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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For Fiscal Year Ended December 29, 1996
Commission File Number 1-6553
CARROLS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 16-0958146
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
968 JAMES STREET, SYRACUSE, NEW YORK 13203
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(Address of principal executive office) (Zip Code)
(315) 424-0513
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
11-1/2% SENIOR NOTES DUE 2003
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _ x No___
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K ('SS'229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant: NO VOTING STOCK IS HELD BY NON-AFFILIATES.
The number of shares outstanding of each of the Registrant's classes of
common stock, as of March 15, 1997: 10.
Documents Incorporated by Reference: NONE.
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The Company uses a 52-53 week fiscal year ending on the Sunday
closest to December 31. All references herein to the fiscal years ended January
1, 1995, December 31, 1995 and December 29, 1996 will hereinafter be referred to
as the fiscal years ended December 31, 1994, 1995 and 1996, respectively.
PART I
ITEM 1. BUSINESS
RECENT DEVELOPMENTS
ATLANTIC ACQUISITION
Acquisition. On April 3, 1996, pursuant to the Securities Purchase
Agreement (the "Atlantic Agreement"), dated as of March 6, 1996, among Carrols
Corporation (the "Company" or "Carrols"), Carrols Holdings Corporation
("Holdings"), the stockholders of Holdings and Atlantic Restaurants, Inc.
("Atlantic"), Atlantic acquired Holdings, the owner of 100% of the outstanding
capital stock of the Company (the "Atlantic Acquisition"). Pursuant to the
Atlantic Agreement, Atlantic acquired all of the outstanding voting capital
stock of Holdings for an aggregate purchase price of approximately $84 million
in cash.
Atlantic. Atlantic is an indirect wholly-owned subsidiary of Bahrain
International Bank (E.C.), a Bahrain exempt joint stock company ("BIB").
Redemption of Notes. The Atlantic Acquisition constituted a "change of
control" under the Indenture (the "Indenture"), dated as of August 17, 1993,
among the Company, Holdings and Marine Midland Bank, N.A., as trustee, governing
Carrols' $110 million aggregate principal amount (currently $107.7 million
outstanding) of 11-1/2% Senior Notes Due 2003 (the "Notes"). In accordance with
the terms and conditions of the Indenture, the Company offered to each holder of
the Notes the right to require the Company to repurchase all or any part of such
holder's Notes at a repurchase price in cash equal to 101% of the principal
amount of the Notes being repurchased (plus accrued and unpaid interest, if
any). The holders of $838,000 in principal amount of Notes redeemed their Notes
pursuant to such offer.
Employment Agreements. In connection with the Atlantic Acquisition, the
Company entered into Amended and Restated Employment Agreements (the "Employment
Agreements") with each of Alan Vituli (Chairman of the Board and Chief Executive
Officer of the Company) and Daniel T. Accordino (President and Chief Operating
Officer of the Company), each as more specifically described below. The
Employment Agreements contain terms and conditions substantially similar to
Messrs. Vituli's and Accordino's respective previous employment agreements
except that, in lieu of the previous stock option plans maintained by Holdings
(all of which were terminated in connection with the Atlantic Acquisition), a
new stock option plan (the "1996 Plan") was adopted pursuant to which employees
of the Company were eligible to be awarded options to purchase up to 9.09% of
the outstanding Shares of Common Stock on a fully-diluted basis. Messrs. Vituli
and Accordino received, pursuant to the 1996 Plan, 36% and 24%, respectively, of
the options (the "Option Agreements") that were available under the 1996 Plan.
Board of Directors. Upon consummation of the Atlantic Acquisition, each
of M. Bruce Adelberg, Richard V. Cross and Franklin Glasgall resigned from the
Board of Directors of the
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Company and of Holdings. Immediately following completion of the Atlantic
Acquisition, Robin McIlvenny, David J. Mathies, Jr. and Paul W. Durrant, each an
officer of Atlantic or one of its affiliates, were each elected to the
five-person Board of Directors of the Company and of Holdings.
Revised and Proposed Credit Facility. In connection with the Atlantic
Acquisition, the Company entered into a Seventh Amendment to Third Amended and
Restated Loan Security Agreement (the "Loan Amendment"), dated as of April 3,
1996, among Heller Financial, Inc. ("Heller"), Holdings and the Company which
provides, among other things, for additional availability under the senior
secured revolving credit facility (the "Senior Secured Credit Facility") of the
Company to repurchase Notes. The Company and Holdings are presently negotiating
the terms of additional financing (the "TCB Refinancing") pursuant to which
Texas Commerce Bank National Association ("TCB"), as Administrative Agent for a
syndicate of lenders (the "Lenders"), would (i) establish a $25 million
Revolving Credit Facility that would replace the current Senior Secured Credit
Facility and (ii) establish a $127 million Advance Term Loan ($5 million of
which would be used to replace the current $5 million term loan with Heller).
RECAPITALIZATION
On February 20, 1997, the Certificate of Incorporation of Holdings was
amended (the "Amendment") such that (i) the 3,146,110 shares of Common Stock
held by Atlantic were converted into 850,000 shares of Common Stock, (ii) each
of the classes consisting of (a) 882,353 shares of Non-Voting Common Stock of
Holdings, (b) 750 shares of Class B 10% Cumulative Redeemable Preferred Stock
(Series I) of Holdings, par value $0.01 per share, and (c) 750 shares of Class B
10% Cumulative Redeemable Preferred Stock (Series lI) of Holdings, par value
$.01 per share, was canceled and (iii) the outstanding warrants to purchase
488,111 shares of Common Stock were converted into warrants to purchase 131,876
shares of Common Stock. After giving effect to the foregoing, Holdings had
850,000 shares of Common Stock outstanding, all of which were held by Atlantic,
and no other voting capital stock outstanding. The descriptions below of the
1996 Plan and the Option Agreements are made after giving effect to the
foregoing.
MADISON DEARBORN INVESTMENT
MD Investment. On February 25, 1997, Holdings, Atlantic, Madison
Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P.
(together with Madison Dearborn Capital Partners, L.P., the "MD Investors")
entered into a Stock Purchase Agreement (the "MD Agreement"). Pursuant to the MD
Agreement and subject to certain conditions precedent described below, the MD
Investors will acquire (the "MD Investment") (i) from Holdings 283,334 shares of
Common Stock (the "Holdings Shares") and (ii) from Atlantic 283,333 of the
outstanding shares of Common Stock (the "Atlantic Shares," and, together with
the Holdings Shares, the "MD Shares"). Pursuant to the MD Agreement, certain
members of senior management will purchase, in the aggregate, 10,810 shares of
Common Stock.
The aggregate purchase price for the MD Shares will be approximately $61
million in cash (the "MD Purchase Price"), of which approximately one-half will
be paid to Holdings.
Stockholders Agreement. At the closing (the "MD Closing") of the MD
Investment, Holdings, Atlantic, the MD Investors, Alan Vituli and certain
other members of senior management (collectively the "New Stockholders") will
enter into a stockholders agreement (the "Stockholders Agreement"). Pursuant to
the Stockholders Agreement, at the MD Closing the New Stockholders will elect a
new Board of Directors of Holdings and Holdings will elect a new Board of
Directors of
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Carrols. Such new board will include three representatives designated by the MD
Investors (the "MD Directors"), three representatives designated by Atlantic
(the "Atlantic Directors") and two representatives (each of whom shall be
executive officers of the Company) designated by Mr. Vituli (the "Management
Directors"). The Stockholders Agreement also includes restrictions on the
transfer of Common Stock, restrictions on and covenants of Holdings and the
provision of preemptive, tag along and drag along rights to the parties thereto.
Conditions to MD Closing. The MD Investment is subject to several
conditions customary for comparable transactions and is also subject to the
following conditions:
1. The execution and delivery of the Stockholders Agreement by the
parties thereto;
2. The execution and delivery by Holdings, Atlantic, the MD Investors
and Messrs. Vituli, Accordino and Joseph A. Zirkman (Vice President and General
Counsel of the Company) of a registration rights agreement (the "Registration
Rights Agreement") granting rights relating to the registration of shares of
Common Stock under the Securities Act of 1933, as amended (the "Securities
Act");
3. The execution by Holdings and each of Messrs. Vituli and Accordino
of new employment agreements (the "New Employment Agreements) providing for a
minimum of four year terms of employment for Messrs. Vituli and Accordino;
4. The adoption of the Carrols Holdings Corporation 1996 Long-Term
Incentive Plan (the "New 1996 Plan");
5. The execution by Holdings and each of Messrs. Vituli and Accordino of
new stock option agreements, pursuant to the New 1996 Plan (collectively,
the "New Plan Option Agreements") providing in the aggregate for the purchase of
72,250 shares of Common Stock by them at an exercise price of $101.7646 per
share, a portion of which options vest immediately and a portion of which vest
over a period of four years;
6. The execution by Holdings and each of Messrs. Vituli, Accordino and
Zirkman of new stock option agreements (collectively, the "New Non-Plan
Option Agreements") providing in the aggregate for the purchase of 32,427 shares
of Common Stock by them at an exercise price of $101.7646 per share, which
options vest over a period of five years;
7. The execution and delivery of new financing and related agreements
with respect to the TCB Refinancing;
8. Holdings shall have obtained a key-man life insurance policy on the
life of Mr. Vituli in the face amount of $10,000,000; and
9. The investment by Messrs. Vituli, Accordino and Zirkman in Holdings
through the purchase of 9,827, 860 and 123 shares, respectively, of Common Stock
at the cash purchase price of $101.7646 per share.
Prospective Redemption of Notes. The consummation of the MD Investment
will constitute a "change of control" under the Indenture. In accordance with
the terms and conditions of the Indenture, upon a "change of control", each
holder of the Notes will have the right to require that Carrols repurchase all
or any part of such holder's Notes at a repurchase price in cash equal to
101% of the principal amount of the Notes being repurchased (plus accrued
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interest, if any). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources.
PENDING OMEGA ACQUISITIONS
The Company has entered into (i) a Purchase and Sale Agreement dated as
of January 15, 1997 with Omega Food Services, Inc. ("Omega") and Harold W.
Hobgood, as Omega's agent (the "Omega I Agreement"), pursuant to which the
Company will acquire the assets of 5 Burger King restaurants for an aggregate
purchase price of $5 million (subject to certain adjustments for inventory) and
(ii) a Purchase and Sale Agreement dated as of January 15, 1997 with Omega and
Harold W. Hobgood, as Omega's agent (the "Omega II Agreement"), pursuant to
which the Company will acquire the assets of 18 Burger King restaurants for an
aggregate purchase price of $16 million (subject to certain adjustments for
inventory). In addition, pursuant to the Omega I Agreement and the Omega II
Agreement the Company will purchase, upon their construction, two additional
Burger King restaurants.
* * *
The Atlantic Agreement, the Employment Agreements, the 1996 Plan, the
Option Agreements, the Insurance Agreements, the Loan Amendment, the commitment
letter describing the proposed TCB Refinancing, the Amendment, the MD Agreement,
the Stockholders Agreement, the Registration Rights Agreement, the New
Employment Agreements, the New 1996 Plan, the New Plan Option Agreements and the
New Non-Plan Option Agreements are included as Exhibits to this Form 10-K and
are incorporated by reference herein. The discussions in this Form 10-K of those
instruments are qualified in their entirety by reference to those instruments.
HISTORICAL DEVELOPMENT
Carrols was incorporated in 1968 and through 1976 its principal business
was the operation of fast food hamburger restaurants under the name Carrols
Restaurants and the operation of movie theaters under the name CinemaNational.
In 1976, as a result of growing competition from larger and better recognized
national fast food restaurant chains, Carrols became a franchisee of BKC and
began converting its restaurants into Burger King restaurants and ceased
operating and franchising restaurants under the name of Carrols Restaurants. In
order to facilitate the financing of the conversion of these restaurants,
Carrols disposed of a substantial portion of its movie theater assets.
In 1969, Carrols offered its common stock through an initial public
offering. The Company's shares were listed for trading on the New York Stock
Exchange in 1983.
The Company was acquired in December 1986 (the "1986 Acquisition") by
Holdings, a corporation formed to effect the 1986 Acquisition by Mr. Vituli and
other members of the Company's then-current senior management, a private
investor group and certain institutional investors. As a result of the 1986
Acquisition, Carrols became a wholly-owned subsidiary of Holdings. In March
1992, Mr. Vituli, who was Chairman of the Board of the Company from the time of
the 1986 Acquisition in December 1986, was also elected to serve as Chief
Executive Officer of the Company. Mr. Accordino was appointed President of the
Company in February 1993. In January 1995, the Company entered into three-year
employment agreements, which agreements were amended effective April 3, 1996
pursuant to the Atlantic Acquisition, with each of Messrs. Vituli and Accordino.
See "Executive Compensation -- Employment Agreements".
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At the time of the 1986 Acquisition, the Company owned 138 Burger King
restaurants and a food distribution business. In August 1990, the Company sold
its food distribution business to Burger King Distribution Services (BKDS), a
division of BKC. Carrols currently purchases substantially all of its
requirements for foodstuffs and paper and packaging products from ProSource
Services Corporation ("ProSource"), the successor to BKDS, pursuant to a five
year supply agreement which expires on March 31, 1999. See "Business--Supplies
and Distribution."
Since the 1986 Acquisition, Carrols has expanded its operations from 138
Burger King restaurants to 238 as of March 15, 1997. During this period, Carrols
built 38 restaurants, purchased 75 restaurants and disposed of or closed 13
restaurants. See "Business--Restaurant Locations." Since March 1994, the Company
has acquired 36 Burger King restaurants through the 1994 acquisitions of 22
Burger King restaurants for an aggregate purchase price of approximately $11.6
million, the 1995 acquisition of one Burger King restaurant, the 1996
acquisitions of 8 Burger King restaurants for an aggregate purchase price of
approximately $7.8 million and the 1997 acquisitions of 5 Burger King
restaurants for an aggregate purchase price of approximately $3.6 million.
COMPANY OPERATIONS
General. Since 1976, the Company's principal business has been the
operation of Burger King restaurants. The Company is the largest independent
Burger King franchisee in the United States. As of March 15, 1997, the Company
operated, as franchisee, 238 Burger King restaurants, of which 217 are
free-standing restaurants and 21 are located in retail shopping centers or
specialty stores. Carrols currently operates Burger King restaurants in nine
Northeastern and Midwestern states and one Southeastern state.
Carrols' Burger King restaurants are typically open seven days a week
from 7:00 a.m. to 11:00 p.m. Substantially all of Carrols' Burger King
restaurants offer a breakfast menu and the traditional Burger King menu for
lunch and dinner. A standard, free-standing Burger King restaurant building
typically has an area of approximately 3,000 square feet with a seating capacity
of approximately 90, drive-thru service and adjacent parking areas. Smaller
Burger King facilities are utilized in retail shopping centers. In Carrols'
free-standing Burger King restaurants, greater than 50% of sales are generally
generated through drive-thru service. Carrols leases most of its restaurant
properties, although it owns the land and buildings on which 28 of its Burger
King restaurants are located. See "Properties."
Burger King. There are approximately 8,700 Burger King restaurants
worldwide making BKC the second largest fast food hamburger operation. BKC has
been franchising since 1954 and has expanded to locations in all 50 states, the
District of Columbia and over 50 foreign countries.
Burger King restaurants are fast food restaurants of distinctive design
which serve a limited menu of moderately-priced foods and offer efficient and
rapid service. The Company believes that convenience, quality of food,
price/value and speed of service are the primary competitive advantages of
Burger King restaurants. Burger King restaurants appeal to a broad spectrum of
consumers.
Burger King restaurants feature flame-broiled hamburgers, which are an
integral part of the Burger King identity, and several widely-known, trademarked
products, the most popular being the Whopper'r' sandwich, which is a large,
flame-broiled hamburger on a five-inch toasted bun garnished with combinations
of mayonnaise, lettuce, onions, pickles and tomatoes. The basic
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menu of all Burger King restaurants consists of hamburgers, cheeseburgers,
chicken sandwiches and filets, fish sandwiches, french fried potatoes, salads,
various breakfast products, shakes, desserts, soft drinks, milk and coffee. From
time to time, other promotional items are added to the menu for limited periods.
BKC continually seeks to develop new products and concepts as it endeavors to
enhance the menu and service of Burger King restaurants.
Franchise Agreements. Each of Carrols' Burger King restaurants operates
under a separate Franchise Agreement from BKC. The Franchise Agreements require,
among other things, that all restaurants be of standardized design and be
operated in a prescribed manner, including utilization of the standard Burger
King menu. The Franchise Agreements generally provide for an initial term of 20
years and have an initial fee of $40,000. A Successor Franchise Agreement may be
granted by Burger King for an additional 20 year term, provided the restaurant
meets the then-current BKC operating standards and the Company is not in default
under the relevant Franchise Agreement. Currently, the Successor Franchise
Agreement fee is $40,000. In addition to this fee, in order to obtain a
Successor Franchise Agreement, a franchisee is typically required to make
capital improvements to the subject restaurant to bring the restaurant up to
BKC's then-current design standards. The amount of such capital expenditures
will vary widely depending upon the magnitude of the required changes and the
degree to which the Company has made interim changes to the restaurant. Although
the Company estimates that a substantial remodeling can cost in excess of
$250,000, the Company's average remodeling cost over the past five years has
been approximately $130,000 per restaurant. The Franchise Agreements are
non-cancelable except for failure to abide by the terms thereof.
Carrols believes that it enjoys a good relationship with BKC and that it
will satisfy BKC's normal Successor Franchise Agreement policies and,
accordingly, believes that Successor Franchise Agreements will be granted in due
course by BKC at the expiration of its existing Franchise Agreements.
Historically, BKC has granted each of the Company's requests for a Successor
Franchise Agreement for its restaurants.
In addition to the initial franchise fee, franchisees currently pay to
BKC a monthly royalty of 3-1/2% of the gross revenues from their Burger King
restaurants. Burger King franchisees currently also contribute 4% of monthly
gross revenues from their Burger King restaurants to fund BKC's national and
regional advertising. BKC engages in substantial advertising and promotional
activities and other efforts to maintain and enhance the nationwide Burger King
system. Carrols supplements BKC's marketing with local advertising and
promotional campaigns. See "Business--Business Strategy" and "Advertising and
Promotion."
The franchisee of a new restaurant must also purchase the requisite
equipment, furniture and signage and pay various other costs to open a new
Burger King restaurant. The Company estimates that the average initial cost for
a standard free-standing restaurant is approximately $240,000 (excluding the
cost of the building, land and site improvements). The Company estimates that
the aggregate cost of constructing a free-standing restaurant and the cost of
land and site improvements varies considerably depending upon building type,
land cost and site work, and generally ranges from $650,000 to $1,000,000.
The BKC Franchise Agreements do not grant any franchisees exclusive
rights to a defined territory. The Company believes that BKC generally seeks to
ensure that newly granted franchises do not materially adversely affect the
operations of existing Burger King restaurants.
The Company is required to obtain BKC's consent prior to the acquisition
or development of new Burger King restaurants. BKC has the right of first
refusal to purchase any Burger King
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restaurant which the Company wishes to acquire from other franchisees. In
addition, BKC's prior consent is required for the sale by the Company of any of
its restaurants. Since the Acquisition, BKC has consented to each of the
Company's requests for consent to acquisitions.
Management Structure; Staffing; Training. Substantially all executive
management, finance, marketing and operation support functions of the Company
are conducted centrally at Carrols' Syracuse, New York headquarters. The Company
currently has four vice president-regional directors who are each responsible
for the operations of all of Carrols' Burger King restaurants in their
respective regions. Three of the regional directors have been employed by
Carrols for over 20 years. There are 32 district supervisors who report to the
regional directors. Each district supervisor is responsible for the direct
supervision of the day-to-day operations of an average of seven restaurants.
Typically, district supervisors previously served as restaurant managers at one
of Carrols' restaurants. Both regional directors and district supervisors are
compensated with a fixed salary plus an incentive bonus based upon the
performance of the restaurants under their supervision.
A typical Carrols' Burger King restaurant is staffed with hourly
employees who are supervised by a salaried manager and two or three salaried
assistant managers.
Carrols provides both classroom and in-restaurant training for its
salaried and hourly personnel, in addition to the training programs provided by
BKC. Carrols believes that training and management development are integral to
its success.
Control Systems. Financial and management control of Carrols'
restaurants is facilitated by the use of an integrated computerized back office
and point of sale system which electronically retrieves data from each of the
Company's restaurants on a daily basis. Sales reports, payroll data, food and
labor cost analyses and other operating information for each restaurant are also
available daily to the restaurant manager, who is expected to react quickly to
trends or situations in his or her restaurant. The district supervisors receive
key daily information for all restaurants under their respective control, both
on an individual unit and a cumulative basis. Daily information is accumulated
into weekly and monthly operating reports covering significant restaurant
performance indicators for each restaurant. These reports are monitored at each
management level from district supervisor through senior management. Carrols
believes that these systems materially enhance its ability to control and manage
its restaurant operations.
Factors Affecting the Company's Operations. Carrols' business is
affected by various conditions such as automobile usage, inclement weather,
gasoline prices and road construction. Weather conditions can be particularly
severe in the Northeast where the Company operates a significant number of its
Burger King restaurants. Historically, the Company's business has also been
affected by changes in local and national economic conditions, demographic
trends and consumer spending habits, tastes and concerns about the nutritional
quality of fast food.
Site Selection. The Company believes that the location of each of its
restaurants is very important to such restaurant's success. Potential new
development sites are evaluated based upon accessibility, visibility, costs,
surrounding traffic patterns, competition and demographic characteristics. The
Company's senior management, based upon analyses prepared by its real estate
professionals and its operations personnel, determines the acceptability of all
acquisition and new development sites. See "Business--Business Strategy."
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RESTAURANT LOCATIONS
The following table sets forth the locations of the 238 Burger King
restaurants in Carrols' system at March 15, 1997.
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NEW YORK (98) OHIO (68) MAINE (3)
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Greater Albany (14) Greater Akron (13) Augusta (1)
Auburn (1) Alliance (2) Bangor (2)
Amsterdam (1) Archbold (1)
Greater Binghamton (6) Ashland (1)
Boonville (1) Bowling Green (3) MASSACHUSETTS (2)
Buffalo (1) Bryan (1)
Catskill (1) Greater Canton (11) North Andover (1)
Cobleskill (1) Greater Cleveland (9) Billerica (1)
Cortland (1) Defiance (1)
Fulton (1) Edon (1)
Glens Falls (2) Findlay (2) NEW JERSEY (2)
Gloversville (2) Fostoria (1)
Hamilton (1) Fremont (1)
Herkimer (1) Hartville (1) Franklin (1)
Hudson (1) Lima (2) Newton (1)
Kingston (3) Mansfield (6)
Middletown (2) Medina (1)
New City (1) Mentor (1) CONNECTICUT (1)
Newburgh (3) New Philadelphia (2)
Niagara Falls (1) Ottawa (1) Westport (1)
Norwich (1) Streetsboro (1)
Oneonta (2) Tiffin (1)
Oswego (1) Van Wert (1) VERMONT (1)
Peekskill (1) Wapakoneta (1)
Plattsburgh (3) Wooster (2) Rutland (1)
Poughkeepsie (2) Wauseon (1)
Port Jarvis (1)
Greater Rochester (14) MICHIGAN (21)
Rome (2)
Greater Syracuse (18) Ann Arbor (3)
Schodack (1) Battle Creek (4)
Greater Utica (4) Brooklyn (1)
Watertown (2) Dearborn (1)
Yorktown Heights (1) Kalamazoo (4)
Jackson (3)
Michigan Center (1)
NORTH CAROLINA (32) Parma (1)
Roseville (2)
Greater Asheville (9) Washtenaw (1)
Durham (7)
Forest City (1)
Havelock (2) PENNSYLVANIA (10)
Hendersonville (2)
Kinston (3) Bradford (1)
Marion (1) East Stroudsburg (1)
Morganton (1) Harrisburg (2)
New Bern (3) Lebanon (1)
Raleigh (2) Reading (4)
Shelby (1) Tamaqua (1)
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ADVERTISING AND PROMOTION
As a Burger King franchisee, a significant portion of the Company's
advertising and promotional programs are established and coordinated by BKC
through regional and national advertising campaigns. Carrols supplements BKC's
advertising and promotional activities with local advertising and promotions,
including the purchase of additional television, radio and print advertising.
Carrols also utilizes promotional programs, such as combination meals and
discounted prices, targeted to its customers, thereby enabling Carrols to create
a flexible and directed marketing program.
Most BKC franchisees and BKC-owned restaurants are required to
contribute 4% of their monthly gross revenues from restaurant operations to an
advertising fund, utilized by BKC for its advertising, promotional programs and
public relations activities. BKC's advertising programs consist of national
campaigns supplemented by local advertising. BKC's advertising campaigns are
generally carried on television, radio and in circulated print media (national
and regional newspapers and magazines). Carrols believes that one of the major
advantages of being a Burger King franchisee is the leverage it realizes from
the marketing power of BKC.
SUPPLIES AND DISTRIBUTION
As a Burger King franchisee, Carrols is required to purchase all of its
foodstuffs, paper goods and packaging materials from BKC-approved suppliers.
Other non-food items such as kitchen utensils, equipment maintenance tools and
other supplies may be purchased from any suitable source provided such items
meet BKC product uniformity standards. On April 1, 1994, Carrols entered into a
new supply agreement with its BKC-approved supplier, ProSource. Pursuant to that
agreement, Carrols is required to obtain substantially all of its foodstuffs
(other than bread products), paper goods, promotional premiums and packaging
materials from ProSource. The supply agreement with ProSource is a five-year
agreement which expires on March 31, 1999. The Company believes that ProSource's
services are competitive with alternatives available to the Company. Carrols
purchases its bread products from local bakeries. See "Business--Historical
Development."
There are other BKC-approved supplier/distributors which compete with
ProSource. Carrols believes that it would be able to substitute another supplier
if ProSource were unable, for any reason, or chose not to continue to service
the Company.
All BKC-approved suppliers are required to purchase all foodstuffs and
supplies from BKC-approved manufacturers and purveyors. BKC is responsible for
monitoring quality control and supervision of these manufacturers and purveyors.
See "Business--Quality Assurance."
BKC monitors all BKC-approved manufacturers and purveyors of its
foodstuffs. BKC regularly visits these manufacturers and purveyors to observe
the preparation of foodstuffs and run various tests to ensure that only high
quality foodstuffs are sold to BKC-approved suppliers and distributors. In
addition, BKC coordinates and supervises audits of approved suppliers and
distributors to determine continuing product specification compliance and to
ensure that manufacturing plant and distribution center standards are met.
QUALITY ASSURANCE
All Burger King franchisees, including Carrols, operate subject to a
comprehensive regimen of quality assurance and health standards set by
BKC, as well as standards set by
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Federal, state and local governmental laws and regulations. These standards
include food preparation rules regarding, among other things, minimum cooking
temperatures, sanitation and cleanliness. The "conveyor belt" cooking system
utilized in all Burger King restaurants, which is calibrated to carry hamburgers
through the flame broiler at regulated speeds, helps ensure that standardized
cooking times and temperatures are met. In addition, BKC has set maximum time
standards for holding unsold prepared food; for example, unsold sandwiches are
discarded ten minutes after preparation and unsold french fries are discarded
seven minutes after preparation.
Carrols, through its regional directors and district supervisors,
closely supervises the operation of all of its restaurants to help ensure that
Company standards and policies are followed and that product quality, customer
service and cleanliness of the restaurants are maintained. BKC conducts
unscheduled periodic inspections of each Burger King restaurant throughout the
Burger King system.
BUSINESS STRATEGY
The Company's primary business strategy is to expand its operations
through the acquisition and construction of additional Burger King restaurants
while enhancing the quality of operations and competitive position of its
existing Burger King restaurants. Carrols believes the size of the nationwide
Burger King system will continue to present opportunities for selective growth
through acquisitions. In addition, Carrols believes that the number of markets
in which the Company operates will provide opportunities for construction of new
restaurants. The ability of the Company to expand through the acquisition and
construction of additional Burger King restaurants is subject to, among other
things, the availability of financing and the obtaining of consent from BKC.
GOVERNMENT REGULATION
Carrols is subject to various Federal, state and local laws affecting
its business, including various health, sanitation, fire and safety standards.
Newly constructed or remodeled restaurants are subject to state and local
building code and zoning requirements. In connection with the remodeling and
alteration of the Company's restaurants, the Company may be required to expend
funds to meet certain Federal, state and local regulations, including
regulations requiring that remodeled or altered restaurants be handicap
accessible. The Company is also subject to Federal and state environmental
regulations, although such regulations have not had, and are not expected to
have, a material effect on the Company's operations.
The Company is subject to the Fair Labor Standards Act and various state
laws governing such matters as minimum wage requirements, overtime and other
working conditions and citizenship requirements. A significant number of the
Company's food service personnel are paid at rates which may be affected by
changes to the Federal minimum wage. The increase in the Federal minimum wage on
October 1, 1996 had the effect of increasing the Company's average hourly rate
by approximately 2%. The Federal minimum wage is scheduled to increase on
September 1, 1997.
The Company believes that it is operating in substantial compliance with
applicable Federal, state and local laws and regulations governing its
operations.
-11-
<PAGE>
<PAGE>
COMPETITION
The fast food industry is highly competitive. In each of its markets,
Carrols' restaurants compete with a large number of national and regional
restaurant chains, as well as locally-owned restaurants, offering low-priced and
medium-priced fare. Convenience stores, grocery store delicatessens and food
counters, cafeterias and other purveyors of moderately priced and quickly
prepared foods also compete with the Company. In the Company's markets,
McDonald's, Wendy's and Hardee's provide the most significant competition. The
Company's largest competitor is McDonald's. Carrols believes that BKC's national
brand name identification provides a significant competitive advantage in the
fast food business. The Company believes that product quality and taste,
convenience of location, speed of service, menu variety and price are the most
important competitive factors in the fast food restaurant industry.
EMPLOYEES
At December 31, 1996, Carrols employed approximately 8,400 persons;
approximately 100 were administrative personnel and 8,300 were restaurant
operating personnel. None of Carrols' employees are covered by collective
bargaining agreements. Approximately 7,600 of the restaurant operating personnel
at December 31, 1996 were part-time employees. Carrols believes that its
employee relations are satisfactory.
ITEM 2. PROPERTIES
The Company owns the approximately 20,000 square foot building at 968
James Street, Syracuse, New York, in which its executive offices are located.
This building houses all of the Company's administrative operations (except for
those conducted at three small regional offices) and is adequate for future
expansion. In addition to the above, at March 15, 1997 the Company owned or
leased the following properties:
</TABLE>
<TABLE>
<CAPTION>
Owned Leased Leased
Land; Land; Land;
Owned Owned Leased
Building Building Building Total
-------- -------- -------- -----
<S> <C> <C> <C> <C>
Burger King restaurants 28 16 194(a) 238
Excess properties:
Leased to others -- -- 4 4
Available for sale or lease 4 -- -- 4
--- ---- ----- -----
Total properties 32 16 198 246
=== ==== ===== =====
</TABLE>
(a) Includes 21 restaurants located in mall shopping centers or specialty
locations.
Most of the Company's leases are coterminous with the related Franchise
Agreements. The Company believes that it generally will be able to renew at
commercially reasonable rates the leases whose terms expire prior to the subject
Franchise Agreements.
-12-
<PAGE>
<PAGE>
Most leases require the Company, as lessee, to pay utility and water
charges, premiums on insurance and real estate taxes. Certain leases also
require contingent rentals based upon a percentage of gross sales that exceed
specified minimums.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding which, in
management's belief, will have a material adverse effect on the Company's
results of operations or financial condition, nor to any other pending legal
proceedings other than ordinary, routine litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-13-
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established trading market for the Company's capital stock.
Holdings owns 10 shares of common stock of the Company (representing 100% of the
capital stock of the Company).
Cash dividends per share were paid during 1995 and 1996 by Carrols to
Holdings as follows:
January, 1995 $ 20,000.00
April, 1995 $ 20,000.00
June, 1995 $ 3,672.00
July, 1995 $ 20,000.00
January, 1996 $ 800.00
March, 1996 $ 41,480.00
August, 1996 $ 20,722.40
October, 1996 $ 37,000.38
See discussion of dividend restriction in "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
-14-
<PAGE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
CARROLS CORPORATION AND SUBSIDIARIES-SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- ---------- ---------- --------
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks)
(Dollars in thousands except for per share data and restaurants)
OPERATING RESULTS:
<S> <C> <C> <C> <C> <C>
Revenues $ 241,125 $ 226,458 $ 204,254 $ 171,634 $ 156,413
Income (loss) before taxes,
extraordinary loss and
cumulative effect of change in
accounting principle 6,283 5,100 (1,666) (4,408) (1,262)
(Provision) benefit for taxes
(3,100) 9,826 (165)
Extraordinary loss on
extinguishment of debt (4,883)
Cumulative effect of change in
accounting for post-
retirement benefits (1,037)
------------ ------------ ------------ -------- ----------
Net income (loss) $ 3,183 $ 14,926 $ (1,831) $(9,291) $ (2,299)
============ ============ ============ ======== ==========
PER SHARE OF COMMON STOCK:
Income (loss) before taxes,
extraordinary loss and
cumulative effect of change in
accounting principle $ 628,300 $ 510,000 $ (166,600) $ (440,800) $ (126,200)
(Provision)
benefit for taxes (310,000) 982,600 (16,500)
Extraordinary loss on
extinguishment of debt (488,300)
Cumulative effect of change in
accounting for post-retirement
benefits (103,700)
------------ ------------ ------------ ----------- ----------
Net income (loss) $ 318,300 $1,492,600 $ (183,100) $ (929,100) $ (229,900)
============ ============ ============ ========== ==========
Dividends Declared $ 100,002 $ 63,672 $ 297,301 $ 273,960 $ 20,010
OTHER DATA:
Total assets $ 138,588 $ 135,064 $ 125,319 $ 119,735 $ 115,900
Long-term debt 118,180 116,375 120,680 114,197 91,245
Capital lease obligations 2,503 3,301 3,966 4,603 5,436
Total long-term debt and capital
lease obligations 120,683 119,676 124,646 118,800 96,681
Common stockholder's deficit (11,662) (12,916) (10,383) (27,208) (22,404)
Burger King restaurants in
operation:
At end of period 232 219 219 195 177
Annual weighted average 225 219 207 185 169
</TABLE>
-15-
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS RESULTS OF OPERATIONS
General. The following table sets forth for the years ended December 31,
1996, 1995 and 1994 certain consolidated financial data for the Company,
expressed as a percentage of sales:
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
YEARS ENDED DECEMBER 31
--------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Other income .1 .1 .2
Cost of sales 28.3 28.1 28.4
Restaurant wages and related expenses 29.4 29.1 29.4
Other restaurant operating expenses 20.2 20.2 20.8
Depreciation and amortization 4.6 5.0 5.5
Administrative expenses 4.4 4.7 4.6
Advertising expense 4.5 4.3 4.3
Loss on closing restaurants and other .9
Costs associated with change of control .2
Operating income 8.5 8.7 6.3
Interest expense 5.9 6.4 7.1
Income (loss) before taxes 2.6 2.3 (.9)
(Provision) benefit for taxes (1.3) 4.3 (.1)
</TABLE>
1996 COMPARED TO 1995
Sales. Sales for the year ended December 31, 1996 increased $14.6
million, or 6.4%, as compared to the year ended December 31, 1995. The Company
operated an average of 225 Burger King restaurants during 1996 as compared to an
average of 219 for 1995. Average unit sales increased 2.2% during the year ended
1996 as compared to 1995. Sales at comparable restaurants, the 211 restaurants
operating for the entirety of the compared periods, increased $7.1 million, or
3.2%. Net restaurant selling prices decreased 3.5% from the prior year due
mainly to higher discount promotional activity offset by menu price increases of
approximately 1%.
Cost of Sales. Cost of sales (food and paper costs) for the year ended
December 31, 1996 increased in dollars due to higher sales. Cost of sales
increased as a percentage of sales from 28.1% to 28.3% in 1996 due to the effect
of higher discount promotional activity partially offset by certain lower
commodity costs especially beef.
-16-
<PAGE>
<PAGE>
Restaurant Wages and Related Expenses. Restaurant wages and related
expenses increased from 29.1% of sales to 29.4% of sales when comparing the year
ended December 31, 1995 to 1996 due mainly to increased wage rates (including
the increase in the minimum wage effective October 1, 1996), the effect of
higher discount promotional activity and increased group insurance costs
partially offset by reduced unemployment tax rates.
Other Restaurant Operating Expenses. Other restaurant operating expenses
increased in dollars due to higher sales and more restaurants while the costs as
a percentage of sales remained at 20.2% of sales.
Depreciation and Amortization. Depreciation and amortization decreased
$0.2 million from assets becoming fully depreciated offset partially from the
additional depreciation and amortization of new restaurants.
Administrative Expenses. Administrative expenses remained relatively
stable during the year ended December 31, 1996 as compared to 1995. Some
increased costs related to future expansion were offset by the effect of the
fixed element of other costs.
Advertising Expense. An increase in advertising payments to Burger King
Corporation of $0.6 million (based on sales levels) and the costs associated
with increased promotional activity were the principal causes of the increase in
advertising expense when comparing 1996 to 1995.
Interest Expense. A reduction in average loan balances was the principal
cause for interest expense to decrease $0.3 million for 1996 as compared to
1995.
Costs Associated with Change in Control. Costs of $0.5 million during
the year ended December 31, 1996 related to the Atlantic Acquisition during the
second quarter of 1996.
Provision for Income Taxes. The higher than anticipated effective tax
rate is principally the result of the $.5 million of costs associated with
change of control not being deductible.
1995 COMPARED TO 1994
Sales. Sales for the year ended December 31, 1995 increased $22.3
million, or 11.0%, as compared to the year ended December 31, 1994. The Company
operated an average of 219 Burger King restaurants for the year ended December
31, 1995 as compared to 207 for 1994. Average unit sales increased 4.9% when
comparing 1995 to 1994. Sales at comparable restaurants, the 187 units operating
for the entirety of the compared periods, increased $7.1 million, or 3.8%. Net
restaurant selling prices increased approximately 0.5% from fewer discount
promotions in 1995.
Cost of Sales. Cost of sales (food and paper costs) for the year ended
December 31, 1995 increased in dollars due to higher sales. Cost of sales as a
percentage of sales decreased 0.3% from 1994 to 1995 as a result of the effect
of net restaurant selling prices and decreases in various commodity costs,
especially beef, partially offset by the introduction of larger-sized meat
patties in certain sandwiches.
-17-
<PAGE>
<PAGE>
Restaurant Wages and Related Expenses. Restaurant wages and related
expenses decreased from 29.4% of sales to 29.1% of sales when comparing the year
ended December 31, 1994 to 1995. The effect of increased selling prices, lower
workers' compensation cost and lower health insurance cost were the principal
reasons for the lower percentage in 1995.
Other Restaurant Operating Expenses. Other restaurant operating expenses
increased by $3.2 million but decreased 0.6% as a percentage of sales for 1995
compared to 1994. The increase in dollars was caused primarily by expenses
associated with the operation of the additional restaurants during the most
recent year when compared to the prior year. The effect of higher sales on the
fixed element of some expenses like utilities, real estate taxes, linen and some
repair and maintenance costs was the primary reason for the decrease in the
percentage from 1994 to 1995.
Depreciation and Amortization. Depreciation and amortization remained
relatively equal to the year ended December 31, 1994. Additional depreciation
and amortization from new and acquired restaurants were offset by assets
becoming fully depreciated during the last two years.
Administrative Expenses. Supervision and training expenses associated
with operating additional restaurants were the principal cause of increased
administrative expenses during the year ended December 31, 1995 as compared to
1994.
Advertising Expense. An increase in advertising payments to Burger King
Corporation of $0.9 million (based on sales levels) was the principal cause of
the increase in advertising expense when comparing 1995 to 1994.
Interest Expense. Average interest rates and average loan balances
remained relatively the same in 1995 and 1994.
(Provision) Benefit for Taxes. The income tax benefit reflected during
the twelve months ended December 31, 1995, resulted from the elimination of the
valuation allowance for the net deferred income tax asset which arises
substantially from the availability of tax loss carryforwards. A review of
current and expected future pre-tax earnings based upon historical earnings
adjusted for recent acquisitions, led to the conclusion that it is more likely
than not that the Company will realize the entire benefit of the net deferred
income tax asset at December 31, 1995 of $10,061,000.
LIQUIDITY
The operating activities of the Company during 1996 provided $15.9
million of cash.
Capital spending during 1996 of $23.2 million included $7.9 million for
the acquisition of seven restaurants (including real estate for five of the
restaurants) in North Carolina and one in New York, $3.4 million for the
purchase of real estate for five restaurants operated by the Company and $3.8
million for the construction of five new restaurants, including the real estate
for one of the restaurants. The balance of the spending went toward restaurant
capital maintenance and remodeling. The Company completed 24 remodelings in 1996
at a cost of $2.5 million principally in conjunction with the renewal of
franchises that were scheduled to expire in 1996 through 1998.
-18-
<PAGE>
<PAGE>
During 1996, utilization of the Company's revolving line of credit
portion of the Senior Secured Credit Facility with Heller Financial, Inc.
increased $3.0 million. Sale and leasebacks of five restaurant properties
generated $4.2 million. Dividends of $1.0 million were paid to Holdings for the
payment by Holdings of 5 regular quarterly preferred stock dividends that were
in arrears. The Company redeemed $.8 million of Notes pursuant to the change of
control resulting from the Atlantic Acquisition (see Redemption of Notes in Item
1 - Recent Developments).
At December 31, 1996, the Company had $19.2 million available under its
Senior Secured Credit Facility after reserving $1.1 million for a letter of
credit guaranteed by the Senior Secured Credit Facility. While interest is
accrued monthly, payments of approximately $6.2 million for interest on the
Notes are made each February 15th and August 15th thus creating semi-annual cash
needs. The Company believes that future cash flow from operations together with
funds available under the Senior Secured Credit Facility will be sufficient to
meet all interest and principal payments under its indebtedness, fund the
maintenance of property and equipment, fund restaurant remodeling required under
the Franchise Agreements and meet required payments in respect of Holdings'
Preferred Stock (subject to the terms of the Indenture and the Senior Secured
Credit Facility) for at least the next twelve months. The balance will provide
funds for future acquisitions.
The Company's loan agreements impose limitations on certain restricted
payments, which include dividends and preferred stock redemptions. The ability
to make such restricted payments is dependent upon either earnings or proceeds
from the issuance of new capital stock. As of March 15, 1997 dividends on the
Preferred Stock for the last quarter of 1996 of $.2 million and a scheduled
mandatory preferred stock redemption of $1.8 million were not paid. As more
fully explained in Note 6 to the financial statements, the dividend rate is
increased if dividend payments by Holdings are not made within specific time
periods.
Consummation of the MD Closing described in "Business--Recent
Developments" will constitute a "change of control" under the Indenture
governing the Senior Notes. In accordance with the terms and conditions of the
Indenture, upon a "change of control", each holder of Senior Notes will have the
right to require the Company (within a 30-60 day period, as determined by the
Company, following such a change of control) to repurchase all or any part of
such holder's Senior Notes at a repurchase price in cash equal to 101% of the
principal amount of the Senior Notes being repurchased (plus accrued interest,
if any). In light of current market conditions, the Company does not anticipate
that a significant number of Senior Note holders will exercise their repurchase
rights. To the extent that such repurchase rights are exercised, the Company
expects to finance the aggregate repurchase amount through borrowings under the
TCB Refinancing (see Revised and Proposed Credit Facility in Item I Recent
Developments). Upon closing of the MD Investment (See MD Investment in Item I -
Recent Developments), the Company will be receiving new cash equity of
approximately $30.5 million.
INFLATION
While inflation can have a significant impact on food, paper, labor and
other operating costs, the Company has historically been able to minimize the
effect of inflation through periodic price increases, and believes it will be
able to offset future inflation with price increases, if necessary.
-19-
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Index to Financial Statements attached hereto is set forth in Item
14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On October 29, 1996, the board of directors of the Company voted to
approve the dismissal of the accounting firm of Coopers & Lybrand, L.L.P.
("Coopers & Lybrand") as their principal audit accountant and has engaged the
services of Arthur Andersen LLP ("Arthur Andersen") as their principal
accountants.
Coopers & Lybrand were the principal audit accountants during the two
years ended December 31, 1995 and their report on the financial statements for
the periods ended December 31, 1994 and 1995 did not contain an adverse opinion
or disclaimer of opinion nor were financial statement opinions qualified or
modified as to uncertainty, as to audit scope or as to accounting principals.
There have been no disagreements on any matters of accounting principles
or practices, financial statement disclosure or auditing scope of procedure with
the accounting firm of Coopers & Lybrand for the most recent two years or any
subsequent interim period.
-20-
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Directors and executive officers are:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C>
Daniel T. Accordino 46 President, Chief Operating Officer and Director
Steven Barnes 48 Vice President--Regional Director
Michael A. Biviano 40 Vice President--Regional Director
Richard V. Cross 61 Executive Vice President - Finance and Treasurer
Paul P. Drotar 50 Vice President--Corporate Controller
Paul Durrant 38 Director
Richard H. Liem 43 Vice President--Financial Operations
David Mathies 49 Director
Robin McIlvenny 44 Director
David R. Smith 47 Vice President--Regional Director
James E. Tunnessen 42 Vice President--Regional Director
Alan Vituli 55 Chairman of the Board and Chief Executive Officer
Joseph A. Zirkman 36 Vice President, General Counsel and Secretary
</TABLE>
Certain biographical information regarding each current Director and
executive officer of the Company is set forth below:
Mr. Accordino has been President, Chief Operating Officer and a Director
of Carrols since February 1993. Prior thereto, he served as Executive Vice
President--Operations of Carrols from December 1986 and as Senior Vice President
from April 1984. He is also a Director of Holdings. From 1979 to April 1984 he
was Vice President responsible for restaurant operations of the Company, having
previously served as the Company's Assistant Director of Restaurant Operations.
Mr. Accordino has been employed by the Company since 1973.
Mr. Barnes is Vice President--Regional Director of Carrols. He has been
a Vice President since February 1997 and a Regional Director of Operations since
1993. Prior to joining Carrols, Mr. Barnes was Vice President--Operations of
Snapps Restaurants, Inc. from 1989 to 1993.
Mr. Biviano is Vice President--Regional Director of Carrols. He has been
Regional Director of Operations since October 1989, having served as District
Supervisor from December 1983 to October 1989. Mr. Biviano has been employed by
the Company since 1973.
Mr. Cross is Executive Vice President--Finance and Treasurer of Carrols.
He has served as Executive Vice President since 1986 and Treasurer from 1981.
Mr. Cross also served as Director of Carrols from 1981 to April 1996. From 1984
through 1986, Mr. Cross was Senior Vice President of Carrols. He also served as
a Director of Holdings from 1981 to April 1996. Prior to 1984, Mr. Cross was
Vice President and Controller of Carrols for more than five years. Mr. Cross has
been employed by the Company since 1969.
Mr. Drotar has been Vice President--Corporate Controller of Carrols
since April 1984. He was Assistant Controller from June 1982 through April 1984,
having served as Manager of
-21-
<PAGE>
<PAGE>
Restaurant Accounting from December 1980 to June 1982. Mr. Drotar has been
employed by the Company since 1973.
Mr. Durrant has served as a Director of Carrols since April 1996. He is
also a Director of Holdings. Since 1994, Mr. Durrant has been Managing Director
of the Merchant Banking group at Dilmun Investments Inc. ("Dilmun"), an
investment advisor and wholly owned subsidiary of BIB. From 1992 to 1994, he was
employed by Dilmun Investment Advisors, Ltd., London, where he was Director of
Direct Corporate Investments.
Mr. Liem became Vice President--Financial Operations in May 1994. Prior
to joining Carrols Mr. Liem was a Senior Audit Manager with the accounting firm
of Price Waterhouse. Mr. Liem was with Price Waterhouse beginning in 1983.
Mr. Mathies has served as a Director of Carrols since April 1996. He is
also a Director of Holdings. Since 1988, Mr. Mathies has been President of
Dilmun. From 1971 to 1988, he was employed by Mellon Bank, where he was Head of
Pension Management Group, providing investment management services to middle
market clients.
Mr. McIlvenny has served as a Director of Carrols since April 1996. He
is also a Director of Holdings. Since 1991, Mr. McIlvenny has been Chief
Executive of BIB. From 1989 to 1991, he was employed by Saudi International
Bank, London, where he was Assistant General Manager and Head of Corporate
Finance.
Mr. Smith is Vice President--Regional Director of Carrols. He has been
Regional Director of Operations since 1984, having served as District Supervisor
from 1975 to 1984. Mr. Smith has been employed by the Company since 1972.
Mr. Tunnessen is Vice President--Regional Director of Carrols. He has
been Regional Director of Operations since August 1988, having served as
District Supervisor from 1979 to August 1988. Mr. Tunnessen has been employed by
the Company since 1972.
Mr. Vituli has been Chairman of the Board of Carrols since 1986 and
Chief Executive Officer since March 1992. He is also a director and Chairman of
the Board of Holdings. Mr. Vituli is also general partner of Morgan Ventures
III, a limited partnership ("Morgan Ventures"). Between 1983 and 1985, Mr.
Vituli was employed by Smith Barney, Harris Upham & Co., Inc. as a senior vice
president responsible for real estate transactions. From 1966 until joining
Smith Barney, Mr. Vituli was associated with the accounting firm of Coopers &
Lybrand, first as an employee and the last ten years as a partner. Among the
positions held by Mr. Vituli at Coopers & Lybrand was national director of
mergers and acquisitions. Prior to joining Coopers & Lybrand, Mr. Vituli was
employed in a family owned restaurant business. Mr. Vituli currently serves as a
Director on the Board of Directors of Pollo Tropical, Inc.
Mr. Zirkman became Vice President and General Counsel of Carrols in
January 1993. He was appointed Secretary of the Company in February 1993. Prior
to joining Carrols, Mr. Zirkman was an associate with the New York City law firm
of Baer Marks & Upham beginning in 1986.
-22-
<PAGE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth certain information for the fiscal years
ended December 31, 1996, 1995 and 1994 for the Chief Executive Officer and the
next four most highly compensated executive officers of the Company who were
serving as executive officers at December 31, 1996 and whose annual compensation
exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- --------------
NUMBER OF
SECURITIES
NAME AND PRINCIPAL UNDERLYING
POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
-------- ---- ---------- --------- -----------
<S> <C> <C> <C>
Alan Vituli 1996 $363,160 $128,210 ---
Chairman of the 1995 352,632 245,000 20,000
Board
and Chief 1994 300,430 81,000 ---
Executive
Officer
Daniel T. 1996 258,943 91,778 ---
Accordino
President, Chief 1995 250,751 150,322 10,000
Operating 1994 226,216 60,891 ---
Officer
and Director
Richard V. Cross 1996 161,264 57,144 ---
Executive Vice 1995 161,522 80,262 5,000
President--Finance 1994 156,378 42,106 ---
and Treasurer
Joseph A. 1996 115,288 40,934 ---
Zirkman
Vice President, 1995 105,249 41,995 3,000
General Counsel 1994 95,890 24,303 ---
and Secretary
Richard H. Liem 1996 94,750 30,288 ---
Vice President, 1995 93,092 37,153 3,000
Financial 1994 57,552 15,423 10,000
Operations
</TABLE>
-23-
<PAGE>
<PAGE>
Aggregated Option/SAR Exercises and Fiscal Year-End Options/SAR Value Table
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options/SARs Money Options/SARs
Shares Acquire Value at FY-End (#) at FY-End ($)
Name on Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------------- ----------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Daniel T. 0/0 0/0
Accordino --- ---
Richard V. Cross --- --- 0/0 0/0
Richard H. Liem 2,000 $38,484 0/0 0/0
Alan Vituli --- --- 0/0 0/0
Joseph A. Zirkman 1,000 19,242 0/0 0/0
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, no executive officer of the Company served
as a director of or member of a compensation committee of any entity for which
any of the persons serving on the Board of Directors of the Company or on the
Compensation Committee of the Board of Directors (the "Compensation Committee")
is an executive officer.
The Board of Directors currently has four committees: the Executive
Committee, of which Messrs. Vituli, Accordino and Durrant are members; the
Finance Committee, of which Messrs. Vituli, Durrant and Cross (as advisor) are
members; the Compensation Committee, of which Messrs. Mathies and Durrant are
members; and the Audit Committee, of which Messrs. Mathies and Durrant are
members.
All Directors hold office until the next annual meeting of stockholders
or until their successors have been elected and qualified. The executive
officers of the Company are chosen by the Board and serve at its discretion.
All non-employee Directors of the Company receive a fee of $15,000 per
annum. All Directors are reimbursed for all reasonable expenses incurred by them
in acting as Directors, including as members of any committee of the Board of
Directors.
As permitted under the Delaware General Corporation Law, the Company's
Restated Certificate of Incorporation provides that a Director of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for breach of a fiduciary duty owed to the Company or its stockholders.
By its terms and in accordance with the laws of the State of Delaware, however,
this provision does not eliminate or limit the liability of a Director of the
Company (i) for any breach of the Director's duty of loyalty to the Company or
its stockholders, (ii) for an act or omission committed in bad faith or
involving intentional misconduct or a knowing violation of law, (iii) for any
transaction from which the Director derived an improper personal benefit or (iv)
for an improper declaration of dividends or purchase of the Company's
securities.
The Company's Restated Certificate of Incorporation provides that the
Company shall indemnify its Directors and officers to the fullest extent
permitted by Delaware law.
-24-
<PAGE>
<PAGE>
DESCRIPTION OF PLANS
Employee Savings Plan. In 1979, Carrols adopted two identical savings
plans, qualified as profit-sharing plans, for its salaried employees, permitting
participating employees to make annual contributions. On December 31, 1994,
Carrols merged the two plans into a single plan, the Carrols Corporation
Corporate Employee Savings Plan (the "Savings Plan"). In accordance with the
Savings Plan, Carrols matches up to $1,060 of an employee's contributions by
contributing $0.50 for each dollar contributed by the employee. Employees are
fully vested in their own contributions; employees become vested in Carrols'
contributions beginning in the fourth year of service, and are fully vested
after seven years of service or upon retirement at age 65 with five years'
service, death, permanent or total disability or termination. Benefits may be
paid out upon the occurrence of any of the foregoing events in a single cash
lump sum, in periodic installments over not more than 15 years or in the form of
an annuity. The employee's contributions may be withdrawn at any time, subject
to restrictions on future contributions. Carrols' matching contributions may be
withdrawn under certain conditions of financial necessity or hardship as defined
in the Savings Plan.
Bonus Plans. Carrols has cash bonus plans designed to promote and reward
excellent performance by providing employees with incentive compensation. Key
senior management executives of each operating division can be eligible for
bonuses equal to varying percentages of their respective annual salaries
determined by the performance of the Company and the division.
1996 Plan. On December 26, 1996, Holdings, with the approval of its
stockholder, adopted the 1996 Plan pursuant to which the Company may grant
"Incentive Stock Options" (as defined under Section 422 of the Internal Revenue
Code), nonqualified stock options, stock appreciation rights, restricted stock,
performance shares and performance units and other stock-based awards (the
foregoing collectively "Awards") to certain officers and employees of the
Company and its subsidiaries. The 1996 Plan is designed to advance the interests
of Holdings and the Company by providing an additional incentive to attract and
retain qualified and competent persons through the encouragement of stock
ownership or stock appreciation rights in Holdings.
The 1996 Plan permits the Company's Compensation Committee to grant,
from time to time, options to purchase an aggregate of up to 106,250 shares of
Common Stock. The vesting periods for awards and the expiration dates for
exercisability of Awards granted under the 1996 Plan are determined by the
Compensation Committee; however, the exercise period for an option granted under
the 1996 Plan may not exceed ten years from the date of the grant. The
Compensation Committee is authorized to grant options under the 1996 Plan to all
eligible employees of the Company and its subsidiaries, including executive
officers and directors (other than outside Directors and members of the
Compensation Committee). As of March 15, 1997, the only options outstanding
under the 1996 Plan are governed by the Option Agreements, each as described
below.
The option exercise price per share of any option granted under the 1996
Plan is determined by the Compensation Committee; however, in no event shall the
option price per share of any option intended to qualify as an Incentive Stock
Option be less than the fair market value of the Common Stock on the date such
option is granted. Payment of such option exercise price shall be made (i) in
cash, (ii) by delivering shares of Common Stock already owned by the holder of
such options, (iii) by delivering a promissory note payable over a three year
period and bearing interest at the rate provided under Section 1274(d) of the
Internal Revenue Code of 1986, as amended from time to time or (iv) by a
combination of any of the foregoing, in accordance with
-25-
<PAGE>
<PAGE>
the terms of the 1996 Plan, the applicable stock option agreement and any
applicable guidelines of the Compensation Committee in effect at the time.
Pursuant to the 1996 Plan, in the event of a Change of Control (as
defined in the 1996 Plan, any or all Stock Options (as defined in the 1996 Plan)
and Stock Appreciation Rights (as defined in the 1996 Plan) still outstanding
shall, notwithstanding any contrary terms of the Award Agreement (as defined in
the 1996 Plan), accelerate and become exercisable in full at least ten days
prior to (and shall expire on) the consummation of such Change of Control, on
such conditions as the Compensation Committee shall determine, unless the
successor corporation assumes the outstanding Stock Options or Stock
Appreciation Rights or substitutes substantially equivalent options.
The New 1996 Plan. The 1996 Plan will be replaced at the MD
Closing by the New 1996 Plan. The New 1996 Plan will be subject to substantially
similar terms as the 1996 Plan, provided, however, that, pursuant to the New
1996 Plan, in the event that the holder of an option issued pursuant to the New
1996 Plan elects to pay the exercise price of such option by delivering a
promissory note, such promissory note may be either (i) unsecured and fully
recourse against the holder of such option or (ii) nonrecourse but secured by
the shares of Common Stock being purchased by such exercise and by other assets
having a fair market value equal to not less than forty percent of the exercise
price of such option and, in either event, such note shall mature on the fifth
anniversary of the date thereof.
In addition, pursuant to the New 1996 Plan, in the event of a
Change of Control (as defined in the New 1996 Plan) during the term of
employment with Carrols of a holder of an option issued under the New 1996 Plan,
the portion of any such option that is not vested shall vest and become
exercisable in full on the date of such Change of Control. In addition, as soon
as practicable but in no event later than thirty days prior to the occurrence of
a Change of Control, the Compensation Committee shall notify any holder of an
option granted under the New 1996 Plan of such Change of Control. Further, upon
a Change of Control that qualifies as an Approved Sale (as defined in the New
1996 Plan) in which the outstanding Common Stock is converted or exchanged for
or becomes a right to receive any cash, property or securities other than
Illiquid Consideration (as defined in the New 1996 Plan), (i) each option
granted under the New 1996 Plan shall become exercisable solely for the amount
of such cash, property or securities that the holder of such option would have
been entitled to had such option been exercised immediately prior to such event
(ii) the holder of such option shall be given an opportunity to either (A)
exercise such option prior to the consummation of the Approved Sale and
participate in such sale as a holder of Common Stock or (B) upon consummation of
the Approved Sale, receive in exchange for such option consideration equal to
the amount determined by multiplying (1) the same amount of consideration per
share of Common Stock received by the holders of Common Stock in connection with
the Approved Sale less the exercise price per share of Common Stock of such
option to acquire Common Stock by (2) the number of shares of Common Stock
represented by such option; and (iii) to the extent such option is not exercised
prior to or simultaneous with such Approved Sale, any such option shall be
canceled.
DESCRIPTION OF EMPLOYMENT AGREEMENTS
Vituli Employment Agreements. Upon the consummation of the Atlantic
Transaction, the Company entered into an Amended and Restated Employment
Agreement (the "Vituli Employment Agreement"), dated as of April 3, 1996, with
Alan Vituli pursuant to which Mr. Vituli serves as Chairman of the Board and
Chief Executive Officer of the Company. The term of Mr. Vituli's employment
under the Vituli Employment Agreement is deemed to have commenced
-26-
<PAGE>
<PAGE>
on January 1, 1995 and is for an initial term from such deemed commencement date
of three years, provided, however, that the employment term automatically renews
for successive one-year terms unless either the Company or Mr. Vituli elects not
to renew by giving written notice to the other at least 90 days before a
scheduled expiration date. Pursuant to the Vituli Employment Agreement, Mr.
Vituli received a base salary of $350,000 in 1995, which amount is subject to a
consumer price index increase for the second and third years of the term.
Beginning in 1998, the base salary for each year thereafter will be increased in
accordance with the recommendation of the Compensation Committee. Pursuant to
the Vituli Employment Agreement, Mr. Vituli participates in the Executive Bonus
Plan of the Company and all stock option programs of the Company applicable to
executive employees. In addition, pursuant to the Vituli Employment Agreement,
the Company is responsible for maintaining the premium payments on a
split-dollar life insurance policy on the life of Mr. Vituli providing a death
benefit of $1.5 million payable to an irrevocable trust designated by Mr.
