<PAGE>


                                                                   Exhibit 10.25


                          CARROLS HOLDINGS CORPORATION
                    2001 TACO CABANA LONG-TERM INCENTIVE PLAN

1.       Purpose

         The purpose of this Plan is to further the growth and general
         prosperity of Carrols Holdings Corporation (the "Company") by providing
         long-term incentives to officers and employees of the Company and any
         Subsidiaries of the Company. The Company intends that the Plan will
         help attract, retain and motivate officers and key employees of high
         caliber and good potential and promote the alignment of the
         Participants' interests with that of the Company's shareholders.

2.       Definitions

         As used in the Plan, the following words shall have the following
         meanings:

         "Affiliate" of a Person other than an individual means any other
         Person, directly or indirectly controlling, controlled by or under
         common control with such Person or, with respect to any partnership,
         any partner thereof.

         "Award" means an award made to a Participant pursuant to the Plan and
         described in Paragraph 6, including, without limitation, an award of an
         Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation
         Right, Restricted Stock, Performance Units, Performance Shares, or
         Other Stock-Based Awards or any combination of the foregoing.

         "Award Agreement" means an agreement between the Company and a
         Participant that sets forth the terms, conditions and limitations
         applicable to an Award.

         "Board" means the Board of Directors of the Company as constituted from
         time to time.

         "Cause" has the meaning determined by the Committee and set forth in
         the applicable Participant's Award Agreement.

         "Carrols Stock" means Carrols stock, par value $.01 per share, of the
         Company, which is a series of common stock of the Company.

         "Certificate of Amendment" means the Certificate of Amendment to the
         Restated Certificate of Incorporation of the Company, filed with the
         Secretary of State of the State of Delaware.

         "Change of Control" means:

                (a)     The acquisition (other than from the Company) by any
                        person, entity or "group", within the meaning of Section
                        13(d)(3) or 14(d)(2) of the Exchange Act, excluding for
                        this purpose any employee benefit plan of the Company or
                        its subsidiaries which acquires beneficial ownership of
                        voting

<PAGE>

                        securities of the Company, of beneficial ownership
                        (within the meaning of Rule 13d-3 promulgated under the
                        Exchange Act), of more than 50% of either the Company's
                        then outstanding shares of common stock or the combined
                        voting power of the Company's then outstanding voting
                        securities entitled to vote generally in the election of
                        directors; or

                (b)(1)  Individuals who are elected as members of the Board of
                        Directors of the Company (the "Incumbent Board")
                        pursuant to the terms of the Stockholders Agreement
                        executed in connection with the Stock Purchase Agreement
                        thereto (the "Stockholders Agreement") cease for any
                        reason to constitute at least a majority of the Board;
                        provided that any person becoming a director on or after
                        the effective date of the Stockholders Agreement whose
                        election, or nomination for election by the Company's
                        shareholders, was approved by a vote of at least a
                        majority of the directors then comprising the Incumbent
                        Board (other than an election or nomination of an
                        individual whose initial assumption of office is in
                        connection with an actual or threatened election contest
                        relating to the election of directors of the Company, as
                        such terms are used in Rule 14a-11 of Regulation 14A
                        promulgated under the Exchange Act) shall be for
                        purposes of the Plan, considered as though such person
                        were a member of the Incumbent Board; or

                (b)(2)  Notwithstanding the foregoing, Paragraph (b)(1) above
                        shall not apply to any change in the Incumbent Board
                        during the period in which the Stockholders Agreement is
                        in effect and a majority of the Board of the Company is
                        designated or otherwise appointed to serve on the Board
                        under the provisions of such Stockholders Agreement; or

                (c)     Approval and consummation of a reorganization, merger,
                        or consolidation, in each case, with respect to which
                        persons who were the stockholders of the Company
                        immediately prior to such reorganization, merger or
                        consolidation do not, immediately thereafter, own more
                        than 50% of the combined voting power entitled to vote
                        generally in the election of directors of the
                        reorganized, merged or consolidated company's then
                        outstanding voting securities, or a liquidation or
                        dissolution of the Company or a Sale of Company or a
                        Sale of the Taco Cabana Group; or

                (d)     The Company ceases to own at least 50 percent of Carrols
                        Corporation.

                (e)     A Change of Control shall not be deemed to have occurred
                        as a result of any purchase or acquisition of shares of
                        capital stock in the Company by Madison Dearborn Capital
                        Partners, L.P. and its affiliates, Madison Dearborn
                        Capital Partners II, L.P. and its affiliates, BIB
                        Holdings (Bermuda) Ltd. and its affiliates, or any
                        combination thereof.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

         "Committee" means the Compensation Committee of the Board or, if no
Committee shall have been appointed, the full Board.

