Document:

Fourth Amendment to Loan and Security Agreement

 EXHIBIT 10.42 
 FOURTH AMENDMENT 
 TO

 LOAN AND SECURITY AGREEMENT 

THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into as of March 3, 2011
by and between Silicon Valley Bank (“Bank”) and Enteromedics Inc., a Delaware corporation (“Borrower”), whose address is 2800 Patton Road, Saint Paul, MN 55113. 

RECITALS 
 A. Borrower, as borrower, and Bank, Compass Horizon Funding Company LLC and Venture Lending & Leasing V, Inc., as lenders, entered into that certain Loan and Security Agreement with an
“Effective Date” of November 18, 2008, Subsequently, in accordance with that certain First Amendment to Loan and Security Agreement (the “First Amendment”), dated February 8, 2010, between Borrower and Bank, the
Borrower and Bank agreed to the terms of the Amended SVB/Borrower Loan Agreement (as defined in the First Amendment and herein referred to, as amended to date, as the “Loan Agreement”). 

B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement. 

C. Borrower has requested that Bank amend the Loan Agreement, as herein set forth, and Bank has agreed to the same, but only to
the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth herein. 
 AGREEMENT 
 NOW,
THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the
Loan Agreement. 
 2. Amendments and Other Provisions. 

2.1. Acknowledgment, Additional Advance and Repayment of Term Loan. Borrower and Bank acknowledge and agree that the
outstanding principal amount of the Term Loan was $5,959,843.28 as of February 28, 2011 (the “Prior Balance”) and was $5,768,173.34 as of March 2, 2011 (the “Current Balance”) following a principal payment. Upon
Borrower and Bank entering into this Amendment, Bank shall lend to Borrower an amount equal to the difference between the Prior Balance and the Current Balance, and the amount so lent shall be added to and become a part of the Term Loan. The portion
of Section 2.1.1(d) of the Loan Agreement that reads as follows: 

 Borrower shall repay the remaining outstanding amount of the Term Loan in 30 consecutive
equal monthly payments, each consisting of the interest required to be paid with respect to such Term Loan pursuant to subsection “c” above plus a portion of the principal of the Term Loan, in the amount necessary to fully amortize the
Term Loan over such period (such amount to be calculated by Facility Agent), commencing on January 1, 2011 and continuing on the Payment Date of each month thereafter until June 1, 2013 (the “Term Loan Maturity
Date”)... 
 is hereby amended to read as follows: 

Borrower shall repay the remaining outstanding amount of the Term Loan in 30 consecutive equal monthly payments, each consisting of the
interest required to be paid with respect to such Term Loan pursuant to subsection “c” above plus a portion of the principal of the Term Loan, in the amount necessary to fully amortize the Term Loan over such period (such amount to be
calculated by Facility Agent) (the “Payment Amount”), commencing on October 1, 2011 and continuing on the Payment Date of each month thereafter until March 1, 2014 (the “Term Loan Maturity Date”)...

 2.2. Change in Payment Amount. Section 2.1.1(d) of the Loan Agreement is hereby amended by adding the
following to the end thereof: 
 If the interest rate applicable to the Term Loan shall ever change pursuant to Section 2.3,
then the Payment Amount shall change so that it shall continue to be the amount necessary to fully amortize the Term Loan over the remaining number of monthly Payment Dates to and including the Term Loan Maturity Date (such changed amount to be
calculated by Facility Agent). 
 2.3. Permitted Prepayment of Term Loan. The portion of Section 2.1.1(f) of
the Loan Agreement that reads as follows: 
 (B) a fee equal to the Make-Whole Premium with respect to each Term Loan,

 is hereby amended to read as follows: 
 (B) a fee equal to the Make-Whole Premium with respect to each Term Loan, provided that such Make-Whole Premium with respect to such prepayment shall not be charged if such prepayment is part of a
replacement of the Term Loan with a new facility from another division of SVB, 

 2.4. Interest Rate. Section 2.3(a) of the Loan Agreement reads as follows:

 (a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under the Term Loan shall accrue
interest at a fixed per annum rate equal to eleven percent (11%), which interest shall be payable monthly in accordance with Section 2.3(f) below. 
 Effective as of March 1, 2011, said Section 2.3(a) of the Loan Agreement is hereby amended to read as follows: 
 (a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under the Term Loan shall accrue interest at a fixed per annum rate based on Borrower’s Liquidity Ratio (and
the existence or non-existence of an Event of Default) as set forth below, which interest shall be payable monthly in accordance with Section 2.3(f) below. 
  

			
	 Liquidity Ratio as of the end of a month

and Event of Default status
	  	 Interest Rate

		
	Greater than or equal to 1.50:1.00, and no Event of Default has occurred and is continuing	  	6.25% (the “Lower Rate”)
		
	Less than 1.50:1:00, or an Event of Default has occurred and is continuing	  	9.00% (the “Higher Rate”)

The initial interest rate in effect as of March 1, 2011 shall be the Lower Rate. Increases or decreases in the interest rate based
on the Borrower’s Liquidity Ratio as provided above shall go into effect as of the first day of the month following the month in which Borrower’s monthly financial statements and Compliance Certificate are received by Bank. If, based on
the Liquidity Ratio as shown in Borrower’s financial statements there is to be an increase in the interest rate, the interest rate increase may be put into effect by Bank as of the first day of the month following the month in which
Borrower’s financial statements and Compliance Certificate were due, even if the delivery of the financial statements and Compliance Certificate is delayed. The Higher Rate shall go into effect immediately upon the occurrence and during the
continuance of an Event of Default unless Bank otherwise elects from time to time in its sole discretion to delay its effect or impose a smaller increase. If thereafter such Event of Default (and any other then-existing Event of Default) is waived
in writing, the interest rate that otherwise would be in effect according to the above table shall go into effect as of the first day of the month following the month in which such waiver occurred. 

