Quiznos Corp

SECURITIES AND EXCHANGE COMMISSION

FORM 10KSB Annual and transition reports of small business issuers [Section 13 or 15(d), not S-B Item 405]

Filing Date: 1999-12-30 | Period of Report: 1999-09-30 SEC Accession No. 0000949303-99-000182

(HTML Version on secdatabase.com)

FILER QUIZNOS CORP Mailing Address Business Address 1099 18TH STREET 1415 LARIMER STREET CIK:915803| IRS No.: 841169286 | State of Incorp.:CO | Fiscal Year End: 0930 SUITE 601 STE 601 Type: 10KSB | Act: 34 | File No.: 000-23174 | Film No.: 99783871 DENVER CO 80202 DENVER CO 80202 SIC: 6794 Patent owners & lessors 3032910999

Form 10-KSB

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended September 30, 1999 (Nine Month Transition Period)

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO ------

Commission File Number 000-23174

THE QUIZNO'S CORPORATION (Exact name of small business issuer as specified in its charter)

Colorado 84-1169286 ------(State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)

1415 Larimer Street Denver, Colorado 80202 ------(Address of Principal Executive Offices) (Zip Code)

(303) 291-0999 (Issuer's telephone number including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.001 par value

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 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 the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]

State registrant's revenue for its most recent fiscal year: $20,947,634

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of December 17, 1999 was approximately $11,682,385 (for purposes of the foregoing calculation only, each of the registrant's officers and directors is deemed to be an affiliate).

There were 3,049,750 shares of registrant's common stock outstanding as of December 17, 1999.

Documents incorporated by reference: None

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

PART I PAGE NO.

ITEM 1. DESCRIPTION OF BUSINESS...... 1

ITEM 2. DESCRIPTION OF PROPERTY...... 12

ITEM 3. LEGAL PROCEEDINGS...... 12

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...... 14

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...... 15

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...... 16

ITEM 7. FINANCIAL STATEMENTS...... 27

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...... 27

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT...... 27

ITEM 10. EXECUTIVE COMPENSATION...... 31

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...... 35

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...... 38

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K...... 39

PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

The Quizno's Corporation was incorporated in Colorado in 1991. Our headquarters is located at 1415 Larimer Street, Denver, CO 80202. Our telephone number is (720) 359-3300.

We incorporated in Colorado in January 1991 as D&R, Inc. We changed our name to The Quizno's Franchise Corporation in April 1991 and to The Quizno's Corporation in June 1995. We do business as The Quizno's Corporation and Quizno's. Our principal business address and that of our subsidiaries is 1415 Larimer Street, Denver, Colorado 80202. In January 1991, we purchased certain assets of Quizno's America, Inc., which had operated, owned, and franchised Quizno's restaurants (directly and through predecessors and affiliates) under the QUIZNO'S name since 1981. We operate, and offer franchises to individuals or entities ("Franchisees" or "Owners") to operate, restaurants with carry-out facilities that sell submarine and other sandwiches, salads, other food products and beverages, and related services ("Restaurants"). As of December 17, 1999, there were 614 Restaurants (including 8 Bain's Deli Restaurants) in operation in the United States, and agreements were in place for the opening of an additional 542 franchised restaurants in the United States. During the last two years, we have grown to become the third largest sub sandwich chain in the United States.

Additionally, we offer franchises for area director marketing businesses in which the area director ("Area Director") acts as our sales representative within a defined geographic area to solicit and identify prospective franchisees, to assist us in locating and securing sites for Restaurants within a territory, and to provide additional support before, during, and after the Restaurant opens.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document We also offer master franchise rights for international markets, in which the master franchisee has the right to function as a franchisor to offer and sell Restaurant franchises and area director marketing agreements using our trademarks and service marks in a defined geographic area (usually a country). We have master franchise agreements in place for Canada, the United Kingdom, Japan, Australia, and Central America. As of December 17, 1999, there were 83 Quizno's restaurants in operation in Canada, 3 in Japan, and 1 in Australia.

The Area Director or master franchisee is required to open a specified number of Restaurants annually throughout the life of the area director marketing agreement or master franchise agreement.

In 1999, we changed the date of our fiscal year end to September 30. Therefore, our 1999 fiscal year, which ended on September 30, 1999, contained only three-quarters (or nine months).

The Restaurants

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. We believe 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.

We focus on the quality of the ingredients contained in the food products we produce and we require that certain 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 us in accordance with proprietary recipes developed by us. 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 our proprietary recipe tuna mix blend, garlic oil blend, and marinara sauce.

The Restaurants' upscale decor is designed to convey an Italian deli ambiance and to match the upscale quick service market niche represented by the product. Open kitchens allow customers to watch as their sandwiches are prepared. The decor package for the Restaurants includes reproductions of old Italian food product labels, and hand-painted Italian style posters. The Italian theme is prevalent throughout a Quizno's Restaurant.

Besides a pleasant upscale environment for in-house dining, the Restaurants offer conveniently packaged meals for carry out to serve lunchtime office workers and to serve the home meal replacement segment of the market.

The Restaurants are also located in mall food courts and are designed to operate in smaller spaces while retaining the same ambiance and decor as a traditional Quizno's Restaurant. "Quizno's Express" Restaurants are typically smaller units established at such non-traditional locations as convenience and gasoline stations, sports facilities, hospitals, and college campuses. Quizno's Express units offer a full menu with an extensive variety of Quizno's sandwiches. Soups, salads and desserts are also available at Quizno's Express units. Quizno's Express units will typically share common area seating or may have very limited seating at venues designed primarily for take out.

Concept and Strategy

Our marketing strategy is to position the Restaurants between fast food and full-service dining. We believe that consumers are looking for a healthy and tasty alternative to typical fast foods; in particular, they are looking for an alternative to fast food hamburgers and fried foods. At the same time, we believe many busy families are looking for a more convenient and reasonably priced alternative to full-service dining. Quizno's offers all the convenience of typical fast food in terms of quick ticket times, affordability, and carry out and home meal replacement options, but with a fresh, tasty alternative to fast food products. In terms of full-service dining benefits, Quizno's offers

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document more comfortable dining rooms than most fast food restaurant concepts as well as other dining options -- such as catering and delivery -- generally not available in the fast food arena. We believe our concept is well positioned to fill a growing niche in the restaurant business between fast food and full-service dining. The Quizno's concept also accommodates a variety of dining options from comfortable in-house dining to lunchtime carry out to home meal replacement.

Our goal is to build a strong and consistently profitable nationwide chain of Restaurants with international expansion of the chain into selected foreign markets. The primary vehicle for achieving our planned growth has been our area director marketing program and, more recently, our master franchise program.

Our revenues are primarily derived from a royalty on all sales at franchised Restaurants, initial franchise fees from each franchise sold, and fees collected from Area Directors or master franchisees, as well as revenue generated from company-owned Restaurants and license fees generated from licensing of our logos or in exchange for allowing a product company to sell proprietary Quizno's items. Franchisees, master franchisees and Area Directors pay fees to us only once in connection with execution of franchise agreements, master franchise agreements, and area director marketing agreements, respectively. Royalties provide a long-term continuing source of revenue. Franchise fees and royalties are expected to increase as the number of franchised Restaurants in operation increases. We may also repurchase certain area directorships and territories in the future, as we have in 1999. The royalty rate is currently 7% for traditional Restaurants, and the royalty rate is 8% for Quizno's Express units; however, a small number of Franchisees operate under older agreements that set lower royalty rates at 4% or 6%.

From time to time, we may make proposals and engage in negotiations regarding acquisitions of material restaurant assets or other companies in the restaurant industry, if management and the Board of Directors believe that such proposed transaction would be in the our best interest. Our policy is not to publicly announce such proposals until the likelihood that the proposed transaction will be completed becomes probable.

Bain's Deli

In November 1997, our wholly-owned subsidiary, The Quizno's Acquisition Company, purchased the assets of Bain's Deli Franchise Associates, L.P., a Pennsylvania limited partnership and franchisor and operator of approximately 63 delicatessen-style sandwich shops located primarily in the eastern United States. We never offered or sold additional Bain's Deli franchises and, in March 1999, sold to a third party all but 14 of the Bain's Deli franchise agreements we originally acquired. There are currently 8 non-converted Bain's Deli franchisees for which we are the franchisor. We will continue to give these 8 Bain's Deli franchisees the opportunity to convert to Quizno's Restaurants.

Area Director and Master Franchise Agreements

We offer Area Directors a domestic geographical territory, within which to sell franchised Restaurants pursuant to an area director marketing agreement. This program is designed to assist us in accelerating the marketing and sale of franchises and the selection of Restaurant locations in the territory. Each territory is based on areas of dominant influence of local television broadcast stations as defined by the television broadcast industry. Our growth strategy clusters Restaurants in particular television markets in order to facilitate implementation of our advertising program.

Each Area Director pays us a fee based on the total of the population in the territory. At present, the fee is $.07 per person located within the territory, plus a training fee of $10,000. The population based portion of this fee is not refundable.

Area Directors are required to market franchises for Restaurants to be located within the territory. The Area Director agrees to open, through the sale of franchises, a specified number of franchised Restaurants within the territory during the term of the area director marketing agreement. The sales and opening schedules are lower in the first years of the development period. The area director marketing agreement does not grant the Area Director the exclusive right to market franchises or solicit franchisees in the territory, but it does grant the Area Director the right to receive certain fees and royalties, described in more detail below, from all franchised Restaurants and company-owned Restaurants established in the territory during the term of the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document area director marketing agreement (with certain exceptions). We reserve the right under the area director marketing agreement to market and sell franchises and to establish company-owned Restaurants in a territory.

In international markets, we generally market our franchises through a qualified person, or "Master Franchisee," from whom we receive a one-time master franchise fee, negotiated on a case by case basis. The Master Franchisee receives the right to sell franchises and area directorships in a defined international market on an exclusive basis. We are paid a portion, typically 30%, of all franchise fees, royalties and area director fees collected by the Master Franchisee.

As of December 17, 1999, we had 68 Area Directors whose Territories cover approximately 75% of the population of the United States. We have also sold master franchise rights for Canada, Japan, United Kingdom, Australia, and portions of Central America.

The area director and master franchisee agreements set increasing minimum performance levels that require the Area Director or Master Franchisee to develop a specified number of Restaurants in each quarter or year (depending on the form of agreement) during the term of the agreement. Our experience with the Area Director and Master Franchisee programs to date indicates that while some Area Directors and Master Franchisees will exceed their development schedules, others will fail to meet their schedules. In our planning, we have allowed for a certain percentage of Area Directors and Master Franchisees who will not meet their development schedules. Delays in the sale and opening of Restaurants can occur for many reasons. The most common are delays in the selection or acquisition of an appropriate location for the Restaurant, delays in negotiating the terms of the lease and delays in franchisee financing. We may terminate an agreement if the Area Director or Master Franchisee fails to meet the development schedule, and we would then have the right to resell the territory to a new Area Director or Master Franchisee.

In addition, through a required monthly minimum marketing expenditure, the Area Director is required to actively promote the sale of our franchises within the territory. The Area Director is required to visit with prospective franchisees and refer appropriate locations for franchised Restaurants within the territory to us for consideration. The Area Director is also required to perform monthly quality assurance inspections of the units in its area and assist Franchisees within its area in opening. Our franchise sales materials are made available to the Area Director.

Each domestic Area Director is paid a commission of 40% of the royalty fees collected by us from each franchised Restaurant, or of royalties that would otherwise be payable by company-owned Restaurants in the territory opened and operated during the term of the area director marketing agreement, so long as the Area Director performs the services described above, subject to certain exceptions in some contracts for pre-existing Restaurants in the territory, "Turnkey" Restaurants, and conversion Restaurants for which the Area Director is paid a flat monthly fee of $200 per Restaurant for performing support services. Other forms of agreement exclude airport and other non-traditional units from the commission payment obligation. Under some forms of agreement, Area Directors are entitled to an ongoing commission of 1% on gross sales of Restaurants open and operating in the territory on the date the area director marketing agreement is terminated because of failure to meet the sales or opening goals, through either the initial term of the underlying franchise agreement or five years (15 years for area director marketing agreements executed before January 1998), whichever is less. This approach rewards the Area Director for selecting higher quality franchisees and higher quality locations while discouraging the Area Director from selecting locations that are too close together. In addition to the foregoing, the Area Director is entitled to receive a commission of 50% of the initial franchise fee paid to us for each franchise sold and open within the territory during the term of the area director marketing agreement.

We have a program under which we will finance up to 50% of the area director marketing fees for certain approved domestic Area Director candidates who have the experience and skill requirement sought by us for our Area Directors, but do not have sufficient cash to pay the fee in full. The Area Director is required to personally sign a promissory note due to us for the amount financed, which will bear interest at 15% per year and be repaid in monthly installments over five years. The promissory note is secured by the area director marketing agreement and by other collateral unrelated to the business.

Franchise Program

We authorize individuals and companies, within the United States, called "Franchisees" or "Owners," to establish and operate Restaurants at an approved location pursuant to the terms of a franchise agreement. Under the franchise agreement, we undertake to perform or have performed certain services with respect to the opening and operation of a Restaurant. In connection with the opening of a Restaurant, those services include (i) review and approval of the proposed Restaurant location, (ii) review and approval of construction plans for

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Restaurant, (iii) identification of sources of supply for items which are ordinarily necessary to operate a Restaurant, (iv) an operations manual providing detailed instructions with respect to operation of the Restaurant, (v) training with respect to our method of operations, including operating procedures, food preparation techniques, controls, promotion programs, management and public relations, and (vi) pre-opening assistance. After opening of the Restaurant, we provide continuing advice and consultation with respect to operation of the Restaurant. From time to time, we elect to take over the operation of a Restaurant from an unsuccessful franchisee and operate the Restaurant until a new franchisee is found. Our investment in such operations may be recovered at the time the Restaurant is transferred to the new franchisee.

The current franchise fee for the Owner's first Restaurant is $20,000, $15,000 for the second, and $10,000 for the third and any additional franchise agreement. We offer the franchise for a Quizno's Express unit at a reduced franchise fee of $10,000. The Owner also pays us a continuing royalty fee of 7% of the Owner's gross sales (8% for Quizno's Express franchises). Old forms of the franchise agreement require royalty fee payments at rates between 4% and 6%. "Gross sales" is defined as all sales whether on credit or for cash and all revenues from any source caused by the operation of the Restaurant, whether directly or indirectly relating to the operation. Sales tax and any other state or federal tax is excepted. The Owner also pays an advertising fee to us in an amount equal to 1% to 4% of gross sales, which are used by us for advertising, marketing, and public relations programs and materials to enhance and build the image and goodwill of the Quizno's system. There are certain other fees that must be paid by the Franchisee to us in order to reimburse us for costs incurred in connection with the establishment of a Restaurant. The total average cost to a Franchisee for opening a Restaurant ranges between $50,200 and $225,162, including the initial franchise fee, with most of the variation attributable to differences in the costs of leasehold improvements for the Restaurant, size of the Restaurant, and whether the unit is a traditional or Express Restaurant.

We collect weekly and monthly sales and other operating information from each franchisee. We have agreements with most franchisees permitting us to electronically debit the franchisees' bank accounts for the payment of royalties, marketing fund contributions and other amounts owed to us under the franchise agreement. This system significantly reduces the resources needed to process receivables, improves cash flow and helps to limit past-due accounts related to these items. Franchisees generally are required to purchase and install an approved point of sale system that, among other things, allows us to poll sales information daily.

We have developed certain items, such as bread and dressings for salads and sandwiches, which are prepared for use in the Restaurants based upon recipes developed by us and which are provided to Owners under the private label "Quizno's." The Owner is required to purchase those items from specified vendors for sale and use in the Restaurant. The franchise agreement also requires the Owner to acquire specified equipment and inventory, to establish and maintain specified signage and to operate the Restaurant in accordance with the standards and requirements outlined in our operations manual.

We have entered into an agreement with a national food products distributor that allows Owners to obtain meat products, produce and other food and non-food items necessary for operation of franchised Restaurants at prices more favorable than those that could be obtained by individual Owners. All of the purchasing of the ingredients for the food products offered in the Restaurants is done centrally by us, which allows for better quality control. Each Owner then contacts the distributor directly to obtain the items needed for the Owner's Restaurant, which are delivered by the distributor. The distributor bills the Owner directly for all items ordered and we are not liable for any amounts owed by the Owners. If the national food product distributor no longer provided this service to us and our franchisees, we believe adequate alternative national services would be available without a significant increase in costs.

We retain the right to approve the terms of the Owner's lease. A law firm selected by us must review the lease as part of the approval process. The Owner pays the costs for the review of the lease. We also reserve the right to enter into a lease directly with each landlord and then to sublease to the Franchisee.

The Owner, or person designated by the Owner and approved by us, is required to devote his or her full time, attention and efforts to the performance of the Owner's duties under the franchise agreement relating to the operation of the Restaurant. The Owner agrees in the franchise agreement to use his or her best efforts to produce maximum volume of gross sales in the Restaurant. The Restaurant must be operated continuously on such days and during such minimum hours as are required by us, unless restricted by the Owner's lease or other rules applicable to the Restaurant.

The Owner agrees to maintain books and records for the Restaurant in accordance with the requirements and specifications set forth from time to time by us. The Franchisee is required by the franchise agreement to submit all required reports to us when and in the manner or format required by us.

In order to provide for proper financial tracking and planning for Owners, we began providing a restaurant bookkeeping service to our Restaurant Owners in 1994. In mid-1998, we outsourced the bookkeeping function. This service is intended to assure the Owners have accurate financial records as well as to allow us to keep accurate systemwide statistics. Franchise agreements executed after February 10, 1995, require Owners to use this bookkeeping service for the first year of operations, for the Owner's first unit, for a fee of $85 per week.

The Owner must submit copies of all proposed advertising or promotional materials for written approval by us prior to use.

We have the right to terminate a franchise agreement for a variety of reasons, including a Franchisee's failure to make payments when due or failure to adhere to our policies and standards. However, state franchise laws may limit our ability to terminate or refuse to renew a franchise.

We expect that Restaurants operating within our franchise system will emphasize quality submarine sandwiches. In order to satisfy customer expectations regarding menus and service, we require substantial uniformity among all Restaurants. All Restaurants must conform to our decor and menu specifications. The Owner is not allowed to sell any goods or services at a Restaurant other than those goods and services specified by us.

Franchise Marketing Programs

In order to facilitate the marketing of franchised Restaurants, we devote resources for national print media, sales staff, marketing materials, and trade shows. In addition, we have specific programs to market our franchises, including:

Discovery Day. Discovery Day is a day-long event regularly scheduled in Denver to introduce potential Owners from throughout the country to the Quizno's concept.

Toll Free Phone Line. We have installed a toll free phone line (1-800-DELI-SUBS) that rings directly into the Franchise sales department. The information is entered into a data base of potential Owner inquiries and an informational package is mailed to the caller.

Open Houses. We have an ongoing program of hosting open houses throughout the country in conjunction with our Area Directors. Individuals who have expressed an interest in our franchises are invited to open houses.

Computerized Data Base of Franchise Inquiries. We have installed a computer network within our Franchise sales department for the purpose of organizing, managing, and tracking individuals who inquire about our franchises.

National Advertising. We advertise nationally for new franchisees on a regular and consistent basis in national, regional and local publications.

Company-Owned Restaurants

As of December 28, 1999, we currently own and operate 25 Quizno's Restaurants. 17 are located in Colorado and 8 are located in Kansas. In fiscal 1999, company-owned Restaurants generated $534,636 in earnings. We also currently own and operate 1 Quizno's Restaurant held for resale, which incurred losses totaling $210,753 in fiscal 1999.

While we expect to add new company-owned Restaurants from time to time, we expect most of our growth in the foreseeable future to result from the development of franchised Restaurants.

In addition, from time to time, we acquire or assume the operation of franchised Restaurants where the franchisee has been unable to operate successfully for reasons unrelated to the location or the market. In such cases, we will typically operate the Restaurant, make any required improvements and repairs, re-staff, begin local store marketing, and ultimately transfer the Restaurant to a new qualified Owner. Occasionally, we may incur short term losses in such cases. However, the royalty stream provided over the long term by the new Owner will normally offset or exceed any such losses.

Advertising

Our advertising staff develops advertising campaigns for use at all levels to support consumer sales in the Restaurants. Each franchised Restaurant currently pays 1% of gross sales to the marketing fund. All company-owned Restaurants must pay into the marketing fund on an equal percentage basis with

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document all franchised Restaurants. We use the marketing fund to create, produce, and place advertising, in-store signs, in-store promotions, and commercial advertising; to pay agency costs and commissions; to create and produce video, audio, and written advertisements; to administer multi-regional advertising programs, including direct mail and other media advertising; to employ advertising agencies and in-house staff assistance; and to support public relations, market research, and other advertising and marketing activities. The advertising may be disseminated in print, television, or radio. The coverage has been local or regional, and, since early 1998, we have used national cable television campaigns.

Each traditional Restaurant is required to spend another 3% of sales for local advertising or promotions. Funds may be used to purchase media schedules for TV, radio, or print ads produced by us, or any other approved media. A number of markets with a concentration of restaurants have formed separate advertising cooperatives which coincide with the area of dominant influence of local television broadcast stations. These cooperatives pool their advertising fees to jointly purchase media. We have the right to collect and designate all or a portion of the local advertising fee for either a regional advertising program or the marketing fund for the benefit of either the Restaurants within a particular region or all Restaurants.

Competition

Restaurant Operations. 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 we possess.

We compete in the sandwich segment of the fast food industry, an industry long dominated by hamburger chains. We believe that within the sub sandwich segment, our largest competitors by number of stores are Subway and Blimpie. Subway, the nation's largest submarine sandwich restaurant chain, has in excess of 12,000 units in the U.S., while Blimpie has grown significantly in recent years and has approximately 2,000 domestic units. The expansion of Subway has drawn attention to submarine sandwiches, during a time of growing concern relating to beef and fried foods. We believe that the submarine sandwich segment is underdeveloped, and that demand for submarine style sandwiches will continue to grow. Other than Subway and Blimpie, most submarine sandwich chains currently have less than 200 units each and are primarily local or regional.

Our major competitors, including Blimpie, have followed Subway closely in the style and quality of the product, creating very little, if any differentiation in the market. Subway offers a low-cost product in a fast food style restaurant with limited seating. We have positioned the Restaurants between the traditional fast food restaurant style of our submarine sandwich competitors and full-service dining, and have focused on higher quality food products, to distinguish the Restaurants from their competitors. The restaurant business can be affected by changes in consumer tastes, national, regional or local economic conditions, demographic trends, traffic patterns and the type, number and location of competing restaurants. In addition, inflation, increased food costs, labor and benefits costs and the lack of experienced management and hourly employees may adversely affect the restaurant industry in general and our Restaurants in particular

Franchise Competition. In addition to our Restaurant operations, we compete with fast food chains, major restaurant chains and other franchisors for franchisees. Many franchisors, including those in the restaurant industry, have greater market recognition and greater financial, marketing and human resources than we have. We believe that we can compete successfully for franchisees for several reasons. The total cost of opening a Quizno's Restaurant tends to be lower than that of hamburger fast food and full-service dining restaurants. The ratio of sales revenue per restaurant to restaurant opening costs is also better for Quizno's Restaurants than for most of our competitors. Finally, the ambiance of Restaurants offers a Franchisee a pride in ownership that is unique to the Quizno's concept.

Government Regulations

We are subject to Federal Trade Commission ("FTC") regulation and several state laws which regulate the offer and sale of franchises. We are also subject to a number of state laws which regulate substantive aspects of the franchisor-franchisee relationship. The FTC's Trade Regulation Rule on Franchising (the "FTC Rule") requires us to furnish to prospective franchisees a franchise offering circular containing information prescribed by the FTC Rule.

State laws that regulate the offer and sale of franchises and the franchisor-franchisee relationship presently exist in a substantial number of states. State laws that regulate the offer and sale of franchises generally require registration of the franchise offering with state authorities. Those that regulate the franchise relationship generally require that the franchisor deal with its franchisees in good faith, prohibit interference with the right of

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document free association among franchisees, limit the imposition of standards of performance on a franchisee and regulate discrimination against franchisees in charges, royalties or fees. Although such laws may restrict a franchisor in the termination of a franchise agreement by, for example, requiring "good cause" to exist as a basis for the termination, advance notice to the franchisee of the termination, an opportunity to cure a default and a repurchase of inventory or other compensation, these provisions have not had a significant effect on our franchise operations.

In October 1999, the FTC issued proposed changes to the FTC Rule that would effect certain disclosure obligations in connection with franchise sales. These proposed changes are still subject to public comment, and even if adopted as proposed, we do not think the changes would materially effect our franchise sales or other operations. We are not aware of any other probable pending franchise legislation that in our view is likely to affect our operations significantly. We believe that our operations comply in all material respects with the FTC Rule and the applicable state franchise laws.

Each franchised Restaurant, and each company-owned Restaurant, is subject to licensing and regulation by a number of governmental authorities, which may include health, sanitation, safety, fire, building and other agencies in the state or municipality in which the Restaurant is located. Difficulties in obtaining or failure to obtain the required licenses or approvals could delay or prevent the development of a new Restaurant in a particular area. We are subject to federal and state environmental regulations, but these have not had a material effect on our operations. More stringent and varied requirements of local governmental bodies with respect to zoning, land use and environmental factors could delay or prevent the development of a new Restaurant in a particular area.

We are also subject to state and federal labor laws that govern our relationship with our employees, such as minimum wage requirements, overtime, working conditions and citizenship requirements, or customers, such as the Americans with Disabilities Act. Significant numbers of food service and preparation personnel are paid at rates governed by the federal minimum wage. Accordingly, increases in the benefits under any of these laws could increase labor costs to us and our franchisees.

We do not have significant costs related to environmental law compliance or research and development.

Trademarks

We presently own the following principal trademarks or service marks (the "Marks"). All of our primary Marks are registered on the Principal Register of the United States Patent and Trademark Office:

Mark Registration Number Registration Date ------

"QUIZNO'S" service mark 1,317,420 January 29, 1985

"QUIZNO'S" service mark 1,317,421 January 29, 1985

"QUIZNO'S & Design" service mark 1,716,834 September 15, 1992

"QUIZNO'S EXPRESS CLASSIC SUBS" service mark 2,086,598 September 19, 1996

"QUIZNO'S SUBS OVEN BAKED CLASSICS and DESIGN" 2,228,680 March 2, 1999

The Quizno's Acquisition Company grants current Bain's Deli franchisees the non-exclusive right to use the following trademarks for the operations of their Bain's Deli Restaurants: "BAIN'S CAFETERIA" trademark, Registration Number 959,079 (May 15, 1973); and "BAIN'S" trademark, Registration Number 1,640,049 (April 2, 1991).

There are no presently effective determinations of the United States Patent and Trademark Office, the trademark trial and appeal board, the trademark administrator of any state or any court, nor are there any pending infringement, opposition or cancellation proceedings or material litigation, involving the Marks.

We have also filed the following trademarks or service marks

Application or Application or Registration Registration Country Trademark Number Date Status ------

Australia Quizno's App. # 789815 30 March 1999 Pending

Quizno's Subs Australia Oven Baked App. # 789814 30 March 1999 Pending Classics

Canada Quizno's Reg. # 489496 6 February 1998 Registered

Quizno's Subs Canada Oven Baked App. # not yet Classics available Pending (and design)

Europe-CTM Quizno's App. # 1057223 28 January 1999 Pending

Quizno's Subs Europe-CTM Oven Baked App. # 1057264 28 January 1999 Pending Classics

Great Quizno's Reg. # 1576926 18 August 1995 Registered Britain

Quizno's Subs Great Oven Baked Britain Classics App # 2197852 (and design)

Japan Quizno's Reg. # 4275508 21 May 1999 Registered

Quizno's Subs Japan Oven Baked Classics App. # 17745/99 1 March 1999 Pending (and design)

Mexico Quizno's Reg. # 502259 30 August 1995 Registered

Puerto Quizno's None 23 September 1997 Pending Rico

Singapore Quizno's Reg. #6014/94 12 September 1994 Registered

South Quizno's Reg. # 29994 11 January 1996 Registered Korea

There are no agreements currently in effect which significantly limit our right to use or license the use of the Marks.

Employees

As of December 20, 1999, we employed 70 full-time employees. In addition, we employed 97 full-time and 191 part-time employees in our company-owned Restaurants. Our employees are not covered by any collective bargaining agreement and we believe our employee relations are excellent.

ITEM 2. DESCRIPTION OF PROPERTY

We lease our headquarters office space of 13,368 square feet at 1415 Larimer Street, Denver, Colorado. We also lease the premises for each of the 27 company-owned and operated Restaurants at September 30, 1999, as follows:

1. 12201 East Arapahoe Englewood, CO 80112 2,486 sq. feet Road, #B7 2. 6525 Gunpark Drive Boulder, CO 80301 1,976 sq. feet 3. 191 Blue River Parkway Silverthorne, CO 80498 931 sq. feet 4. 8081 East Orchard Road, Greenwood Village, CO 3,166 sq. feet #67 80111 5. 2311 30th Street Boulder, CO 80301 1,400 sq. feet

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 6. 9425 South University Highlands Ranch, CO 1,919 sq. feet Blvd. 80126 7. 1275 Grant Street Denver, CO 80203 1,400 sq. feet 8. 1250 South Hover Road, Longmont, CO 80501 2,350 sq. feet Bldg. 8A 9. 1660 Lincoln Street, # Denver, CO 80264 1,660 sq. feet 105 10. 10450 West Colfax Lakewood, CO 80215 1,992 sq. feet 11. 4495 North Washington Denver, CO 80216 1,903 sq. feet 12. 11211 120th Avenue, # Kenosha, WI 53142 1,214 sq. feet 73A 13. 14413 West Colfax Lakewood, CO 80401 1,300 sq. feet 14. 999 18th Street, # 136 Denver, CO 80202 1,360 sq. feet 15. 3507 Manchester Expr., Columbus, GA 31909 613 sq. feet # F10 16. 270 West 14th Street Denver, CO 80204 1,700 sq. feet 17. 4403 South Tamarac Denver, CO 80237 2,420 sq. feet Parkway 18. 818 17th Street Denver, CO 80202 1,800 sq. feet 19. 2401 West Central El Dorado, KS 67042 1,800 sq. feet 20. 738 North Waco Wichita, KS 67203 1,151 sq. feet 21. 4100 East Harry, #55 Wichita, KS 67218 1,850 sq. feet 22. 3300 North Rock Road Wichita, KS 67226 1,840 sq. feet 23. 2792 South Seneca Wichita, KS 67217 1,700 sq. feet 24. 2407 West 21st Street Wichita, KS 67203 1,225 sq. feet 25. 602 North Tyler Wichita, KS 67212 1,500 sq. feet 26. 678 East 47th Street Wichita, KS 67216 1,540 sq. feet South 27. 1695 Larimer Street Denver, CO 80202 2,981 sq. feet

ITEM 3. LEGAL PROCEEDINGS

In re Kirwin Ventures, L.L.C., Case No. 54 114 00312 98, American Arbitration Association. On June 29, 1998, Kirwin Ventures, L.L.C., a Michigan franchisee, filed an arbitration action in Southfield, Michigan against us, the Marketing and Promotion Fund, Michigan Restaurant Development, L.L.C. (the former Michigan area director), Richard F. Schaden, and Richard E. Schaden. The claim alleges violations of the Michigan Franchise Investment Law and misrepresentations in connection with the franchise sale; failure of the area director to comply with the area director marketing agreement; that advertising materials were not well-suited to the Michigan market; breach of a duty of good faith and fair dealing; and fraud. Kirwin seeks compensatory damages in excess of $400,000 plus attorneys' fees and other unspecified relief. On July 17, 1998, we filed a declaratory judgment action in federal court in Colorado asking that the arbitration be moved to Colorado according to the terms of the underlying franchise agreement. On December 27, 1999, the American Arbitration Association notified us that the arbitration would be held in Denver. We and the other defendants intend to deny each claim and will pursue counterclaims against Kirwin Ventures.

Mibichu L.L.C. v. The Quizno's Corporation, No. 98-007226-CK (Oakland County, Michigan). Mibichu L.L.C. is a franchisee owned by the same individuals who own Kirwin Ventures and which operate a second Restaurant in Michigan. On June 29, 1998, Mibichu filed an action in Michigan state court against the same respondents named in Kirwin. We removed the case to the United States District Court for the Eastern District of Michigan Southern Division (No. 98-73256). The complaint alleges virtually identical claims and seeks identical relief. We and the other defendants once again deny the claims and intend to vigorously defend the action and pursue counterclaims.

