<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report pursuant to section 13 or 15(d) of the Securities
--- Exchange Act of 1934 for the quarterly period ended December 29, 1996;
or
Transition report pursuant to section 13 or 15(d) of the Securities
--- Exchange Act of 1934 for the transition period from _____ to _____.
Commission File Number 0-24828
UNITED RESTAURANTS, INC.
------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-4428370
---------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1990 WESTWOOD BOULEVARD, LOS ANGELES, CALIFORNIA 90025
------------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(310) 475-5600
------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Check whether the Issuer (1) filed all reports to be filed by Section 13 or
15(d) during the preceding 12 months (or for such shorter period that the
Registrant was required to file such Reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
YES X NO
---------- ----------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at February 12, 1997
----------------------- --------------------------------
Common Stock, par value 7,509,100 shares
$.01 per share ---------
Transitional Small Business Disclosure Format (check one):
YES NO X
---------- ----------
<PAGE> 2
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED RESTAURANTS AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 29, 1996 September 30,1996
(Unaudited) (Derived from
Audited Financial
Statements)
----------------- -----------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 982,895 $1,010,062
Accounts receivable, less allowance for doubtful
accounts of $15,500 (December 29, 1996),
$15,500 (September 30, 1996) 158,638 125,402
Short term note receivable 5,954
Equipment contract receivable 330,000
Inventories 248,226 210,054
Prepaid expenses and other assets 159,502 145,187
Net assets discontinued business, held for sale 450,248
---------- ----------
TOTAL CURRENT ASSETS 2,005,463 1,820,705
PROPERTY AND EQUIPMENT, NET 2,145,171 2,124,346
OTHER ASSETS
Pre-opening costs 489,765 132,723
Due from related parties 48,000 69,419
Deferred financing cost 66,665 80,000
Deposits and other 49,602 131,389
---------- ----------
TOTAL OTHER ASSETS 654,032 413,531
---------- ----------
TOTAL ASSETS $4,804,666 $4,358,582
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
2
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LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 29, 1996 September 30,1996
(Unaudited) (Derived From
Audited Financial
Statements)
----------------- -----------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 708,099 $ 561,819
Accrued liabilities 342,240 125,219
Accrued costs of discontinued operations 774,248
Current portion of long-term debt 1,051 172,571
------------- -------------
TOTAL CURRENT LIABILITIES 1,825,638 859,609
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY Preferred Stock, $.01 par value:
Authorized - 3,000,000 shares
Issued and outstanding - none
Common Stock, $.01 par value:
Authorized - 22,000,000 shares
Issued and outstanding - 7,309,100 shares
and 6,362,500 shares 73,091 63,625
Additional paid - in capital 8,550,576 7,850,042
Accumulated deficit (5,644,639) (4,414,694)
------------- ----------
TOTAL STOCKHOLDERS' EQUITY 2,979,028 3,498,973
$ 4,804,666 $ 4,358,582
============= =============
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
3
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UNITED RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
December 29, 1996 December 31, 1995
----------------- -----------------
REVENUES
<S> <C> <C>
Food and beverage sales $ 638,186 $ 1,017,702
Merchandise sales 72,869 84,910
Membership fees 158,367 136,708
Other 19,499 4,000
--------------- -------------
888,921 1,243,320
--------------- ------------
COST AND EXPENSES:
Food and beverage 215,925 302,312
Merchandise 48,305 55,822
Direct labor and benefits 403,091 409,089
Occupancy and other 297,784 406,787
General and administrative 101,656 297,597
Depreciation and amortization 51,386 69,809
--------------- -------------
1,118,147 1,541,416
--------------- ------------
LOSS FROM OPERATIONS (229,226) (298,096)
OTHER INCOME (EXPENSES)
Interest income 5,650 34,489
Interest expense (36,558) (7,224)
Other income, net (756) 2,323
--------------- -------------
(31,664) 29,588
--------------- ------------
LOSS FROM CONTINUING OPERATIONS (260,890) (268,508)
--------------- ------------
DISCONTINUED OPERATIONS:
Loss from operations of Loves Restaurants (94,809) (103,538)
Loss on disposal of Loves Restaurants,