 2.5. Final Payment. For purposes of clarity, the parties acknowledge and agree that
the amount of the Final Payment for the Bank Term Loan is $500,000. 
 2.6. Elimination of Springing Lien on Excluded
Collateral. Section 4.3 of the Loan Agreement is hereby amended to read as follows: “4.3 [Reserved]”. 

2.7. Financial Statements, Reports, Certificates. The “twenty (20) days” set forth in subpart (i) of
Section 6.2(a) of the Loan Agreement is hereby amended to read “thirty (30) days”. The “one hundred twenty (120) days” set forth in subpart (ii) of Section 6.2(a) of the Loan Agreement is hereby amended
to read “one hundred fifty (150) days”. Subpart (iii) of Section 6.2(a) of the Loan Agreement is hereby amended to read “(iii) as soon as available, but in any event at least 15 days before the end of each fiscal year
of Borrower, Borrower’s operating budget and financial projections for its next fiscal year as approved by Borrower’s Board of Directors”. The “twenty (20) days” set forth in Section 6.2(b) of the Loan Agreement is
hereby amended to read “thirty (30) days”. The “twenty (20) days” set forth on Schedule 2 of the Loan Agreement is hereby amended to read “thirty (30) days”. 

2.8. Financial Covenants. Section 6.7 of the Loan agreement reads as follows: 

Financial Covenants. 
 Borrower shall maintain at all times, to be tested as of the last day of each month, unless otherwise noted, on a consolidated basis with respect to Borrower and its Subsidiaries: 

(a) Liquidity Ratio. A ratio of (i) the sum of Borrower’s unrestricted cash and Cash Equivalents held with Silicon
Valley Bank and Silicon Valley Bank’s Affiliates plus Borrower’s Eligible Accounts, divided by (ii) the outstanding principal amount of the Term Loan, of not less than 1.00:1.00. 

Said Section 6.7 of the Loan Agreement is amended to read as follows for the month of March 2011 and continuing for the months thereafter:

 Financial Covenants. 
 Borrower shall maintain at all times, to be tested as of the last day of each month, unless otherwise noted, on a consolidated basis with respect to Borrower and its Subsidiaries: 

(a) Liquidity Ratio. A ratio (the “Liquidity Ratio”) of (i) the sum of Borrower’s unrestricted cash and
Cash Equivalents held with Silicon Valley Bank and Silicon Valley Bank’s Affiliates plus Borrower’s Eligible Accounts, divided by (ii) the outstanding principal amount of the Term Loan, of not less than 1.00:1.00. 

 (b) EBITDA. If the Liquidity Ratio is less than 1.50:1.00 as of the last day in any
month, EBITDA for the three months ending as of the last day of such month that is (i) not less than 110% of the Projected EBITDA for such period, if the Projected EBITDA for such period were less than zero (for example, if Projected
EBITDA were negative $1,000,000, then actual EBITDA would be required to be not less than negative $1,100,000), or (ii) at least 90% of the Projected EBITDA for such period, if the Projected EBITDA for such period were greater or equal
to zero. 
 2.9. Elimination of New Capital Transactions Requirement. Section 6.12 of the Loan Agreement is hereby
amended to read as follows: “Section 6.12 [Reserved].” 
 2.10. Definition of “Make-Whole
Premium”. The definition of “Make-Whole Premium” set forth in Section 13.1 of the Loan Agreement that reads as follows: 
 “Make-Whole Premium” shall mean, with respect to each Term Loan, an amount equal to the following percentage of the aggregate of all interest that would have been due
with respect to such Term Loan had such Term Loan been repaid in all the installments provided for in Section 2.1.1(d), but was not so repaid as a consequence of a mandatory or permitted prepayment (as applicable) of the Term Loan: (a) 80%
if at the time the Make-Whole Premium becomes due under the terms hereof Borrower has made twelve (12) regularly scheduled monthly payments of principal in accordance with Section 2.1.1(d), and (b) 100% if at the time the Make-Whole
Premium becomes due under the terms hereof Borrower has not made twelve (12) regularly scheduled monthly payments of principal in accordance with Section 2.1.1(d). 
 is hereby amended by replacing it with the following definitions: 

“Make-Whole Amount” shall mean, with respect to each Term Loan, (a) in the case of any prepayment pursuant to
Section 2.1.1(f) hereof, the amount of the Term Loan being prepaid, and (b) in the case of all or any portion of the Term Loan becoming due and payable according to the terms hereof because of the occurrence and continuance of an Event of
Default, such amount of the Term Loan that has become due and payable according to the terms hereof. 
 “Make-Whole Event
Date” shall mean, with respect to each Term Loan, (a) in the case of any prepayment pursuant to Section 2.1.1(f) hereof, the date of such prepayment, and (b) in the case of all or any portion of the Term Loan becoming due and
payable according to the terms hereof because of the occurrence and 

 
continuance of an Event of Default, the date such amount of the Term Loan has become due and payable according to the terms hereof. 

