UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For Fiscal Year Ended December 29, 1996
Commission File Number 1-6553
CARROLS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 16-0958146
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
968 JAMES STREET, SYRACUSE, NEW YORK 13203
- --------------------------------------- --------------------
(Address of principal executive office) (Zip Code)
(315) 424-0513
-------------------------------
(Registrant's telephone number, including area code)
|
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _ x No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ('SS'229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant: NO VOTING STOCK IS HELD BY NON-AFFILIATES.
The number of shares outstanding of each of the Registrant's classes of common stock, as of March 15, 1997: 10.
Documents Incorporated by Reference: NONE.
The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. All references herein to the fiscal years ended January 1, 1995, December 31, 1995 and December 29, 1996 will hereinafter be referred to as the fiscal years ended December 31, 1994, 1995 and 1996, respectively.
PART I
ITEM 1. BUSINESS
RECENT DEVELOPMENTS
ATLANTIC ACQUISITION
Acquisition. On April 3, 1996, pursuant to the Securities Purchase Agreement (the "Atlantic Agreement"), dated as of March 6, 1996, among Carrols Corporation (the "Company" or "Carrols"), Carrols Holdings Corporation ("Holdings"), the stockholders of Holdings and Atlantic Restaurants, Inc. ("Atlantic"), Atlantic acquired Holdings, the owner of 100% of the outstanding capital stock of the Company (the "Atlantic Acquisition"). Pursuant to the Atlantic Agreement, Atlantic acquired all of the outstanding voting capital stock of Holdings for an aggregate purchase price of approximately $84 million in cash.
Atlantic. Atlantic is an indirect wholly-owned subsidiary of Bahrain International Bank (E.C.), a Bahrain exempt joint stock company ("BIB").
Redemption of Notes. The Atlantic Acquisition constituted a "change of control" under the Indenture (the "Indenture"), dated as of August 17, 1993, among the Company, Holdings and Marine Midland Bank, N.A., as trustee, governing Carrols' $110 million aggregate principal amount (currently $107.7 million outstanding) of 11-1/2% Senior Notes Due 2003 (the "Notes"). In accordance with the terms and conditions of the Indenture, the Company offered to each holder of the Notes the right to require the Company to repurchase all or any part of such holder's Notes at a repurchase price in cash equal to 101% of the principal amount of the Notes being repurchased (plus accrued and unpaid interest, if any). The holders of $838,000 in principal amount of Notes redeemed their Notes pursuant to such offer.
Employment Agreements. In connection with the Atlantic Acquisition, the Company entered into Amended and Restated Employment Agreements (the "Employment Agreements") with each of Alan Vituli (Chairman of the Board and Chief Executive Officer of the Company) and Daniel T. Accordino (President and Chief Operating Officer of the Company), each as more specifically described below. The Employment Agreements contain terms and conditions substantially similar to Messrs. Vituli's and Accordino's respective previous employment agreements except that, in lieu of the previous stock option plans maintained by Holdings (all of which were terminated in connection with the Atlantic Acquisition), a new stock option plan (the "1996 Plan") was adopted pursuant to which employees of the Company were eligible to be awarded options to purchase up to 9.09% of the outstanding Shares of Common Stock on a fully-diluted basis. Messrs. Vituli and Accordino received, pursuant to the 1996 Plan, 36% and 24%, respectively, of the options (the "Option Agreements") that were available under the 1996 Plan.
Board of Directors. Upon consummation of the Atlantic Acquisition, each of M. Bruce Adelberg, Richard V. Cross and Franklin Glasgall resigned from the Board of Directors of the
Company and of Holdings. Immediately following completion of the Atlantic Acquisition, Robin McIlvenny, David J. Mathies, Jr. and Paul W. Durrant, each an officer of Atlantic or one of its affiliates, were each elected to the five-person Board of Directors of the Company and of Holdings.
Revised and Proposed Credit Facility. In connection with the Atlantic Acquisition, the Company entered into a Seventh Amendment to Third Amended and Restated Loan Security Agreement (the "Loan Amendment"), dated as of April 3, 1996, among Heller Financial, Inc. ("Heller"), Holdings and the Company which provides, among other things, for additional availability under the senior secured revolving credit facility (the "Senior Secured Credit Facility") of the Company to repurchase Notes. The Company and Holdings are presently negotiating the terms of additional financing (the "TCB Refinancing") pursuant to which Texas Commerce Bank National Association ("TCB"), as Administrative Agent for a syndicate of lenders (the "Lenders"), would (i) establish a $25 million Revolving Credit Facility that would replace the current Senior Secured Credit Facility and (ii) establish a $127 million Advance Term Loan ($5 million of which would be used to replace the current $5 million term loan with Heller).
RECAPITALIZATION
On February 20, 1997, the Certificate of Incorporation of Holdings was amended (the "Amendment") such that (i) the 3,146,110 shares of Common Stock held by Atlantic were converted into 850,000 shares of Common Stock, (ii) each of the classes consisting of (a) 882,353 shares of Non-Voting Common Stock of Holdings, (b) 750 shares of Class B 10% Cumulative Redeemable Preferred Stock (Series I) of Holdings, par value $0.01 per share, and (c) 750 shares of Class B 10% Cumulative Redeemable Preferred Stock (Series lI) of Holdings, par value $.01 per share, was canceled and (iii) the outstanding warrants to purchase 488,111 shares of Common Stock were converted into warrants to purchase 131,876 shares of Common Stock. After giving effect to the foregoing, Holdings had 850,000 shares of Common Stock outstanding, all of which were held by Atlantic, and no other voting capital stock outstanding. The descriptions below of the 1996 Plan and the Option Agreements are made after giving effect to the foregoing.
MADISON DEARBORN INVESTMENT
MD Investment. On February 25, 1997, Holdings, Atlantic, Madison
Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P.
(together with Madison Dearborn Capital Partners, L.P., the "MD Investors")
entered into a Stock Purchase Agreement (the "MD Agreement"). Pursuant to the MD
Agreement and subject to certain conditions precedent described below, the MD
Investors will acquire (the "MD Investment") (i) from Holdings 283,334 shares of
Common Stock (the "Holdings Shares") and (ii) from Atlantic 283,333 of the
outstanding shares of Common Stock (the "Atlantic Shares," and, together with
the Holdings Shares, the "MD Shares"). Pursuant to the MD Agreement, certain
members of senior management will purchase, in the aggregate, 10,810 shares of
Common Stock.
The aggregate purchase price for the MD Shares will be approximately $61 million in cash (the "MD Purchase Price"), of which approximately one-half will be paid to Holdings.
Stockholders Agreement. At the closing (the "MD Closing") of the MD Investment, Holdings, Atlantic, the MD Investors, Alan Vituli and certain other members of senior management (collectively the "New Stockholders") will enter into a stockholders agreement (the "Stockholders Agreement"). Pursuant to the Stockholders Agreement, at the MD Closing the New Stockholders will elect a new Board of Directors of Holdings and Holdings will elect a new Board of Directors of
Carrols. Such new board will include three representatives designated by the MD Investors (the "MD Directors"), three representatives designated by Atlantic (the "Atlantic Directors") and two representatives (each of whom shall be executive officers of the Company) designated by Mr. Vituli (the "Management Directors"). The Stockholders Agreement also includes restrictions on the transfer of Common Stock, restrictions on and covenants of Holdings and the provision of preemptive, tag along and drag along rights to the parties thereto.
Conditions to MD Closing. The MD Investment is subject to several conditions customary for comparable transactions and is also subject to the following conditions:
1. The execution and delivery of the Stockholders Agreement by the parties thereto;
2. The execution and delivery by Holdings, Atlantic, the MD Investors and Messrs. Vituli, Accordino and Joseph A. Zirkman (Vice President and General Counsel of the Company) of a registration rights agreement (the "Registration Rights Agreement") granting rights relating to the registration of shares of Common Stock under the Securities Act of 1933, as amended (the "Securities Act");
3. The execution by Holdings and each of Messrs. Vituli and Accordino of new employment agreements (the "New Employment Agreements) providing for a minimum of four year terms of employment for Messrs. Vituli and Accordino;
4. The adoption of the Carrols Holdings Corporation 1996 Long-Term Incentive Plan (the "New 1996 Plan");
5. The execution by Holdings and each of Messrs. Vituli and Accordino of new stock option agreements, pursuant to the New 1996 Plan (collectively, the "New Plan Option Agreements") providing in the aggregate for the purchase of 72,250 shares of Common Stock by them at an exercise price of $101.7646 per share, a portion of which options vest immediately and a portion of which vest over a period of four years;
6. The execution by Holdings and each of Messrs. Vituli, Accordino and Zirkman of new stock option agreements (collectively, the "New Non-Plan Option Agreements") providing in the aggregate for the purchase of 32,427 shares of Common Stock by them at an exercise price of $101.7646 per share, which options vest over a period of five years;
7. The execution and delivery of new financing and related agreements with respect to the TCB Refinancing;
8. Holdings shall have obtained a key-man life insurance policy on the life of Mr. Vituli in the face amount of $10,000,000; and
9. The investment by Messrs. Vituli, Accordino and Zirkman in Holdings through the purchase of 9,827, 860 and 123 shares, respectively, of Common Stock at the cash purchase price of $101.7646 per share.
Prospective Redemption of Notes. The consummation of the MD Investment will constitute a "change of control" under the Indenture. In accordance with the terms and conditions of the Indenture, upon a "change of control", each holder of the Notes will have the right to require that Carrols repurchase all or any part of such holder's Notes at a repurchase price in cash equal to 101% of the principal amount of the Notes being repurchased (plus accrued
interest, if any). See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.
PENDING OMEGA ACQUISITIONS
The Company has entered into (i) a Purchase and Sale Agreement dated as
of January 15, 1997 with Omega Food Services, Inc. ("Omega") and Harold W.
Hobgood, as Omega's agent (the "Omega I Agreement"), pursuant to which the
Company will acquire the assets of 5 Burger King restaurants for an aggregate
purchase price of $5 million (subject to certain adjustments for inventory) and
(ii) a Purchase and Sale Agreement dated as of January 15, 1997 with Omega and
Harold W. Hobgood, as Omega's agent (the "Omega II Agreement"), pursuant to
which the Company will acquire the assets of 18 Burger King restaurants for an
aggregate purchase price of $16 million (subject to certain adjustments for
inventory). In addition, pursuant to the Omega I Agreement and the Omega II
Agreement the Company will purchase, upon their construction, two additional
Burger King restaurants.
* * *
The Atlantic Agreement, the Employment Agreements, the 1996 Plan, the Option Agreements, the Insurance Agreements, the Loan Amendment, the commitment letter describing the proposed TCB Refinancing, the Amendment, the MD Agreement, the Stockholders Agreement, the Registration Rights Agreement, the New Employment Agreements, the New 1996 Plan, the New Plan Option Agreements and the New Non-Plan Option Agreements are included as Exhibits to this Form 10-K and are incorporated by reference herein. The discussions in this Form 10-K of those instruments are qualified in their entirety by reference to those instruments.
HISTORICAL DEVELOPMENT
Carrols was incorporated in 1968 and through 1976 its principal business was the operation of fast food hamburger restaurants under the name Carrols Restaurants and the operation of movie theaters under the name CinemaNational. In 1976, as a result of growing competition from larger and better recognized national fast food restaurant chains, Carrols became a franchisee of BKC and began converting its restaurants into Burger King restaurants and ceased operating and franchising restaurants under the name of Carrols Restaurants. In order to facilitate the financing of the conversion of these restaurants, Carrols disposed of a substantial portion of its movie theater assets.
In 1969, Carrols offered its common stock through an initial public offering. The Company's shares were listed for trading on the New York Stock Exchange in 1983.
The Company was acquired in December 1986 (the "1986 Acquisition") by Holdings, a corporation formed to effect the 1986 Acquisition by Mr. Vituli and other members of the Company's then-current senior management, a private investor group and certain institutional investors. As a result of the 1986 Acquisition, Carrols became a wholly-owned subsidiary of Holdings. In March 1992, Mr. Vituli, who was Chairman of the Board of the Company from the time of the 1986 Acquisition in December 1986, was also elected to serve as Chief Executive Officer of the Company. Mr. Accordino was appointed President of the Company in February 1993. In January 1995, the Company entered into three-year employment agreements, which agreements were amended effective April 3, 1996 pursuant to the Atlantic Acquisition, with each of Messrs. Vituli and Accordino. See "Executive Compensation -- Employment Agreements".
At the time of the 1986 Acquisition, the Company owned 138 Burger King restaurants and a food distribution business. In August 1990, the Company sold its food distribution business to Burger King Distribution Services (BKDS), a division of BKC. Carrols currently purchases substantially all of its requirements for foodstuffs and paper and packaging products from ProSource Services Corporation ("ProSource"), the successor to BKDS, pursuant to a five year supply agreement which expires on March 31, 1999. See "Business--Supplies and Distribution."
Since the 1986 Acquisition, Carrols has expanded its operations from 138 Burger King restaurants to 238 as of March 15, 1997. During this period, Carrols built 38 restaurants, purchased 75 restaurants and disposed of or closed 13 restaurants. See "Business--Restaurant Locations." Since March 1994, the Company has acquired 36 Burger King restaurants through the 1994 acquisitions of 22 Burger King restaurants for an aggregate purchase price of approximately $11.6 million, the 1995 acquisition of one Burger King restaurant, the 1996 acquisitions of 8 Burger King restaurants for an aggregate purchase price of approximately $7.8 million and the 1997 acquisitions of 5 Burger King restaurants for an aggregate purchase price of approximately $3.6 million.
COMPANY OPERATIONS
General. Since 1976, the Company's principal business has been the operation of Burger King restaurants. The Company is the largest independent Burger King franchisee in the United States. As of March 15, 1997, the Company operated, as franchisee, 238 Burger King restaurants, of which 217 are free-standing restaurants and 21 are located in retail shopping centers or specialty stores. Carrols currently operates Burger King restaurants in nine Northeastern and Midwestern states and one Southeastern state.
Carrols' Burger King restaurants are typically open seven days a week from 7:00 a.m. to 11:00 p.m. Substantially all of Carrols' Burger King restaurants offer a breakfast menu and the traditional Burger King menu for lunch and dinner. A standard, free-standing Burger King restaurant building typically has an area of approximately 3,000 square feet with a seating capacity of approximately 90, drive-thru service and adjacent parking areas. Smaller Burger King facilities are utilized in retail shopping centers. In Carrols' free-standing Burger King restaurants, greater than 50% of sales are generally generated through drive-thru service. Carrols leases most of its restaurant properties, although it owns the land and buildings on which 28 of its Burger King restaurants are located. See "Properties."
Burger King. There are approximately 8,700 Burger King restaurants worldwide making BKC the second largest fast food hamburger operation. BKC has been franchising since 1954 and has expanded to locations in all 50 states, the District of Columbia and over 50 foreign countries.
Burger King restaurants are fast food restaurants of distinctive design which serve a limited menu of moderately-priced foods and offer efficient and rapid service. The Company believes that convenience, quality of food, price/value and speed of service are the primary competitive advantages of Burger King restaurants. Burger King restaurants appeal to a broad spectrum of consumers.
Burger King restaurants feature flame-broiled hamburgers, which are an integral part of the Burger King identity, and several widely-known, trademarked products, the most popular being the Whopper'r' sandwich, which is a large, flame-broiled hamburger on a five-inch toasted bun garnished with combinations of mayonnaise, lettuce, onions, pickles and tomatoes. The basic
menu of all Burger King restaurants consists of hamburgers, cheeseburgers, chicken sandwiches and filets, fish sandwiches, french fried potatoes, salads, various breakfast products, shakes, desserts, soft drinks, milk and coffee. From time to time, other promotional items are added to the menu for limited periods. BKC continually seeks to develop new products and concepts as it endeavors to enhance the menu and service of Burger King restaurants.
Franchise Agreements. Each of Carrols' Burger King restaurants operates under a separate Franchise Agreement from BKC. The Franchise Agreements require, among other things, that all restaurants be of standardized design and be operated in a prescribed manner, including utilization of the standard Burger King menu. The Franchise Agreements generally provide for an initial term of 20 years and have an initial fee of $40,000. A Successor Franchise Agreement may be granted by Burger King for an additional 20 year term, provided the restaurant meets the then-current BKC operating standards and the Company is not in default under the relevant Franchise Agreement. Currently, the Successor Franchise Agreement fee is $40,000. In addition to this fee, in order to obtain a Successor Franchise Agreement, a franchisee is typically required to make capital improvements to the subject restaurant to bring the restaurant up to BKC's then-current design standards. The amount of such capital expenditures will vary widely depending upon the magnitude of the required changes and the degree to which the Company has made interim changes to the restaurant. Although the Company estimates that a substantial remodeling can cost in excess of $250,000, the Company's average remodeling cost over the past five years has been approximately $130,000 per restaurant. The Franchise Agreements are non-cancelable except for failure to abide by the terms thereof.
Carrols believes that it enjoys a good relationship with BKC and that it will satisfy BKC's normal Successor Franchise Agreement policies and, accordingly, believes that Successor Franchise Agreements will be granted in due course by BKC at the expiration of its existing Franchise Agreements. Historically, BKC has granted each of the Company's requests for a Successor Franchise Agreement for its restaurants.
In addition to the initial franchise fee, franchisees currently pay to BKC a monthly royalty of 3-1/2% of the gross revenues from their Burger King restaurants. Burger King franchisees currently also contribute 4% of monthly gross revenues from their Burger King restaurants to fund BKC's national and regional advertising. BKC engages in substantial advertising and promotional activities and other efforts to maintain and enhance the nationwide Burger King system. Carrols supplements BKC's marketing with local advertising and promotional campaigns. See "Business--Business Strategy" and "Advertising and Promotion."
The franchisee of a new restaurant must also purchase the requisite equipment, furniture and signage and pay various other costs to open a new Burger King restaurant. The Company estimates that the average initial cost for a standard free-standing restaurant is approximately $240,000 (excluding the cost of the building, land and site improvements). The Company estimates that the aggregate cost of constructing a free-standing restaurant and the cost of land and site improvements varies considerably depending upon building type, land cost and site work, and generally ranges from $650,000 to $1,000,000.
The BKC Franchise Agreements do not grant any franchisees exclusive rights to a defined territory. The Company believes that BKC generally seeks to ensure that newly granted franchises do not materially adversely affect the operations of existing Burger King restaurants.
The Company is required to obtain BKC's consent prior to the acquisition or development of new Burger King restaurants. BKC has the right of first refusal to purchase any Burger King
restaurant which the Company wishes to acquire from other franchisees. In addition, BKC's prior consent is required for the sale by the Company of any of its restaurants. Since the Acquisition, BKC has consented to each of the Company's requests for consent to acquisitions.
Management Structure; Staffing; Training. Substantially all executive management, finance, marketing and operation support functions of the Company are conducted centrally at Carrols' Syracuse, New York headquarters. The Company currently has four vice president-regional directors who are each responsible for the operations of all of Carrols' Burger King restaurants in their respective regions. Three of the regional directors have been employed by Carrols for over 20 years. There are 32 district supervisors who report to the regional directors. Each district supervisor is responsible for the direct supervision of the day-to-day operations of an average of seven restaurants. Typically, district supervisors previously served as restaurant managers at one of Carrols' restaurants. Both regional directors and district supervisors are compensated with a fixed salary plus an incentive bonus based upon the performance of the restaurants under their supervision.
A typical Carrols' Burger King restaurant is staffed with hourly employees who are supervised by a salaried manager and two or three salaried assistant managers.
Carrols provides both classroom and in-restaurant training for its salaried and hourly personnel, in addition to the training programs provided by BKC. Carrols believes that training and management development are integral to its success.
Control Systems. Financial and management control of Carrols' restaurants is facilitated by the use of an integrated computerized back office and point of sale system which electronically retrieves data from each of the Company's restaurants on a daily basis. Sales reports, payroll data, food and labor cost analyses and other operating information for each restaurant are also available daily to the restaurant manager, who is expected to react quickly to trends or situations in his or her restaurant. The district supervisors receive key daily information for all restaurants under their respective control, both on an individual unit and a cumulative basis. Daily information is accumulated into weekly and monthly operating reports covering significant restaurant performance indicators for each restaurant. These reports are monitored at each management level from district supervisor through senior management. Carrols believes that these systems materially enhance its ability to control and manage its restaurant operations.
Factors Affecting the Company's Operations. Carrols' business is affected by various conditions such as automobile usage, inclement weather, gasoline prices and road construction. Weather conditions can be particularly severe in the Northeast where the Company operates a significant number of its Burger King restaurants. Historically, the Company's business has also been affected by changes in local and national economic conditions, demographic trends and consumer spending habits, tastes and concerns about the nutritional quality of fast food.
Site Selection. The Company believes that the location of each of its restaurants is very important to such restaurant's success. Potential new development sites are evaluated based upon accessibility, visibility, costs, surrounding traffic patterns, competition and demographic characteristics. The Company's senior management, based upon analyses prepared by its real estate professionals and its operations personnel, determines the acceptability of all acquisition and new development sites. See "Business--Business Strategy."
RESTAURANT LOCATIONS
The following table sets forth the locations of the 238 Burger King restaurants in Carrols' system at March 15, 1997.
NEW YORK (98) OHIO (68) MAINE (3)
Greater Albany (14) Greater Akron (13) Augusta (1)
Auburn (1) Alliance (2) Bangor (2)
Amsterdam (1) Archbold (1)
Greater Binghamton (6) Ashland (1)
Boonville (1) Bowling Green (3) MASSACHUSETTS (2)
Buffalo (1) Bryan (1)
Catskill (1) Greater Canton (11) North Andover (1)
Cobleskill (1) Greater Cleveland (9) Billerica (1)
Cortland (1) Defiance (1)
Fulton (1) Edon (1)
Glens Falls (2) Findlay (2) NEW JERSEY (2)
Gloversville (2) Fostoria (1)
Hamilton (1) Fremont (1)
Herkimer (1) Hartville (1) Franklin (1)
Hudson (1) Lima (2) Newton (1)
Kingston (3) Mansfield (6)
Middletown (2) Medina (1)
New City (1) Mentor (1) CONNECTICUT (1)
Newburgh (3) New Philadelphia (2)
Niagara Falls (1) Ottawa (1) Westport (1)
Norwich (1) Streetsboro (1)
Oneonta (2) Tiffin (1)
Oswego (1) Van Wert (1) VERMONT (1)
Peekskill (1) Wapakoneta (1)
Plattsburgh (3) Wooster (2) Rutland (1)
Poughkeepsie (2) Wauseon (1)
Port Jarvis (1)
Greater Rochester (14) MICHIGAN (21)
Rome (2)
Greater Syracuse (18) Ann Arbor (3)
Schodack (1) Battle Creek (4)
Greater Utica (4) Brooklyn (1)
Watertown (2) Dearborn (1)
Yorktown Heights (1) Kalamazoo (4)
Jackson (3)
Michigan Center (1)
NORTH CAROLINA (32) Parma (1)
Roseville (2)
Greater Asheville (9) Washtenaw (1)
Durham (7)
Forest City (1)
Havelock (2) PENNSYLVANIA (10)
Hendersonville (2)
Kinston (3) Bradford (1)
Marion (1) East Stroudsburg (1)
Morganton (1) Harrisburg (2)
New Bern (3) Lebanon (1)
Raleigh (2) Reading (4)
Shelby (1) Tamaqua (1)
-9-
|
ADVERTISING AND PROMOTION
As a Burger King franchisee, a significant portion of the Company's
advertising and promotional programs are established and coordinated by BKC
through regional and national advertising campaigns. Carrols supplements BKC's
advertising and promotional activities with local advertising and promotions,
including the purchase of additional television, radio and print advertising.
Carrols also utilizes promotional programs, such as combination meals and
discounted prices, targeted to its customers, thereby enabling Carrols to create
a flexible and directed marketing program.
Most BKC franchisees and BKC-owned restaurants are required to
contribute 4% of their monthly gross revenues from restaurant operations to an
advertising fund, utilized by BKC for its advertising, promotional programs and
public relations activities. BKC's advertising programs consist of national
campaigns supplemented by local advertising. BKC's advertising campaigns are
generally carried on television, radio and in circulated print media (national
and regional newspapers and magazines). Carrols believes that one of the major
advantages of being a Burger King franchisee is the leverage it realizes from
the marketing power of BKC.
SUPPLIES AND DISTRIBUTION
As a Burger King franchisee, Carrols is required to purchase all of its
foodstuffs, paper goods and packaging materials from BKC-approved suppliers.
Other non-food items such as kitchen utensils, equipment maintenance tools and
other supplies may be purchased from any suitable source provided such items
meet BKC product uniformity standards. On April 1, 1994, Carrols entered into a
new supply agreement with its BKC-approved supplier, ProSource. Pursuant to that
agreement, Carrols is required to obtain substantially all of its foodstuffs
(other than bread products), paper goods, promotional premiums and packaging
materials from ProSource. The supply agreement with ProSource is a five-year
agreement which expires on March 31, 1999. The Company believes that ProSource's
services are competitive with alternatives available to the Company. Carrols
purchases its bread products from local bakeries. See "Business--Historical
Development."
There are other BKC-approved supplier/distributors which compete with
ProSource. Carrols believes that it would be able to substitute another supplier
if ProSource were unable, for any reason, or chose not to continue to service
the Company.
All BKC-approved suppliers are required to purchase all foodstuffs and
supplies from BKC-approved manufacturers and purveyors. BKC is responsible for
monitoring quality control and supervision of these manufacturers and purveyors.
See "Business--Quality Assurance."
BKC monitors all BKC-approved manufacturers and purveyors of its
foodstuffs. BKC regularly visits these manufacturers and purveyors to observe
the preparation of foodstuffs and run various tests to ensure that only high
quality foodstuffs are sold to BKC-approved suppliers and distributors. In
addition, BKC coordinates and supervises audits of approved suppliers and
distributors to determine continuing product specification compliance and to
ensure that manufacturing plant and distribution center standards are met.
QUALITY ASSURANCE
All Burger King franchisees, including Carrols, operate subject to a
comprehensive regimen of quality assurance and health standards set by
BKC, as well as standards set by
-10-
|
Federal, state and local governmental laws and regulations. These standards
include food preparation rules regarding, among other things, minimum cooking
temperatures, sanitation and cleanliness. The "conveyor belt" cooking system
utilized in all Burger King restaurants, which is calibrated to carry hamburgers
through the flame broiler at regulated speeds, helps ensure that standardized
cooking times and temperatures are met. In addition, BKC has set maximum time
standards for holding unsold prepared food; for example, unsold sandwiches are
discarded ten minutes after preparation and unsold french fries are discarded
seven minutes after preparation.
Carrols, through its regional directors and district supervisors,
closely supervises the operation of all of its restaurants to help ensure that
Company standards and policies are followed and that product quality, customer
service and cleanliness of the restaurants are maintained. BKC conducts
unscheduled periodic inspections of each Burger King restaurant throughout the
Burger King system.
BUSINESS STRATEGY
The Company's primary business strategy is to expand its operations
through the acquisition and construction of additional Burger King restaurants
while enhancing the quality of operations and competitive position of its
existing Burger King restaurants. Carrols believes the size of the nationwide
Burger King system will continue to present opportunities for selective growth
through acquisitions. In addition, Carrols believes that the number of markets
in which the Company operates will provide opportunities for construction of new
restaurants. The ability of the Company to expand through the acquisition and
construction of additional Burger King restaurants is subject to, among other
things, the availability of financing and the obtaining of consent from BKC.
GOVERNMENT REGULATION
Carrols is subject to various Federal, state and local laws affecting
its business, including various health, sanitation, fire and safety standards.
Newly constructed or remodeled restaurants are subject to state and local
building code and zoning requirements. In connection with the remodeling and
alteration of the Company's restaurants, the Company may be required to expend
funds to meet certain Federal, state and local regulations, including
regulations requiring that remodeled or altered restaurants be handicap
accessible. The Company is also subject to Federal and state environmental
regulations, although such regulations have not had, and are not expected to
have, a material effect on the Company's operations.
The Company is subject to the Fair Labor Standards Act and various state
laws governing such matters as minimum wage requirements, overtime and other
working conditions and citizenship requirements. A significant number of the
Company's food service personnel are paid at rates which may be affected by
changes to the Federal minimum wage. The increase in the Federal minimum wage on
October 1, 1996 had the effect of increasing the Company's average hourly rate
by approximately 2%. The Federal minimum wage is scheduled to increase on
September 1, 1997.
The Company believes that it is operating in substantial compliance with
applicable Federal, state and local laws and regulations governing its
operations.
-11-
|
COMPETITION
The fast food industry is highly competitive. In each of its markets,
Carrols' restaurants compete with a large number of national and regional
restaurant chains, as well as locally-owned restaurants, offering low-priced and
medium-priced fare. Convenience stores, grocery store delicatessens and food
counters, cafeterias and other purveyors of moderately priced and quickly
prepared foods also compete with the Company. In the Company's markets,
McDonald's, Wendy's and Hardee's provide the most significant competition. The
Company's largest competitor is McDonald's. Carrols believes that BKC's national
brand name identification provides a significant competitive advantage in the
fast food business. The Company believes that product quality and taste,
convenience of location, speed of service, menu variety and price are the most
important competitive factors in the fast food restaurant industry.
EMPLOYEES
At December 31, 1996, Carrols employed approximately 8,400 persons;
approximately 100 were administrative personnel and 8,300 were restaurant
operating personnel. None of Carrols' employees are covered by collective
bargaining agreements. Approximately 7,600 of the restaurant operating personnel
at December 31, 1996 were part-time employees. Carrols believes that its
employee relations are satisfactory.
ITEM 2. PROPERTIES
The Company owns the approximately 20,000 square foot building at 968
James Street, Syracuse, New York, in which its executive offices are located.
This building houses all of the Company's administrative operations (except for
those conducted at three small regional offices) and is adequate for future
expansion. In addition to the above, at March 15, 1997 the Company owned or
leased the following properties:
|
Owned Leased Leased
Land; Land; Land;
Owned Owned Leased
Building Building Building Total
-------- -------- -------- -----
Burger King restaurants 28 16 194(a) 238
Excess properties:
Leased to others -- -- 4 4
Available for sale or lease 4 -- -- 4
--- ---- ----- -----
Total properties 32 16 198 246
=== ==== ===== =====
|
(a) Includes 21 restaurants located in mall shopping centers or specialty locations.
Most of the Company's leases are coterminous with the related Franchise Agreements. The Company believes that it generally will be able to renew at commercially reasonable rates the leases whose terms expire prior to the subject Franchise Agreements.
Most leases require the Company, as lessee, to pay utility and water charges, premiums on insurance and real estate taxes. Certain leases also require contingent rentals based upon a percentage of gross sales that exceed specified minimums.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding which, in management's belief, will have a material adverse effect on the Company's results of operations or financial condition, nor to any other pending legal proceedings other than ordinary, routine litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established trading market for the Company's capital stock. Holdings owns 10 shares of common stock of the Company (representing 100% of the capital stock of the Company).
Cash dividends per share were paid during 1995 and 1996 by Carrols to Holdings as follows:
January, 1995 $ 20,000.00 April, 1995 $ 20,000.00 June, 1995 $ 3,672.00 July, 1995 $ 20,000.00 January, 1996 $ 800.00 March, 1996 $ 41,480.00 August, 1996 $ 20,722.40 October, 1996 $ 37,000.38 |
See discussion of dividend restriction in "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."
ITEM 6. SELECTED FINANCIAL DATA
CARROLS CORPORATION AND SUBSIDIARIES-SUMMARY OF SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- ---------- ---------- --------
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks)
(Dollars in thousands except for per share data and restaurants)
OPERATING RESULTS:
Revenues $ 241,125 $ 226,458 $ 204,254 $ 171,634 $ 156,413
Income (loss) before taxes,
extraordinary loss and
cumulative effect of change in
accounting principle 6,283 5,100 (1,666) (4,408) (1,262)
(Provision) benefit for taxes
(3,100) 9,826 (165)
Extraordinary loss on
extinguishment of debt (4,883)
Cumulative effect of change in
accounting for post-
retirement benefits (1,037)
------------ ------------ ------------ -------- ----------
Net income (loss) $ 3,183 $ 14,926 $ (1,831) $(9,291) $ (2,299)
============ ============ ============ ======== ==========
PER SHARE OF COMMON STOCK:
Income (loss) before taxes,
extraordinary loss and
cumulative effect of change in
accounting principle $ 628,300 $ 510,000 $ (166,600) $ (440,800) $ (126,200)
(Provision)
benefit for taxes (310,000) 982,600 (16,500)
Extraordinary loss on
extinguishment of debt (488,300)
Cumulative effect of change in
accounting for post-retirement
benefits (103,700)
------------ ------------ ------------ ----------- ----------
Net income (loss) $ 318,300 $1,492,600 $ (183,100) $ (929,100) $ (229,900)
============ ============ ============ ========== ==========
Dividends Declared $ 100,002 $ 63,672 $ 297,301 $ 273,960 $ 20,010
OTHER DATA:
Total assets $ 138,588 $ 135,064 $ 125,319 $ 119,735 $ 115,900
Long-term debt 118,180 116,375 120,680 114,197 91,245
Capital lease obligations 2,503 3,301 3,966 4,603 5,436
Total long-term debt and capital
lease obligations 120,683 119,676 124,646 118,800 96,681
Common stockholder's deficit (11,662) (12,916) (10,383) (27,208) (22,404)
Burger King restaurants in
operation:
At end of period 232 219 219 195 177
Annual weighted average 225 219 207 185 169
|
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS RESULTS OF OPERATIONS
General. The following table sets forth for the years ended December 31, 1996, 1995 and 1994 certain consolidated financial data for the Company, expressed as a percentage of sales:
PERCENTAGE OF SALES
YEARS ENDED DECEMBER 31
--------------------------
1996 1995 1994
---- ---- ----
Sales 100.0% 100.0% 100.0%
Other income .1 .1 .2
Cost of sales 28.3 28.1 28.4
Restaurant wages and related expenses 29.4 29.1 29.4
Other restaurant operating expenses 20.2 20.2 20.8
Depreciation and amortization 4.6 5.0 5.5
Administrative expenses 4.4 4.7 4.6
Advertising expense 4.5 4.3 4.3
Loss on closing restaurants and other .9
Costs associated with change of control .2
Operating income 8.5 8.7 6.3
Interest expense 5.9 6.4 7.1
Income (loss) before taxes 2.6 2.3 (.9)
(Provision) benefit for taxes (1.3) 4.3 (.1)
|
1996 COMPARED TO 1995
Sales. Sales for the year ended December 31, 1996 increased $14.6 million, or 6.4%, as compared to the year ended December 31, 1995. The Company operated an average of 225 Burger King restaurants during 1996 as compared to an average of 219 for 1995. Average unit sales increased 2.2% during the year ended 1996 as compared to 1995. Sales at comparable restaurants, the 211 restaurants operating for the entirety of the compared periods, increased $7.1 million, or 3.2%. Net restaurant selling prices decreased 3.5% from the prior year due mainly to higher discount promotional activity offset by menu price increases of approximately 1%.
Cost of Sales. Cost of sales (food and paper costs) for the year ended December 31, 1996 increased in dollars due to higher sales. Cost of sales increased as a percentage of sales from 28.1% to 28.3% in 1996 due to the effect of higher discount promotional activity partially offset by certain lower commodity costs especially beef.
Restaurant Wages and Related Expenses. Restaurant wages and related expenses increased from 29.1% of sales to 29.4% of sales when comparing the year ended December 31, 1995 to 1996 due mainly to increased wage rates (including the increase in the minimum wage effective October 1, 1996), the effect of higher discount promotional activity and increased group insurance costs partially offset by reduced unemployment tax rates.
Other Restaurant Operating Expenses. Other restaurant operating expenses increased in dollars due to higher sales and more restaurants while the costs as a percentage of sales remained at 20.2% of sales.
Depreciation and Amortization. Depreciation and amortization decreased $0.2 million from assets becoming fully depreciated offset partially from the additional depreciation and amortization of new restaurants.
Administrative Expenses. Administrative expenses remained relatively stable during the year ended December 31, 1996 as compared to 1995. Some increased costs related to future expansion were offset by the effect of the fixed element of other costs.
Advertising Expense. An increase in advertising payments to Burger King Corporation of $0.6 million (based on sales levels) and the costs associated with increased promotional activity were the principal causes of the increase in advertising expense when comparing 1996 to 1995.
Interest Expense. A reduction in average loan balances was the principal cause for interest expense to decrease $0.3 million for 1996 as compared to 1995.
Costs Associated with Change in Control. Costs of $0.5 million during the year ended December 31, 1996 related to the Atlantic Acquisition during the second quarter of 1996.
Provision for Income Taxes. The higher than anticipated effective tax rate is principally the result of the $.5 million of costs associated with change of control not being deductible.
1995 COMPARED TO 1994
Sales. Sales for the year ended December 31, 1995 increased $22.3 million, or 11.0%, as compared to the year ended December 31, 1994. The Company operated an average of 219 Burger King restaurants for the year ended December 31, 1995 as compared to 207 for 1994. Average unit sales increased 4.9% when comparing 1995 to 1994. Sales at comparable restaurants, the 187 units operating for the entirety of the compared periods, increased $7.1 million, or 3.8%. Net restaurant selling prices increased approximately 0.5% from fewer discount promotions in 1995.
Cost of Sales. Cost of sales (food and paper costs) for the year ended December 31, 1995 increased in dollars due to higher sales. Cost of sales as a percentage of sales decreased 0.3% from 1994 to 1995 as a result of the effect of net restaurant selling prices and decreases in various commodity costs, especially beef, partially offset by the introduction of larger-sized meat patties in certain sandwiches.
Restaurant Wages and Related Expenses. Restaurant wages and related expenses decreased from 29.4% of sales to 29.1% of sales when comparing the year ended December 31, 1994 to 1995. The effect of increased selling prices, lower workers' compensation cost and lower health insurance cost were the principal reasons for the lower percentage in 1995.
Other Restaurant Operating Expenses. Other restaurant operating expenses increased by $3.2 million but decreased 0.6% as a percentage of sales for 1995 compared to 1994. The increase in dollars was caused primarily by expenses associated with the operation of the additional restaurants during the most recent year when compared to the prior year. The effect of higher sales on the fixed element of some expenses like utilities, real estate taxes, linen and some repair and maintenance costs was the primary reason for the decrease in the percentage from 1994 to 1995.
Depreciation and Amortization. Depreciation and amortization remained relatively equal to the year ended December 31, 1994. Additional depreciation and amortization from new and acquired restaurants were offset by assets becoming fully depreciated during the last two years.
Administrative Expenses. Supervision and training expenses associated with operating additional restaurants were the principal cause of increased administrative expenses during the year ended December 31, 1995 as compared to 1994.
Advertising Expense. An increase in advertising payments to Burger King Corporation of $0.9 million (based on sales levels) was the principal cause of the increase in advertising expense when comparing 1995 to 1994.
Interest Expense. Average interest rates and average loan balances remained relatively the same in 1995 and 1994.
(Provision) Benefit for Taxes. The income tax benefit reflected during the twelve months ended December 31, 1995, resulted from the elimination of the valuation allowance for the net deferred income tax asset which arises substantially from the availability of tax loss carryforwards. A review of current and expected future pre-tax earnings based upon historical earnings adjusted for recent acquisitions, led to the conclusion that it is more likely than not that the Company will realize the entire benefit of the net deferred income tax asset at December 31, 1995 of $10,061,000.
LIQUIDITY
The operating activities of the Company during 1996 provided $15.9 million of cash.
Capital spending during 1996 of $23.2 million included $7.9 million for the acquisition of seven restaurants (including real estate for five of the restaurants) in North Carolina and one in New York, $3.4 million for the purchase of real estate for five restaurants operated by the Company and $3.8 million for the construction of five new restaurants, including the real estate for one of the restaurants. The balance of the spending went toward restaurant capital maintenance and remodeling. The Company completed 24 remodelings in 1996 at a cost of $2.5 million principally in conjunction with the renewal of franchises that were scheduled to expire in 1996 through 1998.
During 1996, utilization of the Company's revolving line of credit
portion of the Senior Secured Credit Facility with Heller Financial, Inc.
increased $3.0 million. Sale and leasebacks of five restaurant properties
generated $4.2 million. Dividends of $1.0 million were paid to Holdings for the
payment by Holdings of 5 regular quarterly preferred stock dividends that were
in arrears. The Company redeemed $.8 million of Notes pursuant to the change of
control resulting from the Atlantic Acquisition (see Redemption of Notes in Item
1 - Recent Developments).
At December 31, 1996, the Company had $19.2 million available under its Senior Secured Credit Facility after reserving $1.1 million for a letter of credit guaranteed by the Senior Secured Credit Facility. While interest is accrued monthly, payments of approximately $6.2 million for interest on the Notes are made each February 15th and August 15th thus creating semi-annual cash needs. The Company believes that future cash flow from operations together with funds available under the Senior Secured Credit Facility will be sufficient to meet all interest and principal payments under its indebtedness, fund the maintenance of property and equipment, fund restaurant remodeling required under the Franchise Agreements and meet required payments in respect of Holdings' Preferred Stock (subject to the terms of the Indenture and the Senior Secured Credit Facility) for at least the next twelve months. The balance will provide funds for future acquisitions.
The Company's loan agreements impose limitations on certain restricted payments, which include dividends and preferred stock redemptions. The ability to make such restricted payments is dependent upon either earnings or proceeds from the issuance of new capital stock. As of March 15, 1997 dividends on the Preferred Stock for the last quarter of 1996 of $.2 million and a scheduled mandatory preferred stock redemption of $1.8 million were not paid. As more fully explained in Note 6 to the financial statements, the dividend rate is increased if dividend payments by Holdings are not made within specific time periods.
Consummation of the MD Closing described in "Business--Recent Developments" will constitute a "change of control" under the Indenture governing the Senior Notes. In accordance with the terms and conditions of the Indenture, upon a "change of control", each holder of Senior Notes will have the right to require the Company (within a 30-60 day period, as determined by the Company, following such a change of control) to repurchase all or any part of such holder's Senior Notes at a repurchase price in cash equal to 101% of the principal amount of the Senior Notes being repurchased (plus accrued interest, if any). In light of current market conditions, the Company does not anticipate that a significant number of Senior Note holders will exercise their repurchase rights. To the extent that such repurchase rights are exercised, the Company expects to finance the aggregate repurchase amount through borrowings under the TCB Refinancing (see Revised and Proposed Credit Facility in Item I Recent Developments). Upon closing of the MD Investment (See MD Investment in Item I - Recent Developments), the Company will be receiving new cash equity of approximately $30.5 million.
INFLATION
While inflation can have a significant impact on food, paper, labor and other operating costs, the Company has historically been able to minimize the effect of inflation through periodic price increases, and believes it will be able to offset future inflation with price increases, if necessary.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Index to Financial Statements attached hereto is set forth in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On October 29, 1996, the board of directors of the Company voted to approve the dismissal of the accounting firm of Coopers & Lybrand, L.L.P. ("Coopers & Lybrand") as their principal audit accountant and has engaged the services of Arthur Andersen LLP ("Arthur Andersen") as their principal accountants.
Coopers & Lybrand were the principal audit accountants during the two years ended December 31, 1995 and their report on the financial statements for the periods ended December 31, 1994 and 1995 did not contain an adverse opinion or disclaimer of opinion nor were financial statement opinions qualified or modified as to uncertainty, as to audit scope or as to accounting principals.
There have been no disagreements on any matters of accounting principles or practices, financial statement disclosure or auditing scope of procedure with the accounting firm of Coopers & Lybrand for the most recent two years or any subsequent interim period.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Directors and executive officers are:
NAME AGE POSITION WITH THE COMPANY ---- --- ------------------------- Daniel T. Accordino 46 President, Chief Operating Officer and Director Steven Barnes 48 Vice President--Regional Director Michael A. Biviano 40 Vice President--Regional Director Richard V. Cross 61 Executive Vice President - Finance and Treasurer Paul P. Drotar 50 Vice President--Corporate Controller Paul Durrant 38 Director Richard H. Liem 43 Vice President--Financial Operations David Mathies 49 Director Robin McIlvenny 44 Director David R. Smith 47 Vice President--Regional Director James E. Tunnessen 42 Vice President--Regional Director Alan Vituli 55 Chairman of the Board and Chief Executive Officer Joseph A. Zirkman 36 Vice President, General Counsel and Secretary |
Certain biographical information regarding each current Director and executive officer of the Company is set forth below:
Mr. Accordino has been President, Chief Operating Officer and a Director of Carrols since February 1993. Prior thereto, he served as Executive Vice President--Operations of Carrols from December 1986 and as Senior Vice President from April 1984. He is also a Director of Holdings. From 1979 to April 1984 he was Vice President responsible for restaurant operations of the Company, having previously served as the Company's Assistant Director of Restaurant Operations. Mr. Accordino has been employed by the Company since 1973.
Mr. Barnes is Vice President--Regional Director of Carrols. He has been a Vice President since February 1997 and a Regional Director of Operations since 1993. Prior to joining Carrols, Mr. Barnes was Vice President--Operations of Snapps Restaurants, Inc. from 1989 to 1993.
Mr. Biviano is Vice President--Regional Director of Carrols. He has been Regional Director of Operations since October 1989, having served as District Supervisor from December 1983 to October 1989. Mr. Biviano has been employed by the Company since 1973.
Mr. Cross is Executive Vice President--Finance and Treasurer of Carrols. He has served as Executive Vice President since 1986 and Treasurer from 1981. Mr. Cross also served as Director of Carrols from 1981 to April 1996. From 1984 through 1986, Mr. Cross was Senior Vice President of Carrols. He also served as a Director of Holdings from 1981 to April 1996. Prior to 1984, Mr. Cross was Vice President and Controller of Carrols for more than five years. Mr. Cross has been employed by the Company since 1969.
Mr. Drotar has been Vice President--Corporate Controller of Carrols since April 1984. He was Assistant Controller from June 1982 through April 1984, having served as Manager of
Restaurant Accounting from December 1980 to June 1982. Mr. Drotar has been employed by the Company since 1973.
Mr. Durrant has served as a Director of Carrols since April 1996. He is also a Director of Holdings. Since 1994, Mr. Durrant has been Managing Director of the Merchant Banking group at Dilmun Investments Inc. ("Dilmun"), an investment advisor and wholly owned subsidiary of BIB. From 1992 to 1994, he was employed by Dilmun Investment Advisors, Ltd., London, where he was Director of Direct Corporate Investments.
Mr. Liem became Vice President--Financial Operations in May 1994. Prior to joining Carrols Mr. Liem was a Senior Audit Manager with the accounting firm of Price Waterhouse. Mr. Liem was with Price Waterhouse beginning in 1983.
Mr. Mathies has served as a Director of Carrols since April 1996. He is also a Director of Holdings. Since 1988, Mr. Mathies has been President of Dilmun. From 1971 to 1988, he was employed by Mellon Bank, where he was Head of Pension Management Group, providing investment management services to middle market clients.
Mr. McIlvenny has served as a Director of Carrols since April 1996. He is also a Director of Holdings. Since 1991, Mr. McIlvenny has been Chief Executive of BIB. From 1989 to 1991, he was employed by Saudi International Bank, London, where he was Assistant General Manager and Head of Corporate Finance.
Mr. Smith is Vice President--Regional Director of Carrols. He has been Regional Director of Operations since 1984, having served as District Supervisor from 1975 to 1984. Mr. Smith has been employed by the Company since 1972.
Mr. Tunnessen is Vice President--Regional Director of Carrols. He has been Regional Director of Operations since August 1988, having served as District Supervisor from 1979 to August 1988. Mr. Tunnessen has been employed by the Company since 1972.
Mr. Vituli has been Chairman of the Board of Carrols since 1986 and Chief Executive Officer since March 1992. He is also a director and Chairman of the Board of Holdings. Mr. Vituli is also general partner of Morgan Ventures III, a limited partnership ("Morgan Ventures"). Between 1983 and 1985, Mr. Vituli was employed by Smith Barney, Harris Upham & Co., Inc. as a senior vice president responsible for real estate transactions. From 1966 until joining Smith Barney, Mr. Vituli was associated with the accounting firm of Coopers & Lybrand, first as an employee and the last ten years as a partner. Among the positions held by Mr. Vituli at Coopers & Lybrand was national director of mergers and acquisitions. Prior to joining Coopers & Lybrand, Mr. Vituli was employed in a family owned restaurant business. Mr. Vituli currently serves as a Director on the Board of Directors of Pollo Tropical, Inc.
Mr. Zirkman became Vice President and General Counsel of Carrols in January 1993. He was appointed Secretary of the Company in February 1993. Prior to joining Carrols, Mr. Zirkman was an associate with the New York City law firm of Baer Marks & Upham beginning in 1986.
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth certain information for the fiscal years ended December 31, 1996, 1995 and 1994 for the Chief Executive Officer and the next four most highly compensated executive officers of the Company who were serving as executive officers at December 31, 1996 and whose annual compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- --------------
NUMBER OF
SECURITIES
NAME AND PRINCIPAL UNDERLYING
POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
-------- ---- ---------- --------- -----------
Alan Vituli 1996 $363,160 $128,210 ---
Chairman of the 1995 352,632 245,000 20,000
Board
and Chief 1994 300,430 81,000 ---
Executive
Officer
Daniel T. 1996 258,943 91,778 ---
Accordino
President, Chief 1995 250,751 150,322 10,000
Operating 1994 226,216 60,891 ---
Officer
and Director
Richard V. Cross 1996 161,264 57,144 ---
Executive Vice 1995 161,522 80,262 5,000
President--Finance 1994 156,378 42,106 ---
and Treasurer
Joseph A. 1996 115,288 40,934 ---
Zirkman
Vice President, 1995 105,249 41,995 3,000
General Counsel 1994 95,890 24,303 ---
and Secretary
Richard H. Liem 1996 94,750 30,288 ---
Vice President, 1995 93,092 37,153 3,000
Financial 1994 57,552 15,423 10,000
Operations
|
Aggregated Option/SAR Exercises and Fiscal Year-End Options/SAR Value Table
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options/SARs Money Options/SARs
Shares Acquire Value at FY-End (#) at FY-End ($)
Name on Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------------- ----------- ------------------------- --------------------------
Daniel T. 0/0 0/0
Accordino --- ---
Richard V. Cross --- --- 0/0 0/0
Richard H. Liem 2,000 $38,484 0/0 0/0
Alan Vituli --- --- 0/0 0/0
Joseph A. Zirkman 1,000 19,242 0/0 0/0
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, no executive officer of the Company served as a director of or member of a compensation committee of any entity for which any of the persons serving on the Board of Directors of the Company or on the Compensation Committee of the Board of Directors (the "Compensation Committee") is an executive officer.
The Board of Directors currently has four committees: the Executive Committee, of which Messrs. Vituli, Accordino and Durrant are members; the Finance Committee, of which Messrs. Vituli, Durrant and Cross (as advisor) are members; the Compensation Committee, of which Messrs. Mathies and Durrant are members; and the Audit Committee, of which Messrs. Mathies and Durrant are members.
All Directors hold office until the next annual meeting of stockholders or until their successors have been elected and qualified. The executive officers of the Company are chosen by the Board and serve at its discretion.
All non-employee Directors of the Company receive a fee of $15,000 per annum. All Directors are reimbursed for all reasonable expenses incurred by them in acting as Directors, including as members of any committee of the Board of Directors.
As permitted under the Delaware General Corporation Law, the Company's Restated Certificate of Incorporation provides that a Director of the Company will not be personally liable to the Company or its stockholders for monetary damages for breach of a fiduciary duty owed to the Company or its stockholders. By its terms and in accordance with the laws of the State of Delaware, however, this provision does not eliminate or limit the liability of a Director of the Company (i) for any breach of the Director's duty of loyalty to the Company or its stockholders, (ii) for an act or omission committed in bad faith or involving intentional misconduct or a knowing violation of law, (iii) for any transaction from which the Director derived an improper personal benefit or (iv) for an improper declaration of dividends or purchase of the Company's securities.
The Company's Restated Certificate of Incorporation provides that the Company shall indemnify its Directors and officers to the fullest extent permitted by Delaware law.
DESCRIPTION OF PLANS
Employee Savings Plan. In 1979, Carrols adopted two identical savings plans, qualified as profit-sharing plans, for its salaried employees, permitting participating employees to make annual contributions. On December 31, 1994, Carrols merged the two plans into a single plan, the Carrols Corporation Corporate Employee Savings Plan (the "Savings Plan"). In accordance with the Savings Plan, Carrols matches up to $1,060 of an employee's contributions by contributing $0.50 for each dollar contributed by the employee. Employees are fully vested in their own contributions; employees become vested in Carrols' contributions beginning in the fourth year of service, and are fully vested after seven years of service or upon retirement at age 65 with five years' service, death, permanent or total disability or termination. Benefits may be paid out upon the occurrence of any of the foregoing events in a single cash lump sum, in periodic installments over not more than 15 years or in the form of an annuity. The employee's contributions may be withdrawn at any time, subject to restrictions on future contributions. Carrols' matching contributions may be withdrawn under certain conditions of financial necessity or hardship as defined in the Savings Plan.
Bonus Plans. Carrols has cash bonus plans designed to promote and reward excellent performance by providing employees with incentive compensation. Key senior management executives of each operating division can be eligible for bonuses equal to varying percentages of their respective annual salaries determined by the performance of the Company and the division.
1996 Plan. On December 26, 1996, Holdings, with the approval of its stockholder, adopted the 1996 Plan pursuant to which the Company may grant "Incentive Stock Options" (as defined under Section 422 of the Internal Revenue Code), nonqualified stock options, stock appreciation rights, restricted stock, performance shares and performance units and other stock-based awards (the foregoing collectively "Awards") to certain officers and employees of the Company and its subsidiaries. The 1996 Plan is designed to advance the interests of Holdings and the Company by providing an additional incentive to attract and retain qualified and competent persons through the encouragement of stock ownership or stock appreciation rights in Holdings.
The 1996 Plan permits the Company's Compensation Committee to grant, from time to time, options to purchase an aggregate of up to 106,250 shares of Common Stock. The vesting periods for awards and the expiration dates for exercisability of Awards granted under the 1996 Plan are determined by the Compensation Committee; however, the exercise period for an option granted under the 1996 Plan may not exceed ten years from the date of the grant. The Compensation Committee is authorized to grant options under the 1996 Plan to all eligible employees of the Company and its subsidiaries, including executive officers and directors (other than outside Directors and members of the Compensation Committee). As of March 15, 1997, the only options outstanding under the 1996 Plan are governed by the Option Agreements, each as described below.
The option exercise price per share of any option granted under the 1996 Plan is determined by the Compensation Committee; however, in no event shall the option price per share of any option intended to qualify as an Incentive Stock Option be less than the fair market value of the Common Stock on the date such option is granted. Payment of such option exercise price shall be made (i) in cash, (ii) by delivering shares of Common Stock already owned by the holder of such options, (iii) by delivering a promissory note payable over a three year period and bearing interest at the rate provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended from time to time or (iv) by a combination of any of the foregoing, in accordance with
the terms of the 1996 Plan, the applicable stock option agreement and any applicable guidelines of the Compensation Committee in effect at the time.
Pursuant to the 1996 Plan, in the event of a Change of Control (as defined in the 1996 Plan, any or all Stock Options (as defined in the 1996 Plan) and Stock Appreciation Rights (as defined in the 1996 Plan) still outstanding shall, notwithstanding any contrary terms of the Award Agreement (as defined in the 1996 Plan), accelerate and become exercisable in full at least ten days prior to (and shall expire on) the consummation of such Change of Control, on such conditions as the Compensation Committee shall determine, unless the successor corporation assumes the outstanding Stock Options or Stock Appreciation Rights or substitutes substantially equivalent options.
The New 1996 Plan. The 1996 Plan will be replaced at the MD Closing by the New 1996 Plan. The New 1996 Plan will be subject to substantially similar terms as the 1996 Plan, provided, however, that, pursuant to the New 1996 Plan, in the event that the holder of an option issued pursuant to the New 1996 Plan elects to pay the exercise price of such option by delivering a promissory note, such promissory note may be either (i) unsecured and fully recourse against the holder of such option or (ii) nonrecourse but secured by the shares of Common Stock being purchased by such exercise and by other assets having a fair market value equal to not less than forty percent of the exercise price of such option and, in either event, such note shall mature on the fifth anniversary of the date thereof.
In addition, pursuant to the New 1996 Plan, in the event of a
Change of Control (as defined in the New 1996 Plan) during the term of
employment with Carrols of a holder of an option issued under the New 1996 Plan,
the portion of any such option that is not vested shall vest and become
exercisable in full on the date of such Change of Control. In addition, as soon
as practicable but in no event later than thirty days prior to the occurrence of
a Change of Control, the Compensation Committee shall notify any holder of an
option granted under the New 1996 Plan of such Change of Control. Further, upon
a Change of Control that qualifies as an Approved Sale (as defined in the New
1996 Plan) in which the outstanding Common Stock is converted or exchanged for
or becomes a right to receive any cash, property or securities other than
Illiquid Consideration (as defined in the New 1996 Plan), (i) each option
granted under the New 1996 Plan shall become exercisable solely for the amount
of such cash, property or securities that the holder of such option would have
been entitled to had such option been exercised immediately prior to such event
(ii) the holder of such option shall be given an opportunity to either (A)
exercise such option prior to the consummation of the Approved Sale and
participate in such sale as a holder of Common Stock or (B) upon consummation of
the Approved Sale, receive in exchange for such option consideration equal to
the amount determined by multiplying (1) the same amount of consideration per
share of Common Stock received by the holders of Common Stock in connection with
the Approved Sale less the exercise price per share of Common Stock of such
option to acquire Common Stock by (2) the number of shares of Common Stock
represented by such option; and (iii) to the extent such option is not exercised
prior to or simultaneous with such Approved Sale, any such option shall be
canceled.