The Quizno's Corporation v. Robert W. Mitelhaus, No. 77 114 00187 98, American Arbitration Association (Denver, Colorado). On August 1, 1998, we terminated the area director agreement between us and Robert W. Mitelhaus, a California area director. On the same day, we instituted an arbitration action against Mitelhaus in Denver, Colorado, alleging that Mitelhaus breached various provisions of the area director agreement. On September 1, 1998, Mitelhaus denied that he breached the area director agreement. Mitelhaus alleged fraudulent termination of the area director agreement. In addition, Mitelhaus alleged that we failed to refund or pay certain amounts he claimed were due to him, and that we violated various state and federal franchise laws. Hearings in this matter were held before the American Arbitration Association from March 8-16, 1999. During the hearings, the respondent demanded damages in excess of $4 million.

On April 13, 1999, the arbitration panel issued its ruling. It found that Mitelhaus had materially breached the area director agreement and that we had properly terminated that agreement. The panel therefore denied all of Mitelhaus' claims for breach of contract and refuted his allegations of franchise law violations. While the panel did award Mitelhaus approximately $230,000 in pre-termination commissions and costs, those related primarily to referral commissions that we owed Mitelhaus, before we terminated him in August 1998, for previous master franchise and area directorship sales we had made. We had no liability for our lawful termination of Mitelhaus' area director agreement. The

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document panel also ordered Mitelhaus to abide by all of the post-termination covenants in the area director agreement

The Quizno's Corporation v. Hot Concepts, Inc., No. 77 116 00246 99, American Arbitration Association (Denver, Colorado). On July 19, 1999, we terminated the area director agreement between us and Hot Concepts, Inc., an area director for the Cincinnati, Ohio and Lexington, Kentucky markets. On the same day, we instituted an arbitration action against Hot Concepts in Denver, Colorado, alleging that Hot Concepts breached various provisions of the area director agreement, including failure to develop the market. On October 14, 1999, Hot Concepts denied that it breached the area director agreement. Hot Concepts counterclaimed that we fraudulently terminated the area director agreement. In addition, Hot Concepts alleged that we failed to deal in good faith by terminating the agreement, and that we fraudulently induced Hot Concepts to enter into the agreement by misrepresenting the ability to develop the market. Hot Concepts also alleged unjust enrichment. Hot Concepts seeks damages of $1.5 million. We have denied the counterclaims and intend to pursue the claims against Hot Concepts. The principal owners of Hot Concepts also owned a second area directorship under Hampton-Davis Corp. for the Bowling Green, Kentucky and Jacksonville, Tennessee markets. On September 15, 1999, we filed an action entitled The Quizno's Corporation v. Hampton-Davis Corp., in the United States District Court for the District of Colorado (No. 99-S-1812), in which we asserted that Hampton-Davis failed to meet its development quota. On October 11, 1999, we terminated the area director agreement with Hampton-Davis. Although Hampton-Davis has not yet responded to the compliant, we believe it will file counterclaims similar to those filed by Hot Concepts and will seek similar relief. If so, we intend to also deny those counterclaims.

From time to time, we are involved in litigation and proceedings arising out of the ordinary course of our business. There are no other pending material legal proceedings to which we are a party or to which our property is subject. We do not believe that any of the foregoing litigation will have a material adverse effect on us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The following matters were submitted to our shareholders at the 1999 Annual Meeting of Shareholders held on September 27, 1999:

Proposal #1 Election of Directors For Withheld Richard E. Schaden 1,596,203 225 Richard F. Schaden 1,596,203 225 Frederick H. Schaden 1,596,203 225 J. Eric Lawrence 1,596,203 225 Mark L. Bromberg 1,596,203 225 Brad A. Griffin 1,556,247 Brownell M. Bailey 39,956 225

Proposal #2 Approval of the increase of the number of shares authorized under our Employee Stock Option Plan from 320,000 to 670,000

For Against Abstained 1,592,403 4,025 0

Proposal #3 Approval of the increase of the number of shares authorized under our Amended and Restarted Non-Employee Directors and Advisors Stock Option Plan from 140,000 to 200,000

For Against Abstained 1,592,203 4,225 0

Proposal # 4 Ratification of Accountants For Against Abstained 1,595,928 0 500

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock is traded in the NASDAQ Small-Cap Issues Market under the symbol "QUIZ." The following table shows high asked, low bid and close price information for each quarter in the last two fiscal years as reported by Prophet Information Services, Inc., a provider of online historical stock price data for all major U.S. securities markets. Such quotations reflect inter-dealer prices, without retail mark-ups, markdowns or commissions, and may not necessarily represent actual transactions. On December 17, 1999, the stock closed at $8.125.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fiscal Year Ended December 31, 1998 High Low Close First Quarter $5.88 $4.44 $5.88 Second Quarter $9.00 $6.00 $8.19 Third Quarter $8.38 $7.25 $8.13 Fourth Quarter $8.06 $6.50 $7.63

Fiscal Year Ended September 30, 1999 High Low Close First Quarter $7.75 $6.88 $7.19 Second Quarter $7.75 $6.50 $7.25 Third Quarter $9.50 $6.94 $8.25

There were 169 holders of record (and approximately 1,000 beneficial owners) of our Common Stock as of December 17, 1999. The first number includes shareholders of record who hold stock for the benefit of others.

We do not expect to pay any dividends on our Common Stock in the foreseeable future. Management currently intends to retain all available funds for the development of our business and for use as working capital.

In October 1999, we announced a program to repurchase up to 200,000 shares of our common stock. The timing, price, quantity and manner of purchases are being determined by management consistent with applicable Securities and Exchange Commission rules and are dependent upon market conditions. As of November 30, 1999, we had repurchased 61,300 shares under this program.

During the last quarter of the fiscal year ending September 30, 1999, we sold the following securities without registration with the Securities and Exchange Commission pursuant to the exemption noted:

Securities Number of Exemptions Sold Date Shares Consideration Purchasers Claimed ------

Common Stock 8/5/99 1,527 $12,025 Plan Quizno's 401(k) Section 4(2) obligation Trust

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-Looking Statements

Certain of the information discussed in this annual report, and in particular in this section entitled "Management's Discussion and Analysis or Plan of Operation," are forward-looking statements that involve risks and uncertainties that might adversely affect our operating results in the future in a material way. Such risks and uncertainties include, without limitation, the effect of national and regional economic and market conditions in the U.S. and the other countries in which we franchise Restaurants, costs of labor and employee benefits, costs of marketing, the success or failure of marketing efforts, costs of food and non-food items used in the operation of the Restaurants, intensity of competition for locations and Franchisees as well as customers, perception of food safety, spending patterns and demographic trends, legal claims and litigation, the availability of financing for us and our Franchisees at reasonable interest rates, the availability and cost of land and construction, legislation and governmental regulations, and accounting policies and practices. Many of these risks are beyond our control. In addition, specific reference is made to the "Risk Factors" section contained in our Prospectus, dated January 9, 1998, included in the Registration Statement on Form S-3 filed by our company (Registration No. 333-38691).

The principal sources of our income are continuing fees, initial franchise fees, and, historically, area director marketing fees. These sources are subject to a variety of factors that could adversely impact our profitability in the future, including those mentioned in the preceding paragraph. The continued strength of the U.S. economy is a key factor to the restaurant business because consumers tend to immediately reduce their discretionary purchases in economically difficult times. An economic downturn would adversely affect all three of the sources of income identified above. Because our franchises are still concentrated in certain regions of the U.S., regional economic factors could adversely affect our profitability. Weather, particularly severe winter weather, will adversely affect royalty income and could affect the other sources cited above. Culinary fashions among Americans and people in other countries in which we franchise the Restaurants will also impact our profitability. As eating habits change and types of cuisine move in and out of fashion, our challenge will be to formulate a menu within the Quizno's distinctive culinary style that appeals to an increasing market share. Finally, the intense competition in the restaurant industry continues to challenge participants in all segments of this

As our revenues from foreign operations become more significant, our profitability could be adversely impacted by international business risks and political or economic instability in foreign markets. While, international operations involve risks that do not exist in domestic operations, such as adverse fluctuation in foreign exchange rates, monetary exchange controls, foreign government regulation of business relationships, and uncertainty of intellectual property protection, we believe that the potential rewards of expanding the market for our services to selected foreign countries far outweighs such risks.

Overview

In November 1999, we announced that we had changed our fiscal year end from December 31 to September 30. The financial statements included with this 10-KSB filing reflect our balance sheet as of September 30, 1999, December 31, 1998 and December 31, 1997 and the related statements of operations, stockholders' equity and cash flows for the nine months ended September 30, 1999 and the twelve months ended December 31, 1998 and 1997. Included below is the unaudited statement of operations for the twelve months ended September 30, 1999 and 1998 and the unaudited statement of cash flows for the twelve months ended September 30, 1999 and 1998. For purposes of Management's Discussion and Analysis or Plan of Operation, we believe that these twelve-month statements and comparisons provide a more meaningful analysis. Therefore, all comparison and analysis included in this Management's Discussion and Analysis or Plan of Operation will be based upon these twelve-month statements and related data. Unless noted otherwise, all references to 1999 and 1998 refer to the twelve months ending September 30, 1999 and 1998, respectively.

Consolidated Statement of Operations

For the Year Ended September 30, ------1999 1998 ------(Unaudited) Franchise operations: Revenue Continuing fees ...... $ 10,412,414 $ 5,119,903 Initial franchise fees ...... 3,610,042 2,675,567 Area director and master franchise fees ...... 2,131,882 2,357,216 Other ...... 508,240 659,263 Interest ...... 355,608 172,582 ------Total revenue ...... 17,018,186 10,984,531 ------

Expenses Sales and royalty commissions .... (5,302,456) (3,607,186) Advertising and promotion ...... (96,433) (213,700) General and administrative (8,560,924) (5,567,313) Total expenses (13,959,813) (9,388,199)

Income from franchise operations .... 3,058,373 1,596,332 ------

Company store operations: Sales ...... 8,276,368 6,378,379 Cost of sales ...... (2,511,086) (1,929,730) Cost of labor ...... (2,222,855) (1,549,512) Other store expenses (2,924,237) (2,319,752) Total expenses (7,658,178) (5,798,994) ------

Income from Company stores operations $ 618,190 $ 579,385 ======

For the Year Ended September 30, ------1999 1998 ------(Unaudited) Other income (expenses): Research, development and new programs .. $ -- $ (72,161) Sales by stores held for resale ...... 997,583 859,745 Loss and expenses related to stores held for sale ...... (1,260,529) Loss on sale or closure of Company stores (127,809) (120,928) Sale of Japan master franchise ...... 1,168,801 -- Provision for bad debts ...... (354,827) (115,141) Other expenses ...... (68,245) (16,261) Depreciation and amortization ...... (1,280,836) (564,766) Privatization costs ...... (265,472) -- Interest expense ...... (321,718) (330,779) ------Total other expenses (1,513,052) (1,433,270) ------

Net income before income taxes ...... 2,163,511 742,447 Income tax provision ...... (353,135) ------

Net income (loss) ...... 1,810,376 742,447 Preferred stock dividends ...... (179,151) (217,262) ------

Net income before cumulative effect of changed accounting principle ...... 1,631,225 525,185 Cumulative effect of changed accounting principle (net of taxes) ...... (2,769,592) ------

Net income (loss) applicable to common stockholders ...... $(1,138,367) $ 525,185 ======

Consolidated Statement of Cash Flows

For the Year Ended September 30, ------1999 1998 ------(Unaudited) Cash flows from operating activities Net income (loss) before preferred stock dividends ...... $ (959,216) $ 742,447 Adjustments to reconcile net income (loss) to net cash provided by operating activities - Depreciation and amortization ...... 1,179,690 564,766 Cumulative effect of changed accounting principle ...... 4,388,208 -- Provision for losses on accounts and notes receivable ...... 354,827 115,141 Loss on disposal of Company stores .. 158,308 120,928 Deferred income taxes ...... (3,395,416) (65,515) Amortization of deferred financing costs ...... 101,146 54,072 Issuance of notes receivable for master franchise and area director .. (1,211,237) (965,407) marketing agreements Other ...... 17,972 2,660 Changes in assets and liabilities - Accounts receivable ...... (497,682) (249,502) Other assets ...... 108,968 (184,110) Accounts payable ...... 95,453 (334,563) Accrued liabilities ...... 384,684 (71,374) Deferred franchise costs ...... (536,385) (283,370) Deferred initial franchise fees and other fees ...... 5,174,771 2,010,112 Accrued income taxes ...... 851,469 ------5,581,278 887,193 ------

Consolidated Statement of Cash Flows (continued)

For the Year Ended September 30, ------1999 1998 ------(Unaudited) Cash flows from investing activities Cash paid for acquisition ...... $ (286,355) $ - Purchase of property and equipment .... (2,139,866) (1,420,853) Proceeds from notes receivable ...... 1,355,282 812,944 Investment in turnkey stores ...... (7,558) (546,790) Short-term investments ...... (3,060,688) (1,203,189) Issuance of other notes receivable .... (362,578) (631,864) Investment by minority interest owners 151,601 -- Purchase of minority interest owners .. (150,000) -- Intangible and deferred assets ...... (1,262,185) (248,207) Proceeds from sale of assets and stores 213,000 -- Deposits ...... (42,805) (121,265) Area director marketing territory repurchases ...... (863,984) -- Other investments ...... (15,000) ------Net cash used by investing activities ...... (6,471,136) (3,359,224) ------

Cash flows from financing activities Principal payments on long-term obligatins ...... (1,866,919) (377,605) Proceeds from long-term obligations ... 2,242,187 973,924 Loan and offering costs ...... -- (56,317) Redemption of Class B Preferred Stock (500,000) -- Proceeds from issuance of common stock and preferred stock ...... 128,479 1,419,351 Preferred dividends paid ...... (179,452) (217,262) ------Net cash (used by) provided by financing activities ...... (175,705) 1,742,091 ------

Net decrease in cash and cash equivalents (431,281) (160,848)

Cash and cash equivalents - beginning of year ...... 1,058,109 1,218,957 ------

Cash and cash equivalents - end of year .. $ 626,828 $ 1,058,109 ======

In 1999, before the cumulative effect of accounting changes, we were profitable for the year and for each of the four quarters in 1999. We ended the year with 634 Restaurants open (including 8 Bain's Deli restaurants), another 505 Restaurants sold and scheduled to open in the future, 27 Company owned Restaurants, 79 area directorships owned by 68 Area Directors, and 5 international master franchisees. We believe we have built a strong foundation for the Company upon which growth can continue with regular profits. In 1999, before the cumulative effect of accounting changes, we earned $1,810,376 compared to $742,447 in 1998 (amounts are before preferred stock dividends).

On a quarterly basis, earnings before cumulative effect of changes in accounting principle and preferred stock dividends, by business segment, reflect continued overall improvement over the last eight quarters.

Franchise Company Quarter Ended Operations Stores Other Net ------

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document December 31, 1997 357,877 102,059 (386,349) 73,587 March 31, 1998 291,888 107,384 (257,593) 141,679 June 30, 1998 482,699 166,386 (400,411) 248,674 September 30, 1998 463,868 203,556 (388,917) 278,507 December 31, 1998 708,022 83,554 (347,821) 443,755 March 31, 1999 526,519 183,564 (260,848) 449,235 June 30, 1999 535,169 197,769 (538,877) 194,061 September 30, 1999 1,288,663 153,303 (718,641) 723,325

The following table reflects our revenue growth by source and Restaurants for the past two years:

For the year ended September 30, ------1999 1998 ------Revenue (000's) Continuing fees ...... $10,412 $ 5,120 Initial franchise fees ...... 3,610 2,676 Area director fees ...... 2,132 2,357 Other ...... 832 ------864 832 Franchise revenue ...... 17,018 10,985 Sales by Company owned stores 8,276 6,378 Sales by stores held for .... 860 ------resale ...... 998 860 ------Total revenue ...... $26,292 $18,223 ======Percent increase ...... 44% ======

Restaurants open, beginning . 438 241 New Restaurants opened ...... 258 167 Restaurants acquired ...... -- 60 Restaurants sold ...... (31) -- Restaurants closed ...... (28) (25) Restaurants closed, scheduled to reopen...... (4) (5) Restaurants reopened ...... 1 ------Restaurant open, end ...... 634 438 ======

Franchises sold, domestic and international ...... 545 361 ======

Initial franchise fees collected (000's)...... $6,986 $4,785 Systemwide sales (millions).. $152 $89 Average unit volume (1)...... $369,000 $339,000 Same store sales (2) (3)..... Up 7.3%

(1) Average unit volumes of $369,000 and $339,000, are for the nine months ended September 30, 1999 (annualized) and December 31, 1998, respectively. Average unit volumes exclude Restaurants located in convenience stores and gas stations and include only Restaurants open at least one year under the same ownership.

(2) Same store sales are for the nine months ended September 30, 1999 compared to the comparable period in 1998 and is based on 228 stores open all of 1999 and 1998. Stores that transferred ownership during this period, or were in substantial default of the franchise agreement at September 30, 1999, are excluded.

(3) Because we are and will continue to be in an aggressive growth mode over the next few years, it is anticipated that same store sales will fluctuate as Restaurants are included from more start up markets. Results of Operations

Comparison of Years Ended September 30, 1999 and 1998

Franchise revenue increased 55% in 1999 to $17,018,186 from $10,984,531 in 1998. Total revenue increased 44% in 1999 to $26,292,137 from $18,222,655 in 1998. The revenue increase resulted primarily from continuing fees and Company store sales.

Continuing fees increased 103% in 1999 to $10,412,414 from $5,119,903 in

Royalty fees increased 74% in 1999 to $8,386,050 from $4,832,014 in 1998. Royalty fees are a percentage of each Owner's sales paid to us and will increase as new franchises open, as the average royalty percentage increases, and as average unit sales increase. At September 30, 1999, there were 607 franchises open (including Bain's) compared to 408 franchises open at September 30, 1998. The royalty rate was 5% for agreements entered into prior to February 11, 1995, 6% for all franchise agreements entered into from February 11, 1995 through March 31, 1998 and 7% for all agreements entered into since March 31, 1998. We have no immediate plans to further increase the royalty rate.

Licensing fees are generated through the licensing of our trademark for use by others. Licensing fees are expected to continue and to increase as systemwide sales and the awareness and value of our brand increases. For 1999, licensing fees were $2,026,364 and $287,889 in 1998. There was no licensing fee revenue prior to January 1, 1998.

Initial franchise fees increased 35% in 1999 to $3,610,042 from $2,675,567 in 1998. Initial franchise fees are one-time fees paid by Owners at the time the franchise is purchased. Initial franchise fees are not recognized as income until the period in which all of our obligations relating to the sale have been substantially performed, which generally occurs when the franchise opens. Our share of initial franchise fees sold by foreign master franchisees is recognized when received. In 1999, we opened 258 franchises, including 46 international Restaurants, as compared to 167, including 22 international Restaurants, opened in 1998. Our initial franchise fee has been $20,000 since 1994. Owners may purchase a second franchise for $15,000 and third and subsequent franchise for $10,000. The initial franchise fee for a Quizno's Express franchise is $10,000 for the first, $7,500 for the second, and $5,000 for the third and additional franchises purchased by the same Owner. Our share of initial franchise fees for international Restaurants is generally 30% of the franchise fee and will vary depending on the country and the currency exchange rate.

Initial franchise fees collected by us for domestic franchise sales are recorded as deferred initial franchise fees until the related franchise opens. Deferred initial franchise fees at September 30, 1999 were $7,910,648 and represent 505 domestic franchises sold but not yet in operation, compared to $4,279,868 at September 30, 1998 representing 324 domestic franchises sold but not open. Approximately 159 international franchises had been sold but were not open at September 30, 1999 (approximately 80 at September 30, 1998). Direct costs related to the sale, primarily sales commissions to Area Directors, are deferred on our books and recorded as an expense at the same time as the related initial franchise fee is recorded as income. Deferred costs paid and due at the time of opening with respect to initial franchise fees deferred at September 30, 1999 were $1,585,773. Approximately 50% of all domestic initial franchise fees received by us are paid to Area Directors for sales and opening commissions.

We did not sell or open any Bain's franchises in 1999 or 1998, nor do we expect to in the future.

Area director and master franchise fees were $2,131,882 in 1999 and $2,357,216 in 1998. Domestic area director fees were $1,200,813 in 1999 and $1,499,466 in 1998. For analysis purposes, these amounts are not comparable. Effective January 1, 1999, we changed our accounting policy related to the recognition of revenue from area director marketing agreement fees to one that recognizes these fees as revenue on a straight-line basis over the term of the agreement, which is ten years. This change reflected a decision made by the U.S. Securities and Exchange Commission in December 1999 relative to the recognition of area director fee revenue. Commissions paid to the area director upon the inception of the agreement are classified as a prepaid and recognized as an expense over the same ten year term. The effect of the change in the nine-month period ending September 30, 1999, was the deferral of $4,262,701 of net revenue previously recognized in prior years. This was reported as a cumulative effect of change in accounting principle for $2,685,502 (net of $1,577,199 in income tax benefits) and is included in the net loss for 1999.

The fee for U.S. areas was $.03 per person in the designated area through June 1996, $.035 from July 1996 through December 1996, $.05 from January 1997 through December 1997, $.06 from January 1998 through February 1998, and $.07 since March 1, 1998. In addition, each Area Director is required to pay a training fee of $10,000. In 1999, we sold 14 new area directorships including 5 existing Area Directors who purchased additional territory, as compared to 20 area directorships sold in 1998. At September 30, 1999, we had a total of 79 area directorships owned by 68 Area Directors who owned areas encompassing approximately 75% of the population of the United States.

International master franchise fees are one-time fees paid to us for the right to sell franchises in a designated, exclusive, international market. The master franchisee assumes all of our obligations and duties under the agreement. We recognize these fees when received. International master franchise fees earned were $931,069 in 1999 and $857,750 in 1998. The 1999 fees received were

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document for the United Kingdom, $510,000, Japan, $125,000, Australia, $221,069, and the rights to part of Central America, $115,000. A total of $40,000 of the fees have been deferred until our training obligations are completed. The 1998 fees of $632,750 and $225,000 were for Canada and Japan, respectively.

We offer domestic Area Director applicants financing for up to 50% of the area fee. The amount financed is required to be paid to us in installments over five years at interest rates between 6% and 15%. The promissory notes are personally signed by the Area Director and, depending on the personal financial strength of the Area Director, secured by collateral unrelated to the area directorship. We also periodically offer payment plans to international Master Franchisee applicants. Of the 14 domestic and international areas sold in 1999, 11 used this financing for $1,450,309, representing 68% of the area director fees recognized in 1999. In 1998, a total of $1,083,408 was financed, representing 46% of area revenue.

Other revenue decreased by 23% in 1999 to $508,240 from $659,263 in 1998. Other revenue is primarily amounts paid by equipment suppliers for design and construction, franchise transfer fees and bookkeeping fees charged Owners for whom we provided bookkeeping services. Amounts paid by equipment suppliers were $324,139 in 1999 compared to $298,330 in 1998. This amount will vary based on new store openings. Franchise transfer fees increased in 1999 to $86,500 from $46,000 in 1998. Since 1995, our franchise agreement requires all new Owners to utilize our bookkeeping services, or a firm designated by us, to provide bookkeeping services, for their first 12 months of operations. Bookkeeping fees were $30,888 in 1999 compared to $286,364 in 1998. Bookkeeping fees declined, and are expected to be immaterial in the future, because we out-sourced the function to a third party in 1998.

Sales and royalty commissions expense increased 47% to $5,302,456 (44.2% of royalty and initial franchise fees) in 1999 from $3,607,186 (48.0% of royalty and initial franchise fees) in 1998. Sales and royalty commissions are amounts paid to our domestic Area Directors, commissions paid to other sales agents and employees, and costs related to sales promotions and incentives. Sales and royalty commission expense declined in 1999 as a percentage of royalty and initial franchise fee due to the repurchase of certain area directorships.

Our domestic Area Directors receive commissions equal to 50% of the initial franchise fees and 40% of royalties received by us from franchises sold, opened, and operating in the Area Director's territory. In exchange for these payments, the Area Director is required to market and sell franchises, provide location selection assistance, provide opening assistance to new owners, and perform monthly quality control reviews at each franchise open in the Area Director's territory.

The Area Director is entitled to receive commissions during the term of the area director marketing agreement and in some cases, upon expiration of the area director agreement, the commission paid is reduced to 1% of sales for 5 years.

General and administrative expenses increased 54% to $8,560,924 in 1999 from $5,567,313 in 1998. As a percent of franchise revenue, general and administrative expenses have decreased slightly from 50.7% in 1998 to 50.3% in 1999. General and administrative expenses include all of our operating costs. The increase is primarily due to the addition of employees to service the rapidly growing network of our Owners and Area Directors. Although general and administrative expenses will likely continue to increase as we grow, we expect the rate of increase to continue to decline.

We believe our general and administrative expenses are adequate and are not excessive in relation to our size and growth.

Company owned stores earned $618,190 on sales of $8,276,368 in 1999 compared to $579,385 on sales of $6,378,379 in 1998. During 1999, we operated stores for a total of 257 store operating months. In 1998, we had a total of 189 store operating months. Sales per store month decreased 4.7% in 1999 to $32,166 from $33,748 in 1998.

At September 30, 1999, we had 25 (24 at September 30, 1998) Company owned stores. In 1999, we purchased from an Owner one Restaurant. During 1998, we acquired and converted to Company owned Quizno's eight competitive sandwich shops in Wichita, Kansas, built and opened six new Company owned Quizno's, purchased from Owners four Restaurants, reclassified as stores held for resale five Company owned Quizno's, and sold to an Owner one Company owned store.

Stores held for resale lost $262,946 on sales of $997,583 in 1999 compared to a loss of $213,234 on sales of $859,745 in 1998. At September 30, 1999 and 1998, we operated two and six stores held for resale, respectively. In 1999, we closed two stores held for resale and sold two stores to an Owner. During 1998, eight stores were classified as stores held for resale and two Bain's units were returned to the seller.

Japan master franchise income represents payments received in 1999 of $1,423,348 for the master franchise rights of Japan. In the second quarter of 1999, we also received $22,000 for our share of an area director marketing agreement sold in Japan. In 1999, we incurred direct costs related to the revenue totaling $276,547 resulting in net revenue of $1,168,801. We received $350,000 in 1998. The payments were recognized as revenue when received. Although we plan to continue to enter into master franchise agreements internationally, we do not expect such transactions to be of the magnitude of the Japanese transaction.

Provision for bad debts was $354,827 in 1999 compared to $115,141 in 1998. The increase in the 1999 expense was primarily due to allowances for promissory notes due for stores purchased from us and subsequently closed.

Other expenses were $68,245 in 1999 compared to $16,261 in 1998. The increase in the 1999 expense was primarily due to the loss on the sale of assets. The 1998 expense was primarily subleasing losses related to one store previously owned by us and sold to an Owner.

Depreciation and amortization was $1,280,836 in 1999 and $564,766 in 1998. The increase was due primarily to the depreciation related to assets of stores held for resale, the acquisition and development of new Company owned Restaurants in 1998 and certain other tangible and intangible assets with short lives expensed beginning in late 1998. A portion of the increase is related to certain intangible assets fully amortized in 1999 and thereafter not recurring.

Privatization costs were $265,472 in 1999 and represents our costs associated with a proposed going private transaction. As discussed in our 1998 Form 10-KSB, on December 29, 1998, we received a proposal from our majority shareholders to merge the company into a new entity owned by them, pursuant to which all of our shareholders other than themselves, would receive cash for their company shares. On August 10, 1999, we announced that the proposal had been withdrawn. An agreement regarding all the terms of the transaction could not be reached with the Special Committee of the Board of Directors evaluating the offer.

Interest expense was $321,718 in 1999 and $330,779 in 1998. The decrease was primarily attributable to a decrease in our effective interest rate. On January 6, 1999, we paid $500,000 to redeem all of our outstanding Class B Preferred Stock and paid off the remaining principal of our 12.75% convertible subordinated debt. The funds used for this payoff were obtained through the borrowing of $1,853,931 from an unrelated noteholder. This note accrues interest at the rate of 7.75% per annum.

Income tax expense was $353,135 in 1999. There was no income tax benefit or expense recorded in 1998. Our taxable income has historically exceeded our book income primarily because initial franchise fees we receive are taxable income in the year received and are book income in the year the franchise opens. Consequently, we will not pay income taxes on this income when it is recognized for financial reporting purposes. As of December 31, 1998, we used all of our tax net operating loss carryforwards and incurred a tax liability. Accordingly, in the first quarter of 1999, we reduced the amount by which we had recorded an impairment of our deferred tax asset in prior years and recorded the tax benefit of prior years net operating losses of $368,553. Subsequent to December 31, 1998, our provision for income taxes was recorded at 37%.

Cumulative effect of a change in accounting principle was $2,769,592. This amount was composed of a $2,685,502 (net of $1,577,199 in income tax benefits) change reflected by a decision made by the U.S. Securities and Exchange Commission in December 1999 relative to the recognition of area director fees. As previously discussed, effective January 1, 1999, we changed our accounting policy related to the recognition of area director marketing agreement fees to one that recognizes such fees as revenue on a straight-line basis over the term of the agreement, which is ten years.

Also, during April 1998, Statement of Position 98-5, "Reporting in the Costs of Start-Up Activities" was issued. SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. SOP 98-5 was required to be adopted in the second quarter of 1999. Upon adoption, we were required to write-off $84,090 (net of $41,417 in income tax benefits) in preopening related costs that were deferred on the balance sheet as of December 31, 1998.

Liquidity and Capital Resources

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Net cash provided by operating activities was $6,215,560 in 1999 compared to $1,456,285 in 1998, an improvement of $4,759,275. The primary reasons for the improvement were the increase in net deferred franchise fees of $2,911,644, the increase of $1,729,927 in net income before depreciation, amortization, and the cumulative effect of changes in accounting principles, and the increase in accounts payable, accrued liabilities and the decrease in accounts receivable totaling $637,794. These amounts were partially offset by an increase of $859,816 in deferred income taxes less other changes totaling $339,629.

Net cash used in investing activities was $6,471,136 in 1999 compared to cash used by investing activities of $3,359,224 in 1998. Cash used by investing activities for both years was primarily related to the acquisition or development of company owned Restaurants. The primary reason for the increase in funds used was the $1,857,499 increase associated with short-term investments. In addition, in 1999, cash of $863,984 was used to acquire area director territory repurchases.

Net cash used by financing activities was $175,705 in 1999 compared to cash provided by financing activities of $1,742,091 in 1998. The 1999 amount was primarily from financing company owned Restaurants and the redemption of the Class B Preferred stock. The amount provided in 1998 was primarily from the sale of Class B and Class C preferred stock.

At September 30, 1999, we had $192,923 invested in two stores held for resale. The stores held for resale are expected to be sold or closed by December 31, 1999.

In the second quarter of 1998, we tested a program under which our Area Directors had the right to elect to have all future franchisee leases in the Area Director's territory signed by The Quizno's Realty Company ("QRC"), a wholly owned subsidiary of ours. As a condition of the lease, the landlord agrees not to look beyond QRC for payments. These locations would then be subleased by QRC to the Owner, whose personal liability is limited to one year. The Owner pays QRC an indemnification fee of $165 per month, pays a one-time lease-processing fee to QRC of $2,200, and pays a security deposit to QRC equal to two months rent. Effective March 1, 1998, we transferred cash and other assets having a book value of approximately $500,000 to QRC in exchange for stock and a promissory note. As of September 30, 1999, 13 leases had been executed under this program.

On December 31, 1996, we completed a debt financing for $2 million of which $500,000 was converted to preferred stock in December 1997. On January 6, 1999, we paid off the loan and redeemed the preferred stock at a cost of $1,854,000. As required by the loan agreement, we issued a warrant to the lender to purchase 372,847 shares of our common stock at an exercise price of $3.10.

On October 1, 1999, our Board of Directors authorized the purchase of up to 200,000 shares of our common stock. Subject to applicable security laws, repurchases may be made at such times, and in such amounts, as we deem appropriate. As of November 30, 1999, we had repurchased 61,300 shares at an average price of $8.63.