“Make-Whole Premium” shall mean, with respect to each Term Loan, and with respect to any actual or required prepayment of
all or any portion of the Term Loan, an amount equal to 1% of the Make-Whole Amount if the Make-Whole Event Date occurs on or before the first anniversary of the date of the Fourth Amendment; zero (0) if the Make-Whole Event Date occurs
thereafter. 
 2.11 Exhibit B—Compliance Certificate. Exhibit B to the Loan Agreement (the form of Compliance
Certificate) shall be replaced with Exhibit A hereto in accordance with the transition to the revised Financial Covenants provided for herein. 
 2.12. Elimination of Cash Security for Term Loan. Sections 2.3 and 2.4 of the Third Amendment (regarding Borrower’s obligation to maintain cash collateral with Bank) are hereby deleted and of
no further force or effect. 
 2.13. Addition of Definitions. The following definitions are hereby added to
Section 13.1 of the Loan Agreement in the appropriate alphabetical order: 
 “Bank” shall mean Silicon
Valley Bank (which is also sometimes referred to as “SVB”). 
 “EBITDA” shall mean (a) Net
Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense. 

“Fourth Amendment” is that certain Fourth Amendment to Loan and Security Agreement dated March 3, 2011, between SVB
and Borrower. 
 “Interest Expense” means for any fiscal period, interest expense (whether cash or non-cash)
determined in accordance with GAAP for the relevant period ending on such date, including, in any event, interest expense with respect to any Credit Extension and other Indebtedness of Borrower and its Subsidiaries, including, without limitation or
duplication, all commissions, discounts, or related amortization and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated with interest rate swap, cap, and similar arrangements,
and the interest portion of any deferred payment obligation (including leases of all types). 
 “Liquidity
Ratio” is defined in Section 6.7 of the Loan Agreement. 

 “Net Income” means, as calculated on a consolidated basis for Borrower and
its Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period. 

“Payment Amount” is defined in Section 2.1.1(d) of the Loan Agreement. 

“Projected EBITDA” means, for any period, the EBITDA that would be achieved for that period if Borrower’s financial
results for the period match the financial projections covering such period that are provided to Bank pursuant to Section 6.2(a)(iii) hereof. 
 3. Limitation of Amendments. 
 3.1. The amendments set forth above
are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or
(b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document. 
 3.2. This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. 
 4.
Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows: 
 4.1. Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the
date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing; 

4.2. Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan
Agreement, as amended by this Amendment; 
 4.3. The organizational documents of Borrower delivered to Bank on the
Effective Date (including the Fifth Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on November 20, 2007), as amended and supplemented by the Certificates of Amendment filed with the Delaware
Secretary of State on July 2, 2009 and July 9, 2010 and by the Certificate of Designations filed with the Delaware Secretary of State on September 29, 2010, remain true, accurate and complete and have not been amended, supplemented or
restated and are and continue to be in full force and effect; 

 4.4. The execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized; 
 4.5.
The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or
affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower; 
 4.6. The execution and delivery by Borrower of this Amendment and
the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by
any governmental or public body or authority, or subdivision thereof, binding on either Borrower, except as already has been obtained or made; and 
 4.7. This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights. 

5. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument. 
 6. Effectiveness. This Amendment shall be deemed effective upon the
execution and delivery of this Amendment by each party hereto. 
 [Signature page follows] 

 IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be duly executed and delivered as of the date first written above. 
  

									
	BANK	 	 	 	BORROWER
			
	Silicon Valley Bank	 		 	Enteromedics Inc.
					
	By:	 	 /s/ Benjaman Johnson
	 		 	By:	 	 /s/ Greg S. Lea

	Name:	 	Benjaman Johnson	 		 	Name:	 	Greg S. Lea
	Title:	 	Deal Team Leader	 		 	Title:	 	Senior Vice President and Chief Financial Officer

 EXHIBIT A TO FOURTH AMENDMENT 

EXHIBIT B 
 COMPLIANCE CERTIFICATE 
  

							
	TO:	  	SILICON VALLEY BANK	  	 	  	Date:                     
				
	FROM:	  	ENTEROMEDICS INC.	  		  	

 The undersigned authorized officer of EnteroMedics Inc. (“Borrower”) certifies that
under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for the period ending
             with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and
correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has
timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of
Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification
to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or
footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this
certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement. 

Please indicate compliance status by circling Yes/No under “Complies” column. 

 

					
	 REPORTING
COVENANT
	  	 REQUIRED
	  	 COMPLIES

			
	 Monthly financial statements with Compliance Certificate
	  	Monthly within 30 days	  	Yes    No
			
	 Annual financial statement (CPA Audited)
	  	FYE within 150 days	  	Yes    No
			
	 Annual financial projections
	  	15 days prior to FYE	  	Yes    No
			
	 10-Q, 10-K and 8-K
	  	Within 5 days after filing with SEC	  	Yes    No
			
	 Reports per Agreement Schedule 2
	  	Monthly within 30 days	  	Yes    No
	  
 The following Intellectual Property was registered (or
an application for registration was made) after the Effective Date (if no registrations or applications, state “None”)
  

 

  

							
	 FINANCIAL
COVENANT
	  	 REQUIRED
	  	 ACTUAL
	  	 COMPLIES

				
	 Maintain on a Monthly Basis:
	  		  		  	
				
	 Liquidity Ratio (“LR”)
	  	1.0:1.0	  	_____:1.0	  	Yes    No
				
	 EBITDA (if “LR” less than 1.5:1.0)
	  	See Agreement	  	________	  	Yes    No

 The following financial covenant analys[is][es] and information set forth in Schedule 1
attached hereto are true and accurate as of the date of this Certificate. 
 The following are the exceptions with respect to
the certification above: (If no exceptions exist, state “No exceptions to note.”) 
  