DESCRIPTION OF EMPLOYMENT AGREEMENTS
Vituli Employment Agreements. Upon the consummation of the Atlantic Transaction, the Company entered into an Amended and Restated Employment Agreement (the "Vituli Employment Agreement"), dated as of April 3, 1996, with Alan Vituli pursuant to which Mr. Vituli serves as Chairman of the Board and Chief Executive Officer of the Company. The term of Mr. Vituli's employment under the Vituli Employment Agreement is deemed to have commenced
on January 1, 1995 and is for an initial term from such deemed commencement date of three years, provided, however, that the employment term automatically renews for successive one-year terms unless either the Company or Mr. Vituli elects not to renew by giving written notice to the other at least 90 days before a scheduled expiration date. Pursuant to the Vituli Employment Agreement, Mr. Vituli received a base salary of $350,000 in 1995, which amount is subject to a consumer price index increase for the second and third years of the term. Beginning in 1998, the base salary for each year thereafter will be increased in accordance with the recommendation of the Compensation Committee. Pursuant to the Vituli Employment Agreement, Mr. Vituli participates in the Executive Bonus Plan of the Company and all stock option programs of the Company applicable to executive employees. In addition, pursuant to the Vituli Employment Agreement, the Company is responsible for maintaining the premium payments on a split-dollar life insurance policy on the life of Mr. Vituli providing a death benefit of $1.5 million payable to an irrevocable trust designated by Mr. Vituli.
On the date of the MD Closing, the Company will enter into a Second Amended and Restated Employment Agreement (the "New Vituli Employment Agreement") with Alan Vituli, which shall amend and restate the Vituli Employment Agreement. Pursuant to the New Vituli Employment Agreement, Mr. Vituli will continue to serve as Chairman of the Board and Chief Executive Officer of the Company. The New Vituli Employment Agreement shall be for an initial term of four years, commencing on the date of the MD Closing and will be subject to automatic renewals for successive one-year terms unless either the Company or Mr. Vituli elects not to renew by giving written notice to the other at least 90 days before a scheduled expiration date. Pursuant to the New Vituli Employment Agreement, Mr. Vituli will receive a base salary of $400,000 for the first year of the term, which amount increases annually by at least $25,000 subject to additional increases that may be authorized by the Compensation Committee. Pursuant to the New Vituli Employment Agreement, Mr. Vituli will participate in the Executive Bonus Plan of the Company and any stock option plan of the Company applicable to executive employees. The New Vituli Employment Agreement also will require that the Company is responsible for maintaining the premium payments on a split-dollar life insurance policy on the life of Mr. Vituli providing a death benefit of $1.5 million payable to an irrevocable trust designated by Mr. Vituli.
Accordino Employment Agreements. Upon the consummation of the Atlantic Transaction, the Company entered into an Amended and Restated Employment Agreement (the "Accordino Employment Agreement"), dated as of April 3, 1996, with Daniel T. Accordino pursuant to which Mr. Accordino serves as President and Chief Operating Officer of the Company. The term of Mr. Accordino's employment under the Accordino Employment Agreement is deemed to have commenced on January 1, 1995 and is for an initial term from such deemed commencement date of three years, provided, however, that the employment term automatically renews for successive one-year terms unless either the Company or Mr. Accordino elects not to renew by giving written notice to the other at least 90 days before a scheduled expiration date. Pursuant to the Accordino Employment Agreement, Mr. Accordino received a base salary of $250,000 in 1995, which amount is subject to a consumer price index increase for the second and third years of the term. Beginning in 1998, the base salary for each year thereafter will be increased in accordance with the recommendation of the Compensation Committee. Pursuant to the Accordino Employment Agreement, Mr. Accordino participates in the Executive Bonus Plan of the Company and all stock option programs of the Company applicable to executive employees. In addition, pursuant to the Accordino Employment Agreement, the Company is responsible for maintaining the premium payments on a split-dollar life insurance policy on the life of Mr. Accordino providing a death benefit of $1 million payable to an irrevocable trust designated by Mr. Accordino.
On the date of the MD Closing, the Company will enter into a Second Amended and Restated Employment Agreement (the "New Accordino Employment Agreement") with Daniel T. Accordino, which shall amend and restate the Accordino Employment Agreement. Pursuant to the New Accordino Employment Agreement, Mr. Accordino will continue to serve as President and Chief Operating Officer of the company. The New Accordino Employment Agreement shall be for an initial term of four years, commencing on the date of the MD Closing and will be subject to automatic renewal for successive one-year terms unless either the Company or Mr. Accordino elects not to renew by giving written notice to the other at least 90 days before a scheduled expiration date. Pursuant to the New Accordino Employment Agreement, Mr. Accordino will receive a base salary of $300,000 for the first year of the term, which amount increases annually by at least $20,000 subject to additional increases that may be authorized by the Compensation Committee. Pursuant to the New Accordino Employment Agreement, Mr. Accordino will participate in the Executive Bonus Plan of the Company and any stock option plan of the Company applicable to executive employees. The New Accordino Employment Agreement also will require that the Company is responsible for maintaining the premium payments on a split-dollar life insurance policy on the life of Mr. Accordino providing a death benefit of $1 million payable to an irrevocable trust designated by Mr. Accordino.
DESCRIPTION OF OPTION AGREEMENTS
OPTION AGREEMENTS PURSUANT TO STOCK OPTION PLANS
Vituli Plan Option Agreements. On December 30, 1996 (during the Company's 1997 fiscal year), pursuant to the Atlantic Transaction, the Company granted to Alan Vituli, under the 1996 Plan, an option (the "Vituli Option") to purchase 43,350 shares of Common Stock. The Vituli Option (i) was immediately exercisable with regard to 15,300 shares of Common Stock at an exercise price of $110.00 per share and (ii) becomes exercisable on December 31, 1997 with regard to (a) 15,300 shares of Common Stock at an exercise price of $130.00 per share and (b) 12,750 shares of Common Stock at an exercise price of $140.00 per share. Pursuant to its terms, the Vituli Option may not be exercised after the earlier of a Change in Control (as defined in the 1996 Plan) and the tenth anniversary of the date of grant.
On the date of the MD Closing, the Vituli Option will be canceled and Holdings will grant to Mr. Vituli, under the New 1996 Plan, an option (the "New Vituli Plan Option") to purchase 43,350 shares of Common Stock at an exercise price of $101.7646 per share. The New Vituli Plan Option shall have a term of ten years from the date of grant and shall (i) become exercisable on the date of grant with regard to 15,300 shares of Common Stock and (ii) shall become exercisable (a) on December 31, 1997 with regard to 5,610 shares of Common Stock, (b) on December 31, 1998 with regard to 5,610 shares of Common Stock, (c) on December 31, 1999 with regard to 5,610 shares of Common Stock and (d) on December 31, 2000 with regard to 11,220 shares of Common Stock.
Accordino Plan Option Agreements. On December 30, 1996 (during the Company's 1997 fiscal year), pursuant to the Atlantic Transaction, the Company granted to Daniel T. Accordino, under the 1996 Plan, an option (the "Accordino Option") to purchase 28,900 shares of Common Stock. The Accordino Option (i) was immediately exercisable with regard to 10,200 shares of Common Stock at an exercise price of $110.00 per share and (ii) becomes exercisable on December 31, 1997 with regard to (a) 10,200 shares of Common Stock at an exercise price of $130.00 per share and (b) 8,500 shares of Common Stock at an exercise price of $140.00 per share. Pursuant to its terms, the Accordino Option may not be exercised after the earlier of a Change in Control (as defined in the 1996 Plan) and the tenth anniversary of the date of grant.
On the date of the MD Closing, the Accordino Option will be canceled and
the Company will grant to Mr. Accordino, under the New 1996 Plan, an option (the
"New Accordino Plan Option") to purchase 28,900 shares of Common Stock at an
exercise price of $101.7646 per share. The New Accordino Plan Option shall have
a term of ten years from the date of grant and shall (i) become exercisable on
the date of grant with regard to 10,200 shares of Common Stock and (ii) shall
become exercisable (a) on December 31, 1997 with regard to 3,740 shares of
Common Stock, (b) on December 31, 1998 with regard to 3,740 shares of Common
Stock, (c) on December 31, 1999 with regard to 3,740 shares of Common Stock and
(d) on December 31, 2000 with regard to 7,480 shares of Common Stock.
OTHER OPTION AGREEMENTS
Vituli Non-Plan Option Agreement. On the date of the MD Closing, Holdings will grant to Mr. Vituli a nonqualified stock option (the "Vituli Non-Plan Option") to purchase 29,480 shares of Common Stock at an exercise price of $101.7646. The Vituli Non-Plan Option shall have a term of ten years from the date of grant and shall become exercisable in five equal parts on the five consecutive anniversaries of the date of grant. The Vituli Non-Plan Option will have substantially the same terms as options issued under the New 1996 Plan with respect to (i) the method of payment of the exercise price of the Vituli Non-Plan Option and (ii) the effect of a Change in Control (as defined in the New 1996 Plan) on the Vituli Non-Plan Option.
Accordino Non-Plan Option Agreement. On the date of the MD Closing, Holdings will grant to Mr. Accordino a nonqualified stock option (the "Accordino Non-Plan Option") to purchase 2,579 shares of Common Stock at an exercise price of $101.7646. The Accordino Non-Plan Option shall have a term of ten years from the date of grant and shall become exercisable in five equal parts on the five consecutive anniversaries of the date of grant.
The Accordino Non-Plan Option will have substantially the same terms as the Vituli Non-Plan Option.
Zirkman Non-Plan Option Agreement. On the date of the MD Closing, Holdings will grant to Joseph A. Zirkman a nonqualified stock option (the "Zirkman Non-Plan Option") to purchase 368 shares of Common Stock at an exercise price of $101.7646. The Zirkman Non-Plan Option shall have a term of ten years from the date of grant and shall become exercisable in five substantially equal parts on the five consecutive anniversaries of the date of grant.
The Zirkman Non-Plan Option will have substantially the same terms as the Vituli Non-Plan Option.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following tables set forth the number and percentage of shares of voting common stock of the Company and of Holdings beneficially owned, as of March 15, 1997, by (i) all persons known by the Company to be the beneficial owners of more than 5% of the shares of such voting common stock, (ii) each Director of the Company who owns shares of such voting common stock, (iii) each executive officer of the Company included in the Summary Compensation Table above and (iv) all executive officers and Directors of the Company as a group.
CARROLS' COMMON STOCK
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF SHARES
- ------------------------ ------------------ -----------------
Carrols Holdings Corporation 10 100%
968 James Street
Syracuse, New York 13203
|
HOLDINGS' COMMON STOCK
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (a) PERCENT OF SHARES (a)
- ------------------------ --------------------- ---------------------
Atlantic Restaurants, Inc. 850,000 100%
Deemer Corporation (b) 131,876 13.4%
Alan Vituli (c) 15,300 1.8%
Daniel T. Accordino (d) 10,200 1.2%
Joseph A. Zirkman --- ---
Richard V. Cross --- ---
Richard H. Liem --- ---
Directors and executive officers of
Carrols as a group (13 persons) 25,500 2.9%
|
(a) As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). For purposes of this table, a person is deemed as of any date to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date. As calculated in this table, the percent of shares is the percent of each beneficial owner's shares to the total shares of Holdings' common stock outstanding plus the shares to which that person has a right to acquire within 60 days.
(b) Consists of currently exercisable warrants (the "Warrants") for the purchase of 119,195 shares of Holdings voting common stock at $3.590 per share and 12,681 shares of Holdings voting common stock at $3.701 per share. The address for Deemer Corporation ("Deemer") is 276 Fifth Avenue, New York, New York 10001. Holdings has the option to purchase the Warrants from Deemer for $19.033 per warrant if exercised before November 2, 1997, and $19.109 if exercised after November 1, 1997. The option expires on November 1, 2000. Deemer purchased the Warrants from Heller on November 2, 1995 for the sum of $2,500,000 and borrowed the purchase price from Holdings which loan was secured by a collateral pledge of the shares of Deemer and the Warrants. The Company intends to exercise its option to purchase the Warrants from Deemer upon the consummation of the MD Investment.
(c) Consists of currently exercisable stock options to purchase Common Stock. The address of Mr. Vituli is c/o Carrols Corporation, 968 James Street, Syracuse, New York 13203.
(d) Consists of currently exercisable stock options to purchase Common Stock. The address of Mr. Accordino is c/o Carrols Corporation, 968 James Street, Syracuse, New York 13203.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
CARROLS CORPORATION AND SUBSIDIARIES:
Page
----
Opinion of Independent Certified F-1 to
Public Accountants F-2
Financial Statements:
Consolidated Balance Sheets F-3 to
F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholder's Deficit F-6
Consolidated Statements of Cash Flows F-7 to
F-8
Notes to Consolidated Financial F-9 to
Statements F-20
|
(b) Financial Statement Schedules
Schedule Description Page
- -------- ----------- ----
CARROLS CORPORATION AND SUBSIDIARIES:
II Valuation and Qualifying Accounts F-21
|
Schedules other than those listed are omitted for the reason that they are not required, not applicable, or the required information is shown in the financial statements or notes thereto.
Separate financial statements of the Company are not filed for the reasons that (1) consolidated statements of the Company and its consolidated subsidiaries are filed and (2) the Company is primarily an operating Company and all subsidiaries included in the consolidated financial statements filed are wholly-owned, and indebtedness of all subsidiaries included in the consolidated financial statements to any person other than the Company does not exceed 5% of the total assets as shown by the Consolidated Balance Sheet at December 31, 1996.
(c) Exhibits Required by Item 601 of Regulation S-K
INCORPORATION BY REFERENCE TO THE FOLLOWING
INSTRUMENTS PREVIOUSLY FILED WITH THE
EXHIBIT NUMBER DESCRIPTION SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- ------------------------------------------
2.1 Purchase and Sale Agreement dated Exhibit 2.1 to the Company's 1994 Annual
February 10, 1994 between Carrols Report on Form 10-K
Corporation, as Purchaser, and KIN
Restaurant, Inc., as Seller
2.2 Purchase and Sale Agreement dated Exhibit 2.2 to the Company's 1994 Annual
April 18, 1994 among Carrols Report on Form 10-K
Corporation, as Purchaser, and Riva
Development Corporation and John Riva,
as Seller
2.3 Purchase and Sale Agreement dated May Exhibit 2.3 to the Company's 1994 Annual
31, 1994 among Carrols Corporation, as Report on Form 10-K
Purchaser, and Michael P. Jones and
Donald M. Cepiel, Sr., and the
corporations listed therein
2.4 Securities Purchase Agreement dated as Exhibit 2.1 to the Company's current report
of March 6, 1996, by and among on Form 8-K filed March 21, 1996
Atlantic Restaurants, Inc., Carrols
Holdings Corporation, Carrols
Corporation and certain Selling
Shareholders
2.5 Deferred Securities Purchase Agreement Exhibit 2.2 to the
dated as of March 6, 1996 by and among Company's current report on
Atlantic Restaurants, Inc., Alan Form 8-K filed March 21, 1996
Vituli and Pryor, Cashman, Sherman &
Flynn
3.1 Restated Certificate of Incorporation Exhibit 3.(3)(a) to the Company's 1987
Annual Report on Form 10-K
3.2 Certificate of Amendment of the
Restated Certificate of Incorporation
3.3 Restated By-laws Exhibit 3.(3)(b) to the Company's 1987
Annual Report on Form 10-K
4.1 Indenture dated as of August 17, 1993 Exhibit 4.1 to Amendment No. 3 to the
among Holdings, the Company and Marine Company's Registration Statement on Form
Midland Bank, N.A. S-1 (Number 3365100) filed August 10, 1993
|
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
10.1 First Amended and Restated Loan Exhibit 10.1 to the Company's 1987 Annual
Security and Preferred Stock Purchase Report on Form 10-K
Agreement by and among Carrols Merger
Corporation, Carrols Holdings
Corporation and Heller Financial, Inc.
dated as of December 22, 1986
10.2 Second Amended and Restated Loan and Exhibit 10.15 to the Company's 1992 Annual
Security Agreement by and among Report on Form 10-K
Carrols Corporation, Carrols Holdings
Corporation and Heller Financial, Inc.
dated as of September 15, 1992
10.3 Senior Subordinated Credit Agreement Exhibit 10.17 to the Company's Annual
dated as of September 15, 1992 between Report on Form 10-K
Carrols Corporation, Carrols Holdings
Corporation and World Subordinated
Debt Partners, L.P.
10.4 Third Amended and Restated Loan and Exhibit 10.19 to Amendment No. 2 to the
Security Agreement by, and among Company's Form S-1 Registration Statement
Carrols Corporation, Carrols Holdings filed August 4, 1993
Corporation and Heller Financial, Inc.
dated as of August 9, 1993
10.5 First Amendment to Third Amended and The Company's 1993 Annual Report on Form
Restated Loan and Security Agreement 10-K
by and among Carrols Corporation,
Carrols Holdings Corporation and
Heller Financial, Inc. dated as of
October 27, 1993
10.6 Second Amendment to Third Amended and The Company's 1993 Annual Report on Form
Restated Loan and Security Agreement 10-K
by and among Carrols Corporation,
Carrols Holdings Corporation and
Heller Financial, Inc. dated as of
March 11, 1994
|
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
10.7 Third Amendment to Third Amended and Exhibit 10.9 to the Company's 1994 Annual
Restated Loan and Security Agreement Report on Form 10-K
among Carrols Holdings Corporation,
Carrols Corporation and Heller
Financial, Inc. dated as of May 2, 1994
10.8 Fourth Amendment to Third Amended and Exhibit 10.10 to the Company's 1994 Annual
Restated Loan and Security Agreement Report on Form 10-K
among Carrols Holdings Corporation,
Carrols Corporation and Heller
Financial, Inc. dated as of December
20, 1994
10.9 Supply Agreement between ProSource Exhibit 10.11 to the Company's 1994 Annual
Services Corporation and Carrols Report on Form 10-K
Corporation dated April 1, 1994
10.10 Fifth Amendment to Third Amended and
Restated Loan and Security Agreement
among Carrols Holdings Corporation,
Carrols Corporation and Heller
Financing, Inc. dated as of February
22, 1995
10.11 Sixth Amendment to Third Amended and
Restated Loan and Security Agreement
among Carrols Holdings Corporation,
Carrols Corporation and Heller
Financing, Inc. dated as of February
14, 1996
10.12 Stock Purchase Agreement dated as of
February 25, 1997 by and among Madison
Dearborn Capital Partners, L.P.,
Madison Dearborn Capital Partners II,
L.P., Atlantic Restaurants, Inc. and
Carrols Holdings Corporation
10.13 1994 Regional Directors Bonus Plan Exhibit 10.19 to the Company's 1994 Annual
Report on Form 10-K
|
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
10.14 Carrols Corporation Corporate Exhibit 10.21 to the Company's 1994 Annual
Employee's Savings Plan dated December Report on Form 10-K
31, 1994
10.15 Commitment Letter from Texas Commerce
Bank National Association and Chase
Securities Inc. and accepted and
agreed to by Carrols Corporation as of
January 8, 1997
10.16 Escrow Agreement dated as of March 6, Exhibit 2.3 to the Company's Current
1996 by and among Atlantic Report on Form 8-K filed March 21, 1996
Restaurants, Inc., Bahrain
International Bank (E.C.), Carrols
Holdings Corporation, Carrols
Corporation, certain selling
shareholders and Baer Marks & Upham
L.L.P.
10.17 Seventh Amendment to Third Amended and Exhibit 10.27 to the Company's current
Restated Loan and Security Agreement report on Form 8-K filed April 10, 1996
by and among Heller Financial, Inc.,
Carrols Holdings Corporation and
Carrols Corporation dated as of April
3, 1996
10.18 Amended and Restated Employment Exhibit 10.23 to the Company's
Agreement dated as of Current Report on Form 8-K
April 3, 1996 by and between Carrols filed on April 10, 1996
Corporation and Alan Vituli
10.19 Amended and Restated Employment Exhibit 10.24 to the Company's Current
Agreement dated as of April 3, 1996 by Report on Form 8-K filed on April 10, 1996
and between Carrols Corporation and
Daniel T. Accordino
10.20 Carrols Corporation 1996 Long-Term
Incentive Plan
10.21 Stock Option Agreement dated as of
December 30, 1996 by and between
Carrols Corporation and Alan Vituli
|
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
10.22 Stock Option Agreement dated as of
December 30, 1996 by and between
Carrols Corporation and Daniel T.
Accordino
10.23 Form of Stockholders Agreement by and
among Carrols Holdings Corporation,
Madison Dearborn Capital Partners,
L.P., Madison Dearborn Capital
Partners II, L.P., Atlantic
Restaurants, Inc., Alan Vituli, Daniel
T. Accordino and Joseph A. Zirkman
10.24 Form of Registration Agreement by and
among Carrols Holdings Corporation,
Atlantic Restaurants, Inc., Madison
Dearborn Capital Partners, L.P.,
Madison Dearborn Capital Partners II,
L.P., Alan Vituli, Daniel T. Accordino
and Joseph A. Zirkman
10.25 Form of Second Amended and Restated
Employment Agreement by and between
Carrols Corporation and Alan Vituli
10.26 Form of Second Amended and Restated
Employment Agreement by and between
Carrols Corporation and Daniel T.
Accordino
10.27 Form of Carrols Holdings Corporation
1996 Long-Term Incentive Plan
10.28 Form of Stock Option Agreement by and
between Carrols Holdings Corporation
and Alan Vituli
10.29 Form of Stock Option Agreement by and
between Carrols Holdings Corporation
and Daniel T. Accordino
|
INCORPORATION BY REFERENCE TO THE
FOLLOWING INSTRUMENTS PREVIOUSLY FILED
EXHIBIT NUMBER DESCRIPTION WITH THE SECURITIES AND EXCHANGE COMMISSION
- -------------- ----------- -------------------------------------------
10.30 Form of Unvested Stock Option
Agreement by and between Carrols
Holdings Corporation and Alan Vituli
10.31 Form of Unvested Stock Option
Agreement by and between Carrols
Holdings Corporation and Daniel T.
Accordino
10.32 Form of Unvested Stock Option
Agreement by and between Carrols
Holdings Corporation and Joseph A.
Zirkman
16.1 Letter re change in certifying
accountant
22.1 Subsidiaries of the Registrant, all
wholly-owned are:
Carrols J.G. Corp.
Carrols Realty Holdings Corp.
Carrols Realty I Corp.
Carrols Realty II Corp.
CDC Theater Properties, Inc.
H.N.S. Equipment & Leasing Corp.
Quanta Advertising Corp.
Confectionery Square Corp.
Jo-Ann Enterprises, Inc.
(d) Reports on Form 8-K
|
One report on Form 8-K, dated November 4, 1996, was filed during the quarter ended December 29, 1996 reporting a change of the Company's certifying accountant.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized in the City of Syracuse, State of New York on the 25th day of March, 1996
CARROLS CORPORATION
BY: /s/ Alan Vituli Alan Vituli, Chairman and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/Alan Vituli Director, Chairman and Chief March 25, 1997
(Alan Vituli) Executive Officer
/s/Daniel T. Accordino Director, President and Chief March 25, 1997
(Daniel T. Accordino) Operating Officer
/s/ Robin McIlvenny Director March 25, 1997
(Robin McIlvenny)
/s/ Paul Durrant Director March 25,1997
(Paul Durrant)
/s/ David Mathies Director March 25,1997
(David Mathies)
|
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Carrols Corporation:
We have audited the accompanying consolidated balance sheet of Carrols Corporation (a wholly-owned subsidiary of Carrols Holdings Corporation) and subsidiaries as of December 29, 1996, and the related consolidated statements of operations, stockholder's deficit, and cash flows for the year then ended. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Carrols Corporation and subsidiaries as of December 29, 1996, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule for the year ended December 29, 1996 listed in the index at Item 14 is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Rochester, New York
March 7, 1997
|
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Carrols Corporation
We have audited the consolidated balance sheet of Carrols Corporation (a wholly owned subsidiary of Carrols Holdings Corporation) and Subsidiaries as of December 31, 1995 and the related consolidated statements of operations, stockholder's deficit and cash flows for each of the two years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Carrols Corporation and Subsidiaries as of December 31, 1995, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The accompanying schedule
for the years ended December 31, 1995 and 1994 as listed in Item 14 of the Form
10-K is presented for purposes of additional analysis and is not a required part
of the basic consolidated financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic consolidated financial statements
taken as a whole.
/s/ Coopers & Lybrand, L.L.P.
Syracuse, New York
March 1, 1996
|
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
----- ----
Current assets:
Cash and cash equivalents $ 1,314,000 $ 1,463,000
Trade and other receivables net of
reserves of $310,000 and $419,000
for 1996 and 1995, respectively 793,000 688,000
Inventories 2,163,000 2,292,000
Prepaid real estate taxes 725,000 664,000
Deferred income taxes 3,264,000 3,641,000
Prepaid expenses and other current assets 932,000 830,000
----------- -----------
Total current assets 9,191,000 9,578,000
----------- -----------
Property and equipment, at cost:
Land 9,066,000 6,888,000
Buildings and improvements 16,175,000 15,049,000
Leasehold improvements 38,816,000 36,260,000
Equipment 46,834,000 42,361,000
Capital leases 14,548,000 15,352,000
----------- -----------
125,439,000 115,910,000
Less accumulated depreciation
and amortization (63,356,000) (59,631,000)
------------ -----------
Net property and equipment 62,083,000 56,279,000
------------ -----------
Franchise rights, at cost (less accumulated amortization of
$21,787,000 and 19,648,000 for 1996 and 1995, respectively)
46,203,000 44,582,000
Beneficial leases, at cost (less accumulated
amortization of $7,748,000 and $7,655,000
for 1996 and 1995, respectively) 6,907,000 7,705,000
Excess of cost over fair value of assets acquired
(less accumulated amortization
of $578,000 and $520,000 for 1996 and
1995, respectively) 1,733,000 1,791,000
Deferred income taxes 6,637,000 6,420,000
Other assets 5,834,000 8,709,000
------------ ------------
$138,588,000 $135,064,000
============ ============
|
The accompanying notes are an integral part of these balance sheets.
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
DECEMBER 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDER'S DEFICIT 1996 1995
---- ----
Current liabilities:
Current portion of long-term debt $ 8,000 $ 258,000
Current portion of capital lease obligations 574,000 644,000
Accounts payable 9,319,000 8,909,000
Accrued liabilities:
Taxes 2,334,000 1,426,000
Payroll and employee benefits 3,837,000 4,000,000
Interest 4,741,000 4,809,000
Other 3,382,000 3,134,000
--------- ----------
Total current liabilities 24,195,000 23,180,000
Long-term debt, net of current portion 118,180,000 116,375,000
Capital lease obligations, net of current portion 2,503,000 3,301,000
Deferred income - sale/leaseback of real estate 2,154,000 1,773,000
Accrued postretirement benefits 1,522,000 1,424,000
Other liabilities 1,696,000 1,927,000
----------- -----------
Total liabilities 150,250,000 147,980,000
----------- -----------
Commitments and contingencies
Stockholder's deficit:
Common stock, par value $1; authorized
1,000 shares, issued and outstanding -
10 shares 10 10
Additional paid-in capital 1,411,990 840,990
Accumulated deficit (10,574,000) (13,757,000)
Less: note receivable - redemption of warrants (2,500,000)
----------- ------------
Total stockholder's deficit (11,662,000) (12,916,000)
------------ ------------
$138,588,000 $135,064,000
============ ============
|
The accompanying notes are an integral part of these balance sheets.
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
(52 WEEKS) (52 WEEKS) (52 WEEKS)
---------- ---------- ----------
Revenues:
Sales $240,809,000 $226,257,000 $203,927,000
Other income 316,000 201,000 327,000
------------ ------------ ------------
241,125,000 226,458,000 204,254,000
------------ ------------ ------------
Costs and expenses:
Cost of sales 68,031,000 63,629,000 57,847,000
Restaurant wages and related expenses 70,894,000 65,932,000 59,934,000
Other restaurant operating expenses 48,683,000 45,635,000 42,390,000
Depreciation and amortization 11,015,000 11,263,000 11,259,000
Administrative expenses 10,703,000 10,635,000 9,449,000
Advertising expense 10,798,000 9,764,000 8,785,000
Loss on closing restaurants and other 1,800,000
Costs associated with change of control 509,000
----------- ----------- -----------
Total operating expenses 220,633,000 206,858,000 191,464,000
----------- ----------- -----------
Operating income 20,492,000 19,600,000 12,790,000
Interest expense 14,209,000 14,500,000 14,456,000
---------- ---------- ----------
Income (loss) before taxes 6,283,000 5,100,000 (1,666,000)
(Provision) benefit for taxes (3,100,000) 9,826,000 (165,000)
----------- ----------- -----------
NET INCOME (LOSS) $ 3,183,000 $14,926,000 $(1,831,000)
=========== =========== ===========
|
The accompanying notes are an integral part of the financial statements.
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDER'S
STOCK CAPITAL DEFICIT DEFICIT
------ --------- ----------- ---------
Balances at December 31, 1993 $ 10 $ 4,447,990 $(26,852,000) $ (22,404,000)
Net loss (1,831,000) (1,831,000)
Dividends declared (2,973,000) (2,973,000)
--- ----------- ------------ -------------
Balances at December 31, 1994 10 1,474,990 (28,683,000) (27,208,000)
Net income 14,926,000 14,926,000
Dividends declared (636,000) (636,000)
Exercise of stock options 2,000 2,000
--- ----------- ------------ -------------
Balances at December 31, 1995 10 840,990 (13,757,000) (12,916,000)
Net income 3,183,000 3,183,000
Dividends declared (1,000,000) (1,000,000)
Exercise of stock options 12,000 12,000
Tax benefit related to stock
options canceled due to change
of control 1,559,000 1,559,000
Note receivable-redemption of warrants (2,500,000)
--- ----------- ------------ -------------
Balances at December 31, 1996 $ 10 $ 1,411,990 $(10,574,000) $ (11,662,000)
======= =========== ============ =============
|
The accompanying notes are an integral part of the financial statements.
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Increase (Decrease) in Cash and Cash Equivalents
1996 1995 1994
(52 WEEKS) (52 WEEKS) (52 WEEKS)
----------- ---------- ----------
Cash flows from operating activities:
Net income (loss) $ 3,183,000 $14,926,000 $ (1,831,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
(Gain) loss on disposal of
property and equipment (314,000) 156,000
Depreciation and amortization 11,015,000 11,263,000 11,259,000
Non cash charges included
in loss on closing restaurants
and other 1,800,000
Deferred income taxes 1,719,000 (10,061,000)
Change in operating assets and
liabilities:
Trade and other receivables (105,000) (156,000) 100,000
Inventories 129,000 (38,000) (203,000)
Prepaid expenses and other
current assets (174,000) (45,000) (256,000)
Other assets (611,000) (80,000) (494,000)
Accounts payable 410,000 1,363,000 1,209,000
Accrued interest (68,000) (90,000) 35,000
Accrued liabilities and
other 697,000 (556,000) 2,781,000
----------- ---------- ----------
Cash provided by operating
activities 15,881,000 16,682,000 14,400,000
----------- ---------- ----------
Cash flows from investing activities:
Capital expenditures:
Real estate and equipment (9,642,000) (4,846,000) (4,509,000)
Construction of new restaurants (4,714,000) (2,607,000) (1,357,000)
Acquisition of restaurants (7,945,000) (516,000) (11,615,000)
Franchise fees and renewals (899,000) (569,000) (158,000)
Notes and mortgages issued (749,000) (2,503,000)
Payments received on notes, mortgages
and capital subleases receivable 39,000 32,000 112,000
Disposal of property, equipment
and franchise rights 2,342,000 17,000 569,000
Other investments 1,330,000 (1,356,000)
----------- ---------- -----------
Net cash used for
investing activities (20,238,000) (12,348,000) (16,958,000)
---------- ---------- -----------
|
The accompanying notes are an integral part of the financial statements.
Continued
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Increase (Decrease) in Cash and Cash Equivalents
1996 1995 1994
(52 WEEKS) (52 WEEKS) (52 WEEKS)
---------- ------------- ----------
Cash flows from financing activities:
Proceeds from long-term debt $ 2,997,000 $ 4,376,000 $ 6,800,000
Principal payments on long-term debt (154,000) (7,181,000) (267,000)
Retirement of long-term debt (450,000) (75,000)
Purchase of senior notes (838,000) (1,387,000)
Proceeds from sale-leaseback transactions 4,246,000 861,000 672,000
Dividends paid (1,000,000) (636,000) (3,473,000)
Principal payments on capital leases (605,000) (616,000) (561,000)
Exercise of employee stock options 12,000 2,000
----------- ---------- ----------
Net cash provided by (used for)
financing activities 4,208,000 (4,581,000) 3,096,000
----------- ---------- ----------
Increase (decrease) in cash
and cash equivalents (149,000) (247,000) 538,000
Cash and cash equivalents,
beginning of year 1,463,000 1,710,000 1,172,000
----------- ---------- ----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,314,000 $ 1,463,000 $ 1,710,000
=========== =========== ==========
Supplemental disclosures:
Interest paid on debt $14,277,000 $14,590,000 $ 14,421,000
Taxes paid $ 393,000 $ 153,000 $ 126,000
|
The accompanying notes are an integral part of the financial statements.
CARROLS CORPORATION AND SUBSIDIARIES
Accounting Policies
The following is a summary of certain significant accounting policies followed in the preparation of the consolidated financial statements.
Basis of Consolidation
The consolidated financial statements include the accounts of Carrols Corporation and its subsidiaries (the "Company"). All significant intercompany transactions have been eliminated in consolidation. The Company is a wholly-owned subsidiary of Carrols Holdings Corporation ("Holdings").
At December 31, 1996 the Company operated, as franchisee, 232 fast food restaurants under the trade name "Burger King" in nine Northeastern and Midwestern states and one Southeastern state. As reported by Burger King Corporation ("BKC"), the Burger King system is the second largest "hamburger fast food" restaurant system in the United States in terms of sales and number of restaurants. The Company is the largest independent Burger King franchisee in the United States.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Depreciation and Amortization
Depreciation and amortization is provided on the straight-line method for financial reporting purposes. The useful lives for computing depreciation and amortization are as follows:
Buildings and improvements 5 to 20 years
Leasehold improvements Remaining life of lease including
renewal options or life of asset,
whichever is shorter
Equipment 3 to 10 years
Capital leases Remaining life of lease
|
At the time of retirement or other disposition, the cost and accumulated depreciation is removed from the accounts and any gain or loss is reflected in income. Depreciation expense for the years ended December 31, 1996, 1995 and 1994 was $7,300,000, $7,594,000 and $7,404,000, respectively.
Franchise Rights and Beneficial Leases
Fees for initial franchises and renewals paid to Burger King Corporation are amortized using the straight-line method over the term of the agreement, generally twenty years.
Acquisition costs allocated to franchise rights and beneficial leases are amortized using the straight-line method, principally over the remaining lives of the leases including renewal options, but not in excess of 40 years.
CARROLS CORPORATION AND SUBSIDIARIES
Excess of Cost Over Fair Value
The excess of cost over fair value of assets acquired is amortized on a straight-line basis over 40 years.
Long-lived Assets
The recoverability of the carrying values of property, equipment, franchise rights and beneficial leases is periodically evaluated based on current and forecasted undiscounted cash flows, future market opportunities, strategic importance and estimated disposal values.
Deferred Financing Costs
Financing costs incurred in obtaining long-term debt are capitalized and amortized over the life of the related debt on an effective interest basis.
Income Taxes
The Company and its subsidiaries are included in the consolidated federal income tax return of Holdings through the date of the change of control at April 3, 1996. The Company and its subsidiaries will file separate federal income tax returns for the period April 4, 1996 to December 31, 1996.
Advertising Costs
All advertising costs are expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that fair value:
Current Assets and Liabilities - The carrying value of cash and cash equivalents and accrued liabilities approximates fair value because of the short maturity of those instruments.
Senior Notes - The fair value of senior notes is based on quoted market prices. The recorded amount, as of December 31, 1996, approximates fair value.
Revolving Line of Credit and Acquisition Loan - Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value. The recorded amount, as of December 31, 1996, approximates fair value.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Self Insurance
The Company is self insured for workers compensation and general liability up to predetermined amounts above which third party insurance applies. Losses are accrued based upon the Company's estimates of the aggregate liability for claims incurred based on the Company's experience.
Stock-Based Compensation
In October 1995, Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation" was issued which sets forth a fair value method of recognizing stock based compensation expense. As permitted by SFAS No. 123, the Company intends to continue to measure compensation for such plans using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees" and will disclose the additional information relative to issued stock options and pro forma net income, as if the options granted were expensed at their estimated fair value at the time of grant. There was no effect on the Company's financial statements as a result of adopting this statement.
Fiscal Year
The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The financial statements included herein are as of December 29, 1996 (52 weeks), December 31, 1995 (52 weeks), and January 1, 1995 (52 weeks) and are referred to as the fiscal years ended December 31, 1996, 1995 and 1994, respectively.
Reclassification
Certain amounts for prior years have been reclassified to conform to the current year presentation.
2. INVENTORIES
Inventories at December 31 consisted of:
1996 1995
---- ----
Raw materials (food and paper products) $ 1,386,000 $ 1,458,000
Supplies 777,000 834,000
----------- -----------
$ 2,163,000 $ 2,292,000
=========== ===========
|
3. LEASES
The Company utilizes land and buildings in its operations under various lease agreements. These leases are generally for initial terms of twenty years and, in most cases, contain renewal options for two to four additional five year periods. The rent payable under such leases is generally a percentage of sales with a provision for minimum rent. In addition, most leases require payment of property taxes, insurance and utilities.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. LEASES CONTINUED
Deferred gains of approximately $2,815,000 were recorded as a result of sale/leaseback transactions and are being amortized over the lives of the leases. These leases are operating leases, have a 20 year primary term with four five-year renewal options and provide for additional rent based on a percentage of sales in excess of predetermined levels. The net deferred gain of $2,154,000 and $1,773,000 at December 31, 1996 and 1995, respectively, is the result of these transactions.
Accumulated amortization pertaining to capital leases for the years ended December 31, 1996 and 1995 was $9,151,000 and $8,945,000, respectively.
Minimum rent commitments under noncancelable leases as of December 31, 1996, are as follows:
CAPITAL OPERATING
------- ---------
Years Ending:
1997 $927,000 $11,459,000
1998 758,000 10,889,000
1999 541,000 10,255,000
2000 480,000 9,965,000
2001 470,000 9,388,000
2002 and thereafter 1,758,000 78,886,000
--------- ------------
Total minimum lease payments 4,934,000 $130,842,000
============
Less amount representing interest
(7.7% to 16.6%) 1,857,000
---------
Total obligations under capital leases 3,077,000
Less: current portion 574,000
----------
Long term obligations under capital leases $2,503,000
==========
|
Total rent expense on operating leases, including percentage rent on both operating and capital leases, for the years ended December 31, was as follows:
1996 1995 1994
---- ---- ----
Minimum rent on real property $ 11,590,000 $ 11,108,000 $ 10,147,000
Additional rent based on a
percentage of sales 2,700,000 2,548,000 1,917,000
Equipment rent 167,000 164,000 109,000
------------ ------------ ------------
$ 14,457,000 $ 13,820,000 $ 12,173,000
============ ============ ============
|
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LONG-TERM DEBT
Long-term debt at December 31 consisted of:
1996 1995
--------- ---------
Collateralized:
Revolving line of credit $4,669,000 $ 1,700,000
Acquisition loan 5,000,000 5,000,000
Industrial Development Revenue bonds -- 596,000
Other notes payable with
interest rates tp 10% 857,000 837,000
Unsecured:
Senior notes 107,662,000 108,500,000
----------- -----------
118,188,000 116,633,000
Less: current portion 8,000 258,000
------------ ------------
$118,180,000 $116,375,000
============ ============
|
The Company issued $110 million of unsecured senior notes in August 1993. The senior notes bear interest at a rate of 11.5%, payable semi-annually on each February 15 and August 15, and are due August 15, 2003. The notes are redeemable at the option of the Company in whole or in part on or after August 15, 1998 at specified redemption prices. Provisions of the revolving line of credit facility place limitations on the redemption or repurchase of the notes so long as the facility remains in effect. During 1996, the Company purchased $0.8 million face value of senior notes.
On December 20, 1994, the revolving line of credit agreement was amended to provide for an additional acquisition loan of $5 million. The $5 million acquisition loan was collateralized by the twenty-two restaurants acquired during 1994 and was fully advanced during 1995.
CARROLS CORPORATION AND SUBSIDIARIES
4. LONG-TERM DEBT (CONTINUED)
Effective December 20, 1994, in conjunction with the additional $5 million acquisition loan, the revolving line of credit agreement was amended to reduce the interest rate on all borrowings thereunder to either the London Interbank Offering Rate plus 2.5% or the prime rate plus 1.25%, as selected by the Company. If the revolving line of credit and acquisition loan exceed $25 million, the interest rate is increased to either the London Interbank Offering Rate plus 3.5% or the prime rate plus 2.25% on the amount of the loan exceeding $25 million. The amount available under the revolving line of credit was increased to $25 million with no future reductions until its maturity in August 2000. At December 31, 1996 there was $19.2 million available under the revolving line of credit facility after reduction for the $4.7 million outstanding and a $1.1 million letter of credit guaranteed by the facility. A commitment fee of 1/2% is payable on the unused balance. At December 31, 1996, the facility was collateralized by substantially all assets of the Company.
The Industrial Development Revenue bonds were collateralized by a warehouse which was sold during 1996, at which time the bonds were retired. Interest was at seventy-five percent of prime.
Restrictive covenants of the senior notes and the revolving line of credit facility include limitations with respect to the issuance of additional debt and redeemable preferred stock; the sale of assets; dividend payments and capital stock redemption; transactions with affiliates; investments; consolidations, mergers and transfers of assets and minimum interest and fixed charge coverage ratios.
At December 31, 1996, principal payments required on all long-term debt are as follows:
1997 $ 8,000
1998 8,000
1999 192,000
2000 9,789,000
2001
2002 and thereafter 108,191,000
------------
$118,188,000
============
|
5. INCOME TAXES
The income tax (provision) benefit was comprised of the following at December 31:
1996 1995 1994
---- ---- ----
Current:
Federal $ (981,000) $ (35,000)
State (400,000) (200,000) $(165,000)
------------ ----------- ---------
(1,381,000) (235,000) (165,000)
------------ ----------- ---------
Deferred:
Federal (1,199,000) 8,552,000
State (520,000) 1,509,000
------------ ----------- ---------
(1,719,000) 10,061,000
------------ ----------- ---------
$(3,100,000) $ 9,826,000 $ (165,000)
============ =========== =========
|
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INCOME TAXES CONTINUED
The components of deferred income tax assets and liabilities at December 31, are as follows:
1996 1995
---- ----
Deferred tax assets:
Receivable and other reserves $ 503,000 $ 405,000
Accrued vacation benefits 427,000 484,000
Deferred income on sale/leaseback
of real estate 853,000 709,000
Postretirement benefits 602,000 569,000
Capital leases 463,000 545,000
Property and equipment 671,000 138,000
Alternative minimum tax credit carryforward 35,000
Net operating loss carryforwards 12,348,000 12,458,000
---------- ----------
15,867,000 15,343,000
Deferred tax liabilities:
Franchise rights 5,966,000 5,282,000
---------- ----------
Net deferred income tax asset $ 9,901,000 $10,061,000
========== ==========
|
The Company has net operating loss carryforwards for income tax purposes of approximately $32 million. The net operating loss carryforwards expire in varying amounts beginning 2003 through 2010. Realization of the deferred income tax assets relating to the net operating loss is dependent on generating sufficient taxable income prior to the expiration of the loss carryforwards. Based upon results of operations, management believes it is more likely than not that the Company will generate sufficient future taxable income to fully realize the benefit of the net operating loss carryforwards and existing temporary differences, although there can be no assurance of this. Accordingly, during 1995, the previously provided valuation allowance was eliminated and the net deferred tax asset was recognized as a deferred income tax benefit.
Reconciliation of the statutory federal income tax rate to the effective tax rate is as follows:
1996
----
Statutory federal income tax rate 34.00%
Change in valuation allowance
State Income Taxes, net of
federal benefit 9.66%
Nondeductible expenses 3.13%
Miscellaneous 2.54%
-----
49.34%
=====
|
A non-cash tax benefit of $1,559,000 resulting from the disqualifying disposition of incentive stock options associated with the change of control transaction was credited directly to paid in capital and increased the deferred income tax asset.
CARROLS CORPORATION AND SUBSIDIARIES
The Company
The Company has 1,000 shares of common stock authorized of which 10 shares are issued and outstanding. Dividends on the Company's common stock are restricted to amounts permitted by various loan agreements.
Additional paid-in capital was reduced for cash dividends declared of $1,000,000, $636,000, and $2,973,000 in 1996, 1995 and 1994, respectively.
Holdings
The sole activity of Holdings is the ownership of 100% of the stock of Carrols Corporation. In February 1997, a 1 for 3.701 reverse stock split was effected to reduce the outstanding shares of common stock of Holdings to 850,000 shares.
Holdings, the parent, has issued various classes of stock with redemption, convertibility and cumulative dividend payment requirements. The following amounts have been restated to reflect the effects of the reverse stock split at December 31,:
1996 1995
---- ----
Preferred stock:
Class A, 10% cumulative redeemable,
par value $.01, authorized, issued
and outstanding 7,250 shares at
liquidation preference and
redemption price $7,250,000 $7,250,000
Class B, convertible, 10% cumulative
redeemable Series I, par value $.01,
authorized, 750 shares, issued and
outstanding - none for 1996 and 750
shares for 1995 750,000
Class B, 10% cumulative redeemable
Series II, par value $.01, authorized
750 shares, issued - none
Common stock:
Voting, par value $.01, authorized
6,000,000 shares, issued and
outstanding 850,000 and 610,801
shares for 1996 and 1995, respectively 9,000 6,000
Non-voting, par value $.01, authorized
882,353 shares, issued - none
|
The Class A Preferred Stock, issued in December 1986, is subject to mandatory redemptions equally over each of the tenth through thirteenth anniversaries of issuance. In addition, subject to the redemption restrictions of various loan agreements, all preferred stock may be redeemed at the option of Holdings, at a price of $1,000 per share, plus accrued dividends. In the event that the scheduled redemptions are not timely made, the annual dividend rate on the amount of Class A Preferred Stock scheduled to be redeemed but not redeemed will automatically increase to 14%.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. STOCKHOLDER'S EQUITY CONTINUED
Holders of the Preferred Stock are entitled to cumulative dividends payable quarterly at the rate of 10% per annum. In the event that Holdings fails to pay four consecutive quarterly dividends on the Class A preferred stock, the subsequent dividend rate increases to 11.5%; if eight consecutive quarterly dividends are missed, the rate increases to 13% per annum until such dividends are paid. Because of certain restrictive covenants in the Company's loan agreements, at December 31, 1996, the first scheduled redemption of $1,813,000 and dividends of $182,000 for the last quarter of 1996 have not been paid.
In conjunction with various financings completed between 1986 and 1992, warrants to purchase shares of Holdings Common Stock at an exercise price of $3.590 to $3.701 per share were granted with 131,886 and 201,338 outstanding at December 31, 1996 and 1995, respectively.
The warrants outstanding at December 31, 1996 are owned by an independent third party. The warrants were originally owned by Heller Financial, Inc. To facilitate the sale and purchase of the warrants, Holdings loaned $2,500,000 to the purchaser of the warrants which loan was secured by a collateral pledge of the shares of the purchaser and of the warrants. Holdings has an option to purchase the warrants at an aggregate price of $2,510,000 if exercised before November 2, 1997 and $2,520,000 if exercised after November 1, 1997. The option expires on November 1, 2000. Upon completion of the sale of Holdings common stock referred to in Note 11 - Subsequent Event, Holdings will exercise its option to purchase the warrants. Accordingly, to reflect the ultimate effect of the Company's exercise of the option, the receivable has been reclassified to increase stockholder's deficit as of December 31, 1996.
Change of Control
On April 3, 1996, Carrols Holdings Corporation, Carrols Corporation and certain selling shareholders of Carrols Holdings Corporation sold approximately 97 percent of the issued common stock and common stock equivalents (the Class B Convertible Preferred stock, warrants to buy common stock and options to buy common stock) exclusive of the warrants referred to above. This change in control resulted in the Company incurring a one-time charge of $509,000 in fiscal 1996.
The sale of stock pursuant to this agreement constituted an ownership change under certain provisions of the Internal Revenue Code which resulted in annual limitations on utilization of the net operating loss carryforward referred to in Note 5.
This transaction constituted a "change of control" under the Indenture governing the senior notes due 2003. Accordingly, each holder of the notes had the right to require the Company to repurchase all or any part of such holder's notes at a repurchase price in cash equal to 101% of the principal amount of the notes being repurchased plus accrued and unpaid interest. Such redemptions totaled $838,000 in fiscal 1996.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. STOCKHOLDER'S EQUITY CONTINUED
Stock Options
Carrols Holdings Corporation adopted an Employee Stock Option and Award Plan on December 14, 1993. Effective April 1, 1994, Holdings also adopted a Stock Option Plan for non-employee directors. The Plans allowed for the granting of non-qualified stock options, stock appreciation rights and incentive stock options to directors, officers and certain other Company employees. The Company was authorized to grant options for up to 850,000 shares, 100,000 shares for non-employee directors and 750,000 shares for employees. Options were generally exercisable over 5 years with 94,600 options exerciseable at December 31, 1995. As of December 31, 1995, non-employee directors were granted options totaling 18,000. Under the non-employee director plan, no options were exercised or canceled during 1995. During 1996, 210,800 options (135,400 at $4.00 and 75,400 at $6.12) were canceled by the sale of such options in conjunction with the change of control transaction and the plans were canceled. The remaining 120,000 options were subject to a deferred purchase agreement whereby the sale and cancellation occurred in January, 1997.
The Company accounts for its stock-based compensation plans under APB Opinion No. 25. Accordingly, compensation cost has been recognized only to the extent the exercise price was below the fair market value at the time of the grant. The pro forma effect on the Company's net income, assuming the compensation cost for the Company's stock-based compensation plans had been determined based on the fair value at the grant dates for awards consistent with the method of SFAS No. 123, would be immaterial.
Option activity during 1995, and 1996 consisted of:
OPTIONS AT $4.00 OPTIONS AT $6.12
---------------- ----------------
Balance at December 31, 1994 257,000 0
Granted 99,100
Exercised (600)
Canceled (12,400) (2,300)
------- --------
Balance at December 31, 1995 244,000 96,800
Exercised (3,000)
Canceled (141,000) (76,800)
-------- --------
Balance at December 31, 1996 100,000 20,000
======== ========
|
On December 26, 1996, the Company adopted an incentive stock option plan whereby the Company may grant options to purchase up to 106,250 shares of Common Stock to eligible officers and employees of the Company. As of the Company's most recent year end, no options were granted.
7. LITIGATION
The Company is a party to various legal proceedings arising from the normal course of business. Management believes adverse decisions relating to litigation and contingencies in the aggregate would not materially effect the Company's results of operations, financial condition or cash flows.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. EMPLOYEE SAVINGS PLAN
The Company offers a savings plan for salaried employees. Under the plan, participating employees may contribute up to 10% of their salary annually. The Company's contributions, which begin to vest after three years and fully vest after seven years of service, are equal to 50% of the employee's contributions to a maximum Company contribution of $530 annually. The employees have various investment options available under a trust established by the plan. The plan expense was $164,000, $125,000, and $125,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
9. POSTRETIREMENT BENEFITS
While the Company reserves the right to change its policy, the Company provides postretirement medical and life insurance benefits covering substantially all salaried employees.
The following sets forth the plan status at December 31:
Accumulated Postretirement Benefit Obligation (APBO):
1996 1995
---- ----
Retirees $ 518,000 $ 411,000
Fully eligible active participants 26,000 242,000
Other active plan participants
not fully eligible 697,000 580,000
----------- -----------
Total APBO 1,241,000 1,233,000
Unrecognized benefit from plan changes 315,000 255,000
Unrecognized net loss (34,000) (64,000)
----------- -----------
Accrued postretirement
benefit obligation $ 1,522,000 $ 1,424,000
=========== ===========
|
Net periodic postretirement benefit cost included the following components:
1996 1995 1994
---- ---- ----
Service cost $64,000 $47,000 $47,000
Interest cost 77,000 76,000 70,000
Net amortization of
gains,losses and unrecognized
benefit from plan changes (25,000) (29,000) (20,000)
-------- ------ ------
$116,000 $94,000 $97,000
======== ====== ======
|
A 6.75% annual rate of increase in the per capita costs of covered health care benefits was assumed for 1996, gradually decreasing to 5.5% by the year 2001. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1996 by $157,000 and
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. POST RETIREMENT BENEFITS CONTINUED
increase the aggregate of the service cost and interest cost components of net periodic postretirement benefit cost for 1996 by $23,000. For 1996 and 1995, a discount rate of 7% was used to determine the accumulated postretirement benefit obligation. Actual benefit costs paid on behalf of retirees in 1996, 1995 and 1994 amounted to $24,000, $24,000, and $31,000, respectively.
10. LOSS ON CLOSING RESTAURANTS AND OTHER
The loss on closing restaurants and other of $1.8 million for 1994 included the write-down of assets to net realizable value and estimated lease termination costs for the closing during 1995 of certain restaurants operating at a negative annual cash flow and the write down to net realizable value of a vacant warehouse held for sale. The vacant warehouse was sold in 1996.
11. SUBSEQUENT EVENT
In February 1997, a 1 for 3.701 reverse stock split was effected to reduce the outstanding shares of common stock of Holdings to 850,000 shares.
On February 25, 1997, Carrols Holdings Corporation and its sole stockholder entered into an agreement whereby each agreed to sell 283,334 shares of common stock of Carrols Holdings Corporation to an independent third party. Consummation of the transaction is subject to certain conditions, among which is the completion of a new credit facility satisfactory to the independent third party. Additionally, Holdings agreed to sell 10,810 shares to certain officers of the Company. The sale of the new common stock by Holdings will result in approximately $31.0 million of new equity for the Company.
The consummation of the transaction contemplated by the agreement will constitute a "change of control" under the indenture governing the senior notes due 2003. Accordingly, each holder of the notes will have the right to require the Company to repurchase all or any part of such holder's notes at a repurchase price in cash equal to 101% of the principal amount of the notes being repurchased plus accrued and unpaid interest, if any, within a 30-60 day period, as determined by the Company. The Company anticipates that an insignificant number of note holders will exercise their rights, based on current market conditions. However, to the extent holders exercise their rights, the Company expects to finance the aggregate repurchase amount through borrowings under the revolving line of credit portion of its senior secured credit facility and/or through other financing.
CARROLS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Col. A Col. B Col. C Col. D Col E
------ ------ ------ ------ -----
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
----------- --------- ----------- ---------- ----------
Year ended December 31, 1996:
Accumulated depreciation of
property and equipment $ 59,631,000 $ 7,300,000 $(3,575,000)(d) $ 63,356,000
Accumulated amortization of
franchise rights 19,648,000 2,575,000 (436,000)(a) 21,787,000
Accumulated amortization of
beneficial leases 7,655,000 634,000 (541,000)(a) 7,748,000
Accumulated amortization of excess
cost over fair value of assets 520,000 58,000 578,000
Reserve for doubtful trade accounts
receivable 419,000 16,000 (125,000)(b) 310,000
Other reserves (c) 788,000 (35,000)(b) 753,000
Year ended December 31, 1995:
Accumulated depreciation of property
and equipment 53,969,000 7,594,000 (1,932,000)(d) 59,631,000
Accumulated amortization of
franchise rights 17,548,000 2,512,000 (412,000)(a) 19,648,000
Accumulated amortization of
beneficial leases 7,433,000 721,000 (499,000)(a) 7,655,000
Accumulated amortization of excess
cost over fair value of assets 462,000 58,000 520,000
Reserve for doubtful trade accounts
receivable 424,000 12,000 (17,000)(b) 419,000
Other reserves (c) 542,000 388,000 (142,000)(b) 788,000
Year ended December 31, 1994:
Accumulated depreciation of property
and equipment 47,254,000 7,404,000 (689,000)(d) 53,969,000
Accumulated amortization of
franchise rights 15,146,000 2,402,000 17,548,000
Accumulated amortization of
beneficial leases 6,921,000 785,000 (273,000)(a) 7,433,000
Accumulated amortization of excess
cost over fair value of assets 404,000 58,000 462,000
Reserve for doubtful trade accounts
receivable 563,000 2,000 (141,000)(b) 424,000
Other reserves (c) 521,000 21,000 542,000
|
(a) Represents reduction of accumulated amortization due to sale or disposition
of restaurants.
(b) Represents write-offs of accounts.
(c) Included principally in other assets
(d) Represents retirements of fixed assets.
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as...............'r' The section symbol shall be expressed as............................'SS'
FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
AMONG
CARROLS HOLDINGS CORPORATION
CARROLS CORPORATION
AND
HELLER FINANCIAL, INC.
DATED AS OF FEBRUARY 22, 1995
FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Fifth Amendment to Third Amended and Restated Loan and Security Agreement, dated as of February 22, 1995 (this "Agreement") is among Carrols Holdings Corporation, a Delaware corporation ("Holdings"), Carrols Corporation, a Delaware corporation ("Borrower") and HELLER FINANCIAL, INC., a Delaware corporation ("Lender").
W I T N E S S E T H:
WHEREAS, Holdings, Borrower and Lender are parties to that certain Third Amended and Restated Loan and Security Agreement dated as of August 9, 1993 (as heretofore amended, the "Credit Agreement"; capitalized terms not otherwise defined herein having the definitions provided therefor in the Credit Agreement) and to certain other documents executed in connection with the Credit Agreement; and
WHEREAS, the parties hereto wish to further amend the Credit Agreement as provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendments to the Credit Agreement.