         "Employee" means any officer or other employee of the Company or any
Subsidiary.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.


                                       2

<PAGE>

         "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 as determined in good faith by the Committee or
                        the Board of the Company on the advice of its
                        independent auditors; or

                (b)     of assets other than Stock shall equal such value as
                        determined by the Committee in its sole discretion.

         "Immediate Family" means an individual's spouse and descendants
         (whether natural or adopted) and any trust or partnership solely for
         the benefit of the individual and/or the individual's spouse and/or
         descendants.

         "Incentive Stock Option" means an option intended to be and designated
         as an incentive stock option meeting the requirements of Section 422 of
         the Code.

         "Independent Third Party" means any Person who, immediately prior to a
         contemplated transaction, does not own in excess of 5% of the Carrols
         Stock on a fully-diluted basis (a "5% Owner"); who is not controlling,
         controlled by or under control with any such 5% Owner and who is not
         the spouse or descendent (by birth or adoption) of any such 5% Owner or
         a trust for the benefit of such 5% Owner and/or such other Persons.

         "Nonqualified Stock Option" means an option that is not intended to be
         nor designated as an Incentive Stock Option.

         "Other Stock-Based Awards" means any Award other than a Stock Option,
         Stock Appreciation Right, Restricted Stock, Performance Unit or
         Performance Share that is valued by reference to or otherwise based
         upon the Stock.

         "Participant" means an Employee who, as of any date, has been granted
         one or more Awards under the Plan which are still outstanding (i.e.,
         have not been exercised, forfeited or terminated).

         "Performance Goals" means, with respect to any Performance Period,
         performance goals based on any of the following criteria and
         established by the Committee prior to the beginning of such Performance
         Period or performance goals based on any of the following criteria and
         established by the Committee after the beginning of such Performance
         Period that meet the requirements to be considered pre-established
         performance goals under Section 162(m) of the Code: earnings or
         earnings growth; return on equity, assets or investment; revenues;
         expenses; stock price; market share; charge-offs; or reductions in
         non-performing assets or such other performance indicators as
         determined by the Committee in its sole discretion. Such Performance
         Goals may be particular to an Employee or the division, department,
         branch, line of business, Subsidiary or other unit in which the
         Employee works, or may be based on the performance of the Company
         generally.

         "Performance Period" means (when and if applicable) the period of time
         designated by the Committee during which Performance Goals will be
         measured in connection with an Award.


                                       3

<PAGE>

         "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.

         "Taco Cabana Group" has the meaning set forth in the Certificate of
         Amendment.

         "Plan" means this Carrols Holdings Corporation 2001 Taco Cabana
         Long-Term Incentive Plan, as amended from time to time.

         "Qualified Public Offering" means the sale in an underwritten public
         offering registered under the Securities Act of 1933 of shares of
         Carrols Stock resulting in aggregate gross proceeds to the Company of
         at least $50 million and a price per share of not less than $108.2353
         (as such amount is equitably adjusted for subsequent stock splits,
         stock dividends and recapitalizations).

         "Sale of the Company" means the sale of the Company to an Independent
         Third Party or affiliate group of Independent Third Parties pursuant to
         which such party or parties acquire (a) capital stock of the Company
         possessing the voting power to elect a majority of the Company's Board
         (whether by merger, consolidation or sale or transfer of the Company's
         capital stock) or (b) all or substantially all of the Company's assets
         determined on a consolidated basis.

         "Sale of the Taco Cabana Group" means the sale by the Company of the
         Taco Cabana Group to an Independent Third Party or affiliate group of
         Independent Third Parties pursuant to which such party or parties
         acquire (a) all or substantially all of the assets of the Taco Cabana
         Group determined on a consolidated basis or (b) in the event all of the
         assets and liabilities of the Taco Cabana Group are held directly or
         indirectly by a Subsidiary, capital stock of the Subsidiary possessing
         the voting power to elect a majority of the Subsidiary's Board (whether
         by merger, consolidation or sale or transfer of the Subsidiary's
         capital stock).

         "Stock" or "Share" means the series of common stock, par value $.01 per
         share, of the Company that has been designated as Taco Cabana Stock
         under the Certificate of Amendment, which may be authorized but
         unissued or issued and reacquired.

         "Stock Options" means the collective reference to Incentive Stock
         Options and Nonqualified Stock Options.

         "Subsidiary" means any corporation, other than the Company, in which
         the Company has at least a fifty percent beneficial ownership interest.