including provision of $424,000 for
operating losses during phase-out period (874,248)
--------------- -------------
LOSS FROM DISCONTINUED OPERATIONS (969,057) (103,538)
--------------- ------------
NET LOSS $ (1,229,947) $ (372,046)
=============== ============
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK OUTSTANDING 7,309,100 6,262,500
=============== =============
LOSS PER COMMON STOCK
Loss from continuing operations $ (0.04) $ (0.04)
Loss from discontinued operations (0.13) (0.02)
--------------- -------------
NET LOSS PER COMMON STOCK $ (0.17) $ (0.06)
=============== ============
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
4
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UNITED RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
December 29, 1996 December 31, 1995
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $(1,229,947) $ (372,046)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 76,749 97,765
Amortization of deferred financing costs 13,335
Allowance for sale of net assets 100,000
Changes in operating assets/liabilities:
Accounts and other receivables (39,190) (35,038)
Inventories (76,208) (45,381)
Prepaid expenses (60,744) 27,993
Deposits and other (17,304)
Accounts payable and other accrued liability 363,301 (12,333)
Accrued costs of discontinued operations 774,248
----------- -----------
Net Cash Used In Operating Activities (78,456) (356,344)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Pre-opening costs (357,042)
Purchases of property and equipment (481,568)
Advance to related party 21,419
Capital assets (7,302)
----------- -----------
Net Cash - Used by Investing Activities (817,191) (7,302)
----------- -----------
CASH FLOW - FINANCING
Equipment contract recv. 330,000
Capital stock 9,466
Additional paid in capital 700,534
Notes payable (171,520) (9,828)
----------- -----------
Net Cash - Financing 868,480 (9,828)
----------- -----------
NET CHANGE IN CASH AND
CASH EQUIVALENTS (27,167) (373,474)
CASH AND CASH EQUIVALENTS,
beginning of period 1,010,062 2,281,973
----------- -----------
CASH AND CASH EQUIVALENTS,
end of period $ 982,895 $ 1,908,499
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
5
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UNITED RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. The results of interim periods are not necessarily indicative of
results to be expected for the year. In the opinion of the Company,
the accompanying consolidated financial statements reflect all
adjustments (which are normal recurring adjustments) necessary for a
fair presentation of the results for the interim period and the
comparable period presented. These condensed financial statements do
not purport to be full presentations and do not include all
requirements in accordance with generally accepted accounting
principles, but include all information required by the instructions
to Form 10-QSB.
The information included in this quarterly report on form 10-QSB
should be read in conjunction with the audited financial statements as
of September 30, 1996 filed as part of the Company's annual report on
form 10-KSB.
Note 2. Disposition of business segment in December 1996. The Board of
Directors approved a plan of dissolution for the Love's restaurant
chain. The Company estimates that it will lose approximately $450,000
on the sale of the related assets and an additional $424,000 related
to the wind down and disposal of the Love's restaurant chain over an
estimated ten to eighteen months.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-QSB contains forward-looking
statements. A forward-looking statement may contain words such as "will continue
to be," "will be," continue to," "expect to," "anticipates that," "to be" or
"can impact." Management cautions that forward-looking statements are subject to
risks and uncertainties that could cause the Company's actual results to differ
materially from those projected in forward-looking statements.
United Restaurants, Inc. and its subsidiaries (collectively,
the "Company") is engaged in the business of the ownership, operation and
development of restaurants, including the ownership and operation of one "Grand
Havana Room" private restaurant and cigar club which opened in June 1995 and two
additional Grand Havana Rooms, one in New York, New York and one in Washington,
D.C., which are scheduled to open in the near future. The Company intends to
actively pursue the operation of its existing Grand Havana Room locations and
the development of additional Grand Havana Room locations in major cities as its
principal business focus.
