<PAGE>
==========================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1999
or
[ ] Transition report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934
Commission File Number
0-25629
CARROLS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 16-0958146
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
968 James Street
Syracuse, New York 13203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (315) 424-0513
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____
Common stock, par value $1.00, outstanding at November 18, 1999: 10 shares
==========================================================================
<PAGE>
PART 1 - FINANCIAL INFORMATION
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
September 30, December 31,
ASSETS 1999 1998
- ------ -------------- ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,089,000 $ 6,777,000
Trade and other receivables 221,000 1,060,000
Inventories 3,563,000 3,431,000
Prepaid real estate taxes 1,317,000 796,000
Prepaid expenses and other current assets 3,128,000 2,768,000
Refundable income taxes 1,208,000 4,588,000
Deferred income taxes 2,337,000 3,956,000
------------- -------------
Total current assets 12,863,000 23,376,000
Property and equipment, at cost less accumulated
depreciation of $88,723,000 and $77,451,000,
respectively 111,940,000 107,669,000
Franchise rights, at cost less accumulated
amortization of $33,303,000 and $29,819,000,
respectively 100,651,000 106,041,000
Intangible assets, at cost less accumulated
amortization of $11,004,000 and $9,630,000
respectively 70,153,000 69,167,000
Other assets 9,990,000 10,367,000
Deferred income taxes 4,802,000 2,986,000
------------- -------------
$ 310,399,000 $ 319,606,000
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
<TABLE>
September 30, December 31,
LIABILITIES and STOCKHOLDER'S EQUITY 1999 1998
- ------------------------------------ ------------- ------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 15,367,000 $ 10,614,000
Accrued interest 5,895,000 2,012,000
Accrued payroll, related taxes and benefits 7,117,000 9,390,000
Other liabilities 8,048,000 9,431,000
Current portion of long-term debt 3,870,000 3,200,000
Current portion of capital lease obligations 238,000 296,000
------------- ------------
Total current liabilities 40,535,000 34,943,000
Long-term debt, net of current portion 239,161,000 256,285,000
Capital lease obligations, net of current portion 1,545,000 1,741,000
Deferred income - sale/leaseback of real estate 4,543,000 4,274,000
Accrued postretirement benefits 1,847,000 1,708,000
Other liabilities 8,263,000 6,657,000
------------- ------------
Total liabilities 295,894,000 305,608,000
Stockholder's equity:
Common stock, par value $1; authorized 1,000 shares,
issued and outstanding - 10 shares 10 10
Additional paid-in capital 24,484,990 24,484,990
Accumulated deficit (9,980,000) (10,487,000)
------------- ------------
Total stockholder's equity 14,505,000 13,998,000
------------- ------------
$310,399,000 $ 319,606,000
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
1999 1998
---- ----
(13 Weeks) (13 Weeks)
(unaudited)
<S> <C> <C>
Revenues:
Restaurant sales $ 115,129,000 $ 112,608,000
Franchise fees and royalty revenues 343,000 161,000
------------- -------------
Total revenues 115,472,000 112,769,000
Costs and expenses:
Cost of sales 34,795,000 34,204,000
Restaurant wages and related expenses 33,354,000 32,259,000
Other restaurant operating expenses 22,781,000 21,982,000
Advertising expense 5,201,000 5,049,000
General and administrative 5,714,000 5,297,000
Depreciation and amortization 5,935,000 5,334,000
------------- -------------
Total operating expenses 107,780,000 104,125,000
------------- -------------
Income from operations 7,692,000 8,644,000
Refinancing expenses (Note 6) - 1,639,000
Interest expense 5,416,000 5,819,000
------------- -------------
Income before income taxes 2,276,000 1,186,000
Provision for income taxes 1,115,000 527,000
------------- -------------
Net income $ 1,161,000 $ 659,000
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
1999 1998
---- ----
(39 Weeks) (40 Weeks)
(unaudited)
<S> <C> <C>
Revenues:
Restaurant sales $ 335,537,000 $ 305,866,000
Franchise fees and royalty revenues 832,000 161,000
------------- -------------
Total revenues 336,369,000 306,027,000
Costs and expenses:
Cost of sales 101,814,000 89,829,000
Restaurant wages and related expenses 99,117,000 89,014,000
Other restaurant operating expenses 66,219,000 60,685,000
Advertising expense 14,835,000 13,920,000
General and administrative 17,010,000 13,364,000
Depreciation and amortization 17,473,000 14,294,000
------------- -------------
Total operating expenses 316,468,000 281,106,000
------------- -------------
Income from operations 19,901,000 24,921,000
Refinancing expenses (Note 6) 1,639,000
-
Interest expense 16,707,000 14,716,000
------------- -------------
Income before income taxes and extraordinary loss 3,194,000 8,566,000
Provision for income taxes 1,747,000 3,850,000
------------- -------------
Income before extraordinary loss 1,447,000 4,716,000
Extraordinary loss on write-off of debt issue costs, net of taxes
(Note 5) 940,000 -
------------- -------------
Net income $ 507,000 $ 4,716,000
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
1999 1998
---- ----
(39 Weeks) (40 Weeks)
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 507,000 $4,716,000
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 17,473,000 14,294,000
Deferred income taxes (197,000) (445,000)
Loss (gain) on sale of property and equipment 100,000 (119,000)
Extraordinary loss on write-off of debt issue costs, net of tax 940,000 -
Change in operating assets and liabilities 10,539,000 3,308,000
------------- -------------
Net cash provided by operating activities 29,362,000 21,754,000
------------- -------------
Cash flows from investing activities:
Capital expenditures:
Purchase of Pollo Tropical, Inc., net of cash acquired - (94,632,000)
New restaurant development (8,717,000) (7,595,000)
Remodels and other capital expenditures (23,116,000) (14,368,000)
Acquisitions of restaurants (544,000) (629,000)
Proceeds from sales of property and equipment 121,000 1,337,000
------------- -------------
Net cash used for investing activities (32,256,000) (115,887,000)
------------- -------------
Cash flows from financing activities:
Proceeds from long-term debt - 83,800,000
Principal payments on long-term debt (16,454,000) (2,196,000)
Financing costs associated with issuance of debt (886,000) (1,575,000)
Principal payments on capital leases (254,000) (364,000)
Proceeds from sale-leaseback transactions 14,800,000 18,536,000
Dividends paid - (3,878,000)
------------- -------------
Net cash (used for) provided by financing activities (2,794,000) 94,323,000
------------- -------------
Increase (decrease) in cash and cash equivalents (5,688,000) 190,000
Cash and cash equivalents, beginning of period 6,777,000 2,252,000
------------- -------------
Cash and cash equivalents, end of period $ 1,089,000 $ 2,442,000
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Statement of Management
-----------------------
The accompanying consolidated financial statements have been prepared
without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission and do not include all of the information and
the footnotes required by generally accepted accounting principles for
complete statements. In the opinion of management, all normal and
recurring adjustments necessary for a fair presentation of such
financial statements have been included.
The Company uses a 52-53 week fiscal year ending on the Sunday closest
to December 31. Fiscal 1998 contained 53 weeks and the Company has
historically included the extra week in its second fiscal quarter.
Accordingly, the nine months results of operations and cash flows
ending September 30, 1999 and 1998 include 39 weeks and 40 weeks,
respectively.
The results of operations for the three and nine months ended September
30, 1999 and 1998 are not necessarily indicative of the results to be
expected for the full year.
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 and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto for the
year ended December 31, 1998 contained in our 1998 Annual Report on
Form 10-K. The December 31, 1998 balance sheet data is derived from
these audited financial statements.
Certain amounts for the prior year have been reclassified to conform to
the current year presentation.
2. Income Taxes
------------
The income tax provision for the nine months ended September 30, 1999
and 1998 was comprised of the following:
1999 1998
----------- -----------
Current $ 1,944,000 $ 4,295,000
Deferred (197,000) (445,000)
----------- -----------
$ 1,747,000 $ 3,850,000
=========== ===========
7
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (continued)
For 1999 and 1998 the difference between the expected tax provision
resulting from application of the federal statutory income tax rate to
pre-tax income and the reported income tax provision result principally
from state taxes and non-deductible amortization of franchise rights
and certain other intangibles.
3. Summarized Financial Information of Certain Subsidiaries
--------------------------------------------------------
The following table presents summarized combined financial information
for the following wholly-owned subsidiaries, whom unconditionally
guarantee the $170.0 million senior subordinated notes of the Company:
Carrols Realty Holdings, Carrols Realty I Corp., Carrols Realty II
Corp., Carrols J.G. Corp., Quanta Advertising Corp., Pollo Franchise
Inc. and Pollo Operations, Inc.
September 30, December 31,
1999 1998
------------- ------------
Balance Sheet:
Current assets $ 2,021,000 $ 910,000
Non-current assets 88,505,000 89,922,000
Current liabilities 5,965,000 7,401,000
Non-current liabilities 1,829,000 1,845,000
Nine Months Ended
September 30,
1999 1998
------------- ------------
Statement of Operations:
Revenues $63,285,000 $16,802,000
Operating expenses 53,401,000 14,182,000
Income from operations 9,884,000 2,620,000
Net income 4,079,000 1,070,000
8
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (continued)
4. Business Segment Information
----------------------------
The Company is engaged in the quick-service restaurant industry, with
two restaurant concepts: Burger King, operating as a franchisee, and
Pollo Tropical, a Company owned concept which was acquired in July
1998. The Company's Burger King restaurants are all located in the
United States, primarily in the Northeast, Southeast and Midwest. Pollo
Tropical is a regional quick-service restaurant chain featuring grilled
marinated chicken and authentic "made from scratch" side dishes. Pollo
Tropical's core markets are located in south and central Florida.
Segment information for Burger King restaurants and Pollo Tropical for
the nine months ended September 30, 1999 and 1998 is shown in the
following table. The "Other" column includes corporate related items
not allocated to reportable segments and for income from operations,
principally corporate depreciation and amortization. Other identifiable
assets consist primarily of franchise rights and intangible assets.
Non-operating expenses, comprised of interest expense and the
extraordinary loss, are corporate related items and therefore have not
been allocated to the reportable segments.
<TABLE>
Burger
King Pollo
Restaurants Tropical Other Consolidated
----------- -------- ----- ------------
($ in 000's)
Nine Months Ended September 30, 1999:
<S> <C> <C> <C> <C>
Revenues $ 273,494 $62,875 $ $ 336,369
Cost of sales 80,097 21,717 101,814
Restaurant wages and related
expenses 84,924 14,193 99,117
Depreciation and amortization 9,658 1,464 6,351 17,473
Income from operations 14,938 11,314 (6,351) 19,901
Identifiable assets 192,198 22,772 95,429 310,399
Capital expenditures, excluding
acquisitions 22,001 7,914 1,918 31,833
</TABLE>
9
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (continued)
<TABLE>
Burger
King Pollo
Restaurants Tropical Other Consolidated
----------- -------- ----- ------------
($ in 000's)
Nine Months Ended September 30, 1998:
<S> <C> <C> <C> <C>
Revenues $ 289,393 $ 16,634 $ 306,027
Cost of sales 84,087 5,742 89,829
Restaurant wages and related
expenses 85,284 3,730 89,014
Depreciation and amortization 8,548 401 5,345 14,294
Income from operations 27,210 3,056 (5,345) 24,921
Identifiable assets 203,175 26,326 90,105 319,606
Capital expenditures, excluding
acquisitions 19,344 1,990 629 21,963
</TABLE>
5. Extraordinary Loss
------------------
On February 12, 1999, the Company entered into a new senior credit
facility with Chase Bank of Texas, National Association, as agent and
lender, and other lenders as parties thereto. In connection with this
transaction, the Company recognized an extraordinary loss of $940,000,
net of $885,000 in income taxes, in the first quarter of 1999. This
loss represents the write-off of unamortized debt issue costs related
to the previous senior credit facility.
6. Loss on Refinancing Expenses
----------------------------
The Company expensed all costs associated with its efforts to refinance
its existing debt in the third quarter of 1998 as the timing of any
future refinancing was uncertain at that time and efforts had ceased.
7. Acquisition
-----------
On July 9, 1998, the Company consummated the purchase of the
outstanding common stock of Pollo Tropical Inc. ("Pollo Tropical") for
an approximate cash purchase price of $94.6 million and on July 20,
1998 merged Pollo Tropical into the Company. Pollo Tropical operates
and franchises quick-service restaurants featuring fresh grilled
chicken marinated in a proprietary blend of tropical fruit juices and
spices and authentic "made from scratch" side dishes. The Pollo
Tropical acquisition has been accounted for by the purchase method of
accounting. The excess purchase price over net assets acquired is
included in intangible assets and is amortized over 40 years using the
straight-line method.
The following proforma results of operations for the nine months ended
September 30, 1998 assume this acquisition occurred as of the beginning
of the period:
Revenues $344,114,000
Income from operations $ 30,519,000
Net income $ 5,441,000
The preceeding proforma financial information is not necessarily indicative of
the operating results that would have occurred had the acquisition been
consummated as of the beginning of the period, nor are they necessarily
indicative of future operating results.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Overview
- --------
As of September 30, 1999, we operated 345 Burger King restaurants located
in 13 Northeastern, Midwestern and Southeastern states and owned and
operated 42 Pollo Tropical restaurants in Florida. In addition, at
September 30, 1999, we franchised 23 Pollo Tropical restaurants in Puerto
Rico, Ecuador and Miami. In July 1998, the Company acquired Pollo Tropical,
Inc. which owned and operated 36 restaurants. Since September 30, 1998, the
Company has built five Pollo Tropical restaurants. Since September 30,
1998, the Company has built nine Burger King restaurants, acquired two
Burger King restaurants and closed four under-performing Burger King
restaurants. Comparable store sales data is for a comparable number of
weeks for each period discussed.
Certain statements included in this "Management's Discussion and Analysis
of Results of Operations and Financial Condition" and elsewhere in this
Quarterly Report on Form 10-Q which are not statements of historical fact
are intended to be, and are hereby identified as, "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Without limiting the foregoing, the words "believe,"
"anticipate," "plan," "expect," "estimate," "intend," and other similar
expressions are intended to identify forward-looking statements. The
Company cautions readers that forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially
different from any future results, performance or achievement expressed or
implied by such forward-looking statements. Such factors include, among
others, the following: the success or failure of the Company in
implementing its current business and operational strategies; availability,
terms and access to capital and customary trade credit; general economic
and business conditions, competition; changes in the Company's business
strategy; failure by the Company or other entities with which it does
business to achieve compliance; labor relations; the outcome of pending or
yet-to-be instituted legal proceedings; labor and employee benefit costs;
and availability and terms of necessary or desirable financing or
refinancing.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of Operations
- ---------------------
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998.
The following table sets forth, for the three months ended September 30, 1999
and 1998, selected operating results as a percentage of restaurant sales:
1999 1998
---- ----
Restaurant sales:
Burger King restaurants 82.1% 85.4%
Pollo Tropical 17.9 14.6%
----- -----
100.0 100.0
Costs and expenses:
Cost of sales 30.2 30.4
Restaurant wages and related expenses 29.0 28.6
Other restaurant expenses including advertising 24.3 24.0
General and administrative 5.0 4.7
Depreciation and amortization 5.2 4.7
----- -----
Income from restaurant operations 6.7% 7.7%
===== =====
Restaurant Sales
- ----------------
Restaurant sales for the three months ended September 30, 1999, increased 2.2%
to $115.1 million from $112.6 million in the third quarter of 1998. The increase
in sales was primarily the result of a $4.1 million increase in Pollo Tropical
sales, whose total restaurant sales were $20.6 million in the third quarter of
1999. This increase was due to a full quarter of Pollo Tropical sales being
included in the third quarter of 1999 and due to the opening of five new Pollo
Tropical restaurants in the past twelve months. Sales at our comparable Burger
King restaurants (those units operating for the entirety of the compared
periods) decreased 3.8% for the third quarter of 1999 as compared to an increase
of 7.9% for the third quarter of 1998. This sales decrease was offset by the
opening of nine new Burger King restaurants in the past twelve months.