3.       Administration

         (a)      The Plan shall be administered by the Committee. None of the
                  members of the Committee shall be eligible to receive Awards
                  under the Plan. Members of the Committee shall be intended to
                  qualify to administer and make Awards under the Plan for
                  purposes of Section 162(m) of the Code and Rule 16b-3 (and any
                  other applicable rule) promulgated under Section 16(b) of the
                  Exchange Act. The Committee may adopt its own rules or
                  procedures, and the action of a majority of the Committee,
                  taken at a meeting or taken without a meeting by a writing
                  signed by such majority, shall constitute action by the
                  Committee. The Committee shall have the power and authority to
                  administer, construe and interpret the Plan, to make rules for
                  carrying it out and to make changes in such rules. Any such

                                       4

<PAGE>

                  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 (who are members of
                  the Board) 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

                                       5

<PAGE>

              extent the aggregate Fair Market Value (determined as of the time
              the Incentive Stock Option is granted) of the Stock with respect
              to which Incentive Stock Options become exercisable for the first
              time by a Participant during any calendar year under all plans of
              the Company or any Subsidiary exceeds ONE HUNDRED THOUSAND DOLLARS
              ($100,000), such options shall be treated as Nonqualified Stock
              Options.

         (b)  Nonqualified Stock Options: These are options to purchase Stock
              which are not intended to be and are not designated by the
              Committee as "Incentive Stock Options." At the time of the Award,
              the Committee shall determine, and shall have included in the
              Award Agreement or other Plan rules, the option exercise period,
              the option exercise price, and such other conditions or
              restrictions as may be appropriate. In addition to the other
              restrictions contained in the Plan, an option granted under this
              Paragraph 6(b), (i) may not be exercised more than 10 years after
              the date it is granted, and (ii) may not have an option exercise
              price less than 100% of the Fair Market Value of Stock on the date
              the option is granted.

              Payment of the option exercise price for Stock Options granted
              pursuant to Paragraphs 6(a) and 6(b) shall be made (i) in cash,
              (ii) by delivering shares of Stock already owned by the
              Participant which shares of Stock shall have been owned by the
              Participant for at least six months prior to the date of such
              payment, or (iii) by delivering a promissory note to the Company
              that is either (A) unsecured and fully recourse against the
              Participant or (B) nonrecourse with respect to payment of the
              principal amount thereof, recourse with respect to payment of
              interest thereon, and 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 "Note") and, in either event, such note shall mature on the
              earlier of (x) the expiration date of such Stock Option or (y) the
              fifth anniversary date of the Note, and shall bear interest,
              payable quarterly, at the Federal mid-term rate provided under
              Section 1274(d) of the Code or (iv) by a combination of any of the
              foregoing, in accordance with the terms of the Plan, the Award
              Agreement, and any other applicable guidelines of the Committee.
              The terms of the Note shall provide that: (i) any dividends
              received on Stock securing a Note shall be applied toward payment
              of the principal and accrued interest of the Note; and (ii) the
              Note shall become immediately due and payable upon the sale of the
              Stock securing the Note and the proceeds shall be applied to the
              payment of the unpaid principal balance and accrued interest of
              the Note.

         (c)  Stock Appreciation Rights: These are rights that on exercise
              entitle the holder to receive the excess of (i) the Fair Market
              Value of a Share on the date of exercise over (ii) the Fair Market
              Value on the date of award or, if connected with a previously
              issued Stock Option, the Fair Market Value at the time such
              previously issued Stock Option was granted (the "base value"),
              multiplied by (iii) the number of Shares covered by the rights
              exercised, as determined by the Committee. A Stock Appreciation
              Right granted under the Plan may, but need not be, granted in
              tandem with a Stock Option under Paragraphs 6(a) or 6(b). The
              Committee, in the Award Agreement or by other Plan rules, may
              impose such restrictions or conditions on the exercise of Stock
              Appreciation Rights as it deems appropriate, and may terminate,
              amend, or suspend such Stock Appreciation Rights at any time. No
              Stock Appreciation Right granted under the Plan may be exercised
              more than 10 years after the date it is granted.



                                       6

<PAGE>

         (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 that shall be
              specified by the Committee, and may relate to the performance of
              the Company or the Taco Cabana Group or a combination thereof. At
              the time an Award of such Shares or units is made, the Committee
              shall, in the Award Agreement, determine the base value of the
              Award or specify a formula for determining such value. Other than
              an Award intended to qualify under Section 162(m) of the Internal
              Revenue Code, the Committee may adjust previously established
              Performance Goals and other terms and conditions of an Award at
              any time prior to the determination of the payment amount, to
              reflect major unforeseen events such as changes in laws,
              regulations or accounting policies or procedures, mergers,
              acquisitions or divestitures or extraordinary, unusual or
              non-recurring items or events.

