Exhibit 10.2

Published CUSIP Number:                     

EXECUTION COPY

 

 

 

$25,000,000

CREDIT AGREEMENT

among

FIESTA RESTAURANT GROUP, INC.,

as Borrower,

CERTAIN DOMESTIC SUBSIDIARIES OF THE BORROWER

FROM TIME TO TIME PARTY HERETO,

as Guarantors,

THE LENDERS PARTY HERETO,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent

Dated as of August 5, 2011

WELLS FARGO SECURITIES, LLC,

as Sole Lead Arranger and Sole Bookrunner

LOGO [g214641g68e79.jpg]

 

 

 

 

Prepared by:

   LOGO [g214641g90o64.jpg]

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TABLE OF CONTENTS

 

          Page  

ARTICLE I DEFINITIONS

     2   

Section 1.1

  

Defined Terms

     2   

Section 1.2

  

Other Definitional Provisions

     33   

Section 1.3

  

Accounting Terms

     33   

Section 1.4

  

Time References

     34   

Section 1.5

  

Execution of Documents

     35   

ARTICLE II THE LOANS; AMOUNT AND TERMS

     35   

Section 2.1

  

Revolving Loans

     35   

Section 2.2

  

[Reserved]

     37   

Section 2.3

  

Letter of Credit Subfacility

     37   

Section 2.4

  

[Reserved]

     41   

Section 2.5

  

Fees

     41   

Section 2.6

  

Commitment Reductions

     42   

Section 2.7

  

Prepayments

     42   

Section 2.8

  

Default Rate and Payment Dates

     44   

Section 2.9

  

Conversion Options

     45   

Section 2.10

  

Computation of Interest and Fees; Usury

     46   

Section 2.11

  

Pro Rata Treatment and Payments

     47   

Section 2.12

  

Non-Receipt of Funds by the Administrative Agent

     49   

Section 2.13

  

Inability to Determine Interest Rate

     51   

Section 2.14

  

Yield Protection

     51   

Section 2.15

  

Compensation for Losses; Eurocurrency Liabilities

     53   

Section 2.16

  

Taxes

     54   

Section 2.17

  

Indemnification; Nature of Issuing Lender’s Duties

     58   

Section 2.18

  

Illegality

     59   

Section 2.19

  

Mitigation Obligations; Replacement of Lenders

     59   

Section 2.20

  

Cash Collateral

     61   

Section 2.21

  

Defaulting Lenders

     62   

Section 2.22

  

Incremental Revolving Facility Increase

     64   

ARTICLE III REPRESENTATIONS AND WARRANTIES

     66   

Section 3.1

  

Financial Condition

     66   

Section 3.2

  

No Material Adverse Effect

     67   

Section 3.3

  

Corporate Existence; Compliance with Law; Patriot Act Information

     67   

Section 3.4

  

Corporate Power; Authorization; Enforceable Obligations

     67   

Section 3.5

  

No Legal Bar; No Default

     68   

Section 3.6

  

No Material Litigation

     68   

Section 3.7

  

Investment Company Act; etc.

     68   

Section 3.8

  

Margin Regulations

     69   

Section 3.9

  

ERISA

     69   

Section 3.10

  

Environmental Matters

     69   

Section 3.11

  

Use of Proceeds

     70   

Section 3.12

  

Subsidiaries; Joint Ventures; Partnerships

     70   

 

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Section 3.13

  

Ownership

     71   

Section 3.14

  

Consent; Governmental Authorizations

     71   

Section 3.15

  

Taxes

     71   

Section 3.16

  

Collateral Representations

     71   

Section 3.17

  

Solvency

     73   

Section 3.18

  

Compliance with FCPA

     73   

Section 3.19

  

Reserved

     73   

Section 3.20

  

Brokers’ Fees

     73   

Section 3.21

  

Labor Matters

     74   

Section 3.22

  

Accuracy and Completeness of Information

     74   

Section 3.23

  

Material Contracts

     74   

Section 3.24

  

Insurance

     74   

Section 3.25

  

Security Documents

     74   

Section 3.26

  

Classification of Senior Indebtedness

     75   

Section 3.27

  

Anti-Terrorism Laws

     75   

Section 3.28

  

Compliance with OFAC Rules and Regulations

     75   

Section 3.29

  

Authorized Officer

     76   

Section 3.30

  

Regulation H

     76   

ARTICLE IV CONDITIONS PRECEDENT

     76   

Section 4.1

  

Conditions to Closing Date

     76   

Section 4.2

  

Conditions to All Extensions of Credit

     80   

ARTICLE V AFFIRMATIVE COVENANTS

     82   

Section 5.1

  

Financial Statements

     82   

Section 5.2

  

Certificates; Other Information

     83   

Section 5.3

  

Payment of Taxes and Other Obligations

     85   

Section 5.4

  

Conduct of Business and Maintenance of Existence

     85   

Section 5.5

  

Maintenance of Property; Insurance

     85   

Section 5.6

  

Maintenance of Books and Records

     86   

Section 5.7

  

Notices

     86   

Section 5.8

  

Environmental Laws

     87   

Section 5.9

  

Financial Covenants

     88   

Section 5.10

  

Additional Guarantors

     88   

Section 5.11

  

Compliance with Law

     88   

Section 5.12

  

Pledged Assets

     89   

Section 5.13

  

Further Assurances and Post-Closing Covenants

     90   

Section 5.14

  

New Restaurants

     92   

ARTICLE VI NEGATIVE COVENANTS

     92   

Section 6.1

  

Indebtedness

     92   

Section 6.2

  

Liens

     94   

Section 6.3

  

Nature of Business

     96   

Section 6.4

  

Consolidation, Merger, Sale or Purchase of Assets, etc.

     96   

Section 6.5

  

Advances, Investments and Loans

     98   

Section 6.6

  

Transactions with Affiliates

     99   

Section 6.7

  

Ownership of Subsidiaries; Restrictions

     99   

Section 6.8

  

Corporate Changes; Material Contracts

     99   

 

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Section 6.9

  

Limitation on Restricted Actions

     100   

Section 6.10

  

Restricted Payments

     100   

Section 6.11

  

Amendment of Subordinated Debt

     101   

Section 6.12

  

Sale Leasebacks

     101   

Section 6.13

  

No Further Negative Pledges

     102   

Section 6.14

  

Account Control Agreements; Additional Bank Accounts

     102   

ARTICLE VII EVENTS OF DEFAULT

     102   

Section 7.1

  

Events of Default

     102   

Section 7.2

  

Acceleration; Remedies

     106   

ARTICLE VIII THE ADMINISTRATIVE AGENT

     106   

Section 8.1

  

Appointment and Authority

     106   

Section 8.2

  

Nature of Duties

     107   

Section 8.3

  

Exculpatory Provisions

     107   

Section 8.4

  

Reliance by Administrative Agent

     108   

Section 8.5

  

Notice of Default

     109   

Section 8.6

  

Non-Reliance on Administrative Agent and Other Lenders

     109   

Section 8.7

  

Indemnification

     110   

Section 8.8

  

Administrative Agent in Its Individual Capacity

     110   

Section 8.9

  

Resignation of Administrative Agent

     110   

Section 8.10

  

Collateral and Guaranty Matters

     112   

Section 8.11

  

Bank Products

     112   

ARTICLE IX MISCELLANEOUS

     113   

Section 9.1

  

Amendments, Waivers, Consents and Release of Collateral

     113   

Section 9.2

  

Notices

     116   

Section 9.3

  

No Waiver; Cumulative Remedies

     118   

Section 9.4

  

Survival of Representations and Warranties

     118   

Section 9.5

  

Payment of Expenses and Taxes; Indemnity

     118   

Section 9.6

  

Successors and Assigns; Participations

     120   

Section 9.7

  

Right of Set-off; Sharing of Payments

     125   

Section 9.8

  

Table of Contents and Section Headings

     127   

Section 9.9

  

Counterparts; Effectiveness; Electronic Execution

     127   

Section 9.10

  

Severability

     127   

Section 9.11

  

Integration

     128   

Section 9.12

  

Governing Law

     128   

Section 9.13

  

Consent to Jurisdiction; Service of Process and Venue

     128   

Section 9.14

  

Confidentiality

     129   

Section 9.15

  

Acknowledgments

     130   

Section 9.16

  

Waivers of Jury Trial; Waiver of Consequential Damages

     130   

Section 9.17

  

Patriot Act Notice

     130   

Section 9.18

  

Resolution of Drafting Ambiguities

     130   

Section 9.19

  

Subordination of Intercompany Debt

     131   

Section 9.20

  

Continuing Agreement

     131   

Section 9.21

  

Reserved

     131   

Section 9.22

  

Press Releases and Related Matters

     131   

Section 9.23

  

Appointment of Borrower

     132   

 

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Section 9.24

  

No Advisory or Fiduciary Responsibility

     132   

Section 9.25

  

Responsible Officers and Authorized Officers

     133   

ARTICLE X GUARANTY

     133   

Section 10.1

  

The Guaranty

     133   

Section 10.2

  

Bankruptcy

     134   

Section 10.3

  

Nature of Liability

     134   

Section 10.4

  

Independent Obligation

     134   

Section 10.5

  

Authorization

     135   

Section 10.6

  

Reliance

     135   

Section 10.7

  

Waiver

     135   

Section 10.8

  

Limitation on Enforcement

     136   

Section 10.9

  

Confirmation of Payment

     137   

 

iv

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Schedules   

Schedule 1.1(a)

   Investments

Schedule 1.1(b)

   Liens

Schedule 1.1(c)

   Excluded Real Property

Schedule 1.1(d)

   Identified Sale Leaseback Property

Schedule 1.1(e)

   Existing Letters of Credit

Schedule 1.1(f)

   Pollo Tropical Trademarks

Schedule 1.1(g)

   Subject Lease Financing Obligations

Schedule 3.3

   Patriot Act Information

Schedule 3.6

   Litigation

Schedule 3.12

   Subsidiaries

Schedule 3.16(a)

   Intellectual Property

Schedule 3.16(b)

   Documents, Instruments and Tangible Chattel Paper

Schedule 3.16(c)

   Deposit Accounts, Electronic Chattel Paper, Letter-of-Credit Rights,
Securities Accounts, Uncertificated Investment Property

Schedule 3.16(d)

   Commercial Tort Claims

Schedule 3.16(e)

   Pledged Equity Interests

Schedule 3.16(f)(i)

   Mortgaged Properties

Schedule 3.16(f)(ii)

   Other Collateral Locations

Schedule 3.23

   Material Contracts

Schedule 3.24

   Insurance

Schedule 3.29

   Authorized Officers

Schedule 6.1(b)

   Indebtedness Exhibits   

Exhibit 1.1(a)

   Form of Account Designation Notice

Exhibit 1.1(b)

   Form of Assignment and Assumption

Exhibit 1.1(c)

   Form of Joinder Agreement

Exhibit 1.1(d)

   Form of Notice of Borrowing

Exhibit 1.1(e)

   Form of Notice of Conversion/Extension

Exhibit 1.1(f)

   Form of Permitted Acquisition Certificate

Exhibit 1.1(g)

   Form of Bank Product Provider Notice

Exhibit 2.1(a)

   Form of Funding Indemnity Letter

Exhibit 2.1(e)

   Form of Revolving Loan Note

Exhibit 4.1(b)

   Form of Officer’s Certificate

Exhibit 4.1(g)

   Form of Solvency Certificate

Exhibit 4.1(m)

   Form of Financial Condition Certificate

Exhibit 5.2(b)

   Form of Officer’s Compliance Certificate

 

v

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THIS CREDIT AGREEMENT, dated as of August 5, 2011, is by and among FIESTA
RESTAURANT GROUP, INC., a Delaware corporation (the “Borrower”), the Guarantors
(as hereinafter defined), the Lenders (as hereinafter defined) and WELLS FARGO
BANK, NATIONAL ASSOCIATION, a national banking association, as administrative
agent for the Lenders hereunder (in such capacity, the “Administrative Agent”).

W I T N E S S E T H:

WHEREAS, Carrols Restaurant Group, Inc. (“CRG”), a Delaware corporation, intends
to restructure its business by separating its Burger King restaurant business
and its Hispanic Brand restaurant businesses into two separate publicly traded
companies (CRG and the Borrower), subject to various conditions;

WHEREAS, Carrols LLC, a Delaware limited liability company, a wholly-owned
subsidiary of Carrols (defined below) and an indirect wholly-owned subsidiary of
CRG, owns substantially all of CRG’s owned and operated Burger King franchises
and related businesses;

WHEREAS, the Borrower owns and operates all of CRG’s previously owned Pollo
Tropical and Pollo Cabana restaurants and related businesses through its
Subsidiaries;

WHEREAS, CRG intends to distribute on a pro rata basis all of the outstanding
shares of common stock of the Borrower, to CRG’s stockholders (the “Spin-off”);

WHEREAS, prior to completion of the Spin-off, the Carrols LLC will enter into a
new debt agreement (the “Carrols LLC Financing”) and the Borrower will issue the
8.875% senior secured second lien notes (the “Second Lien Notes”), the net
proceeds of term loan borrowings under the Carrols LLC Financing and the Second
Lien Notes will be used to repay the 9% Senior Subordinated Notes due 2013 (the
“Existing Carrols Notes”) of Carrols Corporation (“Carrols”) and the outstanding
loans and obligations under Carrols’ existing credit facility;

WHEREAS, following the Spin-Off, CRG, Carrols and the Borrower shall enter into
certain agreements with each other in connection with the Spin-Off, including
the Transition Services Agreement and the Other Spin-Off Documents;

WHEREAS, the Credit Parties (as hereinafter defined) have requested that the
Lenders make loans and other financial accommodations to the Credit Parties in
an aggregate amount of up to $25,000,000, as more particularly described herein;
and

WHEREAS, the Lenders have agreed to make such loans and other financial
accommodations to the Credit Parties on the terms and conditions contained
herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties hereto, such parties hereby
agree as follows:

 

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ARTICLE I

DEFINITIONS

Section 1.1 Defined Terms.

As used in this Agreement, terms defined in the preamble to this Agreement have
the meanings therein indicated, and the following terms have the following
meanings:

“Account Designation Notice” shall mean the Account Designation Notice dated as
of the Closing Date from the Borrower to the Administrative Agent in
substantially the form attached hereto as Exhibit 1.1(a).

“Additional Credit Party” shall mean each Person that becomes a Guarantor by
execution of a Joinder Agreement in accordance with Section 5.10.

“Adjusted Leverage Ratio” shall mean, as of any date of determination, for the
Credit Parties and their Subsidiaries on a Consolidated basis, the ratio of
(a) the sum of (i) Consolidated Funded Debt on such date plus (ii) the product
of eight (8) multiplied by Consolidated Rent Expense for the four
(4) consecutive quarters ending on such date to (b) Consolidated EBITDAR for the
four (4) consecutive quarters ending on such date.

“Administrative Agent” or “Agent” shall have the meaning set forth in the first
paragraph of this Agreement and shall include any successors in such capacity.

“Administrative Questionnaire” shall mean an Administrative Questionnaire in a
form supplied by the Administrative Agent.

“Affiliate” shall mean, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, the Person specified.

“Agreement” or “Credit Agreement” shall mean this Agreement, as amended,
modified, extended, restated, replaced, or supplemented from time to time in
accordance with its terms.

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1% and (c) the sum of (i) LIBOR
(as determined pursuant to the definition of LIBOR), for an Interest Period of
one (1) month commencing on such day plus (ii) 1.00%, in each instance as of
such date of determination. For purposes hereof: “Prime Rate” shall mean, at any
time, the rate of interest per annum publicly announced or otherwise identified
from time to time by Wells Fargo at its principal office in San Francisco,
California as its prime rate. Each change in the Prime Rate shall be effective
as of the opening of business on the day such change in the Prime Rate occurs.
The parties hereto acknowledge that the rate announced publicly by Wells Fargo
as its Prime Rate is an index or base rate and shall not necessarily be its
lowest or best rate charged to its customers or other banks; and “Federal Funds
Effective Rate” shall mean,

 

2

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for any day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published on the next
succeeding Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive in the absence of manifest error) (A) that it is unable to ascertain
the Federal Funds Effective Rate, for any reason, including the inability or
failure of the Administrative Agent to obtain sufficient quotations in
accordance with the terms above or (B) that the Prime Rate or LIBOR no longer
accurately reflects an accurate determination of the prevailing Prime Rate or
LIBOR, the Administrative Agent may select a reasonably comparable index or
source to use as the basis for the Alternate Base Rate, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in any of the foregoing will become effective on the
effective date of such change in the Federal Funds Rate, the Prime Rate or LIBOR
for an Interest Period of one (1) month. Notwithstanding anything contained
herein to the contrary, to the extent that the provisions of Section 2.13 shall
be in effect in determining LIBOR pursuant to clause (c) hereof, the Alternate
Base Rate shall be the greater of (i) the Prime Rate in effect on such day and
(ii) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.

“Alternate Base Rate Loans” shall mean Revolving Loans that bear interest at an
interest rate based on the Alternate Base Rate.

“Anti-Terrorism Order” shall mean that certain Executive Order 13224 signed into
law on September 23, 2001.

“Applicable Margin” shall mean, for any day, the rate per annum set forth below
opposite the applicable level then in effect (based on the Adjusted Leverage
Ratio), it being understood that the Applicable Margin for (a) Revolving Loans
that are Alternate Base Rate Loans shall be the percentage set forth under the
column “Base Rate Margin”, (b) Revolving Loans that are LIBOR Rate Loans shall
be the percentage set forth under the column “LIBOR Margin & L/C Fee”, (c) the
Letter of Credit Fee shall be the percentage set forth under the column “LIBOR
Margin & L/C Fee”, and (d) the Commitment Fee shall be the percentage set forth
under the column “Commitment Fee”:

Applicable Margin

 

Level

  

Adjusted Leverage Ratio

   LIBOR
Margin
& L/C  Fee     Base Rate
Margin     Commitment
Fee   I    Greater than 5.50 to 1.00      3.75 %      2.75 %      0.50 %  II   
Greater than 5.00 to 1.00 but less than or equal to 5.50 to 1.00      3.50 %   
  2.50 %      0.50 %  III    Greater than 4.50 to 1.00 but less than or equal to
5.00 to 1.00      3.25 %      2.25 %      0.375 %  IV    Less than or equal to
4.50 to 1.00      3.00 %      2.00 %      0.375 % 

 

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The Applicable Margin shall, in each case, be determined and adjusted quarterly
on the date five (5) Business Days after the date on which the Administrative
Agent has received from the Borrower the quarterly financial information (in the
case of the first three fiscal quarters of the Borrower’s fiscal year), the
annual financial information (in the case of the Fourth Quarter) and the
certifications required to be delivered to the Administrative Agent and the
Lenders in accordance with the provisions of Sections 5.1(a), 5.1(b) and 5.2(b)
(each an “Interest Determination Date”). Such Applicable Margin shall be
effective from such Interest Determination Date until the next such Interest
Determination Date. After the Closing Date, if the Credit Parties shall fail to
provide the financial information or certifications in accordance with the
provisions of Sections 5.1(b) and 5.2(b), the Applicable Margin shall, on the
date five (5) Business Days after the date by which the Credit Parties were so
required to provide such financial information or certifications to the
Administrative Agent and the Lenders, be based on Level I until such time as
such information or certifications or corrected information or corrected
certificates are provided, whereupon the Level shall be determined by the then
current Adjusted Leverage Ratio. Notwithstanding the foregoing, the initial
Applicable Margins shall be set with pricing set forth in Level II until the
financial information and certificates required to be delivered pursuant to
Section 5.1 and 5.2 for the Fourth Quarter of 2011 have been delivered to the
Administrative Agent, for distribution to the Lenders. In the event that any
financial statement or certification delivered pursuant to Sections 5.1 or 5.2
is shown to be inaccurate (regardless of whether this Agreement or the
Commitments are in effect when such inaccuracy is discovered), and such
inaccuracy, if corrected, would have led to the application of a higher
Applicable Margin for any period (an “Applicable Period”) than the Applicable
Margin applied for such Applicable Period, the Borrower shall immediately
(a) deliver to the Administrative Agent a corrected compliance certificate for
such Applicable Period, (b) determine the Applicable Margin for such Applicable
Period based upon the corrected compliance certificate, and (c) immediately pay
to the Administrative Agent for the benefit of the Lenders the accrued
additional interest and other fees owing as a result of such increased
Applicable Margin for such Applicable Period, which payment shall be promptly
distributed by the Administrative Agent to the Lenders entitled thereto. It is
acknowledged and agreed that nothing contained herein shall limit the rights of
the Administrative Agent and the Lenders under the Credit Documents, including
their rights under Sections 2.8 and Article VII.

“Applicable Percentage” shall mean, with respect to any Lender, the percentage
of the total Revolving Commitments represented by such Lender’s Revolving
Commitment. If the Revolving Commitments have terminated or expired, the
Applicable Percentage shall be determined based on the Revolving Commitments
most recently in effect, giving effect to any assignments.

“Approved Bank” shall have the meaning set forth in the definition of “Cash
Equivalents.”

 

4

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“Approved Fund” shall mean any Fund that is administered, managed or
underwritten by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or
an Affiliate of an entity that administers or manages a Lender.

“Arranger” shall mean WFS.

“ASC Section 840-40” shall mean Accounting Standards Codification Section 840-40
(Leases-Sale-Leaseback Transactions) issued by the Financial Accounting
Standards Board, as now or hereafter in effect or any successor pronouncements.

“Asset Disposition” shall mean the disposition of any or all of the assets
(including, without limitation, the Equity Interests of a Subsidiary or any
ownership interest in a joint venture) of any Credit Party or any Subsidiary of
a Credit Party whether by sale, lease, transfer or otherwise, in a single
transaction or in a series of transactions. The term “Asset Disposition” shall
not include (a) the sale, lease, transfer or other disposition of assets
permitted by Subsections 6.4(a)(i) through (vi), or (b) any issuance by the
Borrower of its Equity Interests.

“Assignment and Assumption” shall mean an assignment and assumption entered into
by a Lender and an Eligible Assignee (with the consent of any party whose
consent is required by Section 9.6), and accepted by the Administrative Agent,
in substantially the form of Exhibit 1.1(b) or any other form approved by the
Administrative Agent.

“Authorized Officers” shall mean the Responsible Officers set forth on Schedule
3.29.

“Bank Product” shall mean any of the following products, services or facilities
extended to any Credit Party or any Subsidiary of a Credit Party by any Bank
Product Provider: (a) Cash Management Services; (b) products under any Hedging
Agreement; and (c) commercial credit card, purchase card and merchant card
services; provided, however, that for any of the foregoing to be included as
“Credit Party Obligations” for purposes of a distribution under Section 2.11(b),
the applicable Bank Product Provider must have previously provided a Bank
Product Provider Notice to the Administrative Agent which shall provide the
following information: (i) the existence of such Bank Product and (ii) the
maximum dollar amount (if reasonably capable of being determined) of obligations
arising thereunder (the “Bank Product Amount”). The Bank Product Amount may be
changed from time to time upon written notice to the Administrative Agent by the
Bank Product Provider. Any Bank Product established from and after the time that
the Lenders have received written notice from the Company or the Administrative
Agent that an Event of Default exists, until such Event of Default has been
waived in accordance with Section 9.1, shall not be included as “Credit Party
Obligations” for purposes of a distribution under Section 2.11(b).

“Bank Product Amount” shall have the meaning set forth in the definition of Bank
Product.

“Bank Product Debt” shall mean the Indebtedness and other obligations of any
Credit Party or Subsidiary relating to Bank Products.

 

5

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“Bank Product Provider” shall mean any Person that provides Bank Products to a
Credit Party or any Subsidiary of a Credit Party to the extent that (a) such
Person is a Lender, an Affiliate of a Lender or any other Person that was a
Lender (or an Affiliate of a Lender) at the time it entered into the Bank
Product but has ceased to be a Lender (or whose Affiliate has ceased to be a
Lender) under the Credit Agreement or (b) such Person is a Lender or an
Affiliate of a Lender on the Closing Date and the Bank Product was entered into
on or prior to the Closing Date (even if such Person ceases to be a Lender or
such Person’s Affiliate ceased to be a Lender).

“Bank Product Provider Notice” shall mean a notice substantially in the form of
Exhibit 1.1(g).

“Bankruptcy Code” shall mean the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.

“Bankruptcy Event” shall mean any of the events described in Section 7.1(f).

“Borrower” shall have the meaning set forth in the first paragraph of this
Agreement.

“Borrowing Date” shall mean, in respect of any Revolving Loan, the date such
Revolving Loan is made.

“Business” shall have the meaning set forth in Section 3.10.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which commercial banks in Boston, Massachusetts, San Francisco, California or
New York, New York are authorized or required by law to close; provided,
however, that when used in connection with a rate determination, borrowing or
payment in respect of a LIBOR Rate Loan, the term “Business Day” shall also
exclude any day on which banks in London, England are not open for dealings in
Dollar deposits in the London interbank market.

“Capital Lease” shall mean any lease of property, real or personal, the
obligations with respect to which are required to be capitalized on a balance
sheet of the lessee in accordance with GAAP.

“Capital Lease Obligations” shall mean the capitalized lease obligations
relating to a Capital Lease determined in accordance with GAAP.

“Carrols” shall have the meaning set forth in the preamble.

“Carrols LLC Financing” shall have the meaning set forth in the preamble.

“Cash Collateralize” shall mean to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the Administrative Agent or the Issuing
Lender (as applicable) and the Lenders, as collateral for LOC Obligations or
obligations of Lenders to fund participations in respect thereof, cash or
deposit account balances or, if the Issuing Lender shall agree in its sole
discretion, other credit support, in each case pursuant to documentation in form

 

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and substance reasonably satisfactory to (a) the Administrative Agent and
(b) the Issuing Lender. “Cash Collateral” shall have a meaning correlative to
the foregoing and shall include the proceeds of such cash collateral and other
credit support.

“Cash Equivalents” shall mean (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition (“Government Obligations”),
(b) Dollar denominated time deposits, certificates of deposit, Eurodollar time
deposits and Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $500,000,000
or (ii) any bank whose short-term commercial paper rating at the time of the
acquisition thereof is at least A-1 or the equivalent thereof from S&P or from
Moody’s is at least P-1 or the equivalent thereof from Moody’s (any such bank
being an “Approved Bank”), in each case with maturities of not more than 364
days from the date of acquisition, (c) commercial paper and variable or fixed
rate notes issued by any Approved Bank (or by the parent company thereof) or any
variable rate notes issued by, or guaranteed by any domestic corporation rated
A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent
thereof) or better by Moody’s and maturing within six months of the date of
acquisition, (d) repurchase agreements with a term of not more than thirty
(30) days with a bank or trust company (including a Lender) or a recognized
securities dealer having capital and surplus in excess of $500,000,000 for
direct obligations issued by or fully guaranteed by the United States of
America, (e) obligations of any state of the United States or any political
subdivision thereof for the payment of the principal and redemption price of and
interest on which there shall have been irrevocably deposited Government
Obligations maturing as to principal and interest at times and in amounts
sufficient to provide such payment, (f) money market accounts subject to Rule
2a-7 of the Investment Company Act of 1940 (“Rule 2a-7”) which consist primarily
of cash and cash equivalents set forth in clauses (a) through (e) above and of
which 95% shall at all times be comprised of First Tier Securities (as defined
in Rule 2a-7) and any remaining amount shall at all times be comprised of Second
Tier Securities (as defined in Rule 2a-7) and (g) shares of any so-called “money
market fund”; provided that such fund is registered under the Investment Company
Act of 1940, has net assets of at least $500,000,000 and has an investment
portfolio with an average maturity of 365 days or less.

“Cash Management Services” shall mean any services provided from time to time to
any Credit Party or Subsidiary of a Credit Party in connection with operating,
collections, payroll, trust, or other depository or disbursement accounts,
including automatic clearinghouse, controlled disbursement, depository,
electronic funds transfer, information reporting, lockbox, stop payment,
overdraft and/or wire transfer services and all other treasury and cash
management services.

“Change in Law” shall mean the occurrence, after the date of this Agreement, of
any of the following: (a) the adoption or taking effect of any law, rule,
regulation or treaty, (b) any change in any law, rule, regulation or treaty or
in the administration, interpretation, implementation or application thereof by
any Governmental Authority or (c) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided, that notwithstanding anything herein to the
contrary, (i)

 

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the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, guidelines or directives thereunder or issued in connection therewith and
(ii) all requests, rules, guidelines or directives promulgated by the Bank for
International Settlements, the Basel Committee on Banking Supervision (or any
successor or similar authority) or the United States or foreign regulatory
authorities, in each case pursuant to Basel III, shall in each case be deemed to
be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Change of Control” shall mean at any time the occurrence of any of the
following events: (a) any “person” or “group” (as such terms are used in
Section 13(d) and 14(d) of the Exchange Act), other than the Permitted Holders
(individually or in any combination as a group), is or becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have “beneficial ownership” of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, in
excess of forty percent (40%) of the then outstanding Voting Stock of the
Borrower; (b) the replacement of a majority of the Board of Directors of the
Borrower (other than in connection with the Spin-Off) over a two-year period
from the directors who constituted the Board of Directors at the beginning of
such period, and such replacement shall not have been approved by a vote of at
least a majority of the Board of Directors of the Borrower then still in office
who either were members of such Board of Directors at the beginning of such
period or whose election as a member of such Board of Directors was previously
so approved; (c) the occurrence of a “Change of Control” or any equivalent term
or concept under the Second Lien Notes Indenture or (d) prior to the Spin-Off
Date, Carrols shall cease to own 100% of the Voting Stock of the Borrower.

“Closing Date” shall mean the date of this Agreement.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

“Collateral” shall mean a collective reference to the collateral which is
identified in, and at any time will be covered by, the Security Documents and
any other property or assets of a Credit Party, whether tangible or intangible
and whether real or personal, that may from time to time secure the Credit Party
Obligations; provided that there shall be excluded from the Collateral (a) any
account, instrument, chattel paper or other obligation or property of any kind
due from, owed by, or belonging to, a Sanctioned Person or Sanctioned Entity,
(b) any lease in which the lessee is a Sanctioned Person or Sanctioned Entity,
(c) all leased real property interests of the Credit Parties, (d) subject to
Section 5.12(c), the Identified Sale Leaseback Property, (e) the Excluded Real
Property and (f) any other property specifically excluded pursuant to the
Security Documents.

“Commitment” shall mean the Revolving Commitments and the LOC Commitment,
individually or collectively, as appropriate.

“Commitment Fee” shall have the meaning set forth in Section 2.5(a).

“Commitment Period” shall mean (a) with respect to Revolving Loans, the period
from and including the Closing Date to but excluding the Maturity Date and
(b) with respect to Letters

 

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of Credit, the period from and including the Closing Date to but excluding the
date that is thirty (30) days prior to the Maturity Date.

“Committed Funded Exposure” shall mean, as to any Lender at any time, the
aggregate principal amount at such time of its outstanding Revolving Loans, LOC
Obligations and Participation Interests at such time.

“Commonly Controlled Entity” shall mean an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of
Section 4001(b)(1) of ERISA or is part of a group which includes the Borrower
and which is treated as a single employer under Section 414(b) or 414(c) of the
Code or, solely for purposes of Section 412 of the Code to the extent required
by such Section, Section 414(m) or 414(o) of the Code.

“Consolidated” shall mean, when used with reference to financial statements or
financial statement items of the Borrower and its Subsidiaries or any other
Person, such statements or items on a consolidated basis in accordance with the
consolidation principles of GAAP.

“Consolidated Capital Expenditures” shall mean, as of any date of determination
for the four (4) consecutive fiscal quarter period ending on such date, all
expenditures of the Credit Parties and their Subsidiaries on a Consolidated
basis for such period that in accordance with GAAP would be classified as
capital expenditures, including, without limitation, Capital Lease Obligations.

“Consolidated EBITDAR” shall mean, as of any date of determination for the four
(4) consecutive fiscal quarter period ending on such date, without duplication,
(a) Consolidated Net Income for such period plus (b) the sum of the following to
the extent deducted in calculating Consolidated Net Income for such period:
(i) Consolidated Interest Expense for such period, (ii) tax expense (including,
without limitation, any federal, state, local and foreign income and similar
taxes) of the Credit Parties and their Subsidiaries for such period,
(iii) depreciation and amortization expense of the Credit Parties and their
Subsidiaries for such period, (iv) Consolidated Rent Expense for such period,
(v) Other Designated Expenses, and (vi) other non-cash charges (excluding
reserves for future cash charges) of the Credit Parties and their Subsidiaries
for such period (including, without limitation, non-cash expense related to
stock option or other equity compensation plans or grants) minus (c) non-cash
charges previously added back to Consolidated Net Income in determining
Consolidated EBITDAR to the extent such non-cash charges have become cash
charges during such period minus (d) to the extent not deducted in the
calculation of Consolidated Net Income, all amounts paid by the Credit Parties
pursuant to Sections 6.10(d) and (e) (other than any payments or reimbursements
for capital expenditures made for the benefit of the Credit Parties and their
Subsidiaries).

“Consolidated Funded Debt” shall mean, as of any date of determination, Funded
Debt of the Credit Parties and their Subsidiaries on a Consolidated basis.

“Consolidated Interest Expense” shall mean, as of any date of determination for
the four (4) consecutive fiscal quarter period ending on such date, all interest
expense (excluding amortization of debt discount and premium, but including the
interest component under Capital

 

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Leases and synthetic leases, tax retention operating leases, off-balance sheet
loans and similar off-balance sheet financing products) for such period of the
Credit Parties and their Subsidiaries on a Consolidated basis. In addition, for
purposes of calculating “Consolidated Interest Expense,” the sale leaseback
transactions relating to the Subject Lease Financing Obligations shall be
treated as sale leaseback transactions and not financing transactions as
described under the definition of “Consolidated Net Income” below.

“Consolidated Net Income” shall mean, as of any date of determination for the
four (4) consecutive fiscal quarter period ending on such date, (i) the net
income (excluding (a) extraordinary losses and gains, (b) gains from
Dispositions not in the ordinary course of business, (c) gains from the early
extinguishment of Indebtedness, (d) all non-cash income (other than amortization
of deferred gains from Sale Leaseback transactions), (e) interest income,
(f) tax credits, rebates and other benefits and (g) income received from joint
venture investments to the extent not received in cash) of the Credit Parties
and their Subsidiaries on a Consolidated basis for such period, all as
determined in accordance with GAAP and (ii) to the extent not included in net
income, any cash payments received by the Credit Parties and their Subsidiaries
under the Transition Services Agreement for such period. In addition, for
purposes of calculating “Consolidated Net Income,” the sale leaseback
transactions relating to the Subject Lease Financing Obligations shall be
treated as sale leaseback transactions and not financing transactions
(including, without limitation, treating any restaurant leases relating to such
Subject Lease Financing Obligations as operating leases, i.e. (A) reducing
depreciation expense for the property and plant subject to the Subject Lease
Financing Obligations as if they were sale leaseback transactions and
(B) characterizing the lease payments as rent expense for the restaurant leases
relating to such Subject Lease Financing Obligations instead of principal
repayments and interest expense under a financing transaction).

“Consolidated Rent Expense” shall mean, as of any date of determination for the
four (4) consecutive fiscal quarter period ending on such date, all rent expense
for such period of the Credit Parties and their Subsidiaries on a Consolidated
basis. In addition, for purposes of calculating “Consolidated Rent Expense,” the
sale leaseback transactions relating to the Subject Lease Financing Obligations
shall be treated as sale leaseback transactions and not financing transactions
(including, without limitation, treating any restaurant leases relating to such
Subject Lease Financing Obligations as operating leases, i.e. (a) reducing
deprecation expense for the property and plant subject to the Subject Lease
Financing Obligations as if they were sale leaseback transactions and
(b) characterizing the lease payment as rent expense for the restaurant leases
under sale leaseback transactions instead of principal repayments and interest
expense under a financing transaction) as set forth in the definition of
“Consolidated Net Income” and the rent thereunder shall be included as rent
expense in the calculation of “Consolidated Rent Expense.”

“Contractual Obligation” shall mean, as to any Person, any provision of any
security issued by such Person or of any contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.

“Control” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise

 

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voting power, by contract or otherwise. “Controlling” and “Controlled” have
meanings correlative thereto.

“Copyright Licenses” shall mean any agreement, whether written or oral,
providing for the grant by or to a Person of any right under any Copyright.

“Copyrights” shall mean all copyrights in all Works, all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, registrations, recordings and applications in the United
States Copyright Office or in any similar office or agency of the United States,
any state thereof or any other country or any political subdivision thereof, or
otherwise and all renewals thereof.

“Credit Documents” shall mean this Agreement, each of the Revolving Loan Notes,
any Joinder Agreement, the Letters of Credit, LOC Documents and the Security
Documents and all other agreements, documents, certificates and instruments
delivered to the Administrative Agent or any Lender by any Credit Party in
connection therewith (other than any agreement, document, certificate or
instrument related to a Bank Product).

“Credit Party” shall mean any of the Borrower or the Guarantors.

“Credit Party Obligations” shall mean, without duplication, (a) the Obligations
and (b) for purposes of the Guaranty, the Security Documents and all provisions
under the other Credit Documents relating to the Collateral, the sharing thereof
and/or payments from proceeds of the Collateral, all Bank Product Debt.

“CRG” shall have the meaning set forth in the preamble.

“Debt Issuance” shall mean the issuance of any Indebtedness by any Credit Party
or any of its Subsidiaries (excluding any issuance by the Borrower of its Equity
Interests or any Indebtedness of any Credit Party and its Subsidiaries permitted
to be incurred pursuant to Sections 6.1 (a)-(l) hereof).

“Debtor Relief Laws” shall mean the Bankruptcy Code and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief Laws of the United States or other applicable jurisdictions from
time to time in effect.

“Default” shall mean any of the events specified in Section 7.1, whether or not
any requirement for the giving of notice or the lapse of time, or both, or any
other condition, has been satisfied.

“Default Rate” shall mean (a) when used with respect to the Obligations, other
than Letter of Credit Fees, an interest rate equal to (i) for Alternate Base
Rate Loans (A) the Alternate Base Rate plus (B) the Applicable Margin applicable
to Alternate Base Rate Loans plus (C) 2.00% per annum and (ii) for LIBOR Rate
Loans, (A) the LIBOR Rate plus (B) the Applicable Margin applicable to LIBOR
Rate Loans plus (C) 2.00% per annum, (b) when used

 

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with respect to Letter of Credit Fees, a rate equal to the Applicable Margin
applicable to Letter of Credit Fees plus 2.00% per annum and (c) when used with
respect to any other fee or amount due hereunder, a rate equal to the Applicable
Margin applicable to Alternate Base Rate Loans plus 2.00% per annum.

