ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN
OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The Second Amendment amends the Credit
Agreement dated as of November 30, 2017 among the Company, the Guarantors, JPMorgan Chase Bank, N.A., as administrative agent and
as a lender and the other lenders party thereto (collectively, the “Lenders”) (as previously amended by the First
Amendment to Credit Agreement dated as of March 9, 2018 among the Company, the Guarantors, the Administrative Agent and the lenders
party thereto and as further amended from time to time, together with the Second Amendment, the “Credit Agreement”).
Capitalized terms used herein and not defined shall have the meanings set forth in the Credit Agreement.
The Second Amendment reduced aggregate
maximum commitments available for revolving credit borrowings (including standby letters of credit) under the Credit Agreement
(the “Revolving Commitment”) by $30 million to $120 million as of the Second Amendment Effective Date. The Second
Amendment further reduces the Revolving Commitment by (i) $15 million to $105 million on January 3, 2021 and (ii) $10 million to
$95 million on April 4, 2021.
The Second Amendment provides that the
Company is not required to be in compliance with the Adjusted Leverage Ratio and Fixed Charge Coverage Ratio (each as amended by
the Second Amendment) under the Credit Agreement for the period beginning on the Second Amendment Effective Date through April
3, 2021 (the “Amendment Period”). The Company is required to be in compliance with the Adjusted Leverage Ratio
and Fixed Charge Coverage Ratio beginning with the fiscal quarter ending April 4, 2021. Following the Amendment Period, the Company
will be permitted to exercise equity cures (“Equity Cure”) with respect to compliance with the Adjusted Leverage
Ratio and Fixed Charge Coverage Ratio provided that, among other items, (i) the equity raised is from the issuance of common stock
of the Company, (ii) not less than 50% of the net proceeds received by the Company from the issuance of Company common stock
are immediately used to prepay outstanding revolving credit borrowings under the Credit Agreement which will result in a corresponding
reduction of the Revolving Commitment by such amount, (iii) the amount of the Equity Cure is not more than $5 million in any
fiscal quarter, and (iv) the aggregate amount of all Equity Cures do not exceed $15 million. The Second Amendment also provides
that the Company must maintain minimum Liquidity of (i) $40 million from the Second Amendment Effective Date through September
27, 2020, (ii) $30 million from September 28, 2020 through January 3, 2021 and (iii) $25 million on January 4, 2021 and thereafter
(the “Liquidity Covenant”).
Pursuant to the Second Amendment, borrowings
under the Credit Agreement will bear interest at a rate per annum, at the Company’s option, of (a) the Alternate Base Rate
plus the Applicable Rate of 4.0% with a minimum Alternate Base Rate of 2.0% or (b) the Adjusted LIBO Rate plus the Applicable
Rate of 5.0% with a minimum Adjusted LIBO Rate of 1.0%. Pursuant to the Second Amendment, the Company will be subject to a commitment
fee of 0.50% per annum on the daily amount of the undrawn portion of the Revolving Commitment.
The outstanding borrowings under the Credit
Agreement are prepayable without penalty (other than customary breakage costs). The Second Amendment provides that for any of the
following by the Company, (i) the sale of certain specified real property, including pursuant to sale leaseback transactions, (ii)
the issuance of equity of the Company (other than under the Company’s 2012 Stock Incentive Plan, as amended, or any successor plans,
subject to the restrictions set forth in the Credit Agreement), (iii) the incurrence of certain Indebtedness and (iv) the receipt
of insurance proceeds (each a “Prepayment Event”), (a) if such Prepayment Event occurs during the Amendment Period,
100% of the Net Proceeds of such Prepayment Event received by the Company in each case must be used to reduce the outstanding revolving
credit borrowings under the Credit Agreement which will result in a corresponding reduction of the Revolving Commitment and (b)
following the Amendment Period, (1) 50% of the Net Proceeds received by the Company pursuant to (ii) of the definition of Prepayment
Event above and the sale of real property pursuant to a sale leaseback transaction in each case must be used to reduce the outstanding
revolving credit borrowings under the Credit Agreement which will result in a corresponding reduction of the Revolving Commitment
and (2) 100% of the Net Proceeds received by the Company pursuant to Prepayment Event other those identified in (1) above, in each
case must be used to reduce the outstanding revolving credit borrowings under the Credit Agreement which will result in a corresponding
reduction of the Revolving Commitment. The Second Amendment further provides that Company must prepay outstanding revolving credit
borrowings if the outstanding revolving credit borrowings exceed $75 million and Excess Cash of the Company exceeds $20 million.