              Payment pursuant to an Award of Performance Shares or Performance
              Units shall be made following the Committee's determination of the
              extent to which the performance criteria were satisfied, and shall
              be made in the form of stock, cash or a combination thereof, as
              the Committee may determine. Payment shall be made as promptly as
              practicable following the end of the Performance Period unless
              deferred subject to such terms and conditions as may be prescribed
              by the Committee.

         (f)  Other Stock-Based Awards: Other Stock-Based Awards may be granted
              to such Employees as the Committee may select, at any time and
              from time to time as the Committee shall determine. The Committee
              shall have complete discretion in determining the number of Shares
              subject to such Awards, the consideration for such Awards and the
              terms, conditions and limitations pertaining to same including
              without limitation, restrictions based upon the achievement of
              specified business objectives, tenure, and other measurements of
              individual or business performance, and/or restrictions under
              applicable federal or state securities laws, and conditions under
              which same will lapse. Such awards may include the issuance of
              Stock in payments of amounts earned under other incentive
              compensation plans of the Company. The terms, restrictions and
              conditions of the Award need not be the same with respect to each
              Participant.

              The Committee may, in its sole discretion, direct the Company to
              issue Shares subject to such restrictive legends and/or stop
              transfer instructions as the Committee deems appropriate.

7.       Limitations and Conditions

         (a)      The number of Shares of Taco Cabana Stock available for Awards
                  under the Plan shall be 1,000,000 or, if greater, such number
                  of Shares as approved by the

                                       7

<PAGE>

              Committee. The Shares available for Awards under the Plan will be
              available for grant at an exercise price per share as determined
              by the Committee. The number of Shares subject to Awards under the
              Plan (including, but not limited to, Stock Options and Stock
              Appreciation Rights) to any one Participant shall not exceed
              750,000 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 the Plan shall interfere with or limit in any way the
              right of the Company or any Subsidiary to terminate any
              Participant's employment at any time, nor confer upon any
              Participant any right to continue in the employ of the Company or
              any Subsidiary.

         (d)  Deferral of Award payouts may be provided for, in the sole
              discretion of the Committee, subject to such terms and conditions
              as the Committee may specify in the Award Agreements.

         (e)  Participants shall not have any of the rights or privileges of
              stockholders of the Company with respect to any Shares purchasable
              in connection with any Award, unless and until certificates
              representing such Shares have been issued by the Company to such
              Participants.

         (f)  Except as otherwise provided in this Paragraph 7, no Award may be
              sold, transferred, assigned or otherwise alienated or
              hypothecated, other than by will or by the laws of descent and
              distribution, and shall be exercisable during a Participant's
              lifetime only by the Participant or the Participant's legal
              representative. The Participant may, if permitted by the
              Committee, transfer the Award, other than Incentive Stock Options,
              without payment of consideration, to a member of Participant's
              Immediate Family. Any attempt at assignment, transfer, pledge or
              disposition of the Award contrary to the provisions hereof or the
              levy of any execution, attachment or similar process upon the
              Award other than as expressly permitted in this Paragraph 6 shall
              be null and void and without effect.

         (g)  No holder of Shares shall sell, transfer, assign, pledge or
              otherwise dispose of (whether with or without consideration and
              whether voluntarily or involuntarily or by operation of law) any
              interest in the Shares (a "Transfer"), except pursuant to a Public
              Sale or an Approved Sale (an "Exempt Transfer") or pursuant to
              this Paragraph 7; provided that in no event shall any Transfer of
              Shares pursuant to this Paragraph 7 be made for any consideration
              other than cash payable upon consummation of such Transfer or in
              installments over time. For purposes hereof, "Public Sale" means
              any sale of Shares to the public pursuant to an offering
              registered under the Securities Act of 1933, as amended.

         (h)  Prior to making any Transfer other than an Exempt Transfer, any
              holder of Shares intending to make such a Transfer (the
              "Transferring Stockholder") shall deliver written notice (the
              "Sale Notice") to the Company. The Sale Notice shall disclose in
              reasonable detail the identity of the prospective transferee(s),
              the number of shares to be transferred (the "Specified Shares")
              and the terms and conditions of the proposed Transfer. No
              Transferring Stockholder shall consummate any such


                                       8

<PAGE>

              Transfer until 45 days after the Sale Notice has been delivered to
              the Company, unless the parties to the Transfer have been finally
              determined pursuant to this Paragraph 6 prior to the expiration of
              such 45-day period.