Vituli.
On the date of the MD Closing, the Company will enter into a Second
Amended and Restated Employment Agreement (the "New Vituli Employment
Agreement") with Alan Vituli, which shall amend and restate the Vituli
Employment Agreement. Pursuant to the New Vituli Employment Agreement, Mr.
Vituli will continue to serve as Chairman of the Board and Chief Executive
Officer of the Company. The New Vituli Employment Agreement shall be for an
initial term of four years, commencing on the date of the MD Closing and will be
subject to automatic renewals for successive one-year terms unless either the
Company or Mr. Vituli elects not to renew by giving written notice to the other
at least 90 days before a scheduled expiration date. Pursuant to the New Vituli
Employment Agreement, Mr. Vituli will receive a base salary of $400,000 for the
first year of the term, which amount increases annually by at least $25,000
subject to additional increases that may be authorized by the Compensation
Committee. Pursuant to the New Vituli Employment Agreement, Mr. Vituli will
participate in the Executive Bonus Plan of the Company and any stock option plan
of the Company applicable to executive employees. The New Vituli Employment
Agreement also will require that the Company is responsible for maintaining the
premium payments on a split-dollar life insurance policy on the life of Mr.
Vituli providing a death benefit of $1.5 million payable to an irrevocable trust
designated by Mr. Vituli.
Accordino Employment Agreements. Upon the consummation of the Atlantic
Transaction, the Company entered into an Amended and Restated Employment
Agreement (the "Accordino Employment Agreement"), dated as of April 3, 1996,
with Daniel T. Accordino pursuant to which Mr. Accordino serves as President and
Chief Operating Officer of the Company. The term of Mr. Accordino's employment
under the Accordino Employment Agreement is deemed to have commenced on January
1, 1995 and is for an initial term from such deemed commencement date of three
years, provided, however, that the employment term automatically renews for
successive one-year terms unless either the Company or Mr. Accordino elects not
to renew by giving written notice to the other at least 90 days before a
scheduled expiration date. Pursuant to the Accordino Employment Agreement, Mr.
Accordino received a base salary of $250,000 in 1995, which amount is subject to
a consumer price index increase for the second and third years of the term.
Beginning in 1998, the base salary for each year thereafter will be increased in
accordance with the recommendation of the Compensation Committee. Pursuant to
the Accordino Employment Agreement, Mr. Accordino participates in the Executive
Bonus Plan of the Company and all stock option programs of the Company
applicable to executive employees. In addition, pursuant to the Accordino
Employment Agreement, the Company is responsible for maintaining the premium
payments on a split-dollar life insurance policy on the life of Mr. Accordino
providing a death benefit of $1 million payable to an irrevocable trust
designated by Mr. Accordino.
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<PAGE>
<PAGE>
On the date of the MD Closing, the Company will enter into a Second
Amended and Restated Employment Agreement (the "New Accordino Employment
Agreement") with Daniel T. Accordino, which shall amend and restate the
Accordino Employment Agreement. Pursuant to the New Accordino Employment
Agreement, Mr. Accordino will continue to serve as President and Chief Operating
Officer of the company. The New Accordino Employment Agreement shall be for an
initial term of four years, commencing on the date of the MD Closing and will be
subject to automatic renewal for successive one-year terms unless either the
Company or Mr. Accordino elects not to renew by giving written notice to the
other at least 90 days before a scheduled expiration date. Pursuant to the New
Accordino Employment Agreement, Mr. Accordino will receive a base salary of
$300,000 for the first year of the term, which amount increases annually by at
least $20,000 subject to additional increases that may be authorized by the
Compensation Committee. Pursuant to the New Accordino Employment Agreement, Mr.
Accordino will participate in the Executive Bonus Plan of the Company and any
stock option plan of the Company applicable to executive employees. The New
Accordino Employment Agreement also will require that the Company is responsible
for maintaining the premium payments on a split-dollar life insurance policy on
the life of Mr. Accordino providing a death benefit of $1 million payable to an
irrevocable trust designated by Mr. Accordino.
DESCRIPTION OF OPTION AGREEMENTS
OPTION AGREEMENTS PURSUANT TO STOCK OPTION PLANS
Vituli Plan Option Agreements. On December 30, 1996 (during the
Company's 1997 fiscal year), pursuant to the Atlantic Transaction, the Company
granted to Alan Vituli, under the 1996 Plan, an option (the "Vituli Option") to
purchase 43,350 shares of Common Stock. The Vituli Option (i) was immediately
exercisable with regard to 15,300 shares of Common Stock at an exercise price of
$110.00 per share and (ii) becomes exercisable on December 31, 1997 with regard
to (a) 15,300 shares of Common Stock at an exercise price of $130.00 per share
and (b) 12,750 shares of Common Stock at an exercise price of $140.00 per share.
Pursuant to its terms, the Vituli Option may not be exercised after the earlier
of a Change in Control (as defined in the 1996 Plan) and the tenth anniversary
of the date of grant.
On the date of the MD Closing, the Vituli Option will be canceled and
Holdings will grant to Mr. Vituli, under the New 1996 Plan, an option (the "New
Vituli Plan Option") to purchase 43,350 shares of Common Stock at an exercise
price of $101.7646 per share. The New Vituli Plan Option shall have a term of
ten years from the date of grant and shall (i) become exercisable on the date of
grant with regard to 15,300 shares of Common Stock and (ii) shall become
exercisable (a) on December 31, 1997 with regard to 5,610 shares of Common
Stock, (b) on December 31, 1998 with regard to 5,610 shares of Common Stock, (c)
on December 31, 1999 with regard to 5,610 shares of Common Stock and (d) on
December 31, 2000 with regard to 11,220 shares of Common Stock.
Accordino Plan Option Agreements. On December 30, 1996 (during the
Company's 1997 fiscal year), pursuant to the Atlantic Transaction, the Company
granted to Daniel T. Accordino, under the 1996 Plan, an option (the "Accordino
Option") to purchase 28,900 shares of Common Stock. The Accordino Option (i) was
immediately exercisable with regard to 10,200 shares of Common Stock at an
exercise price of $110.00 per share and (ii) becomes exercisable on December 31,
1997 with regard to (a) 10,200 shares of Common Stock at an exercise price of
$130.00 per share and (b) 8,500 shares of Common Stock at an exercise price of
$140.00 per share. Pursuant to its terms, the Accordino Option may not be
exercised after the earlier of a Change in Control (as defined in the 1996 Plan)
and the tenth anniversary of the date of grant.
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<PAGE>
<PAGE>
On the date of the MD Closing, the Accordino Option will be canceled and
the Company will grant to Mr. Accordino, under the New 1996 Plan, an option (the
"New Accordino Plan Option") to purchase 28,900 shares of Common Stock at an
exercise price of $101.7646 per share. The New Accordino Plan Option shall have
a term of ten years from the date of grant and shall (i) become exercisable on
the date of grant with regard to 10,200 shares of Common Stock and (ii) shall
become exercisable (a) on December 31, 1997 with regard to 3,740 shares of
Common Stock, (b) on December 31, 1998 with regard to 3,740 shares of Common
Stock, (c) on December 31, 1999 with regard to 3,740 shares of Common Stock and
(d) on December 31, 2000 with regard to 7,480 shares of Common Stock.
OTHER OPTION AGREEMENTS
Vituli Non-Plan Option Agreement. On the date of the MD Closing,
Holdings will grant to Mr. Vituli a nonqualified stock option (the "Vituli
Non-Plan Option") to purchase 29,480 shares of Common Stock at an exercise price
of $101.7646. The Vituli Non-Plan Option shall have a term of ten years from the
date of grant and shall become exercisable in five equal parts on the five
consecutive anniversaries of the date of grant. The Vituli Non-Plan Option will
have substantially the same terms as options issued under the New 1996 Plan with
respect to (i) the method of payment of the exercise price of the Vituli
Non-Plan Option and (ii) the effect of a Change in Control (as defined in the
New 1996 Plan) on the Vituli Non-Plan Option.
Accordino Non-Plan Option Agreement. On the date of the MD Closing,
Holdings will grant to Mr. Accordino a nonqualified stock option (the "Accordino
Non-Plan Option") to purchase 2,579 shares of Common Stock at an exercise price
of $101.7646. The Accordino Non-Plan Option shall have a term of ten years from
the date of grant and shall become exercisable in five equal parts on the five
consecutive anniversaries of the date of grant.
The Accordino Non-Plan Option will have substantially the same terms as
the Vituli Non-Plan Option.
Zirkman Non-Plan Option Agreement. On the date of the MD Closing,
Holdings will grant to Joseph A. Zirkman a nonqualified stock option (the
"Zirkman Non-Plan Option") to purchase 368 shares of Common Stock at an exercise
price of $101.7646. The Zirkman Non-Plan Option shall have a term of ten years
from the date of grant and shall become exercisable in five substantially equal
parts on the five consecutive anniversaries of the date of grant.
The Zirkman Non-Plan Option will have substantially the same terms as
the Vituli Non-Plan Option.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following tables set forth the number and percentage of shares of
voting common stock of the Company and of Holdings beneficially owned, as of
March 15, 1997, by (i) all persons known by the Company to be the beneficial
owners of more than 5% of the shares of such voting common stock, (ii) each
Director of the Company who owns shares of such voting common stock, (iii) each
executive officer of the Company included in the Summary Compensation Table
above and (iv) all executive officers and Directors of the Company as a group.
CARROLS' COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF SHARES
- ------------------------ ------------------ -----------------
<S> <C> <C>
Carrols Holdings Corporation 10 100%
968 James Street
Syracuse, New York 13203
</TABLE>
HOLDINGS' COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (a) PERCENT OF SHARES (a)
- ------------------------ --------------------- ---------------------
<S> <C> <C>
Atlantic Restaurants, Inc. 850,000 100%
Deemer Corporation (b) 131,876 13.4%
Alan Vituli (c) 15,300 1.8%
Daniel T. Accordino (d) 10,200 1.2%
Joseph A. Zirkman --- ---
Richard V. Cross --- ---
Richard H. Liem --- ---
Directors and executive officers of
Carrols as a group (13 persons) 25,500 2.9%
</TABLE>
(a) As used in this table, "beneficial ownership" means the sole or
shared power to vote, or to direct the voting of, a security, or the sole or
shared investment power with respect to a security (i.e., the power to dispose
of, or to direct the disposition of, a security). For purposes of this table, a
person is deemed as of any date to have "beneficial ownership" of any security
that such person has the right to acquire within 60 days after such date. As
calculated in this table, the percent of shares is the percent of each
beneficial owner's shares to the total shares of Holdings' common stock
outstanding plus the shares to which that person has a right to acquire within
60 days.
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<PAGE>
<PAGE>
(b) Consists of currently exercisable warrants (the "Warrants") for the
purchase of 119,195 shares of Holdings voting common stock at $3.590 per share
and 12,681 shares of Holdings voting common stock at $3.701 per share. The
address for Deemer Corporation ("Deemer") is 276 Fifth Avenue, New York, New
York 10001. Holdings has the option to purchase the Warrants from Deemer for
$19.033 per warrant if exercised before November 2, 1997, and $19.109 if
exercised after November 1, 1997. The option expires on November 1, 2000. Deemer
purchased the Warrants from Heller on November 2, 1995 for the sum of $2,500,000
and borrowed the purchase price from Holdings which loan was secured by a
collateral pledge of the shares of Deemer and the Warrants. The Company intends
to exercise its option to purchase the Warrants from Deemer upon the
consummation of the MD Investment.
(c) Consists of currently exercisable stock options to purchase Common
Stock. The address of Mr. Vituli is c/o Carrols Corporation, 968 James Street,
Syracuse, New York 13203.
(d) Consists of currently exercisable stock options to purchase Common
Stock. The address of Mr. Accordino is c/o Carrols Corporation, 968 James
Street, Syracuse, New York 13203.
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<PAGE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
CARROLS CORPORATION AND SUBSIDIARIES:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Opinion of Independent Certified F-1 to
Public Accountants F-2
Financial Statements:
Consolidated Balance Sheets F-3 to
F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholder's Deficit F-6
Consolidated Statements of Cash Flows F-7 to
F-8
Notes to Consolidated Financial F-9 to
Statements F-20
</TABLE>
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
Schedule Description Page
- -------- ----------- ----
<S> <C> <C>
CARROLS CORPORATION AND SUBSIDIARIES:
II Valuation and Qualifying Accounts F-21
</TABLE>
Schedules other than those listed are omitted for the reason that they
are not required, not applicable, or the required information is shown in the
financial statements or notes thereto.
Separate financial statements of the Company are not filed for the
reasons that (1) consolidated statements of the Company and its consolidated
subsidiaries are filed and (2) the Company is primarily an operating Company and
all subsidiaries included in the consolidated financial statements filed are
wholly-owned, and indebtedness of all subsidiaries included in the consolidated
financial statements to any person other than the Company does not exceed 5% of
the total assets as shown by the Consolidated Balance Sheet at December 31,
1996.
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<PAGE>
<PAGE>
(c) Exhibits Required by Item 601 of Regulation S-K
<TABLE>
<CAPTION>
INCORPORATION BY REFERENCE TO THE FOLLOWING
INSTRUMENTS PREVIOUSLY FILED WITH THE
EXHIBIT NUMBER DESCRIPTION SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- ------------------------------------------
<S> <C> <C>
2.1 Purchase and Sale Agreement dated Exhibit 2.1 to the Company's 1994 Annual
February 10, 1994 between Carrols Report on Form 10-K
Corporation, as Purchaser, and KIN
Restaurant, Inc., as Seller
2.2 Purchase and Sale Agreement dated Exhibit 2.2 to the Company's 1994 Annual
April 18, 1994 among Carrols Report on Form 10-K
Corporation, as Purchaser, and Riva
Development Corporation and John Riva,
as Seller
2.3 Purchase and Sale Agreement dated May Exhibit 2.3 to the Company's 1994 Annual
31, 1994 among Carrols Corporation, as Report on Form 10-K
Purchaser, and Michael P. Jones and
Donald M. Cepiel, Sr., and the
corporations listed therein
2.4 Securities Purchase Agreement dated as Exhibit 2.1 to the Company's current report
of March 6, 1996, by and among on Form 8-K filed March 21, 1996
Atlantic Restaurants, Inc., Carrols
Holdings Corporation, Carrols
Corporation and certain Selling
Shareholders
2.5 Deferred Securities Purchase Agreement Exhibit 2.2 to the
dated as of March 6, 1996 by and among Company's current report on
Atlantic Restaurants, Inc., Alan Form 8-K filed March 21, 1996
Vituli and Pryor, Cashman, Sherman &
Flynn
3.1 Restated Certificate of Incorporation Exhibit 3.(3)(a) to the Company's 1987
Annual Report on Form 10-K
3.2 Certificate of Amendment of the
Restated Certificate of Incorporation
3.3 Restated By-laws Exhibit 3.(3)(b) to the Company's 1987
Annual Report on Form 10-K
4.1 Indenture dated as of August 17, 1993 Exhibit 4.1 to Amendment No. 3 to the
among Holdings, the Company and Marine Company's Registration Statement on Form
Midland Bank, N.A. S-1 (Number 3365100) filed August 10, 1993
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
<S> <C> <C>
10.1 First Amended and Restated Loan Exhibit 10.1 to the Company's 1987 Annual
Security and Preferred Stock Purchase Report on Form 10-K
Agreement by and among Carrols Merger
Corporation, Carrols Holdings
Corporation and Heller Financial, Inc.
dated as of December 22, 1986
10.2 Second Amended and Restated Loan and Exhibit 10.15 to the Company's 1992 Annual
Security Agreement by and among Report on Form 10-K
Carrols Corporation, Carrols Holdings
Corporation and Heller Financial, Inc.
dated as of September 15, 1992
10.3 Senior Subordinated Credit Agreement Exhibit 10.17 to the Company's Annual
dated as of September 15, 1992 between Report on Form 10-K
Carrols Corporation, Carrols Holdings
Corporation and World Subordinated
Debt Partners, L.P.
10.4 Third Amended and Restated Loan and Exhibit 10.19 to Amendment No. 2 to the
Security Agreement by, and among Company's Form S-1 Registration Statement
Carrols Corporation, Carrols Holdings filed August 4, 1993
Corporation and Heller Financial, Inc.
dated as of August 9, 1993
10.5 First Amendment to Third Amended and The Company's 1993 Annual Report on Form
Restated Loan and Security Agreement 10-K
by and among Carrols Corporation,
Carrols Holdings Corporation and
Heller Financial, Inc. dated as of
October 27, 1993
10.6 Second Amendment to Third Amended and The Company's 1993 Annual Report on Form
Restated Loan and Security Agreement 10-K
by and among Carrols Corporation,
Carrols Holdings Corporation and
Heller Financial, Inc. dated as of
March 11, 1994
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
<S> <C> <C>
10.7 Third Amendment to Third Amended and Exhibit 10.9 to the Company's 1994 Annual
Restated Loan and Security Agreement Report on Form 10-K
among Carrols Holdings Corporation,
Carrols Corporation and Heller
Financial, Inc. dated as of May 2, 1994
10.8 Fourth Amendment to Third Amended and Exhibit 10.10 to the Company's 1994 Annual
Restated Loan and Security Agreement Report on Form 10-K
among Carrols Holdings Corporation,
Carrols Corporation and Heller
Financial, Inc. dated as of December
20, 1994
10.9 Supply Agreement between ProSource Exhibit 10.11 to the Company's 1994 Annual
Services Corporation and Carrols Report on Form 10-K
Corporation dated April 1, 1994
10.10 Fifth Amendment to Third Amended and
Restated Loan and Security Agreement
among Carrols Holdings Corporation,
Carrols Corporation and Heller
Financing, Inc. dated as of February
22, 1995
10.11 Sixth Amendment to Third Amended and
Restated Loan and Security Agreement
among Carrols Holdings Corporation,
Carrols Corporation and Heller
Financing, Inc. dated as of February
14, 1996
10.12 Stock Purchase Agreement dated as of
February 25, 1997 by and among Madison
Dearborn Capital Partners, L.P.,
Madison Dearborn Capital Partners II,
L.P., Atlantic Restaurants, Inc. and
Carrols Holdings Corporation
10.13 1994 Regional Directors Bonus Plan Exhibit 10.19 to the Company's 1994 Annual
Report on Form 10-K
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
<S> <C> <C>
10.14 Carrols Corporation Corporate Exhibit 10.21 to the Company's 1994 Annual
Employee's Savings Plan dated December Report on Form 10-K
31, 1994
10.15 Commitment Letter from Texas Commerce
Bank National Association and Chase
Securities Inc. and accepted and
agreed to by Carrols Corporation as of
January 8, 1997
10.16 Escrow Agreement dated as of March 6, Exhibit 2.3 to the Company's Current
1996 by and among Atlantic Report on Form 8-K filed March 21, 1996
Restaurants, Inc., Bahrain
International Bank (E.C.), Carrols
Holdings Corporation, Carrols
Corporation, certain selling
shareholders and Baer Marks & Upham
L.L.P.
10.17 Seventh Amendment to Third Amended and Exhibit 10.27 to the Company's current
Restated Loan and Security Agreement report on Form 8-K filed April 10, 1996
by and among Heller Financial, Inc.,
Carrols Holdings Corporation and
Carrols Corporation dated as of April
3, 1996
10.18 Amended and Restated Employment Exhibit 10.23 to the Company's
Agreement dated as of Current Report on Form 8-K
April 3, 1996 by and between Carrols filed on April 10, 1996
Corporation and Alan Vituli
10.19 Amended and Restated Employment Exhibit 10.24 to the Company's Current
Agreement dated as of April 3, 1996 by Report on Form 8-K filed on April 10, 1996
and between Carrols Corporation and
Daniel T. Accordino
10.20 Carrols Corporation 1996 Long-Term
Incentive Plan
10.21 Stock Option Agreement dated as of
December 30, 1996 by and between
Carrols Corporation and Alan Vituli
</TABLE>
-36-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
<S> <C> <C>
10.22 Stock Option Agreement dated as of
December 30, 1996 by and between
Carrols Corporation and Daniel T.
Accordino
10.23 Form of Stockholders Agreement by and
among Carrols Holdings Corporation,
Madison Dearborn Capital Partners,
L.P., Madison Dearborn Capital
Partners II, L.P., Atlantic
Restaurants, Inc., Alan Vituli, Daniel
T. Accordino and Joseph A. Zirkman
10.24 Form of Registration Agreement by and
among Carrols Holdings Corporation,
Atlantic Restaurants, Inc., Madison
Dearborn Capital Partners, L.P.,
Madison Dearborn Capital Partners II,
L.P., Alan Vituli, Daniel T. Accordino
and Joseph A. Zirkman
10.25 Form of Second Amended and Restated
Employment Agreement by and between
Carrols Corporation and Alan Vituli
10.26 Form of Second Amended and Restated
Employment Agreement by and between
Carrols Corporation and Daniel T.
Accordino
10.27 Form of Carrols Holdings Corporation
1996 Long-Term Incentive Plan
10.28 Form of Stock Option Agreement by and
between Carrols Holdings Corporation
and Alan Vituli
10.29 Form of Stock Option Agreement by and
between Carrols Holdings Corporation
and Daniel T. Accordino
</TABLE>
-37-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
<S> <C> <C>
10.30 Form of Unvested Stock Option
Agreement by and between Carrols
Holdings Corporation and Alan Vituli
10.31 Form of Unvested Stock Option
Agreement by and between Carrols
Holdings Corporation and Daniel T.
Accordino
10.32 Form of Unvested Stock Option
Agreement by and between Carrols
Holdings Corporation and Joseph A.
Zirkman
16.1 Letter re change in certifying
accountant
22.1 Subsidiaries of the Registrant, all
wholly-owned are:
Carrols J.G. Corp.
Carrols Realty Holdings Corp.
Carrols Realty I Corp.
Carrols Realty II Corp.
CDC Theater Properties, Inc.
H.N.S. Equipment & Leasing Corp.
Quanta Advertising Corp.
Confectionery Square Corp.
Jo-Ann Enterprises, Inc.
(d) Reports on Form 8-K
</TABLE>
One report on Form 8-K, dated November 4, 1996, was filed during
the quarter ended December 29, 1996 reporting a change of the Company's
certifying accountant.
-38-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized in the City of Syracuse,
State of New York on the 25th day of March, 1996
CARROLS CORPORATION
BY: /s/ Alan Vituli
Alan Vituli, Chairman
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/Alan Vituli Director, Chairman and Chief March 25, 1997
(Alan Vituli) Executive Officer
/s/Daniel T. Accordino Director, President and Chief March 25, 1997
(Daniel T. Accordino) Operating Officer
/s/ Robin McIlvenny Director March 25, 1997
(Robin McIlvenny)
/s/ Paul Durrant Director March 25,1997
(Paul Durrant)
/s/ David Mathies Director March 25,1997
(David Mathies)
</TABLE>
-39-
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Carrols Corporation:
We have audited the accompanying consolidated balance sheet of Carrols
Corporation (a wholly-owned subsidiary of Carrols Holdings Corporation) and
subsidiaries as of December 29, 1996, and the related consolidated statements of
operations, stockholder's deficit, and cash flows for the year then ended. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Carrols Corporation and
subsidiaries as of December 29, 1996, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule for the year ended December 29, 1996
listed in the index at Item 14 is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Rochester, New York
March 7, 1997
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Carrols Corporation
We have audited the consolidated balance sheet of Carrols Corporation (a wholly
owned subsidiary of Carrols Holdings Corporation) and Subsidiaries as of
December 31, 1995 and the related consolidated statements of operations,
stockholder's deficit and cash flows for each of the two years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Carrols
Corporation and Subsidiaries as of December 31, 1995, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The accompanying schedule
for the years ended December 31, 1995 and 1994 as listed in Item 14 of the Form
10-K is presented for purposes of additional analysis and is not a required part
of the basic consolidated financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic consolidated financial statements
taken as a whole.
/s/ Coopers & Lybrand, L.L.P.
Syracuse, New York
March 1, 1996
F-2
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
-----------
<TABLE>
<CAPTION>
ASSETS 1996 1995
----- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,314,000 $ 1,463,000
Trade and other receivables net of
reserves of $310,000 and $419,000
for 1996 and 1995, respectively 793,000 688,000
Inventories 2,163,000 2,292,000
Prepaid real estate taxes 725,000 664,000
Deferred income taxes 3,264,000 3,641,000
Prepaid expenses and other current assets 932,000 830,000
----------- -----------
Total current assets 9,191,000 9,578,000
----------- -----------
Property and equipment, at cost:
Land 9,066,000 6,888,000
Buildings and improvements 16,175,000 15,049,000
Leasehold improvements 38,816,000 36,260,000
Equipment 46,834,000 42,361,000
Capital leases 14,548,000 15,352,000
----------- -----------
125,439,000 115,910,000
Less accumulated depreciation
and amortization (63,356,000) (59,631,000)
------------ -----------
Net property and equipment 62,083,000 56,279,000
------------ -----------
Franchise rights, at cost (less accumulated amortization of
$21,787,000 and 19,648,000 for 1996 and 1995, respectively)
46,203,000 44,582,000
Beneficial leases, at cost (less accumulated
amortization of $7,748,000 and $7,655,000
for 1996 and 1995, respectively) 6,907,000 7,705,000
Excess of cost over fair value of assets acquired
(less accumulated amortization
of $578,000 and $520,000 for 1996 and
1995, respectively) 1,733,000 1,791,000
Deferred income taxes 6,637,000 6,420,000
Other assets 5,834,000 8,709,000
------------ ------------
$138,588,000 $135,064,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
DECEMBER 31, 1996 AND 1995
-----------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S DEFICIT 1996 1995
---- ----
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 8,000 $ 258,000
Current portion of capital lease obligations 574,000 644,000
Accounts payable 9,319,000 8,909,000
Accrued liabilities:
Taxes 2,334,000 1,426,000
Payroll and employee benefits 3,837,000 4,000,000
Interest 4,741,000 4,809,000
Other 3,382,000 3,134,000
--------- ----------
Total current liabilities 24,195,000 23,180,000
Long-term debt, net of current portion 118,180,000 116,375,000
Capital lease obligations, net of current portion 2,503,000 3,301,000
Deferred income - sale/leaseback of real estate 2,154,000 1,773,000
Accrued postretirement benefits 1,522,000 1,424,000
Other liabilities 1,696,000 1,927,000
----------- -----------
Total liabilities 150,250,000 147,980,000
----------- -----------
Commitments and contingencies
Stockholder's deficit:
Common stock, par value $1; authorized
1,000 shares, issued and outstanding -
10 shares 10 10
Additional paid-in capital 1,411,990 840,990
Accumulated deficit (10,574,000) (13,757,000)
Less: note receivable - redemption of warrants (2,500,000)
----------- ------------
Total stockholder's deficit (11,662,000) (12,916,000)
------------ ------------
$138,588,000 $135,064,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-4
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
-----------
<TABLE>
<CAPTION>
1996 1995 1994
(52 WEEKS) (52 WEEKS) (52 WEEKS)
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Sales $240,809,000 $226,257,000 $203,927,000
Other income 316,000 201,000 327,000
------------ ------------ ------------
241,125,000 226,458,000 204,254,000
------------ ------------ ------------
Costs and expenses:
Cost of sales 68,031,000 63,629,000 57,847,000
Restaurant wages and related expenses 70,894,000 65,932,000 59,934,000
Other restaurant operating expenses 48,683,000 45,635,000 42,390,000
Depreciation and amortization 11,015,000 11,263,000 11,259,000
Administrative expenses 10,703,000 10,635,000 9,449,000
Advertising expense 10,798,000 9,764,000 8,785,000
Loss on closing restaurants and other 1,800,000
Costs associated with change of control 509,000
----------- ----------- -----------
Total operating expenses 220,633,000 206,858,000 191,464,000
----------- ----------- -----------
Operating income 20,492,000 19,600,000 12,790,000
Interest expense 14,209,000 14,500,000 14,456,000
---------- ---------- ----------
Income (loss) before taxes 6,283,000 5,100,000 (1,666,000)
(Provision) benefit for taxes (3,100,000) 9,826,000 (165,000)
----------- ----------- -----------
NET INCOME (LOSS) $ 3,183,000 $14,926,000 $(1,831,000)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
-----------
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDER'S
STOCK CAPITAL DEFICIT DEFICIT
------ --------- ----------- ---------
<S> <C> <C> <C> <C>
Balances at December 31, 1993 $ 10 $ 4,447,990 $(26,852,000) $ (22,404,000)
Net loss (1,831,000) (1,831,000)
Dividends declared (2,973,000) (2,973,000)
--- ----------- ------------ -------------
Balances at December 31, 1994 10 1,474,990 (28,683,000) (27,208,000)
Net income 14,926,000 14,926,000
Dividends declared (636,000) (636,000)
Exercise of stock options 2,000 2,000
--- ----------- ------------ -------------
Balances at December 31, 1995 10 840,990 (13,757,000) (12,916,000)
Net income 3,183,000 3,183,000
Dividends declared (1,000,000) (1,000,000)
Exercise of stock options 12,000 12,000
Tax benefit related to stock
options canceled due to change
of control 1,559,000 1,559,000
Note receivable-redemption of warrants (2,500,000)
--- ----------- ------------ -------------
Balances at December 31, 1996 $ 10 $ 1,411,990 $(10,574,000) $ (11,662,000)
======= =========== ============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
-----------
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1996 1995 1994
(52 WEEKS) (52 WEEKS) (52 WEEKS)
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,183,000 $14,926,000 $ (1,831,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
(Gain) loss on disposal of
property and equipment (314,000) 156,000
Depreciation and amortization 11,015,000 11,263,000 11,259,000
Non cash charges included
in loss on closing restaurants
and other 1,800,000
Deferred income taxes 1,719,000 (10,061,000)
Change in operating assets and
liabilities:
Trade and other receivables (105,000) (156,000) 100,000
Inventories 129,000 (38,000) (203,000)
Prepaid expenses and other
current assets (174,000) (45,000) (256,000)
Other assets (611,000) (80,000) (494,000)
Accounts payable 410,000 1,363,000 1,209,000
Accrued interest (68,000) (90,000) 35,000
Accrued liabilities and
other 697,000 (556,000) 2,781,000
----------- ---------- ----------
Cash provided by operating
activities 15,881,000 16,682,000 14,400,000
----------- ---------- ----------
Cash flows from investing activities:
Capital expenditures:
Real estate and equipment (9,642,000) (4,846,000) (4,509,000)
Construction of new restaurants (4,714,000) (2,607,000) (1,357,000)
Acquisition of restaurants (7,945,000) (516,000) (11,615,000)
Franchise fees and renewals (899,000) (569,000) (158,000)
Notes and mortgages issued (749,000) (2,503,000)
Payments received on notes, mortgages
and capital subleases receivable 39,000 32,000 112,000
Disposal of property, equipment
and franchise rights 2,342,000 17,000 569,000
Other investments 1,330,000 (1,356,000)
----------- ---------- -----------
Net cash used for
investing activities (20,238,000) (12,348,000) (16,958,000)
---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Continued
F-7
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
-----------
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1996 1995 1994
(52 WEEKS) (52 WEEKS) (52 WEEKS)
---------- ------------- ----------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt $ 2,997,000 $ 4,376,000 $ 6,800,000
Principal payments on long-term debt (154,000) (7,181,000) (267,000)
Retirement of long-term debt (450,000) (75,000)
Purchase of senior notes (838,000) (1,387,000)
Proceeds from sale-leaseback transactions 4,246,000 861,000 672,000
Dividends paid (1,000,000) (636,000) (3,473,000)
Principal payments on capital leases (605,000) (616,000) (561,000)
Exercise of employee stock options 12,000 2,000
----------- ---------- ----------
Net cash provided by (used for)
financing activities 4,208,000 (4,581,000) 3,096,000
----------- ---------- ----------
Increase (decrease) in cash
and cash equivalents (149,000) (247,000) 538,000
Cash and cash equivalents,
beginning of year 1,463,000 1,710,000 1,172,000
----------- ---------- ----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,314,000 $ 1,463,000 $ 1,710,000
=========== =========== ==========
Supplemental disclosures:
Interest paid on debt $14,277,000 $14,590,000 $ 14,421,000
Taxes paid $ 393,000 $ 153,000 $ 126,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Policies
The following is a summary of certain significant accounting policies followed
in the preparation of the consolidated financial statements.
Basis of Consolidation
The consolidated financial statements include the accounts of Carrols
Corporation and its subsidiaries (the "Company"). All significant intercompany
transactions have been eliminated in consolidation. The Company is a
wholly-owned subsidiary of Carrols Holdings Corporation ("Holdings").
At December 31, 1996 the Company operated, as franchisee, 232 fast food
restaurants under the trade name "Burger King" in nine Northeastern and
Midwestern states and one Southeastern state. As reported by Burger King
Corporation ("BKC"), the Burger King system is the second largest "hamburger
fast food" restaurant system in the United States in terms of sales and number
of restaurants. The Company is the largest independent Burger King franchisee in
the United States.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Depreciation and Amortization
Depreciation and amortization is provided on the straight-line method for
financial reporting purposes. The useful lives for computing depreciation and
amortization are as follows:
Buildings and improvements 5 to 20 years
Leasehold improvements Remaining life of lease including
renewal options or life of asset,
whichever is shorter
Equipment 3 to 10 years
Capital leases Remaining life of lease
At the time of retirement or other disposition, the cost and accumulated
depreciation is removed from the accounts and any gain or loss is reflected in
income. Depreciation expense for the years ended December 31, 1996, 1995 and
1994 was $7,300,000, $7,594,000 and $7,404,000, respectively.
Franchise Rights and Beneficial Leases
Fees for initial franchises and renewals paid to Burger King Corporation are
amortized using the straight-line method over the term of the agreement,
generally twenty years.
Acquisition costs allocated to franchise rights and beneficial leases are
amortized using the straight-line method, principally over the remaining lives
of the leases including renewal options, but not in excess of 40 years.
F-9
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Excess of Cost Over Fair Value
The excess of cost over fair value of assets acquired is amortized on a
straight-line basis over 40 years.
Long-lived Assets
The recoverability of the carrying values of property, equipment, franchise
rights and beneficial leases is periodically evaluated based on current and
forecasted undiscounted cash flows, future market opportunities, strategic
importance and estimated disposal values.
Deferred Financing Costs
Financing costs incurred in obtaining long-term debt are capitalized and
amortized over the life of the related debt on an effective interest basis.
Income Taxes
The Company and its subsidiaries are included in the consolidated federal income
tax return of Holdings through the date of the change of control at April 3,
1996. The Company and its subsidiaries will file separate federal income tax
returns for the period April 4, 1996 to December 31, 1996.
Advertising Costs
All advertising costs are expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The following methods were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate that fair value:
Current Assets and Liabilities - The carrying value of cash and cash equivalents
and accrued liabilities approximates fair value because of the short maturity of
those instruments.
Senior Notes - The fair value of senior notes is based on quoted market prices.
The recorded amount, as of December 31, 1996, approximates fair value.
Revolving Line of Credit and Acquisition Loan - Rates currently available to the
Company for debt with similar terms and remaining maturities are used to
estimate fair value. The recorded amount, as of December 31, 1996, approximates
fair value.
F-10
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Self Insurance
The Company is self insured for workers compensation and general liability up to
predetermined amounts above which third party insurance applies. Losses are
accrued based upon the Company's estimates of the aggregate liability for claims
incurred based on the Company's experience.
Stock-Based Compensation
In October 1995, Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation" was issued which sets forth a fair
value method of recognizing stock based compensation expense. As permitted by
SFAS No. 123, the Company intends to continue to measure compensation for such
plans using the intrinsic value based method of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and will disclose the
additional information relative to issued stock options and pro forma net
income, as if the options granted were expensed at their estimated fair value at
the time of grant. There was no effect on the Company's financial statements as
a result of adopting this statement.
Fiscal Year
The Company uses a 52-53 week fiscal year ending on the Sunday closest to
December 31. The financial statements included herein are as of December 29,
1996 (52 weeks), December 31, 1995 (52 weeks), and January 1, 1995 (52 weeks)
and are referred to as the fiscal years ended December 31, 1996, 1995 and 1994,
respectively.
Reclassification
Certain amounts for prior years have been reclassified to conform to the current
year presentation.
2. INVENTORIES
Inventories at December 31 consisted of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Raw materials (food and paper products) $ 1,386,000 $ 1,458,000
Supplies 777,000 834,000
----------- -----------
$ 2,163,000 $ 2,292,000
=========== ===========
</TABLE>
3. LEASES
The Company utilizes land and buildings in its operations under various lease
agreements. These leases are generally for initial terms of twenty years and, in
most cases, contain renewal options for two to four additional five year
periods. The rent payable under such leases is generally a percentage of sales
with a provision for minimum rent. In addition, most leases require payment of
property taxes, insurance and utilities.
F-11
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
3. LEASES CONTINUED
Deferred gains of approximately $2,815,000 were recorded as a result of
sale/leaseback transactions and are being amortized over the lives of the
leases. These leases are operating leases, have a 20 year primary term with four
five-year renewal options and provide for additional rent based on a percentage
of sales in excess of predetermined levels. The net deferred gain of $2,154,000
and $1,773,000 at December 31, 1996 and 1995, respectively, is the result of
these transactions.
Accumulated amortization pertaining to capital leases for the years ended
December 31, 1996 and 1995 was $9,151,000 and $8,945,000, respectively.
Minimum rent commitments under noncancelable leases as of December 31, 1996, are
as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
Years Ending:
<S> <C> <C>
1997 $927,000 $11,459,000
1998 758,000 10,889,000
1999 541,000 10,255,000
2000 480,000 9,965,000
2001 470,000 9,388,000
2002 and thereafter 1,758,000 78,886,000
--------- ------------
Total minimum lease payments 4,934,000 $130,842,000
============
Less amount representing interest
(7.7% to 16.6%) 1,857,000
---------
Total obligations under capital leases 3,077,000
Less: current portion 574,000
----------
Long term obligations under capital leases $2,503,000
==========
</TABLE>
Total rent expense on operating leases, including percentage rent on both
operating and capital leases, for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Minimum rent on real property $ 11,590,000 $ 11,108,000 $ 10,147,000
Additional rent based on a
percentage of sales 2,700,000 2,548,000 1,917,000
Equipment rent 167,000 164,000 109,000
------------ ------------ ------------
$ 14,457,000 $ 13,820,000 $ 12,173,000
============ ============ ============
</TABLE>
F-12
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
4. LONG-TERM DEBT
Long-term debt at December 31 consisted of:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Collateralized:
Revolving line of credit $4,669,000 $ 1,700,000
Acquisition loan 5,000,000 5,000,000
Industrial Development Revenue bonds -- 596,000
Other notes payable with
interest rates tp 10% 857,000 837,000
Unsecured:
Senior notes 107,662,000 108,500,000
----------- -----------
118,188,000 116,633,000
Less: current portion 8,000 258,000
------------ ------------
$118,180,000 $116,375,000
============ ============
</TABLE>
The Company issued $110 million of unsecured senior notes in August 1993. The
senior notes bear interest at a rate of 11.5%, payable semi-annually on each
February 15 and August 15, and are due August 15, 2003. The notes are redeemable
at the option of the Company in whole or in part on or after August 15, 1998 at
specified redemption prices. Provisions of the revolving line of credit facility
place limitations on the redemption or repurchase of the notes so long as the
facility remains in effect. During 1996, the Company purchased $0.8 million face
value of senior notes.
On December 20, 1994, the revolving line of credit agreement was amended to
provide for an additional acquisition loan of $5 million. The $5 million
acquisition loan was collateralized by the twenty-two restaurants acquired
during 1994 and was fully advanced during 1995.
F-13
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------
4. LONG-TERM DEBT (CONTINUED)
Effective December 20, 1994, in conjunction with the additional $5 million
acquisition loan, the revolving line of credit agreement was amended to reduce
the interest rate on all borrowings thereunder to either the London Interbank
Offering Rate plus 2.5% or the prime rate plus 1.25%, as selected by the
Company. If the revolving line of credit and acquisition loan exceed $25
million, the interest rate is increased to either the London Interbank Offering
Rate plus 3.5% or the prime rate plus 2.25% on the amount of the loan exceeding
$25 million. The amount available under the revolving line of credit was
increased to $25 million with no future reductions until its maturity in August
2000. At December 31, 1996 there was $19.2 million available under the revolving
line of credit facility after reduction for the $4.7 million outstanding and a
$1.1 million letter of credit guaranteed by the facility. A commitment fee of
1/2% is payable on the unused balance. At December 31, 1996, the facility was
collateralized by substantially all assets of the Company.
The Industrial Development Revenue bonds were collateralized by a warehouse
which was sold during 1996, at which time the bonds were retired. Interest was
at seventy-five percent of prime.
Restrictive covenants of the senior notes and the revolving line of credit
facility include limitations with respect to the issuance of additional debt and
redeemable preferred stock; the sale of assets; dividend payments and capital
stock redemption; transactions with affiliates; investments; consolidations,
mergers and transfers of assets and minimum interest and fixed charge coverage
ratios.
At December 31, 1996, principal payments required on all long-term debt are as
follows:
<TABLE>
<S> <C> <C>
1997 $ 8,000
1998 8,000
1999 192,000
2000 9,789,000
2001
2002 and thereafter 108,191,000
------------
$118,188,000
============
</TABLE>
5. INCOME TAXES
The income tax (provision) benefit was comprised of the following at December
31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ (981,000) $ (35,000)
State (400,000) (200,000) $(165,000)
------------ ----------- ---------
(1,381,000) (235,000) (165,000)
------------ ----------- ---------
Deferred:
Federal (1,199,000) 8,552,000
State (520,000) 1,509,000
------------ ----------- ---------
(1,719,000) 10,061,000
------------ ----------- ---------
$(3,100,000) $ 9,826,000 $ (165,000)
============ =========== =========
</TABLE>
F-14
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
5. INCOME TAXES CONTINUED
The components of deferred income tax assets and liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Receivable and other reserves $ 503,000 $ 405,000
Accrued vacation benefits 427,000 484,000
Deferred income on sale/leaseback
of real estate 853,000 709,000
Postretirement benefits 602,000 569,000
Capital leases 463,000 545,000
Property and equipment 671,000 138,000
Alternative minimum tax credit carryforward 35,000
Net operating loss carryforwards 12,348,000 12,458,000
---------- ----------
15,867,000 15,343,000
Deferred tax liabilities:
Franchise rights 5,966,000 5,282,000
---------- ----------
Net deferred income tax asset $ 9,901,000 $10,061,000
========== ==========
</TABLE>
The Company has net operating loss carryforwards for income tax purposes of
approximately $32 million. The net operating loss carryforwards expire in
varying amounts beginning 2003 through 2010. Realization of the deferred income
tax assets relating to the net operating loss is dependent on generating
sufficient taxable income prior to the expiration of the loss carryforwards.
Based upon results of operations, management believes it is more likely than not
that the Company will generate sufficient future taxable income to fully realize
the benefit of the net operating loss carryforwards and existing temporary
differences, although there can be no assurance of this. Accordingly, during
1995, the previously provided valuation allowance was eliminated and the net
deferred tax asset was recognized as a deferred income tax benefit.
Reconciliation of the statutory federal income tax rate to the effective tax
rate is as follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Statutory federal income tax rate 34.00%
Change in valuation allowance
State Income Taxes, net of
federal benefit 9.66%
Nondeductible expenses 3.13%
Miscellaneous 2.54%
-----
49.34%
=====
</TABLE>
A non-cash tax benefit of $1,559,000 resulting from the disqualifying
disposition of incentive stock options associated with the change of control
transaction was credited directly to paid in capital and increased the deferred
income tax asset.
F-15
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------------
6. STOCKHOLDER'S EQUITY
The Company
The Company has 1,000 shares of common stock authorized of which 10 shares are
issued and outstanding. Dividends on the Company's common stock are restricted
to amounts permitted by various loan agreements.
Additional paid-in capital was reduced for cash dividends declared of
$1,000,000, $636,000, and $2,973,000 in 1996, 1995 and 1994, respectively.
Holdings
The sole activity of Holdings is the ownership of 100% of the stock of Carrols
Corporation. In February 1997, a 1 for 3.701 reverse stock split was effected to
reduce the outstanding shares of common stock of Holdings to 850,000 shares.
Holdings, the parent, has issued various classes of stock with redemption,
convertibility and cumulative dividend payment requirements. The following
amounts have been restated to reflect the effects of the reverse stock split
at December 31,:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Preferred stock:
Class A, 10% cumulative redeemable,
par value $.01, authorized, issued
and outstanding 7,250 shares at
liquidation preference and
redemption price $7,250,000 $7,250,000
Class B, convertible, 10% cumulative
redeemable Series I, par value $.01,
authorized, 750 shares, issued and
outstanding - none for 1996 and 750
shares for 1995 750,000
Class B, 10% cumulative redeemable
Series II, par value $.01, authorized
750 shares, issued - none
Common stock:
Voting, par value $.01, authorized
6,000,000 shares, issued and
outstanding 850,000 and 610,801
shares for 1996 and 1995, respectively 9,000 6,000
Non-voting, par value $.01, authorized
882,353 shares, issued - none
</TABLE>
The Class A Preferred Stock, issued in December 1986, is subject to mandatory
redemptions equally over each of the tenth through thirteenth anniversaries of
issuance. In addition, subject to the redemption restrictions of various loan
agreements, all preferred stock may be redeemed at the option of Holdings, at a
price of $1,000 per share, plus accrued dividends. In the event that the
scheduled redemptions are not timely made, the annual dividend rate on the
amount of Class A Preferred Stock scheduled to be redeemed but not redeemed will
automatically increase to 14%.
F-16
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
6. STOCKHOLDER'S EQUITY CONTINUED
Holders of the Preferred Stock are entitled to cumulative dividends payable
quarterly at the rate of 10% per annum. In the event that Holdings fails to pay
four consecutive quarterly dividends on the Class A preferred stock, the
subsequent dividend rate increases to 11.5%; if eight consecutive quarterly
dividends are missed, the rate increases to 13% per annum until such dividends
are paid. Because of certain restrictive covenants in the Company's loan
agreements, at December 31, 1996, the first scheduled redemption of $1,813,000
and dividends of $182,000 for the last quarter of 1996 have not been paid.
In conjunction with various financings completed between 1986 and 1992, warrants
to purchase shares of Holdings Common Stock at an exercise price of $3.590 to
$3.701 per share were granted with 131,886 and 201,338 outstanding at December
31, 1996 and 1995, respectively.
The warrants outstanding at December 31, 1996 are owned by an independent third
party. The warrants were originally owned by Heller Financial, Inc. To
facilitate the sale and purchase of the warrants, Holdings loaned $2,500,000 to
the purchaser of the warrants which loan was secured by a collateral pledge of
the shares of the purchaser and of the warrants. Holdings has an option to
purchase the warrants at an aggregate price of $2,510,000 if exercised before
November 2, 1997 and $2,520,000 if exercised after November 1, 1997. The option
expires on November 1, 2000. Upon completion of the sale of Holdings common
stock referred to in Note 11 - Subsequent Event, Holdings will exercise its
option to purchase the warrants. Accordingly, to reflect the ultimate effect of
the Company's exercise of the option, the receivable has been reclassified to
increase stockholder's deficit as of December 31, 1996.
Change of Control
On April 3, 1996, Carrols Holdings Corporation, Carrols Corporation and certain
selling shareholders of Carrols Holdings Corporation sold approximately 97
percent of the issued common stock and common stock equivalents (the Class B
Convertible Preferred stock, warrants to buy common stock and options to buy
common stock) exclusive of the warrants referred to above. This change in
control resulted in the Company incurring a one-time charge of $509,000 in
fiscal 1996.
The sale of stock pursuant to this agreement constituted an ownership change
under certain provisions of the Internal Revenue Code which resulted in annual
limitations on utilization of the net operating loss carryforward referred to in
Note 5.
This transaction constituted a "change of control" under the Indenture governing
the senior notes due 2003. Accordingly, each holder of the notes had the right
to require the Company to repurchase all or any part of such holder's notes at a
repurchase price in cash equal to 101% of the principal amount of the notes
being repurchased plus accrued and unpaid interest. Such redemptions totaled
$838,000 in fiscal 1996.
F-17
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
6. STOCKHOLDER'S EQUITY CONTINUED
Stock Options
Carrols Holdings Corporation adopted an Employee Stock Option and Award Plan on
December 14, 1993. Effective April 1, 1994, Holdings also adopted a Stock Option
Plan for non-employee directors. The Plans allowed for the granting of
non-qualified stock options, stock appreciation rights and incentive stock
options to directors, officers and certain other Company employees. The Company
was authorized to grant options for up to 850,000 shares, 100,000 shares for
non-employee directors and 750,000 shares for employees. Options were generally
exercisable over 5 years with 94,600 options exerciseable at December 31, 1995.
As of December 31, 1995, non-employee directors were granted options totaling
18,000. Under the non-employee director plan, no options were exercised or
canceled during 1995. During 1996, 210,800 options (135,400 at $4.00 and 75,400
at $6.12) were canceled by the sale of such options in conjunction with the
change of control transaction and the plans were canceled. The remaining 120,000
options were subject to a deferred purchase agreement whereby the sale and
cancellation occurred in January, 1997.
The Company accounts for its stock-based compensation plans under APB Opinion
No. 25. Accordingly, compensation cost has been recognized only to the extent
the exercise price was below the fair market value at the time of the grant. The
pro forma effect on the Company's net income, assuming the compensation cost for
the Company's stock-based compensation plans had been determined based on the
fair value at the grant dates for awards consistent with the method of SFAS No.
123, would be immaterial.
Option activity during 1995, and 1996 consisted of:
<TABLE>
<CAPTION>
OPTIONS AT $4.00 OPTIONS AT $6.12
---------------- ----------------
<S> <C> <C>
Balance at December 31, 1994 257,000 0
Granted 99,100
Exercised (600)
Canceled (12,400) (2,300)
------- --------
Balance at December 31, 1995 244,000 96,800
Exercised (3,000)
Canceled (141,000) (76,800)
-------- --------
Balance at December 31, 1996 100,000 20,000
======== ========
</TABLE>
On December 26, 1996, the Company adopted an incentive stock option plan whereby
the Company may grant options to purchase up to 106,250 shares of Common Stock
to eligible officers and employees of the Company. As of the Company's most
recent year end, no options were granted.
7. LITIGATION
The Company is a party to various legal proceedings arising from the normal
course of business. Management believes adverse decisions relating to litigation
and contingencies in the aggregate would not materially effect the Company's
results of operations, financial condition or cash flows.
F-18
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
8. EMPLOYEE SAVINGS PLAN
The Company offers a savings plan for salaried employees. Under the plan,
participating employees may contribute up to 10% of their salary annually. The
Company's contributions, which begin to vest after three years and fully vest
after seven years of service, are equal to 50% of the employee's contributions
to a maximum Company contribution of $530 annually. The employees have various
investment options available under a trust established by the plan. The plan
expense was $164,000, $125,000, and $125,000 for the years ended December 31,
1996, 1995 and 1994, respectively.
9. POSTRETIREMENT BENEFITS
While the Company reserves the right to change its policy, the Company provides
postretirement medical and life insurance benefits covering substantially all
salaried employees.
The following sets forth the plan status at December 31:
Accumulated Postretirement Benefit Obligation (APBO):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Retirees $ 518,000 $ 411,000
Fully eligible active participants 26,000 242,000
Other active plan participants
not fully eligible 697,000 580,000
----------- -----------
Total APBO 1,241,000 1,233,000
Unrecognized benefit from plan changes 315,000 255,000
Unrecognized net loss (34,000) (64,000)
----------- -----------
Accrued postretirement
benefit obligation $ 1,522,000 $ 1,424,000
=========== ===========
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost $64,000 $47,000 $47,000
Interest cost 77,000 76,000 70,000
Net amortization of
gains,losses and unrecognized
benefit from plan changes (25,000) (29,000) (20,000)
-------- ------ ------
$116,000 $94,000 $97,000
======== ====== ======
</TABLE>
A 6.75% annual rate of increase in the per capita costs of covered health care
benefits was assumed for 1996, gradually decreasing to 5.5% by the year 2001.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1996 by $157,000 and
F-19
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
9. POST RETIREMENT BENEFITS CONTINUED
increase the aggregate of the service cost and interest cost components of net
periodic postretirement benefit cost for 1996 by $23,000. For 1996 and 1995, a
discount rate of 7% was used to determine the accumulated postretirement benefit
obligation. Actual benefit costs paid on behalf of retirees in 1996, 1995 and
1994 amounted to $24,000, $24,000, and $31,000, respectively.
10. LOSS ON CLOSING RESTAURANTS AND OTHER
The loss on closing restaurants and other of $1.8 million for 1994 included the
write-down of assets to net realizable value and estimated lease termination
costs for the closing during 1995 of certain restaurants operating at a negative
annual cash flow and the write down to net realizable value of a vacant
warehouse held for sale. The vacant warehouse was sold in 1996.
11. SUBSEQUENT EVENT
In February 1997, a 1 for 3.701 reverse stock split was effected to reduce the
outstanding shares of common stock of Holdings to 850,000 shares.
On February 25, 1997, Carrols Holdings Corporation and its sole stockholder
entered into an agreement whereby each agreed to sell 283,334 shares of common
stock of Carrols Holdings Corporation to an independent third party.
Consummation of the transaction is subject to certain conditions, among which is
the completion of a new credit facility satisfactory to the independent third
party. Additionally, Holdings agreed to sell 10,810 shares to certain officers
of the Company. The sale of the new common stock by Holdings will result in
approximately $31.0 million of new equity for the Company.
The consummation of the transaction contemplated by the agreement will
constitute a "change of control" under the indenture governing the senior notes
due 2003. Accordingly, each holder of the notes will have the right to require
the Company to repurchase all or any part of such holder's notes at a repurchase
price in cash equal to 101% of the principal amount of the notes being
repurchased plus accrued and unpaid interest, if any, within a 30-60 day period,
as determined by the Company. The Company anticipates that an insignificant
number of note holders will exercise their rights, based on current market
conditions. However, to the extent holders exercise their rights, the Company
expects to finance the aggregate repurchase amount through borrowings under the
revolving line of credit portion of its senior secured credit facility and/or
through other financing.
F-20
<PAGE>
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col E
------ ------ ------ ------ -----
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
----------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Accumulated depreciation of
property and equipment $ 59,631,000 $ 7,300,000 $(3,575,000)(d) $ 63,356,000
Accumulated amortization of
franchise rights 19,648,000 2,575,000 (436,000)(a) 21,787,000
Accumulated amortization of
beneficial leases 7,655,000 634,000 (541,000)(a) 7,748,000
Accumulated amortization of excess
cost over fair value of assets 520,000 58,000 578,000
Reserve for doubtful trade accounts
receivable 419,000 16,000 (125,000)(b) 310,000
Other reserves (c) 788,000 (35,000)(b) 753,000
Year ended December 31, 1995:
Accumulated depreciation of property
and equipment 53,969,000 7,594,000 (1,932,000)(d) 59,631,000
Accumulated amortization of
franchise rights 17,548,000 2,512,000 (412,000)(a) 19,648,000
Accumulated amortization of
beneficial leases 7,433,000 721,000 (499,000)(a) 7,655,000
Accumulated amortization of excess
cost over fair value of assets 462,000 58,000 520,000
Reserve for doubtful trade accounts
receivable 424,000 12,000 (17,000)(b) 419,000
Other reserves (c) 542,000 388,000 (142,000)(b) 788,000
Year ended December 31, 1994:
Accumulated depreciation of property
and equipment 47,254,000 7,404,000 (689,000)(d) 53,969,000
Accumulated amortization of
franchise rights 15,146,000 2,402,000 17,548,000
Accumulated amortization of
beneficial leases 6,921,000 785,000 (273,000)(a) 7,433,000
Accumulated amortization of excess
cost over fair value of assets 404,000 58,000 462,000
Reserve for doubtful trade accounts
receivable 563,000 2,000 (141,000)(b) 424,000
Other reserves (c) 521,000 21,000 542,000
</TABLE>
(a) Represents reduction of accumulated amortization due to sale or disposition
of restaurants.
(b) Represents write-offs of accounts.
(c) Included principally in other assets
(d) Represents retirements of fixed assets.
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as...............'r'
The section symbol shall be expressed as............................'SS'
<PAGE>
<PAGE>
FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
AMONG
CARROLS HOLDINGS CORPORATION
CARROLS CORPORATION
AND
HELLER FINANCIAL, INC.
DATED AS OF FEBRUARY 22, 1995
<PAGE>
<PAGE>
FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Fifth Amendment to Third Amended and Restated Loan and
Security Agreement, dated as of February 22, 1995 (this "Agreement") is among
Carrols Holdings Corporation, a Delaware corporation ("Holdings"), Carrols
Corporation, a Delaware corporation ("Borrower") and HELLER FINANCIAL, INC., a
Delaware corporation ("Lender").
W I T N E S S E T H:
WHEREAS, Holdings, Borrower and Lender are parties to that
certain Third Amended and Restated Loan and Security Agreement dated as of
August 9, 1993 (as heretofore amended, the "Credit Agreement"; capitalized terms
not otherwise defined herein having the definitions provided therefor in the
Credit Agreement) and to certain other documents executed in connection with the
Credit Agreement; and
WHEREAS, the parties hereto wish to further amend the Credit
Agreement as provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendments to the Credit Agreement.
A. Clause (iv) of subsection 9.2(g) of the Credit
Agreement is hereby amended by deleting the sum "$2,000,000" and
by substituting in its place the sum "$5,000,000."
B. Subpart (a) of clause (iv) of subsection 9.2(g) of the
Credit Agreement is hereby amended by deleting the percentage
"2%" expressed therein and by substituting in its place the
percentage "5%"."
2. Representations and Warranties. To induce Lender to enter into
this Agreement, Holdings and Borrower each represents and warrants to Lender
that the execution, delivery and performance by Holdings and Borrower of this
Agreement are within their respective corporate powers, have been duly
authorized by all necessary corporate action (including, without limitation,
shareholder approval), have received all necessary governmental approval (if any
shall be required), and do not and will not contravene or conflict with any
provision of law applicable to Holdings or Borrower, the Certificate of
Incorporation or Bylaws of Holdings or Borrower, or any order, judgment or
decree of any court or other agency of government or any contractual obligation
binding upon Holdings or Borrower; and the Credit Agreement as amended as of the
date hereof is the legal, valid and binding obligation of Holdings and Borrower
enforceable against Holdings and Borrower in accordance with its terms.
3. Conditions. The effectiveness of the amendments stated in this
Agreement is subject to the following conditions precedent or concurrent:
<PAGE>
<PAGE>
(a) No Default. No Default or Event of Default under the
Credit Agreement, as amended hereby, shall have occurred and be continuing.
(b) Warranties and Representations. The warranties and
representations of Holdings and Borrower contained in this Agreement, the Credit
Agreement, as amended hereby, and the other Loan Documents, shall be true and
correct as of the effective date hereof, with the same effect as though made on
such date.
4. Miscellaneous.
(a) Captions. Section captions used in this Agreement are
for convenience only, and shall not affect the construction of this Agreement.
(b) Governing Law. This Agreement shall be a contract made
under and governed by the laws of the State of New York, without regard to
conflict of laws principles. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
(d) Successors and Assigns. This Agreement shall be
binding upon Holdings, Borrower and Lender and their respective permitted
successors and assigns, and shall inure to the sole benefit of Holdings,
Borrower and Lender and the successors and assigns of Holdings, Borrower and
Lender.
(e) References. Any reference to the Credit Agreement
contained in any notice, request, certificate, or other document executed
concurrently with or after the execution and delivery of this Agreement shall be
deemed to include this Agreement unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything
contained herein, the terms of this Agreement are not intended to and do not
serve to effect a novation as to the Credit Agreement. The parties hereto
expressly do not intend to extinguish the Credit Agreement. Instead, it is the
express intention of the parties hereto to reaffirm the indebtedness created
under the Credit Agreement which is evidenced by the Replacement Revolving
Promissory Note and secured by the Collateral. The Credit Agreement as amended
hereby and each of the other Loan Documents remain in full force and effect.
2
<PAGE>
<PAGE>
(g) Costs, Expenses and Taxes. Borrower affirms and
acknowledges that Section 2.19 of the Credit Agreement applies to this Agreement
and the transactions and agreements and documents contemplated hereunder.
Delivered at Chicago, Illinois, as of the day and year first
above written.
CARROLS CORPORATION
Address: By: /s/ Richard V. Cross
968 James Street ---------------------------------
Syracuse, New York 13217-6969 Printed: Richard V. Cross
---------------------------------
Title: Executive Vice-President
---------------------------------
CARROLS HOLDINGS CORPORATION
Address: By: /s/ Richard V. Cross
968 James Street ---------------------------------
Syracuse, New York 13217-6969 Printed: Richard V. Cross
---------------------------------
Title: Assistant Treasurer
---------------------------------
HELLER FINANCIAL, INC.