On October 5, 1999, we closed on a loan in the principal amount of $14,000,000 from AMRESCO Commercial Finance, Inc. The loan bears interest at 10.1%, which may be adjusted to the ten-year Treasury note rate plus 4.25% during the first 120 days, and is repayable in monthly installments of $193,344 for nine years and five months. The loan is secured by the assets of our company owned stores and other assets of ours existing at September 30, 1999. The loan is part of a securitized pool and includes a provision which could require us to pay up to another $1,555,555 depending on the amount of defaults, if any, in the loan pool. The proceeds of the loan were used to pay-off existing debt of $3,320,956, pay costs and fees associated with the loan of $560,000, and prepay interest and one payment of $304,624. The balance of $9,814,420 is available to use, with certain restrictions, for general corporate purposes other than working capital, dividends, or to repurchase the majority shareholder's stock. Certain notes payable held by us at September 30, 1999 were repaid with the AMRESCO note proceeds. See Note 9 of the Notes to the Consolidated Financial Statements for the identification of the notes repaid with these proceeds.

On October 11, 1999, our Board of Directors approved the purchase of a corporate jet allowing for more efficient travel by management between areas of franchise operations. For tax purposes, the airplane qualifies for accelerated depreciation, resulting in the deferral of income tax payments. The $3,350,000 purchase was completed on October 13, 1999.

On November 16, 1999, we announced that our subsidiary, QUIZ-DIA, Inc. purchased the assets of ASI-DIA, Inc. ("ASI") for a total of $4.875 million in cash. Assets purchased include two Quizno's restaurants and three bars, including the WWW.COWBOY bar, and various other assets located on Concourses A and B at the Denver International Airport. We intend to continue operating the restaurants as Quizno's Classic Subs and the bars as operated by ASI.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document As discussed in our 1998 Form 10-KSB, on December 29, 1998, we received a proposal from our majority shareholders to merge the company into a new entity owned by them, pursuant to which all of our shareholders other than themselves would receive cash for their company shares. On August 10, 1999, we announced that the proposal had been withdrawn. An agreement regarding all the terms of the transaction could not be reached with the Special Committee of the Board of Directors evaluating the offer.

As we have in the past, we will continue to consider acquisitions of other chains, the purchase of Quizno's Restaurants from our Owners, and the purchase of Quizno's area directorships from our Area Directors. From time to time, we will make offers and enter into letters of intent for such transactions subject to the completion of due diligence. In all such cases, we will identify the sources of cash required to complete such transactions prior to entering into a binding agreement.

We have never paid cash dividends on our common stock and we do not anticipate a change in this policy in the foreseeable future.

Year 2000 Disclosure

Prior to December 1, 1999, we took various steps to address the year 2000 (or Y2K) issues as they related to our computer systems and operations in general. We reviewed our internal systems to determine what steps we could take to minimize Y2K's potential disruptive effect on our operations. We concluded that we were not at material risk from Y2K issues. We use current versions of widely used, publicly available software for our accounting and other data processing requirements. The providers of the software utilized by us have stated that there will be no failures in the programs used by us resulting from the year 2000. We use a small amount of customized software, all of which has been developed by us over the last two years, and has been written to be functional in the year 2000. We did not determine the impact, if any, that year 2000 issues might have on our vendors. However, we believe there are adequate alternative vendors that can supply products and services to us if necessary. Finally, our business, quick service restaurants, is not highly dependent upon electronic data processing.

ITEM 7. FINANCIAL STATEMENTS

Attached hereto and filed as a part of this Form 10-KSB are the consolidated financial statements listed in the Index to the Consolidated Financial Statements at page F-1.

THE QUIZNO'S CORPORATION AND SUBSIDIARIES

Table of Contents

Page

Independent Auditors' Report...... F - 1

Consolidated Financial Statements

Consolidated Balance Sheets...... F - 2

Consolidated Statements of Operations...... F - 3

Consolidated Statement of Stockholders' Equity...... F - 5

Consolidated Statements of Cash Flows...... F - 6

Notes to Consolidated Financial Statements...... F - 8

To the Board of Directors and Stockholders The Quizno's Corporation and Subsidiaries Denver, Colorado

We have audited the accompanying consolidated balance sheets of The Quizno's Corporation and Subsidiaries as of the September 30, 1999 and December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for the nine months ended September 30, 1999 and the years ended December 31, 1998 and 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Quizno's Corporation and Subsidiaries as of September 30, 1999 and December 31, 1998 and 1997 and the results of their operations and their cash flows for the nine months ended September 30, 1999 and the years ended December 31, 1998 and 1997, in conformity with generally accepted accounting principles.

/s/Ehrhardt Keefe Steiner & Hottman PC Ehrhardt Keefe Steiner & Hottman PC December 13, 1999 Denver, Colorado

F - 1

THE QUIZNO'S CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

See notes to consolidated financial statements.

F - 2

THE QUIZNO'S CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

See notes to consolidated financial statements.

F - 3

THE QUIZNO'S CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

See notes to consolidated financial statements.

F - 4

THE QUIZNO'S CORPORATION AND SUBSIDIARIES

Consolidated Statement of Stockholders' Equity

See notes to consolidated financial statements.

F - 5

Consolidated Statements of Cash Flows

See notes to consolidated financial statements.

F - 6

THE QUIZNO'S CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (continued)

Supplemental disclosure of cash flow information: Cash paid during the year for interest was $240,827 (1999), $340,614 (1998) and $290,019 (1997). Cash paid during the year for income taxes was $1,198,275 (1999), $72,515 (1998) and $0 1997.

Supplemental disclosure of non-cash investing and financing activities: During 1999, the Company sold a store held for resale for $150,000, all of which was in the form of a promissory note, and recorded a loss on sale of $11,684. Also, the Company sold the franchising rights and obligations for all but 14 of its Bain's Deli's franchise agreements to Bain's Deli Corporation for $850,000, represented by a note receivable, a reduction of a related payable and other intangibles. In 1999, the Company recorded a gain of $12,071 related to this sale.

Also, during 1999, the Company reached a settlement with Bain's Deli that resulted in the return to the Company of the 9,091 shares of Company stock originally issued as part of the purchase of the Bain's units in 1997 and the cancellation of the Company's note payable to Bain's Deli in the amount of $116,118.

During 1998, the Company transferred $220,227 of property and equipment to assets of stores held for resale or under development.

Additionally in 1998, the Company reduced notes payable, pursuant to the terms of the Bain's purchase agreements, in the amount of $437,553. Corresponding reductions in property and equipment ($150,000) and intangibles ($287,553) were also recorded.

During 1999, 1998 and 1997, the Company acquired assets under capital leases totaling $124,742, $231,085and $77,942, respectively.

During 1997, the Company converted $500,000 of subordinated debt to 100,000 shares of Series B convertible preferred stock net of $44,277 of deferred offering costs.

Additionally in 1997, the Company acquired the assets of Bain's Deli Franchise Associates, which included 52 franchise restaurants and three company owned deli restaurants as follows:

Property and equipment $ 225,000 Non-compete agreement 1,060,000 Other assets 122,900 ------

$ 1,407,900 ======

Acquisition costs $ (104,600) Cash paid (623,800) Promissory note issued (579,500) Common stock issued (100,000) ------

$(1,407,900) ======

See notes to consolidated financial statements.

THE QUIZNO'S CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Description of Business and Summary of Significant Accounting Policies

The Quizno's Corporation (the "Company") was incorporated on January 7, 1991, in the State of Colorado, and is primarily engaged in the business of franchising Quizno's quick service restaurants throughout the United States, Canada, United Kingdom, Australia, Japan and Central America featuring submarine sandwiches, salads, soups, and refreshments.

The Company's wholly owned subsidiaries are The Quizno's Operating Company ("QOC") incorporated in 1994 to own and operate Company stores, S & S, Inc. ("S&S") formerly the Quizno's Development Company ("QDC") incorporated in 1995 to develop stores to sell or lease to franchisees, The Quizno's Realty Company ("QRC") incorporated in 1995 to execute leases for store locations, The Quizno's Acquisition Company ("QAC") incorporated in 1997 to purchase existing unrelated quick service restaurants, the Quizno's Licensing Company ("QLC") incorporated in 1998 to license companies who use the Quizno's logos and QUIZ-DIA, Inc. ("DIA") incorporated in 1999 to purchase restaurant assets at Denver International Airport. In addition, in 1998, the Company organized Quizno's Kansas LLC ("QKL"), and purchased the assets of Stoico Restaurant Group (see below).

The following table summarizes the number of Quizno's restaurants open at September 30, 1999:

Sold But Not Yet In Operation Operational Total ------Quizno's Company owned restaurants ...... -- 17 17 Franchise restaurants - U.S. and Puerto Rico ...... 505 527 1,032 Franchise Restaurants - International 159 72 231 Restaurants held for resale ...... -- 2 2

Bain's Franchise restaurants ...... -- 8 8

Quizno's Kansas Company owned restaurants ...... -- 8 8 ------

664 634 1,298 ======

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries QOC, S&S, QRC, QLC, QAC and QKL.

Change in Fiscal Year

In November 1999, the Company changed its fiscal year from December 31 to September 30. All references in the financial statements to the year or period ended September 30 relate to the nine months ended September 30, 1999.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

Inventory

Inventory is included in other assets and is stated at the lower of cost or market and consists of food and paper products. Cost is determined using the first in, first out (FIFO) method.

Credit Risk

The Company grants credit in the normal course of business, primarily consisting of royalty fees receivable and loans to area directors and its franchisees. To reduce credit risk for U.S. franchises, the Company electronically debits the franchisees bank account weekly for fees due the Company according to franchise agreements entered into after 1993, and reserves the right to terminate franchise and area director agreements for non-payment of amounts owed.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company's cash equivalents consists of short-term commercial paper with original maturities not in excess of three months. The Company continually monitors its positions with, and the credit quality of, the financial institutions it invests with. As of the balance sheet date, balances of cash and cash equivalents exceeded the federally insured limit by approximately $1,140,779.

Short-Term Investments

The Company classifies its investment in corporate debt securities with original maturities in excess of three months as short-term investments held-to-maturity. The Company has the ability and intent to hold these securities until maturity.

Short-term investments are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Realized gains and losses are recognized in earnings upon redemption. The specific identification method is used to determine the cost of securities sold. Discounts or premiums are accreted or amortized using the level-interest-yield method to the earlier of the call date or maturity of the related security.

During 1999, unrealized gains and losses were immaterial as amortized cost approximated market value.

Accounts Receivable/Royalties Receivable

At the time the accounts and royalties receivable are originated, the Company considers a reserve for doubtful accounts based on the creditworthiness of the franchisee. The provision for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management's best estimate of uncollectible amounts and is determined based on historical performance that is tracked by the Company on an ongoing basis. The losses ultimately incurred could differ materially in the near term from the amounts estimated in determining the allowance.

Property and Equipment

Property and equipment is stated at cost. Equipment under capital leases is valued at the lower of fair market value or net present value of the minimum lease payments at inception of the lease. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets, ranging from 3 to 10 years, and the related lease term for leasehold improvements and equipment under capital leases.

Deferred Financing Costs

Cost associated with obtaining debt financing are deferred and amortized on a straight-line basis over the term of the debt.

Intangible Assets

The amounts paid by the Company for non-compete agreements are being amortized over the term of the non-compete agreements.

The excess of the purchase price over net assets acquired for stores purchased by the Company from unrelated third parties is recorded as goodwill and is amortized over 15 years.

Other intangibles are recorded at cost and are amortized on the straight-line basis over the contractual or estimated useful lives as follows:

Franchise agreements 12 years Trademarks and other intangibles 3 - 15 years

Area Director Territory Repurchases

Costs associated with repurchasing area directory territories are deferred and amortized on a straight-line basis over 15 years.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to the undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. At September 30, 1999, the Company determined no impairment was appropriate.

Initial Franchise Fees and Related Franchise Costs

Management believes it is probable that all of the deferred franchise fees will be realized. The amount of the deferred franchise fees considered realizable, however, could be reduced in the near term if estimates of the future franchise

Initial franchise fees paid by U.S. franchisees are recognized as revenue when all material services and conditions required to be performed by the Company have been substantially completed, which is generally when the franchise commences operations. Initial franchise fees collected by the Company before all material services and conditions are substantially performed are recorded as deferred franchise sales revenue. These franchise fees are non-refundable in most circumstances. Incremental development costs are deferred, but not in excess of the deferred revenue and estimated cost to open the Quizno's restaurant, and are expensed when the revenue is recognized.

Area Director Marketing Agreements

The area director marketing agreement provides the area director a non-exclusive right to sell and open franchises in a defined geographic territory in the U.S. and requires that the area director be responsible for advertising for, soliciting and screening prospective franchisees. The agreements also require the area director to sell and open a minimum of new franchised restaurants each year or forfeit future rights to the territory. In addition, the area director is responsible for identifying possible locations, providing on-site opening assistance, and providing quality assurance services to franchises in the defined area. The Company pays the area director 50% of the initial franchise fee sold by the area director, and a fee of 40% of the royalty received by the Company from each franchise within the defined area. The agreements are for a period of ten years, with the option to extend for an additional ten years after certain restrictive performance criteria are met. The area director is entitled to receive commissions during the term of the area director marketing agreement and, in certain circumstances, the area director is entitled to 1% of gross sales for franchise restaurants operating in the territory as of the termination date of the area director agreement. The area director marketing fee is $.07 per person living in the area director's territory, plus a $10,000 training fee which is deferred until training has been completed. Prior to January 1, 1999, the Company recognized revenue when all material services and conditions required to be performed by the Company had been substantially completed.

Change in Accounting Method for Area Director Marketing Agreements

Effective January 1, 1999, the Company changed its accounting policy related to the recognition of area director marketing agreement fees to one that recognizes such fees as revenue on a straight-line basis over the term of the agreement, which is ten years. Direct expenses attributable to the fees are classified as a prepaid and recognized as an expense over the same ten year term. The effect of the change in fiscal 1999 resulted in the deferral of $4,262,701 of net revenue previously recognized in prior years. Fiscal 1999 income before the cumulative effect adjustment included $387,108 of amortized deferred net revenue related to area director marketing agreement fees. This change was reported as a cumulative effect of change in accounting principle for $2,685,502 (net of $1,577,199 in income tax benefits) and is included in the net loss in fiscal 1999.

International Fees

The Company grants master franchise rights for the development of international markets. The master franchisee will enter into individual franchise and area director agreements for development within the franchised country, and will assume all of the franchisor's obligations and duties under the agreement. The Company is not a party to the individual franchise and area director agreements. Generally, the master franchise agreement requires the master franchisee to pay the Company a percentage, currently 30%, of all initial franchise fees, royalties, and area fees collected by the master franchisee. The Company recognizes these fees when received by the Company.

The master franchise agreement provides the master franchisee an exclusive right to sell and open franchises and grant area directorships in a defined geographic territory. The master franchisee is responsible for providing all franchisor services in the territory and must sell and open a minimum of new franchised restaurants each year. The fee for master franchise agreements is based on the population of the territory and will vary depending on certain economic, demographic and cultural factors. Revenue is recognized when all material services and conditions required to be performed by the Company have been substantially performed, which is generally the date the fee is paid.

Royalties and Advertising Fees

Pursuant to the various franchise agreements, U.S. franchises are required to pay the Company royalties and advertising fees based on a percentage of sales ranging from 4% to 8% for royalties, and 1% to 4% for advertising fees.

Royalties as required by the franchise agreement are accrued based on a percentage of gross sales, as reported by franchisees, and are included in accounts receivable.

The Company does not recognize any portion of the advertising fees as revenue, nor does it accrue such fees or consolidate the accounts of any of the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document advertising funds as they are paid to and disbursed out of separate legal advertising entities.

Income Taxes

The Company calculates and records the amount of taxes payable or refundable currently or in future years for temporary differences between the consolidated financial statement basis and income tax basis based on the current enacted tax laws. Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. The Company's temporary differences result primarily from depreciation, deferred franchise sales and area director fee revenues and costs and net operating loss carryforwards.

Basic and Diluted Loss Per Common Share

In accordance with FAS 128, basic earnings per share is computed by dividing net income by the number of weighted average common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the number of weighted average common shares outstanding during the year, including potential common shares, which for the nine months ended September 30, 1999 and the years ended December 31, 1997 and 1998 consisted of preferred stock, convertible debt, stock options and warrants outstanding (Note 14).

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash and cash equivalents, short-term investments, receivables, prepaids, current portion of notes receivable, accounts payable and accrued expenses approximated fair value as of September 30, 1999 because of the relatively short maturity of these instruments.

The carrying amounts of long-term notes receivable approximate fair value as of September 30, 1999 because the discounted cash flows at current rates approximate the rates of the significant notes.

The carrying amounts of notes payable and debt issued approximate fair value as of September 30, 1999 because interest rates on these instruments approximate market interest rates.

Reclassifications of Prior Year Amounts

Certain reclassifications have been made to the balances for the years ended December 31, 1998 and 1997 to make them comparable to those presented for the nine months ended September 30, 1999, none of which change the previously reported net income or total assets.

Recently Issued Accounting Pronouncements

During April 1998, Statement of Position 98-5, "Reporting in the Costs of Start-Up Activities" was issued. SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. SOP 98-5 was required to be adopted by the first quarter of 1999. Upon adoption, the Company was required to write-off $125,507 ($84,090 net of applicable taxes) in preopening related costs that were deferred on the balance sheet as of December 31, 1998. This write-off was reported as a cumulative effect of a change in accounting principle.

Note 2 - Acquisition of Assets

Effective July 31, 1999, the Company repurchased the 30% minority interest of QKL for $150,000 in cash.

On July 1, 1999, the Company purchased, for cash, a Quizno's Restaurant from a franchisee for a total purchase price of $286,355. The purchase was accounted for under the purchase method.

The purchase price has been allocated to the assets purchased based on the fair market values at the date of acquisition, as follows:

Equipment $ 65,000 Leasehold improvements 105,000 Covenant not to compete 100,000 Lease Agreement 10,087

$ 286,355 ======

No pro forma statement of operations is presented as the effect is not material to the Company's operations.

Note 3 - Notes Receivable

Notes receivable consist of the following: December 31, September 30, ------1999 1998 1997 ------Notes receivable related to area director marketing agreements, interest ranging from 6% to 15%, due in varying amounts through December 2010. $1,540,826 $1,878,855 $ 853,028

Notes receivable for sale of stores, interest ranging from 6% to 15%, due in varying amounts through October 2012. 530,026 410,058 494,318

Note receivable from national advertising trust, interest at 10%, paid in full in February 1999. - 267,058 -

Note receivable from Bain's Deli Corporation, interest accrues at 6% if note balance not paid down $25,000 in any one year, due February 1, 2006 150,000 - -

Other notes receivable with interest ranging from 0% to 11%, due in varying amounts through 2011. Includes $0 (1999), $21,524 (1998) and $35,524 (1997) due from the Advertising Fund (Note 8). 11,213 32,423 125,635 ------2,232,065 2,588,394 1,472,981 Less current portion (519,994) (1,212,522) (598,486) ------1,712,071 1,375,872 874,495 Less allowance (41,742) - (140,000) ------

$ 1,670,329 $1,375,872 $ 734,495 ======

At the time notes receivable are executed, the Company reserves an allowance for doubtful collections. The provision for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management's best estimate of uncollectible amounts and is determined based on historical performance of the notes which is tracked by the Company on an ongoing basis. The losses ultimately incurred could differ materially in the near term from the amounts estimated in determining the allowance. The Company collateralizes the notes with the area directorship agreement, assets of the store sold or other related assets.

Future principal payments are as follows:

Year Ended September 30, ------

2000 $ 519,994 2001 360,189 2002 378,702 2003 331,937 2004 205,829 Thereafter 435,414 ------2,232,065 Less allowance (41,742) ------

$2,190,323 ======

Note 4 - Assets Held for Resale

Included in assets held for resale are the following:

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document December 31, September 30, ------1999 1998 1997 ------Furniture fixtures and equipment $ 65,421 $ 221,034 $ - Leasehold improvements 108,056 383,771 - Goodwill and other 19,446 33,590 - Area director territory repurchases 889,387 51,635 - Stores under development - - 593,675 ------

$1,082,310 $ 690,030 $ 593,675 ======

During 1997, the Company acquired a store from a franchisee and also was in the process of constructing four stores. At the end of 1997, three of the four stores were operational and in 1998, the fourth store became operational. In March 1998, one of the stores was sold as a franchise for a sale price of $213,000. Cost incurred by the Company prior to the sale amounted to approximately $234,000. In 1999, the Company sold another store as a franchise for a sale price of $150,000 and closed one store. Costs incurred by the Company prior to their disposal amounted to approximately $179,000 and $170,000, respectively. The Company intends to close one store and sell the remaining store by the end of 1999.

Note 5 - Property and Equipment

Property and equipment consist of the following:

Depreciation expense for 1999 included depreciation on certain assets sold, or held for resale that will not recur in future years if these assets are sold, as is the intention of the Company.

Note 6 - Intangible Assets

Intangible assets consist of the following:

December 31, September 30,------1999 1998 1997 ------Covenants not to compete $ 600,113 $1,667,546 $ 1,664,759 Franchise agreements 792,796 310,506 292,395 Prepaid area director marketing commission 526,776 - - Trademarks and other 455,339 442,813 318,827 ------2,375,024 2,420,865 2,275,981 Less accumulated amortization (712,759) (867,343) (624,344) ------

$1,662,265 $1,553,522 $ 1,651,637 ======

Note 7 - Other Deferred Assets

Other deferred assets consist of the following:

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document December 31, September 30, ------1999 1998 1997 ------Deferred franchise costs $1,585,773 $ 926,226 $ 638,616 Deferred financing costs 108,769 87,080 101,146 Other deferred costs 32,442 106,065 ------

$1,726,984 $1,119,371 $ 739,762 ======

Note 8 - Related Party Transactions

The Company had notes receivable from the Advertising Fund of $0, $21,524 and $35,524 at September 30, 1999 and December 31, 1998 and 1997, respectively. The balances related to an off season build-up for advertising which was reimbursed to the Company in the subsequent year.

In September 1999, two employees of the Company purchased an area directorship for $200,000, of which $180,000 of which was in the form of a promissory note and $20,000 was in cash.

Two directors of the Company own more than 50% in a company that owns an area directorship. In 1999, 1998 and 1997, the Company paid the Area Director $142,364, $139,358 and $85,577, respectively, in commissions and royalties. At September 30, 1999, $55,547 was owed to the Company on a promissory note due from the area director. During 1997, 1998 and 1999, payments on such notes were $4,655, $6,212 and $8,000, respectively. An additional $10,000 was paid in November 1999 to bring the note and all accrued interest current. The area director is also indebted to the Company for $13,075 in connection with the resale of a Quizno's restaurant once operated by the area director. The area director is reducing this debt by offsetting commissions on royalty fees from that location paid to the managing area director. The debt is expected to be paid off in approximately 24 months.

In 1995, the Company sold an area directorship to a company owned by a director, officer and shareholder for $150,000. During 1997 and 1998, the Company paid the area director no sales commissions and $9,259 and $27,664 in royalties, respectively. The area directorship was sold in 1998 to an unrelated third party.

In 1997, the Company purchased a Quizno's restaurant from a company in which an executive officer is a 50% shareholder. The restaurant paid royalties to the Company of $2,027 in 1997 up to the date purchased by the Company. The purchase price was $80,000 of which $15,000 was paid in cash and $60,000 paid by issuance of the Company's promissory note bearing interest at 11% and payable over 4 years. During 1997, 1998 and 1999, the Company made payments pursuant to the promissory note totaling $18,839, $18,993 and $14,245, respectively. In October of 1999, this note was paid-off in full.

Note 9 - Long-Term Obligations and Convertible Subordinated Debt

December 31, September 30,------1999 1998 1997 ------Various capital leases, with monthly payments totaling approximately $25,200 including interest at rates ranging from 9.74% to 11% and expiring through June 2004. Collateralized by restaurant and office equipment. In conjunction with Company's loan agreement with AMRESCO, $852,982 of the September 30, 1999 balance was paid-off in October 1999 (Note 15). $ 970,999 $ 986,077 $ 127,770

Note payable to a financial institution, $1,372 monthly payments including interest at the bank index rate (8.75% at December 31, 1998) plus 1%, through February 2001, when any unpaid principal and interest is due. The note is collateralized by restaurant equipment. In conjunction with Company's loan agreement with AMRESCO, the September 30, 1999 balance was paid-off in October 1999 (Note 15). 23,574 35,869 52,048

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Note payable to a company, with interest at 11%. The note calls for monthly payments of $1,583 and matures November 2001. Collateralized by the assets of one store with a net book value of approximately $68,000. In conjunction with Company's loan agreement with AMRESCO, the September 30, 1999 balance was paid-off in October 1999 (Note 15). 35,220 46,056 59,188

Notes payable to a company, with interest at 11%. The notes call for monthly payments of $2,888 and mature through July 2001. Collateralized by the assets of two stores. In conjunction with Company's loan agreement with AMRESCO, the September 30, 1999 balance was paid-off in October 1999 (Note 15). 37,470 57,526 82,833

Note payable to a company with interest payments at 10%. The note calls for monthly payments of $10,736 and matures in January 2004. Collateralized by the assets acquired from Bain's Deli Franchise Associates. In 1998, the principal balance of the note was decreased by approximately $431,000 due to provisions in the purchase agreement which allow for quarterly decreases or increases in the note balance based on certain performance standards of the franchises acquired. In connection with a settlement with Bain's Deli Franchise Associates, this note was cancelled in 1999. - 116,118 576,612

Note payable to a financing company with interest at 9.5%. The note calls for monthly principal and interest payments of $2,106 and matures July 15, 2003. Collateralized by restaurant equipment. In conjunction with Company's loan agreement with AMRESCO, the September 30, 1999 balance was paid-off in October 1999 (Note 15). 81,072 93,742 -

Note payable to a financing company with interest at 7.92%. The note calls for monthly principal and interest payments of $7,528 and matures March 23, 2006. Collateralized by restaurant equipment. In conjunction with Company's loan agreement with AMRESCO, the September 30, 1999 balance was paid-off in October 1999 (Note 15). 457,811 - -

Notes payable, paid in full in 1998. - - 146,203 ------1,606,146 1,335,388 1,044,654 Less current portion (337,642) (370,404) (303,084) ------

$1,268,504 $ 964,984 $ 741,570 ======

Subordinated debt consists of:

December 31, September 30, ------1999 1998 1997 ------Subordinated debt payable to a financing company with an initial principal balance of $1,853,931. The note accrues interest at the rate of 7.75% per annum and requires monthly payments of $28,665. The note is collateralized by all of the restaurant equipment and furniture and fixtures existing at six of the Company's stores. The Company is required to maintain certain annual cash flow covenants under the agreement. In conjunction with Company's loan agreement

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document with AMRESCO, the September 30, 1999 balance was paid-off in October 1999 (Note 15). $1,717,337 $ - $ -

12.75% convertible subordinated debt, paid in full during 1999. - 1,375,000 1,500,000

Less current portion (218,546) (244,084) (110,912) ------

$1,498,791 $1,130,916 $ 1,389,088 ======

In connection with the conversion of debt to equity, the Company granted the note holder 42,209 warrants to purchase common stock at $5.00 per share. The inherent value of the options of $44,277 was recorded as deferred offering costs associated with the conversion.

Maturities of long-term obligations, convertible subordinated debt and capital leases are as follows:

Long-Term Obligations and Subordinated Capital Year Ending September 30, Debt Leases Total ------2000 $ 344,172 $ 302,724 $ 646,896 2001 360,471 297,946 658,417 2002 344,462 281,196 625,658 2003 366,978 231,381 598,359 2004 511,326 33,725 545,051 Thereafter 425,075 -- 425,075 ------2,352,484 1,146,972 3,499,456 Less amount representing interest -- (175,973) (175,973) ------Total principal 2,352,484 970,999 3,323,483 Less current portion (344,172) (212,016) (556,188) ------

$2,008,312 $ 758,983 $ 2,767,295 ======

Included in equipment in the accompanying 1999, 1998 and 1997 balance sheets are assets held under capital leases in the amount of $1,063,920, $1,278,925 and $161,147, respectively and accumulated amortization of $149,372, 132,837 and $65,079, respectively.

Note 10 - Commitments and Contingencies

The Company leases an office facility, twenty-nine restaurant locations (including stores held for resale) and certain equipment and vehicles under operating lease agreements which provide for the payment of rent totaling approximately $64,000 per month plus common area maintenance costs. One of the restaurant locations also requires the Company to pay 6% of gross sales in excess of $430,000 annually. Rent expense under these operating leases, totaled $762,891, $642,447 and $636,874 during the periods ended September 30, 1999 and December 31, 1998 and 1997, respectively.

Future minimum rental payments are as follows:

Year Ending September 30, ------

2000 $1,379,049 2001 1,394,739 2002 1,319,456 2003 1,167,023 2004 890,451 Thereafter 1,665,003 ------

$7,815,721 ======

Minimum payments for the period ended September 30, 1999 have not been reduced by minimum rentals of $1,653,278 due in the future under a noncancellable sublease.

The Company has entered into employment agreements with two directors, officers, and stockholders of the Company which provide for the payment of annual salaries totaling $192,000 plus individual bonuses equal to six and ten percent of the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document positive increase in net income before taxes, depreciation, amortization and interest over the prior year. Bonuses accrued during 1997, 1998 and 1999 totaled $291,260, $209,000 and $262,354, respectively. One agreement expires in December 2000 while the other agreement expires in December 2003.

On April 26, 1999, the Company signed a licensing agreement with the Coca Cola Company to purchase certain amounts of fountain syrups in return for cash incentives. The agreements requires the Company to purchase a total of 12,000,000 gallons of fountain products and 1,000,000 cases of bottled products. If the Company cancels the agreement, the Company would be obligated to refund a pro rata share of the licensing fee based upon contract product not purchased.

Litigation

There are various claims and lawsuits pending by and against the Company, which, in the opinion of the management, and supported by advice from legal counsel, will not result in any material adverse effect in excess of amounts accrued in the accompanying consolidated financial statements.

On August 10, 1998, the Company terminated an area director agreement and instituted an arbitration action alleging that the area director had breached various provisions of the area director agreement. On September 1, 1998, the area director denied that he breached the area director agreement, alleged fraudulent termination of the area director agreement, alleged that the Company failed to refund or pay certain amounts due him and alleged that the Company violated various state and federal franchise and securities laws by misstating revenues in publicly filed documents. Hearings in this matter were held before the American Arbitration Association from March 8-16, 1999. The Company denied each of the area director's claims and defenses.

On April 13, 1999, the arbitration panel issued its ruling. It found that the area director had materially breached the area director agreement and that the Company had properly terminated that agreement. The panel therefore denied all of the area director's claims for breach of contract and refuted his allegations of franchise and securities law violations. While the panel did award the area director approximately $230,000 in pre-termination commissions and costs, those related primarily to referral commissions that the Company owed the area director, before the Company terminated him in August 1998, for previous master franchise and area directorship sales made. The Company had no liability for its lawful termination of the area director's area director agreement. The panel also ordered the area director to abide by all of the post-termination covenants in the area director agreement.

Note 11 - Stockholders' Equity

Convertible Preferred Stock

Series A convertible preferred stock bears a 6.5% cumulative dividend, payable monthly and is convertible into common shares on a one for one basis and is callable by the Company with sixty days notice. The Series A convertible preferred stock has a liquidation preference of $6 per share plus all then accrued and unpaid cumulative dividends.

Series B convertible preferred stock bears a 12.75% cumulative dividend, payable monthly and is convertible after five years at the then market value of the common stock. The Series B convertible preferred stock is redeemable at the Company's option and has a liquidation preference of $5.00 per share plus all then accrued and unpaid cumulative dividends. All issued and outstanding Series B convertible preferred stock was redeemed in full in 1999.

Series C convertible preferred stock bears a 12.00% cumulative dividend, payable monthly and is convertible into common stock on a one-for-one basis at $5.00 per share. The Series C convertible preferred stock is redeemable at the Company's option at $5.00 per share anytime after October 8, 2000, and has a liquidation preference of $5.00 per share plus all then accrued and unpaid cumulative dividends.

During 1997, the Company sold 167,000 shares of Series C convertible preferred stock at $5.00 per share. The Company incurred legal and accounting costs related to the sale of $36,454.

