Exhibit 10.3

EXECUTION COPY

 

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PARENT GUARANTY AGREEMENT

dated as of March 9, 2007

by

CARROLS RESTAURANT GROUP, INC.,

as Parent Guarantor,

in favor of

WACHOVIA BANK, NATIONAL ASSOCIATION

as Agent

 

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TABLE OF CONTENTS

 

          Page

ARTICLE I DEFINED TERMS

   1

SECTION 1.1

   Definitions    1

SECTION 1.2

   Other Definitional Provisions    2

ARTICLE II GUARANTY

   2

SECTION 2.1

   Parent Guaranty    2

SECTION 2.2

   Bankruptcy Limitations on Parent Guarantor    3

SECTION 2.3

   Agreement    3

SECTION 2.4

   Nature of Parent Guaranty    4

SECTION 2.5

   Waivers    5

SECTION 2.6

   Modification of Loan Documents, etc.    6

SECTION 2.7

   Demand by the Agent    7

SECTION 2.8

   Remedies    7

SECTION 2.9

   Benefits of Parent Guaranty    7

SECTION 2.10

   Termination; Reinstatement    7

SECTION 2.11

   Payments    8

ARTICLE III REPRESENTATIONS AND WARRANTIES

   8

SECTION 3.1

   Organization; Power; Qualification    8

SECTION 3.2

   Authorization of Agreement; Enforceability    8

SECTION 3.3

   Title; Liens    9

SECTION 3.4

   Litigation    9

SECTION 3.5

   Solvency    9

ARTICLE IV MISCELLANEOUS

   9

SECTION 4.1

   Notices    9

SECTION 4.2

   Amendments in Writing    10

SECTION 4.3

   Expenses; Indemnification; Waiver of Consequential Damages, etc.    10

SECTION 4.4

   Right of Set-off    10

SECTION 4.5

   Governing Law; Jurisdiction; Venue; Service of Process    11

SECTION 4.6

   Waiver of Jury Trial    12

SECTION 4.7

   No Waiver by Course of Conduct, Cumulative Remedies    12

SECTION 4.8

   Successors and Assigns    12

SECTION 4.9

   Survival of Indemnities    12

SECTION 4.10

   Titles and Captions    13

SECTION 4.11

   Severability of Provisions    13

SECTION 4.12

   Counterparts, Integration and Effectiveness    13

SECTION 4.13

   Advice of Counsel, No Strict Construction    13

SECTION 4.14

   Acknowledgements    13

SECTION 4.15

   Releases    13

 

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PARENT GUARANTY AGREEMENT (as amended, restated, supplemented or otherwise
modified, this “Parent Guaranty” or this “Agreement”), dated as of March 9,
2007, is made by CARROLS RESTAURANT GROUP, INC., a Delaware corporation (the
“Parent Guarantor”), in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, as
administrative agent (in such capacity, the “Agent”) for the ratable benefit of
itself and the Secured Parties.

STATEMENT OF PURPOSE

Pursuant to the terms of the Loan Agreement dated as of even date herewith (as
amended, restated, supplemented or otherwise modified from time to time, the
“Loan Agreement”) by and among Carrols Corporation, a Delaware corporation, as
borrower (the “Borrower”), the financial institutions who are or may become
party thereto (the “Lenders”) and the Agent, the Lenders have agreed to make
extensions of credit to the Borrower upon the terms and subject to the
conditions set forth therein.

The Borrower and the Parent Guarantor, though separate legal entities, comprise
one integrated financial enterprise, and all extensions of credit to the
Borrower will inure, directly or indirectly to the benefit of the Parent
Guarantor.

It is a condition precedent to the obligation of the Lenders to make their
respective extensions of credit to the Borrower under the Loan Agreement that
the Parent Guarantor shall have executed and delivered this Parent Guaranty to
the Agent, for the ratable benefit of itself and the Secured Parties.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties hereto, and to induce the Agent
and the Lenders to enter into the Loan Agreement and to induce the Lenders to
make their respective extensions of credit to the Borrower thereunder, the
Parent Guarantor hereby agrees with the Agent, for the ratable benefit of itself
and the Secured Parties, as follows:

ARTICLE I

DEFINED TERMS

SECTION 1.1 Definitions. The following terms when used in this Parent Guaranty
shall have the meanings assigned to them below:

“Applicable Insolvency Laws” means all Legal Requirements governing bankruptcy,
reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution, insolvency, fraudulent transfers or conveyances or other similar
laws (including, without limitation, 11 U.S.C. Sections 544, 547, 548 and 550
and other “avoidance” provisions of Title 11 of the United States Code, as
amended or supplemented).

