under Section 3.15 or Article
8 of the Declaration.

              Section 207. PAYING AGENT; SECURITIES REGISTRAR. If the Senior
Deferrable Notes are issued in certificated form pursuant to Section 203(b)
above, the Paying Agent and the Securities Registrar for the Senior Deferrable
Notes shall be the Property Trustee.

              Section 208. EXTENSION OF INTEREST PAYMENT PERIOD. The Company
shall have the right at any time and from time to time, so long as no Event of
Default with respect to the Senior Deferrable Notes has occurred and is
continuing, to defer payments of interest by extending the interest payment
period of such Senior Deferrable Notes for a period not extending beyond the
Maturity Date (an "Extension Period"), during which Extension Period no interest
shall be due and payable. To the extent permitted by applicable law, interest,
the payment of which has been deferred because of the extension of the interest
payment period pursuant to this Section 208, will accrue at the rate of 9.5% per
annum to but excluding February 16, 2005, and at the Reset

                                       5
<Page>

Rate (which shall not be lower than 6.9% per annum nor higher than the maximum
rate permitted by applicable law) thereafter, compounded quarterly for each
quarter of such Extension Period ("Compounded Interest"). At the end of such
Extension Period, the Company shall pay all interest accrued and unpaid on the
Senior Deferrable Notes and Compounded Interest (together, "Deferred Interest")
that shall be payable to the Holders of the Senior Deferrable Notes in whose
names the Senior Deferrable Notes are registered in the Security Register on the
first Regular Record Date after the end of the Extension Period. Prior to the
expiration of any Extension Period, the Company may further extend such period,
provided that such period together with all such previous and further extensions
thereof shall not extend beyond the Maturity Date. Upon termination of any
Extension Period and the payment of all Deferred Interest then due, the Company
may commence a new Extension Period, PROVIDED that such Extension Period,
together with all extensions thereof, may not extend beyond the Maturity Date.
No interest shall be due and payable during an Extension Period except at the
end thereof, but the Company, at its option, may prepay on any Interest Payment
Date all or any portion of the interest accrued during the then elapsed portion
of an Extension Period.

              Section 209. NOTICE OF EXTENSION. The Company shall give written
notice to the Trustee (and the Trustee shall give notice thereof to Holders of
Senior Deferrable Notes) of its election of any Extension Period (or any further
extension thereof) at least five Business Days before the earlier of (i) the
date on which interest on the Senior Deferrable Notes would have been payable
except for the election to begin or extend the Extension Period (whether or not
an Interest Payment Date), (ii) the record date therefor, or (iii) the date the
Trustee is required to give notice to any securities exchange or to Holders of
Senior Deferrable Notes of such date on which interest on Senior Deferrable
Notes would have been payable or of the record date therefor.

              Section 210. PLACE OF PAYMENT. The Place of Payment will be
initially the principal corporate trust office of the Trustee which, at the date
hereof, is located at 38 Fountain Square Plaza Cincinnati, Ohio 45263.

                                 ARTICLE THREE
                                    EXPENSES

              Section 301. PAYMENT OF EXPENSES. In connection with the offering,
sale and issuance of the Senior Deferrable Notes to the Trust in connection with
the sale of the Preferred Securities and Common Securities by the Trust, the
Company will pay for all costs and expenses relating to the offering, sale and
issuance of the Senior Deferrable Notes, including compensation of the Trustee
under the Indenture in accordance with the provisions of Section 607 of the
Indenture.

                                       6
<Page>

                                  ARTICLE FOUR
                                    COVENANTS

              Section 401. COVENANTS DURING AN EXTENSION PERIOD OR IN THE EVENT
OF AN EVENT OF DEFAULT. During an Extension Period or if an Event of Default
with respect to the Senior Deferrable Notes occurs and is continuing, then the
Company shall not:

                     (a)    declare or pay any dividends or distributions on its
capital stock,

                     (b)    redeem, purchase, acquire, or make a liquidation
payment with respect to, any of its capital stock,

                     (c)    make any distribution on any trust preferred
security that ranks PARI PASSU with the Preferred Securities or pay interest on
senior deferrable debt with similar deferral provisions to the Senior Deferrable
Notes; or

                     (d)    make any payment of principal, interest or premium,
if any, on or repay, repurchase or redeem any debt securities issued by the
Company that rank subordinate in right of payment to, the Senior Deferrable
Notes or make any guarantee payments with respect to any guarantee by the
Company of the debt of any subsidiary of the Company if such guarantee ranks
subordinate in right of payment to, the Senior Deferrable Notes.

