Lyle B. Stewart, P.C.
3751 South Quebec Street
Denver, Colorado 80237
Telephone: 303-267-0920
Fax: 303-267-0922
January 29, 1998
United States Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20459
Dear Madams and Sirs:
On behalf of my client, The Quizno's Corporation, we are filing herewith a
Form S-8 relating to such company's Area Director Equity Participation Rights
Stock Option Plan. Pursuant to General Instruction C to Form S-8, a Form S-3
Prospectus is included therewith for use in the resale of restricted
securities (as defined in Rule 144(a)(3)) of the company purchased in private
transactions pursuant to the Plan prior to the filing of the Registration
Statement.
If you have any questions about this filing, please contact the undersigned at
the telephone or fax numbers indicated above.
Very truly yours
/s/Lyle B. Stewart
<PAGE>
Registration No. 333-
(as filed with the SEC on January 29, 1998)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------------
The Quizno's Corporation
------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Colorado 84-1169286
- ---------------------------- --------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
1099 18th Street, Suite 2850
Denver, Colorado 80202
- ------------------------------------- --------------
The Quizno's Corporation
Area Director Equity Participation Rights Stock Option Plan
-----------------------------------------------------------
(FULL TITLE OF THE PLAN)
Patrick E. Meyers, Esq.
Vice President and General Counsel
The Quizno's Corporation
1099 18th Street, Suite 2850
Denver Colorado 80202
----------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(303) 291-0999
-------------------------------------------
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
with a copy to:
Lyle B. Stewart, Esquire
Lyle B. Stewart, P.C.
3751 S. Quebec Street
Denver, Colorado 80237
(303) 267-0920
CALCULATION OF REGISTRATION FEE
-------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Securities Offering Price Aggregate Amount of
to be Amount to be Per Offering Registration
Registered Registered (1) Share (2) Price (1) Fee
- ------------------ -------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Common stock, par
value $.001 per
share 150,000 $ 5.19 $ 778,500 $ 229.66
</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933,
this registration statement also covers an indeterminate amount of options
covering the above Common Stock to be granted pursuant to the Plan described
herein.
(2) Estimated solely for the purpose of calculating the registration fee.
In accordance with Rule 457(c) and (h), the price shown is based upon the
average of the high and low price of The Quizno's Corporation Common Stock on
January 27, 1998, $5.19, as reported on the Nasdaq SmallCap Market.
<PAGE>
PART I - INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I of this
Registration Statement will be given or sent to all persons who are granted or
exercise options under the Area Director Equity Participation Stock Option
Plan of The Quizno's Corporation (the "Company"), as specified by Rule 428.
THE FOLLOWING PROSPECTUS, FILED AS PART OF THIS REGISTRATION STATEMENT
PURSUANT TO GENERAL INSTRUCTION C TO FORM S-8, HAS BEEN PREPARED IN ACCORDANCE
WITH THE REQUIREMENTS OF FORM S-3 AND WILL BE USED FOR REOFFERINGS AND RESALES
OF RESTRICTED SECURITIES (AS DEFINED IN RULE 144(A)(3)) OF THE COMPANY
PURCHASED IN PRIVATE TRANSACTIONS PURSUANT TO THE PLAN PRIOR TO THE FILING OF
THIS REGISTRATION STATEMENT.
PROSPECTUS
6,300 Shares
THE QUIZNO'S CORPORATION
Common Stock
(par value $.001 per share)
This Prospectus relates to 6,300 shares of common stock, par value
$.001 per share ("Common Stock"), of The Quizno's Corporation, a Colorado
corporation (the "Company"), which may be offered for sale from time to time
by certain stockholders of the Company (the "Selling Stockholders"), or by
their pledgees, donees, transferees or other successors in interest, to or
through underwriters or directly to other purchasers or through agents in one
or more transactions at varying prices determined at the time of sale or at
negotiated prices (the "Offering"). See "Plan of Distribution."
The Company is a franchisor and operator of quick service
restaurants ("QSRs") under the name "Quizno's Classic Subs."
The Company will not receive any of the proceeds from the sale of
the shares of Common Stock (the "Shares") by the Selling Stockholders, but has
received funds upon the exercise of options held by the Selling Stockholders,
that were exercisable for the Shares registered hereby (the "Options"). The
expenses of registration under the Securities Act of 1933, as amended (the
"Securities Act"), of the Shares which may be offered hereby will be paid by
the Company.
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "QUIZ". On January 27, 1998, the last sale price of the Common Stock
was reported as $5.125.
SEE "RISK FACTORS" ON PAGE 7 FOR CERTAIN RISKS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY.
_____________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JANUARY 29, 1998
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE SUCH DATE.
<PAGE>
__________________
TABLE OF CONTENTS
__________________
Page
----
AVAILABLE INFORMATION 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 1
THE COMPANY 2
RISK FACTORS 5
USE OF PROCEEDS 9
SELLING STOCKHOLDERS 10
PLAN OF DISTRIBUTION 11
INDEMNIFICATION OF OFFICERS AND DIRECTORS 12
LEGAL MATTERS 12
EXPERTS 12
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports,
proxy statements and other information concerning the Company filed with the
Commission may be inspected and copied at the public reference facilities
maintained by the Commission at its office at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the Regional Offices of the
Commission at Citicorp Center, 300 West Madison Street, Chicago, Illinois
60661 and Seven World Trade Center, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Shares of the Common Stock are traded on the Nasdaq SmallCap Market. Such
reports, proxy statements and other information can also be inspected and
copied at the offices of The Nasdaq Stock Market, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed a registration statement (herein, together
with all amendments and exhibits thereto, the "Registration Statement"), under
the Securities Act with respect to the securities offered pursuant to this
Prospectus. This Prospectus does not contain all of the information set forth
in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement and the exhibits
filed as a part thereof. Statements contained herein concerning any document
filed as an exhibit are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934
(the "Exchange Act") by the Company (File No. 000-23174) are incorporated
herein by reference:
(a) the Company's annual report for the fiscal year ended
December 31, 1996 filed on Form 10-KSB, as filed with the Commission on March
31, 1997;
(b) the Company's quarterly reports for the periods ended March
31, June 30, and September 30, 1997, each filed on Form 10-QSB, as filed with
the Commission on May 15, August 12, and October 9, 1997, respectively, and as
amended on Forms 10-QSB/A on August 19, 1997 and October 14, 1997,
respectively;
(c) the Company's current reports dated January 21, April 2, May
28, June 27, July 31, August 13, and November 26, 1997 on Form 8-K, as amended
on December 31, 1997 on Form 8-K/A; and
(d) the description of the Company's Common Stock which is
contained in the Company's Registration Statement on Form 8-A filed under the
Exchange Act, including any amendment or reports filed for the purpose of
updating such description.
