Subsequent Events

The Company reviewed and evaluated subsequent events through the issuance date of the Company’s unaudited condensed consolidated financial statements.

Merger Agreement

On April 30, 2019, the Company consummated the transaction contemplated by the Agreement and Plan of Merger ("Merger Agreement") dated as of February 19, 2019 among Carrols Restaurant Group, Carrols Holdco, GRC MergerSub Inc. ("GRC MergerSub"), GRC MergerSub LLC, Cambridge Franchise Partners, LLC, Cambridge Franchise Holdings, LLC ("Cambridge Holdings") and New CFH, LLC to acquire 165 Burger King® and 55 Popeyes® restaurants and six convenience stores from Cambridge Holdings (the "Cambridge Acquisition"). Cambridge Holdings received 7,364,413 shares of the Company's common stock, and at closing owned approximately 16.6% of the Company's outstanding common stock. Cambridge Holdings also received 10,000 shares of Series C Convertible Preferred Stock of the Company ("Series C Preferred Stock") which accrues a 9% dividend per annum, payable semi-annually in shares of the Company's common stock and that will initially be convertible into approximately 7.45 million shares of Carrols common stock. The conversion of the Series C Preferred Stock received by Cambridge Holdings will be subject to a vote of the Company's stockholders which will occur at the Company’s 2019 Annual Meeting of Stockholders, and will automatically convert into the Company's common stock upon stockholder approval of such conversion. All shares issued to Cambridge Holdings are subject to a two year restriction on sale or transfer subject to certain limited exceptions. As part of the transaction, Cambridge Holdings will have the right to designate up to two director nominees and two Cambridge Holdings executives joined the Company's Board of Directors on April 30, 2019.

Pursuant to the Merger Agreement, on April 30, 2019, the merger of GRC MergerSub and Carrols Restaurant Group, Inc. ("OldCRG") was consummated with OldCRG as the surviving entity (the "Holding Company Reorganization") which resulted in OldCRG becoming a wholly-owned subsidiary of Carrols Holdco Inc. ("NewCRG"). On April 30, 2019, OldCRG was renamed "Carrols Holdco Inc." and NewCRG was renamed "Carrols Restaurant Group, Inc." In connection with the Holding Company Reorganization and by operation of Rule 12g-3(a) promulgated under the Securities Exchange Act of 1934 as amended (the "Exchange Act"), NewCRG is the successor issuer to OldCRG and has succeeded to the attributes of OldCRG as the registrant, including OldCRG’s Securities and Exchange Commission ("SEC") file number and CIK number. Shares of NewCRG Common Stock are deemed to be registered under Section 12(b) of the Exchange Act, and NewCRG is subject to the informational requirements of the Exchange Act, and the rules and regulations promulgated thereunder, and will file reports and other information with the SEC using OldCRG’s SEC file number (001-33174). Shares of NewCRG common stock continue to trade on the NASDAQ Global Market under the symbol “TAST”.

The preliminary allocation of the purchase price for the Cambridge Acquisition requires extensive use of accounting estimates and judgments to allocate the purchase price to tangible and intangible assets acquired and liabilities assumed based on their respective fair values. As the values of certain asset and liabilities are preliminary in nature, the fair values for assets acquired and liabilities assumed are subject to adjustment as additional information is obtained. For purposes of a preliminary allocation of the assets acquired and liabilities assumed, the excess of the purchase price over the estimated fair value of net tangible and intangible assets has been assigned to franchise rights. The preliminary fair value of property and equipment, and franchise agreements is based on the assets carrying value due to recent valuations completed by Cambridge Holdings. The amounts allocated to the assets acquired and liabilities assumed are based on management’s preliminary estimates of their respective fair values. Definitive allocations will be performed and finalized, including the completion of valuations of assets acquired and liabilities assumed with the assistance of third party valuation specialists.

The following table summarizes the preliminary allocation of the aggregate purchase price for the Cambridge Acquisition and has been derived from the December 30, 2018 balance sheet of Cambridge Holdings:



Inventory	$	2,705
Prepaid expenses	2,418
Other assets	11,965
Property and equipment	114,008
Franchise fees	4,175
Franchise rights	207,148
Deferred income taxes	725
Accounts payable	(3,557		)
Accrued payroll, related taxes and benefits	(3,989		)
Long-term debt	(124,879		)
Lease financing obligations	(50,839		)
Other liabilities	(16,607		)
Net assets acquired	$	143,273

New Credit Facilities

On April 30, 2019, the Company entered into a new senior secured credit facility in an aggregate principal amount of $550.0 million, consisting of (i) a term loan B facility in an aggregate principal amount of $425.0 million (the “Term Loan B Facility”) and (ii) a new revolving credit facility (including a sub-facility for standby letters of credit) in an aggregate principal amount of $125.0 million (the “New Revolving Credit Facility” and, together with the Term Loan B Facility, the “New Senior Credit Facilities”). Borrowings under the New Senior Credit Facilities bear interest, at a rate per annum equal to (i) the Alternate Base Rate (as defined in the New Senior Credit Facilities) plus 2.25% or (b) LIBOR Rate (as defined in the New Senior Credit Facilities) plus 3.25%. The Term Loan B Facility will amortize in equal quarterly installments in an aggregate annual amount equal to 1% of the original principal amount of the Term Loan B Facility with the remainder due on the Term Loan B Facility maturing in seven years on April 30, 2026. The New Revolving Credit Facility will mature in five years on April 30, 2024.

The proceeds of the Term Loan B Facility were used to refinance the existing indebtedness of (i) the Company and (ii) New CFH and its subsidiaries and (iii) the payment of fees and expenses in connection with the transactions contemplated by the Merger Agreement and New Senior Credit Facilities. The proceeds of the Revolving Credit Facility will be used to finance ongoing working capital and for other general corporate purposes, including permitted acquisitions and required expenditures under development agreements.

Area Development and Remodeling Agreement

The Company, Carrols, Carrols LLC, and BKC have entered into an Area Development and Remodeling Agreement ("Area Development Agreement") commencing on April 30, 2019 and ending on September 30, 2024, which supersedes the Operating Agreement dated as of May 30, 2012, as amended, between Carrols LLC and BKC. Pursuant to the Area Development Agreement, BKC assigned its right of first refusal under its franchise agreements with its franchisees to purchase all of the assets of a Burger King restaurant on the same terms proposed between such franchisee and a third party purchaser (the “ADA ROFR”), in 16 states and a limited number of counties in four additional states, and granted franchise pre-approval to acquire Burger King restaurants until the date that Carrols LLC has acquired more than an aggregate of 500 Burger King restaurants. The continued assignment of the ADA ROFR is subject to suspension or termination in the event of non-compliance by Carrols LLC with certain terms as set forth in the Area Development Agreement. Carrols LLC will pay BKC $3.0 million for the ADA ROFR in four equal installment payments over the course of one year.

Pursuant to the Area Development Agreement, Carrols LLC agreed to open, build and operate 200 new Burger King restaurants and remodel or upgrade 748 Burger King restaurants to BKC’s Burger King of Tomorrow restaurant image over the term of the Area Development Agreement.