“Defaulting Lender” shall mean, subject to Section 2.21(b) any Lender that,
(a) has failed to (i) fund all or any portion of its Revolving Loans within two
Business Days of the date such Revolving Loans were required to be funded
hereunder unless such Lender notifies the Administrative Agent and the Borrower
in writing that such failure is the result of such Lender’s determination that
one or more conditions precedent to funding (each of which conditions precedent,
together with any applicable default, shall be specifically identified in such
writing) has not been satisfied, or (ii) pay to the Administrative Agent, any
Issuing Lender or any other Lender any other amount required to be paid by it
hereunder (including in respect of its participation in Letters of Credit)
within two Business Days of the date when due, (b) has notified the Borrower,
the Administrative Agent or any Issuing Lender in writing that it does not
intend to comply with its funding obligations hereunder, or has made a public
statement to that effect (unless such writing or public statement relates to
such Lender’s obligation to fund a Revolving Loan hereunder and states that such
position is based on such Lender’s determination that a condition precedent to
funding (which condition precedent, together with any applicable default, shall
be specifically identified in such writing or public statement) cannot be
satisfied), (c) has failed, within three Business Days after written request by
the Administrative Agent or the Borrower, to confirm in writing to the
Administrative Agent and the Borrower that it will comply with its prospective
funding obligations hereunder (provided that such Lender shall cease to be a
Defaulting Lender pursuant to this clause (c) upon receipt of such written
confirmation by the Administrative Agent and the Borrower), or (d) has, or has a
direct or indirect parent company that has, (i) become the subject of a
proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver,
custodian, conservator, trustee, administrator, assignee for the benefit of
creditors or similar Person charged with reorganization or liquidation of its
business or assets, including the Federal Deposit Insurance Corporation or any
other state or federal regulatory authority acting in such a capacity; provided
that a Lender shall not be a Defaulting Lender solely by virtue of the ownership
or acquisition of any equity interest in that Lender or any direct or indirect
parent company thereof by a Governmental Authority so long as such ownership
interest does not result in or provide such Lender with immunity from the
jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Lender (or such
Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts
or agreements made with such Lender. Any determination by the Administrative
Agent that a Lender is a Defaulting Lender under clauses (a) through (d) above
shall be conclusive and binding absent manifest error, and such Lender shall be
deemed to be a Defaulting Lender (subject to Section 2.21(b)) upon delivery of
written notice of such determination to the Borrower, each Issuing Lender and
each Lender.

“Deposit Account Control Agreement” shall mean an agreement, among a Credit
Party, a depository institution, and the Administrative Agent, which agreement
is in a form acceptable to the Administrative Agent and which provides the
Administrative Agent with “control” (as such term is used in Article 9 of the
UCC) over the deposit account(s) described therein, as the same may be amended,
modified, extended, restated, replaced, or supplemented from time to time.

 

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“Disposition” shall have the meaning set forth in Section 6.4.

“Dollars” and “$” shall mean dollars in lawful currency of the United States of
America.

“Domestic Lending Office” shall mean, initially, the office of each Lender
designated as such Lender’s Domestic Lending Office shown in such Lender’s
Administrative Questionnaire; and thereafter, such other office of such Lender
as such Lender may from time to time specify to the Administrative Agent and the
Borrower as the office of such Lender at which Alternate Base Rate Loans of such
Lender are to be made.

“Domestic Subsidiary” shall mean any Subsidiary that is organized and existing
under the laws of the United States or any state or commonwealth thereof or
under the laws of the District of Columbia, other than an Excluded Holding
Subsidiary.

“Eligible Assignee” shall mean (a) a Lender, (b) an Affiliate of a Lender,
(c) an Approved Fund and (d) any other Person (other than a natural person)
approved by (i) the Administrative Agent (which approval shall not unreasonable
be withheld or delayed in the case of an assignment pursuant to Section 2.19),
(ii) in the case of any assignment of a Revolving Commitment, the Issuing Lender
and (iii) unless an Event of Default has occurred and is continuing and so long
as the primary syndication of the Revolving Loans has been completed as
determined by Wells Fargo, the Borrower (each such approval not to be
unreasonably withheld or delayed); provided that notwithstanding the foregoing,
“Eligible Assignee” shall not include (A) CRG, Carrols, any Credit Party or any
of the CRG’s, Carrol’s or the Credit Party’s Affiliates or Subsidiaries or
(B) any Person holding Subordinated Debt of the Credit Parties or any of such
Person’s Affiliates or (C) any Defaulting Lender (or any of their Affiliates).

“Environmental Laws” shall mean any and all applicable foreign, federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other Requirement
of Law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time be in effect during the term of this Agreement.

“Equity Interests” shall mean (a) in the case of a corporation, capital stock,
(b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (c) in the case of a partnership, partnership interests (whether
general, preferred or limited), (d) in the case of a limited liability company,
membership interests and (e) any other interest or participation that confers or
could confer on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person, without limitation,
options, warrants and any other “equity security” as defined in Rule 3a11-1 of
the Exchange Act.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

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“Event of Default” shall mean any of the events specified in Section 7.1;
provided, however, that any requirement for the giving of notice or the lapse of
time, or both, or any other condition, has been satisfied.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Excluded Holding Subsidiary” shall mean a Subsidiary that has no material
assets other than the Equity Interests in one or more Foreign Subsidiaries.

“Excluded Real Property” shall mean the owned real property set forth on
Schedule 1.1(c) hereto.

“Excluded Subsidiaries” shall mean Cabana Club of Webbs Chapel, Inc., Cabana
Club of Bruckner, Inc., Two Pesos Private Club 1, Two Pesos Private Club 3 and
Cabana Club of Pasadena, Inc.

“Excluded Taxes” shall mean any of the following Taxes imposed on or with
respect to a Recipient, (a) Taxes imposed on or measured by the Recipient’s net
income (however denominated), franchise Taxes imposed on the Recipient, and
branch profits Taxes imposed on the Recipient, in each case, (i) by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located or (ii) as
the result of any other present or former connection between such Recipient and
the jurisdiction imposing such Tax (other than connections arising solely from
such Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Credit Document, or sold or assigned an interest in any Revolving Loan or Credit
Document), (b) in the case of a Lender (other than an assignee pursuant to a
request by the Borrower under Section 2.19(b)), Taxes imposed on amounts payable
to or for the account of such Lender pursuant to a law in effect on the date on
which (i) such Lender becomes a party hereto or (ii) such Lender changes its
lending office, except in each case to the extent that, pursuant to
Section 2.16, amounts with respect to such Taxes were payable either to such
Lender’s assignor immediately before such Lender became a party hereto or to
such Lender immediately before it changed its lending office, (c) Taxes
attributable to such Recipient’s failure to comply with Section 2.16(g) and
(d) any Taxes imposed under FATCA (or any amended or successor version of FATCA
that is substantively comparable and not materially more onerous to comply
with).

“Existing Carrols Notes” shall have the meaning set forth in the preamble.

“Existing Letter of Credit” shall mean each of the letters of credit described
by applicant, date of issuance, letter of credit number, amount, beneficiary and
the date of expiry on Schedule 1.1(e) hereto.

“Extension of Credit” shall mean, as to any Lender, the making of a Revolving
Loan by such Lender, any conversion of a Revolving Loan from one Type to another
Type, any extension

 

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of any Revolving Loan or the issuance, extension or renewal of, or participation
in, a Letter of Credit by such Lender.

“Extraordinary Receipt” shall mean any cash received by or paid to or for the
account of any Person not in the ordinary course of business for Recovery
Events.

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of
this Agreement, and any current or future regulations or official
interpretations thereof.

“Federal Funds Effective Rate” shall have the meaning set forth in the
definition of “Alternate Base Rate”.

“Fee Letter” shall mean the letter agreement dated July 13, 2011, addressed to
the Borrower from Wells Fargo and WFS, as amended, modified, extended, restated,
replaced, or supplemented from time to time.

“First Quarter” shall mean, with respect to any fiscal year of the Borrower, the
thirteen (13) week period ending on the Sunday closest to March 31 of such
fiscal year.

“Fixed Charge Coverage Ratio” shall mean, as of any date of determination, for
the Credit Parties and their Subsidiaries on a Consolidated basis, the ratio of
(a) Consolidated EBITDAR for the four (4) consecutive fiscal quarters ending on
such date to (b) the sum of (i) Consolidated Interest Expense paid or payable in
cash during the four (4) consecutive fiscal quarter period ending on such date,
(ii) all cash Income Taxes paid during the four (4) consecutive fiscal quarter
period ending on such date, (iii) Scheduled Funded Debt Payments made during the
four (4) consecutive fiscal quarter period ending on such date (including the
principal component of payments due on Capital Leases) and (iv) Consolidated
Rent Expense during the four (4) consecutive fiscal quarter period ending on
such date. Notwithstanding the foregoing, for purposes of calculating the Fixed
Charge Coverage Ratio for the Third Quarter of 2011, the Fourth Quarter of 2011
and the First Quarter of 2012, the components of the Fixed Charge Coverage Ratio
attributable to (1) Consolidated Interest Expense and (2) Scheduled Funded Debt
Payments ((1) and (2) collectively, the “Annualized Fixed Charges”) shall be
annualized during such fiscal quarters such that (I) for the calculation of the
Fixed Charge Coverage Ratio as of the end of the Third Quarter of 2011,
Annualized Fixed Charges for the fiscal quarter then ending will be multiplied
by four (4), (II) for the calculation of the Fixed Charge Coverage Ratio as of
the end of the Fourth Quarter of 2011, Annualized Fixed Charges for the two
fiscal quarter period then ending will be multiplied by two (2) and (III) for
the calculation of the Fixed Charge Coverage Ratio as of the end of the First
Quarter of 2012, Annualized Fixed Charges for the three fiscal quarter period
then ending will be multiplied by one and one-third (1 1/3). For purposes of the
computations in clauses (I), (II) and (III) above and for purposes of
calculating the Fixed Charge Coverage Ratio for the four quarter period ended as
of the end of as of the end of the Third Quarter of 2012, the Consolidated
Interest Expense and Scheduled Funded Debt Payments for the Third Quarter of
2011 shall be computed by measuring actual Consolidated Interest Expense and
Scheduled Funded Debt Payments from the Closing Date through the end of the
Third Quarter of 2011 (the “Stub Period”), dividing such

 

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amount by the number of days in the Stub Period and then multiplying such daily
amount by ninety-two (92).

“Flood Hazard Property” shall mean any Mortgaged Property that is in an area
designated by the Federal Emergency Management Agency as having special flood or
mudslide hazards.

“Foreign Lender” shall mean (a) if the Borrower is a U.S. Person, a Lender that
is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, any Lender
that is resident or organized under the laws of a jurisdiction other than that
in which the Borrower is resident for tax purposes.

“Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic
Subsidiary.

“Fourth Quarter” shall mean, with respect to any fiscal year of the Borrower,
the thirteen (13) or fourteen (14) week period ending on the Sunday closest to
December 31 of such fiscal year.

“Fronting Exposure” shall mean, at any time there is a Defaulting Lender, such
Defaulting Lender’s Applicable Percentage of the outstanding LOC Obligations
with respect to Letters of Credit issued by the Issuing Lender other than LOC
Obligations as to which such Defaulting Lender’s participation obligation has
been reallocated to other Lenders or Cash Collateralized in accordance with the
terms hereof.

“Fund” shall mean any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

“Funded Debt” shall mean, with respect to any Person, without duplication, all
Indebtedness of such Person (other than Indebtedness set forth in clauses (e),
(i), and (n) of such definition); provided, that (a) Funded Debt shall only
include Indebtedness set forth in clause (j) of the definition thereof to the
extent of unreimbursed drawings under such letters of credit or bankers’
acceptances facilities and (b) Funded Debt shall exclude all of the Subject
Lease Financing Obligations.

“GAAP” shall mean generally accepted accounting principles in effect in the
United States of America (or, in the case of Foreign Subsidiaries with
significant operations outside the United States of America, generally accepted
accounting principles in effect from time to time in their respective
jurisdictions of organization or formation) applied on a consistent basis,
subject, however, in the case of determination of compliance with the financial
covenants set out in Section 5.9 to the provisions of Section 1.3.

“Government Acts” shall have the meaning set forth in Section 2.17.

“Government Obligations” shall have the meaning set forth in the definition of
“Cash Equivalents.”

 

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“Governmental Authority” shall mean the government of the United States of
America or any other nation, or of any political subdivision thereof, whether
state or local, and any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government (including any supra-national bodies such as the European Union or
the European Central Bank).

“Granting Lender” shall have the meaning set forth in Section 9.6(f).

“Guarantor” shall mean the Domestic Subsidiaries of the Borrower (other than any
Excluded Subsidiary and any Domestic Subsidiary owned by a Foreign Subsidiary)
as are, or may from time to time become parties to this Agreement.

“Guaranty” shall mean the guaranty of the Guarantors set forth in Article X.

“Guaranty Obligations” shall mean, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including, without limitation, any
obligation, whether or not contingent, (a) to purchase any such Indebtedness or
any property constituting security therefor, (b) to advance or provide funds or
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of such
other Person (including, without limitation, keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (c) to lease or
purchase property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (d) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount of any
Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Guaranty Obligation is made.

“Hedging Agreements” shall mean, with respect to any Person, any agreement
entered into to protect such Person against fluctuations in interest rates, or
currency or raw materials values, including, without limitation, any interest
rate swap, cap or collar agreement or similar arrangement between such Person
and one or more counterparties, any foreign currency exchange agreement,
currency protection agreements, commodity purchase or option agreements or other
interest or exchange rate hedging agreements.

“Identified Sale Leaseback Property” shall mean the owned real property
identified on Schedule 1.1(d).

“Income Taxes” shall mean federal, state, local and foreign income and similar
taxes (including franchise taxes, to the extent such franchise taxes are based
on the income or revenues of the Credit Parties and their Subsidiaries).

 

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“Indebtedness” shall mean, with respect to any Person, without duplication,
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (d) all obligations (including, without limitation, earnout
obligations) of such Person incurred, issued or assumed as the deferred purchase
price of property or services purchased by such Person (other than trade debt
and accrued expenses incurred in the ordinary course of business and due within
six months of the incurrence thereof) which would appear as liabilities on a
balance sheet of such Person, (e) all obligations of such Person under
take-or-pay or similar arrangements or under commodities agreements, (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on,
or payable out of the proceeds of production from, property owned or acquired by
such Person, whether or not the obligations secured thereby have been assumed,
(g) all Guaranty Obligations of such Person with respect to Indebtedness of
another Person, (h) the principal portion of all Capital Lease Obligations plus
any accrued interest thereon, (i) all net obligations of such Person under
Hedging Agreements, (j) the maximum amount of all letters of credit issued or
bankers’ acceptances facilities created for the account of such Person and,
without duplication, all drafts drawn thereunder (to the extent unreimbursed),
(k) all preferred Equity Interests issued by such Person and which by the terms
thereof could be (at the request of the holders thereof or otherwise) subject to
mandatory sinking fund payments, redemption or other acceleration on or prior to
the Maturity Date, (l) the principal balance outstanding under any synthetic
lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product plus any accrued interest thereon, (m) all
obligations of any partnership or unincorporated joint venture in which such
Person is a general partner or a joint venturer, (n) obligations of such Person
under non-compete agreements to the extent such obligations are quantifiable
contingent obligations of such Person under GAAP principles and (o) all ASC
Section 840-40 lease financing obligations.

“Indemnified Taxes” shall mean (a) Taxes, other than Excluded Taxes, imposed on
or with respect to any payment made by or on account of any obligation of any
Credit Party under any Credit Document and (b) to the extent not otherwise
described in (a), Other Taxes.

“Indemnitee” shall have the meaning set forth in Section 9.5(b).

“Insolvency” shall mean, with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.

“Intellectual Property” shall mean, collectively, all Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses of the
Credit Parties and their Subsidiaries, all goodwill associated therewith and all
rights to sue for infringement thereof.

“Intercompany Debt” shall have the meaning set forth in Section 9.19.

 

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“Intercreditor Agreement” shall mean that certain Intercreditor Agreement dated
as of the date hereof by and among the Administrative Agent and BNY Mellon, in
its capacity as trustee under the Second Lien Notes Indenture.

“Interest Determination Date” shall have the meaning specified in the definition
of “Applicable Margin”.

“Interest Payment Date” shall mean (a) as to any Alternate Base Rate Loan, the
last Business Day of each of the First Quarter, Second Quarter, Third Quarter
and Fourth Quarter and on the applicable Maturity Date, (b) as to any LIBOR Rate
Loan having an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any LIBOR Rate Loan having an Interest Period longer
than three months, (i) each three (3) month anniversary following the first day
of such Interest Period and (ii) the last day of such Interest Period and (d) as
to any Revolving Loan which is the subject of a mandatory prepayment required
pursuant to Section 2.7(b), the date on which such mandatory prepayment is due.

“Interest Period” shall mean, with respect to any LIBOR Rate Loan,

(a) initially, the period commencing on the Borrowing Date or conversion date,
as the case may be, with respect to such LIBOR Rate Loan and ending one, two,
three, six, nine or twelve months thereafter, subject to availability to all
applicable Lenders, as selected by the Borrower in the Notice of Borrowing or
Notice of Conversion given with respect thereto; and

(b) thereafter, each period commencing on the last day of the immediately
preceding Interest Period applicable to such LIBOR Rate Loan and ending one,
two, three, six, nine or twelve months thereafter, subject to availability to
all applicable Lenders, as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that the
foregoing provisions are subject to the following:

(i) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise end
on a day that is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;

(ii) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the relevant calendar month;

(iii) if the Borrower shall fail to give notice as provided above, the Borrower
shall be deemed to have selected an Alternate Base Rate Loan to replace the
affected LIBOR Rate Loan;

 

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(iv) no Interest Period in respect of any Revolving Loan shall extend beyond the
applicable Maturity Date; and

(v) no more than six (6) LIBOR Rate Loans may be in effect at any time. For
purposes hereof, LIBOR Rate Loans with different Interest Periods shall be
considered as separate LIBOR Rate Loans, even if they shall begin on the same
date and have the same duration, although borrowings, extensions and conversions
may, in accordance with the provisions hereof, be combined at the end of
existing Interest Periods to constitute a new LIBOR Rate Loan with a single
Interest Period.

“Investment” shall mean (a) the acquisition (whether for cash, property,
services, assumption of Indebtedness, securities or otherwise) of Equity
Interests, other ownership interests or other securities of any Person or bonds,
notes, debentures or all or substantially all of the assets of any Person,
(b) any deposit with, or advance, loan or other extension of credit to, any
Person (other than deposits made in the ordinary course of business), (c) the
construction or development of, or the entering into of a binding commitment to
construct or develop, a new Restaurant, or (d) any other capital contribution to
or investment in any Person, including, without limitation, any Guaranty
Obligation (including any support for a letter of credit issued on behalf of
such Person) incurred for the benefit of such Person.

“IRS” shall mean the United States Internal Revenue Service.

“Issuing Lender” shall mean Wells Fargo together with any successor.

“Issuing Lender Fees” shall have the meaning set forth in Section 2.5(c).

“Joinder Agreement” shall mean a Joinder Agreement in substantially the form of
Exhibit 1.1(c), executed and delivered by an Additional Credit Party in
accordance with the provisions of Section 5.10.

“Lender” shall mean any of the several banks and other financial institutions as
are, or may from time to time become parties to this Agreement; provided that
notwithstanding the foregoing, “Lender” shall not include any Credit Party or
any of the Credit Party’s Affiliates or Subsidiaries.

“Lender Commitment Letter” shall mean, with respect to any Lender, the letter
(or other correspondence) to such Lender from the Administrative Agent notifying
such Lender of its LOC Commitment and Revolving Commitment Percentage.

“Letter of Credit” shall mean (a) any letter of credit issued by the Issuing
Lender pursuant to the terms hereof, as such letter of credit may be amended,
modified, restated, extended, renewed, increased, replaced or supplemented from
time to time in accordance with the terms of this Agreement and (b) any Existing
Letter of Credit, in each case as such letter of credit may be amended,
modified, extended, renewed or replaced from time to time in accordance with the
terms of this Agreement.

 

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“Letter of Credit Facing Fee” shall have the meaning set forth in
Section 2.5(c).

“Letter of Credit Fee” shall have the meaning set forth in Section 2.5(b).

“LIBOR” shall mean, for any LIBOR Rate Loan for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBOR01 Page (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two (2) Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, then “LIBOR” shall mean the rate per annum at which, as
determined by the Administrative Agent in accordance with its customary
practices, Dollars in an amount comparable to the Revolving Loans then requested
are being offered to leading banks at approximately 11:00 A.M. London time, two
(2) Business Days prior to the commencement of the applicable Interest Period
for settlement in immediately available funds by leading banks in the London
interbank market for a period equal to the Interest Period selected.

“LIBOR Lending Office” shall mean, initially, the office(s) of each Lender
designated as such Lender’s LIBOR Lending Office in such Lender’s Administrative
Questionnaire; and thereafter, such other office of such Lender as such Lender
may from time to time specify to the Administrative Agent and the Borrower as
the office of such Lender at which the LIBOR Rate Loans of such Lender are to be
made.

“LIBOR Rate” shall mean a LIBOR rate per annum (rounded upwards, if necessary,
to the next higher 1/100th of 1%) determined by the Administrative Agent in
accordance with the definition of “LIBOR”.

“LIBOR Rate Loan” shall mean Revolving Loans the rate of interest applicable to
which is based on the LIBOR Rate.

“LIBOR Tranche” shall mean the collective reference to LIBOR Rate Loans whose
Interest Periods begin and end on the same day.

“Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
(a) any conditional sale or other title retention agreement and any Capital
Lease having substantially the same economic effect as any of the foregoing and
(b) the filing of, or the agreement to give, any UCC financing statement.

“LOC Commitment” shall mean the commitment of the Issuing Lender to issue
Letters of Credit and with respect to each Lender, the commitment of such Lender
to purchase Participation Interests in the Letters of Credit up to such Lender’s
Revolving Commitment Percentage of the LOC Committed Amount.

“LOC Committed Amount” shall have the meaning set forth in Section 2.3(a).

 

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“LOC Documents” shall mean, with respect to each Letter of Credit, such Letter
of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (a) the rights and obligations of
the parties concerned or (b) any collateral for such obligations.

“LOC Obligations” shall mean, at any time, the sum of (a) the maximum amount
which is, or at any time thereafter may become, available to be drawn under
Letters of Credit then outstanding, assuming compliance with all requirements
for drawings referred to in such Letters of Credit plus (b) the aggregate amount
of all drawings under Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed.

“Management Services Agreement” shall mean that certain Management Services
Agreement dated as of the Closing Date by and between the Borrower, Carrols and
CRG.

“Mandatory LOC Borrowing” shall have the meaning set forth in Section 2.3(e).

“Material Adverse Effect” shall mean a material adverse effect on (a) the
business, operations, property, assets or condition (financial or otherwise) of
the Credit Parties and their Subsidiaries taken as a whole, (b) the ability of
the Borrower or any Guarantor to perform its obligations, when such obligations
are required to be performed, under this Agreement, any of the Revolving Loan
Notes or any other Credit Document or (c) the validity or enforceability of this
Agreement, any of the Revolving Loan Notes or any of the other Credit Documents,
the Administrative Agent’s Liens (for the benefit of the Secured Parties) on the
Collateral or the priority of such Liens or the rights or remedies of the
Administrative Agent or the Lenders hereunder or thereunder.

“Material Contract” shall mean (a) the Management Services Agreement, (b) the
Transition Services Agreement and (c) any contract or agreement of the Credit
Parties or any of their Subsidiaries as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto, could reasonably be
expected to have a Material Adverse Effect. The parties acknowledge that no
individual Restaurant real property lease is a Material Contract for purposes of
this Agreement.

“Materials of Environmental Concern” shall mean any gasoline or petroleum
(including crude oil or any extraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
perchlorate, polychlorinated biphenyls and urea-formaldehyde insulation.

“Maturity Date” shall mean the date that is four and one-half years following
the Closing Date; provided, however, if such date is not a Business Day, the
Maturity Date shall be the next preceding Business Day.

“Moody’s” shall mean Moody’s Investors Service, Inc.

 

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“Mortgage Instrument” shall mean any mortgage, deed of trust or deed to secure
debt executed by a Credit Party in favor of the Administrative Agent, for the
benefit of the Secured Parties, as the same may be amended, modified, extended,
restated, replaced, or supplemented from time to time.

“Mortgaged Property” shall mean any owned real property of a Credit Party listed
on Schedule 3.16(f)(i) and any other owned real property of a Credit Party that
is or will become encumbered by a Mortgage Instrument in favor of the
Administrative Agent in accordance with the terms of this Agreement. Mortgaged
Properties shall not include any Excluded Real Property.

“Multiemployer Plan” shall mean a Plan that is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.

“Net Cash Proceeds” shall mean the aggregate cash proceeds received by any
Credit Party or any Subsidiary in respect of any Asset Disposition, Debt
Issuance or Extraordinary Receipts, net of (a) reasonable direct costs and
expenses (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) associated therewith and paid to Persons
who are not Credit Parties or their Affiliates, (b) amounts held in escrow to be
applied as part of the purchase price of any Asset Disposition or the amount of
any reserves established to fund contingent liabilities reasonably estimated to
be payable, (c) the amount of such proceeds required to be used to permanently
repay any Indebtedness (other than the Obligations) and (d) taxes paid or
reasonably estimated to be payable as a result thereof; it being understood that
“Net Cash Proceeds” shall include, without limitation, any cash received upon
the sale or other disposition of any non-cash consideration received by any
Credit Party or any Subsidiary in any Asset Disposition, Debt Issuance or
Extraordinary Receipt and any cash released from escrow as part of the purchase
price in connection with any Asset Disposition.

“Non-Consenting Lender” means any Lender that does not approve any consent,
waiver or amendment that (a) requires the approval of all affected Lenders in
accordance with the terms of Section 9.1 and (b) has been approved by the
Required Lenders.

“Non-Defaulting Lender’ shall mean, at any time, each Lender that is not a
Defaulting Lender at such time.

“Notice of Borrowing” shall mean a request for a Revolving Loan borrowing
pursuant to Section 2.1(b)(i). A Form of Notice of Borrowing is attached as
Exhibit 1.1(d).

“Notice of Conversion/Extension” shall mean the written notice of conversion of
a LIBOR Rate Loan to an Alternate Base Rate Loan or an Alternate Base Rate Loan
to a LIBOR Rate Loan, or extension of a LIBOR Rate Loan, in each case
substantially in the form of Exhibit 1.1(e).

“Obligations” shall mean, collectively, all of the obligations, Indebtedness and
liabilities of the Credit Parties to the Lenders (including the Issuing Lender)
and the Administrative Agent,

 

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whenever arising, under this Agreement, the Revolving Loan Notes or any of the
other Credit Documents, including principal, interest, fees, costs, charges,
expenses, professional fees, reimbursements, all sums chargeable to the Credit
Parties or for which any Credit Party is liable as an indemnitor and whether or
not evidenced by a note or other instrument and indemnification obligations and
other amounts (including, but not limited to, any interest accruing after the
occurrence of a filing of a petition of bankruptcy under the Bankruptcy Code
with respect to any Credit Party, regardless of whether such interest is an
allowed claim under the Bankruptcy Code).

“OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets
Control.

“Operating Lease” shall mean, as applied to any Person, any lease (including,
without limitation, leases which may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) which is not a Capital Lease or a
lease in connection with an ASC 840-40 lease financing obligation other than any
such lease in which that Person is the lessor.

“Other Designated Expenses” shall mean, for any period, (a) consolidated
impairment charges recorded in connection with the application of Financial
Accounting Standard No. 142 “Goodwill and Other Intangibles” and Financial
Accounting Standard No. 144 “Accounting for the Impairment or Disposal of Long
Lived Assets,” or any successor pronouncements, (b) amortization associated with
the excess of purchase price over the value allocated to tangible property or
assets acquired by the Borrower or its consolidated Subsidiaries, (c) any
non-recurring cash fees, charges or other expenses made or incurred in
connection with the credit facilities under this Agreement and the issuance of
the Second Lien Notes and (d) cash fees, charges or other expenses made or
incurred in connection with the Spin-Off.

“Other Spin-Off Documents” shall mean the separation and distribution agreement,
tax matters agreement and employee matters agreement (and any ancillary
agreements executed in connection therewith) to be entered into in connection
with the Spin-Off, as generally described in the Offering Memorandum, dated
July 28, 2011, relating to the issuance by the Borrower of the Second Lien
Notes, with any changes, additions, modifications and amendments that vary from
such description which would not be materially more disadvantageous to the
Lenders.

“Other Taxes” shall mean all present or future stamp, court or documentary,
intangible, recording, filing or similar taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Credit Document, except any such taxes that are imposed
with respect to an assignment (other than an assignment made pursuant to
Section 2.19).

“Participant” has the meaning assigned to such term in clause (d) of
Section 9.6.

“Participation Interest” shall mean a participation interest purchased by a
Lender in LOC Obligations as provided in Section 2.3(c).

“Participant Register” has the meaning specified in clause (d) of Section 9.6.

 

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“Patent Licenses” shall mean any agreement, whether written or oral, providing
for the grant by or to a Person of any right to manufacture, use or sell any
invention covered by a Patent.

“Patents” shall mean (a) all letters patent of the United States or any other
country, now existing or hereafter arising, and all improvement patents,
reissues, reexaminations, patents of additions, renewals and extensions thereof
and (b) all applications for letters patent of the United States or any other
country and all provisionals, divisions, continuations and continuations-in-part
and substitutes thereof.

“Patriot Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT)
Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26,
2001)), as amended or modified from time to time.

“Payment Event of Default” shall mean an Event of Default specified in
Section 7.1(a).

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.

“Permitted Acquisition” shall mean an acquisition or any series of related
acquisitions by a Credit Party of (a) all or substantially all of the assets or
a majority of the outstanding Voting Stock or economic interests of a Person
that is incorporated, formed or organized in the United States, (b) a Person
that is incorporated, formed or organized in the United States by a merger,
amalgamation or consolidation or any other combination with such Person, (c) any
division, line of business or other business unit of a Person that is
incorporated, formed or organized in the United States (such Person or such
division, line of business or other business unit of such Person shall be
referred to herein as the “Target”), in each case that is a type of business (or
assets used in a type of business) permitted to be engaged in by the Credit
Parties and their Subsidiaries pursuant to Section 6.3 or (d) one or more
Restaurants not part of a transaction described in clause (a), (b) or (c) above,
in each case so long as:

(i) no Default or Event of Default shall then exist or would exist after giving
effect thereto;

(ii) the Credit Parties shall demonstrate to the reasonable satisfaction of the
Administrative Agent that, after giving effect to the acquisition on a Pro Forma
Basis, (A) the Credit Parties are in compliance with each of the financial
covenants set forth in Section 5.9 and (B) for acquisitions consummated at any
time the Adjusted Leverage Ratio covenant level set forth in Section 5.9(a) is
greater than 5.50 to 1.0, the Adjusted Leverage Ratio shall be 0.25 to 1.0 less
than the then applicable level set forth in Section 5.9;

(iii) the Administrative Agent, on behalf of the Secured Parties, shall have
received (or shall receive in connection with the closing of such acquisition) a
first priority perfected security interest in all property (including, without

 

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limitation, Equity Interests) acquired with respect to the Target in accordance
with the terms of Sections 5.10 and 5.12 and the Target, if a Person, shall have
executed a Joinder Agreement in accordance with the terms of Section 5.10;

(iv) in connection with any Permitted Acquisition with a purchase price in
excess of $5,000,000, the Administrative Agent and the Lenders shall have
received (A) a description of the material terms of such acquisition, (B) with
respect to Permitted Acquisitions referred to in clause (a) above, audited
financial statements (or, if unavailable, unaudited financial statements
prepared by management of the Target) of the Target for the periods available to
the Borrower (which shall not exceed its two most recent fiscal years) and for
any fiscal quarters ended within the fiscal year to date (which quarters
financial statements shall be unaudited), (C) with respect to Permitted
Acquisitions referred to in clauses (b) or (c) above, financial statements of
the Target that are made available to the Borrower (or such other financial
information reasonably acceptable to the Administrative Agent) for its most
recent fiscal year, (D) with respect to Permitted Acquisitions referred to in
clause (d) above, profit and loss statements with respect to each Restaurant
acquired and (E) not less than five (5) Business Days prior to the consummation
of any such Permitted Acquisition, a certificate substantially in the form of
Exhibit 1.1(f), executed by an Authorized Officer of the Borrower certifying
that such Permitted Acquisition complies with the requirements of this
Agreement; and

(v) such acquisition shall not be a “hostile” acquisition and shall have been
approved by the Board of Directors (or equivalent) and/or shareholders (or
equivalent) of the applicable Credit Party and the Target.

“Permitted Construction Transaction” shall have the meaning set forth in
Section 6.5(h).

“Permitted Holders” shall mean (i) CRG or Carrols (prior to the Spin-Off),
(ii) Jefferies Capital Partners IV LP, Jefferies Employee Partners IV LLC, JCP
Partners IV LLC and/or any of their respective Affiliates and (iii) Alan Vituli,
Timothy Taft and/or any member of executive management (vice president or more
senior) of CRG, Carrols or the Borrower as of the Closing Date and/or any of
their respective Affiliates.

“Permitted Investments” shall have the meaning set forth in Section 6.5.

“Permitted Liens” shall have the meaning set forth in Section 6.2.

“Permitted Tax Distributions” shall mean payments, dividends or distributions by
the Borrower made to Carrols to permit Carrols or CRG to pay Income Taxes
required to be paid by Carrols or CRG resulting from the direct or indirect
ownership of the Equity Interests of the Borrower and its Subsidiaries.

“Person” shall mean any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

 

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“Plan” shall mean, as of any date of determination, any employee benefit plan
which is covered by Title IV of ERISA and in respect of which any Credit Party
or a Commonly Controlled Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an “employer” as
defined in Section 3(5) of ERISA.

“Pollo Tropical Trademarks” shall mean those certain Trademarks owned by Carrols
and transferred to the Borrower prior to or after the Closing Date and as set
forth in Schedule 1.1(f).

“Prime Rate” shall have the meaning set forth in the definition of Alternate
Base Rate.

“Pro Forma Basis” shall mean, with respect to any transaction, that such
transaction shall be deemed to have occurred as of the first day of the
four-quarter period (or twelve month period, as applicable) ending as of the
most recent quarter end (or month end, as applicable) preceding the date of such
transaction for which financial statement information is available.

“Properties” shall have the meaning set forth in Section 3.10(a).

“Recipient” shall mean (a) the Administrative Agent, (b) any Lender and (c) any
Issuing Lender, as applicable.

“Recovery Event” shall mean the receipt by any Credit Party or its Subsidiaries
of any cash insurance proceeds or condemnation award payable by reason of theft,
loss, physical destruction or damage, taking or similar event with respect to
any of their respective property or assets.

“Register” shall have the meaning set forth in Section 9.6(c).

“Reimbursement Obligation” shall mean the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 2.3(d) for amounts drawn under
Letters of Credit.

“Related Parties” shall mean, with respect to any Person, such Person’s
Affiliates and the partners, directors, officers, employees, agents, trustees
and advisors of such Person and of such Person’s Affiliates.

“Reorganization” shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of such term as
used in Section 4241 of ERISA.

“Reportable Event” shall mean any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty-day notice period is
waived under PBGC Reg. §4043.

“Required Lenders” shall mean, as of any date of determination, two or more
Lenders holding at least a majority of (a) the outstanding Revolving Commitments
or (b) if the Revolving Commitments have been terminated, the outstanding
Revolving Loans and Participation

 

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Interests; provided, however, that if any Lender shall be a Defaulting Lender at
such time, then there shall be excluded from the determination of Required
Lenders, Obligations (including Participation Interests) owing to such
Defaulting Lender and such Defaulting Lender’s Commitments.

“Requirement of Law” shall mean, as to any Person, (a) the articles or
certificate of incorporation, by-laws or other organizational or governing
documents of such Person, and (b) all international, foreign, Federal, state and
local statutes, treaties, rules, guidelines, regulations, ordinances, codes,
executive orders, and administrative or judicial precedents or authorities,
including the interpretation or administration thereof by any Governmental
Authority charged with the enforcement, interpretation or administration
thereof, and all applicable administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any Governmental
Authority (in each case whether or not having the force of law); in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.

“Responsible Officer” shall mean, for any Credit Party, the chief executive
officer, the president, chief financial officer, general counsel, secretary,
treasurer or any vice president of such Credit Party and any additional
responsible officer that is designated as such to the Administrative Agent.

“Restaurant” means any restaurant owned or leased by the Borrower or any of its
Subsidiaries.

“Restricted Payment” shall mean (a) any dividend or other distribution, direct
or indirect, on account of any shares (or equivalent) of any class of Equity
Interests of any Credit Party or any of its Subsidiaries, now or hereafter
outstanding, (b) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares (or
equivalent) of any class of Equity Interests of any Credit Party or any of its
Subsidiaries, now or hereafter outstanding, (c) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Equity Interests of any Credit Party or any of
its Subsidiaries, now or hereafter outstanding, (d) any payment or prepayment of
principal of, premium, if any, or interest on, redemption, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, any Subordinated
Debt of any Credit Party or any of its Subsidiaries, (e) the payment by any
Credit Party or any of its Subsidiaries of any management, advisory or
consulting fee to any Person that is an Affiliate of a Credit Party, (f) the
payment by any Credit Party or any of its Subsidiaries of any fee pursuant to
the Management Services Agreement, (g) the payment by any Credit Party or any of
its Subsidiaries of any amounts under the Other Spin-Off Documents,
(h) Permitted Tax Distributions, (i) payments by any Credit Party to Carrols or
CRG referred to in Section 6.10(h) and (j) any redemption, repurchase or
clawback of the Second Lien Notes.

“Revolving Availability” shall mean the amount by which the Revolving Committed
Amount exceeds the aggregate Revolving Credit Exposure.

 

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“Revolving Commitment” shall mean, with respect to each Lender, the commitment
of such Lender to make Revolving Loans in an aggregate principal amount at any
time outstanding up to an amount equal to such Lender’s Revolving Commitment
Percentage of the Revolving Committed Amount.

“Revolving Commitment Percentage” shall mean, for each Lender, the percentage
identified as its Revolving Commitment Percentage in its Lender Commitment
Letter or in the Assignment and Assumption pursuant to which such Lender became
a Lender hereunder, as such percentage may be modified in connection with any
assignment made in accordance with the provisions of Section 9.6(b).

“Revolving Committed Amount” shall have the meaning set forth in Section 2.1(a).

“Revolving Credit Exposure” shall mean, as to any Lender at any time, the
aggregate principal amount at such time of its outstanding Revolving Loans and
such Lender’s participation in LOC Obligations at such time.

“Revolving Facility” shall have the meaning set forth in Section 2.1(a).

“Revolving Loan” shall have the meaning set forth in Section 2.1.

“Revolving Loan Note” or “Revolving Loan Notes” shall mean the promissory notes
of the Borrower provided pursuant to Section 2.1(e) in favor of any of the
Lenders evidencing the Revolving Loan provided by any such Lender pursuant to
Section 2.1(a), individually or collectively, as appropriate, as such promissory
notes may be amended, modified, extended, restated, replaced, or supplemented
from time to time.

“S&P” shall mean Standard & Poor’s Ratings Services, a division of The McGraw
Hill Companies, Inc.

“Sale Leaseback” shall have the meaning set forth in Section 6.12.

“Sanctioned Entity” shall mean (a) a country or a government of a country,
(b) an agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, or (d) a person or entity
resident in or determined to be resident in a country, that is subject to a
country sanctions program administered and enforced by OFAC.

“Sanctioned Person” shall mean a person named on the list of Specially
Designated Nationals maintained by OFAC.

“Sarbanes-Oxley” shall mean the Sarbanes-Oxley Act of 2002.

“Scheduled Funded Debt Payments” shall mean, as of any date of determination for
the four (4) consecutive fiscal quarter period ending on such date, the sum of
all regularly scheduled payments of principal on Funded Debt of the Credit
Parties and their Subsidiaries on a Consolidated basis for the applicable period
ending on the date of determination (including the

 

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principal component of payments due on Capital Leases during the applicable
period ending on the date of determination) to the extent actually paid in cash.

“SEC” shall mean the Securities and Exchange Commission or any successor
Governmental Authority.

“Second Lien Notes” means those certain notes (together with any Additional
Notes (as defined in the Second Lien Notes Indenture)) issued to the holders
thereof from time to time.

“Second Lien Notes Indenture” shall have the meaning set forth in the preamble.

“Second Quarter” shall mean, with respect to any fiscal year of the Borrower,
the thirteen (13) week period ending on the Sunday closest to June 30 of such
fiscal year.

“Secured Parties” shall mean the Administrative Agent, the Lenders and the Bank
Product Providers.