 
  

 
  

 
  

											
	ENTEROMEDICS INC.	 	 	 	 BANK USE ONLY
	 	 
						
		 		 		 	Received by:	 	  
	 	
	 By:
	 	  
	 		 	AUTHORIZED SIGNER	 	
						
	 Name:
	 	  
	 		 	  
 Date:
	 	  
	 	
						
	 Title:
	 	  
	 		 	Verified: 	 	  
	 	
		 		 		 	AUTHORIZED SIGNER	 	
		 		 		 	  
 Date:
	 	  
	 	
					
		 		 		 	Compliance Status:        Yes    No	 	

 SCHEDULE 1 TO COMPLIANCE CERTIFICATE 

Financial Covenants of Borrower 
 In the event of a conflict between this Schedule and the Agreement, the terms of the Agreement shall govern. 
 Dated:                      
 I. Liquidity Ratio (Section 6.7(a)) 
 Required:
        not less than 1.00:1.00 
 Actual: 

 

							
	 A.
	  	Borrower’s unrestricted cash (and Cash Equivalents) held with SVB and its Affiliates	  	 	$            	  
			
	 B.
	  	Borrower’s Eligible Accounts	  	 	$            	  
			
	 C.
	  	The sum of line A plus line B	  	 	$            	  
			
	 D.
	  	Outstanding principal amount of the Term Loan	  	 	$            	  
			
	 E.
	  	Liquidity Ratio (line C divided by line D)	  	 	___:___	  

  

			
	 Is line E greater than or equal to 1.00:1.00?
	  	
		
	              No, not in
compliance
	  	             Yes, in compliance
		
	 II. Minimum EBITDA (Section 6.7(b))
	  	
		
	 Required:         as set forth in Section 6.7(b) of the Loan
Agreement
	  	
		
	 Actual:
	  	

  

							
	 A.
	  	Net Income	  	 	$            	  
			
	 B.
	  	To the extent included in the determination of Net Income	  			
			
		  	 1.        Interest Expense
	  	 	$            	  
		  		  			
		  	 2.        Depreciation expense
	  	 	$            	  
		  		  			
		  	 3.        Amortization expense
	  	 	$            	  
		  		  			
		  	 4.        Income tax expense
	  	 	$            	  
		  		  			
		  	 5.        The sum of lines 1 through 4
	  	 	$            	  
			
	C.	  	EBITDA (line A plus line B.5)	  	 	______	  

  

			
	 Does line C meet the requirement of Section 6.7(b) of the Loan Agreement?

		
	              No, not in
compliance
	  	             Yes, in complianceThird Forbearance Agreement

 Exhibit 10.1 
 Execution Copy 
 THIRD FORBEARANCE
AGREEMENT 
 This Third Forbearance Agreement (herein, the “Third Forbearance Agreement”) is
made as of this 3rd day of March, 2011, by and among Sbarro, Inc., a New York corporation (the “Borrower”), Sbarro Holdings, LLC, a Delaware limited liability company (“Holdings”), the Lenders (as defined in the
Credit Agreement) party hereto and Bank of America, N.A., as Administrative Agent. 
 RECITALS:

 A. The Lenders have extended credit to the Borrower on the terms and conditions set forth in that certain Credit
Agreement dated as of January 31, 2007, as amended or otherwise modified prior to the date hereof, by and among the Borrower, Holdings, the Lenders, the Administrative Agent and the other entities party thereto (the “Credit
Agreement”). 
 B. The Borrower has informed the Lenders that it is not in compliance with Section 7.16 of the
Credit Agreement for the four fiscal quarter period ending January 2, 2011 (the “Financial Covenant Default”) (and the parties hereto acknowledge and agree that the date of December 26, 2010 set forth in such Section is a
mistake and the correct date is January 2, 2011). 
 C. The Borrower has also informed the Lenders that it has failed to
make the interest payment in respect of its Senior Notes that was due and payable on February 1, 2011, and that, beginning on March 3, 2011, such failure will constitute (i) an Event of Default under Section 8.01(e)(i)(A) of the
Credit Agreement and (ii) an Event of Default under Section 8.01(e)(i)(A) of the Second Lien Credit Agreement, which will constitute an additional Event of Default under Section 8.01(e)(i)(A) of the Credit Agreement (such Events of
Default, the “Cross-Defaults”). 
 D. The Lenders are not willing to waive the Event of Default that exists as
a result of the Financial Covenant Default or the Events of Default that will exist beginning on March 3, 2011 as a result of the Cross-Defaults. 
 E. The Borrower has also informed the Lenders that it received a “Notice of Default” under the Senior Notes Indenture from a holder of the Senior Notes on December 28, 2010 with respect to
the entry of the Second Lien Credit Agreement by the Loan Parties in March 2009 (the “Indenture Default Notice”) and that the Borrower disputes the defaults specified in the Indenture Default Notice. 

F. The Borrower has requested that the Lenders temporarily forbear from exercising certain rights and remedies under the Loan Documents.

 G. The Borrower, Holdings, the Lenders party thereto and the Administrative Agent have entered into (i) that certain
Forbearance Agreement dated as of January 3, 2011 (the “First Forbearance Agreement”) and (ii) that certain Second Forbearance Agreement dated as of January 31, 2011 (the “Second Forbearance
Agreement”). 