A. Clause (iv) of subsection 9.2(g) of the Credit Agreement is hereby amended by deleting the sum "$2,000,000" and by substituting in its place the sum "$5,000,000."
B. Subpart (a) of clause (iv) of subsection 9.2(g) of the Credit Agreement is hereby amended by deleting the percentage "2%" expressed therein and by substituting in its place the percentage "5%"."
2. Representations and Warranties. To induce Lender to enter into this Agreement, Holdings and Borrower each represents and warrants to Lender that the execution, delivery and performance by Holdings and Borrower of this Agreement are within their respective corporate powers, have been duly authorized by all necessary corporate action (including, without limitation, shareholder approval), have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law applicable to Holdings or Borrower, the Certificate of Incorporation or Bylaws of Holdings or Borrower, or any order, judgment or decree of any court or other agency of government or any contractual obligation binding upon Holdings or Borrower; and the Credit Agreement as amended as of the date hereof is the legal, valid and binding obligation of Holdings and Borrower enforceable against Holdings and Borrower in accordance with its terms.
3. Conditions. The effectiveness of the amendments stated in this Agreement is subject to the following conditions precedent or concurrent:
(a) No Default. No Default or Event of Default under the Credit Agreement, as amended hereby, shall have occurred and be continuing.
(b) Warranties and Representations. The warranties and representations of Holdings and Borrower contained in this Agreement, the Credit Agreement, as amended hereby, and the other Loan Documents, shall be true and correct as of the effective date hereof, with the same effect as though made on such date.
4. Miscellaneous.
(a) Captions. Section captions used in this Agreement are for convenience only, and shall not affect the construction of this Agreement.
(b) Governing Law. This Agreement shall be a contract made under and governed by the laws of the State of New York, without regard to conflict of laws principles. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement.
(d) Successors and Assigns. This Agreement shall be binding upon Holdings, Borrower and Lender and their respective permitted successors and assigns, and shall inure to the sole benefit of Holdings, Borrower and Lender and the successors and assigns of Holdings, Borrower and Lender.
(e) References. Any reference to the Credit Agreement contained in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Agreement shall be deemed to include this Agreement unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything contained herein, the terms of this Agreement are not intended to and do not serve to effect a novation as to the Credit Agreement. The parties hereto expressly do not intend to extinguish the Credit Agreement. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Credit Agreement which is evidenced by the Replacement Revolving Promissory Note and secured by the Collateral. The Credit Agreement as amended hereby and each of the other Loan Documents remain in full force and effect.
(g) Costs, Expenses and Taxes. Borrower affirms and acknowledges that Section 2.19 of the Credit Agreement applies to this Agreement and the transactions and agreements and documents contemplated hereunder.
Delivered at Chicago, Illinois, as of the day and year first above written.
CARROLS CORPORATION
Address: By: /s/ Richard V. Cross
968 James Street ---------------------------------
Syracuse, New York 13217-6969 Printed: Richard V. Cross
---------------------------------
Title: Executive Vice-President
---------------------------------
|
CARROLS HOLDINGS CORPORATION
Address: By: /s/ Richard V. Cross
968 James Street ---------------------------------
Syracuse, New York 13217-6969 Printed: Richard V. Cross
---------------------------------
Title: Assistant Treasurer
---------------------------------
|
HELLER FINANCIAL, INC.
Address: By: /s/ Stacia L. Kopplin
500 West Monroe Street ---------------------------------
Chicago, Illinois 60661 Printed: Stacia L. Kopplin
---------------------------------
Title: Assistant Vice-President
---------------------------------
|
SIXTH AMENDMENT TO THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
AMONG
CARROLS HOLDINGS CORPORATION
CARROLS CORPORATION
AND
HELLER FINANCIAL, INC.
DATED AS OF FEBRUARY 14, 1996
SIXTH AMENDMENT TO THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Sixth Amendment to Third Amended and Restated Loan and Security Agreement, dated as of February 14, 1996 (this "Agreement") is among Carrols Holdings Corporation, a Delaware corporation ("Holdings"), Carrols Corporation, a Delaware corporation ("Borrower") and HELLER FINANCIAL, INC., a Delaware corporation ("Lender").
W I T N E S S E T H:
WHEREAS, Holdings, Borrower and Lender are parties to that certain Third Amended and Restated Loan and Security Agreement dated as of August 9, 1993 (as heretofore amended, the "Credit Agreement"; capitalized terms not otherwise defined herein having the definitions provided therefor in the Credit Agreement) and to certain other documents executed in connection with the Credit Agreement; and
WHEREAS, the parties hereto wish to further amend the Credit Agreement as provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment to Section 9.2(g) of the Credit Agreement:
Subpart (a) of clause (iv) of subsection 9.2(g) of the Credit Agreement is hereby amended by deleting the words "at a discount to par of at least 5%" therefrom and by substituting in their place the words "at a premium to par of not greater than 5%."
2. Representations and Warranties. To induce Lender to enter into this Agreement, Holdings and Borrower each represents and warrants to Lender that the execution, delivery and performance by Holdings and Borrower of this Agreement are within their respective corporate powers, have been duly authorized by all necessary corporate action (including, without limitation, shareholder approval), have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law applicable to Holdings or Borrower, the Certificate of Incorporation or Bylaws of Holdings or Borrower, or any order, judgment or decree of any court or other agency of government or any contractual obligation binding upon Holdings or Borrower; the Credit Agreement as amended as of the date hereof is the legal, valid and binding obligation of Holdings and Borrower enforceable against Holdings and Borrower in accordance with its terms; and as of the date of this Agreement, Borrower has repurchased $1,500,000 face amount of Senior Notes for an aggregate consideration of approximately $1,380,000.
3. Conditions. The effectiveness of the amendments stated in this Agreement is subject to the following conditions precedent or concurrent:
(a) No Default. No Default or Event of Default under the Credit Agreement, as amended hereby, shall have occurred and be continuing.
(b) Warranties and Representations. The warranties and representations of Holdings and Borrower contained in this Agreement, the Credit Agreement, as amended hereby, and the other Loan Documents, shall be true and correct as of the effective date hereof, with the same effect as though made on such date.
4. Miscellaneous.
(a) Captions. Section captions used in this Agreement are for convenience only, and shall not affect the construction of this Agreement.
(b) Governing Law. This Agreement shall be a contract made under and governed by the laws of the State of New York, without regard to conflict of laws principles. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement.
(d) Successors and Assigns. This Agreement shall be binding upon Holdings, Borrower and Lender and their respective permitted successors and assigns, and shall inure to the sole benefit of Holdings, Borrower and Lender and the successors and assigns of Holdings, Borrower and Lender.
(e) References. Any reference to the Credit Agreement contained in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Agreement shall be deemed to include this Agreement unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything contained herein, the terms of this Agreement are not intended to and do not serve to effect a novation as to the Credit Agreement. The parties hereto expressly do not intend to extinguish the Credit Agreement. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Credit Agreement which is evidenced by the Replacement Revolving Promissory Note and secured by the Collateral. The Credit Agreement as amended hereby and each of the other Loan Documents remain in full force and effect.
(g) Costs, Expenses and Taxes. Borrower affirms and acknowledges that Section 2.19 of the Credit Agreement applies to this Agreement and the transactions and agreements and documents contemplated hereunder.
Delivered at Chicago, Illinois, as of the day and year first above written.
CARROLS CORPORATION
By: /s/ Richard V. Cross
--------------------------------
Printed: Richard V. Cross
-----------------------------
Title: Executive Vice-President
-------------------------------
|
CARROLS HOLDINGS CORPORATION
By: /s/ Richard V. Cross
--------------------------------
Printed: Richard V. Cross
--------------------------------
Title: Assistant Treasurer
-------------------------------
|
HELLER FINANCIAL, INC.
By: /s/ Kelli J. O'Connell
-----------------------------------
Printed: Kelli J. O'Connell
-----------------------------
Title: Assistant Vice-President
-------------------------------
|
STOCK PURCHASE AGREEMENT
BY AND AMONG
MADISON DEARBORN CAPITAL PARTNERS, L.P.
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
ATLANTIC RESTAURANTS, INC.
AND
CARROLS HOLDINGS CORPORATION
TABLE OF CONTENTS
Page
1. Authorization and Closing.......................................................... 1
1A. Purchase and Sale of the Securities......................................... 1
1B. The Closing................................................................. 1
1C. Purchase Price.............................................................. 2
2. Conditions of the Investors' Obligation at the Closing............................. 2
2A. Representations and Warranties; Covenants................................... 2
2B. Registration Agreement...................................................... 2
2C. Executive Options........................................................... 2
2D. Stockholders Agreement...................................................... 2
2E. Securities Law Compliance................................................... 3
2F. Loan Agreement.............................................................. 3
2G. Employment Agreements....................................................... 3
2H. Third Party Consents and Approvals.......................................... 3
2I. Governmental Consents and Approvals......................................... 3
2J. Purchase and Sale of the Securities......................................... 3
2K. Key-Man Life Insurance...................................................... 3
2L. Execution by Bank........................................................... 4
2M. Purchase of Shares by Alan Vituli, Daniel T. Accordino and Joseph A.
Zirkman................................................................. 4
2N. Amendment of Certificate of Incorporation................................... 4
2O. Opinion of the Company's Counsel............................................ 4
2P. Closing Documents........................................................... 4
2Q. Proceedings................................................................. 5
2R. Waiver...................................................................... 5
2S. Fees and Expenses........................................................... 5
3. Conditions of the Company's and Selling Shareholder's Obligations at the
Closing............................................................................ 5
3A. Representations and Warranties.............................................. 5
3B. Registration Agreement...................................................... 5
3C. Stockholders Agreement...................................................... 6
3D. Third Party Consents and Approvals.......................................... 6
3E. Governmental Consents and Approvals......................................... 6
3F. Fees and Expenses........................................................... 6
4. Pre-closing Covenants.............................................................. 6
4A. Company Covenants........................................................... 6
4B. Selling Shareholder Covenants............................................... 7
4C. Investors' Covenant......................................................... 7
|
5. Transfer of Restricted Securities.................................................. 7
5A. General Provisions.......................................................... 7
5B. Opinion Delivery............................................................ 7
5C. Rule 144A................................................................... 8
5D. Legend Removal.............................................................. 8
6. Representations and Warranties of the Company; Covenants........................... 8
6A. Organization, Corporate Power and Licenses.................................. 8
6B. Capital Stock and Related Matters........................................... 8
6C. Subsidiaries; Investments................................................... 9
6D. Authorization; No Breach.................................................... 9
6E. Securities Laws............................................................. 10
6F. Financial Statements........................................................ 10
6G. Absence of Undisclosed Liabilities.......................................... 10
6H. Affiliated Transactions..................................................... 11
6I. No Material Adverse Change.................................................. 11
6J. Absence of Certain Developments............................................. 11
6K. Assets...................................................................... 12
6L. Tax Matters................................................................. 15
6M. Contracts and Commitments................................................... 16
6N. Intellectual Property Rights................................................ 18
6O. Litigation, etc............................................................. 19
6P. Brokerage................................................................... 19
6Q. Governmental Consent, etc................................................... 19
6R. Insurance................................................................... 19
6S. Employees................................................................... 19
6T. ERISA....................................................................... 20
6U. Compliance with Laws........................................................ 21
6V. Environmental and Safety Matters............................................ 22
6W. Disclosure.................................................................. 23
6X. Closing Date................................................................ 23
6Y. Reports with the Securities and Exchange Commission......................... 23
7. Representations and Warranties of the Selling Shareholder.......................... 24
7A. The ARI Shares.............................................................. 24
7B. Authorization............................................................... 24
7C. Company Representations..................................................... 25
7D. Compliance with Laws........................................................ 25
7E. Ownership of Selling Shareholder............................................ 25
7F. Brokerage................................................................... 25
7G. Closing Date................................................................ 26
8. Investors' Representations and Warranties.......................................... 26
8A. Investors' Investment Representations....................................... 26
8B. Brokerage................................................................... 26
|
8C. Governmental Consent, etc................................................... 26
8D. Closing Date................................................................ 27
9. Definitions........................................................................ 27
9A. Definitions................................................................. 27
10. Termination........................................................................ 30
10A. Conditions of Termination................................................... 30
10B. Effect of Termination....................................................... 30
11. Miscellaneous...................................................................... 30
11A. Expenses.................................................................... 31
11B. Remedies.................................................................... 31
11C. Consent to Amendments....................................................... 31
11D. Successors and Assigns...................................................... 31
11E. Severability................................................................ 32
11F. Counterparts................................................................ 32
11G. Descriptive Headings; Interpretation........................................ 32
11H. Governing Law............................................................... 32
11I. Notices..................................................................... 32
11J. No Strict Construction...................................................... 34
11K. Indemnification............................................................. 34
11L. Further Assurances.......................................................... 38
11M. Consent to Jurisdiction..................................................... 39
Schedules and Exhibits
List of Exhibits
List of Disclosure Schedules
|
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of February 25, 1997 by and among Carrols Holdings Corporation, a Delaware corporation (the "Company"), Atlantic Restaurants, Inc., a Delaware corporation (the "Selling Shareholder" and, together with the Company, the "Sellers"), Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P. (together with Madison Dearborn Capital Partners, L.P., the "Investors"). Except as otherwise indicated herein, capitalized terms used herein are defined in Section 9 hereof.
WHEREAS, the authorized capital stock of the Company includes 3,000,000 shares of common stock, par value $0.01 per share (the "Common Stock"), of which 850,000 shares are issued and outstanding;
WHEREAS, the Selling Shareholder owns beneficially and of record 850,000 of the outstanding shares of Common Stock; and
WHEREAS, on the terms and subject to the conditions set forth in this Agreement, the Investors desire to acquire 283,334 shares of Common Stock from the Company and 283,333 shares of Common Stock from the Selling Shareholder.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. Purchase and Sale of the Securities. At the Closing, the Company shall sell to the Investors, and subject to the terms and conditions set forth herein, the Investors shall purchase and acquire from the Company 283,334 shares of Common Stock (the "Company Shares") at a price of $108.2353 per share, and the Selling Shareholder shall sell to the Investors and, subject to the terms and conditions set forth herein, the Investors shall purchase and acquire from the Selling Shareholder 283,333 shares of Common Stock (the "ARI Shares" and, together with the Company Shares, the "Shares") at a price of $108.2353 per share.
1B. The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis, 153 East 53rd Street, New York, New York, or at such other place as may be mutually agreeable to each of the parties hereto, commencing at 10:00 a.m. on the date which is five business days after the date on which the conditions to the Closing set forth in Section 2 and Section 3 have been satisfied or waived, or at such other time and on such other date as the parties hereto mutually agree. At the Closing, the Sellers shall deliver to the Investors: (i) stock certificates evidencing the Company Shares registered in such Investors' name; and (ii) stock certificates evidencing the ARI Shares, such certificates being duly endorsed or accompanied by duly executed forms of assignment.
1C. Purchase Price. At the Closing, the Investors shall pay the purchase price for the Company Shares and the ARI Shares as follows:
(i) an amount equal to $30,666,740.49 by wire transfer of immediately available funds to an account or accounts designated by the Company; and
(ii) an amount equal to $30,666,632.25 by wire transfer of immediately available funds to an account or accounts designated by the Selling Shareholder.
Section 2. Conditions of the Investors' Obligation at the Closing2. Conditions of the Investors' Obligation at the Closing. The obligation of the Investors to purchase and pay for the Company Shares and the ARI Shares at the Closing is subject to the satisfaction as of the Closing of the following conditions:
2A. Representations and Warranties; Covenants. Subject to paragraphs 11K(iii)(a) and 11K(iii)(d) hereof, the representations and warranties contained in Section 6 and Section 7 hereof shall be true and correct in all material respects at and as of the Closing as though then made, except to the extent of changes caused by the transactions expressly contemplated herein, and the Company and the Selling Shareholder shall have performed in all material respects all of the covenants required to be performed by them hereunder prior to the Closing.
2B. Registration Agreement. The Company, the Selling Shareholder, the Investors, Alan Vituli and certain management optionholders shall have entered into a registration agreement in form and substance as set forth in Exhibit A attached hereto (the "Registration Agreement"), and the Registration Agreement shall be in full force and effect as of the Closing.
2C. Executive Options. The Company shall have entered into an Unvested Stock Option Agreement with each of Alan Vituli, Daniel T. Accordino, and Joseph A. Zirkman in form and substance set forth in Exhibit B1, Exhibit B2 and Exhibit B3 attached hereto, respectively. The Company shall have adopted the Carrols Holdings Corporation 1996 Long-Term Incentive Plan (the "1996 Plan") in form and substance set forth in Exhibit B4 attached hereto. The Company shall have entered into stock option agreements with each of Alan Vituli and Daniel T. Accordino pursuant to the 1996 Plan in form and substance set forth on Exhibit B5 and Exhibit B6 attached hereto, respectively. Each of the option agreements referred to in this paragraph 2C shall collectively be referred to herein as the "Executive Option Agreements."
2D. Stockholders Agreement. The Company, the Selling Shareholder, the Investors, Alan Vituli and certain management optionholders shall have entered into a stockholders agreement in form and substance set forth in Exhibit C attached hereto (the "Stockholders Agreement"), and the Stockholders Agreement shall be in full force and effect as of the Closing. At the Closing, the Selling Shareholder shall surrender any and all stock certificates held by the Selling Shareholder on the date thereof to the Company so that such certificate(s) may be imprinted with the legends in substantially the form set forth in paragraph 8A hereof and paragraph 6 of the Stockholders Agreement.
2E. Securities Law Compliance. The Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance of the Company Shares pursuant to this Agreement in compliance with such laws.
2F. Loan Agreement. The Company and its Subsidiaries shall have entered into a loan agreement providing for one or more loan facilities in form and substance reasonably satisfactory to the Investors (together with all related agreements and instruments, the "Loan Agreement").
2G. Employment Agreements. The Company shall have entered into a Second Amended and Restated Employment Agreement with each of Alan Vituli and Daniel T. Accordino (the "Employment Agreements") in form and substance satisfactory to the Investors set forth in Exhibit D1 and Exhibit D2 attached hereto, respectively, and each of the Employment Agreements shall not have been amended or modified and shall be in full force and effect as of the Closing.
2H. Third Party Consents and Approvals. The Company and the Selling Shareholder shall have received or obtained all third party and shareholder consents and approvals that are necessary for the consummation of the transactions contemplated hereby or that are required in order to prevent a breach of or default under, a termination or modification of, or acceleration of the terms of, any contract, agreement or document listed or described on the Schedules attached hereto, in each case on terms and conditions reasonably satisfactory to the Investors (including, without limitation, the approval of Burger King Corporation).
2I. Governmental Consents and Approvals. The Company and the Selling Shareholder shall have received or obtained all governmental and regulatory consents and approvals that are necessary for the consummation of the transactions contemplated hereby, in each case on terms and conditions reasonably satisfactory to the Investors and, to the extent applicable, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart-Scott-Rodino Act"), shall have expired or been terminated.
2J. Purchase and Sale of the Securities. The sale of the Company Shares and the sale of the ARI Shares to the Investors shall have occurred simultaneously hereunder.
2K. Key-Man Life Insurance. The Company shall have obtained a key-man life insurance policy on the life of Alan Vituli in the face amount of $10,000,000 which policy shall be in full force and effect as of the Closing. Such insurance shall name the Company as beneficiary and shall provide that such insurance policy may not be canceled unless the insurance carrier gives at least 30 days prior written notice of such cancellation to the Investors.
2L. Execution by Bank. Bahrain International Bank, E.C. (the "Bank") shall have executed and delivered this Agreement, the Stockholders Agreement and the Registration Agreement.
2M. Purchase of Shares by Alan Vituli, Daniel T. Accordino and Joseph A. Zirkman. Simultaneously with the consummation of sale of the ARI Shares and the Company
Shares to the Investors, Alan Vituli shall purchase 9,827 shares of Common Stock at a price of $101.7646 per share, Daniel T. Accordino shall purchase 860 shares of Common Stock at a price of $101.7646 per share and Joseph A. Zirkman shall purchase 123 shares of Common Stock at a price of $101.7646, each amount payable by wire transfer of immediately available funds.
2N. Amendment of Certificate of Incorporation. The Company's Certificate of Incorporation shall have been amended to eliminate all authorized shares of nonvoting common stock and all stockholder preemptive rights therein.
2O. Opinion of the Company's Counsel. The Investors shall have received from each of Schulte Roth & Zabel LLP and Joseph A. Zirkman, Esq., counsel for the Company, and Pryor, Cashman, Sherman & Flynn, counsel for the Selling Shareholder, an opinion with respect to the matters set forth in Exhibits E1, E2 and E3 attached hereto, respectively, which shall be addressed to the Investors, dated the date of the Closing and in form and substance satisfactory to the Investors.
2P. Closing Documents. The Company shall have delivered to the Investors the documents listed in subparagraphs (i) through (vi) below and the Selling Shareholder shall have delivered to the Investors the documents listed in subparagraph (vii) below:
(i) an Officer's Certificate of the Company, dated the date of the Closing, stating that the conditions specified in Section 1 and paragraphs 2A through 2N, inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the Company's board of directors authorizing the execution, delivery and performance of this Agreement, the Registration Agreement, the Stockholders Agreement and each of the other agreements contemplated hereby to which the Company is a party;
(iii) certified copies of the Company's Certificate of Incorporation and the Company's bylaws, each as in effect at the Closing;
(iv) certified copies of the Loan Agreement, the Employment Agreements and the Executive Option Agreements, each in effect at the Closing;
(v) copies of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions hereunder (including the waiver of all preemptive rights and rights of first refusal with respect to the issuance and sale of the Company Shares and ARI Shares hereunder);
(vi) such other documents relating to the transactions contemplated by this Agreement as the Investors or its counsel may reasonably request; and
(vii) an Officer's Certificate of the Selling Shareholder, dated the date of the Closing, stating that, with respect to the Selling Shareholder, the conditions set forth in paragraphs 2A, 2H, 2I, 2J and 2L have been fully satisfied, and certified copies of
the resolutions duly adopted by the Selling Shareholder's board of directors and by the Bank's board of directors authorizing the execution, delivery and performance of this Agreement, the Registration Agreement, the Stockholders Agreement and each of the other agreements contemplated hereby to which the Selling Shareholder or the Bank, respectively, is a party.
2Q. Proceedings. All corporate and other proceedings taken or required to be taken by the Company in connection with the transactions contemplated hereby to be consummated at or prior to the Closing and all documents incident thereto shall be satisfactory in form and substance to the Investors and their special counsel.
2R. Waiver. Any condition specified in this Section 2 may be waived if consented to by the Investors; provided that no such waiver shall be effective against the Investors unless it is set forth in a writing executed by the Investors.
2S. Fees and Expenses. At the Closing, the Company shall have reimbursed the Investors for the reasonable fees and expenses of their special counsel and all other expenses associated with their due diligence review of the Company and its Subsidiaries, and the Company shall have paid the Investors a transaction fee in the aggregate amount of $500,000.
Section 3. Conditions of the Company's and Selling Shareholder's Obligations at the Closing3. Conditions of the Company's and Selling Shareholder's Obligations at the Closing. The obligations of the Company and the Selling Shareholder to sell the Company Shares and the ARI Shares, respectively, at the Closing are subject to the satisfaction as of the Closing of the following conditions:
3A. Representations and Warranties. The representations and warranties contained in Section 8 hereof shall be true and correct in all material respects at and as of the Closing as though then made, except to the extent of changes caused by the transactions expressly contemplated herein.
3B. Registration Agreement. The Company, the Selling Shareholder, the Investors, Alan Vituli and the other management optionholders shall have entered into the Registration Agreement, and the Registration Agreement shall be in full force and effect as of the Closing.
3C. Stockholders Agreement. The Company, the Selling Shareholder, the Investors, Alan Vituli and the other management optionholders shall have entered into the Stockholders Agreement, and the Stockholders Agreement shall be in full force and effect as of the Closing.
3D. Third Party Consents and Approvals. The Company and the Selling Shareholder shall have received or obtained all third party consents and approvals that are necessary for the consummation of the transactions contemplated hereby or that are required in order to prevent a breach of or default under, a termination or modification of, or acceleration of the terms of, any contract, agreement or document listed or described on the attached Contracts Schedule (all of which are listed on the Third Party Approval Schedule attached hereto), in each
case on terms and conditions reasonably satisfactory to the Company and the Selling Shareholder, as the case may be.
3E. Governmental Consents and Approvals. The Company and the Selling Shareholder shall have received or obtained all governmental and regulatory consents and approvals that are necessary for the consummation of the transactions contemplated hereby (all of which are listed on the Governmental Approval Schedule), in each case on terms and conditions reasonably satisfactory to the Company and the Selling Shareholder, as the case may be, and to the extent applicable, the waiting period under the Hart-Scott-Rodino Act, have expired or been terminated.
3F. Fees and Expenses. At the Closing, the Company shall have reimbursed the Selling Shareholder for the reasonable fees and expenses of their special counsel in connection with this transaction.
Section 4. Pre-closing Covenants
4A. Company Covenants. Prior to the Closing, the Company shall:
(i) provide the Investors' representatives with reasonable access during normal business hours to the employees, facilities and books and records of the Company and its Subsidiaries and allow the Investors' representatives to make copies of such books and records as reasonably requested;
(ii) provide the Investors with copies of monthly financial statements of the Company and its Subsidiaries promptly after preparation thereof and promptly provide any and all other information reasonably requested by the Investors;
(iii) promptly notify the Investors of any material adverse event or occurrence affecting the financial condition, operating results, assets, operations, business prospects, employee relations or customer or supplier relations of the Company and its Subsidiaries taken as a whole, and any other event or occurrence which would have a material adverse effect upon the consummation of the transactions contemplated hereby (including, without limitation, the filing of any lawsuit against the Company having such effect); and
(iv) cooperate with the Investors in connection with the consummation of the transactions contemplated hereby (including without limitation the filing of any forms and related materials as required by the Hart-Scott-Rodino Act) and use its reasonable best efforts to cause the closing conditions set forth in Sections 2 and 3 to be fully satisfied.
4B. Selling Shareholder Covenants. Prior to the Closing, the Selling Shareholder shall cooperate with the Investors in connection with the consummation of the transactions contemplated hereby (including, without limitation, the filing of any forms and
related materials as required by the Hart-Scott-Rodino Act) and use its reasonable best efforts to cause the closing conditions set forth in Section 2 and 3 to be fully satisfied.
4C. Investors' Covenant. Prior to the Closing, the Investors shall either file all forms and other materials required by the Hart-Scott-Rodino Act or deliver to the Company and the Selling Shareholder a written statement certifying that the Investors will have less than $10,000,000 of net sales and total assets (as determined under the Hart-Scott-Rodino Act) as of the date of the Closing.
Section 5. Transfer of Restricted Securities.
5A. General Provisions. Restricted Securities are transferable only pursuant to (i) public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar rule or rules then in force) if such rule is available and (iii) subject to the conditions specified in paragraph 5B below, any other legally available means of transfer.
5B. Opinion Delivery. In connection with the transfer of any
Restricted Securities (other than a transfer described in paragraph 5A(i) or
(ii) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of
Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company an opinion of counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates for such Restricted Securities which do not
bear the Securities Act legend set forth in paragraph 8A. If the Company is not
required to deliver new certificates for such Restricted Securities not bearing
such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this paragraph and paragraph 8A.
5C. Rule 144A. Upon the request of the Investors, the Company shall promptly supply to the Investors or their prospective transferees all information regarding the Company required to be delivered in connection with a transfer pursuant to Rule 144A of the Securities and Exchange Commission.
5D. Legend Removal. If any Restricted Securities become eligible for sale pursuant to Rule 144(k), the Company shall, upon the request of the holder of such Restricted Securities (and, if necessary, an opinion of counsel reasonably satisfactory to the Company), remove the legend set forth in paragraph 8A from the certificates for such Restricted Securities.
Section 6. Representations and Warranties of the Company; Covenants6. Representations and Warranties of the Company; Covenants. As a material inducement to the Investors to enter into this Agreement and purchase the Company Shares and the ARI Shares hereunder, the Company hereby represents and warrants that:
6A. Organization, Corporate Power and Licenses. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. The Company possesses all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties, to carry on its businesses as now conducted and to carry out the transactions contemplated by this Agreement. The copies of the Company's and each Subsidiary's charter documents and bylaws which have been furnished to the Investors' special counsel reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete.
6B. Capital Stock and Related Matters.
(i) As of the date hereof and, except as expressly contemplated by this Agreement, as of the Closing, the "Capitalization Schedule" correctly sets forth the authorized and outstanding capital stock of the Company and the name and number of shares of capital stock held by each stockholder of the Company. As of the Closing, except as set forth on the Capitalization Schedule, neither the Company nor any Subsidiary shall have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock or containing any profit participation features, nor shall it have outstanding any rights or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its capital stock or any stock appreciation rights or phantom stock rights. As of the Closing, neither the Company nor any Subsidiary shall be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock, any warrants, options or other rights to acquire its capital stock, or any obligation to make any payments with respect to any profit participation features of any of its capital stock, carried interest rights, stock appreciation rights, phantom stock rights or similar rights, except as set forth on the Capitalization Schedule and except pursuant to the Certificate of Incorporation and the Executive Option Agreements. As of the Closing, all of the outstanding shares of the Company's capital stock shall be validly issued, fully paid and nonassessable.
(ii) Except as set forth in the Company's Certificate of Incorporation, as of the date hereof, there are no statutory or, to the best of the Company's knowledge, contractual stockholders preemptive rights or rights of refusal with respect to the issuance of the Common Stock hereunder. The Company has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock. To the best of the Company's knowledge, there are no agreements between the Company's stockholders with respect to the voting or transfer of the Company's capital stock or with respect to any other aspect of the Company's affairs, except for the Stockholders Agreement.
(iii) As of the Closing, upon the delivery thereof, all of the Company Shares shall be validly issued, fully paid and nonassessable and free and clear of any claims, liens, encumbrances, security interests, options, participation rights, appreciation rights, carried interest obligations, charges and restrictions of any kind ("Adverse Claims").
6C. Subsidiaries; Investments. The attached "Subsidiary Schedule" correctly sets forth the name of each Subsidiary, the jurisdiction of its incorporation and the Persons owning the outstanding capital stock of such Subsidiary. Each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, possesses all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own its properties and to carry on its businesses as now being conducted and is qualified to do business in every jurisdiction in which its ownership of property or the conduct of business requires it to qualify. Except as set forth on the Subsidiary Schedule, all of the outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and nonassessable, and all such shares are owned by the Company or another Subsidiary free and clear of any Lien and not subject to any option or right to purchase any such shares. Except as set forth on the Subsidiary Schedule, neither the Company nor any Subsidiary owns or holds the right to acquire any shares of stock or any other security or interest in any other Person.
6D. Authorization; No Breach. The execution, delivery and performance of this Agreement, the Registration Agreement, the Stockholders Agreement, the Loan Agreement and all other agreements contemplated hereby to which the Company is a party have been duly authorized by the Company. This Agreement, the Registration Agreement, the Stockholders Agreement, the Loan Agreement and all other agreements contemplated hereby to which the Company is a party each constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms. Except as set forth on the "Restrictions Schedule" attached hereto, the execution and delivery by the Company and the Selling Shareholder, as the case may be, of this Agreement, the Registration Agreement, the Stockholders Agreement, the Loan Agreement and all other agreements contemplated hereby to which the Company or the Selling Shareholder is a party, the offering, sale and issuance of the Common Stock and the fulfillment of and compliance with the respective terms hereof and thereof by the Company or the Selling Shareholder, do not and shall not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company's or any Subsidiary's capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, (vi) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, or (vii) give rise to any Adverse Claim with respect to any of the Company's capital stock or other equity securities (or any securities convertible into or exchangeable for any shares of the Company's capital stock or other equity securities) under, the charter or bylaws of the Company or any Subsidiary, or any law, statute, rule or regulation to which the Company, any Subsidiary or the Selling Shareholder is subject, or any agreement (oral or written), instrument, order, judgment or decree to which the Company, any Subsidiary or the Selling Shareholder is subject.
6E. Securities Laws. No consent, authorization, approval, permit, or order of or filing with any governmental or regulatory authority is required under current laws and regulations in connection with the execution and delivery of this Agreement or the offer, issuance, sale or delivery of the Company Shares or the ARI Shares, other than the qualification
under applicable state securities laws, which qualification will, if required, be effected as a condition of the sales contemplated hereby.
6F. Financial Statements. Attached hereto as the "Financial Statements Schedule" are the following financial statements:
(i) the audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 1993, 1994 and 1995, the related statements of income and cash flows (or the equivalent) for the respective twelve-month periods then ended; and
(ii) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of September 30, 1996 (the "Latest Balance Sheet"), and the related statements of income and cash flows (or the equivalent) for the nine-month period then ended.
Each of the foregoing financial statements (including in all cases the notes thereto, if any) is complete in all material respects, is consistent with the books and records of the Company (which, in turn, are complete in all material respects) and has been prepared in accordance with generally accepted accounting principles, consistently applied, and presents fairly the consolidated financial condition, results of operations and cash flows of the Company and its Subsidiaries as of the dates and for the periods set forth therein, except for the absence of notes in the Latest Balance Sheet and subject to normal year-end audit adjustments for recurring accruals.
6G. Absence of Undisclosed Liabilities. Except as set forth on the attached "Liabilities Schedule," the Company and its Subsidiaries do not have any obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing, or any action or inaction at or prior to the Closing, or any state of facts existing at or prior to the Closing other than: (i) liabilities set forth on the Latest Balance Sheet (including any notes thereto), (ii) liabilities and obligations which have arisen after the date of the Latest Balance Sheet in the ordinary course of business (none of which is a liability resulting from breach of contract, breach of warranty, tort, infringement, claim or lawsuit), (iii) liabilities and obligations expressly disclosed in the other Schedules to this Agreement and (iv) liabilities and obligations under agreements, contracts and commitments not required to be disclosed on the Schedules hereto.
6H. Affiliated Transactions. Except as set forth on the attached "Affiliated Transaction Schedule" and for employment agreements and stock option agreements between the Company and certain of its officers, to the Company's knowledge, no officer, director, employee, stockholder, or Affiliate of the Company or any individual related by blood, marriage, or adoption to any such individual or any entity in which such person or individual owns any beneficial interest, is a party to any material agreement, contract, commitment, or transaction with the Company or has any material interest in any property used by the Company or any Subsidiary.
6I. No Material Adverse Change. Since the date of the Latest Balance Sheet, there has been no material adverse event or occurrence affecting the financial condition, operating results, assets, operations, business prospects, employee relations or customer or supplier relations of the Company and its Subsidiaries taken as a whole.
6J. Absence of Certain Developments. Except as expressly contemplated by this Agreement or as set forth on the attached "Developments Schedule," since the date of the Latest Balance Sheet, neither the Company nor any Subsidiary have:
(a) issued any notes, bonds or other debt securities or any capital stock or other equity securities or any securities convertible, exchangeable or exercisable into any capital stock or other equity securities;
(b) borrowed any amount or incurred or become subject to any liabilities, except for current liabilities incurred in the ordinary course of business and liabilities under contracts entered into in the ordinary course of business, and except for any sale/leaseback transactions entered into in the ordinary course of business between the date hereof and the Closing within the Board's current authorization;
(c) discharged or satisfied any Lien or paid any obligation or liability, other than current liabilities paid in the ordinary course of business;
(d) declared or made any payment or distribution of cash or other property to its stockholders with respect to its capital stock or other equity securities (except for regularly scheduled dividends on the Company's preferred stock in accordance with the Company's Certificate of Incorporation) or purchased or redeemed any shares of its capital stock or other equity securities (including, without limitation, any warrants, options or other rights to acquire its capital stock or other equity securities);
(e) mortgaged or pledged any of its properties or assets or subjected them to any Lien, except Liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any of its tangible assets, except in the ordinary course of business, or canceled any debts or claims;
(g) sold, assigned or transferred any patents or patent applications, trademarks, service marks, trade names, corporate names, copyrights or copyright registrations, trade secrets or other intangible assets, or disclosed any proprietary confidential information to any Person;
(h) suffered any extraordinary losses or waived any rights of value, whether or not in the ordinary course of business or consistent with past practice;
(i) made capital expenditures or commitments therefor that aggregate in excess of $200,000, except for capital expenditures made in the ordinary course of business between the date hereof and the Closing;
(j) made any loans or advances to, guarantees for the benefit of, or any Investments in, any Persons in excess of $100,000 in the aggregate;
(k) made any charitable contributions or pledges in excess of $50,000 in the aggregate;
(l) suffered any damage, destruction or casualty loss exceeding in the aggregate $100,000, not covered by insurance;
(m) made any Investment in or taken steps to incorporate any Subsidiary;
(n) acquired any operating business or any assets outside of the ordinary course of business or entered any commitment to do so; or
(o) except for this Agreement or any other agreement contemplated hereby, entered into any other material transaction other than in the ordinary course of business.
6K. Assets. Except as set forth on the attached "Assets Schedule," the Company and each Subsidiary have good and marketable title to, or a valid leasehold interest in, the properties and assets used by them, located on their premises or shown on the Latest Balance Sheet or acquired thereafter, free and clear of all Liens, except for properties and assets disposed of in the ordinary course of business since the date of the Latest Balance Sheet and except for Liens disclosed on the Latest Balance Sheet or 1995 audited consolidated balance sheet of the Company and its Subsidiaries (including any notes thereto) and Liens for current property taxes not yet due and payable. Except as described on the Assets Schedule, the Company's and each Subsidiary's buildings and other improvements, equipment and other tangible assets are in good operating condition in all material respects and are fit for use in the ordinary course of business. The Company and each Subsidiary own, or have a valid leasehold or other interest in, all assets necessary for the conduct of their respective businesses as presently conducted and as presently proposed to be conducted.
(i) Owned Properties. The "Assets Schedule" sets forth a list
of all owned real property (the "Owned Real Property") used by the Company or
any Subsidiary in the operation of the Company's business. With respect to each
such parcel of Owned Real Property except as disclosed on the Assets Schedule:
(a) the Company or one of its Subsidiaries has good and marketable fee simple
title in such parcel, free and clear of all encumbrances; and (b) there are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any person the right of use or occupancy of any portion of such
parcel.
(ii) Leased Properties. The Assets Schedule sets forth a list of all of the leases and subleases ("Leases") in which the Company or any subsidiary has a leasehold and subleasehold interest (the "Leased Real Property") (the Owned Real Property and the Leased Real Property are collectively referred to herein as the "Real Property"). Each of the Leases is in full force and effect and the Company holds a valid and existing leasehold or subleasehold
interest under each of the Leases. The Company has made available to the
Investors true, correct, complete and accurate copies of each of the Leases
described in the Assets Schedule. With respect to each Lease listed on the
Assets Schedule: (a) the Lease is legal, valid, binding, enforceable and in full
force and effect; (b) the validity, binding nature and enforceability of the
Lease shall not be adversely affected by the transaction contemplated hereby;
(c) neither the Company, nor to the Company's knowledge, any other party to the
Lease is in breach or default, and no event has occurred which, with notice or
lapse of time, would constitute such a breach or default or permit termination,
modification or acceleration under the Lease; (d) no party to the Lease has
repudiated any provision thereof; (e) the Lease has not been modified in any
respect, except to the extent that such modifications are disclosed by the
documents made available to the Investors' special counsel; and (f) except as
set forth on the Assets Schedule, the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease.
(iii) Real Property Disclosure. Except as disclosed on the Assets Schedule, there is no real property leased or owned by the Company or any subsidiary and used in the Company's business.
(iv) No Proceedings. There are no pending or, to the Company's knowledge, threatened proceedings in eminent domain or other similar proceedings affecting any portion of the Real Property. There exists no writ, injunction, decree, order or judgment outstanding, nor any litigation, pending or to our knowledge threatened, relating to the ownership, lease, use, occupancy or operation by any person of the Real Property.
(v) Current Use. The current use or occupancy of the Real Property does not violate in any material respect any instrument of record or agreement affecting such Real Property or any covenant, condition, restriction, easement, agreement or order of any governmental authority having jurisdiction over any of the Real Property. No damage or destruction has occurred with respect to any of the Real Property that, individually or in the aggregate, has had or resulted in, or will have or result in, a significant adverse effect on the operation of the Company's business.
(vi) Condition and Operation of Improvements. All buildings and all components of all buildings, structures and other improvements included within the Owned Real Property (the "Improvements"), are in good condition and repair and are adequate to operate such facilities as currently used. To the best of the Company's knowledge and belief, there are no facts or conditions affecting any of the Improvements and the Leased Real Property which would, individually or in the aggregate, interfere in any significant respect with the use, occupancy or operation thereof as currently used, occupied or operated or intended to be used, occupied or operated. To the best of the Company's knowledge and belief, there are no structural deficiencies or latent defects affecting any Improvements. All water, gas, electrical, steam, compressed air, telecommunication, sanitary and storm sewage lines and systems and other similar systems serving the Real Property are installed and operating and are sufficient to enable the Real Property to continue to be used and operated in the manner currently being used and operated. Each such utility or other service is provided by a public or private utility or
service company and enters the Owned Real Property from an adjacent public street or valid private easement owned by the supplier of such utility or other service. Each Improvement has direct access to a public street adjoining the Real Property on which such Improvement is situated over the driveways and accessways currently being used in connection with the use and operation of such Improvement and no existing accessway crosses or encroaches upon any property or property interest not owned by the Company.
(vii) Permits. All certificates of occupancy, permits, licenses, franchises, approvals and authorizations (collectively, the "Real Property Permits") of all governmental authorities having jurisdiction over the Real Property, required or appropriate to have been issued to the Company to enable the Real Property to be lawfully occupied and used for all of the purposes for which it is currently occupied and used, have been lawfully issued and are, as of the date hereof, in full force and effect, with no suspension, revocation or modification of any Real Property Permit pending or threatened.
(viii) Compliance with Laws. The Real Property is in full compliance with all applicable building, zoning, subdivision, health and safety and other land use and similar laws affecting the Real Property (collectively, the "Real Property Laws"), and the Company has not received any notice of violation or claimed violation of any Real Property Law. There is no pending or, to the best knowledge of the Company, any anticipated change in any Real Property Law that will have or result in a significant adverse effect upon the ownership, alteration, use, occupancy or operation of the Real Properties or any portion thereof. Nothing in this paragraph 6K(viii) shall be deemed to apply to compliance with Environmental and Safety Requirements, which are covered by the representations and warranties set forth in paragraph 6V hereof.
6L. Tax Matters.
(i) Except as set forth on the attached "Taxes Schedule": the Company and each Subsidiary have filed all Tax Returns which they are required to file under applicable laws and regulations; the Company and each Subsidiary have either paid all Taxes due and owing by them (whether or not such Taxes are required to be shown on a Tax Return) or accrued such Taxes on the Latest Balance Sheet (excluding any amount recorded which is attributable solely to timing differences between book and Tax income); the Company and each Subsidiary have withheld and paid over to the appropriate taxing authority all Taxes which they are required to withhold from amounts paid or owing to any employee, stockholder, creditor or other third party; neither the Company nor any Subsidiary has waived any statute of limitations with respect to any Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency; the accrual for Taxes on the Latest Balance Sheet would be adequate to pay all Tax liabilities of the Company and its Subsidiaries with respect to their current tax year if such year were treated as ending on the date of the Latest Balance Sheet (excluding any amount recorded which is attributable solely to timing differences between book and Tax income); since the date of the Latest Balance Sheet, the Company and its Subsidiaries have not incurred any liability for Taxes other than in the ordinary course of business; the assessment of any additional Taxes for periods for which Tax Returns have been filed by the Company and each Subsidiary shall not exceed the recorded liability therefor on the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income); the federal income Tax Returns of the Company and its Subsidiaries have been audited and closed or otherwise are closed for all tax years through 1992; no foreign, federal, state or local tax audits or administrative or judicial proceedings are pending or being conducted with respect to the Company or any Subsidiary, no information related to Tax matters has been requested by any foreign, federal, state or local taxing authority and no written notice indicating an intent to open an audit or other review has been received by the Company from any foreign, federal, state or local taxing authority; there are no material unresolved questions or claims raised by a taxing authority concerning the Company's or any Subsidiary's Tax liability; and the Company and its Subsidiaries have net operating loss carryforwards for federal income Tax purposes as of December 31, 1996 of at least $25 million (ignoring for this purpose any limitations on the use of these net operating losses arising either out of the acquisition of the Company by the Selling Shareholder or out of the transactions contemplated by this Agreement).
(ii) Neither the Company nor any of its Subsidiaries has made an election under 'SS'341(f) of the IRC. Neither the Company nor any Subsidiary is liable for the Taxes of another Person that is not a Subsidiary in a material amount under (a) Treas. Reg. 'SS' 1.1502-6 (or comparable provisions of state, local or foreign law), (b) as a transferee or successor, (c) by contract or indemnity or (d) otherwise. Neither the Company nor any Subsidiary is a party to any tax sharing agreement that includes any entity other than the Company or any Subsidiary. Neither the Company nor any Subsidiary has made any payments, is obligated to make payments or is a party to an agreement that could obligate it to make any payments that would not be deductible under IRC 'SS'280G.
(iii) "Tax" or "Taxes" means federal, state, county, local, foreign or other income, gross receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, communications, real or personal property, capital stock, license, payroll, wage or other withholding, employment, social security, severance, stamp, occupation, alternative or add-on minimum, estimated and other taxes of any kind whatsoever (including, without limitation, deficiencies, penalties, additions to tax, and interest attributable thereto) whether disputed or not. "Tax Return" means any return, information report or filing with respect to Taxes, including any schedules attached thereto and including any amendment thereof.
6M. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or as set forth on the attached "Contracts Schedule" or the attached "Employee Benefits Schedule," neither the Company nor any Subsidiary is a party to or bound by any written or oral:
(a) pension, profit sharing, stock option, employee stock purchase or other plan or arrangement providing for deferred or other compensation to employees or any other employee benefit plan or arrangement, or any collective bargaining agreement or any other contract with any labor union, or severance agreements, programs, policies or arrangements;
(b) contract for the employment of any officer, individual employee or
other Person on a full-time, part-time, consulting or other basis providing annual compensation in excess of $100,000 or contract relating to loans to officers, directors or Affiliates which, in the aggregate, exceed $50,000;
(c) contract under which the Company or Subsidiary has advanced or loaned any other Person amounts in the aggregate exceeding $50,000;
(d) agreement or indenture relating to borrowed money or other Indebtedness or the mortgaging, pledging or otherwise placing a Lien on any material asset or material group of assets of the Company and its Subsidiaries;
(e) guarantee of any obligation in excess of $25,000 (other than by the Company of a Wholly-Owned Subsidiary's debts or a guarantee by a Subsidiary of the Company's debts or another Subsidiary's debts);
(f) lease or agreement under which the Company or any Subsidiary is lessee of or holds or operates any property, real or personal, owned by any other party, except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $50,000;
(g) other than as set forth on the Assets Schedule, lease or agreement under which the Company or any Subsidiary is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by the Company or any Subsidiary;
(h) contract or group of related contracts with the same party or group of affiliated parties the performance of which involves consideration in excess of $100,00 per annum;
(i) assignment, license, indemnification or agreement with respect to any intangible property (including, without limitation, any Intellectual Property Rights) having a value in excess of $50,000;
(j) express warranties with respect to its services rendered or its products sold or leased;
(k) agreement under which it has granted any Person any registration rights (including, without limitation, demand and piggyback registration rights);
(l) sales, distribution or franchise agreement;
(m) contract or agreement prohibiting it from freely engaging in any business or competing anywhere in the world; or
(n) any other agreement which is material to its operations and business prospects and involves a consideration in excess of $50,000 annually.
(ii) All of the contracts, agreements and instruments set forth on the Contracts Schedule are valid, binding and enforceable in accordance with their respective terms. The Company and each Subsidiary have performed all obligations required to be performed by them under the contracts, agreements and instruments listed on the Contracts Schedule and are not in default under or in breach of nor in receipt of any claim of default or breach under any contract, agreement or instrument listed on the Contracts Schedule; no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of noncompliance by the Company or any Subsidiary under any contract, agreement or instrument to which the Company or any Subsidiary is subject; neither the Company nor any Subsidiary has any present expectation or intention of not fully performing all such obligations; and neither the Company nor any Subsidiary has knowledge of any breach or anticipated breach by the other parties to any contract, agreement, instrument or commitment listed on the Contracts Schedule.
(iii) The Contracts Schedule shall list each Burger King Franchise Agreement and shall disclose the termination date of each such agreement. The Company has neither any knowledge nor any reason to believe that any franchise agreement terminating within five years after the date of this Agreement will not, if so requested by the Company, be renewed on substantially similar terms and without a cost per restaurant in excess of $40,000 for the successor franchise fee payable to Burger King Corporation in connection with such renewal.
(iv) The Company has made available to the Investors' special counsel a true and correct copy of each of the written instruments, plans, contracts and agreements and an accurate description of each of the oral arrangements, contracts and agreements which are referred to on the Contracts Schedule, together with all amendments, waivers or other changes thereto.
6N. Intellectual Property Rights.
(i) The attached "Intellectual Property Schedule" contains a complete and accurate list of all (a) patented or registered Intellectual Property Rights owned or used by the Company or any Subsidiary, (b) pending patent applications and applications for registrations of other Intellectual Property Rights filed by the Company or any Subsidiary, (c) unregistered trade names and corporate names owned or used by the Company or any Subsidiary and (d) unregistered trademarks, service marks, copyrights, mask works and computer software owned or used by the Company or any Subsidiary. The Intellectual Property Schedule also contains a complete and accurate list of all licenses and other rights granted by the Company or any Subsidiary to any third party with respect to any Intellectual Property Rights and all licenses and other rights granted by any third party to the Company or any Subsidiary with respect to any Intellectual Property Rights, in each case identifying the subject Intellectual Property Rights. The Company or one of its Subsidiaries owns all right, title and interest to, or has the right to use pursuant to a valid license, all Intellectual Property Rights necessary for the operation of the businesses of the Company and its Subsidiaries as presently conducted free and clear of all Liens. The loss or expiration of any Intellectual Property Right or related group of Intellectual Property Rights owned or used by the Company or any Subsidiary has not had and would not reasonably be expected to have a material adverse effect on the conduct of the Company's and its Subsidiaries'
respective businesses, and no such loss or expiration is threatened, pending or reasonably foreseeable. The Company and its Subsidiaries have taken all necessary and desirable actions to maintain and protect the Intellectual Property Rights which they own. To the best of the Company's knowledge, the owners of any Intellectual Property Rights licensed to the Company or any Subsidiary have taken all necessary and desirable actions to maintain and protect the Intellectual Property Rights which are subject to such licenses.
(ii) Except as set forth on the Intellectual Property Schedule,
(a) the Company and its Subsidiaries own all right, title and interest in and to
all of the Intellectual Property Rights listed on such schedule, free and clear
of all Liens, (b) there have been no claims made against the Company or any
Subsidiary asserting the invalidity, misuse or unenforceability of any of such
Intellectual Property Rights, and there are no grounds for the same, (c) neither
the Company nor any Subsidiary has received any notices of, and is not aware of
any facts which indicate a likelihood of, any infringement or misappropriation
by, or conflict with, any third party with respect to such Intellectual Property
Rights (including, without limitation, any demand or request that the Company or
any Subsidiary license any rights from a third party), and (d) the conduct of
the Company's and each Subsidiary's business has not infringed, misappropriated
or conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, nor would any future conduct as
presently contemplated infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons. The transactions contemplated by
this Agreement shall have no material adverse effect on the Company's or any
Subsidiary's right, title and interest in and to the Intellectual Property
Rights listed on the Intellectual Property Schedule.
6O. Litigation, etc. Except as set forth on the attached "Litigation Schedule," there are no actions, suits, proceedings, orders, investigations or claims pending or, to the Company's knowledge, threatened against the Company or any Subsidiary (or to the Company's knowledge, pending or threatened against any of the officers, directors or key employees of the Company and its Subsidiaries with respect to the Company's or any Subsidiary's businesses or proposed business activities), or pending or threatened by the Company or any Subsidiary against any third party, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality (including, without limitation, any actions, suit, proceedings or investigations with respect to the transactions contemplated by this Agreement); neither the Company nor any Subsidiary is subject to any arbitration proceedings under collective bargaining agreements or otherwise or, to the best of the Company's knowledge, any governmental investigations or inquiries (including, without limitation, inquiries as to the qualification to hold or receive any license or permit); and, to the Company's knowledge, there is no basis for any of the foregoing.
6P. Brokerage. There are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Company or any Subsidiary. The Company shall pay, and hold the Investors harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in connection with any such claim.
6Q. Governmental Consent, etc. Except for any filings required to be made pursuant to the Hart-Scott-Rodino Act, no permit, consent, approval or authorization of, or declaration to or filing with, any governmental authority is required in connection with the execution, delivery and performance by the Company of this Agreement or the other agreements contemplated hereby, or the consummation by the Company of any other transactions contemplated hereby or thereby, except as expressly contemplated herein or in the exhibits hereto.
6R. Insurance. The attached "Insurance Schedule" contains a description of each insurance policy maintained by the Company and its Subsidiaries with respect to its properties, assets and businesses, and each such policy is in full force and effect as of the Closing. Neither the Company nor any Subsidiary is in default with respect to its obligations under any insurance policy maintained by it. The insurance coverage of the Company and its Subsidiaries is customary for corporations of similar size engaged in similar lines of business. Except as set forth on the Insurance Schedule, the Company and its Subsidiaries do not have any self-insurance or co-insurance programs.
6S. Employees. Except as set forth on the attached "Employee Schedule," the Company is not aware that any executive or key employee of the Company or any Subsidiary or any group of employees of the Company or any Subsidiary has any plans to terminate employment with the Company or any Subsidiary. The Company and each Subsidiary have complied in all material respects with all laws relating to the employment of labor (including, without limitation, provisions thereof relating to wages, hours, equal opportunity, sexual harassment, collective bargaining and the payment of social security and other taxes), and the Company is not aware that it or any Subsidiary has any material labor relations problems (including, without limitation, any union organization activities, threatened or actual strikes or work stoppages or material grievances). Neither the Company, its Subsidiaries nor, to the Company's knowledge after due inquiry, any of their employees is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements relating to, affecting or in conflict with the present or proposed business activities of the Company and its Subsidiaries, except for agreements between the Company and its present and former employees, those certain Franchise Agreements between Burger King Corporation and the Company or any of its Subsidiaries and those agreements set forth on the attached Employee Schedule.
6T. ERISA.
(i) Multiemployer Plans. The Company does not have any obligation to contribute to (or any other liability, including current or potential withdrawal liability, with respect to) any Multiemployer Plan.
(ii) Retiree Welfare Plans. Except as set forth on the attached Employee Benefits Schedule, the Company does not maintain or have any obligation to contribute to (or any other liability with respect to) any Employee Benefit Plan or arrangement whether or not terminated, which provides medical, health, life insurance or other welfare-type benefits for current or future retired or terminated employees (except for limited continued medical benefit
coverage required to be provided under Section 4980B of the IRC or as required under applicable state law).
(iii) Defined Benefit Plans. The Company does not maintain, contribute to or have any liability under (or with respect to) any employee plan which is a Defined Benefit Plan, whether or not terminated.
(iv) Defined Contribution Plans. The Company does not maintain, contribute to or have any liability under (or with respect to) any employee plan which is a Defined Contribution Plan, whether or not terminated, other than the Carrols Corporation Corporate Division Employee Savings Plan (the "Profit Sharing Plan").
(v) Other Plans. Except as set forth in the "Employee Benefits Schedule", the Company does not maintain, contribute to or have any liability under (or with respect to) any Employee Benefit Plan or arrangement providing benefits to current or former employees, including any bonus plan, plan for deferred compensation, employee health or other welfare benefit plan or other arrangement, whether or not terminated.
(vi) Each Employee Benefit Plan and all related trusts, insurance contracts, and funds have been maintained, funded and administered in compliance with applicable laws and regulations, including but not limited to ERISA and the IRC. None of the Company, any trustee or administrator of any Employee Benefit Plan, or any other person has engaged in any transaction with respect to any Plan which would reasonably subject the Company, or any trustee or administrator of any Employee Benefit Plan, or any party dealing with any Employee Benefit Plan, or the Investors to any tax or penalty imposed by ERISA or the IRC. To the Company's knowledge, no actions, suits, claims, complaints, charges, proceedings, hearings, investigations, or demands with respect to the Plans (other than routine claims for benefits) are pending or threatened, and the Company has no knowledge of any facts which could reasonably give rise to or reasonably be expected to give rise to any actions, suits, claims, complaints, charges, proceedings, hearings, investigations or demands.
(vii) Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the IRC, and each trust forming a part thereof, has received a favorable determination letter from the IRS as to the qualification under the IRC of such Plan and the tax-exempt status of such related trust and nothing has occurred since the date of such determination letter that would adversely affect the qualification of such Plan or the tax-exempt status of such related trust.
(viii) No underfunded Defined Benefit Plan has been, during the five years preceding the Closing Date, transferred out of the Controlled Group of Companies of which the Company is a member or was a member during such five-year period.
(ix) As of the Closing Date, all required or recommended payments, premiums, contributions, reimbursements or accruals with respect to any Employee Benefit Plan for all periods ending prior to or as of the Closing Date shall have been made or properly accrued. No Employee Benefit Plan has any material unfunded liabilities.
(x) With respect to each Employee Benefit Plan, the Company has provided the Investors with true, complete and correct copies, to the extent applicable, of (A) all documents pursuant to which the Plans are maintained, funded and administered, (B) the two most recent annual reports (Form 5500 series) filed with the IRS (with attachments), (C) the two most recent actuarial reports, (D) the two most recent financial statements, (E) all governmental rulings, determinations, and opinions (and pending requests for governmental rulings, determinations and opinions), and (F) the most recent valuation of the present and future obligations under each Employee Benefit Plan that provides post-retirement or post-employment health, life insurance, accident or other "welfare-type" benefits.