Notwithstanding the foregoing, the Company may (i) purchase or acquire capital
stock of the Company in connection with the satisfaction by the Company of its
obligations under any employee or director compensation or benefit plans, under
its direct stock purchase and dividend reinvestment plan or pursuant to any
contract or security outstanding on the first day of any such Extension Period
or Event of Default, as the case may be, requiring the Company to purchase
capital stock of the Company, (ii) reclassify the Company's capital stock or
exchange or convert one class or series of the Company's capital stock for
another class or series of the Company's capital stock, (iii) purchase
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iv) declare or pay dividends or distributions in
capital stock of the Company, (v) redeem or repurchase any rights pursuant to a
rights agreement or (vi) make payments under the Guarantee.

              Section 402. ADDITIONAL COVENANTS RELATING TO THE TRUST. As long
as the Preferred Securities remain outstanding, the Company will:

                     (a)    maintain, directly or indirectly, 100% ownership of
the Common Securities;

                     (b)    cause the Trust to remain a statutory business trust
and not to voluntarily dissolve, wind up, liquidate or be terminated, except as
permitted by the Declaration;

                                       7
<Page>

                     (c)    use its commercially reasonable efforts to ensure
that the Trust will not be an "investment company" required to be registered
under the Investment Company Act of 1940;

                     (d)    not take any action that would be reasonably likely
to cause the Trust to be classified as an association or a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes; and

                     (e)    pay all of the debts and obligations of the Trust
(other than with respect to the securities issued by the Trust) and all costs
and expenses of the Trust (including, but not limited to, all costs and expenses
relating to the organization of the Trust, the fees and expenses of the Property
Trustee, the Delaware Trustee and the Administrative Trustee and all costs and
expenses relating to the operation of the Trust) and any and all taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed on the Trust by the United States, or any other taxing authority,
so that the net amounts received and retained by the Trust after paying such
expenses will be equal to the amounts the Trust would have received had no
debts, obligations, costs, expenses, taxes, duties, assessments or governmental
charges been incurred by or imposed on the Trust.

                                  ARTICLE FIVE
                    ORIGINAL ISSUE OF SENIOR DEFERRABLE NOTES

              Section 501. ORIGINAL ISSUE OF SENIOR DEFERRABLE NOTES. Senior
Deferrable Notes in an aggregate principal amount of up to $326,032,000 may,
upon execution of this Second Supplemental Indenture, be executed by the Company
and delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Senior Deferrable Notes upon receipt of Company
Order for authentication and delivery, without any further action by the
Company.

                                  ARTICLE SIX
                    RIGHTS OF HOLDERS OF PREFERRED SECURITIES

              Section 601. PREFERRED SECURITY HOLDERS' RIGHTS. Notwithstanding
Section 507 of the Indenture, if the Property Trustee fails to enforce its
rights under the Senior Deferrable Notes after a holder of Preferred Securities
has made a written request, the holder of Preferred Securities may, to the
fullest extent permitted by law, institute a legal proceeding directly against
the Company to enforce the Property Trustee's rights under the Indenture without
first instituting any legal proceeding against the Property Trustee or any other
Person.

              Section 602. DIRECT ACTION. Notwithstanding any other provision of
the Indenture, for as long as any Preferred Securities remain outstanding, to
the fullest extent permitted by law, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the Senior Deferrable Notes on the date such interest
or principal is otherwise payable (or in the case of redemption, the Tax Event
Redemption Date or Repurchase Date), then a holder of Preferred Securities may

                                       8
<Page>

institute a proceeding directly against the Company (a "Direct Action") to
enforce payment to such holder of the principal or interest on Senior Deferrable
Notes having an aggregate principal amount equal to the aggregate liquidation
amount of the Preferred Securities of such holder.

              Section 603. PAYMENTS PURSUANT TO DIRECT ACTIONS. The Company will
have the right to set off against its obligations to the Trust, as Holder of the
Senior Deferrable Notes, any payment made to a holder of Preferred Securities in
connection with a Direct Action.