Operating Costs and Expenses
- ----------------------------
Cost of sales (food and paper costs), as a percentage of restaurant sales, were
30.2% for the third quarter of 1999 compared to 30.4% for the third quarter of
1998. The decrease in the third quarter of 1999 was due to lower discounting of
food, related to promotional activities at our Burger King restaurants. Cost of
sales at our Burger King restaurants decreased from 29.6% in the third quarter
of 1998 to 29.2%. This decrease was partially offset by the effect of Pollo
Tropical's higher food and paper cost relationships on the increase in Pollo
Tropical sales to total Company sales in the third quarter of 1999. Pollo
Tropical's cost of sales were 35.1% for the third quarter of 1999 compared to
34.9% for the third quarter of 1998. This increase was due primarily to higher
commodity costs for chicken.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (continued)
Restaurant wages and related expenses increased, as a percentage of sales,
during the third quarter to 29.0% in 1999 from 28.6% in 1998. This increase was
due primarily to a 3.5% increase in our average hourly labor rate in the third
quarter of 1999 at our Burger King restaurants and the effect of lower sales
volumes on fixed labor costs. This increase was partially offset by the effect
of Pollo Tropical's lower restaurant wages, as a percentage of sales, due to the
increase in Pollo Tropical sales to total Company sales in the third quarter of
1999. Pollo Tropical's restaurant wages and related expenses were 23.1% and
22.7% of restaurant sales in the third quarter of 1999 and 1998, respectively.
This increase was due primarily to an increase in average hourly labor rates.
Burger King restaurant wages and related expenses increased from 29.7% in the
third quarter of 1998 to 30.3% in the third quarter of 1999, due to the factors
discussed above.
Other restaurant operating expenses, including advertising, increased from 24.0%
of restaurant sales in the third quarter of 1998 to 24.3% in the third quarter
of 1999 due to an increase in occupancy costs associated with the sale/leaseback
of 18 Pollo Tropical restaurant properties in 1998 and 1999 and the effect of
fixed costs, particularly occupancy costs, on lower sales volumes in the third
quarter of 1999 at our Burger King restaurants.
Administrative expenses increased, as a percentage of sales, from 4.7% in the
third quarter of 1998 to 5.0% in the third quarter of 1999. This increase is due
to lower sales volumes at our Burger King restaurants in the third quarter of
1999.
Earnings before interest, taxes, depreciation and amortization and non-cash
extraordinary items ("EBITDA") was $13.6 million in the third quarter of 1999
compared to $14.0 million in the third quarter of 1998. As a percentage of total
revenues, EBITDA decreased from 12.4% in the third quarter of 1998 to 11.8% in
the third quarter of 1999 as a result of the factors discussed above.
Depreciation and amortization increased $0.6 million in the third quarter of
1999 from the third quarter of 1998 due to the Company's capital expenditures of
$44.2 million since the end of the third quarter of 1998.
Interest expense was $5.4 million in the third quarter of 1999 compared to $5.8
million in the third quarter of 1998 and decreased as a result of the favorable
effect on average interest rates from the Company's 1998 refinancing activities.
The provision for income taxes in the third quarter of 1999 was derived on an
estimated effective income tax rate for 1999 of 54.7%. This rate is higher than
the Federal statutory tax rate due to state franchise taxes and non-deductible
amortization of franchise rights and certain other intangible assets.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (continued)
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998
The following table sets forth, for the nine months ended September 30, 1999 and
1998, selected operating results as a percentage of restaurant sales:
1999 1998
---- ----
Restaurant sales:
Burger King restaurants 81.5% 94.6%
Pollo Tropical 18.5 5.4
----- -----
100.0 100.0
Costs and expenses:
Cost of sales 30.3 29.4
Restaurant wages and related expenses 29.5 29.1
Other restaurant expenses including advertising 24.2 24.4
General and administrative 5.1 4.4
Depreciation and amortization 5.2 4.7
----- -----
Income from restaurant operations 5.9% 8.1%
===== =====
Restaurant Sales
- ----------------
Restaurant sales for the nine months ended September 30, 1999, increased 9.7% to
$335.5 million from $305.9 million in the first nine months of 1998. The
increase in sales was primarily the result of the acquisition of Pollo Tropical
in July 1998, whose total restaurant sales were $62.0 million in the first nine
months of 1999 compared to $16.5 million in the first nine months of 1998. Sales
at our comparable Burger King restaurants (those units operating for the
entirety of the compared periods) decreased 5.0% for the first nine months of
1999 as compared to an increase of 7.2% for the first nine months of 1998, using
a comparable number of weeks in each period. The second quarter of 1998
contained an additional week which had $7.3 million in restaurant sales.
Operating Costs and Expenses
- ----------------------------
Cost of sales (food and paper costs), as a percentage of restaurant sales, were
30.3% for the first nine months of 1999 compared to 29.4% for the first nine
months of 1998. The increase was due to the increase in Pollo Tropical sales to
total Company sales in the first nine months of 1999 compared to 1998. Pollo
Tropical's cost of sales were 35.0% for the first nine months of 1999 compared
to 29.3% for our Burger King restaurants. This caused total cost of sales to
increase by 1.0% . Cost of sales at our Burger King restaurants increased from
29.1% in 1998 and was primarily due to higher discounting of food related to
increased promotional activities. In addition, the second quarter of 1998
included a cost rebate of approximately $815,000, linked to the adverse impact
of a recall of beef in the third quarter of 1997.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (continued)
Restaurant wages and related expenses increased, as a percentage of sales,
during the first nine months to 29.5% in 1999 from 29.1% in 1998. This increase
was due to the effect of lower sales volumes in the first nine months of 1999 on
fixed labor costs and a 3.6% increase in our average hourly labor rate for the
first nine months of 1999 at our Burger King restaurants. Collectively, these
factors caused, as a percentage of total sales, a 1.3% increase in restaurant
wages and related expenses. This increase was substantially offset by Pollo
Tropical's lower restaurant wages, as a percentage of sales, due to Pollo's
higher unit sales volumes and the increase in Pollo Tropical's sales to total
Company sales in the first nine months of 1999 compared to 1998. Pollo
Tropical's restaurant wages and related expenses were 22.6% of restaurant sales
in the first nine months of 1999, and decreased total restaurant wages by 0.8%
compared to the first nine months of 1998.
Other restaurant operating expenses, including advertising, decreased from 24.4%
of restaurant sales in the first nine months of 1998 to 24.2% in the first nine
months of 1999, due to Pollo Tropical's other restaurant operating expenses
being 17.1% of restaurant sales in the first nine months of 1999. This caused an
0.8% decrease, as a percentage of sales, in total other restaurant operating
expenses. This decrease was offset by the effect of lower sales volumes on fixed
costs in the first nine months of 1999 for our Burger King restaurants,
particularly utility and occupancy costs. Other operating expenses, including
advertising, increased to 25.8% of restaurant sales for our Burger King
restaurants in the first nine months of 1999 from 24.9% in 1998.
Administrative expenses increased, as a percentage of sales, from 4.4% in the
first nine months of 1998 to 5.1% in the first nine months of 1999. This
increase is due to lower sales volumes in our Burger King restaurants in the
first nine months of 1999 and administrative functions acquired in the July 1998
acquisition of Pollo Tropical.
Earnings before interest, taxes, depreciation and amortization and non-cash
extraordinary items ("EBITDA") was $37.4 million in the first nine months of
1999 compared to $39.2 million in the first nine months of 1998. As a percentage
of total revenues, EBITDA decreased from 12.8% in the first nine months of 1998
to 11.1% in the first nine months of 1999 as a result of the factors discussed
above.
Depreciation and amortization increased $3.2 million in the first nine months of
1999 due primarily to the increase in property and equipment, goodwill and
purchased intangibles from the purchase of Pollo Tropical in July 1998 and
capital expenditures of $44.2 million since the end of the third quarter of
1998.
Interest expense was $16.7 million in the first nine months of 1999 compared to
$14.7 million in the first nine months of 1998 and increased as a result of the
higher average debt balances from the funding of the acquisition of Pollo
Tropical in July 1998. This was offset somewhat by the favorable effect on
average interest rates due to the Company's 1998 refinancing activities.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (continued)
The income tax provision of $1,747,000 for the first nine months of 1999 is
based on an estimated effective income tax rate for 1999 of 54.7%. This rate is
higher than the Federal statutory tax rate due to state franchise taxes and non-
deductible amortization of franchise rights and certain other intangible assets.
Liquidity and Capital Resources
- -------------------------------
We do not have significant receivables or inventory and receive trade credit
based upon negotiated terms in purchasing food products and other supplies. We
are able to operate with a substantial working capital deficit because (i)
restaurant operations are conducted on a cash basis (ii) rapid turnover allows a
limited investment in inventories, and (iii) cash from sales is usually received
before related accounts for food, supplies and payroll become due. Our cash
requirements arise primarily from the need to finance the opening and equipping
of new restaurants, ongoing capital reinvestment in our existing restaurants,
the acquisition of existing Burger King restaurants, and for servicing our debt.
The Company's operations in the first nine months generated approximately $29.4
million in cash in 1999, compared with $21.8 million in 1998.
Capital expenditures represent a major investment of cash for the Company, and
totaled, excluding acquisitions, $31.8 million in the first nine months of 1999
and $22.0 million in the first nine months of 1998. Capital expenditures in 1999
included $3.3 million for the purchase of the land and building for two Pollo
Tropical restaurants that were previously leased. Capital expenditures included
$0.5 million and $0.6 million for the acquisition of two Burger King restaurants
in each of the nine months ended September 30, 1999 and 1998, respectively.
The sale and leaseback of eight Burger King restaurant properties and five Pollo
Tropical restaurant properties in June 1999 generated proceeds of $14.8 million
which were used to reduce outstanding debt.
Under our senior credit facility, which was amended on May 17, 1999 to increase
our revolving credit facility by $5 million, Chase Bank of Texas, National
Association, as agent, along with a syndicate of six other lenders, have
provided a term loan facility of $50.0 million, of which $47.8 million is
outstanding at September 30, 1999 and a revolving credit facility under which we
may borrow up to $105.0 million, $79.2 million of which is available at
September 30, 1999 after reserving for a $1.2 million letter of credit
guaranteed by the facility. At September 30, 1999, we had total indebtedness of
$244.8 million comprised of $170.0 million of unsecured 9.5% senior subordinated
notes, total borrowings under our senior credit facility of $72.4 million and
other debt of $2.5 million.
In 1999, we anticipate total capital expenditures to approximate $42 million,
excluding the cost of any acquisitions. This amount includes approximately $9.5
million for construction of new Burger King restaurants, including real estate;
$5 million for construction of new Pollo Tropical restaurants; and $16 million
for ongoing reinvestment and remodeling of our existing restaurants. We are also
in the process
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (continued)
of upgrading our restaurant point-of-sale systems, our in-restaurant support
systems and our corporate information systems. We have remaining commitments at
September 30, 1999 to purchase approximately $3.2 million of restaurant
point-of-sale systems.
Interest payments under our outstanding indebtedness will represent significant
liquidity requirements for us. We believe cash generated from our operations and
availability under our senior credit facility will provide sufficient cash
availability to cover our working capital needs, capital expenditures, planned
development and debt service requirements for the next 12 months.
Inflation
- ---------
The inflationary factors which have historically affected our results of
operations include increases in food and paper costs, labor and other operating
expenses. Wages paid in our restaurants are impacted by changes in the Federal
or state minimum hourly wage rates. Accordingly, changes in the Federal or state
minimum hourly wage rate directly affect our labor cost. We and the restaurant
industry typically attempt to offset the effect of inflation, at least in part,
through periodic menu price increases and various cost reduction programs.
However, no assurance can be given that we will be able to offset such
inflationary cost increases in the future.
Year 2000
- ---------
We recognize the need to ensure our operations will not be adversely impacted by
Year 2000 software failures. We have addressed this risk to the availability and
integrity of financial systems and the reliability of operating systems. We are
currently installing new point-of-sale (POS) systems in our restaurants, and
have completed installation of these systems in approximately 100 restaurants
thus far including all restaurants that had Year 2000 non-compliant Systems.
We have substantially completed our implementation of new corporate financial
and decision support applications including general ledger, accounts payable,
asset management, payroll and human resource systems. The remaining corporate
support systems to be implemented include implementation of new sales and
inventory accounting systems which will be completed in the fourth quarter of
1999. The implementation of corporate financial software applications began in
1998 and is estimated to cost, $4.7 million, of which $.5 million remains to be
expended in the fourth quarter of 1999. We believe that all of our computer
systems will be Year 2000 compliant in the fourth quarter of 1999.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (continued)
In addition to our internal efforts, we are also monitoring certain initiatives
of Burger King Corporation ("BKC") as they evaluate Year 2000 readiness of food
and equipment suppliers, utility companies and other key suppliers to the Burger
King system. Although BKC has not made any representations or warranties with
respect to such activities, they are providing us the results of third party
validations of the readiness of existing equipment used in the restaurants,
summarized responses from shared vendors and domestic contingency plans. We have
also been closely monitoring the remediation progress of our major food supplier
and working closely with it to successfully interface our ordering and delivery
systems as transitions are made to new systems.
We are evaluating our implementation progress on an ongoing basis and are
currently developing a contingency plan which will address upgrading certain
existing systems, should our scheduled implementation dates be modified or if
the Burger King results warrant enhanced contingency planning. While we are
monitoring the progress of our key suppliers, we cannot be assured that their
remediation efforts will be successful, in which case we could be adversely
impacted by our ability to obtain food supplies for our restaurants. In the
event that the remediation efforts of our suppliers are not successful, we
believe that we could alternatively process orders to obtain food supplies for
our restaurants manually. Should we be unable to process orders, we believe that
the time required by our key suppliers to implement corrective actions, when
combined with our inventory levels, would not result in a material disruption to
our restaurant operations.
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On November 16, 1998, the Equal Employment Opportunity Commission
("EEOC") filed suit in the United States District Court for the
Northern District of New York, under Title VII of the Civil Rights Act
of 1964, as amended, against the Company, on behalf of "Wendy McFarlan
and other similarly situated individuals affected by sexual harassment
by Carrols Corporation".
The case is in the early phase of discovery, written discovery is
required to be completed by February 21, 2000, at which time the
parties may file motions for summary judgment. The Company is
currently considering filing such a motion at the close of written
discovery. The Company intends to contest the case vigorously and
believes it is without merit. It is too early to make an evaluation of
the likelihood of an unfavorable outcome and/or an estimate of the
amount or range of potential loss.
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
19
<PAGE>
PART II - OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8K
a. The following exhibits are filed as part of this report.
Exhibit No.
-----------
3.1 Certificate of Amendment to the Restated Certificate of
Incorporation of Carrols Holdings Corporation.