On May 27, 1993, soon after its incorporation, the Company
acquired all of the issued and outstanding shares of the capital stock of Love's
Enterprises, Inc. ("Love's"). Love's, which has been in business since the
1950's, currently operates three Company-owned Love's restaurants and is the
franchisor of an additional 10 Love's restaurants. In December 1996, the Company
adopted a formal plan of discontinuance of its Love's subsidiary.
In April 1995, the Company opened "On Canon," an upscale
Italian restaurant and bar in Beverly Hills, California, which it continues to
operate. In June of 1994 the Company acquired 85% of the stock of Il Forno,
Inc., which owns and operates an Italian restaurant in Santa Monica, California.
On September 20, 1996, the Company sold its 85% interest back to Il Forno's
former owners.
The Company's initial Grand Havana Room opened in June, 1995
and is located in Beverly Hills, California, on the second floor in the space
above the Company's On Canon restaurant. The Company has entered into leases for
space in New York, New York and Washington, D.C., in which it is currently
developing two new Grand Havana Rooms, which Grand Havana Rooms are anticipated
to open in the near future. The Grand Havana Room is a private club that
includes the operation of an upscale restaurant, a full bar and a private
smoking lounge. The Grand Havana Room also offers the ancillary sale of cigars,
tobacco products and cigar accessories.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED DECEMBER 29, 1996, COMPARED TO THREE
MONTHS ENDED DECEMBER 31, 1995
The Company derives revenues from three principal sources:
food and beverage sales, merchandise sales and membership fees. During the
quarter ended December 29, 1996, the Company was operating the On Canon
Restaurant and one
7
<PAGE> 8
Grand Havana Room. During the quarter ended December 31, 1995, the Company was
operating the Il Forno Restaurant, the On Canon Restaurant and one Grand Havana
Room. The operations of Love's was discontinued and accordingly, its results of
operations for the quarter ended December 29, 1996 and December 31, 1995 are
shown under "Discontinued operations" in the accompanying statements of
operations. The Company had revenues of $888,921 for the quarter ended December
29, 1996, compared to $1,243,320 for the quarter ended December 31, 1995. This
decrease in revenues was primarily due to decrease in the food and beverage
sales that resulted from the sale of the Il Forno Restaurant in September of
1996. Membership fees from the Company's one Grand Havana Room increased from
$136,708 for the fiscal quarter ended December 31, 1995 to $158,367 in the
fiscal quarter ended December 29, 1996 due to the increase in the number of
members in the Grand Havana Room.
Cost and expenses decreased significantly, from $1,541,416 in
the fiscal quarter ended December 31, 1995 to $1,118,147 in the fiscal quarter
ended December 29, 1996 due to the cost and expense associated with the
operation of the Il Forno Restaurant in the prior year. Cost of food and
beverage as a percentage of food and beverage sales increased from 30% last year
to 34% this quarter.
The discontinued operations of Love's resulted in a loss of
$103,538 and $969,057 for the quarters ended December 31, 1995 and
December 29, 1996, respectively. The loss from discontinued operations
included a provision for estimated loss on disposal, including operating
losses during the phase-out period, of $874,248.
LIQUIDITY AND CAPITAL RESOURCES
The Company intends to continue the expansion of its business,
primarily through the development and operation of additional Grand Havana
Rooms, including the addition of a new Grand Havana Room in New York, New York
and Washington, D.C. The Company may also continue to expand its business in
accordance with its original business plan by introducing new restaurant
concepts in Southern California, but there are no new pending restaurant
concepts currently being considered by management.
As a result of its expansion activities, the Company's working
capital has continually been reduced. At December 29, 1996 the Company had cash
or cash equivalents of $982,895. The Company anticipates that in connection with
its development plans during the next 12 months of operations, the Company may
require additional funds which the Company may raise through the private
placement of securities. In this regard, since the end of its fiscal year ended
September 30, 1996, the Company has raised an aggregate of $710,000 during the
quarter ended December 29, 1996 through the sale of its securities in a private
placement and contemplates that it may need to raise up to an additional
$290,000 in this private placement, for aggregate proceeds to the Company from
this private placement of up to $1,000,000. Management believes that with its
current working capital the funds raised in this private placement and the
monies received from initial membership fees at its Grand Havana Rooms, the
Company will be able to operate its business and to fund the development of its
business
8
<PAGE> 9
for at least the next 12 months. The Company's management believes that funds
spent on the Company's development activities will accrue to the Company's
benefit in future years.