Address: By: /s/ Stacia L. Kopplin
500 West Monroe Street ---------------------------------
Chicago, Illinois 60661 Printed: Stacia L. Kopplin
---------------------------------
Title: Assistant Vice-President
---------------------------------
3
<PAGE>
<PAGE>
SIXTH AMENDMENT TO THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
AMONG
CARROLS HOLDINGS CORPORATION
CARROLS CORPORATION
AND
HELLER FINANCIAL, INC.
DATED AS OF FEBRUARY 14, 1996
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SIXTH AMENDMENT TO THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Sixth Amendment to Third Amended and Restated Loan and
Security Agreement, dated as of February 14, 1996 (this "Agreement") is among
Carrols Holdings Corporation, a Delaware corporation ("Holdings"), Carrols
Corporation, a Delaware corporation ("Borrower") and HELLER FINANCIAL, INC., a
Delaware corporation ("Lender").
W I T N E S S E T H:
WHEREAS, Holdings, Borrower and Lender are parties to that
certain Third Amended and Restated Loan and Security Agreement dated as of
August 9, 1993 (as heretofore amended, the "Credit Agreement"; capitalized terms
not otherwise defined herein having the definitions provided therefor in the
Credit Agreement) and to certain other documents executed in connection with the
Credit Agreement; and
WHEREAS, the parties hereto wish to further amend the Credit
Agreement as provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment to Section 9.2(g) of the Credit Agreement:
Subpart (a) of clause (iv) of subsection 9.2(g) of the
Credit Agreement is hereby amended by deleting the words "at a
discount to par of at least 5%" therefrom and by substituting in
their place the words "at a premium to par of not greater than
5%."
2. Representations and Warranties. To induce Lender to enter into
this Agreement, Holdings and Borrower each represents and warrants to Lender
that the execution, delivery and performance by Holdings and Borrower of this
Agreement are within their respective corporate powers, have been duly
authorized by all necessary corporate action (including, without limitation,
shareholder approval), have received all necessary governmental approval (if any
shall be required), and do not and will not contravene or conflict with any
provision of law applicable to Holdings or Borrower, the Certificate of
Incorporation or Bylaws of Holdings or Borrower, or any order, judgment or
decree of any court or other agency of government or any contractual obligation
binding upon Holdings or Borrower; the Credit Agreement as amended as of the
date hereof is the legal, valid and binding obligation of Holdings and Borrower
enforceable against Holdings and Borrower in accordance with its terms; and as
of the date of this Agreement, Borrower has repurchased $1,500,000 face amount
of Senior Notes for an aggregate consideration of approximately $1,380,000.
3. Conditions. The effectiveness of the amendments stated in this
Agreement is subject to the following conditions precedent or concurrent:
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(a) No Default. No Default or Event of Default under the
Credit Agreement, as amended hereby, shall have occurred and be continuing.
(b) Warranties and Representations. The warranties and
representations of Holdings and Borrower contained in this Agreement, the Credit
Agreement, as amended hereby, and the other Loan Documents, shall be true and
correct as of the effective date hereof, with the same effect as though made on
such date.
4. Miscellaneous.
(a) Captions. Section captions used in this Agreement are
for convenience only, and shall not affect the construction of this Agreement.
(b) Governing Law. This Agreement shall be a contract made
under and governed by the laws of the State of New York, without regard to
conflict of laws principles. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
(d) Successors and Assigns. This Agreement shall be
binding upon Holdings, Borrower and Lender and their respective permitted
successors and assigns, and shall inure to the sole benefit of Holdings,
Borrower and Lender and the successors and assigns of Holdings, Borrower and
Lender.
(e) References. Any reference to the Credit Agreement
contained in any notice, request, certificate, or other document executed
concurrently with or after the execution and delivery of this Agreement shall be
deemed to include this Agreement unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything
contained herein, the terms of this Agreement are not intended to and do not
serve to effect a novation as to the Credit Agreement. The parties hereto
expressly do not intend to extinguish the Credit Agreement. Instead, it is the
express intention of the parties hereto to reaffirm the indebtedness created
under the Credit Agreement which is evidenced by the Replacement Revolving
Promissory Note and secured by the Collateral. The Credit Agreement as amended
hereby and each of the other Loan Documents remain in full force and effect.
2
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(g) Costs, Expenses and Taxes. Borrower affirms and
acknowledges that Section 2.19 of the Credit Agreement applies to this Agreement
and the transactions and agreements and documents contemplated hereunder.
Delivered at Chicago, Illinois, as of the day and year first
above written.
CARROLS CORPORATION
By: /s/ Richard V. Cross
--------------------------------
Printed: Richard V. Cross
-----------------------------
Title: Executive Vice-President
-------------------------------
CARROLS HOLDINGS CORPORATION
By: /s/ Richard V. Cross
--------------------------------
Printed: Richard V. Cross
--------------------------------
Title: Assistant Treasurer
-------------------------------
HELLER FINANCIAL, INC.
By: /s/ Kelli J. O'Connell
-----------------------------------
Printed: Kelli J. O'Connell
-----------------------------
Title: Assistant Vice-President
-------------------------------
3
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STOCK PURCHASE AGREEMENT
BY AND AMONG
MADISON DEARBORN CAPITAL PARTNERS, L.P.
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
ATLANTIC RESTAURANTS, INC.
AND
CARROLS HOLDINGS CORPORATION
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TABLE OF CONTENTS
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1. Authorization and Closing.......................................................... 1
1A. Purchase and Sale of the Securities......................................... 1
1B. The Closing................................................................. 1
1C. Purchase Price.............................................................. 2
2. Conditions of the Investors' Obligation at the Closing............................. 2
2A. Representations and Warranties; Covenants................................... 2
2B. Registration Agreement...................................................... 2
2C. Executive Options........................................................... 2
2D. Stockholders Agreement...................................................... 2
2E. Securities Law Compliance................................................... 3
2F. Loan Agreement.............................................................. 3
2G. Employment Agreements....................................................... 3
2H. Third Party Consents and Approvals.......................................... 3
2I. Governmental Consents and Approvals......................................... 3
2J. Purchase and Sale of the Securities......................................... 3
2K. Key-Man Life Insurance...................................................... 3
2L. Execution by Bank........................................................... 4
2M. Purchase of Shares by Alan Vituli, Daniel T. Accordino and Joseph A.
Zirkman................................................................. 4
2N. Amendment of Certificate of Incorporation................................... 4
2O. Opinion of the Company's Counsel............................................ 4
2P. Closing Documents........................................................... 4
2Q. Proceedings................................................................. 5
2R. Waiver...................................................................... 5
2S. Fees and Expenses........................................................... 5
3. Conditions of the Company's and Selling Shareholder's Obligations at the
Closing............................................................................ 5
3A. Representations and Warranties.............................................. 5
3B. Registration Agreement...................................................... 5
3C. Stockholders Agreement...................................................... 6
3D. Third Party Consents and Approvals.......................................... 6
3E. Governmental Consents and Approvals......................................... 6
3F. Fees and Expenses........................................................... 6
4. Pre-closing Covenants.............................................................. 6
4A. Company Covenants........................................................... 6
4B. Selling Shareholder Covenants............................................... 7
4C. Investors' Covenant......................................................... 7
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5. Transfer of Restricted Securities.................................................. 7
5A. General Provisions.......................................................... 7
5B. Opinion Delivery............................................................ 7
5C. Rule 144A................................................................... 8
5D. Legend Removal.............................................................. 8
6. Representations and Warranties of the Company; Covenants........................... 8
6A. Organization, Corporate Power and Licenses.................................. 8
6B. Capital Stock and Related Matters........................................... 8
6C. Subsidiaries; Investments................................................... 9
6D. Authorization; No Breach.................................................... 9
6E. Securities Laws............................................................. 10
6F. Financial Statements........................................................ 10
6G. Absence of Undisclosed Liabilities.......................................... 10
6H. Affiliated Transactions..................................................... 11
6I. No Material Adverse Change.................................................. 11
6J. Absence of Certain Developments............................................. 11
6K. Assets...................................................................... 12
6L. Tax Matters................................................................. 15
6M. Contracts and Commitments................................................... 16
6N. Intellectual Property Rights................................................ 18
6O. Litigation, etc............................................................. 19
6P. Brokerage................................................................... 19
6Q. Governmental Consent, etc................................................... 19
6R. Insurance................................................................... 19
6S. Employees................................................................... 19
6T. ERISA....................................................................... 20
6U. Compliance with Laws........................................................ 21
6V. Environmental and Safety Matters............................................ 22
6W. Disclosure.................................................................. 23
6X. Closing Date................................................................ 23
6Y. Reports with the Securities and Exchange Commission......................... 23
7. Representations and Warranties of the Selling Shareholder.......................... 24
7A. The ARI Shares.............................................................. 24
7B. Authorization............................................................... 24
7C. Company Representations..................................................... 25
7D. Compliance with Laws........................................................ 25
7E. Ownership of Selling Shareholder............................................ 25
7F. Brokerage................................................................... 25
7G. Closing Date................................................................ 26
8. Investors' Representations and Warranties.......................................... 26
8A. Investors' Investment Representations....................................... 26
8B. Brokerage................................................................... 26
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8C. Governmental Consent, etc................................................... 26
8D. Closing Date................................................................ 27
9. Definitions........................................................................ 27
9A. Definitions................................................................. 27
10. Termination........................................................................ 30
10A. Conditions of Termination................................................... 30
10B. Effect of Termination....................................................... 30
11. Miscellaneous...................................................................... 30
11A. Expenses.................................................................... 31
11B. Remedies.................................................................... 31
11C. Consent to Amendments....................................................... 31
11D. Successors and Assigns...................................................... 31
11E. Severability................................................................ 32
11F. Counterparts................................................................ 32
11G. Descriptive Headings; Interpretation........................................ 32
11H. Governing Law............................................................... 32
11I. Notices..................................................................... 32
11J. No Strict Construction...................................................... 34
11K. Indemnification............................................................. 34
11L. Further Assurances.......................................................... 38
11M. Consent to Jurisdiction..................................................... 39
Schedules and Exhibits
List of Exhibits
List of Disclosure Schedules
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
February 25, 1997 by and among Carrols Holdings Corporation, a Delaware
corporation (the "Company"), Atlantic Restaurants, Inc., a Delaware corporation
(the "Selling Shareholder" and, together with the Company, the "Sellers"),
Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners
II, L.P. (together with Madison Dearborn Capital Partners, L.P., the
"Investors"). Except as otherwise indicated herein, capitalized terms used
herein are defined in Section 9 hereof.
WHEREAS, the authorized capital stock of the Company includes
3,000,000 shares of common stock, par value $0.01 per share (the "Common
Stock"), of which 850,000 shares are issued and outstanding;
WHEREAS, the Selling Shareholder owns beneficially and of record
850,000 of the outstanding shares of Common Stock; and
WHEREAS, on the terms and subject to the conditions set forth in
this Agreement, the Investors desire to acquire 283,334 shares of Common Stock
from the Company and 283,333 shares of Common Stock from the Selling
Shareholder.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. Purchase and Sale of the Securities. At the Closing, the
Company shall sell to the Investors, and subject to the terms and conditions set
forth herein, the Investors shall purchase and acquire from the Company 283,334
shares of Common Stock (the "Company Shares") at a price of $108.2353 per share,
and the Selling Shareholder shall sell to the Investors and, subject to the
terms and conditions set forth herein, the Investors shall purchase and acquire
from the Selling Shareholder 283,333 shares of Common Stock (the "ARI Shares"
and, together with the Company Shares, the "Shares") at a price of $108.2353 per
share.
1B. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Kirkland &
Ellis, 153 East 53rd Street, New York, New York, or at such other place as may
be mutually agreeable to each of the parties hereto, commencing at 10:00 a.m. on
the date which is five business days after the date on which the conditions to
the Closing set forth in Section 2 and Section 3 have been satisfied or waived,
or at such other time and on such other date as the parties hereto mutually
agree. At the Closing, the Sellers shall deliver to the Investors: (i) stock
certificates evidencing the Company Shares registered in such Investors' name;
and (ii) stock certificates evidencing the ARI Shares, such certificates being
duly endorsed or accompanied by duly executed forms of assignment.
1C. Purchase Price. At the Closing, the Investors shall pay the
purchase price for the Company Shares and the ARI Shares as follows:
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(i) an amount equal to $30,666,740.49 by wire transfer of
immediately available funds to an account or accounts designated by the
Company; and
(ii) an amount equal to $30,666,632.25 by wire transfer of
immediately available funds to an account or accounts designated by the
Selling Shareholder.
Section 2. Conditions of the Investors' Obligation at the
Closing2. Conditions of the Investors' Obligation at the Closing. The obligation
of the Investors to purchase and pay for the Company Shares and the ARI Shares
at the Closing is subject to the satisfaction as of the Closing of the following
conditions:
2A. Representations and Warranties; Covenants. Subject to
paragraphs 11K(iii)(a) and 11K(iii)(d) hereof, the representations and
warranties contained in Section 6 and Section 7 hereof shall be true and correct
in all material respects at and as of the Closing as though then made, except to
the extent of changes caused by the transactions expressly contemplated herein,
and the Company and the Selling Shareholder shall have performed in all material
respects all of the covenants required to be performed by them hereunder prior
to the Closing.
2B. Registration Agreement. The Company, the Selling Shareholder,
the Investors, Alan Vituli and certain management optionholders shall have
entered into a registration agreement in form and substance as set forth in
Exhibit A attached hereto (the "Registration Agreement"), and the Registration
Agreement shall be in full force and effect as of the Closing.
2C. Executive Options. The Company shall have entered into an
Unvested Stock Option Agreement with each of Alan Vituli, Daniel T. Accordino,
and Joseph A. Zirkman in form and substance set forth in Exhibit B1, Exhibit B2
and Exhibit B3 attached hereto, respectively. The Company shall have adopted the
Carrols Holdings Corporation 1996 Long-Term Incentive Plan (the "1996 Plan") in
form and substance set forth in Exhibit B4 attached hereto. The Company shall
have entered into stock option agreements with each of Alan Vituli and Daniel T.
Accordino pursuant to the 1996 Plan in form and substance set forth on Exhibit
B5 and Exhibit B6 attached hereto, respectively. Each of the option agreements
referred to in this paragraph 2C shall collectively be referred to herein as the
"Executive Option Agreements."
2D. Stockholders Agreement. The Company, the Selling Shareholder,
the Investors, Alan Vituli and certain management optionholders shall have
entered into a stockholders agreement in form and substance set forth in Exhibit
C attached hereto (the "Stockholders Agreement"), and the Stockholders Agreement
shall be in full force and effect as of the Closing. At the Closing, the Selling
Shareholder shall surrender any and all stock certificates held by the Selling
Shareholder on the date thereof to the Company so that such certificate(s) may
be imprinted with the legends in substantially the form set forth in paragraph
8A hereof and paragraph 6 of the Stockholders Agreement.
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2E. Securities Law Compliance. The Company shall have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Company Shares pursuant to this Agreement in
compliance with such laws.
2F. Loan Agreement. The Company and its Subsidiaries shall have
entered into a loan agreement providing for one or more loan facilities in form
and substance reasonably satisfactory to the Investors (together with all
related agreements and instruments, the "Loan Agreement").
2G. Employment Agreements. The Company shall have entered into a
Second Amended and Restated Employment Agreement with each of Alan Vituli and
Daniel T. Accordino (the "Employment Agreements") in form and substance
satisfactory to the Investors set forth in Exhibit D1 and Exhibit D2 attached
hereto, respectively, and each of the Employment Agreements shall not have been
amended or modified and shall be in full force and effect as of the Closing.
2H. Third Party Consents and Approvals. The Company and the
Selling Shareholder shall have received or obtained all third party and
shareholder consents and approvals that are necessary for the consummation of
the transactions contemplated hereby or that are required in order to prevent a
breach of or default under, a termination or modification of, or acceleration of
the terms of, any contract, agreement or document listed or described on the
Schedules attached hereto, in each case on terms and conditions reasonably
satisfactory to the Investors (including, without limitation, the approval of
Burger King Corporation).
2I. Governmental Consents and Approvals. The Company and the
Selling Shareholder shall have received or obtained all governmental and
regulatory consents and approvals that are necessary for the consummation of the
transactions contemplated hereby, in each case on terms and conditions
reasonably satisfactory to the Investors and, to the extent applicable, the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "Hart-Scott-Rodino Act"), shall have expired or been terminated.
2J. Purchase and Sale of the Securities. The sale of the Company
Shares and the sale of the ARI Shares to the Investors shall have occurred
simultaneously hereunder.
2K. Key-Man Life Insurance. The Company shall have obtained a
key-man life insurance policy on the life of Alan Vituli in the face amount of
$10,000,000 which policy shall be in full force and effect as of the Closing.
Such insurance shall name the Company as beneficiary and shall provide that such
insurance policy may not be canceled unless the insurance carrier gives at least
30 days prior written notice of such cancellation to the Investors.
2L. Execution by Bank. Bahrain International Bank, E.C. (the
"Bank") shall have executed and delivered this Agreement, the Stockholders
Agreement and the Registration Agreement.
2M. Purchase of Shares by Alan Vituli, Daniel T. Accordino and
Joseph A. Zirkman. Simultaneously with the consummation of sale of the ARI
Shares and the Company
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Shares to the Investors, Alan Vituli shall purchase 9,827 shares of Common Stock
at a price of $101.7646 per share, Daniel T. Accordino shall purchase 860 shares
of Common Stock at a price of $101.7646 per share and Joseph A. Zirkman shall
purchase 123 shares of Common Stock at a price of $101.7646, each amount payable
by wire transfer of immediately available funds.
2N. Amendment of Certificate of Incorporation. The Company's
Certificate of Incorporation shall have been amended to eliminate all authorized
shares of nonvoting common stock and all stockholder preemptive rights therein.
2O. Opinion of the Company's Counsel. The Investors shall have
received from each of Schulte Roth & Zabel LLP and Joseph A. Zirkman, Esq.,
counsel for the Company, and Pryor, Cashman, Sherman & Flynn, counsel for the
Selling Shareholder, an opinion with respect to the matters set forth in
Exhibits E1, E2 and E3 attached hereto, respectively, which shall be addressed
to the Investors, dated the date of the Closing and in form and substance
satisfactory to the Investors.
2P. Closing Documents. The Company shall have delivered to the
Investors the documents listed in subparagraphs (i) through (vi) below and the
Selling Shareholder shall have delivered to the Investors the documents listed
in subparagraph (vii) below:
(i) an Officer's Certificate of the Company, dated the
date of the Closing, stating that the conditions specified in Section 1
and paragraphs 2A through 2N, inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by
the Company's board of directors authorizing the execution, delivery and
performance of this Agreement, the Registration Agreement, the
Stockholders Agreement and each of the other agreements contemplated
hereby to which the Company is a party;
(iii) certified copies of the Company's Certificate of
Incorporation and the Company's bylaws, each as in effect at the
Closing;
(iv) certified copies of the Loan Agreement, the
Employment Agreements and the Executive Option Agreements, each in
effect at the Closing;
(v) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the transactions hereunder (including the waiver of all preemptive
rights and rights of first refusal with respect to the issuance and sale
of the Company Shares and ARI Shares hereunder);
(vi) such other documents relating to the transactions
contemplated by this Agreement as the Investors or its counsel may
reasonably request; and
(vii) an Officer's Certificate of the Selling Shareholder,
dated the date of the Closing, stating that, with respect to the Selling
Shareholder, the conditions set forth in paragraphs 2A, 2H, 2I, 2J and
2L have been fully satisfied, and certified copies of
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the resolutions duly adopted by the Selling Shareholder's board of
directors and by the Bank's board of directors authorizing the
execution, delivery and performance of this Agreement, the Registration
Agreement, the Stockholders Agreement and each of the other agreements
contemplated hereby to which the Selling Shareholder or the Bank,
respectively, is a party.
2Q. Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be satisfactory in form and substance to the
Investors and their special counsel.
2R. Waiver. Any condition specified in this Section 2 may be
waived if consented to by the Investors; provided that no such waiver shall be
effective against the Investors unless it is set forth in a writing executed by
the Investors.
2S. Fees and Expenses. At the Closing, the Company shall have
reimbursed the Investors for the reasonable fees and expenses of their special
counsel and all other expenses associated with their due diligence review of the
Company and its Subsidiaries, and the Company shall have paid the Investors a
transaction fee in the aggregate amount of $500,000.
Section 3. Conditions of the Company's and Selling Shareholder's
Obligations at the Closing3. Conditions of the Company's and Selling
Shareholder's Obligations at the Closing. The obligations of the Company and the
Selling Shareholder to sell the Company Shares and the ARI Shares, respectively,
at the Closing are subject to the satisfaction as of the Closing of the
following conditions:
3A. Representations and Warranties. The representations and
warranties contained in Section 8 hereof shall be true and correct in all
material respects at and as of the Closing as though then made, except to the
extent of changes caused by the transactions expressly contemplated herein.
3B. Registration Agreement. The Company, the Selling Shareholder,
the Investors, Alan Vituli and the other management optionholders shall have
entered into the Registration Agreement, and the Registration Agreement shall be
in full force and effect as of the Closing.
3C. Stockholders Agreement. The Company, the Selling Shareholder,
the Investors, Alan Vituli and the other management optionholders shall have
entered into the Stockholders Agreement, and the Stockholders Agreement shall be
in full force and effect as of the Closing.
3D. Third Party Consents and Approvals. The Company and the
Selling Shareholder shall have received or obtained all third party consents and
approvals that are necessary for the consummation of the transactions
contemplated hereby or that are required in order to prevent a breach of or
default under, a termination or modification of, or acceleration of the terms
of, any contract, agreement or document listed or described on the attached
Contracts Schedule (all of which are listed on the Third Party Approval Schedule
attached hereto), in each
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case on terms and conditions reasonably satisfactory to the Company and the
Selling Shareholder, as the case may be.
3E. Governmental Consents and Approvals. The Company and the
Selling Shareholder shall have received or obtained all governmental and
regulatory consents and approvals that are necessary for the consummation of the
transactions contemplated hereby (all of which are listed on the Governmental
Approval Schedule), in each case on terms and conditions reasonably satisfactory
to the Company and the Selling Shareholder, as the case may be, and to the
extent applicable, the waiting period under the Hart-Scott-Rodino Act, have
expired or been terminated.
3F. Fees and Expenses. At the Closing, the Company shall have
reimbursed the Selling Shareholder for the reasonable fees and expenses of their
special counsel in connection with this transaction.
Section 4. Pre-closing Covenants
4A. Company Covenants. Prior to the Closing, the Company shall:
(i) provide the Investors' representatives with reasonable
access during normal business hours to the employees, facilities and
books and records of the Company and its Subsidiaries and allow the
Investors' representatives to make copies of such books and records as
reasonably requested;
(ii) provide the Investors with copies of monthly
financial statements of the Company and its Subsidiaries promptly after
preparation thereof and promptly provide any and all other information
reasonably requested by the Investors;
(iii) promptly notify the Investors of any material
adverse event or occurrence affecting the financial condition, operating
results, assets, operations, business prospects, employee relations or
customer or supplier relations of the Company and its Subsidiaries taken
as a whole, and any other event or occurrence which would have a
material adverse effect upon the consummation of the transactions
contemplated hereby (including, without limitation, the filing of any
lawsuit against the Company having such effect); and
(iv) cooperate with the Investors in connection with the
consummation of the transactions contemplated hereby (including without
limitation the filing of any forms and related materials as required by
the Hart-Scott-Rodino Act) and use its reasonable best efforts to cause
the closing conditions set forth in Sections 2 and 3 to be fully
satisfied.
4B. Selling Shareholder Covenants. Prior to the Closing, the
Selling Shareholder shall cooperate with the Investors in connection with the
consummation of the transactions contemplated hereby (including, without
limitation, the filing of any forms and
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related materials as required by the Hart-Scott-Rodino Act) and use its
reasonable best efforts to cause the closing conditions set forth in Section 2
and 3 to be fully satisfied.
4C. Investors' Covenant. Prior to the Closing, the Investors
shall either file all forms and other materials required by the
Hart-Scott-Rodino Act or deliver to the Company and the Selling Shareholder a
written statement certifying that the Investors will have less than $10,000,000
of net sales and total assets (as determined under the Hart-Scott-Rodino Act) as
of the date of the Closing.
Section 5. Transfer of Restricted Securities.
5A. General Provisions. Restricted Securities are transferable
only pursuant to (i) public offerings registered under the Securities Act, (ii)
Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar
rule or rules then in force) if such rule is available and (iii) subject to the
conditions specified in paragraph 5B below, any other legally available means of
transfer.
5B. Opinion Delivery. In connection with the transfer of any
Restricted Securities (other than a transfer described in paragraph 5A(i) or
(ii) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of
Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company an opinion of counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates for such Restricted Securities which do not
bear the Securities Act legend set forth in paragraph 8A. If the Company is not
required to deliver new certificates for such Restricted Securities not bearing
such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this paragraph and paragraph 8A.
5C. Rule 144A. Upon the request of the Investors, the Company
shall promptly supply to the Investors or their prospective transferees all
information regarding the Company required to be delivered in connection with a
transfer pursuant to Rule 144A of the Securities and Exchange Commission.
5D. Legend Removal. If any Restricted Securities become eligible
for sale pursuant to Rule 144(k), the Company shall, upon the request of the
holder of such Restricted Securities (and, if necessary, an opinion of counsel
reasonably satisfactory to the Company), remove the legend set forth in
paragraph 8A from the certificates for such Restricted Securities.
Section 6. Representations and Warranties of the Company;
Covenants6. Representations and Warranties of the Company; Covenants. As a
material inducement to the Investors to enter into this Agreement and purchase
the Company Shares and the ARI Shares hereunder, the Company hereby represents
and warrants that:
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6A. Organization, Corporate Power and Licenses. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify. The Company
possesses all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to carry
on its businesses as now conducted and to carry out the transactions
contemplated by this Agreement. The copies of the Company's and each
Subsidiary's charter documents and bylaws which have been furnished to the
Investors' special counsel reflect all amendments made thereto at any time prior
to the date of this Agreement and are correct and complete.
6B. Capital Stock and Related Matters.
(i) As of the date hereof and, except as expressly
contemplated by this Agreement, as of the Closing, the "Capitalization Schedule"
correctly sets forth the authorized and outstanding capital stock of the Company
and the name and number of shares of capital stock held by each stockholder of
the Company. As of the Closing, except as set forth on the Capitalization
Schedule, neither the Company nor any Subsidiary shall have outstanding any
stock or securities convertible or exchangeable for any shares of its capital
stock or containing any profit participation features, nor shall it have
outstanding any rights or options to subscribe for or to purchase its capital
stock or any stock or securities convertible into or exchangeable for its
capital stock or any stock appreciation rights or phantom stock rights. As of
the Closing, neither the Company nor any Subsidiary shall be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock, any warrants, options or other rights to
acquire its capital stock, or any obligation to make any payments with respect
to any profit participation features of any of its capital stock, carried
interest rights, stock appreciation rights, phantom stock rights or similar
rights, except as set forth on the Capitalization Schedule and except pursuant
to the Certificate of Incorporation and the Executive Option Agreements. As of
the Closing, all of the outstanding shares of the Company's capital stock shall
be validly issued, fully paid and nonassessable.
(ii) Except as set forth in the Company's Certificate of
Incorporation, as of the date hereof, there are no statutory or, to the best of
the Company's knowledge, contractual stockholders preemptive rights or rights of
refusal with respect to the issuance of the Common Stock hereunder. The Company
has not violated any applicable federal or state securities laws in connection
with the offer, sale or issuance of any of its capital stock. To the best of the
Company's knowledge, there are no agreements between the Company's stockholders
with respect to the voting or transfer of the Company's capital stock or with
respect to any other aspect of the Company's affairs, except for the
Stockholders Agreement.
(iii) As of the Closing, upon the delivery thereof, all of the
Company Shares shall be validly issued, fully paid and nonassessable and free
and clear of any claims, liens, encumbrances, security interests, options,
participation rights, appreciation rights, carried interest obligations, charges
and restrictions of any kind ("Adverse Claims").
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6C. Subsidiaries; Investments. The attached "Subsidiary
Schedule" correctly sets forth the name of each Subsidiary, the jurisdiction
of its incorporation and the Persons owning the outstanding capital stock of
such Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses
as now being conducted and is qualified to do business in every jurisdiction in
which its ownership of property or the conduct of business requires it to
qualify. Except as set forth on the Subsidiary Schedule, all of the outstanding
shares of capital stock of each Subsidiary are validly issued, fully paid and
nonassessable, and all such shares are owned by the Company or another
Subsidiary free and clear of any Lien and not subject to any option or right to
purchase any such shares. Except as set forth on the Subsidiary Schedule,
neither the Company nor any Subsidiary owns or holds the right to acquire any
shares of stock or any other security or interest in any other Person.
6D. Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Registration Agreement, the Stockholders
Agreement, the Loan Agreement and all other agreements contemplated hereby
to which the Company is a party have been duly authorized by the Company. This
Agreement, the Registration Agreement, the Stockholders Agreement, the Loan
Agreement and all other agreements contemplated hereby to which the Company is
a party each constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms. Except as set forth on the
"Restrictions Schedule" attached hereto, the execution and delivery by the
Company and the Selling Shareholder, as the case may be, of this Agreement, the
Registration Agreement, the Stockholders Agreement, the Loan Agreement and all
other agreements contemplated hereby to which the Company or the Selling
Shareholder is a party, the offering, sale and issuance of the Common Stock
and the fulfillment of and compliance with the respective terms hereof and
thereof by the Company or the Selling Shareholder, do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's or any Subsidiary's
capital stock or assets pursuant to, (iv) give any third party the right to
modify, terminate or accelerate any obligation under, (v) result in a violation
of, (vi) require any authorization, consent, approval, exemption or other
action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to, or (vii) give rise to
any Adverse Claim with respect to any of the Company's capital stock or other
equity securities (or any securities convertible into or exchangeable for any
shares of the Company's capital stock or other equity securities) under, the
charter or bylaws of the Company or any Subsidiary, or any law, statute, rule or
regulation to which the Company, any Subsidiary or the Selling Shareholder is
subject, or any agreement (oral or written), instrument, order, judgment or
decree to which the Company, any Subsidiary or the Selling Shareholder is
subject.
6E. Securities Laws. No consent, authorization, approval,
permit, or order of or filing with any governmental or regulatory authority is
required under current laws and regulations in connection with the execution
and delivery of this Agreement or the offer, issuance, sale or delivery of the
Company Shares or the ARI Shares, other than the qualification
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under applicable state securities laws, which qualification will, if required,
be effected as a condition of the sales contemplated hereby.
6F. Financial Statements. Attached hereto as the "Financial
Statements Schedule" are the following financial statements:
(i) the audited consolidated balance sheets of the Company
and its Subsidiaries as of December 31, 1993, 1994 and 1995, the related
statements of income and cash flows (or the equivalent) for the
respective twelve-month periods then ended; and
(ii) the unaudited consolidated balance sheet of the
Company and its Subsidiaries as of September 30, 1996 (the "Latest
Balance Sheet"), and the related statements of income and cash flows (or
the equivalent) for the nine-month period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is complete in all material respects, is consistent with the
books and records of the Company (which, in turn, are complete in all material
respects) and has been prepared in accordance with generally accepted accounting
principles, consistently applied, and presents fairly the consolidated financial
condition, results of operations and cash flows of the Company and its
Subsidiaries as of the dates and for the periods set forth therein, except for
the absence of notes in the Latest Balance Sheet and subject to normal year-end
audit adjustments for recurring accruals.
6G. Absence of Undisclosed Liabilities. Except as set forth on
the attached "Liabilities Schedule," the Company and its Subsidiaries do not
have any obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due and regardless of when
asserted) arising out of transactions entered into at or prior to the Closing,
or any action or inaction at or prior to the Closing, or any state of facts
existing at or prior to the Closing other than: (i) liabilities set forth on the
Latest Balance Sheet (including any notes thereto), (ii) liabilities and
obligations which have arisen after the date of the Latest Balance Sheet in the
ordinary course of business (none of which is a liability resulting from breach
of contract, breach of warranty, tort, infringement, claim or lawsuit), (iii)
liabilities and obligations expressly disclosed in the other Schedules to this
Agreement and (iv) liabilities and obligations under agreements, contracts and
commitments not required to be disclosed on the Schedules hereto.
6H. Affiliated Transactions. Except as set forth on the attached
"Affiliated Transaction Schedule" and for employment agreements and stock option
agreements between the Company and certain of its officers, to the Company's
knowledge, no officer, director, employee, stockholder, or Affiliate of the
Company or any individual related by blood, marriage, or adoption to any such
individual or any entity in which such person or individual owns any beneficial
interest, is a party to any material agreement, contract, commitment, or
transaction with the Company or has any material interest in any property used
by the Company or any Subsidiary.
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6I. No Material Adverse Change. Since the date of the Latest
Balance Sheet, there has been no material adverse event or occurrence affecting
the financial condition, operating results, assets, operations, business
prospects, employee relations or customer or supplier relations of the Company
and its Subsidiaries taken as a whole.
6J. Absence of Certain Developments. Except as expressly
contemplated by this Agreement or as set forth on the attached "Developments
Schedule," since the date of the Latest Balance Sheet, neither the Company nor
any Subsidiary have:
(a) issued any notes, bonds or other debt securities or
any capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or other
equity securities;
(b) borrowed any amount or incurred or become subject to
any liabilities, except for current liabilities incurred in the ordinary
course of business and liabilities under contracts entered into in the
ordinary course of business, and except for any sale/leaseback
transactions entered into in the ordinary course of business between the
date hereof and the Closing within the Board's current authorization;
(c) discharged or satisfied any Lien or paid any
obligation or liability, other than current liabilities paid in the
ordinary course of business;
(d) declared or made any payment or distribution of cash
or other property to its stockholders with respect to its capital stock
or other equity securities (except for regularly scheduled dividends on
the Company's preferred stock in accordance with the Company's
Certificate of Incorporation) or purchased or redeemed any shares of its
capital stock or other equity securities (including, without limitation,
any warrants, options or other rights to acquire its capital stock or
other equity securities);
(e) mortgaged or pledged any of its properties or assets
or subjected them to any Lien, except Liens for current property taxes
not yet due and payable;
(f) sold, assigned or transferred any of its tangible
assets, except in the ordinary course of business, or canceled any debts
or claims;
(g) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registrations, trade secrets or other intangible
assets, or disclosed any proprietary confidential information to any
Person;
(h) suffered any extraordinary losses or waived any rights
of value, whether or not in the ordinary course of business or
consistent with past practice;
(i) made capital expenditures or commitments therefor that
aggregate in excess of $200,000, except for capital expenditures made in
the ordinary course of business between the date hereof and the Closing;
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(j) made any loans or advances to, guarantees for the
benefit of, or any Investments in, any Persons in excess of $100,000 in
the aggregate;
(k) made any charitable contributions or pledges in excess
of $50,000 in the aggregate;
(l) suffered any damage, destruction or casualty loss
exceeding in the aggregate $100,000, not covered by insurance;
(m) made any Investment in or taken steps to incorporate
any Subsidiary;
(n) acquired any operating business or any assets outside
of the ordinary course of business or entered any commitment to do so;
or
(o) except for this Agreement or any other agreement
contemplated hereby, entered into any other material transaction other
than in the ordinary course of business.
6K. Assets. Except as set forth on the attached "Assets
Schedule," the Company and each Subsidiary have good and marketable title to, or
a valid leasehold interest in, the properties and assets used by them, located
on their premises or shown on the Latest Balance Sheet or acquired thereafter,
free and clear of all Liens, except for properties and assets disposed of in the
ordinary course of business since the date of the Latest Balance Sheet and
except for Liens disclosed on the Latest Balance Sheet or 1995 audited
consolidated balance sheet of the Company and its Subsidiaries (including any
notes thereto) and Liens for current property taxes not yet due and payable.
Except as described on the Assets Schedule, the Company's and each Subsidiary's
buildings and other improvements, equipment and other tangible assets are in
good operating condition in all material respects and are fit for use in the
ordinary course of business. The Company and each Subsidiary own, or have a
valid leasehold or other interest in, all assets necessary for the conduct of
their respective businesses as presently conducted and as presently proposed to
be conducted.
(i) Owned Properties. The "Assets Schedule" sets forth a list
of all owned real property (the "Owned Real Property") used by the Company or
any Subsidiary in the operation of the Company's business. With respect to each
such parcel of Owned Real Property except as disclosed on the Assets Schedule:
(a) the Company or one of its Subsidiaries has good and marketable fee simple
title in such parcel, free and clear of all encumbrances; and (b) there are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any person the right of use or occupancy of any portion of such
parcel.
(ii) Leased Properties. The Assets Schedule sets forth a list
of all of the leases and subleases ("Leases") in which the Company or any
subsidiary has a leasehold and subleasehold interest (the "Leased Real
Property") (the Owned Real Property and the Leased Real Property are
collectively referred to herein as the "Real Property"). Each of the Leases is
in full force and effect and the Company holds a valid and existing leasehold or
subleasehold
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interest under each of the Leases. The Company has made available to the
Investors true, correct, complete and accurate copies of each of the Leases
described in the Assets Schedule. With respect to each Lease listed on the
Assets Schedule: (a) the Lease is legal, valid, binding, enforceable and in full
force and effect; (b) the validity, binding nature and enforceability of the
Lease shall not be adversely affected by the transaction contemplated hereby;
(c) neither the Company, nor to the Company's knowledge, any other party to the
Lease is in breach or default, and no event has occurred which, with notice or
lapse of time, would constitute such a breach or default or permit termination,
modification or acceleration under the Lease; (d) no party to the Lease has
repudiated any provision thereof; (e) the Lease has not been modified in any
respect, except to the extent that such modifications are disclosed by the
documents made available to the Investors' special counsel; and (f) except as
set forth on the Assets Schedule, the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease.
(iii) Real Property Disclosure. Except as disclosed on the Assets
Schedule, there is no real property leased or owned by the Company or any
subsidiary and used in the Company's business.
(iv) No Proceedings. There are no pending or, to the Company's
knowledge, threatened proceedings in eminent domain or other similar proceedings
affecting any portion of the Real Property. There exists no writ, injunction,
decree, order or judgment outstanding, nor any litigation, pending or to our
knowledge threatened, relating to the ownership, lease, use, occupancy or
operation by any person of the Real Property.
(v) Current Use. The current use or occupancy of the Real
Property does not violate in any material respect any instrument of record or
agreement affecting such Real Property or any covenant, condition, restriction,
easement, agreement or order of any governmental authority having jurisdiction
over any of the Real Property. No damage or destruction has occurred with
respect to any of the Real Property that, individually or in the aggregate, has
had or resulted in, or will have or result in, a significant adverse effect on
the operation of the Company's business.
(vi) Condition and Operation of Improvements. All buildings and
all components of all buildings, structures and other improvements included
within the Owned Real Property (the "Improvements"), are in good condition and
repair and are adequate to operate such facilities as currently used. To the
best of the Company's knowledge and belief, there are no facts or conditions
affecting any of the Improvements and the Leased Real Property which would,
individually or in the aggregate, interfere in any significant respect with the
use, occupancy or operation thereof as currently used, occupied or operated or
intended to be used, occupied or operated. To the best of the Company's
knowledge and belief, there are no structural deficiencies or latent defects
affecting any Improvements. All water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and other similar
systems serving the Real Property are installed and operating and are sufficient
to enable the Real Property to continue to be used and operated in the manner
currently being used and operated. Each such utility or other service is
provided by a public or private utility or
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service company and enters the Owned Real Property from an adjacent public
street or valid private easement owned by the supplier of such utility or other
service. Each Improvement has direct access to a public street adjoining the
Real Property on which such Improvement is situated over the driveways and
accessways currently being used in connection with the use and operation of such
Improvement and no existing accessway crosses or encroaches upon any property or
property interest not owned by the Company.
(vii) Permits. All certificates of occupancy, permits, licenses,
franchises, approvals and authorizations (collectively, the "Real Property
Permits") of all governmental authorities having jurisdiction over the Real
Property, required or appropriate to have been issued to the Company to enable
the Real Property to be lawfully occupied and used for all of the purposes for
which it is currently occupied and used, have been lawfully issued and are, as
of the date hereof, in full force and effect, with no suspension, revocation or
modification of any Real Property Permit pending or threatened.
(viii) Compliance with Laws. The Real Property is in full
compliance with all applicable building, zoning, subdivision, health and safety
and other land use and similar laws affecting the Real Property (collectively,
the "Real Property Laws"), and the Company has not received any notice of
violation or claimed violation of any Real Property Law. There is no pending or,
to the best knowledge of the Company, any anticipated change in any Real
Property Law that will have or result in a significant adverse effect upon the
ownership, alteration, use, occupancy or operation of the Real Properties or any
portion thereof. Nothing in this paragraph 6K(viii) shall be deemed to apply to
compliance with Environmental and Safety Requirements, which are covered by the
representations and warranties set forth in paragraph 6V hereof.
6L. Tax Matters.
(i) Except as set forth on the attached "Taxes Schedule": the
Company and each Subsidiary have filed all Tax Returns which they are required
to file under applicable laws and regulations; the Company and each Subsidiary
have either paid all Taxes due and owing by them (whether or not such Taxes are
required to be shown on a Tax Return) or accrued such Taxes on the Latest
Balance Sheet (excluding any amount recorded which is attributable solely to
timing differences between book and Tax income); the Company and each Subsidiary
have withheld and paid over to the appropriate taxing authority all Taxes which
they are required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third party; neither the Company nor any
Subsidiary has waived any statute of limitations with respect to any Taxes or
agreed to any extension of time with respect to any Tax assessment or
deficiency; the accrual for Taxes on the Latest Balance Sheet would be adequate
to pay all Tax liabilities of the Company and its Subsidiaries with respect to
their current tax year if such year were treated as ending on the date of the
Latest Balance Sheet (excluding any amount recorded which is attributable solely
to timing differences between book and Tax income); since the date of the Latest
Balance Sheet, the Company and its Subsidiaries have not incurred any liability
for Taxes other than in the ordinary course of business; the assessment of any
additional Taxes for periods for which Tax Returns have been filed by the
Company and each Subsidiary shall not exceed the recorded liability therefor on
the Latest Balance Sheet (excluding any amount recorded which is
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attributable solely to timing differences between book and Tax income); the
federal income Tax Returns of the Company and its Subsidiaries have been audited
and closed or otherwise are closed for all tax years through 1992; no foreign,
federal, state or local tax audits or administrative or judicial proceedings are
pending or being conducted with respect to the Company or any Subsidiary, no
information related to Tax matters has been requested by any foreign, federal,
state or local taxing authority and no written notice indicating an intent to
open an audit or other review has been received by the Company from any foreign,
federal, state or local taxing authority; there are no material unresolved
questions or claims raised by a taxing authority concerning the Company's or any
Subsidiary's Tax liability; and the Company and its Subsidiaries have net
operating loss carryforwards for federal income Tax purposes as of December 31,
1996 of at least $25 million (ignoring for this purpose any limitations on the
use of these net operating losses arising either out of the acquisition of the
Company by the Selling Shareholder or out of the transactions contemplated by
this Agreement).
(ii) Neither the Company nor any of its Subsidiaries has made
an election under 'SS'341(f) of the IRC. Neither the Company nor any Subsidiary
is liable for the Taxes of another Person that is not a Subsidiary in a material
amount under (a) Treas. Reg. 'SS' 1.1502-6 (or comparable provisions of state,
local or foreign law), (b) as a transferee or successor, (c) by contract or
indemnity or (d) otherwise. Neither the Company nor any Subsidiary is a party to
any tax sharing agreement that includes any entity other than the Company or any
Subsidiary. Neither the Company nor any Subsidiary has made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under IRC 'SS'280G.
(iii) "Tax" or "Taxes" means federal, state, county, local,
foreign or other income, gross receipts, ad valorem, franchise, profits, sales
or use, transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties, additions to tax, and
interest attributable thereto) whether disputed or not. "Tax Return" means any
return, information report or filing with respect to Taxes, including any
schedules attached thereto and including any amendment thereof.
6M. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or as
set forth on the attached "Contracts Schedule" or the attached "Employee
Benefits Schedule," neither the Company nor any Subsidiary is a party to or
bound by any written or oral:
(a) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(b) contract for the employment of any officer, individual
employee or
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other Person on a full-time, part-time, consulting or other basis
providing annual compensation in excess of $100,000 or contract relating
to loans to officers, directors or Affiliates which, in the aggregate,
exceed $50,000;
(c) contract under which the Company or Subsidiary has
advanced or loaned any other Person amounts in the aggregate exceeding
$50,000;
(d) agreement or indenture relating to borrowed money or
other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of the Company
and its Subsidiaries;
(e) guarantee of any obligation in excess of $25,000
(other than by the Company of a Wholly-Owned Subsidiary's debts or a
guarantee by a Subsidiary of the Company's debts or another Subsidiary's
debts);
(f) lease or agreement under which the Company or any
Subsidiary is lessee of or holds or operates any property, real or
personal, owned by any other party, except for any lease of real or
personal property under which the aggregate annual rental payments do
not exceed $50,000;
(g) other than as set forth on the Assets Schedule, lease
or agreement under which the Company or any Subsidiary is lessor of or
permits any third party to hold or operate any property, real or
personal, owned or controlled by the Company or any Subsidiary;
(h) contract or group of related contracts with the same
party or group of affiliated parties the performance of which involves
consideration in excess of $100,00 per annum;
(i) assignment, license, indemnification or agreement with
respect to any intangible property (including, without limitation, any
Intellectual Property Rights) having a value in excess of $50,000;
(j) express warranties with respect to its services
rendered or its products sold or leased;
(k) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and piggyback
registration rights);
(l) sales, distribution or franchise agreement;
(m) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world; or
(n) any other agreement which is material to its
operations and business prospects and involves a consideration in excess
of $50,000 annually.
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(ii) All of the contracts, agreements and instruments set forth
on the Contracts Schedule are valid, binding and enforceable in accordance with
their respective terms. The Company and each Subsidiary have performed all
obligations required to be performed by them under the contracts, agreements and
instruments listed on the Contracts Schedule and are not in default under or in
breach of nor in receipt of any claim of default or breach under any contract,
agreement or instrument listed on the Contracts Schedule; no event has occurred
which with the passage of time or the giving of notice or both would result in a
default, breach or event of noncompliance by the Company or any Subsidiary under
any contract, agreement or instrument to which the Company or any Subsidiary is
subject; neither the Company nor any Subsidiary has any present expectation or
intention of not fully performing all such obligations; and neither the Company
nor any Subsidiary has knowledge of any breach or anticipated breach by the
other parties to any contract, agreement, instrument or commitment listed on the
Contracts Schedule.
(iii) The Contracts Schedule shall list each Burger King
Franchise Agreement and shall disclose the termination date of each such
agreement. The Company has neither any knowledge nor any reason to believe that
any franchise agreement terminating within five years after the date of this
Agreement will not, if so requested by the Company, be renewed on substantially
similar terms and without a cost per restaurant in excess of $40,000 for the
successor franchise fee payable to Burger King Corporation in connection with
such renewal.
(iv) The Company has made available to the Investors' special
counsel a true and correct copy of each of the written instruments, plans,
contracts and agreements and an accurate description of each of the oral
arrangements, contracts and agreements which are referred to on the Contracts
Schedule, together with all amendments, waivers or other changes thereto.
6N. Intellectual Property Rights.
(i) The attached "Intellectual Property Schedule" contains a
complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or used by the Company or any Subsidiary, (b) pending
patent applications and applications for registrations of other Intellectual
Property Rights filed by the Company or any Subsidiary, (c) unregistered trade
names and corporate names owned or used by the Company or any Subsidiary and (d)
unregistered trademarks, service marks, copyrights, mask works and computer
software owned or used by the Company or any Subsidiary. The Intellectual
Property Schedule also contains a complete and accurate list of all licenses and
other rights granted by the Company or any Subsidiary to any third party with
respect to any Intellectual Property Rights and all licenses and other rights
granted by any third party to the Company or any Subsidiary with respect to any
Intellectual Property Rights, in each case identifying the subject Intellectual
Property Rights. The Company or one of its Subsidiaries owns all right, title
and interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights necessary for the operation of the businesses of
the Company and its Subsidiaries as presently conducted free and clear of all
Liens. The loss or expiration of any Intellectual Property Right or related
group of Intellectual Property Rights owned or used by the Company or any
Subsidiary has not had and would not reasonably be expected to have a material
adverse effect on the conduct of the Company's and its Subsidiaries'
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respective businesses, and no such loss or expiration is threatened, pending or
reasonably foreseeable. The Company and its Subsidiaries have taken all
necessary and desirable actions to maintain and protect the Intellectual
Property Rights which they own. To the best of the Company's knowledge, the
owners of any Intellectual Property Rights licensed to the Company or any
Subsidiary have taken all necessary and desirable actions to maintain and
protect the Intellectual Property Rights which are subject to such licenses.
(ii) Except as set forth on the Intellectual Property Schedule,
(a) the Company and its Subsidiaries own all right, title and interest in and to
all of the Intellectual Property Rights listed on such schedule, free and clear
of all Liens, (b) there have been no claims made against the Company or any
Subsidiary asserting the invalidity, misuse or unenforceability of any of such
Intellectual Property Rights, and there are no grounds for the same, (c) neither
the Company nor any Subsidiary has received any notices of, and is not aware of
any facts which indicate a likelihood of, any infringement or misappropriation
by, or conflict with, any third party with respect to such Intellectual Property
Rights (including, without limitation, any demand or request that the Company or
any Subsidiary license any rights from a third party), and (d) the conduct of
the Company's and each Subsidiary's business has not infringed, misappropriated
or conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, nor would any future conduct as
presently contemplated infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons. The transactions contemplated by
this Agreement shall have no material adverse effect on the Company's or any
Subsidiary's right, title and interest in and to the Intellectual Property
Rights listed on the Intellectual Property Schedule.
6O. Litigation, etc. Except as set forth on the attached
"Litigation Schedule," there are no actions, suits, proceedings, orders,
investigations or claims pending or, to the Company's knowledge, threatened
against the Company or any Subsidiary (or to the Company's knowledge, pending or
threatened against any of the officers, directors or key employees of the
Company and its Subsidiaries with respect to the Company's or any Subsidiary's
businesses or proposed business activities), or pending or threatened by the
Company or any Subsidiary against any third party, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); neither the Company nor any Subsidiary is subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to the best
of the Company's knowledge, any governmental investigations or inquiries
(including, without limitation, inquiries as to the qualification to hold or
receive any license or permit); and, to the Company's knowledge, there is no
basis for any of the foregoing.
6P. Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company or any Subsidiary. The Company shall pay, and hold the
Investors harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim.
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6Q. Governmental Consent, etc. Except for any filings required to
be made pursuant to the Hart-Scott-Rodino Act, no permit, consent, approval or
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as expressly contemplated herein or in the exhibits hereto.
6R. Insurance. The attached "Insurance Schedule" contains a
description of each insurance policy maintained by the Company and its
Subsidiaries with respect to its properties, assets and businesses, and each
such policy is in full force and effect as of the Closing. Neither the Company
nor any Subsidiary is in default with respect to its obligations under any
insurance policy maintained by it. The insurance coverage of the Company and its
Subsidiaries is customary for corporations of similar size engaged in similar
lines of business. Except as set forth on the Insurance Schedule, the Company
and its Subsidiaries do not have any self-insurance or co-insurance programs.
6S. Employees. Except as set forth on the attached "Employee
Schedule," the Company is not aware that any executive or key employee of the
Company or any Subsidiary or any group of employees of the Company or any
Subsidiary has any plans to terminate employment with the Company or any
Subsidiary. The Company and each Subsidiary have complied in all material
respects with all laws relating to the employment of labor (including, without
limitation, provisions thereof relating to wages, hours, equal opportunity,
sexual harassment, collective bargaining and the payment of social security and
other taxes), and the Company is not aware that it or any Subsidiary has any
material labor relations problems (including, without limitation, any union
organization activities, threatened or actual strikes or work stoppages or
material grievances). Neither the Company, its Subsidiaries nor, to the
Company's knowledge after due inquiry, any of their employees is subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or similar
agreements relating to, affecting or in conflict with the present or proposed
business activities of the Company and its Subsidiaries, except for agreements
between the Company and its present and former employees, those certain
Franchise Agreements between Burger King Corporation and the Company or any of
its Subsidiaries and those agreements set forth on the attached Employee
Schedule.
6T. ERISA.
(i) Multiemployer Plans. The Company does not have any
obligation to contribute to (or any other liability, including current or
potential withdrawal liability, with respect to) any Multiemployer Plan.
(ii) Retiree Welfare Plans. Except as set forth on the attached
Employee Benefits Schedule, the Company does not maintain or have any obligation
to contribute to (or any other liability with respect to) any Employee Benefit
Plan or arrangement whether or not terminated, which provides medical, health,
life insurance or other welfare-type benefits for current or future retired or
terminated employees (except for limited continued medical benefit
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coverage required to be provided under Section 4980B of the IRC or as required
under applicable state law).
(iii) Defined Benefit Plans. The Company does not maintain,
contribute to or have any liability under (or with respect to) any employee plan
which is a Defined Benefit Plan, whether or not terminated.
(iv) Defined Contribution Plans. The Company does not maintain,
contribute to or have any liability under (or with respect to) any employee plan
which is a Defined Contribution Plan, whether or not terminated, other than the
Carrols Corporation Corporate Division Employee Savings Plan (the "Profit
Sharing Plan").
(v) Other Plans. Except as set forth in the "Employee Benefits
Schedule", the Company does not maintain, contribute to or have any liability
under (or with respect to) any Employee Benefit Plan or arrangement providing
benefits to current or former employees, including any bonus plan, plan for
deferred compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated.
(vi) Each Employee Benefit Plan and all related trusts,
insurance contracts, and funds have been maintained, funded and administered in
compliance with applicable laws and regulations, including but not limited to
ERISA and the IRC. None of the Company, any trustee or administrator of any
Employee Benefit Plan, or any other person has engaged in any transaction with
respect to any Plan which would reasonably subject the Company, or any trustee
or administrator of any Employee Benefit Plan, or any party dealing with any
Employee Benefit Plan, or the Investors to any tax or penalty imposed by ERISA
or the IRC. To the Company's knowledge, no actions, suits, claims, complaints,
charges, proceedings, hearings, investigations, or demands with respect to the
Plans (other than routine claims for benefits) are pending or threatened, and
the Company has no knowledge of any facts which could reasonably give rise to or
reasonably be expected to give rise to any actions, suits, claims, complaints,
charges, proceedings, hearings, investigations or demands.
(vii) Each Employee Benefit Plan that is intended to be
qualified under Section 401(a) of the IRC, and each trust forming a part
thereof, has received a favorable determination letter from the IRS as to the
qualification under the IRC of such Plan and the tax-exempt status of such
related trust and nothing has occurred since the date of such determination
letter that would adversely affect the qualification of such Plan or the
tax-exempt status of such related trust.
(viii) No underfunded Defined Benefit Plan has been, during the
five years preceding the Closing Date, transferred out of the Controlled Group
of Companies of which the Company is a member or was a member during such
five-year period.
(ix) As of the Closing Date, all required or recommended
payments, premiums, contributions, reimbursements or accruals with respect to
any Employee Benefit Plan for all periods ending prior to or as of the Closing
Date shall have been made or properly accrued. No Employee Benefit Plan has any
material unfunded liabilities.
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(x) With respect to each Employee Benefit Plan, the Company
has provided the Investors with true, complete and correct copies, to the extent
applicable, of (A) all documents pursuant to which the Plans are maintained,
funded and administered, (B) the two most recent annual reports (Form 5500
series) filed with the IRS (with attachments), (C) the two most recent actuarial
reports, (D) the two most recent financial statements, (E) all governmental
rulings, determinations, and opinions (and pending requests for governmental
rulings, determinations and opinions), and (F) the most recent valuation of the
present and future obligations under each Employee Benefit Plan that provides
post-retirement or post-employment health, life insurance, accident or other
"welfare-type" benefits.
(xi) For purposes of this paragraph 6T, the term "Company"
includes all organizations under common control with the Company pursuant to
Section 414(b) or (c) of the IRC.
6U. Compliance with Laws. Except as set forth on the attached
"Compliance Schedule", neither the Company nor any Subsidiary has violated any
law or any governmental regulation or requirement which violation has had or
would reasonably be expected to have an adverse effect upon the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole, and neither the Company nor any
Subsidiary has received notice of any such violation, and neither the Company
nor any Subsidiary has violated any health code regulations or requirements, and
neither the Company nor any Subsidiary has received notice of any such
violation. Nothing in this paragraph 6U shall be deemed to apply to compliance
with Environmental and Safety Requirements, which are covered by the
representations and warranties set forth in paragraph 6V hereof.
6V. Environmental and Safety Matters.
(i) For purposes of this Agreement, the term "Environmental
and Safety Requirements" shall mean all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law, in each case concerning public
health and safety, worker health and safety and pollution or protection of the
environment (including, without limitation, all those relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, containment or cleanup of any Hazardous Materials; "Hazardous
Materials" shall include (a) any element, compound, or chemical that is defined,
listed or otherwise classified as a contaminant, pollutant, toxic pollutant,
toxic or hazardous substance, extremely hazardous substance or chemical
hazardous waste, medical waste, biohazardous or infectious waste, special waste,
or solid waste under Environmental and Safety Requirements, (b) petroleum,
petroleum-based or petroleum-derived products, (c) polychlorinated biphenyls and
(d) asbestos-containing materials; "Release" shall have the meaning set forth in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"); "Environmental Claims" shall include any complaint,
summons, citation, notice of violation, notice of potential liability,
directive, order, claim, litigation, investigation, proceeding, judgement,
letter or other communication from any
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governmental agency, department, bureau, office or other authority, or any third
party involving violations of Environmental and Safety Requirements or Releases
of Hazardous Materials; "Environmental Liabilities" shall mean any monetary
obligations, losses, liabilities (including strict liability), damages, punitive
damages, consequential damages, treble damages, costs and expenses (including
all reasonable out-of-pocket costs for environmental site assessments, remedial
investigation and feasibility studies), fines, penalties, sanctions and interest
incurred as a result of any Environmental Claim filed by any Governmental
Authority or any third party which relate to any violations of Environmental and
Safety Requirements, Remedial Actions, Releases or threatened Releases of
Hazardous Materials; and "Remedial Action" means all actions taken to clean up,
remove, remediate, contain, treat, monitor, assess, evaluate or in any other way
address Hazardous Materials in the environment, prevent or minimize a Release or
threatened Release of Hazardous Materials so they do not migrate or endanger or
threaten to endanger public health or welfare or the environment, perform
pre-remedial studies and investigations and post-remedial operation and
maintenance activities, or any other actions authorized by 42 U.S.C. 9601.
(ii) Except as set forth on the attached "Environmental Schedule":
(a) the Company and its Subsidiaries have complied with
and are currently in compliance with all Environmental and Safety
Requirements, and neither the Company nor its Subsidiaries have received
any Environmental Claims relating to the Company or its Subsidiaries or
any of their properties or facilities;
(b) without limiting the generality of the foregoing, the
Company and its Subsidiaries have obtained and complied with, and are
currently in compliance with, all permits, licenses and other
authorizations that may be required pursuant to any Environmental and
Safety Requirements for the occupancy of their properties or facilities
or the operation of their businesses;
(c) neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations
on the Company and its Subsidiaries for site investigation or cleanup,
or notification to or consent of any government agencies or third
parties under any Environmental and Safety Requirements (including,
without limitation, any so called "transaction-triggered" or
"responsible property transfer" laws and regulations);
(d) neither the Company nor any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled or Released any substance (including, without
limitation, any hazardous substance) or owned, occupied or operated any
facility or property, so as to give rise to liabilities of the Company
or its Subsidiaries for response costs, natural resource damages or
attorneys fees pursuant to CERCLA, or any other Environmental and Safety
Requirements; and
(e) neither the Company nor any of its Subsidiaries has,
contractually assumed or undertaken any Remedial Action, obligation or
Environmental Liability of any other Person relating to any
Environmental and Safety Requirements.
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6W. Disclosure. Neither this Agreement nor any of the exhibits,
schedules or attachments hereto nor any certificate delivered by the Company
hereunder contain any untrue statement of a material fact or omit a material
fact necessary to make each statement contained herein or therein not
misleading. There is no confidential or nonpublic fact which the Company has not
disclosed to the Investors in writing and of which any of its officers,
directors or executive employees is aware and which has had or would reasonably
be expected to have a material adverse effect upon the financial condition,
operating results, assets, customer or supplier relations, employee relations or
business prospects of the Company and its Subsidiaries taken as a whole.