(xi) For purposes of this paragraph 6T, the term "Company"
includes all organizations under common control with the Company pursuant to
Section 414(b) or (c) of the IRC.
6U. Compliance with Laws. Except as set forth on the attached "Compliance Schedule", neither the Company nor any Subsidiary has violated any law or any governmental regulation or requirement which violation has had or would reasonably be expected to have an adverse effect upon the financial condition, operating results, assets, operations or business prospects of the Company and its Subsidiaries taken as a whole, and neither the Company nor any Subsidiary has received notice of any such violation, and neither the Company nor any Subsidiary has violated any health code regulations or requirements, and neither the Company nor any Subsidiary has received notice of any such violation. Nothing in this paragraph 6U shall be deemed to apply to compliance with Environmental and Safety Requirements, which are covered by the representations and warranties set forth in paragraph 6V hereof.
6V. Environmental and Safety Matters.
(i) For purposes of this Agreement, the term "Environmental
and Safety Requirements" shall mean all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law, in each case concerning public
health and safety, worker health and safety and pollution or protection of the
environment (including, without limitation, all those relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, containment or cleanup of any Hazardous Materials; "Hazardous
Materials" shall include (a) any element, compound, or chemical that is defined,
listed or otherwise classified as a contaminant, pollutant, toxic pollutant,
toxic or hazardous substance, extremely hazardous substance or chemical
hazardous waste, medical waste, biohazardous or infectious waste, special waste,
or solid waste under Environmental and Safety Requirements, (b) petroleum,
petroleum-based or petroleum-derived products, (c) polychlorinated biphenyls and
(d) asbestos-containing materials; "Release" shall have the meaning set forth in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"); "Environmental Claims" shall include any complaint,
summons, citation, notice of violation, notice of potential liability,
directive, order, claim, litigation, investigation, proceeding, judgement,
letter or other communication from any
governmental agency, department, bureau, office or other authority, or any third party involving violations of Environmental and Safety Requirements or Releases of Hazardous Materials; "Environmental Liabilities" shall mean any monetary obligations, losses, liabilities (including strict liability), damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable out-of-pocket costs for environmental site assessments, remedial investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any Environmental Claim filed by any Governmental Authority or any third party which relate to any violations of Environmental and Safety Requirements, Remedial Actions, Releases or threatened Releases of Hazardous Materials; and "Remedial Action" means all actions taken to clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the environment, prevent or minimize a Release or threatened Release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the environment, perform pre-remedial studies and investigations and post-remedial operation and maintenance activities, or any other actions authorized by 42 U.S.C. 9601.
(ii) Except as set forth on the attached "Environmental Schedule":
(a) the Company and its Subsidiaries have complied with and are currently in compliance with all Environmental and Safety Requirements, and neither the Company nor its Subsidiaries have received any Environmental Claims relating to the Company or its Subsidiaries or any of their properties or facilities;
(b) without limiting the generality of the foregoing, the Company and its Subsidiaries have obtained and complied with, and are currently in compliance with, all permits, licenses and other authorizations that may be required pursuant to any Environmental and Safety Requirements for the occupancy of their properties or facilities or the operation of their businesses;
(c) neither this Agreement nor the consummation of the transactions contemplated by this Agreement shall impose any obligations on the Company and its Subsidiaries for site investigation or cleanup, or notification to or consent of any government agencies or third parties under any Environmental and Safety Requirements (including, without limitation, any so called "transaction-triggered" or "responsible property transfer" laws and regulations);
(d) neither the Company nor any of its Subsidiaries has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or Released any substance (including, without limitation, any hazardous substance) or owned, occupied or operated any facility or property, so as to give rise to liabilities of the Company or its Subsidiaries for response costs, natural resource damages or attorneys fees pursuant to CERCLA, or any other Environmental and Safety Requirements; and
(e) neither the Company nor any of its Subsidiaries has, contractually assumed or undertaken any Remedial Action, obligation or Environmental Liability of any other Person relating to any Environmental and Safety Requirements.
6W. Disclosure. Neither this Agreement nor any of the exhibits, schedules or attachments hereto nor any certificate delivered by the Company hereunder contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein not misleading. There is no confidential or nonpublic fact which the Company has not disclosed to the Investors in writing and of which any of its officers, directors or executive employees is aware and which has had or would reasonably be expected to have a material adverse effect upon the financial condition, operating results, assets, customer or supplier relations, employee relations or business prospects of the Company and its Subsidiaries taken as a whole.
6X. Closing Date. The representations and warranties of the Company contained in this Section 6 and elsewhere in this Agreement and all information contained in any exhibit, schedule or attachment hereto or in any certificate delivered by, or on behalf of, the Company to the Investors pursuant to this Agreement or any schedule hereto shall be true and correct on the date of the Closing as though then made, except as affected by the transactions expressly contemplated by this Agreement.
6Y. Reports with the Securities and Exchange Commission. The Company has made available to the Investors and the Investors' special counsel complete and accurate copies of its Form 10-K for its three most recent fiscal years, all other reports or documents required to be filed by the Company pursuant to Section 13(a) or 15(d) of the Securities Exchange Act since the filing of the most recent Form 10-K. Such filings do not contain any material false statements or any misstatement of any material fact and do not omit to state any fact necessary to make the statements set forth therein not misleading. The Company has made all filings with the Securities and Exchange Commission which it is required to make, and the Company has not received any request from the Securities and Exchange Commission to file any amendment or supplement to any of the current or pending filings described in this paragraph.
Section 7. Representations and Warranties of the Selling Shareholder7. Representations and Warranties of the Selling Shareholder. As a material inducement to the Investors to enter into this Agreement, the Selling Shareholder hereby represents and warrants to the Investors that:
7A. The ARI Shares. As of the date of this Agreement and immediately prior to the Closing, the Selling Shareholder is, and will be (as the case may be), the record and beneficial owner of 850,000 shares of Common Stock of the Company. Such shares have been duly authorized and validly issued, are fully paid and nonassessable, and are owned by the Selling Shareholder free and clear of any Adverse Claims. Upon delivery to the Investors at the Closing of certificates representing the ARI Shares, such certificates being duly endorsed or accompanied by duly executed forms of assignment, and upon receipt by the Selling Shareholder of the purchase price for the ARI Shares, good and valid title to the ARI Shares shall pass to the Investors, free and clear of any Adverse Claims (regardless of any knowledge the Investors have of any Adverse Claims or potential Adverse Claims). The Selling Shareholder has neither entered into nor violated any agreement, written or oral, that would create any rights, or would give rise to any Adverse Claims or potential Adverse Claims, in any shares held by the Selling Shareholder as of the date of this Agreement and immediately prior to the Closing Date, or that
would result in any loss, liability or damage with respect to the Company or any of its Subsidiaries.
7B. Authorization. Each of the Selling Shareholder and the Bank
has full power and authority to enter into this Agreement and the other
agreements, instruments, documents and certificates to be executed and delivered
by Selling Shareholder or the Bank, respectively, pursuant hereto and to
consummate the transactions contemplated hereby. All acts and other proceedings
required to be taken by the Selling Shareholder or the Bank to authorize the
execution, delivery and performance of this Agreement, the Registration
Agreement, the Stockholders Agreement, and all other agreements contemplated
hereby to which the Selling Shareholder or the Bank is a party, and the
consummation of the transactions contemplated hereby have been (or in the case
of the Bank, prior to the Closing will be) duly and properly taken and each of
such agreements constitutes a valid and binding agreement of the Selling
Shareholder and the Bank, respectively, enforceable in accordance with their
terms. The execution and delivery by the Selling Shareholder and the Bank of
this Agreement, the Registration Agreement, the Stockholders Agreement, and all
other agreements contemplated hereby to which the Selling Shareholder or the
Bank is a party do not and shall not (i) conflict with or result in a breach of
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any lien, security interest, charge or encumbrance
upon the Selling Shareholder's capital stock or assets pursuant to, (iv) give
any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency pursuant to, or
(vii) give rise to any Adverse Claim with respect to any of the Company's
capital stock (other than the ARI Shares) or other equity securities (or any
securities convertible into or exchangeable for any shares of the Company's
capital stock or other equity securities) under, the charter or bylaws of the
Selling Shareholder or the Bank, or any law, statute, rule or regulation to
which the Selling Shareholder or the Bank is subject, or any agreement (oral or
written), instrument, order, judgment or decree to which the Selling Shareholder
or the Bank is subject.
7C. Company Representations. To the Selling Shareholder's actual knowledge (other than with respect to representations and warranties of the Company contained in paragraphs 6B, 6D and 6P hereof) all of the representations and warranties contained in Section 6 are true and correct in all material respects on the date of this Agreement and shall be true and correct in all material respects on the Closing Date.
7D. Compliance with Laws. Neither the Selling Shareholder nor any of its Affiliates has violated any law or any governmental regulation or requirement which violation has had or would reasonably be expected to have an adverse effect upon the financial condition, operating results, assets, operations or business prospects of the Company and its Subsidiaries or any effect on its ownership of the Company and its Subsidiaries taken as a whole, and the Selling Shareholder has not received notice of any such violation. Neither the Selling Shareholder nor any of its Affiliates is subject to, or has any reason to believe it may be subject to, any liability or corrective or remedial obligation arising under any federal, state, local or foreign law, rule or regulation (including the common law) relating to or regulating securities, currency, banking, or
exchange controls affecting the Company or the Selling Shareholder's ownership of the Company and its Subsidiaries.
7E. Ownership of Selling Shareholder. BIB (Bermuda) Holdings, Ltd. and certain executive employees and directors of the Bank and its Affiliates own in the aggregate 100% of the issued and outstanding capital stock of the Selling Shareholder (provided that such employees and directors do not own more than 20% of the issued and outstanding capital stock of the Selling Shareholder nor more than 20% of the voting power of the Selling Shareholder), and the Bank owns 100% of the issued and outstanding capital stock of BIB (Bermuda) Holdings, Ltd. and Dilmun Financial Services.
7F. Brokerage. There are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Selling Shareholder or any of its Affiliates. The Selling Shareholder shall pay, and hold the Company and the Investors harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in connection with any such claim.
7G. Closing Date. The representations and warranties of the Selling Shareholder contained in this Section 7 and elsewhere in this Agreement shall be true and correct in all material respects on the date of the Closing as though then made.
Section 8. Investors' Representations and Warranties.
8A. Investors' Investment Representations. Each of the Investors hereby represents that it is acquiring the Restricted Securities purchased hereunder or acquired pursuant hereto for its own account with the present intention of holding such securities for purposes of investment, and that it has no intention of selling such securities in a public distribution in violation of the federal securities laws or any applicable state securities laws; provided that nothing contained herein shall prevent the Investors and subsequent holders of Restricted Securities from transferring such securities in compliance with the provisions of Section 5 hereof. Each certificate or instrument representing Restricted Securities shall be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally issued on _________, 1997, and have not been registered under the Securities Act of 1933, as amended. The transfer of the securities represented by this certificate is subject to the conditions specified in the Stock Purchase Agreement, dated as of February 25, 1997, and as amended and modified from time to time, between the issuer (the "Company") and certain investors, and the Company reserves the right to refuse the transfer of such securities until such conditions have been fulfilled with respect to such transfer. A copy of such conditions shall be furnished by the Company to the holder hereof upon written request and without charge."
8B. Brokerage. There are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement binding upon the Investors. The Investors shall pay, and hold the Company and the Selling Shareholder harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in connection with any such claim.
8C. Governmental Consent, etc. No permit, consent, approval or authorization of, or declaration to or filing with any governmental authority is required in connection with the execution, delivery and performance by the Investors of this Agreement or the other agreements contemplated hereby, or the consummation by the Investors of any other transactions contemplated hereby or thereby, except as expressly contemplated herein or in the exhibits hereto, and except for the filings required to be made pursuant to the Hart-Scott-Rodino Act.
8D. Closing Date. The representations and warranties of the Investors herein shall be true and correct in all material respects on the date of the Closing as though then made.
9. Definitions.
9A. Definitions. For the purposes of this Agreement, the following terms have the meanings set forth below:
"Affiliate" of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise.
"Adverse Claims" shall have the meaning set forth in paragraph 6B(iii).
"Controlled Group of Companies" has the meaning set forth in
Section 414 of the IRC.
"Defined Benefit Plan" shall have the meaning set forth in
Section 3(35) of ERISA.
"Defined Contribution Plan" shall have the meaning set forth in
Section 3(34) of ERISA.
"Employee Benefit Plan" means any (a) qualified or nonqualified Employee Pension Benefit Plan, (b) Employee Welfare Benefit Plan, or (c) fringe benefit plan, policy, program and arrangement, whether or not subject to ERISA and whether or not funded.
"Employee Pension Benefit Plan" shall have the meaning set forth in Section 3(2) of ERISA.
"Employee Welfare Benefit Plan" shall have the meaning set forth in Section 3(1) of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Indebtedness" means at a particular time, without duplication,
(i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by
any note, bond, debenture or other debt security, (iii) any indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business), (iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness guaranteed in any manner by
a Person (including, without limitation, guarantees in the form of an agreement
to repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, and (vii) any indebtedness secured by a Lien on a
Person's assets.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information,
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"Investment" as applied to any Person means (i) any direct or indirect purchase or other acquisition by such Person of any notes, obligations, instruments, stock, securities or ownership interest (including partnership interests and joint venture interests) of any other Person and (ii) any capital contribution by such Person to any other Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and any reference to any particular IRC section shall be interpreted to include any revision of or successor to that section regardless of how numbered or classified.
"IRS" means the United States Internal Revenue Service.
"Liens" means any mortgage, pledge, security interest, encumbrance, lien, covenant, condition, restriction or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against the Company, any Subsidiary or any Affiliate, any filing or
agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to the Company or any Subsidiaries under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the ordinary course of business).
"Multiemployer Plan" shall have the meaning set forth in Section 3(37) of ERISA.
"Officer's Certificate" means a certificate signed by the
Company's or the Selling Shareholder's, as the case may be, president or its
chief financial officer on behalf of the Company or the Selling Shareholder, as
the case may be, stating that (i) the officer signing such certificate has made
or has caused to be made such investigations as are necessary in order to permit
him to verify the accuracy of the information set forth in such certificate and
(ii) to such officer's knowledge, such certificate does not misstate any
material fact and does not omit to state any fact necessary to make the
certificate not misleading.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
"Public Sale" means any sale of securities to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act.
"Restricted Securities" means Common Stock issued pursuant to
this Agreement. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) been distributed to the public through
a broker, dealer or market maker pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act or become eligible for sale pursuant to
Rule 144(k) (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 8A have been delivered by the
Company in accordance with paragraph 5B. Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 8A.
"Securities Act" means the Securities Act of 1933, as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force.
"Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity.
"Treasury Regulations" means the United States Treasury Regulations promulgated under the IRC, and any reference to any particular Treasury Regulation section shall be interpreted to include any final or temporary revision of or successor to that section regardless of how numbered or classified.
Section 10. Termination.
10A. Conditions of Termination. This Agreement may be terminated at any time prior to the Closing:
(i) by the mutual written consent of the Company, the Selling Shareholder and the Investors;
(ii) by the Investors if there has been a material misrepresentation, material breach of warranty or material breach of a covenant by the Company or the Selling Shareholder in the representations and warranties or covenants set forth in this Agreement or the Schedules and Exhibits attached hereto, which in the case of any breach of covenant has not been cured within ten days after written notification thereof by the Investors to the Company and the Selling Shareholder; or
(iii) by the Investors, the Selling Shareholder or the Company
if the transactions contemplated hereby have not been consummated by April 30,
1997; provided that the party electing termination pursuant to this subparagraph
(iii) is not in breach of any of its representations, warranties, covenants or
agreements contained in this Agreement or the Schedules and Exhibits attached
hereto.
In the event of termination by either the Investors, the Company or the Selling Shareholder pursuant to this paragraph 10A, written notice thereof (describing in reasonable detail the basis therefor) shall forthwith be delivered to the other parties hereto.
10B. Effect of Termination. In the event of termination of this Agreement by either the Investors, the Company or the Selling Shareholder as provided above, this Agreement shall forthwith become void and of no further force and effect, except that the covenants and agreements set forth in paragraphs 10B and Section 11 shall survive such termination indefinitely, and except that nothing in paragraph 10A or this paragraph 10B shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or to impair the right of any party to compel specific performance by another party of its obligations under this Agreement.
11. Miscellaneous.
11A. Expenses. The Company shall pay, and hold the Investors and
all holders of Common Stock harmless against liability for the payment of (i)
the reasonable fees and expenses of their special counsel arising in connection
with the negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement which shall be payable at the
Closing or, if the Closing does not occur for any reason other than as a result
of material breach by the Investors of any of their representations, warranties
or covenants contained in this Agreement, upon the termination of this
Agreement, payable upon demand, (ii) the reasonable fees and expenses incurred
with respect to any amendments or waivers (whether or not the same become
effective) under or in respect of this Agreement, the agreements contemplated
hereby and the Certificate of Incorporation, (iii) stamp and other taxes which
may be payable in respect of the execution and delivery of this Agreement or the
issuance, delivery or acquisition of any shares of Common Stock, (iv) the
reasonable fees and expenses incurred with respect to the enforcement of the
rights granted under this Agreement, the agreements contemplated hereby, and the
Certificate of Incorporation, (v) the reasonable fees and expenses incurred by
each such Person in any filing with any governmental agency with respect to its
investment in the Company or in any other filing with any governmental agency
with respect to the Company which mentions such Person, including, but not
limited to, any filings required to be made under the Hart-Scott-Rodino Act and
(vi) the reasonable fees and expenses incurred by the Investors in connection
with their business, legal and accounting due diligence review of the Company
and negotiation of all legal documents.
11B. Remedies. The Investors shall have all rights and remedies set forth in this Agreement, the Certificate of Incorporation and all rights and remedies which holders of Common Stock have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law.
11C. Consent to Amendments. Except as otherwise expressly provided herein, the provisions of this Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of a majority of the Shares purchased hereunder. No other course of dealing between the Company and the holder of any of the Shares purchased
hereunder or any delay in exercising any rights hereunder or under the Certificate of Incorporation shall operate as a waiver of any rights of any such holders. Notwithstanding the foregoing, no waiver or amendment which would adversely affect the Selling Shareholder shall be made without the prior written consent of the Selling Shareholder.
11D. Successors and Assigns. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not; provided that prior to the Closing, no party hereto may assign its rights or delegate its duties hereunder without the prior written consent of the other parties hereto and no holder of Common Stock purchased hereunder shall assign its rights hereunder except in connection with a sale or other transfer of the Common Stock (other than in a Public Sale); provided further, that such rights are not assignable to more than five (5) assignees in total who are not Affiliates of the Investors or the Selling Shareholder. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for the Investors' benefit as purchasers or holders of Common Stock are also for the benefit of, and enforceable by, any subsequent holder of such Common Stock (other than in a Public Sale).
11E. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
11F. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement.
11G. Descriptive Headings; Interpretation. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. The use of the word "including" in this Agreement shall be by way of example rather than by limitation.
11H. Governing Law. The corporate law of the State of Delaware shall govern all issues and questions concerning the relative rights and obligations of the Company and its stockholders. All other issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. In furtherance of the foregoing, the internal law of the State of New York shall control the interpretation and construction of this Agreement (and all schedules and exhibits hereto), even though under that jurisdiction's choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.
11I. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to the Investors at the address and to the Company at the addresses indicated below:
Notices to the Company:
Carrols Holdings Corporation
James Street
Syracuse, NY 13203
Attn: Joseph A. Zirkman, Esq.
With copies (which shall not constitute notice) to:
Schulte Roth & Zabel LLP
Third Avenue
New York, NY 10022
Attn: Andre Weiss, Esq.
Notices to Investors:
Madison Dearborn Capital Partners, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
With copies (which shall not constitute notice) to:
Kirkland & Ellis
East Randolph Drive
Suite 5700
Chicago, IL 60601
Attn: Edward T. Swan, Esq.
Notices to Selling Shareholder:
Atlantic Restaurants, Inc.
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, CT 06902
Attn : Paul Durrant
With copies (which shall not constitute notice) to:
Pryor, Cashman, Sherman, and Flynn
Park Avenue, 10th Floor
New York, NY 10022
Attn: Selig Sacks, Esq.
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
11J. No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
11K. Indemnification. Subject to 11K(iii)(h) below, all representations and warranties contained herein or made in any certificate or other writing by any party in connection herewith shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, regardless of any investigation made by the Investors or on their behalf.
(i) Company's Indemnification Obligation. Subject to the limitations set forth in paragraph (iii) below, in consideration of the Investors' execution and delivery of this Agreement and acquiring the Company Shares and the ARI Shares hereunder, and in addition to all of the Company's other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Investors and all of their respective officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to (a) the inaccuracy of any representation or warranty made by the Company in this Agreement or in any certificate delivered by the Company to any of the Indemnitees pursuant to this Agreement, or (b) the failure of the Company to comply with any of its covenants under this Agreement or in any certificate delivered by the Company to any of the Indemnities pursuant to this Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.
(ii) Selling Shareholder's Indemnification Obligation. Subject to the limitations set forth in paragraph (iii) below, in consideration of the Investors' execution and delivery of this Agreement and acquiring the Company Shares and the ARI Shares hereunder and in addition to all of the Selling Shareholder's other obligations under this Agreement, the Selling Shareholder shall defend, protect, indemnify and hold harmless the Investors and their respective officers, directors, employees and agents (including, without limitation, those retained in connection with transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification is sought), and including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to the inaccuracy of any representation or warranty made by the Selling Shareholder in this Agreement or in any certificate delivered by the Selling Shareholder to any of the Indemnitees pursuant to this Agreement. To the extent that the foregoing undertaking by the Selling Shareholder may be unenforceable for any reason, the Selling Shareholder shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.
(iii) Conditions of Indemnification.
(a) Except as set forth in paragraph (c) below, none of the Company's representations, warranties or covenants in this Agreement shall be deemed to have been breached for purposes of paragraph 2A except to the extent that (x) any individual breach has resulted in or could reasonably be expected to result in an Indemnified Liability exceeding $20,000 and (y) the total amount of Indemnified Liabilities that have resulted, and could reasonably be expected to result, from all breaches identified in (x) would exceed $3 million in the aggregate.
(b) Except as set forth in paragraph (c) below, the Company shall only be liable to the Investors for any Indemnified Liabilities arising under paragraph 11K(i) to the extent that (x) the amount of any individual Indemnified Liability exceeds $20,000 and (y) the total amount of all Indemnified Liabilities identified in (x) exceeds $3 million in the aggregate, in
which case the Company shall be liable to the Investors for all Indemnified Liabilities from the first dollar.
(c) The foregoing limitations set forth in clauses (a) and (b) shall not apply to (x) any inaccuracy of any representation or warranty contained in paragraphs 6A, 6B, 6D and 6P or (y) any Indemnified Liability resulting from any Adverse Claim with respect to the record or beneficial ownership of ARI Shares, the Company Shares or any other shares of the Company held by the Selling Shareholder.
(d) Except as set forth in paragraph (f) below, none of the Selling Shareholder's representations or warranties set forth in paragraph 7C shall be deemed to have been breached for purposes of paragraph 2A, except to the extent that (x) any individual breach has resulted in or could reasonably be expected to result in an Indemnified Liability exceeding $20,000 and (y) the total amount of Indemnified Liabilities that have resulted, and could reasonably be expected to result, from all breaches identified in (x) would exceed $3 million in the aggregate.
(e) Except as set forth in paragraph (f) below, the Selling Shareholder shall only be liable to the Investors for any Indemnified Liabilities arising under paragraph 11K(ii) with respect to a breach of paragraph 7C hereof to the extent that (x) the amount of any individual Indemnified Liability exceeds $20,000 and (y) the total amount of all Indemnified Liabilities identified in (x) exceeds $3 million in the aggregate, in which case the Selling Shareholder shall be liable to the Investors for all Indemnified Liabilities from the first dollar.
(f) The foregoing limitation set forth in clause (d) and (e)
shall not apply to (x) a breach of paragraph 7C that relates to any inaccuracy
of any representation or warranty contained in paragraphs 6A, 6B, 6D and 6P or
(y) any Indemnified Liability resulting from any Adverse Claim with respect to
the ownership of ARI Shares, the Company Shares or any other shares of the
Company held by the Selling Shareholder.
(g) Notwithstanding any other provision contained in this
paragraph 11K, in the event that the representations and warranties contained in
paragraph 7C (other than with respect to the inaccuracy of any representation or
warranty contained in paragraph 6B, 6D or 6P) hereof are breached, the Selling
Shareholder shall only be required to indemnify the Investors and the other
Indemnitees for one-half (1/2) of the total Indemnified Liabilities of the
Indemnitees as a result of such breach and the corresponding breach under
Section 6 pursuant to paragraphs 11K(i) and (ii) above subject to an aggregate
cap of $30,666,632.25 on the Selling Shareholder's overall indemnification
obligation pursuant to paragraph 11K(ii) with respect to paragraph 7C (other
than with respect to the breach or inaccuracy of any representation or warranty
contained in paragraph 6B, 6D (to the extent that such breach or inaccuracy (i)
pertains to the title to, ownership of, or other rights with respect to, the
Company's capital stock or other equity securities including, but not limited
to, the ARI Shares and the Company Shares, and (ii) impairs or affects the value
thereof or the right to realize the value thereof) or 6P) above; provided,
however, that nothing contained in this paragraph 11K(iii)(g) shall in any way
limit the Company's liability or indemnification obligations under paragraph
11K(i) except to the extent
that the Investors have recovered any amounts from the Selling Shareholder as a result of such breach and the corresponding breach under Section 6.
(h) Any claim based upon the breach of any representation or warranty contained in Section 6, 7 or 8 must be made to the breaching party in writing prior to the later of (i) April 1, 1998 or (ii) fifteen (15) days after delivery to the Investors by the Company of its 1997 audited financial statements pursuant to Section 5 of the Stockholders Agreement; provided that (A) any claim based upon the breach of any representation or warranty contained in paragraphs 6L, 6U, 6V or 7C (with respect to the inaccuracy of any representation or warranty contained in paragraphs 6L, 6U and 6V) must be made to the Company or the Selling Shareholder (as the case may be) in writing prior to the third anniversary of the Closing and (B) there shall be no time limit for claims made for a breach of the representations and warranties contained in paragraphs 6A, 6B, 6P, 7A, 7B, 7C (with respect to the inaccuracy of any representation or warranty contained in paragraph 6B), 7D, 7E, 7F and the first two sentences of 6D.
(i) Notwithstanding anything to the contrary contained in this paragraph 11K, each of the Company and the Selling Shareholder shall be jointly and severally liable to the Investors with respect to any Indemnified Liability arising out of, or as a result of, the breach or inaccuracy of any representation or warranty contained in paragraph 6B, 6D (to the extent that such breach or inaccuracy (i) pertains to the title to, ownership of, or other rights with respect to, the Company's capital stock or other equity securities including, but not limited to, the ARI Shares and the Company Shares, and (ii) impairs or affects the value thereof or the right to realize the value thereof) or 6P hereof.
(iv) Adjustment to Purchase Price. If the Indemnitees recover Indemnified Liabilities from the Company under paragraph 11K(i) with respect to a breach of any representations or warranties contained in Section 6 hereof or in any certificate delivered by the Company to any Indemnitee pursuant to this Agreement and the Indemnitees do not have any right to recover any Indemnified Liabilities with respect to such breach from the Selling Shareholder (or indirectly the Bank) under paragraphs 11K(ii) and (iii), then notwithstanding anything to the contrary contained in this paragraph 11K, the purchase price paid by the Investors to the Selling Shareholder for the ARI Shares hereunder shall be adjusted to reflect the reduction in the value of the Company as a result of the payment of such Indemnified Liabilities by the Company to the Indemnitees, and the Selling Shareholder shall be liable to the Indemnitees for and shall promptly pay to the Indemnitees (as an adjustment to the consideration paid by the Investors to the Selling Shareholder for the ARI Shares) an amount in cash equal to (i) $30,666,632.25 (the purchase price paid by the Investors to the Selling Shareholder for the ARI Shares hereunder), minus (ii) 22.0867% (the percentage of the Company's fully-diluted Common Stock purchased by the Investors from the Selling Shareholder) multiplied by the post-Closing valuation of the Company's Common Stock on a fully-diluted basis (not adjusted to reflect the reduction in value of the Company as a result of such breach of its representations and warranties but reduced by any actual recovery of Indemnified Liabilities from the Company by the Indemnitees).
(v) Failure to Recover. If any breach or inaccuracy of any representations and warranties in paragraph 6B, 6D (to the extent that such breach or inaccuracy (i) pertains to the title to, ownership of, or other rights with respect to, the Company's capital stock or other equity securities including, but not limited to, the ARI Shares and the Company Shares, and (ii) impairs or affects the value thereof or the right to realize the value thereof), 6P or 7A results in a claim against the Company for which the Indemnitees are entitled to recover Indemnified Liabilities from either the Company or the Selling Shareholder or both of them and the Indemnitees fail to recover the full amount thereof from either the Company or the Selling Shareholder or both of them (after final determination of the judicial authority or alternative dispute resolution authority selected by the parties, as the case may be, which determination is either not appealable or all applicable time periods to appeal have lapsed and thereafter, following five (5) days prior written notice by the Indemnitees to the Company and the Selling Shareholder), the Company shall (a) issue that number of additional shares of Common Stock to the Investors (for no additional consideration and as an adjustment to the purchase price paid for the Company Shares and the ARI Shares hereunder) such that the Investors' aggregate fully-diluted ownership of the Common Stock at the Closing would have been equal to (i) the aggregate amount invested by the Investors at Closing (for the purchase of both the Company Shares and ARI Shares) less any amounts received by the Indemnitees for Indemnified Liabilities from either the Company or the Selling Shareholder, divided by (ii) the fully-diluted post-closing value of the Common Stock immediately after the Closing (as adjusted to reflect any reduction in value of the Company resulting from any breaches of representations and warranties by the Company hereunder and any actual recovery of Indemnified Liabilities from the Company by the Indemnitees) and (b) issue or grant that number of additional shares of Common Stock or options to acquire Common Stock to management shareholders and optionholders as of the Closing, respectively, such that their aggregate fully diluted ownership of the Common Stock as of the Closing would have remained the same as it was prior to the Company issuing additional shares to the Investors hereunder.
(vi) Claims Against the Investors. If any breach or inaccuracy
of any representations and warranties in paragraph 6B, 6D (to the extent that
such breach or inaccuracy (i) pertains to the title to, ownership of, or other
rights with respect to, the Company's capital stock or other equity securities
including, but not limited to, the ARI Shares and the Company Shares, and (ii)
impairs or affects the value thereof or the right to realize the value thereof),
6P or 7A results in a direct claim (a "Direct Claim") against the Investors for
which the Investors are entitled to recover Indemnified Liabilities from either
the Company or the Selling Shareholder or both of them and the Indemnitees fail
to recover the full amount thereof from either the Company or the Selling
Shareholder or both of them, the Company shall (a) issue that number of
additional shares of Common Stock to the Investors so that the fully-diluted
percentage ownership of the Investors as of the Closing would have been equal to
(i) the aggregate amount invested by the Investors at Closing (for the purchase
of both the Company Shares and ARI Shares) plus the amount of the Direct Claim,
less any amounts received by the Indemnitees for Indemnified Liabilities from
either the Company or the Selling Shareholder, divided by (ii) the fully-diluted
post-closing value of the Common Stock immediately after the Closing (as
adjusted to reflect any reduction in value of the Company resulting from any
breaches of representations and warranties by the Company hereunder and any
actual recovery of Indemnified Liabilities from
the Company by the Indemnitees) and (b) issue or grant that number of additional shares of Common Stock or options to acquire Common Stock to management shareholders and optionholders as of the Closing, respectively, such that their aggregate fully diluted ownership of the Common Stock as of the Closing would have remained the same as it was prior to the Company issuing additional shares to the Investors hereunder.
Examples illustrating the operation of paragraphs 11K(iv), 11K(v) and 11K(vi) are set forth in Exhibit F attached hereto.
11L. Further Assurances. The Selling Shareholder agrees that at any time and from time to time upon the request of the Investors, the Selling Shareholder shall execute and deliver such further documents and do such further acts and things as the Investors may reasonably request in connection with the sale and transfer of the ARI Shares to the Investors under this Agreement.
11M. Consent to Jurisdiction. Any legal action, suit or proceeding arising out of or relating to this Agreement or the consummation of the transactions contemplated hereby may only be instituted in any court of the State of New York or State of Delaware, as determined by paragraph 11H, and each party (including the Bank) agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of such courts, that the action, suit or proceeding if brought in such courts, would be in an inconvenient forum, that the venue of the action, suit or proceeding, if brought in any of such courts, is improper or that this Agreement or the subject matter hereof may not be enforced in or by such courts on jurisdictional grounds. The Bank hereby designates and appoints Pryor, Cashman, Sherman & Flynn (the "Authorized Agent") as its agent to accept and acknowledge on its behalf service of any process which may be served in any suit, action or proceeding and agrees that service upon such Authorized Agent shall be deemed in every respect service of process on the Bank and, to the extent permitted by applicable law, shall be taken and held to be valid and personal service and shall constitute an appearance by the Bank for all purposes in any such suit, action or proceeding. The Bank represents and warrants to the Investors that the Authorized Agent has agreed to act as such agent for service of process.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.
CARROLS HOLDINGS CORPORATION
By:/s/ Alan Vituli --------------------------------------- Its: Chairman and Chief Executive Officer |
MADISON DEARBORN CAPITAL
PARTNERS, L.P.
By: Madison Dearborn Partners, L.P.
Its: General Partner
By: Madison Dearborn Partners, Inc.
Its: General Partner
By: /s/ Benjamin D. Chereskin ------------------------------- Benjamin D. Chereskin |
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By: Madison Dearborn Partners, L.P.
Its: General Partner
By: Madison Dearborn Partners, Inc.
Its: General Partner
By:/s/ Benjamin D. Chereskin
-------------------------
Benjamin D. Chereskin
|
ATLANTIC RESTAURANTS, INC.
By: /s/ David J. Mathies
--------------------------------------
Its: President
--------------------------------------
|
The undersigned, as the indirect owner of all or substantially all of the outstanding capital stock of Atlantic Restaurants, Inc., does hereby guarantee the obligations of Atlantic Restaurants, Inc. under this Stock Purchase Agreement and shall cause Atlantic Restaurants, Inc. to comply with the provisions of this Stock Purchase Agreement.
BAHRAIN INTERNATIONAL BANK, E.C.
By /s/ Robin McIlvenny --------------------------------------- Its Chief Executive Officer --------------------------------------- |
LIST OF EXHIBITS
Exhibit A - Registration Agreement
Exhibit B1 - Alan Vituli Unvested Stock Option Agreement
Exhibit B2 - Daniel Accordino Unvested Stock Option Agreement
Exhibit B3 - Joseph Zirkman Unvested Stock Option Agreement
Exhibit B4 - Amended 1996 Long-Term Incentive Plan
Exhibit B5 - Options granted to Alan Vituli pursuant to the Carrols
Corporation 1996 Long-Term Incentive Plan
Exhibit B6 - Options granted to Daniel Accordino pursuant to the
Carrols Corporation
1996 Long-Term Incentive Plan
Exhibit C - Stockholders Agreement
Exhibit D1 - Alan Vituli Employment Agreement
Exhibit D2 - Daniel Accordino Employment Agreement
Exhibit E1 - Form of Opinion of Schulte Roth & Zabel LLP
Exhibit E2 - Form of Opinion of Joseph A. Zirkman, Esq.
Exhibit E3 - Form of Opinion of Pryor, Cashman, Sherman & Flynn
Exhibit F - Operation of Paragraphs 11K(iv), 11K(v) and 11K(vi)
|
LIST OF DISCLOSURE SCHEDULES
Third Party Approval Schedule
Governmental Approval Schedule
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Affiliated Transactions Schedule
Developments Schedule
Assets Schedule Taxes Schedule
Contracts Schedule
Intellectual Property Schedule
Litigation Schedule
Insurance Schedule
Employee Schedule
Employee Benefits Schedule
Compliance Schedule
Environmental Schedule
Jurisdiction of Organization and Qualification
for the Company and its Subsidiaries Schedule
Carrols Corporation $152,000,000 Senior Secured Credit Facilities Commitment Letter
January 8, 1997
Carrols Corporation
968 James Street
Syracuse, New York 13203
Attention: Alan Vituli
Gentlemen:
You have advised Texas Commerce Bank National Association ("TCB") and Chase Securities Inc. ("CSI") that Carrols Corporation, a Delaware corporation (the "Borrower" or "you"), intend to raise $152,000,000 in senior secured credit facilities to refinance existing debt and fund current and future acquisitions. In that connection, you have requested that CSI agree to structure and syndicate senior secured credit facilities in an aggregate amount of $152,000,000 consisting of a $25,000,000 revolving credit facility, a $41,000,000 term loan and a $86,000,000 advance term loan (the "Financing" or the "Facilities"), and that TCB commit to provide the entire principal amount of the Facilities and to serve as administrative agent for the Facilities.
CSI is pleased to advise you that it is willing to act as exclusive advisor and arranger for the Facilities.
Furthermore, TCB is pleased to advise you of its commitment to provide the entire amount of the Facilities upon the terms and subject to the conditions set forth or referred to in this commitment letter (the "Commitment Letter") and in the Summary of Terms and Conditions attached hereto as Exhibit A (the "Term Sheet").
It is agreed that TCB will act as the sole and exclusive Administrative Agent and that CSI will act as the sole and exclusive advisor and arranger, for the Facilities, and each will, in such capacities, perform the duties and exercise the authority customarily performed by it in such roles. You agree that no other agents, co-agents or arrangers will be appointed, no other titles will be awarded and no compensation (other than that expressly contemplated by the Term Sheet and the Fee Letter referred to below) will be paid in connection with the Facilities unless you and we shall so agree.
CSI intends to syndicate the Facilities to a group of financial institutions (together with TCB, the "Lenders") identified by us in consultation with you and agreed to by you. CSI intends to commence syndication efforts promptly upon the execution of this Commitment Letter, and you agree actively to assist CSI in completing a syndication satisfactory to it and you. Such assistance shall include (a) direct contact between senior management and advisors of the
Carrols Corporation
January 8, 1997
Borrower and the proposed Lenders, (b) assistance in the preparation of a Confidential Information Memorandum and other marketing materials to be used in connection with the syndication and (c) the hosting, with CSI, of one or more meetings of prospective Lenders.
CSI will, in consultation with you, manage all aspects of the syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate, the allocations of the commitments among the Lenders and the amount and distribution of fees among the Lenders. To assist CSI in its syndication efforts, you agree promptly to provide to CSI and TCB all such information with respect to the Borrower, Financing and the other transactions contemplated hereby and by the Term Sheet and the Fee Letter referred to below, including all financial information and projections (the "Projections"), as we may deem reasonably necessary in connection with the arrangement and syndication of the Facilities. You hereby represent and covenant that (a) all information other than the Projections (the "Information") that has been or will be made available to TCB or CSI by you or any of your representatives is or will be, when furnished, complete and correct in all material respects; and (b) the Projections that have been or will be made available to TCB or CSI by you or any of your representatives have been or will be prepared in good faith based upon reasonable assumptions. You understand that in arranging and syndicating the Facilities we may use and rely on such Information and Projections without independent verification thereof. You hereby acknowledge and consent that CSI may share the Confidential Information Memorandum, the Information and any other information or matters relating to the Borrower or the transactions contemplated hereby with affiliates of CSI, including The Chase Manhattan Bank, and TCB, and that such affiliates may likewise share information relating to the Borrower or such transactions with CSI.
As consideration for TCB's commitment hereunder and CSI's agreement to perform the services described herein, you agree to pay to TCB the nonrefundable fees set forth in the Fee Letter dated the date hereof and delivered herewith (the "Fee Letter").
TCB's commitment hereunder and CSI's agreement to perform the services described herein are subject to (a) there not occurring or becoming known to us any material adverse condition or material adverse change in or affecting the business, operations, property, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries, taken as a whole, (b) our completion of and satisfaction in all respects with a due diligence investigation of the Borrower, (c) there not having occurred a material disruption of or material adverse change in financial, banking or capital market conditions since the date hereof that, in our judgment, could materially impair the syndication of the Facilities, (d) our satisfaction that prior to and during the syndication of the Facilities there shall be no competing offering, placement or arrangement of any debt securities or bank financing by or on behalf of the Borrower or any affiliate thereof, (e) the negotiation, execution and delivery on or before March 31, 1997 of definitive documentation with respect to the Facilities mutually satisfactory to you and to TCB and its counsel, and (f) the other conditions set forth or referred to in the Term Sheet.
Carrols Corporation
January 8, 1997
You agree to indemnify and hold harmless TCB, CSI, their affiliates and their respective officers, directors, employees, advisors, and agents (each, an "Indemnified Person") from and against any and all losses, claims, damages and liabilities to which any such Indemnified Person may become subject arising out of or in connection with this Commitment Letter, the Facilities, the use of the proceeds thereof, the Financing or the transactions contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any Indemnified Person is a party thereto, and to reimburse each Indemnified Person upon demand for any legal or other expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any Indemnified Person, apply to losses, claims, damages or liabilities, or related expenses to the extent they are found by a final, non-appealable judgment of a court to arise from the willful misconduct or gross negligence of such Indemnified Person. YOU AGREE THAT THE INDEMNITY CONTAINED IN THE PRECEDING SENTENCE EXTENDS TO AND IS INTENDED TO COVER LOSSES AND RELATED EXPENSES ARISING OUT OF THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF AN INDEMNIFIED PERSON. In addition, you agree to reimburse TCB, CSI and their affiliates on demand for all out-of-pocket expenses (including due diligence expenses, syndication expenses, travel expenses, and reasonable fees, charges and disbursements of counsel) incurred in connection with the Facilities and any related documentation (including this Commitment Letter, the Term Sheet, the Fee Letter and the definitive financing documentation) or the administration, amendment, modification or waiver thereof. No Indemnified Person shall be liable for any indirect or consequential damages in connection with its activities related to the Facilities.
This Commitment Letter shall not be assignable by any party hereto without the prior written consent of each other party (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you, TCB and CSI. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof . This Commitment Letter (together with the Term Sheet) and the Fee Letter are the only agreements that have been entered into among us with respect to the Facilities and set forth the entire understanding of the parties with respect thereto.
THIS COMMITMENT LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) to your officers, agents and
Carrols Corporation
January 8, 1997
advisors who are directly involved in the consideration of this matter, (b) as
may be compelled in a judicial or administrative proceeding or as otherwise
required by law (in which case you agree to inform us promptly thereof); (c) in
filings with the SEC; (d) as to the Term Sheet only, to prospective Lenders; and
(e) to shareholders of Carrols Holdings Corporation and employees of Madison
Dearborn Capital Partners II, L.P. and their respective counsel.
The compensation, expense reimbursement, indemnification and confidentiality provisions contained herein and in the Fee Letter shall remain in full force and effect, notwithstanding the termination of this Commitment Letter or TCB's commitment hereunder, until as to expense reimbursement and indemnification provisions definitive financing documentation is executed and delivered by the parties.
THIS COMMITMENT LETTER, THE ATTACHED TERM SHEET, THE FEE LETTER AND ALL EXHIBITS, SCHEDULES AND OTHER ATTACHMENTS HERETO AND THERETO CONSTITUTE A "LOAN AGREEMENT" FOR PURPOSES OF SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by returning to us executed counterparts hereof and of the Fee Letter together with the amount agreed upon pursuant to the Fee Letter to be payable upon acceptance hereof not later than 5:00 p.m., Houston, Texas time, on January 10, 1997. TCB's commitment and CSI's agreements herein will expire at such time in the event TCB has not received such executed counterparts in accordance with the immediately preceding sentence.
Carrols Corporation
January 8, 1997
TCB and CSI are pleased to have been given the opportunity to assist you in connection with this important financing.
Very truly yours,
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/Mike Costello
---------------------------
Name: Mike Costello
Title: Vice President
|
CHASE SECURITIES INC.
By: /s/Laif Afseth
---------------------------
Name: Laif Afseth
Title: Vice President
|
Accepted and agreed to as of
the date first above written:
Carrols Corporation
By: /s/Alan Vituli
--------------------------------
Name: Alan Vituli
Title: Chief Executive Officer
|
CARROLS CORPORATION
1996 LONG-TERM INCENTIVE PLAN
1. PURPOSE
The purpose of this Plan is to further the growth and general prosperity of Carrols Corporation (the "Company") by providing long-term incentives to officers and employees of the Company and any Subsidiaries of the Company. The Company intends that the Plan will help attract, retain and motivate officers and key employees of high caliber and good potential and promote the alignment of the Participant's interests with that of the Company's shareholders.
2. DEFINITIONS
As used in the Plan, the following words shall have the following meanings:
"Award" means an award made to a Participant pursuant to the Plan and described in Paragraph 6, including, without limitation, an award of an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Performance Units, Performance Shares, or Other Stock-Based Awards or any combination of the foregoing.
"Award Agreement" means an agreement between the Company and a Participant that sets forth the terms, conditions and limitations applicable to an Award.
"Board" means the Board of Directors of the Company as constituted from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Cause" means, except as may otherwise be provided in a Participant's employment agreement (if any) or in the Award Agreement, (i) a felony conviction of the Participant (or a plea of nolo contendere in lieu thereof); (ii) the unauthorized disclosure of confidential proprietary information of the Company which disclosure the Participant knows or reasonably should have known would be reasonably likely to result in material damage to the Company; (iii) the breach by the Participant of any material provision of the Participant's employment agreement (if any), which breach, if curable, is not remedied within thirty (30) days after the Participant's receipt of written notice thereof, provided, however, that the Company need not permit the Participant to cure any breach which has been the subject of a prior written notice; (iv) the engagement in self dealing in breach of fiduciary duties with respect to the Company's assets or properties unless disclosed to and approved by the Committee; (v) an act of gross misconduct in connection with the Participant's duties hereunder; or (vi) habitual or material neglect of
the Participant's duties to the Company (as determined in good faith by the Committee, continuing after prior written notice to the Participant).
"Change of Control" means, except as set forth on Appendix A to this Plan:
(a) The acquisition (other than from the Company) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, excluding for this purpose any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act), of 50% or more of either the then outstanding shares of common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors;
(b) Individuals who, as of the effective date of the Plan specified in Section 20, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided that any person becoming a director subsequent to the effective date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, shall be for purposes of this Plan, considered as though such person were a member of the Incumbent Board); or
(c) Approval by the stockholders of the Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or a liquidation or dissolution of the Company or of the sale of all or substantially all of the assets of the Company.
"Committee" means the Compensation Committee of the Board.
"Controlling Shareholder" means Dilmun Investments.
"Employee" means any officer or other employee of the Company or a Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
"Fair Market Value" means, as of any date:
(a) if the Stock is publicly traded, the average of the highest and lowest prices at which the Stock is traded on such date on the principal market on which the Stock is traded, or if the Stock is not traded on such date, on next date on which the Stock is traded; or
(b) if the Stock is not publicly traded, the value of a Share of Stock as determined in good faith by the Company on the advice of its independent auditors.
"Good Reason" means (i) the material failure of the Company to comply
with the provisions of the Participant's employment agreement, if any,
which failure shall not cease promptly and in no event more than ten
(10) days after the Company's receipt of written notice from the
Participant objecting to such conduct; (ii) any purported termination by
the Company of the Participant's employment other than as expressly
permitted in the Participant's employment agreement, if any; or (iii)
the assignment to Participant of duties and responsibilities
inconsistent with those duties and responsibilities customarily assigned
to individuals holding positions similar to that of the Participant at a
company of comparable size to the Company or the substantial reduction
by the Company of Participant's duties and responsibilities.
"Incentive Stock Option" means an option intended to be and designated as an incentive stock option meeting the requirements of Section 422 of the Code.
"Nonqualified Stock Option" means an option that is not intended to be nor designated as an Incentive Stock Option.
"Participant" means an Employee who, as of any date, has been granted one or more Awards under the Plan which are still outstanding (i.e., have not been exercised, forfeited or terminated).
"Performance Goals" means, with respect to any Performance Period, performance goals based on any of the following criteria and established by the Committee prior to the beginning of such Performance Period or performance goals based on any of the following criteria and established by the Committee after the beginning of such Performance Period that meet the requirements to be considered pre-established performance goals under Section 162(m) of the Code: earnings or earnings growth; return on equity, assets or investment; revenues; expenses; stock price; market share; charge-offs; or reductions in non-performing assets. Such Performance Goals may be particular to an Employee or the division, department, branch, line of business, Subsidiary or other unit in which the Employee works, or may be based on the performance of the Company generally.
"Performance Period" means (when and if applicable) the period of time designated by the Committee during which Performance Goals will be measured in connection with an Award.
"Permanent Disability" means the complete and permanent inability of a Participant, for medical reasons, to perform all of his or her duties with the Company as determined by the Committee upon the basis of such evidence, including but not limited to independent medical reports and data, as the Committee deems appropriate or necessary.
"Plan" means the Carrols Corporation 1996 Long-Term Incentive Plan.
"Retirement" means termination of employment without Good Reason or for other than Cause, death or Permanent Disability on or after the Participant's attainment of age 58.
"Stock" or "Share" means common stock of Carrols Holdings Corporation, par value $.01 per share, which may be authorized but unissued or issued and reacquired.
"Other Stock-Based Awards" means any Award other than a Stock Option, Stock Appreciation Right, Restricted Stock, Performance Unit or Performance Share that is valued by reference to or otherwise based upon the Stock.
"Stock Options" means the collective reference to Incentive Stock Options and Nonqualified Stock Options.
"Subsidiary" means any corporation, other than the Company, in which the Company has at least a fifty percent beneficial ownership interest.
3. ADMINISTRATION
(a) The Plan shall be administered by the Committee. None of the members of the Committee shall be eligible to receive Awards under the Plan. Members of the Committee shall qualify to administer and make Awards under the Plan for purposes of Section 162(m) of the Code and Rule 16b-3 (and any other applicable rule) promulgated under Section 16(b) of the Exchange Act. The Committee may adopt its own rules or procedures, and the action of a majority of the Committee, taken at a meeting or taken without a meeting by a writing signed by such majority, shall constitute action by the Committee. The Committee shall have the power and authority to administer, construe and interpret the Plan, to make rules for carrying it out and to make changes in such rules. Any such interpretations, rules, and administration shall be consistent with the basic purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Company its duties under the Plan
subject to such conditions and limitations as the Committee shall
prescribe; provided, however, that only the Committee may
designate and make Awards to Participants who are subject to
Section 16 of the Exchange Act and Section 162(m) of the Code.
(c) The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company, and the officers and
directors of the Company shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards made under the Plan, and all members of the Committee shall be fully protected by the Company with respect to any such action, determination or interpretation.
4. ELIGIBILITY
The Committee, in its discretion, may grant Awards to any Employee, subject to the provisions of the Plan. No Employee shall be entitled as a matter of right to receive an Award, nor shall the grant of an Award entitle an Employee to receive any future Award.
5. AWARD AGREEMENT
The terms, conditions and limitations of each Award under the Plan shall be determined by the Committee subject to the limitations provided for in Section 7 below, and shall be set forth in an Award Agreement, in a form approved by the Committee, consistent, however, with the terms of the Plan; provided, however, that such Award Agreement shall contain provisions dealing with the treatment of Awards in the event of the termination, death or disability of a Participant.
6. AWARDS
As the Committee may determine, the following types of Awards may be granted under the Plan to eligible Employees, either alone, in combination or on an alternative basis:
(a) Incentive Stock Options: These are options within the meaning of
Section 422 of the Code to purchase Stock. In addition to other
restrictions contained in the Plan, an option granted under this
Paragraph 6(a), (i) may not be exercised more than 10 years after
the date it is granted, (ii) may not have an option exercise
price less than the Fair Market Value of the Stock on the date
the option is granted, (iii) must otherwise comply with the
requirements of Section 422 of the Code, and (iv) must be
designated as an "Incentive Stock Option" by the Committee. To
the extent the aggregate Fair Market Value (determined as of the
time the Incentive Stock Option is granted) of the Stock with
respect to which Incentive Stock Options become exercisable for
the first time by an individual during any calendar year under
all plans of the Company or any Subsidiary exceeds ONE HUNDRED
THOUSAND DOLLARS ($100,000), such options shall be treated as
Nonqualified Stock Options. Payment of the option exercise price
shall be made (i) in cash, (ii) by delivering shares of Stock
already owned by the Participant, (iii) by
delivering a promissory note to the Controlling Shareholder payable over a three (3) year period and bearing interest at the rate provided under Section 1274(d) of the Code, or (iv) by a combination of any of the foregoing, in accordance with the terms of the Plan, the Award Agreement, and any applicable guidelines of the Committee in effect at the time.
(b) Nonqualified Stock Options: These are options to purchase Stock
which are not intended to be and are not designated by the
Committee as "Incentive Stock Options." At the time of the Award,
the Committee shall determine, and shall have included in the
Award Agreement or other Plan rules, the option exercise period,
the option price, and such other conditions or restrictions as
may be appropriate. In addition to the other restrictions
contained in the Plan, an option granted under this Paragraph
6(b), (i) may not be exercised more than 10 years after the date
it is granted, and (ii) may not have an option exercise price
less than 100% of the Fair Market Value of Stock on the date the
option is granted. Payment of the option exercise price shall be
made (i) in cash, (ii) by delivering shares of Stock already
owned by the Participant, (iii) by delivering a promissory note
to the Controlling Shareholder payable over a three (3) year
period and bearing interest at the rate provided under Section
1274(d) of the Code, or (iv) by a combination of any of the
foregoing, in accordance with the terms of the Plan, the Award
Agreement and of any applicable guidelines of the Committee in
effect at the time.
(c) Stock Appreciation Rights: These are rights that on exercise
entitle the holder to receive the excess of (i) the Fair Market
Value of a Share of Stock on the date of exercise over (ii) the
Fair Market Value on the date of award or, if connected with a
previously issued Stock Option, the Fair Market Value at the time
such previously issued Stock Option was granted (the "base
value"), multiplied by (iii) the number of Shares covered by the
rights exercised, as determined by the Committee. A Stock
Appreciation Right granted under the Plan may, but need not be,
granted in tandem with a Stock Option under Paragraphs 6(a) or
6(b). The Committee, in the Award Agreement or by other Plan
rules, may impose such restrictions or conditions on the exercise
of Stock Appreciation Rights as it deems appropriate, and may
terminate, amend, or suspend such Stock Appreciation Rights at
any time. No Stock Appreciation Right granted under this Plan may
be exercised more than 10 years after the date it is granted.
(d) Restricted Stock: Restricted Stock is Stock delivered to a Participant with or without payment of consideration, subject to such conditions, terms and restrictions (including performance-based or employment-based vesting, forfeiture conditions and transfer restrictions) on the Participant's right to transfer or sell such Stock. The number of Shares of Restricted Stock and the restrictions or conditions on such Shares shall be determined by the Committee, in the Award Agreement or by other Plan rules, and the certificate for the Restricted Stock shall bear evidence of the restrictions or conditions.
(e) Performance Shares and Performance Units: An Award of Performance Shares or Performance Units shall entitle a Participant to receive Stock or a cash payment specified by the Committee, depending upon the attainment of certain Performance Goals over a Performance Period. The Performance Period and Performance Goals shall be specified by the Committee and may relate to the performance of the Company or one or more Subsidiaries or a combination thereof. At the time an Award of such Shares or units is made, the Committee shall, in the Award Agreement, determine the base value of the Award or specify a formula for determining such value. Other than an Award intended to qualify under Section 162(m) of the Internal Revenue Code, the Committee may adjust previously established Performance Goals and other terms and conditions of an Award at any time prior to the determination of the payment amount, to reflect major unforeseen events such as changes in laws, regulations or accounting policies or procedures, mergers, acquisitions or divestitures or extraordinary, unusual or non-recurring items or events.
Payment pursuant to an Award of Performance Shares or Performance Units shall be made following the Committee's determination of the extent to which the performance criteria were satisfied, and shall be made in the form of Stock, cash or a combination thereof, as the Committee may determine. Payment shall be made as promptly as practicable following the end of the Performance Period unless deferred subject to such terms and conditions as may be prescribed by the Committee.
(f) Other Stock-Based Awards: Other Stock-Based Awards may be granted to such Employees as the Committee may select, at any time and from time to time as the Committee shall determine. The Committee shall have complete discretion in determining the number of Shares subject to such Awards, the consideration for such Awards and the terms, conditions and limitations pertaining to same including, without limitation, restrictions based upon the achievement of specific business objectives, tenure, and other measurements of individual or business performance, and/or restrictions under applicable federal or state securities laws, and conditions under which same will lapse. Such Awards may include the issuance of Stock in payments of amounts earned under other incentive compensation plans of the Company. The terms, restrictions and conditions of the Award need not be the same with respect to each Participant.
The Committee may, in its sole discretion, direct the Company to issue Shares subject to such restrictive legends and/or stop transfer instructions as the Committee deems appropriate.
7. LIMITATIONS AND CONDITIONS
(a) The number of Shares available for Awards under this Plan shall be 393,263.77 Shares or, if greater 12.5% of the Shares authorized as of the effective date of the Plan (on a pre-dilution basis associated with grants of Stock Options). Of the
Shares available for Awards under this Plan, 157,305.51 Shares (or, if greater, 2/5 of 12.5% of the Shares) will be available for grant at an exercise price per share of $29.7192; 157,305.51 Shares (or, if greater, 2/5 of 12.5% of the Shares) will be available for grant at an exercise price per share of $35.1227; and 78,652.75 Shares (or, if greater 1/5 of 12.5% of the Shares) will be available for grant at an exercise price per share of $37.8245 (notwithstanding the preceding sentence, if, on the date of any such grant of options, the Fair Market Value of a Share of Stock is greater than the stated exercise prices, such options will be granted with an exercise price equal to Fair Market Value). The number of Shares subject to Awards under the Plan (including, but not limited to, Stock Options and Stock Appreciation Rights) to any one Participant shall not exceed 166,558.77 Shares. To the extent that any Award is canceled or forfeited, or terminates, expires, or lapses for any reason, any unissued Shares subject to such Award shall again be available for grant under the Plan.