“Guaranteed Obligations” has the meaning set forth in Section 2.1.

“Secured Parties” means the Agent, each Lender and any counterparty to an
Interest Rate Risk Agreement that is a Lender or an Affiliate of a Lender at the
time such Interest Rate Risk Agreement is executed.

 

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“Subsidiary Guarantor” means each Subsidiary of the Borrower party to the
Subsidiary Guaranty.

“Subsidiary Guaranty” means the Subsidiary Guaranty Agreement, dated as of even
date herewith, made by certain Subsidiaries of the Borrower in favor of the
Agent for the ratable benefit of itself and the Secured Parties, as amended,
restated, supplemented or otherwise modified.

SECTION 1.2 Other Definitional Provisions. Capitalized terms used and not
otherwise defined in this Parent Guaranty including the preambles and recitals
hereof shall have the meanings ascribed to them in the Loan Agreement. In the
event of a conflict between capitalized terms defined herein and in the Loan
Agreement, the Loan Agreement shall control. The words “hereof,” “herein”,
“hereto” and “hereunder” and words of similar import when used in this Parent
Guaranty shall refer to this Parent Guaranty as a whole and not to any
particular provision of this Parent Guaranty, and Section references are to this
Parent Guaranty unless otherwise specified. The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms of such
terms. Where the context requires, terms relating to the Collateral or any part
thereof, when used in relation to the Parent Guarantor, shall refer to the
Parent Guarantor’s Collateral or the relevant part thereof.

ARTICLE II

GUARANTY

SECTION 2.1 Parent Guaranty. The Parent Guarantor hereby unconditionally
guarantees to the Agent for the ratable benefit of itself and the Secured
Parties, and their respective permitted successors, endorsees, transferees and
assigns, the prompt payment and performance of:

(a) all Obligations of the Borrower; and

(b) all liabilities and obligations of the Parent Guarantor and each of its
Subsidiaries with respect to overdrafts, returned items and related liabilities
and all indemnification obligations under the Loan Documents now or hereafter
owing by any such Person to the Agent or any Lender arising from or in
connection with treasury, depositary or cash management services or in
connection with any automated clearinghouse transfer of funds for the benefit of
such Person, in each case, whether primary or secondary (whether by way of
endorsement or otherwise), whether now existing or hereafter arising, whether or
not from time to time reduced or extinguished (except by payment thereof) or
hereafter increased or incurred, whether enforceable or unenforceable as against
the Borrower, whether or not discharged, stayed or otherwise affected by any
Applicable Insolvency Law or proceeding thereunder, whether created directly
with the Agent or any Secured Party or acquired by the Agent or any Secured
Party through assignment or endorsement or otherwise, whether matured or
unmatured, whether joint or several, as and when the same become due and payable
(whether at maturity or earlier, by reason of acceleration, mandatory repayment
or otherwise), in accordance with the terms of any

 

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such instruments evidencing any such obligations, including all renewals,
extensions or modifications thereof (all Obligations of the Borrower, including
all of the foregoing being hereafter collectively referred to as the “Guaranteed
Obligations”).

SECTION 2.2 Bankruptcy Limitations on Parent Guarantor. Notwithstanding anything
to the contrary contained in Section 2.1, it is the intention of the Parent
Guarantor and the Secured Parties that, in any proceeding involving the
bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution or insolvency or any similar proceeding with respect to the Parent
Guarantor or its assets, the amount of the Parent Guarantor’s obligations with
respect to the Guaranteed Obligations shall be equal to, but not in excess of,
the maximum amount thereof not subject to avoidance or recovery by operation of
Applicable Insolvency Laws. To that end, but only in the event and to the extent
that the Parent Guarantor’s obligations with respect to the Guaranteed
Obligations or any payment made pursuant to such Guaranteed Obligations would,
but for the operation of the first sentence of this Section 2.2, be subject to
avoidance or recovery in any such proceeding under Applicable Insolvency Laws,
the amount of the Parent Guarantor’s obligations with respect to the Guaranteed
Obligations shall be limited to the largest amount which, after giving effect
thereto, would not, under Applicable Insolvency Laws, render the Parent
Guarantor’s obligations with respect to the Guaranteed Obligations unenforceable
or avoidable or otherwise subject to recovery under Applicable Insolvency Laws.
To the extent any payment actually made pursuant to the Guaranteed Obligations
exceeds the limitation of the first sentence of this Section 2.2 and is
otherwise subject to avoidance and recovery in any such proceeding under
Applicable Insolvency Laws, the amount subject to avoidance shall in all events
be limited to the amount by which such actual payment exceeds such limitation
and the Guaranteed Obligations as limited by the first sentence of this
Section 2.2 shall in all events remain in full force and effect and be fully
enforceable against the Parent Guarantor. The first sentence of this Section 2.2
is intended solely to preserve the rights of the Agent hereunder against the
Parent Guarantor in such proceeding to the maximum extent permitted by
Applicable Insolvency Laws and neither the Parent Guarantor, the Borrower, any
Subsidiary Guarantor nor any other Person shall have any right or claim under
such sentence that would not otherwise be available under Applicable Insolvency
Laws in such proceeding.