10.1 Carrols Holdings Corporation 1998 Pollo Tropical Long-Term
Incentive Plan.
27 Financial Data Schedule
b. There were no reports on Form 8-K filed during the reported
quarter.
20
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
CARROLS CORPORATION
968 James Street
Syracuse, New York 13203
(Registrant)
Date: November 17, 1999 /s/ Alan Vituli
----------------------------------------
(Signature)
Alan Vituli
Chairman and Chief Executive Officer
Date: November 17, 1999 /s/ Paul R. Flanders
----------------------------------------
(Signature)
Paul R. Flanders
Vice President - Finance (Principal
Financial Officer and Principal
Accounting Officer)
21
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
CARROLS HOLDINGS CORPORATION
-------------
Under Section 242 of the
General Corporation Law
-------------
Carrols Holdings Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), pursuant to Section 242 of the General Corporation Law of the
State of Delaware, hereby certifies as follows:
FIRST: The name of the Corporation is "Carrols Holdings Corporation".
SECOND: The Certificate of Incorporation of the Corporation originally
filed with the Secretary of State on September 15, 1986, was restated pursuant
to the Restated Certificate of Incorporation filed with the Secretary of State
on December 22, 1986, was amended and restated pursuant to the Certificate of
Amendment to Restated Certificate of Incorporation filed with the Secretary of
State on August 18, 1993 and was further amended and restated pursuant to the
Certificate of Amendment to Restated Certificate of Incorporation filed with the
Secretary of State on February 20, 1997.
THIRD: Pursuant to the unanimous written consent of the Board of Directors
of the Corporation, the following resolutions setting forth the proposed
amendment to the Restated Certificate of Incorporation of the Corporation were
duly adopted by the Board of Directors in accordance with the provision of
Section 141(f) of the General Corporation Law of the State of Delaware ("DGCL")
and were duly authorized and adopted by the holders of all of the outstanding
shares of the Corporation entitled to vote thereon in accordance with the
provision of Section 228 of the DGCL.
RESOLVED, that the class consisting of 7,250 shares of Class A 10%
Cumulative Redeemable Preferred Stock, par value $0.01 per share, all of
which are authorized but unissued, is hereby canceled; and
1
<PAGE>
RESOLVED, that the Board of Directors of this Corporation hereby declares
it advisable and recommends to the shareholders that the shares of Common
Stock, par value $0.01 per share of the Corporation be increased and
reclassified and that shares of Preferred Stock, par value $0.01 per share
of the Corporation be authorized and that, to effect such recommendations,
the Restated Certificate of Incorporation of the Corporation be amended by
amending Article FOURTH of the Restated Certificate of Incorporation to
read as follows:
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is Five Million One Hundred Thousand (5,100,000)
shares, of which Five Million (5,000,000) shares shall be shares of common
stock, par value $0.01 per share and One Hundred Thousand (100,000) shares shall
be shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock").
A. General. The Board of Directors, by adoption of this Certificate of Amendment
-------
to the Restated Certificate of Incorporation may fix, in whole or part, the
preferences, limitations and relative rights, within the limits set forth under
applicable law, of one or more series of Common Stock of the Corporation before
the issuance of any shares of that series.
B. Carrols Stock and Pollo Tropical Stock.
--------------------------------------
(1) Designation of Series; Number of Shares of Each Series. One series of
------------------------------------------------------
Common Stock is hereby designated as Carrols Stock ("Carrols Stock"), consisting
of Three Million (3,000,000) shares, par value $0.01 per share and a second
series of Common Stock is hereby designated as Pollo Tropical Stock ("Pollo
Tropical Stock") consisting of Two Million (2,000,000) shares, par value $0.01
per share. The number of shares of each such series may from time to time be
increased (but not above the total number of authorized shares of the class of
Common Stock) or decreased (but not below the number of shares of such series
then outstanding) by the Board of Directors of the Corporation.
(2) Dividends. Subject to any preferences, limitations and relative rights of
---------
any outstanding series of Preferred Stock, dividends may be declared and paid
upon the Carrols Stock and the Pollo Tropical Stock, upon the terms with respect
to each such series, and subject to the limitations provided for below in this
paragraph B(2) of this Article, as the Board of Directors may determine.
(a) Dividends on Carrols Stock. Dividends on Carrols Stock may be
--------------------------
declared and paid only out of the lesser of (i) the assets legally available
therefor and (ii) the Carrols Available Dividend Amount.
(b) Dividends on Pollo Tropical Stock. Dividends on Pollo Tropical Stock
---------------------------------
may be declared and paid only out of the lesser of (i) the assets legally
available therefor and (ii) the Pollo Tropical Available Dividend Amount.
(c) Discrimination in Dividends Between Carrols Stock and Pollo Tropical
--------------------------------------------------------------------
Stock. The Board of Directors, subject to the provisions of paragraphs
-----
B(2)(a) and B(2)(b) of this Article, may at any time declare and pay
dividends exclusively on Carrols Stock,
2
<PAGE>
exclusively on Pollo Tropical Stock or on both such series, in equal or
unequal amounts, notwithstanding the relative amounts of the Carrols
Available Dividend Amount and the Pollo Tropical Available Dividend Amount,
the amount of dividends previously declared on each series, the respective
voting or liquidation rights of each series or any other factor.
(d) Share Distributions. Subject to paragraphs B(2)(a) and B(2)(b) of
-------------------
this Article, as the case may be, and except as permitted by paragraphs
B(5)(a) and B(5)(b)(ii)(2) of this Article, the Board of Directors may
declare and pay dividends or distributions of shares of the Common Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of the Common Stock) on shares of the Common Stock or shares of the
Preferred Stock only as follows:
(i) dividends or distributions of shares of Carrols Stock (or
Convertible Securities convertible into or exchangeable or exercisable
for shares of Carrols Stock) on shares of Carrols Stock; or shares of
the Preferred Stock attributed to the Carrols Group;
(ii) dividends or distributions of shares of Pollo Tropical
Stock (or Convertible Securities convertible into or exchangeable or
exercisable for shares of Pollo Tropical Stock) on shares of Pollo
Tropical Stock or shares of the Preferred Stock attributed to the Pollo
Tropical Group; and
(iii) dividends or distributions of shares of Pollo Tropical
Stock (or Convertible Securities convertible into or exchangeable or
exercisable for shares of Pollo Tropical Stock) on shares of Carrols
Stock or shares of the Preferred Stock attributed to the Carrols Group,
if any, but only if the sum of (1) the number of shares of Pollo
Tropical Stock to be so issued (or the number of such shares which
would be issuable upon conversion, exchange or exercise of any
Convertible Securities to be so issued) and (2) the number of shares of
Pollo Tropical Stock which are issuable upon conversion, exchange or
exercise of any Convertible Securities then outstanding that are
attributed in accordance with this Article to the Carrols Group is less
than or equal to the Number of Shares Issuable with Respect to the
Inter-Group Interest.
(3) Voting Rights.
-------------
(a) The holders of Carrols Stock shall have the exclusive right to
vote for the election of directors and on all other matters requiring action by
the stockholders or submitted to the stockholders for action, except as may be
determined by the Board of Directors in establishing any series of Common or
Preferred Stock or as otherwise may be required by law. Each share of Carrols
Stock shall entitle the holder thereof to one vote.
(b) No holder of outstanding shares of Pollo Tropical Stock shall be
entitled to vote for the election of directors or upon any other matter, to
receive notice of or to participate in any meeting of the stockholders of the
Corporation, except as may be required by law.
3
<PAGE>
(4) Liquidation Rights. In the event of the dissolution, liquidation or
------------------
winding up of the Corporation, whether voluntary or involuntary, the rights of
the holders of Carrols Stock and Pollo Tropical Stock shall be as follows:
(a) After the Corporation has satisfied or made provisions for its
debts and obligations and for the payment to the holders of shares of any
class or series of capital stock having preferential rights to receive
distributions of the assets of the Corporation (including any accumulated
and unpaid dividends), the holders of Carrols Stock and Pollo Tropical
Stock shall be entitled to receive the assets, if any, of the Corporation
remaining for distribution, on a per share basis in proportion to the
respective liquidation units for all series of Common Stock. The Carrols
Stock shall have nine liquidation units and the Pollo Tropical Stock shall
have one liquidation unit. Upon the determination by the Corporation of the
amount of assets the holders of the Carrols Stock and Pollo Tropical Stock,
respectively, shall be entitled to receive (determined in accordance with
the then applicable liquidation units), the amount of assets to be
distributed to the holders of Pollo Tropical Stock shall be reduced and the
holders of Pollo Tropical Stock shall be entitled to receive, on a pro rata
basis, an amount equal to the product of (i) such distributable amount of
assets and (ii) the Outstanding Pollo Tropical Fraction. The liquidation
units of the Carrols Stock and the Pollo Tropical Stock shall be adjusted
by the Board as appropriate to reflect equitably any subdivision (by stock
split or otherwise) or combination (by reverse stock split or otherwise) of
such class of Common Stock or any dividend or other distribution of shares
or similar transaction with respect to such class of Common Stock. Whenever
a change in the liquidation units occurs, the Corporation shall prepare and
file a statement of such change with the Secretary of the Corporation and
distribute a notice of such change to all holders of shares of such class
or series of Common Stock, together with a notice of such stock split,
reverse split, distribution or other transaction requiring such change.
(b) For the purposes of this paragraph B(4), any merger or business
combination involving the Corporation or any sale of all or substantially
all of the assets of the Corporation shall not be treated as a liquidation,
dissolution or winding up of the Corporation.
(5) Redemption or Conversion of the Common Stock. The Carrols Stock is
--------------------------------------------
subject to redemption and the Pollo Tropical Stock is subject to redemption or
conversion upon the terms provided below in this paragraph B(5) of this Article;
provided, however, that neither the Carrols Stock nor the Pollo Tropical Stock
may be redeemed or converted, as the case may be, if the other series has been
redeemed or converted, as the case may be, in its entirety or notice thereof
shall have been given as required by this paragraph B(5) of this Article.
(a) Mandatory and Optional Redemption or Conversion of Common Stock
---------------------------------------------------------------
Other than for Subsidiary Stock.
-------------------------------
(i) In the event of the Disposition, in one transaction or a
series of related transactions, by the Corporation and/or its
subsidiaries of all or substantially all of
4
<PAGE>
the properties and assets attributed to either Group to one or more
persons or entities (other than (1) the Disposition by the Corporation
of all or substantially all of its properties and assets in one
transaction or a series of related transactions in connection with the
liquidation, dissolution or winding up of the Corporation and the
distribution of assets to stockholders as referred to in paragraph
B(4) of this Article, (2) the Disposition of the properties and assets
of either Group as contemplated by paragraph B(5)(b) of this Article
or otherwise to all holders of shares of such Group divided among such
holders on a pro rata basis in accordance with the number of shares of
stock issued in respect of such Group outstanding and, in the case of
a Disposition of the properties and assets attributed to the Pollo
Tropical Group, to the Corporation or subsidiaries thereof, divided
among such holders and the Corporation or subsidiaries thereof on a
pro rata basis in accordance with the number of shares of stock issued
in respect of such Group outstanding and the Number of Shares Issuable
with Respect to the Inter-Group Interest or (3) to any person or
entity controlled (as determined by the Board of Directors) by the
Corporation), the Corporation shall, on or prior to the 30th Business
Day after the date of consummation of such Disposition (the
"Disposition Date"), pay a dividend on the Common Stock relating to
such Group or redeem some or all of such Common Stock, all as provided
by the following paragraph B(5)(a)(i) of this Article and, to the
extent applicable, by paragraph B(5)(d) of this Article, as the Board
of Directors shall have selected among such alternatives;
provided that there are assets legally available therefor:
(a) pay to the holders of the shares of the series of
the Common Stock relating to the Group subject to such
Disposition a dividend, as the Board of Directors shall have
declared subject to compliance with paragraph B(2) of this
Article, in cash and/or in securities (other than a dividend
of the Common Stock) or other property having a Fair Value
as of the Disposition Date in the aggregate equal to (I) in
the case of a Disposition of the properties and assets
attributed to the Carrols Group, the Net Proceeds of such
Disposition and (II) in the case of a Disposition of the
properties and assets attributed to the Pollo Tropical
Group, the product of the Outstanding Pollo Tropical
Fraction as of the record date for determining holders
entitled to receive such dividend and the Net Proceeds of
such Disposition; or
(b)(I) subject to the last sentence of this paragraph
B(5)(a)(i) of this Article, if such Disposition involves all
(not merely substantially all) of the properties and assets
attributed to such Group, redeem as of the Redemption Date
provided by paragraph B(5)(d)(iii), all outstanding shares
of the Common Stock relating to the Group subject to such
Disposition in exchange for cash and/or for securities
(other than the Common Stock) or other property having a
Fair Value as of the Disposition Date in the aggregate
5
<PAGE>
equal to (A) in the case of a Disposition of the properties
and assets attributed to the Carrols Group, the Net Proceeds
of such Disposition and (B) in the case of a Disposition of
the properties and assets attributed to the Pollo Tropical
Group, the product of the Outstanding Pollo Tropical
Fraction as of such Redemption Date and the Net Proceeds of
such Disposition; or
(II) subject to the last sentence of this paragraph
B(5)(a)(i) of this Article, if such Disposition involves
substantially all (but not all) of the properties and assets
attributed to such Group, redeem as of the Redemption Date
provided by paragraph B(5)(d)(iv) of this Article such
number of whole shares of the series of the Common Stock
relating to the Group subject to such Disposition (which may
be all of, but not more than, such shares outstanding) as
have (A) in the case of a Disposition of the properties and
assets attributed to the Carrols Group, the Fair Value as of
the Disposition Date of the Net Proceeds of such
Disposition, in consideration for cash and/or securities
(other than the Common Stock) or other property having a
Fair Value in the aggregate equal to such Net Proceeds of
such Disposition or (B) in the case of a Disposition of the
properties and assets attributed to the Pollo Tropical
Group, the product of the Outstanding Pollo Tropical
Fraction as of the date such shares are selected for
redemption and the Fair Value as of the Disposition Date of
the Net Proceeds of such Disposition in consideration for
cash and/or securities (other than the Common Stock) or
other property having a Fair Value in the aggregate equal to
such product; or
Notwithstanding the foregoing provisions of this paragraph B(5)(a)(i) of
this Article, the Corporation shall redeem shares of a series of the Common
Stock as provided by paragraphs B(5)(a)(i)(b)(I) or (II) of this Article only if
the amount to be paid in redemption of such stock is less than or equal to
either the Carrols Available Dividend Amount or the Pollo Tropical Available
Dividend Amount, as the case may be, with respect to the Group subject to such
Disposition as of the Redemption Date.
(ii) For purposes of this paragraph B(5)(a) of this Article:
(1) as of any date, "substantially all of the properties and
assets" attributed to either Group shall mean a portion of such properties
and assets (x) that represents at least 80% of the Fair Value of the
properties and assets attributed to such Group as of such date or (y) from
which were derived at least 80% of the aggregate revenues for the
immediately preceding twelve fiscal quarterly periods of the Company
(calculated on a pro forma basis to include revenues derived from any of
such properties and assets acquired during such period) derived from the
properties and assets of such Group as of such date;
6
<PAGE>
(2) in the case of a Disposition of the properties and assets
attributed to either Group in a series of related transactions, such
Disposition shall not be deemed to have been consummated until the
consummation of the last of such transactions; and
(3) the Board of Directors may pay any dividend or redemption
price referred to in paragraph B(5)(a)(i) of this Article in cash,
securities (other than the Common Stock) or other property, regardless
of the form or nature of the proceeds of the Disposition.