<PAGE>
All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offering pursuant to this
Prospectus shall be deemed to be incorporated by reference and to be a part of
this Prospectus from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a
copy of this Prospectus is delivered, upon oral or written request of any such
person, a copy of any or all of the documents incorporated herein by
reference, other than the exhibits to such documents (unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates). Requests should be directed to the Investor
Relations Department, The Quizno's Corporation, 1099 18th Street, Suite 2850,
Denver, Colorado 80202, telephone (303) 291-0999.
THE COMPANY
GENERAL
The Company is engaged in franchising and, to a lesser extend,
operating QSRs (the "Restaurants") using the registered service mark "Quizno's
" and the name "Quizno's Classic Subs." The Restaurants offer a menu of
submarine style sandwiches, salads, soups, desserts and beverages, including
"Classic Lite" selections of submarine sandwiches and salads designed for
consumers who are looking for a low-fat, healthy alternative to typical fast
food products.
The Company believes that the submarine sandwiches offered in the
Restaurants are distinctive in the market for several reasons. Each submarine
sandwich is prepared after the customer orders and with special ingredients,
recipes and techniques. These ingredients, recipes and techniques are
controlled to provide uniformity of taste and quality among all of the
Restaurants.
One of the most important distinctions of the Quizno's sandwich
product is that it is served to the customer warm. Each sandwich is prepared
open face and run through a conveyor oven that toasts the bread, melts the
cheese and enhances the flavors of the meats.
The Company focuses on the quality of the ingredients contained in
the food products it uses and requires that all of its specified ingredients,
which are generally higher quality than those that other submarine sandwich
shops use, be purchased from approved suppliers. The cheeses used in the
Restaurants are all natural. The Italian style meats include a wine-cured
Genoa salami, pepperoni and capicola, an Italian spiced ham. The turkey
breast is real turkey breast.
The Restaurants also are required to use certain products which are
prepared for the Company in accordance with proprietary recipes developed by
the Company. Foremost among these is Quizno's special recipe soft baguette
style bread and its red-wine based vinaigrette dressing used as a base on most
of the sandwiches. In addition, the Restaurants use the Company's proprietary
recipe tuna mix blend, garlic oil blend, and marinara sauce.
<PAGE>
The Restaurants' upscale decor is designed to convey an Italian deli
ambiance and to match the upscale QSR market niche represented by the product.
The typical Restaurant has a seating capacity of 20 to 60 customers at up to
30 tables. Open kitchens allow customers to watch as their sandwiches are
prepared. The decor package for the Restaurants includes framed reproductions
of old Italian food product labels, hand-painted Italian style posters. The
Italian theme is carried through in standard red and green seating fixtures
against a black and white ceramic tile floor. Real wood trim adds a rich
warmth to the dining room not found in typical fast food dining environments.
Besides a pleasant upscale environment for in-house dining, the
Restaurants offer conveniently packaged meals for carry out to serve lunch
time office workers and to serve the home meal replacement segment of the
market.
Quizno's Restaurants were first opened in 1981 by the Company's
predecessor. As of September 30, 1997, there were 241 Restaurants in
operation, of which 13 are Company-owned, and agreements were in place for the
opening of an additional 170 franchised Restaurants. Since its inception, the
Company has incurred losses totaling $2,158,709, through September 30, 1997.
The Company has financed these losses primarily through the sale of common
stock and through the issuance of preferred stock as well as convertible
subordinated debt. For the nine months ended September 30, 1997, the Company
has incurred a loss of $205,000 compared to $475,000 in its prior year. The
Company's trends are positive in that for the three months ended September 30,
1997, it had a profit of $90,000 as compared to a loss of $279,000 for the
same period in the preceding year. As seen in its statement of cash flows for
the nine months ended September 30, 1997, the Company generated cash from
operations of approximately $165,000. The Company believes its ability to
generate cash flow, combined with additional financing if necessary, will
generate sufficient cash to support its operations for the next twelve months.
The Company's principal executive office is located at 1099 18th
Street, Suite 2850, Denver, Colorado 80202, and its telephone number is (303)
291-0999.
RECENT DEVELOPMENTS
During the months of October and November of 1997, the Company
raised $835,000 through a private placement of 167,000 shares of its Class C
Convertible Preferred Stock. Such Class C shares carry a preferred dividend
of 12% per annum until converted and are immediately convertible on a
one-for-one basis into shares of the Company's Common Stock. During such
period, the Company also issued 100,000 shares of its Class B Preferred Stock
to its principal lender upon the conversion of $500,000 of debt principal to
such shares. Such Class B shares carry a preferred dividend of 12.75% per
annum, are redeemable by the Company and are convertible after five years at
the then market value.