9
<PAGE> 10
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
The Company is conducting a private placement to raise up to
$1,000,000 through the sale of its equity securities. From October through
December 1996 an aggregate of seven investors purchased an aggregate of 946,666
shares of common stock and warrants to purchase an additional 946,666 shares of
common stock, which warrants are exercisable at an exercise price of $1.50 per
share, for aggregate proceeds to the Company of $710,000. The offering was made
directly by the officers and directors of the Company. The following individuals
purchased the following securities in the private placement:
<TABLE>
<CAPTION>
Investor # Shares # Warrants Purchase Price
- -------- -------- ---------- --------------
<S> <C> <C> <C>
Harry Shuster 333,333 333,333 $ 250,000
Anthony Mazzarella 33,333 33,333 $ 25,000
United Leisure Corp. 333,333 333,333 $ 250,000
Todd Rome 40,000 40,000 $ 30,000
Warren D. Bagatelle 66,667 66,667 $ 50,000
Euro Translation Ltd. 40,000 40,000 $ 30,000
Marshall Geller 100,000 100,000 $ 75,000
--------- --------- - ------
946,666 946,666 $ 710,000
</TABLE>
Harry Shuster, a purchaser of securities in the private placement, is the
Chairman of the Board and President of the Company. Harry Shuster is also the
Chairman of the Board and President of United Leisure Corporation, another
investor in the private placement.
On December 3, 1996 the Company issued options to purchase an
aggregate of 100,000 shares of the common stock of the Company to Stanley
Shuster, an officer and director of the Company, pursuant to the Company's 1996
Non-Qualified Stock Option Plan. The options granted to Mr. Shuster are
exercisable at an exercise price of $1.00 per share, 85% of the fair market
value of such shares on the date of grant. See Item 5, below.
On January 30, 1996, in consideration for consulting services
rendered, the Company granted an option to Joe Pantoliano to purchase an
aggregate of 5,000 shares of the Company's common stock at an exercise price of
$1.00 per share. On September 15, 1996, in consideration for consulting services
rendered, the Company granted an option to Joe Pantoliano to purchase an
aggregate of 20,000 shares of the Company's Common Stock at an exercise price of
$.80 per share.
Each of the forgoing transactions was exempt pursuant to
Section 4(2) of the Securities Act of 1933, as amended, for issuance of
securities not involving any public offering.
10
<PAGE> 11
ITEM 5. OTHER INFORMATION
1996 Stock Option Plan
On December 1, 1996 the Board of Directors of the Company
adopted the United Restaurants, Inc. 1996 Stock Option Plan (the "Plan"). The
plan provides for the grant of non-qualified stock options to purchase an
aggregate of up to 626,250 shares of the Company's common stock. The Plan was
adopted in order to enable the Company to attract and retain the services of
selected employees, directors and other key contributors (including consultants
and non-employee agents) of the Company or any subsidiary of the Company in
order to promote the success of the Company.
The Plan is administered by the Board of Directors of the
Company which has authority to determine and designate from time to time (a) the
purchase price of the shares covered by each option, (b) whether any payment
will be required upon grant of the option, (c) the individuals to whom, and the
time or times at which, options shall be granted, (d) the number of shares to be
subject to each option, (e) when an option can be exercised and whether in whole
or in installments, (f) whether the options are immediately transferable, (g)
whether the exercisability of the options is subject to a risk of forfeiture or
other conditions and (h) whether the stock issued upon exercise of an option is
subject to repurchase by the Company, and the terms of such repurchase.
With respect to each option grant, the Board of Directors
shall determine the option price (which shall not be less than 85% of the last
price at which shares of the Company's Common Stock were sold as reported by
NASDAQ on the day prior to the date of grant, or, if no last sales price is
available, such other price as the Board determines is at least 85% of the fair
market value of the stock on the date of grant).