Stock Options and Warrants

The Company has established an Employee Stock Option Plan (the Plan). The Company has reserved 670,000 shares of its Common Stock for issuance upon the exercise of options available for grant under the Plan. Options are granted under the plan at not less than the market price of the Company stock. The options cannot be exercisable for more than ten years. Options granted under the Plan will include incentive stock options (ISOs) as defined in Section 422 of the Internal Revenue Code and non-qualified stock options (NQSOs). Under the terms of the Plan, all officers and employees are eligible for ISOs. During the periods ended September 30, 1999 and December 31, 1998 and 1997, 250,500, 117,205 and 98,550, options were granted under the Plan, respectively.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Additionally, the Company has established an Amended and Restated Stock Option Plan for Non-Employee Directors and Advisors (Director Plan). The Company has reserved 200,000 shares of common stock for issuance upon the exercise of options granted or available for grant to non-employee directors and advisors under the Director Plan. The Director Plan provides that any person who becomes a non-employee director or advisor of the Company may receive an option to purchase 4,000 shares (or a pro rata portion thereof) at their fair market value on the date such person becomes a non-employee director or advisor, and on the first day of each year thereafter as long as the person continues as a non-employee director or advisor, limited to the overall number of shares available for issuance under the Director Plan. Options that expire or are canceled may be re-granted under the Director Plan at the discretion of the Board of Directors. The options expire after ten years. During the periods ended September 30, 1999 and December 31, 1998 and 1997, 29,000, 28,000 and 18,000 options were granted under the Director Plan, respectively.

In 1997, the Company granted stock options covering 48,500 shares to area directors pursuant to individual contracts. The Company established an Area Director Equity Participation Rights Stock Option Plan (AD Plan) providing for grants of stock options to area directors beginning in 1998. During 1998, the Company granted stock options covering 60,375 shares pursuant to the AD Plan. Options are granted under the AD Plan at the market price of the common stock for six month options or a 20% discount (not to exceed $1.20) if the grantee exercises within seven business days of the grant. The Company recorded $33,950 related to the inherent value of the options granted to area directors in 1997. No amounts were recorded for inherent value of the options for 1998. During 1999, the Company granted options under the AD Plan for 10,275 shares.

In 1996, the Company issued warrants to purchase 372,847 shares of its common stock to a lender in connection with a $2,000,000 convertible subordinated loan made to the Company. The warrants are exercisable at $3.10 per share and expire on December 31, 2004. Additionally, in 1997, the Company issued warrants to purchase another 42,209 shares of its common stock to the same lender in connection with the lender's conversion of $500,000 of the convertible subordinated debt to Class B preferred stock. The warrants are exercisable at $5.00 per share and do not have an expiration date. These warrants are reduced to 20,597 if the Company meets certain earnings goals through 2000.

In connection with the Company's public offering, the Company issued a warrant for the underwriter to purchase up to 100,000 shares of its common stock at $5.00 per share. During 1998, 80,000 warrants were exercised and the remaining 20,000 were cancelled. Additionally in 1997, the Company issued 33,000 warrants to consultants that allowed the holders to purchase 33,000 shares of common stock at $5.40 to $5.50 per share. These warrants expire through December 2000.

In 1999, the Company reached a settlement with Bains Deli that resulted in the return to the Company of the 9,091 shares of Company stock originally issued as part of the purchase of the Bains units in 1997.

The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans as they relate to options issued to employees and directors.

Had compensation cost for the Company's two employee stock option plans been determined based on the fair value at the grant date for consistent with the provisions of SFAS No. 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:

December 31, September 30,------1999 1998 1997 ------

Net income (loss) before cumulative effect of changes in accounting principle = as reported $1,242,391 $ 891,725 $ (183,616) Net income (loss) before cumulative effect of changes in accounting principle - pro forma $ 662,806 $ 586,960 $ (433,536) Basic earnings (loss) per share - as reported $ .40 $ .30 $ (.06) Basic earnings (loss) per share - pro forma $ .22 $ .19 $ (.15)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants: dividend yield of 0%; expected volatility of 42%; discount rate of 5.5%; and expected lives from 5 to 10 years.

The following is a summary of options and warrants granted, exercised and expired:

September 30, 1999 ------Options and Options and Warrants Outstanding Warrants Exercisable ------Weighted Weighted Average Weighted Range of Options and Average Remaining Average Warrants Number Exercise Contractual Number Exercise Exercisable Price Outstanding Price Life Exercisable Price ------

$3.00 - $5.50 819,043 $3.21 5.3 years 614,965 $3.53 $5.75 - $8.18 296,300 $7.28 5.8 years 1,960 $6.64 ------

1,115,343 $4.29 5.4 years 616,925 $3.54 ======

The Company granted an option during the year ended December 31, 1993, to an area director that after this area director opened its tenth restaurant in accordance with the area director agreement, the area director would be entitled to purchase one percent of the then outstanding common stock of the Company for $50,000. In 1997, the Company waived the requirement for ten restaurants and the area director exercised the right to purchase one percent of the outstanding common stock for $50,000 and received approximately 28,900 shares of common stock.

Note 12 - Income Taxes

The components of the provision for income tax benefit for the year ended September 30, 1999 and December 31, 1998 are as follows:

September 30, December 31, 1999 1998 ------

Current income tax expense $ 1,951,848 $ 213,500 Deferred income tax benefit (1,230,160) (582,053) ------

$ 721,688 $ (368,553) ======

For the period ended September 30, 1999, the net deferred tax benefit related to the cumulative effect of changes in accounting of $1,589,703 is not reflected in the table above.

Prior to 1998, the Company had provided for a valuation allowance against its deferred tax asset as management had determined that it was more likely than not that the Company would not realize its deferred tax asset. In 1998, management determined it would be more likely than not that the Company would realize its deferred tax asset and this has eliminated its valuation allowance against the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document deferred tax asset resulting in a benefit of $582,053 reflected in the statement of operations for the year ending December 31, 1998.

Deferred tax liabilities and assets are determined based on the difference between the financial statement assets and liabilities and tax basis assets and liabilities using the tax rates in effect for the year in which the differences occur. In 1999, the Company's deferred income tax assets and liabilities result primarily from differing depreciation and amortization periods of certain assets, deferred franchise revenue and costs and the recognition of certain expenses for financial statement purposes and not for tax purposes. For 1997, the deferred income tax assets related primarily to net operating losses.

The net current and long-term deferred tax assets (liabilities) in the accompanying balance sheet include the following items:

December 31, September 30,------1999 1998 1997 ------Current deferred tax asset $ 128,718 $ 81,260 $ - Current deferred tax liabilities ------

Net current deferred tax asset $ 128,718 $ 81,260 $ - ======

Rate Reconciliation

The reconciliation of income tax expense (benefit) by applying the Federal statutory tax rates to the Company's effective income tax rate is as follows:

December 31, September 30, ------1999 1998 1997 ------

Federal statutory rate 37.0% 34.0% (34.0)% Nondeductible expenses .9 8.4 - Other - deferred including utilization of NOL (3.3) (13.5) - Valuation allowance - (78.0) 34.0 ------

34.6% (49.1)% - % ======

Note 13 - Employee Benefit Plan

The Company has adopted a 401(k) plan during 1995 for its employees. Participation is voluntary and employees are eligible to participate at age 21 and after one year of employment with the Company. The Company matches 50% of the employee's contribution up to $10,000 of the employee's salary. The maximum amount will increase to $10,500 in 2000.

A participant's vested benefit is fully distributed upon death or disability and is distributed upon termination of employment according to the following vesting schedule:

Years of Services Percentage

The Company has contributed $60,427, $31,675 and $33,251 to the Plan for the periods ended September 30, 1999 and December 31, 1998 and 1997, respectively.

Note 14 - Earnings (Loss) Per Share

The following table sets forth the computation for basic and diluted earnings per share:

For the Nine For the Years Ended Months Ended December 31, September 30, ------1999 1998 1997 ------Numerator - net income (loss) before cumulative effect of changes in accounting principle Numerator for basic earnings per share $1,242,391 $ 891,725 $(183,616) Preferred dividends (net of taxes) 78,265 ------

Numerator for diluted earnings per share $1,320,656 $ 891,725 $(183,616) ======

Numerator for basic and diluted earnings per share - cumulative effect of changes in accounting principle $(2,769,592) N/A N/A

Denominator - net income (loss) before cumulative effect of changes in accounting principle Denominator for basic earnings per share - weighted average shares 3,060,878 3,014,042 2,878,310 Effect of dilutive securities - convertible debt, options and warrants 755,671 431,930 ------Denominator for diluted earnings per share - adjusted weighted average shares 3,816,549 3,445,972 2,878,310 ======

Denominator for basic and diluted earnings per share - cumulative effect of changes in accounting principle 3,060,878 N/A N/A

Basic earnings (loss) per share $ (.50) $ .30 $ (.06) ======

Diluted earnings (loss) per share $ (.55) $ .26 $ (.06) ======

Where the inclusion of potential common shares is anti-dilutive, such shares are excluded from the computation.

Note 15 - Subsequent Events

On October 11, 1999, the Board of Directors of the Company approved the purchase of a corporate jet by the Company allowing for more efficient travel by management between areas of franchise operations. For tax purposes, the airplane qualifies for accelerated depreciation, resulting in the deferral of income tax payments. The $3,350,000 purchase was completed on October 13, 1999.

On October 5, 1999, the Company closed on a loan in the principal amount of $14,000,000 from AMRESCO Commercial Finance, Inc. The loan bears interest at 10.1%, which may be adjusted to the ten-year treasury note rate plus 4.25% during the first 120 days, and is repayable in monthly installments of $193,338 for nine years and five months. The loan is secured by the assets of Company owned stores and other assets of the Company existing at September 30, 1999. The loan is part of a securitized pool and includes a provision which could require the Company to pay up to another $1,555,555 depending on the amount of defaults, if any, in the loan pool. The proceeds of the loan were used to pay-off existing

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document debt of $3,320,956, pay costs and fees associated with the loan of $560,000, and prepay interest and one payment of $304,624. The balance of $9,814,420 is available to use, with certain restrictions, for general corporate purposes other than working capital, dividends, or to repurchase the majority shareholder's stock.

Certain notes payable held by the Company at September 30, 1999 were repaid with the AMRESCO note proceeds. See Note 9 for the identification of the notes repaid with these proceeds.

On November 16, 1999, the Company announced that its subsidiary, QUIZ-DIA, Inc. purchased the assets of ASI-DIA, Inc. ("ASI") for a total of $4.875 million in cash.

Assets purchased include two Quizno's Company restaurants and three bars, including the WWW.COWBOY bar, and various other assets located on Concourses A and B at Denver International Airport. The Company intends to continue operating the restaurants as Quizno's Classic Subs and the bars as operated by ASI.

The purchase will be accounted for under the purchase method. The purchase price will be allocated to the assets purchased based on the fair market values at the date of acquisition.

Note 16 - Transition Reporting

In October 1999, the Company changed its fiscal year from December 31 to September 30. As such, the 1999 financial statements are as of and for the nine months ended September 30, 1999. The 1998 and 1997 financial statements are as of and for the twelve months ended December 31, 1998 and 1997, respectively. For comparative purposes, the following unaudited summarized consolidated statement of operations is presented for the nine-month periods ended September 30, 1998 and 1997.

For the Nine Months Ended September 30, ------(Unaudited) 1998 1997 ------

Total revenue $14,223,450 $8,108,457 Income from franchise operations $ 1,238,455 $ 325,163 Income from Company store operations $ 477,326 $ 189,592 Net income (loss) before taxes $ 668,860 $ (163,205) Net income (loss) applicable to common $ 502,891 $ (205,910) shareholders

Net income (loss) per share - basic $ .17 $ (.07) Net income (loss) per share - diluted $ .15 $ (.07)

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Directors

The names of and other information about our Directors as of December 17, 1999, are set forth below:

Name Age Position(s) with Company Director Since ------Richard E. Schaden 35 President, Chief 1991 Executive Officer and Director

Richard F. Schaden 61 Secretary and 1991 Director

Frederick H. Schaden 53 Director 1993

J. Eric Lawrence 32 Director 1997

Brad A. Griffin 49 Director 1999

Mark L. Bromberg 48 Director 1997

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Each director is currently serving a one year term that will end on the date of our 2000 Annual Meeting of Shareholders.

Director's Biographical Information

Mr. Richard E. Schaden has been President and a Director of our company since its inception on January 7, 1991, and was appointed as Chairman of the Board of Directors in November 1999. Mr. Schaden had been a principal and the chief operating officer of Schaden & Schaden, Inc., a company that owned and operated Quizno's franchised restaurants from 1987 to 1994 when it was sold to our company. Mr. Schaden graduated Magna Cum Laude from the University of Colorado with a degree in Business Management and Finance. See "Certain Transactions."

Mr. Richard F. Schaden has been Vice President, Secretary and a Director of our company since its inception on January 7, 1991. Mr. Schaden had been a principal of Schaden & Schaden, Inc., a company that owned and operated Quizno's franchised restaurants from 1987 to 1994 when it was sold to our company. Mr. Schaden is the founding partner of the law firm of Schaden, Katzman, Lampert & McClune with offices in Bloomfield Hills, Michigan and Broomfield, Colorado. Mr. Schaden graduated from the University of Detroit with a Bachelor of Science in Aeronautical Engineering, received his Juris Doctorate from the University of Detroit Law School and is an internationally known, well-published attorney, specializing in aviation law. Prior to entering the legal profession, Mr. Schaden was an aeronautical engineer for Boeing Aircraft and Continental Aviation and Engineering. Mr. Schaden has been on the board of numerous private companies. See "Certain Transactions."

Mr. Frederick H. Schaden is an Executive Vice President of the Automotive Consulting Group of Aon Consulting, Inc. Aon Consulting, Inc. is a subsidiary of Aon Corporation, a publicly held company with annual revenues of nearly $6 billion. He has been employed by Aon for over 25 years and has served as a senior officer of its affiliates since 1981. Mr. Schaden earned a B.S. in Business Administration from Xavier University in Cincinnati, Ohio. See "Certain Transactions."

Mr. J. Eric Lawrence has been the General Partner of Retail & Restaurant Growth Capital, L.P. ("RRGC"), a $60 million investment fund focused on providing growth and expansion capital to small businesses in the retail and restaurant industries, since December 1995. RRGC is a Small Business Investment Company, federally licensed by the Small Business Administration. RRGC loaned us $2,000,000 in 1996, and Mr. Lawrence serves on the Board pursuant to a contractual arrangement between our company and RRGC. Mr. Lawrence has been extensively involved in the analysis of the financial, operational and managerial aspects of retail and restaurant companies throughout his career. Prior to RRGC, he served as Vice President of Strategic Retail Ventures, Inc., a boutique financial consulting and private investment firm focusing on the needs of specialty retail and restaurant companies from December 1993 to December 1995. Prior to SRV, Mr. Lawrence was a Senior Consultant with Arthur Andersen, in Dallas, Texas. Mr. Lawrence is a licensed C.P.A., and is a graduate of Southern Methodist University with a B.B.A. in Accounting and Minor in Economics, which included study abroad at Oxford University, Oxford, England.

Mr. Brad A. Griffin has been the managing director of GriffCo Development, which develops, builds, leases and manages commercial and retail real estate, since 1994. He is also the managing director of Oasis Investment, a company that manages investment assets and trades NASDAQ and Exchange stocks and options.

Mr. Mark L. Bromberg has been a self-employed management consultant providing strategic planning, positioning and senior management consulting services to the hospitality industry, for over five years. Mr. Bromberg is the former President & CEO of East Side Mario's Restaurants Inc., the Dallas based subsidiary of PepsiCo, which he grew from one restaurant in 1988 to 30 in 1993 when it was sold to PepsiCo. Mr. Bromberg has been the founder and President of a number of causal dining restaurant chains, including Mr. Greenjeans, Ginsberg & Wong and Lime Rickey's and served as President of Prime Restaurant Group, the largest privately-held restaurant chain in Canada. He holds a B.S. and an M.B.A. from Cornell University and remains highly involved in foodservice education as a curriculum advisor and guest lecturer. He is a past chairman of the Canadian Restaurant and Foodservice Association and is a past director of the National Restaurant Association of the U.S. Mr. Bromberg was elected to the Board of Directors pursuant to a contractual arrangement with RRGC that required the election of an additional Board member acceptable to RRGC.

Richard F. Schaden is the father of Richard E. Schaden. Frederick H. Schaden is the brother of Richard F. Schaden and Richard E. Schaden's uncle.

The following table sets forth (i) the names of the executive officers, (ii) their ages, and (iii) the capacities in which they serve our company:

Name Age Position(s) with the Company ------Richard E. Schaden 35 President, Chief Executive Officer and Chairman of the Board Mark R. Laramie 48 Chief Operating Officer Robert W. Scanlon 53 Executive Vice President for Development Sue A. Hoover 54 Executive Vice President for Marketing Richard F. Schaden 61 Vice President, Secretary and Director Patrick E. Meyers 40 Vice President and General Counsel John L. Gallivan 52 Chief Financial Officer, Treasurer and Assistant Secretary

Executive Officer's Biographical Information

See "Director's Biographical Information" above for a description of the backgrounds of Richard E. Schaden and Richard F. Schaden.

Mark R. Laramie joined us in 1998 as the Chief Operating Officer. Prior to joining us, he was a managing member and owner of Great Lakes Restaurant Group, LLC from November 1997 through August 1998. From July 1996 through October 1997, Mr. Laramie was a managing member of Peer Group, LLC, a franchisee of Little Caesars Pizza in Michigan. Mr. Laramie was also the Vice President of Franchising for Little Caesars Enterprises, Inc. from August 1980 through June 1996. He received his B.S. degree from Eastern Michigan University in 1973.

Robert W. Scanlon has been our Executive Vice President of Development since October 1998. Mr. Scanlon served as our Senior Vice President of Real Estate/Design & Construction from August 1997 through September 1998. He also served as our Senior Vice President of Concept Development and Design from January 1997 to July 1997 and as our Vice President of Nontraditional Development from May 1996 to December 1996. From June 1990 through April 1996, he was first Vice President of Sales and Marketing and later Vice President of Business Development for Carts of Colorado, located in Commerce City, Colorado, an equipment manufacturer. Mr. Scanlon graduated from the University of Texas, with a B.S. degree in 1973.

Sue A. Hoover joined our company as Director of Marketing in 1991. She was named Senior Vice President of Marketing in 1997 and was named an Executive Vice President in October 1998. Ms. Hoover graduated from the University of Iowa with a B.A. in 1968.

Patrick E. Meyers joined us in 1997. He had been an associate with the Denver law firm of Moye, Giles, O'Keefe, Vermeire & Gorrell since September 1991, and was selected as a partner of that firm in 1996. Before that he served as a judicial law clerk to a Justice of the Colorado Supreme Court from July 1990 to September 1991. Mr. Meyers received his J.D. degree from the University of California, Hastings College of Law and his B.A. degree from the University of Colorado-Denver. Mr. Meyers served as a Director of our company from 1993 to 1997, when he resigned to become a full-time employee of our company.

John L. Gallivan joined us as Chief Financial Officer in 1994. He was later elected Treasurer and Assistant Secretary. Prior to his joining our company, he was a director and Executive Vice President of Grease Monkey Holding Corporation of Denver, a franchisor, owner, and operator of over 200 ten minute oil change and fluid maintenance centers in the U.S. and Mexico from 1979 through April 1994. He is a member of the Colorado Society and the American Institute of CPAs. He graduated from the University of Colorado at Boulder with a bachelors degree in accounting.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, our officers (including a person performing a policy-making function) and persons who own more than 10% of a registered class of our equity securities ("10% Holders") to file with the Securities and Exchange Commission ("SEC") initial reports of ownership and reports of changes in ownership of common stock and other equity securities. Directors, officers and 10% Holders are required by SEC regulations to furnish us with copies of all of the Section 16(a) reports they file. Based solely upon such reports, we believe that during fiscal 1999 our directors, advisors, officers and 10% Holders complied with all filing requirements under Section 16(a) of the Exchange Act, except for Messrs. Mark R. Laramie, Mark L. Bromberg, J. Eric Lawrence, Frederick H. Schaden, Brad A. Griffin, Brownell E. Bailey (a former Director), and Lewis G. Rudnick, Bruce H. Gulbus and Lyle B. Stewart (Advisory Board members), who inadvertently failed to file their Forms 5 for fiscal 1999 in a timely manner, as a result of our change of the date of our fiscal year end.

Executive Compensation

Set forth below is information about compensation during fiscal 1999 of our five most highly compensated executive officers, including our CEO ("Named Officers").

Summary Compensation Table. The following table provides certain summary information for fiscal 1999 (1), 1998 and 1997 concerning compensation awarded or paid to, or earned by, the Named Officers:

(1) Fiscal 1999 contained only nine months because we changed our fiscal year end to September 30 during 1999.

(2) As an incentive for our eligible employees to work to enhance our performance and assure our future success, we grant options to purchase shares of common stock to successful employees from time to time under our Employee Stock Option Plan. All options indicated in this table have been granted under that Plan.

(3) We provide our employees with a 401(k) Employee's Savings Plan, pursuant to which we contribute to each eligible employee's account an amount equal to 50% of such employee's annual contribution. Employees in 1999 were limited to a maximum contribution of $10,000 by applicable provisions of the Internal Revenue Code. That amount increases to $10,500 in 2000. Prior to 1999, we matched employee contributions up to 6% of each employee's total annual compensation. We have issued shares of Common Stock for 50% our annual contribution to each account under the 401(k) Plan.

(4) Because of the change in our fiscal year end to September 30, and the fact that Mr. Schaden's contractual bonus is calculated on a calendar year basis, he has not yet earned (nor can the amount be calculated) the bonus that is expected to be paid covering the 1999 fiscal year.

Stock Option Awards. We adopted our Employee Stock Option Plan (the "Employee Plan") in 1993. The purposes of the Employee Plan are to enable us to provide opportunities for certain officers and key employees to acquire a proprietary interest in our company, to increase incentives for such persons to contribute to our performance and further success, and to attract and retain individuals with exceptional business, managerial and administrative talents, who will contribute to our progress, growth and profitability. As of September 30, 1999, we had issued 22,963 shares upon exercise of options under the Employee Plan and had 647,037 shares reserved for issuance under the Employee Plan.

Options granted under the Employee Plan include both incentive stock options ("ISOs"), within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified stock options ("NQOs"). Under the terms of the Employee Plan, all of our officers and employees are eligible for ISOs. We determine which persons will receive ISOs, the applicable exercise price, vesting provisions and the exercise term. The terms and conditions of option grants differ and are set forth in the optionees individual stock option agreement. Such options generally vest over a period of one or more years and expire after up to ten years. ISOs must satisfy the statutory requirements of the Code in order to qualify for certain preferential treatment. Options that fail to satisfy those requirements will be deemed NQOs and will not receive preferential treatment under the Code. Upon exercise, shares will be issued upon payment of the exercise price in cash, by delivery of shares of common stock, by delivery of options granted under the Employee Plan or a combination of any of these methods.

Option information for fiscal 1999 relating to the Named Officers is set forth below:

Option Grants in Fiscal 1999

Number of Shares of Percentage of Common Stock Total Options Underlying Granted to Options Employees in Granted in Fiscal Exercise Expiration Name Fiscal 1999 1999 Price Date ------Richard E. Schaden 33,000 13.3% $7.975 (1)

Mark R. Laramie 36,000 14.5% $ 7.25 (1)

Robert W. Scanlon 9,000 3.6% $ 7.25 (1)

Sue A. Hoover 6,000 2.4% $ 7.25 (1)

Patrick E. Meyers 14,000 5.6% $ 7.25 (1)

(1) One-third of all options granted to the Named Officers and others in 1999 vest on each of the second, third and fourth anniversary of the grant date, February 4, 1999, if the optionee is still employed by us on that date. Vested options terminate if not exercised on February 4, 2004 or 90 days after an employee leaves our company.

(1) The dollar values are calculated by determining the difference between $ 7.88 per share, the fair market value of the Common Stock at September 30, 1999, and the exercise price of the respective options.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Employment Contracts. Richard E. Schaden has entered into an Employment Agreement with us that terminates on December 31, 2003. His contract provides that he will serve as our President and Chief Executive Officer. Mr. Schaden will devote his full time to company matters. His annual base salary is $220,000. Such amount may be adjusted from time to time by mutual agreement between Mr. Schaden and the Board of Directors. The contract provides an annual bonus equal to 10% of any positive increase in earnings before interest, taxes, depreciation and amortization for each full calendar year during the term of the agreement over the level of such amount for the prior full calendar year. Mr. Schaden will receive a monthly automobile allowance of up to $620.00 plus up to $150.00 for insurance coverage. He will also receive a per diem travel allowance of $30.00 per day while traveling on business. The contract provides that we will pay one-half of Mr. Schaden's medical insurance coverage and one-half of the cost of disability insurance. We will pay for $1,000,000 of term life insurance for Mr. Schaden, payable to his designated beneficiary. We may terminate the Employment Agreement for cause upon ninety days notice. Mr. Schaden may terminate the Employment Agreement upon ninety days notice.

Richard F. Schaden entered into an Employment Agreement with us in 1993 that terminated by its terms on December 31, 1998. At a Board Meeting on May 6, 1999, the Board of Directors approved the extension of Mr. Schaden's 1993 Employment Agreement for an additional two years, retroactive to January 1, 1999. This Agreement provides that he will serve as Vice President and Secretary of our company. Mr. Schaden will not devote his full time to company matters, but will devote such time to company matters as we request. His current base salary is $83,500 per year, which may be adjusted from time to time by mutual agreement between Mr. Schaden and the Board of Directors. Mr. Schaden may take on special projects for us at the direction of the Board of Directors and receive additional compensation for such projects. The Agreement provides an annual bonus equal to 6% of any positive increase in earnings before interest, taxes, depreciation and amortization for each full calendar year during the term of the agreement over the level of such amount for the prior full calendar year. We may terminate the Agreement for cause upon ninety days' notice. Mr. Schaden may terminate the Employment Agreement upon ninety days' notice.

None of the other Named Officers have an employment agreement with us.

Director Compensation

Directors who are not officers or employees are paid $500 per day for each Board and Committee meeting they attend and they are reimbursed for their reasonable expenses of attending such meetings. In addition, such directors receive an annual grant of options to purchase 4,000 shares of common stock, which immediately vest.

During fiscal 1999, we paid each of our four non-employee directors, $1,500 (except for J. Eric Lawrence who was paid $1,000), as compensation for their attendance at regular Board and Committee meetings. For their service during fiscal 1999, these outside Directors each received a grant of options to purchase 4,000 shares of common stock that immediately vested. In addition, during fiscal 1999, a Special Committee of the Board of Directors, composed of two independent members of the Board of Directors, was constituted to review and evaluate a proposal to take our company private. That proposal was ultimately withdrawn. For their service on the Committee, Mr. Mark Bromberg was paid $44,718.52 plus out-of-pocket disbursements, and Mr. Brownell Bailey was paid $43,225.81 plus out-of-pocket disbursements.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of our equity securities (common stock and three classes of preferred stock) as of December 17, 1999, (a) by each person known to us to own beneficially more than 5% of the Common Stock, (b) each of our Named Officers and directors and (c) by all of our officers and directors named herein as a group.

* Indicates less than 1% of the shares outstanding

(1) The persons named in the table have sole voting power with respect to all shares of common stock shown as beneficially owned by them. A person is deemed to be the beneficial owner of securities that can be acquired by such person within sixty (60) days from the filing date of this Report, upon the exercise of options or warrants or conversion of convertible securities. The record ownership of each beneficial owner is determined by assuming that such options or warrants or convertible securities that are exercisable or convertible within sixty (60) days, have been exercised or converted. The total outstanding shares used to calculate each beneficial owner's percentage also assumes such options, warrants or convertible securities have been exercised or converted. Our Class A and Class C Preferred Stock are currently convertible into Quizno's common stock.

(2) Richard E. Schaden and Richard F. Schaden beneficially own, through a voting trust pursuant to which they are joint voting trustees, 1,547,334 shares of common stock and 146,000 shares of Class A Convertible Preferred Stock of our company, and 4,000 shares of common stock owned by a family member for which the voting trust holds sole voting power. Each of them, individually, has been given a proxy by the voting trust to vote 50% of the shares owned by the voting trust. The remaining duration of the voting trust agreement is 4 years, subject to extension. Richard E. Schaden, individually, beneficially owns 784 shares of common stock allocated to him under our 401(k) Plan, 4339 shares of common stock held in his own name, 1,087 shares of common stock represented by currently exercisable stock options, and 2,000 shares of common stock owned by a family member for which he holds sole voting power. Richard F. Schaden, individually, beneficially owns 34,000 shares of our Class C Convertible Preferred Stock. Of the shares of common stock indicated as owned by each of them, 73,000 may be acquired by conversion of Class A Convertible Preferred Stock, and 34,000 may be acquired by Richard F. Schaden by conversion of Class C Convertible Preferred Stock.

(3) Retail & Restaurant Growth Capital, L.P. ("RRGC"), in connection with a loan to our company that has since been repaid, has been issued two Warrants by us. One is exercisable for 372,847 shares of common stock at an exercise price of $3.10, subject to adjustment in certain circumstances. The other is exercisable for 42,209 shares of Common Stock at an exercise price of $5.00 per share, subject to adjustment in certain circumstances.

(4) All of the shares indicated as beneficially owned by Messrs. Lawrence, Bromberg, Griffin and Laramie may be acquired through the exercise of options. All of the shares indicated as beneficially owned by Mr. Frederick Schaden may be acquired through the exercise of options or conversion of Class C Convertible Preferred Stock.

(5) Robert W. Scanlon, individually, beneficially owns 473 shares of common stock allocated to him under our 401(k) Plan, 1,475 shares of common stock held in his own name, and 4,000 shares of common stock represented by currently exercisable stock options. Sue A. Hoover, individually, beneficially owns 709 shares of common stock allocated to her under our 401(k) Plan, 11,873 shares of common stock held in her own name, and 12,400 shares of common stock represented by currently exercisable stock options. Patrick E. Meyers, individually, beneficially owns 158 shares of common stock allocated to him under our 401(k) Plan, 3,973 shares of common stock held in his own name, and 22,000 shares of common stock represented by currently exercisable stock options.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document On December 31, 1996, Retail & Restaurant Growth Capital, L.P. ("RRGC") made a $2,000,000 loan to our company, a portion of which was convertible into 372,847 shares of our common stock, and with interest accrued at 12.75% per annum. If the loan were repaid before conversion, RRGC would receive a warrant to purchase the same number of shares of our common stock at $3.10 per share. On October 8, 1997, we and RRGC amended the loan agreement to provide for the conversion of $500,000 of the principal amount of the loan into 100,000 shares of our Class B Preferred Stock, reducing the outstanding principal amount of the loan to $1,500,000. The Class B Preferred Stock was non-voting, with a cumulative dividend of 12.75%. In connection with such amendment, we also issued a warrant to RRGC that granted it the right to purchase up to 42,209 shares of the common stock at $5.00 per share. Such number of shares of common stock is subject to downward adjustment if we meet certain net income and other goals. In no case will the warrant be exercisable for less than 30,041 shares of the common stock. On January 6, 1999, we paid off the loan from RRGC, issued to RRGC the warrant to purchase 372,847 shares of common stock referred to above and redeemed the Class B Preferred Stock held by RRGC.

Effective October 1, 1994, a wholly-owned subsidiary of our company acquired by merger all of the assets and obligations of Schaden & Schaden, Inc., a Colorado corporation, or "SSI", owned by Richard E. Schaden and Richard F. Schaden. The assets of SSI included interests in several Quizno's Classic Subs restaurants and interests in two area directorships. The consideration paid by us to the Schadens, included $876,000 that was paid in our Class A Preferred Stock. The Class A Preferred Stock is non-voting, bears a 6.5% cumulative dividend, and became convertible on November 1, 1997 into 146,000 shares of the common stock. We may call the Class A Preferred Stock upon 60 days notice. During fiscal 1999 and 1998 each preferred shareholder received dividends of $28,470 annually.

Richard F. Schaden and Frederick H. Schaden, directors of our company, each own an interest in Illinois Food Management, Inc. ("IFM") that owns approximately 50% of our Chicago Area Director. We also own approximately 12% of IFM. In fiscal 1998 and 1999, respectively, we paid the Area Director $139,358 and $142,363.54 as commissions on the sale of new franchises and royalties. In early 1996, IFM requested that we extend the payment terms relating to amounts owed to us by IFM as a result of its operations as an Area Director. As a result of that request, we agreed to defer payment of $63,547. IFM issued to us a promissory note in that amount payable over 6 years with an interest rate of 12% per annum. At September 30, 1999, $55,547.29 was owed to us on this promissory note. During fiscal 1998 and 1999, accrued interest payments on the note were $6,212 and $8,000, respectively. IFM is also indebted to us for $13,075.34 in connection with the resale of a Restaurant once operated by IFM. IFM is reducing this debt by offsetting commissions on royalty fees from that location paid to the managing Area Director. The debt is expected to be reduced to zero in approximately 26 months.