         (i)  The Company may elect to purchase all (but not less than all) of
              the Specified Shares upon the same terms and conditions as those
              set forth in the Sale Notice by delivering a written notice of
              such election to the Transferring Stockholder within 30 days after
              the Sale Notice has been delivered to the Company. If the Company
              has elected to purchase the Specified Shares, the purchase of such
              Specified Shares shall be consummated as soon as is practicable
              after the delivery of the election notice to the Transferring
              Stockholder. If the Company has not elected to purchase all of the
              Specified Shares, the Transferring Stockholder may transfer the
              Specified Shares at a price and on terms no more favorable to the
              transferee(s) thereof than those specified in the Sale Notice. Any
              Specified Shares not so transferred by the Transferring
              Stockholder within 30 days shall be reoffered to the Company
              pursuant to this Paragraph 7 prior to any subsequent Transfer.

         (j)  The restrictions set forth in this Paragraph 7 shall not apply
              with respect to any Transfer of Shares by any Person (i) in the
              case of any individual, pursuant to applicable laws of descent and
              distributions or among such individual's Immediate Family or (ii)
              in the case of a Person other than an individual, among its
              Affiliates (collectively referred to herein as "Permitted
              Transferees"); provided that the restrictions contained in this
              Paragraph 7 shall continue to be applicable to the Shares after
              any such Transfer. Notwithstanding the foregoing, no party hereto
              shall avoid the provisions of the Plan by making one or more
              transfers to one or more Permitted Transferees and then disposing
              of all or any portion of such party's interest in any such
              Permitted Transferee.

         (k)  The restrictions on the Transfer of Shares set forth in this
              Paragraph 7 shall continue with respect to each Share until the
              date on which such Share has been transferred in a Public Sale or
              an Approved Sale.

         (l)  No grant or Award related payout under the Plan shall be deemed
              compensation for purposes of computing benefits or contributions
              under any retirement plan of the Company or any Subsidiary and
              shall not affect any benefits under any other benefit plan of any
              kind or any benefit plan subsequently instituted under which the
              availability or amount of benefits is related to level of
              compensation.

         (m)  No benefit or promise under the Plan shall be secured by any
              specific assets of the Company or any Subsidiary, nor shall any
              assets of the Company or any Subsidiary be designated as
              attributable or allocated to the satisfaction of the Company's
              obligations under the Plan.

         (n)  Upon the conversion of Shares in connection with a public offering
              of the Company's securities, other than a Qualified Public
              Offering, the Participant must execute, become a party to and
              agree to be bound by the Company's Stockholder's Agreement dated
              March 27, 1997 by and among the Company, Madison Dearborn Capital
              Partners, L.P., Madison Dearborn Capital Partners II, L.P.,
              Atlantic Restaurants, Inc., Alan Vituli and the Management
              Investors.



                                       9

<PAGE>

8.       Option Terms

         (a)      The exercise period for a Stock Option, including any
                  extension which the Committee may from time to time decide to
                  grant, shall not exceed ten years from the date of grant.

         (b)      Except as otherwise provided by the Committee, a Stock Option
                  shall become exercisable with respect to 20% of the Shares
                  commencing on the first anniversary of the date of grant, with
                  an additional 20% becoming exercisable on each anniversary of
                  the date of grant thereafter; provided, in each case, that the
                  Participant shall have continuously remained in the active
                  employment of the Company, or where appropriate, a Subsidiary.

         (c)      Except as otherwise provided by the Committee, if a
                  Participant's employment with the Company, or where
                  appropriate, a Subsidiary terminates, then the Stock Options
                  held by the Participant shall have the vesting and exercise
                  terms as determined by the Committee and provided in the
                  applicable Participant's Award Agreement.

         (d)      Except as otherwise provided by the Committee, in the event
                  that a Participant ceases to be employed by the Company or any
                  of its Subsidiaries as a result of the Participant's
                  termination for Cause (the "Termination"), any and all Shares
                  which the Participant has acquired upon the exercise of the
                  Stock Options (the "Repurchase Shares"), shall be subject to
                  repurchase (the "Repurchase Option") by the Company as
                  follows:

                           (i) The purchase price for each Repurchase Share
                           shall be the lesser of (1) the exercise price paid
                           for such Repurchase Share (as proportionately
                           adjusted for all subsequent stock splits, stock
                           dividends and other recapitalizations) and (2) the
                           Fair Market Value for such Repurchase Share.