SECTION 2.3 Agreements Regarding Subrogation and Reimbursement.

(a) Agreement Regarding Subrogation. Notwithstanding any payment or payments by
the Parent Guarantor hereunder, or any set-off or application of funds of the
Parent Guarantor by the Agent or any Secured Party, or the receipt of any
amounts by the Agent or any Secured Party with respect to any of the Guaranteed
Obligations, the Parent Guarantor shall not be entitled to be subrogated to any
of the rights of the Agent or any Secured Party against the Borrower, any of the
Subsidiary Guarantors or any other guarantor of the Guaranteed Obligations or
against any collateral security held by the Agent or any Secured Party for the
payment of the Guaranteed Obligations, nor shall the Parent Guarantor seek any
reimbursement from the Borrower, any of the Subsidiary Guarantors or any other
guarantor of the Guaranteed Obligations in respect of payments made by the
Parent Guarantor in connection with the Guaranteed Obligations, until all
amounts owing to the Agent and the Secured Parties on account of the Guaranteed
Obligations are paid in full and the Revolving Loan Commitments are terminated.
If any amount shall be paid to the Parent Guarantor on account of such
subrogation

 

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rights at any time when all of the Guaranteed Obligations shall not have been
paid in full or the Revolving Loan Commitments are not terminated, such amount
shall be held by the Parent Guarantor in trust for the Agent, segregated from
other funds of the Parent Guarantor, and shall, forthwith upon receipt by the
Parent Guarantor, be turned over to the Agent in the exact form received by the
Parent Guarantor (duly endorsed by the Parent Guarantor to the Agent, if
required) to be applied against the Guaranteed Obligations, whether matured or
unmatured, in such order as set forth in the Loan Agreement.

(b) Agreement Regarding Reimbursement. Notwithstanding anything to the contrary
contained herein, the parties hereto acknowledge and agree that, as the Borrower
is a wholly-owned Subsidiary of the Parent Guarantor and part of an integrated
financial enterprise to which the Parent Guarantor and each Subsidiary Guarantor
is a party, each Subsidiary Guarantor shall have a right of reimbursement and
indemnity from the Parent Guarantor for any amount paid by such Subsidiary
Guarantor in lieu of a right of contribution between the Subsidiary Guarantors
and the Parent Guarantor.

SECTION 2.4 Nature of Parent Guaranty.

(a) The Parent Guarantor agrees that this Parent Guaranty is a continuing,
unconditional guaranty of payment and performance and not of collection, and
that its obligations under this Parent Guaranty shall be primary, absolute and
unconditional, irrespective of, and unaffected by:

(i) the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, the Loan Agreement or any other Loan Document or any
other agreement, document or instrument to which the Parent Guarantor, the
Borrower or any Subsidiary Guarantor is or may become a party;

(ii) the absence of any action to enforce this Parent Guaranty, the Loan
Agreement or any other Loan Document or the waiver or consent by the Agent or
any Secured Party with respect to any of the provisions of this Parent Guaranty,
the Loan Agreement or any other Loan Document;

(iii) the existence, value or condition of, or failure to perfect its Lien
against, any security for or other guaranty of the Guaranteed Obligations or any
action, or the absence of any action, by the Agent or any Secured Party in
respect of such security or guaranty (including, without limitation, the release
of any such security or guaranty); or

(iv) any other action or circumstances which might otherwise constitute a legal
or equitable discharge or defense of a surety or guarantor;

it being agreed by the Parent Guarantor that, subject to the first sentence of
Section 2.2, its obligations under this Parent Guaranty shall not be discharged
until the final indefeasible payment and performance, in full, of all of the
Guaranteed Obligations and the termination of the Revolving Loan Commitments.

 

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(b) The Parent Guarantor represents, warrants and agrees that its obligations
under this Parent Guaranty are not and shall not be subject to any
counterclaims, offsets or defenses of any kind (other than the defense of
payment) against the Agent, any Secured Party, the Borrower or any Subsidiary
Guarantor whether now existing or which may arise in the future.