6X. Closing Date. The representations and warranties of the
Company contained in this Section 6 and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in any
certificate delivered by, or on behalf of, the Company to the Investors pursuant
to this Agreement or any schedule hereto shall be true and correct on the date
of the Closing as though then made, except as affected by the transactions
expressly contemplated by this Agreement.
6Y. Reports with the Securities and Exchange Commission. The
Company has made available to the Investors and the Investors' special counsel
complete and accurate copies of its Form 10-K for its three most recent fiscal
years, all other reports or documents required to be filed by the Company
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act since the
filing of the most recent Form 10-K. Such filings do not contain any material
false statements or any misstatement of any material fact and do not omit to
state any fact necessary to make the statements set forth therein not
misleading. The Company has made all filings with the Securities and Exchange
Commission which it is required to make, and the Company has not received any
request from the Securities and Exchange Commission to file any amendment or
supplement to any of the current or pending filings described in this paragraph.
Section 7. Representations and Warranties of the Selling
Shareholder7. Representations and Warranties of the Selling Shareholder. As a
material inducement to the Investors to enter into this Agreement, the Selling
Shareholder hereby represents and warrants to the Investors that:
7A. The ARI Shares. As of the date of this Agreement and
immediately prior to the Closing, the Selling Shareholder is, and will be (as
the case may be), the record and beneficial owner of 850,000 shares of Common
Stock of the Company. Such shares have been duly authorized and validly issued,
are fully paid and nonassessable, and are owned by the Selling Shareholder free
and clear of any Adverse Claims. Upon delivery to the Investors at the Closing
of certificates representing the ARI Shares, such certificates being duly
endorsed or accompanied by duly executed forms of assignment, and upon receipt
by the Selling Shareholder of the purchase price for the ARI Shares, good and
valid title to the ARI Shares shall pass to the Investors, free and clear of any
Adverse Claims (regardless of any knowledge the Investors have of any Adverse
Claims or potential Adverse Claims). The Selling Shareholder has neither entered
into nor violated any agreement, written or oral, that would create any rights,
or would give rise to any Adverse Claims or potential Adverse Claims, in any
shares held by the Selling Shareholder as of the date of this Agreement and
immediately prior to the Closing Date, or that
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would result in any loss, liability or damage with respect to the Company or any
of its Subsidiaries.
7B. Authorization. Each of the Selling Shareholder and the Bank
has full power and authority to enter into this Agreement and the other
agreements, instruments, documents and certificates to be executed and delivered
by Selling Shareholder or the Bank, respectively, pursuant hereto and to
consummate the transactions contemplated hereby. All acts and other proceedings
required to be taken by the Selling Shareholder or the Bank to authorize the
execution, delivery and performance of this Agreement, the Registration
Agreement, the Stockholders Agreement, and all other agreements contemplated
hereby to which the Selling Shareholder or the Bank is a party, and the
consummation of the transactions contemplated hereby have been (or in the case
of the Bank, prior to the Closing will be) duly and properly taken and each of
such agreements constitutes a valid and binding agreement of the Selling
Shareholder and the Bank, respectively, enforceable in accordance with their
terms. The execution and delivery by the Selling Shareholder and the Bank of
this Agreement, the Registration Agreement, the Stockholders Agreement, and all
other agreements contemplated hereby to which the Selling Shareholder or the
Bank is a party do not and shall not (i) conflict with or result in a breach of
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any lien, security interest, charge or encumbrance
upon the Selling Shareholder's capital stock or assets pursuant to, (iv) give
any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency pursuant to, or
(vii) give rise to any Adverse Claim with respect to any of the Company's
capital stock (other than the ARI Shares) or other equity securities (or any
securities convertible into or exchangeable for any shares of the Company's
capital stock or other equity securities) under, the charter or bylaws of the
Selling Shareholder or the Bank, or any law, statute, rule or regulation to
which the Selling Shareholder or the Bank is subject, or any agreement (oral or
written), instrument, order, judgment or decree to which the Selling Shareholder
or the Bank is subject.
7C. Company Representations. To the Selling Shareholder's actual
knowledge (other than with respect to representations and warranties of the
Company contained in paragraphs 6B, 6D and 6P hereof) all of the representations
and warranties contained in Section 6 are true and correct in all material
respects on the date of this Agreement and shall be true and correct in all
material respects on the Closing Date.
7D. Compliance with Laws. Neither the Selling Shareholder nor any
of its Affiliates has violated any law or any governmental regulation or
requirement which violation has had or would reasonably be expected to have an
adverse effect upon the financial condition, operating results, assets,
operations or business prospects of the Company and its Subsidiaries or any
effect on its ownership of the Company and its Subsidiaries taken as a whole,
and the Selling Shareholder has not received notice of any such violation.
Neither the Selling Shareholder nor any of its Affiliates is subject to, or has
any reason to believe it may be subject to, any liability or corrective or
remedial obligation arising under any federal, state, local or foreign law, rule
or regulation (including the common law) relating to or regulating securities,
currency, banking, or
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exchange controls affecting the Company or the Selling Shareholder's ownership
of the Company and its Subsidiaries.
7E. Ownership of Selling Shareholder. BIB (Bermuda) Holdings,
Ltd. and certain executive employees and directors of the Bank and its
Affiliates own in the aggregate 100% of the issued and outstanding capital stock
of the Selling Shareholder (provided that such employees and directors do not
own more than 20% of the issued and outstanding capital stock of the Selling
Shareholder nor more than 20% of the voting power of the Selling Shareholder),
and the Bank owns 100% of the issued and outstanding capital stock of BIB
(Bermuda) Holdings, Ltd. and Dilmun Financial Services.
7F. Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Selling Shareholder or any of its Affiliates. The Selling Shareholder
shall pay, and hold the Company and the Investors harmless against, any
liability, loss or expense (including, without limitation, reasonable attorneys'
fees and out-of-pocket expenses) arising in connection with any such claim.
7G. Closing Date. The representations and warranties of the
Selling Shareholder contained in this Section 7 and elsewhere in this Agreement
shall be true and correct in all material respects on the date of the Closing as
though then made.
Section 8. Investors' Representations and Warranties.
8A. Investors' Investment Representations. Each of the Investors
hereby represents that it is acquiring the Restricted Securities purchased
hereunder or acquired pursuant hereto for its own account with the present
intention of holding such securities for purposes of investment, and that it has
no intention of selling such securities in a public distribution in violation of
the federal securities laws or any applicable state securities laws; provided
that nothing contained herein shall prevent the Investors and subsequent holders
of Restricted Securities from transferring such securities in compliance with
the provisions of Section 5 hereof. Each certificate or instrument representing
Restricted Securities shall be imprinted with a legend in substantially the
following form:
"The securities represented by this certificate were originally issued
on _________, 1997, and have not been registered under the Securities
Act of 1933, as amended. The transfer of the securities represented by
this certificate is subject to the conditions specified in the Stock
Purchase Agreement, dated as of February 25, 1997, and as amended and
modified from time to time, between the issuer (the "Company") and
certain investors, and the Company reserves the right to refuse the
transfer of such securities until such conditions have been fulfilled
with respect to such transfer. A copy of such conditions shall be
furnished by the Company to the holder hereof upon written request and
without charge."
8B. Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement
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based on any arrangement or agreement binding upon the Investors. The Investors
shall pay, and hold the Company and the Selling Shareholder harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim.
8C. Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with any governmental authority is
required in connection with the execution, delivery and performance by the
Investors of this Agreement or the other agreements contemplated hereby, or the
consummation by the Investors of any other transactions contemplated hereby or
thereby, except as expressly contemplated herein or in the exhibits hereto, and
except for the filings required to be made pursuant to the Hart-Scott-Rodino
Act.
8D. Closing Date. The representations and warranties of the
Investors herein shall be true and correct in all material respects on the date
of the Closing as though then made.
9. Definitions.
9A. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Adverse Claims" shall have the meaning set forth in paragraph
6B(iii).
"Controlled Group of Companies" has the meaning set forth in
Section 414 of the IRC.
"Defined Benefit Plan" shall have the meaning set forth in
Section 3(35) of ERISA.
"Defined Contribution Plan" shall have the meaning set forth in
Section 3(34) of ERISA.
"Employee Benefit Plan" means any (a) qualified or nonqualified
Employee Pension Benefit Plan, (b) Employee Welfare Benefit Plan, or (c) fringe
benefit plan, policy, program and arrangement, whether or not subject to ERISA
and whether or not funded.
"Employee Pension Benefit Plan" shall have the meaning set forth
in Section 3(2) of ERISA.
"Employee Welfare Benefit Plan" shall have the meaning set forth
in Section 3(1) of ERISA.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Indebtedness" means at a particular time, without duplication,
(i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by
any note, bond, debenture or other debt security, (iii) any indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business), (iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness guaranteed in any manner by
a Person (including, without limitation, guarantees in the form of an agreement
to repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, and (vii) any indebtedness secured by a Lien on a
Person's assets.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information,
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
any reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
"Liens" means any mortgage, pledge, security interest,
encumbrance, lien, covenant, condition, restriction or charge of any kind
(including, without limitation, any conditional sale or other title retention
agreement or lease in the nature thereof), any sale of receivables with recourse
against the Company, any Subsidiary or any Affiliate, any filing or
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agreement to file a financing statement as debtor under the Uniform Commercial
Code or any similar statute other than to reflect ownership by a third party of
property leased to the Company or any Subsidiaries under a lease which is not in
the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of business).
"Multiemployer Plan" shall have the meaning set forth in Section
3(37) of ERISA.
"Officer's Certificate" means a certificate signed by the
Company's or the Selling Shareholder's, as the case may be, president or its
chief financial officer on behalf of the Company or the Selling Shareholder, as
the case may be, stating that (i) the officer signing such certificate has made
or has caused to be made such investigations as are necessary in order to permit
him to verify the accuracy of the information set forth in such certificate and
(ii) to such officer's knowledge, such certificate does not misstate any
material fact and does not omit to state any fact necessary to make the
certificate not misleading.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Sale" means any sale of securities to the public pursuant
to an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
"Restricted Securities" means Common Stock issued pursuant to
this Agreement. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) been distributed to the public through
a broker, dealer or market maker pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act or become eligible for sale pursuant to
Rule 144(k) (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 8A have been delivered by the
Company in accordance with paragraph 5B. Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 8A.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental
body or agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
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"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Treasury Regulations" means the United States Treasury
Regulations promulgated under the IRC, and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered or
classified.
Section 10. Termination.
10A. Conditions of Termination. This Agreement may be terminated
at any time prior to the Closing:
(i) by the mutual written consent of the Company, the Selling
Shareholder and the Investors;
(ii) by the Investors if there has been a material
misrepresentation, material breach of warranty or material breach of a covenant
by the Company or the Selling Shareholder in the representations and warranties
or covenants set forth in this Agreement or the Schedules and Exhibits attached
hereto, which in the case of any breach of covenant has not been cured within
ten days after written notification thereof by the Investors to the Company and
the Selling Shareholder; or
(iii) by the Investors, the Selling Shareholder or the Company
if the transactions contemplated hereby have not been consummated by April 30,
1997; provided that the party electing termination pursuant to this subparagraph
(iii) is not in breach of any of its representations, warranties, covenants or
agreements contained in this Agreement or the Schedules and Exhibits attached
hereto.
In the event of termination by either the Investors, the Company or the
Selling Shareholder pursuant to this paragraph 10A, written notice thereof
(describing in reasonable detail the basis therefor) shall forthwith be
delivered to the other parties hereto.
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10B. Effect of Termination. In the event of termination of
this Agreement by either the Investors, the Company or the Selling Shareholder
as provided above, this Agreement shall forthwith become void and of no further
force and effect, except that the covenants and agreements set forth in
paragraphs 10B and Section 11 shall survive such termination indefinitely,
and except that nothing in paragraph 10A or this paragraph 10B shall be
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or to impair the right of any party
to compel specific performance by another party of its obligations under this
Agreement.
11. Miscellaneous.
11A. Expenses. The Company shall pay, and hold the Investors and
all holders of Common Stock harmless against liability for the payment of (i)
the reasonable fees and expenses of their special counsel arising in connection
with the negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement which shall be payable at the
Closing or, if the Closing does not occur for any reason other than as a result
of material breach by the Investors of any of their representations, warranties
or covenants contained in this Agreement, upon the termination of this
Agreement, payable upon demand, (ii) the reasonable fees and expenses incurred
with respect to any amendments or waivers (whether or not the same become
effective) under or in respect of this Agreement, the agreements contemplated
hereby and the Certificate of Incorporation, (iii) stamp and other taxes which
may be payable in respect of the execution and delivery of this Agreement or the
issuance, delivery or acquisition of any shares of Common Stock, (iv) the
reasonable fees and expenses incurred with respect to the enforcement of the
rights granted under this Agreement, the agreements contemplated hereby, and the
Certificate of Incorporation, (v) the reasonable fees and expenses incurred by
each such Person in any filing with any governmental agency with respect to its
investment in the Company or in any other filing with any governmental agency
with respect to the Company which mentions such Person, including, but not
limited to, any filings required to be made under the Hart-Scott-Rodino Act and
(vi) the reasonable fees and expenses incurred by the Investors in connection
with their business, legal and accounting due diligence review of the Company
and negotiation of all legal documents.
11B. Remedies. The Investors shall have all rights and remedies
set forth in this Agreement, the Certificate of Incorporation and all rights and
remedies which holders of Common Stock have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law.
11C. Consent to Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holders of a majority of the Shares purchased hereunder. No other
course of dealing between the Company and the holder of any of the Shares
purchased
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hereunder or any delay in exercising any rights hereunder or under the
Certificate of Incorporation shall operate as a waiver of any rights of any such
holders. Notwithstanding the foregoing, no waiver or amendment which would
adversely affect the Selling Shareholder shall be made without the prior written
consent of the Selling Shareholder.
11D. Successors and Assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not; provided that prior to the Closing, no party hereto may assign its
rights or delegate its duties hereunder without the prior written consent of the
other parties hereto and no holder of Common Stock purchased hereunder shall
assign its rights hereunder except in connection with a sale or other transfer
of the Common Stock (other than in a Public Sale); provided further, that such
rights are not assignable to more than five (5) assignees in total who are not
Affiliates of the Investors or the Selling Shareholder. In addition, and whether
or not any express assignment has been made, the provisions of this Agreement
which are for the Investors' benefit as purchasers or holders of Common Stock
are also for the benefit of, and enforceable by, any subsequent holder of such
Common Stock (other than in a Public Sale).
11E. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
11F. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
11G. Descriptive Headings; Interpretation. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a substantive part of this Agreement. The use of the word "including"
in this Agreement shall be by way of example rather than by limitation.
11H. Governing Law. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights and
obligations of the Company and its stockholders. All other issues and questions
concerning the construction, validity, enforcement and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York. In
furtherance of the foregoing, the internal law of the State of New York shall
control the interpretation and construction of this Agreement (and all schedules
and exhibits hereto), even though under that jurisdiction's choice of law or
conflict of law analysis, the substantive law of some other jurisdiction would
ordinarily apply.
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11I. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Investors at the address and to the Company
at the addresses indicated below:
Notices to the Company:
Carrols Holdings Corporation
James Street
Syracuse, NY 13203
Attn: Joseph A. Zirkman, Esq.
With copies (which shall not constitute notice) to:
Schulte Roth & Zabel LLP
Third Avenue
New York, NY 10022
Attn: Andre Weiss, Esq.
Notices to Investors:
Madison Dearborn Capital Partners, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
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With copies (which shall not constitute notice) to:
Kirkland & Ellis
East Randolph Drive
Suite 5700
Chicago, IL 60601
Attn: Edward T. Swan, Esq.
Notices to Selling Shareholder:
Atlantic Restaurants, Inc.
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, CT 06902
Attn : Paul Durrant
With copies (which shall not constitute notice) to:
Pryor, Cashman, Sherman, and Flynn
Park Avenue, 10th Floor
New York, NY 10022
Attn: Selig Sacks, Esq.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
11J. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement 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 of the provisions of this Agreement.
11K. Indemnification. Subject to 11K(iii)(h) below, all
representations and warranties contained herein or made in any certificate or
other writing by any party in connection herewith shall survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, regardless of any investigation made by the Investors or on
their behalf.
(i) Company's Indemnification Obligation. Subject to the
limitations set forth in paragraph (iii) below, in consideration of the
Investors' execution and delivery of this Agreement and acquiring the Company
Shares and the ARI Shares hereunder, and in addition to all of the Company's
other obligations under this Agreement, the Company shall defend, protect,
indemnify and hold harmless the Investors and all of their respective officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against
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any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"), incurred by the Indemnitees
or any of them as a result of, or arising out of, or relating to (a) the
inaccuracy of any representation or warranty made by the Company in this
Agreement or in any certificate delivered by the Company to any of the
Indemnitees pursuant to this Agreement, or (b) the failure of the Company to
comply with any of its covenants under this Agreement or in any certificate
delivered by the Company to any of the Indemnities pursuant to this Agreement.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
(ii) Selling Shareholder's Indemnification Obligation. Subject
to the limitations set forth in paragraph (iii) below, in consideration of the
Investors' execution and delivery of this Agreement and acquiring the Company
Shares and the ARI Shares hereunder and in addition to all of the Selling
Shareholder's other obligations under this Agreement, the Selling Shareholder
shall defend, protect, indemnify and hold harmless the Investors and their
respective officers, directors, employees and agents (including, without
limitation, those retained in connection with transactions contemplated by this
Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
is sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to the inaccuracy of any
representation or warranty made by the Selling Shareholder in this Agreement or
in any certificate delivered by the Selling Shareholder to any of the
Indemnitees pursuant to this Agreement. To the extent that the foregoing
undertaking by the Selling Shareholder may be unenforceable for any reason, the
Selling Shareholder shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
(iii) Conditions of Indemnification.
(a) Except as set forth in paragraph (c) below, none of the
Company's representations, warranties or covenants in this Agreement shall be
deemed to have been breached for purposes of paragraph 2A except to the extent
that (x) any individual breach has resulted in or could reasonably be expected
to result in an Indemnified Liability exceeding $20,000 and (y) the total amount
of Indemnified Liabilities that have resulted, and could reasonably be expected
to result, from all breaches identified in (x) would exceed $3 million in the
aggregate.
(b) Except as set forth in paragraph (c) below, the Company shall
only be liable to the Investors for any Indemnified Liabilities arising under
paragraph 11K(i) to the extent that (x) the amount of any individual Indemnified
Liability exceeds $20,000 and (y) the total amount of all Indemnified
Liabilities identified in (x) exceeds $3 million in the aggregate, in
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which case the Company shall be liable to the Investors for all Indemnified
Liabilities from the first dollar.
(c) The foregoing limitations set forth in clauses (a) and (b)
shall not apply to (x) any inaccuracy of any representation or warranty
contained in paragraphs 6A, 6B, 6D and 6P or (y) any Indemnified Liability
resulting from any Adverse Claim with respect to the record or beneficial
ownership of ARI Shares, the Company Shares or any other shares of the Company
held by the Selling Shareholder.
(d) Except as set forth in paragraph (f) below, none of the
Selling Shareholder's representations or warranties set forth in paragraph 7C
shall be deemed to have been breached for purposes of paragraph 2A, except to
the extent that (x) any individual breach has resulted in or could reasonably be
expected to result in an Indemnified Liability exceeding $20,000 and (y) the
total amount of Indemnified Liabilities that have resulted, and could reasonably
be expected to result, from all breaches identified in (x) would exceed $3
million in the aggregate.
(e) Except as set forth in paragraph (f) below, the Selling
Shareholder shall only be liable to the Investors for any Indemnified
Liabilities arising under paragraph 11K(ii) with respect to a breach of
paragraph 7C hereof to the extent that (x) the amount of any individual
Indemnified Liability exceeds $20,000 and (y) the total amount of all
Indemnified Liabilities identified in (x) exceeds $3 million in the aggregate,
in which case the Selling Shareholder shall be liable to the Investors for all
Indemnified Liabilities from the first dollar.
(f) The foregoing limitation set forth in clause (d) and (e)
shall not apply to (x) a breach of paragraph 7C that relates to any inaccuracy
of any representation or warranty contained in paragraphs 6A, 6B, 6D and 6P or
(y) any Indemnified Liability resulting from any Adverse Claim with respect to
the ownership of ARI Shares, the Company Shares or any other shares of the
Company held by the Selling Shareholder.
(g) Notwithstanding any other provision contained in this
paragraph 11K, in the event that the representations and warranties contained in
paragraph 7C (other than with respect to the inaccuracy of any representation or
warranty contained in paragraph 6B, 6D or 6P) hereof are breached, the Selling
Shareholder shall only be required to indemnify the Investors and the other
Indemnitees for one-half (1/2) of the total Indemnified Liabilities of the
Indemnitees as a result of such breach and the corresponding breach under
Section 6 pursuant to paragraphs 11K(i) and (ii) above subject to an aggregate
cap of $30,666,632.25 on the Selling Shareholder's overall indemnification
obligation pursuant to paragraph 11K(ii) with respect to paragraph 7C (other
than with respect to the breach or inaccuracy of any representation or warranty
contained in paragraph 6B, 6D (to the extent that such breach or inaccuracy (i)
pertains to the title to, ownership of, or other rights with respect to, the
Company's capital stock or other equity securities including, but not limited
to, the ARI Shares and the Company Shares, and (ii) impairs or affects the value
thereof or the right to realize the value thereof) or 6P) above; provided,
however, that nothing contained in this paragraph 11K(iii)(g) shall in any way
limit the Company's liability or indemnification obligations under paragraph
11K(i) except to the extent
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that the Investors have recovered any amounts from the Selling Shareholder as a
result of such breach and the corresponding breach under Section 6.
(h) Any claim based upon the breach of any representation or
warranty contained in Section 6, 7 or 8 must be made to the breaching party in
writing prior to the later of (i) April 1, 1998 or (ii) fifteen (15) days after
delivery to the Investors by the Company of its 1997 audited financial
statements pursuant to Section 5 of the Stockholders Agreement; provided that
(A) any claim based upon the breach of any representation or warranty contained
in paragraphs 6L, 6U, 6V or 7C (with respect to the inaccuracy of any
representation or warranty contained in paragraphs 6L, 6U and 6V) must be made
to the Company or the Selling Shareholder (as the case may be) in writing prior
to the third anniversary of the Closing and (B) there shall be no time limit for
claims made for a breach of the representations and warranties contained in
paragraphs 6A, 6B, 6P, 7A, 7B, 7C (with respect to the inaccuracy of any
representation or warranty contained in paragraph 6B), 7D, 7E, 7F and the first
two sentences of 6D.
(i) Notwithstanding anything to the contrary contained in this
paragraph 11K, each of the Company and the Selling Shareholder shall be jointly
and severally liable to the Investors with respect to any Indemnified Liability
arising out of, or as a result of, the breach or inaccuracy of any
representation or warranty contained in paragraph 6B, 6D (to the extent that
such breach or inaccuracy (i) pertains to the title to, ownership of, or other
rights with respect to, the Company's capital stock or other equity securities
including, but not limited to, the ARI Shares and the Company Shares, and (ii)
impairs or affects the value thereof or the right to realize the value thereof)
or 6P hereof.
(iv) Adjustment to Purchase Price. If the Indemnitees recover
Indemnified Liabilities from the Company under paragraph 11K(i) with respect to
a breach of any representations or warranties contained in Section 6 hereof or
in any certificate delivered by the Company to any Indemnitee pursuant to this
Agreement and the Indemnitees do not have any right to recover any Indemnified
Liabilities with respect to such breach from the Selling Shareholder (or
indirectly the Bank) under paragraphs 11K(ii) and (iii), then notwithstanding
anything to the contrary contained in this paragraph 11K, the purchase price
paid by the Investors to the Selling Shareholder for the ARI Shares hereunder
shall be adjusted to reflect the reduction in the value of the Company as a
result of the payment of such Indemnified Liabilities by the Company to the
Indemnitees, and the Selling Shareholder shall be liable to the Indemnitees for
and shall promptly pay to the Indemnitees (as an adjustment to the consideration
paid by the Investors to the Selling Shareholder for the ARI Shares) an amount
in cash equal to (i) $30,666,632.25 (the purchase price paid by the Investors to
the Selling Shareholder for the ARI Shares hereunder), minus (ii) 22.0867% (the
percentage of the Company's fully-diluted Common Stock purchased by the
Investors from the Selling Shareholder) multiplied by the post-Closing valuation
of the Company's Common Stock on a fully-diluted basis (not adjusted to reflect
the reduction in value of the Company as a result of such breach of its
representations and warranties but reduced by any actual recovery of Indemnified
Liabilities from the Company by the Indemnitees).
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(v) Failure to Recover. If any breach or inaccuracy of any
representations and warranties in paragraph 6B, 6D (to the extent that such
breach or inaccuracy (i) pertains to the title to, ownership of, or other rights
with respect to, the Company's capital stock or other equity securities
including, but not limited to, the ARI Shares and the Company Shares, and (ii)
impairs or affects the value thereof or the right to realize the value thereof),
6P or 7A results in a claim against the Company for which the Indemnitees are
entitled to recover Indemnified Liabilities from either the Company or the
Selling Shareholder or both of them and the Indemnitees fail to recover the full
amount thereof from either the Company or the Selling Shareholder or both of
them (after final determination of the judicial authority or alternative dispute
resolution authority selected by the parties, as the case may be, which
determination is either not appealable or all applicable time periods to appeal
have lapsed and thereafter, following five (5) days prior written notice by the
Indemnitees to the Company and the Selling Shareholder), the Company shall (a)
issue that number of additional shares of Common Stock to the Investors (for no
additional consideration and as an adjustment to the purchase price paid for the
Company Shares and the ARI Shares hereunder) such that the Investors' aggregate
fully-diluted ownership of the Common Stock at the Closing would have been equal
to (i) the aggregate amount invested by the Investors at Closing (for the
purchase of both the Company Shares and ARI Shares) less any amounts received by
the Indemnitees for Indemnified Liabilities from either the Company or the
Selling Shareholder, divided by (ii) the fully-diluted post-closing value of the
Common Stock immediately after the Closing (as adjusted to reflect any reduction
in value of the Company resulting from any breaches of representations and
warranties by the Company hereunder and any actual recovery of Indemnified
Liabilities from the Company by the Indemnitees) and (b) issue or grant that
number of additional shares of Common Stock or options to acquire Common Stock
to management shareholders and optionholders as of the Closing, respectively,
such that their aggregate fully diluted ownership of the Common Stock as of the
Closing would have remained the same as it was prior to the Company issuing
additional shares to the Investors hereunder.
(vi) Claims Against the Investors. If any breach or inaccuracy
of any representations and warranties in paragraph 6B, 6D (to the extent that
such breach or inaccuracy (i) pertains to the title to, ownership of, or other
rights with respect to, the Company's capital stock or other equity securities
including, but not limited to, the ARI Shares and the Company Shares, and (ii)
impairs or affects the value thereof or the right to realize the value thereof),
6P or 7A results in a direct claim (a "Direct Claim") against the Investors for
which the Investors are entitled to recover Indemnified Liabilities from either
the Company or the Selling Shareholder or both of them and the Indemnitees fail
to recover the full amount thereof from either the Company or the Selling
Shareholder or both of them, the Company shall (a) issue that number of
additional shares of Common Stock to the Investors so that the fully-diluted
percentage ownership of the Investors as of the Closing would have been equal to
(i) the aggregate amount invested by the Investors at Closing (for the purchase
of both the Company Shares and ARI Shares) plus the amount of the Direct Claim,
less any amounts received by the Indemnitees for Indemnified Liabilities from
either the Company or the Selling Shareholder, divided by (ii) the fully-diluted
post-closing value of the Common Stock immediately after the Closing (as
adjusted to reflect any reduction in value of the Company resulting from any
breaches of representations and warranties by the Company hereunder and any
actual recovery of Indemnified Liabilities from
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the Company by the Indemnitees) and (b) issue or grant that number of additional
shares of Common Stock or options to acquire Common Stock to management
shareholders and optionholders as of the Closing, respectively, such that their
aggregate fully diluted ownership of the Common Stock as of the Closing would
have remained the same as it was prior to the Company issuing additional shares
to the Investors hereunder.
Examples illustrating the operation of paragraphs 11K(iv), 11K(v) and
11K(vi) are set forth in Exhibit F attached hereto.
11L. Further Assurances. The Selling Shareholder agrees that at
any time and from time to time upon the request of the Investors, the Selling
Shareholder shall execute and deliver such further documents and do such further
acts and things as the Investors may reasonably request in connection with the
sale and transfer of the ARI Shares to the Investors under this Agreement.
11M. Consent to Jurisdiction. Any legal action, suit or
proceeding arising out of or relating to this Agreement or the consummation of
the transactions contemplated hereby may only be instituted in any court of the
State of New York or State of Delaware, as determined by paragraph 11H, and each
party (including the Bank) agrees not to assert, by way of motion, as a defense
or otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of such courts, that the action, suit or
proceeding if brought in such courts, would be in an inconvenient forum, that
the venue of the action, suit or proceeding, if brought in any of such courts,
is improper or that this Agreement or the subject matter hereof may not be
enforced in or by such courts on jurisdictional grounds. The Bank hereby
designates and appoints Pryor, Cashman, Sherman & Flynn (the "Authorized Agent")
as its agent to accept and acknowledge on its behalf service of any process
which may be served in any suit, action or proceeding and agrees that service
upon such Authorized Agent shall be deemed in every respect service of process
on the Bank and, to the extent permitted by applicable law, shall be taken and
held to be valid and personal service and shall constitute an appearance by the
Bank for all purposes in any such suit, action or proceeding. The Bank
represents and warrants to the Investors that the Authorized Agent has agreed to
act as such agent for service of process.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
CARROLS HOLDINGS CORPORATION
By:/s/ Alan Vituli
---------------------------------------
Its: Chairman and Chief Executive Officer
MADISON DEARBORN CAPITAL
PARTNERS, L.P.
By: Madison Dearborn Partners, L.P.
Its: General Partner
By: Madison Dearborn Partners, Inc.
Its: General Partner
By: /s/ Benjamin D. Chereskin
-------------------------------
Benjamin D. Chereskin
Its: Vice President
------------------------------
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By: Madison Dearborn Partners, L.P.
Its: General Partner
By: Madison Dearborn Partners, Inc.
Its: General Partner
By:/s/ Benjamin D. Chereskin
-------------------------
Benjamin D. Chereskin
Its: Vice President
------------------------
ATLANTIC RESTAURANTS, INC.
By: /s/ David J. Mathies
--------------------------------------
Its: President
--------------------------------------
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The undersigned, as the indirect owner of all or substantially all of
the outstanding capital stock of Atlantic Restaurants, Inc., does hereby
guarantee the obligations of Atlantic Restaurants, Inc. under this Stock
Purchase Agreement and shall cause Atlantic Restaurants, Inc. to comply with the
provisions of this Stock Purchase Agreement.
BAHRAIN INTERNATIONAL BANK, E.C.
By /s/ Robin McIlvenny
---------------------------------------
Its Chief Executive Officer
---------------------------------------
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LIST OF EXHIBITS
Exhibit A - Registration Agreement
Exhibit B1 - Alan Vituli Unvested Stock Option Agreement
Exhibit B2 - Daniel Accordino Unvested Stock Option Agreement
Exhibit B3 - Joseph Zirkman Unvested Stock Option Agreement
Exhibit B4 - Amended 1996 Long-Term Incentive Plan
Exhibit B5 - Options granted to Alan Vituli pursuant to the Carrols
Corporation 1996 Long-Term Incentive Plan
Exhibit B6 - Options granted to Daniel Accordino pursuant to the
Carrols Corporation
1996 Long-Term Incentive Plan
Exhibit C - Stockholders Agreement
Exhibit D1 - Alan Vituli Employment Agreement
Exhibit D2 - Daniel Accordino Employment Agreement
Exhibit E1 - Form of Opinion of Schulte Roth & Zabel LLP
Exhibit E2 - Form of Opinion of Joseph A. Zirkman, Esq.
Exhibit E3 - Form of Opinion of Pryor, Cashman, Sherman & Flynn
Exhibit F - Operation of Paragraphs 11K(iv), 11K(v) and 11K(vi)
-41-
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<PAGE>
LIST OF DISCLOSURE SCHEDULES
Third Party Approval Schedule
Governmental Approval Schedule
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Affiliated Transactions Schedule
Developments Schedule
Assets Schedule Taxes Schedule
Contracts Schedule
Intellectual Property Schedule
Litigation Schedule
Insurance Schedule
Employee Schedule
Employee Benefits Schedule
Compliance Schedule
Environmental Schedule
Jurisdiction of Organization and Qualification
for the Company and its Subsidiaries Schedule
-42-
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<PAGE>
Carrols Corporation
$152,000,000 Senior Secured Credit Facilities
Commitment Letter
January 8, 1997
Carrols Corporation
968 James Street
Syracuse, New York 13203
Attention: Alan Vituli
Gentlemen:
You have advised Texas Commerce Bank National Association ("TCB")
and Chase Securities Inc. ("CSI") that Carrols Corporation, a Delaware
corporation (the "Borrower" or "you"), intend to raise $152,000,000 in senior
secured credit facilities to refinance existing debt and fund current and future
acquisitions. In that connection, you have requested that CSI agree to structure
and syndicate senior secured credit facilities in an aggregate amount of
$152,000,000 consisting of a $25,000,000 revolving credit facility, a
$41,000,000 term loan and a $86,000,000 advance term loan (the "Financing" or
the "Facilities"), and that TCB commit to provide the entire principal amount of
the Facilities and to serve as administrative agent for the Facilities.
CSI is pleased to advise you that it is willing to act as
exclusive advisor and arranger for the Facilities.
Furthermore, TCB is pleased to advise you of its commitment to
provide the entire amount of the Facilities upon the terms and subject to the
conditions set forth or referred to in this commitment letter (the "Commitment
Letter") and in the Summary of Terms and Conditions attached hereto as Exhibit A
(the "Term Sheet").
It is agreed that TCB will act as the sole and exclusive
Administrative Agent and that CSI will act as the sole and exclusive advisor and
arranger, for the Facilities, and each will, in such capacities, perform the
duties and exercise the authority customarily performed by it in such roles. You
agree that no other agents, co-agents or arrangers will be appointed, no other
titles will be awarded and no compensation (other than that expressly
contemplated by the Term Sheet and the Fee Letter referred to below) will be
paid in connection with the Facilities unless you and we shall so agree.
CSI intends to syndicate the Facilities to a group of financial
institutions (together with TCB, the "Lenders") identified by us in consultation
with you and agreed to by you. CSI intends to commence syndication efforts
promptly upon the execution of this Commitment Letter, and you agree actively to
assist CSI in completing a syndication satisfactory to it and you. Such
assistance shall include (a) direct contact between senior management and
advisors of the
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Carrols Corporation
January 8, 1997
Page 2
Borrower and the proposed Lenders, (b) assistance in the preparation of a
Confidential Information Memorandum and other marketing materials to be used in
connection with the syndication and (c) the hosting, with CSI, of one or more
meetings of prospective Lenders.
CSI will, in consultation with you, manage all aspects of the
syndication, including decisions as to the selection of institutions to be
approached and when they will be approached, when their commitments will be
accepted, which institutions will participate, the allocations of the
commitments among the Lenders and the amount and distribution of fees among the
Lenders. To assist CSI in its syndication efforts, you agree promptly to provide
to CSI and TCB all such information with respect to the Borrower, Financing and
the other transactions contemplated hereby and by the Term Sheet and the Fee
Letter referred to below, including all financial information and projections
(the "Projections"), as we may deem reasonably necessary in connection with the
arrangement and syndication of the Facilities. You hereby represent and covenant
that (a) all information other than the Projections (the "Information") that has
been or will be made available to TCB or CSI by you or any of your
representatives is or will be, when furnished, complete and correct in all
material respects; and (b) the Projections that have been or will be made
available to TCB or CSI by you or any of your representatives have been or will
be prepared in good faith based upon reasonable assumptions. You understand that
in arranging and syndicating the Facilities we may use and rely on such
Information and Projections without independent verification thereof. You hereby
acknowledge and consent that CSI may share the Confidential Information
Memorandum, the Information and any other information or matters relating to the
Borrower or the transactions contemplated hereby with affiliates of CSI,
including The Chase Manhattan Bank, and TCB, and that such affiliates may
likewise share information relating to the Borrower or such transactions with
CSI.
As consideration for TCB's commitment hereunder and CSI's
agreement to perform the services described herein, you agree to pay to TCB the
nonrefundable fees set forth in the Fee Letter dated the date hereof and
delivered herewith (the "Fee Letter").
TCB's commitment hereunder and CSI's agreement to perform the
services described herein are subject to (a) there not occurring or becoming
known to us any material adverse condition or material adverse change in or
affecting the business, operations, property, condition (financial or otherwise)
or prospects of the Borrower and its subsidiaries, taken as a whole, (b) our
completion of and satisfaction in all respects with a due diligence
investigation of the Borrower, (c) there not having occurred a material
disruption of or material adverse change in financial, banking or capital market
conditions since the date hereof that, in our judgment, could materially impair
the syndication of the Facilities, (d) our satisfaction that prior to and during
the syndication of the Facilities there shall be no competing offering,
placement or arrangement of any debt securities or bank financing by or on
behalf of the Borrower or any affiliate thereof, (e) the negotiation, execution
and delivery on or before March 31, 1997 of definitive documentation with
respect to the Facilities mutually satisfactory to you and to TCB and its
counsel, and (f) the other conditions set forth or referred to in the Term
Sheet.
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Carrols Corporation
January 8, 1997
Page 3
You agree to indemnify and hold harmless TCB, CSI, their
affiliates and their respective officers, directors, employees, advisors, and
agents (each, an "Indemnified Person") from and against any and all losses,
claims, damages and liabilities to which any such Indemnified Person may become
subject arising out of or in connection with this Commitment Letter, the
Facilities, the use of the proceeds thereof, the Financing or the transactions
contemplated hereby or any claim, litigation, investigation or proceeding
relating to any of the foregoing, regardless of whether any Indemnified Person
is a party thereto, and to reimburse each Indemnified Person upon demand for any
legal or other expenses incurred in connection with investigating or defending
any of the foregoing, provided that the foregoing indemnity will not, as to any
Indemnified Person, apply to losses, claims, damages or liabilities, or related
expenses to the extent they are found by a final, non-appealable judgment of a
court to arise from the willful misconduct or gross negligence of such
Indemnified Person. YOU AGREE THAT THE INDEMNITY CONTAINED IN THE PRECEDING
SENTENCE EXTENDS TO AND IS INTENDED TO COVER LOSSES AND RELATED EXPENSES ARISING
OUT OF THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF AN INDEMNIFIED PERSON.
In addition, you agree to reimburse TCB, CSI and their affiliates on demand for
all out-of-pocket expenses (including due diligence expenses, syndication
expenses, travel expenses, and reasonable fees, charges and disbursements of
counsel) incurred in connection with the Facilities and any related
documentation (including this Commitment Letter, the Term Sheet, the Fee Letter
and the definitive financing documentation) or the administration, amendment,
modification or waiver thereof. No Indemnified Person shall be liable for any
indirect or consequential damages in connection with its activities related to
the Facilities.
This Commitment Letter shall not be assignable by any party
hereto without the prior written consent of each other party (and any purported
assignment without such consent shall be null and void), is intended to be
solely for the benefit of the parties hereto and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than the
parties hereto. This Commitment Letter may not be amended or waived except by an
instrument in writing signed by you, TCB and CSI. This Commitment Letter may be
executed in any number of counterparts, each of which shall be an original, and
all of which, when taken together, shall constitute one agreement. Delivery of
an executed signature page of this Commitment Letter by facsimile transmission
shall be effective as delivery of a manually executed counterpart hereof . This
Commitment Letter (together with the Term Sheet) and the Fee Letter are the only
agreements that have been entered into among us with respect to the Facilities
and set forth the entire understanding of the parties with respect thereto.
THIS COMMITMENT LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
This Commitment Letter is delivered to you on the understanding
that neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except (a) to your officers, agents and
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Carrols Corporation
January 8, 1997
Page 4
advisors who are directly involved in the consideration of this matter, (b) as
may be compelled in a judicial or administrative proceeding or as otherwise
required by law (in which case you agree to inform us promptly thereof); (c) in
filings with the SEC; (d) as to the Term Sheet only, to prospective Lenders; and
(e) to shareholders of Carrols Holdings Corporation and employees of Madison
Dearborn Capital Partners II, L.P. and their respective counsel.
The compensation, expense reimbursement, indemnification and
confidentiality provisions contained herein and in the Fee Letter shall remain
in full force and effect, notwithstanding the termination of this Commitment
Letter or TCB's commitment hereunder, until as to expense reimbursement and
indemnification provisions definitive financing documentation is executed and
delivered by the parties.
THIS COMMITMENT LETTER, THE ATTACHED TERM SHEET, THE FEE LETTER
AND ALL EXHIBITS, SCHEDULES AND OTHER ATTACHMENTS HERETO AND THERETO CONSTITUTE
A "LOAN AGREEMENT" FOR PURPOSES OF SECTION 26.02 OF THE TEXAS BUSINESS AND
COMMERCE CODE AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof and of the Term Sheet and the Fee
Letter by returning to us executed counterparts hereof and of the Fee Letter
together with the amount agreed upon pursuant to the Fee Letter to be payable
upon acceptance hereof not later than 5:00 p.m., Houston, Texas time, on January
10, 1997. TCB's commitment and CSI's agreements herein will expire at such time
in the event TCB has not received such executed counterparts in accordance with
the immediately preceding sentence.
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<PAGE>
Carrols Corporation
January 8, 1997
Page 5
TCB and CSI are pleased to have been given the opportunity to
assist you in connection with this important financing.
Very truly yours,
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/Mike Costello
---------------------------
Name: Mike Costello
Title: Vice President
CHASE SECURITIES INC.
By: /s/Laif Afseth
---------------------------
Name: Laif Afseth
Title: Vice President
Accepted and agreed to as of
the date first above written:
Carrols Corporation
By: /s/Alan Vituli
--------------------------------
Name: Alan Vituli
Title: Chief Executive Officer
<PAGE>
<PAGE>
CARROLS CORPORATION
1996 LONG-TERM INCENTIVE PLAN
1. PURPOSE
The purpose of this Plan is to further the growth and general prosperity
of Carrols Corporation (the "Company") by providing long-term incentives
to officers and employees of the Company and any Subsidiaries of the
Company. The Company intends that the Plan will help attract, retain and
motivate officers and key employees of high caliber and good potential
and promote the alignment of the Participant's interests with that of
the Company's shareholders.
2. DEFINITIONS
As used in the Plan, the following words shall have the following
meanings:
"Award" means an award made to a Participant pursuant to the Plan and
described in Paragraph 6, including, without limitation, an award of an
Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation
Right, Restricted Stock, Performance Units, Performance Shares, or Other
Stock-Based Awards or any combination of the foregoing.
"Award Agreement" means an agreement between the Company and a
Participant that sets forth the terms, conditions and limitations
applicable to an Award.
"Board" means the Board of Directors of the Company as constituted from
time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Cause" means, except as may otherwise be provided in a Participant's
employment agreement (if any) or in the Award Agreement, (i) a felony
conviction of the Participant (or a plea of nolo contendere in lieu
thereof); (ii) the unauthorized disclosure of confidential proprietary
information of the Company which disclosure the Participant knows or
reasonably should have known would be reasonably likely to result in
material damage to the Company; (iii) the breach by the Participant of
any material provision of the Participant's employment agreement (if
any), which breach, if curable, is not remedied within thirty (30) days
after the Participant's receipt of written notice thereof, provided,
however, that the Company need not permit the Participant to cure any
breach which has been the subject of a prior written notice; (iv) the
engagement in self dealing in breach of fiduciary duties with respect to
the Company's assets or properties unless disclosed to and approved by
the Committee; (v) an act of gross misconduct in connection with the
Participant's duties hereunder; or (vi) habitual or material neglect of
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the Participant's duties to the Company (as determined in good faith by
the Committee, continuing after prior written notice to the
Participant).
"Change of Control" means, except as set forth on Appendix A to this
Plan:
(a) The acquisition (other than from the Company) by any person,
entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act, excluding for this purpose any
employee benefit plan of the Company or its subsidiaries
which acquires beneficial ownership of voting securities of
the Company, of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act), of 50% or
more of either the then outstanding shares of common stock or
the combined voting power of the Company's then outstanding
voting securities entitled to vote generally in the election
of directors;
(b) Individuals who, as of the effective date of the Plan
specified in Section 20, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a
majority of the Board; provided that any person becoming a
director subsequent to the effective date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board (other
than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or
threatened election contest relating to the election of
directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act,
shall be for purposes of this Plan, considered as though such
person were a member of the Incumbent Board); or
(c) Approval by the stockholders of the Company of a
reorganization, merger, or consolidation, in each case, with
respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than
50% of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or
a liquidation or dissolution of the Company or of the sale of
all or substantially all of the assets of the Company.
"Committee" means the Compensation Committee of the Board.
"Controlling Shareholder" means Dilmun Investments.
"Employee" means any officer or other employee of the Company or a
Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
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"Fair Market Value" means, as of any date:
(a) if the Stock is publicly traded, the average of the highest
and lowest prices at which the Stock is traded on such date
on the principal market on which the Stock is traded, or if
the Stock is not traded on such date, on next date on which
the Stock is traded; or
(b) if the Stock is not publicly traded, the value of a Share of
Stock as determined in good faith by the Company on the
advice of its independent auditors.
"Good Reason" means (i) the material failure of the Company to comply
with the provisions of the Participant's employment agreement, if any,
which failure shall not cease promptly and in no event more than ten
(10) days after the Company's receipt of written notice from the
Participant objecting to such conduct; (ii) any purported termination by
the Company of the Participant's employment other than as expressly
permitted in the Participant's employment agreement, if any; or (iii)
the assignment to Participant of duties and responsibilities
inconsistent with those duties and responsibilities customarily assigned
to individuals holding positions similar to that of the Participant at a
company of comparable size to the Company or the substantial reduction
by the Company of Participant's duties and responsibilities.
"Incentive Stock Option" means an option intended to be and designated
as an incentive stock option meeting the requirements of Section 422 of
the Code.
"Nonqualified Stock Option" means an option that is not intended to be
nor designated as an Incentive Stock Option.
"Participant" means an Employee who, as of any date, has been granted
one or more Awards under the Plan which are still outstanding (i.e.,
have not been exercised, forfeited or terminated).
"Performance Goals" means, with respect to any Performance Period,
performance goals based on any of the following criteria and established
by the Committee prior to the beginning of such Performance Period or
performance goals based on any of the following criteria and established
by the Committee after the beginning of such Performance Period that
meet the requirements to be considered pre-established performance goals
under Section 162(m) of the Code: earnings or earnings growth; return on
equity, assets or investment; revenues; expenses; stock price; market
share; charge-offs; or reductions in non-performing assets. Such
Performance Goals may be particular to an Employee or the division,
department, branch, line of business, Subsidiary or other unit in which
the Employee works, or may be based on the performance of the Company
generally.
"Performance Period" means (when and if applicable) the period of time
designated by the Committee during which Performance Goals will be
measured in connection with an Award.
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"Permanent Disability" means the complete and permanent inability of a
Participant, for medical reasons, to perform all of his or her duties
with the Company as determined by the Committee upon the basis of such
evidence, including but not limited to independent medical reports and
data, as the Committee deems appropriate or necessary.
"Plan" means the Carrols Corporation 1996 Long-Term Incentive Plan.
"Retirement" means termination of employment without Good Reason or for
other than Cause, death or Permanent Disability on or after the
Participant's attainment of age 58.
"Stock" or "Share" means common stock of Carrols Holdings Corporation,
par value $.01 per share, which may be authorized but unissued or issued
and reacquired.
"Other Stock-Based Awards" means any Award other than a Stock Option,
Stock Appreciation Right, Restricted Stock, Performance Unit or
Performance Share that is valued by reference to or otherwise based upon
the Stock.
"Stock Options" means the collective reference to Incentive Stock
Options and Nonqualified Stock Options.
"Subsidiary" means any corporation, other than the Company, in which the
Company has at least a fifty percent beneficial ownership interest.
3. ADMINISTRATION
(a) The Plan shall be administered by the Committee. None of the
members of the Committee shall be eligible to receive Awards
under the Plan. Members of the Committee shall qualify to
administer and make Awards under the Plan for purposes of Section
162(m) of the Code and Rule 16b-3 (and any other applicable rule)
promulgated under Section 16(b) of the Exchange Act. The
Committee may adopt its own rules or procedures, and the action
of a majority of the Committee, taken at a meeting or taken
without a meeting by a writing signed by such majority, shall
constitute action by the Committee. The Committee shall have the
power and authority to administer, construe and interpret the
Plan, to make rules for carrying it out and to make changes in
such rules. Any such interpretations, rules, and administration
shall be consistent with the basic purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Company its duties under the Plan
subject to such conditions and limitations as the Committee shall
prescribe; provided, however, that only the Committee may
designate and make Awards to Participants who are subject to
Section 16 of the Exchange Act and Section 162(m) of the Code.
(c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company,
and the officers and
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<PAGE>
directors of the Company shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions
taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all
Participants, the Company and all other interested persons. No
member of the Committee shall be personally liable for any
action, determination or interpretation made in good faith with
respect to the Plan or Awards made under the Plan, and all
members of the Committee shall be fully protected by the Company
with respect to any such action, determination or interpretation.
4. ELIGIBILITY
The Committee, in its discretion, may grant Awards to any Employee,
subject to the provisions of the Plan. No Employee shall be entitled as
a matter of right to receive an Award, nor shall the grant of an Award
entitle an Employee to receive any future Award.
5. AWARD AGREEMENT
The terms, conditions and limitations of each Award under the Plan shall
be determined by the Committee subject to the limitations provided for
in Section 7 below, and shall be set forth in an Award Agreement, in a
form approved by the Committee, consistent, however, with the terms of
the Plan; provided, however, that such Award Agreement shall contain
provisions dealing with the treatment of Awards in the event of the
termination, death or disability of a Participant.
6. AWARDS
As the Committee may determine, the following types of Awards may be
granted under the Plan to eligible Employees, either alone, in
combination or on an alternative basis:
(a) Incentive Stock Options: These are options within the meaning of
Section 422 of the Code to purchase Stock. In addition to other
restrictions contained in the Plan, an option granted under this
Paragraph 6(a), (i) may not be exercised more than 10 years after
the date it is granted, (ii) may not have an option exercise
price less than the Fair Market Value of the Stock on the date
the option is granted, (iii) must otherwise comply with the
requirements of Section 422 of the Code, and (iv) must be
designated as an "Incentive Stock Option" by the Committee. To
the extent the aggregate Fair Market Value (determined as of the
time the Incentive Stock Option is granted) of the Stock with
respect to which Incentive Stock Options become exercisable for
the first time by an individual during any calendar year under
all plans of the Company or any Subsidiary exceeds ONE HUNDRED
THOUSAND DOLLARS ($100,000), such options shall be treated as
Nonqualified Stock Options. Payment of the option exercise price
shall be made (i) in cash, (ii) by delivering shares of Stock
already owned by the Participant, (iii) by
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<PAGE>
delivering a promissory note to the Controlling Shareholder
payable over a three (3) year period and bearing interest at the
rate provided under Section 1274(d) of the Code, or (iv) by a
combination of any of the foregoing, in accordance with the terms
of the Plan, the Award Agreement, and any applicable guidelines
of the Committee in effect at the time.
(b) Nonqualified Stock Options: These are options to purchase Stock
which are not intended to be and are not designated by the
Committee as "Incentive Stock Options." At the time of the Award,
the Committee shall determine, and shall have included in the
Award Agreement or other Plan rules, the option exercise period,
the option price, and such other conditions or restrictions as
may be appropriate. In addition to the other restrictions
contained in the Plan, an option granted under this Paragraph
6(b), (i) may not be exercised more than 10 years after the date
it is granted, and (ii) may not have an option exercise price
less than 100% of the Fair Market Value of Stock on the date the
option is granted. Payment of the option exercise price shall be
made (i) in cash, (ii) by delivering shares of Stock already
owned by the Participant, (iii) by delivering a promissory note
to the Controlling Shareholder payable over a three (3) year
period and bearing interest at the rate provided under Section
1274(d) of the Code, or (iv) by a combination of any of the
foregoing, in accordance with the terms of the Plan, the Award
Agreement and of any applicable guidelines of the Committee in
effect at the time.
(c) Stock Appreciation Rights: These are rights that on exercise
entitle the holder to receive the excess of (i) the Fair Market
Value of a Share of Stock on the date of exercise over (ii) the
Fair Market Value on the date of award or, if connected with a
previously issued Stock Option, the Fair Market Value at the time
such previously issued Stock Option was granted (the "base
value"), multiplied by (iii) the number of Shares covered by the
rights exercised, as determined by the Committee. A Stock
Appreciation Right granted under the Plan may, but need not be,
granted in tandem with a Stock Option under Paragraphs 6(a) or
6(b). The Committee, in the Award Agreement or by other Plan
rules, may impose such restrictions or conditions on the exercise
of Stock Appreciation Rights as it deems appropriate, and may
terminate, amend, or suspend such Stock Appreciation Rights at
any time. No Stock Appreciation Right granted under this Plan may
be exercised more than 10 years after the date it is granted.
(d) Restricted Stock: Restricted Stock is Stock delivered to a
Participant with or without payment of consideration, subject to
such conditions, terms and restrictions (including
performance-based or employment-based vesting, forfeiture
conditions and transfer restrictions) on the Participant's right
to transfer or sell such Stock. The number of Shares of
Restricted Stock and the restrictions or conditions on such
Shares shall be determined by the Committee, in the Award
Agreement or by other Plan rules, and the certificate for the
Restricted Stock shall bear evidence of the restrictions or
conditions.
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(e) Performance Shares and Performance Units: An Award of Performance
Shares or Performance Units shall entitle a Participant to
receive Stock or a cash payment specified by the Committee,
depending upon the attainment of certain Performance Goals over a
Performance Period. The Performance Period and Performance Goals
shall be specified by the Committee and may relate to the
performance of the Company or one or more Subsidiaries or a
combination thereof. At the time an Award of such Shares or units
is made, the Committee shall, in the Award Agreement, determine
the base value of the Award or specify a formula for determining
such value. Other than an Award intended to qualify under Section
162(m) of the Internal Revenue Code, the Committee may adjust
previously established Performance Goals and other terms and
conditions of an Award at any time prior to the determination of
the payment amount, to reflect major unforeseen events such as
changes in laws, regulations or accounting policies or
procedures, mergers, acquisitions or divestitures or
extraordinary, unusual or non-recurring items or events.
Payment pursuant to an Award of Performance Shares or Performance
Units shall be made following the Committee's determination of
the extent to which the performance criteria were satisfied, and
shall be made in the form of Stock, cash or a combination
thereof, as the Committee may determine. Payment shall be made as
promptly as practicable following the end of the Performance
Period unless deferred subject to such terms and conditions as
may be prescribed by the Committee.
(f) Other Stock-Based Awards: Other Stock-Based Awards may be granted
to such Employees as the Committee may select, at any time and
from time to time as the Committee shall determine. The Committee
shall have complete discretion in determining the number of
Shares subject to such Awards, the consideration for such Awards
and the terms, conditions and limitations pertaining to same
including, without limitation, restrictions based upon the
achievement of specific business objectives, tenure, and other
measurements of individual or business performance, and/or
restrictions under applicable federal or state securities laws,
and conditions under which same will lapse. Such Awards may
include the issuance of Stock in payments of amounts earned under
other incentive compensation plans of the Company. The terms,
restrictions and conditions of the Award need not be the same
with respect to each Participant.
The Committee may, in its sole discretion, direct the Company to
issue Shares subject to such restrictive legends and/or stop
transfer instructions as the Committee deems appropriate.
7. LIMITATIONS AND CONDITIONS
(a) The number of Shares available for Awards under this Plan shall
be 393,263.77 Shares or, if greater 12.5% of the Shares
authorized as of the effective date of the Plan (on a
pre-dilution basis associated with grants of Stock Options). Of
the
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Shares available for Awards under this Plan, 157,305.51 Shares
(or, if greater, 2/5 of 12.5% of the Shares) will be available
for grant at an exercise price per share of $29.7192; 157,305.51
Shares (or, if greater, 2/5 of 12.5% of the Shares) will be
available for grant at an exercise price per share of $35.1227;
and 78,652.75 Shares (or, if greater 1/5 of 12.5% of the Shares)
will be available for grant at an exercise price per share of
$37.8245 (notwithstanding the preceding sentence, if, on the date
of any such grant of options, the Fair Market Value of a Share of
Stock is greater than the stated exercise prices, such options
will be granted with an exercise price equal to Fair Market
Value). The number of Shares subject to Awards under the Plan
(including, but not limited to, Stock Options and Stock
Appreciation Rights) to any one Participant shall not exceed
166,558.77 Shares. To the extent that any Award is canceled or
forfeited, or terminates, expires, or lapses for any reason, any
unissued Shares subject to such Award shall again be available
for grant under the Plan.
(b) No Awards shall be made under the Plan beyond ten years after the
effective date of the Plan, but the terms of Awards made on or
before the expiration thereof may extend beyond such expiration.
(c) Nothing in this Plan shall interfere with or limit in any way the
right of the Company or any Subsidiary to terminate any
Participant's employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company or
any Subsidiary.
(d) Deferral of Award payouts may be provided for, at the sole
discretion of the Committee, subject to such terms and conditions
as the Committee may specify in the Award Agreements.
(e) Participants shall not have any of the rights or privileges of
stockholders of the Company with respect to any Shares purchasable
in connection with any Award, unless and until certificates
representing such Shares have been issued by the Company to such
Participants, except as otherwise specifically provided.
(f) Except as otherwise provided in this Paragraph 7, no Stock Option
or other Award under the Plan shall be sold, transferred,
assigned or otherwise alienated or hypothecated by the
Participant, other than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable during
the Participant's lifetime only by the Participant or the
Participant's legal representative. The Participant may, if
permitted by state law or the rules and regulations governing any
exchange on which the Stock is traded, transfer, without payment
of consideration, any Stock Option, other than Incentive Stock
Options, to a member of such Participant's immediate family or to
a trust or partnership whose beneficiaries are members of such
Participant's immediate family. For purposes of this Paragraph,
the term "immediate family" shall include the Participant's
spouse, children and grandchildren.
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(g) No grant or Award related payout under this Plan shall be deemed
compensation for purposes of computing benefits or contributions
under any retirement plan of the Company or its Subsidiaries and
shall not affect any benefits under any other benefit plan of any
kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of
compensation. This Plan is not a "Retirement-Plan" or "Welfare
Plan" under the Employee Retirement Income Security Act of 1974,
as amended.
(h) No benefit or promise under the Plan shall be secured by any
specific assets of the Company or any of its Subsidiaries, nor
shall any assets of the Company or any of it Subsidiaries be
designated as attributable or allocated to the satisfaction of the
Company's obligations under the Plan.
(i) Prior to the issuance of Shares, the Participant must execute a
shareholder's agreement containing such terms and conditions as
determined by the Committee and approved by the Board.
8. OPTION TERMS
(a) The exercise period for a Stock Option, including any extension
which the Committee may from time to time decide to grant, shall
not exceed ten years from the date of grant.
(b) Except as otherwise provided by the Committee, a Stock Option
shall become exercisable with respect to 25% of the Shares
commencing on the first anniversary of the date of grant, with an
additional 25% becoming exercisable on each anniversary of the
date of grant thereafter; provided, in each case, that the
Participant shall have continuously remained in the active
employment of the Company.
(c) Except as otherwise provided by the Committee, if a Participant's
employment by the Company terminates because of (i) death,
Permanent Disability, Retirement, termination for Good Reason or
without Cause, all Stock Options held by the Participant, or his
or her legal representative, which are not exercisable shall vest
and the option shall become immediately exercisable in full (i)
for a period of one year after the date of the Participant's
termination of employment on account of death, Permanent
Disability or Retirement; or (ii) for a period of forty-five (45)
days after the Participant's termination of employment for Good
Reason or without Cause.
(d) If a Participant's employment by the Company is terminated for
any reason other than death, Permanent Disability, Retirement,
for Good Reason or without Cause, all Options, to the extent not
vested and exercisable on the date of the Participant's
termination, shall be forfeited on such date of termination.
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(e) If a Participant's employment with the Company is terminated for
Cause, any portion of the Participant's Stock Option that was
vested and exercisable on the date the Company delivers notice of
termination of employment for Cause to the Participant shall be
forfeited as of such date.
9. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that Awards earn dividends or dividend
equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to an account established by the Committee
under the Plan in the name of the Participant. Any crediting of
dividends or dividend equivalents may be subject to such restrictions
and conditions as the Committee may establish, including reinvestment in
additional Shares or Share equivalents.