<PAGE>
As a result of these preferred stock sales, and assuming they
occurred as of September 30, 1997, the Company's pro forma Balance Sheet would
be adjusted as follows:
THE QUIZNO'S CORPORATION
Summary Financial Data
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
September 30, Pro Forma
1997 September 30,
As Reported 1997
------------- --------------
<S> <C> <C>
Current assets $ 3,501,036 $ 4,336,036(1)
Property and equipment, net 1,763,742 1,763,742
Other assets 1,942,225 1,942,225
----------- -----------
Total assets $ 7,207,003 $ 8,042,003
=========== ===========
</TABLE>
THE QUIZNO'S CORPORATION
Summary Financial Data
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
September 30, Pro Forma
1997 September 30,
As Reported 1997
------------ -------------
<S> <C> <C>
Current liabilities $ 1,575,880 $ 1,575,880
Long-term liabilities 2,202,908 1,702,908(1)
Deferred franchise fees 2,269,756 2,269,756
Stockholders' equity
Preferred stock, $.001 par
value, 1,000,000 shares
authorized
Class A - 146,000 issued and
outstanding, liquidation value
of $6 per share plus unpaid
and accumulated dividends 146 146
Class B - 0 and 100,000 (pro
forma) shares issued and outstanding,
liquidation value of $5 per share plus
unpaid and accumulated dividends - 100(1)
Class C - 0 and 167,000 (pro forma)
shares issued and outstanding, liquidation
value of $5 per share plus
unpaid and accumulated dividends - 167(1)
Common stock, $.001 par value, 9,000,000
shares authorized, issued and outstanding
2,904,567 2,905 2,905
Capital in excess of par value 3,314,117 4,648,850
Accumulated deficit (2,158,709) (2,158,709)
------------ ------------
1,158,459 2,493,459
------------ -----------
$ 7,207,003 $ 8,042,003
============ ===========
</TABLE>
(1) Assumes the conversion of $500,000 of the $2 million debt into Class B
Preferred Stock and the sale of $835,000 of Class C Preferred Stock
<PAGE>
On November 12, 1997, The Quizno's Acquisition Company (the
"Company"), a wholly-owned subsidiary of the Company, acquired certain assets
used in the franchise operations and restaurant business known as Bain's Deli
from Bain's Deli Franchise Associates and Jolles #4 Partnership (the
"Sellers"). The Company acquired the rights to operate three company-owned
restaurants and to be the franchisor of sixty operating Bain's Deli
restaurants. The consideration paid by the Company to the Sellers for the
acquisition was valued at $1,235,000, subject to adjustment upward or downward
in certain circumstances. Such consideration is as follows: Sellers were
paid $555,490 at the closing, the Company is obligated to issue Sellers 18,182
shares of its common stock, and a promissory note was issued by the Company to
the Sellers in the principal amount of $579,510, bearing simple interest at
10% per annum, payable by the Company in monthly payments of $10,735.91 for
seventy-two months. The Company has the right to adjust the principal amount
of the promissory note as a setoff in certain circumstances. In addition, the
Company entered into a consulting agreement with Mr. Jordon A. Katz, a
principal of the Sellers, purchased the name "Bain's Deli" from Jolles
Corporation and entered a managing agreement with Jeffrey Jolles, a principal
of Jolles Corporation.
On December 5, 1997, an arbitration involving the Company as a defendant was
scheduled for hearing on January 12, 1998. The Demand for Arbitration was
filed on December 31, 1996 by S2D Subs, LLC, a former franchisee of the
Company (S2d Subs, LLC v. The Quizno's Corporation Case No. 54 11400027 97,
American Arbitration Association). The arbitration also names Richard E.
Schaden, the President, Chief Executive Officer and a Director of the Company,
Richard F. Schaden, A Director and Secretary of the Company, another member of
their family and a former employee of the Company. The allegations of the
plaintiff include breach of contract, fraud, misrepresentation, unfair trade
practices and violation of the Michigan Franchise Investment Law. While the
specific amount sought by the plaintiff is not stated in the Demand for
Arbitration, preliminary discussions between representatives of the parties
suggested plaintiff would settle for approximately $300,000. The Company
rejected any possible settlement at that level. The Company and all the
defendants have denied the allegations and intend to vigorously defend the
action. Management of the Company does not believe that this claim will have
a material adverse affect on the Company. The Company has filed a
counterclaim against S2D, LLC alleging among other things, breach of its
franchise agreement.
RISK FACTORS
Each prospective investor should carefully consider the following
factors inherent in and affecting the business of the Company, and this
offering before making a decision to purchase the Common Stock offered hereby.
NO OPERATING PROFIT TO DATE
The Company began business operations in January 1991 and went
public in early 1994. The Company has not yet earned a profit in any year.
The Company had net losses applicable to common stockholders of $1,075,908 in
1996, $348,512 in 1995 and $768,266 in 1994. See "THE COMPANY - General"
COMPETITION FOR BUSINESS
The restaurant industry is highly competitive with respect to price,
service, food quality and location and there are numerous well-established
competitors possessing substantially greater financial, marketing, personnel
and other resources than the Company. Many of the Company's competitors have
achieved significant national, regional and local brand name and product
recognition and engage in extensive advertising and promotional programs, both
generally and in response to efforts by additional competitors to enter new
markets or introduce new products. The quick service industry is
characterized by the frequent introduction of new products, accompanied by
substantial promotional campaigns.
<PAGE>
Industry data indicates that over the decade of the 1990s, the
number and frequency of Americans eating out has increased. However, such
data also indicates that the number of restaurants, and particularly QSRs,
have increased more rapidly than the number of customers during this decade.
Increasing competition has reduced margins and made consistent profitable
operations more of a challenge.
Culinary fashions among Americans will also impact the Company's
profitability. As eating habits change and types of cuisine move in and out
of fashion, the Company's challenge will be to maintain a menu within the
Company's distinctive culinary style that appeals to an increasing market
share.
In response to flat growth rates and declines in average sales per
restaurant, certain of QSR companies have adopted "value pricing" strategies.
Such strategies could have the effect of drawing customers away from companies
that do not engage in discount pricing and could also negatively impact the
operating margins of competitors that do attempt to match competitors price
reductions. Continuing or sustained price discounting in the quick service
industry could have an adverse effect on the Company.
COMPETITION FOR AND DEPENDENCE ON AREA DIRECTORS, FRANCHISEES AND LOCATIONS
The Company's future success will depend, in part, upon its ability
to attract qualified Area Directors and franchisees, who will be primarily
responsible for the development of the Quizno's concept in their regional or
local area, and upon the ability of its Area Directors and franchisees to
obtain suitable Restaurant locations and sufficient financing to successfully
develop and operate Restaurants. The market for suitable Restaurant locations
is highly competitive because both restaurant and non-restaurant retail
operations compete for prime real estate sites. The Company will train and
work with its Area Directors and franchisees to maintain the quality and
ambiance that are integral to the Quizno's concept. However, no assurance can
be given that the Company's Area Directors and franchisees will be successful.
VIABILITY OF CONCEPT NATIONWIDE
To date, most of the Company's mature franchises are located in
Colorado and Colorado is the Company's most developed market. While
franchisees of the Company have opened over 175 Restaurants in other markets,
there can be no assurance that the Company's concept of a higher quality,
health conscious food product, served in a Italian deli-like ambiance, will
appeal to consumers in other areas of the United States.
ABILITY TO ACHIEVE DESIRED EXPANSION
The Company's growth strategy is to focus on the controlled
development of additional franchised and Company-operated Restaurants in
selected markets across the United States. The Company's ability to expand
will depend on a number of factors, including the availability and cost of
suitable locations, the hiring, training and retraining of skilled management
and other personnel, the availability of adequate financing, the selection and
acceptability of franchisees and other facts, some of which are beyond the
control of the Company. There can be no assurance that the Company or its
franchisees will be able to continue to open the planned new Restaurants or
that, if opened, those Restaurants can be operated profitably. The Company
has not yet been able to institute a program with one or more financial
institutions to provide regular financing to its franchisees. The opening of
additional Restaurants in the same market areas could have the effect of
attracting customers from existing Restaurants located in that area and
thereby reduce sales volumes in existing Restaurants.