              Section 604. MODIFICATIONS. So long as any Preferred Securities
remain outstanding, (i) no amendment to this Indenture shall be made that
adversely affects the holders of the Preferred Securities in any material
respect, and no termination of this Indenture shall occur, and no waiver of any
Event of Default or compliance with any covenant under this Indenture shall be
effective, without the prior consent of the holders of at least a Majority in
Liquidation Amount (as defined in the Declaration) of the Preferred Securities
then outstanding unless and until the principal of the Senior Deferrable Notes
and all accrued and unpaid interest thereon have been paid in full, and (ii) no
amendment shall be made to this Article Six of this Second Supplemental
Indenture that would impair the rights of the holders of the Preferred
Securities without the prior consent of the holders of each Preferred Security
then outstanding unless and until the principal of the Senior Deferrable Notes
and all accrued and unpaid interest thereon have been paid in full.

                                  ARTICLE SEVEN
                                   REMARKETING

              Section 701. EFFECTIVENESS OF THIS ARTICLE. Upon a distribution of
the Senior Deferrable Notes upon the liquidation and dissolution of the Trust
which occurs prior to the Remarketing of the Preferred Securities pursuant to
the Declaration, the Senior Deferrable Notes shall be Remarketed in accordance
with the Remarketing procedures of the Declaration where all references in the
Remarketing procedures to (i) the Preferred Securities shall be read as
references to the Senior Deferrable Notes and (ii) the Property Trustee shall be
read as references to the Indenture Trustee, unless the context requires
otherwise. Until such a distribution, or if such distribution occurs after the
Remarketing of the Preferred Securities pursuant to the Declaration, this
Article Seven will have no effect.

                                 ARTICLE EIGHT
                            ACCELERATION OF MATURITY

              Section 801. AUTOMATIC ACCELERATION. If an Event of Default with
respect to the Senior Deferrable Notes specified in clause (5) or (6) of Section
501 of the Indenture occurs and is continuing, the principal of the Senior
Deferrable Notes shall become due and payable immediately, without any
declaration, notice or other act on the part of the Trustee or any holder
thereof.

                                       9
<Page>

                                  ARTICLE NINE
                                  MISCELLANEOUS

              Section 901. EXECUTION OF SUPPLEMENTAL INDENTURE. This Second
Supplemental Indenture is executed and shall be construed as an indenture
supplemental to the Indenture, and, as provided in the Indenture, this Second
Supplemental Indenture forms a part thereof.

              Section 902. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof or of the
Indenture which is required to be included in this Second Supplemental Indenture
by any of the provisions of the Trust Indenture Act, such required provision
shall control.

              Section 903. CONSTRUCTION. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof. Unless
otherwise indicated herein, a reference to a Section or Article is to a Section
or Article of this Second Supplemental Indenture.

              Section 904. SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Second Supplemental Indenture by the Company shall bind its successors
and assigns, whether so expressed or not.

              Section 905. SEPARABILITY CLAUSE. In case any provision in this
Second Supplemental Indenture or in the Senior Deferrable 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 906. BENEFITS OF SECOND SUPPLEMENTAL INDENTURE. Nothing in
this Second Supplemental Indenture or in the Senior Deferrable Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the holders, any benefit or any legal or equitable
right, remedy or claim under this Second Supplemental Indenture.

              Section 907. GOVERNING LAW. This Second Supplemental Indenture and
each Senior Deferrable Note shall be deemed to be a contract made under the laws
of the State of New York, and for all purposes shall be governed by and
construed in accordance with the laws of said State.

              Section 908. RECITALS. The recitals contained in this Second
Supplemental Indenture shall be taken as statements of the Company, and the
Trustee assumes no responsibility for their correctness.

                                       10
<Page>

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

                                  CINERGY CORP.

                                  By:
                                     -------------------------------------------
                                  Name:
                                       -----------------------------------------
                                  Title:
                                        ----------------------------------------

                                  FIFTH THIRD BANK, as Trustee

                                  By:
                                     -------------------------------------------
                                     Name:
                                          -------------------------------------
                                     Title:
                                           ------------------------------------

<Page>

                                                                      EXHIBIT A

                    [FORM OF FACE OF SENIOR DEFERRABLE NOTE]

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES HEREINAFTER DESCRIBED AND 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 NOMINEE OF THE DEPOSITARY TO A SUCCESSOR OF THE
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR.

REGISTERED                                                           REGISTERED

                                  CINERGY CORP.