(b) No Awards shall be made under the Plan beyond ten years after the effective date of the Plan, but the terms of Awards made on or before the expiration thereof may extend beyond such expiration.
(c) Nothing in this Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or any Subsidiary.
(d) Deferral of Award payouts may be provided for, at the sole discretion of the Committee, subject to such terms and conditions as the Committee may specify in the Award Agreements.
(e) Participants shall not have any of the rights or privileges of stockholders of the Company with respect to any Shares purchasable in connection with any Award, unless and until certificates representing such Shares have been issued by the Company to such Participants, except as otherwise specifically provided.
(f) Except as otherwise provided in this Paragraph 7, no Stock Option or other Award under the Plan shall be sold, transferred, assigned or otherwise alienated or hypothecated by the Participant, other than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative. The Participant may, if permitted by state law or the rules and regulations governing any exchange on which the Stock is traded, transfer, without payment of consideration, any Stock Option, other than Incentive Stock Options, to a member of such Participant's immediate family or to a trust or partnership whose beneficiaries are members of such Participant's immediate family. For purposes of this Paragraph, the term "immediate family" shall include the Participant's spouse, children and grandchildren.
(g) No grant or Award related payout under this Plan shall be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or its Subsidiaries and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. This Plan is not a "Retirement-Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of 1974, as amended.
(h) No benefit or promise under the Plan shall be secured by any specific assets of the Company or any of its Subsidiaries, nor shall any assets of the Company or any of it Subsidiaries be designated as attributable or allocated to the satisfaction of the Company's obligations under the Plan.
(i) Prior to the issuance of Shares, the Participant must execute a shareholder's agreement containing such terms and conditions as determined by the Committee and approved by the Board.
8. OPTION TERMS
(a) The exercise period for a Stock Option, including any extension which the Committee may from time to time decide to grant, shall not exceed ten years from the date of grant.
(b) Except as otherwise provided by the Committee, a Stock Option shall become exercisable with respect to 25% of the Shares commencing on the first anniversary of the date of grant, with an additional 25% becoming exercisable on each anniversary of the date of grant thereafter; provided, in each case, that the Participant shall have continuously remained in the active employment of the Company.
(c) Except as otherwise provided by the Committee, if a Participant's employment by the Company terminates because of (i) death, Permanent Disability, Retirement, termination for Good Reason or without Cause, all Stock Options held by the Participant, or his or her legal representative, which are not exercisable shall vest and the option shall become immediately exercisable in full (i) for a period of one year after the date of the Participant's termination of employment on account of death, Permanent Disability or Retirement; or (ii) for a period of forty-five (45) days after the Participant's termination of employment for Good Reason or without Cause.
(d) If a Participant's employment by the Company is terminated for any reason other than death, Permanent Disability, Retirement, for Good Reason or without Cause, all Options, to the extent not vested and exercisable on the date of the Participant's termination, shall be forfeited on such date of termination.
(e) If a Participant's employment with the Company is terminated for Cause, any portion of the Participant's Stock Option that was vested and exercisable on the date the Company delivers notice of termination of employment for Cause to the Participant shall be forfeited as of such date.
9. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that Awards earn dividends or dividend equivalents. Such dividends or dividend equivalents may be paid currently or may be credited to an account established by the Committee under the Plan in the name of the Participant. Any crediting of dividends or dividend equivalents may be subject to such restrictions and conditions as the Committee may establish, including reinvestment in additional Shares or Share equivalents.
10. TRANSFERS AND LEAVES OF ABSENCE
For purposes of the Plan, (a) the transfer of a Participant's employment between the Company and any Subsidiary without an intervening period of separation shall not be deemed a termination of employment, and (b) a Participant who is granted in writing a leave of absence shall be deemed to have remained in the employ of the Company during such leave of absence; provided, however, that no Awards may be granted to an Employee while absent on such leave.
11. ADJUSTMENTS
In the event of a reclassification, recapitalization, merger, consolidation, reorganization, issuance of warrants, rights or debentures, stock dividends, stock split or reverse stock split, cash dividend, property dividend, including, without limitation, a distribution of the stock of a Subsidiary, combination or exchange of Shares, repurchase of Shares, or any other change in corporate structure, which materially affects the value of the Shares, the Committee shall determine, in its discretion, the appropriate adjustments, if any, to (a) the number of Shares which may be issued under the Plan, and (b) the number of Shares issuable and the exercise price per Share pursuant to any outstanding Award theretofore granted under this Plan.
12. CHANGE OF CONTROL
In the event of a Change of Control, any or all Stock Options and Stock Appreciation Rights still outstanding shall, notwithstanding any contrary terms of the Award Agreement, accelerate and become exercisable in full at least ten days prior to (and shall expire on) the consummation of such Change of Control, on such conditions as the Committee shall determine, unless the successor corporation assumes the outstanding Stock Options or Stock Appreciation Rights or substitutes substantially equivalent options.
13. REDEMPTION AND SALE OF SHARES
(a) Upon the occurrence of a Change of Control of the Company, all Shares of Stock issued pursuant to the Plan shall be redeemed by the Company at the Fair Market Value of such Shares on the effective date of the Change of Control, subject to such other terms and conditions as the Company may require, including, but not limited to, requiring the Participant to tender the share certificate or certificates representing such Shares as a condition of such redemption.
(b) Except as otherwise provided by the Committee, in the event a Participant's employment with the Company is terminated for any reason, either by the Company or by the Participant, the Company may, in its sole discretion and within one year from the date of termination, redeem all or any portion of the Shares of Stock issued to the Participant pursuant to the Plan, at the Fair Market Value of such Shares on the date of termination.
(c) Except as otherwise provided by the Committee, in the event the Controlling Shareholder elects to sell or otherwise transfer to a third party (the "Purchaser") 50% or more of the Shares owned (as of the effective date of this Plan) by the Controlling Shareholder, a Participant shall be entitled to sell to the Purchaser, as of the time and at the per share sale price to be received by the Controlling Shareholder, up to an equivalent percentage of the Shares issued to and owned by the Participant pursuant to the Plan, in the following manner:
(i) the Controlling Shareholder shall notify each Participant of such sale or transfer and its material terms at least ten (10) days prior to the effective date of such sale or transfer;
(ii) within five (5) days thereafter, each Participant shall notify the Company of the number, if any, of such Shares owned by the Participant to be sold to the Purchaser (the "Participant Shares"), subject to the limitations set forth in subparagraph (c) above;
(iii) the Controlling Shareholder shall sell both its Shares and, acting on behalf of each such Participant, the Participant Shares, to the Purchaser and, to the extent necessary, the Controlling Shareholder shall reduce the number of its Shares available for sale to accommodate the sale of the Participant Shares.
14. AMENDMENT AND TERMINATION
(a) The Committee shall have the authority to make such amendments to any terms and conditions applicable to outstanding Awards as are consistent with this Plan provided that, except for adjustments under Paragraph 11 hereof, no such action shall modify such Award in a manner adverse to the Participant without the
Participant's consent, except as such modification is provided for or contemplated under the terms of the Award.
(b) The Committee may terminate, amend or modify the provisions of this Plan (including any performance criteria or conditions which must be achieved in order for an Employee to receive an Award or Awards, subject to Paragraph 6(e)) at any time and from time to time; provided, however, that an amendment which requires stockholder approval in order for the Plan to continue to comply with Rule 16b-3, Section 162(m) of the Code or any other law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of stockholders. The termination, amendment or modification of the Plan may be in response to changes in the Code, the Exchange Act, national securities exchange regulations or for other reasons deemed appropriate by the Committee.
15. FOREIGN OPTIONS AND RIGHTS
The Committee may make Awards to Employees who are subject to the laws of nations other than the United States, which Awards may have terms and conditions that differ from the terms thereof as provided elsewhere in the Plan for the purpose of complying with foreign laws.
16. WITHHOLDING TAXES
The Company shall have the right to deduct from any cash payment made under the Plan any federal, state or local income or other taxes required by law to be withheld with respect to such payment. It shall be a condition to the obligation of the Company to deliver Shares upon the exercise of a Stock Option or Stock Appreciation Right, upon payment of Performance Units or Performance Shares, upon delivery of Restricted Stock or upon exercise, settlement or payment of any Other Stock-Based Award, that the Participant pay to the Company such amount as may be requested by the Company for the purpose of satisfying any liability for such withholding taxes.
17. INDEMNIFICATION
Each current or former member of the Committee, and of the Board, shall be indemnified and held harmless by the Company against any loss, cost, liability or expense that may be imposed upon, or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which the member may be a party or in which the member may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by the member in settlement thereof, with the Company's approval, or paid by the member in satisfaction of any judgment in any such action, suit or proceeding against the member, provided such member shall give the Company an opportunity, at its own expense, to handle and defend the same before the
member undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which the member may be entitled under the Company's Certificate of Incorporation or By-laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
18. SUCCESSORS
The terms of the Plan shall be binding upon the Company and its successors and assigns.
19. REQUIREMENTS OF LAW
(a) The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approval by any governmental agencies or national securities exchanges as may be required.
(b) In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
(c) To the extent that federal laws do not otherwise control, the Plan and all Award Agreements, shall be construed in accordance with and governed by the laws of the State of New York.
20. EFFECTIVE DATE AND TERMINATION DATES
The Plan shall be effective on and as of the date of its approval by the stockholders of the Company (pursuant to the Company by-laws) and shall terminate ten years later, subject to such earlier termination by the Board pursuant to Paragraph 14.
CARROLS CORPORATION
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTION)
THIS AGREEMENT, dated as of December 30, 1996 (the "Date of Grant") is made by and between Carrols Corporation, a Delaware corporation (hereinafter called the "Company") and Alan Vituli, an employee of the Company (hereinafter referred to as the "Optionee"). All capitalized terms herein shall have such meanings as are ascribed to them in the Plan and in this Agreement.
1. Grant and Approval of Option. The Company hereby grants to the Optionee a nonqualified stock option (this "Option") to purchase all or any part of the aggregate of 160,451.60 shares of $.01 par value common stock of Carrols Holdings Corporation (the "Shares"), subject to all of the terms and conditions of this agreement (the "Agreement") and the Carrols Corporation 1996 Long-Term Incentive Plan (the "Plan").
2. Exercise Price and Period of Option. Subject to the terms and
conditions of the Plan and this Agreement, this Option shall become exercisable
(a) with regard to 56,629.98 Shares, on the Date of Grant, at an exercise price
per share (the "Exercise Price") of $29.7192; (b) with regard to 56,629.98
Shares, on December 31, 1997, at an Exercise Price of $35.1227; and (c) with
regard to 47,191.64 Shares, on December 31, 1997, at an Exercise Price of
$37.8245. If the Optionee's employment with the Company is terminated prior to
such dates, other then due to death, Permanent Disability, Retirement,
termination for Good Reason or termination without Cause, this Option shall not
become exercisable.
3. Expiration of Option. This Option may not be exercised to any extent by Optionee after the first to occur of the following events:
(a) the tenth anniversary of the Date of Grant; or
(b) a Change of Control (as defined in the Plan).
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary of the Company of an executed written Notice and Agreement in the form attached hereto as Exhibit A, or in such other form as may be required by the Company, which shall set forth Optionee's election to exercise this Option, the number of Shares being purchased and such other representations and agreements regarding Optionee's investment intent and access to information as may be required by the Company to comply with applicable securities laws.
(b) Such Notice and Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased (i) in cash (including check, bank draft or money order); (ii) where approved by the Committee in its sole discretion, by surrender of Shares of the Company owned by the Optionee having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a promissory note to the Controlling Shareholder payable over a three (3) year period and bearing interest at the rate provided under Section 1274(d) of the Code; (iv) by any combination of the foregoing where approved by the Committee in writing in its sole discretion; or (v) any other method the Committee may approve in its sole discretion, subject to the terms and conditions of the Plan.
(c) Prior to the issuance of the Shares upon exercise of this Option, Optionee must pay or, in a manner acceptable to the Company, make adequate provision to pay, any applicable federal, state or local withholding obligations as determined by the Company.
(d) Provided that the foregoing Notice and Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of the Optionee, the Optionee and the Optionee's spouse, or the Optionee's legal representative.
(e) Prior to the issuance of the Shares upon exercise of this Option, the Optionee must execute a shareholders' agreement containing such terms and conditions as determined by the Committee and approved by the Board of Directors.
(f) Any exercisable portion of this Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when this Option becomes unexercisable under Paragraph 3; provided, however, that any partial exercise shall be for whole Shares only.
(g) This Option may not be exercised unless such exercise is in compliance with the Securities Act of 1933, as amended, and all applicable state securities laws, as they are in effect on the date of exercise.
5. Redemption of Options Upon Change of Control. In the event that (i) a Change of Control (as defined in the Plan) of the Company occurs within five (5) years of the Date Of Grant; (ii) the Bahrain International Bank E.C. has realized a return of its investment; and (iii) the successor corporation neither assumes this Option nor agrees to substitute a substantially equivalent option or options at least ten (10) days prior to the date of the Change of Control, the Company shall redeem any options granted to the Optionee pursuant to the Plan (including, but not limited to, this Option), in an amount (the "Redemption Amount") determined pursuant to Schedule I attached hereto, payable within thirty (30) days of the date of the Change of Control.
6. Compliance with Laws and Regulations. The issuance and transfer of Shares shall be subject to compliance by the Company and the Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock
exchange on which the Company's shares may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the Securities and Exchange Commission, any state securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. This Option may not be transferred in any manner except (a) as determined by the Committee in its sole discretion, or (b) pursuant to Paragraph 7(f) of the Plan.
8. Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company with respect to any shares purchasable upon the exercise of the Option or any portion thereof, unless and until certificates representing such Shares shall have been issued by the Company to such holder.
9. Sale by Controlling Shareholder. In the event the Controlling Shareholder elects to sell or otherwise transfer to a third party (the "Purchaser") any Shares owned (as of the effective date of the Plan) by the Controlling Shareholder, the Optionee shall be entitled to sell to the Purchaser the Shares issued to and owned by the Optionee pursuant to the Plan, as of the same time and at the per share sale price to be received by the Controlling Shareholder, up to an equivalent percentage of the Shares sold by the Controlling Shareholder, in the following manner:
(i) the Controlling Shareholder shall notify the Optionee of
such sale or transfer and its material terms at least ten
(10) days prior to the effective date of such sale or
transfer;
(ii) within five (5) days thereafter, the Optionee shall notify the Company of the number, if any, of such Shares owned by the Optionee to be sold to the Purchaser (the "Participant Shares"), subject to the limitations set forth above;
(iii) the Controlling Shareholder shall sell both its Shares and, acting on behalf of the Optionee, the Participant Shares, to the Purchaser and, to the extent necessary, the Controlling Shareholder shall reduce the number of its Shares available for sale to accommodate the sale of the Participant Shares.
10. Consequences. Optionee shall be solely responsible for the payment of any taxes due in connection with the Plan and this Option grant; provided, however, that the Company may make such provisions as it may deem appropriate for the withholding of any taxes which the Company determines it is required to withhold in connection with the issuance, exercise or vesting of this Option.
11. Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option.
12. Notice. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Paragraph 12, either party may hereafter designate a different address for notices to be delivered. Any notice which is required to be given to the Optionee shall, if the Optionee is deceased, be given to the Optionee's personal representative. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
13. Dividends. In the event the Committee provides that Awards granted under the Plan earn dividends or dividend equivalents, such dividends or dividend equivalents may, in the Committee's discretion and in accordance with the terms of the Plan, (a) be paid currently, or (b) be credited to an account established by the Committee under the Plan in the name of the Optionee.
14. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Optionee or the Company forthwith to the Committee, which shall review such dispute at its next regular meeting. The resolution of such dispute by the Committee shall be final and binding on the Company and on the Optionee.
15. Governing Document. This Agreement is in every respect subject to the provisions of the Plan, as it may be amended from time to time. The provisions of the Plan shall govern in the case of any inconsistency between the Plan and this Agreement.
16. Entire Agreement. The Plan and the Notice and Agreement attached as Exhibit A are incorporated herein by reference. This Agreement, the Plan and the Notice and Agreement constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof.
CARROLS CORPORATION
By: /s/ Joseph Zirkman
---------------------------------
Its: Vice President
---------------------------------
|
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents that Optionee has read and understands the terms and provisions thereof, and accepts this Option subject to all the terms and provisions of the Plan and this Agreement. Optionee acknowledges that there may be various tax consequences upon exercise of this Option or disposition of the Shares and that Optionee should consult a tax adviser prior to such exercise or disposition.
/s/ Alan Vituli
------------------------------
Name
|
CARROLS CORPORATION
STOCK OPTION AGREEMENT
(Nonqualified Stock Option)
THIS AGREEMENT, dated as of December 30, 1996 (the "Date of Grant") is made by and between Carrols Corporation, a Delaware corporation (hereinafter called the "Company") and Daniel T. Accordino, an employee of the Company (hereinafter referred to as the "Optionee"). All capitalized terms herein shall have such meanings as are ascribed to them in the Plan and in this Agreement.
1. Grant and Approval of Option. The Company hereby grants to the Optionee a nonqualified stock option (this "Option") to purchase all or any part of the aggregate of 106,967.74 shares of $.01 par value common stock of Carrols Holdings Corporation (the "Shares"), subject to all of the terms and conditions of this agreement (the "Agreement") and the Carrols Corporation 1996 Long-Term Incentive Plan (the "Plan").
2. Exercise Price and Period of Option. Subject to the terms and
conditions of the Plan and this Agreement, this Option shall become exercisable
(a) with regard to 37,753.32 Shares, on the Date of Grant, at an exercise price
per share (the "Exercise Price") of $29.7192; (b) with regard to 37,753.32
Shares, on December 31, 1997, at an Exercise Price of $35.1227; and (c) with
regard to 31,461.10 Shares, on December 31, 1997, at an Exercise Price of
$37.8245. If the Optionee's employment with the Company is terminated prior to
such dates, other then due to death, Permanent Disability, Retirement,
termination for Good Reason or termination without Cause, this Option shall not
become exercisable.
3. Expiration of Option. This Option may not be exercised to any extent by Optionee after the first to occur of the following events:
(a) the tenth anniversary of the Date of Grant; or
(b) a Change of Control (as defined in the Plan).
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary of the Company of an executed written Notice and Agreement in the form attached hereto as Exhibit A, or in such other form as may be required by the Company, which shall set forth Optionee's election to exercise this Option, the number of Shares being purchased and such other representations and agreements regarding Optionee's investment intent and access to information as may be required by the Company to comply with applicable securities laws.
(b) Such Notice and Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased (i) in cash (including check, bank draft or money order); (ii) where approved by the Committee in its sole discretion, by surrender of Shares of the Company owned by the Optionee having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a promissory note to the Controlling Shareholder payable over a three (3) year period and bearing interest at the rate provided under Section 1274(d) of the Code; (iv) by any combination of the foregoing where approved by the Committee in writing in its sole discretion; or (v) any other method the Committee may approve in its sole discretion, subject to the terms and conditions of the Plan.
(c) Prior to the issuance of the Shares upon exercise of this Option, Optionee must pay or, in a manner acceptable to the Company, make adequate provision to pay, any applicable federal, state or local withholding obligations as determined by the Company.
(d) Provided that the foregoing Notice and Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of the Optionee, the Optionee and the Optionee's spouse, or the Optionee's legal representative.
(e) Prior to the issuance of the Shares upon exercise of this Option, the Optionee must execute a shareholders' agreement containing such terms and conditions as determined by the Committee and approved by the Board of Directors.
(f) Any exercisable portion of this Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when this Option becomes unexercisable under Paragraph 3; provided, however, that any partial exercise shall be for whole Shares only.
(g) This Option may not be exercised unless such exercise is in compliance with the Securities Act of 1933, as amended, and all applicable state securities laws, as they are in effect on the date of exercise.
5. Redemption of Options Upon Change of Control. In the event that (i) a Change of Control (as defined in the Plan) of the Company occurs within five (5) years of the Date Of Grant; (ii) the Bahrain International Bank E.C. has realized a return of its investment; and (iii) the successor corporation neither assumes this Option nor agrees to substitute a substantially equivalent option or options at least ten (10) days prior to the date of the Change of Control, the Company shall redeem any options granted to the Optionee pursuant to the Plan (including, but not limited to, this Option), in an amount (the "Redemption Amount") determined pursuant to Schedule I attached hereto, payable within thirty (30) days of the date of the Change of Control.
6. Compliance with Laws and Regulations. The issuance and transfer of Shares shall be subject to compliance by the Company and the Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock
exchange on which the Company's shares may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the Securities and Exchange Commission, any state securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. This Option may not be transferred in any manner except (a) as determined by the Committee in its sole discretion, or (b) pursuant to Paragraph 7(f) of the Plan.
8. Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company with respect to any shares purchasable upon the exercise of the Option or any portion thereof, unless and until certificates representing such Shares shall have been issued by the Company to such holder.
9. Sale by Controlling Shareholder. In the event the Controlling Shareholder elects to sell or otherwise transfer to a third party (the "Purchaser") any Shares owned (as of the effective date of the Plan) by the Controlling Shareholder, the Optionee shall be entitled to sell to the Purchaser the Shares issued to and owned by the Optionee pursuant to the Plan, as of the same time and at the per share sale price to be received by the Controlling Shareholder, up to an equivalent percentage of the Shares sold by the Controlling Shareholder, in the following manner:
(i) the Controlling Shareholder shall notify the Optionee of
such sale or transfer and its material terms at least ten
(10) days prior to the effective date of such sale or
transfer;
(ii) within five (5) days thereafter, the Optionee shall notify the Company of the number, if any, of such Shares owned by the Optionee to be sold to the Purchaser (the "Participant Shares"), subject to the limitations set forth above;
(iii) the Controlling Shareholder shall sell both its Shares and, acting on behalf of the Optionee, the Participant Shares, to the Purchaser and, to the extent necessary, the Controlling Shareholder shall reduce the number of its Shares available for sale to accommodate the sale of the Participant Shares.
10. Consequences. Optionee shall be solely responsible for the payment of any taxes due in connection with the Plan and this Option grant; provided, however, that the Company may make such provisions as it may deem appropriate for the withholding of any taxes which the Company determines it is required to withhold in connection with the issuance, exercise or vesting of this Option.
11. Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option.
12. Notice. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Paragraph 12, either party may hereafter designate a different address for notices to be delivered. Any notice which is required to be given to the Optionee shall, if the Optionee is deceased, be given to the Optionee's personal representative. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
13. Dividends. In the event the Committee provides that Awards granted under the Plan earn dividends or dividend equivalents, such dividends or dividend equivalents may, in the Committee's discretion and in accordance with the terms of the Plan, (a) be paid currently, or (b) be credited to an account established by the Committee under the Plan in the name of the Optionee.
14. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Optionee or the Company forthwith to the Committee, which shall review such dispute at its next regular meeting. The resolution of such dispute by the Committee shall be final and binding on the Company and on the Optionee.
15. Governing Document. This Agreement is in every respect subject to the provisions of the Plan, as it may be amended from time to time. The provisions of the Plan shall govern in the case of any inconsistency between the Plan and this Agreement.
16. Entire Agreement. The Plan and the Notice and Agreement attached as Exhibit A are incorporated herein by reference. This Agreement, the Plan and the Notice and Agreement constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof.
CARROLS CORPORATION
By: /s/ Joseph Zirkman
-------------------------------
Its: Vice President
-------------------------------
|
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents that Optionee has read and understands the terms and provisions thereof, and accepts this Option subject to all the terms and provisions of the Plan and this Agreement. Optionee acknowledges that there may be various tax consequences upon exercise of this Option or disposition of the Shares and that Optionee should consult a tax adviser prior to such exercise or disposition.
/s/ Daniel T. Accordino
------------------------------------
Name
|
EXHIBIT C
CARROLS HOLDINGS CORPORATION
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of _______, 1997 by and among Carrols Holdings Corporation, a Delaware corporation (the "Company"), Madison Dearborn Capital Partners, L.P., Madison Dearborn Capital Partners II, L.P. (together with Madison Dearborn Capital Partners, L.P., the "Investors"), Atlantic Restaurants, Inc. ("ARI"), Alan Vituli ("Vituli") and the Management Investors (as defined herein). For purposes of this Agreement, the Management Holders (as defined herein), ARI, the Investors and Vituli are collectively referred to as the "Stockholders"). Capitalized terms used herein are defined in paragraph 11 hereof.
The Investors shall purchase certain shares of the Company's Common Stock pursuant to a stock purchase agreement among the Company, the Investors and ARI (the "Purchase Agreement") dated as of February 25, 1997.
The Company and the Stockholders desire to enter into this Agreement for the purposes, among others, of (i) establishing the composition of the Company's Board of Directors (the "Board"), (ii) assuring continuity in the management and ownership of the Company and (iii) limiting the manner and terms by which the Stockholders' Common Stock may be transferred. The execution and delivery of this Agreement is a condition to the Investors' purchase of the Company's and ARI's stock pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Board of Directors.
(a) From and after the Closing (as defined in the Purchase Agreement) and until the provisions of this paragraph 1 cease to be effective, each holder of Stockholder Shares shall vote all of such holder's Stockholder Shares which are voting shares and any other voting securities of the Company over which such holder has voting control and shall take all other necessary or desirable actions within such holder's control (whether in his capacity as a stockholder, director, member of a board committee or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all necessary or desirable actions within its control (including, without limitation, calling special board and stockholder meetings), so that:
(i) the authorized number of directors on the Board shall be established at eight directors, or, as provided in subparagraph (e) below, six directors;
(ii) the following individuals shall be elected to the Board:
(A) subject to paragraph 1(c) below, three representatives designated by the Investors (the "Investor Directors"); provided that so long as the Investors are entitled to three Investor Directors, one of the Investor Directors shall not be an employee or officer of either of the Investors or any of their Affiliates and such director shall not be elected to or remain on the Board unless there are three ARI Directors serving on the Board at such time but if and only if ARI is entitled to three ARI Directors at such time;
(B) subject to paragraph 1(d) below, three representatives designated by ARI (the "ARI Directors"); provided that so long as ARI is entitled to three ARI Directors, one of the ARI Directors shall not be an employee or officer of ARI or any of its Affiliates and such director shall not be elected to or remain on the Board unless there are three Investor Directors serving on the Board at such time but if and only if the Investors are entitled to three Investor Directors at such time; and
(C) so long as Vituli is the Chief Executive Officer of Carrols Corporation ("Carrols"), two representatives designated by Vituli who shall be executive officers of Carrols (the "Management Directors");
(iii) the composition of the board of directors of each of the Company's Subsidiaries (a "Sub Board") shall be the same as that of the Board;
(iv) any committees of the Board or a Sub Board shall be created, and the members thereof determined, only with the approval of a majority of the Investor Directors and a majority of the ARI Directors (it being understood that (x) the audit committee and the compensation committee, which committees shall be created on the date hereof, shall not include any Management Directors and (y) at least one of the Management Directors shall serve on all other committees (if any) of the Board);
(v) the removal from the Board or a Sub Board (with or without cause) of any representative designated hereunder by the Investors, ARI or Vituli shall be at the Investors', ARI's or Vituli's written request, respectively, but only upon such written request and under no other circumstances, and if any Management Director ceases to be an employee of the Company and its Subsidiaries, he shall be removed as a director promptly after his employment ceases; and
(vi) (A) in the event that any Investor Director ceases to serve as a member of the Board or a Sub Board during his term of office, the resulting vacancy on the Board or Sub Board shall be filled by a representative designated as provided in subparagraph (ii)(A) above, (B) in the event that any ARI Director ceases to serve as a
member of the Board or a Sub Board during his term of office, the
resulting vacancy on the Board or Sub Board shall be filled by a
representative designated as provided in subparagraph (ii)(B) above, and
(C) in the event that any Management Director ceases to serve as a
member of the Board or a Sub Board during his term of office, the
resulting vacancy on the Board or Sub Board shall be filled by a
representative designated as provided in subparagraph (ii)(C) above.
(b) The Company shall pay the reasonable out-of-pocket expenses incurred by each director in connection with attending the meetings of the Board, any Sub Board and any committee thereof. In addition, the Company shall pay to each Investor Director and each ARI Director an annual fee in an amount determined by the Board from time to time to be paid by the Company to each non-employee director as and when determined by the Board. So long as any Investor Director, ARI Director or Management Director serves on the Board or a Sub Board, and for five years thereafter, the Company's Restated Certificate of Incorporation and Bylaws shall provide for the indemnification and exculpation or directors to the fullest extent permitted under applicable law.
(c) Subject to paragraph (h) below, at such time as the Investor
Holders hold in the aggregate less than (i) 80% of the Stockholder Shares held
by the Investors on the date hereof, the number of Investor Directors shall be
reduced to two directors and ARI, if the number of the ARI Directors has not
been reduced pursuant to paragraph (d) below, shall then have the right to
designate an additional ARI Director, which individual shall serve as an ARI
Director pursuant to the provisions of this paragraph 1; (ii) 65% of the
Stockholder Shares held by the Investors on the date hereof, the number of
Investor Directors shall be reduced to one director and ARI, if the number of
the ARI Directors has not been reduced pursuant to paragraph (d) below, shall
then have the right to designate two additional ARI Directors, which individuals
shall serve as ARI Directors pursuant to the provisions of this paragraph 1; and
(iii) 33% of the Stockholder Shares held by the Investors on the date hereof,
the number of Investor Directors shall be reduced to zero and ARI, if the number
of the ARI Directors has not been reduced pursuant to paragraph (d) below, shall
then have the right to designate an additional three ARI Directors, which
individuals shall serve as ARI Directors pursuant to the provisions of this
paragraph 1.
(d) Subject to paragraph (h) below, at such time as the ARI Holders hold in the aggregate less than (i) 80% of the Stockholder Shares held by ARI on the date hereof, the number of ARI Directors shall be reduced to two directors and the Investors, if the number of the Investor Directors has not been reduced pursuant to paragraph (c) above, shall then have the right to designate an additional Investor Director, which individual shall serve as an Investor Director pursuant to the provisions of this paragraph 1; (ii) 65% of the Stockholder Shares held by ARI on the date hereof, the number of ARI Directors shall be reduced to one director and the Investors, if the number of the Investor Directors has not been reduced pursuant to paragraph (c) above, shall then have the right to designate two additional Investor Directors, which individuals shall serve as Investor Directors pursuant to the provisions of this paragraph 1; and (iii) 33% of the Stockholder Shares held by ARI on the date hereof, the number of ARI Directors shall be reduced to zero and the Investors, if the number of the Investor Directors has not been reduced
pursuant to paragraph (c) above, shall then have the right to designate an additional three Investor Directors, which individuals shall serve as Investor Directors pursuant to the provisions of this paragraph 1.
(e) If Vituli ceases to be Chief Executive Officer of Carrols, his right to designate any Management Directors under this paragraph 1 shall cease immediately, the Management Directors shall resign or be removed from the Board hereunder and the size of the Board shall be reduced to six directors.
(f) If any party fails to designate a representative to fill a directorship pursuant to the terms of this paragraph 1, the individual previously holding such directorship shall be elected to such position, or if such individual fails or declines to serve, the election of an individual to such directorship shall be accomplished in accordance with the Company's Bylaws and applicable law; provided that the Stockholders shall vote to remove such individual if the party which failed to designate such directorship so directs.
(g) Each of (i) the Investors and (ii) ARI shall be entitled to appoint up to two individuals (who shall be officers or employees of the Investors or their Affiliates or of ARI or its Affiliates, respectively) who may attend as an observer all meetings of the Board (the "Board Attendees"); provided that only one appointee of each of the Investors and ARI shall be entitled to attend any given meeting of the Board. The Company shall give written notice of each meeting of the Board to such individuals at the same time and in the same manner as notice is given to the directors (which notice shall be promptly confirmed in writing to such Person). The Board Attendees shall be entitled to receive all written materials and other information (including, without limitation, copies of meeting minutes) given to directors in connection with such meetings at the time such materials and information are given to the directors. If the Company proposes to take any action by written consent in lieu of a meeting of the Board, the Company shall give written notice thereof to each Board Attendee prior to the effective date of such consent describing in reasonable detail the nature and substance of such action. At such time as the Investors or ARI appoint a new Board Attendee, the Investors or ARI, as the case may be, shall promptly provide notice to the Company of such action and the identity of such new Board Attendee.
(h) The provisions of this paragraph 1 shall continue to be in effect following the consummation of the Company's initial Public Offering, except that thereafter, neither ARI nor the Investors shall be entitled to designate any additional directors under paragraphs (1)(c) or (1)(d), respectively.
2. Representations and Warranties. Each Stockholder represents and warrants that (i) such Stockholder is the record owner of the number of Stockholder Shares set forth opposite its name on the Schedule of Stockholders attached hereto, (ii) this Agreement has been duly authorized, executed and delivered by such Stockholder and constitutes the valid and binding obligation of such Stockholder, enforceable in accordance with its terms, and (iii) such Stockholder has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with, conflicts with or violates any provision of this Agreement. No holder
of Stockholder Shares shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with, conflicts with or violates any provision of this Agreement.
3. Retention of Stockholder Shares. Until the fourth anniversary of the date of this Agreement, neither Vituli nor any Management Investor shall sell, transfer, assign, pledge or otherwise dispose of any Stockholder Shares held by him on the date hereof or hereafter acquired, except pursuant to an Approved Sale or a Public Sale; provided that nothing contained in this paragraph 3 shall prohibit Vituli or any Management Investor from transferring Stockholder Shares as permitted by paragraphs 4(d) and 4(e) hereof; and provided further that the provisions of this paragraph 3 shall terminate and cease to be effective (i) upon the consummation of a Qualified Public Offering or an Approved Sale, (ii) upon the termination of such individual's employment with the Company or any of its Subsidiaries because of such individual's death, Permanent Disability, termination for Good Reason or termination without Cause, or (iii) upon a Change in Control. For purposes of this paragraph 3, the terms "Permanent Disability", "Good Reason", "Cause" and "Change of Control" shall have the definitions ascribed to them in the Executive Option Agreements.
4. Restrictions on Transfer of Stockholder Shares.
(a) Transfer of Stockholder Shares. No holder of Stockholder Shares shall sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) any interest in Stockholder Shares (a "Transfer"), except pursuant to a Public Sale or an Approved Sale (an "Exempt Transfer") or pursuant to this paragraph 4; provided that in no event shall any Transfer of Stockholder Shares pursuant to this paragraph 4 be made for any consideration other than cash payable upon consummation of such Transfer or in installments over time.
(b) Sale Notice. Prior to making any Transfer other than an Exempt Transfer, any holder of Stockholder Shares intending to make such a Transfer (the "Transferring Stockholder") shall deliver written notice (the "Sale Notice") to the Company and to each Investor Holder, each ARI Holder and each Management Holder other than the Transferring Stockholder (the "Other Holders"). The Sale Notice shall disclose in reasonable detail the identity of the prospective transferee(s), the number of shares to be transferred (the "Specified Shares") and the terms and conditions of the proposed Transfer. No Transferring Stockholder shall consummate any such Transfer until 45 days after the Sale Notice has been delivered to the Company and to the Other Holders, unless the parties to the Transfer have been finally determined pursuant to this paragraph 4 prior to the expiration of such 45-day period.
(c) First Refusal Rights. The Company may elect to purchase all (but not less than all) of the Specified Shares upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to the Transferring Stockholder and the Other Holders within 30 days after the Sale Notice has been delivered to the Company. If the Company has not elected to purchase all of the Specified Shares within such 30-day period, each of the Other Holders may elect to purchase any or all of the Specified Shares set forth in the Sale Notice at the price and on the terms specified therein by delivering written notice of such election
to the Transferring Stockholder and the Other Holders as soon as practical but in any event within 45 days after delivery of the Sale Notice. If the Other Holders have in the aggregate elected to purchase more than the Specified Shares, the Specified Shares shall be allocated among the Other Holders electing to purchase shares pro rata based on the number of Stockholder Shares owned by such Other Holder. If the Company or the Other Holders have elected to purchase Specified Shares, the purchase of such shares shall be consummated as soon as practical after the delivery of the election notice(s) to the Transferring Stockholder, but in any event within 15 days after the delivery of the election notice to the Transferring Stockholder. If the Company and the Other Holders have not elected to purchase all of the Specified Shares, the Transferring Stockholder may transfer the remaining Specified Shares at a price and on terms no more favorable to the transferee(s) thereof than those specified in the Sale Notice. Any Specified Shares not so transferred by the Transferring Stockholder within 30 days shall be reoffered to the Company and the Other Holders pursuant to this paragraph 4(c) prior to any subsequent Transfer.
(d) Co-Sale Rights. Any Other Holders who have not elected to purchase Specified Shares from the Transferring Stockholder pursuant to paragraph 4(c) may elect to participate in the proposed Transfer by delivering written notice to the Transferring Stockholder and the Company within 45 days after the Sale Notice has been delivered by the Transferring Stockholder. If any such Other Holder elects to participate in such Transfer (a "Participating Stockholder"), the Transferring Stockholder and each Participating Stockholder shall be entitled to sell in the contemplated Transfer, on the same terms, a number of Stockholder Shares equal to the product of (i) the quotient determined by dividing the percentage of Stockholder Shares owned by the Participating Stockholder by the aggregate percentage of Stockholder Shares owned by the Transferring Stockholder and all Participating Stockholders and (ii) the number of Stockholder Shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 Stockholder Shares by the Transferring Stockholder, and if the Transferring Stockholder at such time owns 30% of all Stockholder Shares and if the Participating Stockholder owns 20% of all Stockholder Shares, the Transferring Stockholder would be entitled to sell 60 shares (30%[div]50% x 100 shares) and the Participating Stockholder would be entitled to sell 40 shares (20%[div]50% x 100 shares).
Each Transferring Stockholder shall use best efforts to obtain the agreement of the prospective transferee(s) to the participation of the Participating Stockholder in any such contemplated Transfer, and no Transferring Stockholder shall transfer any of its Stockholder Shares to any prospective transferee if such prospective transferee(s) declines to allow the participation of the Participating Stockholder. Each Person transferring Stockholder Shares pursuant to this paragraph 4(d) shall pay its pro rata share (based on the number of Stockholder Shares to be sold) of any expenses incurred in connection with such Transfer and shall be obligated to join on a pro rata basis in any indemnification or other obligations that the Transferring Stockholder agrees to provide in connection with such Transfer (other than any such obligations that relate specifically to a particular Stockholder such as indemnification with respect to representations and warranties given by a Stockholder regarding such Stockholder's title to and ownership of Stockholder Shares); provided that no holder shall be obligated in connection with such Transfer to agree to
indemnify or hold harmless the transferees with respect to an amount in excess of the net cash proceeds paid to such holder in connection with such Transfer. In the event that any Management Holder elects neither to purchase any Specified Shares pursuant to paragraph 4(c) nor to participate in any Transfer pursuant to the terms of this paragraph 4(d), those shares which such Management Holder would have been entitled to sell in such Transfer (the "Management Participating Shares") shall cease to be subject to the restrictions set forth in paragraph 3 hereof, but shall continue to be subject to the restrictions set forth in this paragraph 4. Notwithstanding the foregoing, in the event that the participation of any Management Holder pursuant to this paragraph 4(d) would result in a Change of Control, the prior written consent of ARI (if the Transferring Stockholder is one of the Investors) or the Investors (if the Transferring Stockholder is ARI), as the case may be, shall be required for such Management Holder to participate in such Transfer.
(e) Permitted Transfers. The restrictions set forth in this paragraph 4 shall not apply with respect to any Transfer of Stockholder Shares by any Person (i) in the case of an individual, pursuant to applicable laws of descent and distribution or among such individual's Family Group or (ii) in the case of a Person other than an individual, among its Affiliates (collectively referred to herein as "Permitted Transferees"); provided that the restrictions contained in this paragraph 4 shall continue to be applicable to the Stockholder Shares after any such Transfer and provided further that the transferees of such Stockholder Shares shall have agreed in writing to be bound by the provisions of this Agreement affecting the Stockholder Shares so transferred. For purposes of this Agreement, "Family Group" means an individual's spouse and descendants (whether natural or adopted) and any trust solely for the benefit of the individual and/or the individual's spouse and/or descendants, and "Affiliate" of a Person other than an individual means any other Person, directly or indirectly controlling, controlled by or under common control with such Person or, with respect to any partnership, any partner thereof. Notwithstanding the foregoing, no party hereto shall avoid the provisions of this Agreement by making one or more transfers to one or more Permitted Transferees and then disposing of all of any portion of such party's interest in any such Permitted Transferee.
(f) Termination of Restrictions. The restrictions on the Transfer of Stockholder Shares set forth in this paragraph 4 shall continue with respect to each Stockholder Share until the date on which such Stockholder Share has been transferred in a Public Sale or an Approved Sale.
5. Company Covenants.
(a) Financial Statements and Other Information. The Company
shall deliver to (x) the Investors (so long as the Investors and their
Affiliates hold in the aggregate at least 5% of the outstanding Common Stock),
(y) ARI (so long as ARI and its Affiliates hold in the aggregate at least 5% of
the outstanding Common Stock) and (z) Vituli (so long as Vituli and Daniel T.
Accordino hold in the aggregate at least 2% of the outstanding Common Stock
(including shares of Common Stock into which their options may be exercised) and
Vituli holds some amount of such Common Stock):
(i) as soon as available but in any event within 30 days after the end of each monthly accounting period in each fiscal year, unaudited consolidating and consolidated statements of income and cash flows of the Company and its Subsidiaries for such monthly period and for the period from the beginning of the fiscal year to the end of such month, and, unless the Company, the Investors and ARI mutually agree otherwise, unaudited consolidating and consolidated balance sheets of the Company and its Subsidiaries as of the end of such monthly period, setting forth in each case comparisons to the Company's annual budget and to the corresponding period in the preceding fiscal year, and all such statements shall be prepared in accordance with generally accepted accounting principles, consistently applied and shall be certified by the Company's chief financial officer;
(ii) accompanying the financial statements referred to in subparagraph (i), (a) an officer's certificate on behalf of the Company stating that neither the Company nor any of its Subsidiaries is in default under any of its other material agreements or, if any such default exists, specifying the nature and period of existence thereof and what actions the Company and its Subsidiaries have taken and propose to take with respect thereto, and (b) a summary prepared by management of the Company describing significant aspects of the Company's and its Subsidiaries' operations and financial affairs (including, but not limited to, material deviations from the Company's annual or other budgets, material breaches or defaults under material agreements or any other material adverse change, event or circumstance affecting the Company or any Subsidiary (including, without limitation, the filing of any material litigation against the Company or any Subsidiary));
(iii) upon the completion thereof, but in no event later than 90 days after the end of each fiscal year, consolidating and consolidated statements of income and cash flows of the Company and its Subsidiaries for such fiscal year, and consolidating and consolidated balance sheets of the Company and its Subsidiaries as of the end of such fiscal year, setting forth in each case comparisons to the Company's annual budget and to the preceding fiscal year, all prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by (a) with respect to the consolidated portions of such statements, an opinion of an independent accounting firm of recognized national standing acceptable to the holders of a majority of the outstanding Common Stock that is unqualified with respect to the scope of such firm's examination, (b) a certificate from such accounting firm, addressed to the Board, stating that in the course of its examination nothing came to its attention that caused it to believe that there was any default by the Company or any Subsidiary in the fulfillment of or compliance with any of the financial provisions of any other material agreement to which the Company or any Subsidiary is a party or, if such accountants have reason to believe any default by the Company or any Subsidiary exists, a certificate specifying the nature and period of existence thereof, and (c) a copy of such firm's annual management letter to the board of directors;
(iv) promptly upon receipt thereof, any additional reports, management letters or other detailed information concerning significant aspects of the Company's and its Subsidiaries' operations or financial affairs given to the Company by its independent accountants (and not otherwise contained in other materials provided hereunder);
(v) at least 30 days but not more than 90 days prior to the beginning of each fiscal year, an annual budget prepared on a monthly basis for the Company and its Subsidiaries for such fiscal year (displaying anticipated statements of income and cash flows and balance sheets), and promptly upon preparation thereof any other significant budgets prepared by the Company and any revisions of such annual or other budgets;
(vi) within ten days after transmission thereof, copies of all registration statements and all regular, special or periodic reports which it files, or any of its officers or directors file with respect to the Company, with the Securities and Exchange Commission or with any securities exchange on which any of its securities are then listed, and copies of all press releases and other statements made available generally by the Company to the public concerning material developments in the Company's and its Subsidiaries' businesses; and
(vii) with reasonable promptness, such other information and financial data concerning the Company and its Subsidiaries as any Person entitled to receive information under this paragraph 5(a) may reasonably request.
(b) Inspection of Property. The Company shall permit any representatives designated by (x) the Investors (so long as the Investors and their Affiliates hold in the aggregate at least 5% of the outstanding Common Stock), (y) ARI (so long as ARI and its Affiliates hold in the aggregate at least 5% of the Common Stock), or (z) Vituli (so long as Vituli and Daniel T. Accordino hold in the aggregate at least 2% of the outstanding Common Stock (including shares of Common Stock into which their options may be exercised) and Vituli holds some amount of such Common Stock) , upon reasonable notice and during normal business hours and at such other times as any such holder may reasonably request, to (i) visit and inspect any of the properties of the Company and its Subsidiaries, (ii) examine the corporate and financial records of the Company and its Subsidiaries and make copies thereof or extracts therefrom and (iii) discuss the affairs, finances and accounts of any such corporations with the directors, officers, key employees and independent accountants of the Company and its Subsidiaries. The presentation of an executed copy of this Agreement by the Investors or ARI to the Company's independent accountants shall constitute the Company's permission to its independent accountants to participate in discussions with such Persons.
(c) Restrictions. The Company shall not, without the prior written consent of the Investors (so long as the Investors and their Affiliates hold at least 50% of the Common Stock owned by the Investors on the date hereof) and of ARI (so long as ARI and its Affiliates hold at least 50% of the Common Stock owned by ARI on the date hereof):
(i) directly or indirectly redeem, purchase or otherwise acquire, or permit any Subsidiary to redeem, purchase or otherwise acquire, any of the Company's or
any Subsidiary's capital stock or other equity securities, except for (A) the redemption of any preferred stock issued and outstanding as of the date hereof in accordance with and as permitted by the Company's Restated Certificate of Incorporation and senior notes and other lending arrangements and (B) the repurchase of shares of Common Stock from former employees of the Company and its Subsidiaries in connection with the termination of their employment in an aggregate amount not exceeding $1,000,000;
(ii) directly or indirectly declare or pay any dividends or make any distributions upon any of its capital stock or other equity securities, except for dividends on the Company's Class A Preferred Stock issued and outstanding as of the date hereof in accordance with and as permitted by the Company's Restated Certificate of Incorporation, dividends payable in shares of Common Stock issued upon the outstanding shares of Common Stock and repurchases permitted under paragraph 5(c)(i);
(iii) liquidate, dissolve or effect a recapitalization or reorganization in any form of transaction (including, without limitation, any reorganization into a limited liability company, a partnership or any other non-corporate entity which is treated as a partnership for federal income tax purposes);
(iv) authorize, issue or enter into any agreement providing for the issuance (contingent or otherwise) of any capital stock or other equity securities (or any securities convertible into or exchangeable for any capital stock or other equity securities or containing any profit participation features), or any stock options, stock appreciation rights, phantom stock rights or similar rights, except for shares of Common Stock issued upon exercise of the options pursuant to the Executive Option Agreements and options that have been or may, from time to time, be approved by the compensation committee of the Board;
(v) merge or consolidate with any Person or, except as permitted by subparagraph (vii) below, permit any Subsidiary to merge or consolidate with any Person (other than a Wholly-Owned Subsidiary);
(vi) other than sale/leaseback transactions entered into in the ordinary course of business, sell, lease (as lessor) or otherwise dispose of, or permit any Subsidiary to sell, lease (as lessor) or otherwise dispose of, more than $3,000,000 of assets of the Company and its Subsidiaries (computed on the basis of book value, determined in accordance with generally accepted accounting principles consistently applied, or fair market value, determined by the Board in its reasonable good faith judgment) in any transaction or series of related transactions;
(vii) acquire or enter into, or permit any Subsidiary to acquire or enter into, any interest in any company or business (whether by a purchase of assets, purchase of stock, merger or otherwise), or any joint venture, guarantee of any obligation, or make any Investment, loan or advance in each case involving an aggregate consideration (including, without limitation, the assumption of liabilities whether direct or indirect) exceeding $10,000,000 in any one transaction or series of related transactions or
exceeding $25,000,000 in the aggregate (the "Threshold Amount") for all such transactions consummated after the date of this Agreement. Notwithstanding the foregoing, to the extent that such transaction or series of related transactions was approved by the Board or was otherwise consummated, but the prior written consent of the Investors and ARI was not obtained pursuant to this paragraph 5(c), the aggregate consideration involved in such transaction or series of related transactions shall be included in calculating whether or not the Threshold Amount has been met. At such time as the Threshold Amount has been met, all such transactions or series of related transactions which follow shall require the prior written consent of the Investors and ARI in accordance with this paragraph 5(c);
(viii) other than any Indebtedness outstanding from time to time under the Loan Agreement and other than Indebtedness arising from sale/leaseback transactions entered into by the Company or any of its Subsidiaries in the ordinary course of business, create, incur or assume, or permit any Subsidiary to create, incur or assume any Indebtedness exceeding an aggregate principal amount of $10,000,000 outstanding at any time on a consolidated basis;
(ix) amend or modify any provision of the Loan Agreement which would increase the aggregate maximum principal amount of Indebtedness permitted to be outstanding at any time pursuant to the terms thereof or which would extend the maturity date of such Indebtedness by more than one year;
(x) make any capital expenditures (including, without limitation, payments with respect to capitalized leases, as determined in accordance with generally accepted accounting principles consistently applied, but excluding capital expenditures arising from damage to the Company's property to the extent such damage is covered by the Company's insurance) on a consolidated basis during any fiscal year exceeding by more than $1,000,000 the Company's capital budget approved by the Board for such year, as modified by the Board at any time;
(xi) make any amendment to the Company's Restated Certificate of Incorporation or the Company's Bylaws or file any certificate of designations with the Delaware Secretary of State;
(xii) enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors, employees, stockholders or Affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such Person or individual owns a material beneficial interest, except for customary employment arrangements and benefit programs on reasonable terms and except as otherwise expressly contemplated by this Agreement;
(xiii) enter into, or permit any Subsidiary to enter into, the ownership, active management or operation of any business other than Burger King franchise restaurants;
(xiv) amend, modify or waive any provision of the 1996 Plan or any other stock option plan other than by action of the compensation committee of the Board; or
(xv) approve or consummate a sale of all or substantially all of the Company's assets determined on a consolidated basis or a sale of all or substantially all of the Company's outstanding capital stock (whether by merger, consolidation or otherwise) to any Independent Third Party or group of Independent Third Parties (any of the foregoing which have been so approved, being referred to herein as an "Approved Sale").
In the event of an Approved Sale, the holders of Stockholder Shares shall bear their pro rata share (based upon the proceeds to be received by the holders of Stockholder Shares) of the costs of any sale of Stockholder Shares in connection therewith to the extent such costs are incurred for the benefit of all holders of Stockholder Shares and are not otherwise paid by the Company or the acquiring party. Costs incurred in exercising reasonable efforts to take all necessary actions in connection with the consummation of an Approved Sale in accordance with this paragraph shall be deemed to be for the benefit of all holders of Stockholder Shares. Costs incurred by holders of Stockholder Shares on their own behalf will not be considered costs of the transaction hereunder. The provisions of this paragraph shall terminate upon a Qualified Public Offering.
Notwithstanding the foregoing, the Company shall not be required
to obtain the prior written consent of the Investors, following an Investor
Material Change, or ARI, following an ARI Material Change, with respect to any
of the actions set forth in subparagraphs (ii), (iv), (v), (vi), (vii), (viii),
(ix), (x), (xiv) and (xv) of this paragraph 5(c).
(d) Affirmative Covenants. Prior to the consummation of a Qualified Public Offering, the Company shall, and shall cause each Subsidiary to, unless otherwise approved by the Investors (so long as the Investors and their Affiliates hold at least 50% of the Common Stock owned by Investors on the date hereof) and by ARI (so long as ARI and its Affiliates hold at least 50% of the Common Stock owned by ARI on the date hereof):
(i) at all times cause to be done all things necessary to maintain, preserve and renew its corporate existence and all material licenses, authorizations and permits necessary to the conduct of its businesses;
(ii) maintain and keep its properties in good repair, working order and condition, and from time to time make all necessary or desirable repairs, renewals and replacements, so that its businesses may be properly and advantageously conducted at all times;
(iii) pay and discharge when payable all taxes, assessments and governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties accrue thereon) and all claims for labor, materials or supplies which if unpaid would by law become a Lien upon any of its property, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves (as determined in accordance with generally accepted accounting principles, consistently applied) have been established on its books with respect thereto;
(iv) comply with all other obligations which it incurs pursuant to any contract or agreement, whether oral or written, express or implied, as such obligations become due, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves (as determined in accordance with generally accepted accounting principles, consistently applied) have been established on its books with respect thereto;
(v) comply with all applicable laws, rules and regulations of all governmental authorities, the violation of which would reasonably be expected to have a material adverse effect upon the financial condition, operating results, assets, operations or business prospects of the Company and its Subsidiaries taken as a whole;
(vi) apply for and continue in force with good and responsible insurance companies adequate insurance covering risks of such types and in such amounts as are customary for corporations of similar size engaged in similar lines of business;
(vii) maintain and continue in effect the key man policy on the life of Alan Vituli referred to in paragraph 2K of the Purchase Agreement;
(viii) maintain proper books of record and account which present fairly in all material respects its financial condition and results of operations and make provisions on its financial statements for all such proper reserves as in each case are required in accordance with generally accepted accounting principles, consistently applied; and
(ix) until the aggregate principal amount, premium, if any, and all interest is paid in full, comply in all respects with the terms and provisions of that certain Indenture, dated as of August 17, 1993 (the "Indenture"), as in effect from time to time, including, but not limited to, providing the required notices to the trustee and all holders of securities issued under the Indenture in connection with the transactions contemplated by the Purchase Agreement.
(e) Current Public Information. At all times after the Company has filed a registration statement with the Securities and Exchange Commission pursuant to the requirements of either the Securities Act or the Securities Exchange Act, the Company shall file all reports required to be filed by it under the Securities Act and the Securities Exchange Act and the rules and regulations adopted by the Securities and Exchange Commission thereunder and shall take such further action as any holder or holders of Restricted Securities may reasonably
request, all to the extent required to enable such holders to sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities and Exchange Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission or (ii) a registration statement on Form S-2 or S-3 or any similar registration form hereafter adopted by the Securities and Exchange Commission. Upon request, the Company shall deliver to any holder of Restricted Securities a written statement as to whether it has complied with such requirements.
(f) Unrelated Business Taxable Income. Except with the
Investors' prior written consent, the Company shall not knowingly engage, and
shall not knowingly permit any Subsidiary to engage, in any transaction which is
reasonably likely to cause any holder of Common Stock or any of such holder's
limited partners which are exempt from income taxation under Section 501(a) of
the Code and, if applicable, any pension plan that any such limited partner may
be a part of, to recognize unrelated business taxable income as defined in
Section 512 and Section 514 of the Code.
6. Legend. Each certificate evidencing Stockholder Shares and each certificate issued in exchange for or upon the transfer of any Stockholder Shares (if such shares remain Stockholder Shares after such transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AS OF ________, 1997 AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS, AS AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The Company shall imprint such legend on certificates evidencing Stockholder Shares outstanding as of the date hereof. The legend set forth above shall be removed from the certificates evidencing any shares which cease to be Stockholder Shares in accordance with paragraph 11 hereof.
7. Preemptive Rights.
(a) Except for issuance of equity securities of the Company or options or other rights to acquire equity securities of the Company:
(i) in connection with a registered primary public offering;
(ii) to employees of the Company or its Subsidiaries;
(iii) to any lender in connection with the incurrence of Indebtedness by the Company or any of its Subsidiaries;
(iv) as payment of all or a portion of the purchase price of any business or assets thereof acquired by the Company or any of its Subsidiaries; or
(v) upon exercise of any option or other right described in any of clauses (i) through (iv) above or any other option or right to acquire equity securities issued by the Company;
if the Company authorizes the issuance or sale of any equity securities of the Company or any securities containing options or rights to acquire any equity securities of the Company (other than as a dividend on the outstanding Common Stock), the Company shall first offer to sell to each Investor Holder, each ARI Holder and each Management Holder a portion of such stock or securities equal to the percentage of Stockholder Shares owned by such Person. Each Person shall be entitled to purchase such stock or securities at the most favorable price and on the most favorable terms as such stock or securities are to be offered to any other Persons.
(b) In order to exercise its purchase rights hereunder, a Stockholder must within 15 days after receipt of written notice from the Company describing in reasonable detail the stock or securities being offered, the purchase price thereof, the payment terms and such holder's percentage allotment, deliver a written notice to the Company describing its election hereunder. If all of the stock and securities offered to the Stockholders is not fully subscribed by such holders, the remaining stock and securities shall be reoffered by the Company to the holders purchasing their full allotment pro rata (based on the number of Stockholder Shares owned by such holders) upon the terms set forth in this paragraph, except that such holders must give written notice of its election to purchase such reoffered stock and securities within 10 days after receipt of such reoffer.