(c) The Parent Guarantor hereby agrees and acknowledges that the Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Parent Guaranty, and all dealings between the Borrower and the Parent
Guarantor, on the one hand, and the Agent and the Secured Parties, on the other
hand, likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Parent Guaranty.

SECTION 2.5 Waivers. To the extent permitted by law, the Parent Guarantor
expressly waives all of the following rights and defenses (and agrees not to
take advantage of or assert any such right or defense):

(a) any rights it may now or in the future have under any statute, or at law or
in equity, or otherwise, to compel the Agent or any Lender to proceed in respect
of the Guaranteed Obligations against the Borrower, the Subsidiary Guarantors or
any other Person or against any security for or other guaranty of the payment
and performance of the Guaranteed Obligations before proceeding against, or as a
condition to proceeding against, the Parent Guarantor;

(b) any defense based upon the failure of the Agent or any Secured Party to
commence an action in respect of the Guaranteed Obligations against the Parent
Guarantor, the Borrower, any of the Subsidiary Guarantors, any other guarantor
of the Guaranteed Obligations or any other Person or any security for the
payment and performance of the Guaranteed Obligations;

(c) any right to insist upon, plead or in any manner whatever claim or take the
benefit or advantage of, any appraisal, valuation, stay, extension, marshalling
of assets or redemption laws, or exemption, whether now or at any time hereafter
in force, which may delay, prevent or otherwise affect the performance by the
Parent Guarantor of its obligations under, or the enforcement by the Agent or
the Secured Parties of this Parent Guaranty;

(d) any right of diligence, presentment, demand, protest and notice (except as
specifically required herein) of whatever kind or nature with respect to any of
the Guaranteed Obligations and waives, to the extent permitted by any Legal
Requirement, the benefit of all provisions of law which are or might be in
conflict with the terms of this Parent Guaranty; and

(e) any and all right to notice of the creation, renewal, extension or accrual
of any of the Guaranteed Obligations and notice of or proof of reliance by the
Agent or any Secured Party upon, or acceptance of, this Parent Guaranty.

The Parent Guarantor agrees that any notice or directive given at any time to
the Agent or any Secured Party which is inconsistent with any of the foregoing
waivers shall be null and void and may be ignored by the Agent or such Secured
Party, and, in addition, may not be pleaded or introduced as evidence in any
litigation relating to this Parent Guaranty for the reason that such pleading or
introduction would be at variance with the written terms of this Parent
Guaranty,

 

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unless the Agent and the Majority Lenders have specifically agreed otherwise in
writing. The foregoing waivers are of the essence of the transaction
contemplated by the Loan Agreement and the other Loan Documents and, but for
this Parent Guaranty and such waivers, the Agent and Lenders would decline to
enter into the Loan Agreement and the other Loan Documents.

SECTION 2.6 Modification of Loan Documents, etc. Neither the Agent nor any
Secured Party shall incur any liability to the Parent Guarantor as a result of
any of the following, and none of the following shall impair or release this
Parent Guaranty or any of the obligations of the Parent Guarantor under this
Parent Guaranty:

(a) any change or extension of the manner, place or terms of payment of, or
renewal or alteration of all or any portion of, the Guaranteed Obligations;

(b) any action under or in respect of the Loan Agreement or the other Loan
Documents in the exercise of any remedy, power or privilege contained therein or
available to any of them at law, in equity or otherwise, or waiver or refraining
from exercising any such remedies, powers or privileges;

(c) any amendment to, or modification of, in any manner whatsoever, the Loan
Documents;

(d) any extension or waiver of the time for performance by the Parent Guarantor,
any Subsidiary Guarantor, any other guarantor of the Guaranteed Obligations, the
Borrower or any other Person of, or compliance with, any term, covenant or
agreement on its part to be performed or observed under a Loan Document, or
waiver of such performance or compliance or consent to a failure of, or
departure from, such performance or compliance;

(e) the taking and holding security or collateral for the payment of the
Guaranteed Obligations or the sale, exchange, release, disposal of, or other
dealing with, any property pledged, mortgaged or conveyed, or in which the Agent
or the Secured Parties have been granted a Lien, to secure any debt of the
Parent Guarantor, any Subsidiary Guarantor, any other guarantor of the
Guaranteed Obligations or the Borrower to the Agent or the Secured Parties;

(f) the release of anyone who may be liable in any manner for the payment of any
amounts owed by the Parent Guarantor, any Subsidiary Guarantor, any other
guarantor of the Guaranteed Obligations or the Borrower to the Agent or any
Secured Party;

(g) any modification or termination of the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of the
Parent Guarantor, any Subsidiary Guarantor, any other guarantor of the
Guaranteed Obligations or the Borrower are subordinated to the claims of the
Agent or any Secured Party; or

(h) any application of any sums by whomever paid or however realized to any
Guaranteed Obligations owing by the Parent Guarantor, any Subsidiary Guarantor,
any other guarantor of the Guaranteed Obligations or the Borrower to the Agent
or any Secured Party in such manner as the Agent or any Secured Party shall
determine in its reasonable discretion.