 H. In order to accommodate the Borrower’s request, during and only during the period
(the “Standstill Period”) beginning on the date of this Third Forbearance Agreement and ending on the Standstill Termination Date (as defined below), the Lenders are willing to temporarily forbear from exercising their rights and
remedies available solely by reason of the Financial Covenant Default, the Cross-Defaults or the delivery of the Indenture Default Notice on the terms, conditions, and provisions contained in this Third Forbearance Agreement. 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows: 
 1. Incorporation of Recitals; Defined Terms. Holdings, the Borrower
and each of the Lenders party hereto acknowledges that the Recitals set forth above are true and correct in all material respects. The defined terms in the Recitals set forth above are hereby incorporated into this Third Forbearance Agreement by
reference. All other capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. 
 2. Confirmation by the Borrower of Loans and Letters of Credit. The Borrower acknowledges and agrees that as of March 1, 2011, the respective aggregate outstanding principal balances of the
Loans and the aggregate face amount of outstanding Letters of Credit were as follows: 
  

					
	 Revolving Loans:
	  	$	17,900,000.00	  
		
	 Term B Loans:
	  	$	154,797,500.00	  
		
	 Letters of Credit:
	  	$	3,599,909.53	  

 The Borrower acknowledges and agrees
that as of (and including) March 1, 2011: (i) the aggregate amount of accrued and unpaid interest on the Revolving Loans and Term B Loans is $2,023,269.46, (ii) the aggregate amount of accrued and unpaid Letter of Credit Fees payable
pursuant to Section 2.11(b) of the Credit Agreement is $27,449.32 and (iii) the foregoing amounts do not include other fees, expenses and other amounts which are chargeable or otherwise reimbursable under the Credit Agreement and the other
Loan Documents. All of the foregoing amounts are the bona fide obligations of the Borrower, and the Borrower acknowledges its obligation to pay such amounts in accordance with the terms of the Credit Agreement and agrees that it has no right
of setoff, defenses, claims or counterclaims with respect thereto. 
 3. Acknowledgment of Default. The Financial
Covenant Default constitutes as of January 2, 2011, and each Cross-Default will constitute as of March 3, 2011, an Event of Default under the Credit Agreement (such Events of Default, the “Specified Events of Default”).
The Borrower acknowledges that, as a result of the Specified Events of Default, (i) the conditions precedent to the obligation of each Lender to make Loans to the Borrower and to the obligation of each L/C Issuer to issue (or renew or extend
the term of) any Letter of Credit set forth in Section 4.02 of the Credit Agreement are not satisfied and (ii) the Lenders are permitted and entitled under Section 8.02 of the Credit Agreement to terminate the Commitments, to
accelerate 

  
 -2-

 
the Loans, to require cash collateral for L/C Obligations, to enforce Liens granted under the Collateral Documents and to exercise any other rights or remedies that may be available under the
Loan Documents or under applicable law. Each of Holdings and the Borrower represents to the Administrative Agent and the Lenders that no Default or Event of Default exists other than the Specified Events of Default. Each of Holdings and the Borrower
acknowledges that as a result of the Specified Events of Default, it is prohibited from taking any actions that would be otherwise permitted under the Credit Agreement that are conditioned upon no Default or Event of Default having occurred and
being continuing (or words of similar import), and agrees not to take, and not to permit any of its respective Subsidiaries to take, any such actions. Furthermore (and without limiting the foregoing), each of Holdings and the Borrower acknowledges
and agrees that as a result of the Specified Events of Default: 
  

	 	(i)	in accordance with the definition of “Eligible Assignee” contained in Section 1.01 of the Credit Agreement and Section 10.06(b) of the Credit
Agreement, the Borrower’s consent right in respect of certain assignments is no longer in effect; 

  

	 	(ii)	in accordance with clause (x) of Section 2.06(c) of the Credit Agreement, all outstanding Loans bear interest at the Default Rate; and

  

	 	(iii)	in accordance with Section 2.07(d) of the Credit Agreement, the Borrower is not entitled to convert Eurodollar Loans to, or continue any Eurodollar Loans for
additional Interest Periods as, Eurodollar Loans having an Interest Period in excess of one month. 

 4.
Forbearance. Until the Standstill Termination Date (as defined below) occurs, the Lenders will not (i) accelerate the Loans or enforce any of the Liens granted under the Collateral Documents solely as a result of the Specified Events of
Default or the delivery of the Indenture Default Notice or (ii) exercise any other rights or remedies under the Loan Documents available solely by reason of the Specified Events of Default or the delivery of the Indenture Default Notice.

 5. Certain Covenants. Each of Holdings and the Borrower hereby covenants and agrees with the Administrative Agent and
the Lenders as follows: 
  

	 	(a)	Principal Payments. The Borrower shall continue to pay all principal on the Loans as and when due under the Credit Agreement including, without limitation, all
scheduled payments of principal on the Term B Loans, and shall reimburse each L/C Issuer for any L/C Disbursements as and when due under the Credit Agreement. 

 

	 	(b)	Interest and Fee Payments. The Borrower shall make all payments in respect of interest, fees and other amounts due under the Loan Documents when due.

  

	 	(c)	 Fees and Expenses. The Borrower shall pay on demand all reasonable and documented fees and expenses (including attorneys’ and
advisors’ fees) 

  
 -3-

	 	 
incurred by the Administrative Agent and its counsel in connection with this Third Forbearance Agreement, and will comply with its payment obligations pursuant to that certain letter agreement,
dated as of December 22, 2010, by and among Conway Del Genio Gries & Co., LLC (“CDG”), Davis Polk & Wardwell LLP and the Administrative Agent, as acknowledged by the Borrower and Holdings pursuant to that
certain letter of acknowledgement, dated as of December 22, 2010, delivered by the Borrower and Holdings to the Administrative Agent and Davis Polk & Wardwell LLP. 

 

	 	(d)	Capital Expenditures. The Borrower shall not permit Consolidated Capital Expenditures for the period beginning March 3, 2011 and ending on April 1,
2011 to exceed $2,500,000. 

  

	 	(e)	[Reserved.] 