Unless otherwise determined by the Board of Directors, in
the event the employment or service of the optionee with the Company terminates
for any reason other than because of physical disability or death as provided
below, the option may be exercised at any time prior to the expiration date of
the option or the expiration of 30 days after the date of such termination,
whichever is the shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of such termination; provided,
however, in connection with the termination of any employee or other person
rendering services to the Company, the Board of Directors may determine, in its
sole discretion, to allow the exercisability of the option to continue until the
original expiration date of the option.
The Board of Directors has granted options to purchase an
aggregate of 100,000 shares of the Company's Common Stock under the Plan to date
and an aggregate of 526,250 shares remain available for grant under the Plan.
11
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(10) 1996 Stock Option Plan of the Company
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no Reports on Form 8-K during the period
covered by this Quarterly Report on Form 10-QSB.
No other Items of Part II are applicable to the Registrant for
the period covered by this Quarterly Report on Form 10-QSB.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
UNITED RESTAURANTS, INC.
Dated: February 14, 1997 By /s/Harry Shuster
-----------------------------
Harry Shuster,
Chairman of the Board,
Chief Executive Officer and
Chief Financial Officer
13
<PAGE> 1
EXHIBIT 10
UNITED RESTAURANTS, INC.
1996 STOCK OPTION PLAN
1. Purpose.
This 1996 Stock Option Plan (the "Plan") provides for the
grant of non-qualified stock options by United Restaurants, Inc. (the
"Company"). The purpose of the Plan is to enable the Company to attract and
retain the services of selected employees, officers, directors and other key
contributors (including consultants and nonemployee agents) of the Company or
any subsidiary of the Company in order to promote the success of the Company.
Pursuant to the Plan, such persons will be given the opportunity to acquire
common stock of the Company through the grant of non-qualified stock options.
Non-qualified stock options are those which do not qualify for preferential tax
treatment afforded incentive stock options under Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code"). For purposes of this Plan, the
term "Company" shall be deemed to include subsidiaries.
2. Shares Subject to the Plan.
Subject to adjustment as provided below, there will be
reserved for issuance upon the exercise of options under the Plan an aggregate
of 626,250 shares of Common Stock. Such shares may be, in whole or in part,
authorized but unissued shares of Common Stock or issued shares of Common Stock
which shall have been reacquired by the Company. If an option granted under the
Plan expires, terminates or is cancelled, the unissued shares subject to such
option shall again be available under the Plan.
3. Effective Date and Duration of Plan.
3.1 Effective Date. The Plan shall be effective as of
December 1, 1996.
3.2 Duration. The Plan shall continue in effect until all
shares available for issuance under the Plan have been issued and all
restrictions on such shares have lapsed; provided, however, the Board of
Directors may suspend or terminate the Plan at any time except with respect to
options then outstanding under the Plan. Termination shall not affect any
outstanding option.
4. Administration.
4.1 Board of Directors. The Plan shall be administered by
the Board of Directors of the Company, which shall determine and designate from
time to time (a) the purchase price of the shares covered by each option, (b)
whether any payment will be required upon grant of the option, (c) the
individuals to whom, and the time or times at which, options shall be granted,
(d) the number of shares to be subject to each option, (e) when an option can be
exercised and whether in whole or in installments, (f) whether the
<PAGE> 2
options are immediately transferable, (g) whether the exercisability of the
options is subject to a risk of forfeiture or other conditions and (h) whether
the stock issued upon exercise of an option is subject to repurchase by the
Company, and the terms of such repurchase. Subject to the provisions of the
Plan, the Board of Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the Board
of Directors shall be final and conclusive. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any related agreement in the manner and to the extent it shall deem expedient
to carry the Plan into effect, and it shall be the sole and final judge of such
expediency.