(iii) At any time prior to the closing of a firm commitment initial
public offering relating to the Carrols Stock (the "IPO"), the Board of
Directors may declare that each outstanding share of Pollo Tropical Stock
or Convertible Security convertible into or exchangeable for Pollo Tropical
Stock shall be converted, as of the Conversion Date provided by paragraph
B(5)(d)(v) of this Article, into the number of fully paid and nonassessable
shares of Carrols Stock equal the Fair Value Ratio of the Pollo Tropical
Stock to the Carrols Stock.
(b) Redemption of Common Stock for Subsidiary Stock.
-----------------------------------------------
(i) At any time at which all of the assets and liabilities
attributed to the Pollo Tropical Group (and no other assets or liabilities
of the Corporation or any subsidiary thereof) are held directly or
indirectly by one or more wholly-owned subsidiaries of the Corporation
(each, a "Pollo Tropical Group Subsidiary"), the Board of Directors may,
provided that there are assets legally available therefor, redeem all of
the outstanding shares of Pollo Tropical Stock, on a Redemption Date of
which notice is delivered in accordance with paragraph B(5)(d)(vi) of this
Article, in exchange for the number of shares of common stock of each Pollo
Tropical Group Subsidiary equal to the product of the Outstanding Pollo
Tropical Fraction and the number of shares of common stock of such Pollo
Tropical Group Subsidiary to be outstanding immediately following such
exchange of shares, such Pollo Tropical Group Subsidiary shares to be
delivered to the holders of shares of Pollo Tropical Stock on the
Redemption Date either directly or indirectly through another Pollo
Tropical Group Subsidiary (as a wholly-owned subsidiary thereof) and to be
divided among the holders of Pollo Tropical Stock pro rata in accordance
with the number of shares of Pollo Tropical Stock held by each on such
Redemption Date, each of which shares of common stock of such Pollo
Tropical Group Subsidiary shall be, upon such delivery, fully paid and
nonassessable.
(ii) At any time at which all of the assets and liabilities
attributed to the Carrols Group (and no other assets or liabilities of the
Corporation or any subsidiary thereof) are held directly or indirectly by
one or more wholly-owned subsidiaries of the Corporation (each, a "Carrols
Group Subsidiary"), the Board of Directors may, provided that there are
assets legally available therefor;
(1) if the Number of Shares Issuable with Respect to the Inter-
Group Interest is zero, redeem all of the outstanding shares of
Carrols Stock, on a
7
<PAGE>
Redemption Date of which notice is delivered in accordance with
paragraph B(5)(d)(vi) of this Article, in exchange for all of the
shares of common stock of each Carrols Group Subsidiary as will be
outstanding immediately following such exchange of shares, such shares
of common stock of each Carrols Group Subsidiary to be delivered to
the holders of shares of Carrols Stock on the Redemption Date either
directly or indirectly through another Carrols Group Subsidiary (as a
wholly-owned subsidiary thereof) and to be divided among the holders
of Carrols Stock pro rata in accordance with the number of shares of
Carrols Stock held by each on such Redemption Date, each of which
shares of common stock of such Carrols Group Subsidiary shall be, upon
such delivery, fully paid and nonassessable; or
(2) if the Number of Shares Issuable with Respect to the Inter-
Group Interest is greater than zero, either (x) redeem all of the
outstanding shares of Carrols Stock, on such a Redemption Date, in
exchange for (1) all of the shares of common stock of each Carrols
Group Subsidiary as will be outstanding immediately following such
exchange of shares and (2) a number of shares of Pollo Tropical Stock
equal to the Number of Shares Issuable with Respect to the Inter-Group
Interest, such shares of common stock of each Carrols Group Subsidiary
to be delivered to the holders of shares of Carrols Stock on the
Redemption Date either directly or indirectly through another Carrols
Group Subsidiary (as a wholly-owned subsidiary thereof) and the shares
of common stock of each Carrols Group Subsidiary and the shares of
Pollo Tropical Stock to be divided among the holders of Carrols Stock
pro rata in accordance with the number of shares of Carrols Stock held
by each on such Redemption Date, each of which shares of common stock
of each Carrols Group Subsidiary and shares of Pollo Tropical Stock
shall be, upon such delivery, fully paid and nonassessable; or (y) (1)
redeem all of the outstanding shares of Carrols Stock as contemplated
by clause (x) (1) above and (2) issue to one or more of the Carrols
Group Subsidiaries a number of shares of Pollo Tropical Stock equal to
the Number of Shares Issuable with Respect to the Inter-Group
Interest.
(c) Treatment of Convertible Securities. After any Conversion Date or
-----------------------------------
Redemption Date on which all outstanding shares of either series of the
Common Stock are converted or redeemed, any share of such series of the
Common Stock that is to be issued on conversion, exchange or exercise of
any Convertible Securities shall, immediately upon such conversion,
exchange or exercise and without any notice from or to, or any other action
on the part of, the Corporation or its Board of Directors or the holder of
such Convertible Security be converted into the amount of cash and/or the
number of shares of the kind of capital stock and/or other securities or
property of the Corporation that the number of shares of such series of the
Common Stock that were to be issued upon such conversion, exchange or
exercise would have received had such shares been outstanding on such
Conversion Date or Redemption Date. The provisions of the immediately
preceding sentence shall not apply to the extent that other adjustments in
respect of such conversion, exchange or redemption of a series of the
Common Stock are otherwise made pursuant to the provisions of such
Convertible Securities.
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(d) Notice and Other Provisions.
---------------------------
(i) Not later than the 30/th/ Business Day following the
consummation of a Disposition referred to in paragraph B(5)(a)(i) of this
Article, the Corporation shall notify the holders of Common Stock with
respect to (1) the Net Proceeds of such Disposition, (2) the number of
shares outstanding of the series of the Common Stock relating to the Group
subject to such Disposition, (3) the number of shares of such series of
Common Stock into or for which Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise price
thereof and (4) in the case of a Disposition of the properties and assets
attributable to the Pollo Tropical Group, the Outstanding Pollo Tropical
Fraction on the date of such notice.
(ii) If the Corporation determines to pay a dividend pursuant to
paragraph B(5)(a)(i)(a) of this Article, the Corporation shall, not later
than the 30th Business Day following the consummation of the Disposition
referred to in such paragraph, cause notice to be given to each holder of
shares of the series of the Common Stock relating to the Group subject to
such Disposition and to each holder of Convertible Securities that are
convertible into or exchangeable or exercisable for shares of such series
of Common Stock (unless alternate provision for such notice to the holders
of such Convertible Securities is made pursuant to the terms of such
Convertible Securities), setting forth (1) the record date for determining
holders entitled to receive such dividend, which shall be not earlier than
the 40th Business Day and not later than the 50th Business Day following
the consummation of such Disposition, (2) the anticipated payment date of
such dividend (which shall not be more than 85 Business Days following the
consummation of such Disposition), (3) the type of property to be paid as
such dividend in respect of the outstanding shares of such series of Common
Stock, (4) the Net Proceeds of such Disposition, (5) in the case of a
Disposition of the properties and assets attributable to the Pollo Tropical
Group, the Outstanding Pollo Tropical Fraction on the date of such notice,
(6) the number of outstanding shares of such series of Common Stock and the
number of shares of such series of Common Stock into or for which
outstanding Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof and (7)
in the case of notice to be given to holders of Convertible Securities, a
statement to the effect that a holder of such Convertible Securities shall
be entitled to receive such dividend only if such holder properly converts,
exchanges or exercises such Convertible Securities on or prior to the
record date referred to in clause (1) of this sentence. Such notice shall
be sent by first-class mail, postage prepaid, to each such holder at such
holder's address as the same appears on the transfer books of the
Corporation.
(iii) If the Corporation determines to undertake a redemption pursuant
to paragraph B(5)(a)(i)(b)(I) of this Article, the Corporation shall, not
less than 35 Business Days and not more than 45 Business Days prior to the
Redemption Date, cause notice to be given to each holder of shares of the
series of the Common Stock relating to the Group subject to the Disposition
referred to in such paragraph and to each holder of Convertible Securities
convertible into or exchangeable or exercisable for shares of such series
of
9
<PAGE>
Common Stock (unless alternate provision for such notice to the holders of
such Convertible Securities is made pursuant to the terms of such
Convertible Securities), setting forth (1) a statement that all shares of
such series of Common Stock outstanding on the Redemption Date shall be
redeemed, (2) the Redemption Date (which shall not be more than 85 Business
Days following the consummation of such Disposition), (3) the type of
property in which the redemption price for the shares of such series of
Common Stock to be redeemed is to be paid, (4) the Net Proceeds of such
Disposition, (5) in the case of a Disposition of the properties and assets
attributed to the Pollo Tropical Group, the Outstanding Pollo Tropical
Fraction on the date of such notice, (6) the place or places where
certificates for shares of such series of Common Stock, properly endorsed
or assigned for transfer (unless the Corporation waives such requirement),
are to be surrendered for delivery of cash and/or securities or other
property, (7) the number of outstanding shares of such series of Common
Stock and the number of shares of such series of the Common Stock into or
for which such outstanding Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise price
thereof, (8) in the case of notice to be given to holders of Convertible
Securities, a statement to the effect that a holder of such Convertible
Securities shall be entitled to participate in such redemption only if such
holder properly converts, exchanges or exercises such Convertible
Securities on or prior to the Redemption Date referred to in clause (2) of
this sentence and a statement as to what, if anything, such holder will be
entitled to receive pursuant to the terms of such Convertible Securities
or, if applicable, this paragraph B(5) of this Article if such holder
thereafter converts, exchanges or exercises such Convertible Securities and
(9) a statement to the effect that, except as otherwise provided by
paragraph B(5)(d)(ix) of this Article, dividends on such shares of the
Common Stock shall cease to be paid as of such Redemption Date. Such notice
shall be sent by first-class mail, postage prepaid, to each such holder at
such holder's address as the same appears on the transfer books of the
Corporation.
(iv) If the Corporation determines to undertake a redemption pursuant
to paragraph B(5)(a)(i)(b)(II) of this Article, the Corporation shall, not
later than the 30th Business Day following the consummation of the
Disposition referred to in such paragraph, cause notice to be given to each
holder of shares of the series of the Common Stock relating to the Group
subject to such Disposition and to each holder of Convertible Securities
that are convertible into or exchangeable or exercisable for shares of such
series of Common Stock (unless alternate provision for such notice to the
holders of such Convertible Securities is made pursuant to the terms of
such Convertible Securities) setting forth (1) a date not earlier than the
40th Business Day and not later than the 50th Business Day following the
consummation of the Disposition in respect of which such redemption is to
be made on and which shares of such series of the Common Stock shall be
selected for redemption, (2) the anticipated Redemption Date (which shall
not be more than 85 Business Days following the consummation of such
Disposition), (3) the type of property in which the redemption price for
the shares to be redeemed is to be paid, (4) the Net Proceeds of such
Disposition, (5) in the case of a Disposition of the properties and assets
attributed to the Pollo Tropical Group, the Outstanding Pollo Tropical
Fraction, (6) the number of shares of such series of Common Stock
outstanding and the number of shares of such series of Common Stock into or
for which outstanding Convertible
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<PAGE>
Securities are then convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof, (7) in the case of notice
to be given to holders of Convertible Securities, a statement to the effect
that a holder of such Convertible Securities shall be eligible to
participate in such selection for redemption only if such holder properly
converts, exchanges or exercises such Convertible Securities on or prior to
the record date referred to in clause (1) of this sentence, and a statement
as to what, if anything, such holder will be entitled to receive pursuant
to the terms of such Convertible Securities or, if applicable, this
paragraph B(5) of this Article if such holder thereafter converts,
exchanges or exercises such Convertible Securities and (8) a statement that
the Corporation will not be required to register a transfer of any shares
of such series of the Common Stock for a period of 15 Business Days next
preceding the date referred to in clause (1) of this sentence. Promptly
following the date referred to in clause (1) of the preceding sentence, but
not earlier than 40 Business Days nor later than 50 Business Days following
the consummation of such Disposition, the Corporation shall cause a notice
to be given to each holder of record of shares of such series of Common
Stock to be redeemed setting forth (1) the number of shares of such series
of Common Stock held by such holder to be redeemed, (2) a statement that
such shares of such series of Common Stock shall be redeemed, (3) the
Redemption Date, (4) the kind and per share amount of cash and/or
securities or other property to be received by such holder with respect to
each share of such series of Common Stock to be redeemed, including details
as to the calculation thereof, (5) the place or places where certificates
for shares of such series of Common Stock, properly endorsed or assigned
for transfer (unless the Corporation shall waive such requirement), are to
be surrendered for delivery of such cash and/or securities or other
property, (6) if applicable, a statement to the effect that the shares
being redeemed may no longer be transferred on the transfer books of the
Corporation after the Redemption Date and (7) a statement to the effect
that, subject to paragraph B(5)(d)(ix) of this Article, dividends on such
shares of such series of Common Stock shall cease to be paid as of the
Redemption Date. Such notices shall be sent by first-class mail, postage
prepaid, to each such holder at such holder's address as the same appears
on the transfer books of the Corporation.
(v) If the Corporation determines to convert the Pollo Tropical Stock
into Carrols Stock (or another class or series of common stock of the
Corporation) pursuant to paragraph B(5)(a)(iii) of this Article, the
Corporation shall, not less than 35 Business Days prior to the Conversion
Date, cause notice to be given to each holder of shares of Pollo Tropical
Stock to be so converted and to each holder of Convertible Securities that
are convertible into or exchangeable or exercisable for shares of Pollo
Tropical Stock (unless alternate provision for such notice to the holders
of such Convertible Securities is made pursuant to the terms of such
Convertible Securities) setting forth (1) a statement that all outstanding
shares of Pollo Tropical Stock shall be converted, (2) the anticipated
Conversion Date, (3) the per share number of shares of Carrols Stock or
another class or series of common stock of the Corporation, as the case may
be, to be received with respect to each share of Pollo Tropical Stock,
including details as to the calculation thereof, (4) the place or places
where certificates for shares of Pollo Tropical Stock, properly endorsed or
assigned for transfer (unless the Corporation shall waive such
requirement), are to be surrendered for delivery of certificates for shares
of Pollo Tropical
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<PAGE>
Stock, (5) the number of outstanding shares of Pollo Tropical Stock and the
number of shares of Pollo Tropical Stock into or for which outstanding
Convertible Securities are then convertible, exchangeable or exercisable
and the conversion, exchange or exercise price thereof, (6) a statement to
the effect that, subject to paragraph B(5)(d)(ix) of this Article,
dividends on Pollo Tropical Stock shall cease to be paid as of such
Conversion Date and (7) in the case of notice to holders of such
Convertible Securities, a statement to the effect that a holder of such
Convertible Securities shall be entitled to receive shares of Pollo
Tropical Stock upon such conversion only if such holder properly converts,
exchanges or exercises such Convertible Securities on or prior to such
Conversion Date and a statement as to what, if anything, such holder will
be entitled to receive pursuant to the terms of such Convertible Securities
or, if applicable, this paragraph B(5) of this Article if such holder
thereafter converts, exchanges or exercises such Convertible Securities.