  

	 	(f)	Additional Reporting. During the Standstill Period, the Borrower shall provide on each Wednesday of each calendar week, (x) a report showing aggregate
weekly store sales statistics for the most recently completed calendar week with a comparison to the corresponding week of the preceding year and (y) a report showing, with respect to the calendar week ending 10 calendar days prior to such
Wednesday, actual cash flow for the Borrower and its Subsidiaries and a comparison to the projected amount for such week set forth in the Updated 13-Week Forecast (as defined in the Second Forbearance Agreement). For the avoidance of doubt, each
calendar week ends on Sunday. 

  

	 	(g)	[Reserved.] 

  

	 	(h)	[Reserved.] 

  

	 	(i)	Other Documents. Not later than March 18, 2011, the Borrower shall deliver to the Administrative Agent such other documents as has been agreed by the
Borrower and the Administrative Agent prior to the date hereof. 

  

	 	(j)	Notices of Certain Payments. During the Standstill Period, the Borrower shall provide the Administrative Agent with not less than two (2) Business
Days’ advance notice of any payment to be made by the Borrower or any of its Subsidiaries that (x) is in an amount greater than $1,000,000 and (y) is not reflected in the Updated 13-Week Forecast (as defined in the Second Forbearance
Agreement). 

  

	 	(k)	Other Restrictions. During the Standstill Period and regardless of whether or not any of the following would otherwise be permitted under the Credit Agreement,
neither Holdings nor the Borrower shall, nor shall they permit any other Group Company to: 

  
 -4-

	 	(1)	directly or indirectly, redeem, purchase, prepay, retire, defease or otherwise acquire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment, any Subordinated Indebtedness, any Indebtedness incurred pursuant to the Senior Notes Documents or any Indebtedness incurred pursuant the Second Lien Loan Documents; 

 

	 	(2)	pay in cash any Management Fees (including any Financial Advisory Fees (as defined in the Management Agreement as in effect on the date of the First Forbearance
Agreement)) or make any other cash payments to the Sponsor or any Affiliate of the Sponsor that is not a Group Company, except for (A) reimbursements of airline tickets and other documented out-of-pocket expenses made pursuant to the Management
Agreement as in effect on the date hereof in an aggregate amount for all such expenses (other than airline tickets) not to exceed $10,000, (B) payments made to or on behalf of such Persons that are directors of the Company, solely in such
capacity, that are consistent with payments made by the Company to or on behalf of other directors, (C) payments made to or on behalf of such Persons that are lenders under the Second Lien Credit Agreement, solely in such capacity, in
accordance with the terms of the Second Lien Credit Agreement, including the fees, charges and disbursements of counsel and (D) any payments in respect of goods or services provided by other portfolio companies of the Sponsor or its Affiliates
that are in the ordinary course of business and otherwise permitted to be made under the Credit Agreement; 

  

	 	(3)	incur, create or assume any Indebtedness or Swap Obligations pursuant to clause (xx) of Section 7.01 of the Credit Agreement; 

 

	 	(4)	create, incur or assume any Lien on any property or assets pursuant to clause (xxx) or (xxxi) of Section 7.02 of the Credit Agreement; provided,
that the Group Companies may create, incur or assume Liens pursuant to such clause (xxxi) securing obligations or other liabilities in an aggregate amount not to exceed $500,000; 

 

	 	(5)	enter into any transaction of merger or consolidation pursuant to clause (v) of Section 7.04 of the Credit Agreement; 

 

	 	(6)	declare or pay any Restricted Payments pursuant to clause (vii) or (ix) of Section 7.07 of the Credit Agreement; or 

 

	 	(7)	 make or acquire any Investment in any Person pursuant to clause (xi)(A), (xiv), (xv), (xxii), (xxiv) or (xxv) of Section 7.06(a) of the
Credit Agreement; provided, that (A) the Group Companies may make or acquire Investments pursuant to such clause (xi)(A) in an aggregate amount not to exceed $250,000 and (B) the Group Companies may

  
 -5-

	 	 
make or acquire Investments pursuant to such clauses (xv) and (xxii) in an aggregate amount (in aggregate for both such clauses together) not to exceed $500,000.

  

	 	(l)	Minimum Liquidity. During the Standstill Period, Holdings and the Borrower shall not permit the aggregate amount of unrestricted cash and Cash Equivalents of the
Loan Parties (“Liquidity”) as of the last day of any calendar week, commencing with the calendar week ending February 27, 2011, to be less than (x) the projected Liquidity set forth in the Updated 13-Week Forecast for the
last day of such calendar week plus (y) $2,000,000. 