In 1997, we purchased a Restaurant from a company in which Sue Hoover, our Executive Vice President of Marketing, was a 42.5% shareholder. The purchase price was $80,000 of which $15,000 was paid in cash and $65,000 paid by issuance of a promissory note bearing interest at 11% and payable over four years. During fiscal 1998 and 1999, we made payments pursuant to the promissory note totaling $18,993 and $14,245, respectively.

On October 13, 1999, we purchased a 1997 Cessna Citation 525. As of the same date, we entered into an interchange agreement with Richard F. Schaden, P.C., which is 100% owned by Richard F. Schaden. Mr. Schaden, through his company, owns a 1980 Cessna 560 Citation V. Under the interchange agreement, the parties agreed to lease each aircraft to each other, on an as-needed basis, without charge, although the parties will pay the operational costs of the airplane. We also will pay Mr. Schaden or his company to provide services related to the airplane operations, including for pilot and management services. We do not anticipate that such payments will be material.

We anticipate entering into an agreement with Pink Sand Corporation, for the development rights to United States Territory of Guam and the Commonwealth of the Northern Mariana Islands. Pink Sand is principally owned by Richard F. Schaden. The development agreement will require Pink Sand to open 5 Restaurants during the term of the agreement. So long as Pink Sand meets the development schedule, it will have the exclusive rights to develop Restaurants in the territory. The development fee is $42,500, payable upon execution of the agreement. The fee equals one hundred percent of the first initial franchise fee and fifty percent of the aggregate initial franchise fees due for all of the other Restaurants that Pink Sand must develop under the agreement. Each time Pink Sand signs a franchise agreement for a Restaurant to be developed within the territory, we will apply the Development Fee in increments equal to fifty percent of the initial franchise fee due for that Restaurant to reduce the additional amount Pink Sand must pay. We anticipate entering into the agreement in December 1999 or early January 2000.

In 1995, we sold the Area Director rights for the Detroit, Michigan area to a company wholly-owned by Richard F. Schaden. The fee paid to us was

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document $150,000, which is consistent with the then fees received for the sale of area directorships to unaffiliated parties, and was paid in cash. During 1998, we paid the Area Director $27,664 in royalties. Mr. Schaden sold the area directorship in 1998 to an entity owned by Scott Adams, a former employee of our company, and we approved the transfer of the area director marketing agreement.

Thomas Schaden, a brother of Richard F. Schaden and Frederick H. Schaden, is in the insurance brokerage business and has acted as a broker for our insurance policies, including the directors and officers policies that we have purchased.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits required by Item 601 of Regulation S-B. We will furnish to our shareholders, a copy of any of the exhibits listed below upon payment of $.25 per page to cover our costs of furnishing the exhibits.

Item No. Exhibit Description

2.1 Articles of Merger Merging Schaden & Schaden into The Quizno's Operating Company, incorporated by reference to Exhibit 2(ii) to the Company's Form 8-K, dated November 4, 1994.

2.2 Asset Purchase Agreement, among The Quizno's Acquisition Company, Bain's Deli Franchise Associates, through its General Partner, Gemini Enterprises, Ltd., Gemini One, Inc. and Jolles #4 Partnership, dated November 12, 1997, incorporated by reference to Exhibit 2.1 to Firm 8-K, filed by the Company with the SEC on November 26, 1997.

2.3 Asset Purchase Agreement among Stoico Restaurant Group, Inc. d/b/a Stoico Food Service, Inc., Sub & Stuff, Inc. and Spaghetti Jack's Inc. and Quizno's Kansas LLC, incorporated by reference to Exhibit 2.1 to the Company's Form 8-K, filed by the Company with the SEC on September 1, 1998

2.4 Asset Purchase Agreement, among Quiz-DIA, Inc., Airport services, Inc. and ASI-DIA, L.P., dated as of the 5th day of November, 1999, incorporated by reference to Exhibit 2.3 to Form 8-K, filed by the Company with the SEC on November 22,1999.

3.1 Amended and Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 3(a) to the Company's Registration Statement on Form SB-2 (Reg. No. 33-72378-D).

3.2 Articles of Amendment to the Articles of Incorporation of the Company Authorizing 146,000 Shares of Class A Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3.2 to the Company's Form 10-KSB, dated March 28, 1997.

3.3 Articles of Amendment changing the Company name, incorporated by reference to Exhibit 3.3 to the Company's Form 10-KSB, dated March 28, 1997.

3.(I) By-laws of the Company*

3.5 Articles of Amendment to the Articles of Incorporation of the Company, authorizing 100,000 shares of Class B Preferred Stock and 200,000 shares of Class C Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3.5 to the Company's Form 10-KSB, dated March 26, 1998.

3.(II) Articles of Amendment to the Articles of Incorporation of the Company, authorizing 10,000 shares of Class D Preferred Stock.*

4.1 Form of certificate evidencing Common Stock, $.001 par value, of the Company, incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form SB-2 (Reg. No. 33-72378-D).

9.1 Voting Trust Agreement between Richard E. Schaden and Richard F. Schaden, dated July 14, 1994, incorporated by reference to Exhibit A to the Schedule 13-D, dated July 14, 1994, filed by Richard E. Schaden and Richard F. Schaden.

9.2 First Amendment to Voting Trust Agreement dated November 4, 1994, incorporated by reference to Exhibit A to the Amendment No. 1 to Schedule 13-D, dated November 4, 1994, filed by Richard E. Schaden and Richard F. Schaden.

9.3 Second Amendment to Voting Trust Agreement dated September 5, 1996, incorporated by reference to Exhibit 9.3 to the Company's Form 10-KSB, dated March 28, 1997.

10.1 Employment Agreement of Mr. Richard E. Schaden, incorporated by reference to Exhibit 10(a) to the Company's Registration Statement on Form SB-2 (Reg. No. 33-72378-D).

10.2 Employment Agreement of Mr. Richard F. Schaden, incorporated by reference to Exhibit 10(b) to the Company's Registration Statement on Form SB-2 (Reg. No. 33-72378-D).

10.3 Employee Stock Option Plan, incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8 (Reg. No.333-45549).

10.4 Amended and Restated Stock Option Plan for Directors and Advisors.*

10.5 Indemnity Agreement of Richard E. Schaden, incorporated by reference to Exhibit 10(e) to the Company's Registration Statement on Form SB-2 (Reg. No. 33-72378-D).

10.6 Indemnity Agreement of Richard F. Schaden, incorporated by reference to Exhibit 10(f) to the Company's Registration Statement on Form SB-2 (Reg. No. 33-72378-D).

10.7 Indemnity Agreement of Patrick E. Meyers, incorporated by reference to Exhibit 10(g) to the Company's Registration Statement on Form SB-2 (Reg. No. 33-72378-D).

10.8 Indemnity Agreement of Brownell M. Bailey, incorporated by reference to Exhibit 10(h) to the Company's Registration Statement on Form SB-2 (Reg. No. 33-72378-D).

10.9 Indemnity Agreement of Frederick H. Schaden, incorporated by reference to Exhibit 10(i) to the Company's Registration Statement on Form SB-2 (Reg. No. 33-72378-D).

10.10 Indemnity Agreement of J. Eric Lawrence, incorporated by reference to Exhibit 10.10 to the Company's Form 10-KSB, dated March 26, 1998

10.11 Indemnity Agreement of Mark L. Bromberg, incorporated by reference to Exhibit 10.11 to the Company's Form 10-KSB, dated March 26, 1998

10.12 Form of Franchise Agreement, incorporated by reference to Exhibit 10.12 to the Company's Form 10-KSB, dated March 26, 1998.

10.13 Form of Area Director Marketing Agreement, incorporated by reference to Exhibit 10.12 to the Company's Form 10-KSB, dated March 28, 1997

10.14 Headquarters Office Lease for the Company, incorporated by reference to Exhibit 10.14(b) to the Company's Form 10-KSB, filed with the SEC on March 31, 1999.

10.15 Amendment to Employment Agreement between the Company and Mr. Richard E. Schaden, dated February 29, 1996, incorporated by reference to Exhibit 10.15 to the Company's 10-KSB, dated March 29, 1996.

10.16 Amendment to Employment Agreement between the Company and Mr. Richard F. Schaden, dated February 29, 1996, incorporated by reference to Exhibit 10.16 to the Company's 10-KSB, dated March 29, 1996.

10.17 Deferment Agreement between the Company and Illinois Food Management, Inc., dated February 27, 1996, incorporated by reference to Exhibit 10.17 to the Company's 10-KSB, dated March 29, 1996.

10.18 Investment Agreement between the Company and Retail and Restaurant Growth Capital, L.P. ("RRGC"), dated as of December 31, 1996, incorporated by reference to Exhibit 10.18 to the Company's From 10-KSB, dated March 28, 1997.

10.19 Stockholders' Agreement between the Company and RRGC, dated as of December 31, 1996, incorporated by reference to Exhibit 99(b) to Schedule 13D filed by RRGC with the SEC on January 9, 1998.

10.20 First Amendment to Investment Agreement between RRGC and the Company, dated as of October 8, 1997, incorporated by reference to Exhibit 10.23 to the Company's Form 10-KSB, dated March 26, 1998.

10.21 Warrant to Purchase Shares of Common Stock of the Company, dated as of November 11, 1997 and issued to RRGC, incorporated by reference to Exhibit 10.24 to the Company's Form 10-KSB, dated March 26, 1998.

10.22 Warrant to Purchase Shares of Common Stock of the Company, dated as of December 31, 1998 and issued to RRGC.*

10.23 Asset Purchase Agreement between The Quizno's Acquisition Company and Bain's Deli Corporation dated as of February 1, 1999, incorporated by reference to Exhibit 10.28 to the Company's form 10-KSB filed with the SEC on March 31, 1999.

10.24 Airplane Purchase Agreement, dated as of September 22, 1999, between the Company and Sacramento Aviation Management Company.*

10.25 Interchange Agreement, dated as of October 13, 1999, between the Company and Richard F. Schaden, P.C.*

10.26 Form of Master Franchise Agreement*

10.27 Investment letter agreement, dated as of October 4, 1999, between the Company and AMERESCO Commercial Finance, Inc.*

10.28 Form of Promissory Note, dated as of October 5, 1999, issued by the Company to AMERESCO Commercial Finance, Inc.*

10.29 Form of Pledge and Security Agreement, dated as of October 5, 1999, between the Company and AMERESCO Commercial Finance, Inc.*

20.1 Risk Factors Section from the Company's Prospectus dated January 9, 1998 included in the Registration Statement on Form S-3 filed by the Company (Registration No. 333-38691), incorporated by reference to Exhibit 20.1 to the Company's 10-KSB, dated March 26, 1998.

21.1 List of Company subsidiaries.*

23 Consent of Ehrhardt Keefe Steiner & Hottman PC to the incorporation by reference of its report dated November 5, 1999 appearing elsewhere in this Form 10-KSB into two Registration Statements on Form S-8 of the Company, Reg. Nos. 333-45549 and 333-45205.* ------

* Filed with this Report.

(b) Reports on Form 8-K. We filed three (3) reports on Form 8-K during the fiscal quarter ending September 30, 1999. All three Form 8-K filings reported on only Item 5 matters. Such filings where made on August 11, August 19, and September, 1999, and related to press releases announcing the withdrawal of proposed going private transaction, second quarter financial results and the results of shareholder votes taken at our September 27, 1999 Annual Meeting, respectively.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on December 21, 1999.

THE QUIZNO'S CORPORATION

By:/s/ Richard E. Schaden ------Richard E. Schaden, President and Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated and on the dates indicated.

Signature Title Date

/s/ Richard E. Schaden President, Chief Executive December 30, 1999 ------Officer and Director Richard E. Schaden (Principal Executive Officer)

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document /s/ Richard F. Schaden Vice President, December 30, 1999 Richard F. Schaden Secretary and Director

/s/ Mark L. Bromberg Director December 30, 1999 Mark L. Bromberg

/s/ J. Eric Lawrence Director December 30, 1999 J. Eric Lawrence

/s/ Frederick H. Schaden Director December 30, 1999 Frederick H. Schaden

Director December 30, 1999 ------Brad A. Griffin

/s/ John L. Gallivan Chief Financial Officer December 30, 1999 John L. Gallivan and Treasurer (Principal Financial and Accounting Officer

ARTICLE I

Offices and Agents

1. Principal Office. The principal office of the Corporation may be located within or without the State of Colorado, as designated by the most recent filing with the Secretary of State of Colorado. The Corporation may have other offices and places of business at such places within or without the State of Colorado as shall be determined by the directors.

2. Registered Office. The registered office of the corporation required by the Colorado Business Corporation Act must be continually maintained in the State of Colorado, and it may be, but need not be, identical with the principal office, if located in the State of Colorado. The address of the registered office of the Corporation may be changed from time to time as provided by the Colorado Business Corporation Act.

3. Registered Agent. The Corporation shall maintain a registered agent in the State of Colorado as required by the Colorado Business Corporation Act. Such registered agent may be changed from time to time as provided by the Colorado Business Corporation Act.

ARTICLE II

Shareholders Meetings

1. Annual Meetings. The annual meeting of the shareholders of the corporation shall be held at a date and time fixed by resolution of the board of directors or by the president in the absence of action by the board of directors. The annual meeting of the shareholders shall be held for the purpose of electing directors and transacting such other corporate business as may come before the meeting. If the election of directors is not held as provided herein at any annual meeting of the shareholders or at any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as it may conveniently be held.

Notice of an annual meeting need not include a description of the purpose or purposes of the meeting except when the purpose of the meeting is to consider (i) an amendment to the Articles of Incorporation of the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Corporation, (ii) a merger or share exchange in which the Corporation is a party and, with respect to a share exchange, in which the Corporation's shares will be acquired, (iii) the sale, lease, exchange or other disposition, other than in the usual and regular course of business, of all or substantially all of the property of the Corporation or of another entity which the Corporation controls, in each case with or without goodwill, (iv) the dissolution of the Corporation or (v) any other purpose for which a statement of purpose is required by the Colorado Business Corporation Act.

2. Special Meetings. Unless otherwise prescribed by the Colorado Business Corporation Act, special meetings of the shareholders of the Corporation may be called at any time by the chairman of the board of directors, if any, by the president, by resolution of the board of directors or upon receipt of one or more written demands for a meeting, stating the purpose or purposes for which it is to be held, signed and dated by the holders of at least ten percent (10%) of all votes entitled to be cast on any issue proposed to be considered at the meeting. Notice of a special meeting shall include a description of the purpose or purposes for which the meeting is called.

3. Place of Meeting. The annual meeting of the shareholders of the Corporation may be held at any place, either within or without the State of Colorado, as may be designated by the board of directors. Except as limited by the following sentence, the person or persons calling any special meeting of the shareholders may designate any place, within or without the State of Colorado, as the place for the meeting. If no designation is made or if a special meeting shall be called other than by the board of directors, the chairman of the board of directors or the president, the place of meeting shall be the principal office of the Corporation. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place as the place for holding such meeting.

4. Notice of Meeting. Written notice stating the date, time and place of the meeting shall be given no fewer than ten (10) and no more than sixty (60) days before the date of the meeting, except that if the number of authorized shares is to be increased, at least thirty (30) days' notice shall be given. Notice shall be given personally or by mail, private carrier, telegraph, teletype, electronically transmitted facsimile or other form of wire or wireless communication by or at the direction of the president, the secretary, or the officer or other person calling the meeting to each shareholder of record entitled to vote at such meeting. if mailed and if in a comprehensible form, such notice shall be deemed to be given and effective when deposited in the United States mail, addressed to the shareholder at his or her address as it appears in the Corporation's current record of shareholders, with postage prepaid. If notice is given other than by mail, and provided that the notice is in comprehensible form, the notice is given and effective on the date received by the shareholder. No notice need be sent to any shareholder if three successive notices mailed to the last known address of such shareholder have been returned as undeliverable until such time as another address for such shareholder is made known to the Corporation by such shareholder.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document When a meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 120 days, or if a new record date is fixed for the adjourned meeting, a new notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting as of the new record date.

5. Waiver of Notice. A shareholder may waive any notice of a meeting either before or after the time and date of the meeting. The waiver shall be in writing, be signed by the shareholder entitled to the notice and be delivered to the corporation for inclusion in the minutes or filing with the corporate records, but such delivery and filing shall not be conditions for effectiveness.

A shareholder's attendance at a meeting waives objection to (i) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting because of lack of notice or defective notice, and (ii) consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.

6. Fixing of Record Date. In order to determine shareholders entitled (i) to be given notice of a shareholders meeting (ii) to demand a special meeting, (iii) to vote, or (iv) to take any other action, the board of directors may fix a future date as the record date, such date, in any case, shall not be more than seventy (70) days and in case of a meeting of shareholders not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is fixed, the record date shall be the date on which notice of the meeting is mailed or the date on which a resolution of the board of directors providing for a distribution is adopted, as the case may be. When a determination of shareholders entitled to vote at any meeting of shareholders is made as provided in this Section 6, such determination shall apply to any adjournment thereof.

Notwithstanding the foregoing, the record date for determining the shareholders entitled to take action without a meeting or entitled to be given notice of action so taken shall be the date a writing upon which the action is taken is first received by the Corporation. The record date for determining shareholders entitled to demand a special meeting shall be the date of the earliest of the demands pursuant to which the meeting is called.

7. Voting List. After fixing a record date for a shareholder's meeting, the Corporation shall prepare a list of names of all its shareholders who are entitled to be given notice of the meeting. The list shall be arranged by voting groups and within each voting group by class or series, and shall show the address of, and the number of shares of each class or series that are held by each shareholder.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The shareholders' list shall be available for inspection by any shareholder, beginning the earlier of ten (10) days before the meeting for which the list was prepared or two (2) business days after notice of the meeting is given and continuing through the meeting, and any adjournment thereof, at the Corporation's principal office or at a place identified in the notice of the meeting in the city where the meeting will be held.

A shareholder, his agent or attorney, may upon written demand, inspect and copy the list during regular business hours and during the period it is available for inspection, provided, (i) the shareholder has been a shareholder for at least three (3) months immediately preceding the demand or holds at least five percent (5%) of all outstanding shares of any class of shares as the date of the demand, (ii) the demand is made in good faith and for a purpose reasonably related to the demanding shareholder's interest as a shareholder, (iii) the shareholder describes with reasonable particularity the purpose and records the shareholder desires to inspect, (iv) the records are directly connected with the described purpose and (v) the shareholder pays a reasonable charge covering the costs of labor and material for such copies, not to exceed the cost of production and reproduction.

8. Proxies. At all meetings of shareholders, a shareholder may vote by proxy by signing an appointment form either personally or by his or her duly authorized attorney-in-fact. A shareholder may also appoint a proxy by transmitting or authorizing the transmission of a telegram, teletype, or other electronic transmission providing a written statement of the appointment to the proxy, to a proxy solicitor, proxy support service organization or other person duly authorized by the proxy to receive appointments as agent for the proxy, or to the Corporation. The transmitted appointment shall set forth or be transmitted with written evidence from which it can be determined that the shareholder transmitted or authorized the transmission of the appointment. The proxy appointment form shall be filed with the Secretary of the corporation by or at the time of the meeting. The appointment of a proxy is effective when received by the corporation and is valid for eleven (11) months unless a different period is expressly provided in the appointment form.

Any complete copy, including an electronically transmitted facsimile, of an appointment of a proxy may be substituted for or used in lieu of the original appointment for any purpose for which the original appointment could be used.

Revocation of a proxy does not affect the right of the Corporation to accept the proxy's appointment unless (i) the Corporation had notice that the appointment was coupled with an interest and notice that the interest is extinguished is received by the Secretary or other officer or agent authorized to tabulate votes before the proxy exercises his authority under the appointment or (ii) other notice of the revocation of the appointment is received by the Secretary or other officer or agent authorized to tabulate votes before the proxy exercises his authority under the appointment. Other notice of revocation may, in the discretion of the Corporation, be deemed to include the appearance at a shareholders meeting of the shareholder who granted the proxy appointment

The death or incapacity of the shareholder appointing a proxy does not affect the right of the Corporation to accept the proxy's authority unless notice of the death or incapacity is received by the Secretary or other officer or agent authorized to tabulate votes before the proxy exercised his authority under the appointment.

The Corporation shall not be required to recognize an appointment made irrevocable if it has received a writing revoking the appointment signed by the shareholder either personally or by the shareholder's attorney-in-fact, notwithstanding that the revocation may be a breach of an obligation of the shareholder to another person not to revoke the appointment.

A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if the transferee did not know of its existence when he acquired the shares and the irrevocable appointment was not noted on the certificate representing the shares.

Subject to the provisions of Article II, Section 10 below or any express limitation on the proxy's authority appearing on the appointment form, a corporation is entitled to accept the proxy's vote or other action as that of the shareholder making the appointment.

9. Voting Rights. Each outstanding share, regardless of class, is entitled to one vote and each fractional share is entitled to a corresponding fractional vote, on each matter voted on at a shareholder's meeting except to the extent that the voting rights of the shares of any class or classes are limited or denied by the Articles of Incorporation. Only shares are entitled to vote. Voting on any question or in any election may be by voice vote unless the presiding officer shall order, or any shareholder shall demand, that voting be by ballot.

Cumulative voting in the election of directors shall not be permitted.

Except as otherwise ordered by a court of competent jurisdiction upon a finding that the purpose of this Section 9 would not be violated in the circumstances presented to the court, the shares of the Corporation are not entitled to be voted if they are owned, directly or indirectly, by another corporation, domestic or foreign, and the Corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the other corporation, except to the extent the other corporation holds the shares in a fiduciary capacity.

Redeemable shares are not entitled to be voted after notice of redemption is mailed to holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares.

10. Corporation's Acceptance of Votes. If the name signed on a vote,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document consent, waiver, proxy appointment, or proxy appointment revocation corresponds to the name of a shareholder, the Corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, proxy appointment, or proxy appointment revocation and to give it effect as the act of the shareholder. If the name signed on a vote, consent, waiver, proxy appointment, or proxy appointment revocation does not correspond to the name of a shareholder, the Corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, proxy appointment, or proxy appointment revocation and to give it effect as the act of the shareholder if:

(a) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;

(b) The name signed purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the Corporation requests, evidence of fiduciary status acceptable to the Corporation has been presented with respect to the vote, consent, waiver, proxy appointment or proxy appointment revocation;

(c) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the Corporation requests, evidence of this status acceptable to the Corporation has been presented with respect to the vote, consent, waiver, proxy appointment or proxy appointment revocation;

(d) The name signed purports to be that of a pledgee, beneficial owner. or attorney-in-fact of the shareholder and, if the Corporation requests, evidence acceptable to the Corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, proxy appointment or proxy appointment revocation;

(e) Two or more persons are the shareholder as cotenants or fiduciaries and the name signed purports to be the name of at least one of the cotenants or fiduciaries and the person signing appears to be acting on behalf of all the cotenants or fiduciaries; or

(f) The acceptance of the vote, consent, waiver, proxy appointment, or proxy appointment revocation is otherwise proper under rules established by the Corporation that are not inconsistent with the provisions of this Section 10.

The Corporation is entitled to reject a vote, consent, waiver, proxy appointment or proxy appointment revocation if the Secretary or other officer or agent authorized to tabulate votes,, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder.

The Corporation and its officer or agent who accepts or rejects a vote, consent, waiver, proxy appointment or proxy appointment revocation in good faith and in accordance with the standards of this Section 10 are not liable in damages for the consequences of the acceptance or rejection.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 11. Quorum and Voting Requirements. A majority of the votes entitled to be cast on a matter by a voting group shall constitute a quorum of that voting group for action on the matter unless a lesser number is authorized by the Articles of Incorporation. once a share is represented for any purpose at a meeting, including the purpose of determining that a quorum exists, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting, unless otherwise provided in the Articles of Incorporation or unless a new record date is or shall be set for that adjourned meeting.

If a quorum exists, action on a matter other than the election of directors by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast within the voting group opposing the action, unless the vote of a greater number or voting by classes is required by law or the Articles of Incorporation. For election of directors,, those candidates receiving the most votes shall be elected.

12. Adjournments. If less than a quorum of shares entitled to vote is represented at any meeting of the shareholders, a majority of the shares so represented may adjourn the meeting from time to time without further notice, for a period not to exceed 120 days at any one adjournment. If a quorum is present at such adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally noticed. Any meeting of the shareholders may adjourn from time to time until its business is completed.

13. Action by Shareholders Without Meeting. Any action required or permitted to be taken at a shareholders' meeting may be taken without a meeting if all of the shareholders entitled to vote thereon consent to such action in writing. Action taken under this Section 13 shall be effective as of the date the last writing necessary to effect the action is received by the Corporation, unless all of the writings necessary to effect the action specify a later date as the effective date of the action, in which case such later date shall be the effective date of the action. If the corporation receives writings describing and consenting to the action signed by all of the shareholders entitled to vote with respect to the action, the effective date of the action may be any date that is specified in all of the writings as the effective date of the action. Any such writings may be received by the Corporation by electronically transmitted facsimile or other form of wire or wireless communication providing the Corporation with a complete copy thereof, including a copy of the signature thereto. Action taken under this Section 13 has the same effect as action taken at a meeting of shareholders and may be described as such in any document.

Any shareholder who has signed a writing describing and consenting to action taken pursuant to this Section 13 may revoke such consent by a writing signed by the shareholder describing the action and stating that the shareholder's prior consent thereto is revoked, if such writing is received by the Corporation before the effectiveness of the action.

14. Meetings by Telecommunication. Any or all of the shareholders may participate in an annual or special shareholders, meeting by, or the meeting

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document may be conducted through the use of, any means of communication by which all persons participating in the meeting may hear each other during the meeting. A shareholder participating in a meeting by this means is deemed to be present in person at the meeting.

ARTICLE III

Board of Directors

1. General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the board of directors, except as otherwise provided in the Colorado Business Corporation Act or the Articles of Incorporation.

2. Number, Qualifications and Term of Office. The number of directors of the Corporation shall be fixed from time to time by resolution of the board of directors, within a range of no less than three (3) or more than nine (9). A director shall be a natural person who is eighteen years or older. A director need not be a resident of the State of Colorado or a shareholder of the Corporation.

Directors shall be elected at each annual meeting of shareholders and shall hold such office until the next annual meeting of shareholders and until his successor is elected and qualifies. A decrease in the number of directors does not shorten an incumbent director's term.

3. Resignation, Vacancies. Any director may resign at any time by giving written notice to the Corporation. A resignation of a director is effective when the notice is received by the Corporation unless the notice specifies a later effective date. Unless otherwise specified in the notice, the acceptance of such resignation by the Corporation shall not be necessary to make it effective. Any vacancy on the board of directors may be filled by the affirmative vote of a majority of the shareholders or by the affirmative vote of the board of directors even if less than a quorum is remaining in office. If elected by the directors, the director shall hold office until the next annual shareholders' meeting at which directors are elected. If elected by the shareholders, the director shall hold office for the unexpired term of his or her predecessor in office, except that, if the director's predecessor was elected by the directors to fill a vacancy, the director elected by the shareholders shall hold office for the unexpired term of the last predecessor elected by the shareholders.

4. Removal of Directors by Shareholders. Unless otherwise provided in the Articles of Incorporation, the shareholders may remove one or more directors with or without cause. A director may be removed by the shareholders only at a meeting called for the purpose of removing the director and the meeting notice states that the purpose, or one of the purposes, of the meeting is removal of the director.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 5. Removal of Directors by Judicial Proceeding. A director may be removed by the District Court of the Colorado county where the principal office is located or if the corporation has no principal office in the State of Colorado, by the District Court of the Colorado county in which its registered office is located, upon a finding by the District Court that the director engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion with respect to the Corporation and that removal is in the best interests of the Corporation. The judicial proceeding may be commenced either by the Corporation or by shareholders holding at least ten percent (10%) of the outstanding shares of any class.

6. Compensation. By resolution of the board of directors, any director may be paid any one or more of the following: his expenses, if any, of attendance at meetings; a fixed sum for attendance at each meeting; a stated salary as director; or such other compensation as the Corporation and the director may reasonably agree upon. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

ARTICLE IV

Meetings of the Board

1. Place of Meetings. The regular or special meetings of the board of directors shall be held at the principal office of the Corporation unless otherwise designated.

2. Regular Meetings. The board of directors shall meet each year after the annual meeting of the shareholders for the purpose of appointing officers and transacting such other business as may come before the meeting. The board of directors may provide, by resolution, for the holding of additional regular meetings without other notice than such resolution.

3. Special Meetings. Special meetings of the board of directors may be called at any time by the chairman of the board, if any, by the president or by a majority of the members of the board of directors.

4. Notice of Meetings. Notice of the regular meetings of the board of directors need not be given. Except as otherwise provided by these Bylaws or the laws of the State of Colorado, written notice of each special meeting of the board of directors setting forth the time and the place of the meeting shall be given to each director not less than two (2) days prior to the date and time fixed for the meeting. Notice of any special meeting may be either personally delivered or mailed to each director at his business address, or by notice transmitted by telegraph, telex, electronically transmitted facsimile or other form of wire or wireless communication. If mailed, such notice shall be deemed to be given and to be effective on the earlier of (i) three (3) days after such notice is deposited in the United States mail properly addressed, with postage prepaid, or (ii) the date shown on the return receipt if mailed by registered or certified mail return receipt requested. If notice be given by telex,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document electronically transmitted facsimile or other similar form of wire or wireless communication, such notice shall be deemed to be given and to be effective when sent, and with respect to a telegram, such notice shall be deemed to be given and to be effective when the telegram is delivered to the telegraph company. If a director has designated in writing one or more reasonable addresses or facsimile numbers for delivery of notice to him, notice sent by mail, telegraph, telex, electronically transmitted facsimile or other form of wire or wireless communication shall not be deemed to have been given or to be effective unless sent to such addresses or facsimile numbers, as the case may be. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.

5. Waiver of Notice. A director may, in writing, waive notice of any special meeting of the board of directors either before, at, or after the meeting. Such waiver shall be delivered to the Corporation for filing with the corporate records. Attendance or participation of a director at a meeting waives any required notice of that meeting unless at the beginning of the meeting or promptly upon the director's arrival, the director objects to holding the meeting or transacting business at the meeting because of lack of notice or defective notice and does not thereafter vote for or assent to action taken at the meeting.

6. Quorum, Manner of Acting. At meetings of the board of directors a majority of the number of directors fixed by resolution of the board shall constitute a quorum for the transaction of business. If the number of directors is not fixed, then a majority of the number in office immediately before the meeting begins, shall constitute a quorum. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless the vote of a greater number is required by these Bylaws, the Articles of Incorporation or the Colorado Business corporation Act.

7. Presumption of Assent. A director who is present at a meeting of the board of directors when corporate action is taken is deemed to have assented to the action taken unless:

(a) the director objects at the beginning of such meeting or promptly upon his or her arrival, to the holding of the meeting or the transacting of business at the meeting and does not thereafter vote for or assent to any action taken at the meeting;

(b) the director contemporaneously requests that his or her dissent or abstention as to any specific action taken be entered in the minutes of such meeting; or

(c) the director causes written notice of his or her dissent or abstention as to any specific action to be received by the presiding officer of such meeting before its adjournment or by the Corporation promptly after adjournment of such meeting.

The right of dissent or abstention as to a specific action taken in

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document a meeting of a board is not available to a director who votes in favor of the action taken.

8. Committees. The board of directors may, by a resolution adopted by a majority of all of the directors in office when the action is taken, designate one of more of its members to constitute an executive committee, and one or more other committees. To the extent provided in the resolution, each committee shall have and may exercise all of the authority of the board of directors, except that no such committee shall have the authority to: (i) authorize distributions; (ii) approve or propose to shareholders action required by the Colorado Business Corporation Act to be approved by shareholders; (iii) fill vacancies on the board of directors or any committee thereof; (iv) amend the Articles of Incorporation; (v) adopt, amend or repeal these Bylaws; (vi) approve a plan of merger not requiring shareholder approval; (vii) authorize or approve the reacquisition of shares except in accordance with a formula or method prescribed by the board of directors; or (viii) authorize or approve the issuance or sale of shares, or a contract for the sale of shares, or determine the designation, relative rights, preferences and limitations of a class or series of shares; except that the board of directors, may authorize a committee or an officer to do so within limits specifically prescribed by the board of directors. The conduct of committee meetings shall comply with the provisions of this Article IV relating to board of director meetings.