 

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SECTION 2.7 Demand by the Agent. In addition to the terms set forth in this
Article II and in no manner imposing any limitation on such terms, if all or any
portion of the then outstanding Guaranteed Obligations are declared to be
immediately due and payable, then the Parent Guarantor shall, upon demand in
writing therefor by the Agent to the Parent Guarantor, pay all or such portion
of the outstanding Guaranteed Obligations due hereunder then declared due and
payable. Notwithstanding the foregoing, the Parent Guarantor agrees that, in the
event of the dissolution or insolvency of the Borrower or any Subsidiary
Guarantor, or the inability or failure of the Borrower or any Subsidiary
Guarantor to pay debts as they become due, or an assignment by the Borrower or
any Subsidiary Guarantor for the benefit of creditors, or the commencement of
any case or proceeding in respect of the Borrower or any Subsidiary Guarantor
under bankruptcy, insolvency or similar laws, and if such event shall occur at a
time when any of the Guaranteed Obligations may not then be due and payable, the
Parent Guarantor will pay to the Agent, for the ratable benefit of the other
Secured Parties and their respective successors, indorsees, transferees and
assigns, forthwith the full amount which would be payable hereunder by the
Parent Guarantor if all such Guaranteed Obligations were then due and payable.

SECTION 2.8 Remedies. Upon the occurrence and during the continuance of any
Event of Default, with the consent of the Majority Lenders, the Agent may, or
upon the request of the Majority Lenders, the Agent shall, enforce against the
Parent Guarantor its obligations and liabilities hereunder and exercise such
other rights and remedies as may be available to the Agent hereunder, under the
Loan Agreement or the other Loan Documents or otherwise.

SECTION 2.9 Benefits of Parent Guaranty. The provisions of this Parent Guaranty
are for the benefit of the Agent and the Secured Parties and their respective
permitted successors, transferees, endorsees and assigns, and nothing herein
contained shall impair, as between the Borrower, the Agent and the Secured
Parties, the obligations of the Borrower under the Loan Documents. In the event
all or any part of the Obligations are transferred, endorsed or assigned by the
Agent or any Secured Party to any Person or Persons as permitted under the Loan
Agreement, any reference to an “Agent”, or “Secured Party” herein shall be
deemed to refer equally to such Person or Persons.

SECTION 2.10 Termination; Reinstatement.

(a) Subject to clause (c) below, this Parent Guaranty shall remain in full force
and effect until all the Guaranteed Obligations and all the obligations of the
Parent Guarantor shall have been paid in full and the Revolving Loan Commitments
terminated.

(b) No payment made by the Parent Guarantor, the Borrower, any Subsidiary
Guarantor, any other guarantor of the Guaranteed Obligations or any other Person
received or collected by the Agent or any Secured Party from the Parent
Guarantor, the Borrower, any Subsidiary Guarantor, any other guarantor of the
Guaranteed Obligations or any other Person by virtue of any action or proceeding
or any set-off or appropriation or application at any time or from time to time
in reduction of or in payment of the Guaranteed Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the Parent
Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by the Parent Guarantor in respect of the obligations of the
Parent Guarantor or any payment received or collected from the Parent Guarantor
in respect of the obligations of the Parent Guarantor),

 

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remain liable for the obligations of the Parent Guarantor up to the maximum
liability of the Parent Guarantor hereunder until the Guaranteed Obligations and
all the obligations of the Parent Guarantor shall have been paid in full and the
Revolving Loan Commitments terminated.