10. TRANSFERS AND LEAVES OF ABSENCE
For purposes of the Plan, (a) the transfer of a Participant's employment
between the Company and any Subsidiary without an intervening period of
separation shall not be deemed a termination of employment, and (b) a
Participant who is granted in writing a leave of absence shall be deemed
to have remained in the employ of the Company during such leave of
absence; provided, however, that no Awards may be granted to an Employee
while absent on such leave.
11. ADJUSTMENTS
In the event of a reclassification, recapitalization, merger,
consolidation, reorganization, issuance of warrants, rights or
debentures, stock dividends, stock split or reverse stock split, cash
dividend, property dividend, including, without limitation, a
distribution of the stock of a Subsidiary, combination or exchange of
Shares, repurchase of Shares, or any other change in corporate
structure, which materially affects the value of the Shares, the
Committee shall determine, in its discretion, the appropriate
adjustments, if any, to (a) the number of Shares which may be issued
under the Plan, and (b) the number of Shares issuable and the exercise
price per Share pursuant to any outstanding Award theretofore granted
under this Plan.
12. CHANGE OF CONTROL
In the event of a Change of Control, any or all Stock Options and Stock
Appreciation Rights still outstanding shall, notwithstanding any
contrary terms of the Award Agreement, accelerate and become exercisable
in full at least ten days prior to (and shall expire on) the
consummation of such Change of Control, on such conditions as the
Committee shall determine, unless the successor corporation assumes the
outstanding Stock Options or Stock Appreciation Rights or substitutes
substantially equivalent options.
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13. REDEMPTION AND SALE OF SHARES
(a) Upon the occurrence of a Change of Control of the Company, all
Shares of Stock issued pursuant to the Plan shall be redeemed by
the Company at the Fair Market Value of such Shares on the
effective date of the Change of Control, subject to such other
terms and conditions as the Company may require, including, but
not limited to, requiring the Participant to tender the share
certificate or certificates representing such Shares as a
condition of such redemption.
(b) Except as otherwise provided by the Committee, in the event a
Participant's employment with the Company is terminated for any
reason, either by the Company or by the Participant, the Company
may, in its sole discretion and within one year from the date of
termination, redeem all or any portion of the Shares of Stock
issued to the Participant pursuant to the Plan, at the Fair
Market Value of such Shares on the date of termination.
(c) Except as otherwise provided by the Committee, in the event the
Controlling Shareholder elects to sell or otherwise transfer to a
third party (the "Purchaser") 50% or more of the Shares owned (as
of the effective date of this Plan) by the Controlling
Shareholder, a Participant shall be entitled to sell to the
Purchaser, as of the time and at the per share sale price to be
received by the Controlling Shareholder, up to an equivalent
percentage of the Shares issued to and owned by the Participant
pursuant to the Plan, in the following manner:
(i) the Controlling Shareholder shall notify each Participant
of such sale or transfer and its material terms at least
ten (10) days prior to the effective date of such sale or
transfer;
(ii) within five (5) days thereafter, each Participant shall
notify the Company of the number, if any, of such Shares
owned by the Participant to be sold to the Purchaser (the
"Participant Shares"), subject to the limitations set
forth in subparagraph (c) above;
(iii) the Controlling Shareholder shall sell both its Shares
and, acting on behalf of each such Participant, the
Participant Shares, to the Purchaser and, to the extent
necessary, the Controlling Shareholder shall reduce the
number of its Shares available for sale to accommodate the
sale of the Participant Shares.
14. AMENDMENT AND TERMINATION
(a) The Committee shall have the authority to make such amendments to
any terms and conditions applicable to outstanding Awards as are
consistent with this Plan provided that, except for adjustments
under Paragraph 11 hereof, no such action shall modify such Award
in a manner adverse to the Participant without the
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Participant's consent, except as such modification is provided
for or contemplated under the terms of the Award.
(b) The Committee may terminate, amend or modify the provisions of
this Plan (including any performance criteria or conditions which
must be achieved in order for an Employee to receive an Award or
Awards, subject to Paragraph 6(e)) at any time and from time to
time; provided, however, that an amendment which requires
stockholder approval in order for the Plan to continue to comply
with Rule 16b-3, Section 162(m) of the Code or any other law,
regulation or stock exchange requirement shall not be effective
unless approved by the requisite vote of stockholders. The
termination, amendment or modification of the Plan may be in
response to changes in the Code, the Exchange Act, national
securities exchange regulations or for other reasons deemed
appropriate by the Committee.
15. FOREIGN OPTIONS AND RIGHTS
The Committee may make Awards to Employees who are subject to the laws
of nations other than the United States, which Awards may have terms and
conditions that differ from the terms thereof as provided elsewhere in
the Plan for the purpose of complying with foreign laws.
16. WITHHOLDING TAXES
The Company shall have the right to deduct from any cash payment made
under the Plan any federal, state or local income or other taxes
required by law to be withheld with respect to such payment. It shall be
a condition to the obligation of the Company to deliver Shares upon the
exercise of a Stock Option or Stock Appreciation Right, upon payment of
Performance Units or Performance Shares, upon delivery of Restricted
Stock or upon exercise, settlement or payment of any Other Stock-Based
Award, that the Participant pay to the Company such amount as may be
requested by the Company for the purpose of satisfying any liability for
such withholding taxes.
17. INDEMNIFICATION
Each current or former member of the Committee, and of the Board, shall
be indemnified and held harmless by the Company against any loss, cost,
liability or expense that may be imposed upon, or reasonably incurred by
him or her in connection with or resulting from any claim, action, suit
or proceeding to which the member may be a party or in which the member
may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by the member in
settlement thereof, with the Company's approval, or paid by the member
in satisfaction of any judgment in any such action, suit or proceeding
against the member, provided such member shall give the Company an
opportunity, at its own expense, to handle and defend the same before
the
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member undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which the
member may be entitled under the Company's Certificate of
Incorporation or By-laws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold
them harmless.
18. SUCCESSORS
The terms of the Plan shall be binding upon the Company and its
successors and assigns.
19. REQUIREMENTS OF LAW
(a) The granting of Awards and the issuance of Shares under the Plan
shall be subject to all applicable laws, rules and regulations,
and to such approval by any governmental agencies or national
securities exchanges as may be required.
(b) In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had
not been included.
(c) To the extent that federal laws do not otherwise control, the
Plan and all Award Agreements, shall be construed in accordance
with and governed by the laws of the State of New York.
20. EFFECTIVE DATE AND TERMINATION DATES
The Plan shall be effective on and as of the date of its approval by the
stockholders of the Company (pursuant to the Company by-laws) and shall
terminate ten years later, subject to such earlier termination by the
Board pursuant to Paragraph 14.
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CARROLS CORPORATION
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTION)
THIS AGREEMENT, dated as of December 30, 1996 (the "Date of Grant") is
made by and between Carrols Corporation, a Delaware corporation (hereinafter
called the "Company") and Alan Vituli, an employee of the Company (hereinafter
referred to as the "Optionee"). All capitalized terms herein shall have such
meanings as are ascribed to them in the Plan and in this Agreement.
1. Grant and Approval of Option. The Company hereby grants to the
Optionee a nonqualified stock option (this "Option") to purchase all or any part
of the aggregate of 160,451.60 shares of $.01 par value common stock of Carrols
Holdings Corporation (the "Shares"), subject to all of the terms and conditions
of this agreement (the "Agreement") and the Carrols Corporation 1996 Long-Term
Incentive Plan (the "Plan").
2. Exercise Price and Period of Option. Subject to the terms and
conditions of the Plan and this Agreement, this Option shall become exercisable
(a) with regard to 56,629.98 Shares, on the Date of Grant, at an exercise price
per share (the "Exercise Price") of $29.7192; (b) with regard to 56,629.98
Shares, on December 31, 1997, at an Exercise Price of $35.1227; and (c) with
regard to 47,191.64 Shares, on December 31, 1997, at an Exercise Price of
$37.8245. If the Optionee's employment with the Company is terminated prior to
such dates, other then due to death, Permanent Disability, Retirement,
termination for Good Reason or termination without Cause, this Option shall not
become exercisable.
3. Expiration of Option. This Option may not be exercised to any
extent by Optionee after the first to occur of the following events:
(a) the tenth anniversary of the Date of Grant; or
(b) a Change of Control (as defined in the Plan).
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary
of the Company of an executed written Notice and Agreement in the form attached
hereto as Exhibit A, or in such other form as may be required by the Company,
which shall set forth Optionee's election to exercise this Option, the number of
Shares being purchased and such other representations and agreements regarding
Optionee's investment intent and access to information as may be required by the
Company to comply with applicable securities laws.
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(b) Such Notice and Agreement shall be accompanied by full
payment of the Exercise Price for the Shares being purchased (i) in cash
(including check, bank draft or money order); (ii) where approved by the
Committee in its sole discretion, by surrender of Shares of the Company owned by
the Optionee having a Fair Market Value equal to the Exercise Price; (iii) by
delivery of a promissory note to the Controlling Shareholder payable over a
three (3) year period and bearing interest at the rate provided under Section
1274(d) of the Code; (iv) by any combination of the foregoing where approved by
the Committee in writing in its sole discretion; or (v) any other method the
Committee may approve in its sole discretion, subject to the terms and
conditions of the Plan.
(c) Prior to the issuance of the Shares upon exercise of this
Option, Optionee must pay or, in a manner acceptable to the Company, make
adequate provision to pay, any applicable federal, state or local withholding
obligations as determined by the Company.
(d) Provided that the foregoing Notice and Agreement and payment
are in form and substance satisfactory to counsel for the Company, the Company
shall issue the Shares registered in the name of the Optionee, the Optionee and
the Optionee's spouse, or the Optionee's legal representative.
(e) Prior to the issuance of the Shares upon exercise of this
Option, the Optionee must execute a shareholders' agreement containing such
terms and conditions as determined by the Committee and approved by the Board of
Directors.
(f) Any exercisable portion of this Option or the entire Option,
if then wholly exercisable, may be exercised in whole or in part at any time
prior to the time when this Option becomes unexercisable under Paragraph 3;
provided, however, that any partial exercise shall be for whole Shares only.
(g) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable state
securities laws, as they are in effect on the date of exercise.
5. Redemption of Options Upon Change of Control. In the event
that (i) a Change of Control (as defined in the Plan) of the Company occurs
within five (5) years of the Date Of Grant; (ii) the Bahrain International Bank
E.C. has realized a return of its investment; and (iii) the successor
corporation neither assumes this Option nor agrees to substitute a substantially
equivalent option or options at least ten (10) days prior to the date of the
Change of Control, the Company shall redeem any options granted to the Optionee
pursuant to the Plan (including, but not limited to, this Option), in an amount
(the "Redemption Amount") determined pursuant to Schedule I attached hereto,
payable within thirty (30) days of the date of the Change of Control.
6. Compliance with Laws and Regulations. The issuance and
transfer of Shares shall be subject to compliance by the Company and the
Optionee with all applicable requirements of federal and state securities laws
and with all applicable requirements of any stock
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exchange on which the Company's shares may be listed at the time of such
issuance or transfer. Optionee understands that the Company is under no
obligation to register or qualify the Shares with the Securities and Exchange
Commission, any state securities commission or any stock exchange to effect such
compliance.
7. Nontransferability of Option. This Option may not be
transferred in any manner except (a) as determined by the Committee in its sole
discretion, or (b) pursuant to Paragraph 7(f) of the Plan.
8. Rights as Stockholder. The holder of the Option shall not be,
nor have any of the rights or privileges of, a stockholder of the Company with
respect to any shares purchasable upon the exercise of the Option or any portion
thereof, unless and until certificates representing such Shares shall have been
issued by the Company to such holder.
9. Sale by Controlling Shareholder. In the event the Controlling
Shareholder elects to sell or otherwise transfer to a third party (the
"Purchaser") any Shares owned (as of the effective date of the Plan) by the
Controlling Shareholder, the Optionee shall be entitled to sell to the Purchaser
the Shares issued to and owned by the Optionee pursuant to the Plan, as of the
same time and at the per share sale price to be received by the Controlling
Shareholder, up to an equivalent percentage of the Shares sold by the
Controlling Shareholder, in the following manner:
(i) the Controlling Shareholder shall notify the Optionee of
such sale or transfer and its material terms at least ten
(10) days prior to the effective date of such sale or
transfer;
(ii) within five (5) days thereafter, the Optionee shall notify
the Company of the number, if any, of such Shares owned by
the Optionee to be sold to the Purchaser (the "Participant
Shares"), subject to the limitations set forth above;
(iii) the Controlling Shareholder shall sell both its Shares
and, acting on behalf of the Optionee, the Participant
Shares, to the Purchaser and, to the extent necessary, the
Controlling Shareholder shall reduce the number of its
Shares available for sale to accommodate the sale of the
Participant Shares.
10. Consequences. Optionee shall be solely responsible for the
payment of any taxes due in connection with the Plan and this Option grant;
provided, however, that the Company may make such provisions as it may deem
appropriate for the withholding of any taxes which the Company determines it is
required to withhold in connection with the issuance, exercise or vesting of
this Option.
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11. Administration. The Committee shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee shall be final and
binding upon the Optionee, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan or the Option.
12. Notice. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Optionee shall be addressed to him
at the address given beneath his signature hereto. By a notice given pursuant to
this Paragraph 12, either party may hereafter designate a different address for
notices to be delivered. Any notice which is required to be given to the
Optionee shall, if the Optionee is deceased, be given to the Optionee's personal
representative. Any notice shall have been deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by
the United States Postal Service.
13. Dividends. In the event the Committee provides that Awards
granted under the Plan earn dividends or dividend equivalents, such dividends or
dividend equivalents may, in the Committee's discretion and in accordance with
the terms of the Plan, (a) be paid currently, or (b) be credited to an account
established by the Committee under the Plan in the name of the Optionee.
14. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by the Optionee or the Company forthwith to
the Committee, which shall review such dispute at its next regular meeting. The
resolution of such dispute by the Committee shall be final and binding on the
Company and on the Optionee.
15. Governing Document. This Agreement is in every respect
subject to the provisions of the Plan, as it may be amended from time
to time. The provisions of the Plan shall govern in the case of any
inconsistency between the Plan and this Agreement.
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16. Entire Agreement. The Plan and the Notice and Agreement
attached as Exhibit A are incorporated herein by reference. This Agreement, the
Plan and the Notice and Agreement constitute the entire agreement of the parties
and supersede all prior undertakings and agreements with respect to the subject
matter hereof.
CARROLS CORPORATION
By: /s/ Joseph Zirkman
---------------------------------
Its: Vice President
---------------------------------
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ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all the terms and provisions of the Plan and this
Agreement. Optionee acknowledges that there may be various tax consequences upon
exercise of this Option or disposition of the Shares and that Optionee should
consult a tax adviser prior to such exercise or disposition.
/s/ Alan Vituli
------------------------------
Name
Alan Vituli
------------------------------
C/O CARROLS CORPORATION
------------------------------
968 James St., Syracuse, NY
------------------------------
Address
###-##-####
------------------------------
Taxpayer Identification Number
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CARROLS CORPORATION
STOCK OPTION AGREEMENT
(Nonqualified Stock Option)
THIS AGREEMENT, dated as of December 30, 1996 (the "Date of Grant") is
made by and between Carrols Corporation, a Delaware corporation (hereinafter
called the "Company") and Daniel T. Accordino, an employee of the Company
(hereinafter referred to as the "Optionee"). All capitalized terms herein shall
have such meanings as are ascribed to them in the Plan and in this Agreement.
1. Grant and Approval of Option. The Company hereby grants to the
Optionee a nonqualified stock option (this "Option") to purchase all or any part
of the aggregate of 106,967.74 shares of $.01 par value common stock of Carrols
Holdings Corporation (the "Shares"), subject to all of the terms and conditions
of this agreement (the "Agreement") and the Carrols Corporation 1996 Long-Term
Incentive Plan (the "Plan").
2. Exercise Price and Period of Option. Subject to the terms and
conditions of the Plan and this Agreement, this Option shall become exercisable
(a) with regard to 37,753.32 Shares, on the Date of Grant, at an exercise price
per share (the "Exercise Price") of $29.7192; (b) with regard to 37,753.32
Shares, on December 31, 1997, at an Exercise Price of $35.1227; and (c) with
regard to 31,461.10 Shares, on December 31, 1997, at an Exercise Price of
$37.8245. If the Optionee's employment with the Company is terminated prior to
such dates, other then due to death, Permanent Disability, Retirement,
termination for Good Reason or termination without Cause, this Option shall not
become exercisable.
3. Expiration of Option. This Option may not be exercised to any
extent by Optionee after the first to occur of the following events:
(a) the tenth anniversary of the Date of Grant; or
(b) a Change of Control (as defined in the Plan).
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary
of the Company of an executed written Notice and Agreement in the form attached
hereto as Exhibit A, or in such other form as may be required by the Company,
which shall set forth Optionee's election to exercise this Option, the number of
Shares being purchased and such other representations and agreements regarding
Optionee's investment intent and access to information as may be required by the
Company to comply with applicable securities laws.
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(b) Such Notice and Agreement shall be accompanied by full
payment of the Exercise Price for the Shares being purchased (i) in cash
(including check, bank draft or money order); (ii) where approved by the
Committee in its sole discretion, by surrender of Shares of the Company owned by
the Optionee having a Fair Market Value equal to the Exercise Price; (iii) by
delivery of a promissory note to the Controlling Shareholder payable over a
three (3) year period and bearing interest at the rate provided under Section
1274(d) of the Code; (iv) by any combination of the foregoing where approved by
the Committee in writing in its sole discretion; or (v) any other method the
Committee may approve in its sole discretion, subject to the terms and
conditions of the Plan.
(c) Prior to the issuance of the Shares upon exercise of this
Option, Optionee must pay or, in a manner acceptable to the Company, make
adequate provision to pay, any applicable federal, state or local withholding
obligations as determined by the Company.
(d) Provided that the foregoing Notice and Agreement and payment
are in form and substance satisfactory to counsel for the Company, the Company
shall issue the Shares registered in the name of the Optionee, the Optionee and
the Optionee's spouse, or the Optionee's legal representative.
(e) Prior to the issuance of the Shares upon exercise of this
Option, the Optionee must execute a shareholders' agreement containing such
terms and conditions as determined by the Committee and approved by the Board of
Directors.
(f) Any exercisable portion of this Option or the entire Option,
if then wholly exercisable, may be exercised in whole or in part at any time
prior to the time when this Option becomes unexercisable under Paragraph 3;
provided, however, that any partial exercise shall be for whole Shares only.
(g) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable state
securities laws, as they are in effect on the date of exercise.
5. Redemption of Options Upon Change of Control. In the event
that (i) a Change of Control (as defined in the Plan) of the Company occurs
within five (5) years of the Date Of Grant; (ii) the Bahrain International Bank
E.C. has realized a return of its investment; and (iii) the successor
corporation neither assumes this Option nor agrees to substitute a substantially
equivalent option or options at least ten (10) days prior to the date of the
Change of Control, the Company shall redeem any options granted to the Optionee
pursuant to the Plan (including, but not limited to, this Option), in an amount
(the "Redemption Amount") determined pursuant to Schedule I attached hereto,
payable within thirty (30) days of the date of the Change of Control.
6. Compliance with Laws and Regulations. The issuance and
transfer of Shares shall be subject to compliance by the Company and the
Optionee with all applicable requirements of federal and state securities laws
and with all applicable requirements of any stock
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exchange on which the Company's shares may be listed at the time of such
issuance or transfer. Optionee understands that the Company is under no
obligation to register or qualify the Shares with the Securities and Exchange
Commission, any state securities commission or any stock exchange to effect such
compliance.
7. Nontransferability of Option. This Option may not be
transferred in any manner except (a) as determined by the Committee in its sole
discretion, or (b) pursuant to Paragraph 7(f) of the Plan.
8. Rights as Stockholder. The holder of the Option shall not be,
nor have any of the rights or privileges of, a stockholder of the Company with
respect to any shares purchasable upon the exercise of the Option or any portion
thereof, unless and until certificates representing such Shares shall have been
issued by the Company to such holder.
9. Sale by Controlling Shareholder. In the event the Controlling
Shareholder elects to sell or otherwise transfer to a third party (the
"Purchaser") any Shares owned (as of the effective date of the Plan) by the
Controlling Shareholder, the Optionee shall be entitled to sell to the Purchaser
the Shares issued to and owned by the Optionee pursuant to the Plan, as of the
same time and at the per share sale price to be received by the Controlling
Shareholder, up to an equivalent percentage of the Shares sold by the
Controlling Shareholder, in the following manner:
(i) the Controlling Shareholder shall notify the Optionee of
such sale or transfer and its material terms at least ten
(10) days prior to the effective date of such sale or
transfer;
(ii) within five (5) days thereafter, the Optionee shall notify
the Company of the number, if any, of such Shares owned by
the Optionee to be sold to the Purchaser (the "Participant
Shares"), subject to the limitations set forth above;
(iii) the Controlling Shareholder shall sell both its Shares
and, acting on behalf of the Optionee, the Participant
Shares, to the Purchaser and, to the extent necessary, the
Controlling Shareholder shall reduce the number of its
Shares available for sale to accommodate the sale of the
Participant Shares.
10. Consequences. Optionee shall be solely responsible for the
payment of any taxes due in connection with the Plan and this Option grant;
provided, however, that the Company may make such provisions as it may deem
appropriate for the withholding of any taxes which the Company determines it is
required to withhold in connection with the issuance, exercise or vesting of
this Option.
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11. Administration. The Committee shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee shall be final and
binding upon the Optionee, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan or the Option.
12. Notice. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Optionee shall be addressed to him
at the address given beneath his signature hereto. By a notice given pursuant to
this Paragraph 12, either party may hereafter designate a different address for
notices to be delivered. Any notice which is required to be given to the
Optionee shall, if the Optionee is deceased, be given to the Optionee's personal
representative. Any notice shall have been deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by
the United States Postal Service.
13. Dividends. In the event the Committee provides that Awards
granted under the Plan earn dividends or dividend equivalents, such dividends or
dividend equivalents may, in the Committee's discretion and in accordance with
the terms of the Plan, (a) be paid currently, or (b) be credited to an account
established by the Committee under the Plan in the name of the Optionee.
14. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by the Optionee or the Company forthwith to
the Committee, which shall review such dispute at its next regular meeting. The
resolution of such dispute by the Committee shall be final and binding on the
Company and on the Optionee.
15. Governing Document. This Agreement is in every respect
subject to the provisions of the Plan, as it may be amended from time to time.
The provisions of the Plan shall govern in the case of any inconsistency between
the Plan and this Agreement.
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16. Entire Agreement. The Plan and the Notice and
Agreement attached as Exhibit A are incorporated herein by reference. This
Agreement, the Plan and the Notice and Agreement constitute the entire
agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
CARROLS CORPORATION
By: /s/ Joseph Zirkman
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Its: Vice President
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ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all the terms and provisions of the Plan and this
Agreement. Optionee acknowledges that there may be various tax consequences upon
exercise of this Option or disposition of the Shares and that Optionee should
consult a tax adviser prior to such exercise or disposition.
/s/ Daniel T. Accordino
------------------------------------
Name
Daniel T. Accordino
------------------------------------
5175 E. Lake Rd., Cazenovia, NY 13035
------------------------------------
Address
###-##-####
------------------------------------
Taxpayer Identification Number
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EXHIBIT C
CARROLS HOLDINGS CORPORATION
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of
_______, 1997 by and among Carrols Holdings Corporation, a Delaware corporation
(the "Company"), Madison Dearborn Capital Partners, L.P., Madison Dearborn
Capital Partners II, L.P. (together with Madison Dearborn Capital Partners,
L.P., the "Investors"), Atlantic Restaurants, Inc. ("ARI"), Alan Vituli
("Vituli") and the Management Investors (as defined herein). For purposes of
this Agreement, the Management Holders (as defined herein), ARI, the Investors
and Vituli are collectively referred to as the "Stockholders"). Capitalized
terms used herein are defined in paragraph 11 hereof.
The Investors shall purchase certain shares of the Company's
Common Stock pursuant to a stock purchase agreement among the Company, the
Investors and ARI (the "Purchase Agreement") dated as of February 25, 1997.
The Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Company's Board of Directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which the Stockholders' Common Stock may be transferred. The execution and
delivery of this Agreement is a condition to the Investors' purchase of the
Company's and ARI's stock pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Board of Directors.
(a) From and after the Closing (as defined in the Purchase
Agreement) and until the provisions of this paragraph 1 cease to be effective,
each holder of Stockholder Shares shall vote all of such holder's Stockholder
Shares which are voting shares and any other voting securities of the Company
over which such holder has voting control and shall take all other necessary or
desirable actions within such holder's control (whether in his capacity as a
stockholder, director, member of a board committee or officer of the Company or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all necessary or desirable
actions within its control (including, without limitation, calling special board
and stockholder meetings), so that:
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(i) the authorized number of directors on the Board shall
be established at eight directors, or, as provided in subparagraph (e)
below, six directors;
(ii) the following individuals shall be elected to the
Board:
(A) subject to paragraph 1(c) below, three
representatives designated by the Investors (the "Investor
Directors"); provided that so long as the Investors are entitled
to three Investor Directors, one of the Investor Directors shall
not be an employee or officer of either of the Investors or any
of their Affiliates and such director shall not be elected to or
remain on the Board unless there are three ARI Directors serving
on the Board at such time but if and only if ARI is entitled to
three ARI Directors at such time;
(B) subject to paragraph 1(d) below, three
representatives designated by ARI (the "ARI Directors"); provided
that so long as ARI is entitled to three ARI Directors, one of
the ARI Directors shall not be an employee or officer of ARI or
any of its Affiliates and such director shall not be elected to
or remain on the Board unless there are three Investor Directors
serving on the Board at such time but if and only if the
Investors are entitled to three Investor Directors at such time;
and
(C) so long as Vituli is the Chief Executive
Officer of Carrols Corporation ("Carrols"), two representatives
designated by Vituli who shall be executive officers of Carrols
(the "Management Directors");
(iii) the composition of the board of directors of each of
the Company's Subsidiaries (a "Sub Board") shall be the same as that of
the Board;
(iv) any committees of the Board or a Sub Board shall be
created, and the members thereof determined, only with the approval of a
majority of the Investor Directors and a majority of the ARI Directors
(it being understood that (x) the audit committee and the compensation
committee, which committees shall be created on the date hereof, shall
not include any Management Directors and (y) at least one of the
Management Directors shall serve on all other committees (if any) of the
Board);
(v) the removal from the Board or a Sub Board (with or
without cause) of any representative designated hereunder by the
Investors, ARI or Vituli shall be at the Investors', ARI's or Vituli's
written request, respectively, but only upon such written request and
under no other circumstances, and if any Management Director ceases to
be an employee of the Company and its Subsidiaries, he shall be removed
as a director promptly after his employment ceases; and
(vi) (A) in the event that any Investor Director ceases to
serve as a member of the Board or a Sub Board during his term of office,
the resulting vacancy on the Board or Sub Board shall be filled by a
representative designated as provided in subparagraph (ii)(A) above, (B)
in the event that any ARI Director ceases to serve as a
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member of the Board or a Sub Board during his term of office, the
resulting vacancy on the Board or Sub Board shall be filled by a
representative designated as provided in subparagraph (ii)(B) above, and
(C) in the event that any Management Director ceases to serve as a
member of the Board or a Sub Board during his term of office, the
resulting vacancy on the Board or Sub Board shall be filled by a
representative designated as provided in subparagraph (ii)(C) above.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the
Board, any Sub Board and any committee thereof. In addition, the Company shall
pay to each Investor Director and each ARI Director an annual fee in an amount
determined by the Board from time to time to be paid by the Company to each
non-employee director as and when determined by the Board. So long as any
Investor Director, ARI Director or Management Director serves on the Board or a
Sub Board, and for five years thereafter, the Company's Restated Certificate of
Incorporation and Bylaws shall provide for the indemnification and exculpation
or directors to the fullest extent permitted under applicable law.
(c) Subject to paragraph (h) below, at such time as the Investor
Holders hold in the aggregate less than (i) 80% of the Stockholder Shares held
by the Investors on the date hereof, the number of Investor Directors shall be
reduced to two directors and ARI, if the number of the ARI Directors has not
been reduced pursuant to paragraph (d) below, shall then have the right to
designate an additional ARI Director, which individual shall serve as an ARI
Director pursuant to the provisions of this paragraph 1; (ii) 65% of the
Stockholder Shares held by the Investors on the date hereof, the number of
Investor Directors shall be reduced to one director and ARI, if the number of
the ARI Directors has not been reduced pursuant to paragraph (d) below, shall
then have the right to designate two additional ARI Directors, which individuals
shall serve as ARI Directors pursuant to the provisions of this paragraph 1; and
(iii) 33% of the Stockholder Shares held by the Investors on the date hereof,
the number of Investor Directors shall be reduced to zero and ARI, if the number
of the ARI Directors has not been reduced pursuant to paragraph (d) below, shall
then have the right to designate an additional three ARI Directors, which
individuals shall serve as ARI Directors pursuant to the provisions of this
paragraph 1.
(d) Subject to paragraph (h) below, at such time as the ARI
Holders hold in the aggregate less than (i) 80% of the Stockholder Shares held
by ARI on the date hereof, the number of ARI Directors shall be reduced to two
directors and the Investors, if the number of the Investor Directors has not
been reduced pursuant to paragraph (c) above, shall then have the right to
designate an additional Investor Director, which individual shall serve as an
Investor Director pursuant to the provisions of this paragraph 1; (ii) 65% of
the Stockholder Shares held by ARI on the date hereof, the number of ARI
Directors shall be reduced to one director and the Investors, if the number of
the Investor Directors has not been reduced pursuant to paragraph (c) above,
shall then have the right to designate two additional Investor Directors, which
individuals shall serve as Investor Directors pursuant to the provisions of this
paragraph 1; and (iii) 33% of the Stockholder Shares held by ARI on the date
hereof, the number of ARI Directors shall be reduced to zero and the Investors,
if the number of the Investor Directors has not been reduced
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pursuant to paragraph (c) above, shall then have the right to designate an
additional three Investor Directors, which individuals shall serve as Investor
Directors pursuant to the provisions of this paragraph 1.
(e) If Vituli ceases to be Chief Executive Officer of Carrols,
his right to designate any Management Directors under this paragraph 1 shall
cease immediately, the Management Directors shall resign or be removed from the
Board hereunder and the size of the Board shall be reduced to six directors.
(f) If any party fails to designate a representative to fill a
directorship pursuant to the terms of this paragraph 1, the individual
previously holding such directorship shall be elected to such position, or if
such individual fails or declines to serve, the election of an individual to
such directorship shall be accomplished in accordance with the Company's Bylaws
and applicable law; provided that the Stockholders shall vote to remove such
individual if the party which failed to designate such directorship so directs.
(g) Each of (i) the Investors and (ii) ARI shall be entitled to
appoint up to two individuals (who shall be officers or employees of the
Investors or their Affiliates or of ARI or its Affiliates, respectively) who may
attend as an observer all meetings of the Board (the "Board Attendees");
provided that only one appointee of each of the Investors and ARI shall be
entitled to attend any given meeting of the Board. The Company shall give
written notice of each meeting of the Board to such individuals at the same time
and in the same manner as notice is given to the directors (which notice shall
be promptly confirmed in writing to such Person). The Board Attendees shall be
entitled to receive all written materials and other information (including,
without limitation, copies of meeting minutes) given to directors in connection
with such meetings at the time such materials and information are given to the
directors. If the Company proposes to take any action by written consent in lieu
of a meeting of the Board, the Company shall give written notice thereof to each
Board Attendee prior to the effective date of such consent describing in
reasonable detail the nature and substance of such action. At such time as the
Investors or ARI appoint a new Board Attendee, the Investors or ARI, as the case
may be, shall promptly provide notice to the Company of such action and the
identity of such new Board Attendee.
(h) The provisions of this paragraph 1 shall continue to be in
effect following the consummation of the Company's initial Public Offering,
except that thereafter, neither ARI nor the Investors shall be entitled to
designate any additional directors under paragraphs (1)(c) or (1)(d),
respectively.
2. Representations and Warranties. Each Stockholder represents
and warrants that (i) such Stockholder is the record owner of the number of
Stockholder Shares set forth opposite its name on the Schedule of Stockholders
attached hereto, (ii) this Agreement has been duly authorized, executed and
delivered by such Stockholder and constitutes the valid and binding obligation
of such Stockholder, enforceable in accordance with its terms, and (iii) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. No holder
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of Stockholder Shares shall grant any proxy or become party to any voting trust
or other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement.
3. Retention of Stockholder Shares. Until the fourth anniversary
of the date of this Agreement, neither Vituli nor any Management Investor shall
sell, transfer, assign, pledge or otherwise dispose of any Stockholder Shares
held by him on the date hereof or hereafter acquired, except pursuant to an
Approved Sale or a Public Sale; provided that nothing contained in this
paragraph 3 shall prohibit Vituli or any Management Investor from transferring
Stockholder Shares as permitted by paragraphs 4(d) and 4(e) hereof; and provided
further that the provisions of this paragraph 3 shall terminate and cease to be
effective (i) upon the consummation of a Qualified Public Offering or an
Approved Sale, (ii) upon the termination of such individual's employment with
the Company or any of its Subsidiaries because of such individual's death,
Permanent Disability, termination for Good Reason or termination without Cause,
or (iii) upon a Change in Control. For purposes of this paragraph 3, the terms
"Permanent Disability", "Good Reason", "Cause" and "Change of Control" shall
have the definitions ascribed to them in the Executive Option Agreements.
4. Restrictions on Transfer of Stockholder Shares.
(a) Transfer of Stockholder Shares. No holder of Stockholder
Shares shall sell, transfer, assign, pledge or otherwise dispose of (whether
with or without consideration and whether voluntarily or involuntarily or by
operation of law) any interest in Stockholder Shares (a "Transfer"), except
pursuant to a Public Sale or an Approved Sale (an "Exempt Transfer") or pursuant
to this paragraph 4; provided that in no event shall any Transfer of Stockholder
Shares pursuant to this paragraph 4 be made for any consideration other than
cash payable upon consummation of such Transfer or in installments over time.
(b) Sale Notice. Prior to making any Transfer other than an
Exempt Transfer, any holder of Stockholder Shares intending to make such a
Transfer (the "Transferring Stockholder") shall deliver written notice (the
"Sale Notice") to the Company and to each Investor Holder, each ARI Holder and
each Management Holder other than the Transferring Stockholder (the "Other
Holders"). The Sale Notice shall disclose in reasonable detail the identity of
the prospective transferee(s), the number of shares to be transferred (the
"Specified Shares") and the terms and conditions of the proposed Transfer. No
Transferring Stockholder shall consummate any such Transfer until 45 days after
the Sale Notice has been delivered to the Company and to the Other Holders,
unless the parties to the Transfer have been finally determined pursuant to this
paragraph 4 prior to the expiration of such 45-day period.
(c) First Refusal Rights. The Company may elect to purchase all
(but not less than all) of the Specified Shares upon the same terms and
conditions as those set forth in the Sale Notice by delivering a written notice
of such election to the Transferring Stockholder and the Other Holders within 30
days after the Sale Notice has been delivered to the Company. If the Company has
not elected to purchase all of the Specified Shares within such 30-day period,
each of the Other Holders may elect to purchase any or all of the Specified
Shares set forth in the Sale Notice at the price and on the terms specified
therein by delivering written notice of such election
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to the Transferring Stockholder and the Other Holders as soon as practical but
in any event within 45 days after delivery of the Sale Notice. If the Other
Holders have in the aggregate elected to purchase more than the Specified
Shares, the Specified Shares shall be allocated among the Other Holders electing
to purchase shares pro rata based on the number of Stockholder Shares owned by
such Other Holder. If the Company or the Other Holders have elected to purchase
Specified Shares, the purchase of such shares shall be consummated as soon as
practical after the delivery of the election notice(s) to the Transferring
Stockholder, but in any event within 15 days after the delivery of the election
notice to the Transferring Stockholder. If the Company and the Other Holders
have not elected to purchase all of the Specified Shares, the Transferring
Stockholder may transfer the remaining Specified Shares at a price and on terms
no more favorable to the transferee(s) thereof than those specified in the Sale
Notice. Any Specified Shares not so transferred by the Transferring Stockholder
within 30 days shall be reoffered to the Company and the Other Holders pursuant
to this paragraph 4(c) prior to any subsequent Transfer.
(d) Co-Sale Rights. Any Other Holders who have not elected to
purchase Specified Shares from the Transferring Stockholder pursuant to
paragraph 4(c) may elect to participate in the proposed Transfer by delivering
written notice to the Transferring Stockholder and the Company within 45 days
after the Sale Notice has been delivered by the Transferring Stockholder. If any
such Other Holder elects to participate in such Transfer (a "Participating
Stockholder"), the Transferring Stockholder and each Participating Stockholder
shall be entitled to sell in the contemplated Transfer, on the same terms, a
number of Stockholder Shares equal to the product of (i) the quotient determined
by dividing the percentage of Stockholder Shares owned by the Participating
Stockholder by the aggregate percentage of Stockholder Shares owned by the
Transferring Stockholder and all Participating Stockholders and (ii) the number
of Stockholder Shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100
Stockholder Shares by the Transferring Stockholder, and if the
Transferring Stockholder at such time owns 30% of all
Stockholder Shares and if the Participating Stockholder owns 20%
of all Stockholder Shares, the Transferring Stockholder would be
entitled to sell 60 shares (30%[div]50% x 100 shares) and the
Participating Stockholder would be entitled to sell 40 shares
(20%[div]50% x 100 shares).
Each Transferring Stockholder shall use best efforts to obtain the agreement of
the prospective transferee(s) to the participation of the Participating
Stockholder in any such contemplated Transfer, and no Transferring Stockholder
shall transfer any of its Stockholder Shares to any prospective transferee if
such prospective transferee(s) declines to allow the participation of the
Participating Stockholder. Each Person transferring Stockholder Shares pursuant
to this paragraph 4(d) shall pay its pro rata share (based on the number of
Stockholder Shares to be sold) of any expenses incurred in connection with such
Transfer and shall be obligated to join on a pro rata basis in any
indemnification or other obligations that the Transferring Stockholder agrees to
provide in connection with such Transfer (other than any such obligations that
relate specifically to a particular Stockholder such as indemnification with
respect to representations and warranties given by a Stockholder regarding such
Stockholder's title to and ownership of Stockholder Shares); provided that no
holder shall be obligated in connection with such Transfer to agree to
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indemnify or hold harmless the transferees with respect to an amount in excess
of the net cash proceeds paid to such holder in connection with such Transfer.
In the event that any Management Holder elects neither to purchase any Specified
Shares pursuant to paragraph 4(c) nor to participate in any Transfer pursuant to
the terms of this paragraph 4(d), those shares which such Management Holder
would have been entitled to sell in such Transfer (the "Management Participating
Shares") shall cease to be subject to the restrictions set forth in paragraph 3
hereof, but shall continue to be subject to the restrictions set forth in this
paragraph 4. Notwithstanding the foregoing, in the event that the participation
of any Management Holder pursuant to this paragraph 4(d) would result in a
Change of Control, the prior written consent of ARI (if the Transferring
Stockholder is one of the Investors) or the Investors (if the Transferring
Stockholder is ARI), as the case may be, shall be required for such Management
Holder to participate in such Transfer.
(e) Permitted Transfers. The restrictions set forth in this
paragraph 4 shall not apply with respect to any Transfer of Stockholder Shares
by any Person (i) in the case of an individual, pursuant to applicable laws of
descent and distribution or among such individual's Family Group or (ii) in the
case of a Person other than an individual, among its Affiliates (collectively
referred to herein as "Permitted Transferees"); provided that the restrictions
contained in this paragraph 4 shall continue to be applicable to the Stockholder
Shares after any such Transfer and provided further that the transferees of such
Stockholder Shares shall have agreed in writing to be bound by the provisions of
this Agreement affecting the Stockholder Shares so transferred. For purposes of
this Agreement, "Family Group" means an individual's spouse and descendants
(whether natural or adopted) and any trust solely for the benefit of the
individual and/or the individual's spouse and/or descendants, and "Affiliate" of
a Person other than an individual means any other Person, directly or indirectly
controlling, controlled by or under common control with such Person or, with
respect to any partnership, any partner thereof. Notwithstanding the foregoing,
no party hereto shall avoid the provisions of this Agreement by making one or
more transfers to one or more Permitted Transferees and then disposing of all of
any portion of such party's interest in any such Permitted Transferee.
(f) Termination of Restrictions. The restrictions on the
Transfer of Stockholder Shares set forth in this paragraph 4 shall continue with
respect to each Stockholder Share until the date on which such Stockholder Share
has been transferred in a Public Sale or an Approved Sale.
5. Company Covenants.
(a) Financial Statements and Other Information. The Company
shall deliver to (x) the Investors (so long as the Investors and their
Affiliates hold in the aggregate at least 5% of the outstanding Common Stock),
(y) ARI (so long as ARI and its Affiliates hold in the aggregate at least 5% of
the outstanding Common Stock) and (z) Vituli (so long as Vituli and Daniel T.
Accordino hold in the aggregate at least 2% of the outstanding Common Stock
(including shares of Common Stock into which their options may be exercised) and
Vituli holds some amount of such Common Stock):
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(i) as soon as available but in any event within 30 days
after the end of each monthly accounting period in each fiscal year,
unaudited consolidating and consolidated statements of income and cash
flows of the Company and its Subsidiaries for such monthly period and
for the period from the beginning of the fiscal year to the end of such
month, and, unless the Company, the Investors and ARI mutually agree
otherwise, unaudited consolidating and consolidated balance sheets of
the Company and its Subsidiaries as of the end of such monthly period,
setting forth in each case comparisons to the Company's annual budget
and to the corresponding period in the preceding fiscal year, and all
such statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied and shall be certified by
the Company's chief financial officer;
(ii) accompanying the financial statements referred to in
subparagraph (i), (a) an officer's certificate on behalf of the Company
stating that neither the Company nor any of its Subsidiaries is in
default under any of its other material agreements or, if any such
default exists, specifying the nature and period of existence thereof
and what actions the Company and its Subsidiaries have taken and propose
to take with respect thereto, and (b) a summary prepared by management
of the Company describing significant aspects of the Company's and its
Subsidiaries' operations and financial affairs (including, but not
limited to, material deviations from the Company's annual or other
budgets, material breaches or defaults under material agreements or any
other material adverse change, event or circumstance affecting the
Company or any Subsidiary (including, without limitation, the filing of
any material litigation against the Company or any Subsidiary));
(iii) upon the completion thereof, but in no event later
than 90 days after the end of each fiscal year, consolidating and
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidating and consolidated
balance sheets of the Company and its Subsidiaries as of the end of such
fiscal year, setting forth in each case comparisons to the Company's
annual budget and to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles, consistently
applied, and accompanied by (a) with respect to the consolidated
portions of such statements, an opinion of an independent accounting
firm of recognized national standing acceptable to the holders of a
majority of the outstanding Common Stock that is unqualified with
respect to the scope of such firm's examination, (b) a certificate from
such accounting firm, addressed to the Board, stating that in the course
of its examination nothing came to its attention that caused it to
believe that there was any default by the Company or any Subsidiary in
the fulfillment of or compliance with any of the financial provisions of
any other material agreement to which the Company or any Subsidiary is a
party or, if such accountants have reason to believe any default by the
Company or any Subsidiary exists, a certificate specifying the nature
and period of existence thereof, and (c) a copy of such firm's annual
management letter to the board of directors;
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(iv) promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning
significant aspects of the Company's and its Subsidiaries' operations or
financial affairs given to the Company by its independent accountants
(and not otherwise contained in other materials provided hereunder);
(v) at least 30 days but not more than 90 days prior to
the beginning of each fiscal year, an annual budget prepared on a
monthly basis for the Company and its Subsidiaries for such fiscal year
(displaying anticipated statements of income and cash flows and balance
sheets), and promptly upon preparation thereof any other significant
budgets prepared by the Company and any revisions of such annual or
other budgets;
(vi) within ten days after transmission thereof, copies of
all registration statements and all regular, special or periodic reports
which it files, or any of its officers or directors file with respect to
the Company, with the Securities and Exchange Commission or with any
securities exchange on which any of its securities are then listed, and
copies of all press releases and other statements made available
generally by the Company to the public concerning material developments
in the Company's and its Subsidiaries' businesses; and
(vii) with reasonable promptness, such other information
and financial data concerning the Company and its Subsidiaries as any
Person entitled to receive information under this paragraph 5(a) may
reasonably request.
(b) Inspection of Property. The Company shall permit any
representatives designated by (x) the Investors (so long as the Investors and
their Affiliates hold in the aggregate at least 5% of the outstanding Common
Stock), (y) ARI (so long as ARI and its Affiliates hold in the aggregate at
least 5% of the Common Stock), or (z) Vituli (so long as Vituli and Daniel T.
Accordino hold in the aggregate at least 2% of the outstanding Common Stock
(including shares of Common Stock into which their options may be exercised) and
Vituli holds some amount of such Common Stock) , upon reasonable notice and
during normal business hours and at such other times as any such holder may
reasonably request, to (i) visit and inspect any of the properties of the
Company and its Subsidiaries, (ii) examine the corporate and financial records
of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and (iii) discuss the affairs, finances and accounts of any such
corporations with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries. The presentation of an executed
copy of this Agreement by the Investors or ARI to the Company's independent
accountants shall constitute the Company's permission to its independent
accountants to participate in discussions with such Persons.
(c) Restrictions. The Company shall not, without the prior
written consent of the Investors (so long as the Investors and their Affiliates
hold at least 50% of the Common Stock owned by the Investors on the date hereof)
and of ARI (so long as ARI and its Affiliates hold at least 50% of the Common
Stock owned by ARI on the date hereof):
(i) directly or indirectly redeem, purchase or otherwise
acquire, or permit any Subsidiary to redeem, purchase or otherwise
acquire, any of the Company's or
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any Subsidiary's capital stock or other equity securities, except for
(A) the redemption of any preferred stock issued and outstanding as of
the date hereof in accordance with and as permitted by the Company's
Restated Certificate of Incorporation and senior notes and other lending
arrangements and (B) the repurchase of shares of Common Stock from
former employees of the Company and its Subsidiaries in connection with
the termination of their employment in an aggregate amount not exceeding
$1,000,000;
(ii) directly or indirectly declare or pay any dividends
or make any distributions upon any of its capital stock or other equity
securities, except for dividends on the Company's Class A Preferred
Stock issued and outstanding as of the date hereof in accordance with
and as permitted by the Company's Restated Certificate of Incorporation,
dividends payable in shares of Common Stock issued upon the outstanding
shares of Common Stock and repurchases permitted under paragraph
5(c)(i);
(iii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without
limitation, any reorganization into a limited liability company, a
partnership or any other non-corporate entity which is treated as a
partnership for federal income tax purposes);
(iv) authorize, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of any capital
stock or other equity securities (or any securities convertible into or
exchangeable for any capital stock or other equity securities or
containing any profit participation features), or any stock options,
stock appreciation rights, phantom stock rights or similar rights,
except for shares of Common Stock issued upon exercise of the options
pursuant to the Executive Option Agreements and options that have been
or may, from time to time, be approved by the compensation committee of
the Board;
(v) merge or consolidate with any Person or, except as
permitted by subparagraph (vii) below, permit any Subsidiary to merge or
consolidate with any Person (other than a Wholly-Owned Subsidiary);
(vi) other than sale/leaseback transactions entered into
in the ordinary course of business, sell, lease (as lessor) or otherwise
dispose of, or permit any Subsidiary to sell, lease (as lessor) or
otherwise dispose of, more than $3,000,000 of assets of the Company and
its Subsidiaries (computed on the basis of book value, determined in
accordance with generally accepted accounting principles consistently
applied, or fair market value, determined by the Board in its reasonable
good faith judgment) in any transaction or series of related
transactions;
(vii) acquire or enter into, or permit any Subsidiary to
acquire or enter into, any interest in any company or business (whether
by a purchase of assets, purchase of stock, merger or otherwise), or any
joint venture, guarantee of any obligation, or make any Investment, loan
or advance in each case involving an aggregate consideration (including,
without limitation, the assumption of liabilities whether direct or
indirect) exceeding $10,000,000 in any one transaction or series of
related transactions or
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exceeding $25,000,000 in the aggregate (the "Threshold Amount") for all
such transactions consummated after the date of this Agreement.
Notwithstanding the foregoing, to the extent that such transaction or
series of related transactions was approved by the Board or was
otherwise consummated, but the prior written consent of the Investors
and ARI was not obtained pursuant to this paragraph 5(c), the aggregate
consideration involved in such transaction or series of related
transactions shall be included in calculating whether or not the
Threshold Amount has been met. At such time as the Threshold Amount has
been met, all such transactions or series of related transactions which
follow shall require the prior written consent of the Investors and ARI
in accordance with this paragraph 5(c);
(viii) other than any Indebtedness outstanding from time
to time under the Loan Agreement and other than Indebtedness arising
from sale/leaseback transactions entered into by the Company or any of
its Subsidiaries in the ordinary course of business, create, incur or
assume, or permit any Subsidiary to create, incur or assume any
Indebtedness exceeding an aggregate principal amount of $10,000,000
outstanding at any time on a consolidated basis;
(ix) amend or modify any provision of the Loan Agreement
which would increase the aggregate maximum principal amount of
Indebtedness permitted to be outstanding at any time pursuant to the
terms thereof or which would extend the maturity date of such
Indebtedness by more than one year;
(x) make any capital expenditures (including, without
limitation, payments with respect to capitalized leases, as determined
in accordance with generally accepted accounting principles consistently
applied, but excluding capital expenditures arising from damage to the
Company's property to the extent such damage is covered by the Company's
insurance) on a consolidated basis during any fiscal year exceeding by
more than $1,000,000 the Company's capital budget approved by the Board
for such year, as modified by the Board at any time;
(xi) make any amendment to the Company's Restated
Certificate of Incorporation or the Company's Bylaws or file any
certificate of designations with the Delaware Secretary of State;
(xii) enter into, amend, modify or supplement, or permit
any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors, employees, stockholders or Affiliates
or with any individual related by blood, marriage or adoption to any
such individual or with any entity in which any such Person or
individual owns a material beneficial interest, except for customary
employment arrangements and benefit programs on reasonable terms and
except as otherwise expressly contemplated by this Agreement;
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(xiii) enter into, or permit any Subsidiary to enter into,
the ownership, active management or operation of any business other than
Burger King franchise restaurants;
(xiv) amend, modify or waive any provision of the 1996
Plan or any other stock option plan other than by action of the
compensation committee of the Board; or
(xv) approve or consummate a sale of all or substantially
all of the Company's assets determined on a consolidated basis or a sale
of all or substantially all of the Company's outstanding capital stock
(whether by merger, consolidation or otherwise) to any Independent Third
Party or group of Independent Third Parties (any of the foregoing which
have been so approved, being referred to herein as an "Approved Sale").
In the event of an Approved Sale, the holders of Stockholder Shares shall bear
their pro rata share (based upon the proceeds to be received by the holders of
Stockholder Shares) of the costs of any sale of Stockholder Shares in connection
therewith to the extent such costs are incurred for the benefit of all holders
of Stockholder Shares and are not otherwise paid by the Company or the acquiring
party. Costs incurred in exercising reasonable efforts to take all necessary
actions in connection with the consummation of an Approved Sale in accordance
with this paragraph shall be deemed to be for the benefit of all holders of
Stockholder Shares. Costs incurred by holders of Stockholder Shares on their own
behalf will not be considered costs of the transaction hereunder. The provisions
of this paragraph shall terminate upon a Qualified Public Offering.
Notwithstanding the foregoing, the Company shall not be required
to obtain the prior written consent of the Investors, following an Investor
Material Change, or ARI, following an ARI Material Change, with respect to any
of the actions set forth in subparagraphs (ii), (iv), (v), (vi), (vii), (viii),
(ix), (x), (xiv) and (xv) of this paragraph 5(c).
(d) Affirmative Covenants. Prior to the consummation of a
Qualified Public Offering, the Company shall, and shall cause each Subsidiary
to, unless otherwise approved by the Investors (so long as the Investors and
their Affiliates hold at least 50% of the Common Stock owned by Investors on the
date hereof) and by ARI (so long as ARI and its Affiliates hold at least 50% of
the Common Stock owned by ARI on the date hereof):
(i) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and all material
licenses, authorizations and permits necessary to the conduct of its
businesses;
(ii) maintain and keep its properties in good repair,
working order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements, so that its businesses may
be properly and advantageously conducted at all times;
(iii) pay and discharge when payable all taxes,
assessments and governmental charges imposed upon its properties or upon
the income or profits
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therefrom (in each case before the same becomes delinquent and before
penalties accrue thereon) and all claims for labor, materials or
supplies which if unpaid would by law become a Lien upon any of its
property, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect
thereto;
(iv) comply with all other obligations which it incurs
pursuant to any contract or agreement, whether oral or written, express
or implied, as such obligations become due, unless and to the extent
that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have
been established on its books with respect thereto;
(v) comply with all applicable laws, rules and regulations
of all governmental authorities, the violation of which would reasonably
be expected to have a material adverse effect upon the financial
condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole;
(vi) apply for and continue in force with good and
responsible insurance companies adequate insurance covering risks of
such types and in such amounts as are customary for corporations of
similar size engaged in similar lines of business;
(vii) maintain and continue in effect the key man policy
on the life of Alan Vituli referred to in paragraph 2K of the Purchase
Agreement;
(viii) maintain proper books of record and account which
present fairly in all material respects its financial condition and
results of operations and make provisions on its financial statements
for all such proper reserves as in each case are required in accordance
with generally accepted accounting principles, consistently applied; and
(ix) until the aggregate principal amount, premium, if
any, and all interest is paid in full, comply in all respects with the
terms and provisions of that certain Indenture, dated as of August 17,
1993 (the "Indenture"), as in effect from time to time, including, but
not limited to, providing the required notices to the trustee and all
holders of securities issued under the Indenture in connection with the
transactions contemplated by the Purchase Agreement.
(e) Current Public Information. At all times after the Company has
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted Securities
may reasonably
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request, all to the extent required to enable such holders to sell Restricted
Securities pursuant to (i) Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission or (ii) a registration statement on Form S-2 or S-3 or any
similar registration form hereafter adopted by the Securities and Exchange
Commission. Upon request, the Company shall deliver to any holder of Restricted
Securities a written statement as to whether it has complied with such
requirements.
(f) Unrelated Business Taxable Income. Except with the
Investors' prior written consent, the Company shall not knowingly engage, and
shall not knowingly permit any Subsidiary to engage, in any transaction which is
reasonably likely to cause any holder of Common Stock or any of such holder's
limited partners which are exempt from income taxation under Section 501(a) of
the Code and, if applicable, any pension plan that any such limited partner may
be a part of, to recognize unrelated business taxable income as defined in
Section 512 and Section 514 of the Code.
6. Legend. Each certificate evidencing Stockholder Shares and
each certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT DATED AS OF ________, 1997 AMONG THE
ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE
COMPANY'S STOCKHOLDERS, AS AMENDED AND MODIFIED FROM TIME TO
TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with paragraph 11 hereof.
7. Preemptive Rights.
(a) Except for issuance of equity securities of the Company or
options or other rights to acquire equity securities of the Company:
(i) in connection with a registered primary public
offering;
(ii) to employees of the Company or its Subsidiaries;
(iii) to any lender in connection with the incurrence of
Indebtedness by the Company or any of its Subsidiaries;
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(iv) as payment of all or a portion of the purchase price
of any business or assets thereof acquired by the Company or any of its
Subsidiaries; or
(v) upon exercise of any option or other right described
in any of clauses (i) through (iv) above or any other option or right to
acquire equity securities issued by the Company;
if the Company authorizes the issuance or sale of any equity securities of the
Company or any securities containing options or rights to acquire any equity
securities of the Company (other than as a dividend on the outstanding Common
Stock), the Company shall first offer to sell to each Investor Holder, each ARI
Holder and each Management Holder a portion of such stock or securities equal to
the percentage of Stockholder Shares owned by such Person. Each Person shall be
entitled to purchase such stock or securities at the most favorable price and on
the most favorable terms as such stock or securities are to be offered to any
other Persons.
(b) In order to exercise its purchase rights hereunder, a
Stockholder must within 15 days after receipt of written notice from the Company
describing in reasonable detail the stock or securities being offered, the
purchase price thereof, the payment terms and such holder's percentage
allotment, deliver a written notice to the Company describing its election
hereunder. If all of the stock and securities offered to the Stockholders is not
fully subscribed by such holders, the remaining stock and securities shall be
reoffered by the Company to the holders purchasing their full allotment pro rata
(based on the number of Stockholder Shares owned by such holders) upon the terms
set forth in this paragraph, except that such holders must give written notice
of its election to purchase such reoffered stock and securities within 10 days
after receipt of such reoffer.
(c) Upon the expiration of the offering periods described above,
the Company shall be entitled to sell such stock or securities which the
Stockholders have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any stock or securities offered or sold by
the Company after such 90-day period must be reoffered to the Stockholders who
have purchased their full allotment pursuant to paragraph 7(b) pro rata (based
on the number of Stockholder Shares owned by such Stockholders).
(d) The rights pursuant to this paragraph 7 shall terminate upon
the consummation of a Public Offering.
8. Repurchase Option.
(a) In the event that Vituli or any Management Investor ceases
to be employed by the Company or any of its Subsidiaries as a result of Vituli's
or such Management Investor's (as the case may be) termination for Cause (as
such term is defined in the Executive Option Agreements) (the "Termination"),
any and all Stockholder Shares which Vituli or such Management Investor (as the
case may be) has acquired upon the exercise of the option granted to him
pursuant to those certain Unvested Stock Option Agreements, dated as of the date
of the Closing (whether held by Vituli, such Management Investor or one or more
of their respective
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Permitted Transferees) (the "Repurchase Shares"), shall be subject to repurchase
by the Company pursuant to the terms and conditions set forth in this paragraph
8 (the "Repurchase Option").
(b) The purchase price for each Repurchase Share shall be the
lesser of (i) Vituli's or such Management Investor's Original Cost for such
Repurchase Share, and (ii) the Fair Market Value for such Repurchase Share.
(c) The Board may elect to purchase all or any portion of the
Repurchase Shares by delivering written notice (the "Repurchase Notice") to the
holder or holders of the Repurchase Shares within 90 days after the Termination.
The Repurchase Notice shall set forth the number of Repurchase Shares to be
acquired from such holder of Repurchase Shares, the aggregate consideration to
be paid therefor and the time and place for the closing of the transaction.
(d) The closing of the purchase of the Repurchase Shares
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice, which date shall not be more than 60 days nor
less than five days after the delivery of such notice. The Company shall pay for
the Repurchase Shares to be purchased pursuant to the Repurchase Option by
delivery of a check or wire transfer of funds. The Company shall be entitled to
receive from Vituli or the Management Investors (as the case may be) customary
representations and warranties regarding the sale of the Repurchase Shares
(including representations and warranties regarding good title to such shares,
free and clear of any liens or encumbrances).
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Repurchase Shares by the Company shall be subject
to applicable restrictions contained in the Delaware General Corporation Law and
in the Company's and its Subsidiaries debt and equity financing agreements. If
any such restrictions prohibit the repurchase of Repurchase Shares hereunder
which the Company is otherwise entitled or required to make, the time periods
provided in this paragraph 8 shall be suspended, and the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
9. Sale of the Company.
(a) If the Board and the holders of a majority of Stockholder
Shares (including the Investors and ARI, to the extent that the approval of the
Investors and/or ARI is required pursuant to the terms of paragraph 5(c)(xv)
herein) shall approve a Sale of the Company, the holders of Stockholder Shares
shall consent to and raise no objections against the Sale of the Company, and if
the Sale of the Company is structured as a sale of capital stock, the holders of
Stockholder Shares shall agree to sell their Stockholder Shares on the terms and
conditions approved by the Board, the holders of a majority of the Stockholder
Shares and the Investors and ARI (as the case may be). The holders of
Stockholder Shares shall take all necessary and desirable actions in connection
with the consummation of the Sale of the Company.
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(b) The obligations of the holders of Stockholder Shares with
respect to the Sale of the Company is subject to the satisfaction of the
condition that, upon the consummation of the Sale of the Company, all of the
holders of Stockholder Shares receive the same form and amount of consideration
per Stockholder Share, or if any holders of Stockholder Shares are given an
option as to the form and amount of consideration to be received, all holders be
given the same option.
(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Stockholder Shares shall
at the request of the Company, appoint a "purchaser representative" (as such
term is defined in Rule 501) reasonably acceptable to the Company. If any holder
of Stockholder Shares appoints a purchaser representative designated by the
Company, the Company shall pay the fees of such purchaser representative.