4.2 Committee. The Board of Directors may delegate to a
committee of the Board of Directors or specified officers of the Company, or
both (the "Committee"), any or all authority for administration of the Plan. If
authority is delegated to a Committee, all references to the Board of Directors
in the Plan shall mean and relate to the Committee except (i) as otherwise
provided by the Board of Directors and (ii) that only the Board of Directors may
amend or terminate the Plan as provided in paragraphs 3 and 9.
5. Eligibility.
The Board of Directors may, from time to time, grant options
under the Plan to the Company's employees, officers and directors as well as to
consultants of the Company and other non-employees who the Board of Directors
believes have made or will make a valuable contribution to the Company.
6. Option Grants.
6.1 Option Price. With respect to each option grant, the
Board of Directors shall determine the option price (which shall not be less
than 85% of the last price at which shares of the Company's Common Stock were
sold as reported by NASDAQ on the day prior to the date of grant, or, if no last
sales price is available, such other price as the Board determine is at least
85% of the fair market value of the stock on the date of grant).
6.2. Exercise of Options. Except as provided in paragraph
6.4 or as otherwise determined by the Board of Directors, no option granted
under the Plan may be exercised unless, at the time of such exercise, the
optionee is employed by or is in the service of the Company and shall have been
so employed or provided such service continuously since the date such option was
granted.
2
<PAGE> 3
Absence on leave or on account of illness or disability under rules established
by the Board of Directors shall not, however, be deemed an interruption of
employment or service for this purpose. Unless otherwise determined by the Board
of Directors, vesting of options shall not continue during an absence on leave
(including an extended illness) or on account of disability. Except as provided
in paragraphs 6.4 and 7, options granted under the Plan may be exercised from
time to time over the period stated in each option in such amounts and at such
times as shall be prescribed by the Board of Directors, provided that options
shall not be exercised for fractional shares. Unless otherwise determined by the
Board of Directors, if the optionee does not exercise an option in any one year
with respect to the full number of shares to which the optionee is entitled in
that year, the optionee's rights shall be cumulative and the optionee may
purchase those shares in any subsequent year during the term of the option.
6.3 Nontransferability. Unless otherwise determined by the
Board of Directors, each option granted under the Plan by its terms shall be
nonassignable and nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the optionee's domicile at the time of death, and each
option by its terms shall be exercisable during the optionee's lifetime only by
the optionee.
6.4 Termination of Employment or Service.
(a) General Rule. Unless otherwise determined by
the Board of Directors, in the event the employment or service of the optionee
with the Company terminates for any reason other than because of physical
disability or death as provided below, the option may be exercised at any time
prior to the expiration date of the option or the expiration of 30 days after
the date of such termination, whichever is the shorter period, but only if and
to the extent the optionee was entitled to exercise the option at the date of
such termination; provided, however, in connection with the termination of any
employee or other person rendering services to the Company, the Board of
Directors may determine, in its sole discretion, to allow the exercisability of
the option to continue until the original expiration date of the option.
(b) Termination Because of Physical Disability.
Unless otherwise determined by the Board of Directors, in the event of the
termination of employment or service because of physical disability (as that
term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended), the option may be exercised at any time prior to the expiration date
of the option or the expiration of 12 months after the date of such termination,
whichever is the shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of such termination.
3
<PAGE> 4
(c) Termination Because of Death. Unless
otherwise determined by the Board of Directors, in the event of the death of an
optionee while employed by or providing service to the Company, the option may
be exercised at any time prior to the expiration date of the option or the
expiration of 12 months after the date of such death, whichever is the shorter
period, but only if and to the extent the optionee was entitled to exercise the
option at the date of such termination and only by the person or persons to whom
such optionee's rights under the option shall pass by the optionee's will or by
the laws of descent and distribution of the state or country of domicile at the
time of death.
(d) Amendment of Exercise Period Applicable to
Termination. The Board of Directors, at the time of grant or at any time
thereafter, may but shall have no obligation to extend the aforesaid 30-day and
12-month exercise periods to any length of time not later than the original
expiration date of the option, and may increase the portion of an option that is
exercisable, subject to such terms and conditions as the Board of Directors may
determine.