                           (ii) The Board may elect to purchase all or any
                           portion of the Repurchase Shares by delivering
                           written notice (the "Repurchase Notice") to the
                           holder or holders of the Repurchase Shares within 90
                           days after the Termination. The Repurchase Notice
                           shall set forth the number of Repurchase Shares to be
                           acquired from such holder of Repurchase Shares, the
                           aggregate consideration to be paid therefor and the
                           time and place for the closing of the transaction.

                           (iii) The closing of the purchase of the Repurchase
                           Shares shall take place on the date designated by the
                           Company in the Repurchase Notice, which date shall
                           not be more than 90 days nor less than 5 days after
                           the delivery of such notice; provided, however, that
                           in no event will such date be less than six months
                           from the date of exercise of the Stock Option with
                           respect to such Repurchase Shares. The Company shall
                           pay for the Repurchase Shares by delivery of a check
                           or wire transfer of funds. The Company shall be
                           entitled to receive from the Participant customary
                           representations and warranties regarding the sale of
                           the Repurchase Shares (including representations and
                           warranties regarding good title to such shares, free
                           and clear of any liens or encumbrances).

                           (iv)  Notwithstanding anything to the contrary
                           contained in the Plan, all repurchases of Repurchase
                           Shares by the Company shall be subject to

                                       10

<PAGE>

                           applicable restrictions contained in the Delaware
                           General Corporation Law and in the Company's and its
                           Subsidiaries' debt and equity financing agreements.
                           If any such restrictions prohibit the repurchase of
                           Repurchase Shares hereunder which the Company is
                           otherwise entitled or required to make, the time
                           periods provided herein shall be suspended, and the
                           Company may make such repurchases as soon as it is
                           permitted to do so under such restrictions.

  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

         (a)      In the event that a dividend shall be declared upon shares of
                  Stock that is payable in shares of Stock, the number of shares
                  of Stock then subject to any Award, the number of shares of
                  Stock reserved for issuance in accordance with the provisions
                  of the Plan but not yet covered by an Award and the number of
                  shares set forth in Paragraph 7(a) shall be adjusted by adding
                  to each share the number of shares which would be
                  distributable thereon if such shares had been outstanding on
                  the date fixed for determining the stockholders entitled to
                  receive such dividend.

         (b)      In the event that the outstanding shares of Stock shall be
                  changed into or exchanged for a different number or kind of
                  shares of stock or other securities of the Company or of
                  another corporation, whether through reorganization,
                  recapitalization, stock split-up, combination of shares, sale
                  of assets, merger or consolidation, then, there shall be
                  substituted for each share of Stock then subject to any Award,
                  for each share of Stock reserved for issuance in accordance
                  with the provisions of the Plan but not yet covered by an
                  Award and for each share of Stock referred to in Paragraph
                  7(a), the number and kind of shares of stock or other
                  securities into which each outstanding share of Stock shall be
                  so changed or for which each such share shall be exchanged.

         (c)      In the event that there shall be any change, other than as
                  specified in this Paragraph 11, in the number or kind of
                  outstanding shares of Stock, or of any stock or other
                  securities into which Stock shall have been changed into, or
                  for which it shall have been exchanged, then, if the Committee
                  shall, in its sole discretion, determine that such change
                  equitably requires an adjustment in the

                                       11

<PAGE>

                  number or kind of shares then subject to any Award, the number
                  or kind of shares reserved for issuance in accordance with the
                  provisions of the Plan but not yet covered by an Award and the
                  number or kind of shares referred to in Paragraph 7(a), such
                  adjustment shall be made by the Committee and shall be
                  effective and binding for all purposes of the Plan and of
                  Awards granted in accordance with the provisions of the Plan.

         (d)      In the case of any substitution or adjustment in accordance
                  with the provisions of this Paragraph 11, the exercise price
                  payable for each share of Stock issuable under the Stock
                  Option prior to such substitution or adjustment shall be the
                  exercise price for all shares of stock or other securities
                  which shall have been substituted for such share or to which
                  such share shall have been adjusted in accordance with the
                  provisions of this Paragraph 11.

         (e)      No adjustment or substitution provided for in this Paragraph
                  11 shall require the Company to sell a fractional share under
                  any Award. Any fractional share resulting from an adjustment
                  or substitution provided for in this Paragraph 11 shall be
                  rounded up to the nearest whole share.