However, if any holder of Stockholder Shares declines to appoint the purchaser
representative designated by the Company, such holder shall appoint another
purchaser representative (reasonably acceptable to the Company), and such holder
shall be responsible for the fees of the purchaser representative so appointed.
(d) Holders of Stockholder Shares shall bear their pro-rata
share (based upon the number of shares sold) of the costs of any sale of
Stockholder Shares pursuant to a Sale of the Company to the extent such costs
are incurred for the benefit of all holders of Stockholder Shares and are not
otherwise paid by the Company or the acquiring party. Costs incurred by holders
of Stockholder Shares on their own behalf shall not be considered costs of the
transaction hereunder.
(e) The provisions of this paragraph 9 shall terminate upon the
completion of a Qualified Public Offering.
(f) "Sale of the Company" shall mean the sale of the Company to
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) capital stock of the Company
possessing the voting power to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis.
10. Transfers; Future Sales. Prior to any holder of Stockholder
Shares Transferring any Stockholder Shares (other than pursuant to an Exempt
Transfer) to any Person and prior to the Company issuing any Common Stock (other
than pursuant to a Public Offering) or any options or other rights to acquire
Common Stock or any securities convertible into or exchangeable for such Common
Stock to any Person, such holder or the Company, as the case may be, shall cause
the prospective transferee to be bound by this Agreement as a holder of
Stockholder Shares and to execute and deliver to the Company and the other
Stockholders a counterpart to this Agreement.
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11. Definitions.
"Affiliate" has the meaning set forth in paragraph 4(e).
"Approved Sale" has the meaning set forth in subparagraph
5(c)(xv).
"ARI" has the meaning set forth in the preamble.
"ARI Holders" means ARI and its Affiliates so long as they hold
any Stockholder Shares.
"ARI Material Change" shall have occurred if (i) either of the
two ARI Directors as of the date hereof who are officers or employees of ARI or
its Affiliates cease to serve as a director on the Board; provided, however,
that ARI shall have one opportunity, which shall not be deemed an ARI Material
Change, to replace such ARI Director with a new ARI Director, so long as such
individual is reasonably acceptable to the Investors, it being understood that
Robin McIlvenny, Victor Kiarsis and James Conlon shall be deemed reasonably
acceptable to the Investors, (ii) any Person or group of affiliated Persons
acquires (x) more than 51% of the issued and outstanding capital stock or other
equity ownership interests of Bahrain International Bank (E.C.) or (y) the right
to elect a majority of the members of its board of directors or other governing
body, (iii) Bahrain International Bank (E.C.) ceases to own directly or
indirectly through one or more Wholly-Owned Subsidiaries (x) at least 51% of the
issued and outstanding capital stock of ARI or (y) the right to elect a majority
of the members of the board of directors of ARI or (iv) there occurs any event
which affects the control of Bahrain International Bank (E.C.) or its ability to
exercise its rights or to perform its obligations under this Agreement,
regardless of whether such event results in the occurrence of any of the events
set forth in (i), (ii) or (iii) above.
"Board" has the meaning set forth in the preamble.
"Change of Control" shall have the meaning set forth in the
Executive Option Agreements.
"Closing" has the meaning set forth in the Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and
any reference to any particular Code section shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"Common Stock" means the Company's Common Stock, par value $0.01
per share.
"Company" has the meaning set forth in the preamble.
"Executive Option Agreements" shall have the meaning set forth in
the Stock Purchase Agreement.
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"Fair Market Value" of each Repurchase Share means the average of
the closing prices of the sales of the Company's Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or,
if on any day the Common Stock is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time the Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value shall
be the fair value of the Common Stock determined in good faith by the Board
(without taking into account the effect of any contemporaneous repurchase of
Repurchase Shares under paragraph 8 hereof).
"Indebtedness" means at a particular time, without duplication,
(i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by
any note, bond, debenture or other debt security, (iii) any indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business), (iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness guaranteed in any manner by
a Person (including, without limitation, guarantees in the form of an agreement
to repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets and (viii) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under the Employee Retirement
Income Security Act of 1974, as amended.
"Independent Third Party" means any Person who, immediately prior
to the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock on a fully-diluted basis (a "5% Owner"), who is not controlling,
controlled by or under common control with any such 5% Owner and who is not the
spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for
the benefit of such 5% Owner and/or such other Persons.
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Investor Directors" has the meaning set forth in paragraph 1(a).
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"Investor Holder" means the Investors and their Affiliates so
long as they hold any Stockholder Shares.
"Investor Material Change" shall have occurred if a majority of
the principals of the general partner (the "GP") of the general partner of the
Investors cease to be officers of the GP and two or more of Benjamin D.
Chereskin, Robin P. Selati and William J. Hunckler III cease to be officers of
the GP.
"Investors" has the meaning set forth in the preamble.
"Lien" has the meaning set forth in the Stock Purchase Agreement.
"Loan Agreement" has the meaning set forth in the Stock Purchase
Agreement.
"Management Director" has the meaning set forth in paragraph
1(a).
"Management Holder" means Vituli and each Management Investor so
long as such individual holds any Stockholder Shares.
"Management Investor" means Daniel T. Accordino and Joseph A.
Zirkman.
"1996 Plan" has the meaning set forth in the Purchase Agreement.
"Original Cost" of each Repurchase Share shall be equal to
$101.7646 (as proportionately adjusted for all subsequent stock splits, stock
dividends and other recapitalizations).
"Permitted Transferee" has the meaning set forth in paragraph
4(e) hereof.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means the sale of shares of the Company's
Common Stock in a public offering registered under the Securities Act.
"Public Sale" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"Purchase Agreement" has the meaning set forth in the preamble.
"Qualified Public Offering" means the sale in an underwritten
public offering registered under the Securities Act of shares of the Company's
Common Stock resulting in aggregate gross proceeds to the Company of at least
$50 million and a price per share of not less
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than $108.2353 (as such amount is equitably adjusted for subsequent stock
splits, stock dividends and recapitalizations).
"Restricted Securities" has the meaning set forth in the Purchase
Agreement.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any similar federal law then in place.
"Securities and Exchange Commission" includes any governmental
body or agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"Stockholder Shares" means (i) any Common Stock held by a
Stockholder as of the date hereof, (ii) any Common Stock issued or issuable to a
Stockholder under any options held by such Stockholder as of the date hereof,
(iii) any other shares of any class or series of capital stock of the Company
held by a Stockholder, and (iv) any capital stock or other equity securities
issued or issuable directly or indirectly with respect to the Common Stock
referred to in clauses (i), (ii), or (iii) above by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, and after any Transfer permitted
by this Agreement, any such shares owned by the transferee thereof. As to any
particular shares constituting Stockholder Shares, such shares shall cease to be
Stockholder Shares when they have been (x) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them or (y) sold to the public through a broker, dealer or market maker
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act. Notwithstanding the foregoing, for purposes of paragraph 4(d)
hereof, any unvested options held by any Stockholder shall be included in the
calculation of the percentage of Stockholder Shares owned by such Stockholder,
but shall not be included as Specified Shares.
"Stockholders" has the meaning set forth in the preamble.
"Sub Board" has the meaning set forth in paragraph 1(a).
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or
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Persons shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control the
managing director or general partner of such limited liability company,
partnership, association or other business entity.
"Threshold Amount" has the meaning set forth in paragraph
5(c)(vii).
"Transfer" has the meaning set forth in paragraph 4(a).
"Vituli" has the meaning set forth in the preamble.
"Wholly-Owned Subsidiary" has the meaning set forth in the Stock
Purchase Agreement.
12. Transfers in Violation of Agreement. Any Transfer or
attempted Transfer of any Stockholder Shares in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer on
its books or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.
13. Amendment and Waiver. Except as otherwise provided herein,
no modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company, the Investor Holders, the ARI Holders or the
holders of Stockholder Shares unless such modification, amendment or waiver is
approved in writing by the Company, the Investors, ARI or the holders of a
majority of the Stockholder Shares, respectively. The failure of any party to
enforce any of the provisions of this Agreement shall in no way be construed as
a waiver of such provisions and shall not affect the right of such party
thereafter to enforce each and every provision of this Agreement in accordance
with its terms.
14. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
15. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
16. Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and permitted
assigns of each of them, so long as they hold
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Stockholder Shares; provided that neither the Investors nor ARI may assign its
rights under this Agreement to any subsequent holder of Stockholder Shares
except to an Investor Holder or a ARI Holder, respectively.
17. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
18. Remedies. The Company and the holders of Stockholder Shares
shall be entitled to enforce their rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages would not be an adequate remedy for any
breach of the provisions of this Agreement and that the Company, any Investor
Holder, any ARI Holder and any Management Holder may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
19. Notices. Any notice provided for in this Agreement shall be
in writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the schedules hereto and to any subsequent
holder of Stockholder Shares subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices shall be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service as follows:
(a) Notices to the Company and the Management Holders:
Carrols Holdings Corporation
968 James Street
Syracuse, New York 13203
Attn: Mr. Alan Vituli
With copies (which shall not constitute notice) to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attn: Andre Weiss, Esq.
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(b) Notices to the Investors:
Madison Dearborn Capital Partners, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
With copies (which shall not constitute notice) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Edward T. Swan, Esq.
(c) Notices to ARI:
Atlantic Restaurants, Inc,
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, CT 06902
Attn: Paul Durrant
With copies (which shall not constitute notice) to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue, 10th floor
New York, NY 10022
Attn: Selig Sacks, Esq.
20. Governing Law. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
New York or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
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In furtherance of the foregoing, the internal law of the State of New York shall
control the interpretation and construction of this Agreement (and all schedules
and exhibits hereto), even though under that jurisdiction's choice of law or
conflict of law analysis, the substantive law of some other jurisdiction would
ordinarily apply.
21. Business Days. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the state in which the Company's chief executive office is located,
the time period shall automatically be extended to the business day immediately
following such Saturday, Sunday or legal holiday.
22. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
CARROLS HOLDINGS CORPORATION
By
---------------------------------------
Its
---------------------------------------
MADISON DEARBORN CAPITAL
PARTNERS, L.P.
By Madison Dearborn Partners, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
By
-----------------------------
Benjamin D. Chereskin
Its
-----------------------------
MADISON DEARBORN CAPITAL
PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
By
----------------------------
Benjamin D. Chereskin
Its
----------------------------
ATLANTIC RESTAURANTS, INC.
By
------------------------------------
Its
------------------------------------
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------------------------------------
Alan Vituli
------------------------------------
Daniel T. Accordino
------------------------------------
Joseph A. Zirkman
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The undersigned, as the indirect owner of all or substantially all of the
outstanding capital stock of Atlantic Restaurants, Inc., does hereby guarantee
the obligations of Atlantic Restaurants, Inc. under this Stockholders Agreement
and shall cause Atlantic Restaurants, Inc. to comply with the provisions of this
Stockholders Agreement.
BAHRAIN INTERNATIONAL BANK, E.C.
By
------------------------------------
Its
------------------------------------
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SCHEDULE OF STOCKHOLDERS
Name and Address Number of Stockholder Shares
- ---------------- ----------------------------
Atlantic Restaurants, Inc.
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, CT 06902
Attn.: Paul Durrant
Madison Dearborn Capital Partners, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn.: Benjamin D. Chereskin, Robin P. Selati, and William J. Hunckler III
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn.: Benjamin D. Chereskin, Robin P. Selati, and William J. Hunckler III
Alan Vituli
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
Daniel T. Accordino
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
Joseph A. Zirkman
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
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EXHIBIT A
CARROLS HOLDINGS CORPORATION
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "Agreement") is made as of
_________, 1997 by and among Carrols Holdings Corporation, a Delaware
corporation (the "Company"), and the Persons listed on Schedule A attached
hereto (collectively referred to herein as the "Stockholders," and each as a
"Stockholder").
The Company, Atlantic Restaurants, Inc., Madison Dearborn Capital
Partners, L.P., Madison Dearborn Capital Partners II, L.P. (together with
Madison Dearborn Capital Partners, L.P., the "Investors") are parties to a Stock
Purchase Agreement dated as of February __, 1997 (the "Purchase Agreement"). The
execution and delivery of this Agreement is a condition to the Closing under the
Purchase Agreement. Unless otherwise provided in this Agreement, capitalized
terms used herein shall have the meanings set forth in paragraph 8 hereof.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time, the holders of a
majority of the Investor Registrable Securities, as a group, or the holders of a
majority of the ARI Registrable Securities, as a group, may request registration
under the Securities Act of all or any portion of their Registrable Securities
on Form S-1 or any similar long-form registration ("Long-Form Registrations")
or, if available, on Form S-2 or S-3 or any similar short-form registration
("Short-Form Registrations"); provided that (i) in the case of the first Demand
Registration hereunder, the holders of a majority of the Investor Registrable
Securities and the holders of a majority of the ARI Registrable Securities, as a
group, must consent to such registration unless the Company has previously
completed a registered public offering of its Common Stock under the Securities
Act and (ii) all Long-Form Registrations shall be underwritten registrations.
All registrations requested pursuant to this paragraph 1(a) are referred to
herein as "Demand Registrations". Each request for a Demand Registration shall
specify the approximate number of Registrable Securities requested to be
registered and the anticipated per share price range for such offering. Within
ten days after receipt of any such request, the Company shall give written
notice of such requested registration to all other holders of Registrable
Securities and shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations. The holders of a majority of the
Investor Registrable Securities, as a group, and the holders of a majority of
the ARI Registrable
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Securities, as a group, shall each be entitled to request three (3) Long-Form
Registrations in which the Company shall pay all Registration Expenses; provided
that the aggregate offering value of the Registrable Securities requested to be
registered in any Long-Form Registration must be equal to at least $15,000,000.
A registration shall not count as one of the permitted Long-Form Registrations
until it has become effective, and no Long-Form Registration shall count as one
of the permitted Long-Form Registrations unless the person or group making such
request is able to register and sell at least 90% of the Registrable Securities
requested to be included in such registration; provided that in any event the
Company shall pay all Registration Expenses in connection with any registration
initiated as a Long-Form Registration whether or not it has become effective and
whether or not such registration has counted as one of the permitted Long-Form
Registrations.
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), the holders of a majority of
the Investor Registrable Securities, as a group, and the holders of a majority
of the ARI Registrable Securities, as a group, shall be entitled to request an
unlimited number of Short-Form Registrations in which the Company shall pay all
Registration Expenses; provided that the aggregate offering value of the
Registrable Securities requested to be registered in any Short-Form Registration
which is qualified under Rule 415 under the Securities Act must be equal to at
least $5,000,000 and which contemplates an underwritten offering must be equal
to at least $10,000,000. Demand Registrations shall be Short-Form Registrations
whenever the Company is permitted to use any applicable short form. After the
Company has become subject to the reporting requirements of the Securities
Exchange Act, the Company shall use its best efforts to make Short-Form
Registrations on Form S-3 available for the sale of Registrable Securities.
(d) Priority on Demand Registrations. If a Demand Registration is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold therein without adversely affecting the marketability of the
offering, the Company shall include in such registration prior to the inclusion
of any securities which are not Registrable Securities the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold without adversely affecting the marketability of the offering, pro
rata among the respective holders thereof on the basis of the amount of
Registrable Securities owned by each such holder.
(e) Restrictions on Demand Registrations. The Company shall not
be obligated to effect any Demand Registration within 180 days after the
effective date of a previous Demand Registration or a previous registration in
which the holders of Registrable Securities were given piggyback rights pursuant
to paragraph 2 below. The Company may postpone for up to 120 days the filing or
the effectiveness of a registration statement for a Demand Registration if the
Company in good faith determines that such Demand Registration would reasonably
be expected to have a material adverse effect on any proposal or plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer, reorganization or similar transaction; provided that in
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such event, the holders of Registrable Securities initially requesting such
Demand Registration shall be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration shall not count as one of the
permitted Demand Registrations hereunder and the Company shall pay all
Registration Expenses in connection with such registration.
(f) Selection of Underwriters. The Company shall have the right
to select the investment banker(s) and manager(s) to administer the offering,
subject to the approval of the holders of the Registrable Securities requesting
registration hereunder.
(g) Other Registration Rights. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
prior written consent of the holders of at least 80% of the Registrable
Securities; provided that the Company may grant rights to other Persons to
participate in Piggyback Registrations so long as such rights are subordinate to
the rights of the holders of Registrable Securities with respect to such
Piggyback Registrations as set forth in paragraphs 2(c) and 2(d) below.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
shall give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and shall include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 20 days after the receipt of the
Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders
of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the marketability of the offering, the Company shall include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, and (iii) third, other
securities requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering
without adversely affecting the marketability of the offering, the Company shall
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include in such registration (i) first, the securities requested to be included
therein by the holders requesting such registration, and the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by each such holder, and (ii) second, other securities requested to be
included in such registration.
(e) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least 180 days has elapsed from the effective date of such
previous registration.
(f) Selection of Underwriters. If any Piggyback Registration is
an underwritten offering, the Company shall select the investment banker(s) and
manager(s) for the offering.
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period beginning on the effective date of any underwritten Demand Registration
or any underwritten Piggyback Registration in which Registrable Securities are
included (except as part of such underwritten registration), unless the
underwriters managing the registered public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) shall cause each holder of
its Common Stock, or any securities convertible into or exchangeable or
exercisable for shares of its Common Stock purchased from the Company at any
time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its reasonable best efforts to effect
the registration and the sale of such
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Registrable Securities in accordance with the intended method of disposition
thereof and pursuant thereto the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission
a registration statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents shall be subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than 180 days and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed,
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to be listed on the NASD automated quotation system and, if listed on the NASD
automated quotation system, use its best efforts to secure designation of all
such Registrable Securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 of the
Securities and Exchange Commission or, failing that, to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order; and
(l) permit any holder of Registrable Securities which holder, in
its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included.
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5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts,
commissions and underwriters' counsel fees) and other Persons retained by the
Company (all such expenses being herein called "Registration Expenses"), shall
be borne as provided in this Agreement, except that the Company shall, in any
event, pay its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit or quarterly review and the expenses
and fees for listing the securities to be registered on each securities exchange
on which similar securities issued by the Company are then listed or on the NASD
automated quotation system.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Registrable
Securities included in such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities included in such registration and for the reasonable fees
and disbursements of each additional counsel retained by any holder of
Registrable Securities for the purpose of rendering a legal opinion on behalf of
such holder in connection with any underwritten Demand Registration or Piggyback
Registration.
(c) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder shall pay those Registration Expenses allocable to the registration of
such holder's securities so included, and any Registration Expenses not so
allocable shall be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by
law, each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same
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extent as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, shall indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation to indemnify
shall be individual, not joint and several, for each holder and shall be limited
to the net amount of proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and
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executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements; provided that no holder of Registrable Securities included in any
underwritten registration shall be required to make any representations or
warranties to the Company or the underwriters (other than representations and
warranties regarding such holder and such holder's intended method of
distribution) or to undertake any indemnification obligations to the Company or
the underwriters with respect thereto, except as otherwise provided in paragraph
6 hereof.
8. Definitions.
"Affiliate" of a Person other than an individual means any other
Person, directly or indirectly controlling, controlled by or under common
control with such Person or, with respect to any partnership, any partner
thereof.
"ARI" means Atlantic Restaurants, Inc., a Delaware corporation.
"ARI Registrable Securities" means (i) any Common Stock held by
ARI as of the date hereof and (ii) any Common Stock issued or issuable with
respect to the securities referred to in clause (i) by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular ARI
Registrable Securities, such securities shall cease to be ARI Registrable
Securities when they cease to be held by ARI or any of its Affiliates.
"Closing" shall have the meaning set forth in the Stock Purchase
Agreement.
"Common Stock" means the Company's common stock, par value $0.01
per share.
"Investor Registrable Securities" means (i) any Common Stock
issued or transferred to the Investors pursuant to the Purchase Agreement and
(ii) any Common Stock issued or issuable with respect to the securities referred
to in clause (i) by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Investor Registrable Securities, such
securities shall cease to be Investor Registrable Securities when they cease to
be held by any Investor or any of their Affiliates.
"Management Holders" means Alan Vituli, Daniel T. Accordino and
Joseph A. Zirkman.
"Other Registrable Securities" means (i) any employee stock
options held by any Management Holder and shares of Common Stock acquired by any
such Management Holder hereafter through the exercise of employee stock options
or any other option held as of the date hereof, and (ii) any Common Stock issued
or issuable with respect to the securities referred to in clause (i) by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Other Registrable Securities, such securities shall cease to be Other
Registrable Securities when they cease to be held by a Management Holder or his
Family Group. For purposes of this Agreement,
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"Family Group" means an individual's spouse and descendants (whether natural or
adopted) and any trust solely for the benefit of the individual and/or the
individual's spouse and/or descendants.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or
department, agency or political subdivision thereof.
"Public Sale" means any sale of securities to the public pursuant
to an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
"Registrable Securities" means (i) Investor Registrable
Securities, (ii) ARI Registrable Securities or (iii) Other Registrable
Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
Unless otherwise stated, other capitalized terms contained herein
have the meanings set forth in the Purchase Agreement.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not hereafter
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the holders of Registrable Securities in
this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company
shall not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) Remedies. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
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(d) Amendments and Waivers. Except as otherwise provided herein,
no modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company, the holders of Investor Registrable Securities,
the holders of ARI Registrable Securities or the holders of Other Registrable
Securities unless such modification, amendment or waiver is approved in writing
by the Company, the holders of a majority of the Investor Registrable
Securities, the holders of a majority of the ARI Registrable Securities or the
holders of a majority of the Other Registrable Securities, respectively. The
failure of any party to enforce any of the provisions of this Agreement shall in
no way be construed as a waiver of such provisions and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
(e) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and permitted assigns of the parties
hereto whether so expressed or not; provided that the parties hereto may only
assign their rights under this Agreement to, (i) in the case of an individual,
pursuant to applicable laws of descent and distribution or among such
individual's Family Group or (ii) in the case of a Person other than an
individual, among its Affiliates, and provided that any restrictions contained
in this Agreement shall continue to be applicable to the holders of Registrable
Securities after any such assignment other than a Public Sale.
(f) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
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(j) Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Stockholder at the address indicated on the
Schedule A attached hereto and to the Company at the address indicated below:
Carrols Holdings Corporation
968 James Street
Syracuse, New York 13203
Attention: Mr. Alan Vituli
With copies (which shall not constitute notice) to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Andre Weiss, Esq.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
CARROLS HOLDINGS CORPORATION
By__________________________________________
Its_________________________________________
MADISON DEARBORN CAPITAL PARTNERS, L.P.
By Madison Dearborn Partners, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
By_______________________________
Benjamin D. Chereskin
Its______________________________
MADISON DEARBORN CAPITAL PARTNERS II,
L.P.
By Madison Dearborn Partners II, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
By_________________________________
Benjamin D. Chereskin
Its________________________________
ATLANTIC RESTAURANTS, INC.
By____________________________
Its___________________________
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___________________________________
Alan Vituli
___________________________________
Daniel T. Accordino
___________________________________
Joseph A. Zirkman
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The undersigned, as the indirect owner of all or substantially
all of the outstanding capital stock of Atlantic Restaurants, Inc., does hereby
guarantee the obligations of Atlantic Restaurants, Inc. under this Registration
Agreement and shall cause Atlantic Restaurants, Inc. to comply with the
provisions of this Registration Agreement.
BAHRAIN INTERNATIONAL BANK, E.C.
By_________________________________
Its_________________________________
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Schedule A
SCHEDULE OF STOCKHOLDERS
Atlantic Restaurants, Inc.
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, CT 06902
Attn.: Paul Durrant
Madison Dearborn Capital Partners, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn.: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn.: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
Alan Vituli
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
Daniel T. Accordino
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
Joseph A. Zirkman
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
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EXHIBIT D1
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended and Restated Employment Agreement
("Agreement") effective as of the closing of the Stock Purchase Agreement, as
defined below (the "Effective Date"), by and between CARROLS CORPORATION
("Employer"), a corporation organized under the laws of Delaware and whose
address for the purposes of this agreement is 968 James Street, Syracuse, New
York, 13217 and ALAN VITULI whose principal residence is Old Road, Windham, New
York 12496 ("Employee"):
W I T N E S S E T H:
WHEREAS, pursuant to the terms of an employment agreement dated
January 1, 1995 between Employer and Employee as amended effective April 3, 1996
(together the "Prior Employment Agreement"), Employee has been and is presently
employed by the Employer as its Chairman of the Board and Chief Executive
Officer;
WHEREAS, concurrently with the execution and delivery hereof,
pursuant to a certain Stock Purchase Agreement (the "Stock Purchase Agreement")
dated as of February 25, 1997, among Carrols Holdings Corporation ("Holdings"),
Atlantic Restaurants, Inc. ("ARI"), Bahrain International Bank (E.C.) (for the
limited purposes set forth therein), Madison Dearborn Capital Partners, L.P.
("MD") and Madison Dearborn Capital Partners II, L.P. (together with MD,
"MDCP"), MDCP has acquired from ARI and Holdings an aggregate of 566,667 shares
of the outstanding common stock of Holdings on a fully diluted basis; and
WHEREAS, as part of the transactions contemplated by the Stock
Purchase Agreement, the parties thereto have agreed that Employer and Employee
shall enter into this Agreement which shall supersede in its entirety the Prior
Employment Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein set forth and other good and valuable consideration, the
receipt and adequacy of which is mutually acknowledged, it is agreed by and
between the parties as follows:
1. DEFINITIONS
For purposes of this Agreement, unless the context requires
otherwise, the following words and phrases shall have the meanings indicated
below:
"Change of Control" shall mean:
(a) The acquisition (other than from Holdings) by any
person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of
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1934 (the "Exchange Act"), excluding for this purpose any employee benefit plan
of Holdings or its subsidiaries which acquires beneficial ownership of voting
securities of Holdings, of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act), of more than 50% of either the then
outstanding shares of common stock or the combined voting power of Holdings'
then outstanding voting securities entitled to vote generally in the election of
directors;
(b)(1) Individuals who are elected as members of the new
Board of Directors of Holdings (the "Incumbent Board") pursuant to the terms of
the Stockholders Agreement executed in connection with the Stock Purchase
Agreement thereto (the "Stockholders Agreement") cease for any reason to
constitute at least a majority of the Board of Directors; provided that any
person becoming a director on or after the effective date of the Stockholders
Agreement whose election, or nomination for election by Holdings' shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of Directors of Holdings, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) shall be for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board,
(b)(2) Notwithstanding the foregoing, paragraph (b)(1)
above shall not apply to any change in the Incumbent Board during the period in
which the Stockholders Agreement is in effect and a majority of the Board of
Directors of Holdings is designated or otherwise appointed to serve on the Board
of Directors under the provisions of such Stockholders Agreement;
(c) Approval and consummation of a reorganization, merger,
or consolidation, in each case, with respect to which persons who were the
stockholders of Holdings immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50% of the combined
voting power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, or a liquidation or dissolution of Holdings or of the sale of all or
substantially all of the assets of Holdings; or
(d) Holdings ceases to own at least 50 percent of the
Employer.
(e) A Change of Control shall not be deemed to have
occurred as a result of any purchase or acquisition of shares of capital stock
in Holdings by MDCP and its affiliates, ARI and its affiliates, or any
combination thereof.
"Cause" shall mean: (i) the commission by the Employee of
a felony; (ii) the unauthorized disclosure of confidential proprietary
information of the Employer which disclosure the Employee knows or reasonably
should have known would be reasonably likely to result in material damage to the
Employer; (iii) the breach by the Employee of any material provision of this
Agreement, which breach, if curable, is not remedied within thirty (30) days
after the Employee's receipt of written notice thereof provided, however, that
the Employer need not
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permit the Employee to cure any breach which has been the subject of a prior
written notice; (iv) the engagement in material self dealing in breach of
fiduciary duties with respect to the Employer's assets or properties unless
disclosed to and approved by the disinterested members of the Board of
Directors; (v) an act of gross misconduct in connection with the Employee's
duties hereunder; or (vi) chronic alcohol or drug abuse rendering Employee
incapable of carrying out his duties hereunder as determined in good faith by
the Board of Directors continuing after the Employee is given a reasonable
opportunity to obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" shall mean (i) the material failure of the Employer
to comply with the provisions of this Agreement which failure shall not cease
promptly and in no event more than thirty (30) days after the Employer's receipt
of written notice from the Employee objecting to such conduct; (ii) any
termination by the Employer of the Employee's employment other than as expressly
permitted in this Agreement; or (iii) the assignment to Employee of duties and
responsibilities materially inconsistent with those duties and responsibilities
customarily assigned to individuals holding the position of Chairman and Chief
Executive Officer of a company of comparable size or the substantial reduction
by Employer of Employee's duties and responsibilities and, if curable, not
remedied by Employer within 30 days after receipt of written notice.
2. REPRESENTATIONS AND WARRANTIES
Employee represents and warrants that he is not subject to any
restrictive covenants or other agreements or legal restrictions in favor of any
person which would in any way preclude, inhibit, impair, limit or be violated by
his employment by the Employer or the performance of his duties, as contemplated
herein.
3. EMPLOYMENT
The Employer hereby employs Employee and Employee accepts such
employment as Chairman and Chief Executive Officer of the Employer. As its
Chairman and Chief Executive Officer, Employee shall render such services to the
Employer as are customarily rendered by the Chairman and Chief Executive Officer
of comparable companies and as required by the articles and by-laws of the
Employer. Employee accepts such employment and, consistent with fiduciary
standards which exist between an employer and an employee shall perform and
discharge the duties that may be assigned to him from time to time by the
Employer in an efficient, trustworthy and businesslike manner. It is
specifically agreed that nothing in this Agreement shall prohibit Employee from
(i) serving on corporate, civic or charitable boards or committees; (ii)
engaging directly or indirectly, in activities with other public or private
companies or ventures; or (iii) making investments in any capacity whatsoever,
provided only that, such activities or any of them do not impair Employee's
performance of his duties for the Employer.
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4. PLACE OF EMPLOYMENT
During the Term, the Employee shall render services where and as
reasonably required by the Employer. In conformance with the foregoing and not
in limitation thereof, Employee agrees to take such trips as shall be consistent
with or reasonably necessary in connection with his duties. Employer will also
maintain an office within ten (10) miles of the Employee's residence determined
as of the date hereof and shall furnish the Employee both at the Employer's
principal office and at such other location, which may include the Employee's
residence, with an office and secretarial help and such other assistance,
facilities and services consistent with Employee's position and necessary for
the adequate performance of his duties.
5. TERM
Subject to the provisions of Section 11 hereof, the term of this
Agreement shall commence on the Effective Date and shall expire on the fourth
anniversary of the date hereof (the "Initial Term"). This Agreement shall be
automatically renewed for successive twelve (12) month periods on all the
remaining terms and conditions set forth herein, unless either party elects not
to renew this Agreement by giving written notice to the other at least ninety
(90) days before a scheduled expiration date. The Initial Term of this Agreement
together with any such renewals are collectively referred to herein as the
"Term."
6. COMPENSATION
(a) As compensation for all services rendered and to be
rendered by Employee hereunder and the fulfillment by Employee of all of his
obligations herein, the Employer shall pay Employee a base salary (the "Base
Salary") at the rate of $400,000 for the first year of the Term payable in
accordance with the Employer's customary payroll practices. Effective on each
succeeding January 1 during the Term, the Employee's then current Base Salary
shall be increased by a minimum of $25,000 or such greater amount as may be
determined by the Compensation Committee of the Board in its sole discretion
(the "Adjusted Base Salary").
(b) Employee will participate in the Executive Bonus Plan
of the Employer. Notwithstanding any provision contained herein or in the
Executive Bonus Plan to the contrary, no amendment to the Executive Bonus Plan
shall have a material adverse impact on the Employee. If the Executive Bonus
Plan is discontinued, the Employer agrees to establish a plan which will provide
similar potential benefits to the Employee.
(c) Employee will also be eligible to participate in all
phantom and/or actual stock option programs applicable to executive employees as
determined by the Compensation Committee of the Board in its sole discretion.
Employer granted Employee options in accordance with the provisions of the
Carrols Holdings Corporation 1996 Long-Term Incentive Plan, the nonqualified
stock option agreement related thereto and the Unvested Stock Option Agreement
issued to Employee on ____________, 1997.
(d) The Employer shall deduct from the compensation
described in (a), (b) and (c) above, any federal, state or city withholding
taxes, social security contributions and
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any other amounts which may be required to be deducted or withheld by the
Employer pursuant to any federal, state or city laws, rules or regulations.
(e) Any compensation otherwise payable to the Employee
pursuant to this Section in respect of any period during which the Employee is
disabled (as contemplated in Section 11) shall be reduced by any amounts payable
to the Employee for loss of earnings or the like under any insurance plan or
policy the premiums for which are paid for in their entirety by the Employer.
7. STOCK PURCHASE
As a condition of this Agreement, Employee has purchased 9,827
shares of common stock, $.01 par value per share, of Holdings at a purchase
price of $101.7646 per share.
8. BUSINESS EXPENSES
(a) The Employer shall pay, on behalf of Employee, all
dues to professional societies and other organizations as are customarily joined
by individuals holding the position of Chairman and Chief Executive Officer of
businesses similar to the Employer. The Employer will require and shall
reimburse the Employee for his out of pocket cost of one complete physical
examination per fiscal year of the Term.
(b) The Employer agrees that the Employee is authorized to
incur reasonable expenses in the performance of his duties hereunder and agrees
that all reasonable expenses incurred by Employee in the discharge and
fulfillment of his duties for the Employer, as set forth in Section 3, will be
promptly reimbursed or paid by the Employer upon written substantiation signed
by Employee, itemizing said expenses and containing all applicable vouchers.
Employee shall be entitled to receive prompt reimbursement for all reasonable
travel and entertainment expenses and the costs of attending conferences and
seminars, so long as such expenses relate to Employee's ability to serve the
best interests of the Employer. In addition, within 30 days of the rendition of
the applicable invoices, Employer shall reimburse Employee annually for the
reasonable costs incurred by Employee in tax planning and tax return preparation
in an annual amount not to exceed $5,000.
9. BENEFITS AND INSURANCE
(a) The Employer agrees that, during the Term, the
Employee shall be insured under all insurance policies and shall receive all
benefits under all pension and welfare benefit plans (including, without
limitation group life, medical, major medical and disability insurance) that the
Employer may maintain and keep in force during the Term of the Agreement for the
benefit of the Employer's employees, subject to the terms, provisions and
conditions of such pension and welfare benefit plans or insurance and the
agreements with underwriters relating to same. In addition, Employer will
provide medical and major medical insurance for Employee and his spouse during
the Term and for the remainder of their respective lives and during such period
such benefit shall also provide coverage to the Employee's eligible dependents,
notwithstanding the termination of Employee's employment hereunder, whether
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voluntary or involuntary, or his Disability or death, consistent with the level
and type of coverage provided to Employee by Employer's policy at March 1, 1996,
provided however, that the provisions of this Section 9(a) will not require the
Employer to continue post retirement or post employment medical coverage for the
Employee or his spouse in the event the Employer terminates its post retirement
and/or post employment coverage on a company-wide basis. In the event of such
termination of coverage, the Employee shall be entitled to obtain a replacement
policy consistent with the level and type of coverage described in the preceding
sentence covering the Employee and his spouse and the Employer shall reimburse
the Employee on an annual basis with respect to the cost of the same.
(b) ITT Hartford life insurance policy No. U01732239 (the
"Policy"), owned by Shirley Vituli and Arthur Kunofsky as Trustees under the
Alan Vituli Insurance Trust, dated June 22, 1989 (the "Owner"), which provides a
death benefit of One Million Five Hundred Thousand Dollars ($1,500,000), is
presently maintained by Employer pursuant to a Split-Dollar Insurance Agreement,
dated July 1, 1995, as amended during April 1996 (the "Split-Dollar Agreement").
Employer acknowledges such agreement and agrees to be bound by its provisions,
provided however, that the sum total of the Employer's outstanding premium
payments shall be returned to the Employer from the proceeds of the cash value
of the policy if surrendered during the Employee's lifetime, and in the event of
Employee's death, the Employer shall be entitled to receive that portion of the
death benefit in excess of $1,500,000 up to but not exceeding the sum total of
the Employer's outstanding premium payments from the proceeds of the death
benefit.
(c) Pursuant to the Split-Dollar Agreement, until the
earlier to occur of Employee's 65th birthday or Employee's death, Employer
shall, on or before the due date of each premium, make the premium payments on
the Policy. Employer shall provide written proof of such payment to Employee
within fifteen (15) days of the due date of the premium. If Employer shall fail
to supply such proof, Employee shall be entitled to pay the premium and be
reimbursed by Employer.
10. VACATION
Employee shall be entitled to an aggregate of four (4) weeks paid
vacation during each year of the Term at time or times reasonably agreeable to
both the Employee and the Employer, it being understood that any portion of such
vacation not taken in such year shall not be available to be taken during any
other year.
11. TERMINATION; CHANGE OF CONTROL; DEATH; DISABILITY
(a) Subject to the provisions of this Agreement, either
the Employer or the Employee may terminate the employment of the Employee after
receipt of written notice by the other party hereto provided that all applicable
cure periods have expired if Employer terminates the employment of Employee for
Cause or Employee terminates his employment with Good Reason.
(b) If within six (6) months following a Change of Control
occurring during the Term, the employment of the Employee hereunder is
terminated without Cause, the
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Employee shall be paid: (1) his accrued but unpaid Base Salary and vacation as
of the date of termination; (2) all amounts previously deferred under the
Executive Bonus Plan (together with any interest accrued thereon) and not yet
paid by the Employer; (3) continue any and all benefits and insurance policies
as required by Section 9 hereof and (4)(i) if such Change of Control occurs
during the first two years of the Initial Term, a cash payment in an amount
equal to 2.99 multiplied by the average of the sum of the Base Salary and the
Annual Bonus paid or deferred in accordance with the Executive Bonus Plan in the
five calendar years prior to the date of termination (the "Five-Year
Compensation Average") or (ii) if such Change of Control occurs after the first
two years of the Initial Term, a cash lump sum equal to the Base Salary actually
paid to the Employee for the prior twelve (12) month period and any amounts
payable under the Executive Bonus Plan, as and when such amounts are due and
payable under the terms of the Executive Bonus Plan.
(c) If the Employer (1) during the Term enters into a
binding written agreement to engage in a transaction which, if consummated,
would result in a Change of Control; (2) such transaction is consummated within
six (6) months after the last date of the Term; and (3) subsequent to entering
into such agreement the Employer terminates employment of the Employee without
Cause, the Employer shall pay to the Employee an amount equal to the payment set
forth in Section 11(b) hereof.
(d) If the Employee terminates his employment pursuant to
Section 11(a) hereof without Good Reason or the Employer terminates the
employment of the Employee hereunder for Cause, the Employer's only obligations
hereunder shall be to pay to the Employee his accrued but unpaid Base Salary and
vacation pay as of the date of termination plus any compensation or bonus
payments previously deferred by the Employee under the Executive Bonus Plan
(together with any interest accrued thereon) and not yet paid by the Employer
and continue any and all such benefits and insurance policies as required by
Section 9 hereof. The Employee shall have no further obligation to perform
services for the Employer.
(e) Other than in the case of Employee receiving benefits
under paragraph (b) above following a Change of Control, if the Employer
terminates employment of the Employee hereunder without Cause, or the Employee
terminates for Good Reason, the Employer shall pay to the Employee (1) his
accrued but unpaid Base Salary and vacation pay as of the date of termination;
(2) a cash payment in an amount equal to 2.99 multiplied by the Employee's Five
Year Compensation Average; (3) all amounts previously deferred by the Employee
under the Executive Bonus Plan (together with any interest accrued thereon) and
not yet paid by the Employer; and (4) continue any and all such benefits and
insurance policies as required by Section 9 hereof.
(f) If the Employee becomes physically or mentally
disabled during the Term so that he is unable to perform the services required
of him pursuant to this Agreement for a period of six (6) successive months, or
an aggregate of six (6) months in any twelve (12) month period, the Employer may
give the Employee written notice of its intention to terminate the services of
the Employee hereunder. In such event, the Employee's employment with the
Employer shall terminate effective on the thirtieth (30th) day after receipt of
such notice by the
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Employee (the "Disability Effective Date") provided the Employee shall not have
returned to the performance of the Employee's duties. Subject to the provisions
of Section 6(f), in the event the Employee's employment is terminated by reason
of disability, the Employer's only obligations hereunder shall be (1) to
continue the Base Salary, (at the rate in effect on the Disability Effective
Date) for a period of three (3) years from the Disability Effective Date; (2) to
pay a pro rata portion of the Annual Bonus for the year in which the Employee's
employment is terminated as and when such amounts are due and payable under the
term of the Executive Bonus Plan; (3) to pay all amounts previously deferred
under the Executive Bonus Plan together with any interest accrued thereon) as
prescribed by the Employee; and (4) to continue any and all such benefits and
insurance policies as required by Section 9 hereof.
(g) In the event of the Employee's death during the Term,
the Employer shall pay to his spouse, if he is survived by a spouse, or if not,
to the estate of the Employee, (1) the Employee's accrued and unpaid Base Salary
(at the rate in effect on the date of death) as of the date of death; (2) a pro
rata share of the Annual Bonus for the year of his death as and when such
amounts are due and payable under the term of the Executive Bonus Plan; (3) all
amounts previously deferred under the Executive Bonus Plan (together with any
interest accrued thereon) and not yet paid by the Employer in the manner
prescribed by the executor of the Employee's estate and (4) continue any and all
such benefits and insurance policies as required by Section 9 hereof.
(h) If the Employer does not continue the Employee's
employment upon expiration of the Initial Term, the only obligations of the
Employer hereunder shall be to pay the Employee in a cash lump sum an amount
equal to the Base Salary actually paid to the Employee for the prior twelve (12)
month period and any amounts payable under the Executive Bonus Plan, as and when
such amounts are due and payable under the terms of the Executive Bonus Plan,
and to continue any and all such benefits and insurance policies as required by
Section 9 hereof.
(i) Notwithstanding anything contained in this Agreement
to the contrary, to the extent that the payments and benefits provided under
this Agreement or provided for the benefit of the Employee under any other plan
or agreement of or with the Employer (each such payment or benefit, a "Payment,"
and such payments and benefits collectively, the "Payments"), would be subject
to the excise tax imposed under Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties are hereinafter collectively referred to as the
"Excise Tax"), the Payments shall be reduced if and to the extent necessary so
that no Payment shall be subject to the Excise Tax. The Employer shall reduce or
eliminate the Payments by first reducing or eliminating the payments due under
Sections 11(b), 11(c) or 11(e) hereof, then by reducing or eliminating any other
amounts payable in cash, and then by reducing or eliminating benefits which are
not payable in cash, in each case in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the date of the
determination.
12. RESTRICTIVE COVENANTS
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(a) During the Term of this Agreement and for a period of
two years following termination of this Agreement, the Employee (i) will not
violate or cause the Employer to violate the terms of any agreement, including
any franchise agreement, which the Employer is obligated under, except with the
express written consent of the duly empowered officer of the Employer or
pursuant to an order of a court of competent jurisdiction; and (ii) divulge or
use any confidential information the effect of which would be injurious to the
Employer without the prior written consent of a duly empowered officer of the
Employer. Employee shall have the right to approve the provisions of any such
franchise agreement which restricts Employee's future employment or business
interests. During the Term of this Agreement and for a period of two years
following termination of Employee's employment hereunder, the Employee will not
solicit or employ any person, who was employed by the Employer within six months
prior to the termination of Employee's employment, in any business in which
Employee has a material interest, direct or indirect, as an officer, partner,
shareholder or beneficial owner. The preceding sentence shall not prohibit the
Employee from hiring (i) the individual who is the general counsel of the
Employer as of the date of the closing of the Stock Purchase Agreement at any
time, or (ii) any person whose employment is terminated involuntarily by the
Employer during the Term or at any time thereafter provided that such hiring
shall not occur until after the Employee's termination of employment hereunder.
(b) During the Term of employment and for a period of two
(2) years after the termination of the Employee's employment hereunder, Employee
will not in the Area (as defined in Section 12 (c) below) either directly or
indirectly engage in one or more of the following with any Burger King
franchisee: the acquisition of, financing of, providing of advice or consulting
services to, or ownership of the operations of a franchised Burger King
restaurant, as an employee, officer, consultant, independent contractor, partner
or shareholder. This shall not prevent Employee from engaging in any activity
related to the acquisition or ownership of the business of Burger King
Corporation or any other business activity other than that described in this
Section 12(b). In addition, this restriction shall not prevent Employee from
making a passive investment in real estate to be used by Burger King Corporation
or any other fast food restaurants.
(c) For purposes of this Agreement, Area shall mean the
continental United States, Puerto Rico and Canada.
(d) The parties hereto, recognizing that irreparable
injury will result to the Employer, its business and property in the event of
the Employee's breach of this Employee covenant and non-competition provision,
agree that in the event of any such breach by the Employee, the Employer will be
entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by the Employee, the Employee's
partners, agents, servants, employers, employees, and all persons acting for or
with the Employee. Employee represents and admits that (i) in the event of
termination of this Agreement, Employee's experience and capabilities are such
that Employee can obtain employment in a business engaged in other lines and/or
of a different nature than the business of the Employer, and that the
enforcement of a remedy by way of injunction will not prevent the Employee from
earning a livelihood, (ii) this Employee covenant and non-competition provision
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was entered into in connection with the Employee's sale of his ownership
interest in Holdings and in the absence of this provision the sale would not
have been consummated and (iii) this amendment and restatement of the Prior
Employment Agreement shall not eliminate or in any way reduce the Employee's
obligations under the provisions of this Section 12 which shall remain in full
force and effect.
13. INDEMNIFICATION
To the fullest extent permitted by Section 145 of the General
Corporation Law of Delaware, as the same may be amended and supplemented
("Section 145") and Article Ninth of the Employer's certificate of
incorporation, Employer shall indemnify Employee and hold him harmless from and
against any and all of the expenses, liabilities or other matters referred to or
covered in said section and certificate of incorporation (collectively,
"Liabilities") if any of such Liabilities are incurred or suffered by Employee
as a result of, arising out of or in connection with his employment by the
Employer provided however, that the Employee acknowledges that he is not
entitled to the indemnity referred to above (either as set forth in the
Employer's By-laws or in this Agreement), to the extent a dispute arises between
the Employer and the Employee with respect to his conduct as an Employee, or any
claim that may arise either directly or indirectly with respect to the breach of
any terms and conditions of this Agreement. In addition to the indemnification,
as provided in Section 145, the Employer shall advance expenses, including
reasonable attorneys' fees, of Employee. The indemnification and advancement of
expenses provided for herein shall continue after Employee has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of Employee.
14. BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon
the Employer and its successors. The Employer will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of its assets to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Employer would
be required to perform it if no such succession had taken place or with or into
which the Employer may consolidate or merge. Employee agrees that this Agreement
is personal to him and may not be assigned by him otherwise than by will or laws
of descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Employee's legal representatives.
15. MISCELLANEOUS
(a) If any provision of this Agreement, or portion
thereof, shall be held invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision or portion thereof, and this Agreement shall be carried out as if any
such invalid or unenforceable provision or portion thereof were not contained
herein. In addition, any such invalid or unenforceable provision or portion
thereof shall be deemed, without further action on the part of the parties
hereto, modified, amended or limited to the extent necessary to render the same
valid and enforceable.
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(b) This Agreement, and all of the rights and obligations
of the parties in connection with the employment relationship established hereby
shall be construed and enforced in accordance with the laws of New York
applicable to contracts made and fully to be performed therein, and without
giving effect to any rules of conflicts of law.
(c) All notices, requests, demands, and other
communications provided for hereunder shall be in writing and shall be given or
made when (i) delivered personally; (ii) three (3) business days following
mailing by first class postage prepaid, registered or certified mail, return
receipt requested, to the party to be notified at its or his address set forth
herein; or (iii) on the date sent by telecopier, if the addressee has compatible
receiving equipment and provided the transmittal is made on a business day
during the hours of 9:00 a.m. to 6:00 p.m. of the receiving party and if sent at
other times, on the immediately succeeding business day, or (iv) on the first
business day immediately succeeding delivery to an express overnight carrier for
the next business day delivery.
(d) This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Each party shall
deliver such further instruments and take such further action as may be
reasonably requested by the other in order to carry out the provisions and
purposes of this Agreement. This Agreement represents the entire understanding
of the parties with reference to the subject matter hereof, supersedes in its
entirety the provisions of the Prior Employment Agreement, and neither this
Agreement nor any provisions hereof may be modified, discharged or terminated
except by an agreement in writing signed by the party against whom the
enforcement of any waiver, charge, discharge or termination is sought. Any
waiver by either party of a breach of any provision of this Agreement must be in
writing and no waiver of a particular breach shall operate as or be construed as
waiver of any subsequent breach thereof.
IN WITNESSETH WHEREOF, the parties hereto have executed and have
caused this Second Amended and Restated Employment Agreement to be executed as
of ___________, 1997.
CARROLS CORPORATION
By:
--------------------------------
Name:
Title
-----------------------------------
ALAN VITULI
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EXHIBIT D2
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended and Restated Employment Agreement
("Agreement") effective as of the closing of the Stock Purchase Agreement, as
defined below (the "Effective Date"), by and between CARROLS CORPORATION
("Employer"), a corporation organized under the laws of Delaware and whose
address for the purposes of this agreement is 968 James Street, Syracuse, New
York, 13217 and DANIEL T. ACCORDINO whose principal residence is 5175 E. Lake
Road, Cazenovia, New York 13035 ("Employee"):
W I T N E S S E T H:
WHEREAS, pursuant to the terms of an employment agreement dated
January 1, 1995 between Employer and Employee as amended effective April 3, 1996
(together the "Prior Employment Agreement"), Employee has been and is presently
employed by the Employer as its President and Chief Operating Officer;
WHEREAS, concurrently with the execution and delivery hereof,
pursuant to a certain Stock Purchase Agreement (the "Stock Purchase Agreement")
dated as of February 25, 1997, among Carrols Holdings Corporation ("Holdings"),
Atlantic Restaurants, Inc. ("ARI"), Bahrain International Bank (E.C.) (for the
limited purposes set forth therein), Madison Dearborn Capital Partners, L.P.
("MD") and Madison Dearborn Capital Partners II, L.P. (together with MD,
"MDCP"), MDCP has acquired from ARI and Holdings an aggregate of 566,667 shares
of the outstanding common stock of Holdings on a fully diluted basis; and
WHEREAS, as part of the transactions contemplated by the Stock
Purchase Agreement, the parties thereto have agreed that Employer and Employee
shall enter into this Agreement, which shall supersede in its entirety the Prior
Employment Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein set forth and other good and valuable consideration, the
receipt and adequacy of which is mutually acknowledged, it is agreed by and
between the parties as follows:
1. DEFINITIONS
For purposes of this Agreement, unless the context requires
otherwise, the following words and phrases shall have the meanings indicated
below:
"Change of Control" shall mean:
(a) The acquisition (other than from Holdings) by any
person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of
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1934 (the "Exchange Act"), excluding for this purpose any employee benefit plan
of Holdings or its subsidiaries which acquires beneficial ownership of voting
securities of Holdings, of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act), of more than 50% of either the then
outstanding shares of common stock or the combined voting power of Holdings'
then outstanding voting securities entitled to vote generally in the election of
directors;
(b)(1) Individuals who are elected as members of the new
Board of Directors of Holdings (the "Incumbent Board") pursuant to the terms of
the Stockholders Agreement executed in connection with the Stock Purchase
Agreement thereto (the "Stockholders Agreement") cease for any reason to
constitute at least a majority of the Board of Directors; provided that any
person becoming a director on or after the effective date of the Stockholders
Agreement whose election, or nomination for election by Holdings' shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of Directors of Holdings, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) shall be for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board,
(b)(2) Notwithstanding the foregoing, paragraph (b)(1)
above shall not apply to any change in the Incumbent Board during the period in
which the Stockholders Agreement is in effect and a majority of the Board of
Directors of Holdings is designated or otherwise appointed to serve on the Board
of Directors under the provisions of such Stockholders Agreement;
(c) Approval and consummation of a reorganization, merger,
or consolidation, in each case, with respect to which persons who were the
stockholders of Holdings immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50% of the combined
voting power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, or a liquidation or dissolution of Holdings or of the sale of all or
substantially all of the assets of Holdings; or
(d) Holdings ceases to own at least 50 percent of the
Employer.
(e) A Change of Control shall not be deemed to have
occurred as a result of any purchase or acquisition of shares of capital stock
in Holdings by MDCP and its affiliates, ARI and its affiliates, or any
combination thereof.
"Cause" shall mean: (i) the commission by the Employee of a
felony; (ii) the unauthorized disclosure of confidential proprietary information
of the Employer which disclosure the Employee knows or reasonably should have
known would be reasonably likely to result in material damage to the Employer;
(iii) the breach by the Employee of any material provision of this Agreement,
which breach, if curable, is not remedied within thirty (30) days after the
Employee's receipt of written notice thereof provided, however, that the
Employer need not
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permit the Employee to cure any breach which has been the subject of a prior
written notice; (iv) the engagement in material self dealing in breach of
fiduciary duties with respect to the Employer's assets or properties unless
disclosed to and approved by the disinterested members of the Board of
Directors; (v) an act of gross misconduct in connection with the Employee's
duties hereunder; or (vi) chronic alcohol or drug abuse rendering Employee
incapable of carrying out his duties hereunder as determined in good faith by
the Board of Directors continuing after the Employee is given a reasonable
opportunity to obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" shall mean (i) the material failure of the Employer
to comply with the provisions of this Agreement which failure shall not cease
promptly and in no event more than thirty (30) days after the Employer's receipt
of written notice from the Employee objecting to such conduct; (ii) any
termination by the Employer of the Employee's employment other than as expressly
permitted in this Agreement; or (iii) the assignment to Employee of duties and
responsibilities materially inconsistent with those duties and responsibilities
customarily assigned to individuals holding the position of President and Chief
Operating Officer of a company of comparable size or the substantial reduction
by Employer of Employee's duties and responsibilities and, if curable, not
remedied by Employer within 30 days after receipt of written notice.
2. REPRESENTATIONS AND WARRANTIES
Employee represents and warrants that he is not subject to any
restrictive covenants or other agreements or legal restrictions in favor of any
person which would in any way preclude, inhibit, impair, limit or be violated by
his employment by the Employer or the performance of his duties, as contemplated
herein.
3. EMPLOYMENT
The Employer hereby employs Employee and Employee accepts such
employment as President and Chief Operating Officer of the Employer. As its
President and Chief Operating Officer, Employee shall render such services to
the Employer as are customarily rendered by the President and Chief Operating
Officer of comparable companies and as required by the articles and by-laws of
the Employer. Employee accepts such employment and, consistent with fiduciary
standards which exist between an employer and an employee shall perform and
discharge the duties that may be assigned to him from time to time by the
Employer in an efficient, trustworthy and businesslike manner. It is
specifically agreed that nothing in this Agreement shall prohibit Employee from
(i) serving on corporate, civic or charitable boards or committees; (ii)
engaging directly or indirectly, in activities with other public or private
companies or ventures; or (iii) making investments in any capacity whatsoever,
provided only that, such activities or any of them do not impair Employee's
performance of his duties for the Employer.
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4. PLACE OF EMPLOYMENT
During the Term, the Employee shall render services where and as
reasonably required by the Employer. In conformance with the foregoing and not
in limitation thereof, Employee agrees to take such trips as shall be consistent
with or reasonably necessary in connection with his duties. Employer will also
maintain an office within ten (10) miles of the Employee's residence determined
as of the date hereof and shall furnish the Employee both at the Employer's
principal office and at such other location, which may include the Employee's
residence, with an office and secretarial help and such other assistance,
facilities and services consistent with Employee's position and necessary for
the adequate performance of his duties.
5. TERM
Subject to the provisions of Section 11 hereof, the term of this
Agreement shall commence on the Effective Date and shall expire on the fourth
anniversary of the date hereof (the "Initial Term"). This Agreement shall be
automatically renewed for successive twelve (12) month periods on all the
remaining terms and conditions set forth herein, unless either party elects not
to renew this Agreement by giving written notice to the other at least ninety
(90) days before a scheduled expiration date. The Initial Term of this Agreement
together with any such renewals are collectively referred to herein as the
"Term."
6. COMPENSATION
(a) As compensation for all services rendered and to be
rendered by Employee hereunder and the fulfillment by Employee of all of his
obligations herein, the Employer shall pay Employee a base salary (the "Base
Salary") at the rate of $300,000 for the first year of the Term payable in
accordance with the Employer's customary payroll practices. Effective on each
succeeding January 1 during the Term, the Employee's then current Base Salary
shall be increased by a minimum of $20,000 or such greater amount as may be
determined by the Compensation Committee of the Board in its sole discretion
(the "Adjusted Base Salary").
(b) Employee will participate in the Executive Bonus Plan of
the Employer. Notwithstanding any provision contained herein or in the Executive
Bonus Plan to the contrary, no amendment to the Executive Bonus Plan shall have
a material adverse impact on the Employee. If the Executive Bonus Plan is
discontinued, the Employer agrees to establish a plan which will provide similar
potential benefits to the Employee.
(c) Employee will also be eligible to participate in all
phantom and/or actual stock option programs applicable to executive employees as
determined by the Compensation Committee of the Board in its sole discretion.
Employer granted Employee options in accordance with the provisions of the
Carrols Holdings Corporation 1996 Long-Term Incentive Plan, the nonqualified
stock option agreement related thereto and the Deferred Vested and Unvested
Stock Option Agreements issued to Employee on _________, 1997.
(d) The Employer shall deduct from the compensation described
in (a), (b) and (c) above, any federal, state or city withholding taxes, social
security contributions and
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any other amounts which may be required to be deducted or withheld by the
Employer pursuant to any federal, state or city laws, rules or regulations.
(e) Any compensation otherwise payable to the Employee
pursuant to this Section in respect of any period during which the Employee is
disabled (as contemplated in Section 11) shall be reduced by any amounts payable
to the Employee for loss of earnings or the like under any insurance plan or
policy the premiums for which are paid for in their entirety by the Employer.
7. STOCK PURCHASE
As a condition of this Agreement, Employee has purchased 860
shares of common stock, $.01 par value per share, of Holdings at a purchase
price of $101.7646 per share.
8. BUSINESS EXPENSES
(a) The Employer shall pay, on behalf of Employee, all dues to
professional societies and other organizations as are customarily joined by
individuals holding the position of President and Chief Operating Officer of
businesses similar to the Employer. The Employer will require and shall
reimburse the Employee for his out of pocket cost of one complete physical
examination per fiscal year of the Term.
(b) The Employer agrees that the Employee is authorized to
incur reasonable expenses in the performance of his duties hereunder and agrees
that all reasonable expenses incurred by Employee in the discharge and
fulfillment of his duties for the Employer, as set forth in Section 3, will be
promptly reimbursed or paid by the Employer upon written substantiation signed
by Employee, itemizing said expenses and containing all applicable vouchers.
Employee shall be entitled to receive prompt reimbursement for all reasonable
travel and entertainment expenses and the costs of attending conferences and
seminars, so long as such expenses relate to Employee's ability to serve the
best interests of the Employer. In addition, within 30 days of the rendition of
the applicable invoices, Employer shall reimburse Employee annually for the
reasonable costs incurred by Employee in tax planning and tax return preparation
in an annual amount not to exceed $5,000.
9. BENEFITS AND INSURANCE
(a) The Employer agrees that, during the Term, the Employee
shall be insured under all insurance policies and shall receive all benefits
under all pension and welfare benefit plans (including, without limitation group
life, medical, major medical and disability insurance) that the Employer may
maintain and keep in force during the Term of the Agreement for the benefit of
the Employer's employees, subject to the terms, provisions and conditions of
such pension and welfare benefit plans or insurance and the agreements with
underwriters relating to same. In addition, Employer will provide medical and
major medical insurance for Employee and his spouse during the Term and for the
remainder of their respective lives and during such period such benefit shall
also provide coverage to the Employee's eligible dependents, notwithstanding the
termination of Employee's employment hereunder, whether
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voluntary or involuntary, or his Disability or death, consistent with the level
and type of coverage provided to Employee by Employer's policy at March 1, 1996,
provided however, that the provisions of this Section 9(a) will not require the
Employer to continue post retirement or post employment medical coverage for the
Employee or his spouse in the event the Employer terminates its post retirement
and/or post employment coverage on a company-wide basis. In the event of such
termination of coverage, the Employee shall be entitled to obtain a replacement
policy consistent with the level and type of coverage described in the preceding
sentence covering the Employee and his spouse and the Employer shall reimburse
the Employee on an annual basis with respect to the cost of the same.
(b) ITT Hartford life insurance policy No. U01732239 (the
"Policy"), owned by Lucinda Accordino and Lawrence Accordino as Trustees under
the Daniel T. Accordino Insurance Trust, dated February 20, 1995 (the "Owner"),
which provides a death benefit of One Million Dollars ($1,000,000), is presently
maintained by Employer pursuant to a Split-Dollar Insurance Agreement, dated
July 1, 1995, as amended during April 1996 (the "Split-Dollar Agreement").