<PAGE>
IMPACT OF NATIONAL AND REGIONAL ECONOMIES
The health of national and regional economies has a significant
impact on the restaurant industry. An expanding economy provides disposable
income, which causes customers to eat out more frequently. A national or
regional economic slow down will, in all probability, adversely impact the
operations of restaurants, including those owned and franchised by the
Company. This, in turn, will adversely impact the Company's royalty income
and income from Company-owned Restaurants. The Company's franchises are still
concentrated in a few regions of the U.S., and therefore adverse economic
conditions in those regions may have a materially adverse impact on the
Company's profitability. Finally, because many Company franchisees are in
areas affected by severe winter weather, such weather could adversely impact
the Company's royalty income.
LABOR AND OTHER COSTS
Costs of labor and employee benefits are significant expenses in the
restaurant industry. While such costs have remained stable in recent years, a
significant increase in wages throughout the country could adversely impact
the Company and other restaurant businesses. Costs of food and non-food items
are also significant factors in the restaurant industry and, finally, the cost
of marketing may negatively impact restaurant operations, particularly in
competitive markets where the brand name is not yet established.
CONFLICTS OF INTEREST
Mr. Richard F. Schaden, an officer and director of the Company, owns
interests in entities that hold two Quizno's Area Directorships. Mr.
Frederick H. Schaden, a director of the Company, also owns an interest in one
of those entities. Conflicts of interest may arise with respect to
transactions between the Company and Area Directors in which officers or
directors of the Company hold an interest, such as when loans are made by the
Company to such Area Directors. Company-owned stores will also present
conflict of interest issues, particularly with respect to the location of
Company-owned stores in relation to franchisee-owned stores and the amounts
allocated by the Company for goods and services that are also provided by the
Company to its franchisees for a fee, such as advertising services.
GENERAL LIABILITY INSURANCE
Although the Company carries general liability and commercial
insurance of up to $1,000,000 per occurrence and $2,000,000 in the aggregate,
subject to no deductible, there can be no assurance that this insurance will
be adequate to protect the Company against any general, commercial and/or
product liability claims. Any general, commercial and/or product liability
claim which is not covered by such policy, or is in excess of the limits of
liability of such policy could have a material adverse effect on the financial
condition of the Company. There can be no assurance that the Company will be
able to maintain this insurance on reasonable terms.
DEPENDENCE ON RICHARD E. SCHADEN
The success of the Company's business will be dependent upon Mr.
Richard E. Schaden, its Chief Executive Officer, who is also principal
stockholders of the Company. The Company's anticipated growth also depends
upon its ability to attract and retain skilled management personnel. The
Company has obtained key-man life insurance in the amount of $1,000,000 on Mr.
Schaden's life.
<PAGE>
CONTROL BY EXISTING STOCKHOLDERS
Richard E. and Richard F. Schaden (the "Schadens") own an aggregate
of approximately 54% of the outstanding voting Common Stock of the Company,
and rights to purchase an additional approximately 181,000 shares in the
future. Shareholders do not have cumulative voting rights with respect to the
election of directors. The Schadens have the ability to elect all of the
directors of the Company and to thereby direct or substantially influence the
management, policies and business operations of the Company and to have the
power to control the outcome of any matter submitted to the vote of the
Company's stockholders.
NO DIVIDENDS ANTICIPATED
The Company has never paid any cash dividends on its Common Stock.
The Company anticipates that in the future, earnings, if any, will be retained
for use in the business, and it is not anticipated that cash dividends with
respect to the Common Stock will be paid in the foreseeable future.
POSSIBLE PRICE OF THE COMPANY'S COMMON STOCK
The market price of the Company's Common Stock has been highly
volatile. Factors such as the Company's operating results and the small
volume of shares of its Common Stock that are traded have a significant effect
on the market price of the Company's Common Stock. In addition, market prices
for the securities of many emerging and small capitalization companies have
experience wide fluctuations in response to variation in quarterly operating
results and general economic indicators and conditions, as well as other
factors beyond the control of the Company.
PREFERRED SHARES AVAILABLE FOR ISSUANCE
The Company has one million shares of Preferred Stock authorized.
The Company has issued 146,000 shares of Class A Preferred Stock, 100,000
shares of Class B Preferred Stock and 167,000 shares of Class C Preferred
Stock, upon which monthly dividends are paid. Such Classes of Preferred Stock
are senior to the Common Stock as to dividends and liquidation preferences.
Shares of Preferred Stock may be issued by the Company in the future without
shareholder approval and upon such terms as the Board of Directors may
determine, including the payment of dividends. The rights of the holders of
Common Stock will be subject to and may be affected adversely by the rights of
holders of shares of any Preferred Stock that may be issued in the future.
The availability of Preferred Stock, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of discouraging a third party from acquiring control of the Company
through the purchase of shares of the Common Stock.
GOVERNMENT REGULATIONS
The restaurant business is subject to extensive federal, state and
local government regulations relating to the development and operation of
restaurants, including regulations relating to building and zoning
requirements and the preparation and sale of food, and laws that govern the
Company's relationship with its employees, such as minimum wage requirements,
overtime and working conditions and citizenship requirements. The failure to
obtain or retain food licenses or substantial increases in the minimum wage
could adversely affect the operation of the Restaurants. The Company is also
subject to federal regulations and certain state laws which regulate the offer
and sale of franchises to its franchisees.
<PAGE>
CONTINUED LISTING AND PENNY STOCK REGULATIONS
The daily trading price of the Company's Common Stock has been
quoted on the Nasdaq SmallCap Market since its initial public offering. There
can be no assurance that quotation on the Nasdaq SmallCap Market will be
maintained. In August 1997, The Nasdaq Stock Market, Inc. issued new listing
maintenance requirements for the Nasdaq SmallCap Market, which may adversely
affect the ability of listed companies to maintain their Nasdaq SmallCap
listings. The Company currently meets the new Nasdaq SmallCap Market listing
maintenance requirements. If the Company fails to meet the maintenance
criteria in the future, the trading price for the Common Stock would not be
carried in many newspapers, and the shares might be subject to certain rules
of the Securities and Exchange Commission relating to "penny stocks." These
rules require that broker-dealers must apply a special suitability standard
for purchasers of stocks of companies subject to such rules and receive the
purchaser's prior written consent for the transaction. These rules, if
applied to the Company's Common Stock in the future, may inhibit the ability
of broker-dealers to sell the Company's Common Stock in the secondary market.
IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
Future sales by existing stockholders could adversely affect the
prevailing market price of the Common Stock. As of September 30, 1997 the
Company had 2,904,567 shares of Common Stock outstanding. Of these shares,
approximately 1,300,000 shares are freely transferable without restrictions.
The remainder, principally owned by insiders, may be sold into the public
market from time to time in the future, and thereby become freely
transferable. As of September 30, 1997, 6,989 shares had been issued and
approximately 280,000 shares were issuable upon the exercise of outstanding
options. The Company is authorized to issue options covering up to
approximately 650,000 unissued shares of Common Stock to employees,
directors, advisors and Area Directors. The Company intends to register
Common Stock underlying such options in early 1998. Upon exercise of such
options, the shares would be eligible for immediate sale in the public market.
In addition, 446,000 shares of Common Stock have been reserved for issuance
upon conversion of the outstanding shares of Class A, Class B and Class C
Preferred Stock of the Company, and one of the Company's major lenders has the
right to convert debt or exercise warrants for 415,056 shares of Common Stock.
FORWARD-LOOKING STATEMENTS
Certain of the information discussed in this Prospectus are
forward-looking statements that involve risks and uncertainties that might
adversely affect the Company's operating results in the future in a material
way. Such risks and uncertainties include, without limitation, the risk
factors discussed above. Many of these risks are beyond the control of the
Company.
USE OF PROCEEDS
The net proceeds from the sale of the Shares will be received by the
Selling Stockholders. The Company will not receive any of the proceeds from
any sale of the Shares by the Selling Stockholders. The Company has received
funds upon the exercise of the Options by the Selling Shareholders. Such
funds will be used for general corporate purposes, including working capital.
<PAGE>
SELLING STOCKHOLDERS
The table below sets forth information as of January 29, 1998 with
respect to the Selling Stockholders, including names, holdings of shares of
Common Stock prior to the offering of the Shares, the number of Shares being
offered for each account, and the number of shares of Common Stock to be owned
by the Selling Stockholders immediately following the sale of the Shares,
assuming all of the offered Shares are sold.
<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Common Stock
Beneficially to be
Owned Before Shares of Beneficially
the Common Stock Owned After
Name Offering (1) Being Offered Being Offered
- ---- -------------- -------------- --------------
<S> <C> <C> <C>
P. S. Restaurant
Management, Inc. 900 900 0
BBD Management (Wash),
Inc. 750 750 0
QSD Development, LLC 600 600 0
The Food Group, LLC 600 600 0
Alscott, Inc. 600 600 0
Robert Taylor 450 450 0
Lenlar, LLC 450 450 0
Roger Grieco 450 450 0
Impetus Profit LLC 300 300 0
Joel Davis 300 300 0
David Kajganich 300 300 0
LBT Restaurants, Inc. 210 210 0
Charles Cerny 150 150 0
Zachary Enterprises LLC 150 150 0
Bruce Eubanks 90 90 0
</TABLE>
RELATIONSHIP BETWEEN THE COMPANY AND THE SELLING STOCKHOLDERS
Each of the Selling Stockholders is an Area Director for the
Company, with responsibility to sell company franchises in a specific region.
Area Directors are independent contractors of the Company who are subject to
an Area Director Marketing Agreement with the Company.
<PAGE>
PLAN OF DISTRIBUTION
Any distribution of the Shares by the Selling Stockholders, or by
their pledgees, donees, transferees or other successors in interest, may be
effected from time to time in one or more of the following transactions: (a)
to underwriters who will acquire the Shares for their own account and resell
them in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale (any public offering price and any discount or concessions allowed or
reallowed or paid to dealers may be changed from time to time); (b) through
brokers, acting as principal or agent, in transactions (which may involve
block transactions) on the Nasdaq Stock Market or on one or more exchanges on
which the Shares are then listed, in special offerings, exchange distributions
pursuant to the rules of the applicable exchanges or in the over-the-counter
market, or otherwise, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated prices or at
fixed prices; (c) directly or through brokers or agents in private sales at
negotiated prices; or (d) by any other legally available means. In addition,
any securities covered by this Prospectus which qualify for sale pursuant to
Rule 144 of the Securities Act ("Rule 144") may be sold under Rule 144 rather
than pursuant to this Prospectus. All discounts, commissions or fees incurred
in connection with the sale of the Common Stock offered hereby will be paid by
the Selling Stockholders, except that the expenses of preparing and filing
this Prospectus and the related Registration Statement with the Securities and
Exchange Commission, and of registering or qualifying the Common Stock will be
paid by the Company.
The Selling Stockholders and such underwriters, brokers, dealers or
agents, upon effecting a sale of the Shares, may be considered "underwriters"
as that term is defined by the Securities Act.
Underwriters participating in any offering made pursuant to this
Prospectus (as amended or supplemented from time to time) may receive
underwriting discounts and commissions, discounts or concessions may be
allowed or reallowed or paid to dealers, and brokers or agents participating
in such transaction may receive brokerage or agent's commissions or fees.
If required at the time a particular offering of the Shares is made,
a Prospectus Supplement would be distributed which would set forth the amount
of the Shares being offered and the terms of the Offering, including the
purchase price or public offering price, the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriter
for the Shares purchased from the Selling Stockholders, any discounts,
commissions and other items constituting compensation from the Selling
Stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers. The Company has been informed that no
underwriter for the Shares has been engaged at this time.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions, if required, only
through registered or licensed brokers or dealers. In addition, in certain
states the Shares may not be sold unless the Shares have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and complied with.
The Company has agreed that it will bear all costs, expenses and
fees in connection with the registration of the Shares.
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article 109 of the Colorado Business Corporation Act generally
provides that a corporation may indemnify its directors, officers, employees
and agents against liabilities and action, suit or proceeding whether civil,
criminal, administrative or investigative and whether formal or informal (a
"Proceeding"), by reason of being or having been a director, officer,
employee, fiduciary or agent of the Company, if such person acted in good
faith and reasonably believed that his conduct, in his official capacity, was
in the best interests of the Company (or, with respect to employee benefit
plans, was in the best interests of the participants of the plan), and in all
other cases that his conduct was at least not opposed to the Company's best
interests. In the case of a criminal proceeding, the director, officer,
employee or agent must have had no reasonable cause to believe that his
conduct was unlawful. Under Colorado Law, the Company may not indemnify a
director, officer, employee or agent in connection with a proceeding by or in
the right of the Company if the director is adjudged liable to the Company, or
in a proceeding in which the directors, officer employee or agent is adjudged
liable for an improper personal benefit.