                         SENIOR DEFERRABLE NOTE DUE 2007

No._______________                                                 $___________

CUSIP No.____________

                  CINERGY CORP., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company," which term
includes any successor corporation under the Indenture hereinafter referred to
herein), for value received, hereby promises to pay Cede & Co., or registered
assigns, the principal sum of $________________ (____________________ Dollars)
on February 16, 2007, and to pay interest on said principal sum from December
18, 2001, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, quarterly in arrears on February 16, May 16,
August 16 and November 16 of each year (an "Interest Payment Date") commencing
February 16, 2002, at the

                                      A-1
<Page>

rate of 6.9% per annum to but excluding February 16, 2005, and at the Reset Rate
(which shall not be lower than 6.9% per annum nor higher than the maximum rate
permitted by applicable law) thereafter, until the principal hereof shall have
become due and payable, and to pay interest on any overdue principal and
premium, if any, and (without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at 9.5% per annum to but excluding February 16, 2005, and at the Reset
Rate (which shall not be lower than 6.9% per annum nor higher than the maximum
rate permitted by applicable law) thereafter, compounded quarterly. Any deferred
interest shall accrue interest at the rate set forth in the Second Supplemental
Indenture, dated as of December 18, 2001 (the "Second Supplemental Indenture"),
between the Company and Fifth Third Bank, as Trustee. The amount of interest
payable for any period will be computed (1) for any full quarterly period on the
basis of a 360-day year of twelve 30-day months and (2) for any period shorter
than a full quarterly period, on the basis of a 30-day month and, for any period
less than a month, on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable is not a Business
Day, then payment of the interest payable on such date will be made on the next
day that is a Business Day (and without any interest or other payment in respect
of such delay), except that, if such Business Day is in the next calendar year,
then such payment will be made on the preceding Business Day. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture referred to herein, be
paid to the Holder in whose name this Security (or one or more Predecessor
Securities, as defined in said Indenture) is registered at the close of business
on the Regular Record Date for such interest installment, which, shall be the
close of business on the Business Day preceding such Interest Payment Date. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
be paid to the Holder in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date to
be fixed by the Trustee referred to on the reverse side hereof for the payment
of such defaulted interest, notice whereof shall be given to the Holders of this
Security not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which this Security may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture.

                  Payment of the principal of and premium, if any, and interest
on this Security will be made at the office or agency of the Trustee maintained
for that purpose in such coin or currency of the United States of America that
at the time of payment is legal tender for payment of public and private debts.
The Company may pay principal and interest by check payable in such money mailed
to the Holder's registered address or by wire transfer to a dollar account
designated by the Holder.

                  Interest on this Security is deferrable, at the election of
the Company, in accordance with the terms of the Second Supplemental Indenture.

                                      A-2
<Page>

                  This Security is, to the extent provided in the Indenture,
unsecured and will rank in right of payment equally with all other unsecured and
unsubordinated obligations of the Company.

                  Additional provisions of this Security are set forth on the
reverse side hereof, and such provisions shall for all purposes have the same
effect as though fully set forth at this place.

                  Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.

                                      A-3
<Page>

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.

                                             CINERGY CORP.

Dated:___________________                    By:
                                                --------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:
                                                   -----------------------------

                     (FORM OF CERTIFICATE OF AUTHENTICATION)

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

         This is one of the Securities of the series referred to in the
within-mentioned Indenture.

Dated:_____________________                  FIFTH THIRD BANK, as Trustee

                                             By:
                                                -------------------------------
                                                 Authorized Officer

                                      A-4
<Page>

                   (FORM OF REVERSE OF SENIOR DEFERRABLE NOTE)

                                  CINERGY CORP.

                         SENIOR DEFERRABLE NOTE DUE 2007

                  This Senior Deferrable Note is one of a duly authorized series
of securities of the Company (herein called the "Securities") issued and to be
issued in one or more series under the Indenture, dated as of September 12, 2001
pursuant to a Second Supplemental Indenture dated as of December 18, 2001
(herein called the "Indenture"), between the Company and Fifth Third Bank, as
Trustee (herein called the "Trustee," which term includes any successor trustee
under the Indenture), to which Indenture reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities and the
terms upon which the Securities are, and are to be, authenticated and delivered.
This Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $283,506,000.