“Securities Account Control Agreement” shall mean an agreement, among a Credit
Party, a securities intermediary, and the Administrative Agent, which agreement
is in a form acceptable to the Administrative Agent and which provides the
Administrative Agent with “control” (as such term is used in Articles 8 and 9 of
the UCC) over the securities account(s) described therein, as the same may be as
amended, modified, extended, restated, replaced, or supplemented from time to
time.

“Securities Act” shall mean the Securities Act of 1933, together with any
amendment thereto or replacement thereof and any rules or regulations
promulgated thereunder.

“Securities Laws” shall mean the Securities Act, the Exchange Act,
Sarbanes-Oxley and the applicable accounting and auditing principles, rules,
standards and practices promulgated, approved or incorporated by the SEC or the
Public Company Accounting Oversight Board, as each of the foregoing may be
amended and in effect on any applicable date hereunder.

“Security Agreement” shall mean the First Lien Security Agreement dated as of
the Closing Date among the Credit Parties and the Administrative Agent, as
amended, modified, extended, restated, replaced, or supplemented from time to
time in accordance with its terms.

“Security Documents” shall mean the Security Agreement, the Intercreditor
Agreement, any Deposit Account Control Agreement, any Securities Account Control
Agreement, the Mortgage Instruments and all other agreements, documents and
instruments relating to, arising out of, or in any way connected with any of the
foregoing documents or granting to the Administrative Agent, for the benefit of
the Secured Parties, Liens or security interests to secure, inter alia, the
Credit Party Obligations whether now or hereafter executed and/or filed, each as
may be amended from time to time in accordance with the terms hereof, executed
and delivered in connection with the granting, attachment and perfection of the
Administrative Agent’s security interests and liens arising thereunder,
including, without limitation, UCC financing statements.

 

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“Single Employer Plan” shall mean any Plan that is not a Multiemployer Plan.

“SPC” has the meaning specified in Section 9.6(f).

“Spin-Off” shall have the meaning set forth in the preamble.

“Spin-Off Date” shall mean the date on which Carrols’ distributes its ownership
interest in the Borrower to CRG and CRG distributes such ownership interest to
the holders of the Equity Interests of CRG.

“Spin-Off Parties” shall mean CRG and its Subsidiaries (other than the Borrower
and its Subsidiaries).

“Subject Lease Financing Obligations” shall mean the ASC-840-40 lease financing
obligations set forth on Schedule 1.1(g).

“Subordinated Debt” shall mean any Indebtedness incurred by any Credit Party
which by its terms is specifically subordinated in right of payment to the prior
payment of the Credit Party Obligations and contains subordination and other
terms acceptable to the Administrative Agent.

“Subsidiary” shall mean, as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, limited liability company, partnership or other entity are at the
time owned, by such Person. Unless otherwise qualified, all references to a
“Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Borrower.

“Target” shall have the meaning set forth in the definition of “Permitted
Acquisition”.

“Taxes” shall mean all present or future taxes, levies, imposts, duties,
deductions, withholdings (including backup withholding), assessments, fees or
other charges imposed by any Governmental Authority, including any interest,
additions to tax or penalties applicable thereto.

“Tender Offer” shall mean the tender offer for any and all Existing Carrols
Notes commenced on July 22, 2011.

“Third Quarter” shall mean, with respect to any fiscal year of the Borrower, the
thirteen (13) week period ending on the Sunday closest to September 30 of such
fiscal year.

“Total Credit Exposure” means, as to any Lender at any time, the unused
Commitments and Revolving Credit Exposure of such Lender at such time.

“Trademark License” shall mean any agreement, whether written or oral, providing
for the grant by or to a Person of any right to use any Trademark.

 

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“Trademarks” shall mean (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, service marks,
elements of package or trade dress of goods or services, logos and other source
or business identifiers, together with the goodwill associated therewith, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) all renewals thereof.

“Tranche” shall mean the collective reference to (a) LIBOR Rate Loans whose
Interest Periods begin and end on the same day and (b) Alternate Base Rate Loans
made on the same day.

“Transactions” shall mean the closing of this Agreement and the other Credit
Documents and the other transactions contemplated hereby and pursuant to the
other Credit Documents (including, without limitation, the initial borrowings
under the Credit Documents and the payment of fees and expenses in connection
with all of the foregoing).

“Transfer Effective Date” shall have the meaning set forth in each Assignment
and Assumption.

“Transition Services Agreement” shall mean that certain transition services
agreement setting forth the terms and conditions by which the Borrower will
provide certain general and administrative services to the Spin-Off Parties
after the Spin-Off Date; provided, that such Transition Services Agreement shall
be consistent in all material respects with the description of such agreement
provided to the Administrative Agent on or prior to the Closing Date such that
any such changes will not materially adversely affect the Lenders.

“Type” shall mean, as to any Revolving Loan, its nature as an Alternate Base
Rate Loan or LIBOR Rate Loan, as the case may be.

“UCC” shall mean the Uniform Commercial Code from time to time in effect in any
applicable jurisdiction.

“U.S. Borrower” shall mean any Borrower that is a U.S. Person.

“U.S. Person” shall mean any Person that is a “United States Person” as defined
in section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in
paragraph (g) of Section 2.16.

“Voting Stock” shall mean, with respect to any Person, Equity Interests issued
by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
may be or have been suspended by the happening of such a contingency.

 

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“Wells Fargo” shall mean Wells Fargo Bank, National Association, a national
banking association, together with its successors and/or assigns.

“WFS” shall mean Wells Fargo Securities, LLC, together with its successors and
assigns.

“Withholding Agent” means any Credit Party and the Administrative Agent.

“Works” shall mean all works which are subject to copyright protection pursuant
to Title 17 of the United States Code.

Section 1.2 Other Definitional Provisions.

The definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.” The word “will” shall be construed to have the same
meaning and effect as the word “shall.” Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, restated, supplemented, amended and
restated or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein), (b) any reference herein to any
Person shall be construed to include such Person’s successors and assigns,
(c) the words “herein,” “hereof” and “hereunder,” and words of similar import,
shall be construed to refer to this Agreement in its entirety and not to any
particular provision hereof, (d) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement, (e) any reference to any law or
regulation herein shall, unless otherwise specified, refer to such law or
regulation as amended, modified or supplemented from time to time, (f) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights and (g) all terms
defined in this Agreement shall have the defined meanings when used in any other
Credit Document or any certificate or other document made or delivered pursuant
hereto unless the context otherwise requires or such term is otherwise defined
in any such other Credit Document or any certificate or other document.

Section 1.3 Accounting Terms.

(a) Generally. All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data (including
financial ratios and other financial calculations) required to be submitted
pursuant to this Agreement shall be prepared in conformity with, GAAP applied on
a consistent basis, as in effect from time to time, applied in a manner
consistent with that used in preparing the most recently delivered audited
Consolidated financial statements of the Borrower, except as otherwise
specifically prescribed herein.

 

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(b) Changes in GAAP. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in any Credit
Document, and either the Borrower or the Required Lenders shall so request, the
Administrative Agent, the Lenders and the Borrower shall negotiate in good faith
to amend such ratio or requirement to preserve the original intent thereof in
light of such change in GAAP (subject to the approval of the Required Lenders);
provided that, until so amended, (i) such ratio or requirement shall continue to
be computed in accordance with GAAP prior to such change therein and (ii) the
Borrower shall provide to the Administrative Agent and the Lenders financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting forth a reconciliation between calculations of such
ratio or requirement made before and after giving effect to such change in GAAP.

(c) Financial Covenant Calculations. The parties hereto acknowledge and agree
that, for purposes of all calculations made in determining compliance for any
applicable period with the covenants set forth in Section 5.9 and for purposes
of determining the Applicable Margin, (i) after consummation of any Permitted
Acquisition, (A) Consolidated EBITDAR shall be calculated after giving effect
thereto on a Pro Forma Basis (subject to adjustments mutually and reasonably
acceptable to the Borrower and the Administrative Agent), (B) Consolidated
Interest Expense shall be calculated after giving effect thereto (including the
effect of any related incurrence of Indebtedness) on a Pro Forma Basis and
(C) Consolidated Rent Expense shall be calculated after giving effect thereto on
a Pro Forma Basis (subject to adjustments mutually and reasonably acceptable to
the Borrower and the Administrative Agent), (ii) after the consummation of any
Permitted Construction Transaction, (A) Consolidated EBITDAR shall be calculated
after giving effect thereto on a Pro Forma Basis (subject to adjustments
mutually and reasonably acceptable to the Borrower and the Administrative
Agent), (B) Consolidated Interest Expense shall be calculated after giving
effect thereto (including the effect of any related incurrence of Indebtedness)
on a Pro Forma Basis and (C) Consolidated Rent Expense shall be calculated after
giving effect thereto on a Pro Forma Basis (subject to adjustments mutually and
reasonably acceptable to the Borrower and the Administrative Agent) and
(iii) after any Disposition permitted by Section 6.4(a)(vii) and (viii) in an
amount in excess of $2,500,000, (A) Consolidated EBITDAR shall be calculated
after giving effect thereto on a Pro Forma Basis (to the extent the property or
assets subject to such Disposition were owned during the applicable period of
calculation) (subject to adjustments mutually and reasonably acceptable to the
Borrower and the Administrative Agent), (B) Consolidated Interest Expense shall
be calculated after giving effect thereto (including the effect of any related
incurrence of Indebtedness) on a Pro Forma Basis and (C) Consolidated Rent
Expense shall be calculated after giving effect thereto on a Pro Forma Basis
(subject to adjustments mutually acceptable to the Borrower and the
Administrative Agent).

Section 1.4 Time References.

Unless otherwise specified, all references herein to times of day shall be
references to Eastern time (daylight or standard, as applicable).

 

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Section 1.5 Execution of Documents.

Unless otherwise specified, all Credit Documents and all other certificates
executed in connection therewith must be signed by an Authorized Officer.

ARTICLE II

THE LOANS; AMOUNT AND TERMS

Section 2.1 Revolving Loans.

(a) Revolving Commitment. During the Commitment Period, subject to the terms and
conditions hereof, each Lender severally, but not jointly, agrees to make
revolving credit loans in Dollars (“Revolving Loans”) to the Borrower from time
to time in an aggregate principal amount of up to TWENTY-FIVE MILLION DOLLARS
($25,000,000) (as increased from time to time as provided in Section 2.22 and as
such aggregate maximum amount may be reduced from time to time as provided in
Section 2.6, the “Revolving Committed Amount”) for the purposes hereinafter set
forth (such facility, the “Revolving Facility”); provided, however, that (i) no
Revolving Loans shall be made on the Closing Date, (ii) with regard to each
Lender individually, the sum of such Lender’s Revolving Commitment Percentage of
the aggregate principal amount of outstanding Revolving Loans plus such Lender’s
Revolving Commitment Percentage of outstanding LOC Obligations shall not exceed
such Lender’s Revolving Commitment and (iii) with regard to the Lenders
collectively, the sum of the aggregate principal amount of outstanding Revolving
Loans plus outstanding LOC Obligations shall not exceed the Revolving Committed
Amount then in effect. Revolving Loans may consist of Alternate Base Rate Loans
or LIBOR Rate Loans, or a combination thereof, as the Borrower may request, and
may be repaid and reborrowed in accordance with the provisions hereof; provided,
however, the Revolving Loans made on any of the three (3) Business Days
following the Closing Date, may only consist of Alternate Base Rate Loans unless
the Borrower delivers a funding indemnity letter, substantially in the form of
Exhibit 2.1(a), reasonably acceptable to the Administrative Agent not less than
three (3) Business Days prior to the requested borrowing date. LIBOR Rate Loans
shall be made by each Lender at its LIBOR Lending Office and Alternate Base Rate
Loans at its Domestic Lending Office.

(b) Revolving Loan Borrowings.

(i) Notice of Borrowing. The Borrower shall request a Revolving Loan borrowing
by delivering a written Notice of Borrowing (or telephone notice promptly
confirmed in writing by delivery of a written Notice of Borrowing, which
delivery may be by fax) to the Administrative Agent not later than 11:00 A.M. on
the date of the requested borrowing in the case of Alternate Base Rate Loans,
and on the third Business Day prior to the date of the requested

 

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borrowing in the case of LIBOR Rate Loans. Each such Notice of Borrowing shall
be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the
date of the requested borrowing (which shall be a Business Day), (C) the
aggregate principal amount to be borrowed and (D) whether the borrowing shall be
comprised of Alternate Base Rate Loans, LIBOR Rate Loans or a combination
thereof, and if LIBOR Rate Loans are requested, the Interest Period(s) therefor.
If the Borrower shall fail to specify in any such Notice of Borrowing (1) an
applicable Interest Period in the case of a LIBOR Rate Loan, then such notice
shall be deemed to be a request for an Interest Period of one month, or (2) the
Type of Revolving Loan requested, then such notice shall be deemed to be a
request for an Alternate Base Rate Loan hereunder. The Administrative Agent
shall give notice to each Lender promptly upon receipt of each Notice of
Borrowing, the contents thereof and each such Lender’s share thereof.

(ii) Minimum Amounts. Each Revolving Loan that is made as an Alternate Base Rate
Loan shall be in a minimum aggregate amount of $500,000 and in integral
multiples of $250,000 in excess thereof (or the remaining amount of the
Revolving Committed Amount, if less). Each Revolving Loan that is made as a
LIBOR Rate Loan shall be in a minimum aggregate amount of $500,000 and in
integral multiples of $250,000 in excess thereof (or the remaining amount of the
Revolving Committed Amount, if less).

(iii) Advances. Each Lender will make its Revolving Commitment Percentage of
each Revolving Loan borrowing available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent specified in
Section 9.2, or at such other office as the Administrative Agent may designate
in writing, by 1:00 P.M. on the date specified in the applicable Notice of
Borrowing, in Dollars and in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent by crediting the account of the Borrower on the books of
such office (or such other account that the Borrower may designate in writing to
the Administrative Agent) with the aggregate of the amounts made available to
the Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.

(c) Repayment. Subject to the terms of this Agreement, Revolving Loans may be
borrowed, repaid and reborrowed during the Commitment Period, subject to
Section 2.7(a). The principal amount of all Revolving Loans shall be due and
payable in full on the Maturity Date, unless accelerated sooner pursuant to
Section 7.2.

(d) Interest. Subject to the provisions of Section 2.8, Revolving Loans shall
bear interest as follows:

(i) Alternate Base Rate Loans. During such periods as any Revolving Loans shall
be comprised of Alternate Base Rate Loans, each such Alternate Base

 

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Rate Loan shall bear interest at a per annum rate equal to the sum of the
Alternate Base Rate plus the Applicable Margin; and

(ii) LIBOR Rate Loans. During such periods as Revolving Loans shall be comprised
of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear interest at a per
annum rate equal to the sum of the LIBOR Rate plus the Applicable Margin.

Interest on Revolving Loans shall be payable in arrears on each Interest Payment
Date.

(e) Revolving Loan Notes; Covenant to Pay. The Borrower’s obligation to pay each
Lender shall be evidenced by this Agreement and, upon such Lender’s request, by
a duly executed promissory note of the Borrower to such Lender in substantially
the form of Exhibit 2.1(e). The Borrower covenants and agrees to pay the
Revolving Loans in accordance with the terms of this Agreement.

Section 2.2 [Reserved].

Section 2.3 Letter of Credit Subfacility.

(a) Issuance. Subject to the terms and conditions hereof and of the LOC
Documents, if any, and any other terms and conditions which the Issuing Lender
may reasonably require, during the Commitment Period the Issuing Lender shall
issue, and the Lenders shall participate in, standby Letters of Credit for the
account of the Borrower from time to time upon request in a form acceptable to
the Issuing Lender; provided, however, that (i) the aggregate amount of LOC
Obligations shall not at any time exceed TEN MILLION DOLLARS ($10,000,000) (the
“LOC Committed Amount”), (ii) the sum of the aggregate principal amount of
outstanding Revolving Loans plus outstanding LOC Obligations shall not at any
time exceed the Revolving Committed Amount then in effect, (iii) all Letters of
Credit shall be denominated in Dollars and (iv) Letters of Credit shall be
issued for any lawful corporate purposes and shall be issued as standby letters
of credit, including in connection with workers’ compensation and other
insurance programs. Except as otherwise expressly agreed in writing upon by all
the Lenders, no Letter of Credit shall have an original expiry date more than
twenty-four (24) months from the date of issuance; provided, however, so long as
no Default or Event of Default has occurred and is continuing and subject to the
other terms and conditions to the issuance of Letters of Credit hereunder, the
expiry dates of Letters of Credit may be extended annually or periodically from
time to time on the request of the Borrower or by operation of the terms of the
applicable Letter of Credit to a date not more than twelve (12) months from the
date of extension; provided, further, that, subject to Section 2.3(k), Letters
of Credit may, as originally issued or as extended, have an expiry date
extending beyond the Maturity Date. Each Letter of Credit shall comply with the
related LOC Documents. The Existing Letters of Credit shall, as of the Closing
Date, be deemed to have been issued as Letters of Credit hereunder and subject
to and governed by the terms of this Agreement. The issuance and expiry date of
each Letter of Credit shall be a Business Day. Each Letter of Credit issued
hereunder shall be in a minimum original

 

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face amount of $100,000 or such lesser amount as approved by the Issuing Lender.
The Borrower’s Reimbursement Obligations in respect of each Existing Letter of
Credit, and each Lender’s participation obligations in connection therewith,
shall be governed by the terms of this Credit Agreement. Wells Fargo shall be
the Issuing Lender on all Letters of Credit issued after the Closing Date

(b) Notice and Reports. The request for the issuance of a Letter of Credit shall
be submitted to the Issuing Lender at least five (5) Business Days prior to the
requested date of issuance. The Issuing Lender will promptly upon request
provide to the Administrative Agent for dissemination to the Lenders a detailed
report specifying the Letters of Credit which are then issued and outstanding
and any activity with respect thereto which may have occurred since the date of
any prior report, and including therein, among other things, the account party,
the beneficiary, the face amount, expiry date as well as any payments or
expirations which may have occurred. The Issuing Lender will further provide to
the Administrative Agent promptly upon request copies of the Letters of Credit.
The Issuing Lender will provide to the Administrative Agent promptly upon
request a summary report of the nature and extent of LOC Obligations then
outstanding.

(c) Participations. Each Lender, (i) on the Closing Date with respect to each
Existing Letter of Credit and (ii) upon issuance of a Letter of Credit, shall be
deemed to have purchased without recourse a risk participation from the Issuing
Lender in such Letter of Credit and the obligations arising thereunder and any
Collateral relating thereto, in each case in an amount equal to its Revolving
Commitment Percentage of the obligations under such Letter of Credit and shall
absolutely, unconditionally and irrevocably assume, as primary obligor and not
as surety, and be obligated to pay to the Issuing Lender therefor and discharge
when due, its Revolving Commitment Percentage of the obligations arising under
such Letter of Credit; provided that any Person that becomes a Lender after the
Closing Date shall be deemed to have purchased a Participation Interest in all
outstanding Letters of Credit on the date it becomes a Lender hereunder and any
Letter of Credit issued on or after such date, in each case in accordance with
the foregoing terms. Without limiting the scope and nature of each Lender’s
participation in any Letter of Credit, to the extent that the Issuing Lender has
not been reimbursed as required hereunder or under any LOC Document, each such
Lender shall pay to the Issuing Lender its Revolving Commitment Percentage of
such unreimbursed drawing in same day funds pursuant to and in accordance with
the provisions of subsection (d) hereof. The obligation of each Lender to so
reimburse the Issuing Lender shall be absolute and unconditional and shall not
be affected by the occurrence of a Default, an Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or otherwise
impair the obligation of the Borrower to reimburse the Issuing Lender under any
Letter of Credit, together with interest as hereinafter provided.

(d) Reimbursement. In the event of any drawing under any Letter of Credit, the
Issuing Lender will promptly notify the Borrower and the Administrative Agent.
The Borrower shall reimburse the Issuing Lender on the day of drawing under any
Letter of Credit if notified prior to 1:00 P.M. on a Business Day or, if after
1:00 P.M., on the

 

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following Business Day (either with the proceeds of a Revolving Loan obtained
hereunder or otherwise) in same day funds as provided herein or in the LOC
Documents. If the Borrower shall fail to reimburse the Issuing Lender as
provided herein, the unreimbursed amount of such drawing shall automatically
bear interest at a per annum rate equal to the Default Rate. Unless the Borrower
shall immediately notify the Issuing Lender and the Administrative Agent of its
intent to otherwise reimburse the Issuing Lender, the Borrower shall be deemed
to have requested a Mandatory LOC Borrowing in the amount of the drawing as
provided in subsection (e) hereof, the proceeds of which will be used to satisfy
the Reimbursement Obligations. The Borrower’s Reimbursement Obligations
hereunder shall be absolute and unconditional under all circumstances
irrespective of any rights of set-off, counterclaim or defense to payment the
Borrower may claim or have against the Issuing Lender, the Administrative Agent,
the Lenders, the beneficiary of the Letter of Credit drawn upon or any other
Person, including, without limitation, any defense based on any failure of the
Borrower to receive consideration or the legality, validity, regularity or
unenforceability of the Letter of Credit. The Administrative Agent will promptly
notify the other Lenders of the amount of any unreimbursed drawing and each
Lender shall promptly pay to the Administrative Agent for the account of the
Issuing Lender, in Dollars and in immediately available funds, the amount of
such Lender’s Revolving Commitment Percentage of such unreimbursed drawing. Such
payment shall be made on the Business Day such notice is received by such Lender
from the Administrative Agent if such notice is received at or before 2:00 P.M.,
otherwise such payment shall be made at or before 12:00 P.M. on the Business Day
next succeeding the Business Day such notice is received. If such Lender does
not pay such amount to the Administrative Agent for the account of the Issuing
Lender in full upon such request, such Lender shall, on demand, pay to the
Administrative Agent for the account of the Issuing Lender interest on the
unpaid amount during the period from the date of such drawing until such Lender
pays such amount to the Administrative Agent for the account of the Issuing
Lender in full at a rate per annum equal to, if paid within two (2) Business
Days of the date of drawing, the Federal Funds Effective Rate and thereafter at
a rate equal to the Alternate Base Rate. Each Lender’s obligation to make such
payment to the Issuing Lender, and the right of the Issuing Lender to receive
the same, shall be absolute and unconditional, shall not be affected by any
circumstance whatsoever and without regard to the termination of this Agreement
or the Commitments hereunder, the existence of a Default or Event of Default or
the acceleration of the Obligations hereunder and shall be made without any
offset, abatement, withholding or reduction whatsoever.

(e) Repayment with Revolving Loans. On any day on which the Borrower shall have
requested, or been deemed to have requested, a Revolving Loan to reimburse a
drawing under a Letter of Credit, the Administrative Agent shall give notice to
the Lenders that a Revolving Loan has been requested or deemed requested in
connection with a drawing under a Letter of Credit, in which case a Revolving
Loan borrowing comprised entirely of Alternate Base Rate Loans (each such
borrowing, a “Mandatory LOC Borrowing”) shall be made (without giving effect to
any termination of the Commitments pursuant to Section 7.2) pro rata based on
each Lender’s respective Revolving Commitment Percentage (determined before
giving effect to any termination

 

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of the Commitments pursuant to Section 7.2) and the proceeds thereof shall be
paid directly to the Administrative Agent for the account of the Issuing Lender
for application to the respective LOC Obligations. Each Lender hereby
irrevocably agrees to make such Revolving Loans on the day such notice is
received by the Lenders from the Administrative Agent if such notice is received
at or before 2:00 P.M., otherwise such payment shall be made at or before
12:00 P.M. on the Business Day next succeeding the day such notice is received,
in each case notwithstanding (i) the amount of Mandatory LOC Borrowing may not
comply with the minimum amount for borrowings of Revolving Loans otherwise
required hereunder, (ii) whether any conditions specified in Section 4.2 are
then satisfied, (iii) whether a Default or an Event of Default then exists,
(iv) failure for any such request or deemed request for Revolving Loan to be
made by the time otherwise required in Section 2.1(b), (v) the date of such
Mandatory LOC Borrowing, or (vi) any reduction in the Revolving Committed Amount
after any such Letter of Credit may have been drawn upon. In the event that any
Mandatory LOC Borrowing cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the occurrence of
a Bankruptcy Event), then each such Lender hereby agrees that it shall forthwith
fund its Participation Interests in the outstanding LOC Obligations on the
Business Day such notice to fund is received by such Lender from the
Administrative Agent if such notice is received at or before 2:00 P.M.,
otherwise such payment shall be made at or before 12:00 Noon on the Business Day
next succeeding the Business Day such notice is received; provided, further,
that in the event any Lender shall fail to fund its Participation Interest as
required herein, then the amount of such Lender’s unfunded Participation
Interest therein shall automatically bear interest payable by such Lender to the
Administrative Agent for the account of the Issuing Lender upon demand, at the
rate equal to, if paid within two (2) Business Days of such date, the Federal
Funds Effective Rate, and thereafter at a rate equal to the Alternate Base Rate.

(f) Modification, Extension. The issuance of any supplement, modification,
amendment, renewal, or extension to any Letter of Credit shall, for purposes
hereof, be treated in all respects the same as the issuance of a new Letter of
Credit hereunder.

(g) ISP98. Unless otherwise expressly agreed by the Issuing Lender and the
Borrower, when a Letter of Credit is issued, the rules of the “International
Standby Practices 1998,” published by the Institute of International Banking
Law & Practice (or such later version thereof as may be in effect at the time of
issuance) shall apply to each standby Letter of Credit.

(h) Conflict with LOC Documents. In the event of any conflict between this
Agreement and any LOC Document (including any letter of credit application and
any LOC Documents relating to the Existing Letters of Credit), this Agreement
shall control.

(i) Designation of Subsidiaries as Account Parties. Notwithstanding anything to
the contrary set forth in this Agreement, including, without limitation,
Section 2.3(a), a Letter of Credit issued hereunder may contain a statement to
the effect that such Letter of Credit is issued for the account of a Subsidiary
of the Borrower; provided that, notwithstanding such statement, the Borrower
shall be the actual account party for all

 

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purposes of this Agreement for such Letter of Credit and such statement shall
not affect the Borrower’s Reimbursement Obligations hereunder with respect to
such Letter of Credit.

(j) Cash Collateral. At any point in time in which there is a Defaulting Lender,
the Issuing Lender may require the Borrower to Cash Collateralize the LOC
Obligations pursuant to Section 2.20.

(k) Letters of Credit Expiring After Maturity Date. With respect to any Letter
of Credit with an expiry date after the Maturity Date (a “Cash Collateralized
LC”), the Borrower shall deliver Cash Collateral to the Issuing Lender no later
than the date that is thirty (30) days prior to the Maturity Date (the “LC
Expiration Date”) in an amount equal to 105% of the face amount of any such
Letter of Credit (the “LC Cash Collateral”). To the extent the Borrower fails to
provide the LC Cash Collateral on the LC Expiration Date, the Borrower shall be
deemed to have requested a Mandatory LOC Borrowing in an amount equal to 100% of
the face amount of the Cash Collateralized LC as provided in Section 2.3(e)
hereof, the proceeds of which will be delivered to the Issuing Lender as Cash
Collateral. In the event that any Mandatory LOC Borrowing cannot for any reason
be made on the LC Expiration Date, then each such Lender hereby agrees that it
shall promptly fund its Participation Interests in such Cash Collateralized LC
(which shall be delivered to the Issuing Lender as Cash Collateral). Upon the
Cash Collateralization of any Letter of Credit pursuant to this Section 2.3(j),
such Cash Collateralized LC shall be deemed to be issued outside of this
Agreement; provided, that, the fees associated with such Letter of Credit shall
continue to accrue, but shall thereafter be solely for the benefit of the
Issuing Lender.

Section 2.4 [Reserved].

Section 2.5 Fees.

(a) Commitment Fee. Subject to Section 2.21, in consideration of the Revolving
Commitments, the Borrower agrees to pay to the Administrative Agent, for the
ratable benefit of the Lenders, a commitment fee (the “Commitment Fee”) in an
amount equal to the Applicable Margin per annum on the average daily unused
amount of the Revolving Committed Amount. The Commitment Fee shall be calculated
quarterly in arrears. For purposes of computation of the Commitment Fee, LOC
Obligations shall be considered usage of the Revolving Committed Amount. The
Commitment Fee shall be payable quarterly in arrears on the last Business Day of
each calendar quarter.

(b) Letter of Credit Fees. Subject to Section 2.21, in consideration of the LOC
Commitments, the Borrower agrees to pay to the Administrative Agent, for the
ratable benefit of the Lenders, a fee (the “Letter of Credit Fee”) equal to the
Applicable Margin for Revolving Loans that are LIBOR Rate Loans per annum on the
average daily maximum amount available to be drawn under each Letter of Credit
from the date of issuance to the date of expiration. The Letter of Credit Fee
shall be payable quarterly in arrears on the last Business Day of each calendar
quarter.

 

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(c) Issuing Lender Fees. In addition to the Letter of Credit Fees payable
pursuant to subsection (b) hereof, the Borrower shall pay to the Issuing Lender
for its own account without sharing by the other Lenders the reasonable and
customary charges from time to time of the Issuing Lender with respect to the
amendment, transfer, administration, cancellation and conversion of, and
drawings under, such Letters of Credit (collectively, the “Issuing Lender
Fees”). The Issuing Lender may charge, and retain for its own account without
sharing by the other Lenders, an additional facing fee (the “Letter of Credit
Facing Fee”) of 0.125% per annum on the average daily maximum amount available
to be drawn under each such Letter of Credit issued by it. The Issuing Lender
Fees and the Letter of Credit Facing Fee shall be payable quarterly in arrears
on the last Business Day of each calendar quarter.

(d) Administrative Fee. The Borrower agrees to pay to the Administrative Agent
the annual administrative fee as described in the Fee Letter.

Section 2.6 Commitment Reductions.

(a) Voluntary Reductions. The Borrower shall have the right to terminate or
permanently reduce the unused portion of the Revolving Committed Amount at any
time or from time to time upon not less than five (5) Business Days’ prior
written notice to the Administrative Agent (which shall notify the Lenders
thereof as soon as practicable) of each such termination or reduction, which
notice shall specify the effective date thereof and the amount of any such
reduction which shall be in a minimum amount of $1,000,000 or a whole multiple
of $1,000,000 in excess thereof and shall be irrevocable and effective upon
receipt by the Administrative Agent; provided that no such reduction or
termination shall be permitted if after giving effect thereto, and to any
prepayments of the Revolving Loans made on the effective date thereof, the sum
of the aggregate principal amount of outstanding Revolving Loans plus
outstanding LOC Obligations would exceed the Revolving Committed Amount then in
effect. Any reduction in the Revolving Committed Amount shall be applied to the
Commitment of each Lender in accordance with its Revolving Commitment
Percentage.

(b) LOC Committed Amount. If the Revolving Committed Amount is reduced below the
then current LOC Committed Amount, the LOC Committed Amount shall automatically
be reduced by an amount such that the LOC Committed Amount equals the Revolving
Committed Amount.

(c) Maturity Date. The Revolving Commitments and the LOC Commitment shall
automatically terminate on the Maturity Date.

Section 2.7 Prepayments.

(a) Optional Prepayments and Repayments. The Borrower shall have the right to
repay the Revolving Loans in whole or in part from time to time; provided,
however, that each partial prepayment or repayment of (i) Revolving Loans that
are

 

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Alternate Base Rate Loans shall be in a minimum principal amount of $500,000 and
integral multiples of $250,000 in excess thereof (or the remaining outstanding
principal amount) and (ii) Revolving Loans that LIBOR Rate Loans shall be in a
minimum principal amount of $500,000 and integral multiples of $250,000 in
excess thereof (or the remaining outstanding principal amount). The Borrower
shall give three Business Days’ irrevocable notice of prepayment in the case of
LIBOR Rate Loans and same-day irrevocable notice on any Business Day in the case
of Alternate Base Rate Loans, to the Administrative Agent (which shall notify
the Lenders thereof as soon as practicable). To the extent the Borrower elects
to repay the Revolving Loans, amounts prepaid under this Section shall be
applied to the Revolving Loans of the Lenders in accordance with their
respective Revolving Commitment Percentages. Within the foregoing parameters,
prepayments under this Section shall be applied first to Alternate Base Rate
Loans and then to LIBOR Rate Loans in direct order of Interest Period
maturities. All prepayments under this Section shall be subject to Section 2.15,
but otherwise without premium or penalty. Interest on the principal amount
prepaid shall be payable on the next occurring Interest Payment Date that would
have occurred had such loan not been prepaid.

(b) Mandatory Prepayments.

(i) Revolving Committed Amount. If at any time after the Closing Date, the sum
of the aggregate principal amount of outstanding Revolving Loans plus
outstanding LOC Obligations shall exceed the Revolving Committed Amount, the
Borrower shall immediately prepay the Revolving Loans and (after all Revolving
Loans have been repaid) Cash Collateralize the LOC Obligations in an amount
sufficient to eliminate such excess (such prepayment to be applied as set forth
in clause (v) below).

(ii) Asset Dispositions. Promptly following any Asset Disposition (or related
series of Asset Dispositions), the Borrower shall prepay the Revolving Loans in
an aggregate amount equal to one hundred percent (100%) of the Net Cash Proceeds
derived from such Asset Disposition (or related series of Asset Dispositions)
(such prepayment to be applied as set forth in clause (v) below); provided,
however, that, so long as no Default or Event of Default has occurred and is
continuing, such Net Cash Proceeds shall not be required to be so applied
(A) until the aggregate amount of the Net Cash Proceeds derived from any Asset
Dispositions in any fiscal year of the Borrower is equal to or greater than
$2,500,000 and (B) to the extent the Borrower delivers to the Administrative
Agent a certificate stating that the Credit Parties intend to use such Net Cash
Proceeds to acquire capital assets useful to the business of the Credit Parties
within 360 days of the receipt of such Net Cash Proceeds, it being expressly
agreed that Net Cash Proceeds not so reinvested within such time period shall be
applied to prepay the Revolving Loans (such prepayment to be applied as set
forth in clause (v) below).

(iii) Debt Issuances. Immediately upon receipt by any Credit Party or any of its
Subsidiaries of proceeds from any Debt Issuance, the Borrower shall

 

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prepay the Revolving Loans in an aggregate amount equal to one hundred percent
(100%) of the Net Cash Proceeds of such Debt Issuance (such prepayment to be
applied as set forth in clause (v) below).

(iv) Extraordinary Receipts. Promptly upon receipt by any Credit Party or any of
its Subsidiaries (other than Foreign Subsidiaries) of proceeds from any
Extraordinary Receipt, the Borrower shall prepay the Revolving Loans in an
aggregate amount equal to one hundred percent (100%) of the Net Cash Proceeds of
such Extraordinary Receipt (such prepayment to be applied as set forth in clause
(v) below); provided, however, that, so long as no Default or Event of Default
has occurred and is continuing, Net Cash Proceeds from Recovery Events shall not
be required to be so applied to the extent the Borrower delivers to the
Administrative Agent a certificate stating that Credit Parties intend to use
such Net Cash Proceeds to acquire capital assets useful to the business of the
Credit Parties within 360 days of the receipt of such Net Cash Proceeds, it
being expressly agreed that any Net Cash Proceeds not so reinvested within such
time period shall be applied to prepay the Revolving Loans (such prepayment to
be applied as set forth in clause (v below).

(v) Application of Mandatory Prepayments. All amounts required to be paid
pursuant to this Section shall be applied first to the outstanding Revolving
Loans (without a simultaneous corresponding reduction of the Revolving Committed
Amount) and (2) only with respect to (b)(i) above, second to Cash Collateralize
the LOC Obligations. Within the parameters of the applications set forth above,
prepayments shall be applied first to Alternate Base Rate Loans and then to
LIBOR Rate Loans in direct order of Interest Period maturities. All prepayments
under this Section shall be subject to Section 2.15 and be accompanied by
interest on the principal amount prepaid through the date of prepayment, but
otherwise without premium or penalty.

(c) Bank Product Obligations Unaffected. Any repayment or prepayment made
pursuant to this Section shall not affect the Borrower’s obligation to continue
to make payments under any Bank Product, which shall remain in full force and
effect notwithstanding such repayment or prepayment, subject to the terms of
such Bank Product.

Section 2.8 Default Rate and Payment Dates.

(a) If all or a portion of the principal amount of any Revolving Loan which is a
LIBOR Rate Loan shall not be paid when due or continued as a LIBOR Rate Loan in
accordance with the provisions of Section 2.9 (whether at the stated maturity,
by acceleration or otherwise), such overdue principal amount of such Revolving
Loan shall be converted to an Alternate Base Rate Loan at the end of the
Interest Period applicable thereto.

 

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(b) Upon the occurrence and during the continuance of a (i) Bankruptcy Event or
a Payment Event of Default, the principal of and, to the extent permitted by
law, interest on the Revolving Loans and any other amounts owing hereunder or
under the other Credit Documents shall automatically bear interest at a rate per
annum which is equal to the Default Rate and (ii) any other Event of Default
hereunder, at the option of the Required Lenders, the principal of and, to the
extent permitted by law, interest on the Revolving Loans and any other amounts
owing hereunder or under the other Credit Documents shall automatically bear
interest, at a per annum rate which is equal to the Default Rate, in each case
from the date of such Event of Default until such Event of Default is waived in
accordance with Section 9.1. Any default interest owing under this
Section 2.8(b) shall be due and payable on the earlier to occur of (x) demand by
the Administrative Agent (which demand the Administrative Agent shall make if
directed by the Required Lenders) and (y) the Maturity Date.

(c) Interest on each Revolving Loan shall be payable in arrears on each Interest
Payment Date; provided that interest accruing pursuant to paragraph (b) of this
Section shall be payable from time to time on demand.

Section 2.9 Conversion Options.

(a) The Borrower may elect from time to time to convert Alternate Base Rate
Loans to LIBOR Rate Loans or to continue LIBOR Rate Loans, by delivering a
Notice of Conversion/Extension to the Administrative Agent at least three
Business Days prior to the proposed date of conversion or continuation. In
addition, the Borrower may elect from time to time to convert all or any portion
of a LIBOR Rate Loan to an Alternate Base Rate Loan by giving the Administrative
Agent irrevocable written notice thereof by 11:00 A.M. one (1) Business Day
prior to the proposed date of conversion. If the date upon which an Alternate
Base Rate Loan is to be converted to a LIBOR Rate Loan is not a Business Day,
then such conversion shall be made on the next succeeding Business Day and
during the period from such last day of an Interest Period to such succeeding
Business Day such Revolving Loan shall bear interest as if it were an Alternate
Base Rate Loan. LIBOR Rate Loans may only be converted to Alternate Base Rate
Loans on the last day of the applicable Interest Period. If the date upon which
a LIBOR Rate Loan is to be converted to an Alternate Base Rate Loan is not a
Business Day, then such conversion shall be made on the next succeeding Business
Day and during the period from such last day of an Interest Period to such
succeeding Business Day such Revolving Loan shall bear interest as if it were an
Alternate Base Rate Loan. All or any part of outstanding Alternate Base Rate
Loans may be converted as provided herein; provided that (i) no Revolving Loan
may be converted into a LIBOR Rate Loan when any Default or Event of Default has
occurred and is continuing and (ii) partial conversions shall be in an aggregate
principal amount of $500,000 or a whole multiple of $250,000 in excess thereof.
All or any part of outstanding LIBOR Rate Loans may be converted as provided
herein; provided that partial conversions shall be in an aggregate principal
amount of $500,000 or a whole multiple of $250,000 in excess thereof.