(c) Upon the expiration of the offering periods described above, the Company shall be entitled to sell such stock or securities which the Stockholders have not elected to purchase during the 90 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to such holders. Any stock or securities offered or sold by the Company after such 90-day period must be reoffered to the Stockholders who have purchased their full allotment pursuant to paragraph 7(b) pro rata (based on the number of Stockholder Shares owned by such Stockholders).
(d) The rights pursuant to this paragraph 7 shall terminate upon the consummation of a Public Offering.
8. Repurchase Option.
(a) In the event that Vituli or any Management Investor ceases to be employed by the Company or any of its Subsidiaries as a result of Vituli's or such Management Investor's (as the case may be) termination for Cause (as such term is defined in the Executive Option Agreements) (the "Termination"), any and all Stockholder Shares which Vituli or such Management Investor (as the case may be) has acquired upon the exercise of the option granted to him pursuant to those certain Unvested Stock Option Agreements, dated as of the date of the Closing (whether held by Vituli, such Management Investor or one or more of their respective
Permitted Transferees) (the "Repurchase Shares"), shall be subject to repurchase
by the Company pursuant to the terms and conditions set forth in this paragraph
8 (the "Repurchase Option").
(b) The purchase price for each Repurchase Share shall be the lesser of (i) Vituli's or such Management Investor's Original Cost for such Repurchase Share, and (ii) the Fair Market Value for such Repurchase Share.
(c) The Board may elect to purchase all or any portion of the Repurchase Shares by delivering written notice (the "Repurchase Notice") to the holder or holders of the Repurchase Shares within 90 days after the Termination. The Repurchase Notice shall set forth the number of Repurchase Shares to be acquired from such holder of Repurchase Shares, the aggregate consideration to be paid therefor and the time and place for the closing of the transaction.
(d) The closing of the purchase of the Repurchase Shares pursuant to the Repurchase Option shall take place on the date designated by the Company in the Repurchase Notice, which date shall not be more than 60 days nor less than five days after the delivery of such notice. The Company shall pay for the Repurchase Shares to be purchased pursuant to the Repurchase Option by delivery of a check or wire transfer of funds. The Company shall be entitled to receive from Vituli or the Management Investors (as the case may be) customary representations and warranties regarding the sale of the Repurchase Shares (including representations and warranties regarding good title to such shares, free and clear of any liens or encumbrances).
(e) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Repurchase Shares by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries debt and equity financing agreements. If any such restrictions prohibit the repurchase of Repurchase Shares hereunder which the Company is otherwise entitled or required to make, the time periods provided in this paragraph 8 shall be suspended, and the Company may make such repurchases as soon as it is permitted to do so under such restrictions.
9. Sale of the Company.
(a) If the Board and the holders of a majority of Stockholder Shares (including the Investors and ARI, to the extent that the approval of the Investors and/or ARI is required pursuant to the terms of paragraph 5(c)(xv) herein) shall approve a Sale of the Company, the holders of Stockholder Shares shall consent to and raise no objections against the Sale of the Company, and if the Sale of the Company is structured as a sale of capital stock, the holders of Stockholder Shares shall agree to sell their Stockholder Shares on the terms and conditions approved by the Board, the holders of a majority of the Stockholder Shares and the Investors and ARI (as the case may be). The holders of Stockholder Shares shall take all necessary and desirable actions in connection with the consummation of the Sale of the Company.
(b) The obligations of the holders of Stockholder Shares with respect to the Sale of the Company is subject to the satisfaction of the condition that, upon the consummation of the Sale of the Company, all of the holders of Stockholder Shares receive the same form and amount of consideration per Stockholder Share, or if any holders of Stockholder Shares are given an option as to the form and amount of consideration to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Stockholder Shares shall at the request of the Company, appoint a "purchaser representative" (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Stockholder Shares appoints a purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative. However, if any holder of Stockholder Shares declines to appoint the purchaser representative designated by the Company, such holder shall appoint another purchaser representative (reasonably acceptable to the Company), and such holder shall be responsible for the fees of the purchaser representative so appointed.
(d) Holders of Stockholder Shares shall bear their pro-rata share (based upon the number of shares sold) of the costs of any sale of Stockholder Shares pursuant to a Sale of the Company to the extent such costs are incurred for the benefit of all holders of Stockholder Shares and are not otherwise paid by the Company or the acquiring party. Costs incurred by holders of Stockholder Shares on their own behalf shall not be considered costs of the transaction hereunder.
(e) The provisions of this paragraph 9 shall terminate upon the completion of a Qualified Public Offering.
(f) "Sale of the Company" shall mean the sale of the Company to an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power to elect a majority of the Board (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all of the Company's assets determined on a consolidated basis.
10. Transfers; Future Sales. Prior to any holder of Stockholder Shares Transferring any Stockholder Shares (other than pursuant to an Exempt Transfer) to any Person and prior to the Company issuing any Common Stock (other than pursuant to a Public Offering) or any options or other rights to acquire Common Stock or any securities convertible into or exchangeable for such Common Stock to any Person, such holder or the Company, as the case may be, shall cause the prospective transferee to be bound by this Agreement as a holder of Stockholder Shares and to execute and deliver to the Company and the other Stockholders a counterpart to this Agreement.
11. Definitions.
"Affiliate" has the meaning set forth in paragraph 4(e).
"Approved Sale" has the meaning set forth in subparagraph 5(c)(xv).
"ARI" has the meaning set forth in the preamble.
"ARI Holders" means ARI and its Affiliates so long as they hold any Stockholder Shares.
"ARI Material Change" shall have occurred if (i) either of the two ARI Directors as of the date hereof who are officers or employees of ARI or its Affiliates cease to serve as a director on the Board; provided, however, that ARI shall have one opportunity, which shall not be deemed an ARI Material Change, to replace such ARI Director with a new ARI Director, so long as such individual is reasonably acceptable to the Investors, it being understood that Robin McIlvenny, Victor Kiarsis and James Conlon shall be deemed reasonably acceptable to the Investors, (ii) any Person or group of affiliated Persons acquires (x) more than 51% of the issued and outstanding capital stock or other equity ownership interests of Bahrain International Bank (E.C.) or (y) the right to elect a majority of the members of its board of directors or other governing body, (iii) Bahrain International Bank (E.C.) ceases to own directly or indirectly through one or more Wholly-Owned Subsidiaries (x) at least 51% of the issued and outstanding capital stock of ARI or (y) the right to elect a majority of the members of the board of directors of ARI or (iv) there occurs any event which affects the control of Bahrain International Bank (E.C.) or its ability to exercise its rights or to perform its obligations under this Agreement, regardless of whether such event results in the occurrence of any of the events set forth in (i), (ii) or (iii) above.
"Board" has the meaning set forth in the preamble.
"Change of Control" shall have the meaning set forth in the Executive Option Agreements.
"Closing" has the meaning set forth in the Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and any reference to any particular Code section shall be interpreted to include any revision of or successor to that section regardless of how numbered or classified.
"Common Stock" means the Company's Common Stock, par value $0.01 per share.
"Company" has the meaning set forth in the preamble.
"Executive Option Agreements" shall have the meaning set forth in the Stock Purchase Agreement.
"Fair Market Value" of each Repurchase Share means the average of the closing prices of the sales of the Company's Common Stock on all securities exchanges on which the Common Stock may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day. If at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair Market Value shall be the fair value of the Common Stock determined in good faith by the Board (without taking into account the effect of any contemporaneous repurchase of Repurchase Shares under paragraph 8 hereof).
"Indebtedness" means at a particular time, without duplication,
(i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by
any note, bond, debenture or other debt security, (iii) any indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business), (iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness guaranteed in any manner by
a Person (including, without limitation, guarantees in the form of an agreement
to repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets and (viii) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under the Employee Retirement
Income Security Act of 1974, as amended.
"Independent Third Party" means any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Common Stock on a fully-diluted basis (a "5% Owner"), who is not controlling, controlled by or under common control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons.
"Investment" as applied to any Person means (i) any direct or indirect purchase or other acquisition by such Person of any notes, obligations, instruments, stock, securities or ownership interest (including partnership interests and joint venture interests) of any other Person and (ii) any capital contribution by such Person to any other Person.
"Investor Directors" has the meaning set forth in paragraph 1(a).
"Investor Holder" means the Investors and their Affiliates so long as they hold any Stockholder Shares.
"Investor Material Change" shall have occurred if a majority of the principals of the general partner (the "GP") of the general partner of the Investors cease to be officers of the GP and two or more of Benjamin D. Chereskin, Robin P. Selati and William J. Hunckler III cease to be officers of the GP.
"Investors" has the meaning set forth in the preamble.
"Lien" has the meaning set forth in the Stock Purchase Agreement.
"Loan Agreement" has the meaning set forth in the Stock Purchase Agreement.
"Management Director" has the meaning set forth in paragraph 1(a).
"Management Holder" means Vituli and each Management Investor so long as such individual holds any Stockholder Shares.
"Management Investor" means Daniel T. Accordino and Joseph A. Zirkman.
"1996 Plan" has the meaning set forth in the Purchase Agreement.
"Original Cost" of each Repurchase Share shall be equal to $101.7646 (as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations).
"Permitted Transferee" has the meaning set forth in paragraph 4(e) hereof.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
"Public Offering" means the sale of shares of the Company's Common Stock in a public offering registered under the Securities Act.
"Public Sale" means any sale of Stockholder Shares to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act.
"Purchase Agreement" has the meaning set forth in the preamble.
"Qualified Public Offering" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock resulting in aggregate gross proceeds to the Company of at least $50 million and a price per share of not less
than $108.2353 (as such amount is equitably adjusted for subsequent stock splits, stock dividends and recapitalizations).
"Restricted Securities" has the meaning set forth in the Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time to time, or any similar federal law then in place.
"Securities and Exchange Commission" includes any governmental body or agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force.
"Stockholder Shares" means (i) any Common Stock held by a
Stockholder as of the date hereof, (ii) any Common Stock issued or issuable to a
Stockholder under any options held by such Stockholder as of the date hereof,
(iii) any other shares of any class or series of capital stock of the Company
held by a Stockholder, and (iv) any capital stock or other equity securities
issued or issuable directly or indirectly with respect to the Common Stock
referred to in clauses (i), (ii), or (iii) above by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, and after any Transfer permitted
by this Agreement, any such shares owned by the transferee thereof. As to any
particular shares constituting Stockholder Shares, such shares shall cease to be
Stockholder Shares when they have been (x) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them or (y) sold to the public through a broker, dealer or market maker
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act. Notwithstanding the foregoing, for purposes of paragraph 4(d)
hereof, any unvested options held by any Stockholder shall be included in the
calculation of the percentage of Stockholder Shares owned by such Stockholder,
but shall not be included as Specified Shares.
"Stockholders" has the meaning set forth in the preamble.
"Sub Board" has the meaning set forth in paragraph 1(a).
"Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the limited liability company, partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or
Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing director or general partner of such limited liability company, partnership, association or other business entity.
"Threshold Amount" has the meaning set forth in paragraph
5(c)(vii).
"Transfer" has the meaning set forth in paragraph 4(a).
"Vituli" has the meaning set forth in the preamble.
"Wholly-Owned Subsidiary" has the meaning set forth in the Stock Purchase Agreement.
12. Transfers in Violation of Agreement. Any Transfer or attempted Transfer of any Stockholder Shares in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Stockholder Shares as the owner of such shares for any purpose.
13. Amendment and Waiver. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company, the Investor Holders, the ARI Holders or the holders of Stockholder Shares unless such modification, amendment or waiver is approved in writing by the Company, the Investors, ARI or the holders of a majority of the Stockholder Shares, respectively. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.
14. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
15. Entire Agreement. Except as otherwise expressly set forth herein, this Agreement embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
16. Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Stockholders and any subsequent holders of Stockholder Shares and the respective successors and permitted assigns of each of them, so long as they hold
Stockholder Shares; provided that neither the Investors nor ARI may assign its rights under this Agreement to any subsequent holder of Stockholder Shares except to an Investor Holder or a ARI Holder, respectively.
17. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which taken together shall constitute one and the same agreement.
18. Remedies. The Company and the holders of Stockholder Shares shall be entitled to enforce their rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that the Company, any Investor Holder, any ARI Holder and any Management Holder may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.
19. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or mailed first class mail (postage prepaid) or sent by reputable overnight courier service (charges prepaid) to the Company at the address set forth below and to any other recipient at the address indicated on the schedules hereto and to any subsequent holder of Stockholder Shares subject to this Agreement at such address as indicated by the Company's records, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices shall be deemed to have been given hereunder when delivered personally, three days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service as follows:
(a) Notices to the Company and the Management Holders:
Carrols Holdings Corporation
968 James Street
Syracuse, New York 13203
Attn: Mr. Alan Vituli
With copies (which shall not constitute notice) to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attn: Andre Weiss, Esq.
(b) Notices to the Investors:
Madison Dearborn Capital Partners, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
With copies (which shall not constitute notice) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Edward T. Swan, Esq.
(c) Notices to ARI:
Atlantic Restaurants, Inc,
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, CT 06902
Attn: Paul Durrant
With copies (which shall not constitute notice) to:
Pryor, Cashman, Sherman & Flynn 410 Park Avenue, 10th floor New York, NY 10022 Attn: Selig Sacks, Esq.
20. Governing Law. The corporate law of the State of Delaware shall govern all issues and questions concerning the relative rights of the Company and its stockholders. All other issues and questions concerning the construction, validity, interpretation and enforceability of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
In furtherance of the foregoing, the internal law of the State of New York shall control the interpretation and construction of this Agreement (and all schedules and exhibits hereto), even though under that jurisdiction's choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.
21. Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or legal holiday in the state in which the Company's chief executive office is located, the time period shall automatically be extended to the business day immediately following such Saturday, Sunday or legal holiday.
22. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
* * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.
CARROLS HOLDINGS CORPORATION
MADISON DEARBORN CAPITAL
PARTNERS, L.P.
By Madison Dearborn Partners, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
MADISON DEARBORN CAPITAL
PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
ATLANTIC RESTAURANTS, INC.
The undersigned, as the indirect owner of all or substantially all of the outstanding capital stock of Atlantic Restaurants, Inc., does hereby guarantee the obligations of Atlantic Restaurants, Inc. under this Stockholders Agreement and shall cause Atlantic Restaurants, Inc. to comply with the provisions of this Stockholders Agreement.
BAHRAIN INTERNATIONAL BANK, E.C.
SCHEDULE OF STOCKHOLDERS
Name and Address Number of Stockholder Shares - ---------------- ---------------------------- Atlantic Restaurants, Inc. c/o Dilmun Investments, Inc. Metro Center One Station Place Stamford, CT 06902 Attn.: Paul Durrant Madison Dearborn Capital Partners, L.P. Three First National Plaza Suite 1330 Chicago, IL 60602 |
Attn.: Benjamin D. Chereskin, Robin P. Selati, and William J. Hunckler III
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn.: Benjamin D. Chereskin, Robin P. Selati, and William J. Hunckler III
Alan Vituli
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
Daniel T. Accordino
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
Joseph A. Zirkman
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
EXHIBIT A
CARROLS HOLDINGS CORPORATION
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "Agreement") is made as of _________, 1997 by and among Carrols Holdings Corporation, a Delaware corporation (the "Company"), and the Persons listed on Schedule A attached hereto (collectively referred to herein as the "Stockholders," and each as a "Stockholder").
The Company, Atlantic Restaurants, Inc., Madison Dearborn Capital Partners, L.P., Madison Dearborn Capital Partners II, L.P. (together with Madison Dearborn Capital Partners, L.P., the "Investors") are parties to a Stock Purchase Agreement dated as of February __, 1997 (the "Purchase Agreement"). The execution and delivery of this Agreement is a condition to the Closing under the Purchase Agreement. Unless otherwise provided in this Agreement, capitalized terms used herein shall have the meanings set forth in paragraph 8 hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time, the holders of a majority of the Investor Registrable Securities, as a group, or the holders of a majority of the ARI Registrable Securities, as a group, may request registration under the Securities Act of all or any portion of their Registrable Securities on Form S-1 or any similar long-form registration ("Long-Form Registrations") or, if available, on Form S-2 or S-3 or any similar short-form registration ("Short-Form Registrations"); provided that (i) in the case of the first Demand Registration hereunder, the holders of a majority of the Investor Registrable Securities and the holders of a majority of the ARI Registrable Securities, as a group, must consent to such registration unless the Company has previously completed a registered public offering of its Common Stock under the Securities Act and (ii) all Long-Form Registrations shall be underwritten registrations. All registrations requested pursuant to this paragraph 1(a) are referred to herein as "Demand Registrations". Each request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered and the anticipated per share price range for such offering. Within ten days after receipt of any such request, the Company shall give written notice of such requested registration to all other holders of Registrable Securities and shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations. The holders of a majority of the Investor Registrable Securities, as a group, and the holders of a majority of the ARI Registrable
Securities, as a group, shall each be entitled to request three (3) Long-Form Registrations in which the Company shall pay all Registration Expenses; provided that the aggregate offering value of the Registrable Securities requested to be registered in any Long-Form Registration must be equal to at least $15,000,000. A registration shall not count as one of the permitted Long-Form Registrations until it has become effective, and no Long-Form Registration shall count as one of the permitted Long-Form Registrations unless the person or group making such request is able to register and sell at least 90% of the Registrable Securities requested to be included in such registration; provided that in any event the Company shall pay all Registration Expenses in connection with any registration initiated as a Long-Form Registration whether or not it has become effective and whether or not such registration has counted as one of the permitted Long-Form Registrations.
(c) Short-Form Registrations. In addition to the Long-Form Registrations provided pursuant to paragraph 1(b), the holders of a majority of the Investor Registrable Securities, as a group, and the holders of a majority of the ARI Registrable Securities, as a group, shall be entitled to request an unlimited number of Short-Form Registrations in which the Company shall pay all Registration Expenses; provided that the aggregate offering value of the Registrable Securities requested to be registered in any Short-Form Registration which is qualified under Rule 415 under the Securities Act must be equal to at least $5,000,000 and which contemplates an underwritten offering must be equal to at least $10,000,000. Demand Registrations shall be Short-Form Registrations whenever the Company is permitted to use any applicable short form. After the Company has become subject to the reporting requirements of the Securities Exchange Act, the Company shall use its best efforts to make Short-Form Registrations on Form S-3 available for the sale of Registrable Securities.
(d) Priority on Demand Registrations. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities, if any, which can be sold therein without adversely affecting the marketability of the offering, the Company shall include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included which in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, pro rata among the respective holders thereof on the basis of the amount of Registrable Securities owned by each such holder.
(e) Restrictions on Demand Registrations. The Company shall not be obligated to effect any Demand Registration within 180 days after the effective date of a previous Demand Registration or a previous registration in which the holders of Registrable Securities were given piggyback rights pursuant to paragraph 2 below. The Company may postpone for up to 120 days the filing or the effectiveness of a registration statement for a Demand Registration if the Company in good faith determines that such Demand Registration would reasonably be expected to have a material adverse effect on any proposal or plan by the Company or any of its Subsidiaries to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer, reorganization or similar transaction; provided that in
such event, the holders of Registrable Securities initially requesting such Demand Registration shall be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration shall not count as one of the permitted Demand Registrations hereunder and the Company shall pay all Registration Expenses in connection with such registration.
(f) Selection of Underwriters. The Company shall have the right to select the investment banker(s) and manager(s) to administer the offering, subject to the approval of the holders of the Registrable Securities requesting registration hereunder.
(g) Other Registration Rights. Except as provided in this Agreement, the Company shall not grant to any Persons the right to request the Company to register any equity securities of the Company, or any securities convertible or exchangeable into or exercisable for such securities, without the prior written consent of the holders of at least 80% of the Registrable Securities; provided that the Company may grant rights to other Persons to participate in Piggyback Registrations so long as such rights are subordinate to the rights of the holders of Registrable Securities with respect to such Piggyback Registrations as set forth in paragraphs 2(c) and 2(d) below.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company shall give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 20 days after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of Registrable Securities shall be paid by the Company in all Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company shall include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (iii) third, other securities requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company shall
include in such registration (i) first, the securities requested to be included therein by the holders requesting such registration, and the Registrable Securities requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (ii) second, other securities requested to be included in such registration.
(e) Other Registrations. If the Company has previously filed a registration statement with respect to Registrable Securities pursuant to paragraph 1 or pursuant to this paragraph 2, and if such previous registration has not been withdrawn or abandoned, the Company shall not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor form), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least 180 days has elapsed from the effective date of such previous registration.
(f) Selection of Underwriters. If any Piggyback Registration is an underwritten offering, the Company shall select the investment banker(s) and manager(s) for the offering.
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall not effect any public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration in which Registrable Securities are included (except as part of such underwritten registration), unless the underwriters managing the registered public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriters managing the registered public offering otherwise agree, and (ii) shall cause each holder of its Common Stock, or any securities convertible into or exchangeable or exercisable for shares of its Common Stock purchased from the Company at any time after the date of this Agreement (other than in a registered public offering) to agree not to effect any public sale or distribution (including sales pursuant to Rule 144) of any such securities during such period (except as part of such underwritten registration, if otherwise permitted), unless the underwriters managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition thereof and pursuant thereto the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company shall furnish to the counsel selected by the holders of a majority of the Registrable Securities covered by such registration statement copies of all such documents proposed to be filed, which documents shall be subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the effectiveness of each registration statement filed hereunder and prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than 180 days and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed,
to be listed on the NASD automated quotation system and, if listed on the NASD automated quotation system, use its best efforts to secure designation of all such Registrable Securities covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to secure NASDAQ authorization for such Registrable Securities and, without limiting the generality of the foregoing, to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any common stock included in such registration statement for sale in any jurisdiction, the Company shall use its best efforts promptly to obtain the withdrawal of such order; and
(l) permit any holder of Registrable Securities which holder, in its sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts, commissions and underwriters' counsel fees) and other Persons retained by the Company (all such expenses being herein called "Registration Expenses"), shall be borne as provided in this Agreement, except that the Company shall, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback Registration, the Company shall reimburse the holders of Registrable Securities included in such registration for the reasonable fees and disbursements of one counsel chosen by the holders of a majority of the Registrable Securities included in such registration and for the reasonable fees and disbursements of each additional counsel retained by any holder of Registrable Securities for the purpose of rendering a legal opinion on behalf of such holder in connection with any underwritten Demand Registration or Piggyback Registration.
(c) To the extent Registration Expenses are not required to be paid by the Company, each holder of securities included in any registration hereunder shall pay those Registration Expenses allocable to the registration of such holder's securities so included, and any Registration Expenses not so allocable shall be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided that the obligation to indemnify shall be individual, not joint and several, for each holder and shall be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person's right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of securities. The Company also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event the Company's indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may participate in any registration hereunder which is underwritten unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; provided that no holder of Registrable Securities included in any underwritten registration shall be required to make any representations or warranties to the Company or the underwriters (other than representations and warranties regarding such holder and such holder's intended method of distribution) or to undertake any indemnification obligations to the Company or the underwriters with respect thereto, except as otherwise provided in paragraph 6 hereof.
8. Definitions.
"Affiliate" of a Person other than an individual means any other Person, directly or indirectly controlling, controlled by or under common control with such Person or, with respect to any partnership, any partner thereof.
"ARI" means Atlantic Restaurants, Inc., a Delaware corporation.
"ARI Registrable Securities" means (i) any Common Stock held by ARI as of the date hereof and (ii) any Common Stock issued or issuable with respect to the securities referred to in clause (i) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular ARI Registrable Securities, such securities shall cease to be ARI Registrable Securities when they cease to be held by ARI or any of its Affiliates.
"Closing" shall have the meaning set forth in the Stock Purchase Agreement.
"Common Stock" means the Company's common stock, par value $0.01 per share.
"Investor Registrable Securities" means (i) any Common Stock
issued or transferred to the Investors pursuant to the Purchase Agreement and
(ii) any Common Stock issued or issuable with respect to the securities referred
to in clause (i) by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Investor Registrable Securities, such
securities shall cease to be Investor Registrable Securities when they cease to
be held by any Investor or any of their Affiliates.
"Management Holders" means Alan Vituli, Daniel T. Accordino and Joseph A. Zirkman.
"Other Registrable Securities" means (i) any employee stock options held by any Management Holder and shares of Common Stock acquired by any such Management Holder hereafter through the exercise of employee stock options or any other option held as of the date hereof, and (ii) any Common Stock issued or issuable with respect to the securities referred to in clause (i) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular Other Registrable Securities, such securities shall cease to be Other Registrable Securities when they cease to be held by a Management Holder or his Family Group. For purposes of this Agreement,
"Family Group" means an individual's spouse and descendants (whether natural or adopted) and any trust solely for the benefit of the individual and/or the individual's spouse and/or descendants.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or department, agency or political subdivision thereof.
"Public Sale" means any sale of securities to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act.
"Registrable Securities" means (i) Investor Registrable Securities, (ii) ARI Registrable Securities or (iii) Other Registrable Securities.
"Securities Act" means the Securities Act of 1933, as amended from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
Unless otherwise stated, other capitalized terms contained herein have the meanings set forth in the Purchase Agreement.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall not take any action, or permit any change to occur, with respect to its securities which would materially and adversely affect the ability of the holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement or which would materially and adversely affect the marketability of such Registrable Securities in any such registration (including, without limitation, effecting a stock split or a combination of shares).
(c) Remedies. Any Person having rights under any provision of this Agreement shall be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company, the holders of Investor Registrable Securities, the holders of ARI Registrable Securities or the holders of Other Registrable Securities unless such modification, amendment or waiver is approved in writing by the Company, the holders of a majority of the Investor Registrable Securities, the holders of a majority of the ARI Registrable Securities or the holders of a majority of the Other Registrable Securities, respectively. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.
(e) Successors and Assigns. All covenants and agreements in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not; provided that the parties hereto may only assign their rights under this Agreement to, (i) in the case of an individual, pursuant to applicable laws of descent and distribution or among such individual's Family Group or (ii) in the case of a Person other than an individual, among its Affiliates, and provided that any restrictions contained in this Agreement shall continue to be applicable to the holders of Registrable Securities after any such assignment other than a Public Sale.
(f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
(i) Governing Law. The corporate law of the State of Delaware shall govern all issues and questions concerning the relative rights of the Company and its stockholders. All other issues and questions concerning the construction, validity, interpretation and enforcement of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
(j) Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to each Stockholder at the address indicated on the Schedule A attached hereto and to the Company at the address indicated below:
Carrols Holdings Corporation 968 James Street Syracuse, New York 13203 Attention: Mr. Alan Vituli
With copies (which shall not constitute notice) to:
Schulte Roth & Zabel LLP 900 Third Avenue New York, NY 10022 Attention: Andre Weiss, Esq.
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
CARROLS HOLDINGS CORPORATION
By__________________________________________
Its_________________________________________
MADISON DEARBORN CAPITAL PARTNERS, L.P.
By Madison Dearborn Partners, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
By_______________________________
Benjamin D. Chereskin
Its______________________________
MADISON DEARBORN CAPITAL PARTNERS II,
L.P.
By Madison Dearborn Partners II, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
By_________________________________
Benjamin D. Chereskin
Its________________________________
ATLANTIC RESTAURANTS, INC.
By____________________________
Its___________________________
The undersigned, as the indirect owner of all or substantially all of the outstanding capital stock of Atlantic Restaurants, Inc., does hereby guarantee the obligations of Atlantic Restaurants, Inc. under this Registration Agreement and shall cause Atlantic Restaurants, Inc. to comply with the provisions of this Registration Agreement.
BAHRAIN INTERNATIONAL BANK, E.C.
By_________________________________
Its_________________________________
Schedule A
SCHEDULE OF STOCKHOLDERS
Atlantic Restaurants, Inc.
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, CT 06902
Attn.: Paul Durrant
Madison Dearborn Capital Partners, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn.: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attn.: Benjamin D. Chereskin, Robin P. Selati
and William J. Hunckler III
Alan Vituli
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
Daniel T. Accordino
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
Joseph A. Zirkman
c/o Carrols Corporation
968 James Street
Syracuse, NY 13203
EXHIBIT D1
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended and Restated Employment Agreement ("Agreement") effective as of the closing of the Stock Purchase Agreement, as defined below (the "Effective Date"), by and between CARROLS CORPORATION ("Employer"), a corporation organized under the laws of Delaware and whose address for the purposes of this agreement is 968 James Street, Syracuse, New York, 13217 and ALAN VITULI whose principal residence is Old Road, Windham, New York 12496 ("Employee"):
W I T N E S S E T H:
WHEREAS, pursuant to the terms of an employment agreement dated January 1, 1995 between Employer and Employee as amended effective April 3, 1996 (together the "Prior Employment Agreement"), Employee has been and is presently employed by the Employer as its Chairman of the Board and Chief Executive Officer;
WHEREAS, concurrently with the execution and delivery hereof, pursuant to a certain Stock Purchase Agreement (the "Stock Purchase Agreement") dated as of February 25, 1997, among Carrols Holdings Corporation ("Holdings"), Atlantic Restaurants, Inc. ("ARI"), Bahrain International Bank (E.C.) (for the limited purposes set forth therein), Madison Dearborn Capital Partners, L.P. ("MD") and Madison Dearborn Capital Partners II, L.P. (together with MD, "MDCP"), MDCP has acquired from ARI and Holdings an aggregate of 566,667 shares of the outstanding common stock of Holdings on a fully diluted basis; and
WHEREAS, as part of the transactions contemplated by the Stock Purchase Agreement, the parties thereto have agreed that Employer and Employee shall enter into this Agreement which shall supersede in its entirety the Prior Employment Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set forth and other good and valuable consideration, the receipt and adequacy of which is mutually acknowledged, it is agreed by and between the parties as follows:
1. DEFINITIONS
For purposes of this Agreement, unless the context requires otherwise, the following words and phrases shall have the meanings indicated below:
"Change of Control" shall mean:
(a) The acquisition (other than from Holdings) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act"), excluding for this purpose any employee benefit plan of Holdings or its subsidiaries which acquires beneficial ownership of voting securities of Holdings, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act), of more than 50% of either the then outstanding shares of common stock or the combined voting power of Holdings' then outstanding voting securities entitled to vote generally in the election of directors;
(b)(1) Individuals who are elected as members of the new Board of Directors of Holdings (the "Incumbent Board") pursuant to the terms of the Stockholders Agreement executed in connection with the Stock Purchase Agreement thereto (the "Stockholders Agreement") cease for any reason to constitute at least a majority of the Board of Directors; provided that any person becoming a director on or after the effective date of the Stockholders Agreement whose election, or nomination for election by Holdings' shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of Directors of Holdings, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be for purposes of this Agreement, considered as though such person were a member of the Incumbent Board,
(b)(2) Notwithstanding the foregoing, paragraph (b)(1) above shall not apply to any change in the Incumbent Board during the period in which the Stockholders Agreement is in effect and a majority of the Board of Directors of Holdings is designated or otherwise appointed to serve on the Board of Directors under the provisions of such Stockholders Agreement;
(c) Approval and consummation of a reorganization, merger, or consolidation, in each case, with respect to which persons who were the stockholders of Holdings immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or a liquidation or dissolution of Holdings or of the sale of all or substantially all of the assets of Holdings; or
(d) Holdings ceases to own at least 50 percent of the Employer.
(e) A Change of Control shall not be deemed to have occurred as a result of any purchase or acquisition of shares of capital stock in Holdings by MDCP and its affiliates, ARI and its affiliates, or any combination thereof.
"Cause" shall mean: (i) the commission by the Employee of a felony; (ii) the unauthorized disclosure of confidential proprietary information of the Employer which disclosure the Employee knows or reasonably should have known would be reasonably likely to result in material damage to the Employer; (iii) the breach by the Employee of any material provision of this Agreement, which breach, if curable, is not remedied within thirty (30) days after the Employee's receipt of written notice thereof provided, however, that the Employer need not
permit the Employee to cure any breach which has been the subject of a prior written notice; (iv) the engagement in material self dealing in breach of fiduciary duties with respect to the Employer's assets or properties unless disclosed to and approved by the disinterested members of the Board of Directors; (v) an act of gross misconduct in connection with the Employee's duties hereunder; or (vi) chronic alcohol or drug abuse rendering Employee incapable of carrying out his duties hereunder as determined in good faith by the Board of Directors continuing after the Employee is given a reasonable opportunity to obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" shall mean (i) the material failure of the Employer to comply with the provisions of this Agreement which failure shall not cease promptly and in no event more than thirty (30) days after the Employer's receipt of written notice from the Employee objecting to such conduct; (ii) any termination by the Employer of the Employee's employment other than as expressly permitted in this Agreement; or (iii) the assignment to Employee of duties and responsibilities materially inconsistent with those duties and responsibilities customarily assigned to individuals holding the position of Chairman and Chief Executive Officer of a company of comparable size or the substantial reduction by Employer of Employee's duties and responsibilities and, if curable, not remedied by Employer within 30 days after receipt of written notice.
2. REPRESENTATIONS AND WARRANTIES
Employee represents and warrants that he is not subject to any restrictive covenants or other agreements or legal restrictions in favor of any person which would in any way preclude, inhibit, impair, limit or be violated by his employment by the Employer or the performance of his duties, as contemplated herein.
3. EMPLOYMENT
The Employer hereby employs Employee and Employee accepts such
employment as Chairman and Chief Executive Officer of the Employer. As its
Chairman and Chief Executive Officer, Employee shall render such services to the
Employer as are customarily rendered by the Chairman and Chief Executive Officer
of comparable companies and as required by the articles and by-laws of the
Employer. Employee accepts such employment and, consistent with fiduciary
standards which exist between an employer and an employee shall perform and
discharge the duties that may be assigned to him from time to time by the
Employer in an efficient, trustworthy and businesslike manner. It is
specifically agreed that nothing in this Agreement shall prohibit Employee from
(i) serving on corporate, civic or charitable boards or committees; (ii)
engaging directly or indirectly, in activities with other public or private
companies or ventures; or (iii) making investments in any capacity whatsoever,
provided only that, such activities or any of them do not impair Employee's
performance of his duties for the Employer.
4. PLACE OF EMPLOYMENT
During the Term, the Employee shall render services where and as reasonably required by the Employer. In conformance with the foregoing and not in limitation thereof, Employee agrees to take such trips as shall be consistent with or reasonably necessary in connection with his duties. Employer will also maintain an office within ten (10) miles of the Employee's residence determined as of the date hereof and shall furnish the Employee both at the Employer's principal office and at such other location, which may include the Employee's residence, with an office and secretarial help and such other assistance, facilities and services consistent with Employee's position and necessary for the adequate performance of his duties.
5. TERM
Subject to the provisions of Section 11 hereof, the term of this
Agreement shall commence on the Effective Date and shall expire on the fourth
anniversary of the date hereof (the "Initial Term"). This Agreement shall be
automatically renewed for successive twelve (12) month periods on all the
remaining terms and conditions set forth herein, unless either party elects not
to renew this Agreement by giving written notice to the other at least ninety
(90) days before a scheduled expiration date. The Initial Term of this Agreement
together with any such renewals are collectively referred to herein as the
"Term."
6. COMPENSATION
(a) As compensation for all services rendered and to be rendered by Employee hereunder and the fulfillment by Employee of all of his obligations herein, the Employer shall pay Employee a base salary (the "Base Salary") at the rate of $400,000 for the first year of the Term payable in accordance with the Employer's customary payroll practices. Effective on each succeeding January 1 during the Term, the Employee's then current Base Salary shall be increased by a minimum of $25,000 or such greater amount as may be determined by the Compensation Committee of the Board in its sole discretion (the "Adjusted Base Salary").
(b) Employee will participate in the Executive Bonus Plan of the Employer. Notwithstanding any provision contained herein or in the Executive Bonus Plan to the contrary, no amendment to the Executive Bonus Plan shall have a material adverse impact on the Employee. If the Executive Bonus Plan is discontinued, the Employer agrees to establish a plan which will provide similar potential benefits to the Employee.
(c) Employee will also be eligible to participate in all phantom and/or actual stock option programs applicable to executive employees as determined by the Compensation Committee of the Board in its sole discretion. Employer granted Employee options in accordance with the provisions of the Carrols Holdings Corporation 1996 Long-Term Incentive Plan, the nonqualified stock option agreement related thereto and the Unvested Stock Option Agreement issued to Employee on ____________, 1997.
(d) The Employer shall deduct from the compensation described in (a), (b) and (c) above, any federal, state or city withholding taxes, social security contributions and
any other amounts which may be required to be deducted or withheld by the Employer pursuant to any federal, state or city laws, rules or regulations.
(e) Any compensation otherwise payable to the Employee pursuant to this Section in respect of any period during which the Employee is disabled (as contemplated in Section 11) shall be reduced by any amounts payable to the Employee for loss of earnings or the like under any insurance plan or policy the premiums for which are paid for in their entirety by the Employer.
7. STOCK PURCHASE
As a condition of this Agreement, Employee has purchased 9,827 shares of common stock, $.01 par value per share, of Holdings at a purchase price of $101.7646 per share.
8. BUSINESS EXPENSES
(a) The Employer shall pay, on behalf of Employee, all dues to professional societies and other organizations as are customarily joined by individuals holding the position of Chairman and Chief Executive Officer of businesses similar to the Employer. The Employer will require and shall reimburse the Employee for his out of pocket cost of one complete physical examination per fiscal year of the Term.
(b) The Employer agrees that the Employee is authorized to incur reasonable expenses in the performance of his duties hereunder and agrees that all reasonable expenses incurred by Employee in the discharge and fulfillment of his duties for the Employer, as set forth in Section 3, will be promptly reimbursed or paid by the Employer upon written substantiation signed by Employee, itemizing said expenses and containing all applicable vouchers. Employee shall be entitled to receive prompt reimbursement for all reasonable travel and entertainment expenses and the costs of attending conferences and seminars, so long as such expenses relate to Employee's ability to serve the best interests of the Employer. In addition, within 30 days of the rendition of the applicable invoices, Employer shall reimburse Employee annually for the reasonable costs incurred by Employee in tax planning and tax return preparation in an annual amount not to exceed $5,000.
9. BENEFITS AND INSURANCE
(a) The Employer agrees that, during the Term, the Employee shall be insured under all insurance policies and shall receive all benefits under all pension and welfare benefit plans (including, without limitation group life, medical, major medical and disability insurance) that the Employer may maintain and keep in force during the Term of the Agreement for the benefit of the Employer's employees, subject to the terms, provisions and conditions of such pension and welfare benefit plans or insurance and the agreements with underwriters relating to same. In addition, Employer will provide medical and major medical insurance for Employee and his spouse during the Term and for the remainder of their respective lives and during such period such benefit shall also provide coverage to the Employee's eligible dependents, notwithstanding the termination of Employee's employment hereunder, whether
voluntary or involuntary, or his Disability or death, consistent with the level and type of coverage provided to Employee by Employer's policy at March 1, 1996, provided however, that the provisions of this Section 9(a) will not require the Employer to continue post retirement or post employment medical coverage for the Employee or his spouse in the event the Employer terminates its post retirement and/or post employment coverage on a company-wide basis. In the event of such termination of coverage, the Employee shall be entitled to obtain a replacement policy consistent with the level and type of coverage described in the preceding sentence covering the Employee and his spouse and the Employer shall reimburse the Employee on an annual basis with respect to the cost of the same.
(b) ITT Hartford life insurance policy No. U01732239 (the "Policy"), owned by Shirley Vituli and Arthur Kunofsky as Trustees under the Alan Vituli Insurance Trust, dated June 22, 1989 (the "Owner"), which provides a death benefit of One Million Five Hundred Thousand Dollars ($1,500,000), is presently maintained by Employer pursuant to a Split-Dollar Insurance Agreement, dated July 1, 1995, as amended during April 1996 (the "Split-Dollar Agreement"). Employer acknowledges such agreement and agrees to be bound by its provisions, provided however, that the sum total of the Employer's outstanding premium payments shall be returned to the Employer from the proceeds of the cash value of the policy if surrendered during the Employee's lifetime, and in the event of Employee's death, the Employer shall be entitled to receive that portion of the death benefit in excess of $1,500,000 up to but not exceeding the sum total of the Employer's outstanding premium payments from the proceeds of the death benefit.
(c) Pursuant to the Split-Dollar Agreement, until the earlier to occur of Employee's 65th birthday or Employee's death, Employer shall, on or before the due date of each premium, make the premium payments on the Policy. Employer shall provide written proof of such payment to Employee within fifteen (15) days of the due date of the premium. If Employer shall fail to supply such proof, Employee shall be entitled to pay the premium and be reimbursed by Employer.
10. VACATION
Employee shall be entitled to an aggregate of four (4) weeks paid vacation during each year of the Term at time or times reasonably agreeable to both the Employee and the Employer, it being understood that any portion of such vacation not taken in such year shall not be available to be taken during any other year.
11. TERMINATION; CHANGE OF CONTROL; DEATH; DISABILITY
(a) Subject to the provisions of this Agreement, either the Employer or the Employee may terminate the employment of the Employee after receipt of written notice by the other party hereto provided that all applicable cure periods have expired if Employer terminates the employment of Employee for Cause or Employee terminates his employment with Good Reason.
(b) If within six (6) months following a Change of Control occurring during the Term, the employment of the Employee hereunder is terminated without Cause, the
Employee shall be paid: (1) his accrued but unpaid Base Salary and vacation as of the date of termination; (2) all amounts previously deferred under the Executive Bonus Plan (together with any interest accrued thereon) and not yet paid by the Employer; (3) continue any and all benefits and insurance policies as required by Section 9 hereof and (4)(i) if such Change of Control occurs during the first two years of the Initial Term, a cash payment in an amount equal to 2.99 multiplied by the average of the sum of the Base Salary and the Annual Bonus paid or deferred in accordance with the Executive Bonus Plan in the five calendar years prior to the date of termination (the "Five-Year Compensation Average") or (ii) if such Change of Control occurs after the first two years of the Initial Term, a cash lump sum equal to the Base Salary actually paid to the Employee for the prior twelve (12) month period and any amounts payable under the Executive Bonus Plan, as and when such amounts are due and payable under the terms of the Executive Bonus Plan.
(c) If the Employer (1) during the Term enters into a binding written agreement to engage in a transaction which, if consummated, would result in a Change of Control; (2) such transaction is consummated within six (6) months after the last date of the Term; and (3) subsequent to entering into such agreement the Employer terminates employment of the Employee without Cause, the Employer shall pay to the Employee an amount equal to the payment set forth in Section 11(b) hereof.
(d) If the Employee terminates his employment pursuant to
Section 11(a) hereof without Good Reason or the Employer terminates the
employment of the Employee hereunder for Cause, the Employer's only obligations
hereunder shall be to pay to the Employee his accrued but unpaid Base Salary and
vacation pay as of the date of termination plus any compensation or bonus
payments previously deferred by the Employee under the Executive Bonus Plan
(together with any interest accrued thereon) and not yet paid by the Employer
and continue any and all such benefits and insurance policies as required by
Section 9 hereof. The Employee shall have no further obligation to perform
services for the Employer.
(e) Other than in the case of Employee receiving benefits
under paragraph (b) above following a Change of Control, if the Employer
terminates employment of the Employee hereunder without Cause, or the Employee
terminates for Good Reason, the Employer shall pay to the Employee (1) his
accrued but unpaid Base Salary and vacation pay as of the date of termination;
(2) a cash payment in an amount equal to 2.99 multiplied by the Employee's Five
Year Compensation Average; (3) all amounts previously deferred by the Employee
under the Executive Bonus Plan (together with any interest accrued thereon) and
not yet paid by the Employer; and (4) continue any and all such benefits and
insurance policies as required by Section 9 hereof.
(f) If the Employee becomes physically or mentally disabled during the Term so that he is unable to perform the services required of him pursuant to this Agreement for a period of six (6) successive months, or an aggregate of six (6) months in any twelve (12) month period, the Employer may give the Employee written notice of its intention to terminate the services of the Employee hereunder. In such event, the Employee's employment with the Employer shall terminate effective on the thirtieth (30th) day after receipt of such notice by the
Employee (the "Disability Effective Date") provided the Employee shall not have returned to the performance of the Employee's duties. Subject to the provisions of Section 6(f), in the event the Employee's employment is terminated by reason of disability, the Employer's only obligations hereunder shall be (1) to continue the Base Salary, (at the rate in effect on the Disability Effective Date) for a period of three (3) years from the Disability Effective Date; (2) to pay a pro rata portion of the Annual Bonus for the year in which the Employee's employment is terminated as and when such amounts are due and payable under the term of the Executive Bonus Plan; (3) to pay all amounts previously deferred under the Executive Bonus Plan together with any interest accrued thereon) as prescribed by the Employee; and (4) to continue any and all such benefits and insurance policies as required by Section 9 hereof.
(g) In the event of the Employee's death during the Term, the Employer shall pay to his spouse, if he is survived by a spouse, or if not, to the estate of the Employee, (1) the Employee's accrued and unpaid Base Salary (at the rate in effect on the date of death) as of the date of death; (2) a pro rata share of the Annual Bonus for the year of his death as and when such amounts are due and payable under the term of the Executive Bonus Plan; (3) all amounts previously deferred under the Executive Bonus Plan (together with any interest accrued thereon) and not yet paid by the Employer in the manner prescribed by the executor of the Employee's estate and (4) continue any and all such benefits and insurance policies as required by Section 9 hereof.
(h) If the Employer does not continue the Employee's
employment upon expiration of the Initial Term, the only obligations of the
Employer hereunder shall be to pay the Employee in a cash lump sum an amount
equal to the Base Salary actually paid to the Employee for the prior twelve (12)
month period and any amounts payable under the Executive Bonus Plan, as and when
such amounts are due and payable under the terms of the Executive Bonus Plan,
and to continue any and all such benefits and insurance policies as required by
Section 9 hereof.
(i) Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefits provided under this Agreement or provided for the benefit of the Employee under any other plan or agreement of or with the Employer (each such payment or benefit, a "Payment," and such payments and benefits collectively, the "Payments"), would be subject to the excise tax imposed under Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties are hereinafter collectively referred to as the "Excise Tax"), the Payments shall be reduced if and to the extent necessary so that no Payment shall be subject to the Excise Tax. The Employer shall reduce or eliminate the Payments by first reducing or eliminating the payments due under Sections 11(b), 11(c) or 11(e) hereof, then by reducing or eliminating any other amounts payable in cash, and then by reducing or eliminating benefits which are not payable in cash, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the date of the determination.
12. RESTRICTIVE COVENANTS
(a) During the Term of this Agreement and for a period of two years following termination of this Agreement, the Employee (i) will not violate or cause the Employer to violate the terms of any agreement, including any franchise agreement, which the Employer is obligated under, except with the express written consent of the duly empowered officer of the Employer or pursuant to an order of a court of competent jurisdiction; and (ii) divulge or use any confidential information the effect of which would be injurious to the Employer without the prior written consent of a duly empowered officer of the Employer. Employee shall have the right to approve the provisions of any such franchise agreement which restricts Employee's future employment or business interests. During the Term of this Agreement and for a period of two years following termination of Employee's employment hereunder, the Employee will not solicit or employ any person, who was employed by the Employer within six months prior to the termination of Employee's employment, in any business in which Employee has a material interest, direct or indirect, as an officer, partner, shareholder or beneficial owner. The preceding sentence shall not prohibit the Employee from hiring (i) the individual who is the general counsel of the Employer as of the date of the closing of the Stock Purchase Agreement at any time, or (ii) any person whose employment is terminated involuntarily by the Employer during the Term or at any time thereafter provided that such hiring shall not occur until after the Employee's termination of employment hereunder.
(b) During the Term of employment and for a period of two
(2) years after the termination of the Employee's employment hereunder, Employee
will not in the Area (as defined in Section 12 (c) below) either directly or
indirectly engage in one or more of the following with any Burger King
franchisee: the acquisition of, financing of, providing of advice or consulting
services to, or ownership of the operations of a franchised Burger King
restaurant, as an employee, officer, consultant, independent contractor, partner
or shareholder. This shall not prevent Employee from engaging in any activity
related to the acquisition or ownership of the business of Burger King
Corporation or any other business activity other than that described in this
Section 12(b). In addition, this restriction shall not prevent Employee from
making a passive investment in real estate to be used by Burger King Corporation
or any other fast food restaurants.
(c) For purposes of this Agreement, Area shall mean the continental United States, Puerto Rico and Canada.
(d) The parties hereto, recognizing that irreparable injury will result to the Employer, its business and property in the event of the Employee's breach of this Employee covenant and non-competition provision, agree that in the event of any such breach by the Employee, the Employer will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by the Employee, the Employee's partners, agents, servants, employers, employees, and all persons acting for or with the Employee. Employee represents and admits that (i) in the event of termination of this Agreement, Employee's experience and capabilities are such that Employee can obtain employment in a business engaged in other lines and/or of a different nature than the business of the Employer, and that the enforcement of a remedy by way of injunction will not prevent the Employee from earning a livelihood, (ii) this Employee covenant and non-competition provision
was entered into in connection with the Employee's sale of his ownership interest in Holdings and in the absence of this provision the sale would not have been consummated and (iii) this amendment and restatement of the Prior Employment Agreement shall not eliminate or in any way reduce the Employee's obligations under the provisions of this Section 12 which shall remain in full force and effect.
13. INDEMNIFICATION
To the fullest extent permitted by Section 145 of the General Corporation Law of Delaware, as the same may be amended and supplemented ("Section 145") and Article Ninth of the Employer's certificate of incorporation, Employer shall indemnify Employee and hold him harmless from and against any and all of the expenses, liabilities or other matters referred to or covered in said section and certificate of incorporation (collectively, "Liabilities") if any of such Liabilities are incurred or suffered by Employee as a result of, arising out of or in connection with his employment by the Employer provided however, that the Employee acknowledges that he is not entitled to the indemnity referred to above (either as set forth in the Employer's By-laws or in this Agreement), to the extent a dispute arises between the Employer and the Employee with respect to his conduct as an Employee, or any claim that may arise either directly or indirectly with respect to the breach of any terms and conditions of this Agreement. In addition to the indemnification, as provided in Section 145, the Employer shall advance expenses, including reasonable attorneys' fees, of Employee. The indemnification and advancement of expenses provided for herein shall continue after Employee has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of Employee.
14. BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon the Employer and its successors. The Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of its assets to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession had taken place or with or into which the Employer may consolidate or merge. Employee agrees that this Agreement is personal to him and may not be assigned by him otherwise than by will or laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representatives.
15. MISCELLANEOUS
(a) If any provision of this Agreement, or portion thereof, shall be held invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall attach only to such provision or portion thereof, and this Agreement shall be carried out as if any such invalid or unenforceable provision or portion thereof were not contained herein. In addition, any such invalid or unenforceable provision or portion thereof shall be deemed, without further action on the part of the parties hereto, modified, amended or limited to the extent necessary to render the same valid and enforceable.
(b) This Agreement, and all of the rights and obligations of the parties in connection with the employment relationship established hereby shall be construed and enforced in accordance with the laws of New York applicable to contracts made and fully to be performed therein, and without giving effect to any rules of conflicts of law.
(c) All notices, requests, demands, and other communications provided for hereunder shall be in writing and shall be given or made when (i) delivered personally; (ii) three (3) business days following mailing by first class postage prepaid, registered or certified mail, return receipt requested, to the party to be notified at its or his address set forth herein; or (iii) on the date sent by telecopier, if the addressee has compatible receiving equipment and provided the transmittal is made on a business day during the hours of 9:00 a.m. to 6:00 p.m. of the receiving party and if sent at other times, on the immediately succeeding business day, or (iv) on the first business day immediately succeeding delivery to an express overnight carrier for the next business day delivery.
(d) This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each party shall deliver such further instruments and take such further action as may be reasonably requested by the other in order to carry out the provisions and purposes of this Agreement. This Agreement represents the entire understanding of the parties with reference to the subject matter hereof, supersedes in its entirety the provisions of the Prior Employment Agreement, and neither this Agreement nor any provisions hereof may be modified, discharged or terminated except by an agreement in writing signed by the party against whom the enforcement of any waiver, charge, discharge or termination is sought. Any waiver by either party of a breach of any provision of this Agreement must be in writing and no waiver of a particular breach shall operate as or be construed as waiver of any subsequent breach thereof.
IN WITNESSETH WHEREOF, the parties hereto have executed and have caused this Second Amended and Restated Employment Agreement to be executed as of ___________, 1997.
CARROLS CORPORATION
Title
EXHIBIT D2
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended and Restated Employment Agreement ("Agreement") effective as of the closing of the Stock Purchase Agreement, as defined below (the "Effective Date"), by and between CARROLS CORPORATION ("Employer"), a corporation organized under the laws of Delaware and whose address for the purposes of this agreement is 968 James Street, Syracuse, New York, 13217 and DANIEL T. ACCORDINO whose principal residence is 5175 E. Lake Road, Cazenovia, New York 13035 ("Employee"):
W I T N E S S E T H:
WHEREAS, pursuant to the terms of an employment agreement dated January 1, 1995 between Employer and Employee as amended effective April 3, 1996 (together the "Prior Employment Agreement"), Employee has been and is presently employed by the Employer as its President and Chief Operating Officer;
WHEREAS, concurrently with the execution and delivery hereof, pursuant to a certain Stock Purchase Agreement (the "Stock Purchase Agreement") dated as of February 25, 1997, among Carrols Holdings Corporation ("Holdings"), Atlantic Restaurants, Inc. ("ARI"), Bahrain International Bank (E.C.) (for the limited purposes set forth therein), Madison Dearborn Capital Partners, L.P. ("MD") and Madison Dearborn Capital Partners II, L.P. (together with MD, "MDCP"), MDCP has acquired from ARI and Holdings an aggregate of 566,667 shares of the outstanding common stock of Holdings on a fully diluted basis; and
WHEREAS, as part of the transactions contemplated by the Stock Purchase Agreement, the parties thereto have agreed that Employer and Employee shall enter into this Agreement, which shall supersede in its entirety the Prior Employment Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set forth and other good and valuable consideration, the receipt and adequacy of which is mutually acknowledged, it is agreed by and between the parties as follows:
1. DEFINITIONS
For purposes of this Agreement, unless the context requires otherwise, the following words and phrases shall have the meanings indicated below:
"Change of Control" shall mean:
(a) The acquisition (other than from Holdings) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act"), excluding for this purpose any employee benefit plan of Holdings or its subsidiaries which acquires beneficial ownership of voting securities of Holdings, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act), of more than 50% of either the then outstanding shares of common stock or the combined voting power of Holdings' then outstanding voting securities entitled to vote generally in the election of directors;
(b)(1) Individuals who are elected as members of the new Board of Directors of Holdings (the "Incumbent Board") pursuant to the terms of the Stockholders Agreement executed in connection with the Stock Purchase Agreement thereto (the "Stockholders Agreement") cease for any reason to constitute at least a majority of the Board of Directors; provided that any person becoming a director on or after the effective date of the Stockholders Agreement whose election, or nomination for election by Holdings' shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of Directors of Holdings, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be for purposes of this Agreement, considered as though such person were a member of the Incumbent Board,
(b)(2) Notwithstanding the foregoing, paragraph (b)(1) above shall not apply to any change in the Incumbent Board during the period in which the Stockholders Agreement is in effect and a majority of the Board of Directors of Holdings is designated or otherwise appointed to serve on the Board of Directors under the provisions of such Stockholders Agreement;
(c) Approval and consummation of a reorganization, merger, or consolidation, in each case, with respect to which persons who were the stockholders of Holdings immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or a liquidation or dissolution of Holdings or of the sale of all or substantially all of the assets of Holdings; or
(d) Holdings ceases to own at least 50 percent of the Employer.
(e) A Change of Control shall not be deemed to have occurred as a result of any purchase or acquisition of shares of capital stock in Holdings by MDCP and its affiliates, ARI and its affiliates, or any combination thereof.
"Cause" shall mean: (i) the commission by the Employee of a
felony; (ii) the unauthorized disclosure of confidential proprietary information
of the Employer which disclosure the Employee knows or reasonably should have
known would be reasonably likely to result in material damage to the Employer;
(iii) the breach by the Employee of any material provision of this Agreement,
which breach, if curable, is not remedied within thirty (30) days after the
Employee's receipt of written notice thereof provided, however, that the
Employer need not
permit the Employee to cure any breach which has been the subject of a prior written notice; (iv) the engagement in material self dealing in breach of fiduciary duties with respect to the Employer's assets or properties unless disclosed to and approved by the disinterested members of the Board of Directors; (v) an act of gross misconduct in connection with the Employee's duties hereunder; or (vi) chronic alcohol or drug abuse rendering Employee incapable of carrying out his duties hereunder as determined in good faith by the Board of Directors continuing after the Employee is given a reasonable opportunity to obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" shall mean (i) the material failure of the Employer to comply with the provisions of this Agreement which failure shall not cease promptly and in no event more than thirty (30) days after the Employer's receipt of written notice from the Employee objecting to such conduct; (ii) any termination by the Employer of the Employee's employment other than as expressly permitted in this Agreement; or (iii) the assignment to Employee of duties and responsibilities materially inconsistent with those duties and responsibilities customarily assigned to individuals holding the position of President and Chief Operating Officer of a company of comparable size or the substantial reduction by Employer of Employee's duties and responsibilities and, if curable, not remedied by Employer within 30 days after receipt of written notice.
2. REPRESENTATIONS AND WARRANTIES
Employee represents and warrants that he is not subject to any restrictive covenants or other agreements or legal restrictions in favor of any person which would in any way preclude, inhibit, impair, limit or be violated by his employment by the Employer or the performance of his duties, as contemplated herein.