The Credit Agreement, as amended by the
Second Amendment, contains certain covenants, including, without limitation, those limiting Company’s and the Guarantors’
ability to, among other things, incur indebtedness, incur liens, sell or acquire assets or businesses, change the character of
its business in any material respects, engage in transactions with related parties, make certain investments, make certain restricted
payments or pay dividends, including, without limitation, (i) that Capital Expenditures by the Company cannot exceed an aggregate
of $22 million for each of the fiscal years ending 2020 and 2021 and cannot exceed an aggregate of $25 million for the fiscal year
ending 2022 (the “Capital Expenditures Covenant”) and (ii) limiting the construction or development of new restaurants
to one Pollo Tropical prototype restaurant in 2021 and three Pollo Tropical prototype restaurants in 2022, provided further that
(a) no Default shall have occurred and be continuing or would exist after giving effect to the construction or development of the
new Pollo Tropical restaurant(s), (b) after giving effect to the construction or development of such new Pollo Tropical restaurant(s)
on a Pro Forma Basis the Loan Parties are in compliance with each of the Liquidity Covenant, the Adjusted Leverage Ratio, the Fixed
Charge Coverage Ratio and the Capital Expenditures Covenant, (c) the aggregate Revolving Commitment is less than or equal to $95
million and (d) after giving effect to the construction or development of such new Pollo Tropical restaurant(s) on a Pro Forma
Basis, Liquidity is greater than or equal to the sum of $5 million plus the amount of minimum Liquidity required on such date pursuant
to the Liquidity Covenant.
The Second Amendment provides that the
Company will be required to engage a financial advisor or chief restructuring officer acceptable to the Lenders if the Company
is not in compliance with certain milestones, including, among other items, (i) the Company using commercially reasonable efforts
to refinance and pay in full the Obligations under the Credit Agreement, (ii) on or before July 15, 2020 (or such later date agreed
to in writing by the Administrative Agent), the Company furnishing to the Administrative Agent and the Lenders with a written assessment
and reasonable action plan (the “Action Plan”) in such form, substance and detail acceptable to the Administrative
Agent for the Disposition of owned real property with a targeted gross value of $30 million and complying with such Action Plan,
(iii) on or before September 30, 2020 (or such later date agreed to in writing by the Administrative Agent), the Company furnishing
to the Administrative Agent and the Lenders with a written plan from ContinuServe in such form, substance and detail acceptable
to the Administrative Agent for executing certain actions intended to improve service levels, reduce costs and increase efficiency,
(iv) on or before August 14, 2020 (or such later date agreed to in writing by the Administrative Agent), the Company providing
the Administrative Agent with a proposed timeline in such form, substance and detail acceptable to the Administrative Agent for
completion of a shelf registration with the Securities and Exchange Commission for the issuance of common Equity Interests of the
Company, (v) the Company maintaining $30 million of Liquidity on October 1, 2020, (vi) on or before October 1, 2020, the Company
furnishing to the Administrative Agent and the Lenders information demonstrating compliance with the Adjusted Leverage Ratio, the
Fixed Charge Coverage Ratio, the Liquidity Covenant and the Capital Expenditures Covenant, (vii) no Default shall have occurred
and (viii) compliance by the Loan Parties at all times with the Adjusted Leverage Ratio, the Fixed Charge Coverage Ratio, the Liquidity
Covenant and the Capital Expenditures Covenant.
The Company’s obligations under the Credit
Agreement are secured by all of the assets of the Company and the Guarantors (including a pledge of all of the capital stock and
equity interests of the Guarantors) pursuant to the Amended and Restated Security Agreement.
Under the Credit Agreement, the Lenders
may terminate their obligation to advance and may declare the unpaid balance of borrowings, or any part thereof, immediately due
and payable upon the occurrence and during the continuance of customary defaults which include, without limitation, payment default,
covenant defaults, bankruptcy type defaults, defaults on other indebtedness, certain judgments or upon the occurrence of a change
of control (as specified therein).
The foregoing description does not purport
to be complete and is qualified in its entirety by reference to the Second Amendment which includes as Annex I thereto the Credit
Agreement as amended and restated by the Second Amendment and the Amended and Restated Security Agreement, which are attached hereto
as Exhibits 10.1 and 10.2, respectively, and are incorporated by reference herein.