ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of March 6, 1996 (the
"Agreement"), by and among Atlantic Restaurants, Inc., a
Delaware corporation ("Buyer"), Bahrain International Bank
(E.C.), an exempt joint stock company organized under the laws
of Bahrain and the ultimate parent company of Buyer ("BIB"),
Carrols Holdings Corporation, a Delaware corporation
("Holdings"), Carrols Corporation, a Delaware corporation (the
"Company"), the selling shareholders (the "Selling
Shareholders") listed on Schedule I and, to the extent
applicable, Schedule III to the Securities Purchase Agreement
(as defined below), and Baer Marks & Upham LLP, as escrow
agent (or any successor escrow agent pursuant to Section 4(h)
hereof) ("Escrow Agent"). The Selling Shareholders as a group
shall be represented by Alan Vituli (the "Selling Shareholders
Representative"). Those Selling Shareholders listed on
Schedule II to the Securities Purchase Agreement are defined
therein as "Principal Managers". Capitalized terms used and
not otherwise defined herein shall have the meanings ascribed
to such terms in the Securities Purchase Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of
this Agreement, Holdings, the Company, the Selling
Shareholders, Buyer and BIB are entering into a Securities
Purchase Agreement, dated as of the date hereof (the
"Securities Purchase Agreement"), providing for the sale by
the Selling Shareholders to Buyer of a significant part of the
issued and outstanding shares of common stock, together with a
significant part of securities that are convertible into or
exercisable or exchangeable for shares of common stock,
(collectively, the "Securities") of Holdings;
WHEREAS, pursuant to Section 2.02 of the Securities
Purchase Agreement, BIB, on behalf of Buyer, has agreed to
deposit with Escrow Agent, upon the execution of the
Securities Purchase Agreement (such date being the "Deposit
Date"), the amount of $7,500,000, which amount shall be
deposited in a separate interest bearing account pursuant to
the terms and conditions stated in this Agreement; and
WHEREAS, the parties desire that Escrow Agent shall hold,
and Escrow Agent has agreed to hold, all amounts delivered to
and deposited with Escrow Agent hereunder in escrow upon the
terms and conditions provided in this Escrow Agreement;
NOW, THEREFORE, in consideration of the execution of the
Securities Purchase Agreement and the mutual covenants and
agreements set forth herein, the parties hereto mutually agree
as follows, and, in consideration of the mutual covenants set
forth herein, Escrow Agent agrees as follows:
1. ESCROW DEPOSIT. Concurrently with the execution and
delivery of this Agreement, BIB, on behalf of Buyer and to
secure Buyer's obligation to purchase and pay for the
Securities pursuant to the terms of the Securities Purchase
Agreement, is delivering $7,500,000, by wire transfer of
immediately available funds, to Escrow Agent (such $7,500,000
shall hereinafter be referred to as the "Escrow Deposit"), to
be held by Escrow Agent in escrow upon the terms and
conditions hereinafter provided. Escrow Agent hereby
acknowledges receipt of the Escrow Deposit.
2. INVESTMENT OF ESCROW DEPOSIT. Following the delivery
of the Escrow Deposit to Escrow Agent, Escrow Agent shall
promptly cause the Escrow Deposit to be deposited in a
separate interest bearing account (the "Escrow Account"). For
the purposes of this Agreement, the Escrow Deposit means the
Escrow Deposit being delivered to Escrow Agent at the Deposit
Date, in whatever form held, but shall not include any
interest, interest earned on interest, and other income earned
thereon (the "Escrow Interest").
3. DISPOSITION OF ESCROW DEPOSIT. Escrow Agent will hold
the Escrow Deposit in its possession under the provisions of
this Agreement until authorized hereunder to deliver the
Escrow Deposit or any specified portion thereof as follows:
(a) On the Closing Date (as defined in Section 1.03 of
the Securities Purchase Agreement), Escrow Agent shall, upon
receipt of joint written instructions from Buyer and the
Selling Shareholders Representative and in accordance
therewith, disburse the Escrow Deposit held on such date to
the Selling Shareholders Representative, less the amounts, if
any, covered by the Buyer's Purchase Price Claim Notice (as
defined below) pursuant to clause (i) of this subsection (a).
Escrow Agent shall retain in the Escrow Account such amounts
and shall only release such funds in accordance with clause
(ii) of this subsection (a).