The Company's Articles of Incorporation provide that the company
shall indemnify its directors, and officers, employees and agents to the
fullest extent and in the manner permitted by the provisions of the laws of
the State of Colorado, as amended from time to time, subject to any
permissible expansion or limitation of such indemnification, as may be set
forth in the by-laws of the Company or any shareholders' or directors'
resolution or by contract. Consistent with its Articles of Incorporation, the
Company has entered into agreements to provide indemnification for the
Company's directors and certain officers.
Insofar as indemnification for liabilities under the Act may be
permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the company has been informed that in the opinion
of the Commission, such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
LEGAL MATTERS
The validity of the Shares offered hereby is being passed upon for
the Company by Lyle B. Stewart, P.C., Denver, Colorado.
EXPERTS
The consolidated financial statements of the Company as of December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996 appearing in the Form 10-KSB have been audited by Ehrhardt Keefe
Steiner & Hottman P.C., independent auditors, as stated in their report
appearing therein, and have been incorporated herein by reference in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing. With respect to the unaudited interim consolidated
financial information in the Company's quarterly reports for the periods ended
March 31, June 30, and September 30, 1997, each filed on Forms 10-QSB or as
amended on Forms 10-QSB/A, the independent certified public accountants have
not audited or reviewed such consolidated financial information and have not
expressed an opinion or any other form of assurance with respect to such
consolidated financial information.
<PAGE>
PART II - INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
-----------------------------------------------------
The following documents filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934
(the "Exchange Act") by the Company (File No. 000-23174) are incorporated
herein by reference:
(a) the Company's annual report for the fiscal year ended
December 31, 1996 filed on Form 10-KSB, as filed with the Commission on March
31, 1997;
(b) the Company's quarterly reports for the periods ended March
31, June 30, and September 30, 1997, each filed on Form 10-QSB, as filed with
the Commission on May 15, August 12, and October 9, 1997, respectively, and as
amended on Forms 10-QSB/A filed on August 19 and October 14, 1997,
respectively;
(c) the Company's current reports dated January 21, April 2, May
28, June 27, July 31, August 13 and November 26, 1997 on Form 8-K, as amended
by Form 8-K/A filed on December 31, 1997; and
(d) the description of the Company's Common Stock which is
contained in the Company's Registration Statement on Form 8-A filed under the
Exchange Act, including any amendment or reports filed for the purpose of
updating such description.
Each document filed by the Company after the date hereof pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the filing
of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities remaining unsold,
shall be deemed to be incorporated by reference in this Registration Statement
and shall be part hereof from the date of filing of such document. Any
statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or any other subsequently filed document which
also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
ITEM 4. DESCRIPTION OF SECURITIES.
---------------------------
Options shall be granted under the Plan to Area Directors who meet
objective standards of performance in fulfilling their contractual
obligations. No cash or cash equivalents will be paid for the options.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
-------------------------------------------
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
---------------------------------------------
Article 109 of the Colorado Business Corporation Act generally
provides that a corporation may indemnify its directors, officers, employees
and agents against liabilities and reasonable expenses incurred in connection
with any threatened, pending, or completed action, suit or proceeding whether
civil, criminal, administrative or investigative and whether formal or
informal (a "Proceeding"), by reason of being or having been a director,
officer, employee or agent of the Company, if such person acted in good faith
and reasonably believed that his conduct, in his conduct, in his official
capacity, was in the best interests of the Company (or, with respect to
employee benefit plans, was in the best interests of the participants of the
plan), and in all other cases his conduct was at least not opposed to the
Company's best interests. In the case of a criminal proceeding, the director,
officer, employee or agent must have had no reasonable cause to believe his
conduct was unlawful. Under Colorado Law, the Company may not indemnify a
director, officer, employee or agent in connection with a Proceeding by or in
the right of the Company if the director is adjudged liable to the Company, or
in a proceeding in which the director, officer, employee or agent is adjudged
liable for an improper personal benefit.
The Company's Articles of Incorporation provide that the company
shall indemnify its directors, and officers, employees and agents to the
fullest extent and in the manner permitted by the provisions of the laws of
the State of Colorado, as amended from time to time, subject to any
permissible expansion or limitation of such indemnification as may be set
forth in the by-laws of the Company or any shareholders' or directors'
resolution or by contract. The Company has entered into agreements to
provide indemnification for the Company's directors consistent with its
Articles of Incorporation.
Insofar as indemnification for liabilities under the Act may be
permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Commission, such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
--------------------------------------
Not applicable.
ITEM 8. EXHIBITS.
--------
5.1 Opinion of Lyle B. Stewart, P.C.
23.1 Consent of Ehrhardt Keefe Steiner & Hottman P.C.
23.2 Consent of Lyle B. Stewart, P.C. (included in Exhibit 5.1)
24. Power of Attorney (included on signature page)
99.1 Area Director Equity Participation Rights Stock Option Plan
<PAGE>
ITEM 9. UNDERTAKINGS.
------------
The undersigned registrant hereby undertakes:
A. (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Denver, Colorado on January 27, 1998.
THE QUIZNO'S CORPORATION
By /s/ Patrick E. Meyers
------------------------
Patrick E. Meyers,
Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Each person whose signature appears below in so signing also makes,
constitutes and appoints Richard E. Schaden and Patrick E. Meyers, and each of
them, his or her true and lawful attorney-in-fact, with full power of
substitution, for him in any and all capacities, to execute and cause to be
filed with the Securities and Exchange Commission any and all amendments and
post-effective amendments to this Registration Statement, with exhibits
thereto and other documents in connection therewith, and hereby ratifies and
confirms all that said attorney-in-fact or his substitute or substitutes may
do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard E. Schaden President, Chief Executive Officer
- ------------------------- and Director (Principal Executive
Richard E. Schaden Officer) January 27, 1998
/s/ John L. Gallivan Chief Financial Officer and
- ----------------------- Treasurer (Principal Financial
John L. Gallivan and Accounting Officer) January 27, 1998
/s/ Richard F. Schaden Vice President, Secretary
- ----------------------- and Director January 27, 1998
Richard F. Schaden
/s/ Brownell M. Bailey Director January 27, 1998
- -------------------------
Brownell M. Bailey
/s/ Mark L. Bromberg Director January 27, 1998
- -----------------------
Mark L. Bromberg
/s/ J. Eric Lawrence Director January 27, 1998
- -----------------------
J. Eric Lawrence
/s/ Frederick H. Schaden Director January 27, 1998
- ---------------------------
Frederick H. Schaden
</TABLE>
<PAGE>
EXHIBIT INDEX
Number Exhibit
- ------ -------
5.1 Opinion of Lyle B. Stewart, P.C.
23.1 Consent of Ehrhardt Keefe Steiner & Hottman P.C.
23.2 Consent of Lyle B. Stewart, P.C. (included in Exhibit 5.1)
24. Power of Attorney (included on signature page)
99.1 Area Director Equity Participation Rights Stock Option Plan
Exhibit 5.1
Lyle B. Stewart, P.C.