(e) Failure To Exercise Option. To the extent
that the option of any deceased optionee or of any optionee whose employment or
service terminates is not exercised within the applicable period, all further
rights to purchase shares pursuant to such option shall cease and terminate.
6.5 Purchase of Shares. Unless the Board of Directors
determines otherwise, shares may be acquired pursuant to an option granted under
the Plan only upon receipt by the Company of notice in writing from the optionee
of the optionee's intention to exercise, specifying the number of shares as to
which the optionee desires to exercise the option and the date on which the
optionee desires to complete the transaction (which date shall not be later than
ten (10) business days after the date of exercise), and, if required in order to
comply with the Securities Act of 1933, as amended, containing a representation
that it is the optionee's present intention to acquire the shares for investment
and not with a view to distribution, and any other information the Board of
Directors may request. Unless the Board of Directors determines otherwise, on or
before the date specified for completion of the purchase of shares pursuant to
an option, the optionee must have paid the Company the full purchase price of
such shares in cash (including, with the consent of the Board of Directors, cash
that may be the proceeds of a loan from the Company). No shares shall be issued
until full payment therefor has been made. Each optionee who has exercised an
option shall immediately upon notification of the amount due, if any, pay to the
Company in cash amounts necessary to satisfy any applicable federal, state and
local tax withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the certificates, the
optionee shall pay such amount to the Company on demand. If the optionee fails
to pay the amount demanded, the Company may withhold that amount from other
amounts payable by the
4
<PAGE> 5
Company to the optionee, including salary, subject to applicable law.
7. Changes in Capital Structure.
If the outstanding Common Stock of the Company is hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of any recapitalization, reclassification, stock split, combination of
shares or dividend payable in shares, appropriate adjustment shall be made by
the Board of Directors in the number and kind of shares available for awards
under the Plan. In addition, the Board of Directors shall make appropriate
adjustment in the number and kind of shares as to which outstanding options, or
portions thereof then unexercised, shall be exercisable, so that the optionee's
proportionate interest before and after the occurrence of the event is
maintained. Notwithstanding the foregoing, the Board of Directors shall have no
obligation to effect any adjustment that would or might result in the issuance
of fractional shares, and any fractional shares resulting from any adjustment
may be disregarded or provided for in any manner determined by the Board of
Directors. Any such adjustments made by the Board of Directors shall be
conclusive.
8. Effect of Liquidation or Reorganization.
8.1 Cash Stock or Other Property for Stock. Except as
--------------------------------------
provided in paragraph 8.2, upon a merger, consolidation, acquisition of property
or stock, reorganization or liquidation of the Company, as a result of which the
stockholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock, any option granted
hereunder shall terminate, but the optionee shall have the right during a 30-day
period immediately prior to any such merger, consolidation, acquisition of
property or stock, reorganization or liquidation to exercise his or her option
in whole or in part whether or not the vesting requirements applicable to the
option have been satisfied.
8.2 Conversion of Options on Stock for Stock Exchange. If
the stockholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger, consolidation, acquisition of property or stock,
separation or reorganization, all options granted hereunder shall be converted
into options to purchase shares of Exchange Stock unless the Board of Directors,
in its sole discretion, determines that any or all of such options granted
hereunder shall not be converted into options to purchase shares of Exchange
Stock but instead shall terminate in accordance with the provisions of paragraph
8.1. The amount and price of converted options shall be determined by adjusting
the amount and price of the options granted hereunder in the same proportion as
used for determining the number of shares of Exchange Stock the
5
<PAGE> 6
holders of the Common Stock receive in such merger, consolidation, acquisition
of property or stock, separation or reorganization.
9. Corporate Mergers, Acquisitions, Etc.
The Board of Directors may also grant options under the Plan
having terms, conditions and provisions that vary from those specified in this
Plan, provided that any such awards are granted in substitution for, or in
connection with the assumption of, existing options issued by another
corporation and assumed or otherwise agreed to be provided for by the Company
pursuant to or by reason of a transaction involving a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to which the Company or a subsidiary is a party.