(c) The Parent Guarantor agrees that, if any payment made by the Parent
Guarantor, the Borrower, any Subsidiary Guarantor, any other guarantor of the
Guaranteed Obligations or any other Person applied to the Guaranteed Obligations
is at any time annulled, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or is
repaid in whole or in part pursuant to a good faith settlement of a pending or
threatened claim, or the proceeds of any Collateral are required to be refunded
by the Agent or any Secured Party to the Borrower, its estate, trustee,
receiver, the Parent Guarantor, any other guarantor of the Guaranteed
Obligations or any other Person, including, without limitation, any Subsidiary
Guarantor, under any Legal Requirement or equitable cause, then, to the extent
of such payment or repayment, the Parent Guarantor’s liability hereunder (and
any Lien or Collateral securing such liability) shall be and remain in full
force and effect, as fully as if such payment had never been made, and, if prior
thereto, this Parent Guaranty shall have been canceled or surrendered (and if
any Lien or Collateral securing the Parent Guarantor’s liability hereunder shall
have been released or terminated by virtue of such cancellation or surrender),
this Parent Guaranty (and such Lien or Collateral) shall be reinstated in full
force and effect, and such prior cancellation or surrender shall not diminish,
release, discharge, impair or otherwise affect the obligations of the Parent
Guarantor in respect of the amount of such payment (or any Lien or Collateral
securing such obligation).

SECTION 2.11 Payments. Payments by the Parent Guarantor shall be made to the
Agent, to be credited and applied to the Guaranteed Obligations in accordance
with the terms of the Loan Agreement, in immediately available Dollars to an
account designated by the Agent or at the Agent’s Principal Office or at any
other address that may be specified in writing from time to time by the Agent.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce the Agent and the Lenders to make any extensions of credit, the Parent
Guarantor hereby represents and warrants that:

SECTION 3.1 Organization; Power; Qualification. The Parent Guarantor (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all necessary power and authority to
conduct its business as presently conducted, and (c) is duly qualified to do
business and in good standing in all jurisdictions in which the failure to so
qualify could reasonably be expected to have a material adverse effect on the
business, condition (financial or otherwise), operations or Properties of the
Parent Guarantor.

SECTION 3.2 Authorization of Agreement; Enforceability. This Parent Guaranty is
a legal, valid and binding obligation of the Parent Guarantor, enforceable in
accordance with its terms, except as may be limited by bankruptcy, insolvency
and other similar laws and judicial decisions affecting creditors’ rights
generally and by general equitable principles. The

 

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execution, delivery and performance of this Parent Guaranty (a) have all been
duly authorized by all necessary action; (b) are within the power and authority
of the Parent Guarantor; (c) do not and will not contravene or violate any Legal
Requirement applicable to the Parent Guarantor or the Organizational Documents
of the Parent Guarantor, the contravention or violation of which could
reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations or Properties of the Parent
Guarantor; (d) do not and will not result in the breach of, or constitute a
default under, any material agreement or instrument by which the Parent
Guarantor or any of its Property may be bound, and (e) do not and will not
result in the creation of any Lien upon any Property of the Parent Guarantor,
except in favor of Agent or as expressly contemplated therein. All necessary
permits, registrations and consents for such making and performance have been
obtained. Except as otherwise expressly stated in the Security Documents, the
Liens of the Security Documents, will constitute valid and perfected first and
prior Liens on the Property described therein, subject to no other Liens
whatsoever except Permitted Liens.

SECTION 3.3 Title; Liens. The Parent Guarantor has good and marketable title to
the Collateral pledged (or purported to be pledged) thereby pursuant to the
Security Documents, free and clear of all Liens except Permitted Liens.

SECTION 3.4 Litigation. Except as disclosed in the Parent Guarantor’s or the
Borrower’s filings with the Securities and Exchange Commission on or prior to
December 15, 2006, there is no litigation or administrative proceeding, to the
knowledge of any executive officer of the Parent Guarantor, pending or
threatened against, nor any outstanding judgment, order or decree against, the
Parent Guarantor before or by any Governmental Authority which does or could
reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations or Properties of the Parent
Guarantor or on the ability of the Parent Guarantor to perform its respective
obligations under any Loan Document to which it is a party. The Parent Guarantor
is not in default with respect to any judgment, order or decree of any
Governmental Authority where such default would have a material adverse effect
on the business, condition (financial or otherwise), operations or Properties of
the Parent Guarantor.

SECTION 3.5 Solvency. The Parent Guarantor is not “insolvent,” as such term is
used and defined in (a) the Bankruptcy Code and (b) the fraudulent conveyance
statutes of the State of New York or of any jurisdiction in which any of the
Collateral may be located.

ARTICLE IV

MISCELLANEOUS

SECTION 4.1 Notices. All notices and communications hereunder shall be given to
the addresses and otherwise made in accordance with Section 11.2 of the Loan
Agreement; provided that notices and communications to the Parent Guarantor
shall be directed to the Parent Guarantor, at the address of the Borrower set
forth on Schedule 1.1 of the Loan Agreement.

 

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SECTION 4.2 Amendments in Writing. None of the terms or provisions of this
Parent Guaranty may be waived, amended, supplemented or otherwise modified
except in accordance with Section 11.5 of the Loan Agreement.