3751 South Quebec Street
Denver, Colorado 80237
Telephone: 303-267-0920
Fax: 303-267-0922
January 27, 1998
Board of Directors
The Quizno's Corporation
1099 18th Street, Suite 2850
Denver, CO 80202
Gentlemen:
We have acted as counsel to The Quizno's Corporation (the "Company") in
connection with the proposed sale of up to 150,000 shares of its common stock,
par value $.001 per share, by the Company, which sale is being registered on
Form S-8 (the "Registration Statement") filed by the Company on or about the
date hereof with the Securities and Exchange Commission, under the Securities
Act of 1933, as amended.
In connection therewith, we have examined and relied upon such corporate
records and other documents, instruments and certificates and have made such
other investigation as we deem appropriate as basis for the opinion set forth
below.
Based upon the foregoing, we are of the opinion that the shares of common
stock to be sold by the Company or the selling shareholders in the manner
described in the Registration Statement and the Prospectuses relating thereto,
will be legally issued, fully paid and non-assessable.
We hereby consent to the use of our name in the Registration Statement
and the filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Lyle B. Stewart, P.C.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The Quizno's Corporation and Subsidiaries on Form S-8 of our report dated
February 28, 1997 appearing in the annual report on Form 10-KSB of The
Quizno's Corporation and Subsidiaries for the year ended December 31, 1996
and to the reference to us under the heading "Experts" in the Prospectus,
which is part of this Registration Statement.
/s/Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
January 29, 1998
Denver, Colorado
Exhibit 99.1
THE QUIZNO'S CORPORATION
AREA DIRECTOR EQUITY PARTICIPATION RIGHTS STOCK OPTION PLAN
The purposes of The Quizno's Corporation's Area Director Equity
Participation Rights Stock Option Plan (the "Plan") are to (i) enable The
Quizno's Corporation (the "Company") to attract and retain qualified Area
Directors throughout the world who will serve and advise the Company regarding
the establishment of profitable franchises in their geographic areas of
expertise, and (ii) furnish an incentive to Area Directors by making ownership
in the Company available to them. Options granted under the Plan do not
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
ARTICLE I
Definitions
For Plan purposes, except where the context clearly indicates
otherwise, the following terms shall have the following meanings:
"Area Director(s)" shall mean any person or persons, individual
or an entity, who enters into an Area Director Agreement with Company and
who is not an Affiliate of the Company as that term is defined in
Rule 405 promulgated by the SEC under the Security Act of 1933,
as amended.
"Board" shall mean the Board of Directors of the Company.
"Closing Price," see definition in "Fair Market Value."
"Company" shall mean The Quizno's Corporation.
"Fair Market Value" of the Shares shall mean the average of the
daily Closing Price, as defined below, per Share for the ten (10)
consecutive trading days commencing fifteen (15) trading days before
such date. For purposes hereof, "Closing Price" shall mean, with respect
to each share of the Company's common stock for any day, (a) the last
reported sale price or, in case no such sale takes place on such day, the
average of the closing bid and asking price, in either case as reported
on the principal national securities exchange on which the Shares are
listed or admitted for trading or, (b) if the Shares are not listed or
admitted for trading on national securities exchange, the last reported
sale price, or in the case no such sale takes place on such day, the
average of the highest reported bid and the lowest reported asked
quotation for the Shares, in either case as reported on the
Automatic Quotation System of NASDAQ or a similar service if
NASDAQ is no longer reporting such information. If no such market
exists for the Shares, and no such market has existed for the Shares for
ninety (90) days or more, the Board shall make a good faith
determination of the Fair Market Value.
"Option" shall mean a right to purchase Shares granted pursuant to the
Plan and evidenced by an option certificate or stock option agreement
in such form as the Board may adopt for general use from time to
time.
"Optionee" shall mean an Area Director to whom an Option is
granted pursuant to this Plan.
"Plan" shall mean The Quizno's Corporation Area Director Stock
Option Plan.
"Shares" shall mean shares of the Company's common stock, par
value $.001.
"Stock Discount Rights" shall have the meaning given in Article
III below.
"Warrants" shall have the meaning given in Article III below.
ARTICLE II
Shares Subject to the Plan
The aggregate number of Shares which may be delivered upon exercise
of Options granted under the Plan shall not exceed 150,000,
subject to appropriate adjustment in the event the number of issued
Shares shall be increased or reduced by a change in par value,
combination, split-up, merger, reclassification, distribution of a
dividend payable in stock, or the like. Shares covered by Options
which have lapsed or expired may, in the Board's discretion, again be
made subject to grants pursuant to the Plan.
ARTICLE III
Option Grants
1. Grant of Options. During the term of this Plan, Area
------------------
Directors shall be granted Options at such times, upon such conditions
and in such amounts as the management of the Company may determine
from time to time (subject to appropriate adjustment in the event
the number of issued Shares shall be increased or reduced by a change
in par value, combination, split-up, merger, reclassification,
distribution of a dividend payable in stock, or the like).
2. Types of Options. There are two types of Options. Stock
----------------
Discount Rights shall provide the recipient with the right to
purchase up to the number of Shares covered by the Stock Discounts
Rights at a 20% discount from the Closing Price per Share (not to
exceed $1.20) for a period of seven business days. Warrants shall
provide the recipient with the right to purchase up to the
number of Shares covered by the Warrant at the Closing Price per
Share for a period of six months.
3. Stock Option Agreement. Each Option shall be evidenced by a
----------------------
written instrument, in such form as the Board shall from time to time
approve, which shall state the terms and conditions of the Option
in accordance with the Plan and also shall contain such additional
provisions as may be necessary or appropriate under applicable
laws, regulations and rules.
ARTICLE IV
Terms of Options
1. Exercise Price. The Option exercise price per Share shall be
--------------
determined based upon the "Closing Price," as defined in Article I
above, of a Share on the trading day immediately prior to the date
the Option is granted or earned.