Such notice shall be sent by first-class mail, postage prepaid, to each
such holder at such holder's address as the same appears on the transfer
books of the Corporation.
(vi) If the Corporation determines to redeem shares of either series
of the Common Stock pursuant to paragraph B(5)(b) of this Article, the
Corporation shall cause notice to be given to each holder of shares of such
series of the Common Stock to be redeemed and to each holder of Convertible
Securities that are convertible into or exchangeable or exercisable for
shares of such series of the Common Stock (unless alternate provision for
such notice to the holders of such Convertible Securities is made pursuant
to the terms of such Convertible Securities), setting forth (1) a statement
that all shares of such series of the Common Stock outstanding on the
Redemption Date shall be redeemed in exchange for shares of common stock of
each Carrols Group Subsidiary (and, if such redemption is pursuant to
paragraph B(5)(b)(ii)(2)(x) of this Article, Pollo Tropical Stock) or
common stock of each Pollo Tropical Group Subsidiary, as the case may be,
(2) the Redemption Date, (3) in the case of a redemption of the Pollo
Tropical Stock, the Outstanding Pollo Tropical Fraction on the date of such
notice, (4) the place or places where certificates for shares of the series
of the Common Stock to be redeemed, properly endorsed or assigned for
transfer (unless the Corporation shall waive such requirement), are to be
surrendered for delivery of certificates for shares of the common stock of
each Carrols Group Subsidiary (and, if such redemption is pursuant to
paragraph B(5)(b)(ii)(2)(x) of this Article, Pollo Tropical Stock) or
common stock of each Pollo Tropical Group Subsidiary, as the case may be,
(5) a statement to the effect that, subject to paragraph B(5)(d)(ix) of
this Article, dividends on such shares of the Common Stock shall cease to
be paid as of such Redemption Date, (6) the number of shares of such series
of the Common Stock outstanding and the number of shares of such series of
Common Stock into or for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the conversion, exchange or
exercise price thereof and (7) in the case of notice to holders of
Convertible Securities, a statement to the effect that a holder of
Convertible Securities shall be entitled to receive shares of common stock
of each Carrols Group Subsidiary (and, if such redemption is pursuant to
paragraph B(5)(b)(ii)(2)(x) of this Article, Pollo Tropical Stock) or
common stock of each Pollo Tropical Group Subsidiary, as the case may be,
upon redemption only if such holder properly converts, exchanges or
exercises such Convertible Securities on or prior to the Redemption Date
and a statement as to
12
<PAGE>
what, if anything, such holder will be entitled to receive pursuant to the
terms of such Convertible Securities or, if applicable, this paragraph B(5)
of this Article, if such holder thereafter converts, exchanges or exercises
such Convertible Securities. Such notice shall be sent by first-class mail,
postage prepaid, not less than 30 Business Days nor more than 45 Business
Days prior to the Redemption Date to each such holder at such holder's
address as the same appears on the transfer books of the Corporation.
(vii) If less than all of the outstanding shares of the Common Stock
of a series are to be redeemed pursuant to paragraph B(5)(a)(i) of this
Article, the shares to be redeemed by the Corporation shall be selected
from among the holders of shares of such series of the Common Stock
outstanding at the close of business on the record date for such redemption
on a pro rata basis among all such holders or by lot or by such other
method as may be determined by the Board of Directors of the Corporation to
be equitable.
(viii) The Corporation shall not be required to issue or deliver
fractional shares of any capital stock or of any other securities to any
holder of either series of the Common Stock upon any conversion,
redemption, dividend or other distribution pursuant to this paragraph B(5)
of this Article. If more than one share of either series of the Common
Stock shall be held at the same time by the same holder, the Corporation
may aggregate the number of shares of any capital stock that shall be
issuable or any other securities or property that shall be distributable to
such holder upon any conversion, redemption, dividend or other distribution
(including any fractional shares). If there are fractional shares of any
capital stock or of any other securities remaining to be issued or
distributed to the holders of either series of the Common Stock, the
Corporation shall, if such fractional shares are not issued or distributed
to the holder, pay cash in respect of such fractional shares in an amount
equal to the Fair Value thereof on the fifth Business Day prior to the date
such payment is to be made (without interest).
(ix) No adjustments in respect of dividends shall be made upon the
conversion or redemption of any shares of either series of the Common
Stock; provided, however, that if the Conversion Date or Redemption Date,
as the case may be, with respect to any shares of either series of the
Common Stock shall be subsequent to the record date for the payment of a
dividend or other distribution thereon or with respect thereto, the holders
of such series of the Common Stock at the close of business on such record
date shall be entitled to receive the dividend or other distribution
payable on or with respect to such shares on the date set for payment of
such dividend or other distribution, in each case without interest,
notwithstanding the subsequent conversion or redemption of such shares.
(x) Before any holder of either series of the Common Stock shall be
entitled to receive any cash payment and/or certificates or instruments
representing shares of any capital stock and/or other securities or
property to be distributed to such holder with respect to such series of
the Common Stock pursuant to this paragraph B(5) of this Article, such
holder shall surrender at such place as the Corporation shall specify
certificates for such shares of the Common Stock, properly endorsed or
assigned for transfer (unless the Corporation shall waive such
requirement). The Corporation shall, as soon as practicable after receipt
of certificates representing such shares of the Common
13
<PAGE>
Stock deliver to the person for whose account such shares of the Common
Stock were so surrendered, or to such person's nominee or nominees, the
cash and/or the certificates or instruments representing the number of
whole shares of the kind of capital stock and/or other securities or
property to which such person shall be entitled as aforesaid, together with
any payment in respect of fractional shares contemplated by paragraph
B(5)(d)(viii) of this Article, in each case without interest. If less than
all of the shares of either series of the Common Stock represented by any
one certificate are to be redeemed, the Corporation shall issue and deliver
a new certificate for the shares of such series of Common Stock not
redeemed.
(xi) From and after any applicable Conversion Date or Redemption
Date, as the case may be, all rights of a holder of shares of either series
of the Common Stock that were converted or redeemed shall cease except for
the right, upon surrender of the certificates representing such shares of
the Common Stock as required by paragraph B(5)(d)(x) of this Article, to
receive the cash and/or the certificates or instruments representing shares
of the kind and amount of capital stock and/or other securities or property
for which such shares were converted or redeemed, together with any payment
in respect of fractional shares contemplated by paragraph B(5)(d)(viii) of
this Article and rights to dividends as provided in paragraph B(5)(d)(ix)
of this Article, in each case without interest. No holder of a certificate
that immediately prior to the applicable Conversion Date represented shares
of a series of the Common Stock shall be entitled to receive any dividend
or other distribution or interest payment with respect to shares of any
kind of capital stock or other security or instrument for which such series
of the Common Stock was converted until the surrender as required by this
paragraph B(5) of this Article of such certificate in exchange for a
certificate or certificates or instrument or instruments representing such
capital stock or other security. Subject to applicable escheat and similar
laws, upon such surrender, there shall be paid to the holder the amount of
any dividends or other distributions (without interest) which theretofore
became payable on any class or series of capital stock of the Corporation
as of a record date after the Conversion Date, but that were not paid by
reason of the foregoing, with respect to the number of whole shares of the
kind of capital stock represented by the certificate or certificates issued
upon such surrender. From and after a Conversion Date, the Corporation
shall, however, be entitled to treat the certificates for a series of the
Common Stock that have not yet been surrendered for conversion as
evidencing the ownership of the number of whole shares of the kind or kinds
of capital stock of the Corporation for which the shares of such series of
the Common Stock represented by such certificates shall have been
converted, notwithstanding the failure to surrender such certificates.
(xii) The Corporation shall pay any and all documentary, stamp or
similar issue or transfer taxes that may be payable in respect of the
issuance or delivery of any shares of capital stock and/or other securities
upon conversion or redemption of shares of either series of the Common
Stock pursuant to this paragraph B(5) of this Article. The Corporation
shall not, however, be required to pay any tax that may be payable in
respect of any transfer involved in the issuance or delivery of any shares
of capital stock and/or other securities in a name other than that in which
the shares of such series of the Common Stock so converted or redeemed were
registered, and no such issuance or
14
<PAGE>
delivery shall be made unless and until the person requesting such issuance
or delivery has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been
paid.
(xiii) Neither the failure to mail any notice required by this
paragraph B(5)(d) of this Article to any particular holder of the Common
Stock or of Convertible Securities nor any defect therein shall affect the
sufficiency thereof with respect to any other holder of outstanding shares
of the Common Stock or of Convertible Securities or the validity of any
such conversion or redemption.
(xiv) The Board of Directors may establish such rules and
requirements to facilitate the effectuation of the transactions
contemplated by this paragraph B(5) of this Article as the Board of
Directors shall determine to be appropriate.
(6) Application of the Provisions of this Certificate of Amendment to the
---------------------------------------------------------------------
Restated Certificate of Incorporation.
- -------------------------------------
(a) Certain Determinations by the Board of Directors. The Board of
------------------------------------------------
Directors shall make such determinations with respect to the assets and
liabilities to be attributed to the Groups, the application of the
provisions of this paragraph B of this Article to transactions to be
engaged in by the Corporation and the preferences, limitations and relative
rights of the holders of either series of the Common Stock, and the
qualifications and restrictions thereon, provided by this Certificate of
Amendment to the Restated Certificate of Incorporation, as may be, or
become necessary or appropriate to the exercise of such preferences,
limitations and relative rights, including, without limiting the foregoing,
the determinations referred to in the following paragraphs B(6)(a)(i),
(ii), (iii), (iv) and (v) of this Article. A record of any such
determination shall be filed with the records of the actions of the Board
of Directors.
(i) Upon any acquisition by the Corporation or its subsidiaries
of any assets or business, or any assumption of liabilities, outside
of the ordinary course of business of the Carrols Group or the Pollo
Tropical Group, as the case may be, the Board of Directors shall
determine whether such assets, business and liabilities (or an
interest therein) shall be for the benefit of the Carrols Group or the
Pollo Tropical Group or that an interest therein shall be partly for
the benefit of the Carrols Group and partly for the benefit of the
Pollo Tropical Group and, accordingly, shall be attributed to the
Carrols Group or the Pollo Tropical Group, or partly to each, in
accordance with paragraph B(7)(c) or (r) of this Article, as the case
may be.
(ii) Upon any issuance of any shares of Pollo Tropical Stock at
a time when the Number of Shares Issuable with Respect to the Inter-
Group Interest is greater than zero, the Board of Directors shall
determine, based on the use of the proceeds of such issuance and any
other relevant factors, whether all or any part of the shares of Pollo
Tropical Stock so issued shall reduce the Number of Shares
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<PAGE>
Issuable with Respect to the Inter-Group Interest, and the Number of
Shares Issuable with Respect to the Inter-Group Interest shall be
adjusted accordingly.
(iii) Upon any issuance by the Corporation or any subsidiary
thereof of any Convertible Securities that are convertible into or
exchangeable or exercisable for shares of Pollo Tropical Stock, if at
the time such Convertible Securities are issued the Number of Shares
Issuable with Respect to the Inter-Group Interest is greater than
zero, the Board of Directors shall determine, based on the use of the
proceeds of such issuance of Convertible Securities in the business of
the Carrols Group or the Pollo Tropical Group and any other relevant
factors, whether, upon conversion, exchange or exercise thereof, the
issuance of shares of Pollo Tropical Stock pursuant thereto shall, in
whole or in part, reduce the Number of Shares Issuable with Respect to
the Inter-Group Interest.
(iv) Upon any issuance of any shares of the Preferred Stock of
any series, the Board of Directors shall attribute, based on the use
of proceeds of such issuance of shares of the Preferred Stock in the
business of the Carrols Group or the Pollo Tropical Group and any
other relevant factors, the shares so issued entirely to the Carrols
Group or entirely to the Pollo Tropical Group or partly to the Carrols
Group and partly to the Pollo Tropical Group in such proportion as the
Board of Directors shall determine.
(v) Upon any redemption or repurchase by the Corporation or any
subsidiary thereof of shares of the Preferred Stock of any class or
series or of other securities or debt obligations of the Corporation,
the Board of Directors shall determine, based on the property used to
redeem or purchase such shares, other securities or debt obligations,
which, if any, of such shares, other securities or debt obligations
redeemed or repurchased shall be attributed to the Carrols Group and
which, if any, of such shares, other securities or debt obligations
shall be attributed to the Pollo Tropical Group and, accordingly, how
many of the shares of such series of the Preferred Stock or of such
other securities, or how much of such debt obligations, that remain
outstanding, if any, are thereafter attributed to the Carrols Group or
to the Pollo Tropical Group.
(b) Certain Determinations Not Required. Notwithstanding the
-----------------------------------
foregoing provisions of this paragraph B(6) of this Article, the provisions
of paragraphs B(7)(c), (e), (r) or (s) of this Article or any other
provision of this Article, at any time when there are not outstanding both
(i) one or more shares of Carrols Stock or Convertible Securities
convertible into or exchangeable or exercisable for Carrols Stock and (ii)
one or more shares of Pollo Tropical Stock or Convertible Securities
convertible into or exchangeable or exercisable for Pollo Tropical Stock,
the Corporation need not (A) attribute any of the assets or liabilities of
the Corporation or any of its subsidiaries to the Carrols Group or the
Pollo Tropical Group or (B) make any determination required in connection
therewith, nor shall the Board of Directors be required to make any of the
determinations otherwise required by this Article, and in such
circumstances the holders of the shares of Carrols Stock or Pollo Tropical
Stock outstanding, as the case may be, shall (unless otherwise
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<PAGE>
specifically provided by this Certificate of Amendment to the Restated
Certificate of Incorporation) be entitled to all the preferences or other
relative rights of both series of the Common Stock without differentiation
between the Carrols Stock and the Pollo Tropical Stock.
(c) Board Determinations Binding. Subject to applicable law, any
----------------------------
determinations made in good faith by the Board under any provision of this
Article, and any determinations with respect to any Group or the rights of
holders of any class or series of capital stock made pursuant to or in
furtherance of the application of this Article, shall be final and binding
on all stockholders.
(7) Certain Definitions. As used in this Article, the following terms hall
-------------------
have the following meanings (with terms defined in the singular having
comparable meaning when used in the plural and vice versa), unless the context
otherwise requires. As used in this paragraph B(7) of this Article, a
"contribution" or "transfer" of assets or properties from one Group to another
shall refer to the reattribution of such assets or properties from the
contributing or transferring Group to the other Group and correlative phrases
shall have correlative meanings.
(a) "Business Day" shall mean each weekday that banks are open for the
transaction of business in New York City.
(b) "Carrols Available Dividend Amount", as of any date shall mean, with
respect to the Carrols Group either (a) the excess of (i) an amount equal to the
total assets attributed to the Carrols Group less the total liabilities (not
including preferred stock) attributed to the Carrols Group as of such date over
(ii) the aggregate par value of, or any greater amount determined to be capital
in respect of, all outstanding shares of Carrols Stock and to the extent
applicable, each class or series of capital stock attributed to the Carrols
Group or (b) in case there is no such excess, an amount equal to Carrols Net
Earnings (Loss) (if positive) for the fiscal year in which such date occurs
and/or the preceding fiscal year. The Carrols Available Dividend Amount is
intended to be similar to an amount equal to the amount that would be legally
available for the payment of dividends on shares of Carrols Stock under the DGCL
if the Carrols Group was a separate Delaware corporation.