SECTION 4.3 Expenses; Indemnification; Waiver of Consequential Damages, etc.

(a) The Parent Guarantor agrees to pay or reimburse each Secured Party and the
Agent for all its costs and expenses incurred in connection with enforcing or
preserving any rights under this Parent Guaranty and the other Loan Documents to
which the Parent Guarantor is a party, including, without limitation, the
reasonable fees and disbursements of counsel (including the reasonable allocated
fees and expenses of in-house counsel) to each Secured Party and of counsel to
the Agent.

(b) The Parent Guarantor agrees to pay, and to save the Agent and the Secured
Parties harmless from, any and all liabilities with respect to, or resulting
from the Parent Guarantor’s delay in paying, any and all stamp, excise, sales or
other taxes which may be payable or determined to be payable in connection with
any of the transactions contemplated by this Parent Guaranty.

(c) The Parent Guarantor agrees to pay, and to save the Agent and the Secured
Parties harmless from any and all liabilities, obligations, losses, damages,
penalties, costs and expenses in connection with actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Parent Guaranty to the extent the Borrower would be required to do so pursuant
to Section 11.4 of the Loan Agreement.

(d) To the fullest extent permitted by applicable law, the Parent Guarantor
shall not assert, and 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 Parent Guaranty, any other Loan Document or any agreement
or instrument contemplated hereby or the transactions contemplated hereby or
thereby. No indemnitee referred to in this Section 4.3 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 Parent Guaranty
or the other Loan Documents or the transactions contemplated hereby or thereby.

(e) All amounts due under this Section shall be payable promptly after demand
therefor.

SECTION 4.4 Right of Set-off. Upon the occurrence and during the continuance of
any Event of Default, each Secured Party and each of their respective Affiliates
is hereby authorized at any time and from time to time, without notice to the
Parent Guarantor or any other Obligor (any such notice being expressly waived by
the Borrower and the other Obligors), to setoff and apply any and all deposits
(general or special, time or demand, provisional or final but excluding the
funds held in accounts clearly designated as escrow or trust accounts held by
the Parent Guarantor for the benefit of Persons which are not Affiliates of the
Parent Guarantor,

 

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whether or not such setoff results in any loss of interest or other penalty, and
including without limitation all certificates of deposit) at any time held, and
any other funds or Property at any time held, and other Indebtedness at any time
owing by such Secured Party or any such Affiliate to or for the credit or the
account of the Borrower or any other Obligor against any and all of the
Guaranteed Obligations irrespective of whether or not such Secured Party will
have made any demand under the Loan Agreement, this Agreement, the Notes or any
other Loan Document and although such obligations of the Parent Guarantor may be
contingent or unmatured or are owed to a branch or office of such Secured Party
different from the branch or office holding such deposit or obligated on such
indebtedness. Should the right of any Secured Party to realize funds in any
manner set forth hereinabove be challenged and any application of such funds be
reversed, whether by court order or otherwise, the Secured Parties shall make
restitution or refund to the Borrower pro rata in accordance with their (or
their Affiliates’) Revolving Loan Commitments. Each Secured Party agrees to
promptly notify the Borrower, on behalf of itself and the other Obligors, and
the Agent, on behalf of the Secured Parties, after any such setoff and
application, provided that the failure to give such notice will not affect the
validity of such setoff and application. The rights of the Agent and the Secured
Parties and their respective Affiliates under this Section are in addition to
other rights and remedies (including without limitation other rights of setoff)
which the Agent or the Secured Parties may have. This Section is subject to the
terms and provisions of Sections 4.5 and 11.8 of the Loan Agreement.

SECTION 4.5 Governing Law; Jurisdiction; Venue; Service of Process.

(a) Governing Law. This Parent Guaranty shall be governed by, and construed in
accordance with, the law of the State of New York, including Section 5-1401 and
Section 5-1402 of the General Obligations Law of the State of New York, without
reference to the conflicts of law principles thereof.

(b) Submission to Jurisdiction. The Parent Guarantor irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the courts of the State of New York sitting in the Borough of
Manhattan, New York and of the United States District Court of the Borough of
Manhattan, New York, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Parent Guaranty or any other Loan
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
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 Parent Guaranty or in any other Loan Document shall affect any
right that the Agent or any Secured Party may otherwise have to bring any action
or proceeding relating to this Parent Guaranty or any other Loan Document
against the Parent Guarantor or its properties in the courts of any
jurisdiction.

(c) Waiver of Venue. The Parent Guarantor 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 Parent Guaranty or any other Loan Document in
any court referred to in paragraph (b) of this Section.