(i) If the Closing (as defined in Section 1.03 of the
Securities Purchase Agreement) occurs prior to final
determination of the Purchase Price adjustments pursuant to
Section 1.04 of the Securities Purchase Agreement (including
the dispute resolution mechanisms contained therein), Escrow
Agent shall, at Closing, disburse the Escrow Deposit held on
such date to the Selling Shareholders Representative, less any
amounts covered by any claim notice (the "Buyer's Purchase
Price Claim Notice") delivered by Buyer to the Escrow Agent on
or prior to the Closing Date (the "Disputed Purchase Price");
PROVIDED, THAT, and only to the extent that, such Disputed
Purchase Price satisfies the criteria for the holding back of
disputed amounts by Escrow Agent set forth in the last
sentence of Section 1.04 (c) of the Securities Purchase
Agreement. The Buyer's Purchase Price Claim Notice shall
include, with reasonable specificity, the basis of Buyer's
dispute and the amount thereof.
(ii)Escrow Agent shall only release and deliver the
Disputed Purchase Price upon receipt of and in accordance with
(a) joint written instructions of Buyer and the Selling
Shareholders Representative or (b) written instructions of
Buyer or the Selling Shareholders Representative certifying
that the dispute with respect to the Disputed Purchase Price
has been determined and resolved by the Third Accounting Firm
(as defined in Section 4.01(c) of the Securities Purchase
Agreement), which instructions shall be accompanied by a true
and complete copy of such determination.
(b) In the event that the Securities Purchase
Agreement is terminated as provided thereunder, the party or
parties terminating the Securities Purchase Agreement shall
within five (5) business days thereafter notify Escrow Agent
in writing of such termination (the "Notice of Termination",
and the date of receipt of such notice, the "Notice Date") and
Escrow Agent shall mail a copy of such Notice of Termination
to the non-terminating party, to the extent applicable, within
five (5) business days following the Notice Date. Following
completion of the Escrow Waiting Period (as defined below),
Escrow Agent shall deliver the Escrow Deposit (including any
accrued but undistributed Escrow Interest) by wire transfer of
immediately available funds to BIB, less the amount of any
Termination Claims (as defined below) for which written notice
was timely given by the Selling Shareholders Representative as
set forth in clause (i) of this subsection (b). Thereafter,
Escrow Agent shall retain in the Escrow Account the aggregate
amount of any Termination Claims and shall only release such
funds in accordance with clause (ii) of this subsection (b).
(i) If the Securities Purchase Agreement has
terminated and the Selling Shareholders Representative
determines that a Termination Claim is chargeable against the
Escrow Deposit, the Selling Shareholders Representative shall
notify Buyer and Escrow Agent in writing of the Termination
Claim (the "Seller's Termination Claim Notice") within ten
(10) business days (the "Escrow Waiting Period") of (A) such
termination of the Securities Purchase Agreement (if the
Securities Purchase Agreement was terminated by the Selling
Shareholders Representative (alone or with Buyer)) or (B)
receipt of the Notice of Termination from Escrow Agent (if the
Securities Purchase Agreement was terminated by Buyer),
identifying such Termination Claim with reasonable
specificity, including the amount thereof. A "Termination
Claim" shall be any claim by the Selling Shareholders
Representative pursuant to the Securities Purchase Agreement.
(ii)Unless Escrow Agent receives the Buyer's
Termination Claim Reply (as defined below) from Buyer within
ten (10) business days following the receipt by Buyer of the
Seller's Termination Claim Notice (the "Buyer's Reply
Period"), Escrow Agent will release and deliver to the Selling
Shareholders Representative free and discharged from this
Agreement, that portion of the Escrow Deposit equal to the
amount of the Termination Claim, except to the extent disputed
as provided below. Buyer shall have the right to dispute any
Termination Claim asserted by the Selling Shareholders
Representative pursuant to clause (i) of this subsection (b)
by delivering to Escrow Agent and to the Selling Shareholders
Representative, within the Buyer's Reply Period, written
notice (the "Buyer's Termination Claim Reply") that it
disputes the matters set forth in the Seller's Termination
Claim Notice. The Buyer's Termination Claim Reply shall
include, with reasonable specificity, the basis of Buyer's
dispute and the amount thereof. Upon receipt of the Buyer's
Termination Claim Reply, Escrow Agent, except as hereinafter
provided, shall retain in the Escrow Account the amount of
such disputed Termination Claim ("Disputed Funds"). Escrow
Agent shall only distribute the Disputed Funds upon receipt of
and in accordance with (i) joint written instructions of Buyer
and the Selling Shareholders Representative or (ii) written
instructions of Buyer or the Selling Shareholders
Representative certifying that the dispute with respect to any
and all such Disputed Funds has been determined and resolved
by entry of a final order, decree or judgment by a court of
competent jurisdiction in the United States (the time for
appeal therefrom having expired and no appeal having been
perfected), or consent to entry of any judgment concerning a
Termination Claim, which instructions shall be accompanied by
a true and complete copy of any such order, decree or judgment
certified by the clerk of such court.