  12.    Change of Control

         In the event of a Change of Control, any or all Stock Options and Stock
         Appreciation Rights still outstanding shall, notwithstanding any
         contrary terms of the Award Agreement, vest and become exercisable in
         full on the date of such Change of Control. As soon as practicable but
         in no event later than thirty (30) days prior to the occurrence of a
         Change of Control, the Committee shall notify the Participant of such
         Change of Control. Upon a Change of Control that qualifies as an
         Approved Sale (as defined in Paragraph 13) in which the outstanding
         common stock of the Company is converted or exchanged for or becomes a
         right to receive any cash, property or securities other than Illiquid
         Consideration (as defined in Paragraph 13), (i) the Stock Options and
         Stock Appreciation Rights shall become exercisable solely for the
         amount of such cash, property or securities that the Participant would
         have been entitled to had the Stock Options and Stock Appreciation
         Rights been exercised immediately prior to such event; and (ii) the
         Participant shall be given an opportunity to either (A) exercise any
         Stock Options and Stock Appreciation Rights prior to the consummation
         of the Approved Sale and participate in such sale as a holder of Stock
         or (B) upon consummation of the Approved Sale, receive in exchange for
         such Stock Options and Stock Appreciation Rights consideration equal to
         the amount determined by multiplying (1) the same amount of
         consideration per share of Stock received by the holders of Stock in
         connection with the Approved Sale less the exercise price per share of
         Stock of such Stock Options and Stock Appreciation Rights to acquire
         Stock by (2) the number of shares of Stock represented by such Stock
         Options and Stock Appreciation Rights. Notwithstanding the foregoing,
         to the extent the Stock Options and Stock Appreciation Rights are not
         exercised prior to or exchanged simultaneously with the consummation of
         such Approved Sale in accordance with provisions (i) or (ii) herein,
         the Stock Options and Stock Appreciation Rights shall be canceled.

13.      Sale of the Company or Sale of the Taco Cabana Group

         (a)      If (i) the Board and the holders of a majority of the Carrols
                  Stock approve a Sale of the Company or (ii) the Board and, if
                  required by applicable law, the holders of a majority of the
                  Carrols Stock approve a Sale of the Taco Cabana Group (each an
                  "Approved Sale"), the holders of Stock shall, if required by
                  applicable law, consent to and raise no objections against
                  such Approved Sale and if such


                                       12

<PAGE>

                  Approved Sale is structured as a sale of capital stock, the
                  holders of Stock shall agree to sell their Stock on the terms
                  and conditions approved by the Board and, if required, the
                  holders of a majority of the Carrols Stock. The holders of
                  Stock shall take all necessary and desirable actions in
                  connection with the consummation of an Approved Sale of the
                  Company or an Approved Sale of the Taco Cabana Group.
                  Notwithstanding the foregoing, in the event that the
                  consideration to be received by the holders of Stock in
                  connection with an Approved Sale shall include either (x)
                  shares of common stock of a class which is not listed on a
                  national securities exchange or in the NASDAQ system and which
                  is not entitled to registration rights for sale in a
                  registered public offering under the Securities Act of 1933 or
                  (y) shares of senior equity securities which do not provide
                  for a scheduled redemption or a redemption at the option of
                  the holders thereof, such holders shall not be required to
                  sell their shares of Stock pursuant to this Paragraph 13(a)
                  (collectively, the "Illiquid Consideration").

         (b)      The obligations of the holders of Stock with respect to the
                  Approved Sale of the Company or an Approved Sale of the Taco
                  Cabana Group is subject to the satisfaction of the condition
                  that, upon the consummation of such Approved Sale, all of the
                  holders of Stock receive the same form and amount of
                  consideration per share of Stock, or if any holders of Stock
                  are given an option as to the form and amount of consideration
                  to be received, all holders be given the same option.

         (c)      If the Company enters into any negotiation or transaction
                  involving the issuance of securities of another party to the
                  holders of the Company's securities for which Rule 506 (or any
                  similar rule then in effect), promulgated by the Securities
                  Exchange Commission, may be available with respect to such
                  negotiation or transaction (including a merger, consolidation
                  or other reorganization), the holders of Stock shall at the
                  request of the Company, appoint a "purchaser representative"
                  (as such term is defined in Rule 501) reasonably acceptable to
                  the Company. If any holder of Stock appoints a purchaser
                  representative designated by the Company, the Company shall
                  pay the fees of such purchaser representative. However, if any
                  holder of Stock declines to appoint the purchaser
                  representative designated by the Company, such holder shall
                  appoint another purchaser representative (reasonably
                  acceptable to the Company), and such holder shall be
                  responsible for the fees of the purchaser representative so
                  appointed.