                  All terms used in this Security that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

                  This Security is not subject to any sinking fund, nor may this
Security be redeemed at the option of the Company prior to the Maturity Date
except upon the occurrence of a Tax Event or following a Failed Remarketing as
described below.

                  The indebtedness of this Security will not be subject to
defeasance pursuant to the Indenture.

                  If an Event of Default with respect to Securities of this
series shall occur and be continuing, the principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture.

                  If a Tax Event occurs and is continuing, the Company may, at
its option and upon not less than 30 nor more than 60 days' notice to the
Holders of the Securities, redeem the Securities in whole (but not in part)
within 90 days following the occurrence of such Tax Event at the Redemption
Amount, plus any accrued and unpaid interest including compound interest if any
to the Tax Event Redemption Date. The Redemption Amount, plus any accrued and
unpaid interest including compound interest if any to the Tax Event Redemption
Date, shall be paid prior to 12:00 noon, New York City time, on the Tax Event
Redemption Date, by check or wire transfer in immediately available funds at
such place and to such account as may be designated by each such Holder.

                                      A-5
<Page>

                  If a Failed Remarketing has occurred, each Holder of
Securities will have the right to deliver the Securities to the Company for
redemption at a price per Security equal to the Put Price. The Holder shall give
written notice of such election not less than three Business Days prior to April
1, 2005 and the aggregate Put Price shall be paid prior to 12:00 noon, New York
City time, on April 1, 2005 by check or wire transfer in immediately available
funds at such place and to such account as may be designated by each such
Holder.

                  The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities at the time of each
series to be affected (voting as a class). The Indenture also contains
provisions permitting the Holders of a majority in aggregate principal amount of
the Outstanding Securities of each series at the time, on behalf of the Holders
of all Securities of such series, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange hereof or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.

                  No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest, if any, on this Security at the times, place and
rate, and in the coin or currency, herein prescribed.

                  This Security shall be exchangeable for Securities registered
in the names of Persons other than the Depositary with respect to such series or
its nominee only as provided in this paragraph. This Security shall be so
exchangeable if (x) the Depositary is at any time unwilling or unable to
continue as Depositary for such series or no longer eligible or in good standing
under the Securities Exchange Act of 1934, as amended, or other applicable
statute or regulation, or (y) the Company executes and delivers to the Trustee
an Order providing that this Security shall be so exchangeable. Securities so
issued in exchange for this Security shall be of the same series, having the
same interest rate, if any, and maturity and having the same terms as this
Security, in authorized denominations and in the aggregate having the same
principal amount as this Security and registered in such names as the Depositary
for such Global Security shall direct.

                  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of a Security of the series of which
this Security is a part is registrable in the Security Register, upon surrender
of this Security for registration of transfer at the office or agency of the
Company to be maintained by the Trustee for that purpose in the City of
Cincinnati, Ohio, duly endorsed by, or accompanied by a written instrument of
transfer in the form attached hereto and by such other documents satisfactory to
the Company and the Security Registrar duly executed

                                      A-6
<Page>

by, the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Securities of this series, of authorized denominations and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees. The Security Registrar initially appointed under the Indenture
for the Securities is Fifth Third Bank.

                  The Securities of the series of which this Security is a part
are issuable only in registered form without coupons in denominations of $50 and
in integral multiples thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.

                  No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

                  Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Holder in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

                  No recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in this Security, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
indirectly through the Company or any successor corporation, under any rule of
law, statute or constitutional provision or by the enforcement of any assessment
or penalty or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance hereof and as a
condition of and as part of the consideration for the issue hereof.

                  This Security shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.

                                      A-7
<Page>

                                  ABBREVIATIONS

The following abbreviations, when used in the inscription of the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

   TEN COM                 - as tenants in common
   TEN ENT                 - as tenants by the entireties
   JT TEN                  - as joint tenants with right of survivorship and not
                            as tenants in common
   UNIF GIFT MIN ACT -     _________________ Custodian _______________
                               (Cust)                  (Minor) Under
                       Uniform Gifts to Minors Act

             ----------------------------

Additional abbreviations may also be used though not in the above list.

-----------------------------

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------------------------------

--------------------------------------------------------------

------------------------------------------------------------------------

           (Please Print or Typewrite Name and Address of Assignee)

the within instrument of CINERGY CORP. and does hereby irrevocably constitute
and appoint _________________________________________________ Attorney to
transfer said instrument on the books of the within-named corporation, with full
power of substitution in the premises.