 

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(b) Any LIBOR Rate Loans may be continued as such upon the expiration of an
Interest Period with respect thereto by compliance by the Borrower with the
notice provisions contained in Section 2.9(a); provided, that no LIBOR Rate Loan
may be continued as such when any Default or Event of Default has occurred and
is continuing, in which case such Revolving Loan shall be automatically
converted to an Alternate Base Rate Loan at the end of the applicable Interest
Period with respect thereto. If the Borrower shall fail to give timely notice of
an election to continue a LIBOR Rate Loan, or the continuation of LIBOR Rate
Loans is not permitted hereunder, such LIBOR Rate Loans shall be automatically
converted to Alternate Base Rate Loans at the end of the applicable Interest
Period with respect thereto.

Section 2.10 Computation of Interest and Fees; Usury.

(a) Interest payable hereunder with respect to any Alternate Base Rate Loan
based on the Prime Rate shall be calculated on the basis of a year of 365 days
(or 366 days, as applicable) for the actual days elapsed. All other fees,
interest and all other amounts payable hereunder shall be calculated on the
basis of a 360-day year for the actual days elapsed. The Administrative Agent
shall as soon as practicable notify the Borrower and the Lenders of each
determination of a LIBOR Rate on the Business Day of the determination thereof.
Any change in the interest rate on a Revolving Loan resulting from a change in
the Alternate Base Rate shall become effective as of the opening of business on
the day on which such change in the Alternate Base Rate shall become effective.
The Administrative Agent shall promptly notify the Borrower and the Lenders of
the effective date and the amount of each such change.

(b) Each determination of an interest rate by the Administrative Agent pursuant
to any provision of this Agreement shall be conclusive and binding on the
Borrower and the Lenders in the absence of manifest error. The Administrative
Agent shall, at the request of the Borrower, deliver to the Borrower a statement
showing the computations used by the Administrative Agent in determining any
interest rate.

(c) It is the intent of the Lenders and the Credit Parties to conform to and
contract in strict compliance with applicable usury law from time to time in
effect. All agreements between the Lenders and the Credit Parties are hereby
limited by the provisions of this subsection which shall override and control
all such agreements, whether now existing or hereafter arising and whether
written or oral. In no way, nor in any event or contingency (including, but not
limited to, prepayment or acceleration of the maturity of any Obligation), shall
the interest taken, reserved, contracted for, charged, or received under this
Agreement, under the Revolving Loan Notes or otherwise, exceed the maximum
nonusurious amount permissible under applicable law. If, from any possible
construction of any of the Credit Documents or any other document, interest
would otherwise be payable in excess of the maximum nonusurious amount, any such
construction shall be subject to the provisions of this paragraph and such
interest shall be automatically reduced to the maximum nonusurious amount
permitted under applicable law, without the necessity of execution of any
amendment or new document. If any Lender shall ever receive anything of value
which is characterized as interest on the

 

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Revolving Loans under applicable law and which would, apart from this provision,
be in excess of the maximum nonusurious amount, an amount equal to the amount
which would have been excessive interest shall, without penalty, be applied to
the reduction of the principal amount owing on the Revolving Loans and not to
the payment of interest, or refunded to the Borrower or the other payor thereof
if and to the extent such amount which would have been excessive exceeds such
unpaid principal amount of the Revolving Loans. The right to demand payment of
the Revolving Loans or any other Indebtedness evidenced by any of the Credit
Documents does not include the right to receive any interest which has not
otherwise accrued on the date of such demand, and the Lenders do not intend to
charge or receive any unearned interest in the event of such demand. All
interest paid or agreed to be paid to the Lenders with respect to the Revolving
Loans shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term (including any renewal or
extension) of the Revolving Loans so that the amount of interest on account of
such Indebtedness does not exceed the maximum nonusurious amount permitted by
applicable law.

Section 2.11 Pro Rata Treatment and Payments.

(a) Allocation of Payments Prior to Exercise of Remedies. Each borrowing of
Revolving Loans and any reduction of the Revolving Commitments shall be made pro
rata according to the respective Revolving Commitment Percentages of the
Lenders. Unless otherwise required by the terms of this Agreement, each payment
under this Agreement shall be applied, first, to any fees then due and owing by
the Borrower pursuant to Section 2.5, second, to interest then due and owing
hereunder of the Borrower and, third, to principal then due and owing hereunder
and under this Agreement of the Borrower. Each payment on account of any fees
pursuant to Section 2.5 shall be made pro rata in accordance with the respective
amounts due and owing (except as to the Letter of Credit Facing Fees and the
Issuing Lender Fees which shall be paid to the Issuing Lender). Each optional
repayment and prepayment by the Borrower on account of principal of and interest
on the Revolving Loans shall be applied to such Revolving Loans, as applicable,
on a pro rata basis and, to the extent applicable, in accordance with the terms
of Section 2.7(a) hereof. Each mandatory prepayment on account of principal of
the Revolving Loans shall be applied to such Revolving Loans, as applicable, on
a pro rata basis and, to the extent applicable, in accordance with
Section 2.7(b). All payments (including prepayments) to be made by the Borrower
on account of principal, interest and fees shall be made without defense,
set-off or counterclaim and shall be made to the Administrative Agent for the
account of the Lenders at the Administrative Agent’s office specified on
Section 9.2 in Dollars and in immediately available funds not later than
1:00 P.M. on the date when due. The Administrative Agent shall distribute such
payments to the Lenders entitled thereto promptly upon receipt in like funds as
received. If any payment hereunder (other than payments on the LIBOR Rate Loans)
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension. If any payment on a LIBOR Rate Loan becomes due and
payable on a day other than a Business Day, such payment date shall be extended
to the next succeeding Business Day unless the

 

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result of such extension would be to extend such payment into another calendar
month, in which event such payment shall be made on the immediately preceding
Business Day.

(b) Allocation of Payments After Exercise of Remedies. Notwithstanding any other
provisions of this Agreement to the contrary, after the exercise of remedies
(other than the application of default interest pursuant to Section 2.8) by the
Administrative Agent or the Lenders pursuant to Section 7.2 (or after the
Commitments shall automatically terminate and the Revolving Loans (with accrued
interest thereon) and all other amounts under the Credit Documents (including,
without limitation, the maximum amount of all contingent liabilities under
Letters of Credit) shall automatically become due and payable in accordance with
the terms of such Section), all amounts collected or received by the
Administrative Agent or any Lender on account of the Credit Party Obligations or
any other amounts outstanding under any of the Credit Documents or in respect of
the Collateral shall be paid over or delivered as follows (irrespective of
whether the following costs, expenses, fees, interest, premiums, scheduled
periodic payments or Credit Party Obligations are allowed, permitted or
recognized as a claim in any proceeding resulting from the occurrence of a
Bankruptcy Event):

FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including, without limitation, reasonable attorneys’ fees) of the
Administrative Agent in connection with enforcing the rights of the Lenders
under the Credit Documents and any protective advances made by the
Administrative Agent with respect to the Collateral under or pursuant to the
terms of the Security Documents;

SECOND, to the payment of any fees owed to the Administrative Agent and the
Issuing Lender;

THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including, without limitation, reasonable attorneys’ fees) of each of the
Lenders in connection with enforcing its rights under the Credit Documents or
otherwise with respect to the Credit Party Obligations owing to such Lender;

FOURTH, to the payment of all of the Credit Party Obligations consisting of
accrued fees and interest, and including, with respect to any Bank Product, any
fees, premiums and scheduled periodic payments due under such Bank Product and
any interest accrued thereon;

FIFTH, to the payment of the outstanding principal amount of the Credit Party
Obligations and the payment or cash collateralization of the outstanding LOC
Obligations, and including with respect to any Bank Product, any breakage,
termination or other payments due under such Bank Product and any interest
accrued thereon;

 

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SIXTH, to all other Credit Party Obligations and other obligations which shall
have become due and payable under the Credit Documents or otherwise and not
repaid pursuant to clauses “FIRST” through “FIFTH” above; and

SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.

In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (b) each of the Lenders and any Bank Product Provider shall
receive an amount equal to its pro rata share (based on the proportion that the
then outstanding Revolving Loans and LOC Obligations held by such Lender or the
outstanding obligations payable to such Bank Product Provider bears to the
aggregate then outstanding Revolving Loans and LOC Obligations and obligations
payable under all Bank Products) of amounts available to be applied pursuant to
clauses “THIRD”, “FOURTH”, “FIFTH” and “SIXTH” above; and (c) to the extent that
any amounts available for distribution pursuant to clause “FIFTH” above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Administrative Agent in a cash collateral
account and applied (i) first, to reimburse the Issuing Lender from time to time
for any drawings under such Letters of Credit and (ii) then, following the
expiration of all Letters of Credit, to all other obligations of the types
described in clauses “FIFTH” and “SIXTH” above in the manner provided in this
Section. Notwithstanding the foregoing terms of this Section, only Collateral
proceeds and payments under the Guaranty (as opposed to ordinary course
principal, interest and fee payments hereunder) shall be applied to obligations
under any Bank Product. Amounts distributed with respect to any Bank Product
Debt shall be the last Bank Product Amount reported to the Administrative Agent;
provided that any such Bank Product Provider may provide an updated Bank Product
Amount to the Administrative Agent prior to payments made pursuant to this
Section. The Administrative Agent shall have no obligation to calculate the
amount to be distributed with respect to any Bank Product Debt, but may rely
upon written notice of the amount (setting forth a reasonably detailed
calculation) from the applicable Bank Product Provider. In the absence of such
notice, the Administrative Agent may assume the amount to be distributed is the
Bank Product Amount last reported to the Administrative Agent.

Section 2.12 Non-Receipt of Funds by the Administrative Agent.

(a) Funding by Lenders; Presumption by Administrative Agent. Unless the
Administrative Agent shall have received written notice from a Lender prior to
the proposed date of any Extension of Credit that such Lender will not make
available to the Administrative Agent such Lender’s share of such Extension of
Credit, the Administrative Agent may assume that such Lender has made such share
available on such date in accordance with this Agreement and may, in reliance
upon such assumption, make available to the Borrower a corresponding amount. In
such event, if a Lender has not in fact made its share of the applicable
Extension of Credit available to the Administrative Agent, then the applicable
Lender and the Borrower severally agree to

 

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pay to the Administrative Agent forthwith on demand such corresponding amount
with interest thereon, for each day from and including the date such amount is
made available to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of a payment to be made by such Lender,
the greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation and (ii) in the case of a payment to be made by the Borrower, the
interest rate applicable to Alternate Base Rate Loans. If the Borrower and such
Lender shall pay such interest to the Administrative Agent for the same or an
overlapping period, the Administrative Agent shall promptly remit to the
Borrower the amount of such interest paid by the Borrower for such period. If
such Lender pays its share of the applicable Extension of Credit to the
Administrative Agent, then the amount so paid shall constitute such Lender’s
Revolving Loan included in such Extension of Credit. Any payment by the Borrower
shall be without prejudice to any claim the Borrower may have against a Lender
that shall have failed to make such payment to the Administrative Agent.

(b) Payments by Borrower; Presumptions by Administrative Agent. Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders or the Issuing Lender hereunder that the Borrower will not make such
payment, the Administrative Agent may assume that the Borrower has made such
payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders or the Issuing Lender, as the case may be,
the amount due. In such event, if the Borrower has not in fact made such
payment, then each of the Lenders or the Issuing Lender, as the case may be,
severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender or the Issuing Lender, with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.

A notice of the Administrative Agent to any Lender or the Borrower with respect
to any amount owing under subsections (a) and (b) of this Section shall be
conclusive, absent manifest error.

(c) Failure to Satisfy Conditions Precedent. If any Lender makes available to
the Administrative Agent funds for any Revolving Loan to be made by such Lender
as provided in the foregoing provisions of this Article II, and such funds are
not made available to the Borrower by the Administrative Agent because the
conditions to the applicable Extension of Credit set forth in Article IV are not
satisfied or waived in accordance with the terms thereof, the Administrative
Agent shall return such funds (in like funds as received from such Lender) to
such Lender, without interest.

(d) Obligations of Lenders Several. The obligations of the Lenders hereunder to
make Revolving Loans, to fund participations in Letters of Credit and to make
payments pursuant to Section 9.5(c) are several and not joint. The failure of
any Lender

 

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to make any Revolving Loan, to fund any such participation or to make any such
payment under Section 9.5(c) on any date required hereunder shall not relieve
any other Lender of its corresponding obligation to do so on such date, and no
Lender shall be responsible for the failure of any other Lender to so make its
Revolving Loan, to purchase its participation or to make its payment under
Section 9.5(c).

(e) Funding Source. Nothing herein shall be deemed to obligate any Lender to
obtain the funds for any Revolving Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for any Revolving Loan in any particular place or manner.

Section 2.13 Inability to Determine Interest Rate.

Notwithstanding any other provision of this Agreement, if (a) the Administrative
Agent shall reasonably determine (which determination shall be conclusive and
binding absent manifest error) that, by reason of circumstances affecting the
relevant market, reasonable and adequate means do not exist for ascertaining the
LIBOR Rate for such Interest Period, or (b) the Required Lenders shall
reasonably determine (which determination shall be conclusive and binding absent
manifest error) that the LIBOR Rate does not adequately and fairly reflect the
cost to such Lenders of funding LIBOR Rate Loans that the Borrower has requested
be outstanding as a LIBOR Tranche during such Interest Period, the
Administrative Agent shall forthwith give telephone notice of such
determination, confirmed in writing, to the Borrower, and the Lenders at least
two (2) Business Days prior to the first day of such Interest Period. Unless the
Borrower shall have notified the Administrative Agent upon receipt of such
telephone notice that it wishes to rescind or modify its request regarding such
LIBOR Rate Loans, any Revolving Loans that were requested to be made as LIBOR
Rate Loans shall be made as Alternate Base Rate Loans and any Revolving Loans
that were requested to be converted into or continued as LIBOR Rate Loans shall
remain as or be converted into Alternate Base Rate Loans. Until any such notice
has been withdrawn by the Administrative Agent, no further Revolving Loans shall
be made as, continued as, or converted into, LIBOR Rate Loans for the Interest
Periods so affected.

Section 2.14 Yield Protection.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory
loan, insurance charge or similar requirement against assets of, deposits with
or for the account of, or credit extended or participated in by, any Lender
(except any reserve requirement reflected in the LIBOR Rate) or the Issuing
Lender;

(ii) subject any Recipient to any Taxes (other than Indemnified Taxes and
Excluded Taxes) on its loans, loan principal, letters of credit, commitments, or
other obligations, or its deposits, reserves, other liabilities or capital
attributable thereto; or

 

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(iii) impose on any Lender or the Issuing Lender or the London interbank market
any other condition, cost or expense affecting this Agreement or LIBOR Rate
Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lender or such other Recipient of making, converting to, continuing or
maintaining any LIBOR Rate Loan or of maintaining its obligation to make any
such Revolving Loan, or to increase the cost to such Lender, such Issuing Lender
or such other Recipient of participating in, issuing or maintaining any Letter
of Credit (or of maintaining its obligation to participate in or to issue any
Letter of Credit), or to reduce the amount of any sum received or receivable by
such Lender, Issuing Lender or other Recipient hereunder (whether of principal,
interest or any other amount) then, upon request of such Lender, Issuing Lender
or other Recipient, the Borrower will pay to such Lender, Issuing Lender or
other Recipient, as the case may be, such additional amount or amounts as will
compensate such Lender, Issuing Lender or other Recipient, as the case may be,
for such additional costs incurred or reduction suffered.

(b) Capital Requirements. If any Lender or the Issuing Lender determines that
any Change in Law affecting such Lender or the Issuing Lender or any lending
office of such Lender or such Lender’s or the Issuing Lender’s holding company,
if any, regarding capital requirements has or would have the effect of reducing
the rate of return on such Lender’s or the Issuing Lender’s capital or on the
capital of such Lender’s or the Issuing Lender’s holding company, if any, as a
consequence of this Agreement, the Commitments of such Lender or the Revolving
Loans made by, or participations in Letters of Credit held by, such Lender, or
the Letters of Credit issued by the Issuing Lender, to a level below that which
such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s
holding company could have achieved but for such Change in Law (taking into
consideration such Lender’s or the Issuing Lender’s policies and the policies of
such Lender’s or the Issuing Lender’s holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or the
Issuing Lender, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Lender or such Lender’s or the Issuing
Lender’s holding company for any such reduction suffered.

(c) Certificates for Reimbursement. A certificate of a Lender or the Issuing
Lender setting forth the amount or amounts necessary to compensate such Lender
or the Issuing Lender or its holding company, as the case may be, as specified
in paragraph (a) or (b) of this Section and delivered to the Borrower shall be
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Lender, as the case may be, the amount shown as due on any such
certificate within ten (10) Business Days after receipt thereof.

(d) Delay in Requests. Failure or delay on the part of any Lender or the Issuing
Lender to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender’s or the Issuing Lender’s right to demand such
compensation,

 

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provided that the Borrower shall not be required to compensate a Lender or the
Issuing Lender pursuant to this Section for any increased costs incurred or
reductions suffered more than nine (9) months prior to the date such Lender or
Issuing Lender, as the case may be, notifies the Borrower of the Change in Law
giving rise to such increased costs or reductions, and of such Lender’s or
Issuing Lender’s intention to claim compensation therefore (except that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the nine (9) month period referred to above shall be extended to include
the period of retroactive effect thereof).

Section 2.15 Compensation for Losses; Eurocurrency Liabilities.

(a) Upon demand of any Lender (with a copy to the Administrative Agent) from
time to time, the Borrower shall promptly compensate such Lender for and hold
such Lender harmless from any loss, cost or expense incurred by it as a result
of:

(i) any continuation, conversion, payment or prepayment of any Revolving Loan
other than an Alternate Base Rate Loan on a day other than the last day of the
Interest Period for such Revolving Loan (whether voluntary, mandatory,
automatic, by reason of acceleration, or otherwise);

(ii) any failure by the Borrower (for a reason other than the failure of such
Lender to make a Revolving Loan) to prepay, borrow, continue or convert any
Revolving Loan other than an Alternate Base Rate Loan on the date or in the
amount notified by the Borrower; or

(iii) any assignment of a LIBOR Rate Loan on a day other than the last day of
the Interest Period therefor as a result of a request by the Borrower pursuant
to Section 2.19;

including any loss of anticipated profits and any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such
Revolving Loan or from fees payable to terminate the deposits from which such
funds were obtained. The Borrower shall also pay any customary administrative
fees charged by such Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrower to the Lenders under
this Section, each Lender shall be deemed to have funded each LIBOR Rate Loan
made by it at the LIBOR Rate for such Revolving Loan by a matching deposit or
other borrowing in the London interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such LIBOR Rate Loan was in
fact so funded.

(b) The Borrower shall pay to each Lender, as long as such Lender shall be
required to maintain reserves under Regulation D with respect to “Eurocurrency
liabilities” within the meaning of Regulation D, or under any similar or
successor regulation with respect to Eurocurrency liabilities or Eurocurrency
funding, additional interest on the unpaid principal amount of each LIBOR Loan
equal to the actual costs of such reserves allocated to such LIBOR Loan by such
Lender (as determined by such

 

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Lender in good faith, which determination shall be conclusive), which shall be
due and payable on each date on which interest is payable on such LIBOR Loan,
provided the Borrower shall have received at least fifteen (15) Business Days
prior notice (with a copy to the Administrative Agent) of such additional
interest from such Lender. If a Lender fails to give notice fifteen
(15) Business Days prior to the relevant interest payment date, such additional
interest shall be due and payable fifteen (15) Business Days from receipt of
such notice.

Section 2.16 Taxes.

(a) Issuing Lender. For purposes of this Section 2.16, the term “Lender”
includes any Issuing Lender.

(b) Payments Free of Taxes. Any and all payments by or on account of any
obligation of any Credit Party under any Credit Document shall be made free and
clear of and without deduction or withholding for any Taxes, except as required
by applicable law. If any applicable law (as determined in the good faith
discretion of an applicable Withholding Agent) requires the deduction or
withholding of any Tax from any such payment by a Withholding Agent, then the
applicable Withholding Agent shall make such deduction and timely pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law and, if such Tax is an Indemnified Tax, then the sum payable by
the applicable Credit Party shall be increased as necessary so that after making
such deductions (including such deductions applicable to additional sums payable
under this Section) the applicable Recipient receives an amount equal to the sum
it would have received had no such deductions been made.

(c) Payment of Other Taxes by the Borrower. The Credit Parties shall timely pay
to the relevant Governmental Authority in accordance with applicable law, or at
the option of the Administrative Agent timely reimburse it for the payment of,
any Other Taxes.

(d) Indemnification by the Credit Parties. The Credit Parties shall jointly and
severally indemnify each Recipient, within 10 Business Days after demand
therefor, for the full amount of any Indemnified Taxes (including Indemnified
Taxes imposed or asserted on or attributable to amounts payable under this
Section) payable or paid by such Recipient and any reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

(e) Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent, within 10 days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that any
Credit Party has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Credit Parties to
do so), (ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section9.6(d) relating to the maintenance of a Participant
Register and (iii) any Excluded Taxes attributable to such Lender, in each case,
that are payable or paid by the Administrative Agent in connection with any
Credit Document, and any reasonable

 

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expenses arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability delivered
to any Lender by the Administrative Agent shall be conclusive absent manifest
error. Each Lender hereby authorizes the Administrative Agent to set off and
apply any and all amounts at any time owing to such Lender under any Credit
Document or otherwise payable by the Administrative Agent to the Lender from any
other source against any amount due to the Administrative Agent under this
paragraph (e).

(f) Evidence of Payments. As soon as practicable after any payment of Taxes by
any Credit Party to a Governmental Authority pursuant to this Section 2.16, such
Credit Party shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

(g) Status of Lenders. (i) Any Recipient that is entitled to an exemption from
or reduction of withholding Tax with respect to payments made under any Credit
Document shall deliver to the Borrower and the Administrative Agent, at the time
or times reasonably requested by the Borrower or the Administrative Agent, such
properly completed and executed documentation reasonably requested by the
Borrower or the Administrative Agent as will permit such payments to be made
without withholding or at a reduced rate of withholding. In addition, any
Lender, if reasonably requested by the Borrower or the Administrative Agent,
shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender
is subject to backup withholding or information reporting requirements.
Notwithstanding anything to the contrary in the preceding two sentences, the
completion, execution and submission of such documentation (other than such
documentation set forth in Section 2.16(g)(ii)(A), (ii)(B) and (ii)(D) below)
shall not be required if in the Lender’s judgment such completion, execution or
submission would subject such Lender to any material unreimbursed cost or
expense or would materially prejudice the legal or commercial position of such
Lender.

(ii) Without limiting the generality of the foregoing, in the event that the
Borrower is a U.S. Borrower,

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the
Administrative Agent on or prior to the date on which such Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), executed
originals of IRS Form W-9 certifying that such Lender is exempt from U.S.
Federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), whichever of the following is applicable:

 

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(i) in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Credit Document, executed originals of IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “interest” article of such tax treaty and (y) with respect to
any other applicable payments under any Credit Document, IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “business profits” or “other income” article of such tax treaty;

(ii) executed originals of IRS Form W-8ECI;

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, (x) a certificate to the
effect that (A) such Foreign Lender is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign
corporation” described in Section 881(c)(3)(C) of the Code and (B) the interest
payments in question are not effectively connected with a U.S. trade or business
conducted by such Foreign Lender or are effectively connected but are not
includible in the Foreign Lender’s gross income for U.S. federal income tax
purposes under an income tax treaty (a “U.S. Tax Compliance Certificate”) and
(y) executed originals of IRS Form W-8BEN; or

(iv) to the extent a Foreign Lender is not the beneficial owner (for example,
where the Foreign Lender is a partnership or participating Lender granting a
typical participation), executed originals of IRS Form W-8IMY, accompanied by a
Form W-8ECI, W-8BEN, U.S. Tax Compliance Certificate, Form W-9, and/or other
certification documents from each beneficial owner, as applicable; provided that
if the Foreign Lender is a partnership (and not a participating Lender) and one
or more beneficial owners of such Foreign Lender are claiming the portfolio
interest exemption, such Foreign Lender may provide a U.S. Tax Compliance
Certificate on behalf of each such beneficial owner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), executed originals of any other form prescribed by applicable law as a
basis for claiming exemption from or a reduction in U.S. federal withholding
Tax, duly completed, together with such supplementary documentation as may be
prescribed by applicable law to permit the Borrower or the Administrative Agent
to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Credit Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to

 

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comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower and the Administrative Agent at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Administrative Agent such documentation prescribed by applicable law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower and the Administrative
Agent to comply with their obligations under FATCA and to determine that such
Lender has complied with such Lender’s obligations under FATCA or to determine
the amount to deduct and withhold from such payment. Solely for purposes of this
clause (D), “FATCA” shall include any amendments made to FATCA after the date of
this Agreement.

Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrower and the Administrative
Agent in writing of its legal inability to do so.

(h) Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised reasonably and in good faith, that it has received a refund
of any Taxes as to which it has been indemnified pursuant to this Section 2.16
(including additional amounts pursuant to this Section 2.16), it shall promptly
pay to the indemnifying party an amount equal to such refund (but only to the
extent of indemnity payments made under this Section with respect to the Taxes
giving rise to such refund), net of all out-of-pocket expenses (including Taxes)
of such indemnified party and without interest (other than any interest paid by
the relevant Governmental Authority with respect to such refund). Such
indemnifying party, upon the request of such indemnified party, shall repay to
such indemnified party the amount paid over pursuant to this paragraph (h) (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this paragraph (h), in no event will the indemnified party be required to pay
any amount to an indemnifying party pursuant to this paragraph (h) the payment
of which would place the indemnified party in a less favorable net after-Tax
position than the indemnified party would have been in if the indemnification
payments or additional amounts giving rise to such refund had never been paid.
This paragraph shall not be construed to require any indemnified party to make
available its Tax returns (or any other information relating to its Taxes that
it deems confidential) to the indemnifying party or any other Person.

(i) Survival. Each party’s obligations under this Section 2.16 shall survive the
resignation or replacement of the Administrative Agent or any assignment of
rights by, or the replacement of, a Lender, the termination of the Commitments
and the repayment, satisfaction or discharge of all obligations under any Credit
Document.

 

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Section 2.17 Indemnification; Nature of Issuing Lender’s Duties.

(a) In addition to its other obligations under Section 2.3, the Credit Parties
hereby agree to protect, indemnify, pay and save the Issuing Lender and each
Lender harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys’
fees) that the Issuing Lender or such Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit or
(ii) the failure of the Issuing Lender to honor a drawing under a Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental Authority (all
such acts or omissions, herein called “Government Acts”).

(b) As between the Credit Parties, the Issuing Lender and each Lender, the
Credit Parties shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. Neither the Issuing Lender nor any
Lender shall be responsible: (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (iii) for
failure of the beneficiary of a Letter of Credit to comply fully with conditions
required in order to draw upon a Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for
errors in interpretation of technical terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under a Letter of Credit or of the proceeds thereof; and (vii) for any
consequences arising from causes beyond the control of the Issuing Lender or any
Lender, including, without limitation, any Government Acts. None of the above
shall affect, impair, or prevent the vesting of the Issuing Lender’s rights or
powers hereunder.

(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuing
Lender or any Lender, under or in connection with any Letter of Credit or the
related certificates, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not put such Issuing Lender or such Lender under any
resulting liability to the Credit Parties. It is the intention of the parties
that this Agreement shall be construed and applied to protect and indemnify the
Issuing Lender and each Lender against any and all risks involved in the
issuance of the Letters of Credit, all of which risks are hereby assumed by the
Credit Parties, including, without limitation, any and all risks of the acts or
omissions, whether rightful or wrongful, of any Government Authority. The
Issuing Lender and the Lenders shall not, in any way, be liable for any failure
by the Issuing Lender or anyone else to pay any drawing under any Letter of
Credit as a result of any Government Acts or any other cause beyond the control
of the Issuing Lender and the Lenders.

 

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(d) Nothing in this Section is intended to limit the Reimbursement Obligation of
the Borrower contained in Section 2.3(d) hereof. The obligations of the Credit
Parties under this Section shall survive the termination of this Agreement. No
act or omissions of any current or prior beneficiary of a Letter of Credit shall
in any way affect or impair the rights of the Issuing Lender and the Lenders to
enforce any right, power or benefit under this Agreement.

(e) Notwithstanding anything to the contrary contained in this Section, the
Credit Parties shall have no obligation to indemnify the Issuing Lender or any
Lender in respect of any liability incurred by the Issuing Lender or such Lender
arising out of the gross negligence or willful misconduct of the Issuing Lender
(including action not taken by the Issuing Lender or such Lender), as determined
by a court of competent jurisdiction or pursuant to arbitration.

Section 2.18 Illegality.

Notwithstanding any other provision of this Credit Agreement, if any Change in
Law shall make it unlawful for such Lender or its LIBOR Lending Office to make
or maintain LIBOR Rate Loans as contemplated by this Credit Agreement or to
obtain in the interbank eurodollar market through its LIBOR Lending Office the
funds with which to make such Revolving Loans, (a) such Lender shall promptly
notify the Administrative Agent and the Borrower thereof, (b) the commitment of
such Lender hereunder to make LIBOR Rate Loans or continue LIBOR Rate Loans as
such shall forthwith be suspended until the Administrative Agent shall give
notice that the condition or situation which gave rise to the suspension shall
no longer exist, and (c) such Lender’s Revolving Loans then outstanding as LIBOR
Rate Loans, if any, shall be converted on the last day of the Interest Period
for such Revolving Loans or within such earlier period as required by law as
Alternate Base Rate Loans. The Borrower hereby agrees to pay any Lender, within
two (2) Business Days of its demand, any additional amounts necessary to
compensate such Lender for actual and direct costs (but not including
anticipated profits) reasonably incurred by such Lender in making any repayment
in accordance with this Section including, but not limited to, any interest or
fees payable by such Lender to lenders of funds obtained by it in order to make
or maintain its LIBOR Rate Loans hereunder. A certificate (which certificate
shall include a description of the basis for the computation) as to any
additional amounts payable pursuant to this Section submitted by such Lender,
through the Administrative Agent, to the Borrower shall be conclusive in the
absence of manifest error. Each Lender agrees to use reasonable efforts
(including reasonable efforts to change its LIBOR Lending Office) to avoid or to
minimize any amounts which may otherwise be payable pursuant to this Section;
provided, however, that such efforts shall not cause the imposition on such
Lender of any additional costs or legal or regulatory burdens deemed by such
Lender in its sole discretion to be material.

Section 2.19 Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender requests
compensation under Section 2.14, or requires the Borrower to pay any Indemnified
Taxes or additional amounts to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.16, then such Lender shall (at the
request of the

 

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Borrower) use reasonable best efforts to designate a different lending office
for funding or booking its Revolving Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.14 or Section 2.16, as the case
may be, in the future and (ii) would not subject such Lender to any unreimbursed
cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender in connection with any such designation or assignment.

(b) Replacement of Lenders. If any Lender requests compensation under
Section 2.14, or if the Borrower is required to pay any Indemnified Taxes or
additional amounts to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section 2.16 and, in each case, such Lender has
declined or is unable to designate a different lending office in accordance with
Section 2.19(a), or if any Lender is a Defaulting Lender or a Non-Consenting
Lender, then the Borrower may, at its sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in, and consents required by, Section 9.6), all of its interests,
rights (other than its existing rights to payments pursuant to Section 2.14 or
Section 2.16) and obligations under this Agreement and the related Credit
Documents to an Eligible Assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment), provided
that:

(i) the Borrower shall have paid to the Administrative Agent the assignment fee
(if any) specified in Section 9.6;

(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Revolving Loans and participations in Letters of
Credit, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder and under the other Credit Documents (including any amounts under
Section 2.15) from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a claim for compensation
under Section 2.14 or payments required to be made pursuant to Section 2.16,
such assignment will result in a reduction in such compensation or payments
thereafter;

(iv) such assignment does not conflict with applicable law; and

(v) in the case of any assignment resulting from a Lender becoming a
Non-Consenting Lender, the applicable assignee shall have consented to the
applicable amendment, waiver or consent.

 

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A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.

Section 2.20 Cash Collateral.

(a) Cash Collateral. At any time that there shall exist a Defaulting Lender,
within one (1) Business Day following the written request of the Administrative
Agent or the Issuing Lender (with a copy to the Administrative Agent), the
Borrower shall Cash Collateralize all Fronting Exposure of the Issuing Lender
with respect to such Defaulting Lender (determined after giving effect to
Section 2.21(b) and any Cash Collateral provided by the Defaulting Lender).

(b) Grant of Security Interest. The Borrower, and to the extent provided by any
Defaulting Lender, such Defaulting Lender, hereby grants to the Administrative
Agent, for the benefit of the Administrative Agent, the Issuing Lenders and the
Lenders, and agrees to maintain, a first priority security interest in all such
Cash Collateral as security for the Defaulting Lenders’ obligations to which
such Cash Collateral may be applied pursuant to clause (c) below. If at any time
the Administrative Agent or Issuing Lender determines that Cash Collateral is
subject to any right or claim of any Person other than the Administrative Agent
as herein provided, or that the total amount of such Cash Collateral is less
than the applicable Fronting Exposure, the Borrower will, promptly upon demand
by the Administrative Agent or Issuing Lender pay or provide to the
Administrative Agent additional Cash Collateral in an amount sufficient to
eliminate such deficiency (after giving effect to any Cash Collateral provided
by the Defaulting Lender).

(c) Application. Notwithstanding anything to the contrary contained in this
Agreement, Cash Collateral provided under any of this Section or Section 2.21 in
respect of Letters of Credit, shall be held and applied to the satisfaction of
the specific LOC Obligations, obligations to fund participations therein
(including, as to Cash Collateral provided by a Defaulting Lender, any interest
accrued on such obligation) and other obligations for which the Cash Collateral
was so provided, prior to any other application of such property as may be
provided for herein.

(d) Termination of Requirement. Cash Collateral (or the appropriate portion
thereof) provided to reduce Fronting Exposure or other obligations shall no
longer be required to be held as Cash Collateral pursuant to this Section 2.20
following (i) the elimination of the applicable Fronting Exposure or other
obligations giving rise thereto (including by the termination of Defaulting
Lender status of the applicable Lender), or (ii) the determination by the
Administrative Agent, each Issuing Lender that there exists excess Cash
Collateral; provided that, Subject to Section 2.21, the Person providing Cash
Collateral and each applicable Issuing Lender may agree that Cash Collateral
shall be held to support future anticipated Fronting Exposure or other
obligations.

 

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Section 2.21 Defaulting Lenders.

(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary
contained in this Agreement, if any Lender becomes a Defaulting Lender, then,
until such time as such Lender is no longer a Defaulting Lender, to the extent
permitted by applicable law:

(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or
disapprove any amendment, waiver or consent with respect to this Agreement shall
be restricted as set forth in the definition of Required Lenders and
Section 9.1.

(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or
other amounts received by the Administrative Agent for the account of such
Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to
Article VII or otherwise) or received by the Administrative Agent from a
Defaulting Lender pursuant to Section 9.7 shall be applied at such time or times
as may be determined by the Administrative Agent as follows: first, to the
payment of any amounts owing by such Defaulting Lender to the Administrative
Agent hereunder; second, to the payment on a pro rata basis of any amounts owing
by such Defaulting Lender to any Issuing Lender hereunder; third, to Cash
Collateralize the Issuing Lender’s Fronting Exposure in accordance with
Section 2.20; fourth, as the Borrower may request (so long as no Default or
Event of Default exists), to the funding of any Revolving Loan in respect of
which such Defaulting Lender has failed to fund its portion thereof as required
by this Agreement, as determined by the Administrative Agent; fifth, if so
determined by the Administrative Agent and the Borrower, to be held in a
non-interest bearing deposit account and released pro rata in order to
(x) satisfy such Defaulting Lender’s potential future funding obligations with
respect to Revolving Loans under this Agreement and (y) Cash Collateralize the
Issuing Lender’s future Fronting Exposure with respect to such Defaulting Lender
with respect to future Letters of Credit issued under this Agreement in
accordance with Section 2.20; sixth, to the payment of any amounts owing to the
Lenders, the Issuing Lenders as a result of any judgment of a court of competent
jurisdiction obtained by any Lender, the Issuing Lenders against such Defaulting
Lender as a result of such Defaulting Lender’s breach of its obligations under
this Agreement; seventh, so long as no Default or Event of Default exists, to
the payment of any amounts owing to the Borrower as a result of any judgment of
a court of competent jurisdiction obtained by the Borrower against such
Defaulting Lender as a result of such Defaulting Lender’s breach of its
obligations under this Agreement; and eighth, to such Defaulting Lender or as
otherwise directed by a court of competent jurisdiction; provided that if
(A) such payment is a payment of the principal amount of any Revolving Loans or
LOC Obligations in respect of which such Defaulting Lender has not fully funded
its appropriate share and (B) such Revolving Loans were made or the related
Letters of Credit were issued at a time

 

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when the conditions set forth in Section 4.2 were satisfied or waived, such
payment shall be applied solely to pay the Revolving Loans of, and LOC
Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to
being applied to the payment of any Revolving Loans of, or LOC Obligations owed
to, such Defaulting Lender until such time as all Revolving Loans and funded and
unfunded participations in LOC Obligations are held by the Lenders pro rata in
accordance with the Commitments under the applicable facility without giving
effect to Section 2.21(a) (iv). Any payments, prepayments or other amounts paid
or payable to a Defaulting Lender that are applied (or held) to pay amounts owed
by a Defaulting Lender or to post Cash Collateral pursuant to this
Section 2.21(a)(ii) shall be deemed paid to and redirected by such Defaulting
Lender, and each Lender irrevocably consents hereto.

(iii) Certain Fees.

(A) Commitment Fees. No Defaulting Lender shall be entitled to receive any
Commitment Fee for any period during which that Lender is a Defaulting Lender
(and the Borrower shall not be required to pay any such fee that otherwise would
have been required to have been paid to that Defaulting Lender).

(B) Letter of Credit Fees. Each Defaulting Lender shall be entitled to receive
Letter of Credit Fees for any period during which that Lender is a Defaulting
Lender only to the extent allocable to its Applicable Percentage of the stated
amount of Letters of Credit for which it has provided Cash Collateral pursuant
Section 2.20.

(C) Reallocation of Fees. With respect to any Letter of Credit Fee not required
to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the
Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such
fee otherwise payable to such Defaulting Lender with respect to such Defaulting
Lender’s participation in LOC Obligations that has been reallocated to such
Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to each Issuing
Lender the amount of any such fee otherwise payable to such Defaulting Lender to
the extent allocable to such Issuing Lender’s Fronting Exposure to such
Defaulting Lender, and (z) not be required to pay the remaining amount of any
such fee.

(iv) Reallocation of Participations to Reduce Fronting Exposure. All or any part
of such Defaulting Lender’s participation in LOC Obligations shall be
reallocated among the Non-Defaulting Lenders in accordance with their respective
Applicable Percentages (calculated without regard to such Defaulting Lender’s
Revolving Commitment) but only to the extent that (x) the conditions set forth
in Section 4.2 are satisfied at the time of such reallocation (and, unless the
Borrower shall have otherwise notified the Administrative Agent at such time,
the

 

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Borrower shall be deemed to have represented and warranted that such conditions
are satisfied at such time) and (y) such reallocation does not cause the
aggregate Committed Funded Exposure of any Non-Defaulting Lender to exceed such
Non-Defaulting Lender’s Revolving Commitment. No reallocation hereunder shall
constitute a waiver or release of any claim of any party hereunder against a
Defaulting Lender arising from that Lender having become a Defaulting Lender,
including any claim of a Non-Defaulting Lender as a result of such
Non-Defaulting Lender’s increased exposure following such reallocation.

(v) Cash Collateral. If the reallocation described in clause (iv) above cannot,
or can only partially, be effected, the Borrower shall, without prejudice to any
right or remedy available to it hereunder or under law, Cash Collateralize the
Issuing Lender’s Fronting Exposure in accordance with the procedures set forth
in Section 2.20.