Employer acknowledges such agreement and agrees to be bound by its provisions,
provided however, that the sum total of the Employer's outstanding premium
payments shall be returned to the Employer from the proceeds of the cash value
of the policy if surrendered during the Employee's lifetime, and in the event of
Employee's death, the Employer shall be entitled to receive that portion of the
death benefit in excess of $1,000,000 up to but not exceeding the sum total of
the Employer's outstanding premium payments from the proceeds of the death
benefit.
(c) Pursuant to the Split-Dollar Agreement, until the earlier
to occur of Employee's 65th birthday or Employee's death, Employer shall, on or
before the due date of each premium, make the premium payments on the Policy.
Employer shall provide written proof of such payment to Employee within fifteen
(15) days of the due date of the premium. If Employer shall fail to supply such
proof, Employee shall be entitled to pay the premium and be reimbursed by
Employer.
10. VACATION
Employee shall be entitled to an aggregate of four (4) weeks paid
vacation during each year of the Term at time or times reasonably agreeable to
both the Employee and the Employer, it being understood that any portion of such
vacation not taken in such year shall not be available to be taken during any
other year.
11. TERMINATION; CHANGE OF CONTROL; DEATH; DISABILITY
(a) Subject to the provisions of this Agreement, either the
Employer or the Employee may terminate the employment of the Employee after
receipt of written notice by the other party hereto provided that all applicable
cure periods have expired if Employer terminates the employment of Employee for
Cause or Employee terminates his employment with Good Reason.
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(b) If within six (6) months following a Change of Control
occurring during the Term, the employment of the Employee hereunder is
terminated without Cause, the Employee shall be paid: (1) his accrued but unpaid
Base Salary and vacation as of the date of termination; (2) all amounts
previously deferred under the Executive Bonus Plan (together with any interest
accrued thereon) and not yet paid by the Employer; (3) continue any and all
benefits and insurance policies as required by Section 9 hereof and (4)(i) if
such Change of Control occurs during the first two years of the Initial Term, a
cash payment in an amount equal to 2.99 multiplied by the average of the sum of
the Base Salary and the Annual Bonus paid or deferred in accordance with the
Executive Bonus Plan in the five calendar years prior to the date of termination
(the "Five-Year Compensation Average") or (ii) if such Change of Control occurs
after the first two years of the Initial Term, a cash lump sum equal to the Base
Salary actually paid to the Employee for the prior twelve (12) month period and
any amounts payable under the Executive Bonus Plan, as and when such amounts are
due and payable under the terms of the Executive Bonus Plan.
(c) If the Employer (1) during the Term enters into a binding
written agreement to engage in a transaction which, if consummated, would result
in a Change of Control; (2) such transaction is consummated within six (6)
months after the last date of the Term; and (3) subsequent to entering into such
agreement the Employer terminates employment of the Employee without Cause, the
Employer shall pay to the Employee an amount equal to the payment set forth in
Section 11(b) hereof.
(d) If the Employee terminates his employment pursuant to
Section 11(a) hereof without Good Reason or the Employer terminates the
employment of the Employee hereunder for Cause, the Employer's only obligations
hereunder shall be to pay to the Employee his accrued but unpaid Base Salary and
vacation pay as of the date of termination plus any compensation or bonus
payments previously deferred by the Employee under the Executive Bonus Plan
(together with any interest accrued thereon) and not yet paid by the Employer
and continue any and all such benefits and insurance policies as required by
Section 9 hereof. The Employee shall have no further obligation to perform
services for the Employer.
(e) Other than in the case of Employee receiving benefits
under paragraph (b) above following a Change of Control, if the Employer
terminates employment of the Employee hereunder without Cause, or the Employee
terminates for Good Reason, the Employer shall pay to the Employee (1) his
accrued but unpaid Base Salary and vacation pay as of the date of termination;
(2) a cash payment in an amount equal to 2.99 multiplied by the Employee's Five
Year Compensation Average; (3) all amounts previously deferred by the Employee
under the Executive Bonus Plan (together with any interest accrued thereon) and
not yet paid by the Employer; and (4) continue any and all such benefits and
insurance policies as required by Section 9 hereof.
(f) If the Employee becomes physically or mentally disabled
during the Term so that he is unable to perform the services required of him
pursuant to this Agreement for a period of six (6) successive months, or an
aggregate of six (6) months in any twelve (12) month period, the Employer may
give the Employee written notice of its intention to terminate
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the services of the Employee hereunder. In such event, the Employee's employment
with the Employer shall terminate effective on the thirtieth (30th) day after
receipt of such notice by the Employee (the "Disability Effective Date")
provided the Employee shall not have returned to the performance of the
Employee's duties. Subject to the provisions of Section 6(f), in the event the
Employee's employment is terminated by reason of disability, the Employer's only
obligations hereunder shall be (1) to continue the Base Salary, (at the rate in
effect on the Disability Effective Date) for a period of three (3) years from
the Disability Effective Date; (2) to pay a pro rata portion of the Annual Bonus
for the year in which the Employee's employment is terminated as and when such
amounts are due and payable under the term of the Executive Bonus Plan; (3) to
pay all amounts previously deferred under the Executive Bonus Plan together with
any interest accrued thereon) as prescribed by the Employee; and (4) to continue
any and all such benefits and insurance policies as required by Section 9
hereof.
(g) In the event of the Employee's death during the Term, the
Employer shall pay to his spouse, if he is survived by a spouse, or if not, to
the estate of the Employee, (1) the Employee's accrued and unpaid Base Salary
(at the rate in effect on the date of death) as of the date of death; (2) a pro
rata share of the Annual Bonus for the year of his death as and when such
amounts are due and payable under the term of the Executive Bonus Plan; (3) all
amounts previously deferred under the Executive Bonus Plan (together with any
interest accrued thereon) and not yet paid by the Employer in the manner
prescribed by the executor of the Employee's estate and (4) continue any and all
such benefits and insurance policies as required by Section 9 hereof.
(h) If the Employer does not continue the Employee's
employment upon expiration of the Initial Term, the only obligations of the
Employer hereunder shall be to pay the Employee in a cash lump sum an amount
equal to the Base Salary actually paid to the Employee for the prior twelve (12)
month period and any amounts payable under the Executive Bonus Plan, as and when
such amounts are due and payable under the terms of the Executive Bonus Plan,
and to continue any and all such benefits and insurance policies as required by
Section 9 hereof.
(i) Notwithstanding anything contained in this Agreement to
the contrary, to the extent that the payments and benefits provided under this
Agreement or provided for the benefit of the Employee under any other plan or
agreement of or with the Employer (each such payment or benefit, a "Payment,"
and such payments and benefits collectively, the "Payments"), would be subject
to the excise tax imposed under Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties are hereinafter collectively referred to as the
"Excise Tax"), the Payments shall be reduced if and to the extent necessary so
that no Payment shall be subject to the Excise Tax. The Employer shall reduce or
eliminate the Payments by first reducing or eliminating the payments due under
Sections 11(b), 11(c) or 11(e) hereof, then by reducing or eliminating any other
amounts payable in cash, and then by reducing or eliminating benefits which are
not payable in cash, in each case in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the date of the
determination.
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12. RESTRICTIVE COVENANTS
(a) During the Term of this Agreement and for a period of two
years following termination of this Agreement, the Employee (i) will not violate
or cause the Employer to violate the terms of any agreement, including any
franchise agreement, which the Employer is obligated under, except with the
express written consent of the duly empowered officer of the Employer or
pursuant to an order of a court of competent jurisdiction; and (ii) divulge or
use any confidential information the effect of which would be injurious to the
Employer without the prior written consent of a duly empowered officer of the
Employer. Employee shall have the right to approve the provisions of any such
franchise agreement which restricts Employee's future employment or business
interests. During the Term of this Agreement and for a period of two years
following termination of Employee's employment hereunder, the Employee will not
solicit or employ any person, who was employed by the Employer within six months
prior to the termination of Employee's employment, in any business in which
Employee has a material interest, direct or indirect, as an officer, partner,
shareholder or beneficial owner. The preceding sentence shall not prohibit the
Employee from hiring (i) the individual who is the general counsel of the
Employer as of the date of the closing of the Stock Purchase Agreement at any
time, or (ii) any person whose employment is terminated involuntarily by the
Employer during the Term or at any time thereafter provided that such hiring
shall not occur until after the Employee's termination of employment hereunder.
(b) During the Term of employment and for a period of two (2)
years after the termination of the Employee's employment hereunder, Employee
will not in the Area (as defined in Section 12 (c) below) either directly or
indirectly engage in one or more of the following with any Burger King
franchisee: the acquisition of, financing of, providing of advice or consulting
services to, or ownership of the operations of a franchised Burger King
restaurant, as an employee, officer, consultant, independent contractor, partner
or shareholder. This shall not prevent Employee from engaging in any activity
related to the acquisition or ownership of the business of Burger King
Corporation or any other business activity other than that described in this
Section 12(b). In addition, this restriction shall not prevent Employee from
making a passive investment in real estate to be used by Burger King Corporation
or any other fast food restaurants.
(c) For purposes of this Agreement, Area shall mean the
continental United States, Puerto Rico and Canada.
(d) The parties hereto, recognizing that irreparable injury
will result to the Employer, its business and property in the event of the
Employee's breach of this Employee covenant and non-competition provision, agree
that in the event of any such breach by the Employee, the Employer will be
entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by the Employee, the Employee's
partners, agents, servants, employers, employees, and all persons acting for or
with the Employee. Employee represents and admits that (i) in the event of
termination of this Agreement, Employee's experience and capabilities are such
that Employee can obtain employment in a business engaged in other lines and/or
of a different nature than the business of
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the Employer, and that the enforcement of a remedy by way of injunction will not
prevent the Employee from earning a livelihood, (ii) this Employee covenant and
non-competition provision was entered into in connection with the Employee's
sale of his ownership interest in Holdings and in the absence of this provision
the sale would not have been consummated and (iii) this amendment and
restatement of the Prior Employment Agreement shall not eliminate or in any way
reduce the Employee's obligations under the provisions of this Section 12 which
shall remain in full force and effect.
13. INDEMNIFICATION
To the fullest extent permitted by Section 145 of the General
Corporation Law of Delaware, as the same may be amended and supplemented
("Section 145") and Article Ninth of the Employer's certificate of
incorporation, Employer shall indemnify Employee and hold him harmless from and
against any and all of the expenses, liabilities or other matters referred to or
covered in said section and certificate of incorporation (collectively,
"Liabilities") if any of such Liabilities are incurred or suffered by Employee
as a result of, arising out of or in connection with his employment by the
Employer provided however, that the Employee acknowledges that he is not
entitled to the indemnity referred to above (either as set forth in the
Employer's By-laws or in this Agreement), to the extent a dispute arises between
the Employer and the Employee with respect to his conduct as an Employee, or any
claim that may arise either directly or indirectly with respect to the breach of
any terms and conditions of this Agreement. In addition to the indemnification,
as provided in Section 145, the Employer shall advance expenses, including
reasonable attorneys' fees, of Employee. The indemnification and advancement of
expenses provided for herein shall continue after Employee has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of Employee.
14. BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon
the Employer and its successors. The Employer will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of its assets to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Employer would
be required to perform it if no such succession had taken place or with or into
which the Employer may consolidate or merge. Employee agrees that this Agreement
is personal to him and may not be assigned by him otherwise than by will or laws
of descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Employee's legal representatives.
15. MISCELLANEOUS
(a) If any provision of this Agreement, or portion thereof,
shall be held invalid or unenforceable by a court of competent jurisdiction,
such invalidity or unenforceability shall attach only to such provision or
portion thereof, and this Agreement shall be carried out as if any such invalid
or unenforceable provision or portion thereof were not contained herein. In
addition, any such invalid or unenforceable provision or portion thereof shall
be deemed, without
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further action on the part of the parties hereto, modified, amended or limited
to the extent necessary to render the same valid and enforceable.
(b) This Agreement, and all of the rights and obligations of
the parties in connection with the employment relationship established hereby
shall be construed and enforced in accordance with the laws of New York
applicable to contracts made and fully to be performed therein, and without
giving effect to any rules of conflicts of law.
(c) All notices, requests, demands, and other communications
provided for hereunder shall be in writing and shall be given or made when (i)
delivered personally; (ii) three (3) business days following mailing by first
class postage prepaid, registered or certified mail, return receipt requested,
to the party to be notified at its or his address set forth herein; or (iii) on
the date sent by telecopier, if the addressee has compatible receiving equipment
and provided the transmittal is made on a business day during the hours of 9:00
a.m. to 6:00 p.m. of the receiving party and if sent at other times, on the
immediately succeeding business day, or (iv) on the first business day
immediately succeeding delivery to an express overnight carrier for the next
business day delivery.
(d) This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Each party shall deliver
such further instruments and take such further action as may be reasonably
requested by the other in order to carry out the provisions and purposes of this
Agreement. This Agreement represents the entire understanding of the parties
with reference to the subject matter hereof, supersedes in its entirety the
provisions of the Prior Employment Agreement, and neither this Agreement nor any
provisions hereof may be modified, discharged or terminated except by an
agreement in writing signed by the party against whom the enforcement of any
waiver, charge, discharge or termination is sought. Any waiver by either party
of a breach of any provision of this Agreement must be in writing and no waiver
of a particular breach shall operate as or be construed as waiver of any
subsequent breach thereof.
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IN WITNESSETH WHEREOF, the parties hereto have executed and have
caused this Second Amended and Restated Employment Agreement to be executed as
of ____________, 1997.
CARROLS CORPORATION
By:
-----------------------
Name:
Title
--------------------------
DANIEL T. ACCORDINO
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EXHIBIT B4
CARROLS HOLDINGS CORPORATION
1996 LONG-TERM INCENTIVE PLAN
1. PURPOSE
The purpose of this Plan is to further the growth and general prosperity
of Carrols Holdings Corporation (the "Company") by providing long-term
incentives to officers and employees of the Company and any Subsidiaries
of the Company. The Company intends that the Plan will help attract,
retain and motivate officers and key employees of high caliber and good
potential and promote the alignment of the Participant's interests with
that of the Company's shareholders.
2. DEFINITIONS
As used in the Plan, the following words shall have the following
meanings:
"Award" means an award made to a Participant pursuant to the Plan and
described in Paragraph 6, including, without limitation, an award of an
Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation
Right, Restricted Stock, Performance Units, Performance Shares, or Other
Stock-Based Awards or any combination of the foregoing.
"Award Agreement" means an agreement between the Company and a
Participant that sets forth the terms, conditions and limitations
applicable to an Award.
"Board" means the Board of Directors of the Company as constituted from
time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Cause" has the meaning determined by the Committee and set forth in the
applicable Participant's Award Agreement.
"Change of Control" means:
(a) The acquisition (other than from the Company) by any person,
entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act"), excluding for this purpose any employee
benefit plan of the Company or its subsidiaries which
acquires beneficial ownership of voting securities of the
Company, of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act), of more than 50%
of either the then outstanding shares of
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common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally
in the election of directors;
(b)(1) Individuals who are elected as members of the new Board of
Directors of the Company (the "Incumbent Board") pursuant to
the terms of the Stockholders Agreement executed in
connection with the Stock Purchase Agreement thereto (the
"Stockholders Agreement") cease for any reason to constitute
at least a majority of the Board; provided that any person
becoming a director on or after the effective date of the
Stockholders Agreement whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of
an individual whose initial assumption of office is in
connection with an actual or threatened election contest
relating to the election of directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be for purposes of this Plan,
considered as though such person were a member of the
Incumbent Board,
(b)(2) Notwithstanding the foregoing, paragraph (b)(1) above
shall not apply to any change in the Incumbent Board during
the period in which the Stockholders Agreement is in effect
and a majority of the Board of the Company is designated or
otherwise appointed to serve on the Board under the
provisions of such Stockholders Agreement;
(c) Approval and consummation of a reorganization, merger, or
consolidation, in each case, with respect to which persons
who were the stockholders of the Company immediately prior to
such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the combined
voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated
company's then outstanding voting securities, or a
liquidation or dissolution of the Company or of the sale of
all or substantially all of the assets of the Company; or
(d) The Company ceases to own at least 50 percent of the
Employer.
(e) A Change of Control shall not be deemed to have occurred as a
result of any purchase or acquisition of shares of capital
stock in the Company by Madison Dearborn Capital Partners,
L.P. and its affiliates, Madison Dearborn Capital Partners
II, L.P. and its affiliates, Atlantic Restaurants, Inc. and
its affiliates, or any combination thereof.
"Committee" means the Compensation Committee of the Board.
"Employee" means any officer or other employee of the Company or a
Subsidiary.
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"Employer" means Carrols Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" as of any date:
(a) of Stock shall be deemed to equal (i) if the Stock is
publicly traded, the average of the last reported sales
prices of such Stock for ten (10) consecutive trading days as
officially reported on the principal trading market on which
the Stock is traded ending on the second trading day prior to
the date of determination; or (ii) if the Stock is not
publicly traded, the value of a Share of Stock as determined
in good faith by the Committee or the Board of the Company on
the advice of its independent auditors; or
(b) of assets other than Stock shall equal such value as
determined by the Committee in its sole discretion.
"Good Reason" has the meaning determined by the Committee and set forth
in the applicable Participant's Award Agreement.
"Incentive Stock Option" means an option intended to be and designated
as an incentive stock option meeting the requirements of Section 422 of
the Code.
"Nonqualified Stock Option" means an option that is not intended to be
nor designated as an Incentive Stock Option.
"Participant" means an Employee who, as of any date, has been granted
one or more Awards under the Plan which are still outstanding (i.e.,
have not been exercised, forfeited or terminated).
"Performance Goals" means, with respect to any Performance Period,
performance goals based on any of the following criteria and established
by the Committee prior to the beginning of such Performance Period or
performance goals based on any of the following criteria and established
by the Committee after the beginning of such Performance Period that
meet the requirements to be considered pre-established performance goals
under Section 162(m) of the Code: earnings or earnings growth; return on
equity, assets or investment; revenues; expenses; stock price; market
share; charge-offs; or reductions in non-performing assets or such other
performance indicators as determined by the Committee in its sole
discretion. Such Performance Goals may be particular to an Employee or
the division, department, branch, line of business, Subsidiary or other
unit in which the Employee works, or may be based on the performance of
the Company generally.
"Performance Period" means (when and if applicable) the period of time
designated by the Committee during which Performance Goals will be
measured in connection with an Award.
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"Permanent Disability" has the meaning determined by the Committee and
set forth in the applicable Participant's Award Agreement.
"Plan" means this Carrols Holdings Corporation 1996 Long-Term Incentive
Plan, as amended from time to time.
"Retirement" has the meaning determined by the Committee and set forth
in the applicable Participant's Award Agreement.
"Stock" or "Share" means common stock of the Company, par value $.01 per
share, which may be authorized but unissued or issued and reacquired.
"Other Stock-Based Awards" means any Award other than a Stock Option,
Stock Appreciation Right, Restricted Stock, Performance Unit or
Performance Share that is valued by reference to or otherwise based upon
the Stock.
"Stock Options" means the collective reference to Incentive Stock
Options and Nonqualified Stock Options.
"Subsidiary" means any corporation, other than the Company, in which the
Company has at least a fifty percent beneficial ownership interest.
3. ADMINISTRATION
(a) The Plan shall be administered by the Committee. None of the
members of the Committee shall be eligible to receive Awards
under the Plan. Members of the Committee shall qualify to
administer and make Awards under the Plan for purposes of Section
162(m) of the Code and Rule 16b-3 (and any other applicable rule)
promulgated under Section 16(b) of the Exchange Act. The
Committee may adopt its own rules or procedures, and the action
of a majority of the Committee, taken at a meeting or taken
without a meeting by a writing signed by such majority, shall
constitute action by the Committee. The Committee shall have the
power and authority to administer, construe and interpret the
Plan, to make rules for carrying it out and to make changes in
such rules. Any such interpretations, rules, and administration
shall be consistent with the basic purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Company its duties under the Plan
subject to such conditions and limitations as the Committee shall
prescribe; provided, however, that only the Committee may
designate and make Awards to Participants who are subject to
Section 16 of the Exchange Act and Section 162(m) of the Code.
(c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company,
and the officers and directors of the Company shall be entitled
to rely upon the advice, opinions or
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valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good
faith shall be final and binding upon all Participants, the
Company and all other interested persons. No member of the
Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect
to the Plan or Awards made under the Plan, and all members of the
Committee shall be fully protected by the Company with respect to
any such action, determination or interpretation.
4. ELIGIBILITY
The Committee, in its discretion, may grant Awards to any Employee,
subject to the provisions of the Plan. No Employee shall be entitled as
a matter of right to receive an Award, nor shall the grant of an Award
entitle an Employee to receive any future Award.
5. AWARD AGREEMENT
The terms, conditions and limitations of each Award under the Plan shall
be determined by the Committee subject to the limitations provided for
in Paragraph 7 below, and shall be set forth in an Award Agreement, in a
form approved by the Committee, consistent, however, with the terms of
the Plan; provided, however, that such Award Agreement shall contain
provisions dealing with the treatment of Awards in the event of the
termination, death or disability of a Participant.
6. AWARDS
As the Committee may determine, the following types of Awards may be
granted under the Plan to eligible Employees, either alone, in
combination or on an alternative basis:
(a) Incentive Stock Options: These are options within the meaning of
Section 422 of the Code to purchase Stock. In addition to other
restrictions contained in the Plan, an option granted under this
Paragraph 6(a), (i) may not be exercised more than 10 years after
the date it is granted, (ii) may not have an option exercise
price less than the Fair Market Value of the Stock on the date
the option is granted, (iii) must otherwise comply with the
requirements of Section 422 of the Code, and (iv) must be
designated as an "Incentive Stock Option" by the Committee. To
the extent the aggregate Fair Market Value (determined as of the
time the Incentive Stock Option is granted) of the Stock with
respect to which Incentive Stock Options become exercisable for
the first time by an individual during any calendar year under
all plans of the Company or any Subsidiary exceeds ONE HUNDRED
THOUSAND DOLLARS ($100,000), such options shall be treated as
Nonqualified Stock Options. Payment of the option exercise price
shall be made (i) in cash, (ii) by delivering shares of Stock
already owned by the Participant, (iii) by delivering a
promissory note to the Company that is either (A) unsecured and
full
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recourse against the Participant or (B) nonrecourse but secured
by the Stock being purchased by such exercise and by other assets
having a Fair Market Value equal to not less than forty (40)
percent of the exercise price per share (a "Nonrecourse Note")
and, in either event, such note shall mature on the fifth
anniversary date thereof and shall bear interest, payable
quarterly, at the Federal mid-term rate provided under Section
1274(d) of the Code; (iv) by a combination of any of the
foregoing, in accordance with the terms of the Plan, the Award
Agreement, and any applicable guidelines of the Committee in
effect at the time, or (v) by any other means approved by the
Committee. The terms of a Nonrecourse Note shall provide that:
(i) any dividends received on Stock securing a Nonrecourse Note
shall be applied toward payment of the principal and accrued
interest of the Nonrecourse Note; and (ii) a Nonrecourse Note
shall become immediately due and payable upon the sale of Stock
securing the Nonrecourse Note and the proceeds shall be applied
to the payment of the unpaid principal balance and accrued
interest of the Nonrecourse Note.
(b) Nonqualified Stock Options: These are options to purchase Stock
which are not intended to be and are not designated by the
Committee as "Incentive Stock Options." At the time of the Award,
the Committee shall determine, and shall have included in the
Award Agreement or other Plan rules, the option exercise period,
the option price, and such other conditions or restrictions as
may be appropriate. In addition to the other restrictions
contained in the Plan, an option granted under this Paragraph
6(b), (i) may not be exercised more than 10 years after the date
it is granted, and (ii) may not have an option exercise price
less than 100% of the Fair Market Value of Stock on the date the
option is granted. Payment of the option exercise price shall be
made (i) in cash, (ii) by delivering shares of Stock already
owned by the Participant, (iii) by delivering a promissory note
to the Company that is either (A) unsecured and fully recourse
against the Participant or (B) nonrecourse but secured by the
Stock being purchased by such exercise and by other assets having
a Fair Market Value equal to not less than forty (40) percent of
the exercise price per share (a "Nonrecourse Note") and, in
either event, such note shall mature on the fifth anniversary
date thereof and shall bear interest, payable quarterly, at the
Federal mid-term rate provided under Section 1274(d) of the Code;
(iv) by a combination of any of the foregoing, in accordance with
the terms of the Plan, the Award Agreement, and any applicable
guidelines of the Committee in effect at the time, or (v) by any
other means approved by the Committee. The terms of a Nonrecourse
Note shall provide that: (i) any dividends received on Stock
securing a Nonrecourse Note shall be applied toward payment of
the principal and accrued interest of the Nonrecourse Note; and
(ii) a Nonrecourse Note shall become immediately due and payable
upon the sale of Stock securing the Nonrecourse Note and the
proceeds shall be applied to the payment of the unpaid principal
balance and accrued interest of the Nonrecourse Note.
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(c) Stock Appreciation Rights: These are rights that on exercise
entitle the holder to receive the excess of (i) the Fair Market
Value of a Share of Stock on the date of exercise over (ii) the
Fair Market Value on the date of award or, if connected with a
previously issued Stock Option, the Fair Market Value at the time
such previously issued Stock Option was granted (the "base
value"), multiplied by (iii) the number of Shares covered by the
rights exercised, as determined by the Committee. A Stock
Appreciation Right granted under the Plan may, but need not be,
granted in tandem with a Stock Option under Paragraphs 6(a) or
6(b). The Committee, in the Award Agreement or by other Plan
rules, may impose such restrictions or conditions on the exercise
of Stock Appreciation Rights as it deems appropriate, and may
terminate, amend, or suspend such Stock Appreciation Rights at
any time. No Stock Appreciation Right granted under this Plan may
be exercised more than 10 years after the date it is granted.
(d) Restricted Stock: Restricted Stock is Stock delivered to a
Participant with or without payment of consideration, subject to
such conditions, terms and restrictions (including
performance-based or employment-based vesting, forfeiture
conditions and transfer restrictions) on the Participant's right
to transfer or sell such Stock. The number of Shares of
Restricted Stock and the restrictions or conditions on such
Shares shall be determined by the Committee, in the Award
Agreement or by other Plan rules, and the certificate for the
Restricted Stock shall bear evidence of the restrictions or
conditions.
(e) Performance Shares and Performance Units: An Award of Performance
Shares or Performance Units shall entitle a Participant to
receive Stock or a cash payment specified by the Committee,
depending upon the attainment of certain Performance Goals over a
Performance Period. The Performance Period and Performance Goals
shall be specified by the Committee and may relate to the
performance of the Company or one or more Subsidiaries or a
combination thereof. At the time an Award of such Shares or units
is made, the Committee shall, in the Award Agreement, determine
the base value of the Award or specify a formula for determining
such value. Other than an Award intended to qualify under Section
162(m) of the Internal Revenue Code, the Committee may adjust
previously established Performance Goals and other terms and
conditions of an Award at any time prior to the determination of
the payment amount, to reflect major unforeseen events such as
changes in laws, regulations or accounting policies or
procedures, mergers, acquisitions or divestitures or
extraordinary, unusual or non-recurring items or events.
Payment pursuant to an Award of Performance Shares or Performance
Units shall be made following the Committee's determination of
the extent to which the performance criteria were satisfied, and
shall be made in the form of Stock, cash or a combination
thereof, as the Committee may determine. Payment shall be made as
promptly as practicable following the end of the Performance
Period unless deferred subject to such terms and conditions as
may be prescribed by the Committee.
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(f) Other Stock-Based Awards: Other Stock-Based Awards may be granted
to such Employees as the Committee may select, at any time and
from time to time as the Committee shall determine. The Committee
shall have complete discretion in determining the number of
Shares subject to such Awards, the consideration for such Awards
and the terms, conditions and limitations pertaining to same
including, without limitation, restrictions based upon the
achievement of specific business objectives, tenure, and other
measurements of individual or business performance, and/or
restrictions under applicable federal or state securities laws,
and conditions under which same will lapse. Such Awards may
include the issuance of Stock in payments of amounts earned under
other incentive compensation plans of the Company. The terms,
restrictions and conditions of the Award need not be the same
with respect to each Participant.
The Committee may, in its sole discretion, direct the Company to
issue Shares subject to such restrictive legends and/or stop
transfer instructions as the Committee deems appropriate.
7. LIMITATIONS AND CONDITIONS
(a) The number of Shares available for Awards under this Plan shall
be 106,250 Shares or, if greater, such Shares as approved by the
Committee. The Shares available for Awards under this Plan will
be available for grant at an exercise price per share as
determined by the Committee. The number of Shares subject to
Awards under the Plan (including, but not limited to, Stock
Options and Stock Appreciation Rights) to any one Participant
shall not exceed 45,000 Shares. To the extent that any Award is
canceled or forfeited, or terminates, expires, or lapses for any
reason, any unissued Shares subject to such Award shall again be
available for grant under the Plan.
(b) No Awards shall be made under the Plan beyond ten years after the
effective date of the Plan, but the terms of Awards made on or
before the expiration thereof may extend beyond such expiration.
(c) Nothing in this Plan shall interfere with or limit in any way the
right of the Company or any Subsidiary to terminate any
Participant's employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company or
any Subsidiary.
(d) Deferral of Award payouts may be provided for, at the sole
discretion of the Committee, subject to such terms and conditions
as the Committee may specify in the Award Agreements.
(e) Participants shall not have any of the rights or privileges of
stockholders of the Company with respect to any Shares
purchasable in connection with any Award,
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unless and until certificates representing such Shares have been
issued by the Company to such Participants, except as otherwise
specifically provided.
(f) Except as otherwise provided in this Paragraph 7, no Stock Option
or other Award under the Plan shall be sold, transferred,
assigned or otherwise alienated or hypothecated by the
Participant, other than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable during
the Participant's lifetime only by the Participant or the
Participant's legal representative. The Participant may, if
permitted by state law or the rules and regulations governing any
exchange on which the Stock is traded, transfer, without payment
of consideration, any Stock Option, other than Incentive Stock
Options, to a member of such Participant's immediate family or to
a trust or partnership whose beneficiaries are members of such
Participant's immediate family. For purposes of this Paragraph,
the term "immediate family" shall include the Participant's
spouse, children and grandchildren.
(g) No grant or Award related payout under this Plan shall be deemed
compensation for purposes of computing benefits or contributions
under any retirement plan of the Company or its Subsidiaries and
shall not affect any benefits under any other benefit plan of any
kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of
compensation. This Plan is not a "Retirement-Plan" or "Welfare
Plan" under the Employee Retirement Income Security Act of 1974,
as amended.
(h) No benefit or promise under the Plan shall be secured by any
specific assets of the Company or any of its Subsidiaries, nor
shall any assets of the Company or any of it Subsidiaries be
designated as attributable or allocated to the satisfaction of
the Company's obligations under the Plan.
(i) Prior to the issuance of Shares, the Participant must execute a
shareholder's agreement containing such terms and conditions as
determined by the Committee and approved by the Board.
8. OPTION TERMS
(a) The exercise period for a Stock Option, including any extension
which the Committee may from time to time decide to grant, shall
not exceed ten years from the date of grant.
(b) Except as otherwise provided by the Committee, a Stock Option
shall become exercisable with respect to 25% of the Shares
commencing on the first anniversary of the date of grant, with an
additional 25% becoming exercisable on each anniversary of the
date of grant thereafter; provided, in each case, that the
Participant shall have continuously remained in the active
employment of the Company or, where appropriate, a Subsidiary.
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(c) Except as otherwise provided by the Committee, if a Participant's
employment with the Company or, where applicable, a Subsidiary
terminates then the Stock Options held by the Participant shall
have the vesting and exercise terms as determined by the
Committee and provided in the applicable Participant's Award
Agreement.
9. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that Awards earn dividends or dividend
equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to an account established by the Committee
under the Plan in the name of the Participant. Any crediting of
dividends or dividend equivalents may be subject to such restrictions
and conditions as the Committee may establish, including reinvestment in
additional Shares or Share equivalents.
10. TRANSFERS AND LEAVES OF ABSENCE
For purposes of the Plan, (a) the transfer of a Participant's employment
between the Company and any Subsidiary without an intervening period of
separation shall not be deemed a termination of employment, and (b) a
Participant who is granted in writing a leave of absence shall be deemed
to have remained in the employ of the Company or Subsidiary during such
leave of absence; provided, however, that no Awards may be granted to an
Employee while absent on such leave.
11. ADJUSTMENTS
In the event of a reclassification, recapitalization, merger,
consolidation, reorganization, stock dividends, stock split or reverse
stock split, including, without limitation, a distribution of the stock
of a Subsidiary, combination or exchange of Shares, the Committee shall
determine, in its discretion, the appropriate adjustments, if any, to
(a) the number of Shares which may be issued under the Plan, and (b) the
number of Shares issuable and the exercise price per Share pursuant to
any outstanding Award theretofore granted under this Plan.
12. CHANGE OF CONTROL
In the event of a Change of Control, any or all Stock Options and Stock
Appreciation Rights still outstanding shall, notwithstanding any
contrary terms of the Award Agreement, vest and become exercisable in
full on the date of such Change of Control. As soon as practicable but
in no event later than thirty (30) days prior to the occurrence of a
Change of Control, the Committee shall notify the Participant of such
Change of Control. Upon a Change of Control that qualifies as an
Approved Sale (as defined in Paragraph 13) in which the outstanding
common stock of the Company is converted or exchanged for or becomes a
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right to receive any cash, property or securities other than Illiquid
Consideration (as defined in Paragraph 13), (i) the Stock Options and
Stock Appreciation Rights shall become exercisable solely for the amount
of such cash, property or securities that the Participant would have
been entitled to had the Stock Options and Stock Appreciation Rights
been exercised immediately prior to such event; (ii) the Participant
shall be given an opportunity to either (A) exercise any Stock Options
and Stock Appreciation Rights prior to the consummation of the Approved
Sale and participate in such sale as holders of Stock or (B) upon
consummation of the Approved Sale, receive in exchange for such Stock
Options and Stock Appreciation Rights consideration equal to the amount
determined by multiplying (1) the same amount of consideration per share
of Stock received by the holders of Stock in connection with the
Approved Sale less the exercise price per share of Stock of such Stock
Options and Stock Appreciation Rights to acquire Stock by (2) the number
of shares of Stock represented by such Stock Options and Stock
Appreciation Rights; and (iii) to the extent the Stock Options and Stock
Appreciation Rights are not exercised prior to or simultaneous with such
Approved Sale, the Stock Options and Stock Appreciation Rights shall be
canceled.
13. SALE OF THE COMPANY
(a) If the Board and the holders of a majority of the Company's Stock
approve a Sale of the Company (the "Approved Sale"), the holders
of Stock shall consent to and raise no objections against the
Approved Sale of the Company, and if the Approved Sale of the
Company is structured as a sale of capital stock, the holders of
Stock shall agree to sell their shares of Stock on the terms and
conditions approved by the Board and the holders of a majority of
the Company's Stock. The holders of Stock shall take all
necessary and desirable actions in connection with the
consummation of the Approved Sale of the Company. Notwithstanding
the foregoing, in the event that the consideration to be received
by the holders of Stock in connection with the Approved Sale
shall include either (a) shares of common stock of a class which
is not listed on a national securities exchange or in the NASDAQ
system and which is not entitled to registration rights for sale
in a registered public offering under the Securities Act of 1933
or (b) shares of senior equity securities which do not provide
for a scheduled redemption or a redemption at the option of the
holders thereof, such holders shall not be required to sell their
shares of Stock pursuant to this Paragraph 13(a) (collectively,
the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the
Approved Sale of the Company is subject to the satisfaction of
the condition that, upon the consummation of the Approved Sale,
all of the holders of Stock receive the same form and amount of
consideration per share of Stock, or if any holders of Stock are
given an option as to the form and amount of consideration to be
received, all holders be given the same option.
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(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any
similar rule then in effect) promulgated by the Securities
Exchange Commission may be available with respect to such
negotiation or transaction (including a merger, consolidation or
other reorganization), the holders of Stock shall at the request
of the Company, appoint a "purchaser representative" (as such
term is defined in Rule 501) reasonably acceptable to the
Company. If any holder of Stock appoints a purchaser
representative designated by the Company, the Company shall pay
the fees of such purchaser representative. However, if any holder
of Stock declines to appoint the purchaser representative
designated by the Company, such holder shall appoint another
purchaser representative (reasonably acceptable to the Company),
and such holder shall be responsible for the fees of the
purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall bear
their pro-rata share (based upon the number of shares sold) of
the costs of any sale of Stock pursuant to an Approved Sale to
the extent such costs are incurred for the benefit of all holders
of Stock and are not otherwise paid by the Company or the
acquiring party. Costs incurred by Participants and the other
holders of Stock on their own behalf shall not be considered
costs of the transaction hereunder.
(e) The provisions of this Paragraph 13 shall terminate upon the
completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 13, "Independent Third Party"
shall mean any Person who, immediately prior to the contemplated
transaction, does not own in excess of 5% of the Company's Stock
on a fully-diluted basis (a "5% Owner"); who is not controlling,
controlled by or under control with any such 5% Owner and who is
not the spouse or descendent (by birth or adoption) of any such
5% Owner or a trust for the benefit of such 5% Owner and/or such
other Persons; "Person" shall mean an individual, a partnership,
a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency
or political subdivision thereof; "Qualified Public Offering"
shall mean the sale in an underwritten public offering registered
under the Securities Act of 1933 of Shares of the Company's Stock
resulting in aggregate gross proceeds to the Company of at least
$50 million and a price per share of not less than $108.2353 (as
such amount is equitably adjusted for subsequent stock splits,
stock dividends and recapitalizations); and "Sale of the Company"
shall mean the sale of the Company to an Independent Third Party
or affiliated group of Independent Third Parties pursuant to
which such party or parties acquire (i) capital stock of the
Company possessing the voting power to elect a majority of the
Company's board of directors (whether by merger, consolidation or
sale or transfer of the
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Company's capital stock) or (ii) all or substantially all the
Company's assets determined on a consolidated basis.
14. AMENDMENT AND TERMINATION
(a) The Committee shall have the authority to make such amendments to
any terms and conditions applicable to outstanding Awards as are
consistent with this Plan provided that, except for adjustments
under Paragraph 11 hereof, no such action shall modify such Award
in a manner adverse to the Participant without the Participant's
consent, except as such modification is provided for or
contemplated under the terms of the Award.
(b) The Committee may terminate, amend or modify the provisions of
this Plan (including any performance criteria or conditions which
must be achieved in order for an Employee to receive an Award or
Awards, subject to Paragraph 6(e)) at any time and from time to
time; provided, however, that an amendment which requires
stockholder approval in order for the Plan to continue to comply
with Rule 16b-3, Section 162(m) of the Code or any other law,
regulation or stock exchange requirement shall not be effective
unless approved by the requisite vote of stockholders. The
termination, amendment or modification of the Plan may be in
response to changes in the Code, the Exchange Act, national
securities exchange regulations or for other reasons deemed
appropriate by the Committee.
15. FOREIGN OPTIONS AND RIGHTS
The Committee may make Awards to Employees who are subject to the laws
of nations other than the United States, which Awards may have terms and
conditions that differ from the terms thereof as provided elsewhere in
the Plan for the purpose of complying with foreign laws.
16. WITHHOLDING TAXES
The Company shall have the right to deduct from any cash payment made
under the Plan any federal, state or local income or other taxes
required by law to be withheld with respect to such payment. It shall be
a condition to the obligation of the Company to deliver Shares upon the
exercise of a Stock Option or Stock Appreciation Right, upon payment of
Performance Units or Performance Shares, upon delivery of Restricted
Stock or upon exercise, settlement or payment of any Other Stock-Based
Award, that the Participant pay to the Company such amount as may be
requested by the Company for the purpose of satisfying any liability for
such withholding taxes.
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17. INDEMNIFICATION
Each current or former member of the Committee, and of the Board, shall
be indemnified and held harmless by the Company against any loss, cost,
liability or expense that may be imposed upon, or reasonably incurred by
him or her in connection with or resulting from any claim, action, suit
or proceeding to which the member may be a party or in which the member
may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by the member in
settlement thereof, with the Company's approval, or paid by the member
in satisfaction of any judgment in any such action, suit or proceeding
against the member, provided such member shall give the Company an
opportunity, at its own expense, to handle and defend the same before
the member undertakes to handle and defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which the member may be entitled
under the Company's Certificate of Incorporation or By-laws, as a matter
of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
18. SUCCESSORS
The terms of the Plan shall be binding upon the Company and its
successors and assigns.
19. REQUIREMENTS OF LAW
(a) The granting of Awards and the issuance of Shares under the Plan
shall be subject to all applicable laws, rules and regulations,
and to such approval by any governmental agencies or national
securities exchanges as may be required.
(b) In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had
not been included.
(c) To the extent that federal laws do not otherwise control, the
Plan and all Award Agreements, shall be construed in accordance
with and governed by the laws of the State of New York.
20. EFFECTIVE DATE AND TERMINATION DATES
The Plan, as amended and restated, shall be effective as of the closing
of the Stock Purchase Agreement dated as of February 25, 1997 and shall
terminate ten years later, subject to such earlier termination by the
Board pursuant to Paragraph 14.
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EXHIBIT B5
CARROLS HOLDINGS CORPORATION
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTION)
THIS AGREEMENT, dated as of ___________, 1997 is made by and between
Carrols Holdings Corporation, a Delaware corporation (hereinafter called the
"Company") and Alan Vituli, an employee of Carrols Corporation (hereinafter
referred to as the "Optionee"). All capitalized terms herein shall have such
meanings as are ascribed to them in the Plan (as defined below) and in this
agreement (the "Agreement"), including those terms defined on Exhibit A hereto.
1. Grant of Option. The Company grants to the Optionee as of the
date hereof (the "Date of Grant") a nonqualified stock option (this "Option") to
purchase all or any part of the aggregate of 43,350 shares of common stock, $.01
par value per share, of Carrols Holdings Corporation ("Shares"), subject to all
of the terms and conditions of this Agreement and the Carrols Holdings
Corporation 1996 Long-Term Incentive Plan, as amended from time to time (the
"Plan"). As of the date hereof, the Carrols Corporation 1996 Long-Term Incentive
Plan (the "Prior Plan") is terminated and the nonqualified stock option granted
pursuant to the Prior Plan is surrendered.
2. Exercise Price and Period of Option.
(a) Subject to the terms and conditions of the Plan and this
Agreement, this Option (a) became exercisable on the Date of Grant with regard
to 15,300 Shares and (b) shall become exercisable (i) with regard to 5,610
Shares, on December 31, 1997; (ii) with regard to 5,610 Shares, on December 31,
1998; (iii) with regard to 5,610 Shares, on December 31, 1999; and (iv) with
regard to 11,220 Shares, on December 31, 2000. This Option has an exercise price
of $101.7646 per share (the "Exercise Price").
(b) Except as otherwise provided by the Committee, if Optionee's
employment with the Company terminates:
(i) due to death, Permanent Disability, for Good Reason or
without Cause, the portion of the Option which is not vested and exercisable on
the date on which Optionee ceases to be an employee shall vest and become
immediately exercisable in full and all vested and exercisable Options
(including Options that become vested and exercisable under this paragraph)
shall continue to be exercisable until the date of expiration of the Option
pursuant to Paragraph 3 of this Agreement;
(ii) without Good Reason, the portion of the Option that
is not vested and exercisable on the date on which Optionee ceases to be an
employee shall terminate and any vested Options shall continue to be exercisable
until the date of expiration of the Option pursuant to Paragraph 3 of this
Agreement; and
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(iii) for Cause, the portion of the Option that is not
vested and exercisable shall terminate and any vested Options shall be forfeited
on the date the Company delivers notice of termination of employment for Cause
to the Optionee.
(c) In the event of a Change of Control during the term of the
Optionee's employment with Carrols Corporation, the portion of the Option that
is not vested shall vest and become exercisable in full on the date of such
Change of Control. As soon as practicable but in no event later than thirty (30)
days prior to the occurrence of a Change of Control, the Committee shall notify
the Optionee of such Change of Control. Upon a Change of Control that qualifies
as an Approved Sale (as defined in Paragraph 5) in which the outstanding common
stock of the Company is converted or exchanged for or becomes a right to receive
any cash, property or securities other than Illiquid Consideration (as defined
in Paragraph 5), (i) the Option shall become exercisable solely for the amount
of such cash, property or securities that the Optionee would have been entitled
to had the Option been exercised immediately prior to such event (ii) the
Optionee shall be given an opportunity to either (A) exercise the Option prior
to the consummation of the Approved Sale and participate in such sale as holders
of Stock or (B) upon consummation of the Approved Sale, receive in exchange for
such Option consideration equal to the amount determined by multiplying (1) the
same amount of consideration per share of Stock received by the holders of Stock
in connection with the Approved Sale less the exercise price per share of Stock
of such Option to acquire Stock by (2) the number of shares of Stock represented
by such Option; and (iii) to the extent the Option is not exercised prior to or
simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed
in connection with the Stock Purchase Agreement dated February 25, 1997 among
the Company, Atlantic Restaurants, Inc., Bahrain International Bank (E.C.),
Madison Dearborn Capital Partners, L.P., and Madison Dearborn Capital Partners
II, L.P. (the "Stockholders Agreement").
3. Expiration of Option. Notwithstanding anything contained
herein to the contrary, this Option may not be exercised to any extent by
Optionee after the tenth anniversary of the Date of Grant.
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary
of the Company of an executed written Notice and Agreement in the form attached
hereto as Exhibit B, or in such other form as may be required by the Company,
which shall set forth Optionee's election to exercise this Option, the number of
Shares being purchased and such other representations and agreements regarding
Optionee's investment intent and access to information as may be required by the
Company to comply with applicable securities laws.
(b) Such Notice and Agreement shall be accompanied by full
payment of the Exercise Price for the Shares being purchased (i) in cash
(including check, bank draft or money order); (ii) where approved by the
Committee in its sole discretion, by surrender of Shares of the Company owned by
the Optionee having a Fair Market Value equal to the Exercise Price; (iii) by
delivery of a promissory note as provided under the Plan; (iv) by any
combination of the foregoing
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where approved by the Committee in writing in its sole discretion; or (v) any
other method the Committee may approve in its sole discretion, subject to the
terms and conditions of the Plan.
(c) Prior to the issuance of the Shares upon exercise of this
Option, Optionee must pay or, in a manner acceptable to the Company, make
adequate provision to pay, any applicable federal, state or local withholding
obligations as determined by the Company.
(d) Provided that the foregoing Notice and Agreement and payment
are in form and substance satisfactory to counsel for the Company, the Company
shall issue the Shares registered in the name of the Optionee, the Optionee and
the Optionee's spouse, or the Optionee's legal representative.
(e) Any exercisable portion of this Option or the entire Option,
if then wholly exercisable, may be exercised in whole or in part at any time
prior to the time when this Option becomes unexercisable under Paragraph 3;
provided, however, that any partial exercise shall be for whole Shares only.
(f) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable state
securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's
Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock
shall consent to and raise no objections against the Approved Sale of the
Company, and if the Approved Sale of the Company is structured as a sale of
capital stock, the holders of Stock shall agree to sell their shares of Stock on
the terms and conditions approved by the Board and the holders of a majority of
the Company's Stock. The holders of Stock shall take all necessary and desirable
actions in connection with the consummation of the Approved Sale of the Company.
Notwithstanding the foregoing, in the event that the consideration to be
received by the holders of Stock in connection with the Approved Sale shall
include either (a) shares of common stock of a class which is not listed on a
national securities exchange or in the NASDAQ system and which is not entitled
to registration rights for sale in a registered public offering under the
Securities Act of 1933 or (b) shares of senior equity securities which do not
provide for a scheduled redemption or a redemption at the option of the holders
thereof, such holders shall not be required to sell their shares of Stock
pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the
Approved Sale of the Company is subject to the satisfaction of the condition
that, upon the consummation of the Approved Sale, all of the holders of Stock
receive the same form and amount of consideration per share of Stock, or if any
holders of Stock are given an option as to the form and amount of consideration
to be received, all holders be given the same option.
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(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Stock shall at the
request of the Company, appoint a "purchaser representative" (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Stock appoints a purchaser representative designated by the Company, the Company
shall pay the fees of such purchaser representative. However, if any holder of
Stock declines to appoint the purchaser representative designated by the
Company, such holder shall appoint another purchaser representative (reasonably
acceptable to the Company), and such holder shall be responsible for the fees of
the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Stock pursuant to an Approved Sale to the extent such costs are
incurred for the benefit of all holders of Stock and are not otherwise paid by
the Company or the acquiring party. Costs incurred by Participants and the other
holders of Stock on their own behalf shall not be considered costs of the
transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the
completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party"
shall mean any Person who, immediately prior to the contemplated transaction,
does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a
"5% Owner"); who is not controlling, controlled by or under control with any
such 5% Owner and who is not the spouse or descendent (by birth or adoption) of
any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
Persons; "Person" shall mean an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof; "Qualified Public Offering"
shall mean the sale in an underwritten public offering registered under the
Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate
gross proceeds to the Company of at least $50 million and a price per share of
not less than $108.2353 (as such amount is equitably adjusted for subsequent
stock splits, stock dividends and recapitalizations); and "Sale of the Company"
shall mean the sale of the Company to an Independent Third Party or affiliated
group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power to elect a
majority of the Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all the Company's assets determined on a consolidated basis.
6. Compliance with Laws and Regulations. The issuance and
transfer of Shares shall be subject to compliance by the Company and the
Optionee with all applicable requirements of federal and state securities laws
and with all applicable requirements of any stock
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<PAGE>
exchange on which the Company's shares may be listed at the time of such
issuance or transfer. Optionee understands that the Company is under no
obligation to register or qualify the Shares with the Securities and Exchange
Commission, any state securities commission or any stock exchange to effect such
compliance.
7. Nontransferability of Option. This Option may not be
transferred in any manner except (a) as determined by the Committee in its sole
discretion, or (b) pursuant to Paragraph 7(f) of the Plan.
8. Rights as Stockholder. The holder of the Option shall not be,
nor have any of the rights or privileges of, a stockholder of the Company with
respect to any shares purchasable upon the exercise of the Option or any portion
thereof, unless and until certificates representing such Shares shall have been
issued by the Company to such holder.
9. Consequences. Optionee shall be solely responsible for the
payment of any taxes due in connection with the Plan and this Option grant;
provided, however, that the Company may make such provisions as it may deem
appropriate for the withholding of any taxes which the Company determines it is
required to withhold in connection with the issuance, exercise or vesting of
this Option.
10. Administration. The Committee shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee shall be final and
binding upon the Optionee, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan or the Option.
11. Notice. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Optionee shall be addressed to him
at the address given beneath his signature hereto. By a notice given pursuant to
this Paragraph 11, either party may hereafter designate a different address for
notices to be delivered. Any notice which is required to be given to the
Optionee shall, if the Optionee is deceased, be given to the Optionee's personal
representative. Any notice shall have been deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by
the United States Postal Service.
12. Dividends.
(a) In the event that the Company declares a dividend with
respect to any Shares subject to a vested portion of the Option, the Company
shall mail to Optionee a written notice at least ten (10) days prior to the
record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any
unvested Options shall be reduced by the amount of any dividends that the
Optionee would have received had the
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<PAGE>
Optionee held the Shares subject to the Option on the record date with respect
to such dividend, and in the event that the aggregate dividends declared on such
Shares exceeds the aggregate Exercise Price of the Option, the amount of such
excess, if any, shall be deposited in an interest bearing bank account
established by the Committee in the name of the Optionee. Any amount held in an
interest bearing bank account established under this Paragraph 12(b), or the pro
rata portion thereof in the event of a partial exercise of this Option, shall be
paid to the Optionee upon exercise of all or, if relevant, a portion of the
Option.
13. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by the Optionee or the Company forthwith to
the Committee, which shall review such dispute at its next regular meeting. The
resolution of such dispute by the Committee shall be final and binding on the
Company and on the Optionee.
14. Governing Document. This Agreement is in every respect
subject to the provisions of the Plan, as it may be amended from time to time.
The provisions of the Plan shall govern in the case of any inconsistency between
the Plan and this Agreement.
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<PAGE>
15. Entire Agreement. The definitions attached hereto as Exhibit
A and the Plan and the Notice and Agreement attached hereto as Exhibit B are
incorporated herein by reference. This Agreement, including the definitions, the
Plan and the Notice and Agreement constitute the entire agreement of the parties
and supersede all prior undertakings and agreements with respect to the subject
matter hereof.
CARROLS HOLDINGS CORPORATION
By:------------------------------
Its:-----------------------------
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<PAGE>
Exhibit B
to Carrols Holdings Corporation
Stock Option Agreement
of Alan Vituli
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan,
represents that Optionee has read and understands the terms and provisions
thereof, and accepts this Option subject to all the terms and provisions of the
Plan and this Agreement. Optionee acknowledges that there may be various tax
consequences upon exercise of this Option or disposition of the Shares and that
Optionee should consult a tax adviser prior to such exercise or disposition.
By:----------------------------------
Alan Vituli
Old Road, Windham, N.Y. 12496
-------------------------------------
Taxpayer Identification Number
-8-
<PAGE>
<PAGE>
Exhibit A
to Carrols Holdings Corporation
Stock Option Agreement
of Alan Vituli
Definitions. As used in this Agreement, the following terms shall have the
following meanings:
"Cause" means, except as may otherwise be provided in a Participant's
employment agreement (if any) or in the Award Agreement, (i) the
commission by the Participant of a felony; (ii) the unauthorized
disclosure of confidential proprietary information of the Company or any
Subsidiary which disclosure the Participant knows or reasonably should
have known would be reasonably likely to result in material damage to
the Company or Subsidiary; (iii) the breach by the Participant of any
material provision of the Participant's employment agreement (if any),
which breach, if curable, is not remedied within thirty (30) days after
the Participant's receipt of written notice thereof provided, however,
that the Company need not permit the Participant to cure any breach
which has been the subject of a prior written notice; (iv) the
engagement in material self dealing in breach of fiduciary duties with
respect to the assets or properties of the Company or Subsidiary unless
disclosed to and approved by the disinterested members of the Board of
Directors; (v) an act of gross misconduct in connection with the
Participant's duties under his employment agreement (if any); or (vi)
chronic alcohol or drug abuse rendering Participant incapable of
carrying out his duties as determined in good faith by the Committee
continuing after the Participant is given a reasonable opportunity to
obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a
Subsidiary to comply with the provisions of the Participant's employment
agreement, if any, which failure shall not cease promptly and in no
event more than thirty (30) days after receipt by the Company or, where
appropriate, a Subsidiary of written notice from the Participant
objecting to such conduct; (ii) any termination by the Company or
Subsidiary of the Participant's employment other than as expressly
permitted in the Participant's employment agreement, if any; or (iii)
the assignment to Participant of duties and responsibilities materially
inconsistent with those duties and responsibilities customarily assigned
to individuals holding positions similar to that of the Participant at a
company of comparable size to the Company or Subsidiary or the
substantial reduction by the Company or Subsidiary of Participant's
duties and responsibilities and, if curable, not remedied by the Company
or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to
physical or mental disability to perform all of his duties with the
Company or Subsidiary pursuant to his employment agreement, if any, for
a period of six (6) successive months, or an aggregate of six (6) months
in any twelve (12) month period, as determined by the Committee upon the
basis of such evidence, including but not limited to independent medical
reports and data, as the Committee deems appropriate or necessary.
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<PAGE>
EXHIBIT B6
CARROLS HOLDINGS CORPORATION
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTION)
THIS AGREEMENT, dated as of ___________, 1997 is made by and
between Carrols Holdings Corporation, a Delaware corporation (hereinafter called
the "Company") and Daniel T. Accordino, an employee of Carrols Corporation
(hereinafter referred to as the "Optionee"). All capitalized terms herein shall
have such meanings as are ascribed to them in the Plan (as defined below) and in
this agreement (the "Agreement"), including those terms defined on Exhibit A
hereto.
1. Grant of Option. The Company grants to the Optionee as of the
date hereof (the "Date of Grant") a nonqualified stock option (this "Option") to
purchase all or any part of the aggregate of 28,900 shares of common stock, $.01
par value per share, of Carrols Holdings Corporation ("Shares"), subject to all
of the terms and conditions of this Agreement and the Carrols Holdings
Corporation 1996 Long-Term Incentive Plan, as amended from time to time (the
"Plan"). As of the date hereof, the Carrols Corporation 1996 Long-Term Incentive
Plan (the "Prior Plan") is terminated and the nonqualified stock option granted
pursuant to the Prior Plan is surrendered.
2. Exercise Price and Period of Option.
(a) Subject to the terms and conditions of the Plan and this
Agreement, this Option (a) became exercisable on the Date of Grant with regard
to 10,200 Shares and (b) shall become exercisable (i) with regard to 3,740
Shares, on December 31, 1997; (ii) with regard to 3,740 Shares, on December 31,
1998; (iii) with regard to 3,740 Shares, on December 31, 1999; and (iv) with
regard to 7,480 Shares, on December 31, 2000. This Option has an exercise price
of $101.7646 per share (the "Exercise Price").
(b) Except as otherwise provided by the Committee, if Optionee's
employment with the Company terminates:
(i) due to death, Permanent Disability, for Good Reason or
without Cause, the portion of the Option which is not vested and exercisable on
the date on which Optionee ceases to be an employee shall vest and become
immediately exercisable in full and all vested and exercisable Options
(including Options that become vested and exercisable under this paragraph)
shall continue to be exercisable until the date of expiration of the Option
pursuant to Paragraph 3 of this Agreement;
(ii) without Good Reason, the portion of the Option that
is not vested and exercisable on the date on which Optionee ceases to be an
employee shall terminate and any vested
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Options shall only be exercisable for a period of forty-five (45) days after the
Optionee's date of termination of employment without Good Reason; and
(iii) for Cause, the portion of the Option that is not
vested and exercisable shall terminate and any vested Options shall be forfeited
on the date the Company delivers notice of termination of employment for Cause
to the Optionee.
(c) In the event of a Change of Control during the term of the
Optionee's employment with Carrols Corporation, the portion of the Option that
is not vested shall vest and become exercisable in full on the date of such
Change of Control. As soon as practicable but in no event later than thirty (30)
days prior to the occurrence of a Change of Control, the Committee shall notify
the Optionee of such Change of Control. Upon a Change of Control that qualifies
as an Approved Sale (as defined in Paragraph 5) in which the outstanding common
stock of the Company is converted or exchanged for or becomes a right to receive
any cash, property or securities other than Illiquid Consideration (as defined
in Paragraph 5), (i) the Option shall become exercisable solely for the amount
of such cash, property or securities that the Optionee would have been entitled
to had the Option been exercised immediately prior to such event (ii) the
Optionee shall be given an opportunity to either (A) exercise the Option prior
to the consummation of the Approved Sale and participate in such sale as holders
of Stock or (B) upon consummation of the Approved Sale, receive in exchange for
such Option consideration equal to the amount determined by multiplying (1) the
same amount of consideration per share of Stock received by the holders of Stock
in connection with the Approved Sale less the exercise price per share of Stock
of such Option to acquire Stock by (2) the number of shares of Stock represented
by such Option; and (iii) to the extent the Option is not exercised prior to or
simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed
in connection with the Stock Purchase Agreement dated February 25, 1997 among
the Company, Atlantic Restaurants, Inc., Bahrain International Bank (E.C.),
Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners
II, L.P. (the "Stockholders Agreement").
3. Expiration of Option. Notwithstanding anything contained
herein to the contrary, this Option may not be exercised to any extent by
Optionee after the tenth anniversary of the Date of Grant.
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary
of the Company of an executed written Notice and Agreement in the form attached
hereto as Exhibit B, or in such other form as may be required by the Company,
which shall set forth Optionee's election to exercise this Option, the number of
Shares being purchased and such other representations and agreements regarding
Optionee's investment intent and access to information as may be required by the
Company to comply with applicable securities laws.
(b) Such Notice and Agreement shall be accompanied by full
payment of the Exercise Price for the Shares being purchased (i) in cash
(including check, bank draft or money
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order); (ii) where approved by the Committee in its sole discretion, by
surrender of Shares of the Company owned by the Optionee having a Fair Market
Value equal to the Exercise Price; (iii) by delivery of a promissory note as
provided under the Plan; (iv) by any combination of the foregoing where approved
by the Committee in writing in its sole discretion; or (v) any other method the
Committee may approve in its sole discretion, subject to the terms and
conditions of the Plan.
(c) Prior to the issuance of the Shares upon exercise of this
Option, Optionee must pay or, in a manner acceptable to the Company, make
adequate provision to pay, any applicable federal, state or local withholding
obligations as determined by the Company.