(c) Prior to the Closing Date, Escrow Agent shall
distribute to BIB the then accrued Escrow Interest, if any, on
the last day of each calendar month following the date hereof.
Any Escrow Interest earned prior to the Closing Date, but not
distributed to BIB before such date, shall be distributed to
BIB on the Closing Date. Interest accrued on the Escrow
Deposit from and after the Closing Date shall be disbursed by
the Escrow Agent on a pro-rata basis among the parties
ultimately receiving the Escrow Deposit. In the event that
any amounts are held as Disputed Purchase Price or Disputed
Funds as provided in subsections (a) or (b) above, the Escrow
Interest attributable thereto shall be retained by Escrow
Agent in the Escrow Account and shall be delivered by Escrow
Agent to the party which ultimately receives such Disputed
Purchase Price or Disputed Funds, as the case may be, or, if
both parties ultimately prevail, in accordance with their
respective interests therein.
4. RESPONSIBILITY OF ESCROW AGENT
(a) Escrow Agent undertakes to perform only such
duties as are specifically set forth herein. Anything herein
to the contrary notwithstanding, Escrow Agent's sole duties
under this Escrow Agreement shall be (i) to hold the Escrow
Deposit in escrow in accordance with the terms hereof, (ii) to
invest the Escrow Deposit in accordance with this Agreement
and (iii) to follow the instructions regarding the disposition
of the Escrow Deposit and the Escrow Interest as set forth in
Section 3 hereof.
(b) Escrow Agent, after having fully delivered the
Escrow Deposit and Escrow Interest, if any, pursuant hereto,
shall be discharged from any further obligations hereunder.
Buyer and the Selling Shareholders jointly and severally agree
to indemnify Escrow Agent and hold it harmless against any and
all expenses, including reasonable counsel fees and
disbursements, or losses suffered by Escrow Agent in
connection with any action, suit or other proceeding involving
any claim, or in connection with any claim or demand, which in
any way, directly or indirectly, arises out of or relates to
this Agreement, the service of Escrow Agent hereunder, the
monies held by it hereunder or any income earned from
investment of such monies; PROVIDED, HOWEVER, that this
indemnity shall not apply to any such expense or loss that is
the result of Escrow Agent's gross negligence or willful
misconduct. Promptly after the receipt by Escrow Agent of
notice of any demand or claim or the commencement of any
action, suit or proceeding, Escrow Agent shall, if a claim in
respect thereof is to be made against any of the other parties
hereto, notify such other parties thereof in writing; but the
failure by Escrow Agent to give such notice shall not relieve
any party from any liability which such party may have to
Escrow Agent hereunder. The indemnities in this Section 4(b)
shall survive the resignation of Escrow Agent and the
termination of this Agreement.
(c) Escrow Agent shall have no responsibility for the
genuineness or validity of any document or other item
deposited with it, and it shall be fully protected in acting
in accordance with any written instructions given to it
hereunder and reasonably believed by it to have been signed by
the parties hereto or proper officers or other representatives
of the parties hereto. Escrow Agent may consult with counsel
and shall be fully protected in any action taken in good faith
in accordance with such advice. From time to time on and
after the date hereof, the other parties hereto shall deliver
or cause to be delivered to Escrow Agent such further
documents and instruments and shall do and cause to be done
such further acts as Escrow Agent shall reasonably request (it
being understood that Escrow Agent shall have no obligation to
make any such request) to carry out more effectively the
provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected
in acting hereunder.
(d) It is understood and agreed that should any
dispute arise with respect to the payment and/or ownership or
right of possession of the Escrow Deposit or the Escrow
Interest, Escrow Agent shall have the right to (but shall not
be obligated to) retain in its possession, without liability
to anyone, all or any part of such Escrow Deposit or the
Escrow Interest until such dispute shall have been settled
either by mutual agreement by the parties concerned or by the
final order, decree or judgment of a court or other tribunal
of competent jurisdiction in the United States and time for
appeal has expired and no appeal has been perfected, but
Escrow Agent shall be under no duty whatsoever to institute or
defend any such proceedings.