(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent and
Issuing Lender agree in writing that a Lender is no longer a Defaulting Lender,
the Administrative Agent will so notify the parties hereto, whereupon as of the
effective date specified in such notice and subject to any conditions set forth
therein (which may include arrangements with respect to any Cash Collateral),
that Lender will, to the extent applicable, purchase at par that portion of
outstanding Revolving Loans of the other Lenders or take such other actions as
the Administrative Agent may determine to be necessary to cause the Revolving
Loans and funded and unfunded participations in Letters of Credit to be held on
a pro rata basis by the Lenders in accordance with their Applicable Percentages
(without giving effect to Section 2.21(a)(iv)), whereupon such Lender will cease
to be a Defaulting Lender; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of
the Borrower while that Lender was a Defaulting Lender; and provided, further,
that except to the extent otherwise expressly agreed by the affected parties, no
change hereunder from Defaulting Lender to Lender will constitute a waiver or
release of any claim of any party hereunder arising from that Lender’s having
been a Defaulting Lender.

(c) New Letters of Credit. So long as any Lender is a Defaulting Lender, no
Issuing Lender shall be required to issue, extend, renew or increase any Letter
of Credit unless it is satisfied that it will have no Fronting Exposure after
giving effect thereto.

Section 2.22 Incremental Revolving Facility Increase.

(a) Incremental Revolving Facility Increases. Subject to the terms and
conditions set forth herein, the Borrower shall have the right, at any time and
from time to time prior to the Maturity Date, to incur additional Indebtedness
under this Agreement in the form of an increase to the Revolving Committed
Amount (each, a “Revolving Facility Increase”) by an aggregate principal amount
for all such Revolving Facility Increases of up to $5,000,000 (“Incremental
Increase Amount”).

 

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(b) Terms and Conditions. The following terms and conditions shall apply to any
Revolving Facility Increase: (i) no Default or Event of Default shall exist
immediately prior to or after giving effect to such Revolving Facility Increase,
(ii) the other terms and documentation will be reasonably satisfactory to the
Administrative Agent, (iii) any loans made pursuant to any Revolving Facility
Increase shall constitute Credit Party Obligations and will be secured and
guaranteed with the other Credit Party Obligations on a pari passu basis,
(iv) any such Revolving Facility Increase shall have a maturity date no sooner
than the Maturity Date, (v) any Lenders providing such Revolving Facility
Increase shall be entitled to the same voting rights as the existing Lenders and
shall be entitled to receive proceeds of prepayments on the same basis as the
existing Lenders, (vi) any such Revolving Facility Increase shall be in a
minimum principal amount of $2,000,000 and integral multiples of $1,000,000 in
excess thereof (or the remaining amount of the Incremental Increase Amount, if
less), (vii) the proceeds of any such Revolving Facility Increase will be used
for the purposes set forth in Section 3.11, (viii) the Borrower shall execute a
Revolving Loan Note in favor of any new Lender or any existing Lender requesting
a Revolving Loan Note, (ix) the conditions to Extensions of Credit in
Section 4.2 shall have been satisfied, (x) the Administrative Agent shall have
received (A) upon request of the Administrative Agent, an opinion or opinions
(including, if reasonably requested by the Administrative Agent, local counsel
opinions) of counsel for the Credit Parties, addressed to the Administrative
Agent and the Lenders, in form and substance reasonably acceptable to the
Administrative Agent, (B) any authorizing corporate documents as the
Administrative Agent may reasonably request and (C) if applicable, a duly
executed Notice of Borrowing, and (xi) the Administrative Agent shall have
received from the Borrower updated financial projections and an officer’s
certificate, in each case in form and substance reasonably satisfactory to the
Administrative Agent, demonstrating that, after giving effect to any such
Revolving Facility Increase on a Pro Forma Basis, the Borrower will be in
compliance with the financial covenants set forth in Section 5.9.

(c) Applicable Margin and Yield. The Applicable Margin and any other components
of yield on any Revolving Facility Increase payable to the Lenders making such
Revolving Facility Increase may be higher than the then current Applicable
Margin (or any other components of yield) on the Revolving Loans calculating
yield in the same manner but in each case by no more than 50 basis points (it
being understood that the Revolving Loan pricing will be increased and/or
additional fees will be paid to Lenders holding Revolving Commitments to the
extent necessary to satisfy such requirement).

(d) Reallocation. In connection with the closing of any Revolving Facility
Increase, the outstanding Revolving Loans and Participation Interests shall be
reallocated by causing such fundings and repayments (which shall not be subject
to any processing and/or recordation fees) among the Lenders (which the Borrower
shall be responsible for any costs arising under Section 2.15 resulting from
such reallocation and repayments) of Revolving Loans as necessary such that,
after giving effect to such Revolving Facility Increase, each Lender will hold
Revolving Loans and Participation Interests based on its Revolving Commitment
Percentage (after giving effect to such Revolving Facility Increase).

 

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(e) Participation. Participation in any such Revolving Facility Increase may be
offered to each of the existing Lenders, but each such Lender shall have no
obligation to provide all or any portion of such Revolving Facility Increase.
The Borrower may invite other banks, financial institutions and investment funds
reasonably acceptable to the Administrative Agent (such consent not to be
unreasonably withheld or delayed) to join this Credit Agreement as Lenders
hereunder for any portion of such Revolving Facility Increase; provided that
such other banks, financial institutions and investment funds shall enter into
such joinder agreements to give effect thereto as the Administrative Agent may
reasonably request.

(f) Amendments. The Administrative Agent is authorized to enter into, on behalf
of the Lenders, any amendment to this Credit Agreement or any other Credit
Document as may be necessary to incorporate the terms of any such Revolving
Facility Increase.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce the Lenders to enter into this Agreement and to make the Extensions of
Credit herein provided for, the Credit Parties hereby represent and warrant to
the Administrative Agent and to each Lender that:

Section 3.1 Financial Condition.

(a)(i) The audited Consolidated and consolidating financial statements of the
Borrower and its Subsidiaries for the fiscal years ended 2008, 2009 and 2010
together with the related Consolidated and consolidating statements of income or
operations, equity and cash flows for the fiscal years ended on such dates,
(ii) the unaudited Consolidated and consolidating financial statements of the
Borrower and its Subsidiaries for the year-to-date period ending on the last day
of the First Quarter of 2011, together with the related Consolidated and
consolidating statements of income or operations, equity and cash flows for the
year-to-date period ending on such date and (iii) a pro forma balance sheet of
the Borrower and its Subsidiaries as of May 31, 2011:

(A) were prepared in accordance with GAAP consistently applied throughout the
period covered thereby, except as otherwise expressly noted therein; and

(B) fairly present, in all material respects, the financial condition of the
Borrower and its Subsidiaries as of the date thereof (subject, in the case of
the unaudited financial statements, to normal year-end adjustments) and results
of operations for the period covered thereby.

 

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(b) The five-year projections of the Credit Parties and their Subsidiaries
(prepared quarterly for the first year following the Closing Date and annually
thereafter for the term of this Agreement) delivered to the Lenders on or prior
to the Closing Date have been prepared in good faith based upon reasonable
assumptions (i) in light of then existing conditions and (ii) of future results
of operations which may or may not in fact occur and no assurance can be given
that such results will be achieved.

Section 3.2 No Material Adverse Effect.

Since January 2, 2011 (and, in addition, after delivery of annual audited
financial statements in accordance with Section 5.1(a), from the date of the
most recently delivered annual audited financial statements), there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.

Section 3.3 Corporate Existence; Compliance with Law; Patriot Act Information.

Each of the Credit Parties (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, organization
or formation, (b) has the requisite corporate or limited liability company power
and authority and the legal right to own and operate all its property, to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged and has taken all actions necessary to maintain all rights,
privileges, licenses and franchises necessary or required in the normal conduct
of its business except where the failure to take any such action could not
reasonably be expected to have a Material Adverse Effect, (c) is duly qualified
to conduct business and in good standing under the laws of (i) the jurisdiction
of its organization or formation, (ii) the jurisdiction where its chief
executive office is located and (iii) each other jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification except to the extent that the failure to so qualify
or be in good standing in any such other jurisdiction could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect and
(d) is in compliance with all applicable Requirements of Law, organizational
documents, government permits and government licenses except to the extent such
non-compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Set forth on Schedule 3.3 as of the
Closing Date, or as of the last date such Schedule was required to be updated in
accordance with Section 5.2, is the following information for each Credit Party:
the exact legal name and any former legal names of such Credit Party in the four
(4) months prior to the Closing Date, the state of incorporation or
organization, the type of organization, the jurisdictions in which such Credit
Party is qualified to do business, the chief executive office, the principal
place of business, the business phone number, the organization identification
number, the federal tax identification number and ownership information (e.g.
publicly held, if private or partnership, the owners and partners of each of the
Credit Parties).

Section 3.4 Corporate Power; Authorization; Enforceable Obligations.

Each of the Credit Parties has full corporate, partnership or limited liability
company power and authority and the legal right to make, deliver and perform the
Credit Documents to which it is party and has taken all necessary limited
liability company, partnership or corporate

 

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action to authorize the execution, delivery and performance by it of the Credit
Documents to which it is party. Each Credit Document to which it is a party has
been duly executed and delivered on behalf of each Credit Party. Each Credit
Document to which it is a party constitutes a legal, valid and binding
obligation of each Credit Party, enforceable against such Credit Party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).

Section 3.5 No Legal Bar; No Default.

The execution, delivery and performance by each Credit Party of the Credit
Documents to which such Credit Party is a party, the borrowings thereunder and
the use of the proceeds of the Revolving Loans (a) will not violate any
applicable Requirement of Law of any Credit Party (except those as to which
waivers or consents have been obtained), (b) will not conflict with, result in a
breach of or constitute a default under the articles of incorporation, bylaws,
articles of organization, operating agreement or other organization documents of
the Credit Parties or any Material Contract to which such Person is a party or
by which any of its properties may be bound or any material approval or material
consent from any Governmental Authority relating to such Person, and (c) will
not result in, or require, the creation or imposition of any Lien on any Credit
Party’s properties or revenues pursuant to any Requirement of Law or Contractual
Obligation other than the Liens arising under or contemplated in connection with
the Credit Documents or Permitted Liens. No Credit Party is in default under or
with respect to any of its Contractual Obligations except where such default
could not reasonably be expected to have a Material Adverse Effect.

Section 3.6 No Material Litigation.

Except as set forth on Schedule 3.6, no litigation, investigation, claim,
criminal prosecution, civil investigative demand, imposition of criminal or
civil fines and penalties, or any other proceeding of or before any arbitrator
or Governmental Authority is pending or, to the best knowledge of the Credit
Parties, threatened by or against any Credit Party or any of its Subsidiaries or
against any of its or their respective properties or revenues (a) with respect
to the Credit Documents or any Extension of Credit or any of the Transactions,
or (b) which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect. No permanent injunction, temporary restraining order or
similar decree has been issued against any Credit Party or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect. Since the Closing Date there has been no occurrence, change or
development with respect to the matters set forth on Schedule 3.6 which could
reasonably be expected to have a Material Adverse Effect.

Section 3.7 Investment Company Act; etc.

No Credit Party is an “investment company”, or a company “controlled” by an
“investment company”, within the meaning of the Investment Company Act of 1940,
as

 

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amended. No Credit Party is subject to regulation limiting its ability to incur
Credit Party Obligations.

Section 3.8 Margin Regulations.

No part of the proceeds of any Extension of Credit hereunder will be used
directly or indirectly for any purpose that violates, or that would require any
Lender to make any filings in accordance with, the provisions of Regulation T, U
or X of the Board of Governors of the Federal Reserve System as now and from
time to time hereafter in effect. The Credit Parties and their Subsidiaries
(a) are not engaged, principally or as one of their important activities, in the
business of extending credit for the purpose of “purchasing” or “carrying”
“margin stock” within the respective meanings of each of such terms under
Regulation U and (b) taken as a group do not own “margin stock” except as
identified in the financial statements referred to in Section 3.1 or delivered
pursuant to Section 5.1 and the aggregate value of all “margin stock” owned by
the Credit Parties and their Subsidiaries taken as a group does not exceed 25%
of the value of their assets.

Section 3.9 ERISA.

Except as could not reasonably be expected to have a Material Adverse Effect:
(a) neither a Reportable Event nor an “accumulated funding deficiency” (within
the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred
during the five-year period prior to the date on which this representation is
made or deemed made with respect to any Plan, (b) each Plan has complied in all
material respects with the applicable provisions of ERISA and the Code, (c) no
termination of a Single Employer Plan has occurred resulting in any liability
that has remained underfunded, (d) no Lien in favor of the PBGC or a Plan has
arisen, during such five-year period and (e) the present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to
fund such Plans) did not, as of the last annual valuation date prior to the date
on which this representation is made or deemed made, exceed the value of the
assets of such Plan allocable to such accrued benefits and (f) neither any
Credit Party nor any Commonly Controlled Entity is currently subject to any
liability for a complete or partial withdrawal from a Multiemployer Plan.

Section 3.10 Environmental Matters.

Except as could not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect:

(a) The facilities and properties owned, leased or operated by the Credit
Parties or any of their Subsidiaries (the “Properties”) do not contain any
Materials of Environmental Concern in amounts or concentrations which
(i) constitute a violation of, or (ii) could give rise to liability on behalf of
any Credit Party under, any Environmental Law.

(b) The Properties and all operations of the Credit Parties and/or their
Subsidiaries at the Properties are in compliance, and have in the last five
years been in

 

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compliance, with all applicable Environmental Laws, and there is no
contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated by the
Credit Parties or any of their Subsidiaries (the “Business”).

(c) Neither the Credit Parties nor their Subsidiaries have received any written
or actual notice of violation, alleged violation, non-compliance, liability or
potential liability on behalf of any Credit Party with respect to environmental
matters or Environmental Laws regarding any of the Properties or the Business,
nor do the Credit Parties or their Subsidiaries have knowledge or reason to
believe that any such notice will be received or is being threatened.

(d) Materials of Environmental Concern have not been transported or disposed of
from the Properties in violation of, or in a manner or to a location that could
give rise to liability on behalf of any Credit Party under any Environmental
Law, and no Materials of Environmental Concern have been generated, treated,
stored or disposed of at, on or under any of the Properties in violation of, or
in a manner that could give rise to liability on behalf of any Credit Party
under, any applicable Environmental Law.

(e) No judicial proceeding or governmental or administrative action is pending
or, to the knowledge of the Credit Parties and their Subsidiaries, threatened,
under any Environmental Law to which any Credit Party or any Subsidiary is or
will be named as a party with respect to the Properties or the Business, nor are
there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Properties or the
Business.

(f) There has been no release or threat of release of Materials of Environmental
Concern at or from the Properties, or arising from or related to the operations
of any Credit Party or any Subsidiary in connection with the Properties or
otherwise in connection with the Business, in violation of or in amounts or in a
manner that could give rise to liability on behalf of any Credit Party under
Environmental Laws.

Section 3.11 Use of Proceeds.

The proceeds of the Extensions of Credit shall be used by the Borrower
solely for working capital and other general corporate purposes of the Credit
Parties and their Subsidiaries.

Section 3.12 Subsidiaries; Joint Ventures; Partnerships.

Set forth on Schedule 3.12 is a complete and accurate list of all Subsidiaries,
joint ventures and partnerships of the Credit Parties as of the Closing Date and
as of the last date such Schedule was required to be updated in accordance with
Section 5.2. Information on the attached Schedule includes the following:
(a) the number of shares of each class of Equity Interests of each Subsidiary
outstanding and (b) the number and percentage of outstanding shares of each
class of Equity Interests owned by the Credit Parties and their Subsidiaries.
The

 

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outstanding Equity Interests of all such Subsidiaries are validly issued, fully
paid and non-assessable and are owned free and clear of all Liens (other than
those arising under or contemplated in connection with the Credit Documents).
There are no outstanding subscriptions, options, warrants, calls, rights or
other agreements or commitments (other than stock options granted to employees
or directors and directors’ qualifying shares) of any nature relating to any
Equity Interests of any Credit Party or any Subsidiary thereof, except as
contemplated in connection with the Credit Documents.

Section 3.13 Ownership.

Each of the Credit Parties and its Subsidiaries is the owner of, and has good
and marketable title to or a valid leasehold interest in, all of its respective
assets, which, together with assets leased or licensed by the Credit Parties and
their Subsidiaries, represents all assets in the aggregate material to the
conduct of the business of the Credit Parties and their Subsidiaries, other than
the Pollo Tropical Trademarks which shall be transferred to a Credit Party in
accordance with Section 5.13(e). Each Credit Party and its Subsidiaries enjoys
peaceful and undisturbed possession under all of its leases and all such leases
are valid and subsisting and in full force and effect except as could not
reasonably be expected to have a Material Adverse Effect.

Section 3.14 Consent; Governmental Authorizations.

No approval, consent or authorization of, filing with, notice to or other act by
or in respect of, any Governmental Authority or any other Person is required in
connection with acceptance of Extensions of Credit by the Borrower or the making
of the Guaranty hereunder or with the execution, delivery or performance of any
Credit Document by the Credit Parties (other than those which have been
obtained) or with the validity or enforceability of any Credit Document against
the Credit Parties (except such filings as are necessary in connection with the
perfection of the Liens created by such Credit Documents).

Section 3.15 Taxes.

Each of the Credit Parties and its Subsidiaries has filed, or caused to be
filed, all federal income tax returns and all other material tax returns
(federal, state, local and foreign) required to be filed and paid (a) all
amounts of taxes shown thereon to be due (including interest and penalties) and
(b) all other material taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangibles
taxes) owing by it, except for such taxes (i) that are not yet delinquent or
(ii) that are being contested in good faith and by proper proceedings, and
against which adequate reserves are being maintained in accordance with GAAP.
None of the Credit Parties or their Subsidiaries has received written notice as
of the Closing Date of any material tax assessments against it or any of its
Subsidiaries.

Section 3.16 Collateral Representations.

(a) Intellectual Property. Set forth on Schedule 3.16(a), as of the Closing Date
and as of the last date such Schedule was required to be updated in accordance
with

 

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Section 5.2, is a list of all registered or issued Intellectual Property
(including all applications for registration and issuance) owned by each of the
Credit Parties or that each of the Credit Parties has the right to (including
the name/title, current owner, registration or application number, and
registration or application date and such other information as reasonably
requested by the Administrative Agent).

(b) Documents, Instrument, and Tangible Chattel Paper. Set forth on
Schedule 3.16(b), as of the Closing Date and as of the last date such Schedule
was required to be updated in accordance with Section 5.2, is a description of
all Documents (as defined in the UCC), Instruments (as defined in the UCC), and
Tangible Chattel Paper (as defined in the UCC) of the Credit Parties (including
the Credit Party owning such Document, Instrument and Tangible Chattel Paper and
such other information as reasonably requested by the Administrative Agent), in
each case to the extent with a value in excess of $100,000.

(c) Deposit Accounts, Electronic Chattel Paper, Letter-of-Credit Rights,
Securities Accounts and Uncertificated Investment Property. Set forth on
Schedule 3.16(c), as of the Closing Date and as of the last date such Schedule
was required to be updated in accordance with Section 5.2, is a description of
all Deposit Accounts (as defined in the UCC), Electronic Chattel Paper (as
defined in the UCC), Letter-of-Credit Rights (as defined in the UCC), Securities
Accounts (as defined in the UCC) and uncertificated Investment Property (as
defined in the UCC) of the Credit Parties, including the name of (i) the
applicable Credit Party, (ii) in the case of a Deposit Account, the depository
institution and average amount held in such Deposit Account, (iii) in the case
of Electronic Chattel Paper, the account debtor, (iv) in the case of
Letter-of-Credit Rights, the issuer or nominated person, as applicable, and
(v) in the case of a Securities Account or other uncertificated Investment
Property, the Securities Intermediary or issuer and the average amount held in
such Securities Account, as applicable.

(d) Commercial Tort Claims. Set forth on Schedule 3.16(d), as of the Closing
Date and as of the last date such Schedule was required to be updated in
accordance with Section 5.2, is a description of all Commercial Tort Claims (as
defined in the UCC) of the Credit Parties (detailing such Commercial Tort Claim
in such detail as reasonably requested by the Administrative Agent).

(e) Pledged Equity Interests. Set forth on Schedule 3.16(e), as of the Closing
Date and as of the last date such Schedule was required to be updated in
accordance with Section 5.2, is a list of (i) 100% (or, if less, the full amount
owned by such Credit Party) of the issued and outstanding Equity Interests owned
by such Credit Party of each Domestic Subsidiary (other than Excluded
Subsidiaries), (ii) 65% (or, if less, the full amount owned by such Credit
Party) of each class of the issued and outstanding Equity Interests entitled to
vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% (or, if
less, the full amount owned by such Pledgor) of each class of the issued and
outstanding Equity Interests not entitled to vote (within the meaning of Treas.
Reg. Section 1.956-2(c)(2)) owned by such Credit Party of each first-tier
Foreign Subsidiary

 

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and (iii) all other Equity Interests required to be pledged to the
Administrative Agent pursuant to the Security Documents.

(f) Properties. Set forth on Schedule 3.16(f)(i), as of the Closing Date and as
of the last date such Schedule was required to be updated in accordance with
Section 5.2, is a list of all Mortgaged Properties (including the owner of such
Mortgaged Property). Set forth on Schedule 3.16(f)(ii) is a list of (i) each
headquarter location of the Credit Parties (and an indication if such location
is leased or owned) and (ii) each other location where any significant
administrative functions are performed (and an indication if such location is
leased or owned).

Section 3.17 Solvency.

The Credit Parties taken as a whole are solvent and are able to pay their debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, and the fair saleable value of the
Credit Parties assets, taken as a whole and measured on a going concern basis,
exceeds all probable liabilities, including those to be incurred pursuant to
this Agreement. The Credit Parties taken as a whole do not have unreasonably
small capital in relation to the business in which they are or propose to be
engaged. The Credit Parties taken as a whole have not incurred, or believe that
they will incur debts beyond its ability to pay such debts as they become due.
In executing the Credit Documents and consummating the Transactions, none of the
Credit Parties intends to hinder, delay or defraud either present or future
creditors or other Persons to which one or more of the Credit Parties is or will
become indebted. On the Closing Date, the foregoing representations and
warranties shall be made both before and after giving effect to the
Transactions.

Section 3.18 Compliance with FCPA.

Each of the Credit Parties and their Subsidiaries is in compliance with the
Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq., and any foreign
counterpart thereto. None of the Credit Parties or their Subsidiaries has made a
payment, offering, or promise to pay, or authorized the payment of, money or
anything of value (a) in order to assist in obtaining or retaining business for
or with, or directing business to, any foreign official, foreign political
party, party official or candidate for foreign political office, (b) to a
foreign official, foreign political party or party official or any candidate for
foreign political office, and (c) with the intent to induce the recipient to
misuse his or her official position to direct business wrongfully to such Credit
Party or its Subsidiary or to any other Person, in violation of the Foreign
Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq.

Section 3.19 Reserved.

Section 3.20 Brokers’ Fees.

None of the Credit Parties or their Subsidiaries has any obligation to any
Person in respect of any finder’s, broker’s, investment banking or other similar
fee in connection with any

 

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of the Transactions other than the closing and other fees payable pursuant to
this Agreement and as set forth in the Fee Letter.

Section 3.21 Labor Matters.

Except as could not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, (a) there are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Credit Parties
or any of their Subsidiaries as of the Closing Date and none of the Credit
Parties or their Subsidiaries (i) has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years or
(ii) has knowledge of any potential or pending strike, walkout or work stoppage,
(b) no unfair labor practice complaint is pending against any Credit Party or
any of its Subsidiaries and (c) there are no strikes, walkouts, work stoppages
or other material labor difficulty pending or threatened against any Credit
Party.

Section 3.22 Accuracy and Completeness of Information.

No representation or warranty made by the Borrower or any other Credit Party in
any Credit Document or in any document, instrument or other writing furnished to
the Lenders by or on behalf of any Credit Party in connection with the
transactions contemplated in any Credit Document does or will contain any untrue
material statement of fact or will omit to state any such fact (of which any
executive officer of any Credit Party has knowledge) necessary to make the
representations, warranties and other statements contained herein or in such
other document, instrument or writing not misleading in any material respect.

Section 3.23 Material Contracts.

Schedule 3.23 sets forth a complete and accurate list of all Material Contracts
of the Credit Parties and their Subsidiaries in effect as of the Closing Date
and as of the last date such Schedule was required to be updated in accordance
with Section 5.2. Each Material Contract is, and after giving effect to the
Transactions will be, in full force and effect in accordance with the terms
thereof.

Section 3.24 Insurance.

The insurance coverage of the Credit Parties and their Subsidiaries is outlined
as to carrier, policy number, expiration date, type and amount on Schedule 3.24
as of the Closing Date and as of the last date such Schedule was required to be
updated in accordance with Section 5.2 and such insurance coverage complies in
all material respects with the requirements set forth in Section 5.5(b).

Section 3.25 Security Documents.

The Security Documents create valid and enforceable security interests in, and
Liens on, the Collateral purported to be covered thereby. Except as set forth in
the Security Documents, such security interests and Liens are currently (or will
be, upon (a) the filing of appropriate

 

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financing statements with the Secretary of State of the state of incorporation
or organization for each Credit Party, the filing of appropriate assignments or
notices with the United States Patent and Trademark Office and the United States
Copyright Office, and the recordation of the Mortgage Instruments, in each case
in favor of the Administrative Agent, on behalf of the Lenders, and (b) the
Administrative Agent obtaining control or possession over those items of
Collateral in which a security interest is perfected through control or
possession) perfected security interests and Liens in favor of the
Administrative Agent, for the benefit of the Secured Parties, prior to all other
Liens other than Permitted Liens.

Section 3.26 Classification of Senior Indebtedness.

The Credit Party Obligations constitute “Senior Indebtedness”, “Designated
Senior Indebtedness” or any similar designation under and as defined in any
agreement governing any Subordinated Debt and the subordination provisions set
forth in each such agreement are legally valid and enforceable against the
parties thereto.

Section 3.27 Anti-Terrorism Laws.

Neither any Credit Party nor any of its Subsidiaries is an “enemy” or an “ally
of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act
of the United States of America (50 U.S.C. App. §§ 1 et seq.) (the “Trading with
the Enemy Act”), as amended. Neither any Credit Party nor any of its
Subsidiaries is in violation of (a) the Trading with the Enemy Act, as amended,
(b) any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto or (c) the Patriot Act. None of
the Credit Parties (i) is a blocked person described in Section 1 of the
Anti-Terrorism Order or (ii) to the best of its knowledge, engages in any
dealings or transactions, or is otherwise associated, with any such blocked
person.

Section 3.28 Compliance with OFAC Rules and Regulations.

(a) None of the Credit Parties or their Subsidiaries or their respective
Affiliates is in violation of and shall not violate any of the country or list
based economic and trade sanctions administered and enforced by OFAC that are
described or referenced at http://www.ustreas.gov/offices/enforcement/ofac/ or
as otherwise published from time to time.

(b) None of the Credit Parties or their Subsidiaries or their respective
Affiliates (i) is a Sanctioned Person or a Sanctioned Entity, (ii) has a more
than 10% of its assets located in Sanctioned Entities, or (iii) derives more
than 10% of its operating income from investments in, or transactions with
Sanctioned Persons or Sanctioned Entities. No proceeds of any Revolving Loan
will be used nor have any been used to fund any operations in, finance any
investments or activities in or make any payments to, a Sanctioned Person or a
Sanctioned Entity.

 

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Section 3.29 Authorized Officer.

Set forth on Schedule 3.29 are Responsible Officers that are permitted to sign
Credit Documents on behalf of the Credit Parties, holding the offices indicated
next to their respective names, as of the Closing Date and as of the last date
such Schedule was required to be updated in accordance with Section 5.2. Such
Authorized Officers are the duly elected and qualified officers of such Credit
Party and are duly authorized to execute and deliver, on behalf of the
respective Credit Party, the Credit Agreement, the Revolving Loan Notes and the
other Credit Documents.

Section 3.30 Regulation H.

No Mortgaged Property is a Flood Hazard Property unless the Administrative Agent
shall have received the following: (a) the applicable Credit Party’s written
acknowledgment of receipt of written notification from the Administrative Agent
(i) as to the fact that such Mortgaged Property is a Flood Hazard Property and
(ii) as to whether the community in which each such Flood Hazard Property is
located is participating in the National Flood Insurance Program and (b) copies
of insurance policies or certificates of insurance of the applicable Credit
Party evidencing flood insurance reasonably satisfactory to the Administrative
Agent and naming the Administrative Agent as loss payee on behalf of the
Lenders.

ARTICLE IV

CONDITIONS PRECEDENT

Section 4.1 Conditions to Closing Date.

This Agreement shall become effective upon, and the obligation of each Lender to
make the initial Extensions of Credit on the Closing Date is subject to, the
satisfaction of the following conditions precedent:

(a) Execution of Credit Agreement and Credit Documents. The Administrative Agent
shall have received (i) counterparts of this Agreement, executed by a duly
authorized officer of each party hereto, (ii) for the account of each Lender
requesting a promissory note, a duly executed Revolving Loan Note,
(iii) counterparts of the Security Agreement conforming to the requirements of
this Agreement and executed by duly authorized officers of the Credit Parties or
other Person, as applicable and (iv) counterparts of any other Credit Document,
executed by the duly authorized officers of the parties thereto.

(b) Authority Documents. The Administrative Agent shall have received the
following:

(i) Articles of Incorporation/Charter Documents. Original certified articles of
incorporation or other charter documents, as applicable, of each Credit

 

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Party certified (A) by an officer of such Credit Party (pursuant to an officer’s
certificate in substantially the form of Exhibit 4.1(b) attached hereto) as of
the Closing Date to be true and correct and in force and effect as of such date,
and (B) to be true and complete as of a recent date by the appropriate
Governmental Authority of the state of its incorporation or organization, as
applicable.

(ii) Resolutions. Copies of resolutions of the board of directors or comparable
managing body of each Credit Party approving and adopting the Credit Documents,
the Transactions and authorizing execution and delivery thereof, certified by an
officer of such Credit Party (pursuant to an officer’s certificate in
substantially the form of Exhibit 4.1(b) attached hereto) as of the Closing Date
to be true and correct and in force and effect as of such date.

(iii) Bylaws/Operating Agreement. A copy of the bylaws or comparable operating
or partnership agreement of each Credit Party certified by an officer of such
Credit Party (pursuant to an officer’s certificate in substantially the form of
Exhibit 4.1(b) attached hereto) as of the Closing Date to be true and correct
and in force and effect as of such date.

(iv) Good Standing. Original certificates of good standing, existence or its
equivalent with respect to each Credit Party certified as of a recent date by
the appropriate Governmental Authorities of the state of incorporation or
organization and each other state in which the failure to so qualify and be in
good standing could reasonably be expected to have a Material Adverse Effect.

(v) Incumbency. An incumbency certificate of each Authorized Officer of each
Credit Party certified by an officer (pursuant to an officer’s certificate in
substantially the form of Exhibit 4.1(b) attached hereto) to be true and correct
as of the Closing Date.

(c) Legal Opinion of Counsel. The Administrative Agent shall have received an
opinion or opinions of counsel for the Credit Parties (including an opinion of
the general counsel of the Borrower and local counsel opinions from counsel in
Texas and Florida), dated the Closing Date and addressed to the Administrative
Agent and the Lenders, in form and substance reasonably acceptable to the
Administrative Agent (which shall include, without limitation, opinions with
respect to the due organization and valid existence of each Credit Party,
opinions as to perfection of certain of the Liens granted to the Administrative
Agent pursuant to the Security Documents and opinions as to the
non-contravention of the Credit Parties’ organizational documents and Material
Contracts).

(d) Personal Property Collateral. The Administrative Agent shall have received,
in form and substance reasonably satisfactory to the Administrative Agent:

(i) (A) searches of UCC filings in the jurisdiction of incorporation or
formation, as applicable, of each Credit Party and each jurisdiction where any

 

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Collateral is located or where a filing would need to be made in order to
perfect the Administrative Agent’s security interest in the Collateral, copies
of the financing statements on file in such jurisdictions and evidence that no
Liens exist other than Permitted Liens and (B) tax lien and judgment searches;

(ii) searches of ownership of Intellectual Property in the appropriate
governmental offices and such patent/trademark/copyright filings as requested by
the Administrative Agent in order to perfect the Administrative Agent’s security
interest in the Intellectual Property;

(iii) completed UCC financing statements for each appropriate jurisdiction as is
necessary, in the Administrative Agent’s sole discretion, to perfect the
Administrative Agent’s security interest in the Collateral;

(iv) stock or membership certificates, if any, evidencing the Equity Interests
pledged to the Administrative Agent pursuant to the Security Agreement and
undated stock or transfer powers duly executed in blank;

(v) duly executed consents as are necessary, in the Administrative Agent’s sole
discretion, to perfect the Lenders’ security interest in the Collateral;

(vi) to the extent required to be delivered pursuant to the terms of the
Security Documents, all instruments, documents and chattel paper in the
possession of any of the Credit Parties, together with allonges or assignments
as may be necessary or appropriate to perfect the Administrative Agent’s and the
Lenders’ security interest in the Collateral;

(e) Reserved.

(f) Liability, Casualty, Property and Business Interruption Insurance. The
Administrative Agent shall have received copies of insurance policies or
certificates and endorsements of insurance evidencing liability, casualty,
property and business interruption insurance meeting the requirements set forth
herein or in the Security Documents. The Administrative Agent shall be named
(i) as lenders’ loss payee, as its interest may appear, with respect to any such
insurance providing coverage in respect of any Collateral and (ii) as additional
insured, as its interest may appear, with respect to any such insurance
providing liability coverage, and the Credit Parties will use their commercially
reasonable efforts to have each provider of any such insurance agree, by
endorsement upon the policy or policies issued by it or by independent
instruments to be furnished to the Administrative Agent, that it will give the
Administrative Agent thirty (30) days prior written notice before any such
policy or policies shall be altered or cancelled.

(g) Solvency Certificate. The Administrative Agent shall have received an
officer’s certificate prepared by the chief financial officer or other
Authorized Officer approved by the Administrative Agent of the Borrower as to
the financial condition,

 

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solvency and related matters of the Credit Parties and their Subsidiaries, after
giving effect to the Transactions and the initial borrowings under the Credit
Documents, in substantially the form of Exhibit 4.1(g) hereto.

(h) Account Designation Notice. The Administrative Agent shall have received the
executed Account Designation Notice in the form of Exhibit 1.1(a) hereto.

(i) Notice of Borrowing. The Administrative Agent shall have received a Notice
of Borrowing with respect to the Revolving Loans to be made on the Closing Date.

(j) Consents. The Administrative Agent shall have received evidence that all
boards of directors, governmental, shareholder and material third party consents
and approvals necessary in connection with the Transactions have been obtained
and all applicable waiting periods have expired without any action being taken
by any authority that could restrain, prevent or impose any material adverse
conditions on such transactions or that could seek or threaten any of the
foregoing.

(k) Existing Indebtedness of the Credit Parties. All of the existing
Indebtedness for borrowed money of the Credit Parties and their Subsidiaries
(other than Indebtedness permitted to exist pursuant to Section 6.1) shall be
repaid in full (together with accrued and unpaid interest thereon and
obligations with respect thereto) and all security interests related thereto
shall be terminated on or prior to the Closing Date. Carrols shall have
repurchased all Existing Carrols Notes tendered pursuant to the Tender Offer on
or prior to the Closing Date and paid all accrued and unpaid interest thereon.

(l) Financial Statements. The Administrative Agent and the Lenders shall have
received copies of the financial statements referred to in Section 3.1, each in
form and substance reasonably satisfactory to each of them.

(m) Financial Condition Certificate. The Administrative Agent shall have
received a certificate or certificates executed by an Authorized Officer of the
Borrower as of the Closing Date, substantially in the form of Exhibit 4.1(m)
stating that (i) except as set forth on Schedule 3.6, there does not exist any
pending or ongoing, action, suit, investigation, litigation or proceeding in any
court or before any other Governmental Authority (A) affecting this Agreement or
the other Credit Documents, that has not been settled, dismissed, vacated,
discharged or terminated prior to the Closing Date or (B) that purports to
affect any Credit Party or any of its Subsidiaries, or any Transaction, which
action, suit, investigation, litigation or proceeding which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect, that
has not been settled, dismissed, vacated, discharged or terminated prior to the
Closing Date, (ii) immediately after giving effect to this Agreement, the other
Credit Documents, and all the Transactions contemplated to occur on such date,
(A) no Default or Event of Default exists and (B) all representations and
warranties contained herein and in the other Credit Documents are true and
correct in all material respects, and (iii) each of the other conditions
precedent in Section 4.1 have been satisfied, except to the extent the

 

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satisfaction of any such condition is subject to the judgment or discretion of
the Administrative Agent or any Lender.

(n) Carrols LLC Financing. The Administrative Agent shall have received evidence
that, simultaneous with the execution and effectiveness of this Agreement, the
Carrols LLC Financing shall be effective and that Carrols LLC shall have
received gross proceeds of $65,000,000 from term loans issued under the Carrols
LLC Financing.

(o) Management Services Agreement and Transition Services Agreement. The
Administrative Agent shall have received (a) term sheet setting forth the terms
and conditions to be included in the Transition Services Agreement and (b) a
fully executed copy of the Management Services Agreement, in each case certified
by an Authorized Officer of the Borrower to be true and complete and, in the
case of the Management Services Agreement, in full force and effect as of the
Closing Date.

(p) Structure. The pro forma capital, ownership and management structure and
shareholding arrangement of the Borrower and its Subsidiaries (and all
agreements relating thereto) shall be reasonably satisfactory to the
Administrative Agent.

(q) Second Lien Notes. The Borrower shall have received gross proceeds from the
issuance of the Second Lien Notes on the Closing Date of $200,000,000. The
Administrative Agent shall have received a certified copy of the Second Lien
Note Indenture and other related documents (including, without limitation, the
Intercreditor Agreement), each to be in form and substance reasonably
satisfactory to the Administrative Agent.

(r) Fees and Expenses. The Administrative Agent and the Lenders shall have
received all fees and expenses, if any, owing pursuant to the Fee Letter and
Section 2.5.

(s) Additional Matters. All other documents and legal matters in connection with
the Transactions shall be reasonably satisfactory in form and substance to the
Administrative Agent and its counsel.

Without limiting the generality of the provisions of Section 8.4, for purposes
of determining compliance with the conditions specified in this Section 4.1,
each Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.

Section 4.2 Conditions to All Extensions of Credit.

The obligation of each Lender to make any Extension of Credit hereunder is
subject to the satisfaction of the following conditions precedent on the date of
making such Extension of Credit:

 

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(a) Representations and Warranties. The representations and warranties made by
the Credit Parties herein, in the other Credit Documents and which are contained
in any certificate furnished at any time under or in connection herewith shall
(i) with respect to representations and warranties that contain a materiality
qualification, be true and correct and (ii) with respect to representations and
warranties that do not contain a materiality qualification, be true and correct
in all material respects, in each case on and as of the date of such Extension
of Credit as if made on and as of such date except for any representation or
warranty made as of an earlier date, which representation and warranty shall
remain true and correct as of such earlier date.

(b) No Default or Event of Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the Extension
of Credit to be made on such date unless such Default or Event of Default shall
have been waived in accordance with this Agreement.

(c) Compliance with Commitments. Immediately after giving effect to the making
of any such Extension of Credit (and the application of the proceeds thereof),
(i) the sum of the aggregate principal amount of outstanding Revolving Loans
plus outstanding LOC Obligations shall not exceed the Revolving Committed Amount
then in effect, and (ii) the outstanding LOC Obligations shall not exceed the
LOC Committed Amount.