The creation of, delegation of authority to, or action by a committee does not alone constitute compliance by a director with the standards of conduct set forth in Article V.

9. Informal Action by Directors. Any action required or permitted be taken at a board of directors' meeting may be taken without a meeting if all members of the board consent to such action in writing. Action taken under this Section 9 is effective at the time the last director signs a writing describing the action taken unless the directors establish a different effective date, and unless, before such time, a director has revoked his or her consent by a writing signed by the director and received by the president or secretary. Action taken pursuant to this Section 9 has the same effect as action taken at a meeting of the directors and may be described as such in any document.

10. Telephonic Meetings. Members of the board of directors may participate in a regular or special meeting by or conduct the meeting through the use of any means of communication by which all directors participating may hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

ARTICLE V

Standards of Conduct

Each director shall perform his or her duties as a director, including his or her duties as a member of any committee, and each officer with discretionary authority shall discharge his or her duties under that authority,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (i) in good faith, (ii) with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner he or she reasonably believes to be in the best interest of the Corporation.

In discharging his or her duties, a director or officer is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by (i) one or more officers or employees of the Corporation whom the director or officer reasonably believes to be reliable and competent in the matters presented, (ii) legal counsel, a public accountant, or other person as to matters which the director or officer reasonably believes to be within such persons' professional or expert competence or (iii) in the case of a director, a committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.

A director or officer is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted under this Article V unwarranted.

A director or officer is not liable as such to the Corporation or its shareholders for any action he or she takes or omits to take as a director or officer, as the case may be, if, in connection with such action or omission, he or she performed the duties of the position in compliance with this Article V.

ARTICLE VI

Officers and Agents

1. General.

(a) The officers of the Corporation shall consist of a president, secretary and treasurer, appointed annually by the board of directors. Each officer shall be a natural person eighteen years of age or older. The board of directors or the president may appoint such other officers, assistant officers, committees and agents, including a chairman of the board, vice chairman of the board, one or more vice presidents, assistant secretaries and assistant treasurers, as they may consider necessary. To the extent not provided in these bylaws, the board of directors or the president, as the case may be, shall from time to time determine the procedure for the appointment of officers, their term of office, their authority and duties and their compensation. one person may hold more than one office. In all cases where the duties of any officer, agent, or employee are not prescribed by these Bylaws or by the board of directors, such officer, agent or employee shall follow the orders and instructions of the president of the Corporation.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Any officer appointed by the board of directors shall have the power to execute and deliver on behalf of and in the name of the Corporation any instrument requiring the signature of an officer of the Corporation, except as otherwise provided in these Bylaws or where the execution and delivery thereof shall be expressly delegated by the board of directors to some other officer or agent of the Corporation. Unless authorized to do so by these Bylaws or by the board of directors, no officer, agent or employee shall have any power or authority to bind the Corporation in any way, to pledge its credit or to render it liable pecuniarily for any purpose or in any amount.

(c) Any officer of the Corporation with the title of President, Chief Operating Officer, Chief Financial Officer or General Counsel shall be authorized hereby to execute and deliver on behalf of and in the name of the Corporation any lease, contract or other agreement, obligating the Corporation to make periodic payments for goods or services obtained by the Corporation in the ordinary course of its business, in amounts relating to a single lease, contract or other agreement not to exceed $50,000 per year. The execution and delivery of any such instrument by any one of such officers shall legally bind the Corporation, without the necessity of a resolution of the Board of Directors. Any vendor of goods or services to the Corporation shall be justified in relying on the authority of the signature of any of such officers to bind the Corporation upon receipt of a certified copy of this provision.

(d) The Chief Financial Officer of the Corporation shall be authorized hereby to open any account at a banking institution, to legally bind the Corporation to the terms such institution customarily requires of its account holders, and to designate the officers with signing authority on such account, provided, however, that at least two officers of the Corporation shall be necessary to sign checks on or withdraw funds from such account in excess of $10,000. The execution and delivery of any instrument agreeing to such terms or designating such signatories by the Chief Financial Officer shall legally bind the Corporation, without the necessity of a resolution of the Board of Directors. Any banking institution shall be justified in relying on the authority of the signature of the Chief Financial Officer to bind the Corporation upon receipt of a certified copy of this provision.

2. Appointment and Term of Office. The officers of the Corporation appointed by the board of directors shall be appointed at each annual meeting of the board held after each annual meeting of the shareholders. If the appointment of officers is not made at such meeting or if an officer or officers are to be appointed by another officer or officers of the Corporation, such appointments shall be made as soon thereafter as practicable. officers appointed by the president may be appointed for indeterminate terms.

3. Vacancies. A vacancy in any office, however occurring, may be filled by the board of directors, or by the officer or officers authorized by these bylaws or the board of directors, for the unexpired portion of the officer's term.

4. Resignation. An officer may resign at any time by giving written notice of resignation to the Corporation. A resignation of an officer is

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document effective when the notice is received by the Corporation unless the notice specifies a later effective date. If a resignation is made effective at a later date, the board of directors may permit the officer to remain in office until the effective date and may fill the pending vacancy before the effective date if the board of directors provides that the successor does not take office until the effective date, or the board of directors may remove the officer at any time before the effective date and may fill the resulting vacancy.

5. Removal. Any officer or agent of this Corporation may be removed with or without cause by the board of directors, an officer or officers authorized by the board of directors, or the officer that appointed such officer or agent.

6. Contract Rights. Appointment of an officer does not itself create contract rights. An officer's removal does not affect the officer's contract rights, if any, with the Corporation. An officer's resignation does not affect the Corporation's contract rights, if any, with the officer.

7. Chairman of the Board. The chairman of the board, if any, shall preside as chairman at meetings of the shareholders and the board of directors. He or she shall, in addition, have such other duties as the board may prescribe that he or she perform. At the request of the president, the chairman of the board may, in the case of the president's absence or inability to act, temporarily act in his or her place. In the case of death of the president or in the case of his or her absence or inability to act without having designated the chairman of the board to act temporarily in his place, the chairman of the board shall perform the duties of the president, unless the board of directors, by resolution, provides otherwise. If the chairman of the board shall be unable to act in place of the president, the vice presidents may exercise such powers and perform such duties as provided in Section 9 below.

8. Vice-Chairman of the Board. The Vice Chairman of the Board, if any, in the absence of the Chairman of the Board, shall preside at all meetings of the shareholders and of the Board of Directors. He shall have such other powers and duties as may from time to time be prescribed by the Board of Directors.

9. President. Subject to the direction and supervision of the board of directors, the president shall be the chief executive officer of the Corporation and shall have general and active control of its affairs and business and general supervision of its officer, agents and employees. In the event the position of chairman or vice-chairman of the board shall not be occupied or the chairman or vice-chairman shall be absent or otherwise unable to act, the president shall preside at meetings of the shareholders and directors and shall discharge the duties of the presiding officer. The president may sign, with the secretary or any other proper officer of the Corporation thereunto authorized by the board of directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these Bylaws to some other officer or agent of the Corporation,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document or shall be required by law to be otherwise signed or executed. Unless otherwise directed by the board of directors, the president shall attend in person or by substitute appointed by him, or shall execute on behalf of the Corporation written instruments appointing a proxy or proxies to represent the Corporation at, all meetings of the shareholders of any other corporation in which the Corporation holds any stock. on behalf of the Corporation, the president may in person or by substitute or by proxy execute written waivers of notice and consents with respect to any such meetings. At all such meetings and otherwise, the president, in person or by substitute or proxy, may vote the stock held by the Corporation, execute written consents and other instruments with respect to such stock and exercise any and all rights and powers incident to the ownership of said stock.

10. Vice Presidents. Each vice president shall have such powers and perform such duties as the board of directors may from time to time prescribe or as the president may from time to time delegate to him. At the request of the president, in the case of the president's absence or inability to act, any vice president may temporarily act in his place. In the case of the death of the president, or in the case of his absence or inability to act without having designated a vice president or vice presidents to act temporarily in his place, the board of directors, by resolution, may designate a vice president or vice presidents, to perform the duties of the president. If no such designation shall be made, the chairman of the board of directors, if any, shall exercise such powers and perform such duties, as provided in Section 8 of this Article V, but if the Corporation has no chairman of the board of directors, or if the chairman is unable to act in place of the president, any of the vice presidents appointed by the board of directors may exercise such powers and perform such duties.

11. Secretary. The secretary shall (i) prepare, or cause to be prepared, and maintain as permanent records the minutes of the proceedings of the shareholders and the board of directors or any committee thereof, a record of all actions taken by the shareholders or board of directors or any committee thereof without a meeting and a record of all waivers of notice of meetings of shareholders and of the board of directors or any committee thereof, (ii) see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law, (iii) serve as custodian of the records and of the seal of the Corporation and affix the seal to all documents, (iv) keep at the registered office or principal place of business, a record containing the names and addresses of all shareholders in a form that permits preparation of a list of shareholders arranged by voting group and by class or series of shares within each voting group, that is alphabetical within each class or series and that shows the address of, and the number of shares of each class or series held by, each shareholder, unless such a record shall be kept at the office of the Corporation's transfer agent or registrar, (v) maintain at the Corporation's principal office the originals or copies of the Corporation's Articles of Incorporation, Bylaws, minutes of all shareholders, meeting and records of all action taken by shareholders without meeting for the past three years, all written communications within the past three years to shareholders as a group or to the holders of any class or series of shares as a group, a list of the names and business addresses of the current directors and officers, a copy of the Corporation's most recent corporate report filed with the Secretary of State,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and financial statements showing in reasonable detail the Corporation' s assets and liabilities and results of operations for the last three years, (vi) have general charge of the stock transfer books of the Corporation, unless the Corporation has a transfer agent, (vii) authenticate records of the Corporation and (viii) in general, perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to supervision by the secretary. The directors and/or shareholders may however respectively designate a person other than the secretary or assistant secretary to keep the minutes of their respective meetings.

12. Treasurer. The treasurer shall be the chief financial officer of the Corporation, shall have care and custody of all corporate funds, securities, evidences of indebtedness and other personal property of the Corporation and shall deposit the same in accordance with the instructions of the board of directors. The treasurer shall receive and give receipts and acquittances for money paid by or on account of the Corporation, and shall pay out of the Corporation's funds on hand all bills, payrolls and other just debts of the Corporation of whatever nature upon maturity. Such power given to the treasurer to deposit and disburse funds shall not, however, preclude any other officer or employee of the Corporation from also depositing and disbursing funds when authorized to do so by the board of directors. The treasurer shall, if required by the board of directors, give the Corporation a bond in such amount and with such surety or sureties as may be ordered by the board of directors for the faithful performance of duties of his office. The treasurer shall have such other powers and perform such other duties as may be from time to time prescribed by the board of directors or the president. The assistant treasurers, if any, shall have the same powers and duties, subject to the supervision of the treasurer.

The treasurer shall also be the principal accounting officer of the Corporation and shall prescribe and maintain the methods and systems of accounting to be followed, keep complete books and records of account as required by the Colorado Business Corporation Act, prepare and file all local, state and federal tax returns, prescribe and maintain an adequate system of internal audit and prepare and furnish the president and the board of directors statements of account showing the financial position of the Corporation and the results of its operations.

13. Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries and the Assistant Treasurers respectively (in the order designated by the Board of Directors or, lacking such designation, by the President), in the absence of the Secretary or Treasurer, as the case may be, shall perform the duties and exercise the powers of such Secretary or Treasurer and shall perform such other duties as the Board of Directors shall prescribe.

14. Delegation of Duties. Whenever an officer is absent, or whenever, for any reason, the board of directors may deem it desirable, the board may delegate the powers and duties of an officer to any other officer or officers or to any director or directors.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 15. Bond of Officers. The board of directors may require any officer to give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for such terms and conditions as the board of directors may specify, including, without limitation, for the faithful performance of his duties and for the restoration to the Corporation of all property in his or her possession or under his or her control belonging to the Corporation.

ARTICLE VII Share Certificates and the Transfer of Shares

1. Share Certificates. Each share certificate shall state on its face (i) the name of the Corporation and that it is incorporated under the laws of the State of Colorado, (ii) the name of the person to whom the certificate is issued, and (iii) the number and class of shares and the designation of the series, if any, the certificate represents. Each share certificate shall be signed, either manually or in facsimile, by the chairman or vice chairman of the board of directors or by the president or the vice president and by the treasurer or an assistant treasurer or by the secretary or an assistant secretary, or such other officers as the board of directors may designate, by resolution, and may bear the corporate seal or its facsimile, and such other information as may be deemed necessary or appropriate. If the person who signed a share certificate either manually or in facsimile, no longer holds office when the certificate is issued, the certificate is nevertheless valid. If the Corporation is authorized to issue different classes of shares or different series within a class, the certificate shall state conspicuously on its front or back that the Corporation will furnish the shareholder information regarding the designations, preferences, limitations and relative rights of each class and for each series, upon written request and without charge.

2. Shares Without Certificates. The board of directors may authorize the issuance by the Corporation of some or all of the shares of any or all of its classes or series without certificates. Said authorization shall not affect shares already represented by certificates until they are surrendered to the Corporation. Within a reasonable time after the issuance or transfer of shares without certificates, the Corporation shall send to the shareholder a written statement of the information required by Section 1 of this Article VII.

3. Issuance of Shares. Except as provided in the Articles of Incorporation, the board of directors may authorize the issuance of shares for consideration consisting of any tangible, intangible property or benefit to the Corporation, including cash, promissory notes, services performed and other securities of the Corporation. The board of directors shall determine that the consideration received or to be received for the shares to be issued is adequate. Such determination, in the absence of fraud, is conclusive insofar as the adequacy of such consideration relates to whether the shares are validly issued, fully paid and nonassessable. The promissory note of a subscriber or an affiliate of a subscriber for shares shall not constitute consideration for the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shares unless the note is negotiable and is secured by collateral other than the shares, having a fair market value at least equal to the principal amount of the note. For the purposes of this Section 3, "promissory note" means a negotiable instrument on which there is an obligation to pay independent of collateral and does not include a nonrecourse not. Unless otherwise expressly provided in the Articles of Incorporation, shares having a par value may be issued for less than the par value.

4. Lost Certificates. The board of directors may direct a new certificate to be issued in place of a certificate alleged to have been destroyed or lost if the owner makes an affidavit or affirmation of that fact and produces such evidence of loss or destruction as the board may require. The board, in its discretion, may as a condition precedent to the issuance of a new certificate require the owner to give the Corporation a bond as indemnity against any claim that may be made against the Corporation relating to the certificate allegedly destroyed or lost.

5. Transfer of Shares.

(a) Shares of the Corporation shall only be transferred on the stock transfer books of the Corporation by the holder of record thereof upon the surrender to the Corporation of the share certificates duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer and such documentary stamps as may be required by law. In that event, the surrendered certificates shall be cancelled, new certificates issued to the persons entitled to them, and the transaction recorded on the books of the Corporation. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes.

(b) The Articles of Incorporation, by these Bylaws, by an agreement among shareholders, or among shareholders and the Corporation, may impose restriction on the transfer or registration or transfer of shares of the Corporation. A restriction does not affect shares issued before the restriction became effective unless the holder of such shares acquired such shares with knowledge of the restriction, is a party to the agreement containing the restriction, or voted in favor of the restriction or otherwise consented to the restriction.

(c) A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by the Colorado Business Corporation Act and its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by Section 2 of this Article VII above. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction.

6. Registered Shareholders. The Corporation shall be entitled to treat the registered holder of any shares of the Corporation as the owner thereof for all purposes, and the Corporation shall not be bound to recognize

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document any equitable or other claim to, or interest in, such shares or rights deriving from such shares on the part of any person other than the registered holder, including without limitation any purchaser, assignee or transferee of such shares or rights deriving from such shares, unless and until such other person becomes the registered holder of such shares, whether or not the Corporation shall have either actual or constructive notice of the claimed interest of such other person.

7. Transfer Agent, Registrars and Paying Agents. The board may at its discretion appoint one or more transfer agents, registrars and agents for making payment upon any class of stock, bond, debenture or other security of the Corporation. Such agents and registrars may be located either within or outside Colorado. They shall have such rights and duties and shall be entitled to such compensation as may be agreed.

ARTICLE VIII Insurance

By action of the board of directors, notwithstanding any interest of the directors in the action, the Corporation may purchase and maintain insurance, in such scope and amounts as the board of directors deems appropriate, on behalf of any person who is or was a director, officer, employee, fiduciary or agent of the Corporation, or who, while a director, officer, employee, fiduciary or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any other foreign or domestic corporation or of any partnership, joint venture, trust, profit or nonprofit unincorporated association, limited liability company or other enterprise or employee benefit plan, against any liability asserted against, or incurred by, him or her in that capacity or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the Colorado Business Corporation Act. Any such insurance may be procured from any insurance company designated by the board of directors of the Corporation, whether such insurance company is formed under the laws of Colorado or is a company in which the Corporation has an equity interest or any other interest, through stock ownership or otherwise.

ARTICLE IX Miscellaneous

1. Seal. The Corporation's seal, if any, shall be circular in form and shall contain the name of the Corporation and the words, "Seal" and "Colorado."

2. Fiscal Year. The fiscal year of the Corporation shall be December 31 of each year. Said fiscal year may be changed from time to time by the board of directors in its discretion.

3. Amendments. The board of directors shall have power to make, amend

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and repeal these bylaws at any regular or special meeting of the board unless the shareholders expressly provide that the directors may not amend or repeal such bylaw. The shareholders also shall have the power to make, amend or repeal these bylaws at any annual meeting or at any special meeting called for that purpose.

4. Gender. Whenever required by the context, the singular shall include the plural, the plural the singular, and one gender shall include all genders.

5. Invalid Provision. The invalidity or unenforceability of any particular provision of these bylaws shall not affect the other provisions herein, and these Bylaws shall be construed in all respects as if such invalid or unenforceable provision was omitted.

6. Governing Law. These Bylaws shall be governed by and construed in accordance with the laws of the State of Colorado.

7. Definitions. Except as otherwise specifically provided in these Bylaws, all terms used in these Bylaws shall have the same definition as in the Colorado Business Corporation Act.

I, Richard F. Schaden, as Secretary of The Quizno's Corporation, hereby certify that the foregoing Bylaws were adopted by the board of directors of the Corporation effective August 25, 1994, and amended from time to time by such board through May 6, 1999.

/s/Richard F. Schaden ------Richard F. Schaden, Secretary

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SS: Form D-4 Submit in Duplicate Submit in duplicate Filing Fee: $25.00 document must be typewritten

Mail To: Colorado Secretary of State Corporations Office 1560 Broadway, Suite 200 Denver, Colorado 80202 (303) 894-2251

ARTICLES OF AMENDMENT of the ARTICLES OF INCORPORATION of THE QUIZNO'S CORPORATION

Pursuant to the provisions of the Colorado Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation:

FIRST: The name of the corporation is: The Quizno's Corporation.

SECOND: The following amendment to the Amended and Restated Articles of Incorporation was duly authorized by the Board of Directors without shareholder action at a meeting held on May 6, 1999 in accordance with the provisions of Section 7-106-102 of the Colorado Business Corporation Act.

THIRD: Article II of the Amended and Restated Articles of Incorporation of the Corporation is hereby amended by adding the following paragraph to Article II:

"Class D Subordinated Convertible Preferred Stock.

a. General. Ten thousand (10,000) shares of authorized preferred stock is hereby designed as the Class D Subordianted Convertible Preferred Stock (the "Class D Preferred Stock").

b. Conversion.

(i) Subject to the following paragraphs, each share of Class D Preferred Stock shall be convertible into twenty-five (25) shares of the Corporation's common stock, par value $.001 per share (the "Common

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Stock"), at any time after (i) the Corporation's earnings before income tax, depreciation and amortization for a fiscal year (excluding such earnings derived from extraordinary asset acquisitions after June 1, 1999, and nonrecurring or unusual transactions, as determined by the Corporation's Chief Executive Officer) equal or exceed $12,000,000, and (ii) the Corporation's Chief Executive Officer has approved such conversion (the "Conversion Vesting Date"), provided, however that in no case shall any such conversion be permitted to occur before March 31, 2001, or after the redemption date provided for in paragraph c below.

(ii) If at any time the Corporation reorganizes, consolidates, merges, exchanges shares, or sells, leases, exchanges or transfers all or substantially all of its assets, then as a part of such reorganization, consolidation, merger, share exchange or sale, lease, exchange or transfer, provision shall be made so that each holder of shares of Class D Preferred Stock will thereafter be entitled (but only after the occurrence of the Conversion Vesting Date) to receive upon conversion of his shares of Class D Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or successor corporation resulting from such reorganization, consolidation, merger, share exchange or sale, lease, exchange or transfer, which the holder would have received had he converted his shares of Class D Preferred Stock immediately prior to the effective time of such reorganization, consolidation, merger, share exchange or sale, lease, exchange or transfer. In the event of a distribution, including a stock dividend, in shares of Common Stock, or any reclassification, subdivision (stock split) or combination (reverse stock split) of Common Stock, the conversion rate set forth in clause (i) above shall be adjusted so that the holder of Class D Preferred Stock shall receive the kind and amount of shares of Common Stock, or other securities or property, upon conversion, which the holder would have received had he converted his shares of Class D Preferred Stock immediately prior to such distribution, reclassification, subdivision or combination.

c. Redemption. At the option of the Corporation, shares of Class D Preferred Stock may be redeemed, in whole or in part, on or after March 31, 2005, at a redemption price of $3.00 per share, so long as the holder of such shares of Class D Preferred Stock is given sixty (60) days notice of such redemption.

d. Dividends. The holder of record of each share of Class D Preferred Stock shall receive no dividends, whether in cash, stock or other property, except as provided in paragraph e below.

e. Liquidation or Dissolution. In the event of any voluntary or involuntary liquidation, or winding up of the affairs of the Corporation, the holders of the issued and outstanding Class D Preferred Stock shall be entitled to receive for each share of Class D Preferred Stock, before any distribution of the assets of the Corporation shall be made to the holders of shares of Common Stock, a dollar amount equal to $3.00. The payment of the liquidation distribution provided herein shall be subordinated to the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document payment of required liquidation distributions on all other classes or series of Preferred Stock of the Corporation then outstanding, and shall only be paid if the payment of the required liquidation distributions have been made to all holders of any other classes or series of Preferred Stock of the Corporation then outstanding. A reorganization, consolidation or merger of the Corporation, a share exchange, a sale, lease, exchange or transfer of all or substantially all of its assets as an entirety, or any purchase or redemption of stock of the Corporation of any class, shall not be regarded as a "liquidation, dissolution, or winding up of the affairs of the Corporation" within the meaning of this paragraph e.

f. Voting Rights. Except as otherwise expressly provided in the Colorado Business Corporation Act, holders of Class D Preferred Stock shall have no right to vote for the election of directors or for any other purpose."

IN WITNESS WHEREOF, The Quizno's Corporation has caused these Articles of Amendment to its Articles of Incorporation to be signed by its President and Chief Executive Officer, effective as of the date of filing with the Secretary of State of the State of Colorado.

THE QUIZNO'S CORPORATION

By ------

Its President and Chief Executive Officer

THIS AGREEMENT is made and entered into this 1st day of September, 1999, by and between Richard F. Schaden and Richard E. Schaden ("Shareholders"), as shareholders of The Quizno's Corporation (the "Corporation"), and as joint Trustees under the Voting Trust Agreement (the "Trustees").

W I T N E S S E T H:

WHEREAS, the Shareholders and the Trustees are parties to a Voting Trust Agreement dated July 14, 1994, as amended from time to time (the "Voting Trust"); and

WHEREAS, pursuant to the terms of the Voting Trust, the Shareholders deposited, with the Trustees, an aggregate of 1,552,800 shares of the Corporation's Common Stock; and

WHEREAS, pursuant to the terms of the Voting Trust, the Shareholders deposited an additional 9,200 shares of the Corporation's Common Stock and 146,000 shares of the Corporation's Class A Cumulative Convertible Preferred Stock with the Trustees on November 4, 1994; and

WHEREAS, the Shareholders on September 5, 1996 withdrew 8,666 shares of the Corporation's Common Stock from the Voting Trust to make a gift of such shares; and

WHEREAS, the Shareholders on January 20, 1998 withdrew 6,000 shares of the Corporation's Common Stock from the Voting Trust to make gifts of such shares; and

WHEREAS, the Trustees have consented to each such withdrawal.

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows:

1. Section 5 of the Voting Trust is hereby amended, to add the following sentence to such Section: "From time to time the Trustees may issue Restated Trust Certificates in the form included in this Section with such changes and modifications as may be necessary to reflect gifts, sales or other dispositions of the shares deposited hereunder, or consolidations or splitting up of outstanding stock certificates and to void all prior Trust Certificates issued pursuant to the terms hereof."

2. The number of shares of stock subject to the Voting Trust listed adjacent to the signatures of the Shareholders on page 5, as amended from time to time, of the Voting Trust is hereby deleted and the following substituted therefore:

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document NUMBER OF SHARES OF CORPORATION SHAREHOLDERS SUBJECT TO VOTING TRUST AGREEMENT ------Common Stock Class A Stock ------

Richard F. Schaden 773,667 73,000 Richard E. Schaden 773,667 73,000

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

------RICHARD F. SCHADEN, SHAREHOLDER AND TRUSTEE

------RICHARD E. SCHADEN, SHAREHOLDER AND TRUSTEE

AMENDED AND RESTATED STOCK OPTION PLAN FOR DIRECTORS AND ADVISORS

(As Amended Through November 4, 1999)

The purposes of The Quizno's Corporation's Amended and Restated Stock Option Plan for Directors and Advisors (the "Plan") are to (i) enable The Quizno's Corporation (the "Company") to attract and retain qualified directors and advisors who will serve and advise the Company regarding the establishment and satisfaction of long-term, strategic objectives, (ii) furnish an incentive to directors and advisors of the Company by making ownership in the Company available to them and (iii) amend and restate the Company's original Non-Employee Director Stock Option Plan, adopted by the Board on the November 30, 1993 and approved by the stockholders on December 20, 1993, under which no options were granted. 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:

"Advisors" shall mean any person or persons appointed or designated by resolution of the Board as an advisor to the Company or the Board.

"Board" shall mean the Board of Directors of the Company.

"Closing Price," see definition in "Fair Market Value."

"Committee" shall mean the Compensation Committee of the Board, or such other Committee of the Board as the Board shall designate from time to time, which other Committee shall consist of three or more directors appointed by the Board from time to time.

"Company" shall mean The Quizno's Corporation.

"Eligible Participant" shall mean any Advisor or member of the Board.

"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 Committee may adopt for general use from time to time.

"Optionee" shall mean an Eligible Participant to whom an Option is granted

"Plan" shall mean The Quizno's Corporation Stock Option Plan for Directors and Advisors.

"Shares" shall mean shares of the Company's common stock, par value $.001.

"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.

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 200,000, 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

3.1 Grant of Options. During the term of this Plan, all Advisors and directors shall automatically be granted an Option to purchase 4,000 Shares (pro-rated on a quarterly basis for service before an Advisor's or director's initial January 1 and 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,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document reclassification, distribution of a dividend payable in stock, or the like) on (i) the date of their initial appointment or designation by the Board as an Advisor or their initial election to the Board, as the case may be, and (ii) every January 1 subsequent to that appointment, designation or election; provided, however, that such Advisor or director continues to hold such position of Advisor or director on such January 1. An Advisor or director may waive their right to the automatic grant of an Option as provided herein by notifying the Company in writing at least ten (10) business days prior to the grant date.

3.2 Stock Option Agreement. Each Option shall be evidenced by a written instrument, in such form as the Committee 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

4.1 Exercise Price. The Option exercise price per Share shall be one hundred percent (100%) of the "Closing Price," as defined in Article I above, of a Share on the date the Option is granted.

4.2 Transfer--Restrictions. 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.

4.3 Vesting. All Options granted shall vest and be exercisable on the grant date.

4.4 Expiration. All Options shall expire ten (10) years from the grant date or, if an Optionee ceases to be a director or an Advisor of the Company for any reason, all Options held by such optionee shall terminate upon the earlier of (i) three years after the date on which he or she ceased to be a director or an Advisor, as the case may be, or (ii) ten (10) years from the date of grant.

4.5 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

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, at the sole discretion of the Committee, 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 a director or Advisor of the Company or obligate the Company to nominate any Optionee for election as a director or appointment or designation an as Advisor at any time.

ARTICLE VII

Fundamental Transactions

7.1 Merger, Consolidation or Change of Control. In connection with any merger, consolidation, change in control or similar reorganization, excluding an initial public offering ("Reorganization"), the Committee may in its discretion:

(a) Negotiate a binding agreement whereby any acquiring or successor corporation will assume each Option then outstanding or substitute an equivalent option meeting the requirements of Section 424(a) of the Code for each Option outstanding;

(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

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Shares covered by such Option. Any cash payment which the Company may be required to make pursuant to such Committee 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 Committee shall have no obligation to take any action with respect to any Option in connection with a Reorganization.

7.2 Initial Public Offering. Notwithstanding the registration with the Securities and Exchange Commission of any Shares pursuant to a plan for the initial public offering of the Company's common stock, the applicable vesting schedule shall continue to apply to all Options. Upon the registration of any of the Company's common stock, the optionee must comply with all applicable federal and state securities laws which apply to such Optionees and any stock received upon exercise of any options.

ARTICLE VIII

Plan Administration

8.1 Administration by Committee. The Plan shall be administered by the Committee. The Committee shall be empowered, subject to the provisions of the Plan and to any other directives issued by the Board, 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 Committee shall be final, conclusive and binding upon all parties, including the Company, the stockholders and the Eligible Participants.

8.2 Indemnification. Neither the Company, any subsidiary thereof, nor any director or officer thereof, nor the Committee nor any member of the Committee shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan in good faith. The Committee 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

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 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 therefore 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 Committee shall be conclusive. if a Stock Adjustment is made, the Committee 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

Miscellaneous

10.1 No Obligation or Entitlement. It is expressly understood that this Plan grants powers to the Committee 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.

10.2 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 on the Board without reference to, and outside of, this Plan.

10.3 Expenses. All expenses of the Plan, including the cost of maintaining records, shall be borne by the Company.

ARTICLE XII

This Plan shall become effective upon the (i) adoption by the Board and (ii) approval by the Company's stockholders at an Annual Meeting of Stockholders. This Plan shall continue in effect for ten years from the date of its initial approval by the Company's stockholders. 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.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document THIS WARRANT (AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT) AND THE COMMON SHARES INTO WHICH SUCH SECURITIES ARE CONVERTIBLE ARE SUBJECT TO AN INVESTMENT AGREEMENT DATED DECEMBER 31, 1996, AND A STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER 31, 1996, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND WILL BE FURNISHED TO THE HOLDER ON REQUEST TO THE SECRETARY OF THE CORPORATION. SUCH INVESTMENT AGREEMENT AND STOCKHOLDERS AGREEMENT PROVIDE, AMONG OTHER THINGS, FOR CERTAIN RESTRICTIONS ON VOTING, SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED BY THIS WARRANT AND THAT THE HOLDER HAS RIGHTS TO REQUIRE REPURCHASE BY THE CORPORATION UPON THE OCCURRENCE OF CERTAIN EVENTS. THE SECURITIES EVIDENCED BY THIS WET HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED AND QUALIFIED IN ACCORDANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

WARRANT TO PURCHASE SHARES OF COMMON STOCK OF THE QUIZNO'S CORPORATION

Issued Date: December 31, 1998

THIS CERTIFIES THAT, for value received, Retail & Restaurant Growth Capital, L.P., a Delaware limited partnership ("Holder"), is entitled, subject to the provisions and upon the terms and conditions hereinafter set forth, to subscribe for and purchase up to Three Hundred Seventy-Two Thousand Eight Hundred Forty Seven (372,847) shares (as adjusted pursuant to the provisions hereof), (the "Number") of the fully paid and nonassessable Common Stock, par value $.001, of THE QUIZNO'S CORPORATION, a Colorado corporation (the "Company" or the "Corporation"), for a price per share (the "Warrant Price") equal to $3.10 (as adjusted, pursuant to the provisions hereof).