Dated: __________________                            ___________________________
                                                     Signature

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration by enlargement or any change whatever.

                                      A-8
<Page>

                                                                       EXHIBIT B

                    [FORM OF FACE OF SENIOR DEFERRABLE NOTE]

REGISTERED                                                           REGISTERED

                                  CINERGY CORP.

                         SENIOR DEFERRABLE NOTE DUE 2007

No._______________                                                 $___________

CUSIP No.____________

                  CINERGY CORP., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company," which term
includes any successor corporation under the Indenture hereinafter referred to
herein), for value received, hereby promises to pay _____________________, or
registered assigns, the principal sum of $________________ (____________________
Dollars) on February 16, 2007, and to pay interest on said principal sum from
December 18, 2001, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, quarterly in arrears on February
16, May 16, August 16, and November 16 of each year (an "Interest Payment Date")
commencing February 16, 2002, at the rate of 6.9% per annum to but excluding
February 16, 2005, and at the Reset Rate (which shall not be lower than 6.9% per
annum nor higher than the maximum rate permitted by applicable law) thereafter,
until the principal hereof shall have become due and payable, and to pay
interest on any overdue principal and premium, if any, and (without duplication
and to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at 9.5% per annum to but excluding
February, 16, 2005, and at the Reset Rate (which shall not be lower than 6.9%
per annum nor higher than the maximum rate permitted by applicable law)
thereafter, compounded quarterly. Any deferred interest shall accrue interest at
the rate set forth in the Second Supplemental Indenture, dated as of December
18, 2001 (the "Second Supplemental Indenture"), between the Company and Fifth
Third Bank, as Trustee. The amount of interest payable for any period will be
computed (1) for any full quarterly period on the basis of a 360-day year of
twelve 30-day months and (2) for any period shorter than a full quarterly
period, on the basis of a 30-day month and, for any period less than a month, on
the basis of the actual number of days elapsed per 30-day month. In the event
that any date on which interest is payable is not a Business Day, then payment
of the interest

                                      B-1
<Page>

payable on such date will be made on the next day that is a Business Day (and
without any interest or other payment in respect of such delay), except that, if
such Business Day is in the next calendar year, then such payment will be made
on the preceding Business Day. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture referred to herein, be paid to the Holder in whose
name this Security (or one or more Predecessor Securities, as defined in said
Indenture) is registered at the close of business on the Regular Record Date for
such interest installment, which, shall be the close of business on the Business
Day preceding such Interest Payment Date. Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may be paid to the Holder in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on a Special Record Date to be fixed by the Trustee referred to on
the reverse side hereof for the payment of such defaulted interest, notice
whereof shall be given to the Holders of this Security not less than 10 days
prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which this Security may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture.

                  Payment of the principal of and premium, if any, and interest
on this Security will be made at the office or agency of the Trustee maintained
for that purpose in such coin or currency of the United States of America that
at the time of payment is legal tender for payment of public and private debts.
The Company may pay principal and interest by check payable in such money mailed
to the Holder's registered address or by wire transfer to a dollar account
designated by the Holder.

                  Interest on this Security is deferrable, at the election of
the Company, in accordance with the terms of the Second Supplemental Indenture.

                  This Security is, to the extent provided in the Indenture,
unsecured and will rank in right of payment equally with all other unsecured and
unsubordinated obligations of the Company.

                  Additional provisions of this Security are set forth on the
reverse side hereof, and such provisions shall for all purposes have the same
effect as though fully set forth at this place.

                  Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.

                                      B-2
<Page>

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.

                                      CINERGY CORP.

                                      By:
                                         --------------------------------------
                                      Name:
                                           ------------------------------------
                                      Title:
                                            -----------------------------------

                     (FORM OF CERTIFICATE OF AUTHENTICATION)

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

         This is one of the Securities of the series referred to in the
within-mentioned Indenture.

Dated:___________________                      FIFTH THIRD BANK, as Trustee

                                               By:
                                                  ------------------------------
                                                   Authorized Officer

                                      B-3
<Page>

                   (FORM OF REVERSE OF SENIOR DEFERRABLE NOTE)

                                  CINERGY CORP.