(d) Additional Conditions to Revolving Loans. If a Revolving Loan is requested,
all conditions set forth in Section 2.1 shall have been satisfied.

(e) Additional Conditions to Letters of Credit. If the issuance of a Letter of
Credit is requested, (i) all conditions set forth in Section 2.3 shall have been
satisfied and (ii) there shall exist no Lender that is a Defaulting Lender
unless the Issuing Lender has entered into satisfactory arrangements with the
Borrower or such Defaulting Lender to eliminate the Issuing Lender’s risk with
respect to such Defaulting Lender’s LOC Obligations.

(f) Incremental Facility. If an Incremental Facility is requested, all
conditions set forth in Section 2.22 shall have been satisfied.

Each request for an Extension of Credit and each acceptance by the Borrower of
any such Extension of Credit shall be deemed to constitute representations and
warranties by the Credit Parties as of the date of such Extension of Credit that
the conditions set forth above in paragraphs (a) through (f), as applicable,
have been satisfied.

 

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ARTICLE V

AFFIRMATIVE COVENANTS

Each of the Credit Parties hereby covenants and agrees that on the Closing Date,
and thereafter (a) for so long as this Agreement is in effect, (b) until the
Commitments have terminated, and (c) the Credit Party Obligations and all other
amounts owing to the Administrative Agent or any Lender hereunder are paid in
full in cash, such Credit Party shall, and shall cause each of their
Subsidiaries (other than the Excluded Subsidiaries), to:

Section 5.1 Financial Statements.

Furnish to the Administrative Agent and each of the Lenders:

(a) Annual Financial Statements. As soon as available and in any event no later
than ninety (90) days after the end of each fiscal year of the Borrower
(beginning with fiscal year 2011), a copy of the Consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of such fiscal year and the
related Consolidated statements of income and retained earnings and of cash
flows of the Borrower and its Subsidiaries for such year, which shall be audited
by a firm of independent certified public accountants of nationally recognized
standing reasonably acceptable to the Administrative Agent (and the
Administrative Agent hereby acknowledges that Deloitte LLP is acceptable to it),
setting forth in each case in comparative form the figures for the previous
year, reported on without a “going concern” or like qualification or exception,
or qualification indicating that the scope of the audit was inadequate to permit
such independent certified public accountants to certify such financial
statements without such qualification;

(b) Quarterly Financial Statements. As soon as available and in any event no
later than forty-five (45) days after the end of each fiscal quarter of the
Borrower (including the Second Quarter 2011), a copy of the Consolidated balance
sheet of the Borrower and its Subsidiaries as of the end of such period and
related Consolidated statements of income and retained earnings and, other than
with respect to the Fourth Quarter, of cash flows for the Borrower and its
Subsidiaries for such quarterly period and for the portion of the fiscal year
ending with such period, in each case setting forth in comparative form
Consolidated figures for the corresponding period or periods of the preceding
fiscal year (subject to normal recurring year-end audit adjustments); and

(c) Annual Operating Budget and Cash Flow. As soon as available, but in any
event no later than sixty (60) days after the beginning of each fiscal year
(including fiscal year 2012), a copy of the detailed annual operating budget or
plan including cash flow projections of the Borrower and its Subsidiaries for
such fiscal year prepared on a quarterly basis, in form and detail reasonably
acceptable to the Administrative Agent and the Lenders, together with a summary
of the material assumptions made in the preparation of such annual budget or
plan;

 

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all such financial statements furnished pursuant to subsections (a) and
(b) above shall be complete and correct in all material respects (subject, in
the case of interim statements, to normal recurring year-end audit adjustments
and except that such statements are condensed and exclude detailed footnote
disclosures) and to be prepared in reasonable detail and, in the case of the
annual and quarterly financial statements provided in accordance with
subsections (a) and (b) above, in accordance in all material respects with GAAP
applied consistently throughout the periods reflected therein and further
accompanied by a description of, and an estimation of the effect on the
financial statements on account of, a change, if any, in GAAP as provided in
Section 1.3(b).

Notwithstanding the foregoing, financial statements and reports required to be
delivered pursuant to the foregoing provisions of this Section may be delivered
electronically and if so, shall be deemed to have been delivered on the date on
which the Administrative Agent receives such reports from the Borrower through
electronic mail; provided that, upon the Administrative Agent’s request, the
Borrower shall provide paper copies of any documents required hereby to the
Administrative Agent.

Section 5.2 Certificates; Other Information.

Furnish to the Administrative Agent and each of the Lenders:

(a) Reserved.

(b) Officer’s Certificate. Concurrently with the delivery of the financial
statements referred to in Sections 5.1(a) and 5.1(b) above, a certificate of an
Authorized Officer substantially in the form of Exhibit 5.2(b) stating that
(i) such financial statements present fairly in all material respects the
financial position of the Credit Parties and their Subsidiaries for the periods
indicated in conformity with GAAP applied on a consistent basis, (ii) each of
the Credit Parties during such period observed or performed in all material
respects all of its covenants and other agreements, and satisfied in all
material respects every condition, contained in this Agreement to be observed,
performed or satisfied by it, and (iii) such Authorized Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate and such certificate shall include the calculations in reasonable
detail required to indicate compliance with Section 5.9 as of the last day of
such period.

(c) Updated Schedules. Concurrently with or prior to the delivery of the
financial statements referred to in Sections 5.1(a) and 5.1(b) above, (i) an
updated copy of Schedule 3.3 and Schedule 3.12 if the Credit Parties or any of
their Subsidiaries has formed or acquired a new Subsidiary since the Closing
Date or since such Schedule was last updated, as applicable, (ii) an updated
copy of Schedule 3.16(a) if the Credit Parties have registered, applied for
registration of, acquired or otherwise obtained ownership of any new
Intellectual Property since the Closing Date or since such Schedule was last
updated, as applicable, (iii) an updated copy of Schedule 3.16(b) if the Credit
Parties have obtained any Documents (as defined in the UCC), Instruments (as
defined in the UCC) or Tangible Chattel Paper (as defined in the UCC) since the
Closing Date or since

 

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such Schedule was last updated, as applicable, (iv) an updated copy of
Schedule 3.16(c) if the Credit Parties maintain any Deposit Accounts (as defined
in the UCC), Electronic Chattel Paper (as defined in the UCC), Letter-of-Credit
Rights (as defined in the UCC), Securities Accounts (as defined in the UCC) or
uncertificated Investment Property (as defined in the UCC) to the extent not
otherwise set forth on such Schedule as of the Closing Date or since such
Schedule was last updated, as applicable, (v) an updated copy of
Schedule 3.16(d) if the Credit Parties have any Commercial Tort Claims not
otherwise set forth on such Schedule as of the Closing Date or since such
Schedule was last updated, as applicable, (vi) an updated copy of Schedule
3.16(e) to the extent required to be updated to make the representation in
Section 3.16(e) true and correct, (vii) an updated copy of Schedule 3.16(f)(i)
to the extent any Credit Party is obligated to provide a mortgage or deed of
trust on any Property in accordance with Section 5.12, (viii) an updated copy of
Schedule 3.16(f)(ii) to the extent any Credit Party has a (1) headquarter
location and (2) location where any significant administrative functions are
performed (and an indication whether such location is leased or owned), to the
extent not otherwise set forth on such Schedule as of the Closing Date or since
such Schedule was last updated, as applicable, (ix) an updated copy of
Schedule 3.23 if any new Material Contract has been entered into or any Material
Contract has been terminated since the Closing Date or since such Schedule was
last updated, as applicable, together with a copy of each new Material Contract,
and (x) an updated copy of Schedule 3.24 if the Credit Parties or any of their
Subsidiaries has altered or acquired any insurance policies since the Closing
Date or since such Schedule was last updated.

(d) Reports; SEC Filings; Regulatory Reports; Press Releases; Etc. Promptly upon
their becoming available, (i) copies of all reports (other than those provided
pursuant to Section 5.1 and those which are of a promotional nature) and other
financial information which any Credit Party sends to its shareholders,
(ii) copies of all reports and all registration statements and prospectuses, if
any, which any Credit Party may make to, or file with, the SEC (or any successor
or analogous Governmental Authority) or any securities exchange or other private
regulatory authority, (iii) all material regulatory reports and (iv) all press
releases and other statements made available by any of the Credit Parties to the
public concerning material developments in the business of any of the Credit
Parties; provided that the Borrower agrees to deliver each of the foregoing
items, if any, with respect to CRG prior to the Spin-Off Date.

(e) Calculations. Within ninety (90) days after the end of each fiscal year of
the Borrower, a certificate containing information including the amount of all
Restricted Payments, Investments (including Permitted Acquisitions and Permitted
Construction Transactions), Asset Dispositions and Debt Issuances that were made
during the prior fiscal year and amounts received in connection with any
Extraordinary Receipt during the prior fiscal year.

(f) Changes in Corporate Structure. Within ten days prior to any merger,
consolidation, dissolution or other change in corporate structure of any Credit
Party or any of its subsidiaries permitted pursuant to the terms hereof, provide
notice of such change in corporate structure to the Administrative Agent.

 

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(g) General Information. Promptly, such additional financial and other
information as the Administrative Agent, on behalf of any Lender, may from time
to time reasonably request.

Section 5.3 Payment of Taxes and Other Obligations.

Pay, discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, subject, where applicable, to specified grace
periods, (a) all of its material taxes (Federal, state, local and any other
taxes) and (b) all of its other obligations and liabilities of whatever nature
in accordance with industry practice to the extent failure to pay could
reasonably be expected to have a Material Adverse Effect and (c) any additional
costs that are imposed as a result of any failure to so pay, discharge or
otherwise satisfy such taxes, obligations and liabilities, except when the
amount or validity of any such taxes, obligations and liabilities is currently
being contested in good faith by appropriate proceedings and reserves, if
applicable, in conformity with GAAP with respect thereto have been provided on
the books of the Credit Parties.

Section 5.4 Conduct of Business and Maintenance of Existence.

Except as expressly permitted under Section 6.4, continue to engage in business
of the same general type as now conducted by it on the Closing Date and
preserve, renew and keep in full force and effect its corporate or other
formative existence and good standing, take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business and to maintain its goodwill and comply in all material
respects with Requirements of Law.

Section 5.5 Maintenance of Property; Insurance.

Maintain with financially sound and reputable insurance companies liability,
casualty, property and business interruption insurance (including, without
limitation, insurance with respect to its tangible Collateral) in at least such
amounts and against at least such risks as are usually insured against in the
same general area by companies engaged in the same or a similar business; and
furnish to the Administrative Agent, upon the request of the Administrative
Agent, full information as to the insurance carried. To the extent permitted
under applicable laws, the Administrative Agent shall be named (i) as lenders’
loss payee, as its interest may appear with respect to any property insurance,
and (ii) as additional insured, as its interest may appear, with respect to any
such liability insurance, and each provider of any such insurance shall agree,
by endorsement upon the policy or policies issued by it or by independent
instruments to be furnished to the Administrative Agent, that it will give the
Administrative Agent thirty (30) days prior written notice before any such
policy or policies shall be altered or canceled, and such policies shall provide
that no act or default of the Credit Parties or any of their Subsidiaries or any
other Person shall affect the rights of the Administrative Agent or the Lenders
under such policy or policies.

 

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Section 5.6 Maintenance of Books and Records.

Keep proper books, records and accounts which permit financial statements to be
prepared in accordance with GAAP.

Section 5.7 Notices.

Give notice in writing to the Administrative Agent (which shall promptly
transmit such notice to each Lender):

(a) promptly, but in any event within two (2) Business Days after any Credit
Party knows thereof, the occurrence of any Default or Event of Default;

(b) promptly after becoming aware of any default or event of default under any
Contractual Obligation of any Credit Party or any of its Subsidiaries which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or involve a monetary claim in excess of $1,000,000;

(c) promptly after becoming aware of any litigation, or any investigation or
proceeding known or threatened to any Credit Party (i) affecting any Credit
Party or any of its Subsidiaries which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or involve a monetary
claim in excess of $2,500,000 or involving injunctions or requesting injunctive
relief by or against any Credit Party or any Subsidiary of any Credit Party,
(ii) affecting or with respect to this Agreement, any other Credit Document or
any security interest or Lien created thereunder, (iii) involving an
environmental claim or potential liability under Environmental Laws which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, or (iv) by any Governmental Authority relating to any Credit
Party or any Subsidiary thereof and alleging fraud, deception or willful
misconduct by such Person;

(d) of any labor controversy that has resulted in, or threatens to result in, a
strike or other work action against any Credit Party which could reasonably be
expected to have a Material Adverse Effect;

(e) of any attachment, judgment, lien, levy or order exceeding $2,500,000 that
may be assessed against or threatened against any Credit Party other than
Permitted Liens;

(f) as soon as possible and in any event within thirty (30) days after any
Credit Party knows or has reason to know thereof: (i) the occurrence or expected
occurrence of any Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation of any Lien in favor of the
PBGC (other than a Permitted Lien) or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC or any
Credit Party, any Commonly Controlled Entity or any Multiemployer Plan, with
respect to the withdrawal from, or the terminating,

 

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Reorganization or Insolvency of, any Plan, in each case which could reasonably
be expected to have a Material Adverse Effect;

(g) promptly, any notice of any violation received by any Credit Party from any
Governmental Authority including, without limitation, any notice of violation of
Environmental Laws which could reasonably be expected to have a Material Adverse
Effect; and

(h) promptly, any other development or event which could reasonably be expected
to have a Material Adverse Effect.

Each notice pursuant to this Section shall be accompanied by a statement of an
Authorized Officer setting forth details of the occurrence referred to therein
and stating what action the Credit Parties propose to take with respect thereto.
In the case of any notice of a Default or Event of Default, the Borrower shall
specify that such notice is a Default or Event of Default notice on the face
thereof.

Section 5.8 Environmental Laws.

(a) Except as could not reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect, comply with all applicable
Environmental Laws and obtain and comply with and maintain any and all licenses,
approvals, notifications, registrations or permits required by applicable
Environmental Laws;

(b) Except as could not reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect, conduct and complete all
investigations, studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws and promptly comply with all
lawful orders and directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being contested in
good faith by appropriate proceedings; and

(c) Defend, indemnify and hold harmless the Administrative Agent and the
Lenders, and their respective employees, agents, officers and directors and
affiliates, from and against any and all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Credit Parties or any of
their Subsidiaries or the Properties, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable attorney’s and consultant’s fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing arise out of the gross negligence or willful misconduct of
the party seeking indemnification therefor. The agreements in this paragraph
shall survive repayment of the Credit Party Obligations and all other amounts
payable hereunder and termination of the Commitments and the Credit Documents.

 

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Section 5.9 Financial Covenants.

Comply with the following financial covenants:

(a) Adjusted Leverage Ratio. The Adjusted Leverage Ratio, calculated as of the
last day of each fiscal quarter occurring during the periods set forth below
shall be less than or equal to the following:

 

Period

   Ratio  

Closing Date through and including Fourth Quarter of 2012

     6.00 to 1.00   

First Quarter 2013 through and including the Fourth Quarter of 2013

     5.50 to 1.00   

First Quarter of 2014 and thereafter

     5.00 to 1.00   

(b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, calculated as
of the last day of each fiscal quarter, shall be greater than or equal to 1.30
to 1.0.

Section 5.10 Additional Guarantors.

The Credit Parties will cause each of their Domestic Subsidiaries (other than
Excluded Subsidiaries), whether newly formed, after acquired or otherwise
existing to promptly (and in any event within thirty (30) days after such
Subsidiary is formed or acquired (or such longer period of time as agreed to by
the Administrative Agent in its reasonable discretion)) become a Guarantor
hereunder by way of execution of a Joinder Agreement. In connection therewith,
the Credit Parties shall give notice to the Administrative Agent not less than
ten (10) days prior to creating a Subsidiary (or such shorter period of time as
agreed to by the Administrative Agent in its reasonable discretion), or
acquiring the Equity Interests of any other Person. The Credit Party Obligations
shall be secured by, among other things, a first priority perfected security
interest in the Collateral of such new Guarantor and a pledge of 100% of the
Equity Interests of such new Guarantor and its Domestic Subsidiaries (other than
any Domestic Subsidiary that is owned by a Foreign Subsidiary) and 65% of the
voting Equity Interests and 100% of the non-voting Equity Interests of its
first-tier Foreign Subsidiaries. In connection with the foregoing, the Credit
Parties shall deliver to the Administrative Agent, with respect to each new
Guarantor to the extent applicable, substantially the same documentation
required pursuant to Sections 4.1 (b) – (f), (j), Section 5.13(e) and 5.12 and
such other documents or agreements as the Administrative Agent may reasonably
request.

Section 5.11 Compliance with Law.

Comply with all Requirements of Law and orders (including Environmental Laws),
and all applicable restrictions imposed by all Governmental Authorities,
applicable to it and the Collateral if noncompliance with any such Requirements
of Law, order or restriction could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.

 

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Section 5.12 Pledged Assets.

(a) Equity Interests. Each Credit Party will cause 100% of the Equity Interests
in each of its direct or indirect Domestic Subsidiaries (other than any Excluded
Subsidiary and any Domestic Subsidiary that is owned by a Foreign Subsidiary)
and 65% of the voting Equity Interests and 100% of the non-voting Equity
Interests of its first-tier Foreign Subsidiaries, in each case to the extent
owned by such Credit Party, to be subject at all times to a first priority,
perfected Lien in favor of the Administrative Agent pursuant to the terms and
conditions of the Security Documents or such other security documents as the
Administrative Agent shall reasonably request.

(b) Personal Property. Subject to the terms of subsection (c) below,
Section 5.13(e) and any other exclusions set forth in the Security Documents,
each Credit Party will cause all of its tangible and intangible personal
property (other than real property leases) now owned or hereafter acquired by it
to be subject at all times to a first priority, perfected Lien (subject in each
case to Permitted Liens) in favor of the Administrative Agent for the benefit of
the Secured Parties to secure the Credit Party Obligations pursuant to the terms
and conditions of the Security Documents or such other security documents as the
Administrative Agent shall reasonably request. Each Credit Party shall, and
shall cause each of its Subsidiaries to, adhere to the covenants set forth in
the Security Documents.

(c) Real Property.

(i) Each Credit Party shall cause all fee owned real property (“Real Estate”)
(other than the Identified Sale Leaseback Property and the real property subject
to Section 5.13(e)(i)) which has a fair market value in excess of $500,000 to be
subject (within ninety days (or such extended period of time as agreed to by the
Administrative Agent) following the acquisition of such Real Estate) to a first
priority, perfected Lien (subject in each case to Permitted Liens) in favor of
the Administrative Agent; provided, however, the Credit Parties shall not be
required to cause such real property to be subject to a first priority,
perfected Lien to the extent such Credit Party promptly delivers written notice
to the Administrative Agent stating that such Credit Party intends to cause such
real property to be subject to a Sale Leaseback pursuant to Section 6.12 within
180 days (or, in the case of real property acquired without a Restaurant, 365
days) following the acquisition of such real property (it being understood that
the Credit Parties will cause such real property to be subject to a first
priority, perfected Lien in accordance with the terms of this clause (c) to the
extent such Sale Leaseback is not consummated during such 180 day period (or 365
day period, as applicable).

(ii) Each Credit Party shall cause any Identified Sale Leaseback Property that
has not become subject to a Sale Leaseback transaction pursuant to Section 6.12
within 210 days following the Closing Date to be subject to a first priority,
perfected Lien (subject in each case to Permitted Liens) in favor of the
Administrative Agent.

 

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(iii) In connection with each of the foregoing, each Credit Party will deliver
all documentation as the Administrative Agent may reasonably request in
connection with the foregoing, including, without limitation, title reports,
surveys, zoning letters, environmental reports and opinions of counsel, all in
form and substance reasonably satisfactory to the Administrative Agent.

(d) Leases and other Agreements. Each Credit Party shall timely and fully pay
and perform its obligations under all leases and other agreements with respect
to each leased location or public warehouse where any Collateral is or may be
located except where the failure to pay or perform could not reasonably be
expected to have a Material Adverse Effect.

Section 5.13 Further Assurances and Post-Closing Covenants.

(a) Public/Private Designation. The Credit Parties will cooperate with the
Administrative Agent in connection with the publication of certain materials
and/or information provided by or on behalf of the Credit Parties to the
Administrative Agent and Lenders (collectively, “Information Materials”) and
will designate Information Materials (i) that are either available to the public
or not material with respect to the Credit Parties and their Subsidiaries or any
of their respective securities for purposes of United States federal and state
securities laws, as “Public Information” and (ii) that are not Public
Information as “Private Information”.

(b) Additional Information. The Credit Parties shall provide such information
regarding the operations, business affairs and financial condition of the Credit
Parties and their Subsidiaries as the Administrative Agent or any Lender may
reasonably request.

(c) Visits and Inspections. The Credit Parties shall permit representatives of
the Administrative Agent or any Lender, from time to time upon prior reasonable
notice and at such times during normal business hours, to visit and inspect its
properties (including the Collateral); inspect, audit and make extracts from its
books, records and files; and discuss with its principal officers, and its
independent accountants, its business, assets, liabilities, financial condition,
results of operations and business prospects. Upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent or any Lender may
do any of the foregoing at any time without advance notice.

(d) Further Assurances. Upon the reasonable request of the Administrative Agent,
promptly perform or cause to be performed any and all acts and execute or cause
to be executed any and all documents for filing under the provisions of the UCC
or any other Requirement of Law which are necessary or advisable to maintain in
favor of the Administrative Agent, for the benefit of the Secured Parties, Liens
on the Collateral that are duly perfected in accordance with the requirements
of, or the obligations of the Credit Parties under, the Credit Documents and all
applicable Requirements of Law.

(e) Post Closing Covenants.

 

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(i) Real Property Collateral. Subject to Section 5.12(c), within ninety
(90) days after the Closing Date (or such longer period of time as agreed to by
the Administrative Agent in its sole discretion), the Administrative Agent shall
have received, in form and substance satisfactory to the Administrative Agent:

(A) fully executed and notarized Mortgage Instruments encumbering the Mortgaged
Properties as to properties owned by the Credit Parties;

(B) evidence as to (1) whether any Mortgaged Property is a Flood Hazard Property
and (2) if any Mortgaged Property is a Flood Hazard Property, (x) whether the
community in which such Mortgaged Property is located is participating in the
National Flood Insurance Program, (y) the applicable Credit Party’s written
acknowledgment of receipt of written notification from the Administrative Agent
(I) as to the fact that such Mortgaged Property is a Flood Hazard Property and
(II) as to whether the community in which each such Flood Hazard Property is
located is participating in the National Flood Insurance Program and (z) copies
of insurance policies or certificates of insurance of the Credit Parties and
their Subsidiaries evidencing flood insurance reasonably satisfactory to the
Administrative Agent and naming the Administrative Agent as loss payee on behalf
of the Lenders;

(C) maps or plats of an as-built survey of the sites of the Mortgaged
Properties; it being agreed that the surveys in existence on the Closing Date
and provided to the Administrative Agent pursuant to the terms of this clause
(C) (along with a certificate of an Authorized Officer of the Borrower
reasonably acceptable to the Administrative Agent) are satisfactory;

(D) an environmental questionnaire executed by an Authorized Officer of the
Borrower with respect to all owned Mortgaged Properties, along with third-party
environmental reviews of all owned Mortgaged Properties, including but not
limited to Phase I environmental assessments; it being agreed that the Phase I
environmental assessments in existence on the Closing Date and provided to the
Administrative Agent pursuant to the terms of this clause (e) are satisfactory;

(E) to the extent requested by the Administrative Agent, opinions of counsel to
the Credit Parties for each jurisdiction in which the Mortgaged Properties are
located; and

(F) to the extent available, zoning letters from each municipality or other
Governmental Authority for each jurisdiction in which the Mortgaged Properties
are located.

 

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(ii) Account Control Agreements. Within forty-five (45) days after the Closing
Date (or such longer period of time as agreed to by the Administrative Agent in
its sole discretion), the Administrative Agent shall have received Deposit
Account Control Agreements and Securities Account Control Agreements required to
be delivered in accordance with Section 6.14.

(iii) Pollo Tropical Trademarks. Within ninety (90) days after the Closing Date
(or such longer period of time as agreed to by the Administrative Agent in its
sole discretion), the Borrower shall have caused Carrols to transfer all of the
Pollo Tropical Trademarks to a Credit Party and the Administrative Agent shall
have received first priority security interests in the Pollo Tropical
Trademarks.

(iv) Discharge of Existing Carrols Notes. Within fifteen (15) Business Days
after the Closing Date the Borrower agrees to cause Carrols to satisfy and
discharge the obligations under the Existing Carrols Notes, the guarantees
thereof and the indenture under which the Existing Carrols Notes were issued
pursuant to Section 9.01 of such indenture (except those obligations referred to
in the penultimate paragraph of such section).

Section 5.14 New Restaurants.

Provide the Administrative Agent, as of the end of each fiscal quarter
(beginning with the Third Quarter of 2011), notice of the acquisition, lease or
construction (or binding commitment to construct) of any new Restaurant by the
Borrower or any Subsidiary.

ARTICLE VI

NEGATIVE COVENANTS

Each of the Credit Parties hereby covenants and agrees that on the Closing Date,
and thereafter (a) for so long as this Agreement is in effect, (b) until the
Commitments have terminated, (c) the Credit Party Obligations and all other
amounts owing to the Administrative Agent or any Lender hereunder are paid in
full in cash, that:

Section 6.1 Indebtedness.

No Credit Party will, nor will it permit any Subsidiary to, contract, create,
incur, assume or permit to exist any Indebtedness, except:

(a) Indebtedness arising or existing under this Agreement and the other Credit
Documents;

(b) Indebtedness of the Credit Parties and their Subsidiaries existing as of the
Closing Date as referred to in the financial statements referenced in
Section 3.1 (and set

 

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out more specifically in Schedule 6.1(b) hereto) and any renewals, refinancings
or extensions thereof in a principal amount not in excess of that outstanding as
of the date of such renewal, refinancing or extension and the terms of any such
renewal, refinancing or extension are not less favorable in any material respect
to the obligor thereunder;

(c) Indebtedness of the Credit Parties and their Subsidiaries incurred after the
Closing Date consisting of Capital Leases or Indebtedness incurred to provide
all or a portion of the purchase price or cost of construction of an asset;
provided that (i) such Indebtedness when incurred shall not exceed the purchase
price or cost of construction of such asset; (ii) no such Indebtedness shall be
renewed, refinanced or extended for a principal amount in excess of the
principal balance outstanding thereon at the time of such renewal, refinancing
or extension; and (iii) the total amount of all such Indebtedness shall not
exceed $10,000,000 at any time outstanding;

(d) Unsecured intercompany Indebtedness among the Credit Parties;

(e) Indebtedness and obligations owing under (i) Bank Products and (ii) other
Hedging Agreements entered into in the ordinary course of business in order to
manage existing or anticipated interest rate, exchange rate or commodity price
risks and not for speculative purposes;

(f) Indebtedness of a Person existing at the time such Person becomes a
Subsidiary of a Credit Party in a transaction permitted hereunder in an
aggregate principal amount not to exceed $10,000,000 for all such Persons;
provided that any such Indebtedness was not created in anticipation of or in
connection with the transaction or series of transactions pursuant to which such
Person became a Subsidiary of a Credit Party;

(g) any guarantee of the Existing Carrols Notes; provided, that within fifteen
(15) Business Days after the Closing Date, the obligations under the Existing
Carrols Notes, the guarantees thereof and the indenture under which the Existing
Carrols Notes were issued have been satisfied and discharged pursuant to
Section 9.01 of such indenture (except those obligations referred to in the
penultimate paragraph of such section);

(h) all ASC Section 840-40 lease financing obligations;

(i) Guaranty Obligations in respect of Indebtedness of a Credit Party to the
extent such Indebtedness is permitted to exist or be incurred pursuant to this
Section;

(j) Indebtedness under the Second Lien Notes in an aggregate principal amount
not to exceed $200,000,000;

(k) other unsecured Indebtedness of Credit Parties in an aggregate amount not to
exceed $7,500,000; provided that the Credit Parties are in pro forma compliance
with each of the financial covenants set forth in Section 5.9; and

 

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(l) other junior secured or unsecured Indebtedness of Credit Parties; provided
that after giving pro forma effect to the incurrence of any such Indebtedness,
(i) the Adjusted Leverage Ratio of the Borrower and its Subsidiaries on a
Consolidated basis shall be less than 5.00 to 1.00 and (ii) no Default or Event
of Default shall have occurred and be continuing.

Section 6.2 Liens.

The Credit Parties will not, nor will they permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Lien with respect to any of their
respective property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or hereafter acquired, except for the following
(the “Permitted Liens”):

(a) Liens created by or otherwise existing under or in connection with this
Agreement or the other Credit Documents in favor of the Administrative Agent on
behalf of the Secured Parties;

(b) Liens in favor of a Bank Product Provider in connection with a Bank Product;
provided that such Liens shall secure the Credit Party Obligations on a pari
passu basis;

(c) Liens securing purchase money Indebtedness and Capital Lease Obligations
(and refinancings thereof) to the extent permitted under Section 6.1(c);
provided, that (i) any such Lien attaches to such property concurrently with or
within thirty (30) days after the acquisition thereof and (ii) such Lien
attaches solely to the property so acquired in such transaction;

(d) Liens for taxes, assessments, charges or other governmental levies not yet
due or as to which the period of grace, if any, related thereto has not expired
or which are being contested in good faith by appropriate proceedings; provided
that adequate reserves with respect to such contested amounts are maintained on
the books of any Credit Party or its Subsidiaries, as the case may be, in
conformity with GAAP;

(e) statutory Liens such as carriers’, warehousemen’s, mechanics’,
materialmen’s, landlords’, repairmen’s or other like Liens arising in the
ordinary course of business which are not overdue for a period of more than
thirty (30) days or which are being contested in good faith by appropriate
proceedings;

(f) pledges or deposits in connection with workers’ compensation, unemployment
insurance and other social security legislation (other than any Lien imposed by
ERISA) and deposits securing liability to insurance carriers under insurance or
self-insurance arrangements in an aggregate amount not to exceed $500,000;

(g) deposits to secure the performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

 

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(h) easements, rights of way, restrictions and other similar encumbrances
affecting real property which, in the aggregate, are not substantial in amount,
and which do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the applicable Person;

(i) Liens existing on the Closing Date and set forth on Schedule 1.1(b);
provided that (i) no such Lien shall at any time be extended to cover property
or assets other than the property or assets subject thereto on the Closing Date
and improvements thereon and (ii) the principal amount of the Indebtedness
secured by such Lien shall not be extended, renewed, refunded or refinanced;

(j) any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in this definition
(other than Liens set forth on Schedule 1.1(b)); provided that such extension,
renewal or replacement Lien shall be limited to all or a part of the property
which secured the Lien so extended, renewed or replaced (plus improvements on
such property);

(k) Liens arising in the ordinary course of business by virtue of any
contractual, statutory or common law provision relating to banker’s Liens,
rights of set-off or similar rights and remedies covering deposit or securities
accounts (including funds or other assets credited thereto) or other funds
maintained with a depository institution or securities intermediary;

(l) any zoning, building or similar laws or rights reserved to or vested in any
Governmental Authority;

(m) restrictions on transfers of securities imposed by applicable Securities
Laws;

(n) Liens arising out of judgments or awards not resulting in an Event of
Default;

(o) Liens on the property of a Person existing at the time such Person becomes a
Subsidiary of a Credit Party in a transaction permitted hereunder securing
Indebtedness in an aggregate principal amount not to exceed $10,000,000 for all
such Persons; provided, however, that any such Lien may not extend to any other
property of any Credit Party or any other Subsidiary that is not a Subsidiary of
such Person; provided, further, that any such Lien was not created in
anticipation of or in connection with the transaction or series of transactions
pursuant to which such Person became a Subsidiary of a Credit Party;

(p) any interest or title of a lessor, licensor or sublessor under any lease,
license or sublease entered into by any Credit Party or any Subsidiary thereof
in the ordinary course of its business and covering only the assets so leased,
licensed or subleased;

 

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(q) Liens in favor of the Administrative Agent and/or Issuing Lender to Cash
Collateralize or otherwise secure the obligations of a Defaulting Lender to fund
risk participations hereunder;

(r) assignments of insurance or condemnation proceeds provided to landlords (or
their mortgagees) pursuant to the terms of any lease and Liens or rights
reserved in any lease for rent or for compliance with the terms of such lease;

(s) Liens securing the Second Lien Notes,

(t) Liens securing Indebtedness permitted by Section 6.1(k); and

(u) additional Liens so long as the principal amount of Indebtedness and other
obligations secured thereby does not exceed $1,000,000 in the aggregate.

Notwithstanding the foregoing, if a Credit Party shall grant a Lien on any of
its assets in violation of this Section, then it shall be deemed to have
simultaneously granted an equal and ratable Lien on any such assets in favor of
the Administrative Agent for the ratable benefit of the Secured Parties, to the
extent such Lien has not already been granted to the Administrative Agent.

Section 6.3 Nature of Business.

No Credit Party will, nor will it permit any Subsidiary (other than the Excluded
Subsidiaries) to, alter the character of its business in any material respect
from that conducted as of the Closing Date.

Section 6.4 Consolidation, Merger, Sale or Purchase of Assets, etc.

The Credit Parties will not, nor will they permit any Subsidiary to,

(a) dissolve, liquidate or wind up its affairs, or sell, transfer, lease or
otherwise dispose of its property or assets (each a “Disposition”) or agree to
do so at a future time, except the following, without duplication, shall be
expressly permitted:

(i) (A) the sale, transfer, lease or other disposition of inventory and
materials in the ordinary course of business and (B) the conversion of cash into
Cash Equivalents and Cash Equivalents into cash;

(ii) the sale, transfer or other disposition of property or assets to an
unrelated party not in the ordinary course of business where and to the extent
that they are the result of a Recovery Event; to the extent Net Cash Proceeds
from such Recovery Event are reinvested or used to make mandatory prepayments
pursuant to Section 2.7(b)(iv);

 

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(iii) the sale, lease, transfer or other disposition of machinery, parts and
equipment no longer used or useful in the conduct of the business of the Credit
Parties or any of their Subsidiaries;

(iv) the sale, lease or transfer of property or assets from one Credit Party to
another Credit Party or dissolution of any Credit Party (other than the
Borrower) to the extent any and all assets of such Credit Party are distributed
to another Credit Party;

(v) the termination of any Hedging Agreement;

(vi) the sale, lease, transfer, closure or other disposition of Restaurants, the
termination or non-renewal of leases or the subletting of Restaurants, in each
case as determined to be prudent in the reasonable judgment of the senior
officers of the Borrower;

(vii) Sale Leaseback transactions to the extent permitted under Section 6.12;
and

(viii) the sale, lease or transfer of property or assets not to exceed
$2,500,000 in the aggregate in any fiscal year;

provided that (A) with respect to clauses (ii), (iii), (vi), (vii) and
(viii) above, at least 75% of the consideration received therefor by the Credit
Parties or any such Subsidiary shall be in the form of cash or Cash Equivalents,
assets used in the business or Capital Stock, (B) after giving effect to any
Disposition pursuant to clause (vii) above, the Credit Parties shall be in
compliance on a Pro Forma Basis with the financial covenants set forth in
Section 5.9 hereof, recalculated for the most recently ended fiscal quarter for
which information is available and (C) with respect to clause (vii) above, no
Default or Event of Default shall exist or shall result therefrom; provided,
further, that with respect to sales of assets permitted hereunder only, the
Administrative Agent shall, without the consent of any Lender, release its Liens
relating to the particular assets sold; or

(b) (i) purchase, lease or otherwise acquire (in a single transaction or a
series of related transactions) the property or assets of any Person, other than
(A) Permitted Acquisitions, (B) the lease or acquisition of real property in
connection with Permitted Construction Transactions; (C) except as otherwise
limited or prohibited herein, purchases or other acquisitions of inventory,
materials, property and equipment in the ordinary course of business, (D) the
acquisition of certain infrastructure and corporate assets of the Spin-Off
Parties in connection with the Spin-Off, (E) the acquisition of the Pollo
Tropical Trademarks and (F) Investments permitted by Section 6.5 or (ii) enter
into any transaction of merger or consolidation, except for (A) Investments or
acquisitions permitted pursuant to Section 6.5 so long as the Credit Party
subject to such merger or consolidation is the surviving entity, (B) (y) the
merger or consolidation of a Subsidiary that is not a Credit Party with and into
a Credit Party; provided that such Credit Party will

 

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be the surviving entity and (z) the merger or consolidation of a Credit Party
with and into another Credit Party; provided that if the Borrower is a party
thereto, the Borrower will be the surviving corporation, and (C) the merger or
consolidation of a Subsidiary that is not a Credit Party with and into another
Subsidiary that is not a Credit Party.

Section 6.5 Advances, Investments and Loans.

The Credit Parties will not, nor will they permit any Subsidiary to, make any
Investment or contract to make any Investment except for the following (the
“Permitted Investments”):

(a) cash and Cash Equivalents;

(b) Investments existing as of the Closing Date as set forth on Schedule 1.1(a)
(which shall include new Restaurant development);

(c) receivables owing to the Credit Parties or any of their Subsidiaries or any
receivables and advances to suppliers, in each case if created, acquired or made
in the ordinary course of business and payable or dischargeable in accordance
with customary trade terms;

(d) Investments in and loans to any Credit Party;

(e) loans and advances to officers, directors and employees in an aggregate
amount not to exceed $200,000 at any time outstanding; provided that such loans
and advances shall comply with all applicable Requirements of Law (including
Sarbanes-Oxley);

(f) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business;

(g) Permitted Acquisitions;

(h) the construction or development of a new Restaurant; provided, however, that
in each such case, at the time such Credit Party enters into a contract
obligating a Credit Party or any of its Subsidiaries to commence construction or
develop a new Restaurant which obligates any Credit Party to pay greater than
$250,000 in the aggregate (i) no Default or Event of Default shall have occurred
and be continuing or would exist after giving effect to the construction or
development of the new Restaurant, and (ii) after giving effect to the
construction or development of such new Restaurant on a Pro Forma basis (A) the
Credit Parties are in compliance with each of the financial covenants set forth
in Section 5.9 and (B) if any time the Adjusted Leverage Ratio covenant level
set forth in Section 5.9(a) is greater than 5.50 to 1.0, the Adjusted Leverage
Ratio shall be 0.25 to 1.0 less than the then applicable level set forth in
Section 5.9 (each such

 

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construction or development of a new Restaurant permitted pursuant to this
clause (h) shall be referred to in this Agreement as a “Permitted Construction
Transaction”);

(i) Bank Products to the extent permitted hereunder;

(j) to the extent permitted by Section 6.10, Investments consisting of
redemptions, repurchases, and clawbacks of Second Lien Notes; and

(k) additional loan advances and/or Investments of a nature not contemplated by
the foregoing clauses hereof; provided that such loans, advances and/or
Investments made after the Closing Date pursuant to this clause shall not exceed
an aggregate amount of $1,000,000 at any one time outstanding.

Section 6.6 Transactions with Affiliates.

The Credit Parties will not, nor will they permit any Subsidiary to, enter into
any transaction or series of transactions, whether or not in the ordinary course
of business, with any officer, director, shareholder or Affiliate (or any
Spin-Off Party before or after the Spin-Off Date) other than on terms and
conditions substantially as favorable as would be obtainable in a comparable
arm’s-length transaction with a Person other than an officer, director,
shareholder or Affiliate, other than (a) transactions solely between or among
Credit Parties, (b) the Management Services Agreement, (c) the Transition
Services Agreement, (d) the Other Spin-Off Documents and (e) any Restricted
Payment permitted by Section 6.10.

Section 6.7 Ownership of Subsidiaries; Restrictions.