2. Transfer Restrictions. Options shall be granted only to an
---------------------
individual who is an Area Director or an owner of an Area
Director. All Options shall be exercisable during an Optionee's
lifetime only by such Optionee. Options shall not be transferable
other than by will or the laws of descent and distribution. No Option
shall be subject, in whole or in part, to attachment, execution or
levy of any kind.
3. Vesting. All Options granted shall vest and be exercisable
-------
on such date or dates as management of the Company determines.
4. Expiration. All Options shall expire on a date determined by
----------
management of the Company, in its sole discretion, not to exceed
three (3) years from the grant date or, if an Optionee ceases to be
an Area Director or owner of an Area Director for any reason, all
Options held by such Optionee shall terminate no later than the
90th day after such termination.
5. No Rights as Stockholder. No Optionee shall have any rights
------------------------
to dividends or other rights of a stockholder of the Company prior
to the purchase of such Shares upon the exercise of the Option.
ARTICLE V
Delivery of Shares
No Shares will be delivered upon exercise of an Option until the
exercise price of the Option is paid in full (i) in cash, (ii) by the
delivery to the Company of Shares with a Fair Market Value equal to the
exercise price of the Option, (iii) by delivery of a combination of
(i) and (ii) with an aggregate Fair Market Value equal to the exercise
price or (iv) by delivery of an Option or Options to purchase Shares with
a net aggregate value (i.e., the aggregate value of all Shares
subject to the exercised Options less the aggregate exercise price of
such Options) equal to the exercise price.
Share certificates issued to Optionees upon exercise of Options may
be issued subject to, and bear language limiting their transfer otherwise
than in accordance with, the Plan and applicable state and federal law,
including the then existing regulations under Section 16(b) of the
Securities and Exchange Act of 1934, as amended.
ARTICLE VI
Continuation of Service
Neither this Plan nor the grant of any Option hereunder shall confer
upon any Optionee the right to continue as an Area Director of the Company
or obligate the Company retain the services of the Area Director for any
period.
ARTICLE VII
Fundamental Transactions
Merger, Consolidation or Change of Control. In connection with any
-------------------------------------------
merger, consolidation, change in control or similar reorganization,
excluding a public offering ("Reorganization"), the Board may in its
sole discretion:
(a) Negotiate a binding agreement whereby any acquiring or
successor corporation will assume each Option then outstanding or
substitute an equivalent option;
(b) Accelerate any applicable vesting provisions; or
(c) Authorize cash payments to Optionees equal to the difference
between the aggregate exercise price of each Option then
outstanding irrespective of the Option's current exercisability and
the Fair Market Value of the Shares covered by such Option. Any
cash payment which the Company may be required to make pursuant to
such Board authorization shall be made within sixty (60) days
following such authorization and fully discharge any and all
obligations the Company may have in connection with the
Options. Notwithstanding the forgoing, the Board shall have no
obligation to take any action with respect to any Option in
connection with a Reorganization.
ARTICLE VIII
Plan Administration
1. Administration by Board. The rules and criteria of the Plan
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shall be fixed and administered by the management of the Company
under the supervision of the Board. The Board shall be empowered,
to prescribe, amend and rescind rules and regulations of general
application relating to the operation of the Plan and to make
all other determinations necessary or desirable for its proper
administration. Decisions of the Board shall be final,
conclusive and binding upon all parties, including the Company, the
stockholders and the Area Directors.
2. Indemnification. Neither the Company, any subsidiary
---------------
thereof, nor any director or officer thereof, nor the Board shall
be liable for any act, omission, interpretation, construction or
determination made in connection with the Plan in good faith.
The Board and each of its members shall be entitled to
indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including reasonable attorneys'
fees and costs) arising therefrom to the full extent permitted
by law and under any directors and officers liability insurance
coverage which may be in effect from time to time.
ARTICLE IX
Amendment and Discontinuance
The Board is authorized to make such changes in the Plan as it, in
its sole discretion, deems necessary. The Board may at any time
suspend or discontinue the Plan. No action of the Board or of the
stockholders, however, shall alter or impair any Option theretofore
granted under the Plan except as herein provided.
ARTICLE X
Adjustments
In the event of a stock dividend, stock split or other subdivision,
consolidation, reorganization or similar change in the outstanding
shares of Common Stock or capital structure of the Company
(collectively, a "Stock Adjustment"), the following shall occur under
the Plan: (i) the number of shares of Common Stock reserved or
otherwise available under Article II for Options, and subject to
outstanding Options, shall be adjusted proportionately (and
automatically reduced by any fraction resulting from such adjustment);
and (ii) the exercise price per share of outstanding Options shall be
adjusted so that the aggregate exercise price payable pursuant to
each outstanding Option after the Stock Adjustment shall equal the
aggregate amount so payable prior to the Stock Adjustment. In the
event of any dispute concerning such adjustment, the decision of the
Board shall be conclusive. If a Stock Adjustment is made, the
Board shall notify all Optionees of such adjustment within thirty (30)
days of making such an adjustment, which notification shall
state the adjusted number of shares of Common Stock for which a
particular Option is exercisable.
ARTICLE XI
Securities Law Compliance
Management of the Company may impose any requirements on the grant
of Options or exercise of Options granted hereunder, to assure that both
the grant and exercise is either registered under the Securities Act of
1933, as amended, and registered or qualified under applicable state
securities laws, or that on exemption from such registration or
qualification exists. If any state securities authority prevents the
grant of the Options or exercise of the Options within such state, any
affected Area Director may be precluded from participating in this Plan.
ARTICLE XII
Miscellaneous
1. No Obligation or Entitlement. It is expressly understood
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that this Plan grants powers to the Board but does not require their
exercise; nor shall any person, by reason of the adoption of this
Plan, be deemed to be entitled to the grant of any Option; nor shall
any rights be deemed to accrue under the Plan except as Options
may actually be granted hereunder.
2. Other Grants. The adoption of this Plan shall not preclude
------------
the Board from granting options to purchase Shares to any person in
connection with his or her service as an Area Director without
reference to, and outside of, this Plan.
3. Expenses. All expenses of the Plan, including the cost of
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maintaining records, shall be borne by the Company.
ARTICLE XIII
Plan Adoption and Term
This Plan shall become effective upon the adoption by the Board,
which occurred on December 4, 1997. This Plan shall continue in effect
for ten years from the date of its approval by the Board. No
Option may be granted hereunder after such ten-year period, but Options
granted within such ten-year period may extend beyond the termination
date of the Plan.