(c) "Carrols Group" shall mean, as of any date:
(i) the interest of the Corporation or any of its subsidiaries on
such date in all of the assets, liabilities and businesses of the
Corporation or any of its subsidiaries (and any successor companies), other
than any assets, liabilities and businesses attributed in accordance with
this Article to the Pollo Tropical Group;
(ii) a proportionate undivided interest in each and every business,
asset and liability attributed to the Pollo Tropical Group equal to the
Inter-Group Interest Fraction as of such date;
(iii) all properties and assets transferred to the Carrols Group from
the Pollo Tropical Group (other than pursuant to paragraph B(7)(c)(iv) or
(vi) of this Article)
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<PAGE>
pursuant to transactions in the ordinary course of business of both the
Carrols Group and the Pollo Tropical Group or otherwise as the Board of
Directors may have directed as permitted by this Article;
(iv) all properties and assets transferred to the Carrols Group from
the Pollo Tropical Group in connection with a reduction of the Number of
Shares Issuable with Respect to the Inter-Group Interest;
(v) the interest of the Corporation or any of its subsidiaries in
any business or asset acquired and any liabilities assumed by the
Corporation or any of its subsidiaries outside the ordinary course of
business and attributed to the Carrols Group, as determined by the Board of
Directors as contemplated by paragraph B(6)(a)(i) of this Article; and
(vi) from and after the payment date of any dividend, redemption or
other distribution with respect to shares of Pollo Tropical Stock (other
than a dividend or other distribution payable in shares of Pollo Tropical
Stock, with respect to which adjustment shall be made as provided in
paragraph B(7)(o)(i) of this Article, or in securities of the Corporation
attributed to the Pollo Tropical Group, for which provision shall be made
as set forth in the third to last sentence of this definition), an amount
of assets or properties previously attributed to the Pollo Tropical Group
of the same kind as were paid in such dividend or other distribution with
respect to shares of Pollo Tropical Stock as have a Fair Value on the
record date for such dividend or distribution equal to the product of (1)
the Fair Value on such record date of the aggregate of such dividend or
distribution to holders of shares of Pollo Tropical Stock declared and (2)
a fraction the numerator of which is equal to the Inter-Group Interest
Fraction in effect on the record date for such dividend or distribution and
the denominator of which is equal to the Outstanding Pollo Tropical
Fraction in effect on the record date for such dividend or distribution;
provided, that from and after any transfer of any assets or properties from
the Carrols Group to the Pollo Tropical Group, the Carrols Group shall no
longer include such assets or properties so transferred (other than as
reflected in respect of such a transfer by the Inter-Group Interest
Fraction, as provided by paragraph B(7)(c)(ii) of this Article). If the
Corporation shall pay a dividend or make some other distribution with
respect to shares of Pollo Tropical Stock payable in securities of the
Corporation that are attributed to the Pollo Tropical Group for purposes of
this Article (other than Pollo Tropical Stock), the Carrols Group shall be
deemed to hold an interest in the Pollo Tropical Group equivalent to the
number or amount of such securities that is equal to the product of the
number or amount of securities so distributed to holders of Pollo Tropical
Stock and the fraction specified in clause (2) of paragraph B(7)(c)(vi) of
this Article (determined as of the record date for such distribution) and,
to the extent interest is or dividends are paid on the securities so
distributed, the Carrols Group shall include, and there shall be
transferred thereto from the Pollo Tropical Group, a corresponding ratable
amount of the kind of assets paid as such interest or dividends as would
have been paid in respect of such securities so deemed to be held by the
Carrols Group if such securities were outstanding. The Corporation may
also, to the extent the securities so paid as a dividend or other
distribution to the holders of Pollo Tropical Stock are Convertible
Securities and at the
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time are convertible into or exchangeable or exercisable for shares of
Pollo Tropical Stock, treat such Convertible Securities as are so deemed to
be held by the Carrols Group to be deemed to be converted, exchanged or
exercised, and shall do so to the extent such Convertible Securities are
mandatorily converted, exchanged or exercised (and to the extent the terms
of such Convertible Securities require payment of consideration for such
conversion, exchange or exercise, the Carrols Group shall then no longer
include an amount of the kind of properties or assets required to be paid
as such consideration for the amount of Convertible Securities deemed
converted, exchanged or exercised (and the Pollo Tropical Group shall be
attributed such properties or assets)), in which case, from and after such
time, the securities into or for which such Convertible Securities so
deemed to be held by the Carrols Group were so considered converted,
exchanged or exercised shall be deemed held by the Carrols Group (as
provided in clause (3) of paragraph B(7)(o)(iii) of this Article) and such
Convertible Securities shall no longer be deemed to be held by the Carrols
Group. A statement setting forth the election to effectuate any such deemed
conversion, exchange or exercise of Convertible Securities so deemed to be
held by the Carrols Group and the properties or assets, if any, to be
attributed to the Pollo Tropical Group in consideration of such conversion,
exchange or exercise (if any) shall be filed in the records of the actions
of the Board of Directors and, upon such filing, such deemed conversion,
exchange or exercise shall be effectuated.
(d) "Carrols Net Earnings (Loss)", for any period through any date, shall
mean the net earnings or loss of the Carrols Group for such period (or in
respect of fiscal periods of the Corporation commencing prior to the date of the
first issuance of Pollo Tropical Stock, the pro forma net earnings or loss of
the Carrols Group for such period as if such date had been the first day of such
period) determined in accordance with generally accepted accounting principles
in effect at such time, reflecting income and expense of the Corporation
attributed to the Carrols Group on a basis substantially consistent with
attributions of income and expense made in the calculation of Pollo Tropical Net
Earnings (Loss), including, without limitation, corporate administrative costs,
net interest and other financial costs and income taxes.
(e) "Common Stock" shall mean the collective reference to the Carrols
Stock and the Pollo Tropical Stock, and either may sometimes be called a series
of Common Stock.
(f) "Conversion Date" shall mean the closing date of the IPO, which date
shall be the effective date for the conversion of shares of Pollo Tropical Stock
into shares of Carrols Stock (or another class or series of common stock of the
Corporation, as the case may be) and set forth in the notice to holders of
shares of Pollo Tropical Stock subject to such conversion and to holders of any
Convertible Securities that are convertible into or exchangeable or exercisable
for shares of Pollo Tropical Stock subject to such conversion required pursuant
to paragraph (5)(d)(v) of this Article.
(g) "Convertible Securities" at any time shall mean any securities of the
Corporation or of any subsidiary thereof (other than shares of the Common
Stock), including warrants and options, outstanding at such time that by their
terms are convertible into or exchangeable or exercisable for or evidence the
right to acquire any shares of either series of the Common Stock, whether
convertible, exchangeable or exercisable at such time or a later time or only
upon the
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occurrence of certain events, but in respect of anti-dilution provisions of such
securities only upon the effectiveness thereof.
(h) "Disposition" shall mean a sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or contribution of assets or
stock or otherwise) of properties or assets (including stock, other securities
and goodwill).
(i) "Fair Value" shall mean, (i) in the case of equity securities or debt
securities of a class or series that has previously been Publicly Traded for a
period of at least 3 months, the Market Value thereof (if such Market Value, as
so defined, can be determined); (ii) in the case of an equity security or debt
security that has not been Publicly Traded for at least 3 months or the Market
Value of which cannot be determined, the fair value per share of stock or per
other unit of such security, on a fully distributed basis, as determined by an
independent appraiser with recognized standing selected in good faith by the
Board of Directors; provided, however, that in the sole discretion of the Board
-------- -------
of Directors, the appraisal may be conducted by the investment banking firm
engaged by the Corporation in connection with its IPO; (iii) in the case of cash
denominated in U.S. dollars, the face amount thereof and in the case of cash
denominated in other than U.S. dollars, the face amount thereof converted into
U.S. dollars at the rate published in The Wall Street Journal on the date for
the determination of Fair Value or, if not so published, at such rate as shall
be determined in good faith by the Board of Directors based upon such
information as the Board of Directors shall in good faith determine to be
appropriate in accordance with good business practice; and (iv) in the case of
property other than securities or cash, the "Fair Value" thereof shall be
determined in good faith by the Board of Directors based upon such appraisals or
valuation reports of such independent experts as the Board of Directors shall in
good faith determine to be appropriate in accordance with good business
practice. Any such determination of Fair Value shall be described in a statement
filed with the records of the actions of the Board of Directors.
(j) "Fair Value Ratio of the Pollo Tropical Stock to the Carrols Stock" as
of any Conversion Date shall mean the fraction (which may be greater or less
than 1/1), expressed as a decimal (rounded to the nearest five decimal places),
of a share of Carrols Stock to be issued in respect of a share of Pollo Tropical
Stock upon a conversion of Pollo Tropical Stock into Carrols Stock (or another
class or series of common stock of the Corporation) in accordance with paragraph
B(5)(a)(iii) of this Article, based on the ratio of the Fair Value of a share of
Pollo Tropical Stock to the Fair Value of a share of Carrols Stock as of such
date.
(k) "Group" shall mean, as of any date, the Carrols Group or the Pollo
Tropical Group, as the case may be.
(l) "Inter-Group Interest Fraction" as of any date shall mean a fraction
the numerator of which shall be the Number of Shares Issuable with Respect to
the Inter-Group Interest on such date and the denominator of which shall be the
sum of (A) such Number of Shares Issuable with Respect to the Inter-Group
Interest and (B) the aggregate number of shares of Pollo Tropical Stock
outstanding on such date. A statement setting forth the Inter-Group Interest
Fraction as of the record date for any dividend or distribution on either series
of the Common Stock, as of the effective date of any conversion, exchange or
exercise of Convertible Securities into or for shares
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of Pollo Tropical Stock and as of the end of each fiscal quarter of the
Corporation shall be filed by the Secretary of the Corporation in the records of
the Board of Directors of the Corporation not later than ten days after such
date.
(m) "Market Value" of a share of any class or series of capital stock of
the Corporation on any day shall mean the average of the high and low reported
sales prices regular way of a share of such class or series on such Business Day
or, in case no such reported sale takes place on such Business Day, the average
of the reported closing bid and asked prices regular way of a share of such
class or series on such Business Day, in either case as reported on the New York
Stock Exchange Composite Tape or, if the shares of such class or series are not
listed or admitted to trading on such Exchange on such Business Day, on the
principal national securities exchange in the United States on which the shares
of such class or series are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange on such Business Day, on
The Nasdaq National Market or, if the shares of such class or series are not
listed or admitted to trading on any national securities exchange or quoted on
The Nasdaq National Market on such Business Day, the average of the closing bid
and asked prices of a share of such class or series in the over-the-counter
market on such Business Day as furnished by any New York Stock Exchange member
firm selected from time to time by the Corporation or, if such closing bid and
asked prices are not made available by any such New York Stock Exchange member
firm on such Business Day, the Fair Value of a share of such class or series as
set forth in clause (ii) of the definition of Fair Value; provided that, for
purposes of determining the market value of a share of any class or series of
capital stock for any period, (i) the "Market Value" of a share of capital stock
on any day prior to any "ex-dividend" date or any similar date occurring during
such period for any dividend or distribution (other than any dividend or
distribution contemplated by clause (ii)(B) of this sentence) paid or to be paid
with respect to such capital stock shall be reduced by the Fair Value of the per
share amount of such dividend or distribution and (ii) the "Market Value" of any
share of capital stock on any day prior to (A) the effective date of any
subdivision (by stock split or otherwise) or combination (by reverse stock split
or otherwise) of outstanding shares of such class or series of capital stock
occurring during such period or (B) any "ex-dividend" date or any similar date
occurring during such period for any dividend or distribution with respect to
such capital stock to be made in shares of such class or series of capital stock
or Convertible Securities that are convertible, exchangeable or exercisable for
such class or series of capital stock shall be appropriately adjusted, as
determined by the Board of Directors, to reflect such subdivision, combination,
dividend or distribution.
(n) "Net Proceeds" shall mean, as of any date with respect to any
Disposition of any of the properties and assets attributed to the Carrols Group
or the Pollo Tropical Group, as the case may be, an amount, if any, equal to
what remains of the gross proceeds received by the Corporation in such
Disposition after payment of, or reasonable provision is made as determined by
the Board of Directors for, (A) any taxes payable by the Corporation (or which
would have been payable but for the utilization of tax benefits attributable to
the other Group) in respect of such Disposition or in respect of any resulting
dividend or redemption pursuant to paragraphs B(5)(a)(i)(a) or (b) of this
Article, (B) any transaction costs, including, without limitation, any legal,
investment banking and accounting fees and expenses and (C) any liabilities
(contingent or otherwise) of or attributed to such Group, including, without
limitation, any liabilities for deferred taxes or any indemnity or guarantee
obligations of the Corporation incurred in connection with
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<PAGE>
the Disposition or otherwise, and any liabilities for future purchase price
adjustments and any preferential amounts plus any accumulated and unpaid
dividends in respect of the Preferred Stock attributed to such Group. For
purposes of this definition, any properties and assets attributed to the Group,
the properties and assets of which are subject to such Disposition, remaining
after such Disposition shall constitute "reasonable provision" for such amount
of taxes, costs and liabilities (contingent or otherwise) as the Board of
Directors determines can be expected to be supported by such properties and
assets.
(o) "Number of Shares Issuable with Respect to the Inter-Group Interest"
shall be determined by the Board of Directors prior to the first issuance of
shares of Pollo Tropical Stock or Convertible Securities convertible into or
exchangeable or exercisable for shares of Pollo Tropical Stock to be the number
of shares of Pollo Tropical Stock that initially represents 100% of the common
stockholders' equity of the Corporation attributable to the Pollo Tropical
Group, which determination shall be set forth in a statement filed with the
records of the actions of the Board of Directors; provided, however, that such
number shall from time to time thereafter be: (i) adjusted, if before such
adjustment such number is greater than zero, as determined by the Board of
Directors to be appropriate to reflect equitably any subdivision (by stock split
or otherwise) or combination (by reverse stock split or otherwise) of the Pollo
Tropical Stock or any dividend or other distribution of shares of Pollo Tropical
Stock to holders of shares of Pollo Tropical Stock or any reclassification of
Pollo Tropical Stock; (ii) decreased (but to not less than zero), if before such
adjustment such number is greater than zero, by action of the Board of Directors
by (1) the number of shares of Pollo Tropical Stock issued or sold by the
Corporation that, immediately prior to such issuance or sale, were included in
the Number of Shares Issuable with Respect to the Inter-Group Interest, (2) the
number of shares of Pollo Tropical Stock issued upon conversion, exchange or
exercise of Convertible Securities that, immediately prior to the issuance or
sale of such Convertible Securities, were included in the Number of Shares
Issuable with Respect to the Inter-Group Interest, (3) the number of shares of
Pollo Tropical Stock issued by the Corporation as a dividend or other
distribution (including in connection with any reclassification or exchange of
shares) to holders of Carrols Stock, (4) the number of shares of Pollo Tropical
Stock issued upon the conversion, exchange or exercise of any Convertible
Securities issued by the Corporation as a dividend or other distribution
including in connection with any reclassification or exchange of shares) to
holders of Carrols Stock, or (5) the number (rounded, if necessary, to the
nearest whole number) equal to the quotient of (a) the aggregate Fair Value as
of the date of contribution of properties or assets (including cash) transferred
from the Pollo Tropical Group to the Carrols Group in consideration for a
reduction in the Number of Shares Issuable with Respect to the Inter-Group
Interest and (b) the Fair Value of one share of Pollo Tropical Stock as of the
date of such transfer; and (iii) increased by (1) the number of outstanding
shares of Pollo Tropical Stock repurchased by the Corporation for consideration
that is attributed as provided by paragraph B(7)(c) of this Article to the
Carrols Group and (2) the number (rounded, if necessary, to the nearest whole
number) equal to the quotient of (a) the Fair Value of properties or assets
(including cash) theretofore attributed as provided by paragraph B(7)(c) of this
Article to the Carrols Group that are contributed to the Pollo Tropical Group in
consideration of an increase in the Number of Shares Issuable with Respect to
the Inter-Group Interest, and (b) the Fair Value of one share of Pollo Tropical
Stock as of the date of such contribution and (3) the number of shares of Pollo
Tropical Stock into or for which Convertible Securities are deemed converted,
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exchanged or exercised pursuant to the penultimate sentence of the definition of
"Carrols Group" in paragraph B(7)(c) of this Article.