 6. Standstill Termination Date. As used in this
Third Forbearance Agreement, “Standstill Termination Date” shall mean the earliest of (i) April 1, 2011, (ii) the date on which any Event of Default under the Credit Agreement other than the Specified Events Default shall
occur, (iii) the date on which any breach by Holdings or the Borrower of any of the covenants set forth in Section 5 of this Third Forbearance Agreement shall occur (or, in the case of the covenants set forth in clauses (f) and
(i) of such Section 5, the date that is two calendar days following any breach thereof unless such breach has been remedied on or prior to such date), (iv) the date on which the holders of the Senior Notes or the trustee under the
Senior Note Indenture shall (a) accelerate obligations under the Senior Notes pursuant to Section 6.02 of the Senior Notes Indenture or (b) exercise any available remedy at law or in equity before a court of competent jurisdiction to
collect the payment of obligations under the Senior Notes or to enforce the performance of any provision of the Senior Notes or the Senior Notes Indenture pursuant to Section 6.03 of the Senior Notes Indenture and (v) the date on which the
Second Lien Lenders, the administrative agent or the collateral agent under the Second Lien Loan Documents shall (a) accelerate obligations under the Senior Lien Credit Agreement pursuant to Section 8.02(b) of the Second Lien Credit
Agreement or (b) enforce any rights and interests created and existing under the Second Lien Loan Documents pursuant to Section 8.02(d) of the Second Lien Credit Agreement. The occurrence of the Standstill Termination Date shall be deemed
an Event of Default under the Credit Agreement. Upon the occurrence of the Standstill Termination Date, the Standstill Period shall automatically terminate and the Lenders shall, at any time thereafter, be permitted and entitled under
Section 8.02 of the Credit Agreement to, among other things, terminate the Commitments, accelerate the Loans, require cash collateral for L/C Obligations, enforce the Liens granted under the Collateral Documents and exercise all other rights
and remedies available under the Loan Documents or applicable law. 
 7. No Waiver and Reservation of Rights. Each of
Holdings and the Borrower acknowledges and agrees, on behalf of itself and on behalf of its respective Subsidiaries, that the Lenders are not waiving the Specified Events of Default (or any other Default or Event of Default), but are simply agreeing
to forbear from exercising their rights with respect to the Specified Events of Default or the delivery of the Indenture Default Notice to the extent expressly set forth in this Third Forbearance Agreement. Without limiting the generality of the
foregoing, each of Holdings and the Borrower acknowledges and agrees that immediately upon expiration of the Standstill Period, the Administrative Agent and the Lenders have all of their rights and remedies with respect to the Specified Events of
Default or the delivery of the Indenture Default Notice to the same extent, and with the same force and effect, as if the 

  
 -6-

 
forbearance provided for herein had not been granted. Each of Holdings and the Borrower agrees not to assert and hereby forever waives, on behalf of itself and on behalf of its respective
Subsidiaries, any right to assert that the Administrative Agent or the Lenders are obligated in any way to continue beyond the Standstill Period to forbear from enforcing their rights or remedies or that the Administrative Agent and the Lenders are
not entitled to act on the Specified Events of Default or the delivery of the Indenture Default Notice on and after the occurrence of the Standstill Termination Date as if such Event of Default had just occurred and the Standstill Period had never
existed. Each of Holdings and the Borrower acknowledges and agrees, on behalf of itself and on behalf of its respective Subsidiaries, that the Lenders have made no representations as to what actions, if any, the Lenders will take after the
Standstill Period or upon or after the occurrence of the Standstill Termination Date, and the Lenders and the Administrative Agent do hereby specifically reserve any and all rights, remedies, and claims they have (after giving effect hereto) with
respect to the Specified Events of Default or the delivery of the Indenture Default Notice and each other Default or Event of Default that may occur. 
 8. Loan Documents Remain Effective. Except as expressly set forth in this Third Forbearance Agreement, the Loan Documents and all of the obligations of Holdings and the Borrower thereunder, the
rights and benefits of the Administrative Agent and Lenders thereunder, and the Liens created thereby remain in full force and effect. Without limiting the foregoing, each of Holdings and the Borrower agrees to comply with all of the terms,
conditions, and provisions of the Loan Documents. This Third Forbearance Agreement and the Loan Documents are intended by the Lenders party hereto as a final expression of their agreement and are intended as a complete and exclusive statement of the
terms and conditions of that agreement. 
 9. Conditions Precedent. The effectiveness of this Third Forbearance Agreement
and the commencement of the Standstill Period is subject to the satisfaction of the following condition precedent: Holdings, the Borrower and the Required Lenders shall have executed and delivered this Third Forbearance Agreement. 

10. Release. In consideration of, among other things, the forbearance provided for herein, each of Holdings and the Borrower, on
behalf of itself and its respective Subsidiaries and its and their respective successors and assigns (the “Borrower Parties”), jointly and severally releases, acquits and forever discharges (in each case to the extent permitted by
applicable law) the Administrative Agent and each Lender (collectively, the “Lender Parties”), and their respective subsidiaries, parents, affiliates, partners, officers, directors, employees, agents, attorneys, successors and
assigns, both present and former (collectively, the “Lenders’ Affiliates”) from any and all manner of actions, causes of action, suits, debts, controversies, damages, judgments, executions, claims (including without limitation
crossclaims, counterclaims and rights of set-off and recoupment) and demands whatsoever, whether known or unknown, whether asserted or unasserted, in contract, tort, law or equity which Holdings, the Borrower or any other Borrower Party has or may
have against any of the Lender Parties and/or the Lenders’ Affiliates by reason of any action, failure to act, matter or thing whatsoever arising from or based on facts occurring prior to the date hereof that relate to this Third Forbearance
Agreement, the Credit Agreement or the other Loan Documents or the transactions contemplated hereby or thereby, including but not limited to any such claim or defense to the extent that it relates to (i) the making or administration of the
Loans, including without limitation, any such claims and 