(e) Escrow Agent shall be entitled to be reimbursed
for all reasonable expenses, disbursements and advances
(including reasonable attorneys' fees and expenses if actually
incurred by Escrow Agent in connection with the use of outside
attorneys) incurred or made by it in performance of its duties
hereunder. Such reasonable disbursements, expenses and
advances shall be shared by Buyer and the Selling Shareholders
(or by Buyer and the Company if the Securities Purchase
Agreement is terminated as provided thereunder) upon request
by Escrow Agent (which shall not be made more than once during
any one-month period commencing with the one-month period
beginning on the date hereof) and, in the case of any such
reimbursement, upon submission to Buyer and the Selling
Shareholders Representative (or to Buyer and the Company if
the Securities Purchase Agreement is terminated as provided
thereunder) of a reasonably detailed itemized statement
relating to the amounts to be reimbursed.
(f) No party shall have the right to withdraw or
receive any of the amounts held in the Escrow Deposit or the
Escrow Interest except as provided herein.
(g) Escrow Agent shall not be entitled to proceed
against the Escrow Account, nor shall Escrow Agent be entitled
to any offset against the Escrow Account, including any
proceeding or offset for any reimbursable fees, disbursements
or expenses (including counsel fees and disbursements, if any)
or losses suffered by Escrow Agent in connection with any
action, suit, proceeding, claim or demand arising out of or
relating to this Agreement.
(h) Escrow Agent may resign as Escrow Agent under this
Agreement by giving notice of such resignation in writing
addressed to Buyer and the Selling Shareholders
Representative, which writing shall specify a date not less
than thirty days following the date of such notice when such
resignation shall take effect. Escrow Agent may be removed at
any time with or without cause by an instrument in writing
duly executed by Buyer and the Selling Shareholders
Representative. If Escrow Agent shall resign or be removed as
Escrow Agent hereunder, Buyer shall appoint a successor escrow
agent reasonably acceptable to Buyer and the Selling
Shareholders Representative by an instrument of substitution
complying with any applicable requirements of law and, in the
absence of any such requirement, without formality other than
appointment and designation in writing. Such appointment and
designation shall be full evidence of Buyer's right and
authority to make such appointment and designation, and of all
facts therein recited. Upon the effective date of Escrow
Agent's removal as escrow agent hereunder, such successor
escrow agent shall become Escrow Agent hereunder and shall
have all of the rights, powers, privileges, immunities and
duties hereby conferred upon Escrow Agent. All references
herein to Escrow Agent shall be deemed to refer to the party
from time to time acting hereunder as escrow agent. Upon
replacement of Escrow Agent as escrow agent hereunder, Escrow
Agent shall deliver the entire Escrow Deposit to its successor
as escrow agent hereunder in accordance with the written
instructions of Buyer.
(i) Each of the parties hereto acknowledge that Baer
Marks & Upham LLP has in the past represented Holdings, the
Company and the Selling Shareholders as legal counsel, and is
currently representing Holdings, the Company and the Selling
Shareholders as legal counsel in connection with the
transactions contemplated by this Agreement, the Securities
Purchase Agreement and such other related documents. In
addition, the parties hereto acknowledge and agree that
neither the agreement by the parties hereto that Baer Marks &
Upham LLP shall act as Escrow Agent, nor any other term of
this Agreement, nor any other agreement or understanding
between or among the parties hereto shall prevent or inhibit,
or be construed or interpreted so as to prevent or inhibit,
Baer Marks & Upham LLP from serving at any time as legal
counsel to Holdings, the Company or any Selling Shareholder or
any parent, subsidiary, shareholder, director, officer, agent
or affiliate of Holdings, the Company or any Selling
Shareholder (collectively, the "Selling Parties"), whether in
connection with this Agreement or otherwise. The foregoing
notwithstanding, it shall be a condition precedent to Baer
Marks & Upham LLP's ability to serve as legal counsel to any
of the Selling Parties in connection with any dispute under
this Agreement that Baer Marks & Upham LLP deposit any amounts
held as Disputed Purchase Price or Disputed Funds under this
Agreement with a court of competent jurisdiction (subject to
Section 5(g) hereof) or with an unrelated third party
successor escrow agent mutually acceptable to Buyer and the
Selling Shareholders Representative.
(j) Each party shall be responsible for all taxes
payable on any Escrow Interest distributed to it. Any taxes
which become due with respect to accrued interest on any
Disputed Purchase Price or Disputed Funds, shall be paid by
Escrow Agent out of the Disputed Purchase Price or Disputed
Funds, as may be applicable.