         (d)      Participants and the other holders of Stock (if any) shall
                  bear their pro-rata share (based upon the number of shares
                  sold) of the costs of any sale of Stock pursuant to an
                  Approved Sale to the extent such costs are incurred for the
                  benefit of all holders of Stock and are not otherwise paid by
                  the Company or the acquiring party. Costs incurred by
                  Participants and the other holders of Stock on their own
                  behalf shall not be considered costs of the transaction
                  hereunder.

         (e)      The provisions of this Paragraph 13 shall terminate upon the
                  closing of a Qualified Public Offering.

  14.    Amendment and Termination

         (a)      The Committee shall have the authority to make such amendments
                  to any terms and conditions applicable to outstanding Awards
                  as are consistent with the Plan provided that, no such action
                  shall modify such Award in a manner adverse to the Participant
                  without the Participant's consent, except as such modification
                  is provided for or contemplated under the terms of the Award.

                                       13

<PAGE>

         (b)      The Committee may terminate, amend or modify the provisions of
                  the Plan (including any performance criteria or conditions
                  which must be achieved in order for an Employee to receive an
                  Award or Awards, subject to Paragraph 6(e)) at any time and
                  from time to time; provided, however, that an amendment which
                  requires stockholder approval in order for the Plan to
                  continue to comply with Rule 16b-3, Section 162(m) of the Code
                  or any other law, regulation or stock exchange requirement
                  shall not be effective unless approved by the requisite vote
                  of stockholders. The termination, amendment or modification of
                  the Plan may be in response to changes in the Code, the
                  Exchange Act, national securities exchange regulations or for
                  other reasons deemed appropriate by the Committee.

         (c)      Notwithstanding anything herein to the contrary, in the event
                  that the Committee, in its sole discretion, determines that
                  either (i) the grant of an Award or (ii) the issuance of Stock
                  in connection with an Award hereunder, would result in the
                  Company or any of its Subsidiaries recognizing gain for
                  federal or state income tax purposes, the Committee shall have
                  the right, in its sole discretion, to amend, terminate,
                  suspend or otherwise modify the Plan or any Award hereunder in
                  whole or in part in order to limit or eliminate such adverse
                  tax effect on the Company or any of its Subsidiaries;
                  provided, however, that the Committee shall in good faith use
                  its best efforts to put Participants in substantially the same
                  economic position as they would have been in had the
                  provisions of this subsection not been applicable.


15.      Foreign Options and Rights

         The Committee may make Awards to Employees who are subject to the laws
         of nations other than the United States, which Awards may have terms
         and conditions that differ from the terms thereof as provided elsewhere
         in the Plan for the purpose of complying with foreign laws.

  16.    Withholding Taxes

         The Company shall have the right to deduct from any cash payment made
         under the Plan any federal, state or local income or other taxes
         required by law to be withheld with respect to such payment. It shall
         be a condition to the obligation of the Company to deliver Shares upon
         the exercise of a Stock Option or Stock Appreciation Right, upon
         payment of Performance Units or Performance Shares, upon delivery of
         Restricted Stock or upon exercise, settlement or payment of any Other
         Stock-Based Award, that the 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


                                       14

<PAGE>

         the Company's approval, or paid by the member in satisfaction of any
         judgment in any such action, suit or proceeding against the member,
         provided such member shall give the Company an opportunity, at its own
         expense, to handle and defend the same before the member undertakes to
         handle and defend it on his or her own behalf. The foregoing right of
         indemnification shall not be exclusive of any other rights of
         indemnification to which the member may be entitled under the Company's
         Certificate of Incorporation, as amended or By-laws, as a matter of
         law, or otherwise, or any power that the Company may have to indemnify
         them or hold them harmless.

  18.    Successors

         The terms of the Plan shall be binding upon the Company, its successors
         and assigns and all transferees of Awards and/or Shares hereunder.

  19.    Requirement of Law

         (a)      The granting of Awards and the issuance of Shares under the
                  Plan shall be subject to all applicable laws, rules and
                  regulations, and to such approval by any governmental agencies
                  or national securities exchanges as may be required.

         (b)      In the event any provision of the Plan shall be held illegal
                  or invalid for any reason, the illegality or invalidity shall
                  not affect the remaining parts of the Plan, and the Plan shall
                  be construed and enforced as if the illegal or invalid
                  provision had not been included.

         (c)      To the extent that federal laws do not otherwise control, the
                  Plan and all Award Agreements, shall be construed in
                  accordance with and governed by the laws of the State of New
                  York.

  20.    Effective Date and Termination Dates

         The Plan shall be effective as of January 1, 2001 and shall terminate
         ten years later, subject to such earlier termination by the Committee
         pursuant to Paragraph 14.



                                       15