                         SENIOR DEFERRABLE NOTE DUE 2007

                  This Senior Deferrable Note is one of a duly authorized series
of securities of the Company (herein called the "Securities") issued and to be
issued in one or more series under the Indenture, dated as of September 12, 2001
pursuant to a Second Supplemental Indenture dated as of December 18, 2001
(herein called the "Indenture"), between the Company and Fifth Third Bank, as
Trustee (herein called the "Trustee," which term includes any successor trustee
under the Indenture), to which Indenture reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities and the
terms upon which the Securities are, and are to be, authenticated and delivered.
This Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $326,032,000.

                  All terms used in this Security that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

                  This Security is not subject to any sinking fund, nor may this
Security be redeemed at the option of the Company prior to the Maturity Date
except upon the occurrence of a Tax Event or following a Failed Remarketing as
described below.

                  The indebtedness of this Security will not be subject to
defeasance pursuant to the Indenture.

                  If an Event of Default with respect to Securities of this
series shall occur and be continuing, the principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture.

                  If a Tax Event occurs and is continuing, the Company may, at
its option and upon not less than 30 nor more than 60 days' notice to the
Holders of the Securities, redeem the Securities in whole (but not in part)
within 90 days following the occurrence of such Tax Event at the Redemption
Amount, plus any accrued and unpaid interest including compound interest if any
to the Tax Event Redemption Date. The Redemption Amount, plus any accrued and
unpaid interest including compound interest if any to the Tax Event Redemption
Date, shall be paid prior to 12:00 noon, New York City time, on the Tax Event
Redemption Date, by check or wire transfer in immediately available funds at
such place and to such account as may be designated by each such Holder.

                                      B-4
<Page>

                  If a Failed Remarketing has occurred, each Holder of
Securities will have the right to deliver the Securities to the Company for
redemption at a price per Security equal to the Put Price. The Holder shall give
written notice of such election not less than three Business Days prior to April
1, 2005 and the aggregate Put Price shall be paid prior to 12:00 noon, New York
City time, on April 1, 2005 by check or wire transfer in immediately available
funds at such place and to such account as may be designated by each such
Holder.

                  The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities at the time of each
series to be affected (voting as a class). The Indenture also contains
provisions permitting the Holders of a majority in aggregate principal amount of
the Outstanding Securities of each series at the time, on behalf of the Holders
of all Securities of such series, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange hereof or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.

                  No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest, if any, on this Security at the times, place and
rate, and in the coin or currency, herein prescribed.

                  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of a Security of the series of which
this Security is a part is registrable in the Security Register, upon surrender
of this Security for registration of transfer at the office or agency of the
Company to be maintained by the Trustee for that purpose in the City of
Cincinnati, Ohio, duly endorsed by, or accompanied by a written instrument of
transfer in the form attached hereto and by such other documents satisfactory to
the Company and the Security Registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new
Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. The Security Registrar initially appointed under the Indenture for
the Securities is Fifth Third Bank.

                  The Securities of the series of which this Security is a part
are issuable only in registered form without coupons in denominations of $50 and
in integral multiples thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.

                                      B-5
<Page>

                  No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

                  Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Holder in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

                  No recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in this Security, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
indirectly through the Company or any successor corporation, under any rule of
law, statute or constitutional provision or by the enforcement of any assessment
or penalty or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance hereof and as a
condition of and as part of the consideration for the issue hereof.

                  This Security shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.

                                      B-6
<Page>

                                  ABBREVIATIONS

The following abbreviations, when used in the inscription of the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

    TEN COM                - as tenants in common
    TEN ENT                - as tenants by the entireties
    JT TEN                 - as joint tenants with right of survivorship and not
                             as tenants in common
    UNIF GIFT MIN ACT -    _________________ Custodian _______________
                               (Cust)                   (Minor) Under
                           Uniform Gifts to Minors Act

  Additional abbreviations may also be used though not in the above list.

                          -----------------------------

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------------------------------

--------------------------------------------------------------

------------------------------------------------------------------------

           (Please Print or Typewrite Name and Address of Assignee)

the within instrument of CINERGY CORP. and does hereby irrevocably constitute
and appoint __________________________________________________ Attorney to
transfer said instrument on the books of the within-named corporation, with full
power of substitution in the premises.

Dated: __________________                            ___________________________
                                                     Signature

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration by enlargement or any change whatever.

                                      B-7

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