 

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Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by applicable Legal Requirements, the defense of an inconvenient forum
to the maintenance of such action or proceeding in any such court.

(d) Service of Process. Each party hereto irrevocably consents to service of
process in the manner provided for notices in Section 11.2 of the Loan
Agreement. Nothing in this Parent Guaranty will affect the right of any party
hereto to serve process in any other manner permitted by applicable law.

SECTION 4.6 Waiver of Jury Trial.

(a) 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 PARENT
GUARANTY OR ANY OTHER LOAN 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 PARENT
GUARANTY AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.

SECTION 4.7 No Waiver by Course of Conduct, Cumulative Remedies. No waiver of
any Default or Event of Default shall be a waiver of any other Default or Event
of Default. No failure on the part of Agent or any other Secured Party to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Parent Guaranty shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. No remedy, right or power
conferred upon the Agent or any Secured Party is intended to be exclusive of any
other remedy, right or power given hereunder or now or hereafter existing at
law, in equity, or otherwise, and all such remedies, rights and powers shall be
cumulative.

SECTION 4.8 Successors and Assigns. This Parent Guaranty shall be binding upon
the successors and assigns of the Parent Guarantor and shall inure to the
benefit of the Parent Guarantor, the Agent and the Secured Parties and their
successors and assigns; provided that the Parent Guarantor may not assign,
transfer or delegate any of its rights or obligations under this Parent Guaranty
without the prior written consent of the Agent and the Secured Parties.

SECTION 4.9 Survival of Indemnities. Notwithstanding any termination of this
Parent Guaranty, the indemnities to which the Agent and the Secured Parties are
entitled under the provisions of Section 4.3 and any other provision of this
Parent Guaranty and the other Loan Documents shall continue in full force and
effect and shall protect the Agent and the Secured Parties against events
arising after such termination as well as before.

 

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SECTION 4.10 Titles and Captions. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.

SECTION 4.11 Severability of Provisions. Whenever possible, each provision of
this Parent Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law. If any provision of this Parent Guaranty shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions of this Parent
Guaranty shall not be affected or impaired thereby.

SECTION 4.12 Counterparts, Integration and Effectiveness. This Parent Guaranty
may be executed in any number of counterparts, all of which taken together shall
constitute one and the same agreement and any of the parties hereto may execute
this Parent Guaranty by signing any such counterpart. This Parent Guaranty and
the other Loan Documents, and any separate letter agreements with respect to
fees payable to the Agent, constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Delivery of an executed counterpart of a signature page of this Parent
Guaranty by telecopy or electronic mail shall be effective as delivery of a
manually executed counterpart of this Parent Guaranty.

SECTION 4.13 Advice of Counsel, No Strict Construction. Each of the parties
represents to each other party hereto that it has discussed this Parent Guaranty
with its counsel. The parties hereto have participated jointly in the
negotiation and drafting of this Parent Guaranty. In the event an ambiguity or
question of intent or interpretation arises, this Parent Guaranty shall be
construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Parent Guaranty.

SECTION 4.14 Acknowledgements. The Parent Guarantor hereby acknowledges that:

(a) neither the Agent nor any Secured Party has any fiduciary relationship with
or duty to the Parent Guarantor arising out of or in connection with this Parent
Guaranty or any of the other Loan Documents, and the relationship between the
Parent Guarantor, on the one hand, and the Agent and Secured Parties, on the
other hand, in connection herewith or therewith is solely that of debtor and
creditor; and

(b) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Secured Parties or among the Parent Guarantor and the Secured Parties.

SECTION 4.15 Releases. At such time as the Guaranteed Obligations shall have
been paid in full and the Revolving Loan Commitments have been terminated, this
Parent Guaranty and all obligations (other than those expressly stated to
survive such termination) of the Agent and the Parent Guarantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party.

[Signature Pages to Follow]

 

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IN WITNESS WHEREOF, the Parent Guarantor has executed and delivered this Parent
Guaranty under seal by its duly authorized officer, all as of the day and year
first above written.

 

[CORPORATE SEAL]    

CARROLS RESTAURANT GROUP, INC., as

Parent Guarantor

      By:   /s/ Joseph Zirkman       Name:   Joseph Zirkman       Title:   Vice
President

[Signature Pages Continue]

[Parent Guaranty – Carrols Restaurant Group]

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WACHOVIA BANK, NATIONAL

ASSOCIATION as Agent

By:   /s/ Ronald F. Bentien, Jr. Name:   Ronald F. Bentien, Jr. Title:  
Director

[Parent Guaranty – Carrols Restaurant Group]