(p) "Outstanding Pollo Tropical Fraction", as of any date, means the
fraction (which may simplify to 1/1) the numerator of which shall be the number
of shares of Pollo Tropical Stock outstanding on such date and the denominator
of which shall be the sum of the number of shares of Pollo Tropical Stock
outstanding on such date and the Number of Shares Issuable with Respect to the
Inter-Group Interest on such date. A statement setting forth the Outstanding
Pollo Tropical Fraction as of the record date for the payment of any dividend or
distribution on either series of the Common Stock and as of the end of each
fiscal quarter of the Corporation shall be filed by the Secretary of the
Corporation in the records of the actions of the Board of Directors not later
than ten days after such date.
(q) "Pollo Tropical Available Dividend Amount" as of any date shall mean,
with respect to the Pollo Tropical Group, the product of the Outstanding Pollo
Tropical Fraction and either (a) the excess of (i) an amount equal to the total
assets attributed to the Pollo Tropical Group less the total liabilities (not
including preferred stock) attributed to the Pollo Tropical Group as of such
date over (ii) the aggregate par value of, or any greater amount determined to
be capital in respect of, all outstanding shares of Pollo Tropical Stock and to
the extent applicable, each class or series capital stock attributed to the
Pollo Tropical Group or (b) in case there is no such excess, an amount equal to
Pollo Tropical Net Earnings (Loss) (if positive) for the fiscal year in which
such date occurs and/or the preceding fiscal year. The Pollo Tropical Available
Dividend Amount is intended to be similar to an amount equal to the product of
the Outstanding Pollo Tropical Fraction and the amount that would be legally
available for the payment of dividends on shares of Pollo Tropical Stock under
the DGCL if the Pollo Tropical Group was a separate Delaware corporation.
(r) "Pollo Tropical Group" shall mean, as of any date:
(i) all businesses, assets and liabilities of each of Pollo
Franchise, Inc., a Florida corporation and Pollo Operations, Inc. a Florida
corporation (the "Pollo Tropical Group Companies") as of the date of the
first issuance of Pollo Tropical Stock;
(ii) all assets and liabilities of the Corporation and its
subsidiaries attributed by the Board of Directors to the Pollo Tropical
Group, whether or not such assets or liabilities are or were also assets
and liabilities of any of the Pollo Tropical Group Companies;
(iii) all properties and assets transferred to the Pollo Tropical
Group from the Carrols Group (other than a transaction pursuant to
paragraph B(7)(r)(iv) of this Article) pursuant to transactions in the
ordinary course of business of both the Carrols Group and the Pollo
Tropical Group or otherwise as the Board of Directors may have directed as
permitted by this Article;
(iv) all properties and assets transferred to the Pollo Tropical
Group from the Carrols Group in connection with an increase in the Number
of Shares Issuable with respect to the Inter-Group Interest; and
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(v) the interest of the Corporation or any of its subsidiaries in
any business or asset acquired and any liabilities assumed by the
Corporation or any of its subsidiaries outside of the ordinary course of
business and attributed to the Pollo Tropical Group, as determined by the
Board of Directors as contemplated by paragraph B(6)(a)(i) of this Article;
provided, that (1) from and after the payment date of any dividend or other
distribution with respect to shares of Pollo Tropical Stock (other than a
dividend or other distribution payable in shares of Pollo Tropical Stock,
with respect to which adjustment shall be made as provided in paragraph
B(7)(o)(i) of this Article, or in securities of the Corporation attributed
to the Pollo Tropical Group, for which provision shall be made as set forth
in clause (2) of this proviso), the Pollo Tropical Group shall no longer
include an amount of assets or properties previously attributed to the
Pollo Tropical Group of the same kind as so paid in such dividend or other
distribution with respect of shares of Pollo Tropical Stock as have a Fair
Value on the record date for such dividend or distribution equal to the
product of (a) the Fair Value on such record date of the aggregate of such
dividend or distribution to holders of shares of Pollo Tropical Stock
declared and (b) a fraction the numerator of which is equal to the
Inter-Group Interest Fraction in effect on the record date for such
dividend or distribution and the denominator of which is equal to the
Outstanding Pollo Tropical Fraction in effect on the record date for such
dividend or distribution, (2) if the Corporation shall pay a dividend or
make some other distribution with respect to shares of Pollo Tropical Stock
payable in securities of the Corporation that are attributed to the Pollo
Tropical Group for purposes of this Article (other than Pollo Tropical
Stock), there shall be excluded from the Pollo Tropical Group an interest
in the Pollo Tropical Group equivalent to the number or amount of such
securities that is equal to the product of the number or amount of
securities so distributed to holders of Pollo Tropical Stock and the
fraction specified in clause 1(b) of this proviso (determined as of the
record date for such distribution) (and such interest in the Pollo Tropical
Group shall be attributed to the Carrols Group) and, to the extent interest
is or dividends are paid on the securities so distributed, the Pollo
Tropical Group shall no longer include a corresponding ratable amount of
the kind of assets paid as such interest or dividends as would have been
paid in respect of the securities equivalent to such interest in the Pollo
Tropical Group deemed held by the Carrols Group if the securities
equivalent to such interest were outstanding (and in such eventuality such
assets as are no longer included in the Pollo Tropical Group shall be
attributed to the Carrols Group) and (3) from and after any transfer of any
assets or properties from the Pollo Tropical Group to the Carrols Group,
the Pollo Tropical Group shall no longer include such assets or properties
so contributed or transferred. The Corporation may also, to the extent a
dividend or distribution on the Pollo Tropical Stock has been paid in
Convertible Securities that are convertible into or exchangeable or
exercisable for Pollo Tropical Stock, cause such Convertible Securities as
are deemed to be held by the Carrols Group in accordance with the third to
last sentence of paragraph B(7)(c) of this Article and clause (2) of the
proviso to the immediately preceding sentence to be deemed to be converted,
exchanged or exercised as provided in the penultimate sentence of paragraph
B(7)(c) of this Article, in
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which case such Convertible Securities shall no longer be deemed to be held
by the Carrols Group.
(s) "Pollo Tropical Net Earnings (Loss)", for any period through any date,
shall mean the net earnings or loss of the Pollo Tropical Group for such period
(or in respect of fiscal periods of the Corporation commencing prior to the date
of the first issuance of Pollo Tropical Stock, the pro forma net earnings or
loss of the Pollo Tropical Group for such period as if such date had been the
first day of such period) determined in accordance with generally accepted
accounting principles in effect at such time, reflecting income and expense of
the Corporation attributed to the Pollo Tropical Group on a basis substantially
consistent with attributions of income and expense made in the calculation of
the Carrols Net Earnings (Loss), including, without limitation, corporate
administrative costs, net interest and other financial costs and income taxes.
(t) "Publicly Traded" with respect to any security shall mean (i)
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(or any successor provision of law), and (ii) listed for trading on the New York
Stock Exchange or the American Stock Exchange (or any national securities
exchange registered under Section 7 of the Securities Exchange Act of 1934, as
amended (or any successor provision of law), that is the successor to either
such exchange) or listed on The Nasdaq Stock Market (or any successor market
system).
(u) "Redemption Date" shall mean the date fixed by the Board of Directors
as the effective date for a redemption of shares of either series of the Common
Stock, as set forth in a notice to holders thereof required pursuant to
paragraphs B(5)(d)(iii), (iv) or (vi) of this Article.
C. Redesignation of Existing Common Stock. As of the effective date of this
--------------------------------------
Certificate of Amendment to the Restated Certificate of Incorporation and
without any further action on the part of the Corporation or its shareholders,
each share of the Common Stock then issued shall automatically be redesignated,
changed and converted into one fully paid and nonassessable share of Carrols
Stock.
D. Preferred Stock. Shares of Preferred Stock may be issued from time to time
---------------
in one or more series, and the Board of Directors of the Corporation is hereby
authorized, subject to the limitations provided by law, to establish and
designate one or more series of Preferred Stock, to fix the number of shares
constituting each series, and to fix the designation, powers, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of each series and the variations and the
relative rights, preferences and limitations as between series, and to increase
and to decrease the number of shares constituting each series. The authority of
the Board of Directors of the Corporation with respect to each series shall
include, but shall not be limited to, the authority to determine the following:
(a) The designation of such series, which may be by distinguishing
number or letter;
(b) The number of shares initially constituting such series;
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(c) The increase, and the decrease to a number not less than the
number of the then outstanding shares of such series, of the number of
shares constituting such series theretofore fixed;
(d) The rate or rates, and the conditions upon and the times at
which dividends on the shares of such series shall be paid, the preference
or relation which such dividends shall bear to the dividends payable on any
other class or classes or on any other series of stock of the Corporation,
and whether or not such dividends shall be cumulative, and, if such
dividends shall be cumulative, the date or dates from and after which they
shall accumulate;
(e) Whether or not the shares of such series shall be redeemable
and, if such shares shall be redeemable, the terms and conditions of such
redemption, including, but not limited to, the date or dates upon or after
which such shares shall be redeemable and the amount per share which shall
be payable upon such redemption, which amount may vary under different
conditions and at different redemption dates;
(f) The rights to which the holders of the shares of such series
shall be entitled upon the voluntary or involuntary liquidation,
dissolution or winding up of, or upon any distribution of the assets of,
the Corporation, which rights may be different in the case of a voluntary
liquidation, dissolution or winding up than in the case of such an
involuntary event;
(g) Whether or not the shares of such series shall have voting
rights, in addition to the voting rights provided by law and, if such
shares shall have such voting rights, the terms and conditions thereof,
including, but not limited to, the right of the holders of such shares to
vote as a separate class either alone or with the holders of shares of one
or more other series of Preferred Stock and the right to have more than one
vote per share;
(h) Whether or not a sinking or a purchase fund shall be provided
for the redemption or purchase of the shares of such series and, if such a
sinking fund or purchase fund shall be provided, the terms and conditions
thereof;
(i) Whether or not the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes or any
other series of the same or any other class or classes of stock or any
other security of the Corporation or any other entity and, if provision be
made for conversion or exchange, the terms and conditions of conversion or
exchange, including, but not limited to, any provision for the adjustment
of the conversion or exchange rate or price; and
(j) Any other relative rights, preferences and limitations.
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IN WITNESS WHEREOF, said CARROLS HOLDINGS CORPORATION has caused this
Certificate to be signed by Alan Vituli, its Chairman and Chief Executive
Officer this 1/st/ day of October, 1999.
CARROLS HOLDINGS CORPORATION
By: /s/ Alan Vituli
------------------------------------
Alan Vituli,
Chairman and Chief Executive Officer
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EXHIBIT 10.1
CARROLS HOLDINGS CORPORATION
1998 POLLO TROPICAL 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 Participants' interests with that of the
Company's shareholders.
2. Definitions
As used in the Plan, the following words shall have the following meanings:
"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.
"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.
"Cause" has the meaning determined by the Committee and set forth in the
applicable Participant's Award Agreement.
"Carrols Stock" means Carrols stock, par value $.01 per share, of the
Company, which is a series of common stock of the Company.
"Certificate of Amendment" means the Certificate of Amendment to the
Restated Certificate of Incorporation of the Company, filed with the
Secretary of State of the State of Delaware on November 3, 1999, as amended
from time to time.
"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 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 Company's then outstanding shares of common stock or
the
<PAGE>
combined voting power of the Company's then outstanding
voting securities entitled to vote generally in the election of
directors; or
(b)(1) Individuals who are elected as members of the 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 the Plan, considered as though such person were a
member of the Incumbent Board; or
(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; or
(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 a Sale of Company or a Sale of the Pollo Tropical Group; or
(d) The Company ceases to own at least 50 percent of the Carrols
Corporation.
(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.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Compensation Committee of the Board or, if no
Committee shall have been appointed, the full Board.
"Employee" means any officer or other employee of the Company or any
Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Fair Market Value" as of any date:
2
<PAGE>
(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 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.
"Immediate Family" means an individual's spouse and descendants (whether
natural or adopted) and any trust or partnership solely for the benefit of
the individual and/or the individual's spouse and/or descendants.
"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.
"Independent Third Party" means any Person who, immediately prior to a
contemplated transaction, does not own in excess of 5% of the Carrols 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.
"Nonqualified Stock Option" means an option that is not intended to be nor
designated as an Incentive Stock Option.
"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.
"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.
"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
3
<PAGE>
organization and a governmental entity or any department, agency or
political subdivision thereof.
"Pollo Tropical Group" has the meaning set forth in the Certificate of
Amendment.
"Plan" means this Carrols Holdings Corporation 1998 Pollo Tropical Long-
Term Incentive Plan, as amended from time to time.
"Qualified Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of 1933 of shares of Carrols
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).
"Sale of the Company" means the sale of the Company to an Independent Third
Party or affiliate group of Independent Third Parties pursuant to which
such party or parties acquire (a) capital stock of the Company possessing
the voting power to elect a majority of the Company's Board (whether by
merger, consolidation or sale or transfer of the Company's capital stock)
or (b) all or substantially all of the Company's assets determined on a
consolidated basis.
"Sale of the Pollo Tropical Group" means the sale by the Company of the
Pollo Tropical Group to an Independent Third Party or affiliate group of
Independent Third Parties pursuant to which such party or parties acquire
(a) all or substantially all of the assets of the Pollo Tropical Group
determined on a consolidated basis or (b) in the event all of the assets
and liabilities of the Pollo Tropical Group are held directly or indirectly
by a Subsidiary, capital stock of the Subsidiary possessing the voting
power to elect a majority of the Subsidiary's Board (whether by merger,
consolidation or sale or transfer of the Subsidiary's capital stock).
"Stock" or "Share" means the series of common stock, par value $.01 per
share, of the Company that has been designated as Pollo Tropical Stock
under the Certificate of Amendment, which may be authorized but unissued or
issued and reacquired.
"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 be intended to 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.
4
<PAGE>
(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 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 a
Participant 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
5
<PAGE>
Nonqualified Stock Options.
(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 exercise 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 for Stock Options granted
pursuant to Paragraphs 6(a) and 6(b) shall be made (i) in cash, (ii)
by delivering shares of Stock already owned by the Participant, or
(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 or (iv) by a combination of any of the
foregoing, in accordance with the terms of the Plan, the Award
Agreement, and any other applicable guidelines of the Committee. The
terms of the 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 the 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.
(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 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 the 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.