(d) Provided that the foregoing Notice and Agreement and payment
are in form and substance satisfactory to counsel for the Company, the Company
shall issue the Shares registered in the name of the Optionee, the Optionee and
the Optionee's spouse, or the Optionee's legal representative.
(e) Any exercisable portion of this Option or the entire Option,
if then wholly exercisable, may be exercised in whole or in part at any time
prior to the time when this Option becomes unexercisable under Paragraph 3;
provided, however, that any partial exercise shall be for whole Shares only.
(f) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable state
securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's
Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock
shall consent to and raise no objections against the Approved Sale of the
Company, and if the Approved Sale of the Company is structured as a sale of
capital stock, the holders of Stock shall agree to sell their shares of Stock on
the terms and conditions approved by the Board and the holders of a majority of
the Company's Stock. The holders of Stock shall take all necessary and desirable
actions in connection with the consummation of the Approved Sale of the Company.
Notwithstanding the foregoing, in the event that the consideration to be
received by the holders of Stock in connection with the Approved Sale shall
include either (a) shares of common stock of a class which is not listed on a
national securities exchange or in the NASDAQ system and which is not entitled
to registration rights for sale in a registered public offering under the
Securities Act of 1933 or (b) shares of senior equity securities which do not
provide for a scheduled redemption or a redemption at the option of the holders
thereof, such holders shall not be required to sell their shares of Stock
pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the
Approved Sale of the Company is subject to the satisfaction of the condition
that, upon the consummation of the Approved Sale, all of the holders of Stock
receive the same form and amount of consideration
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<PAGE>
per share of Stock, or if any holders of Stock are given an option as to the
form and amount of consideration to be received, all holders be given the same
option.
(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Stock shall at the
request of the Company, appoint a "purchaser representative" (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Stock appoints a purchaser representative designated by the Company, the Company
shall pay the fees of such purchaser representative. However, if any holder of
Stock declines to appoint the purchaser representative designated by the
Company, such holder shall appoint another purchaser representative (reasonably
acceptable to the Company), and such holder shall be responsible for the fees of
the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Stock pursuant to an Approved Sale to the extent such costs are
incurred for the benefit of all holders of Stock and are not otherwise paid by
the Company or the acquiring party. Costs incurred by Participants and the other
holders of Stock on their own behalf shall not be considered costs of the
transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the
completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party"
shall mean any Person who, immediately prior to the contemplated transaction,
does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a
"5% Owner"); who is not controlling, controlled by or under control with any
such 5% Owner and who is not the spouse or descendent (by birth or adoption) of
any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
Persons; "Person" shall mean an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof; "Qualified Public Offering"
shall mean the sale in an underwritten public offering registered under the
Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate
gross proceeds to the Company of at least $50 million and a price per share of
not less than $108.2353 (as such amount is equitably adjusted for subsequent
stock splits, stock dividends and recapitalizations); and "Sale of the Company"
shall mean the sale of the Company to an Independent Third Party or affiliated
group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power to elect a
majority of the Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all the Company's assets determined on a consolidated basis.
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<PAGE>
6. Compliance with Laws and Regulations. The issuance and
transfer of Shares shall be subject to compliance by the Company and the
Optionee with all applicable requirements of federal and state securities laws
and with all applicable requirements of any stock exchange on which the
Company's shares may be listed at the time of such issuance or transfer.
Optionee understands that the Company is under no obligation to register or
qualify the Shares with the Securities and Exchange Commission, any state
securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. This Option may not be
transferred in any manner except (a) as determined by the Committee in its sole
discretion, or (b) pursuant to Paragraph 7(f) of the Plan.
8. Rights as Stockholder. The holder of the Option shall not be,
nor have any of the rights or privileges of, a stockholder of the Company with
respect to any shares purchasable upon the exercise of the Option or any portion
thereof, unless and until certificates representing such Shares shall have been
issued by the Company to such holder.
9. Consequences. Optionee shall be solely responsible for the
payment of any taxes due in connection with the Plan and this Option grant;
provided, however, that the Company may make such provisions as it may deem
appropriate for the withholding of any taxes which the Company determines it is
required to withhold in connection with the issuance, exercise or vesting of
this Option.
10. Administration. The Committee shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee shall be final and
binding upon the Optionee, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan or the Option.
11. Notice. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Optionee shall be addressed to him
at the address given beneath his signature hereto. By a notice given pursuant to
this Paragraph 11, either party may hereafter designate a different address for
notices to be delivered. Any notice which is required to be given to the
Optionee shall, if the Optionee is deceased, be given to the Optionee's personal
representative. Any notice shall have been deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by
the United States Postal Service.
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12. Dividends.
(a) In the event that the Company declares a dividend with
respect to any Shares subject to a vested portion of the Option, the Company
shall mail to Optionee a written notice at least ten (10) days prior to the
record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any
unvested Options shall be reduced by the amount of any dividends that the
Optionee would have received had the Optionee held the Shares subject to the
Option on the record date with respect to such dividend, and in the event that
the aggregate dividends declared on such Shares exceeds the aggregate Exercise
Price of the Option, the amount of such excess, if any, shall be deposited in an
interest bearing bank account established by the Committee in the name of the
Optionee. Any amount held in an interest bearing bank account established under
this Paragraph 12(b), or the pro rata portion thereof in the event of a partial
exercise of this Option, shall be paid to the Optionee upon exercise of all or,
if relevant, a portion of the Option.
13. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by the Optionee or the Company forthwith to
the Committee, which shall review such dispute at its next regular meeting. The
resolution of such dispute by the Committee shall be final and binding on the
Company and on the Optionee.
14. Governing Document. This Agreement is in every respect
subject to the provisions of the Plan, as it may be amended from time to time.
The provisions of the Plan shall govern in the case of any inconsistency between
the Plan and this Agreement.
15. Entire Agreement. The definitions attached hereto as Exhibit
A and the Plan and the Notice and Agreement attached hereto as Exhibit B are
incorporated herein by reference. This Agreement, including the definitions, the
Plan and the Notice and Agreement constitute the entire agreement of the parties
and supersede all prior undertakings and agreements with respect to the subject
matter hereof.
CARROLS HOLDINGS CORPORATION
By:
---------------------------------
Its:
--------------------------------
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<PAGE>
Exhibit B
to Carrols Holdings Corporation
Stock Option Agreement
of Daniel T. Accordino
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all the terms and provisions of the Plan and this
Agreement. Optionee acknowledges that there may be various tax consequences upon
exercise of this Option or disposition of the Shares and that Optionee should
consult a tax adviser prior to such exercise or disposition.
By:
---------------------------------
Daniel T. Accordino
5175 E. Lake Road
Cazenovia, N.Y. 13035
------------------------------------
Taxpayer Identification Number
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<PAGE>
Exhibit A
to Carrols Holdings Corporation
Stock Option Agreement
of Daniel T. Accordino
Definitions. As used in this Agreement, the following terms shall have the
following meanings:
"Cause" means, except as may otherwise be provided in a Participant's
employment agreement (if any) or in the Award Agreement, (i) the
commission by the Participant of a felony; (ii) the unauthorized
disclosure of confidential proprietary information of the Company or any
Subsidiary which disclosure the Participant knows or reasonably should
have known would be reasonably likely to result in material damage to
the Company or Subsidiary; (iii) the breach by the Participant of any
material provision of the Participant's employment agreement (if any),
which breach, if curable, is not remedied within thirty (30) days after
the Participant's receipt of written notice thereof provided, however,
that the Company need not permit the Participant to cure any breach
which has been the subject of a prior written notice; (iv) the
engagement in material self dealing in breach of fiduciary duties with
respect to the assets or properties of the Company or Subsidiary unless
disclosed to and approved by the disinterested members of the Board of
Directors; (v) an act of gross misconduct in connection with the
Participant's duties under his employment agreement (if any); or (vi)
chronic alcohol or drug abuse rendering Participant incapable of
carrying out his duties as determined in good faith by the Committee
continuing after the Participant is given a reasonable opportunity to
obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a
Subsidiary to comply with the provisions of the Participant's employment
agreement, if any, which failure shall not cease promptly and in no
event more than thirty (30) days after receipt by the Company or, where
appropriate, a Subsidiary of written notice from the Participant
objecting to such conduct; (ii) any termination by the Company or
Subsidiary of the Participant's employment other than as expressly
permitted in the Participant's employment agreement, if any; or (iii)
the assignment to Participant of duties and responsibilities materially
inconsistent with those duties and responsibilities customarily assigned
to individuals holding positions similar to that of the Participant at a
company of comparable size to the Company or Subsidiary or the
substantial reduction by the Company or Subsidiary of Participant's
duties and responsibilities and, if curable, not remedied by the Company
or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to
physical or mental disability to perform all of his duties with the
Company or Subsidiary pursuant to his employment agreement, if any, for
a period of six (6) successive months, or an aggregate of six (6) months
in any twelve (12) month period, as determined by the Committee upon the
basis of such evidence, including but not limited to independent medical
reports and data, as the Committee deems appropriate or necessary.
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EXHIBIT B1
CARROLS HOLDINGS CORPORATION
UNVESTED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ___________, 1997 (the "Date of
Grant") is made by and between Carrols Holdings Corporation, a Delaware
corporation (hereinafter called the "Company") and Alan Vituli, an employee of
the Company (hereinafter referred to as the "Optionee"). Unless otherwise
defined herein or on Exhibit A hereto, which is incorporated herein by
reference, all capitalized terms used herein shall have the meanings assigned to
such terms in the Carrols Holdings Corporation 1996 Long-Term Incentive Plan, as
amended from time to time (the "Plan"); provided, however, that the Option
granted hereunder is not subject to or granted under the Plan.
1. Grant and Approval of Option. The Company hereby grants to the
Optionee a nonqualified stock option (the "Option") to purchase all or any part
of the aggregate of 29,480 shares of its $.01 par value common stock (the
"Shares"), subject to all of the terms and conditions of this agreement (the
"Agreement").
2. Exercise Price and Period of Option; Acceleration of Vesting.
(a) Effective as of the closing of the Stock Purchase Agreement
(the "Closing") and subject to the terms and conditions of this Agreement, this
Option shall become exercisable at an exercise price per share (the "Exercise
Price") of $101.7646 as follows: (i) 5,896 Shares will become exercisable on the
first anniversary date of the Closing; (ii) 5,896 Shares will become exercisable
on the second anniversary date of the Closing; (iii) 5,896 Shares will become
exercisable on the third anniversary date of the Closing; and (iv) 5,896 Shares
will become exercisable on the fourth anniversary date of the Closing; and (v)
the remaining 5,896 Shares will become exercisable on the fifth anniversary date
of the Closing.
(b) Except as otherwise provided by the Committee, if Optionee's
employment with the Company terminates:
(i) for Good Reason or without Cause, the portion of the Option
which is not vested and exercisable on the date on which Optionee ceases to be
an employee shall vest and become immediately exercisable in full and shall
continue to be exercisable until the date of expiration of the Option pursuant
to Paragraph 3 of this Agreement;
(ii) on account of death or Permanent Disability, Optionee shall
(A) have the right to purchase such additional Shares to which the Optionee
would have been entitled had his employment continued through the first
anniversary date of the Closing following Optionee's date of termination of
employment on account of death or Permanent Disability (the "Termination Date")
and (B) have the right to purchase such additional Shares equal to the product
of (x) the number of shares which would have become exercisable on the second
anniversary date of the
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Closing following the Termination Date multiplied by (y) a fraction where the
numerator equals the number of days elapsed since the anniversary date of the
Closing preceding the Termination Date and the denominator equals 365 days. In
the event of Optionee's death or Permanent Disability, all vested and
exercisable Options (including Options that become vested and exercisable under
this paragraph 2(b)(ii)) shall continue to be exercisable until the date of
expiration of the Option pursuant to Paragraph 3 of this Agreement;
(iii) without Good Reason, the portion of the Option that is not
vested and exercisable on the date on which Optionee ceases to be an employee
shall terminate and any vested Options shall only be exercisable for a period of
forty-five (45) days after the Optionee's date of termination of employment
without Good Reason; and
(iv) for Cause, the portion of the Option that is not vested and
exercisable shall terminate and any vested Options shall be forfeited on the
date the Company delivers notice of termination of employment for Cause to the
Optionee.
(c) In the event of a Change of Control during the term of the
Optionee's employment with Carrols Corporation, the portion of the Option that
is not vested shall vest and become exercisable in full on the date of such
Change of Control. As soon as practicable but in no event later than thirty (30)
days prior to the occurrence of a Change of Control, the Committee shall notify
the Optionee of such Change of Control. Upon a Change of Control that qualifies
as an Approved Sale (as defined in Paragraph 5) in which the outstanding common
stock of the Company is converted or exchanged for or becomes a right to receive
any cash, property or securities other than Illiquid Consideration (as defined
in Paragraph 5), (i) the Option shall become exercisable solely for the amount
of such cash, property or securities that the Optionee would have been entitled
to had the Option been exercised immediately prior to such event (ii) the
Optionee shall be given an opportunity to either (A) exercise the Option prior
to the consummation of the Approved Sale and participate in such sale as holders
of Stock or (B) upon consummation of the Approved Sale, receive in exchange for
such Option consideration equal to the amount determined by multiplying (1) the
same amount of consideration per share of Stock received by the holders of Stock
in connection with the Approved Sale less the exercise price per share of Stock
of such Option to acquire Stock by (2) the number of shares of Stock represented
by such Option; and (iii) to the extent the Option is not exercised prior to or
simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed
in connection with the Securities Purchase Agreement dated February 25, 1997
among the Company, Atlantic Restaurants, Inc., Bahrain International Bank
(E.C.), Madison Dearborn Capital Partners, L.P., and Madison Dearborn Capital
Partners II, L.P. (the "Stockholders Agreement").
3. Expiration of Option. Notwithstanding anything contained
herein to the contrary, this Option may not be exercised to any extent by
Optionee after the tenth anniversary of the Date of Grant.
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4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary
of the Company of an executed written notice (the "Notice"), or such other form
as may be required by the Committee which shall set forth Optionee's election to
exercise this Option, the number of Shares being purchased and such other
representations and agreements regarding Optionee's investment intent and access
to information as may be required by the Committee to comply with applicable
securities laws.
(b) Such Notice shall be accompanied by full payment of the
Exercise Price, if any, for the Shares being purchased (i) in cash (including
check, bank draft or money order); (ii) where approved by the Committee in its
sole discretion, by surrender of Shares of the Company owned by the Optionee
having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a
promissory note to the Company that is either (A) unsecured and fully recourse
against the Optionee or (B) nonrecourse but secured by the Shares being
purchased by such exercise and by other assets having a Fair Market Value equal
to not less than forty (40) percent of the Exercise Price (a "Nonrecourse Note")
and, in either event, such note shall mature on the fifth anniversary date
thereof and shall bear interest, payable quarterly, at the Federal mid-term rate
provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended;
(iv) by any combination of the foregoing, or any other method, where approved by
the Committee in writing in its sole discretion; or (v) by any other means
approved by the Committee. The terms of a Nonrecourse Note shall provide that:
(i) any dividends received on Stock securing a Nonrecourse Note shall be applied
toward payment of the principal and accrued interest of the Nonrecourse Note;
and (ii) the Nonrecourse Note shall become immediately due and payable upon the
sale of Stock securing the Nonrecourse Note and the proceeds shall be applied to
the payment of the unpaid principal balance and accrued interest of the
Nonrecourse Note. For purposes of this Agreement, "Fair Market Value" as of any
date (i) of Shares shall be deemed to equal: (A) if the Shares are publicly
traded, the average of the last reported sales price of such Shares for ten (10)
consecutive trading days as officially reported on the principal trading market
on which such Shares are traded ending on the second trading day prior to the
date of determination, or (B) if the Shares are not publicly traded, the value
of a Share as determined in good faith by the Committee or the Board of
Directors of the Company on the advice of its independent auditors; and (ii) of
assets other than Shares shall equal such value as determined by the Committee
in its sole discretion.
(c) Prior to the issuance of the Shares upon exercise of this
Option, Optionee must pay or, in a manner acceptable to the Committee, make
adequate provision to pay, any applicable federal, state or local withholding
obligations as determined by the Committee in accordance with applicable law.
(d) Promptly after receipt of any Notice and payment as provided
above, the Company shall issue the number of Shares set forth in such Notice,
registered in the name of the Optionee, the Optionee and the Optionee's spouse,
or the Optionee's legal representative.
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(e) Any exercisable portion of this Option may be exercised in
whole or in part at any time prior to the time when this Option becomes
unexercisable under Paragraph 3 of this Agreement; provided, however, that any
partial exercise shall be for whole Shares only.
(f) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable state
securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's
Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock
shall consent to and raise no objections against the Approved Sale of the
Company, and if the Approved Sale of the Company is structured as a sale of
capital stock, the holders of Stock shall agree to sell their shares of Stock on
the terms and conditions approved by the Board and the holders of a majority of
the Company's Stock. The holders of Stock shall take all necessary and desirable
actions in connection with the consummation of the Approved Sale of the Company.
Notwithstanding the foregoing, in the event that the consideration to be
received by the holders of Stock in connection with the Approved Sale shall
include either (a) shares of common stock of a class which is not listed on a
national securities exchange or in the NASDAQ system and which is not entitled
to registration rights for sale in a registered public offering under the
Securities Act of 1933 or (b) shares of senior equity securities which do not
provide for a scheduled redemption or a redemption at the option of the holders
thereof, such holders shall not be required to sell their shares of Stock
pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the
Approved Sale of the Company is subject to the satisfaction of the condition
that, upon the consummation of the Approved Sale, all of the holders of Stock
receive the same form and amount of consideration per share of Stock, or if any
holders of Stock are given an option as to the form and amount of consideration
to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Stock shall at the
request of the Company, appoint a "purchaser representative" (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Stock appoints a purchaser representative designated by the Company, the Company
shall pay the fees of such purchaser representative. However, if any holder of
Stock declines to appoint the purchaser representative designated by the
Company, such holder shall appoint another purchaser representative (reasonably
acceptable to the Company), and such holder shall be responsible for the fees of
the purchaser representative so appointed.
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(d) Participants and the other holders of Stock (if any) shall
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Stock pursuant to an Approved Sale to the extent such costs are
incurred for the benefit of all holders of Stock and are not otherwise paid by
the Company or the acquiring party. Costs incurred by Participants and the other
holders of Stock on their own behalf shall not be considered costs of the
transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the
completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party"
shall mean any Person who, immediately prior to the contemplated transaction,
does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a
"5% Owner"); who is not controlling, controlled by or under control with any
such 5% Owner and who is not the spouse or descendent (by birth or adoption) of
any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
Persons; "Person" shall mean an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof; "Qualified Public Offering"
shall mean the sale in an underwritten public offering registered under the
Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate
gross proceeds to the Company of at least $50 million and a price per share of
not less than $108.2353 (as such amount is equitably adjusted for subsequent
stock splits, stock dividends and recapitalizations); and "Sale of the Company"
shall mean the sale of the Company to an Independent Third Party or affiliated
group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power to elect a
majority of the Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all the Company's assets determined on a consolidated basis.
6. Compliance with Laws and Regulations. The issuance and
transfer of Shares shall be subject to compliance by the Company and the
Optionee with all applicable requirements of federal and state securities laws
and with all applicable requirements of any stock exchange on which the
Company's shares may be listed at the time of such issuance or transfer.
Optionee understands that the Company is under no obligation to register or
qualify the Shares with the Securities and Exchange Commission, any state
securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. Except as may otherwise be
determined by the Company, this Option may not be sold, transferred, assigned or
otherwise alienated or hypothecated by the Optionee, other than by will or by
the laws of descent and distribution, and shall be exercisable during the
Optionee's lifetime only by the Optionee or the Optionee's legal representative.
The Optionee may, if permitted by state law or the rules and regulations
governing any exchange on which the Company's Shares are traded, transfer the
Option, without payment of consideration, to a member of the Optionee's
immediate family or to a trust or partnership whose
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beneficiaries are members of the Optionee's immediate family. For purposes of
this Paragraph, the term "immediate family" shall include the Optionee's spouse,
children and grandchildren. Any attempt at assignment, transfer, pledge or
disposition of the Option contrary to the provisions hereof or the levy of any
execution, attachment or similar process upon the Option other than as expressly
permitted in this Paragraph 7 shall be null and void and without effect.
8. Rights as Stockholder. Other than as provided herein, the
holder of the Option shall not be, nor have any of the rights or privileges of,
a stockholder of the Company with respect to any Shares purchasable upon the
exercise of the Option or any portion thereof, unless and until certificates
representing such Shares shall have been issued by the Company to such holder.
9. Withholding of Taxes. Whenever the Company proposes or is
required to deliver or transfer Shares in connection with the exercise of this
Option, the Company shall have the right to (a) require the recipient to remit
to the Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for such Shares, or (b) take whatever action it
deems necessary to protect its interests with respect to tax liabilities.
10. Administration. The Committee shall have the power to
interpret this Agreement. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Agreement or the Option.
11. Notice. Any notice to be given under the terms of this
Agreement to the Committee shall be addressed to the Committee, and any notice
to be given to the Optionee shall be addressed to him at the address given
beneath his signature hereto. By a notice given pursuant to this Paragraph 11,
either party may hereafter designate a different address for notices to be
delivered. Any notice which is required to be given to the Optionee shall, if
the Optionee is deceased, be given to the Optionee's personal representative.
Any notice shall have been deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in
a post office or branch post office regularly maintained by the United States
Postal Service.
12. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by the Optionee to the Committee for its
review. The resolution of such dispute by the Committee shall be final and
binding on the Company and on the Optionee.
13. Entire Agreement. This Agreement and the Notice constitute
the entire agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
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14. Dividends.
(a) In the event that the Company declares a dividend with
respect to any Shares subject to a vested portion of the Option, the Company
shall mail to Optionee a written notice at least ten (10) days prior to the
record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any
unvested Options shall be reduced by the amount of any dividends that the
Optionee would have received had the Optionee held the Shares subject to the
Option on the record date with respect to such dividend, and in the event that
the aggregate dividends declared on such Shares exceeds the aggregate Exercise
Price of the Option, the amount of such excess, if any, shall be deposited in an
interest bearing bank account established by the Committee in the name of the
Optionee. Any amount held in an interest bearing bank account established under
this Paragraph 14(b), or the pro rata portion thereof in the event of a partial
exercise of this Option, shall be paid to the Optionee upon exercise of all or,
if relevant, a portion of the Option.
15. Adjustments. In the event of a reclassification,
recapitalization, merger, consolidation, reorganization, stock dividends, stock
split or reverse stock split, including, without limitation, a distribution of
the stock of a Subsidiary, combination or exchange of shares, the Committee
shall determine, in its discretion, the appropriate adjustments, if any, to the
number of Shares which may be issued under this Option and the exercise price of
this Option.
16. Amendment and Termination.
(a) The Committee shall have the authority to make such
amendments to the Option provided that no such action shall modify the Option in
a manner adverse to Optionee without Optionee's consent.
(b) The Committee may terminate, amend or modify the Option at
any time and from time to time; provided, however, that an amendment which
requires stockholder approval in order for the Plan to continue to comply with
Rule 16b-3, Section 162(m) of the Code or any other law, regulation or stock
exchange requirement shall not be effective unless approved by the requisite
vote of stockholders. The termination, amendment or modification of the Option
may be in response to changes in the Code, the Exchange Act, national securities
exchange regulations or for other reasons deemed appropriate by the Committee.
17. Successors. The terms of the Option shall be binding upon the
Company and its successors and assigns.
18. Requirements of Law.
(a) In the event any provision of the Option shall be held
illegal or invalid for any reason, the illegality or invalidity shall not effect
the remaining parts of the Option, and the Option shall be construed and
enforced as if the illegal or invalid provision had not been included.
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(b) To the extent that federal laws do not otherwise control, the
Option shall be construed in accordance with and governed by the laws of the
State of New York.
CARROLS HOLDINGS CORPORATION
By:
---------------------------------
Title:
---------------------------------
ACCEPTED AND AGREED TO:
By:
---------------------------------
Alan Vituli
Old Road, Windham, New York 12496
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Exhibit A
to Carrols Holdings Corporation
Unvested Stock Option Agreement
of Alan Vituli
Definitions. As used in this Agreement, the following terms shall have the
following meanings:
"Cause" means, except as may otherwise be provided in a Participant's
employment agreement (if any) or in the Award Agreement, (i) the
commission by the Participant of a felony; (ii) the unauthorized
disclosure of confidential proprietary information of the Company or any
Subsidiary which disclosure the Participant knows or reasonably should
have known would be reasonably likely to result in material damage to
the Company or Subsidiary; (iii) the breach by the Participant of any
material provision of the Participant's employment agreement (if any),
which breach, if curable, is not remedied within thirty (30) days after
the Participant's receipt of written notice thereof provided, however,
that the Company need not permit the Participant to cure any breach
which has been the subject of a prior written notice; (iv) the
engagement in material self dealing in breach of fiduciary duties with
respect to the assets or properties of the Company or Subsidiary unless
disclosed to and approved by the disinterested members of the Board of
Directors; (v) an act of gross misconduct in connection with the
Participant's duties under his employment agreement (if any); or (vi)
chronic alcohol or drug abuse rendering Participant incapable of
carrying out his duties as determined in good faith by the Committee
continuing after the Participant is given a reasonable opportunity to
obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a
Subsidiary to comply with the provisions of the Participant's employment
agreement, if any, which failure shall not cease promptly and in no
event more than thirty (30) days after receipt by the Company or, where
appropriate, a Subsidiary of written notice from the Participant
objecting to such conduct; (ii) any termination by the Company or
Subsidiary of the Participant's employment other than as expressly
permitted in the Participant's employment agreement, if any; or (iii)
the assignment to Participant of duties and responsibilities materially
inconsistent with those duties and responsibilities customarily assigned
to individuals holding positions similar to that of the Participant at a
company of comparable size to the Company or Subsidiary or the
substantial reduction by the Company or Subsidiary of Participant's
duties and responsibilities and, if curable, not remedied by the Company
or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to
physical or mental disability to perform all of his duties with the
Company or Subsidiary pursuant to his employment agreement, if any, for
a period of six (6) successive months, or an aggregate of six (6) months
in any twelve (12) month period, as determined by the Committee upon the
basis of such evidence, including but not limited to independent medical
reports and data, as the Committee deems appropriate or necessary.
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EXHIBIT B2
CARROLS HOLDINGS CORPORATION
UNVESTED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ___________, 1997 (the "Date of
Grant") is made by and between Carrols Holdings Corporation, a Delaware
corporation (hereinafter called the "Company") and Daniel T. Accordino, an
employee of the Company (hereinafter referred to as the "Optionee"). Unless
otherwise defined herein or on Exhibit A hereto, which is incorporated herein by
reference, all capitalized terms used herein shall have the meanings assigned to
such terms in the Carrols Holdings Corporation 1996 Long-Term Incentive Plan as
amended from time to time (the "Plan"); provided, however, that the Option
granted hereunder is not subject to or granted under the Plan.
1. Grant and Approval of Option. The Company hereby grants to the
Optionee a nonqualified stock option (the "Option") to purchase all or any part
of the aggregate of 2,579 shares of its $.01 par value common stock (the
"Shares"), subject to all of the terms and conditions of this agreement (the
"Agreement").
2. Exercise Price and Period of Option; Acceleration of Vesting.
(a) Effective as of the closing of the Stock Purchase Agreement
(the "Closing") and subject to the terms and conditions of this Agreement, this
Option shall become exercisable at an exercise price per share (the "Exercise
Price") of $101.7646 as follows: (i) 516 Shares will become exercisable on the
first anniversary date of the Closing; (ii) 516 Shares will become exercisable
on the second anniversary date of the Closing; (iii) 516 Shares will become
exercisable on the third anniversary date of the Closing; (iv) 516 Shares will
become exercisable on the fourth anniversary date of the Closing; and (v) the
remaining 515 Shares will become exercisable on the fifth anniversary date of
the Closing.
(b) Except as otherwise provided by the Committee, if Optionee's
employment with the Company terminates:
(i) for Good Reason or without Cause, the portion of the Option
which is not vested and exercisable on the date on which Optionee ceases to be
an employee shall vest and become immediately exercisable in full and shall
continue to be exercisable until the date of expiration of the Option pursuant
to Paragraph 3 of this Agreement;
(ii) on account of death or Permanent Disability, Optionee shall
(A) have the right to purchase such additional Shares to which the Optionee
would have been entitled had his
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employment continued through the first anniversary date of the Closing following
Optionee's date of termination of employment on account of death or Permanent
Disability (the "Termination Date") and (B) have the right to purchase such
additional Shares equal to the product of (x) the number of shares which would
have become exercisable on the second anniversary date of the Closing following
the Termination Date multiplied by (y) a fraction where the numerator equals the
number of days elapsed since the anniversary date of the Closing preceding the
Termination Date and the denominator equals 365 days. In the event of Optionee's
death or Permanent Disability, all vested and exercisable Options (including
Options that become vested and exercisable under this paragraph 2(b)(ii)) shall
continue to be exercisable until the date of expiration of the Option pursuant
to Paragraph 3 of this Agreement;
(iii) without Good Reason, the portion of the Option that is not
vested and exercisable on the date on which Optionee ceases to be an employee
shall terminate and any vested Options shall only be exercisable for a period of
forty-five (45) days after the Optionee's date of termination of employment
without Good Reason; and
(iv) for Cause, the portion of the Option that is not vested and
exercisable shall terminate and any vested Options shall be forfeited on the
date the Company delivers notice of termination of employment for Cause to the
Optionee.
(c) In the event of a Change of Control during the term of the
Optionee's employment with Carrols Corporation, the portion of the Option that
is not vested shall vest and become exercisable in full on the date of such
Change of Control. As soon as practicable but in no event later than thirty (30)
days prior to the occurrence of a Change of Control, the Committee shall notify
the Optionee of such Change of Control. Upon a Change of Control that qualifies
as an Approved Sale (as defined in Paragraph 5) in which the outstanding common
stock of the Company is converted or exchanged for or becomes a right to receive
any cash, property or securities other than Illiquid Consideration (as defined
in Paragraph 5), (i) the Option shall become exercisable solely for the amount
of such cash, property or securities that the Optionee would have been entitled
to had the Option been exercised immediately prior to such event (ii) the
Optionee shall be given an opportunity to either (A) exercise the Option prior
to the consummation of the Approved Sale and participate in such sale as holders
of Stock or (B) upon consummation of the Approved Sale, receive in exchange for
such Option consideration equal to the amount determined by multiplying (1) the
same amount of consideration per share of Stock received by the holders of Stock
in connection with the Approved Sale less the exercise price per share of Stock
of such Option to acquire Stock by (2) the number of shares of Stock represented
by such Option; and (iii) to the extent the Option is not exercised prior to or
simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed
in connection with the Securities Purchase Agreement dated February 25, 1997
among the Company, Atlantic Restaurants, Inc., Bahrain International Bank
(E.C.), Madison Dearborn Capital Partners, L.P., and Madison Dearborn Capital
Partners II, L.P. (the "Stockholders Agreement").
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3. Expiration of Option. Notwithstanding anything contained
herein to the contrary, this Option may not be exercised to any extent by
Optionee after the tenth anniversary of the Date of Grant.
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary
of the Company of an executed written notice (the "Notice"), or such other form
as may be required by the Committee which shall set forth Optionee's election to
exercise this Option, the number of Shares being purchased and such other
representations and agreements regarding Optionee's investment intent and access
to information as may be required by the Committee to comply with applicable
securities laws.
(b) Such Notice shall be accompanied by full payment of the
Exercise Price, if any, for the Shares being purchased (i) in cash (including
check, bank draft or money order); (ii) where approved by the Committee in its
sole discretion, by surrender of Shares of the Company owned by the Optionee
having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a
promissory note to the Company that is either (A) unsecured and fully recourse
against the Optionee or (B) nonrecourse but secured by the Shares being
purchased by such exercise and by other assets having a Fair Market Value equal
to not less than forty (40) percent of the Exercise Price (a "Nonrecourse Note")
and, in either event, such note shall mature on the fifth anniversary date
thereof and shall bear interest, payable quarterly, at the Federal mid-term rate
provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended;
(iv) by any combination of the foregoing, or any other method, where approved by
the Committee in writing in its sole discretion; or (v) by any other means
approved by the Committee. The terms of a Nonrecourse Note shall provide that:
(i) any dividends received on Stock securing a Nonrecourse Note shall be applied
toward payment of the principal and accrued interest of the Nonrecourse Note;
and (ii) the Nonrecourse Note shall become immediately due and payable upon the
sale of Stock securing the Nonrecourse Note and the proceeds shall be applied to
the payment of the unpaid principal balance and accrued interest of the
Nonrecourse Note. For purposes of this Agreement, "Fair Market Value" as of any
date (i) of Shares shall be deemed to equal: (A) if the Shares are publicly
traded, the average of the last reported sales price of such Shares for ten (10)
consecutive trading days as officially reported on the principal trading market
on which such Shares are traded ending on the second trading day prior to the
date of determination, or (B) if the Shares are not publicly traded, the value
of a Share as determined in good faith by the Committee or the Board of
Directors of the Company on the advice of its independent auditors; and (ii) of
assets other than Shares shall equal such value as determined by the Committee
in its sole discretion.
(c) Prior to the issuance of the Shares upon exercise of this
Option, Optionee must pay or, in a manner acceptable to the Committee, make
adequate provision to pay, any applicable federal, state or local withholding
obligations as determined by the Committee in accordance with applicable law.
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(d) Promptly after receipt of any Notice and payment as provided
above, the Company shall issue the number of Shares set forth in such Notice,
registered in the name of the Optionee, the Optionee and the Optionee's spouse,
or the Optionee's legal representative.
(e) Any exercisable portion of this Option may be exercised in
whole or in part at any time prior to the time when this Option becomes
unexercisable under Paragraph 3 of this Agreement; provided, however, that any
partial exercise shall be for whole Shares only.
(f) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable state
securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's
Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock
shall consent to and raise no objections against the Approved Sale of the
Company, and if the Approved Sale of the Company is structured as a sale of
capital stock, the holders of Stock shall agree to sell their shares of Stock on
the terms and conditions approved by the Board and the holders of a majority of
the Company's Stock. The holders of Stock shall take all necessary and desirable
actions in connection with the consummation of the Approved Sale of the Company.
Notwithstanding the foregoing, in the event that the consideration to be
received by the holders of Stock in connection with the Approved Sale shall
include either (a) shares of common stock of a class which is not listed on a
national securities exchange or in the NASDAQ system and which is not entitled
to registration rights for sale in a registered public offering under the
Securities Act of 1933 or (b) shares of senior equity securities which do not
provide for a scheduled redemption or a redemption at the option of the holders
thereof, such holders shall not be required to sell their shares of Stock
pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the
Approved Sale of the Company is subject to the satisfaction of the condition
that, upon the consummation of the Approved Sale, all of the holders of Stock
receive the same form and amount of consideration per share of Stock, or if any
holders of Stock are given an option as to the form and amount of consideration
to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Stock shall at the
request of the Company, appoint a "purchaser representative" (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Stock appoints a purchaser representative designated by the Company, the Company
shall pay the fees of such purchaser representative. However, if any holder of
Stock declines to appoint the purchaser representative designated by the
Company, such holder shall appoint another purchaser representative
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(reasonably acceptable to the Company), and such holder shall be responsible for
the fees of the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Stock pursuant to an Approved Sale to the extent such costs are
incurred for the benefit of all holders of Stock and are not otherwise paid by
the Company or the acquiring party. Costs incurred by Participants and the other
holders of Stock on their own behalf shall not be considered costs of the
transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the
completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party"
shall mean any Person who, immediately prior to the contemplated transaction,
does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a
"5% Owner"); who is not controlling, controlled by or under control with any
such 5% Owner and who is not the spouse or descendent (by birth or adoption) of
any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
Persons; "Person" shall mean an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof; "Qualified Public Offering"
shall mean the sale in an underwritten public offering registered under the
Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate
gross proceeds to the Company of at least $50 million and a price per share of
not less than $108.2353 (as such amount is equitably adjusted for subsequent
stock splits, stock dividends and recapitalizations); and "Sale of the Company"
shall mean the sale of the Company to an Independent Third Party or affiliated
group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power to elect a
majority of the Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all the Company's assets determined on a consolidated basis.
6. Compliance with Laws and Regulations. The issuance and
transfer of Shares shall be subject to compliance by the Company and the
Optionee with all applicable requirements of federal and state securities laws
and with all applicable requirements of any stock exchange on which the
Company's shares may be listed at the time of such issuance or transfer.
Optionee understands that the Company is under no obligation to register or
qualify the Shares with the Securities and Exchange Commission, any state
securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. Except as may otherwise be
determined by the Company, this Option may not be sold, transferred, assigned or
otherwise alienated or
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hypothecated by the Optionee, other than by will or by the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee or the Optionee's legal representative. The Optionee may, if
permitted by state law or the rules and regulations governing any exchange on
which the Company's Shares are traded, transfer the Option, without payment of
consideration, to a member of the Optionee's immediate family or to a trust or
partnership whose beneficiaries are members of the Optionee's immediate family.
For purposes of this Paragraph, the term "immediate family" shall include the
Optionee's spouse, children and grandchildren. Any attempt at assignment,
transfer, pledge or disposition of the Option contrary to the provisions hereof
or the levy of any execution, attachment or similar process upon the Option
other than as expressly permitted in this Paragraph 7 shall be null and void and
without effect.
8. Rights as Stockholder. Other than as provided herein, the
holder of the Option shall not be, nor have any of the rights or privileges of,
a stockholder of the Company with respect to any Shares purchasable upon the
exercise of the Option or any portion thereof, unless and until certificates
representing such Shares shall have been issued by the Company to such holder.
9. Withholding of Taxes. Whenever the Company proposes or is
required to deliver or transfer Shares in connection with the exercise of this
Option, the Company shall have the right to (a) require the recipient to remit
to the Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for such Shares, or (b) take whatever action it
deems necessary to protect its interests with respect to tax liabilities.
10. Administration. The Committee shall have the power to
interpret this Agreement. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Agreement or the Option.
11. Notice. Any notice to be given under the terms of this
Agreement to the Committee shall be addressed to the Committee, and any notice
to be given to the Optionee shall be addressed to him at the address given
beneath his signature hereto. By a notice given pursuant to this Paragraph 11,
either party may hereafter designate a different address for notices to be
delivered. Any notice which is required to be given to the Optionee shall, if
the Optionee is deceased, be given to the Optionee's personal representative.
Any notice shall have been deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in
a post office or branch post office regularly maintained by the United States
Postal Service.
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12. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by the Optionee to the Committee for its
review. The resolution of such dispute by the Committee shall be final and
binding on the Company and on the Optionee.
13. Entire Agreement. This Agreement and the Notice constitute
the entire agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
14. Dividends.
(a) In the event that the Company declares a dividend with
respect to any Shares subject to a vested portion of the Option, the Company
shall mail to Optionee a written notice at least ten (10) days prior to the
record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any
unvested Options shall be reduced by the amount of any dividends that the
Optionee would have received had the Optionee held the Shares subject to the
Option on the record date with respect to such dividend, and in the event that
the aggregate dividends declared on such Shares exceeds the aggregate Exercise
Price of the Option, the amount of such excess, if any, shall be deposited in an
interest bearing bank account established by the Committee in the name of the
Optionee. Any amount held in an interest bearing bank account established under
this Paragraph 14(b), or the pro rata portion thereof in the event of a partial
exercise of this Option, shall be paid to the Optionee upon exercise of all or,
if relevant, a portion of the Option.
15. Adjustments. In the event of a reclassification,
recapitalization, merger, consolidation, reorganization, stock dividends, stock
split or reverse stock split, including, without limitation, a distribution of
the stock of a Subsidiary, combination or exchange of shares, the Committee
shall determine, in its discretion, the appropriate adjustments, if any, to the
number of Shares which may be issued under this Option and the exercise price of
this Option.
16. Amendment and Termination.
(a) The Committee shall have the authority to make such
amendments to the Option provided that no such action shall modify the Option in
a manner adverse to Optionee without Optionee's consent.
(b) The Committee may terminate, amend or modify the Option at
any time and from time to time; provided, however, that an amendment which
requires stockholder approval in order for the Plan to continue to comply with
Rule 16b-3, Section 162(m) of the Code or any other law, regulation or stock
exchange requirement shall not be effective unless approved by the requisite
vote of stockholders. The termination, amendment or modification of the Option
may be in response to changes in the Code, the Exchange Act, national securities
exchange regulations or for other reasons deemed appropriate by the Committee.
17. Successors. The terms of the Option shall be binding upon the
Company and its successors and assigns.
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18. Requirements of Law.
(a) In the event any provision of the Option shall be held
illegal or invalid for any reason, the illegality or invalidity shall not effect
the remaining parts of the Option, and the Option shall be construed and
enforced as if the illegal or invalid provision had not been included.
(b) To the extent that federal laws do not otherwise control, the
Option shall be construed in accordance with and governed by the laws of the
State of New York.
CARROLS HOLDINGS CORPORATION
By:
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Title:
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ACCEPTED AND AGREED TO:
By:
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Daniel T. Accordino
5175 E. Lake Road
Cazenovia, New York 13035
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Exhibit A
to Carrols Holdings Corporation
Unvested Stock Option Agreement
of Daniel T. Accordino
Definitions. As used in this Agreement, the following terms shall have the
following meanings:
"Cause" means, except as may otherwise be provided in a Participant's
employment agreement (if any) or in the Award Agreement, (i) the
commission by the Participant of a felony; (ii) the unauthorized
disclosure of confidential proprietary information of the Company or any
Subsidiary which disclosure the Participant knows or reasonably should
have known would be reasonably likely to result in material damage to
the Company or Subsidiary; (iii) the breach by the Participant of any
material provision of the Participant's employment agreement (if any),
which breach, if curable, is not remedied within thirty (30) days after
the Participant's receipt of written notice thereof provided, however,
that the Company need not permit the Participant to cure any breach
which has been the subject of a prior written notice; (iv) the
engagement in material self dealing in breach of fiduciary duties with
respect to the assets or properties of the Company or Subsidiary unless
disclosed to and approved by the disinterested members of the Board of
Directors; (v) an act of gross misconduct in connection with the
Participant's duties under his employment agreement (if any); or (vi)
chronic alcohol or drug abuse rendering Participant incapable of
carrying out his duties as determined in good faith by the Committee
continuing after the Participant is given a reasonable opportunity to
obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a
Subsidiary to comply with the provisions of the Participant's employment
agreement, if any, which failure shall not cease promptly and in no
event more than thirty (30) days after receipt by the Company or, where
appropriate, a Subsidiary of written notice from the Participant
objecting to such conduct; (ii) any termination by the Company or
Subsidiary of the Participant's employment other than as expressly
permitted in the Participant's employment agreement, if any; or (iii)
the assignment to Participant of duties and responsibilities materially
inconsistent with those duties and responsibilities customarily assigned
to individuals holding positions similar to that of the Participant at a
company of comparable size to the Company or Subsidiary or the
substantial reduction by the Company or Subsidiary of Participant's
duties and responsibilities and, if curable, not remedied by the Company
or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to
physical or mental disability to perform all of his duties with the
Company or Subsidiary pursuant to his employment agreement, if any, for
a period of six (6) successive months, or an aggregate of six (6) months
in any twelve (12) month period, as determined by the Committee upon the
basis of such evidence, including but not limited to independent medical
reports and data, as the Committee deems appropriate or necessary.
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EXHIBIT B3
CARROLS HOLDINGS CORPORATION
UNVESTED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ___________, 1997 (the "Date of
Grant") is made by and between Carrols Holdings Corporation, a Delaware
corporation (hereinafter called the "Company") and Joseph A. Zirkman, an
employee of the Company (hereinafter referred to as the "Optionee"). Unless
otherwise defined herein or on Exhibit A hereto, which is incorporated herein by
reference, all capitalized terms used herein shall have the meanings assigned to
such terms in the Carrols Holdings Corporation 1996 Long-Term Incentive Plan, as
amended from time to time (the "Plan"); provided, however, that the Option
granted hereunder is not subject to or granted under the Plan.
1. Grant and Approval of Option. The Company hereby grants to the
Optionee a nonqualified stock option (the "Option") to purchase all or any part
of the aggregate of 368 shares of its $.01 par value common stock (the
"Shares"), subject to all of the terms and conditions of this agreement (the
"Agreement").
2. Exercise Price and Period of Option; Acceleration of Vesting.
(a) Effective as of the closing of the Stock Purchase Agreement
(the "Closing") and subject to the terms and conditions of this Agreement, this
Option shall become exercisable at an exercise price per share (the "Exercise
Price") of $101.7646 as follows: (i) 74 Shares will become exercisable on the
first anniversary date of the Closing; (ii) 74 Shares will become exercisable on
the second anniversary date of the Closing; (iii) 74 Shares will become
exercisable on the third anniversary date of the Closing; (iv) 73 Shares will
become exercisable on the fourth anniversary date of the Closing; and (v) the
remaining 73 Shares will become exercisable on the fifth anniversary date of the
Closing.
(b) Except as otherwise provided by the Committee, if Optionee's
employment with the Company terminates:
(i) for Good Reason or without Cause, the portion of the Option
which is not vested and exercisable on the date on which Optionee ceases to be
an employee shall vest and become immediately exercisable in full and shall
continue to be exercisable until the date of expiration of the Option pursuant
to Paragraph 3 of this Agreement;
(ii) on account of death or Permanent Disability, Optionee shall
(A) have the right to purchase such additional Shares to which the Optionee
would have been entitled had his employment continued through the first
anniversary date of the Closing following Optionee's date of termination of
employment on account of death or Permanent Disability (the "Termination Date")
and (B) have the right to purchase such additional Shares equal to the product
of (x) the number of shares which would have become exercisable on the second
anniversary date of the
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Closing following the Termination Date multiplied by (y) a fraction where the
numerator equals the number of days elapsed since the anniversary date of the
Closing preceding the Termination Date and the denominator equals 365 days. In
the event of Optionee's death or Permanent Disability, all vested and
exercisable Options (including Options that become vested and exercisable under
this paragraph 2(b)(ii)) shall continue to be exercisable until the date of
expiration of the Option pursuant to Paragraph 3 of this Agreement;
(iii) without Good Reason, the portion of the Option that is not
vested and exercisable on the date on which Optionee ceases to be an employee
shall terminate and any vested Options shall only be exercisable for a period of
forty-five (45) days after the Optionee's date of termination of employment
without Good Reason; and
(iv) for Cause, the portion of the Option that is not vested and
exercisable shall terminate and any vested Options shall be forfeited on the
date the Company delivers notice of termination of employment for Cause to the
Optionee.
(c) In the event of a Change of Control during the term of the
Optionee's employment with Carrols Corporation, the portion of the Option that
is not vested shall vest and become exercisable in full on the date of such
Change of Control. As soon as practicable but in no event later than thirty (30)
days prior to the occurrence of a Change of Control, the Committee shall notify
the Optionee of such Change of Control. Upon a Change of Control that qualifies
as an Approved Sale (as defined in Paragraph 5) in which the outstanding common
stock of the Company is converted or exchanged for or becomes a right to receive
any cash, property or securities other than Illiquid Consideration (as defined
in Paragraph 5), (i) the Option shall become exercisable solely for the amount
of such cash, property or securities that the Optionee would have been entitled
to had the Option been exercised immediately prior to such event (ii) the
Optionee shall be given an opportunity to either (A) exercise the Option prior
to the consummation of the Approved Sale and participate in such sale as holders
of Stock or (B) upon consummation of the Approved Sale, receive in exchange for
such Option consideration equal to the amount determined by multiplying (1) the
same amount of consideration per share of Stock received by the holders of Stock
in connection with the Approved Sale less the exercise price per share of Stock
of such Option to acquire Stock by (2) the number of shares of Stock represented
by such Option; and (iii) to the extent the Option is not exercised prior to or
simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed
in connection with the Securities Purchase Agreement dated February 25, 1997
among the Company, Atlantic Restaurants, Inc., Bahrain International Bank
(E.C.), Madison Dearborn Capital Partners, L.P., and Madison Dearborn Capital
Partners II, L.P. (the "Stockholders Agreement").
3. Expiration of Option. Notwithstanding anything contained
herein to the contrary, this Option may not be exercised to any extent by
Optionee after the tenth anniversary of the Date of Grant.
4. Manner of Exercise.
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(a) This Option shall be exercisable by delivery to the Secretary
of the Company of an executed written notice (the "Notice"), or such other form
as may be required by the Committee which shall set forth Optionee's election to
exercise this Option, the number of Shares being purchased and such other
representations and agreements regarding Optionee's investment intent and access
to information as may be required by the Committee to comply with applicable
securities laws.
(b) Such Notice shall be accompanied by full payment of the
Exercise Price, if any, for the Shares being purchased (i) in cash (including
check, bank draft or money order); (ii) where approved by the Committee in its
sole discretion, by surrender of Shares of the Company owned by the Optionee
having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a
promissory note to the Company that is either (A) unsecured and fully recourse
against the Optionee or (B) nonrecourse but secured by the Shares being
purchased by such exercise and by other assets having a Fair Market Value equal
to not less than forty (40) percent of the Exercise Price (a "Nonrecourse Note")
and, in either event, such note shall mature on the fifth anniversary date
thereof and shall bear interest, payable quarterly, at the Federal mid-term rate
provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended;
(iv) by any combination of the foregoing, or any other method, where approved by
the Committee in writing in its sole discretion ; or (v) by any other means
approved by the Committee. The terms of a Nonrecourse Note shall provide that:
(i) any dividends received on Stock securing a Nonrecourse Note shall be applied
toward payment of the principal and accrued interest of the Nonrecourse Note;
and (ii) the Nonrecourse Note shall become immediately due and payable upon the
sale of Stock securing the Nonrecourse Note and the proceeds shall be applied to
the payment of the unpaid principal balance and accrued interest of the
Nonrecourse Note. For purposes of this Agreement, "Fair Market Value" as of any
date (i) of Shares shall be deemed to equal: (A) if the Shares are publicly
traded, the average of the last reported sales price of such Shares for ten (10)
consecutive trading days as officially reported on the principal trading market
on which such Shares are traded ending on the second trading day prior to the
date of determination, or (B) if the Shares are not publicly traded, the value
of a Share as determined in good faith by the Committee or the Board of
Directors of the Company on the advice of its independent auditors; and (ii) of
assets other than Shares shall equal such value as determined by the Committee
in its sole discretion.
(c) Prior to the issuance of the Shares upon exercise of this
Option, Optionee must pay or, in a manner acceptable to the Committee, make
adequate provision to pay, any applicable federal, state or local withholding
obligations as determined by the Committee in accordance with applicable law.
(d) Promptly after receipt of any Notice and payment as provided
above, the Company shall issue the number of Shares set forth in such Notice,
registered in the name of the Optionee, the Optionee and the Optionee's spouse,
or the Optionee's legal representative.
(e) Any exercisable portion of this Option may be exercised in
whole or in part at any time prior to the time when this Option becomes
unexercisable under Paragraph 3 of this Agreement; provided, however, that any
partial exercise shall be for whole Shares only.
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(f) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable state
securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's
Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock
shall consent to and raise no objections against the Approved Sale of the
Company, and if the Approved Sale of the Company is structured as a sale of
capital stock, the holders of Stock shall agree to sell their shares of Stock on
the terms and conditions approved by the Board and the holders of a majority of
the Company's Stock. The holders of Stock shall take all necessary and desirable
actions in connection with the consummation of the Approved Sale of the Company.
Notwithstanding the foregoing, in the event that the consideration to be
received by the holders of Stock in connection with the Approved Sale shall
include either (a) shares of common stock of a class which is not listed on a
national securities exchange or in the NASDAQ system and which is not entitled
to registration rights for sale in a registered public offering under the
Securities Act of 1933 or (b) shares of senior equity securities which do not
provide for a scheduled redemption or a redemption at the option of the holders
thereof, such holders shall not be required to sell their shares of Stock
pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the
Approved Sale of the Company is subject to the satisfaction of the condition
that, upon the consummation of the Approved Sale, all of the holders of Stock
receive the same form and amount of consideration per share of Stock, or if any
holders of Stock are given an option as to the form and amount of consideration
to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Stock shall at the
request of the Company, appoint a "purchaser representative" (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Stock appoints a purchaser representative designated by the Company, the Company
shall pay the fees of such purchaser representative. However, if any holder of
Stock declines to appoint the purchaser representative designated by the
Company, such holder shall appoint another purchaser representative (reasonably
acceptable to the Company), and such holder shall be responsible for the fees of
the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Stock pursuant to an Approved Sale to the extent such costs are
incurred for the benefit of all holders of Stock and are not otherwise paid by
the Company or the acquiring party. Costs incurred by Participants and
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the other holders of Stock on their own behalf shall not be considered costs
of the transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the
completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party"
shall mean any Person who, immediately prior to the contemplated transaction,
does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a
"5% Owner"); who is not controlling, controlled by or under control with any
such 5% Owner and who is not the spouse or descendent (by birth or adoption) of
any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
Persons; "Person" shall mean an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof; "Qualified Public Offering"
shall mean the sale in an underwritten public offering registered under the
Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate
gross proceeds to the Company of at least $50 million and a price per share of
not less than $108.2353 (as such amount is equitably adjusted for subsequent
stock splits, stock dividends and recapitalizations); and "Sale of the Company"
shall mean the sale of the Company to an Independent Third Party or affiliated
group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power to elect a
majority of the Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all the Company's assets determined on a consolidated basis.
6. Compliance with Laws and Regulations. The issuance and
transfer of Shares shall be subject to compliance by the Company and the
Optionee with all applicable requirements of federal and state securities laws
and with all applicable requirements of any stock exchange on which the
Company's shares may be listed at the time of such issuance or transfer.
Optionee understands that the Company is under no obligation to register or
qualify the Shares with the Securities and Exchange Commission, any state
securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. Except as may otherwise be
determined by the Company, this Option may not be sold, transferred, assigned or
otherwise alienated or hypothecated by the Optionee, other than by will or by
the laws of descent and distribution, and shall be exercisable during the
Optionee's lifetime only by the Optionee or the Optionee's legal representative.
The Optionee may, if permitted by state law or the rules and regulations
governing any exchange on which the Company's Shares are traded, transfer the
Option, without payment of consideration, to a member of the Optionee's
immediate family or to a trust or partnership whose beneficiaries are members of
the Optionee's immediate family. For purposes of this Paragraph, the term
"immediate family" shall include the Optionee's spouse, children and
grandchildren. Any attempt at assignment, transfer, pledge or disposition of the
Option contrary to the provisions hereof
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or the levy of any execution, attachment or similar process upon the Option
other than as expressly permitted in this Paragraph 7 shall be null and void and
without effect.
8. Rights as Stockholder. Other than as provided herein, the
holder of the Option shall not be, nor have any of the rights or privileges of,
a stockholder of the Company with respect to any Shares purchasable upon the
exercise of the Option or any portion thereof, unless and until certificates
representing such Shares shall have been issued by the Company to such holder.
9. Withholding of Taxes. Whenever the Company proposes or is
required to deliver or transfer Shares in connection with the exercise of this
Option, the Company shall have the right to (a) require the recipient to remit
to the Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for such Shares, or (b) take whatever action it
deems necessary to protect its interests with respect to tax liabilities.
10. Administration. The Committee shall have the power to
interpret this Agreement. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Agreement or the Option.
11. Notice. Any notice to be given under the terms of this
Agreement to the Committee shall be addressed to the Committee, and any notice
to be given to the Optionee shall be addressed to him at the address given
beneath his signature hereto. By a notice given pursuant to this Paragraph 11,
either party may hereafter designate a different address for notices to be
delivered. Any notice which is required to be given to the Optionee shall, if
the Optionee is deceased, be given to the Optionee's personal representative.
Any notice shall have been deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in
a post office or branch post office regularly maintained by the United States
Postal Service.
12. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by the Optionee to the Committee for its
review. The resolution of such dispute by the Committee shall be final and
binding on the Company and on the Optionee.
13. Entire Agreement. This Agreement and the Notice constitute
the entire agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
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14. Dividends.
(a) In the event that the Company declares a dividend with
respect to any Shares subject to a vested portion of the Option, the Company
shall mail to Optionee a written notice at least ten (10) days prior to the
record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any
unvested Options shall be reduced by the amount of any dividends that the
Optionee would have received had the Optionee held the Shares subject to the
Option on the record date with respect to such dividend, and in the event that
the aggregate dividends declared on such Shares exceeds the aggregate Exercise
Price of the Option, the amount of such excess, if any, shall be deposited in an
interest bearing bank account established by the Committee in the name of the
Optionee. Any amount held in an interest bearing bank account established under
this Paragraph 14(b), or the pro rata portion thereof in the event of a partial
exercise of this Option, shall be paid to the Optionee upon exercise of all or,
if relevant, a portion of the Option.
15. Adjustments. In the event of a reclassification,
recapitalization, merger, consolidation, reorganization, stock dividends, stock
split or reverse stock split, including, without limitation, a distribution of
the stock of a Subsidiary, combination or exchange of shares, the Committee
shall determine, in its discretion, the appropriate adjustments, if any, to the
number of Shares which may be issued under this Option and the exercise price of
this Option.
16. Amendment and Termination.
(a) The Committee shall have the authority to make such
amendments to the Option provided that no such action shall modify the Option in
a manner adverse to Optionee without Optionee's consent.
(b) The Committee may terminate, amend or modify the Option at
any time and from time to time; provided, however, that an amendment which
requires stockholder approval in order for the Plan to continue to comply with
Rule 16b-3, Section 162(m) of the Code or any other law, regulation or stock
exchange requirement shall not be effective unless approved by the requisite
vote of stockholders. The termination, amendment or modification of the Option
may be in response to changes in the Code, the Exchange Act, national securities
exchange regulations or for other reasons deemed appropriate by the Committee.
17. Successors. The terms of the Option shall be binding upon the
Company and its successors and assigns.
18. Requirements of Law.
(a) In the event any provision of the Option shall be held
illegal or invalid for any reason, the illegality or invalidity shall not effect
the remaining parts of the Option, and the Option shall be construed and
enforced as if the illegal or invalid provision had not been included.
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<PAGE>
(b) To the extent that federal laws do not otherwise control, the
Option shall be construed in accordance with and governed by the laws of the
State of New York.
CARROLS HOLDINGS CORPORATION
By:
-----------------------------
Title:
---------------------------
ACCEPTED AND AGREED TO:
By:
-----------------------------
Joseph A. Zirkman
321 East 71st Street
New York, N.Y. 10021
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Exhibit A
to Carrols Holdings Corporation
Unvested Stock Option Agreement
of Joseph A. Zirkman
Definitions. As used in this Agreement, the following terms shall have the
following meanings:
"Cause" means, except as may otherwise be provided in a Participant's
employment agreement (if any) or in the Award Agreement, (i) the
commission by the Participant of a felony; (ii) the unauthorized
disclosure of confidential proprietary information of the Company or any
Subsidiary which disclosure the Participant knows or reasonably should
have known would be reasonably likely to result in material damage to
the Company or Subsidiary; (iii) the breach by the Participant of any
material provision of the Participant's employment agreement (if any),
which breach, if curable, is not remedied within thirty (30) days after
the Participant's receipt of written notice thereof provided, however,
that the Company need not permit the Participant to cure any breach
which has been the subject of a prior written notice; (iv) the
engagement in material self dealing in breach of fiduciary duties with
respect to the assets or properties of the Company or Subsidiary unless
disclosed to and approved by the disinterested members of the Board of
Directors; (v) an act of gross misconduct in connection with the
Participant's duties under his employment agreement (if any); or (vi)
chronic alcohol or drug abuse rendering Participant incapable of
carrying out his duties as determined in good faith by the Committee
continuing after the Participant is given a reasonable opportunity to
obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a
Subsidiary to comply with the provisions of the Participant's employment
agreement, if any, which failure shall not cease promptly and in no
event more than thirty (30) days after receipt by the Company or, where
appropriate, a Subsidiary of written notice from the Participant
objecting to such conduct; (ii) any termination by the Company or
Subsidiary of the Participant's employment other than as expressly
permitted in the Participant's employment agreement, if any; or (iii)
the assignment to Participant of duties and responsibilities materially
inconsistent with those duties and responsibilities customarily assigned
to individuals holding positions similar to that of the Participant at a
company of comparable size to the Company or Subsidiary or the
substantial reduction by the Company or Subsidiary of Participant's
duties and responsibilities and, if curable, not remedied by the Company
or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to
physical or mental disability to perform all of his duties with the
Company or Subsidiary pursuant to his employment agreement, if any, for
a period of six (6) successive months, or an aggregate of six (6) months
in any twelve (12) month period, as determined by the Committee upon the
basis of such evidence, including but not limited to independent medical
reports and data, as the Committee deems appropriate or necessary.
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