The Credit Parties will not, nor will they permit any Subsidiary to, create,
form or acquire any Subsidiaries, except for Domestic Subsidiaries that are
joined as Additional Credit Parties as required by the terms hereof. The Credit
Parties will not sell, transfer, pledge or otherwise dispose of any Equity
Interests in any of their Subsidiaries, nor will they permit any of their
Subsidiaries to issue, sell, transfer, pledge or otherwise dispose of any of
their Equity Interests, except in a transaction permitted by Section 6.4.

Section 6.8 Corporate Changes; Material Contracts.

No Credit Party will, nor will it permit any of its Subsidiaries to, (a) change
its fiscal quarters or fiscal year, (b) amend, modify or change its articles of
incorporation, certificate of designation (or corporate charter or other similar
organizational document) operating agreement or bylaws (or other similar
document) in any respect materially adverse to the interests of the Lenders
without the prior written consent of the Required Lenders. No Credit Party shall
(a) (i) except as permitted under Section 6.4, alter its legal existence or, in
one transaction or a series of transactions, merge into or consolidate with any
other entity, or sell all or substantially all of its assets, (ii) change its
state of incorporation or organization, without providing thirty (30) days prior
written notice to the Administrative Agent and without filing (or confirming
that the Administrative Agent has filed) such financing statements and
amendments to any previously filed financing statements as the Administrative
Agent may require, or (iii) change its registered

 

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legal name, without providing thirty (30) days prior written notice to the
Administrative Agent and without filing (or confirming that the Administrative
Agent has filed) such financing statements and amendments to any previously
filed financing statements as the Administrative Agent may require, (b) amend,
modify, cancel or terminate or fail to renew or extend or permit the amendment,
modification, cancellation or termination of any of its Material Contracts in
any respect materially adverse to the interests of the Lenders without the prior
written consent of the Required Lenders, (c) have more than one state of
incorporation, organization or formation, or (d) change its accounting method
(except in accordance with GAAP) in any manner adverse to the interests of the
Lenders without the prior written consent of the Required Lenders.

Section 6.9 Limitation on Restricted Actions.

The Credit Parties will not, nor will they permit any Subsidiary to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other distributions to any Credit Party on its Equity
Interests or with respect to any other interest or participation in, or measured
by, its profits, (b) pay any Indebtedness or other obligation owed to any Credit
Party, (c) make loans or advances to any Credit Party, (d) sell, lease or
transfer any of its properties or assets to any Credit Party, or (e) act as a
Guarantor and pledge its assets pursuant to the Credit Documents or any
renewals, refinancings, exchanges, refundings or extension thereof or amend or
otherwise modify the Credit Documents, except (in respect of any of the matters
referred to in clauses (a)-(d) above) for such encumbrances or restrictions
existing under or by reason of (i) this Agreement and the other Credit
Documents, (ii) applicable law, (iii) any document or instrument governing
Indebtedness incurred pursuant to Section 6.1(c); provided that any such
restriction contained therein relates only to the asset or assets constructed or
acquired in connection therewith, (iv) any Permitted Lien or any document or
instrument governing any Permitted Lien; provided that any such restriction
contained therein relates only to the asset or assets subject to such Permitted
Lien.

Section 6.10 Restricted Payments.

The Credit Parties will not, nor will they permit any Subsidiary to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment, except (a) to make dividends payable solely in the same class of Equity
Interests of such Person, (b) to make dividends or other distributions payable
to the Credit Parties (directly or indirectly through its Subsidiaries), (c) to
make payments and dividends to Carrols to be used by Carrols concurrently with
the payment of such payments and dividends (and within 15 Business Days
thereafter pursuant to Section 5.13(e)(iv)) to repay Indebtedness for borrowed
money of Carrols (including all accrued and unpaid interest thereon and
obligations with respect thereto) existing on the Closing Date (and after such
Indebtedness is paid in full, to be used by Carrols for other working capital or
corporate purposes of the Borrower and its Subsidiaries and/or Carrols LLC and
its Subsidiaries), in an aggregate amount for all such Restricted Payments not
to exceed $200,000,000, (d) so long as no Default or Event of Default has
occurred and is continuing to pay, prior to the Spin-Off Date, management fees
to Carrols pursuant to the Management Services Agreement as in effect on the
Closing Date in an aggregate amount not to exceed $12,000,000 during any fiscal
year; provided, that such amount may be increased by $1,000,000

 

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per year, (e) the payment of any obligations under the Other Spin-Off Documents,
(f) from and after the First Quarter of 2013, so long as (A) no Default or Event
of Default has occurred and is continuing or would result therefrom and (B) the
Credit Parties are in compliance with each of the financial covenants set forth
in Section 5.9 after giving effect to such Restricted Payment on a Pro Forma
Basis, to repurchase Equity Interests of the Borrower (including rights, options
or warrants to acquire such Equity Interests) from employees of the Borrower or
any of its Subsidiaries or their authorized representatives upon the death,
disability or termination of employment of such employees, in an aggregate
amount not to exceed $1,000,000 in any fiscal year, (g) with respect to any
taxable year (or portion thereof) for which the Borrower and its Subsidiaries
are members of a consolidated, combined or similar income tax group of which
Carrols or CRG is a member, and so long as no Default or Event of Default has
occurred and is continuing, to make Permitted Tax Distributions, (h) prior to
the Spin-Off Date and so long as (i) no Default or Event of Default has occurred
and is continuing and (ii) the Credit Parties’ shall have cash and Cash
Equivalents together with Revolving Availability of not less than $5,000,000,
make distributions to Carrols and/or CRG in an amount not to exceed $10,000,000
in the aggregate; provided that such distributions are paid by Carrols and CRG,
as applicable, to Carrols LLC, (i) so long as no Default of Event of Default has
occurred and is continuing, redeem, repurchase or clawback the Second Lien Notes
with the net proceeds received by the Borrower from the issuance and sale of the
Borrower’s Equity Interests (or, prior to the Spin-Off Date, from the issuance
and sale of CRG’s or Carrols’ Equity Interests, and (j) so long as no Default or
Event of Default has occurred and is continuing, redeem or repurchase the Second
Lien Notes (other than pursuant clause (i) above); provided that after giving
effect to such redemption or repurchase, (A) the Credit Parties’ shall have cash
and Cash Equivalents together with Revolving Availability of not less than
$5,000,000, (B) the Adjusted Leverage Ratio of the Borrower and its Subsidiaries
on a Consolidated basis shall be less than 5.25 to 1.00, (C) no Default or Event
of Default shall have resulted therefrom and (D) no Revolving Loans may be used
to make such distribution.

Section 6.11 Amendment of Subordinated Debt.

The Credit Parties will not, nor will they permit any Subsidiary to, without the
prior written consent of the Required Lenders, amend, modify, waive or extend or
permit the amendment, modification, waiver or extension of any term of any
document governing or relating to any Subordinated Debt in a manner that is
adverse to the interests of the Lenders.

Section 6.12 Sale Leasebacks.

The Credit Parties will not, nor will they permit any Subsidiary to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
property (whether real, personal or mixed), whether now owned or hereafter
acquired, (a) which any Credit Party or any Subsidiary has sold or transferred
or is to sell or transfer to a Person which is not a Credit Party or a
Subsidiary of a Credit Party or (b) which any Credit Party or any Subsidiary of
a Credit Party intends to use for substantially the same purpose as any other
property which has been sold or is to be sold or transferred by a Credit Party
or a Subsidiary of a Credit Party to another Person which is not a Credit Party
or a Subsidiary of a Credit Party in connection with such lease (each

 

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a “Sale Leaseback”); provided, that the Credit Parties may enter into Sale
Leasebacks so long as (i) the Credit Parties are in compliance with each of the
financial covenants set forth in Section 5.9 after giving effect to such Sale
Leaseback on a Pro Forma Basis and (ii) the proceeds from such Sale Leaseback
are used to prepay the Revolving Loans as required pursuant to
Section 2.7(b)(ii).

Section 6.13 No Further Negative Pledges.

The Credit Parties will not, nor will they permit any Subsidiary to, enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon any of their properties or assets,
whether now owned or hereafter acquired, or requiring the grant of any security
for such obligation if security is given for some other obligation, except
(a) pursuant to this Agreement and the other Credit Documents, (b) pursuant to
any document or instrument governing Indebtedness incurred pursuant to
Section 6.1(c); provided that any such restriction contained therein relates
only to the asset or assets constructed or acquired in connection therewith,
(c) pursuant to the Second Lien Notes Indenture and (d) in connection with any
Permitted Lien or any document or instrument governing any Permitted Lien;
provided that any such restriction contained therein relates only to the asset
or assets subject to such Permitted Lien.

Section 6.14 Account Control Agreements; Additional Bank Accounts.

Set forth on Schedule 3.16(c) is a complete and accurate list of all checking,
savings or other accounts (including securities accounts) of the Credit Parties
at any bank or other financial institution, or any other account where money is
or may be deposited or maintained with any Person as of the Closing Date.
Beginning forty-five (45) days following the Closing Date, each of the Credit
Parties will not open, maintain or otherwise have any checking, savings or other
accounts (including securities accounts) at any bank or other financial
institution, or any other account where money is or may be deposited or
maintained with any Person, other than (a) deposit accounts that are subject to
a Deposit Account Control Agreement, (b) securities accounts that are subject to
a Securities Account Control Agreement, (c) deposit accounts established solely
as payroll and other zero balance accounts and (d) other deposit accounts, so
long as at any time the balance in any such account does not exceed $50,000 and
the aggregate balance in all such accounts does not exceed $50,000.

ARTICLE VII

EVENTS OF DEFAULT

Section 7.1 Events of Default.

An Event of Default shall exist upon the occurrence of any of the following
specified events (each an “Event of Default”):

(a) Payment. (i) The Borrower shall fail to pay any principal on any Revolving
Loan or Revolving Loan Note when due (whether at maturity, by reason of

 

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acceleration or otherwise) in accordance with the terms hereof or thereof; or
(ii) the Borrower shall fail to reimburse the Issuing Lender for any LOC
Obligations when due (whether at maturity, by reason of acceleration or
otherwise) in accordance with the terms hereof; (iii) the Borrower shall fail to
provide cash collateral when required pursuant to Section 2.3(k); or (iv) the
Borrower shall fail to pay any interest on any Revolving Loan or any fee or
other amount payable hereunder when due (whether at maturity, by reason of
acceleration or otherwise) in accordance with the terms hereof and such failure
shall continue unremedied for five (5) days; or (v) or any Guarantor shall fail
to pay on the Guaranty in respect of any of the foregoing or in respect of any
other Guaranty Obligations hereunder (after giving effect to the grace period in
clause (iii)); or

(b) Misrepresentation. Any representation or warranty made or deemed made
herein, in the Security Documents or in any of the other Credit Documents or
which is contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement shall prove to
have been incorrect, false or misleading in any material respect on or as of the
date made or deemed made; or

(c) Covenant Default.

(i) Any Credit Party shall fail to perform, comply with or observe any term,
covenant or agreement applicable to it contained in Sections 5.1, 5.2(b), 5.4
(to the extent such covenant requires that the Credit Parties and their
Subsidiaries preserve, renew and keep in full force and effect their corporate
or other formative existence), 5.7, 5.9, 5.13, or Article VI hereof; or

(ii) Any Credit Party shall fail to comply with any other covenant contained in
this Agreement or the other Credit Documents or any other agreement, document or
instrument among any Credit Party, the Administrative Agent and the Lenders or
executed by any Credit Party in favor of the Administrative Agent or the Lenders
(other than as described in Sections 7.1(a) or 7.1(c)(i) above) and, with
respect to this clause (ii) only, such breach or failure to comply is not cured
within thirty (30) days of its occurrence; or

(d) Indebtedness Cross-Default. (i) Any Credit Party or any of its Subsidiaries
shall default in any payment of principal of or interest on any Indebtedness
(other than the Loans, Reimbursement Obligations, the Guaranty, ASC 840-40 lease
financing obligations and Hedging Agreements entered into in the ordinary course
of business in order to manage existing or anticipated commodity price risks) in
a principal amount outstanding of at least $2,500,000 for the Credit Parties and
any of their Subsidiaries in the aggregate beyond any applicable grace period
(not to exceed thirty (30) days), if any, provided in the instrument or
agreement under which such Indebtedness was created; or (ii) any Credit Party or
any of its Subsidiaries shall default in the observance or performance of any
other agreement or condition relating to any Indebtedness (other than the Loans,
Reimbursement Obligations, the Guaranty, ASC 840-40 lease financing obligations
and Hedging Agreements entered into in the ordinary course of business in order
to manage existing or anticipated commodity price risks) in a

 

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principal amount outstanding of at least $2,500,000 in the aggregate for the
Credit Parties and their Subsidiaries or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to become due prior to its
stated maturity or to be repurchased, prepaid, deferred or redeemed
(automatically or otherwise); or (iii) any Credit Party or any of its
Subsidiaries shall breach or default any Hedging Agreement that is a Bank
Product; or

(e) Other Cross-Defaults. The Credit Parties or any of their Subsidiaries shall
default in (i) the payment when due under any Material Contract or (ii) the
performance or observance, of any obligation or condition of any Material
Contract and, in the case of this clause (ii) only, such failure to perform or
observe such other obligation or condition continues unremedied for a period of
thirty (30) days after notice of the occurrence of such default unless, but only
as long as, the existence of any such default is being contested by the Credit
Parties in good faith by appropriate proceedings and adequate reserves in
respect thereof have been established on the books of the Credit Parties to the
extent required by GAAP except where such default could not be reasonably
expected to have a Material adverse Effect; or

(f) Bankruptcy Default. (i) A Credit Party or any of its Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or a Credit Party or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against a Credit Party or any of its Subsidiaries any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of sixty (60)
days; or (iii) there shall be commenced against a Credit Party or any of its
Subsidiaries any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or any
substantial part of their assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or (iv) a Credit
Party or any of its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) a Credit Party or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing their inability to, pay its debts as they become due; or

 

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(g) Judgment Default. (i) One or more judgments or decrees shall be entered
against a Credit Party or any of its Subsidiaries involving in the aggregate a
liability (to the extent not covered by insurance) of $2,500,000 or more and all
such judgments or decrees shall not have been paid and satisfied, vacated,
discharged, stayed or bonded pending appeal within the earlier of (A) thirty
(30) days from the entry thereof or (B) the expiration of the period during
which an appeal of such judgment or decree is permitted or (ii) any injunction,
temporary restraining order or similar decree shall be issued against a Credit
Party or any of its Subsidiaries that, individually or in the aggregate, could
result in a Material Adverse Effect; or

(h) ERISA Default. The occurrence of any of the following to the extent it could
reasonably be expected to have a Material Adverse Effect: (i) Any Person shall
engage in any “prohibited transaction” (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any “accumulated funding
deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Plan or any Lien in favor of the PBGC or a Plan (other
than a Permitted Lien) shall arise on the assets of the Credit Parties or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Lenders, likely to result
in the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) a
Credit Party, any of its Subsidiaries or any Commonly Controlled Entity shall,
or in the reasonable opinion of the Required Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, any Multiemployer Plan or (vi) any other similar event or
condition shall occur or exist with respect to a Plan; or

(i) Change of Control. There shall occur a Change of Control; or

(j) Invalidity of Guaranty. At any time after the execution and delivery
thereof, the Guaranty, for any reason other than the satisfaction in full of all
Credit Party Obligations, shall cease to be in full force and effect (other than
in accordance with its terms) or shall be declared to be null and void, or any
Credit Party shall contest the validity, enforceability, perfection or priority
of the Guaranty, any Credit Document, or any Lien granted thereunder in writing
or deny in writing that it has any further liability, including with respect to
future advances by the Lenders, under any Credit Document to which it is a
party; or

(k) Invalidity of Credit Documents. Any Credit Document shall fail to be in full
force and effect or to give the Administrative Agent and/or the Lenders the
security interests, liens, rights, powers, priority and privileges purported to
be created thereby (except as such documents may be terminated or no longer in
force and effect in accordance with the terms thereof, other than those
indemnities and provisions which by their terms shall survive) or any Lien shall
fail to be a first priority, perfected Lien on a material portion of the
Collateral; or

 

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(l) Subordinated Debt. The subordination provisions contained in any
Subordinated Debt shall cease to be in full force and effect or shall cease to
give the Lenders the rights, powers and privileges purported to be created
thereby; or

(m) Classification as Senior Debt. The Credit Party Obligations shall cease to
be classified as “Senior Indebtedness,” “Designated Senior Indebtedness” or any
similar designation under any Subordinated Debt instrument; or

(n) Uninsured Loss. Any uninsured damage to or loss, theft or destruction of any
assets of the Credit Parties or any of their Subsidiaries shall occur that is in
excess of $2,500,000 (excluding customary deductible thresholds established in
accordance with historical past practices).

Section 7.2 Acceleration; Remedies.

Upon the occurrence and during the continuance of an Event of Default, then, and
in any such event, (a) if such event is a Bankruptcy Event, automatically the
Commitments shall immediately terminate and the Revolving Loans (with accrued
interest thereon), and all other amounts under the Credit Documents (including,
without limitation, the maximum amount of all contingent liabilities under
Letters of Credit) shall immediately become due and payable, and (b) if such
event is any other Event of Default, any or all of the following actions may be
taken: (i) with the written consent of the Required Lenders, the Administrative
Agent may, or upon the written request of the Required Lenders, the
Administrative Agent shall, declare the Commitments to be terminated forthwith,
whereupon the Commitments shall immediately terminate; (ii) the Administrative
Agent may, or upon the written request of the Required Lenders, the
Administrative Agent shall, declare the Revolving Loans (with accrued interest
thereon) and all other amounts owing under this Agreement and the Revolving Loan
Notes to be due and payable forthwith and direct the Borrower to pay to the
Administrative Agent cash collateral as security for the LOC Obligations for
subsequent drawings under then outstanding Letters of Credit an amount equal to
the maximum amount of which may be drawn under Letters of Credit then
outstanding, whereupon the same shall immediately become due and payable; and/or
(iii) with the written consent of the Required Lenders, the Administrative Agent
may, or upon the written request of the Required Lenders, the Administrative
Agent shall, exercise such other rights and remedies as provided under the
Credit Documents and under applicable law.

ARTICLE VIII

THE ADMINISTRATIVE AGENT

Section 8.1 Appointment and Authority.

Each of the Lenders and the Issuing Lender hereby irrevocably appoints Wells
Fargo to act on its behalf as the Administrative Agent hereunder and under the
other Credit Documents and authorizes the Administrative Agent to take such
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powers as are delegated to the Administrative Agent by the terms hereof or
thereof, together with such actions and powers as are reasonably incidental
thereto. The provisions of this Article are solely for the benefit of the
Administrative Agent, the Lenders and the Issuing Lender, and neither the
Borrower nor any other Credit Party shall have rights as a third party
beneficiary of any of such provisions. It is understood and agreed that the use
of the term “agent” herein or in any other Credit Documents (or any other
similar term) with reference to the Administrative Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead such term is used as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between contracting parties.

Section 8.2 Nature of Duties.

Anything herein to the contrary notwithstanding, none of the bookrunners,
arrangers or other agents listed on the cover page hereof shall have any powers,
duties or responsibilities under this Agreement or any of the other Credit
Documents, except in its capacity, as applicable, as the Administrative Agent, a
Lender or the Issuing Lender hereunder. Without limiting the foregoing, none of
the Lenders or other Persons so identified shall have or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders or other Persons so identified
in deciding to enter into this Agreement or in taking or not taking action
hereunder.

The Administrative Agent may perform any and all of its duties and exercise its
rights and powers hereunder or under any other Credit Document by or through any
one or more sub-agents appointed by the Administrative Agent. The Administrative
Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Related Parties. The
exculpatory provisions of this Article shall apply to any such sub-agent and to
the Related Parties of the Administrative Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as
Administrative Agent. The Administrative Agent shall not be responsible for the
negligence or misconduct of any subagents except to the extent that a court of
competent jurisdiction determines in a final and non appealable judgment that
the Administrative Agent acted with gross negligence or willful misconduct in
the selection of such sub-agents

Section 8.3 Exculpatory Provisions.

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein and in the other Credit Documents, and its
obligations hereunder shall be administrative in nature. Without limiting the
generality of the foregoing, the Administrative Agent:

(a) shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing;

 

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(b) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Credit Documents that the Administrative
Agent is required to exercise as directed in writing by the Required Lenders (or
such other number or percentage of the Lenders as shall be expressly provided
for herein or in the other Credit Documents), provided that the Administrative
Agent shall not be required to take any action that, in its opinion or the
opinion of its counsel, may expose the Administrative Agent to liability or that
is contrary to any Credit Document or applicable law, including for the
avoidance of doubt any action that may be in violation of the automatic stay
under any Debtor Relief Law or that may effect a forfeiture, modification or
termination of property of a Defaulting Lender in violation of any Debtor Relief
Law; and

(c) shall not, except as expressly set forth herein and in the other Credit
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to any Credit Party or any of its Affiliates
that is communicated to or obtained by the Person serving as the Administrative
Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken
by it (i) with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary, or as the
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Sections 9.1 and 7.2) or (ii) in the absence of its
own gross negligence or willful misconduct as determined by a court of competent
jurisdiction by final and nonappealable judgment. The Administrative Agent shall
be deemed not to have knowledge of any Default unless and until notice
describing such Default is given to the Administrative Agent in writing by the
Borrower, a Lender or an Issuing Lender.

The Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Credit Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Credit
Document or any other agreement, instrument or document or (v) the satisfaction
of any condition set forth in Article IV or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the
Administrative Agent.

Section 8.4 Reliance by Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed by
it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person. The Administrative Agent also may rely upon any statement made to
it orally or by telephone and believed by it to have been made by the proper
Person, and

 

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shall not incur any liability for relying thereon. In determining compliance
with any condition hereunder to the making of a Revolving Loan, or the issuance,
extension, renewal or increase of a Letter of Credit, that by its terms must be
fulfilled to the satisfaction of a Lender or the Issuing Lender, the
Administrative Agent may presume that such condition is satisfactory to such
Lender or the Issuing Lender unless the Administrative Agent shall have received
notice to the contrary from such Lender or the Issuing Lender prior to the
making of such Revolving Loan or the issuance of such Letter of Credit. The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

Section 8.5 Notice of Default.

The Administrative Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received written notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default”. In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided, however, that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders except to the extent that
this Agreement expressly requires that such action be taken, or not taken, only
with the consent or upon the authorization of the Required Lenders, or all of
the Lenders, as the case may be.

Section 8.6 Non-Reliance on Administrative Agent and Other Lenders.

Each Lender and the Issuing Lender expressly acknowledges that neither the
Administrative Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any representation or warranty to it
and that no act by the Administrative Agent hereinafter taken, including any
review of the affairs of any Credit Party, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender and the Issuing Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender or any of
their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender and the Issuing Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Credit Document or any related agreement or any document furnished
hereunder or thereunder.

 

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Section 8.7 Indemnification.

The Lenders agree to indemnify the Administrative Agent, and the Issuing Lender
in its capacity hereunder and their Affiliates and their respective officers,
directors, agents and employees (to the extent not reimbursed by the Credit
Parties and without limiting the obligation of the Credit Parties to do so),
ratably according to their respective Revolving Commitment Percentages in effect
on the date on which indemnification is sought under this Section, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Credit Party Obligations) be imposed on, incurred
by or asserted against any such indemnitee in any way relating to or arising out
of any Credit Document or any documents contemplated by or referred to herein or
therein or the Transactions or any action taken or omitted by any such
indemnitee under or in connection with any of the foregoing; provided, however,
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent resulting from such indemnitee’s
gross negligence or willful misconduct, as determined by a court of competent
jurisdiction. The agreements in this Section shall survive the termination of
this Agreement and payment of the Revolving Loan Notes, any Reimbursement
Obligation and all other amounts payable hereunder.

Section 8.8 Administrative Agent in Its Individual Capacity.

The Person serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent and the term
“Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the
context otherwise requires, include the Person serving as the Administrative
Agent hereunder in its individual capacity. Such Person and its Affiliates may
accept deposits from, lend money to, own securities of, act as the financial
advisor or in any other advisory capacity for and generally engage in any kind
of business with the Credit Parties or any Subsidiary or other Affiliate thereof
as if such Person were not the Administrative Agent hereunder and without any
duty to account therefor to the Lenders.

Section 8.9 Resignation of Administrative Agent.

(a) The Administrative Agent may at any time give notice of its resignation to
the Lenders, the Issuing Lender and the Borrower. Upon receipt of any such
notice of resignation, the Required Lenders shall have the right, subject to the
approval of the Borrower to the extent no Event of Default shall then exist and
be continuing (which approval shall not unreasonably be withheld or delayed),
which shall be a bank with an office in the United States, or an Affiliate of
any such bank with an office in the United States. If no such successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Administrative Agent
gives notice of its resignation (or such earlier day as shall be agreed by the
Required Lenders) (the “Resignation Effective Date”), then the retiring
Administrative Agent may (but shall not be obligated to), on behalf of the
Lenders and the Issuing Lender, appoint a successor Administrative Agent meeting
the qualifications

 

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set forth above subject to the approval of the Borrower to the extent no Event
of Default shall then exist and be continuing (which approval shall not
unreasonably be withheld or delayed). Whether or not a successor has been
appointed, such resignation shall nonetheless become effective in accordance
with such notice on the Resignation Effective Date.

(b) If the Person serving as Administrative Agent is a Defaulting Lender
pursuant to clause (d) of the definition thereof, the Required Lenders may, to
the extent permitted by applicable law, by notice in writing to the Borrower and
such Person remove such Person as Administrative Agent and, subject to the
approval of the Borrower to the extent no Event of Default shall then exist and
be continuing (which approval shall not unreasonably be withheld or delayed),
appoint a successor. If no such successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days (or
such earlier day as shall be agreed by the Required Lenders) (the “Removal
Effective Date”), then such removal shall nonetheless become effective in
accordance with such notice on the Removal Effective Date.

(c) With effect from the Resignation Effective Date or the Removal Effective
Date (as applicable) (i) the retiring or removed Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other Credit
Documents (except that in the case of any Collateral held by the Administrative
Agent on behalf of the Lenders or the Issuing Lender under any of the Credit
Documents, the retiring Administrative Agent shall continue to hold such
Collateral until such time as a successor Administrative Agent is appointed) and
(ii) all payments, communications and determinations provided to be made by, to
or through the Administrative Agent shall instead be made by or to each Lender
and the Issuing Lender directly, until such time, if any, as the Required
Lenders appoint a successor Administrative Agent as provided for above. Upon the
acceptance of a successor’s appointment as Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring or removed Administrative Agent, and the
retiring or removed Administrative Agent shall be discharged from all of its
duties and obligations hereunder or under the other Credit Documents (if not
already discharged therefrom as provided above in this paragraph). The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the Borrower
and such successor. After the retiring Administrative Agent’s resignation or
removal hereunder and under the other Credit Documents, the provisions of this
Article and Section 9.5 shall continue in effect for the benefit of such
retiring or removed Administrative Agent, its sub-agents and their respective
Related Parties in respect of any actions taken or omitted to be taken by any of
them while the retiring Administrative Agent was acting as Administrative Agent.

(d) Any resignation by Wells Fargo Bank, as Administrative Agent pursuant to
this Section shall also constitute its resignation as Issuing Lender. Upon the
acceptance of a successor’s appointment as Administrative Agent hereunder,
(i) such successor shall succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring Issuing Lender, (ii) the retiring
Issuing Lender shall be

 

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discharged from all of their respective duties and obligations hereunder or
under the other Credit Documents, and (iii) the successor Issuing Lender shall
issue letters of credit in substitution for the Letters of Credit, if any,
outstanding at the time of such succession or make other arrangements
satisfactory to the retiring Issuing Lender to effectively assume the
obligations of the retiring Issuing Lender with respect to such Letters of
Credit.

Section 8.10 Collateral and Guaranty Matters.

(a) The Lenders and the Bank Product Provider irrevocably authorize and direct
the Administrative Agent:

(i) to release any Lien on any Collateral granted to or held by the
Administrative Agent under any Credit Document (A) upon termination of the
Commitments and payment in full of all Credit Party Obligations (other than
contingent indemnification obligations) and the expiration or termination of all
Letters of Credit, (B) that is transferred or to be transferred as part of or in
connection with any sale or other disposition permitted under Section 6.4, or
(C) subject to Section 9.1, if approved, authorized or ratified in writing by
the Required Lenders;

(ii) to subordinate any Lien on any Collateral granted to or held by the
Administrative Agent under any Credit Document to the holder of any Lien on such
Collateral that is permitted by Section 6.2(c); and

(iii) to release any Guarantor from its obligations under the applicable
Guaranty if such Person ceases to be a Guarantor as a result of a transaction
permitted hereunder.

(b) In connection with a termination or release pursuant to this Section, the
Administrative Agent shall promptly execute and deliver to the applicable Credit
Party, at the Borrower’s expense, all documents that the applicable Credit Party
shall reasonably request to evidence such termination or release. Upon request
by the Administrative Agent at any time, the Required Lenders will confirm in
writing the Administrative Agent’s authority to release or subordinate its
interest in particular types or items of Collateral, or to release any Guarantor
from its obligations under the Guaranty pursuant to this Section.

Section 8.11 Bank Products.

Except as otherwise provided herein, no Bank Product Provider that obtains the
benefits of Sections 2.11 and 7.2, any Guaranty or any Collateral by virtue of
the provisions hereof or of any Guaranty or any Collateral Document shall have
any right to notice of any action or to consent to, direct or object to any
action hereunder or under any other Credit Document or otherwise in respect of
the Collateral (including the release or impairment of any Collateral) other
than in its capacity as a Lender and, in such case, only to the extent expressly
provided in the Credit Documents. The Administrative Agent shall not be required
to verify the payment of,

 

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or that other satisfactory arrangements have been made with respect to, Credit
Party Obligations arising under Bank Products unless the Administrative Agent
has received written notice (including, without limitation, a Bank Product
Provider Notice) of such Credit Party Obligations, together with such supporting
documentation as the Administrative Agent may request, from the applicable Bank
Product Provider.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Amendments, Waivers, Consents and Release of Collateral.

Neither this Agreement nor any of the other Credit Documents, nor any terms
hereof or thereof may be amended, modified, extended, restated, replaced, or
supplemented (by amendment, waiver, consent or otherwise) except in accordance
with the provisions of this Section nor may Collateral be released except as
specifically provided herein or in the Security Documents or in accordance with
the provisions of this Section. The Required Lenders may or, with the consent of
the Required Lenders, the Administrative Agent may, from time to time, (a) enter
into with the Borrower written amendments, supplements or modifications hereto
and to the other Credit Documents for the purpose of adding any provisions to
this Agreement or the other Credit Documents or changing in any manner the
rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive or
consent to the departure from, on such terms and conditions as the Required
Lenders may specify in such instrument, any of the requirements of this
Agreement or the other Credit Documents or any Default or Event of Default and
its consequences; provided, however, that no such amendment, supplement,
modification, release, waiver or consent shall:

(i) reduce the amount or extend the scheduled date of maturity of any Revolving
Loan or Revolving Loan Note or any installment thereon, or reduce the stated
rate of any interest or fee payable hereunder (except in connection with a
waiver of Default Interest which shall be determined by a vote of the Required
Lenders) or extend the scheduled date of any payment thereof or increase the
amount or extend the expiration date of any Lender’s Commitment, in each case
without the written consent of each Lender directly affected thereby; provided
that, it is understood and agreed that no waiver, reduction or deferral of a
mandatory prepayment required pursuant to Section 2.7(b), nor any amendment of
Section 2.7(b) or the definitions of Asset Disposition, Debt Issuance, or
Recovery Event, shall constitute a reduction of the amount of, or an extension
of the scheduled date of, the scheduled date of maturity of, or any installment
of, any Revolving Loan or Revolving Loan Note; or

(ii) amend, modify or waive any provision of this Section or reduce the
percentage specified in the definition of Required Lenders, without the written
consent of all the Lenders; or

 

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(iii) release the Borrower or all or substantially all of the value of the
Guaranty, without the written consent of all of the Lenders; provided that the
Administrative Agent may release any Guarantor permitted to be released pursuant
to the terms of this Agreement; or

(iv) release all or substantially all of the value of the Collateral without the
written consent of all of the Lenders; provided that the Administrative Agent
may release any Collateral permitted to be released pursuant to the terms of
this Agreement or the Security Documents; or

(v) subordinate the Revolving Loans to any other Indebtedness without the
written consent of all of the Lenders; or

(vi) permit a Letter of Credit to have an original expiry date more than
twenty-four (24) months from the date of issuance without the consent of each of
the Lenders; provided, that the expiry date of any Letter of Credit may be
extended in accordance with the terms of Section 2.3(a); or

(vii) permit the Borrower to assign or transfer any of its rights or obligations
under this Agreement or other Credit Documents without the written consent of
all of the Lenders; or

(viii) amend, modify or waive any provision of the Credit Documents requiring
consent, approval or request of the Required Lenders or all Lenders without the
written consent of the Required Lenders or all the Lenders as appropriate; or

(ix) amend, modify or waive (A) the order in which Credit Party Obligations are
paid or (B) the pro rata sharing of payments by and among the Lenders, in each
case in accordance with Section 2.11(b) or 9.7(b) without the written consent of
each Lender directly affected thereby; or

(x) amend, modify or waive any provision of Article VIII without the written
consent of the then Administrative Agent; or

(xi) amend or modify the definition of Credit Party Obligations to delete or
exclude any obligation or liability described therein without the written
consent of each Lender directly affected thereby; or

(xii) amend the definitions of “Hedging Agreement,” “Bank Product,” or “Bank
Product Provider” without the consent of any Bank Product Provider that would be
adversely affected thereby; or

(xiii) amend or modify Section 9.6(f) without the consent of each Granting
Lender all or any part of whose Loans are being funded by an SPC at the time of
such amendment or other modification;

 

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provided, further, that no amendment, waiver or consent affecting the rights or
duties of the Administrative Agent or the Issuing Lender under any Credit
Document shall in any event be effective, unless in writing and signed by the
Administrative Agent and/or the Issuing Lender, as applicable, in addition to
the Lenders required hereinabove to take such action.

Any such waiver, any such amendment, supplement or modification and any such
release shall apply equally to each of the Lenders and shall be binding upon the
Borrower, the other Credit Parties, the Lenders, the Administrative Agent and
all future holders of the Revolving Loan Notes. In the case of any waiver, the
Borrower, the other Credit Parties, the Lenders and the Administrative Agent
shall be restored to their former position and rights hereunder and under the
outstanding Revolving Loans and Revolving Loan Notes and other Credit Documents,
and any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.

Notwithstanding any of the foregoing to the contrary, the consent of the
Borrower and the other Credit Parties shall not be required for any amendment,
modification or waiver of the provisions of Article VIII (other than the
provisions of Section 8.9).

Notwithstanding any of the foregoing to the contrary, the Credit Parties and the
Administrative Agent, without the consent of any Lender, may enter into any
amendment, modification or waiver of any Credit Document, or enter into any new
agreement or instrument, to (i) effect the granting, perfection, protection,
expansion or enhancement of any security interest in any Collateral or
additional property to become Collateral for the benefit of the Secured Parties,
or as required by local law to give effect to, or protect any security interest
for the benefit of the Secured Parties, in any property or so that the security
interests therein comply with applicable law or (ii) correct any obvious error
or omission of a technical nature, in each case that is immaterial (as
determined by the Administrative Agent), in any provision of any Credit
Document, if the same is not objected to in writing by the Required Lenders
within five (5) Business Days following receipt of notice thereof.

Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (a) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Revolving Loans, and each Lender acknowledges that the provisions of
Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein, (b) the Required Lenders may consent to allow a
Credit Party to use cash collateral in the context of a bankruptcy or insolvency
proceeding and (c) no Defaulting Lender shall have any right to approve or
disapprove any amendment, waiver or consent hereunder, except (i) that the
Commitment of such Lender may not be increased or extended without the consent
of such Lender and (ii) to the extent such amendment, waiver or consent impacts
such Defaulting Lender more than the other Lenders.

For the avoidance of doubt and notwithstanding any provision to the contrary
contained in this Section 9.1, this Agreement may be amended (or amended and
restated) with the written consent of the Credit Parties and the Administrative
Agent in accordance with Section 2.22.

 

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Section 9.2 Notices.

(a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
paragraph (b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopier as follows:

 

  (i) If to the Borrower or any other Credit Party:

Fiesta Restaurant Group, Inc.

968 James Street

Syracuse, New York 13203

Attention:    General Counsel

Telephone:  (315) 424-0513

Fax:              (315) 475-9606

Email:          jzirkman@carrols.com

 

  (ii) If to the Administrative Agent:

Wells Fargo Bank, National Association

1525 West W.T. Harris Blvd.

Charlotte, NC 28262

Mail Code: D1109-019

Attention:    Carey Ritenour, Syndication Agency Services

Telephone:  (704) 590-2784

Fax:              (704) 590-2782

E-mail:         carey.ritenour@wachovia.com

with a copy to:

Wells Fargo Bank, National Association

1808 Aston Avenue

Suite 250

Carlsbad, CA, CA 92008

Attention:    Tim Loyd

Telephone:  (760) 918-2715

Fax:              (760) 918-2727

Email:          tim.loyd@wellsfargo.com

 

  (iii) if to a Lender, to it at its address (or telecopier number) set forth in
its Administrative Questionnaire.

 

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Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient). Notices delivered through electronic communications to the extent
provided in paragraph (b) below, shall be effective as provided in said
paragraph (b).

(b) Electronic Communications. Notices and other communications to the Lenders
and the Issuing Lender hereunder may be delivered or furnished by electronic
communication (including e-mail and Internet or intranet websites) pursuant to
procedures approved by the Administrative Agent, provided that the foregoing
shall not apply to notices to any Lender or the Issuing Lender pursuant to
Article II if such Lender or the Issuing Lender, as applicable, has notified the
Administrative Agent that it is incapable of receiving notices under such
Article by electronic communication. The Administrative Agent or the Borrower
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it,
provided that approval of such procedures may be limited to particular notices
or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

(c) Change of Address, Etc. Any party hereto may change its address or
telecopier number for notices and other communications hereunder by notice to
the other parties hereto.

(d) Platform.

(i) Each Credit Party agrees that the Administrative Agent may make the
Communications (as defined below) available to the Lenders by posting the
Communications on Intralinks or a substantially similar electronic transmission
system (the “Platform”).

(ii) The Platform is provided “as is” and “as available.” The Agent Parties (as
defined below) do not warrant the adequacy of the Platform and expressly
disclaim liability for errors or omissions in the communications effected
thereby (the “Communications”). No warranty of any kind, express, implied or
statutory, including, without limitation, any warranty of merchantability,
fitness

 

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for a particular purpose, non-infringement of third-party rights or freedom from
viruses or other code defects, is made by any Agent Party in connection with the
Communications or the Platform. In no event shall the Administrative Agent or
any of its affiliates or any of their respective officers, directors, employees,
agents, advisors or representatives (collectively, “Agent Parties”) have any
liability to the Credit Parties, any Lender or any other Person or entity for
damages of any kind, including, without limitation, direct or indirect, special,
incidental or consequential damages, losses or expenses (whether in tort,
contract or otherwise) arising out of any Credit Party’s or the Administrative
Agent’s transmission of communications through the Platform.

Section 9.3 No Waiver; Cumulative Remedies.

No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.

Section 9.4 Survival of Representations and Warranties.

All representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the Revolving
Loan Notes and the making of the Revolving Loans; provided that all such
representations and warranties shall terminate on the date upon which the
Commitments have been terminated and all Credit Party Obligations have been paid
in full.

Section 9.5 Payment of Expenses and Taxes; Indemnity.