10 Change of Control.
Notwithstanding the provisions of any option which provide for
its exercise in installments as designated by the Board, all options shall
become immediately exercisable in the event of a "change in control" or
"threatened change in control" of the Company. The term "change in control"
shall refer to the acquisition, in any single transaction or series of related
transactions, of 25% or more of the voting securities of the Company by any
person or by persons acting as a group within the meaning of Section 13(d) of
the Securities Exchange Act of 1934; provided, however, that for purposes of the
Plan no change in control or threatened change in control shall be deemed to
have occurred if prior to the acquisition of, or offer to acquire, 25% or more
of the voting securities of the Company, the full Board shall have adopted, by
not less than a two-thirds vote, a resolution specifically approving such
acquisition or offer. Whether a "threatened change in control" has occurred
shall be determined by the Board in its sole discretion. The term "person" shall
include any individual, corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, or unincorporated organization.
11. Amendment of Plan.
The Board of Directors may at any time, and from time to time,
modify or amend the Plan in such respects as it shall deem advisable because of
changes in the law while the Plan is in effect or for any other reason. Except
as provided in paragraphs 6.4, 7 and 8, however, no change in an award already
granted shall be made without the written consent of the holder of such award.
12. Government and Other Regulations.
The obligation of the Company to sell and deliver shares under
the options granted under the Plan shall be subject to (i) all applicable laws,
rules and regulations and such approvals by any governmental agencies as may be
required, including, without
6
<PAGE> 7
limitation, the effectiveness of a registration statement under the Securities
Act of 1933, and (ii) the requirements of any stock exchange upon which the
Common Stock may then be listed. At the time of the grant or exercise of any
option, the Company may, if it is deemed necessary or desirable for any reason
connected with any law or regulation of any governmental authority relating to
the regulation of securities, require the holder to make such representations
regarding his acquisition of the Common Stock or agree to comply with such
restrictions on the transfer of the Common Stock as the Board may specify. In
the event such representations are required, no shares shall be issued to such
individual unless and until the Company is satisfied with any such
representation.
13. Employment and Service Rights.
Nothing in the Plan or any award pursuant to the Plan shall (a) confer upon any
employee any right to be continued in the employment of the Company or interfere
in any way with the right of the Company by whom such employee is employed to
terminate such employee's employment at any time, for any reason, with or
without cause, or to decrease such employee's compensation or benefits, or (b)
confer upon any person engaged by the Company any right to be retained or
employed by the Company or to the continuation, extension, renewal, or
modification of any compensation, contract, or arrangement with or by the
Company.
14. Rights as a Shareholder.
The recipient of any award under the Plan shall have no rights
as a shareholder with respect to any Common Stock until the date of issue to the
recipient of a stock certificate for such shares. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date occurs prior to the date such stock certificate is
issued.
This 1996 Stock Option Plan has been approved by the Board of
Directors of United Restaurants, Inc. as of December 1, 1996.
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
(A) THE COMPANY'S CONSOLIDATED BALANCE SHEETS AND FINANCIAL STATEMENTS OF
OPERATIONS FOR ITS FISCAL QUARTER ENDED DECEMBER 29, 1996, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 982,895
<SECURITIES> 0
<RECEIVABLES> 164,592
<ALLOWANCES> 15,500
<INVENTORY> 248,226
<CURRENT-ASSETS> 2,005,463
<PP&E> 2,145,171
<DEPRECIATION> 76,749
<TOTAL-ASSETS> 4,804,666
<CURRENT-LIABILITIES> 1,825,638
<BONDS> 0
0
0
<COMMON> 2,979,028
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,804,666
<SALES> 711,055
<TOTAL-REVENUES> 888,921
<CGS> 1,066,761
<TOTAL-COSTS> 1,118,147
<OTHER-EXPENSES> 31,664
<LOSS-PROVISION> 424,000
<INTEREST-EXPENSE> 36,558
<INCOME-PRETAX> (229,226)
<INCOME-TAX> 0
<INCOME-CONTINUING> (260,890)
<DISCONTINUED> (969,057)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,229,947)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