As used herein, the term "Shares" shall mean the Company's presently authorized Common Stock, or any stock into or for which such Common Stock shall have been or may hereafter be converted or exchanged pursuant to the Amended and Restated Articles of Incorporation of the Company as from time to time amended as provided by law and in such Articles (hereinafter the "Charter"), the term "Note" shall mean that certain Amended and Restated Senior Subordinated Convertible Note due 2001 issued by the Corporation to Retail & Restaurant Growth Capital, L.P. on December 31, 1996, and the term "Grant Date" shall mean December 31, 1998. Capitalized terms used and not defined herein shall have the meanings set forth in a certain Investment Agreement dated as of December 31, 1996 by and between the Company and Retail & Restaurant Growth Capital, L.P. (the "Investment Agreement").

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1. Term.Subject to the provisions of this Warrant the purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time prior to 5:00 p.m. (Dallas time) on the earlier of (a) December 31, 2004, or (b) six years after prepayment in full of the Note.

2. Method of Exercise

2.1 Standard Method. The purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part and from time to time, by either, at the election of the Holder hereof, (a) the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A-1 duly executed) at the principal office of the Company and by the payment to the Company, by check or by wire transfer, of an amount equal to the then applicable Warrant Price per share multiplied by the number of Shares then being purchased or (b) if in connection with a registered public offering of the Company's securities (provided that such offering includes Shares and that the holder shall have elected to participate therein pursuant to the exercise of the registration rights referred to in Section 6 hereof), the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A-2 duly executed) at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company and any underwriter, in the case of an underwritten registered public offering, for payment to the Company either by certified or bank check or by wire transfer from the proceeds of the sale of Shares to be sold by the holder in such public offering of an amount equal to the then applicable Warrant Price per Share multiplied by the number of Shares then being purchased; however, notwithstanding the cash payment requirements set forth in this Section 2.1, the Holder shall be entitled to use the net issue exercise option as hereinafter provided in Section 2.2. The person or persons in whose names) any certificates) representing Shares shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the Shares represented thereby (and such Shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised and the then applicable Warrant Price paid. In the event of any exercise of the rights represented by this Warrant, certificates for the Shares of stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within ten days of receipt of such notice and payment of the then applicable Warrant Price and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised and containing the same terms and conditions of this Warrant shall also be issued to the holder hereof as soon as possible and in any event within such ten-day period.

2.2 Net Issue Exercise. In lieu of exercising this Warrant for cash, holder may elect to receive Shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of s,.lch election in which event the Company shall issue to Holder that number of Shares computed using the following formula:

X=Y(A-B) A Where

X = the number of Shares to be issued to Holder.

Y = the number of Shares purchasable under this Warrant (or such lesser amount as equals the number of Shares which could be purchased with the portion of this Warrant being cancelled).

A = the Current Market Price (as defined below) of one Share.

B = the Warrant Price (as adjusted to the date of such calculations).

3. Stock Fully Paid. Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant, and all shares into which such Shares are convertible will, upon issuance, be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. During the period within which the rights represented by the Warrant may be exercised, the Company will at all times have authorized and reserved for the purpose of issuance upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of Shares to provide for the exercise of the unexercised rights represented by this Warrant.

4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: The "Warrant Price" shall initially be $3.10 and shall be adjusted and readjusted from time to time as provided in this Warrant.

(a) Adjustments to Warrant Price.

(i) Stock Dividends. Subdivisions and Combinations. Non Pro-Rata Repurchases. In case at any time or from time to time the Corporation shall:

(A) take a record of the holders of its Other Stock (as defined below) for the purpose of entitling them to receive a dividend payable in, or other distribution of, Other Stock (other than Common Stock), or

(B) subdivide its outstanding shares of Other Stock into a larger number of shares of Other Stock, or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (C) combine its outstanding shares of Other Stock into a smaller number of shares of Other Stock, then the Warrant Price in effect immediately after the happening of any such event shall be proportionately decreased, in case of the happening of events described in subparagraphs A or B above, or proportionately increased, in case of the happening of events described in subparagraph C above. "Other Stock" shall mean the Common Stock and shall also include all other stock of the Corporation of any other class other than Convertible Stock. A reclassification of the Other Stock into shares of Other Stock and shares of any other class of stock shall be deemed a distribution by the Corporation to the holders of its Other Stock of such shares of such other class of stock within the meaning of this Subsection and, if the outstanding shares of Other Stock shall be changed into a larger or smaller number of shares of Other Stock as a part of such reclassification, shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Other Stock within the meaning of this Subsection a(i).

(ii) Repurchase of Other Stock. In case at any time or from time to time, the Corporation shall (except as hereinafter provided) repurchase any Other Stock (the "Repurchased Stock"), then upon the consummation of such repurchase the Warrant Price then in effect shall be decreased to an amount determined by multiplying the Warrant Price in effect immediately prior to such adjustment by a fraction, (x) the numerator of which is the Current Market Price (as defined below) per share of Common Stock as determined on the date on which such repurchase is made, and (y) the denominator of which is the Current Market Price per share of Common Stock on the date immediately prior to such repurchase (after giving effect to any stock splits, stock dividends or other stock repurchases between the date of such repurchase and the date on which such calculation is made); provided, however, that if the numerator of such fraction is greater than the denominator of such fraction, then no adjustment to the Warrant Price shall be made. No adjustment of the Warrant Price shall be made under this Subsection upon the repurchase of the Repurchased Stock if such repurchase, together with all repurchases during the previous twelve (12) calendar months, is a repurchase of less than the sum of (1) 5% of the issued and outstanding Other Stock determined as of the date of such repurchase, lua (2) repurchases of stock options and Other Stock underlying such stock options in a transaction or series of transactions during such twelve (12) month period not exceeding $50,000 in the aggregate.

(iii) Issuance of Additional Shares of Other Stock. "Additional Shares of Other Stock" shall mean all shares of Other Stock issued by the Corporation after the date of this Warrant other than (i) the shares of Common Stock issued to a holder of Convertible Stock upon conversion of such Convertible Stock, and (ii) Permitted Common Stock Issuances. In case at any time or from time to time, the Corporation shall (except as hereinafter provided) issue, whether in connection with the merger of a corporation into the Corporation or otherwise, any Additional Shares of Other Stock for a consideration per share less than the Warrant Price then in effect (as so adjusted from time to time for additional issuances, reductions and other adjustments to the number of shares of Common Stock outstanding, including without limitation stock splits, stock dividends,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document reverse stock splits, pro rata repurchases, and any other good faith transfer of securities or other transaction which results in an increase or decrease in the number of shares of Common Stock outstanding, (such amount per share, the "Minimum Issue Price") on the Computation Date (determined as set forth below), then the Warrant Price shall be adjusted to be that number determined by multiplying the Warrant Price in effect immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Other Stock then outstanding, plus the number of shares of Other Stock which the aggregate consideration for the total number of such Additional Shares of Other Stock so issued would purchase at the Minimum Issue Price per share of Common Stock and (y) the denominator of which shall be the number of shares of Other Stock then outstanding plus the number of such Additional Shares of Other Stock so issued. The provisions of this Subsection shall not apply to any issuance of Additional Shares of Other Stock for which an adjustment is provided under Subsection 4(a)(i). No adjustment of the Warrant Price shall be made under this Subsection upon the issuance of any Additional Shares of Other Stock which are issued pursuant to the exercise of any warrants, options or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any Convertible Securities, if any such adjustment shall previously have been made upon the issuance of such warrants, options or other rights or upon the issuance of such Convertible Securities (or upon the issuance of any warrant or other rights therefor) pursuant to Subsection (iv) or (v) of Subsection 4(a). "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities, including additional Performance Shares, which are convertible into or exchangeable for Additional Shares of Other Stock, either immediately or upon the arrival of a specified date or the happening of a specified event. For purposes of this Subsection, the "Computation Date" shall be the earlier of (x) the date on which the Corporation shall enter into a firm contract for the issuance of such Additional Shares of Other Stock, or (y) the date of actual issuance of such Additional Shares of Other Stock.

(iv) Issuance of Warrants. Options or Other Rights. In case at any time or from time to time, the Corporation shall take a record of the holders of its Other Stock for the purpose of entitling them to receive a distribution of, or shall otherwise issue, any warrants, options or other rights to subscribe for or purchase any Additional Shares of Other Stock or any Convertible Securities (other than Permitted Common Stock Issuances and Common Stock issuable upon conversion of Convertible Stock), and the consideration per share for which Additional Shares of Other Stock may at any time thereafter be issuable pursuant to such warrants, options or other rights or pursuant to the terms of such Convertible Securities shall be less than the Minimum Issue Price then in effect on the Computation Date (as determined below), then the Warrant Price shall be adjusted as provided in the second sentence of Subsection 4(a)(iii). Such adjustment shall be made on the basis that (i) the consideration per share for which such Additional Shares of Other Stock may be issued equals a fraction, (x) the denominator of which is the maximum number of Additional Shares of Other Stock issuable pursuant to all such warrants, options or other rights or necessary to effect the conversion or exchange of all such Convertible Securities, and (y) the numerator of which is the minimum consideration received and receivable by the Corporation for such Additional Shares of Other Stock pursuant to such warrants, options or other rights or pursuant to the terms of

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document such Convertible Securities, (ii) the maximum number of Additional Shares of Other Stock issuable pursuant to all such warrants, options or other rights or necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to have been issued as of the Computation Date (determined as set forth in the last sentence of this Subsection), and (iii) the aggregate consideration for such maximum number of Additional Shares of Other Stock shall be deemed to be the minimum consideration received and receivable by the Corporation for the issuance of such Additional Shares of Other Stock pursuant to such warrants, options or other rights or pursuant to the terms of such Convertible Securities.

For purposes of this Subsection, the "Computation Date" shall be the earliest of (a) the date on which the Corporation shall take a record of the holders of its Other Stock for the purpose of entitling them to receive any such warrants, options or other rights, (b) the date on which the Corporation shall enter into a firm contract for the issuance of such warrants, options or other rights, and (c) the date of actual issuance of such warrants, options or other rights.

(v) Issuance of Convertible Securities. In case at any time or from time to time, the Corporation shall take a record of holders of the Other Stock for the purpose of entitling them to receive a distribution of, or shall otherwise issue, any Convertible Securities (other than Permitted Common Stock Issuances, and Convertible Stock) and the consideration per share for which additional shares of other stock may at any time thereafter be issuable pursuant to the terms of such Convertible Securities shall be less than the Minimum Issue Price then in effect on the Computation Date (as determined below), then the Warrant Price shall be adjusted as provided in the second sentence of Subsection 4(a) (iii). Such adjustment shall be made on the basis that (i) the amount of consideration per share for which such Additional Shares of Other Stock may be issued equals a fraction (x) the denominator of which is the maximum number of Additional Shares of Other Stock necessary to effect the conversion or exchange of all such Convertible Securities, and (y) the numerator of which shall be the minimum consideration received and receivable by the Corporation for the issuance of such Additional Shares of Other Stock pursuant to the terms of such Convertible Securities, (ii) the maximum number of Additional Shares of Other Stock necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to have been issued as of the Computation Date (determined as set forth in the penultimate sentence of this Subsection), and (iii) the aggregate consideration for such maximum number of Additional Shares of Other Stock shall be deemed to be the minimum consideration received and receivable by the Corporation for issuance of such Additional Shares of Other Stock pursuant to the terms of such Convertible Securities.

For purposes of this Subsection, the "Computation Date" shall be the earliest of (a) the date on which the Corporation shall take a record of the holders of its Other Stock for the purpose of entitling them to receive any such Convertible Securities, (b) the date on which the Corporation shall enter into a firm contract for the issuance of such Convertible Securities, and (c) the date of actual issuance of such Convertible Securities. No adjustment of the Warrant Price shall be made under this Subsection upon the issuance of any Convertible

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Securities which are issued pursuant to the exercise of any warrants, options or other subscription or purchase rights therefor, if any such adjustment shall previously have been made upon the issuance of such warrants, options or other rights pursuant to Subsection 4(a)(iv).

(vi) Superseding Adjustment of Warrant Price. If at any time after any adjustment of the Warrant Price shall have been made pursuant to the foregoing Subsections 4(a)(iv) or 4(a)(v) on the basis of the issuance of warrants, options or other rights or the issuance of other Convertible Securities or after any new adjustment of the Warrant Price shall have been made pursuant to this Subsection 4(a)(vi),

(A) such warrants, options or other rights or the right of conversion or exchange in such other Convertible Securities shall expire, and a portion of such warrants, options or rights, or the right of conversion or exchange in respect of a portion of such other Convertible Securities, as the case may be, shall not have been exercised, or

(B) the consideration per share for which Additional Shares of Other Stock are issuable pursuant to such warrants, options, or rights or the terms of such other Convertible Securities, shall be increased solely by virtue of provisions therein contained for an automatic increase in such consideration per share upon the arrival of a specified date or the happening of a specified event, such previous adjustment shall be rescinded and annulled and the Additional Shares of Other Stock which were deemed to have been issued by virtue of the computation made in connection with the adjustment so rescinded and annulled shall no longer be deemed to have been issued by virtue of such computation. Thereupon, a recomputation shall be made of the effect of such warrants, options or other rights, or other Convertible Securities on the basis of:

(1) treating the number of Additional Shares of Other Stock, if any, theretofore actually issued or issuable pursuant to the previous exercise of such warrants, options or other rights or such right of conversion or exchange, as having been issued on the date or dates of such issuance as determined for purposes of such previous adjustment and for the consideration actually received therefor, and

(2) treating any such warrants, options or other rights or any such other Convertible Securities which then remain outstanding as having been granted or issued immediately after the time of such increase of the consideration per share for such Additional Shares of Other Stock issuable under such warrants, options or other rights or other Convertible Securities, and, if and to the extent called for by the foregoing provisions of this Subsection 4(a) on the basis aforesaid, a new adjustment of the Warrant Price shall be made, and such new adjustment shall supersede the previous adjustment so rescinded and annulled. If any such superseding adjustment of the Warrant Price is made after the exercise of this Warrant by a former Holder of this Warrant, in lieu of such adjustment, if, and only if, such former Holder owns shares of Common Stock of the Corporation obtained upon exercise of this

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Warrant, the Corporation shall have the option to purchase the number of shares of Common Stock from such former Holder equal to the difference between (x) the number of shares of Common Stock which such former Holder received upon exercise prior to the adjustment, and (y) the number of shares of Common Stock which such former Holder would have received on exercise had such adjustment been made prior to exercise. The purchase price per share of such stock shall be $0.01 per share.

(vii) Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the making of adjustments of the Warrant Price hereinbefore provided for in this Subsection 4(a):

(A) Treasury Stock. The sale or other disposition of any issued shares of Other Stock owned or held by or for the account of the Corporation shall be deemed an issuance thereof for purposes of this Subsection 4(a).

(B) Computation of Consideration. To the extent that any Additional Shares of Other Stock or any Convertible Securities or any warrants, options or other rights to subscribe for or purchase any Additional Shares of Other Stock or any Convertible Securities shall be issued solely for cash consideration, the consideration received by the Corporation therefor shall be deemed to be the amount of cash received by the Corporation therefor, or, if such Additional Shares of Other Stock or Convertible Securities are offered by the Corporation for subscription, the subscription price, or, if such Additional Shares of Other Stock or Convertible Securities are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price, in any such case excluding any amounts paid or receivable for accrued interest or accrued dividends, and after deductions for any compensation, underwriting discounts, placement fees or funding or financing commitment fees (but before deduction for any other expenses) paid or incurred by the Corporation for and in the underwriting of, or otherwise in connection with, the issue thereof. To the extent that such issuance shall be for a consideration other than solely for cash, then, except as herein otherwise expressly provided, the amount of such consideration shall be deemed to be the fair value of such consideration at the time of such issuance as determined in good faith by the Corporation's Board of Directors. The consideration for any Additional Shares of Other Stock issuable pursuant to any warrants, options or other rights to subscribe for or purchase the same shall be the consideration received or receivable by the Corporation for issuing such warrant, options or other rights, plus the additional consideration payable to the Corporation upon the exercise of such warrants, options or other rights. The consideration for any Additional Shares of Other Stock issuable pursuant to the terms of any Convertible Securities shall be the consideration received or receivable by the Corporation for issuing any warrants, options or other rights to subscribe for or purchase such Convertible Securities, plus the consideration paid or payable to the Corporation in respect of the subscription for or purchase of such Convertible Securities, plus the additional consideration, if any, payable to the Corporation upon the exercise of the right of conversion or exchange in such Convertible Securities.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document preceding Subsections of this Subsection 4(a) shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that no adjustment of the Warrant Price that would otherwise be required shall be made (except in the case of a subdivision or combination of shares of the Other Stock, as provided for in Subsection 4(a)(i)) unless and until such adjustment, either by itself or with other adjustments not previously made, adds or subtracts at least 1 % to the Warrant Price, as determined in good faith by the Board of Directors of the Corporation. Any adjustment representing a change of less than such minimum amount shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Subsection 4(a) and not previously made, would result in a minimum adjustment. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence, All calculations made under this Subsection shall be made to the nearest cent. Notwithstanding any other provision of this Warrant, and except for a combination of shares or other adjustment pursuant to Section 4(a)(i), no adjustment to the Warrant Price shall be made which causes the Warrant Price to be increased; and once the Warrant Price is adjusted downward, it shall not be readjusted upward except as provided in Section 4(a)(vi).

(D) Fractional Interests. In computing adjustments under this Subsection 4(a), fractional interests in Other Stock shall be taken into account to the nearest one thousandth of a share.

(E) When Adjustment not Required. If the Corporation shall take a record of the Holders of its Other Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution thereof to shareholders, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then (i) thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled, or (ii) in the event that any such adjustment previously made in respect of such taking of record cannot be rescinded or annulled as a result of the conversion of this Warrant after the taking of such record occurs, in lieu of such recision or annulment of the adjustment, if the Warrant was exercised by a former Holder of this Warrant, and if such former Holder owns shares of Common Stock of the Corporation obtained upon exercise of this Warrant, the Corporation shall have the option to purchase the number of shares of Common Stock from such former Holder equal to the difference between (x) the number of shares of Common Stock which such former Holder had received upon conversion after such record date, and (y) the number of shares of Common Stock which such former Holder would have received on conversion had such adjustment been annulled or rescinded prior to conversion. The purchase price per share of such Common Stock shall be $.01 per share.

(viii) Merger. Consolidation or Disposition of Assets. In case the Corporation shall merge or consolidate into another corporation, and such transaction does not constitute an Event of Default (or the Payee waives its right to accelerated payment under the Investment Agreement) or shall sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and pursuant to the terms of such

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document merger, consolidation or disposition, shares of common stock of the successor or acquiring corporation (or any parent thereof) are to be received by or distributed to the holders of Other Stock of the Corporation, then the Holder of this Warrant shall have the right thereafter to receive, upon conversion of this Warrant, shares of common stock equal to the number of shares of common stock of the successor or acquiring corporation receivable upon or as a result of such merger, consolidation or disposition of assets had the Holder of this Warrant converted it into Common Stock of the Corporation immediately prior to such event. If, pursuant to the terms of such merger, consolidation or disposition of assets, any cash, shares of stock or other securities or property of any nature whatsoever (including warrants, options or other subscription or purchase rights) are to be received by or distributed to the holders of Other Stock of the Corporation (whether in addition to common stock of the successor or acquiring corporation, or any parent thereof, or otherwise) the Warrant Price in effect shall be adjusted to that number determined by multiplying the Warrant Price then in effect by a fraction (x) the numerator of which shall be the Current Market Price per share of Common Stock immediately prior to the closing of such merger, consolidation or disposition minus the portion applicable to one share of Common Stock of any such cash so distributable and of the fair value of any such shares of stock or other securities or property so received or distributed, and (y) the denominator of which shall be the Current Market Price per share of Common Stock immediately prior to the closing of such merger, consolidation or disposition. The fair value of any such shares of stock or other securities or property shall be determined pursuant to the Valuation Procedure. In case of any such merger, consolidation or disposition of assets, the successor or acquiring corporation shall expressly assume the due and punctual observance and performance of each and every covenant and condition hereof to be performed and observed by the Corporation and all of the obligations and liabilities hereunder, subject to such modification as shall be necessary to provide for adjustments to the Warrant Price which shall be as nearly equivalent as practicable to the adjustments provided for in this Subsection 4(a). For the purposes of this Subsection 4(a)(viii), "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class, which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption, and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event, and any warrants, options or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Subsection shall similarly apply to the successive mergers, consolidations or dispositions of assets.

(ix) Sale of Stock under Section 11.1 (b) of Investment Agreement. If the Principal Stockholders invest in the Common Stock of the Corporation under Section 11.1(b)(ii) of the Investment Agreement, then the Warrant Price shall be adjusted as follows: the new Warrant Price shall be equal to a fraction the numerator of which is the Conversion Principal paid on the Note and the denominator of which is the number of shares into which the Warrant is exercisable immediately prior to the adjustment plus a number equal to ten percent (10%) of the number of shares of Common Stock purchased by the Principal

(b) Adjustment to Number. At the time the Warrant Price is adjusted, the Number shall also be adjusted by multiplying the Number immediately prior to the adjustment by a fraction the numerator of which is the Warrant Price immediately prior to the adjustment and the denominator of which is the adjusted Warrant Price.

(c) No Impairment. The Corporation will not through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holder of this Warrant against impairment. Without limiting the generality of the foregoing, the Corporation (i) will not permit the par value of any shares of stock at the time receivable upon the exercise of this Warrant to exceed the Warrant Price then in effect, (ii) will take all such action as may be necessary or appropriate in order that the Corporation may validly and legally issue fully paid nonassessable shares of stock on the exercise of this Warrant, and (iii) will not take any action which results in any adjustment of the Warrant Price if the total number of shares of Common Stock issuable after the action upon the exercise of this Warrant and all other warrants, options and other right to acquire Common Stock will exceed the total number of shares of Common Stock then authorized by the Charter and available for the purpose of issue upon such exercise.

(d) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Warrant Price and the Number pursuant to this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or to be received by the Corporation for any Additional Shares of Other Stock issued or sold or deemed to have been issued, (ii) the number of shares of Other Stock then outstanding or deemed to be outstanding, and (iii) the Warrant Price and the Number in effect immediately prior to such issue or sale and as adjusted and readjusted on account thereof, showing how each was calculated. The Corporation shall, as promptly as practicable following its receipt of the written request, but in any event within five Business Days after receipt of such written request, of the Holder furnish or cause to be furnished to the Holder a like certificate setting forth (i) the Warrant Price and Number at the time in effect, showing how each was calculated, and (ii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of this Warrant.

(e) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document than a cash dividend which is the same as cash dividends paid in previous quarters) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to the Holder at least thirty days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such divide-.(I or distribution.

(f) Common Stock Reserved. The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock such number of shares of Common Stock as shall from time to time be sufficient to effect conversion of this Warrant.

(g) Closing of Books. The Corporation will not close its books against the permitted transfer of this Warrant or its exercise.

(h) Registration: Transfer Taxes. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of this Warrant. Upon the surrender of this Warrant at such place, the Corporation shall, at the request of the Holder execute and deliver a new certificate or certificates in exchange therefor representing in the aggregate the amount of this Warrant represented by the surrendered Warrant (and the Corporation forthwith shall cancel such surrendered Warrant), subject to the requirements of applicable securities laws. Each such new Warrant shall be registered in such name and shall represent such amount as shall be requested by the Holder and shall be substantially identical in form to this Warrant. The issuance of new Warrants shall be made without charge to the Holder for any issuance tax in respect of any transfer involved in the issuance and delivery of any Warrant in a name of (i) the Holder, or (ii) any affiliate of the Holder. ,

(i) Definitions. The following terms shall have the following meanings, which meanings shall be equally applicable to the singular and plural forms of such terms:

"Business Day" means any day which is not a Saturday or a Sunday or a public holiday or a day on which banks are required or permitted to close under the laws of the State of California.

"Common Stock" means the Common Stock of the Corporation, par value $0.001.

"Convertible Stock" means the Corporation's Class A Cumulative Convertible Preferred Stock, par value $0.001 per share, outstanding on the date of this Note.

"Current Market Price" per share of Common Stock at the date herein specified, shall be deemed to be the average of the Closing Prices for ten consecutive Business Days immediately prior to the day in question or, if no Closing Price is reported, the average of the closing bid and asked prices. "Closing Prices" for each such Business Day shall be the last sale price reported on the National

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Association of Securities Dealers Automated Quotations System ("NASDAQ") on the preceding Business Day or, if the Common Stock is an issue for which last sale prices are not reported on NASDAQ, the closing bid quotation on such day (the closing bid quotation for a given day shall be the highest bid quotation as quoted in any of The Wall Street Journal, the national Quotation Bureau pink sheets, quotation sheets of registered marketmakers and, if necessary, dealer's telephone quotations), but, in each of the preceding two cases, if the relevant

NASDAQ price or quotation did not exist on such day, then the price or quotation on the next preceding Business Day in which there was such a price or quotation.

"Other Stock" shall have the meaning assigned to it in Section 4(a)(i).

"Permitted Common Stock Issuances" means (i) shares of Common Stock or options issuable under the Corporation's existing stock option plans and 401 (k) plans, so long as such shares issued and outstanding under these plans do not exceed fifteen percent (15%) issued and outstanding of the capital stock of the Corporation on a fully diluted basis; (ii) shares of Common Stock issuable upon conversion of this Note, (iii) warrants issuable upon prepayment of the Note and Common Stock issuable upon exercise thereof; (iv) shares of Common Stock issuable upon conversion of the Convertible Stock, and (v) shares of Common Stock issuable upon exercise of warrants of the Corporation outstanding on December 31, 1996.

"Principal Stockholders" shall mean each of the Corporation's Stockholders owning five percent (5%) or more of the Corporation's issued and outstanding capital stock on a fully diluted basis.

"Qualified Public Offering" means a secondary public offering of the Corporation's stock which results in net proceeds to the Corporation of at least $15,000,00

"Warrants" means the warrants issued upon payment of the Note.

5. Fractional Shares. No fractional Shares will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Warrant Price then in effect.

6. Other Agreements. This Warrant and the Shares, when issued, are subject to the terms and conditions of an Investment Agreement and a Stockholders Agreement and a Registration Rights Agreement, each dated as of December 31, 1996, among the Company and the "Holders" identified therein, and the holder of this Warrant and the Shares into which it is exercisable is entitled to the benefits and is subject to the obligations set forth therein which may limit the right of the holder to transfer this Warrant and such Shares, entitle the holder to receive certain information from the Company, entitle the holder to certain registration rights and other rights concerning the sale of the Warrant or Shares in certain transactions and contain certain other rights and restrictions.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 7. Representations and Warranties. This Warrant is issued and delivered on the basis of the following representations and warranties of the Company:

7.1 Authorization and Delivery. This Warrant has been duly authorized and executed by the Company and when delivered will be the valid and binding obligation of the Company enforceable in accordance with its terms;

7.2 Warrant Shares. The Warrant Shares have been duly authorized and reserved for issuance by the Company and, when issued and paid for in accordance with the terms hereof, will be validly issued, fully paid and nonassessable;

7.3 Rights and Privileges. The rights, preferences, privileges and restrictions granted to or imposed upon the Shares and the holders thereof are as set forth herein and in the Company's Charter are true and complete copies of which have been delivered to the original warrant holder; and

7.4 No Inconsistency. The execution and delivery of this Warrant are not, and the issuance of the Warrant upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company's Charter or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person.

8. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought.

9. Notice of Expiration. The Company shall give notice of expiration of this Warrant to Holder sixty (60) days prior to the end of the term.

10. Notices. Any notice which is required or permitted to be given pursuant hereto shall be given in the manner provided in the Investment Agreement.

11. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger or consolidation, and all of the obligations of the Company relating to the Shares issuable upon the exercise of this Warrant shall be as set forth in the Company's Charter and the Company's by-laws (each as amended from time to time) and shall survive the exercise and termination of this Warrant and all of the covenants and agreements herein and in such other documents and instruments of the Company shall inure to the benefit of the successors and assigns of the holder hereof. The Company will, at the time of the exercise of this Warrant, in whole or in part, upon request of the holder hereof but at the Company's expense, acknowledge in writing its continuing obligation to the holder hereof in respect of any rights (including, without limitation, any right to registration of the Shares issuable upon exercise of this Warrant) to which the holder hereof shall continue to been titled after such exercise in accordance with this Warrant; provided, that the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document failure of the holder hereof to make any such request shall not affect the continuing obligation of the Company to the holder hereof in respect of such rights.

12. Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant.

13. Governing Law. This warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the state of Texas

IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed and delivered this Warrant as of this day and year set forth at the beginning of this Warrant.

THE QUIZNO'S CORPORATION, a Colorado Corporation

By: ------

Its: Vice President/General Counsel

EXHIBIT A-1 Notice of Exercise

To: The Quizno's Corporation

1. The undersigned hereby elects to purchase - shares of Common Stock of THE QUIZNO'S CORPORATION pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.

2. Please issue a certificate or certificates representing said shares in the name of the undersigned or, subject to compliance with the restrictions on transfer set forth in Section 7 of the Warrant, in such other name or names as are specified below:

______(Name)

______(Address)

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3. The undersigned represents that the aforesaid shares being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.

Signature

______(Name of Signatory)

By:______

Its:______

Date:______

EXHIBIT A-2 Notice of Exercise

To: The Quizno's Corporation

1. Contingent upon and effective immediately prior to the closing (the "Closing") of the Company's public offering contemplated by the Registration Statement on Form S_, filed ______, _____, the undersigned hereby elects to purchase ______shares of Common Stock of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the attached Warrant.

2. Please deliver to the custodian for the selling shareholders a stock certificate representing such shares.

3.The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $______or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing.

Signature

______(Name of Signatory)

Its:______

Date:______

PURCHASE AGREEMENT

THIS AGREEMENT, made this 22ND day of SEPTEMBER 19, 1999 by and between:

SELLER PURCHASER

SACRAMENTO AVIATION MANAGEMENT C0. THE QUIZNO'S CORPORATION 5957 FREEPORT BLVD. 1415 LARIMER SACRAMENTO, CA 95822 DENVER, CO 80202

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows:

1. The PURCHASER agrees to purchase and the SELLER agrees to sell the following aircraft:

Aircraft Make 1997 CESSNA Engine Make WILLIAMS - ROLLS ROYCE

Aircraft Model CITATION 525 Engine Model FJ44-1A

Aircraft Serial # 525-0212 Engine Serial # L- 1433

Aircraft Reg # N67VW Engine Serial # R - 1434 hereinafter, "the Aircraft."

The Aircraft is equipped with standard and/or optional accessories and equipment as specified by Seller's specification sheet, which is attached hereto and incorporated herein by referenced as Exhibit A.

2. PURCHASER agrees to pay to SELLER a total price of: $ 3,350,000.00 due and payable in U.S. Funds upon delivery of said Aircraft to PURCHASER. SELLER acknowledges receipt of deposit from PURCHASER in the amount of $50,000.00, to be applied as credit toward the aforementioned purchase price, requiring a balance due from PURCHASER at closing of $3,300,000.00.

3. SELLER will deliver the aircraft to the PURCHASER by 10/13/99 at such place as may be mutually agreed upon by the Parties.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 4. Seller warrants that it is either the owner of the Aircraft or that it is a duly authorized agent of the Aircraft owner, with authority to execute and deliver this Agreement and carry out the SELLER's obligations herein. At the time of delivery of the Aircraft and full payment of the total price by PURCHASER, SELLER will deliver to PURCHASER an FAA Bill of Sale, FAA Form AC 8050-2, duly executed by SELLER, conveying title to said Aircraft to PURCHASER free and clear of all liens, charges or encumbrances. PURCHASER shall execute and deliver to SELLER, at the time of delivery of the aircraft, a delivery receipt in the form attached hereto as Exhibit B. In addition, SELLER will transfer to the PURCHASER all available logbooks, manuals and other records as pertaining to the application and maintenance of the Aircraft. At the time of delivery, SELLER represents and warrants that all applicable payments relating to the "ProParts" program shall be paid up to date and further, that all due or overdue Cescom inspections and related repairs shall be completed by SELLER. SELLER further agrees to replace the door seal of the Aircraft's emergency door at SELLER's expense prior to delivery. SELLER is aware of no damage history of the Aircraft which would, by law, require the fling of FAA Form 337.