6
<PAGE>
(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 that shall be specified
by the Committee, and may relate to the performance of the Company
or the Pollo Tropical Group 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 specified
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 of Pollo Tropical Stock available for Awards
under the Plan shall be 100,000 or, if greater, such number of
Shares as approved by the Committee. The Shares available for Awards
under the 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 75,000 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.
7
<PAGE>
(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 the 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, in 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.
(f) Except as otherwise provided in this Paragraph 7, no Award may be
sold, transferred, assigned or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution, and
shall be exercisable during a Participant's lifetime only by the
Participant or the Participant's legal representative. The
Participant may, if permitted by the Committee, transfer the Award,
other than Incentive Stock Options, without payment of
consideration, to a member of Participant's Immediate Family. Any
attempt at assignment, transfer, pledge or disposition of the Award
contrary to the provisions hereof or the levy of any execution,
attachment or similar process upon the Award other than as expressly
permitted in this Paragraph 6 shall be null and void and without
effect.
(g) No holder of 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 the Shares (a "Transfer"), except pursuant to a Public
--------
Sale or an Approved Sale (an "Exempt Transfer") or pursuant to this
---------------
Paragraph 7; provided that in no event shall any Transfer of Shares
pursuant to this Paragraph 7 be made for any consideration other
than cash payable upon consummation of such Transfer or in
installments over time. For purposes hereof, "Public Sale" means any
-----------
sale of Shares to the public pursuant to an offering registered
under the Securities Act of 1933, as amended.
(h) Prior to making any Transfer other than an Exempt Transfer, any
holder of Shares intending to make such a Transfer (the
"Transferring Stockholder") shall deliver written notice (the "Sale
------------------------ ----
Notice") to the Company. 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, unless the
parties to the Transfer have been finally determined pursuant to
this Paragraph 6 prior to the expiration of such 45-day period.
(i) 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 within 30 days after the
Sale Notice has been delivered to the Company. If the Company
8
<PAGE>
has elected to purchase the Specified Shares, the purchase of such
Specified Shares shall be consummated as soon as is practicable after
the delivery of the election notice to the Transferring Stockholder.
If the Company has not elected to purchase all of the Specified
Shares, the Transferring Stockholder may transfer the 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 pursuant to this Paragraph 7 prior to any
subsequent Transfer.
(j) The restrictions set forth in this Paragraph 7 shall not apply with
respect to any Transfer of Shares by any Person (i) in the case of any
individual, pursuant to applicable laws of descent and distributions
or among such individual's Immediate Family 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 7 shall continue to be
applicable to the Shares after any such Transfer. Notwithstanding the
foregoing, no party hereto shall avoid the provisions of the Plan by
making one or more transfers to one or more Permitted Transferees and
then disposing of all or any portion of such party's interest in any
such Permitted Transferee.
(k) The restrictions on the Transfer of Shares set forth in this Paragraph
7 shall continue with respect to each Share until the date on which
such Share has been transferred in a Public Sale or an Approved Sale.
(l) No grant or Award related payout under the Plan shall be deemed
compensation for purposes of computing benefits or contributions under
any retirement plan of the Company or any Subsidiary 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.
(m) No benefit or promise under the Plan shall be secured by any specific
assets of the Company or any Subsidiary, nor shall any assets of the
Company or any Subsidiary be designated as attributable or allocated
to the satisfaction of the Company's obligations under the Plan.
(n) Upon the conversion of Shares in connection with a public offering of
the Company's securities, other than a Qualified Public Offering, the
Participant must execute, become a party to and agree to be bound by
the Company's Stockholder's Agreement dated March 27, 1997 by and
among the Company, Madison Dearborn Capital Partners, L.P., Madison
Dearborn Capital Partners II, L.P., Atlantic Restaurants, Inc., Alan
Vituli and the Management Investors.
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 20% of the Shares commencing on the
first anniversary of the date of grant, with an additional 20%
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.
9
<PAGE>
(c) Except as otherwise provided by the Committee, if a Participant's
employment with the Company, or where appropriate, 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.
(d) Except as otherwise provided by the Committee, in the event that a
Participant ceases to be employed by the Company or any of its
Subsidiaries as a result of the Participant's termination for Cause
(the "Termination"), any and all Shares which the Participant has
-----------
acquired upon the exercise of the Stock Options (the "Repurchase
----------
Shares"), shall be subject to repurchase (the "Repurchase Option") by
------ -----------------
the Company as follows:
(i) The purchase price for each Repurchase Share shall be the
lesser of (1) the exercise price paid for such Repurchase Share
(as proportionately adjusted for all subsequent stock splits,
stock dividends and other recapitalizations) and (2) the Fair
Market Value for such Repurchase Share.
(ii) 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.
(iii) The closing of the purchase of the Repurchase Shares 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 5 days after the delivery of such notice. The Company
shall pay for the Repurchase Shares by delivery of a check or
wire transfer of funds. The Company shall be entitled to receive
from the Participant 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).
(iv) Notwithstanding anything to the contrary contained in the
Plan, 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 herein shall be suspended, and
the Company may make such repurchases as soon as it is permitted
to do so under such restrictions.
10
<PAGE>
9. Dividends and Dividend Equivalents
(a) 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.
(b) In the event that any properties or assets attributed to the Pollo
Tropical Group (the "Pollo Transferred Property") are transferred (the
--------------------------
"Pollo Property Transfer") to the Carrols Group from the Pollo
-----------------------
Tropical Group (other than in connection with (i) a decrease in the
Number of Shares Issuable with Respect to the Inter-Group Interest (as
defined in the Certificate of Amendment), (ii) a dividend or
distribution on shares of Pollo Tropical Stock or (iii) all sale-
leaseback transactions with respect to real property of the Pollo
Tropical Group consummated prior to December 31, 1998), an amount
shall be credited to an account established by the Committee under the
Plan in the name of the Participant if the Participant is holding
unexercised Stock Options (the "Individual Account") at the time of
------------------
such Pollo Property Transfer equal to the product of (x) the Fair
Value (as defined in the Certificate of Amendment) of the Pollo
Transferred Property on the date of such Pollo Property Transfer and
(y) a fraction, the numerator of which is equal to the number of
Shares issuable upon exercise of the Participant's unexercised Stock
Options, and the denominator of which is equal to (1) the Number of
Shares Issuable with Respect to the Inter-Group Interest plus (2) the
number of Shares currently outstanding.
(c) In the event that any properties or assets attributed to the Carrols
Group (the "Carrols Transferred Property") are transferred (the
----------------------------
"Carrols Property Transfer") to the Pollo Tropical Group from the
-------------------------
Carrols Group (other than in connection with an increase in the Number
of Shares Issuable with Respect to the Inter-Group Interest), an
amount shall be deducted from, or debited to, the Individual Account
at the time of such Carrols Property Transfer equal to the product of
(i) the Fair Value (as defined in the Certificate of Amendment) of the
Carrols Transferred Property on the date of such Carrols Property
Transfer and (ii) a fraction, the numerator of which is equal to the
number of Shares issuable upon exercise of a Participant's unexercised
Stock Options, and the denominator of which is equal to (x) the Number
of Shares Issuable with Respect to the Inter-Group Interest plus (y)
the number of Shares currently outstanding.
(d) The amount (as such amount may be adjusted from time to time pursuant
to Paragraphs 9(b) and 9(c), the "Participant Amount") maintained in a
------------------
Participant's Individual Account (whether such amount is a positive or
negative balance) will be applied (as provided in Paragraph 9(e)) only
upon the (i) exchange of a Participant's Stock Options or (ii)
exercise by a Participant of any of his or her Stock Options in the
event (x) of a Change of Control, (y) that all of the properties and
assets attributed to the Pollo Tropical Group are transferred to a
wholly owned subsidiary of the Company and the Shares and/or Stock
Options are exchanged for shares of the capital stock of such
subsidiary and/or options to purchase shares of the capital stock of
such subsidiary or (z) of a firm commitment initial public offering
relating to the Carrols Stock and the Shares are exchanged for shares
of Carrols Stock (each, a "Triggering Event").
11
<PAGE>
(e) In the event (i) a Participant is entitled to receive consideration
(whether in the form of cash, property or other securities) upon the
consummation of a Triggering Event (as a result of the exercise of a
Participant's Stock Options) or (ii) a Participant's Stock Options to
purchase Shares are exchanged for options to purchase another security
upon the consummation of a Triggering Event, the aggregate value of
either the consideration per share to be received by a Participant as
a result of such Triggering Event (whether such consideration is
payable in cash, property or securities) or the securities underlying
the options which are issued or exchanged for a Participant's Stock
Options as a result of such Triggering Event, as the case may be,
shall be increased (where the Participant Amount is a positive number)
or decreased (where the Participant Amount is a negative number) by an
amount equal to the quotient of (x) the Participant Amount and (y) the
number of shares issuable upon the exercise of the outstanding Stock
Options, less (in the event the Exercise Price is not paid by the
Participant) the Exercise Price per share payable upon exercise of
such Stock Options.
(f) In the event a Participant's Stock Options expire or terminate, the
Participant Amount shall be either reduced (where the Participant
Amount is a positive number) or increased (where the Participant
Amount is a negative number), as the case may be, by an amount equal
to the product of (1) the Participant Amount and (2) a fraction, the
numerator of which is equal to the number of Shares which would have
been issuable upon the exercise of such expired or terminated Stock
Options, and the denominator of which is equal to the number of Shares
issuable upon exercise of all of the Participant's Stock Options
(including for such calculation the Shares which would have been
issuable upon the exercise of the expired or terminated Stock
Options). Other than as provided in this Paragraph 9, the Participant
shall have no rights whatsoever to receive the Participant Amount.
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
(a) In the event that a dividend shall be declared upon shares of Stock
that is payable in shares of Stock, the number of shares of Stock then
subject to any Award, the number of shares of Stock reserved for
issuance in accordance with the provisions of the Plan but not yet
covered by an Award and the number of shares set forth in Paragraph
7(a) shall be adjusted by adding to each share the number of shares
which would be distributable thereon if such shares had been
outstanding on the date fixed for determining the stockholders
entitled to receive such dividend.
(b) In the event that the outstanding shares of Stock shall be changed
into or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation, whether
through reorganization, recapitalization, stock split-up, combination
of shares, sale of assets, merger or consolidation, then, there shall
be substituted for each share of Stock then subject
12
<PAGE>
to any Award, for each share of Stock reserved for issuance in
accordance with the provisions of the Plan but not yet covered by an
Award and for each share of Stock referred to in Paragraph 7(a), the
number and kind of shares of stock or other securities into which each
outstanding share of Stock shall be so changed or for which each such
share shall be exchanged.
(c) In the event that there shall be any change, other than as specified
in this Paragraph 11, in the number or kind of outstanding shares of
Stock, or of any stock or other securities into which Stock shall have
been changed into, or for which it shall have been exchanged, then, if
the Committee shall, in its sole discretion, determine that such
change equitably requires an adjustment in the number or kind of
shares then subject to any Award, the number or kind of shares
reserved for issuance in accordance with the provisions of the Plan
but not yet covered by an Award and the number or kind of shares
referred to in Paragraph 7(a), such adjustment shall be made by the
Committee and shall be effective and binding for all purposes of the
Plan and of Awards granted in accordance with the provisions of the
Plan.
(d) In the case of any substitution or adjustment in accordance with the
provisions of this Paragraph 11, the exercise price payable for each
share of Stock issuable under the Stock Option prior to such
substitution or adjustment shall be the exercise price for all shares
of stock or other securities which shall have been substituted for
such share or to which such share shall have been adjusted in
accordance with the provisions of this Paragraph 11.
(e) No adjustment or substitution provided for in this Paragraph 11 shall
require the Company to sell a fractional share under any Award. Any
fractional share resulting from an adjustment or substitution provided
for in this Paragraph 11 shall be rounded up to the nearest whole
share.
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 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; and
(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 a holder 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. Notwithstanding the foregoing, to the extent the Stock Options and
Stock Appreciation Rights are not
13
<PAGE>
exercised prior to or exchanged simultaneously with the consummation of
such Approved Sale in accordance with provisions (i) or (ii) herein, the
Stock Options and Stock Appreciation Rights shall be canceled.
13. Sale of the Company or Sale of the Pollo Tropical Group
(a) If (i) the Board and the holders of a majority of the Carrols Stock
approve a Sale of the Company or (ii) the Board and, if required by
applicable law, the holders of a majority of the Carrols Stock approve
a Sale of the Pollo Tropical Group (each an "Approved Sale"), the
-------------
holders of Stock shall, if required by applicable law, consent to and
raise no objections against such Approved Sale and if such Approved
Sale is structured as a sale of capital stock, the holders of Stock
shall agree to sell their Stock on the terms and conditions approved
by the Board and, if required, the holders of a majority of the
Carrols Stock. The holders of Stock shall take all necessary and
desirable actions in connection with the consummation of an Approved
Sale of the Company or an Approved Sale of the Pollo Tropical Group.
Notwithstanding the foregoing, in the event that the consideration to
be received by the holders of Stock in connection with an Approved
Sale shall include either (x) 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 (y)
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 or an Approved Sale of the Pollo Tropical Group is
subject to the satisfaction of the condition that, upon the
consummation of such 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 enters into any negotiation or transaction involving
the issuance of securities of another party to the holders of the
Company's securities 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.
14
<PAGE>
(e) The provisions of this Paragraph 13 shall terminate upon the closing
of a Qualified Public Offering.
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 the Plan provided that, 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 the
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.
(c) Notwithstanding anything herein to the contrary, in the event that the
Committee, in its sole discretion, determines that either (i) the
grant of an Award or (ii) the issuance of Stock in connection with an
Award hereunder, would result in the Company or any of its
Subsidiaries recognizing gain for federal or state income tax
purposes, the Committee shall have the right, in its sole discretion,
to amend, terminate, suspend or otherwise modify the Plan or any Award
hereunder in whole or in part in order to limit or eliminate such
adverse tax effect on the Company or any of its Subsidiaries;
provided, however, that the Committee shall in good faith use its best
efforts to put Participants in substantially the same economic
position as they would have been in had the provisions of this
subsection not been applicable.
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
15
<PAGE>
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 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, as amended 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, its successors and
assigns and all transferees of Awards and/or Shares hereunder.
19. Requirement 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 July 20, 1998
and shall terminate ten years later, subject to such earlier termination by
the Committee pursuant to Paragraph 14.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains Summary Financial Information extracted from the
Quarterly Report for the 9 months ended September 30, 1999 of Carrols
Corporation and is qualified in its entirety by reference to such financial
statement.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,089,000
<SECURITIES> 0
<RECEIVABLES> 221,000
<ALLOWANCES> 56,000
<INVENTORY> 3,563,000
<CURRENT-ASSETS> 12,863,000
<PP&E> 200,663,000
<DEPRECIATION> (88,723,000)
<TOTAL-ASSETS> 310,399,000
<CURRENT-LIABILITIES> 40,535,000
<BONDS> 240,706,000
0
0
<COMMON> 10
<OTHER-SE> 14,505,000
<TOTAL-LIABILITY-AND-EQUITY> 310,399,000
<SALES> 335,537,000
<TOTAL-REVENUES> 336,369,000
<CGS> 101,814,000
<TOTAL-COSTS> 284,623,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,707,000
<INCOME-PRETAX> 3,194,000
<INCOME-TAX> 1,747,000
<INCOME-CONTINUING> 1,447,000
<DISCONTINUED> 0
<EXTRAORDINARY> 940,000
<CHANGES> 0
<NET-INCOME> 507,000
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