3. EMPLOYMENT
The Employer hereby employs Employee and Employee accepts such
employment as President and Chief Operating Officer of the Employer. As its
President and Chief Operating Officer, Employee shall render such services to
the Employer as are customarily rendered by the President and Chief Operating
Officer of comparable companies and as required by the articles and by-laws of
the Employer. Employee accepts such employment and, consistent with fiduciary
standards which exist between an employer and an employee shall perform and
discharge the duties that may be assigned to him from time to time by the
Employer in an efficient, trustworthy and businesslike manner. It is
specifically agreed that nothing in this Agreement shall prohibit Employee from
(i) serving on corporate, civic or charitable boards or committees; (ii)
engaging directly or indirectly, in activities with other public or private
companies or ventures; or (iii) making investments in any capacity whatsoever,
provided only that, such activities or any of them do not impair Employee's
performance of his duties for the Employer.
4. PLACE OF EMPLOYMENT
During the Term, the Employee shall render services where and as reasonably required by the Employer. In conformance with the foregoing and not in limitation thereof, Employee agrees to take such trips as shall be consistent with or reasonably necessary in connection with his duties. Employer will also maintain an office within ten (10) miles of the Employee's residence determined as of the date hereof and shall furnish the Employee both at the Employer's principal office and at such other location, which may include the Employee's residence, with an office and secretarial help and such other assistance, facilities and services consistent with Employee's position and necessary for the adequate performance of his duties.
5. TERM
Subject to the provisions of Section 11 hereof, the term of this
Agreement shall commence on the Effective Date and shall expire on the fourth
anniversary of the date hereof (the "Initial Term"). This Agreement shall be
automatically renewed for successive twelve (12) month periods on all the
remaining terms and conditions set forth herein, unless either party elects not
to renew this Agreement by giving written notice to the other at least ninety
(90) days before a scheduled expiration date. The Initial Term of this Agreement
together with any such renewals are collectively referred to herein as the
"Term."
6. COMPENSATION
(a) As compensation for all services rendered and to be rendered by Employee hereunder and the fulfillment by Employee of all of his obligations herein, the Employer shall pay Employee a base salary (the "Base Salary") at the rate of $300,000 for the first year of the Term payable in accordance with the Employer's customary payroll practices. Effective on each succeeding January 1 during the Term, the Employee's then current Base Salary shall be increased by a minimum of $20,000 or such greater amount as may be determined by the Compensation Committee of the Board in its sole discretion (the "Adjusted Base Salary").
(b) Employee will participate in the Executive Bonus Plan of the Employer. Notwithstanding any provision contained herein or in the Executive Bonus Plan to the contrary, no amendment to the Executive Bonus Plan shall have a material adverse impact on the Employee. If the Executive Bonus Plan is discontinued, the Employer agrees to establish a plan which will provide similar potential benefits to the Employee.
(c) Employee will also be eligible to participate in all phantom and/or actual stock option programs applicable to executive employees as determined by the Compensation Committee of the Board in its sole discretion. Employer granted Employee options in accordance with the provisions of the Carrols Holdings Corporation 1996 Long-Term Incentive Plan, the nonqualified stock option agreement related thereto and the Deferred Vested and Unvested Stock Option Agreements issued to Employee on _________, 1997.
(d) The Employer shall deduct from the compensation described in (a), (b) and (c) above, any federal, state or city withholding taxes, social security contributions and
any other amounts which may be required to be deducted or withheld by the Employer pursuant to any federal, state or city laws, rules or regulations.
(e) Any compensation otherwise payable to the Employee pursuant to this Section in respect of any period during which the Employee is disabled (as contemplated in Section 11) shall be reduced by any amounts payable to the Employee for loss of earnings or the like under any insurance plan or policy the premiums for which are paid for in their entirety by the Employer.
7. STOCK PURCHASE
As a condition of this Agreement, Employee has purchased 860 shares of common stock, $.01 par value per share, of Holdings at a purchase price of $101.7646 per share.
8. BUSINESS EXPENSES
(a) The Employer shall pay, on behalf of Employee, all dues to professional societies and other organizations as are customarily joined by individuals holding the position of President and Chief Operating Officer of businesses similar to the Employer. The Employer will require and shall reimburse the Employee for his out of pocket cost of one complete physical examination per fiscal year of the Term.
(b) The Employer agrees that the Employee is authorized to incur reasonable expenses in the performance of his duties hereunder and agrees that all reasonable expenses incurred by Employee in the discharge and fulfillment of his duties for the Employer, as set forth in Section 3, will be promptly reimbursed or paid by the Employer upon written substantiation signed by Employee, itemizing said expenses and containing all applicable vouchers. Employee shall be entitled to receive prompt reimbursement for all reasonable travel and entertainment expenses and the costs of attending conferences and seminars, so long as such expenses relate to Employee's ability to serve the best interests of the Employer. In addition, within 30 days of the rendition of the applicable invoices, Employer shall reimburse Employee annually for the reasonable costs incurred by Employee in tax planning and tax return preparation in an annual amount not to exceed $5,000.
9. BENEFITS AND INSURANCE
(a) The Employer agrees that, during the Term, the Employee shall be insured under all insurance policies and shall receive all benefits under all pension and welfare benefit plans (including, without limitation group life, medical, major medical and disability insurance) that the Employer may maintain and keep in force during the Term of the Agreement for the benefit of the Employer's employees, subject to the terms, provisions and conditions of such pension and welfare benefit plans or insurance and the agreements with underwriters relating to same. In addition, Employer will provide medical and major medical insurance for Employee and his spouse during the Term and for the remainder of their respective lives and during such period such benefit shall also provide coverage to the Employee's eligible dependents, notwithstanding the termination of Employee's employment hereunder, whether
voluntary or involuntary, or his Disability or death, consistent with the level and type of coverage provided to Employee by Employer's policy at March 1, 1996, provided however, that the provisions of this Section 9(a) will not require the Employer to continue post retirement or post employment medical coverage for the Employee or his spouse in the event the Employer terminates its post retirement and/or post employment coverage on a company-wide basis. In the event of such termination of coverage, the Employee shall be entitled to obtain a replacement policy consistent with the level and type of coverage described in the preceding sentence covering the Employee and his spouse and the Employer shall reimburse the Employee on an annual basis with respect to the cost of the same.
(b) ITT Hartford life insurance policy No. U01732239 (the "Policy"), owned by Lucinda Accordino and Lawrence Accordino as Trustees under the Daniel T. Accordino Insurance Trust, dated February 20, 1995 (the "Owner"), which provides a death benefit of One Million Dollars ($1,000,000), is presently maintained by Employer pursuant to a Split-Dollar Insurance Agreement, dated July 1, 1995, as amended during April 1996 (the "Split-Dollar Agreement"). Employer acknowledges such agreement and agrees to be bound by its provisions, provided however, that the sum total of the Employer's outstanding premium payments shall be returned to the Employer from the proceeds of the cash value of the policy if surrendered during the Employee's lifetime, and in the event of Employee's death, the Employer shall be entitled to receive that portion of the death benefit in excess of $1,000,000 up to but not exceeding the sum total of the Employer's outstanding premium payments from the proceeds of the death benefit.
(c) Pursuant to the Split-Dollar Agreement, until the earlier
to occur of Employee's 65th birthday or Employee's death, Employer shall, on or
before the due date of each premium, make the premium payments on the Policy.
Employer shall provide written proof of such payment to Employee within fifteen
(15) days of the due date of the premium. If Employer shall fail to supply such
proof, Employee shall be entitled to pay the premium and be reimbursed by
Employer.
10. VACATION
Employee shall be entitled to an aggregate of four (4) weeks paid vacation during each year of the Term at time or times reasonably agreeable to both the Employee and the Employer, it being understood that any portion of such vacation not taken in such year shall not be available to be taken during any other year.
11. TERMINATION; CHANGE OF CONTROL; DEATH; DISABILITY
(a) Subject to the provisions of this Agreement, either the Employer or the Employee may terminate the employment of the Employee after receipt of written notice by the other party hereto provided that all applicable cure periods have expired if Employer terminates the employment of Employee for Cause or Employee terminates his employment with Good Reason.
(b) If within six (6) months following a Change of Control occurring during the Term, the employment of the Employee hereunder is terminated without Cause, the Employee shall be paid: (1) his accrued but unpaid Base Salary and vacation as of the date of termination; (2) all amounts previously deferred under the Executive Bonus Plan (together with any interest accrued thereon) and not yet paid by the Employer; (3) continue any and all benefits and insurance policies as required by Section 9 hereof and (4)(i) if such Change of Control occurs during the first two years of the Initial Term, a cash payment in an amount equal to 2.99 multiplied by the average of the sum of the Base Salary and the Annual Bonus paid or deferred in accordance with the Executive Bonus Plan in the five calendar years prior to the date of termination (the "Five-Year Compensation Average") or (ii) if such Change of Control occurs after the first two years of the Initial Term, a cash lump sum equal to the Base Salary actually paid to the Employee for the prior twelve (12) month period and any amounts payable under the Executive Bonus Plan, as and when such amounts are due and payable under the terms of the Executive Bonus Plan.
(c) If the Employer (1) during the Term enters into a binding
written agreement to engage in a transaction which, if consummated, would result
in a Change of Control; (2) such transaction is consummated within six (6)
months after the last date of the Term; and (3) subsequent to entering into such
agreement the Employer terminates employment of the Employee without Cause, the
Employer shall pay to the Employee an amount equal to the payment set forth in
Section 11(b) hereof.
(d) If the Employee terminates his employment pursuant to
Section 11(a) hereof without Good Reason or the Employer terminates the
employment of the Employee hereunder for Cause, the Employer's only obligations
hereunder shall be to pay to the Employee his accrued but unpaid Base Salary and
vacation pay as of the date of termination plus any compensation or bonus
payments previously deferred by the Employee under the Executive Bonus Plan
(together with any interest accrued thereon) and not yet paid by the Employer
and continue any and all such benefits and insurance policies as required by
Section 9 hereof. The Employee shall have no further obligation to perform
services for the Employer.
(e) Other than in the case of Employee receiving benefits
under paragraph (b) above following a Change of Control, if the Employer
terminates employment of the Employee hereunder without Cause, or the Employee
terminates for Good Reason, the Employer shall pay to the Employee (1) his
accrued but unpaid Base Salary and vacation pay as of the date of termination;
(2) a cash payment in an amount equal to 2.99 multiplied by the Employee's Five
Year Compensation Average; (3) all amounts previously deferred by the Employee
under the Executive Bonus Plan (together with any interest accrued thereon) and
not yet paid by the Employer; and (4) continue any and all such benefits and
insurance policies as required by Section 9 hereof.
(f) If the Employee becomes physically or mentally disabled during the Term so that he is unable to perform the services required of him pursuant to this Agreement for a period of six (6) successive months, or an aggregate of six (6) months in any twelve (12) month period, the Employer may give the Employee written notice of its intention to terminate
the services of the Employee hereunder. In such event, the Employee's employment with the Employer shall terminate effective on the thirtieth (30th) day after receipt of such notice by the Employee (the "Disability Effective Date") provided the Employee shall not have returned to the performance of the Employee's duties. Subject to the provisions of Section 6(f), in the event the Employee's employment is terminated by reason of disability, the Employer's only obligations hereunder shall be (1) to continue the Base Salary, (at the rate in effect on the Disability Effective Date) for a period of three (3) years from the Disability Effective Date; (2) to pay a pro rata portion of the Annual Bonus for the year in which the Employee's employment is terminated as and when such amounts are due and payable under the term of the Executive Bonus Plan; (3) to pay all amounts previously deferred under the Executive Bonus Plan together with any interest accrued thereon) as prescribed by the Employee; and (4) to continue any and all such benefits and insurance policies as required by Section 9 hereof.
(g) In the event of the Employee's death during the Term, the Employer shall pay to his spouse, if he is survived by a spouse, or if not, to the estate of the Employee, (1) the Employee's accrued and unpaid Base Salary (at the rate in effect on the date of death) as of the date of death; (2) a pro rata share of the Annual Bonus for the year of his death as and when such amounts are due and payable under the term of the Executive Bonus Plan; (3) all amounts previously deferred under the Executive Bonus Plan (together with any interest accrued thereon) and not yet paid by the Employer in the manner prescribed by the executor of the Employee's estate and (4) continue any and all such benefits and insurance policies as required by Section 9 hereof.
(h) If the Employer does not continue the Employee's
employment upon expiration of the Initial Term, the only obligations of the
Employer hereunder shall be to pay the Employee in a cash lump sum an amount
equal to the Base Salary actually paid to the Employee for the prior twelve (12)
month period and any amounts payable under the Executive Bonus Plan, as and when
such amounts are due and payable under the terms of the Executive Bonus Plan,
and to continue any and all such benefits and insurance policies as required by
Section 9 hereof.
(i) Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefits provided under this Agreement or provided for the benefit of the Employee under any other plan or agreement of or with the Employer (each such payment or benefit, a "Payment," and such payments and benefits collectively, the "Payments"), would be subject to the excise tax imposed under Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties are hereinafter collectively referred to as the "Excise Tax"), the Payments shall be reduced if and to the extent necessary so that no Payment shall be subject to the Excise Tax. The Employer shall reduce or eliminate the Payments by first reducing or eliminating the payments due under Sections 11(b), 11(c) or 11(e) hereof, then by reducing or eliminating any other amounts payable in cash, and then by reducing or eliminating benefits which are not payable in cash, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the date of the determination.
12. RESTRICTIVE COVENANTS
(a) During the Term of this Agreement and for a period of two years following termination of this Agreement, the Employee (i) will not violate or cause the Employer to violate the terms of any agreement, including any franchise agreement, which the Employer is obligated under, except with the express written consent of the duly empowered officer of the Employer or pursuant to an order of a court of competent jurisdiction; and (ii) divulge or use any confidential information the effect of which would be injurious to the Employer without the prior written consent of a duly empowered officer of the Employer. Employee shall have the right to approve the provisions of any such franchise agreement which restricts Employee's future employment or business interests. During the Term of this Agreement and for a period of two years following termination of Employee's employment hereunder, the Employee will not solicit or employ any person, who was employed by the Employer within six months prior to the termination of Employee's employment, in any business in which Employee has a material interest, direct or indirect, as an officer, partner, shareholder or beneficial owner. The preceding sentence shall not prohibit the Employee from hiring (i) the individual who is the general counsel of the Employer as of the date of the closing of the Stock Purchase Agreement at any time, or (ii) any person whose employment is terminated involuntarily by the Employer during the Term or at any time thereafter provided that such hiring shall not occur until after the Employee's termination of employment hereunder.
(b) During the Term of employment and for a period of two (2)
years after the termination of the Employee's employment hereunder, Employee
will not in the Area (as defined in Section 12 (c) below) either directly or
indirectly engage in one or more of the following with any Burger King
franchisee: the acquisition of, financing of, providing of advice or consulting
services to, or ownership of the operations of a franchised Burger King
restaurant, as an employee, officer, consultant, independent contractor, partner
or shareholder. This shall not prevent Employee from engaging in any activity
related to the acquisition or ownership of the business of Burger King
Corporation or any other business activity other than that described in this
Section 12(b). In addition, this restriction shall not prevent Employee from
making a passive investment in real estate to be used by Burger King Corporation
or any other fast food restaurants.
(c) For purposes of this Agreement, Area shall mean the continental United States, Puerto Rico and Canada.
(d) The parties hereto, recognizing that irreparable injury will result to the Employer, its business and property in the event of the Employee's breach of this Employee covenant and non-competition provision, agree that in the event of any such breach by the Employee, the Employer will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by the Employee, the Employee's partners, agents, servants, employers, employees, and all persons acting for or with the Employee. Employee represents and admits that (i) in the event of termination of this Agreement, Employee's experience and capabilities are such that Employee can obtain employment in a business engaged in other lines and/or of a different nature than the business of
the Employer, and that the enforcement of a remedy by way of injunction will not prevent the Employee from earning a livelihood, (ii) this Employee covenant and non-competition provision was entered into in connection with the Employee's sale of his ownership interest in Holdings and in the absence of this provision the sale would not have been consummated and (iii) this amendment and restatement of the Prior Employment Agreement shall not eliminate or in any way reduce the Employee's obligations under the provisions of this Section 12 which shall remain in full force and effect.
13. INDEMNIFICATION
To the fullest extent permitted by Section 145 of the General Corporation Law of Delaware, as the same may be amended and supplemented ("Section 145") and Article Ninth of the Employer's certificate of incorporation, Employer shall indemnify Employee and hold him harmless from and against any and all of the expenses, liabilities or other matters referred to or covered in said section and certificate of incorporation (collectively, "Liabilities") if any of such Liabilities are incurred or suffered by Employee as a result of, arising out of or in connection with his employment by the Employer provided however, that the Employee acknowledges that he is not entitled to the indemnity referred to above (either as set forth in the Employer's By-laws or in this Agreement), to the extent a dispute arises between the Employer and the Employee with respect to his conduct as an Employee, or any claim that may arise either directly or indirectly with respect to the breach of any terms and conditions of this Agreement. In addition to the indemnification, as provided in Section 145, the Employer shall advance expenses, including reasonable attorneys' fees, of Employee. The indemnification and advancement of expenses provided for herein shall continue after Employee has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of Employee.
14. BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon the Employer and its successors. The Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of its assets to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession had taken place or with or into which the Employer may consolidate or merge. Employee agrees that this Agreement is personal to him and may not be assigned by him otherwise than by will or laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representatives.
15. MISCELLANEOUS
(a) If any provision of this Agreement, or portion thereof, shall be held invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall attach only to such provision or portion thereof, and this Agreement shall be carried out as if any such invalid or unenforceable provision or portion thereof were not contained herein. In addition, any such invalid or unenforceable provision or portion thereof shall be deemed, without
further action on the part of the parties hereto, modified, amended or limited to the extent necessary to render the same valid and enforceable.
(b) This Agreement, and all of the rights and obligations of the parties in connection with the employment relationship established hereby shall be construed and enforced in accordance with the laws of New York applicable to contracts made and fully to be performed therein, and without giving effect to any rules of conflicts of law.
(c) All notices, requests, demands, and other communications
provided for hereunder shall be in writing and shall be given or made when (i)
delivered personally; (ii) three (3) business days following mailing by first
class postage prepaid, registered or certified mail, return receipt requested,
to the party to be notified at its or his address set forth herein; or (iii) on
the date sent by telecopier, if the addressee has compatible receiving equipment
and provided the transmittal is made on a business day during the hours of 9:00
a.m. to 6:00 p.m. of the receiving party and if sent at other times, on the
immediately succeeding business day, or (iv) on the first business day
immediately succeeding delivery to an express overnight carrier for the next
business day delivery.
(d) This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each party shall deliver such further instruments and take such further action as may be reasonably requested by the other in order to carry out the provisions and purposes of this Agreement. This Agreement represents the entire understanding of the parties with reference to the subject matter hereof, supersedes in its entirety the provisions of the Prior Employment Agreement, and neither this Agreement nor any provisions hereof may be modified, discharged or terminated except by an agreement in writing signed by the party against whom the enforcement of any waiver, charge, discharge or termination is sought. Any waiver by either party of a breach of any provision of this Agreement must be in writing and no waiver of a particular breach shall operate as or be construed as waiver of any subsequent breach thereof.
IN WITNESSETH WHEREOF, the parties hereto have executed and have caused this Second Amended and Restated Employment Agreement to be executed as of ____________, 1997.
CARROLS CORPORATION
Title
EXHIBIT B4
CARROLS HOLDINGS CORPORATION
1996 LONG-TERM INCENTIVE PLAN
1. PURPOSE
The purpose of this Plan is to further the growth and general prosperity of Carrols Holdings Corporation (the "Company") by providing long-term incentives to officers and employees of the Company and any Subsidiaries of the Company. The Company intends that the Plan will help attract, retain and motivate officers and key employees of high caliber and good potential and promote the alignment of the Participant's interests with that of the Company's shareholders.
2. DEFINITIONS
As used in the Plan, the following words shall have the following meanings:
"Award" means an award made to a Participant pursuant to the Plan and described in Paragraph 6, including, without limitation, an award of an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Performance Units, Performance Shares, or Other Stock-Based Awards or any combination of the foregoing.
"Award Agreement" means an agreement between the Company and a Participant that sets forth the terms, conditions and limitations applicable to an Award.
"Board" means the Board of Directors of the Company as constituted from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Cause" has the meaning determined by the Committee and set forth in the applicable Participant's Award Agreement.
"Change of Control" means:
(a) The acquisition (other than from the Company) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), excluding for this purpose any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act), of more than 50% of either the then outstanding shares of
common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors;
(b)(1) Individuals who are elected as members of the new Board of Directors of the Company (the "Incumbent Board") pursuant to the terms of the Stockholders Agreement executed in connection with the Stock Purchase Agreement thereto (the "Stockholders Agreement") cease for any reason to constitute at least a majority of the Board; provided that any person becoming a director on or after the effective date of the Stockholders Agreement whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be for purposes of this Plan, considered as though such person were a member of the Incumbent Board,
(b)(2) Notwithstanding the foregoing, paragraph (b)(1) above shall not apply to any change in the Incumbent Board during the period in which the Stockholders Agreement is in effect and a majority of the Board of the Company is designated or otherwise appointed to serve on the Board under the provisions of such Stockholders Agreement;
(c) Approval and consummation of a reorganization, merger, or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or a liquidation or dissolution of the Company or of the sale of all or substantially all of the assets of the Company; or
(d) The Company ceases to own at least 50 percent of the Employer.
(e) A Change of Control shall not be deemed to have occurred as a result of any purchase or acquisition of shares of capital stock in the Company by Madison Dearborn Capital Partners, L.P. and its affiliates, Madison Dearborn Capital Partners II, L.P. and its affiliates, Atlantic Restaurants, Inc. and its affiliates, or any combination thereof.
"Committee" means the Compensation Committee of the Board.
"Employee" means any officer or other employee of the Company or a Subsidiary.
"Employer" means Carrols Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
"Fair Market Value" as of any date:
(a) of Stock shall be deemed to equal (i) if the Stock is publicly traded, the average of the last reported sales prices of such Stock for ten (10) consecutive trading days as officially reported on the principal trading market on which the Stock is traded ending on the second trading day prior to the date of determination; or (ii) if the Stock is not publicly traded, the value of a Share of Stock as determined in good faith by the Committee or the Board of the Company on the advice of its independent auditors; or
(b) of assets other than Stock shall equal such value as determined by the Committee in its sole discretion.
"Good Reason" has the meaning determined by the Committee and set forth in the applicable Participant's Award Agreement.
"Incentive Stock Option" means an option intended to be and designated as an incentive stock option meeting the requirements of Section 422 of the Code.
"Nonqualified Stock Option" means an option that is not intended to be nor designated as an Incentive Stock Option.
"Participant" means an Employee who, as of any date, has been granted one or more Awards under the Plan which are still outstanding (i.e., have not been exercised, forfeited or terminated).
"Performance Goals" means, with respect to any Performance Period, performance goals based on any of the following criteria and established by the Committee prior to the beginning of such Performance Period or performance goals based on any of the following criteria and established by the Committee after the beginning of such Performance Period that meet the requirements to be considered pre-established performance goals under Section 162(m) of the Code: earnings or earnings growth; return on equity, assets or investment; revenues; expenses; stock price; market share; charge-offs; or reductions in non-performing assets or such other performance indicators as determined by the Committee in its sole discretion. Such Performance Goals may be particular to an Employee or the division, department, branch, line of business, Subsidiary or other unit in which the Employee works, or may be based on the performance of the Company generally.
"Performance Period" means (when and if applicable) the period of time designated by the Committee during which Performance Goals will be measured in connection with an Award.
"Permanent Disability" has the meaning determined by the Committee and set forth in the applicable Participant's Award Agreement.
"Plan" means this Carrols Holdings Corporation 1996 Long-Term Incentive Plan, as amended from time to time.
"Retirement" has the meaning determined by the Committee and set forth in the applicable Participant's Award Agreement.
"Stock" or "Share" means common stock of the Company, par value $.01 per share, which may be authorized but unissued or issued and reacquired.
"Other Stock-Based Awards" means any Award other than a Stock Option, Stock Appreciation Right, Restricted Stock, Performance Unit or Performance Share that is valued by reference to or otherwise based upon the Stock.
"Stock Options" means the collective reference to Incentive Stock Options and Nonqualified Stock Options.
"Subsidiary" means any corporation, other than the Company, in which the Company has at least a fifty percent beneficial ownership interest.
3. ADMINISTRATION
(a) The Plan shall be administered by the Committee. None of the members of the Committee shall be eligible to receive Awards under the Plan. Members of the Committee shall qualify to administer and make Awards under the Plan for purposes of Section 162(m) of the Code and Rule 16b-3 (and any other applicable rule) promulgated under Section 16(b) of the Exchange Act. The Committee may adopt its own rules or procedures, and the action of a majority of the Committee, taken at a meeting or taken without a meeting by a writing signed by such majority, shall constitute action by the Committee. The Committee shall have the power and authority to administer, construe and interpret the Plan, to make rules for carrying it out and to make changes in such rules. Any such interpretations, rules, and administration shall be consistent with the basic purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Company its duties under the Plan
subject to such conditions and limitations as the Committee shall
prescribe; provided, however, that only the Committee may
designate and make Awards to Participants who are subject to
Section 16 of the Exchange Act and Section 162(m) of the Code.
(c) The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company, and the officers and directors of the Company shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards made under the Plan, and all members of the Committee shall be fully protected by the Company with respect to any such action, determination or interpretation.
4. ELIGIBILITY
The Committee, in its discretion, may grant Awards to any Employee, subject to the provisions of the Plan. No Employee shall be entitled as a matter of right to receive an Award, nor shall the grant of an Award entitle an Employee to receive any future Award.
5. AWARD AGREEMENT
The terms, conditions and limitations of each Award under the Plan shall be determined by the Committee subject to the limitations provided for in Paragraph 7 below, and shall be set forth in an Award Agreement, in a form approved by the Committee, consistent, however, with the terms of the Plan; provided, however, that such Award Agreement shall contain provisions dealing with the treatment of Awards in the event of the termination, death or disability of a Participant.
6. AWARDS
As the Committee may determine, the following types of Awards may be granted under the Plan to eligible Employees, either alone, in combination or on an alternative basis:
(a) Incentive Stock Options: These are options within the meaning of
Section 422 of the Code to purchase Stock. In addition to other
restrictions contained in the Plan, an option granted under this
Paragraph 6(a), (i) may not be exercised more than 10 years after
the date it is granted, (ii) may not have an option exercise
price less than the Fair Market Value of the Stock on the date
the option is granted, (iii) must otherwise comply with the
requirements of Section 422 of the Code, and (iv) must be
designated as an "Incentive Stock Option" by the Committee. To
the extent the aggregate Fair Market Value (determined as of the
time the Incentive Stock Option is granted) of the Stock with
respect to which Incentive Stock Options become exercisable for
the first time by an individual during any calendar year under
all plans of the Company or any Subsidiary exceeds ONE HUNDRED
THOUSAND DOLLARS ($100,000), such options shall be treated as
Nonqualified Stock Options. Payment of the option exercise price
shall be made (i) in cash, (ii) by delivering shares of Stock
already owned by the Participant, (iii) by delivering a
promissory note to the Company that is either (A) unsecured and
full
recourse against the Participant or (B) nonrecourse but secured
by the Stock being purchased by such exercise and by other assets
having a Fair Market Value equal to not less than forty (40)
percent of the exercise price per share (a "Nonrecourse Note")
and, in either event, such note shall mature on the fifth
anniversary date thereof and shall bear interest, payable
quarterly, at the Federal mid-term rate provided under Section
1274(d) of the Code; (iv) by a combination of any of the
foregoing, in accordance with the terms of the Plan, the Award
Agreement, and any applicable guidelines of the Committee in
effect at the time, or (v) by any other means approved by the
Committee. The terms of a Nonrecourse Note shall provide that:
(i) any dividends received on Stock securing a Nonrecourse Note
shall be applied toward payment of the principal and accrued
interest of the Nonrecourse Note; and (ii) a Nonrecourse Note
shall become immediately due and payable upon the sale of Stock
securing the Nonrecourse Note and the proceeds shall be applied
to the payment of the unpaid principal balance and accrued
interest of the Nonrecourse Note.
(b) Nonqualified Stock Options: These are options to purchase Stock
which are not intended to be and are not designated by the
Committee as "Incentive Stock Options." At the time of the Award,
the Committee shall determine, and shall have included in the
Award Agreement or other Plan rules, the option exercise period,
the option price, and such other conditions or restrictions as
may be appropriate. In addition to the other restrictions
contained in the Plan, an option granted under this Paragraph
6(b), (i) may not be exercised more than 10 years after the date
it is granted, and (ii) may not have an option exercise price
less than 100% of the Fair Market Value of Stock on the date the
option is granted. Payment of the option exercise price shall be
made (i) in cash, (ii) by delivering shares of Stock already
owned by the Participant, (iii) by delivering a promissory note
to the Company that is either (A) unsecured and fully recourse
against the Participant or (B) nonrecourse but secured by the
Stock being purchased by such exercise and by other assets having
a Fair Market Value equal to not less than forty (40) percent of
the exercise price per share (a "Nonrecourse Note") and, in
either event, such note shall mature on the fifth anniversary
date thereof and shall bear interest, payable quarterly, at the
Federal mid-term rate provided under Section 1274(d) of the Code;
(iv) by a combination of any of the foregoing, in accordance with
the terms of the Plan, the Award Agreement, and any applicable
guidelines of the Committee in effect at the time, or (v) by any
other means approved by the Committee. The terms of a Nonrecourse
Note shall provide that: (i) any dividends received on Stock
securing a Nonrecourse Note shall be applied toward payment of
the principal and accrued interest of the Nonrecourse Note; and
(ii) a Nonrecourse Note shall become immediately due and payable
upon the sale of Stock securing the Nonrecourse Note and the
proceeds shall be applied to the payment of the unpaid principal
balance and accrued interest of the Nonrecourse Note.
(c) Stock Appreciation Rights: These are rights that on exercise
entitle the holder to receive the excess of (i) the Fair Market
Value of a Share of Stock on the date of exercise over (ii) the
Fair Market Value on the date of award or, if connected with a
previously issued Stock Option, the Fair Market Value at the time
such previously issued Stock Option was granted (the "base
value"), multiplied by (iii) the number of Shares covered by the
rights exercised, as determined by the Committee. A Stock
Appreciation Right granted under the Plan may, but need not be,
granted in tandem with a Stock Option under Paragraphs 6(a) or
6(b). The Committee, in the Award Agreement or by other Plan
rules, may impose such restrictions or conditions on the exercise
of Stock Appreciation Rights as it deems appropriate, and may
terminate, amend, or suspend such Stock Appreciation Rights at
any time. No Stock Appreciation Right granted under this Plan may
be exercised more than 10 years after the date it is granted.
(d) Restricted Stock: Restricted Stock is Stock delivered to a Participant with or without payment of consideration, subject to such conditions, terms and restrictions (including performance-based or employment-based vesting, forfeiture conditions and transfer restrictions) on the Participant's right to transfer or sell such Stock. The number of Shares of Restricted Stock and the restrictions or conditions on such Shares shall be determined by the Committee, in the Award Agreement or by other Plan rules, and the certificate for the Restricted Stock shall bear evidence of the restrictions or conditions.
(e) Performance Shares and Performance Units: An Award of Performance Shares or Performance Units shall entitle a Participant to receive Stock or a cash payment specified by the Committee, depending upon the attainment of certain Performance Goals over a Performance Period. The Performance Period and Performance Goals shall be specified by the Committee and may relate to the performance of the Company or one or more Subsidiaries or a combination thereof. At the time an Award of such Shares or units is made, the Committee shall, in the Award Agreement, determine the base value of the Award or specify a formula for determining such value. Other than an Award intended to qualify under Section 162(m) of the Internal Revenue Code, the Committee may adjust previously established Performance Goals and other terms and conditions of an Award at any time prior to the determination of the payment amount, to reflect major unforeseen events such as changes in laws, regulations or accounting policies or procedures, mergers, acquisitions or divestitures or extraordinary, unusual or non-recurring items or events.
Payment pursuant to an Award of Performance Shares or Performance Units shall be made following the Committee's determination of the extent to which the performance criteria were satisfied, and shall be made in the form of Stock, cash or a combination thereof, as the Committee may determine. Payment shall be made as promptly as practicable following the end of the Performance Period unless deferred subject to such terms and conditions as may be prescribed by the Committee.
(f) Other Stock-Based Awards: Other Stock-Based Awards may be granted to such Employees as the Committee may select, at any time and from time to time as the Committee shall determine. The Committee shall have complete discretion in determining the number of Shares subject to such Awards, the consideration for such Awards and the terms, conditions and limitations pertaining to same including, without limitation, restrictions based upon the achievement of specific business objectives, tenure, and other measurements of individual or business performance, and/or restrictions under applicable federal or state securities laws, and conditions under which same will lapse. Such Awards may include the issuance of Stock in payments of amounts earned under other incentive compensation plans of the Company. The terms, restrictions and conditions of the Award need not be the same with respect to each Participant.
The Committee may, in its sole discretion, direct the Company to issue Shares subject to such restrictive legends and/or stop transfer instructions as the Committee deems appropriate.
7. LIMITATIONS AND CONDITIONS
(a) The number of Shares available for Awards under this Plan shall be 106,250 Shares or, if greater, such Shares as approved by the Committee. The Shares available for Awards under this Plan will be available for grant at an exercise price per share as determined by the Committee. The number of Shares subject to Awards under the Plan (including, but not limited to, Stock Options and Stock Appreciation Rights) to any one Participant shall not exceed 45,000 Shares. To the extent that any Award is canceled or forfeited, or terminates, expires, or lapses for any reason, any unissued Shares subject to such Award shall again be available for grant under the Plan.
(b) No Awards shall be made under the Plan beyond ten years after the effective date of the Plan, but the terms of Awards made on or before the expiration thereof may extend beyond such expiration.
(c) Nothing in this Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or any Subsidiary.
(d) Deferral of Award payouts may be provided for, at the sole discretion of the Committee, subject to such terms and conditions as the Committee may specify in the Award Agreements.
(e) Participants shall not have any of the rights or privileges of stockholders of the Company with respect to any Shares purchasable in connection with any Award,
unless and until certificates representing such Shares have been issued by the Company to such Participants, except as otherwise specifically provided.
(f) Except as otherwise provided in this Paragraph 7, no Stock Option or other Award under the Plan shall be sold, transferred, assigned or otherwise alienated or hypothecated by the Participant, other than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative. The Participant may, if permitted by state law or the rules and regulations governing any exchange on which the Stock is traded, transfer, without payment of consideration, any Stock Option, other than Incentive Stock Options, to a member of such Participant's immediate family or to a trust or partnership whose beneficiaries are members of such Participant's immediate family. For purposes of this Paragraph, the term "immediate family" shall include the Participant's spouse, children and grandchildren.
(g) No grant or Award related payout under this Plan shall be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or its Subsidiaries and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. This Plan is not a "Retirement-Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of 1974, as amended.
(h) No benefit or promise under the Plan shall be secured by any specific assets of the Company or any of its Subsidiaries, nor shall any assets of the Company or any of it Subsidiaries be designated as attributable or allocated to the satisfaction of the Company's obligations under the Plan.
(i) Prior to the issuance of Shares, the Participant must execute a shareholder's agreement containing such terms and conditions as determined by the Committee and approved by the Board.
8. OPTION TERMS
(a) The exercise period for a Stock Option, including any extension which the Committee may from time to time decide to grant, shall not exceed ten years from the date of grant.
(b) Except as otherwise provided by the Committee, a Stock Option shall become exercisable with respect to 25% of the Shares commencing on the first anniversary of the date of grant, with an additional 25% becoming exercisable on each anniversary of the date of grant thereafter; provided, in each case, that the Participant shall have continuously remained in the active employment of the Company or, where appropriate, a Subsidiary.
(c) Except as otherwise provided by the Committee, if a Participant's employment with the Company or, where applicable, a Subsidiary terminates then the Stock Options held by the Participant shall have the vesting and exercise terms as determined by the Committee and provided in the applicable Participant's Award Agreement.
9. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that Awards earn dividends or dividend equivalents. Such dividends or dividend equivalents may be paid currently or may be credited to an account established by the Committee under the Plan in the name of the Participant. Any crediting of dividends or dividend equivalents may be subject to such restrictions and conditions as the Committee may establish, including reinvestment in additional Shares or Share equivalents.
10. TRANSFERS AND LEAVES OF ABSENCE
For purposes of the Plan, (a) the transfer of a Participant's employment between the Company and any Subsidiary without an intervening period of separation shall not be deemed a termination of employment, and (b) a Participant who is granted in writing a leave of absence shall be deemed to have remained in the employ of the Company or Subsidiary during such leave of absence; provided, however, that no Awards may be granted to an Employee while absent on such leave.
11. ADJUSTMENTS
In the event of a reclassification, recapitalization, merger,
consolidation, reorganization, stock dividends, stock split or reverse
stock split, including, without limitation, a distribution of the stock
of a Subsidiary, combination or exchange of Shares, the Committee shall
determine, in its discretion, the appropriate adjustments, if any, to
(a) the number of Shares which may be issued under the Plan, and (b) the
number of Shares issuable and the exercise price per Share pursuant to
any outstanding Award theretofore granted under this Plan.
12. CHANGE OF CONTROL
In the event of a Change of Control, any or all Stock Options and Stock Appreciation Rights still outstanding shall, notwithstanding any contrary terms of the Award Agreement, vest and become exercisable in full on the date of such Change of Control. As soon as practicable but in no event later than thirty (30) days prior to the occurrence of a Change of Control, the Committee shall notify the Participant of such Change of Control. Upon a Change of Control that qualifies as an Approved Sale (as defined in Paragraph 13) in which the outstanding common stock of the Company is converted or exchanged for or becomes a
right to receive any cash, property or securities other than Illiquid Consideration (as defined in Paragraph 13), (i) the Stock Options and Stock Appreciation Rights shall become exercisable solely for the amount of such cash, property or securities that the Participant would have been entitled to had the Stock Options and Stock Appreciation Rights been exercised immediately prior to such event; (ii) the Participant shall be given an opportunity to either (A) exercise any Stock Options and Stock Appreciation Rights prior to the consummation of the Approved Sale and participate in such sale as holders of Stock or (B) upon consummation of the Approved Sale, receive in exchange for such Stock Options and Stock Appreciation Rights consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of Stock received by the holders of Stock in connection with the Approved Sale less the exercise price per share of Stock of such Stock Options and Stock Appreciation Rights to acquire Stock by (2) the number of shares of Stock represented by such Stock Options and Stock Appreciation Rights; and (iii) to the extent the Stock Options and Stock Appreciation Rights are not exercised prior to or simultaneous with such Approved Sale, the Stock Options and Stock Appreciation Rights shall be canceled.
13. SALE OF THE COMPANY
(a) If the Board and the holders of a majority of the Company's Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock shall consent to and raise no objections against the Approved Sale of the Company, and if the Approved Sale of the Company is structured as a sale of capital stock, the holders of Stock shall agree to sell their shares of Stock on the terms and conditions approved by the Board and the holders of a majority of the Company's Stock. The holders of Stock shall take all necessary and desirable actions in connection with the consummation of the Approved Sale of the Company. Notwithstanding the foregoing, in the event that the consideration to be received by the holders of Stock in connection with the Approved Sale shall include either (a) shares of common stock of a class which is not listed on a national securities exchange or in the NASDAQ system and which is not entitled to registration rights for sale in a registered public offering under the Securities Act of 1933 or (b) shares of senior equity securities which do not provide for a scheduled redemption or a redemption at the option of the holders thereof, such holders shall not be required to sell their shares of Stock pursuant to this Paragraph 13(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the Approved Sale of the Company is subject to the satisfaction of the condition that, upon the consummation of the Approved Sale, all of the holders of Stock receive the same form and amount of consideration per share of Stock, or if any holders of Stock are given an option as to the form and amount of consideration to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Stock shall at the request of the Company, appoint a "purchaser representative" (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Stock appoints a purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative. However, if any holder of Stock declines to appoint the purchaser representative designated by the Company, such holder shall appoint another purchaser representative (reasonably acceptable to the Company), and such holder shall be responsible for the fees of the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall bear their pro-rata share (based upon the number of shares sold) of the costs of any sale of Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Stock and are not otherwise paid by the Company or the acquiring party. Costs incurred by Participants and the other holders of Stock on their own behalf shall not be considered costs of the transaction hereunder.
(e) The provisions of this Paragraph 13 shall terminate upon the completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 13, "Independent Third Party" shall mean any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a "5% Owner"); who is not controlling, controlled by or under control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons; "Person" shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof; "Qualified Public Offering" shall mean the sale in an underwritten public offering registered under the Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate gross proceeds to the Company of at least $50 million and a price per share of not less than $108.2353 (as such amount is equitably adjusted for subsequent stock splits, stock dividends and recapitalizations); and "Sale of the Company" shall mean the sale of the Company to an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation or sale or transfer of the
Company's capital stock) or (ii) all or substantially all the Company's assets determined on a consolidated basis.
14. AMENDMENT AND TERMINATION
(a) The Committee shall have the authority to make such amendments to any terms and conditions applicable to outstanding Awards as are consistent with this Plan provided that, except for adjustments under Paragraph 11 hereof, no such action shall modify such Award in a manner adverse to the Participant without the Participant's consent, except as such modification is provided for or contemplated under the terms of the Award.
(b) The Committee may terminate, amend or modify the provisions of this Plan (including any performance criteria or conditions which must be achieved in order for an Employee to receive an Award or Awards, subject to Paragraph 6(e)) at any time and from time to time; provided, however, that an amendment which requires stockholder approval in order for the Plan to continue to comply with Rule 16b-3, Section 162(m) of the Code or any other law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of stockholders. The termination, amendment or modification of the Plan may be in response to changes in the Code, the Exchange Act, national securities exchange regulations or for other reasons deemed appropriate by the Committee.
15. FOREIGN OPTIONS AND RIGHTS
The Committee may make Awards to Employees who are subject to the laws of nations other than the United States, which Awards may have terms and conditions that differ from the terms thereof as provided elsewhere in the Plan for the purpose of complying with foreign laws.
16. WITHHOLDING TAXES
The Company shall have the right to deduct from any cash payment made under the Plan any federal, state or local income or other taxes required by law to be withheld with respect to such payment. It shall be a condition to the obligation of the Company to deliver Shares upon the exercise of a Stock Option or Stock Appreciation Right, upon payment of Performance Units or Performance Shares, upon delivery of Restricted Stock or upon exercise, settlement or payment of any Other Stock-Based Award, that the Participant pay to the Company such amount as may be requested by the Company for the purpose of satisfying any liability for such withholding taxes.
17. INDEMNIFICATION
Each current or former member of the Committee, and of the Board, shall be indemnified and held harmless by the Company against any loss, cost, liability or expense that may be imposed upon, or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which the member may be a party or in which the member may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by the member in settlement thereof, with the Company's approval, or paid by the member in satisfaction of any judgment in any such action, suit or proceeding against the member, provided such member shall give the Company an opportunity, at its own expense, to handle and defend the same before the member undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which the member may be entitled under the Company's Certificate of Incorporation or By-laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
18. SUCCESSORS
The terms of the Plan shall be binding upon the Company and its successors and assigns.
19. REQUIREMENTS OF LAW
(a) The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approval by any governmental agencies or national securities exchanges as may be required.
(b) In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
(c) To the extent that federal laws do not otherwise control, the Plan and all Award Agreements, shall be construed in accordance with and governed by the laws of the State of New York.
20. EFFECTIVE DATE AND TERMINATION DATES
The Plan, as amended and restated, shall be effective as of the closing of the Stock Purchase Agreement dated as of February 25, 1997 and shall terminate ten years later, subject to such earlier termination by the Board pursuant to Paragraph 14.
EXHIBIT B5
CARROLS HOLDINGS CORPORATION
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTION)
THIS AGREEMENT, dated as of ___________, 1997 is made by and between Carrols Holdings Corporation, a Delaware corporation (hereinafter called the "Company") and Alan Vituli, an employee of Carrols Corporation (hereinafter referred to as the "Optionee"). All capitalized terms herein shall have such meanings as are ascribed to them in the Plan (as defined below) and in this agreement (the "Agreement"), including those terms defined on Exhibit A hereto.
1. Grant of Option. The Company grants to the Optionee as of the date hereof (the "Date of Grant") a nonqualified stock option (this "Option") to purchase all or any part of the aggregate of 43,350 shares of common stock, $.01 par value per share, of Carrols Holdings Corporation ("Shares"), subject to all of the terms and conditions of this Agreement and the Carrols Holdings Corporation 1996 Long-Term Incentive Plan, as amended from time to time (the "Plan"). As of the date hereof, the Carrols Corporation 1996 Long-Term Incentive Plan (the "Prior Plan") is terminated and the nonqualified stock option granted pursuant to the Prior Plan is surrendered.
2. Exercise Price and Period of Option.
(a) Subject to the terms and conditions of the Plan and this Agreement, this Option (a) became exercisable on the Date of Grant with regard to 15,300 Shares and (b) shall become exercisable (i) with regard to 5,610 Shares, on December 31, 1997; (ii) with regard to 5,610 Shares, on December 31, 1998; (iii) with regard to 5,610 Shares, on December 31, 1999; and (iv) with regard to 11,220 Shares, on December 31, 2000. This Option has an exercise price of $101.7646 per share (the "Exercise Price").
(b) Except as otherwise provided by the Committee, if Optionee's employment with the Company terminates:
(i) due to death, Permanent Disability, for Good Reason or
without Cause, the portion of the Option which is not vested and exercisable on
the date on which Optionee ceases to be an employee shall vest and become
immediately exercisable in full and all vested and exercisable Options
(including Options that become vested and exercisable under this paragraph)
shall continue to be exercisable until the date of expiration of the Option
pursuant to Paragraph 3 of this Agreement;
(ii) without Good Reason, the portion of the Option that is not vested and exercisable on the date on which Optionee ceases to be an employee shall terminate and any vested Options shall continue to be exercisable until the date of expiration of the Option pursuant to Paragraph 3 of this Agreement; and
(iii) for Cause, the portion of the Option that is not vested and exercisable shall terminate and any vested Options shall be forfeited on the date the Company delivers notice of termination of employment for Cause to the Optionee.
(c) In the event of a Change of Control during the term of the Optionee's employment with Carrols Corporation, the portion of the Option that is not vested shall vest and become exercisable in full on the date of such Change of Control. As soon as practicable but in no event later than thirty (30) days prior to the occurrence of a Change of Control, the Committee shall notify the Optionee of such Change of Control. Upon a Change of Control that qualifies as an Approved Sale (as defined in Paragraph 5) in which the outstanding common stock of the Company is converted or exchanged for or becomes a right to receive any cash, property or securities other than Illiquid Consideration (as defined in Paragraph 5), (i) the Option shall become exercisable solely for the amount of such cash, property or securities that the Optionee would have been entitled to had the Option been exercised immediately prior to such event (ii) the Optionee shall be given an opportunity to either (A) exercise the Option prior to the consummation of the Approved Sale and participate in such sale as holders of Stock or (B) upon consummation of the Approved Sale, receive in exchange for such Option consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of Stock received by the holders of Stock in connection with the Approved Sale less the exercise price per share of Stock of such Option to acquire Stock by (2) the number of shares of Stock represented by such Option; and (iii) to the extent the Option is not exercised prior to or simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed in connection with the Stock Purchase Agreement dated February 25, 1997 among the Company, Atlantic Restaurants, Inc., Bahrain International Bank (E.C.), Madison Dearborn Capital Partners, L.P., and Madison Dearborn Capital Partners II, L.P. (the "Stockholders Agreement").
3. Expiration of Option. Notwithstanding anything contained herein to the contrary, this Option may not be exercised to any extent by Optionee after the tenth anniversary of the Date of Grant.
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary of the Company of an executed written Notice and Agreement in the form attached hereto as Exhibit B, or in such other form as may be required by the Company, which shall set forth Optionee's election to exercise this Option, the number of Shares being purchased and such other representations and agreements regarding Optionee's investment intent and access to information as may be required by the Company to comply with applicable securities laws.
(b) Such Notice and Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased (i) in cash (including check, bank draft or money order); (ii) where approved by the Committee in its sole discretion, by surrender of Shares of the Company owned by the Optionee having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a promissory note as provided under the Plan; (iv) by any combination of the foregoing
where approved by the Committee in writing in its sole discretion; or (v) any other method the Committee may approve in its sole discretion, subject to the terms and conditions of the Plan.
(c) Prior to the issuance of the Shares upon exercise of this Option, Optionee must pay or, in a manner acceptable to the Company, make adequate provision to pay, any applicable federal, state or local withholding obligations as determined by the Company.
(d) Provided that the foregoing Notice and Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of the Optionee, the Optionee and the Optionee's spouse, or the Optionee's legal representative.
(e) Any exercisable portion of this Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when this Option becomes unexercisable under Paragraph 3; provided, however, that any partial exercise shall be for whole Shares only.
(f) This Option may not be exercised unless such exercise is in compliance with the Securities Act of 1933, as amended, and all applicable state securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock shall consent to and raise no objections against the Approved Sale of the Company, and if the Approved Sale of the Company is structured as a sale of capital stock, the holders of Stock shall agree to sell their shares of Stock on the terms and conditions approved by the Board and the holders of a majority of the Company's Stock. The holders of Stock shall take all necessary and desirable actions in connection with the consummation of the Approved Sale of the Company. Notwithstanding the foregoing, in the event that the consideration to be received by the holders of Stock in connection with the Approved Sale shall include either (a) shares of common stock of a class which is not listed on a national securities exchange or in the NASDAQ system and which is not entitled to registration rights for sale in a registered public offering under the Securities Act of 1933 or (b) shares of senior equity securities which do not provide for a scheduled redemption or a redemption at the option of the holders thereof, such holders shall not be required to sell their shares of Stock pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the Approved Sale of the Company is subject to the satisfaction of the condition that, upon the consummation of the Approved Sale, all of the holders of Stock receive the same form and amount of consideration per share of Stock, or if any holders of Stock are given an option as to the form and amount of consideration to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Stock shall at the request of the Company, appoint a "purchaser representative" (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Stock appoints a purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative. However, if any holder of Stock declines to appoint the purchaser representative designated by the Company, such holder shall appoint another purchaser representative (reasonably acceptable to the Company), and such holder shall be responsible for the fees of the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall bear their pro-rata share (based upon the number of shares sold) of the costs of any sale of Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Stock and are not otherwise paid by the Company or the acquiring party. Costs incurred by Participants and the other holders of Stock on their own behalf shall not be considered costs of the transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party" shall mean any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a "5% Owner"); who is not controlling, controlled by or under control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons; "Person" shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof; "Qualified Public Offering" shall mean the sale in an underwritten public offering registered under the Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate gross proceeds to the Company of at least $50 million and a price per share of not less than $108.2353 (as such amount is equitably adjusted for subsequent stock splits, stock dividends and recapitalizations); and "Sale of the Company" shall mean the sale of the Company to an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all the Company's assets determined on a consolidated basis.
6. Compliance with Laws and Regulations. The issuance and transfer of Shares shall be subject to compliance by the Company and the Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock
exchange on which the Company's shares may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the Securities and Exchange Commission, any state securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. This Option may not be transferred in any manner except (a) as determined by the Committee in its sole discretion, or (b) pursuant to Paragraph 7(f) of the Plan.
8. Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company with respect to any shares purchasable upon the exercise of the Option or any portion thereof, unless and until certificates representing such Shares shall have been issued by the Company to such holder.
9. Consequences. Optionee shall be solely responsible for the payment of any taxes due in connection with the Plan and this Option grant; provided, however, that the Company may make such provisions as it may deem appropriate for the withholding of any taxes which the Company determines it is required to withhold in connection with the issuance, exercise or vesting of this Option.
10. Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option.
11. Notice. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Paragraph 11, either party may hereafter designate a different address for notices to be delivered. Any notice which is required to be given to the Optionee shall, if the Optionee is deceased, be given to the Optionee's personal representative. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
12. Dividends.
(a) In the event that the Company declares a dividend with respect to any Shares subject to a vested portion of the Option, the Company shall mail to Optionee a written notice at least ten (10) days prior to the record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any unvested Options shall be reduced by the amount of any dividends that the Optionee would have received had the
Optionee held the Shares subject to the Option on the record date with respect to such dividend, and in the event that the aggregate dividends declared on such Shares exceeds the aggregate Exercise Price of the Option, the amount of such excess, if any, shall be deposited in an interest bearing bank account established by the Committee in the name of the Optionee. Any amount held in an interest bearing bank account established under this Paragraph 12(b), or the pro rata portion thereof in the event of a partial exercise of this Option, shall be paid to the Optionee upon exercise of all or, if relevant, a portion of the Option.
13. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Optionee or the Company forthwith to the Committee, which shall review such dispute at its next regular meeting. The resolution of such dispute by the Committee shall be final and binding on the Company and on the Optionee.
14. Governing Document. This Agreement is in every respect subject to the provisions of the Plan, as it may be amended from time to time. The provisions of the Plan shall govern in the case of any inconsistency between the Plan and this Agreement.
15. Entire Agreement. The definitions attached hereto as Exhibit A and the Plan and the Notice and Agreement attached hereto as Exhibit B are incorporated herein by reference. This Agreement, including the definitions, the Plan and the Notice and Agreement constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof.
CARROLS HOLDINGS CORPORATION
By:------------------------------
Its:-----------------------------
Exhibit B to Carrols Holdings Corporation Stock Option Agreement of Alan Vituli
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents that Optionee has read and understands the terms and provisions thereof, and accepts this Option subject to all the terms and provisions of the Plan and this Agreement. Optionee acknowledges that there may be various tax consequences upon exercise of this Option or disposition of the Shares and that Optionee should consult a tax adviser prior to such exercise or disposition.
By:---------------------------------- Alan Vituli Old Road, Windham, N.Y. 12496
Exhibit A to Carrols Holdings Corporation Stock Option Agreement of Alan Vituli
Definitions. As used in this Agreement, the following terms shall have the following meanings:
"Cause" means, except as may otherwise be provided in a Participant's employment agreement (if any) or in the Award Agreement, (i) the commission by the Participant of a felony; (ii) the unauthorized disclosure of confidential proprietary information of the Company or any Subsidiary which disclosure the Participant knows or reasonably should have known would be reasonably likely to result in material damage to the Company or Subsidiary; (iii) the breach by the Participant of any material provision of the Participant's employment agreement (if any), which breach, if curable, is not remedied within thirty (30) days after the Participant's receipt of written notice thereof provided, however, that the Company need not permit the Participant to cure any breach which has been the subject of a prior written notice; (iv) the engagement in material self dealing in breach of fiduciary duties with respect to the assets or properties of the Company or Subsidiary unless disclosed to and approved by the disinterested members of the Board of Directors; (v) an act of gross misconduct in connection with the Participant's duties under his employment agreement (if any); or (vi) chronic alcohol or drug abuse rendering Participant incapable of carrying out his duties as determined in good faith by the Committee continuing after the Participant is given a reasonable opportunity to obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a Subsidiary to comply with the provisions of the Participant's employment agreement, if any, which failure shall not cease promptly and in no event more than thirty (30) days after receipt by the Company or, where appropriate, a Subsidiary of written notice from the Participant objecting to such conduct; (ii) any termination by the Company or Subsidiary of the Participant's employment other than as expressly permitted in the Participant's employment agreement, if any; or (iii) the assignment to Participant of duties and responsibilities materially inconsistent with those duties and responsibilities customarily assigned to individuals holding positions similar to that of the Participant at a company of comparable size to the Company or Subsidiary or the substantial reduction by the Company or Subsidiary of Participant's duties and responsibilities and, if curable, not remedied by the Company or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to physical or mental disability to perform all of his duties with the Company or Subsidiary pursuant to his employment agreement, if any, for a period of six (6) successive months, or an aggregate of six (6) months in any twelve (12) month period, as determined by the Committee upon the basis of such evidence, including but not limited to independent medical reports and data, as the Committee deems appropriate or necessary.
EXHIBIT B6
CARROLS HOLDINGS CORPORATION
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTION)
THIS AGREEMENT, dated as of ___________, 1997 is made by and between Carrols Holdings Corporation, a Delaware corporation (hereinafter called the "Company") and Daniel T. Accordino, an employee of Carrols Corporation (hereinafter referred to as the "Optionee"). All capitalized terms herein shall have such meanings as are ascribed to them in the Plan (as defined below) and in this agreement (the "Agreement"), including those terms defined on Exhibit A hereto.
1. Grant of Option. The Company grants to the Optionee as of the date hereof (the "Date of Grant") a nonqualified stock option (this "Option") to purchase all or any part of the aggregate of 28,900 shares of common stock, $.01 par value per share, of Carrols Holdings Corporation ("Shares"), subject to all of the terms and conditions of this Agreement and the Carrols Holdings Corporation 1996 Long-Term Incentive Plan, as amended from time to time (the "Plan"). As of the date hereof, the Carrols Corporation 1996 Long-Term Incentive Plan (the "Prior Plan") is terminated and the nonqualified stock option granted pursuant to the Prior Plan is surrendered.
2. Exercise Price and Period of Option.
(a) Subject to the terms and conditions of the Plan and this Agreement, this Option (a) became exercisable on the Date of Grant with regard to 10,200 Shares and (b) shall become exercisable (i) with regard to 3,740 Shares, on December 31, 1997; (ii) with regard to 3,740 Shares, on December 31, 1998; (iii) with regard to 3,740 Shares, on December 31, 1999; and (iv) with regard to 7,480 Shares, on December 31, 2000. This Option has an exercise price of $101.7646 per share (the "Exercise Price").
(b) Except as otherwise provided by the Committee, if Optionee's employment with the Company terminates:
(i) due to death, Permanent Disability, for Good Reason or
without Cause, the portion of the Option which is not vested and exercisable on
the date on which Optionee ceases to be an employee shall vest and become
immediately exercisable in full and all vested and exercisable Options
(including Options that become vested and exercisable under this paragraph)
shall continue to be exercisable until the date of expiration of the Option
pursuant to Paragraph 3 of this Agreement;
(ii) without Good Reason, the portion of the Option that is not vested and exercisable on the date on which Optionee ceases to be an employee shall terminate and any vested
Options shall only be exercisable for a period of forty-five (45) days after the Optionee's date of termination of employment without Good Reason; and
(iii) for Cause, the portion of the Option that is not vested and exercisable shall terminate and any vested Options shall be forfeited on the date the Company delivers notice of termination of employment for Cause to the Optionee.