(a) Costs and Expenses. The Credit Parties shall pay (i) all reasonable
out-of-pocket expenses incurred by the Administrative Agent and its Affiliates
(including the reasonable fees, charges and disbursements of counsel for the
Administrative Agent) in connection with the syndication of the credit
facilities provided for herein, the preparation, negotiation, execution,
delivery and administration of this Agreement and the other Credit Documents or
any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the Transactions shall be consummated), (ii) all reasonable
out-of-pocket expenses incurred by the Issuing Lender in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all out-of-pocket expenses incurred by the
Administrative Agent, any Lender or the Issuing Lender (including the reasonable
fees, charges and disbursements of any counsel for the Administrative Agent, any
Lender or the Issuing Lender), and shall pay all fees and time charges for
attorneys who may be employees of the Administrative Agent, any Lender or the
Issuing Lender, in connection with the enforcement or protection of its rights
(A) in connection with this Agreement

 

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and the other Credit Documents, including its rights under this Section, or
(B) in connection with the Revolving Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Revolving Loans or
Letters of Credit.

(b) Indemnification by the Credit Parties. The Credit Parties shall indemnify
the Administrative Agent (and any sub-agent thereof), each Lender and the
Issuing Lender, and each Related Party of any of the foregoing Persons (each
such Person being called an “Indemnitee”) against, and hold each Indemnitee
harmless from, any and all losses, claims, penalties, damages, liabilities and
related expenses (including the reasonable fees, charges and disbursements of
any counsel for any Indemnitee), incurred by any Indemnitee or asserted against
any Indemnitee by any third party or by the Borrower or any other Credit Party
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement, any other Credit Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto
of their respective obligations hereunder or thereunder or the consummation of
the Transactions, (ii) any Revolving Loan or Letter of Credit or the use or
proposed use of the proceeds therefrom (including any refusal by the Issuing
Lender to honor a demand for payment under a Letter of Credit if the documents
presented in connection with such demand do not strictly comply with the terms
of such Letter of Credit), (iii) any actual or alleged presence or release of
Materials of Environmental Concern on or from any property owned or operated by
any Credit Party or any of its Subsidiaries, or any liability under
Environmental Law related in any way to any Credit Party or any of its
Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort
or any other theory, whether brought by a third party or by the Borrower or any
other Credit Party, and regardless of whether any Indemnitee is a party thereto,
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
(A) are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee or (B) result from a claim brought by the Borrower
or any other Credit Party against an Indemnitee for breach in bad faith of such
Indemnitee’s obligations hereunder or under any other Credit Document, if the
Borrower or such Credit Party has obtained a final and nonappealable judgment in
its favor on such claim as determined by a court of competent jurisdiction. This
section (b) shall not apply with respect to Taxes other than any Taxes that
represent losses or damages arising from non-Tax claim.

(c) Reimbursement by Lenders. To the extent that the Credit Parties for any
reason fail to indefeasibly pay any amount required under paragraph (a) or
(b) of this Section to be paid by it to the Administrative Agent (or any
sub-agent thereof), the Issuing Lender or any Related Party of any of the
foregoing, each Lender severally agrees to pay to the Administrative Agent (or
any such sub-agent), the Issuing Lender or such Related Party, as the case may
be, such Lender’s Revolving Commitment Percentage (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount, provided that the unreimbursed expense or

 

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indemnified loss, claim, damage, liability or related expense, as the case may
be, was incurred by or asserted against the Administrative Agent (or any such
sub-agent) or the Issuing Lender in its capacity as such, or against any Related
Party of any of the foregoing acting for the Administrative Agent (or any such
sub-agent) or Issuing Lender in connection with such capacity.

(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable law, none of the Credit Parties shall assert, and each of the Credit
Parties hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Credit Document or any agreement or instrument
contemplated hereby, the Transactions, any Revolving Loan or Letter of Credit or
the use of the proceeds thereof. No Indemnitee referred to in paragraph (b)
above shall be liable for any damages arising from the use by unintended
recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in
connection with this Agreement or the other Credit Documents or the
Transactions.

(e) Payments. All amounts due under this Section shall be payable promptly/not
later than five (5) Business Days after demand therefor.

(f) Survival. The agreements contained in this Section shall survive the
resignation of the Administrative Agent and the Issuing Lender, the replacement
of any Lender, the termination of the Commitments and the repayment,
satisfaction or discharge of the Credit Party Obligations.

Section 9.6 Successors and Assigns; Participations.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that neither the Borrower nor
any other Credit Party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Administrative
Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an assignee in accordance with the
provisions of paragraph (b) of this Section, (ii) by way of participation in
accordance with the provisions of paragraph (d) of this Section, (iii) by way of
pledge or assignment of a security interest subject to the restrictions of
paragraph (e) of this Section (and any other attempted assignment or transfer by
any party hereto shall be null and void) or (iv) to an SPC in accordance with
the provisions of subsection (f) of this Section. Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby,
Participants to the extent provided in paragraph (d) of this Section and, to the
extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

 

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(b) Assignments by Lenders. Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Revolving Loans
at the time owing to it); provided that any such assignment shall be subject to
the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the Revolving Loans at the time owing to it or
contemporaneous assignments to related Approved Funds that equal at least the
amount specified in paragraph (b)(i)(B) or in the case of an assignment to a
Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be
assigned; and

(B) in any case not described in paragraph (b)(i)(A) of this Section, the
aggregate amount of the Commitment (which for this purpose includes Revolving
Loans outstanding thereunder) or, if the applicable Commitment is not then in
effect, the principal outstanding balance of the Revolving Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent or, if “Trade Date” is specified in the Assignment and
Assumption, as of the Trade Date) shall not be less than $1,000,000 (provided,
however, that simultaneous assignments shall be aggregated in respect of a
Lender and its Approved Funds), unless each of the Administrative Agent and, so
long as no Event of Default has occurred and is continuing, the Borrower
otherwise consents (each such consent not to be unreasonably withheld or
delayed).

(ii) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Revolving Loan or the
Commitment assigned, except that this clause (ii) shall not prohibit any Lender
from assigning all or a portion of its rights and obligations among separate
Tranches on a non-pro rata basis.

(iii) Required Consents. No consent shall be required for any assignment except
to the extent required by paragraph (b)(i)(B) of this Section and, in addition:

(A) the consent of the Borrower (such consent not to be unreasonably withheld or
delayed) shall be required unless (x) an Event of Default has occurred and is
continuing at the time of such assignment, such assignment is to a Lender, an
Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be
deemed to have consented to

 

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any such assignment unless it shall object thereto by written notice to the
Administrative Agent within five (5) Business Days after having received notice
thereof;

(B) the consent of the Administrative Agent (such consent not to be unreasonably
withheld or delayed) shall be required for assignments in respect of a Revolving
Commitment if such assignment is to a Person that is not a Lender with a
Commitment in respect of such facility, an Affiliate of such Lender or an
Approved Fund with respect to such Lender; and

(C) the consent of the Issuing Lender (such consent not to be unreasonably
withheld or delayed) shall be required for assignments in respect of a Revolving
Commitment.

(iv) Assignment and Assumption. The parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Assumption, together with
a processing and recordation fee of $3,500; provided that the Administrative
Agent may, in its sole discretion, elect to waive such processing and
recordation fee in the case of any assignment. The assignee, if it is not a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.

(v) No Assignment to Certain Persons. No such assignment shall be made to
(A) Carrols, CRG, any Credit Party or any of the Carrols’s, CRG’s or any Credit
Party’s Affiliates or Subsidiaries or (B) any Defaulting Lender or any of its
Subsidiaries or any Person who, upon becoming a Lender hereunder, would
constitute any of the foregoing Persons described in this clause (B).

(vi) No Assignment to Natural Persons. No such assignment shall be made to a
natural person.

(vii) Certain Additional Payments. In connection with any assignment of rights
and obligations of any Defaulting Lender hereunder, no such assignment shall be
effective unless and until, in addition to the other conditions thereto set
forth herein, the parties to the assignment shall make such additional payments
to the Administrative Agent in an aggregate amount sufficient, upon distribution
thereof as appropriate (which may be outright payment, purchases by the assignee
of participations or subparticipations, or other compensating actions, including
funding, with the consent of the Borrower and the Administrative Agent, the
applicable pro rata share of Revolving Loans previously requested but not funded
by the Defaulting Lender, to each of which the applicable assignee and assignor
hereby irrevocably consent), to (A) pay and satisfy in full all payment
liabilities then owed by such Defaulting Lender to the Administrative Agent or
any Lender hereunder (and interest accrued thereon), and (B) acquire (and fund
as appropriate) its full pro rata share of all Revolving Loans and
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Letters of Credit in accordance with its Applicable Percentage. Notwithstanding
the foregoing, in the event that any assignment of rights and obligations of any
Defaulting Lender hereunder shall become effective under applicable Law without
compliance with the provisions of this paragraph, then the assignee of such
interest shall be deemed to be a Defaulting Lender for all purposes of this
Agreement until such compliance occurs.

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to paragraph (c) of this Section, from and after the effective date specified in
each Assignment and Assumption, the assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to
the benefits of Sections 2.14 and 9.5 with respect to facts and circumstances
occurring prior to the effective date of such assignment. Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this paragraph shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with paragraph (d) of this Section.

(c) Register. The Administrative Agent, acting solely for this purpose as an
agent of the Borrower, shall maintain at one of its offices in Charlotte, North
Carolina a copy of each Assignment and Assumption delivered to it and a register
for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts (and stated interest) of the Revolving
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be conclusive absent manifest
error, and the Borrower, the Administrative Agent and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary. The Register shall be available for inspection by the Borrower and
any Lender, at any reasonable time and from time to time upon reasonable prior
notice; provided that a Lender shall only be entitled to inspect its own entry
in the Register and not that of any other Lender. In addition, the
Administrative Agent shall maintain on the Register information regarding the
designation and revocation of designation, of any Lender as a Defaulting Lender.

(d) Participations. Any Lender may at any time, without the consent of, or
notice to, the Borrower or the Administrative Agent, sell participations to any
Person (other than a natural Person or the Borrower or any of the Borrower’s
Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such
Lender’s rights and/or obligations under this Agreement (including all or a
portion of its Commitment and/or the Revolving Loans owing to it); provided that
(i) such Lender’s obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to

 

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the other parties hereto for the performance of such obligations, and (iii) the
Borrower, the Administrative Agent, the Issuing Lenders and Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement. For the avoidance of
doubt, each Lender shall be responsible for the indemnity under Section 9.5(c)
with respect to any payments made by such Lender to its Participant(s).

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver requiring the approval of 100% of the
Lenders. The Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.14, 2.15 and 2.16 (subject to the requirements and
limitations therein, including the requirements under Section 2.16(g) (it being
understood that the documentation required under Section 2.16(g) shall be
delivered to the participating Lender)) to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section; provided that such Participant (A) agrees to be subject to the
provisions of Sections 2.19 as if it were an assignee under paragraph (b) of
this Section; and (B) shall not be entitled to receive any greater payment under
Section 2.14 or Section 2.16, with respect to any participation, than its
participating Lender would have been entitled to receive. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 9.7(a) as though it were a Lender; provided that such Participant agrees
to be subject to Section 9.7(b) as though it were a Lender. Each Lender that
sells a participation shall, acting solely for this purpose as an agent of the
Borrower, maintain a register on which it enters the name and address of each
Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Revolving Loans or other obligations under the
Credit Documents (the “Participant Register”); provided that no Lender shall
have any obligation to disclose all or any portion of the Participant Register
to any Person (including the identity of any Participant or any information
relating to a Participant’s interest in any commitments, loans, letters of
credit or its other obligations under any Credit Document) except to the extent
that such disclosure is necessary to establish that such commitment, loan,
letter of credit or other obligation is in registered form under
Section 5f.103-1(c) of the United States Treasury Regulations. The entries in
the Participant Register shall be conclusive absent manifest error, and such
Lender shall treat each Person whose name is recorded in the Participant
Register as the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary.

(e) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

 

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(f) Special Purpose Funding Vehicles. Notwithstanding anything to the contrary
contained herein, any Lender (a “Granting Lender”) may grant to a special
purpose funding vehicle identified as such in writing from time to time by the
Granting Lender to the Administrative Agent and the Borrower (an “SPC”) the
option to provide all or any part of any Loan that such Granting Lender would
otherwise be obligated to make pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to fund any Loan,
and (ii) if an SPC elects not to exercise such option or otherwise fails to make
all or any part of such Loan, the Granting Lender shall be obligated to make
such Loan pursuant to the terms hereof. Each party hereto hereby agrees that
(i) neither the grant to any SPC nor the exercise by any SPC of such option
shall increase the costs or expenses or otherwise increase or change the
obligations of the Borrower under this Agreement, (ii) no SPC shall be liable
for any indemnity or similar payment obligation under this Agreement for which a
Lender would be liable, and (iii) the Granting Lender shall for all purposes,
including the approval of any amendment, waiver or other modification of any
provision of any Loan Document, remain the Lender of record hereunder. The
making of a Loan by an SPC hereunder shall utilize the Revolving Commitment of
the Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender. In furtherance of the foregoing, each party hereto hereby
agrees (which agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in full of all
outstanding commercial paper or other senior debt of any SPC, it will not
institute against, or join any other Person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding
under the laws of the United States or any State thereof. Notwithstanding
anything to the contrary contained herein, any SPC may (i) with notice to, but
without prior consent of the Borrower and the Administrative Agent and with the
payment of a processing fee in the amount of $3,500 (which processing fee may be
waived by the Administrative Agent in its sole discretion), assign all or any
portion of its right to receive payment with respect to any Loan to the Granting
Lender and (ii) disclose on a confidential basis any non-public information
relating to its funding of Loans to any rating agency, commercial paper dealer
or provider of any surety or guarantee or credit or liquidity enhancement to
such SPC.

Section 9.7 Right of Set-off; Sharing of Payments.

(a) If an Event of Default shall have occurred and be continuing, each Lender,
the Issuing Lender and each of their respective Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by applicable
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Lender, the Issuing
Lender or any such Affiliate to or for the credit or the account of the Borrower
or any other Credit Party against any and all of the obligations of the Borrower
or such Credit Party now or hereafter existing under this Agreement or any other
Credit Document to such Lender or the Issuing Lender, irrespective of whether or
not such Lender or the Issuing Lender shall have made any demand under this
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obligations of the Borrower or such Credit Party may be contingent or unmatured
or are owed to a branch, office or affiliate of such Lender or the Issuing
Lender different from the branch, office or Affiliate holding such deposit or
obligated on such indebtedness; provided that in the event that any Defaulting
Lender shall exercise any such right of setoff, (i) all amounts so set off shall
be paid over immediately to the Administrative Agent for further application in
accordance with the provisions of Section 2.21 and, pending such payment, shall
be segregated by such Defaulting Lender from its other funds and deemed held in
trust for the benefit of the Administrative Agent, the Issuing Lender and the
other Lenders, and (ii) the Defaulting Lender shall provide promptly to the
Administrative Agent a statement describing in reasonable detail the Credit
Party Obligations owing to such Defaulting Lender as to which it exercised such
right of setoff. The rights of each Lender, the Issuing Lender and their
respective Affiliates under this Section are in addition to other rights and
remedies (including other rights of setoff) that such Lender, the Issuing Lender
or their respective Affiliates may have. Each Lender and the Issuing Lender
agrees to notify the Borrower and the Administrative Agent promptly after any
such setoff and application, provided that the failure to give such notice shall
not affect the validity of such setoff and application.

(b) If any Lender shall, by exercising any right of setoff or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Revolving Loans or other obligations hereunder resulting in such Lender’s
receiving payment of a proportion of the aggregate amount of its Revolving Loans
and accrued interest thereon or other such obligations greater than its pro rata
share thereof as provided herein, then the Lender receiving such greater
proportion shall (i) notify the Administrative Agent of such fact, and
(ii) purchase (for cash at face value) participations in the Revolving Loans and
such other obligations of the other Lenders, or make such other adjustments as
shall be equitable, so that the benefit of all such payments shall be shared by
the Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Revolving Loans and other amounts owing
them, provided that:

(A) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without
interest; and

(B) the provisions of this paragraph shall not be construed to apply to (x) any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement (including the application of funds arising from the
existence of a Defaulting Lender), (y) any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Revolving Loans or participations in Letters of Credit to any assignee or
participant, other than to any Credit Party or any Subsidiary thereof (as to
which the provisions of this paragraph shall apply) or (z) any amounts received
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to secure the obligations of a Defaulting Lender to fund risk participations
hereunder.

(c) Each Credit Party consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against each
Credit Party rights of setoff and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of each Credit
Party in the amount of such participation.

Section 9.8 Table of Contents and Section Headings.

The table of contents and the Section and subsection headings herein are
intended for convenience only and shall be ignored in construing this Agreement.

Section 9.9 Counterparts; Effectiveness; Electronic Execution.

(a) Counterparts; Effectiveness. This Agreement may be executed in counterparts
(and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. Except as provided in Section 4.1, this Agreement shall become
effective when it shall have been executed by the Borrower, the Guarantors, the
Administrative Agent and the Lenders and the Administrative Agent shall have
received copies hereof (telefaxed or otherwise), and thereafter this Agreement
shall be binding upon and inure to the benefit of the Borrower, the Guarantors,
the Administrative Agent and each Lender and their respective successors and
permitted assigns. Delivery of an executed counterpart of a signature page of
this Agreement by telecopy or email shall be effective as delivery of a manually
executed counterpart of this Agreement.

(b) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.

Section 9.10 Severability.

Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

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Section 9.11 Integration.

This Agreement and the other Credit Documents represent the agreement of the
Borrower, the other Credit Parties, the Administrative Agent and the Lenders
with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent, the
Borrower, the other Credit Parties, or any Lender relative to the subject matter
hereof not expressly set forth or referred to herein or therein.

Section 9.12 Governing Law.

This Agreement and the other Credit Documents any claims, controversy or dispute
arising out of or relating to this Agreement or any other Credit Document
(except, as to any other Credit Document, as expressly set forth therein) shall
be governed by, and construed in accordance with, the laws of the State of New
York.

Section 9.13 Consent to Jurisdiction; Service of Process and Venue.

(a) Consent to Jurisdiction. The Borrower and each other Credit Party
irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of the courts of the State of New York and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement or any other Credit Document, or for recognition or
enforcement of any judgment, and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York sitting State court or,
to the fullest extent permitted by applicable law, in such Federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or in any other Credit Document shall affect any right that the
Administrative Agent, any Lender or the Issuing Lender may otherwise have to
bring any action or proceeding relating to this Agreement or any other Credit
Document against the Borrower or any other Credit Party or its properties in the
courts of any jurisdiction.

(b) Service of Process. Each party hereto irrevocably consents to service of
process in the manner provided for notices in Section 9.2. Nothing in this
Agreement will affect the right of any party hereto to serve process in any
other manner permitted by applicable law.

(c) Venue. The Borrower and each other Credit Party irrevocably and
unconditionally waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of venue of any action
or proceeding arising out of or relating to this Agreement or any other Credit
Document in any court referred to in paragraph (b) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.

 

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Section 9.14 Confidentiality.

Each of the Administrative Agent, the Lenders and the Issuing Lender agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
advisors and other representatives (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority purporting to have jurisdiction
over it (including any self-regulatory authority, such as the National
Association of Insurance Commissioners), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party hereto, (e) in connection with the exercise of any
remedies hereunder, under any other Credit Document or Bank Product or any
action or proceeding relating to this Agreement, any other Credit Document or
Bank Product or the enforcement of rights hereunder or thereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement,
(g) (i) any actual or prospective party (or its partners, directors, officers,
employees, managers, administrators, trustees, agents, advisors or other
representatives) to any swap or derivative or similar transaction under which
payments are to be made by reference to the Borrower and its obligations, this
Agreement or payments hereunder, (ii) an investor or prospective investor in
securities issued by an Approved Fund that also agrees that Information shall be
used solely for the purpose of evaluating an investment in such securities
issued by the Approved Fund, (iii) a trustee, collateral manager, servicer,
backup servicer, noteholder or secured party in connection with the
administration, servicing and reporting on the assets serving as collateral for
securities issued by an Approved Fund, or (iv) a nationally recognized rating
agency that requires access to information regarding the Credit Parties, the
Revolving Loans and Credit Documents in connection with ratings issued in
respect of securities issued by an Approved Fund (in each case, it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such information and instructed to keep such
information confidential), (h) with the consent of the Borrower or (i) to the
extent such Information (x) becomes publicly available other than as a result of
a breach of this Section or (y) becomes available to the Administrative Agent,
any Lender, the Issuing Lender or any of their respective Affiliates on a
nonconfidential basis from a source other than the Borrower.

For purposes of this Section, “Information” shall mean all information received
from any Credit Party or any of its Subsidiaries relating to any Credit Party or
any of its Subsidiaries or any of their respective businesses, other than any
such information that is available to the Administrative Agent, any Lender or
the Issuing Lender on a nonconfidential basis prior to disclosure by any Credit
Party or any of its Subsidiaries; provided that, in the case of information
received from any Credit Party or any of its Subsidiaries after the date hereof,
such information is clearly identified at the time of delivery as confidential.
Any Person required to maintain the confidentiality of Information as provided
in this Section shall be considered to have complied with its obligation to do
so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

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Section 9.15 Acknowledgments.

The Borrower and the other Credit Parties each hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of
each Credit Document;

(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower or any other Credit Party arising out
of or in connection with this Agreement and the relationship between the
Administrative Agent and the Lenders, on one hand, and the Borrower and the
other Credit Parties, on the other hand, in connection herewith is solely that
of creditor and debtor; and

(c) no joint venture exists among the Lenders and the Administrative Agent or
among the Borrower, the Administrative Agent or the other Credit Parties and the
Lenders.

Section 9.16 Waivers of Jury Trial; Waiver of Consequential Damages.

EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER CREDIT DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

Section 9.17 Patriot Act Notice.

Each Lender and the Administrative Agent (for itself and not on behalf of any
other party) hereby notifies the Borrower that, pursuant to the requirements of
the Patriot Act, it is required to obtain, verify and record information that
identifies the Borrower and the other Credit Parties, which information includes
the name and address of the Borrower and the other Credit Parties and other
information that will allow such Lender or the Administrative Agent, as
applicable, to identify the Borrower and the other Credit Parties in accordance
with the Patriot Act.

Section 9.18 Resolution of Drafting Ambiguities.

 

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Each Credit Party acknowledges and agrees that it was represented by counsel in
connection with the execution and delivery of this Agreement and the other
Credit Documents to which it is a party, that it and its counsel reviewed and
participated in the preparation and negotiation hereof and thereof and that any
rule of construction to the effect that ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation hereof or
thereof.

Section 9.19 Subordination of Intercompany Debt.

Each Credit Party agrees that all intercompany Indebtedness among Credit Parties
(the “Intercompany Debt”) is subordinated in right of payment, to the prior
payment in full of all Credit Party Obligations. Notwithstanding any provision
of this Credit Agreement to the contrary, provided that no Event of Default has
occurred and is continuing, Credit Parties may make and receive payments with
respect to the Intercompany Debt to the extent otherwise permitted by this
Credit Agreement; provided that in the event of and during the continuation of
any Event of Default, no payment shall be made by or on behalf of any Credit
Party on account of any Intercompany Debt. In the event that any Credit Party
receives any payment of any Intercompany Debt at a time when such payment is
prohibited by this Section, such payment shall be held by such Credit Party, in
trust for the benefit of, and shall be paid forthwith over and delivered, upon
written request, to, the Administrative Agent.

Section 9.20 Continuing Agreement.

This Credit Agreement shall be a continuing agreement and shall remain in full
force and effect until all Credit Party Obligations (other than those
obligations that expressly survive the termination of this Credit Agreement)
have been paid in full and all Commitments and Letters of Credit have been
terminated. Upon termination, the Credit Parties shall have no further
obligations (other than those obligations that expressly survive the termination
of this Credit Agreement) under the Credit Documents and the Administrative
Agent shall, at the request and expense of the Borrower, deliver all the
Collateral in its possession to the Borrower and release all Liens on the
Collateral; provided that should any payment, in whole or in part, of the Credit
Party Obligations be rescinded or otherwise required to be restored or returned
by the Administrative Agent or any Lender, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, then the Credit
Documents shall automatically be reinstated and all Liens of the Administrative
Agent shall reattach to the Collateral and all amounts required to be restored
or returned and all costs and expenses incurred by the Administrative Agent or
any Lender in connection therewith shall be deemed included as part of the
Credit Party Obligations.

Section 9.21 Reserved.

Section 9.22 Press Releases and Related Matters.

Other than with respect to disclosures required by law, Governmental Authorities
or other regulatory bodies with appropriate jurisdiction, the Credit Parties and
their Affiliates agree that they will not in the future issue any press releases
or other public disclosure using the name of Administrative Agent or any Lender
or their respective Affiliates or referring to this Agreement

 

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or any of the Credit Documents without the prior written consent of such Person.
The Credit Parties consent to the publication by Administrative Agent or any
Lender of customary advertising material relating to the Transactions using the
name, product photographs, logo or trademark of the Credit Parties

Section 9.23 Appointment of Borrower.

Each of the Guarantors hereby appoints the Borrower to act as its agent for all
purposes under this Agreement and agrees that (a) the Borrower may execute such
documents on behalf of such Guarantor as the Borrower deems appropriate in its
sole discretion and each Guarantor shall be obligated by all of the terms of any
such document executed on its behalf, (b) any notice or communication delivered
by the Administrative Agent or the Lender to the Borrower shall be deemed
delivered to each Guarantor and (c) the Administrative Agent or the Lenders may
accept, and be permitted to rely on, any document, instrument or agreement
executed by the Borrower on behalf of each Guarantor.

Section 9.24 No Advisory or Fiduciary Responsibility.

In connection with all aspects of each Transaction, each of the Credit Parties
acknowledges and agrees, and acknowledges its Affiliates’ understanding, that:
(a) the credit facility provided for hereunder and any related arranging or
other services in connection therewith (including in connection with any
amendment, waiver or other modification hereof or of any other Credit Document)
are an arm’s-length commercial transaction between the Credit Parties and their
Affiliates, on the one hand, and the Administrative Agent and WFS, on the other
hand, and the Credit Parties are capable of evaluating and understanding and
understands and accepts the terms, risks and conditions of the Transactions and
by the other Credit Documents (including any amendment, waiver or other
modification hereof or thereof); (b) in connection with the process leading to
such transaction, the Administrative Agent and WFS each is and has been acting
solely as a principal and is not the financial advisor, agent or fiduciary, for
any Credit Party or any of their Affiliates, stockholders, creditors or
employees or any other Person; (c) neither the Administrative Agent nor WFS has
assumed or will assume an advisory, agency or fiduciary responsibility in favor
of any Credit Party with respect to any of the Transactions or the process
leading thereto, including with respect to any amendment, waiver or other
modification hereof or of any other Credit Document (irrespective of whether the
Administrative Agent or WFS has advised or is currently advising any Credit
Party or any of its Affiliates on other matters) and neither the Administrative
Agent nor WFS has any obligation to any Credit Party or any of their Affiliates
with respect to the Transactions except those obligations expressly set forth
herein and in the other Credit Documents; (d) the Administrative Agent and WFS
and their respective Affiliates may be engaged in a broad range of transactions
that involve interests that differ from those of the Credit Parties and their
Affiliates, and neither the Administrative Agent nor WFS has any obligation to
disclose any of such interests by virtue of any advisory, agency or fiduciary
relationship; and (e) the Administrative Agent and WFS have not provided and
will not provide any legal, accounting, regulatory or tax advice with respect to
any of the Transactions (including any amendment, waiver or other modification
hereof or of any other Credit Document) and the Credit Parties have consulted
their own legal, accounting, regulatory and tax advisors to the extent it has
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Credit Parties hereby waives and releases, to the fullest extent permitted by
law, any claims that it may have against the Administrative Agent or WFS with
respect to any breach or alleged breach of agency or fiduciary duty.

Section 9.25 Responsible Officers and Authorized Officers.

The Administrative Agent and each of the Lenders are authorized to rely upon the
continuing authority of the Responsible Officers and the Authorized Officers
with respect to all matters pertaining to the Credit Documents including, but
not limited to, the selection of interest rates, the submission of requests for
Extensions of Credit and certificates with regard thereto. Such authorization
may be changed only upon written notice to Administrative Agent accompanied by
(a) an updated Schedule 3.29 and (b) evidence, reasonably satisfactory to
Administrative Agent, of the authority of the Person giving such notice and such
notice shall be effective not sooner than five (5) Business Days following
receipt thereof by Administrative Agent (or such earlier time as agreed to by
the Administrative Agent).

ARTICLE X

GUARANTY

Section 10.1 The Guaranty.

In order to induce the Lenders to enter into this Agreement and any Bank Product
Provider to enter into any Bank Product and to extend credit hereunder and
thereunder and in recognition of the direct benefits to be received by the
Guarantors from the Extensions of Credit hereunder and any Bank Product, each of
the Guarantors hereby agrees with the Administrative Agent, the Lenders and the
Bank Product Provider as follows: each Guarantor hereby unconditionally and
irrevocably jointly and severally guarantees as primary obligor and not merely
as surety the full and prompt payment when due, whether upon maturity, by
acceleration or otherwise, of any and all Credit Party Obligations. If any or
all of the indebtedness becomes due and payable hereunder or under any Bank
Product, each Guarantor unconditionally promises to pay such indebtedness to the
Administrative Agent, the Lenders, the Bank Product Providers, or their
respective order, on demand, together with any and all reasonable expenses which
may be incurred by the Administrative Agent or the Lenders in collecting any of
the Credit Party Obligations. The Guaranty set forth in this Article X is a
guaranty of timely payment and not of collection. The word “indebtedness” is
used in this Article X in its most comprehensive sense and includes any and all
advances, debts, obligations and liabilities of the Borrower, including
specifically all Credit Party Obligations, arising in connection with this
Agreement, the other Credit Documents or any Bank Product, in each case,
heretofore, now, or hereafter made, incurred or created, whether voluntarily or
involuntarily, absolute or contingent, liquidated or unliquidated, determined or
undetermined, whether or not such indebtedness is from time to time reduced, or
extinguished and thereafter increased or incurred, whether the Borrower may be
liable individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.

 

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Notwithstanding any provision to the contrary contained herein or in any other
of the Credit Documents, to the extent the obligations of a Guarantor shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each such Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code).

Section 10.2 Bankruptcy.

Additionally, each of the Guarantors unconditionally and irrevocably guarantees
jointly and severally the payment of any and all Credit Party Obligations of the
Borrower to the Lenders and any Bank Product Provider whether or not due or
payable by the Borrower upon the occurrence of any Bankruptcy Event and
unconditionally promises to pay such Credit Party Obligations to the
Administrative Agent for the account of the Lenders and to any such Bank Product
Provider, or order, on demand, in lawful money of the United States. Each of the
Guarantors further agrees that to the extent that the Borrower or a Guarantor
shall make a payment or a transfer of an interest in any property to the
Administrative Agent, any Lender or any Bank Product Provider, which payment or
transfer or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, or otherwise is avoided, and/or required to be
repaid to the Borrower or a Guarantor, the estate of the Borrower or a
Guarantor, a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
avoidance or repayment, the obligation or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if said payment had
not been made.

Section 10.3 Nature of Liability.

The liability of each Guarantor hereunder is exclusive and independent of any
security for or other guaranty of the Credit Party Obligations of the Borrower
whether executed by any such Guarantor, any other guarantor or by any other
party, and no Guarantor’s liability hereunder shall be affected or impaired by
(a) any direction as to application of payment by the Borrower or by any other
party, or (b) any other continuing or other guaranty, undertaking or maximum
liability of a guarantor or of any other party as to the Credit Party
Obligations of the Borrower, or (c) any payment on or in reduction of any such
other guaranty or undertaking, or (d) any dissolution, termination or increase,
decrease or change in personnel by the Borrower, or (e) any payment made to the
Administrative Agent, the Lenders or any Bank Product Provider on the Credit
Party Obligations which the Administrative Agent, such Lenders or such Bank
Product Provider repay the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each of the Guarantors waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.

Section 10.4 Independent Obligation.

 

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The obligations of each Guarantor hereunder are independent of the obligations
of any other Guarantor or the Borrower, and a separate action or actions may be
brought and prosecuted against each Guarantor whether or not action is brought
against any other Guarantor or the Borrower and whether or not any other
Guarantor or the Borrower is joined in any such action or actions.

Section 10.5 Authorization.

Each of the Guarantors authorizes the Administrative Agent, each Lender and each
Bank Product Provider without notice or demand (except as shall be required by
applicable statute and cannot be waived), and without affecting or impairing its
liability hereunder, from time to time to (a) renew, compromise, extend,
increase, accelerate or otherwise change the time for payment of, or otherwise
change the terms of the Credit Party Obligations or any part thereof in
accordance with this Agreement and any Bank Product, as applicable, including
any increase or decrease of the rate of interest thereon, (b) take and hold
security from any Guarantor or any other party for the payment of this Guaranty
or the Credit Party Obligations and exchange, enforce waive and release any such
security, (c) apply such security and direct the order or manner of sale thereof
as the Administrative Agent and the Lenders in their discretion may determine,
(d) release or substitute any one or more endorsers, Guarantors, the Borrower or
other obligors and (e) to the extent otherwise permitted herein, release or
substitute any Collateral.

Section 10.6 Reliance.

It is not necessary for the Administrative Agent, the Lenders or any Bank
Product Provider to inquire into the capacity or powers of the Borrower or the
officers, directors, members, partners or agents acting or purporting to act on
its behalf, and any Credit Party Obligations made or created in reliance upon
the professed exercise of such powers shall be guaranteed hereunder.

Section 10.7 Waiver.

(a) Each of the Guarantors waives any right (except as shall be required by
applicable statute and cannot be waived) to require the Administrative Agent,
any Lender or any Bank Product Provider to (i) proceed against the Borrower, any
other guarantor or any other party, (ii) proceed against or exhaust any security
held from the Borrower, any other guarantor or any other party, or (iii) pursue
any other remedy in the Administrative Agent’s, any Lender’s or any Bank Product
Provider’s whatsoever. Each of the Guarantors waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party other than payment in full of the Credit Party Obligations (other than
contingent indemnification obligations), including, without limitation, any
defense based on or arising out of the disability of the Borrower, any other
guarantor or any other party, or the unenforceability of the Credit Party
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower other than payment in full of the Credit Party
Obligations. The Administrative Agent may, at its election, foreclose on any
security held by the Administrative Agent or a Lender by one or more judicial or
nonjudicial sales, whether or not every aspect of any

 

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such sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Administrative Agent
or any Lender may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the Credit Party Obligations have been paid in
full and the Commitments have been terminated. Each of the Guarantors waives any
defense arising out of any such election by the Administrative Agent or any of
the Lenders, even though such election operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of the Guarantors
against the Borrower or any other party or any security.

(b) Each of the Guarantors waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notice of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional Credit
Party Obligations. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower’s financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Credit Party
Obligations and the nature, scope and extent of the risks which such Guarantor
assumes and incurs hereunder, and agrees that neither the Administrative Agent
nor any Lender shall have any duty to advise such Guarantor of information known
to it regarding such circumstances or risks.

(c) Each of the Guarantors hereby agrees it will not exercise any rights of
subrogation which it may at any time otherwise have as a result of this Guaranty
(whether contractual, under Section 509 of the U.S. Bankruptcy Code, or
otherwise) to the claims of the Lenders or any Bank Product Provider against the
Borrower or any other guarantor of the Credit Party Obligations of the Borrower
owing to the Lenders or such Bank Product Provider (collectively, the “Other
Parties”) and all contractual, statutory or common law rights of reimbursement,
contribution or indemnity from any Other Party which it may at any time
otherwise have as a result of this Guaranty until such time as the Credit Party
Obligations shall have been paid in full and the Commitments have been
terminated. Each of the Guarantors hereby further agrees not to exercise any
right to enforce any other remedy which the Administrative Agent, the Lenders or
any Bank Product Provider now have or may hereafter have against any Other
Party, any endorser or any other guarantor of all or any part of the Credit
Party Obligations of the Borrower and any benefit of, and any right to
participate in, any security or collateral given to or for the benefit of the
Lenders and/or the Bank Product Providers to secure payment of the Credit Party
Obligations of the Borrower until such time as the Credit Party Obligations
(other than contingent indemnification obligations) shall have been paid in full
and the Commitments have been terminated.

Section 10.8 Limitation on Enforcement.

The Lenders and the Bank Product Providers agree that this Guaranty may be
enforced only by the action of the Administrative Agent acting upon the
instructions of the Required Lenders or such Bank Product Provider (only with
respect to obligations under the applicable Bank Product) and that no Lender or
Bank Product Provider shall have any right individually to

 

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seek to enforce or to enforce this Guaranty, it being understood and agreed that
such rights and remedies may be exercised by the Administrative Agent for the
benefit of the Lenders under the terms of this Agreement and for the benefit of
any Bank Product Provider under any Bank Product.

Section 10.9 Confirmation of Payment.

The Administrative Agent and the Lenders will, upon request after payment of the
Credit Party Obligations which are the subject of this Guaranty and termination
of the Commitments relating thereto, confirm to the Borrower, the Guarantors or
any other Person that such indebtedness and obligations have been paid and the
Commitments relating thereto terminated, subject to the provisions of
Section 10.2.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by its proper and duly authorized officers as of the day
and year first above written.

 

BORROWER:     FIESTA RESTAURANT GROUP, INC.,     a Delaware corporation     By: 
  /s/ Joseph A. Zirkman       Name: Joseph A. Zirkman       Title: Vice
President GUARANTORS:     CABANA BEVERAGES, INC.,     a Texas corporation    
By:   /s/ Shanna M. Ramirez       Name: Shanna M. Ramirez       Title: President
    CABANA BEVCO, LLC     a Texas corporation     By:   /s/ Shanna M. Ramirez  
    Name: Shanna M. Ramirez       Title: Manager     GET REAL, INC.,     a
Delaware corporation     By:   /s/ Julio Murillo       Name: Julio Murillo      
Title: Vice President

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POLLO FRANCHISE, INC., a Florida corporation By:   /s/ Joseph A. Zirkman   Name:
Joseph A. Zirkman   Title: Vice President POLLO OPERATIONS, INC., a Florida
corporation By:   /s/ Joseph A. Zirkman   Name: Joseph A. Zirkman   Title: Vice
President TACO CABANA, INC., as Delaware corporation By:   /s/ Joseph A. Zirkman
  Name: Joseph A. Zirkman   Title: Vice President TP ACQUISITION CORP., a Texas
corporation By:   /s/ Joseph A. Zirkman   Name: Joseph A. Zirkman   Title: Vice
President TC BEVCO, LLC, a Texas limited liability company By:   /s/ Shanna M.
Ramirez   Name: Shanna M. Ramirez   Title: Manager

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TC MANAGEMENT, INC., a Delaware corporation By:   /s/ Joseph A. Zirkman   Name:
Joseph A. Zirkman   Title: Vice President TC LEASE HOLDINGS III, V AND VI, INC.,
a Texas corporation By:   /s/ Joseph A. Zirkman   Name: Joseph A. Zirkman  
Title: Vice President TEXAS TACO CABANA, L.P., a Texas corporation By:   /s/
Joseph A. Zirkman   Name: Joseph A. Zirkman   Title: Vice President TPAQ HOLDING
CORPORATION, a Delaware corporation By:   /s/ Julio Murillo Name: Julio Murillo
Title: Vice President

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ADMINISTRATIVE AGENT:     WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender
and as Administrative Agent     By:   /s/ Tim G. Loyd     Name: Tim G. Loyd    
Title: Managing Director

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LENDERS:     MANUFACTURERS & TRADERS TRUST COMPANY, as a Lender     By:   /s/
Timothy McDevitt     Name: Timothy McDevitt     Title: Vice President

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JEFFERIES FINANCE, LLC, as a Lender By:   /s/ E. Joseph Hess Name: E. Joseph
Hess Title: Managing Director