  
 -7-

 
defenses based on fraud, mistake, duress, usury or misrepresentation, or any other claim based on so-called “lender liability theories”, (ii) any covenants, agreements, duties or
obligations set forth in the Loan Documents or (iii) any actions or omissions of any of the Lender Parties and/or the Lenders’ Affiliates in connection with the initiation or continuing exercise of any right or remedy contained in the Loan
Documents or at law or in equity with respect to the Loan Documents. 
 11. Miscellaneous. By its acceptance hereof, each
of Holdings and the Borrower hereby represents and warrants that (i) it has the necessary power and authority to execute, deliver, and perform the undertakings contained herein, (ii) this Third Forbearance Agreement constitutes its valid
and binding obligation, enforceable against it in accordance with its terms, (iii) as of the date hereof, each of the Updated Organization Chart (as defined in the First Forbearance Agreement) and the Updated Subsidiary Schedule (as defined in
the First Forbearance Agreement) is complete and correct in all material respects, (iv) as of the date hereof, each Subsidiary of Holdings that is required under the terms of the Credit Agreement to be a party to the Guaranty as a
“Guarantor” (as defined therein) is a party to the Guaranty as a “Guarantor” (as defined therein) and (v) as of the date hereof, each Subsidiary of Holdings that is required under the terms of the Credit Agreement to be a
party to any of the Collateral Documents and to grant Liens pursuant thereto has become a party to such Collateral Documents and has granted such Liens. Any provision of this Third Forbearance Agreement held invalid, illegal, or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality, or unenforceability without affecting the validity, legality, and enforceability of the remaining provision hereof; and the invalidity of a
particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties hereto hereby acknowledge and agree that this Third Forbearance Agreement shall constitute a Loan Document for all purposes
of the Credit Agreement and the other Loan Documents. Unless otherwise expressly stated herein, the provisions of this Third Forbearance Agreement shall survive the termination of the Standstill Period. This Third Forbearance Agreement may be
executed in counterparts and by different parties on separate counterpart signature pages, each of which constitutes an original and all of which taken together constitute one and the same instrument. Delivery of a counterpart hereof by facsimile
transmission or by e-mail transmission of an Adobe portable document format file (also known as a “PDF” file) shall be effective as delivery of a manually executed counterpart hereof. This Third Forbearance Agreement shall be governed by
New York law and shall be governed and interpreted on the same basis as the Credit Agreement. 
 [SIGNATURE
PAGES TO FOLLOW] 

  
 -8-

 This Third Forbearance Agreement is entered into as of the date and year first above
written. 
  

					
	SBARRO, INC.
		
	By	 	 /s/ Nicholas McGrane

		 	 Name
	  	 Nicholas McGrane

		 	 Title
	  	 Interim President and Chief Executive Officer

	
	SBARRO HOLDINGS, LLC
		
	By	 	 /s/ Nicholas McGrane

		 	 Name
	  	 Nicholas McGrane

		 	 Title
	  	 Interim President and Chief Executive Officer

 Accepted and agreed to. 

 

					
	 BANK OF AMERICA, N.A., in its capacity as

    Administrative Agent and Lender

		
	By	 	 /s/ Anthony D. Healey

		 	Name	 	 Anthony D. Healey

		 	Title	 	 Senior Vice President

 
					
	ALADDIN CREDIT PARTNERS LLC
		
	By  	 	 /s/ Luke Gosselin

		 	Name  	 	 Luke Gosselin

		 	Title	 	 Managing Member

	
	If second signature is required:
		
	By	 	  

		 	Name	 	  

		 	Title	 	  

 
			
	 ARTUS LOAN FUND 2007-I, LTD.

	 BABSON CLO LTD. 2003-I

	 BABSON CLO LTD. 2004-II

	 BABSON CLO LTD. 2005-I

	 BABSON CLO LTD. 2006-I

	BABSON CLO LTD. 2007-I
	LOAN STRATEGIES FUNDING LLC
	 SUFFIELD CLO, LIMITED

	By: Babson Capital Management LLC as
	Collateral Manager
		
	By	 	 /s/ Michael J. Fey

		 	Name: Michael J. Fey
		 	Title: Director
	
	MASSACHUSETTS MUTUAL LIFE
	INSURANCE COMPANY
	MASSMUTUAL ASIA LIMITED
	BILL & MELINDA GATES FOUNDATION
	TRUST
	
	By: Babson Capital Management LLC as
	Investment Adviser
		
	By	 	 /s/ Michael J. Fey

		 	Name: Michael J. Fey
		 	Title: Director
	
	VINACASA CLO, LTD.
	By: Babson Capital Management LLC as
	Collateral Servicer
		
	By	 	 /s/ Michael J. Fey

		 	Name: Michael J. Fey
		 	Title: Director

 
					
	DEXTERA
		
	By	 	 /s/ Richard Taylor

		 	Name	 	 Richard Taylor

		 	Title	 	 Authorized Signatory

 
							
	Foothill CLO I, Ltd.
	By:	 	The Foothill Group, Inc.,
		 	as attorney-in-fact
			
		 	By	 	 /s/ Sanjay Roy

		 		 	Name: Sanjay Roy
		 		 	Title: Director

 
			
	The Foothill Group, Inc.
		
	By	 	 /s/ Sanjay Roy

		 	Name: Sanjay Roy
		 	Title: Director

 
							
	NZC GUGGENHEIM MASTER FUND LIMITED
	
	By: Guggenheim Investment Management, LLC, as Manager
			
		 	By	 	 /s/ Michael Damaso

		 		 	Name	 	 Michael Damaso

		 		 	Title	 	 Senior Managing Director

	
	BDIF LLC
	
	By: Guggenheim Investment Management, LLC, as Investment Manager
			
		 	By	 	 /s/ Michael Damaso

		 		 	Name	 	 Michael Damaso

		 		 	Title	 	 Senior Managing Director

 
					
	STONE TOWER CREDIT FUNDING I LTD.
	BY STONE TOWER FUND MANAGEMENT LLC
	AS ITS COLLATERAL MANAGER
		
	By	 	 /s/ Michael DelPercio

		 	Name	 	 Michael DelPercio

		 	Title	 	 Authorized Signatory

 
			
	XELO VII LIMITED
	
	 By: Babson Capital Management LLC as Sub-
 Advisor

		
	By	 	 /s/ Michael J. Fey

		 	Name: Michael J. Fey
		 	Title: Director
	
	GMAM GROUP PENSION TRUST III
	
	 By: Babson Capital Management LLC as
 Investment Manager

		
	By	 	 /s/ Michael J. Fey

		 	Name: Michael J. Fey
		 	Title: Director

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