(c) In the event of a Change of Control during the term of the Optionee's employment with Carrols Corporation, the portion of the Option that is not vested shall vest and become exercisable in full on the date of such Change of Control. As soon as practicable but in no event later than thirty (30) days prior to the occurrence of a Change of Control, the Committee shall notify the Optionee of such Change of Control. Upon a Change of Control that qualifies as an Approved Sale (as defined in Paragraph 5) in which the outstanding common stock of the Company is converted or exchanged for or becomes a right to receive any cash, property or securities other than Illiquid Consideration (as defined in Paragraph 5), (i) the Option shall become exercisable solely for the amount of such cash, property or securities that the Optionee would have been entitled to had the Option been exercised immediately prior to such event (ii) the Optionee shall be given an opportunity to either (A) exercise the Option prior to the consummation of the Approved Sale and participate in such sale as holders of Stock or (B) upon consummation of the Approved Sale, receive in exchange for such Option consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of Stock received by the holders of Stock in connection with the Approved Sale less the exercise price per share of Stock of such Option to acquire Stock by (2) the number of shares of Stock represented by such Option; and (iii) to the extent the Option is not exercised prior to or simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed in connection with the Stock Purchase Agreement dated February 25, 1997 among the Company, Atlantic Restaurants, Inc., Bahrain International Bank (E.C.), Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P. (the "Stockholders Agreement").
3. Expiration of Option. Notwithstanding anything contained herein to the contrary, this Option may not be exercised to any extent by Optionee after the tenth anniversary of the Date of Grant.
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary of the Company of an executed written Notice and Agreement in the form attached hereto as Exhibit B, or in such other form as may be required by the Company, which shall set forth Optionee's election to exercise this Option, the number of Shares being purchased and such other representations and agreements regarding Optionee's investment intent and access to information as may be required by the Company to comply with applicable securities laws.
(b) Such Notice and Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased (i) in cash (including check, bank draft or money
order); (ii) where approved by the Committee in its sole discretion, by surrender of Shares of the Company owned by the Optionee having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a promissory note as provided under the Plan; (iv) by any combination of the foregoing where approved by the Committee in writing in its sole discretion; or (v) any other method the Committee may approve in its sole discretion, subject to the terms and conditions of the Plan.
(c) Prior to the issuance of the Shares upon exercise of this Option, Optionee must pay or, in a manner acceptable to the Company, make adequate provision to pay, any applicable federal, state or local withholding obligations as determined by the Company.
(d) Provided that the foregoing Notice and Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of the Optionee, the Optionee and the Optionee's spouse, or the Optionee's legal representative.
(e) Any exercisable portion of this Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when this Option becomes unexercisable under Paragraph 3; provided, however, that any partial exercise shall be for whole Shares only.
(f) This Option may not be exercised unless such exercise is in compliance with the Securities Act of 1933, as amended, and all applicable state securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock shall consent to and raise no objections against the Approved Sale of the Company, and if the Approved Sale of the Company is structured as a sale of capital stock, the holders of Stock shall agree to sell their shares of Stock on the terms and conditions approved by the Board and the holders of a majority of the Company's Stock. The holders of Stock shall take all necessary and desirable actions in connection with the consummation of the Approved Sale of the Company. Notwithstanding the foregoing, in the event that the consideration to be received by the holders of Stock in connection with the Approved Sale shall include either (a) shares of common stock of a class which is not listed on a national securities exchange or in the NASDAQ system and which is not entitled to registration rights for sale in a registered public offering under the Securities Act of 1933 or (b) shares of senior equity securities which do not provide for a scheduled redemption or a redemption at the option of the holders thereof, such holders shall not be required to sell their shares of Stock pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the Approved Sale of the Company is subject to the satisfaction of the condition that, upon the consummation of the Approved Sale, all of the holders of Stock receive the same form and amount of consideration
per share of Stock, or if any holders of Stock are given an option as to the form and amount of consideration to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Stock shall at the request of the Company, appoint a "purchaser representative" (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Stock appoints a purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative. However, if any holder of Stock declines to appoint the purchaser representative designated by the Company, such holder shall appoint another purchaser representative (reasonably acceptable to the Company), and such holder shall be responsible for the fees of the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall bear their pro-rata share (based upon the number of shares sold) of the costs of any sale of Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Stock and are not otherwise paid by the Company or the acquiring party. Costs incurred by Participants and the other holders of Stock on their own behalf shall not be considered costs of the transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party" shall mean any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a "5% Owner"); who is not controlling, controlled by or under control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons; "Person" shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof; "Qualified Public Offering" shall mean the sale in an underwritten public offering registered under the Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate gross proceeds to the Company of at least $50 million and a price per share of not less than $108.2353 (as such amount is equitably adjusted for subsequent stock splits, stock dividends and recapitalizations); and "Sale of the Company" shall mean the sale of the Company to an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all the Company's assets determined on a consolidated basis.
6. Compliance with Laws and Regulations. The issuance and transfer of Shares shall be subject to compliance by the Company and the Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company's shares may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the Securities and Exchange Commission, any state securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. This Option may not be transferred in any manner except (a) as determined by the Committee in its sole discretion, or (b) pursuant to Paragraph 7(f) of the Plan.
8. Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company with respect to any shares purchasable upon the exercise of the Option or any portion thereof, unless and until certificates representing such Shares shall have been issued by the Company to such holder.
9. Consequences. Optionee shall be solely responsible for the payment of any taxes due in connection with the Plan and this Option grant; provided, however, that the Company may make such provisions as it may deem appropriate for the withholding of any taxes which the Company determines it is required to withhold in connection with the issuance, exercise or vesting of this Option.
10. Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option.
11. Notice. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Paragraph 11, either party may hereafter designate a different address for notices to be delivered. Any notice which is required to be given to the Optionee shall, if the Optionee is deceased, be given to the Optionee's personal representative. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
12. Dividends.
(a) In the event that the Company declares a dividend with respect to any Shares subject to a vested portion of the Option, the Company shall mail to Optionee a written notice at least ten (10) days prior to the record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any unvested Options shall be reduced by the amount of any dividends that the Optionee would have received had the Optionee held the Shares subject to the Option on the record date with respect to such dividend, and in the event that the aggregate dividends declared on such Shares exceeds the aggregate Exercise Price of the Option, the amount of such excess, if any, shall be deposited in an interest bearing bank account established by the Committee in the name of the Optionee. Any amount held in an interest bearing bank account established under this Paragraph 12(b), or the pro rata portion thereof in the event of a partial exercise of this Option, shall be paid to the Optionee upon exercise of all or, if relevant, a portion of the Option.
13. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Optionee or the Company forthwith to the Committee, which shall review such dispute at its next regular meeting. The resolution of such dispute by the Committee shall be final and binding on the Company and on the Optionee.
14. Governing Document. This Agreement is in every respect subject to the provisions of the Plan, as it may be amended from time to time. The provisions of the Plan shall govern in the case of any inconsistency between the Plan and this Agreement.
15. Entire Agreement. The definitions attached hereto as Exhibit A and the Plan and the Notice and Agreement attached hereto as Exhibit B are incorporated herein by reference. This Agreement, including the definitions, the Plan and the Notice and Agreement constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof.
CARROLS HOLDINGS CORPORATION
Exhibit B
to Carrols Holdings Corporation
Stock Option Agreement
of Daniel T. Accordino
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents that Optionee has read and understands the terms and provisions thereof, and accepts this Option subject to all the terms and provisions of the Plan and this Agreement. Optionee acknowledges that there may be various tax consequences upon exercise of this Option or disposition of the Shares and that Optionee should consult a tax adviser prior to such exercise or disposition.
Exhibit A
to Carrols Holdings Corporation
Stock Option Agreement
of Daniel T. Accordino
Definitions. As used in this Agreement, the following terms shall have the following meanings:
"Cause" means, except as may otherwise be provided in a Participant's employment agreement (if any) or in the Award Agreement, (i) the commission by the Participant of a felony; (ii) the unauthorized disclosure of confidential proprietary information of the Company or any Subsidiary which disclosure the Participant knows or reasonably should have known would be reasonably likely to result in material damage to the Company or Subsidiary; (iii) the breach by the Participant of any material provision of the Participant's employment agreement (if any), which breach, if curable, is not remedied within thirty (30) days after the Participant's receipt of written notice thereof provided, however, that the Company need not permit the Participant to cure any breach which has been the subject of a prior written notice; (iv) the engagement in material self dealing in breach of fiduciary duties with respect to the assets or properties of the Company or Subsidiary unless disclosed to and approved by the disinterested members of the Board of Directors; (v) an act of gross misconduct in connection with the Participant's duties under his employment agreement (if any); or (vi) chronic alcohol or drug abuse rendering Participant incapable of carrying out his duties as determined in good faith by the Committee continuing after the Participant is given a reasonable opportunity to obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a Subsidiary to comply with the provisions of the Participant's employment agreement, if any, which failure shall not cease promptly and in no event more than thirty (30) days after receipt by the Company or, where appropriate, a Subsidiary of written notice from the Participant objecting to such conduct; (ii) any termination by the Company or Subsidiary of the Participant's employment other than as expressly permitted in the Participant's employment agreement, if any; or (iii) the assignment to Participant of duties and responsibilities materially inconsistent with those duties and responsibilities customarily assigned to individuals holding positions similar to that of the Participant at a company of comparable size to the Company or Subsidiary or the substantial reduction by the Company or Subsidiary of Participant's duties and responsibilities and, if curable, not remedied by the Company or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to physical or mental disability to perform all of his duties with the Company or Subsidiary pursuant to his employment agreement, if any, for a period of six (6) successive months, or an aggregate of six (6) months in any twelve (12) month period, as determined by the Committee upon the basis of such evidence, including but not limited to independent medical reports and data, as the Committee deems appropriate or necessary.
EXHIBIT B1
CARROLS HOLDINGS CORPORATION
UNVESTED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ___________, 1997 (the "Date of Grant") is made by and between Carrols Holdings Corporation, a Delaware corporation (hereinafter called the "Company") and Alan Vituli, an employee of the Company (hereinafter referred to as the "Optionee"). Unless otherwise defined herein or on Exhibit A hereto, which is incorporated herein by reference, all capitalized terms used herein shall have the meanings assigned to such terms in the Carrols Holdings Corporation 1996 Long-Term Incentive Plan, as amended from time to time (the "Plan"); provided, however, that the Option granted hereunder is not subject to or granted under the Plan.
1. Grant and Approval of Option. The Company hereby grants to the Optionee a nonqualified stock option (the "Option") to purchase all or any part of the aggregate of 29,480 shares of its $.01 par value common stock (the "Shares"), subject to all of the terms and conditions of this agreement (the "Agreement").
2. Exercise Price and Period of Option; Acceleration of Vesting.
(a) Effective as of the closing of the Stock Purchase Agreement (the "Closing") and subject to the terms and conditions of this Agreement, this Option shall become exercisable at an exercise price per share (the "Exercise Price") of $101.7646 as follows: (i) 5,896 Shares will become exercisable on the first anniversary date of the Closing; (ii) 5,896 Shares will become exercisable on the second anniversary date of the Closing; (iii) 5,896 Shares will become exercisable on the third anniversary date of the Closing; and (iv) 5,896 Shares will become exercisable on the fourth anniversary date of the Closing; and (v) the remaining 5,896 Shares will become exercisable on the fifth anniversary date of the Closing.
(b) Except as otherwise provided by the Committee, if Optionee's employment with the Company terminates:
(i) for Good Reason or without Cause, the portion of the Option which is not vested and exercisable on the date on which Optionee ceases to be an employee shall vest and become immediately exercisable in full and shall continue to be exercisable until the date of expiration of the Option pursuant to Paragraph 3 of this Agreement;
(ii) on account of death or Permanent Disability, Optionee shall (A) have the right to purchase such additional Shares to which the Optionee would have been entitled had his employment continued through the first anniversary date of the Closing following Optionee's date of termination of employment on account of death or Permanent Disability (the "Termination Date") and (B) have the right to purchase such additional Shares equal to the product of (x) the number of shares which would have become exercisable on the second anniversary date of the
Closing following the Termination Date multiplied by (y) a fraction where the numerator equals the number of days elapsed since the anniversary date of the Closing preceding the Termination Date and the denominator equals 365 days. In the event of Optionee's death or Permanent Disability, all vested and exercisable Options (including Options that become vested and exercisable under this paragraph 2(b)(ii)) shall continue to be exercisable until the date of expiration of the Option pursuant to Paragraph 3 of this Agreement;
(iii) without Good Reason, the portion of the Option that is not vested and exercisable on the date on which Optionee ceases to be an employee shall terminate and any vested Options shall only be exercisable for a period of forty-five (45) days after the Optionee's date of termination of employment without Good Reason; and
(iv) for Cause, the portion of the Option that is not vested and exercisable shall terminate and any vested Options shall be forfeited on the date the Company delivers notice of termination of employment for Cause to the Optionee.
(c) In the event of a Change of Control during the term of the Optionee's employment with Carrols Corporation, the portion of the Option that is not vested shall vest and become exercisable in full on the date of such Change of Control. As soon as practicable but in no event later than thirty (30) days prior to the occurrence of a Change of Control, the Committee shall notify the Optionee of such Change of Control. Upon a Change of Control that qualifies as an Approved Sale (as defined in Paragraph 5) in which the outstanding common stock of the Company is converted or exchanged for or becomes a right to receive any cash, property or securities other than Illiquid Consideration (as defined in Paragraph 5), (i) the Option shall become exercisable solely for the amount of such cash, property or securities that the Optionee would have been entitled to had the Option been exercised immediately prior to such event (ii) the Optionee shall be given an opportunity to either (A) exercise the Option prior to the consummation of the Approved Sale and participate in such sale as holders of Stock or (B) upon consummation of the Approved Sale, receive in exchange for such Option consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of Stock received by the holders of Stock in connection with the Approved Sale less the exercise price per share of Stock of such Option to acquire Stock by (2) the number of shares of Stock represented by such Option; and (iii) to the extent the Option is not exercised prior to or simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed in connection with the Securities Purchase Agreement dated February 25, 1997 among the Company, Atlantic Restaurants, Inc., Bahrain International Bank (E.C.), Madison Dearborn Capital Partners, L.P., and Madison Dearborn Capital Partners II, L.P. (the "Stockholders Agreement").
3. Expiration of Option. Notwithstanding anything contained herein to the contrary, this Option may not be exercised to any extent by Optionee after the tenth anniversary of the Date of Grant.
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary of the Company of an executed written notice (the "Notice"), or such other form as may be required by the Committee which shall set forth Optionee's election to exercise this Option, the number of Shares being purchased and such other representations and agreements regarding Optionee's investment intent and access to information as may be required by the Committee to comply with applicable securities laws.
(b) Such Notice shall be accompanied by full payment of the
Exercise Price, if any, for the Shares being purchased (i) in cash (including
check, bank draft or money order); (ii) where approved by the Committee in its
sole discretion, by surrender of Shares of the Company owned by the Optionee
having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a
promissory note to the Company that is either (A) unsecured and fully recourse
against the Optionee or (B) nonrecourse but secured by the Shares being
purchased by such exercise and by other assets having a Fair Market Value equal
to not less than forty (40) percent of the Exercise Price (a "Nonrecourse Note")
and, in either event, such note shall mature on the fifth anniversary date
thereof and shall bear interest, payable quarterly, at the Federal mid-term rate
provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended;
(iv) by any combination of the foregoing, or any other method, where approved by
the Committee in writing in its sole discretion; or (v) by any other means
approved by the Committee. The terms of a Nonrecourse Note shall provide that:
(i) any dividends received on Stock securing a Nonrecourse Note shall be applied
toward payment of the principal and accrued interest of the Nonrecourse Note;
and (ii) the Nonrecourse Note shall become immediately due and payable upon the
sale of Stock securing the Nonrecourse Note and the proceeds shall be applied to
the payment of the unpaid principal balance and accrued interest of the
Nonrecourse Note. For purposes of this Agreement, "Fair Market Value" as of any
date (i) of Shares shall be deemed to equal: (A) if the Shares are publicly
traded, the average of the last reported sales price of such Shares for ten (10)
consecutive trading days as officially reported on the principal trading market
on which such Shares are traded ending on the second trading day prior to the
date of determination, or (B) if the Shares are not publicly traded, the value
of a Share as determined in good faith by the Committee or the Board of
Directors of the Company on the advice of its independent auditors; and (ii) of
assets other than Shares shall equal such value as determined by the Committee
in its sole discretion.
(c) Prior to the issuance of the Shares upon exercise of this Option, Optionee must pay or, in a manner acceptable to the Committee, make adequate provision to pay, any applicable federal, state or local withholding obligations as determined by the Committee in accordance with applicable law.
(d) Promptly after receipt of any Notice and payment as provided above, the Company shall issue the number of Shares set forth in such Notice, registered in the name of the Optionee, the Optionee and the Optionee's spouse, or the Optionee's legal representative.
(e) Any exercisable portion of this Option may be exercised in whole or in part at any time prior to the time when this Option becomes unexercisable under Paragraph 3 of this Agreement; provided, however, that any partial exercise shall be for whole Shares only.
(f) This Option may not be exercised unless such exercise is in compliance with the Securities Act of 1933, as amended, and all applicable state securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock shall consent to and raise no objections against the Approved Sale of the Company, and if the Approved Sale of the Company is structured as a sale of capital stock, the holders of Stock shall agree to sell their shares of Stock on the terms and conditions approved by the Board and the holders of a majority of the Company's Stock. The holders of Stock shall take all necessary and desirable actions in connection with the consummation of the Approved Sale of the Company. Notwithstanding the foregoing, in the event that the consideration to be received by the holders of Stock in connection with the Approved Sale shall include either (a) shares of common stock of a class which is not listed on a national securities exchange or in the NASDAQ system and which is not entitled to registration rights for sale in a registered public offering under the Securities Act of 1933 or (b) shares of senior equity securities which do not provide for a scheduled redemption or a redemption at the option of the holders thereof, such holders shall not be required to sell their shares of Stock pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the Approved Sale of the Company is subject to the satisfaction of the condition that, upon the consummation of the Approved Sale, all of the holders of Stock receive the same form and amount of consideration per share of Stock, or if any holders of Stock are given an option as to the form and amount of consideration to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Stock shall at the request of the Company, appoint a "purchaser representative" (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Stock appoints a purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative. However, if any holder of Stock declines to appoint the purchaser representative designated by the Company, such holder shall appoint another purchaser representative (reasonably acceptable to the Company), and such holder shall be responsible for the fees of the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall bear their pro-rata share (based upon the number of shares sold) of the costs of any sale of Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Stock and are not otherwise paid by the Company or the acquiring party. Costs incurred by Participants and the other holders of Stock on their own behalf shall not be considered costs of the transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party" shall mean any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a "5% Owner"); who is not controlling, controlled by or under control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons; "Person" shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof; "Qualified Public Offering" shall mean the sale in an underwritten public offering registered under the Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate gross proceeds to the Company of at least $50 million and a price per share of not less than $108.2353 (as such amount is equitably adjusted for subsequent stock splits, stock dividends and recapitalizations); and "Sale of the Company" shall mean the sale of the Company to an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all the Company's assets determined on a consolidated basis.
6. Compliance with Laws and Regulations. The issuance and transfer of Shares shall be subject to compliance by the Company and the Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company's shares may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the Securities and Exchange Commission, any state securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. Except as may otherwise be determined by the Company, this Option may not be sold, transferred, assigned or otherwise alienated or hypothecated by the Optionee, other than by will or by the laws of descent and distribution, and shall be exercisable during the Optionee's lifetime only by the Optionee or the Optionee's legal representative. The Optionee may, if permitted by state law or the rules and regulations governing any exchange on which the Company's Shares are traded, transfer the Option, without payment of consideration, to a member of the Optionee's immediate family or to a trust or partnership whose
beneficiaries are members of the Optionee's immediate family. For purposes of this Paragraph, the term "immediate family" shall include the Optionee's spouse, children and grandchildren. Any attempt at assignment, transfer, pledge or disposition of the Option contrary to the provisions hereof or the levy of any execution, attachment or similar process upon the Option other than as expressly permitted in this Paragraph 7 shall be null and void and without effect.
8. Rights as Stockholder. Other than as provided herein, the holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company with respect to any Shares purchasable upon the exercise of the Option or any portion thereof, unless and until certificates representing such Shares shall have been issued by the Company to such holder.
9. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Shares in connection with the exercise of this Option, the Company shall have the right to (a) require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Shares, or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities.
10. Administration. The Committee shall have the power to interpret this Agreement. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to this Agreement or the Option.
11. Notice. Any notice to be given under the terms of this Agreement to the Committee shall be addressed to the Committee, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Paragraph 11, either party may hereafter designate a different address for notices to be delivered. Any notice which is required to be given to the Optionee shall, if the Optionee is deceased, be given to the Optionee's personal representative. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
12. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Optionee to the Committee for its review. The resolution of such dispute by the Committee shall be final and binding on the Company and on the Optionee.
13. Entire Agreement. This Agreement and the Notice constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof.
14. Dividends.
(a) In the event that the Company declares a dividend with respect to any Shares subject to a vested portion of the Option, the Company shall mail to Optionee a written notice at least ten (10) days prior to the record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any unvested Options shall be reduced by the amount of any dividends that the Optionee would have received had the Optionee held the Shares subject to the Option on the record date with respect to such dividend, and in the event that the aggregate dividends declared on such Shares exceeds the aggregate Exercise Price of the Option, the amount of such excess, if any, shall be deposited in an interest bearing bank account established by the Committee in the name of the Optionee. Any amount held in an interest bearing bank account established under this Paragraph 14(b), or the pro rata portion thereof in the event of a partial exercise of this Option, shall be paid to the Optionee upon exercise of all or, if relevant, a portion of the Option.
15. Adjustments. In the event of a reclassification, recapitalization, merger, consolidation, reorganization, stock dividends, stock split or reverse stock split, including, without limitation, a distribution of the stock of a Subsidiary, combination or exchange of shares, the Committee shall determine, in its discretion, the appropriate adjustments, if any, to the number of Shares which may be issued under this Option and the exercise price of this Option.
16. Amendment and Termination.
(a) The Committee shall have the authority to make such amendments to the Option provided that no such action shall modify the Option in a manner adverse to Optionee without Optionee's consent.
(b) The Committee may terminate, amend or modify the Option at any time and from time to time; provided, however, that an amendment which requires stockholder approval in order for the Plan to continue to comply with Rule 16b-3, Section 162(m) of the Code or any other law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of stockholders. The termination, amendment or modification of the Option may be in response to changes in the Code, the Exchange Act, national securities exchange regulations or for other reasons deemed appropriate by the Committee.
17. Successors. The terms of the Option shall be binding upon the Company and its successors and assigns.
18. Requirements of Law.
(a) In the event any provision of the Option shall be held illegal or invalid for any reason, the illegality or invalidity shall not effect the remaining parts of the Option, and the Option shall be construed and enforced as if the illegal or invalid provision had not been included.
(b) To the extent that federal laws do not otherwise control, the Option shall be construed in accordance with and governed by the laws of the State of New York.
CARROLS HOLDINGS CORPORATION
ACCEPTED AND AGREED TO:
Exhibit A
to Carrols Holdings Corporation
Unvested Stock Option Agreement
of Alan Vituli
Definitions. As used in this Agreement, the following terms shall have the following meanings:
"Cause" means, except as may otherwise be provided in a Participant's employment agreement (if any) or in the Award Agreement, (i) the commission by the Participant of a felony; (ii) the unauthorized disclosure of confidential proprietary information of the Company or any Subsidiary which disclosure the Participant knows or reasonably should have known would be reasonably likely to result in material damage to the Company or Subsidiary; (iii) the breach by the Participant of any material provision of the Participant's employment agreement (if any), which breach, if curable, is not remedied within thirty (30) days after the Participant's receipt of written notice thereof provided, however, that the Company need not permit the Participant to cure any breach which has been the subject of a prior written notice; (iv) the engagement in material self dealing in breach of fiduciary duties with respect to the assets or properties of the Company or Subsidiary unless disclosed to and approved by the disinterested members of the Board of Directors; (v) an act of gross misconduct in connection with the Participant's duties under his employment agreement (if any); or (vi) chronic alcohol or drug abuse rendering Participant incapable of carrying out his duties as determined in good faith by the Committee continuing after the Participant is given a reasonable opportunity to obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a Subsidiary to comply with the provisions of the Participant's employment agreement, if any, which failure shall not cease promptly and in no event more than thirty (30) days after receipt by the Company or, where appropriate, a Subsidiary of written notice from the Participant objecting to such conduct; (ii) any termination by the Company or Subsidiary of the Participant's employment other than as expressly permitted in the Participant's employment agreement, if any; or (iii) the assignment to Participant of duties and responsibilities materially inconsistent with those duties and responsibilities customarily assigned to individuals holding positions similar to that of the Participant at a company of comparable size to the Company or Subsidiary or the substantial reduction by the Company or Subsidiary of Participant's duties and responsibilities and, if curable, not remedied by the Company or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to physical or mental disability to perform all of his duties with the Company or Subsidiary pursuant to his employment agreement, if any, for a period of six (6) successive months, or an aggregate of six (6) months in any twelve (12) month period, as determined by the Committee upon the basis of such evidence, including but not limited to independent medical reports and data, as the Committee deems appropriate or necessary.
EXHIBIT B2
CARROLS HOLDINGS CORPORATION
UNVESTED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ___________, 1997 (the "Date of Grant") is made by and between Carrols Holdings Corporation, a Delaware corporation (hereinafter called the "Company") and Daniel T. Accordino, an employee of the Company (hereinafter referred to as the "Optionee"). Unless otherwise defined herein or on Exhibit A hereto, which is incorporated herein by reference, all capitalized terms used herein shall have the meanings assigned to such terms in the Carrols Holdings Corporation 1996 Long-Term Incentive Plan as amended from time to time (the "Plan"); provided, however, that the Option granted hereunder is not subject to or granted under the Plan.
1. Grant and Approval of Option. The Company hereby grants to the Optionee a nonqualified stock option (the "Option") to purchase all or any part of the aggregate of 2,579 shares of its $.01 par value common stock (the "Shares"), subject to all of the terms and conditions of this agreement (the "Agreement").
2. Exercise Price and Period of Option; Acceleration of Vesting.
(a) Effective as of the closing of the Stock Purchase Agreement (the "Closing") and subject to the terms and conditions of this Agreement, this Option shall become exercisable at an exercise price per share (the "Exercise Price") of $101.7646 as follows: (i) 516 Shares will become exercisable on the first anniversary date of the Closing; (ii) 516 Shares will become exercisable on the second anniversary date of the Closing; (iii) 516 Shares will become exercisable on the third anniversary date of the Closing; (iv) 516 Shares will become exercisable on the fourth anniversary date of the Closing; and (v) the remaining 515 Shares will become exercisable on the fifth anniversary date of the Closing.
(b) Except as otherwise provided by the Committee, if Optionee's employment with the Company terminates:
(i) for Good Reason or without Cause, the portion of the Option which is not vested and exercisable on the date on which Optionee ceases to be an employee shall vest and become immediately exercisable in full and shall continue to be exercisable until the date of expiration of the Option pursuant to Paragraph 3 of this Agreement;
(ii) on account of death or Permanent Disability, Optionee shall (A) have the right to purchase such additional Shares to which the Optionee would have been entitled had his
employment continued through the first anniversary date of the Closing following Optionee's date of termination of employment on account of death or Permanent Disability (the "Termination Date") and (B) have the right to purchase such additional Shares equal to the product of (x) the number of shares which would have become exercisable on the second anniversary date of the Closing following the Termination Date multiplied by (y) a fraction where the numerator equals the number of days elapsed since the anniversary date of the Closing preceding the Termination Date and the denominator equals 365 days. In the event of Optionee's death or Permanent Disability, all vested and exercisable Options (including Options that become vested and exercisable under this paragraph 2(b)(ii)) shall continue to be exercisable until the date of expiration of the Option pursuant to Paragraph 3 of this Agreement;
(iii) without Good Reason, the portion of the Option that is not vested and exercisable on the date on which Optionee ceases to be an employee shall terminate and any vested Options shall only be exercisable for a period of forty-five (45) days after the Optionee's date of termination of employment without Good Reason; and
(iv) for Cause, the portion of the Option that is not vested and exercisable shall terminate and any vested Options shall be forfeited on the date the Company delivers notice of termination of employment for Cause to the Optionee.
(c) In the event of a Change of Control during the term of the Optionee's employment with Carrols Corporation, the portion of the Option that is not vested shall vest and become exercisable in full on the date of such Change of Control. As soon as practicable but in no event later than thirty (30) days prior to the occurrence of a Change of Control, the Committee shall notify the Optionee of such Change of Control. Upon a Change of Control that qualifies as an Approved Sale (as defined in Paragraph 5) in which the outstanding common stock of the Company is converted or exchanged for or becomes a right to receive any cash, property or securities other than Illiquid Consideration (as defined in Paragraph 5), (i) the Option shall become exercisable solely for the amount of such cash, property or securities that the Optionee would have been entitled to had the Option been exercised immediately prior to such event (ii) the Optionee shall be given an opportunity to either (A) exercise the Option prior to the consummation of the Approved Sale and participate in such sale as holders of Stock or (B) upon consummation of the Approved Sale, receive in exchange for such Option consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of Stock received by the holders of Stock in connection with the Approved Sale less the exercise price per share of Stock of such Option to acquire Stock by (2) the number of shares of Stock represented by such Option; and (iii) to the extent the Option is not exercised prior to or simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed in connection with the Securities Purchase Agreement dated February 25, 1997 among the Company, Atlantic Restaurants, Inc., Bahrain International Bank (E.C.), Madison Dearborn Capital Partners, L.P., and Madison Dearborn Capital Partners II, L.P. (the "Stockholders Agreement").
3. Expiration of Option. Notwithstanding anything contained herein to the contrary, this Option may not be exercised to any extent by Optionee after the tenth anniversary of the Date of Grant.
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary of the Company of an executed written notice (the "Notice"), or such other form as may be required by the Committee which shall set forth Optionee's election to exercise this Option, the number of Shares being purchased and such other representations and agreements regarding Optionee's investment intent and access to information as may be required by the Committee to comply with applicable securities laws.
(b) Such Notice shall be accompanied by full payment of the
Exercise Price, if any, for the Shares being purchased (i) in cash (including
check, bank draft or money order); (ii) where approved by the Committee in its
sole discretion, by surrender of Shares of the Company owned by the Optionee
having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a
promissory note to the Company that is either (A) unsecured and fully recourse
against the Optionee or (B) nonrecourse but secured by the Shares being
purchased by such exercise and by other assets having a Fair Market Value equal
to not less than forty (40) percent of the Exercise Price (a "Nonrecourse Note")
and, in either event, such note shall mature on the fifth anniversary date
thereof and shall bear interest, payable quarterly, at the Federal mid-term rate
provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended;
(iv) by any combination of the foregoing, or any other method, where approved by
the Committee in writing in its sole discretion; or (v) by any other means
approved by the Committee. The terms of a Nonrecourse Note shall provide that:
(i) any dividends received on Stock securing a Nonrecourse Note shall be applied
toward payment of the principal and accrued interest of the Nonrecourse Note;
and (ii) the Nonrecourse Note shall become immediately due and payable upon the
sale of Stock securing the Nonrecourse Note and the proceeds shall be applied to
the payment of the unpaid principal balance and accrued interest of the
Nonrecourse Note. For purposes of this Agreement, "Fair Market Value" as of any
date (i) of Shares shall be deemed to equal: (A) if the Shares are publicly
traded, the average of the last reported sales price of such Shares for ten (10)
consecutive trading days as officially reported on the principal trading market
on which such Shares are traded ending on the second trading day prior to the
date of determination, or (B) if the Shares are not publicly traded, the value
of a Share as determined in good faith by the Committee or the Board of
Directors of the Company on the advice of its independent auditors; and (ii) of
assets other than Shares shall equal such value as determined by the Committee
in its sole discretion.
(c) Prior to the issuance of the Shares upon exercise of this Option, Optionee must pay or, in a manner acceptable to the Committee, make adequate provision to pay, any applicable federal, state or local withholding obligations as determined by the Committee in accordance with applicable law.
(d) Promptly after receipt of any Notice and payment as provided above, the Company shall issue the number of Shares set forth in such Notice, registered in the name of the Optionee, the Optionee and the Optionee's spouse, or the Optionee's legal representative.
(e) Any exercisable portion of this Option may be exercised in whole or in part at any time prior to the time when this Option becomes unexercisable under Paragraph 3 of this Agreement; provided, however, that any partial exercise shall be for whole Shares only.
(f) This Option may not be exercised unless such exercise is in compliance with the Securities Act of 1933, as amended, and all applicable state securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock shall consent to and raise no objections against the Approved Sale of the Company, and if the Approved Sale of the Company is structured as a sale of capital stock, the holders of Stock shall agree to sell their shares of Stock on the terms and conditions approved by the Board and the holders of a majority of the Company's Stock. The holders of Stock shall take all necessary and desirable actions in connection with the consummation of the Approved Sale of the Company. Notwithstanding the foregoing, in the event that the consideration to be received by the holders of Stock in connection with the Approved Sale shall include either (a) shares of common stock of a class which is not listed on a national securities exchange or in the NASDAQ system and which is not entitled to registration rights for sale in a registered public offering under the Securities Act of 1933 or (b) shares of senior equity securities which do not provide for a scheduled redemption or a redemption at the option of the holders thereof, such holders shall not be required to sell their shares of Stock pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the Approved Sale of the Company is subject to the satisfaction of the condition that, upon the consummation of the Approved Sale, all of the holders of Stock receive the same form and amount of consideration per share of Stock, or if any holders of Stock are given an option as to the form and amount of consideration to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Stock shall at the request of the Company, appoint a "purchaser representative" (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Stock appoints a purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative. However, if any holder of Stock declines to appoint the purchaser representative designated by the Company, such holder shall appoint another purchaser representative
(reasonably acceptable to the Company), and such holder shall be responsible for the fees of the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall bear their pro-rata share (based upon the number of shares sold) of the costs of any sale of Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Stock and are not otherwise paid by the Company or the acquiring party. Costs incurred by Participants and the other holders of Stock on their own behalf shall not be considered costs of the transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party" shall mean any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a "5% Owner"); who is not controlling, controlled by or under control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons; "Person" shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof; "Qualified Public Offering" shall mean the sale in an underwritten public offering registered under the Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate gross proceeds to the Company of at least $50 million and a price per share of not less than $108.2353 (as such amount is equitably adjusted for subsequent stock splits, stock dividends and recapitalizations); and "Sale of the Company" shall mean the sale of the Company to an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all the Company's assets determined on a consolidated basis.
6. Compliance with Laws and Regulations. The issuance and transfer of Shares shall be subject to compliance by the Company and the Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company's shares may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the Securities and Exchange Commission, any state securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. Except as may otherwise be determined by the Company, this Option may not be sold, transferred, assigned or otherwise alienated or
hypothecated by the Optionee, other than by will or by the laws of descent and distribution, and shall be exercisable during the Optionee's lifetime only by the Optionee or the Optionee's legal representative. The Optionee may, if permitted by state law or the rules and regulations governing any exchange on which the Company's Shares are traded, transfer the Option, without payment of consideration, to a member of the Optionee's immediate family or to a trust or partnership whose beneficiaries are members of the Optionee's immediate family. For purposes of this Paragraph, the term "immediate family" shall include the Optionee's spouse, children and grandchildren. Any attempt at assignment, transfer, pledge or disposition of the Option contrary to the provisions hereof or the levy of any execution, attachment or similar process upon the Option other than as expressly permitted in this Paragraph 7 shall be null and void and without effect.
8. Rights as Stockholder. Other than as provided herein, the holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company with respect to any Shares purchasable upon the exercise of the Option or any portion thereof, unless and until certificates representing such Shares shall have been issued by the Company to such holder.
9. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Shares in connection with the exercise of this Option, the Company shall have the right to (a) require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Shares, or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities.
10. Administration. The Committee shall have the power to interpret this Agreement. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to this Agreement or the Option.
11. Notice. Any notice to be given under the terms of this Agreement to the Committee shall be addressed to the Committee, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Paragraph 11, either party may hereafter designate a different address for notices to be delivered. Any notice which is required to be given to the Optionee shall, if the Optionee is deceased, be given to the Optionee's personal representative. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
12. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Optionee to the Committee for its review. The resolution of such dispute by the Committee shall be final and binding on the Company and on the Optionee.
13. Entire Agreement. This Agreement and the Notice constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof.
14. Dividends.
(a) In the event that the Company declares a dividend with respect to any Shares subject to a vested portion of the Option, the Company shall mail to Optionee a written notice at least ten (10) days prior to the record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any unvested Options shall be reduced by the amount of any dividends that the Optionee would have received had the Optionee held the Shares subject to the Option on the record date with respect to such dividend, and in the event that the aggregate dividends declared on such Shares exceeds the aggregate Exercise Price of the Option, the amount of such excess, if any, shall be deposited in an interest bearing bank account established by the Committee in the name of the Optionee. Any amount held in an interest bearing bank account established under this Paragraph 14(b), or the pro rata portion thereof in the event of a partial exercise of this Option, shall be paid to the Optionee upon exercise of all or, if relevant, a portion of the Option.
15. Adjustments. In the event of a reclassification, recapitalization, merger, consolidation, reorganization, stock dividends, stock split or reverse stock split, including, without limitation, a distribution of the stock of a Subsidiary, combination or exchange of shares, the Committee shall determine, in its discretion, the appropriate adjustments, if any, to the number of Shares which may be issued under this Option and the exercise price of this Option.
16. Amendment and Termination.
(a) The Committee shall have the authority to make such amendments to the Option provided that no such action shall modify the Option in a manner adverse to Optionee without Optionee's consent.
(b) The Committee may terminate, amend or modify the Option at any time and from time to time; provided, however, that an amendment which requires stockholder approval in order for the Plan to continue to comply with Rule 16b-3, Section 162(m) of the Code or any other law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of stockholders. The termination, amendment or modification of the Option may be in response to changes in the Code, the Exchange Act, national securities exchange regulations or for other reasons deemed appropriate by the Committee.
17. Successors. The terms of the Option shall be binding upon the Company and its successors and assigns.
18. Requirements of Law.
(a) In the event any provision of the Option shall be held illegal or invalid for any reason, the illegality or invalidity shall not effect the remaining parts of the Option, and the Option shall be construed and enforced as if the illegal or invalid provision had not been included.
(b) To the extent that federal laws do not otherwise control, the Option shall be construed in accordance with and governed by the laws of the State of New York.
CARROLS HOLDINGS CORPORATION
ACCEPTED AND AGREED TO:
Exhibit A
to Carrols Holdings Corporation
Unvested Stock Option Agreement
of Daniel T. Accordino
Definitions. As used in this Agreement, the following terms shall have the following meanings:
"Cause" means, except as may otherwise be provided in a Participant's employment agreement (if any) or in the Award Agreement, (i) the commission by the Participant of a felony; (ii) the unauthorized disclosure of confidential proprietary information of the Company or any Subsidiary which disclosure the Participant knows or reasonably should have known would be reasonably likely to result in material damage to the Company or Subsidiary; (iii) the breach by the Participant of any material provision of the Participant's employment agreement (if any), which breach, if curable, is not remedied within thirty (30) days after the Participant's receipt of written notice thereof provided, however, that the Company need not permit the Participant to cure any breach which has been the subject of a prior written notice; (iv) the engagement in material self dealing in breach of fiduciary duties with respect to the assets or properties of the Company or Subsidiary unless disclosed to and approved by the disinterested members of the Board of Directors; (v) an act of gross misconduct in connection with the Participant's duties under his employment agreement (if any); or (vi) chronic alcohol or drug abuse rendering Participant incapable of carrying out his duties as determined in good faith by the Committee continuing after the Participant is given a reasonable opportunity to obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a Subsidiary to comply with the provisions of the Participant's employment agreement, if any, which failure shall not cease promptly and in no event more than thirty (30) days after receipt by the Company or, where appropriate, a Subsidiary of written notice from the Participant objecting to such conduct; (ii) any termination by the Company or Subsidiary of the Participant's employment other than as expressly permitted in the Participant's employment agreement, if any; or (iii) the assignment to Participant of duties and responsibilities materially inconsistent with those duties and responsibilities customarily assigned to individuals holding positions similar to that of the Participant at a company of comparable size to the Company or Subsidiary or the substantial reduction by the Company or Subsidiary of Participant's duties and responsibilities and, if curable, not remedied by the Company or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to physical or mental disability to perform all of his duties with the Company or Subsidiary pursuant to his employment agreement, if any, for a period of six (6) successive months, or an aggregate of six (6) months in any twelve (12) month period, as determined by the Committee upon the basis of such evidence, including but not limited to independent medical reports and data, as the Committee deems appropriate or necessary.
EXHIBIT B3
CARROLS HOLDINGS CORPORATION
UNVESTED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ___________, 1997 (the "Date of Grant") is made by and between Carrols Holdings Corporation, a Delaware corporation (hereinafter called the "Company") and Joseph A. Zirkman, an employee of the Company (hereinafter referred to as the "Optionee"). Unless otherwise defined herein or on Exhibit A hereto, which is incorporated herein by reference, all capitalized terms used herein shall have the meanings assigned to such terms in the Carrols Holdings Corporation 1996 Long-Term Incentive Plan, as amended from time to time (the "Plan"); provided, however, that the Option granted hereunder is not subject to or granted under the Plan.
1. Grant and Approval of Option. The Company hereby grants to the Optionee a nonqualified stock option (the "Option") to purchase all or any part of the aggregate of 368 shares of its $.01 par value common stock (the "Shares"), subject to all of the terms and conditions of this agreement (the "Agreement").
2. Exercise Price and Period of Option; Acceleration of Vesting.
(a) Effective as of the closing of the Stock Purchase Agreement (the "Closing") and subject to the terms and conditions of this Agreement, this Option shall become exercisable at an exercise price per share (the "Exercise Price") of $101.7646 as follows: (i) 74 Shares will become exercisable on the first anniversary date of the Closing; (ii) 74 Shares will become exercisable on the second anniversary date of the Closing; (iii) 74 Shares will become exercisable on the third anniversary date of the Closing; (iv) 73 Shares will become exercisable on the fourth anniversary date of the Closing; and (v) the remaining 73 Shares will become exercisable on the fifth anniversary date of the Closing.
(b) Except as otherwise provided by the Committee, if Optionee's employment with the Company terminates:
(i) for Good Reason or without Cause, the portion of the Option which is not vested and exercisable on the date on which Optionee ceases to be an employee shall vest and become immediately exercisable in full and shall continue to be exercisable until the date of expiration of the Option pursuant to Paragraph 3 of this Agreement;
(ii) on account of death or Permanent Disability, Optionee shall (A) have the right to purchase such additional Shares to which the Optionee would have been entitled had his employment continued through the first anniversary date of the Closing following Optionee's date of termination of employment on account of death or Permanent Disability (the "Termination Date") and (B) have the right to purchase such additional Shares equal to the product of (x) the number of shares which would have become exercisable on the second anniversary date of the
Closing following the Termination Date multiplied by (y) a fraction where the numerator equals the number of days elapsed since the anniversary date of the Closing preceding the Termination Date and the denominator equals 365 days. In the event of Optionee's death or Permanent Disability, all vested and exercisable Options (including Options that become vested and exercisable under this paragraph 2(b)(ii)) shall continue to be exercisable until the date of expiration of the Option pursuant to Paragraph 3 of this Agreement;
(iii) without Good Reason, the portion of the Option that is not vested and exercisable on the date on which Optionee ceases to be an employee shall terminate and any vested Options shall only be exercisable for a period of forty-five (45) days after the Optionee's date of termination of employment without Good Reason; and
(iv) for Cause, the portion of the Option that is not vested and exercisable shall terminate and any vested Options shall be forfeited on the date the Company delivers notice of termination of employment for Cause to the Optionee.
(c) In the event of a Change of Control during the term of the Optionee's employment with Carrols Corporation, the portion of the Option that is not vested shall vest and become exercisable in full on the date of such Change of Control. As soon as practicable but in no event later than thirty (30) days prior to the occurrence of a Change of Control, the Committee shall notify the Optionee of such Change of Control. Upon a Change of Control that qualifies as an Approved Sale (as defined in Paragraph 5) in which the outstanding common stock of the Company is converted or exchanged for or becomes a right to receive any cash, property or securities other than Illiquid Consideration (as defined in Paragraph 5), (i) the Option shall become exercisable solely for the amount of such cash, property or securities that the Optionee would have been entitled to had the Option been exercised immediately prior to such event (ii) the Optionee shall be given an opportunity to either (A) exercise the Option prior to the consummation of the Approved Sale and participate in such sale as holders of Stock or (B) upon consummation of the Approved Sale, receive in exchange for such Option consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of Stock received by the holders of Stock in connection with the Approved Sale less the exercise price per share of Stock of such Option to acquire Stock by (2) the number of shares of Stock represented by such Option; and (iii) to the extent the Option is not exercised prior to or simultaneous with such Approved Sale, the Option shall be canceled.
(d) The Shares are subject to the Stockholders Agreement executed in connection with the Securities Purchase Agreement dated February 25, 1997 among the Company, Atlantic Restaurants, Inc., Bahrain International Bank (E.C.), Madison Dearborn Capital Partners, L.P., and Madison Dearborn Capital Partners II, L.P. (the "Stockholders Agreement").
3. Expiration of Option. Notwithstanding anything contained herein to the contrary, this Option may not be exercised to any extent by Optionee after the tenth anniversary of the Date of Grant.
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Secretary of the Company of an executed written notice (the "Notice"), or such other form as may be required by the Committee which shall set forth Optionee's election to exercise this Option, the number of Shares being purchased and such other representations and agreements regarding Optionee's investment intent and access to information as may be required by the Committee to comply with applicable securities laws.
(b) Such Notice shall be accompanied by full payment of the
Exercise Price, if any, for the Shares being purchased (i) in cash (including
check, bank draft or money order); (ii) where approved by the Committee in its
sole discretion, by surrender of Shares of the Company owned by the Optionee
having a Fair Market Value equal to the Exercise Price; (iii) by delivery of a
promissory note to the Company that is either (A) unsecured and fully recourse
against the Optionee or (B) nonrecourse but secured by the Shares being
purchased by such exercise and by other assets having a Fair Market Value equal
to not less than forty (40) percent of the Exercise Price (a "Nonrecourse Note")
and, in either event, such note shall mature on the fifth anniversary date
thereof and shall bear interest, payable quarterly, at the Federal mid-term rate
provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended;
(iv) by any combination of the foregoing, or any other method, where approved by
the Committee in writing in its sole discretion ; or (v) by any other means
approved by the Committee. The terms of a Nonrecourse Note shall provide that:
(i) any dividends received on Stock securing a Nonrecourse Note shall be applied
toward payment of the principal and accrued interest of the Nonrecourse Note;
and (ii) the Nonrecourse Note shall become immediately due and payable upon the
sale of Stock securing the Nonrecourse Note and the proceeds shall be applied to
the payment of the unpaid principal balance and accrued interest of the
Nonrecourse Note. For purposes of this Agreement, "Fair Market Value" as of any
date (i) of Shares shall be deemed to equal: (A) if the Shares are publicly
traded, the average of the last reported sales price of such Shares for ten (10)
consecutive trading days as officially reported on the principal trading market
on which such Shares are traded ending on the second trading day prior to the
date of determination, or (B) if the Shares are not publicly traded, the value
of a Share as determined in good faith by the Committee or the Board of
Directors of the Company on the advice of its independent auditors; and (ii) of
assets other than Shares shall equal such value as determined by the Committee
in its sole discretion.
(c) Prior to the issuance of the Shares upon exercise of this Option, Optionee must pay or, in a manner acceptable to the Committee, make adequate provision to pay, any applicable federal, state or local withholding obligations as determined by the Committee in accordance with applicable law.
(d) Promptly after receipt of any Notice and payment as provided above, the Company shall issue the number of Shares set forth in such Notice, registered in the name of the Optionee, the Optionee and the Optionee's spouse, or the Optionee's legal representative.
(e) Any exercisable portion of this Option may be exercised in whole or in part at any time prior to the time when this Option becomes unexercisable under Paragraph 3 of this Agreement; provided, however, that any partial exercise shall be for whole Shares only.
(f) This Option may not be exercised unless such exercise is in compliance with the Securities Act of 1933, as amended, and all applicable state securities laws, as they are in effect on the date of exercise.
5. Sale of the Company
(a) If the Board and the holders of a majority of the Company's Stock approve a Sale of the Company (the "Approved Sale"), the holders of Stock shall consent to and raise no objections against the Approved Sale of the Company, and if the Approved Sale of the Company is structured as a sale of capital stock, the holders of Stock shall agree to sell their shares of Stock on the terms and conditions approved by the Board and the holders of a majority of the Company's Stock. The holders of Stock shall take all necessary and desirable actions in connection with the consummation of the Approved Sale of the Company. Notwithstanding the foregoing, in the event that the consideration to be received by the holders of Stock in connection with the Approved Sale shall include either (a) shares of common stock of a class which is not listed on a national securities exchange or in the NASDAQ system and which is not entitled to registration rights for sale in a registered public offering under the Securities Act of 1933 or (b) shares of senior equity securities which do not provide for a scheduled redemption or a redemption at the option of the holders thereof, such holders shall not be required to sell their shares of Stock pursuant to this Paragraph 5(a) (collectively, the "Illiquid Consideration").
(b) The obligations of the holders of Stock with respect to the Approved Sale of the Company is subject to the satisfaction of the condition that, upon the consummation of the Approved Sale, all of the holders of Stock receive the same form and amount of consideration per share of Stock, or if any holders of Stock are given an option as to the form and amount of consideration to be received, all holders be given the same option.
(c) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Stock shall at the request of the Company, appoint a "purchaser representative" (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Stock appoints a purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative. However, if any holder of Stock declines to appoint the purchaser representative designated by the Company, such holder shall appoint another purchaser representative (reasonably acceptable to the Company), and such holder shall be responsible for the fees of the purchaser representative so appointed.
(d) Participants and the other holders of Stock (if any) shall bear their pro-rata share (based upon the number of shares sold) of the costs of any sale of Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Stock and are not otherwise paid by the Company or the acquiring party. Costs incurred by Participants and
the other holders of Stock on their own behalf shall not be considered costs of the transaction hereunder.
(e) The provisions of this Paragraph 5 shall terminate upon the completion of a Qualified Public Offering.
(f) For purposes of this Paragraph 5, "Independent Third Party" shall mean any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Stock on a fully-diluted basis (a "5% Owner"); who is not controlling, controlled by or under control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons; "Person" shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof; "Qualified Public Offering" shall mean the sale in an underwritten public offering registered under the Securities Act of 1933 of Shares of the Company's Stock resulting in aggregate gross proceeds to the Company of at least $50 million and a price per share of not less than $108.2353 (as such amount is equitably adjusted for subsequent stock splits, stock dividends and recapitalizations); and "Sale of the Company" shall mean the sale of the Company to an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all the Company's assets determined on a consolidated basis.
6. Compliance with Laws and Regulations. The issuance and transfer of Shares shall be subject to compliance by the Company and the Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company's shares may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the Securities and Exchange Commission, any state securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. Except as may otherwise be determined by the Company, this Option may not be sold, transferred, assigned or otherwise alienated or hypothecated by the Optionee, other than by will or by the laws of descent and distribution, and shall be exercisable during the Optionee's lifetime only by the Optionee or the Optionee's legal representative. The Optionee may, if permitted by state law or the rules and regulations governing any exchange on which the Company's Shares are traded, transfer the Option, without payment of consideration, to a member of the Optionee's immediate family or to a trust or partnership whose beneficiaries are members of the Optionee's immediate family. For purposes of this Paragraph, the term "immediate family" shall include the Optionee's spouse, children and grandchildren. Any attempt at assignment, transfer, pledge or disposition of the Option contrary to the provisions hereof
or the levy of any execution, attachment or similar process upon the Option other than as expressly permitted in this Paragraph 7 shall be null and void and without effect.
8. Rights as Stockholder. Other than as provided herein, the holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company with respect to any Shares purchasable upon the exercise of the Option or any portion thereof, unless and until certificates representing such Shares shall have been issued by the Company to such holder.
9. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Shares in connection with the exercise of this Option, the Company shall have the right to (a) require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Shares, or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities.
10. Administration. The Committee shall have the power to interpret this Agreement. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to this Agreement or the Option.
11. Notice. Any notice to be given under the terms of this Agreement to the Committee shall be addressed to the Committee, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Paragraph 11, either party may hereafter designate a different address for notices to be delivered. Any notice which is required to be given to the Optionee shall, if the Optionee is deceased, be given to the Optionee's personal representative. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
12. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Optionee to the Committee for its review. The resolution of such dispute by the Committee shall be final and binding on the Company and on the Optionee.
13. Entire Agreement. This Agreement and the Notice constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof.
14. Dividends.
(a) In the event that the Company declares a dividend with respect to any Shares subject to a vested portion of the Option, the Company shall mail to Optionee a written notice at least ten (10) days prior to the record date for such dividends.
(b) On any dividend payment date, the Exercise Price of any unvested Options shall be reduced by the amount of any dividends that the Optionee would have received had the Optionee held the Shares subject to the Option on the record date with respect to such dividend, and in the event that the aggregate dividends declared on such Shares exceeds the aggregate Exercise Price of the Option, the amount of such excess, if any, shall be deposited in an interest bearing bank account established by the Committee in the name of the Optionee. Any amount held in an interest bearing bank account established under this Paragraph 14(b), or the pro rata portion thereof in the event of a partial exercise of this Option, shall be paid to the Optionee upon exercise of all or, if relevant, a portion of the Option.
15. Adjustments. In the event of a reclassification, recapitalization, merger, consolidation, reorganization, stock dividends, stock split or reverse stock split, including, without limitation, a distribution of the stock of a Subsidiary, combination or exchange of shares, the Committee shall determine, in its discretion, the appropriate adjustments, if any, to the number of Shares which may be issued under this Option and the exercise price of this Option.
16. Amendment and Termination.
(a) The Committee shall have the authority to make such amendments to the Option provided that no such action shall modify the Option in a manner adverse to Optionee without Optionee's consent.
(b) The Committee may terminate, amend or modify the Option at any time and from time to time; provided, however, that an amendment which requires stockholder approval in order for the Plan to continue to comply with Rule 16b-3, Section 162(m) of the Code or any other law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of stockholders. The termination, amendment or modification of the Option may be in response to changes in the Code, the Exchange Act, national securities exchange regulations or for other reasons deemed appropriate by the Committee.
17. Successors. The terms of the Option shall be binding upon the Company and its successors and assigns.
18. Requirements of Law.
(a) In the event any provision of the Option shall be held illegal or invalid for any reason, the illegality or invalidity shall not effect the remaining parts of the Option, and the Option shall be construed and enforced as if the illegal or invalid provision had not been included.
(b) To the extent that federal laws do not otherwise control, the Option shall be construed in accordance with and governed by the laws of the State of New York.
CARROLS HOLDINGS CORPORATION
ACCEPTED AND AGREED TO:
Exhibit A
to Carrols Holdings Corporation
Unvested Stock Option Agreement
of Joseph A. Zirkman
Definitions. As used in this Agreement, the following terms shall have the following meanings:
"Cause" means, except as may otherwise be provided in a Participant's employment agreement (if any) or in the Award Agreement, (i) the commission by the Participant of a felony; (ii) the unauthorized disclosure of confidential proprietary information of the Company or any Subsidiary which disclosure the Participant knows or reasonably should have known would be reasonably likely to result in material damage to the Company or Subsidiary; (iii) the breach by the Participant of any material provision of the Participant's employment agreement (if any), which breach, if curable, is not remedied within thirty (30) days after the Participant's receipt of written notice thereof provided, however, that the Company need not permit the Participant to cure any breach which has been the subject of a prior written notice; (iv) the engagement in material self dealing in breach of fiduciary duties with respect to the assets or properties of the Company or Subsidiary unless disclosed to and approved by the disinterested members of the Board of Directors; (v) an act of gross misconduct in connection with the Participant's duties under his employment agreement (if any); or (vi) chronic alcohol or drug abuse rendering Participant incapable of carrying out his duties as determined in good faith by the Committee continuing after the Participant is given a reasonable opportunity to obtain medical or other appropriate treatment or rehabilitation.
"Good Reason" means (i) the material failure of the Company or a Subsidiary to comply with the provisions of the Participant's employment agreement, if any, which failure shall not cease promptly and in no event more than thirty (30) days after receipt by the Company or, where appropriate, a Subsidiary of written notice from the Participant objecting to such conduct; (ii) any termination by the Company or Subsidiary of the Participant's employment other than as expressly permitted in the Participant's employment agreement, if any; or (iii) the assignment to Participant of duties and responsibilities materially inconsistent with those duties and responsibilities customarily assigned to individuals holding positions similar to that of the Participant at a company of comparable size to the Company or Subsidiary or the substantial reduction by the Company or Subsidiary of Participant's duties and responsibilities and, if curable, not remedied by the Company or Subsidiary within 30 days after receipt of written notice.
"Permanent Disability" means the inability of a Participant due to physical or mental disability to perform all of his duties with the Company or Subsidiary pursuant to his employment agreement, if any, for a period of six (6) successive months, or an aggregate of six (6) months in any twelve (12) month period, as determined by the Committee upon the basis of such evidence, including but not limited to independent medical reports and data, as the Committee deems appropriate or necessary.