(k) Escrow Agent covenants that it will not withhold
United States withholding taxes from payments to be made to
BIB if BIB provides Escrow Agent, upon Escrow Agent's
reasonable request, with Internal Revenue Service Form W-8,
Form 4224 or other applicable form, certificate or document
prescribed by the Internal Revenue Service certifying as to
BIB's entitlement to an exemption from any such withholding
requirements.
(l) Escrow Agent covenants that it will not withhold
United States withholding taxes from payments to be made to
BIB, if any, in excess of any applicable treaty rate under an
income tax treaty, if any, between the United States and
Bahrain if BIB provides Escrow Agent, upon Escrow Agent's
reasonable request, with Internal Revenue Service Form 1001 or
other applicable form, certificate or document prescribed by
the Internal Revenue Service certifying as to BIB's
entitlement to a reduced rate of withholding under any such
withholding requirements.
5. MISCELLANEOUS
(a) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been
duly given as of the date and time sent if such notices and
other communications are delivered by messenger, transmitted
by telex or telecopier (with receipt confirmed), or mailed by
registered or certified United States mail, postage prepaid,
as follows:
(i) If to Holdings, the Company or the Selling
Shareholders:
c/o Carrols Corporation
968 James Street
Syracuse, New York 13203
Attention: Mr. Alan Vituli
Joseph Zirkman, Esq.
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York New York 10022
Attention: Joel M. Handel, Esq.
(ii)If to Buyer or BIB:
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, Connecticut 06902
Attention: Mr. Paul Durrant
with a copy to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks, Esq.
(iii) If to Escrow Agent:
Baer Marks & Upham LLP
805 Third Avenue
New York New York 10022
Attention: Joel M. Handel, Esq.
or to such other address as the persons to whom notice is to
be given may have previously furnished to the others in the
manner set forth above, provided that notices of changes of
address shall be effective only upon receipt.
(b) ASSIGNMENT. This Agreement will be binding upon,
inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto. This Agreement
may not be assigned by BIB or Buyer, other than to a
subsidiary or corporate affiliate of BIB or Buyer, or assigned
by the Selling Shareholders without the prior written consent
of the other party, except that no such consent shall be
required for an assignment of Buyer's rights under this
Agreement as security for any acquisition financing.
(c) ENTIRE AGREEMENT, AMENDMENT. This Agreement,
together with the Securities Purchase Agreement, including the
schedules, exhibits and other agreements or writings referred
to therein or delivered pursuant thereto, contains the entire
understanding of the parties hereto with respect to its
subject matter, and this Agreement may be amended only by a
written instrument duly executed by all the parties hereto.
(d) HEADINGS. Article and section headings contained
herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
(e) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
(f) GOVERNING LAW. This Agreement shall be governed
by, and construed and enforced in accordance with the laws of
the State of New York, without regard to its conflict of laws
provisions.
(g) CONSENT TO JURISDICTION. Any legal action, suit
or proceeding arising out of or relating to this Agreement may
only be instituted in any federal court of the Southern
District of New York or any state court located in New York
County, State of New York, and each party (including BIB)
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 any of the other
agreements, documents or instruments to be executed and
delivered by BIB, Buyer, Holdings, the Company or the Selling
Shareholders pursuant hereto or the subject matter hereof or
thereof may not be enforced in or by such courts on
jurisdictional grounds.
(h) TERMINATION. This Agreement shall remain in full
force and effect until Escrow Agent has disposed of all of the
Escrow Deposit and Escrow Interest, if any, in accordance with
the terms hereof.
{[C:\WPDOCS\ESCROW5.DOC/<<Date>>]}
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the authorized officers or representatives of
BIB, Buyer, Holdings, the Company, the Selling Shareholders
and Escrow Agent as of the date first above written.
ATLANTIC RESTAURANTS, INC.
By: _________________________
Name:
Title:
BAHRAIN INTERNATIONAL BANK (E.C.)
By: _________________________
Name:
Title:
CARROLS HOLDINGS CORPORATION
By: _________________________
Name:
Title:
CARROLS CORPORATION
By: _________________________
Name:
Title:
______________________________
Alan Vituli
Selling Shareholders Representative
______________________________
Daniel T. Accordino
Principal Manager
______________________________
Richard V. Cross
Principal Manager
BAER MARKS & UPHAM LLP,
as Escrow Agent
By: _________________________
Name:
Title:
{[C:\WPDOCS\ESCROW5.DOC/<<Date>>]}