5. PURCHASER hereby agrees to pay any and all taxes, duties or fees assessed or levied by any Federal, State or local taxing authority as a result of this sale, delivery, registration or ownership of the Aircraft by PURCHASER.

6. THE AIRCRAFT IS BEING SOLD ON AN "AS IS" BASIS. THERE ARE NO WARRANTIES, RELATING TO THE CONDITION OF THE AIRCRAFT, WHICH EXTEND BEYOND THE DESCRIPTION OF THE AIRCRAFT. EXCEPT FOR WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT AND/OR THE RELATED AIRCRAFT BILL OF SALE, SELLER DISCLAIMS ALL OTHER EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS OF ANY KIND OR NATURE WHATSOEVER INCLUDING MERCHANTABILITY AND FITNESS FOR USE. SHOULD ANY MANUFACTURERS' WARRANTIES STILL BE IN EFFECT WITH RESPECT TO THE AIRCRAFT AND ITS COMPONENTS, INCLUDING ENGINES (OTHER THAN WARRANTIES WHICH BY THEIR TERMS ARE UNASSIGNABLE), SELLER WILL REASONABLY ASSIST PURCHASER TO MAINTAIN CONTINUITY OF THE WARRANTIES FOR PURCHASER'S BENEFIT.

7. SELLER shall not be liable for any failure of or delay in delivery of the Aircraft for the period that such failure or delay is due to acts of God or the public enemy; civil war, governmental priorities or allocations; strikes or labor disputes; inability to obtain necessary materials, accessories, equipment or parts from the manufacturers thereof; or any other cause beyond the SELLER's reasonable control. SELLER agrees to notify PURCHASER promptly of the occurrence of any such cause and to carry out this Purchase Agreement as promptly as practical after such cause is terminated.

8. This Purchase Agreement shall not be modified or amended except by an instrument in writing signed by authorized representatives of the parties. All notices and requests hereunder shall be in writing and shall be sent to the addresses hereinabove set forth (or to such other address as may hereafter be designated in writing).

9. If after execution of this Agreement, either party shall default under this Agreement, then either party shall have all rights provided under this contract and pursuant to applicable law to seek recovery for damages. The

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document parties hereby reserve such rights and no part of this Agreement shall limit those rights, except as specifically provided for herein.

10. PURCHASER and SELLER warrant that the terms and coeditions of this Purchase Agreement were fully read and understood and that they constitute the entire Agreement between the parties.

11. If any one or more provisions of this Purchase Agreement shall be found to be illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

12. This Purchase Agreement shall be binding upon and inure to the benefit of the respective legal representatives and heirs of the individual parties, and the respective successors and assigns of the corporate parties, except as otherwise herein provided.

13. The Parties hereto, appoint as its escrow agent, Insured Aircraft Title Service, Oklahoma City, Oklahoma, and authorizes said agent to receive and hold all deposits of money. Escrow agent is further authorized to, but is not necessarily required to, receive and hold for filing on behalf of both Parties, all applicable bills of sale, security agreements, applications for registration, and related documents, until such time as the conditions, covenants and agreements, expressed and implied, necessary to properly effect the above-described aircraft transaction have been performed. Upon confirmation that the provisions herein have been fully performed and satisfied, by noticed from both Parties, escrow agent may, at the time of closing and delivery, file, said documents for recording with the Federal Aviation Administration, and further shall transfer all deposits to the SELLER. It is agreed that escrow fees will be split equally between Purchaser and Seller.

14. The parties hereto agree to cooperate with the other to ensure completion of any and all requisite documents and/or filings in order to effect the purpose of the transaction described herein.

15. Additional Provisions: NONE

16. Transaction to be completed by October 13, 1999.

IN AGREEMENT WHEREOF, the parties hereto have caused this Purchase Agreement to be executed by their authorized representatives.

WITNESS: THE QUIZNO'S CORPORATION ------PURCHASER

Nicole L. Johnson By: ------

Date:Vice President/General Counsel

WITNESS:

______By:______

Date: 9/27/99

SACRAMENTO AVIATION MANAGEMENT CO. EXHIBIT "A" TO

AIRCRAFT PURCHASE AGREEMENT

1997 CESSNA CITATION JET N67VW SERIAL NUMBER 525-0212

TOTAL TIME AIRFRAME 400 HOURS TOTAL TIME ENGINES L - 400 HOURS R - 400 HOURS EXTERIOR:

INTERIOR: CHAMPAGNE AND SADDLE INTERIOR, GLOSS LAMINATE CABINETRY, LH FORWARD DELUXE BIRCH REFRESHMENT CENTER, RH & LH EXECUTIVE TABLES, AFT BIRCH DIVIDER WITH MIRROR ON FORWARD SIDE, AFT REMOVABLE CURTAIN, AFT BAGGAGE COMPARTMENT, LH AFT BELTED FLUSHING POTTY

AVIONICS

COM DUAL BENDIX/KING NAV DUAL BENDIX/KING DME DUAL BENDIX/KING ADF BENDIX/KING TRANSPONDER BENDIX/KING RADAR 2000 VP RADAR ALTIMETER BENDIX/KING KRA-405 L.R.N. GNS-X/LS WITH GPS

AUTO PILOT/ FLIGHT DIRECTOR

SPZ 5000 TWO TUBE EFIS FLIGHT DIRECTOR

ADDITIONAL EQUIPMENT

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document WOODWARD ENGINE SYNCHRONIZE SHADIN AIR DATA COMPUTER 50 CUBIC FOOT OXYGEN SYSTEM 44 AMP BATTERY CHIMES INDIRECT LIGHTING COCKPIT ASSIST HANDLE NAVIGATION CHART CASE

AIRCRAFT SUBJECT TO PRIOR SALE OR REMOVAL FROM THE MARKET ALL SPECIFICATIONS SUBJECT TO VERIFICATION UPON INSPECTION

SACRAMENTO AVIATION MANAGEMENT CO.

EXHIBIT "B" TO

AIRCRAFT PURCHASE AGREEMENT

DELIVERY RECEIPT

Receipt is hereby acknowledged on behalf of THE QUIZNO' S CORPORATION of the delivery to it by SACRAMENTO AVIATION MANAGEMENT C0. at 1:00 o'clock this 13th day of October, 1999, at______, the following described Aircraft together with the parts and equipment associated herewith, pursuant to the Aircraft Purchase Agreement dated as of the 22ND day of SEPTEMBER, 1999 between SACRAMENTO AVIATION MANAGEMENT C0. and THE QUIZNO'S CORPORATION and verification that all conditions and provisions of said Purchase Agreement are complied with.

Aircraft Make 1997 CESSNA Engine Make WILLIAMS - ROLLS ROYCE

Aircraft Model CITATION 525 Engine Model FJ44-IA

Aircraft Serial # 525-0212 Engine Serial# L- 1433

Aircraft Reg # N67VW Engine Serial# R- 1434

By:______Date:10/13/99

Title: Chief Financial Officer

THIS AGREEMENT, made and entered into as of the 13th day of October, 1999, by and between Richard F. Schaden, P.C., with an address of 11870 Airport Way, Broomfield, Colorado 80021 ("Schaden") and The Quizno's Corporation, with an address of 1415 Larimer Street, Denver, Colorado 80202 ("Quizno's").

WITNESSETH:

WHEREAS, Schaden is the owner of one 1980 Cessna 560 Citation V aircraft, serial number 560-0066, bearing the United States Registration Number N60S ("First Aircraft"); and

WHEREAS, Quizno's is a registered owner of one 1997 Cessna 525CJ aircraft, serial number 525-012, bearing the United States Registration Number N67VW ("Second Aircraft");

WHEREAS, Schaden and Quizno's desire to lease said aircraft, with flight crews, each to the other, on an interchange basis as defined in Section 91.501(c)(2) of the Federal Aviation Regulations ("FARs");

NOW THEREFORE, Schaden and Quizno's, declaring their mutual intention to enter into and be bound by this Interchange Agreement, and for the good and valuable consideration set forth below, hereby covenant and agree as follows:

1. Subject to paragraph 3 hereof, Schaden agrees to lease the First Aircraft to Quizno's pursuant to the provisions of FAR 91.501(c)(2) and to provide a fully qualified flight crew for all operations of First Aircraft during the term of this Agreement in exchange for equal time on the Second Aircraft plus the charges described in paragraph 6 below. The term of this Agreement (the "Term") shall commence on the date of this Agreement and shall continue until termination as provided in paragraph 3 below.

2. Quizno's agrees to lease the Second Aircraft to Schaden pursuant to the provisions of FAR 91.501(c)(2) and to provide a fully qualified flight crew for all operations of Second Aircraft during the Term set forth in paragraph 1 above in exchange for equal time on the First Aircraft.

3. Either party may terminate this Agreement upon thirty (3) days written notice for any reason, or upon five (5) days prior written notice after an uncured default as described in paragraph 14 of this Agreement.

4. The owner of each aircraft shall pay all expenses related to the operation of that aircraft when incurred regardless of which party is using the aircraft when the weather, and related user fees, and any and all additional

5. The owner of each aircraft shall keep an account of the time the other party uses its aircraft. Such account may be inspected by the other party upon reasonable notice. Each accounting shall include the following items:

a. Fuel, oil, lubricants, and other additives; b. Travel expenses of the crew, including food, lodging, and ground transportation; c. Hangar and tie down costs at and away from the aircraft's base of operations; hangar base costs may include equipment specifically acquired for the servicing of each aircraft; d. Insurance obtained for the operation(s) and the cost of hull insurance attributable to such operation(s); e. Landing fees, airport taxes, and similar assessments; f. Customs, foreign permits, and similar fess directly related to the flight; g. In-flight food and beverages; h. Passenger ground transportation; i. Flight planning, charts, Loran, and weather contract services; j. Maintenance expenses including but not limited to labor (both by employees and outside contracts), parts maintenance and replacements, overhaul of engine (including any specific power-by-the-hour expenses), propellers, avionics, and airframe; k. Maintenance reserve fund payments; l. Flight crew, maintenance, and administrative/clerical salaries and associated benefits; m. Contract training costs; n. Depreciation charges.

6. Quizno's shall pay to Schaden a $150.00 per flight hour operational costs differential attributable to the higher engine and fuel consumption costs respecting the First Aircraft in comparison to such costs for the Second Aircraft. Schaden shall provide an invoice to Quizno's from time to time identifying the foregoing cost differentials with reasonable detail. Quizno's shall pay the invoice amount to Schaden within thirty (30) days of the invoice date.

7. Each party will provide the other with requests for flight time and proposed flight schedules as far in advance of any given flight as possible. Requests for flight time shall be in a form, whether oral or written, mutually convenient to, and agreed upon by the parties. In addition to proposed schedules and flight times, each party shall provide at least the following information for each proposed flight at some time prior to scheduled departure as required by the operator or operator's flight crew:

a. proposed departure point; b. destination;

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document c. date and time of flight; d. the number of anticipated passengers; e. the nature and extent of any non-customary luggage and/or cargo to be carried; f. the date and time of a return flight, if any; g. any other information concerning the proposed flight that may be pertinent or required by operator or operator's flight crew;

8. Schaden shall have final authority over the scheduling of the First Aircraft and Quizno's shall have final authority over the scheduling of the Second Aircraft; profided, however, that each will u se its best efforts to accommodate the needs of the other and to avoid conflicts in scheduling.

9. For the purposes of this Agreement, the owner of each aircraft shall be solely responsible for securing maintenance, preventive maintenance, and required or otherwise necessary inspections on that aircraft, and shall take such requirements into account in scheduling the aircraft. No period of maintenance, preventive maintenance, or inspection shall be delayed or postponed for the purpose of scheduling the aircraft, unless said maintenance or inspection can be safely conducted at a later time in compliance with all applicable laws and regulations, and within the sound discretion of the pilot in command. The Pilot in Command shall have final and complete authority to cancel any flight for any reason or condition which in his judgment would compromise the safety of the flight.

10. The owner of each aircraft shall provide a qualified flight crew for each flight undertaken on that aircraft under this Agreement. The foregoing notwithstanding, the lessee operator may conduct operations in the other's aircraft with its own crew, provided such lessee owner remains in compliance with all applicable aircraft insurance requirements, Federal Aviation Regulations, and applicable law.

11. In accordance with applicable Federal Aviation Regulations, each qualified flight crew provided under this Agreement will exercise all of its duties and specifically agrees that the flight crew, in its sole discretion, may terminate any flight, refuse to commence any flight, or take other action which in the considered judgment of the Pilot in Command is necessitated by considerations of safety. No such action of the Pilot in Commend shall create or support any liability for loss, injury, damage, or delay to either party or any other person. The parties further agree that neither party shall be liable for delay or failure to furnish or return either aircraft or crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, or acts of God.

12. Each party warrants that:

a. It will use the other party's aircraft for and on account of its own business only, and will not use said aircraft for the purposes of providing transportation of passengers or

b. It shall refrain from incurring any mechanic's or other lien in connection with inspection, preventative maintenance, maintenance or storage of the aircraft, whether permissible or impermissible under this Agreement, nor shall there be any attempt by any party hereto convey, mortgage, assign, lease or any way alienate the other party's aircraft or create any kind of lien or security interest involving said aircraft or do anything or take any action that might mature into such a lien;

c. During the term of this Agreement, each party will abide by and conform to all such laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of either aircraft pursuant to this Interchange Agreement;

d. Such Interchange operations are covered by the party's aircraft all-risk phsyical damage insurance (hull coverage), aircraft bodily injury and property damage liability insurance, passenger, pilot, and crew voluntary settlement insurance and statutory worker's compensation and employer's liability insurance.

13. Each party agrees to idemnify and hold harmless the other against all losses, including costs, attorneys' fees and expenses, by reason of claims for injury to or death of persons and loss of or damage of property arising out of or in any manner connected with the performance of such party's responsibilities under this Agreement or any breach by such party of any covenant or warranty made herein. The parties agree that in the event either party shall be liable to the other for any reason relating to this Agreement, that under no circumstances shall the damaged party be entitled to any special or consequential damages, including but not limited to damages for lost profits.

14. A party shall be in default hereunder if at any time during the term of this Agreement the party;

a. is delinquent in making any payments under this Agreement for a period of more than fifteen (15) days; or

b. does not perform any or all of the requirements on its part to be performed under this Agreement and/or or is in breach of all or any of the covenants herein contained; and fails to cure after ten (10) days' written notice; or

c. is adjusted bankrupt or insolvement; or

d. files a voluntary petition in bankruptcy or for reorganization; or

15. Upon the occurrence of any of the events listed in paragraph 14 above, the party not in default shall have the right to terminate this Agreement as provided in paragraph 3 above, and to pursue any further remedies available to that party in law or in equity.

16. For purposes of this Agreement, the permanent base of operation of First Aircraft shall be the Jeffco Airport, Broomfield, Colorado.

17. For purposes of this Agreement, the permanent base of operation of Second Aircraft shall be the Jeffco Airport, Broomfield, Colorado.

18. Neither this Agreement nor any party's interein herein shall be assignable to any other party whatsoever. Notwithstanding the foregoing, this Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives, and successors.

19. For purposes of this Agreement, where applicable, the term "owner" shall include persons operating either of the aircraft pursuant to an aircraft lease agreement entered into previously by one or both of the parties.

20. Upon termination of this Agreement, the parties shall determine the number of flight hours each party used the other party's aircraft under this Agreement. If there is a usage differential, then: (a) this Agreement shall be deemed a time sharing agreement (as defined in FAR Section 91.501(c)(1) for the number of flight hours which make up the differential; and (b) the party receiving more flight hours shall pay for the number of flight hours which make up the differential in an amount not to exceed the authorized charges set forth in FAR Section 91.50(d). Such payment shall be made within thirty (30) days following termination of this Agreement. This paragraph shall survive such termination.

21. TRUTH IN LEASING STATEMENT UNDER SECTION 91.23 OF THE FEDERAL AVIATION REGULATIONS.

a. THE FIRST AIRCRAFT, A 1990 CESSNA 560 CITATION V AIRCRAFT, MANUFACTURER'S SERIAL NO. 560-0066, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N60S, HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTHS PRECEDING THE EXECUTION OF THIS AGREEMENT.

b. THE FIRST AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT DURING THE DURATION OF THIS AGREEMENT.

c. SCHADEN IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE FIRST AIRCRAFT UNDER THIS AGREEMENT.

d. SCHADEN HEREBY CERTIFIES THAT IT IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE FIRST AIRCRAFT FOR PURPOSES OF

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document THIS AGREEMENT AND THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

e. THE SECOND AIRCRAFT, A 1997 CESSNA 525CJ AIRCRAFT, MANUFACTURER'S SERIAL NO. 525-0212, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N67VW, HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTHS PRECEDING THE EXECUTION OF THIS AGREEMENT.

f. THE SECOND AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT DURING THE DURATION OF THIS AGREEMENT.

g. QUIZNO'S IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE SECOND AIRCRAFT UNDER THIS AGREEMENT.

h. QUIZNO'S HEREBY CERTIFIES THAT IT IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE SECOND AIRCRAFT FOR PURPOSES OF THIS AGREEMENT AND THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

i. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE.

j. THE "INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASEING REQUIREMENTS" ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE.

IN WITHNESS WHEREOF, the parties hereto have caused the signatures of their authorized representatives to be affixed below on the day and year first above written. The persons signing below warrant their authority to sign.

/s/ Richard F. Schaden P.C. The Quizno's Corporation ------

By: By:

Title: Title:Vice President/General Counsel

NOTE: A COPY OF THIS AGREEMENT MUST BE CARRIED IN THE AIRCRAFT WHILE BEING OPERATED HEREUNDER.

INSTRUCTIONS FOR COMPLIANCE WITH "TRUTH IN LEASING" REQUIREMENTS

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1. Mail a copy of the agreement to the following address via certified mail, return receipt requested, immediately upon execution of the agreement (14 C.F.R. 91.23 requires that the copy be sent within twenty-four hours after it is signed):

Federal Aviation Agreement Aircraft Registration Branch ATTN: Technical Section P.O. Box 25724 Oklahoma City, Oklahoma 73125

2. Telephone or fax the nearest Flight Standards District Office at least forty-eight hours prior to the first flight made under this agreement.

3. Carry a copy of the agreement in the aircraft at all times when the aircraft is being operated under the agreement.

MASTER FRANCHISE AGREEMENT

THE QUIZNO'S CORPORATION MASTER FRANCHISE AGREEMENT FOR ______

MASTER FRANCHISEE

DATE OF AGREEMENT

TABLE OF CONTENTS

SECTION PAGE

1 PREAMBLES...... 1

3 DEVELOPMENT RIGHTS AND OBLIGATIONS...... 5 3.1 GRANT OF DEVELOPMENT RIGHTS...... 5 3.2 TERRITORIAL RIGHTS OF MASTER FRANCHISEE...... 5 3.3 DEVELOPMENT OBLIGATIONS...... 5 3.4 EXTENSION OF DEVELOPMENT TERM...... 6 3.5 FRANCHISE AND AREA DIRECTOR AGREEMENTS...... 6 3.6 RIGHTS RETAINED BY FRANCHISOR...... 7

4 GUIDANCE AND ASSISTANCE...... 7 4.1 INITIAL TRAINING...... 7 4.2 CONTINUING TRAINING...... 7 4.3 CONTINUING GUIDANCE AND SUPPORT BY FRANCHISOR...... 7 4.4 OPERATING MANUAL...... 8 4.5 ASSISTANCE IN OPENING PILOT RESTAURANT...... 9 4.6 PRODUCT AND OPERATIONS DEVELOPMENT...... 9

5 OPERATIONS OBLIGATIONS OF MASTER FRANCHISEE...... 9 5.1 FORM AGREEMENTS...... 9 5.2 APPOINTMENT OF AREA DIRECTORS...... 10 5.3 TRAINING AND SUPPORT...... 10 5.4 SYSTEM STANDARDS...... 10 5.5 COMPLIANCE WITH THE SYSTEM...... 11 5.6 MASTER FRANCHISE PREMISES...... 11

6 OTHER OBLIGATIONS OF MASTER FRANCHISEE...... 11 6.1 CHIEF EXECUTIVE OFFICER...... 11 6.2 OTHER MANAGEMENT PERSONNEL OF MASTER FRANCHISEE...... 12 6.3 INSURANCE...... 12 6.4 RECORDS AND REPORTS...... 13 6.5 GOVERNMENTAL APPROVALS...... 14 6.6 COMPLIANCE WITH LEGALREQUIREMENTS/GOOD RESTAURANT PRACTICES 15 6.7 SUPPLY ARRANGEMENTS...... 15

7 INITIAL AND CONTINUING FEES...... 16 7.1 INITIAL FEES...... 16 7.2 INITIAL FRANCHISE AND AREA DIRECTOR FEES...... 16 7.3 CONTINUING FEES...... 16 7.4 INTEREST ON LATE PAYMENTS...... 16 7.5 WITHHOLDING TAXES...... 17 7.6 CURRENCY OF PAYMENT...... 17 7.7 EXCHANGE CONTROLS...... 18 7.8 STAMP DUTIES...... 18

8 MARKETING...... 18

9 CONFIDENTIAL INFORMATION...... 19

10 EXCLUSIVE RELATIONSHIP...... 20

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 11 INDEPENDENT CONTRACTORS/INDEMNIFICATION...... 20 11.1 INDEPENDENT CONTRACTORS...... 20 11.2 NO LIABILITY FOR ACTS OF OTHER PARTY...... 21 11.3 TAXES...... 21 11.4 INDEMNIFICATION...... 21

12 MARKS...... 22 12.1 GOODWILL AND OWNERSHIP OF THE MARKS...... 22 12.2 LIMITATIONS ON MASTER FRANCHISEE'S USE OF THE MARKS...... 22 12.3 NOTIFICATION OF INFRINGEMENT AND CLAIMS...... 22 12.4 DISCONTINUANCE OF USE OF MARKS...... 23 12.5 REGISTERED USER AGREEMENTS...... 23 12.6 MASTER FRANCHISEE'S TRADE NAME...... 23

13 TRANSFER...... 24 13.1 BY FRANCHISOR...... 24 13.2 BY MASTER FRANCHISEE...... 24 13.3 FRANCHISOR'S RIGHT OF FIRST REFUSAL...... 24 13.4 DEATH OF MASTER FRANCHISEE...... 25

14 TERMINATION OF AGREEMENT...... 25 14.1 BY MASTER FRANCHISEE...... 25 14.2 BY FRANCHISOR...... 26

15 RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION...... 26 15.1 MARKS...... 26 15.2 COVENANT NOT TO COMPETE...... 27 15.3 AREA DIRECTOR AND FRANCHISE AGREEMENTS...... 27 15.4 CONTINUING OBLIGATIONS...... 28

16 ENFORCEMENT...... 28 16.1 INFORMAL DISPUTE RESOLUTION...... 28 16.2 FORMAL DISPUTE RESOLUTION...... 28 16.3 SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.....29 16.4 WAIVER OF OBLIGATIONS...... 30 16.5 RIGHTS OF PARTIES ARE CUMULATIVE...... 30 16.6 WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL...... 31 16.7 LIMITATION OF CLAIMS...... 31 16.8 COSTS AND LEGAL FEES...... 31 16.9 GOVERNING LAW/CONSENT TO JURISDICTION...... 32 16.10NO RIGHT TO SET-OFF...... 32

17 REPRESENTATIONS OF MASTER FRANCHISEE...... 32

18 MISCELLANEOUS PROVISIONS...... 33 18.1 BINDING EFFECT...... 33 18.2 CONSTRUCTION...... 33 18.3 GOVERNING LANGUAGE...... 33 18.4 NOTICES, REPORTS AND PAYMENTS...... 33

EXHIBITS AND ATTACHMENTS

EXHIBIT A - DEVELOPMENT AREA EXHIBIT B - DEVELOPMENT QUOTA EXHIBIT C - MARKS EXHIBIT D - OWNERSHIP INTERESTS

GUARANTY AND ASSUMPTION OF OBLIGATIONS

THE QUIZNO'S CORPORATION MASTER FRANCHISE AGREEMENT FOR ______

THIS AGREEMENT is made and entered into this ____ day of ______, 2000, by and between THE QUIZNO'S CORPORATION, a corporation organized under the laws of the State of Colorado, U.S.A. ("Franchisor"), and ______("Master Franchisee").

1. PREAMBLES.

Franchisor has developed methods for establishing, operating and promoting restaurants offering submarine sandwiches, salads, other food products and beverages and related restaurant and carry out services ("QUIZNO'S Restaurants") which include the use and license of proprietary rights in certain valuable trade names, service marks and trademarks owned by Franchisor (the "Marks"), including the service mark "QUIZNO'S," and Franchisor's distinctive techniques, expertise and knowledge in the establishment, operation and promotion of restaurants and related licensed methods of doing business.

Franchisor grants master franchises to qualified parties to develop and operate and to franchise others to develop and operate QUIZNO'S Restaurants in defined market areas under the Marks and pursuant to the System (defined below).

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Franchisee recognizes and acknowledges the benefits to be derived from being identified and associated with Franchisor and being able to utilize the System and therefore desires to acquire a master franchise for QUIZNO'S Restaurants in the Development Area (defined below). Franchisor is willing to grant Master Franchisee such master franchise under the terms and conditions which are contained in this Agreement.

2. CERTAIN DEFINITIONS.

For purposes of this Agreement, the terms listed below have the meanings indicated. Other terms used in this Agreement are defined and construed in the context in which they occur.

"Affiliate" - any Person (defined below) or entity that directly or indirectly owns or controls, that is directly or indirectly owned or controlled by, or that is under common ownership or control with another Person. For purposes of this definition, the term "control" shall mean the possession, directly or indirectly, of a Controlling Interest (defined below).

"Agreement Date" - the date on which this Agreement is executed by the last party to sign.

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"Agreement Term" - the period commencing upon the Agreement Date and ending upon the expiration or termination of the last Franchise Agreement in the Development Area to expire or terminate, or termination of this Agreement in accordance with the provisions hereof.

"Area Director" - a representative of Master Franchisee authorized by Master Franchisee pursuant to an Area Director Agreement to sell franchises for QUIZNO'S Restaurants in a defined geographic area within the Development Area and to provide site selection and support services to QUIZNO'S Restaurants within such geographic area.

"Area Director Agreement" - the form of area director marketing agreement (including all exhibits, ancillary documents and guarantees attached thereto) approved by Franchisor, as periodically modified in accordance with this Agreement.

"Area Directorship" - the right to sell franchises for QUIZNO'S Restaurants and the obligation to provide site selection and support services to Franchisees pursuant to an Area Director Agreement.

"Competitive Business" - any business operating, or forming joint ventures to operate, or granting franchises or licenses to others to operate, a restaurant or other food service business deriving more than 10% of its gross receipts, excluding gross receipts relating to the sale of alcoholic beverages, from the sale of submarine, hoagie, hero-type or deli-style sandwiches (other

"Confidential Information" - as defined in Section 9.

"Controlling Interest" - A Person shall be deemed to have a controlling interest if that Person has the right to vote twenty five percent (25%) or more of the voting securities or other interest of a partnership, corporation or other form of limited liability company, or is entitled to receive twenty five percent (25%) or more of the net profits of any such entity, or is otherwise able to direct or cause the direction of the management or policies of any such entity. A trustee of a trust shall be deemed to hold one hundred percent (100%) of the voting interests of the trust and each beneficiary of a trust shall be deemed to hold his proportionate share of the voting interest of the trust or, if such interest is indeterminate, one hundred percent (100%) of the voting interests of the trust.

"Development Area" - the geographic area or areas described on Exhibit A to this Agreement.

"Development Period" - each period of time defined as a Development Period on Exhibit B to this Agreement.

"Development Quota" - the minimum number of QUIZNO'S Restaurants that must be open and in operation at the end of each Development Period in each of the geographic areas which comprise the Development Area, as set forth on Exhibit B to this Agreement.

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"Development Rights" - the right to grant Franchises (defined below) and Area Directorships for the development and operation of QUIZNO'S Restaurants to be located in the Development Area.

"Development Term" - the period during which Master Franchisee is authorized to grant Franchises and Area Directorships, which will commence on the Agreement Date and will expire, unless extended or terminated in accordance with the terms of this Agreement, on the tenth (10th) anniversary of the Agreement Date.

"Dollars" and "$" - the legal currency of the United States.

"Form Agreements" - as defined in Section 5.1.

"Franchise" - the right to develop and operate a QUIZNO'S Restaurant at a specified location within the Development Area and to use the Marks and the System in the operation thereof pursuant to a Franchise Agreement (defined below).

"Franchise Agreement" - the form of franchise agreement (including all exhibits, ancillary documents and guarantees attached thereto) approved by Franchisor, as periodically modified in accordance with Section 5.1.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "Franchisee" - one or more person(s) that is (are ) a party to a Franchise Agreement with Master Franchisee for the development and operation of a Restaurant within the Development Area, whether or not such person(s) is (are) an Affiliate of Master Franchisee.

"Gross Sales" - sales of any kind for all services or products from or through a Restaurant, including any such sale of services or products made for cash or upon credit, or partly for cash and partly for credit, regardless of collection of charges for which credit is given, regardless of whether such sale is conducted in compliance with or in violation of the terms of the Franchise Agreement and regardless of whether such sale is at the Restaurant or off-site, but exclusive of discounts, sales, value-added or service taxes or other similar taxes and credits actually collected from customers and paid to the appropriate taxing authority. Gross Sales shall also include the fair market value of any services or products received by Franchisee in barter or exchange for its services and products.

"Legal Requirements" - applicable laws, ordinances, regulations, rules, administrative orders, decrees and policies of any government, governmental agency or department, including without limitation the governments of the Development Area and the United States.

"Marks" - the trademarks, service marks, logos and other commercial symbols set forth on Exhibit D to this Agreement which Franchisor from time to time authorizes Master Franchisee to use and sublicense to Franchisees to identify Restaurants and the Products offered by such Restaurant. Such trademarks, service marks, logos and other commercial symbols are subject to modification and discontinuance and may include additional or substitute trademarks, service marks, logos and commercial symbols as provided in this Agreement.

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"Owners" - all persons or entities holding Ownership Interests (defined below) in Master Franchisee and all persons or entities who have other direct or indirect property rights in Master Franchisee or this Agreement (the persons or entities who are Owners as of the date of this Agreement are listed on Exhibit E to this Agreement).

"Ownership Interest" - a direct or indirect, disclosed or undisclosed, legal or beneficial ownership or property right or voting right, including, without limitation: (a) in relation to a company, the ownership of shares or other equity interests in the company; (b) in relation to a partnership, the ownership of a general or limited partnership interest; (c) in relation to a trust, the ownership of the beneficial interest of such trust; or (d) the right to cast some or all of the votes associated with such shares or interests.

"Person" - an individual, corporation, general or limited partnership, limited liability company, trust, association or other legal entity.

"Products" - all products and services which Franchisor authorizes for sale by Restaurants.

"Restaurant" - a QUIZNO'S Restaurant located within the Development Area.

"Restricted Persons" - (1) Owners who have a Controlling Interest in Master Franchisee; (2) Affiliates of Master Franchisee; (3) the parents, spouses, natural and adopted children of Master Franchisee and of Owners of a Controlling Interest in Master Franchisee, and (4) the officers, directors and management personnel of Master Franchisee and its Affiliates.

"Submarine Sandwich Restaurant" - a business, including a QUIZNO'S Restaurant, that offers for sale submarine, hoagie or hero-type or deli-style sandwiches.

"System" - the recipes, methods, techniques, formats, systems, methods, procedures, standards, and specifications which Franchisor specifies for use in the operation of QUIZNO'S Restaurants, all of which Franchisor may improve, further develop or otherwise modify from time to time.

"United States" and "U.S." - The United States of America.

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3. DEVELOPMENT RIGHTS AND OBLIGATIONS.

3.1 GRANT OF DEVELOPMENT RIGHTS.

Subject to the terms and conditions of this Agreement, Franchisor hereby grants to Master Franchisee the Development Rights during the Development Term and the right to function as the franchisor under Franchise Agreements with Franchisees and Area Director Agreements with Area Directors. Master Franchisee may not itself own or operate QUIZNO'S Restaurants or Area Directorships during the Agreement Term; however, Master Franchisee may grant Franchises or Area Directorships to its Affiliates. Franchisees and Area Directors, including Affiliates of Master Franchisee, shall execute a Franchise Agreement for each such QUIZNO'S Restaurant and an Area Director Agreement for each Area Directorship, as applicable. The rights granted to Master Franchisee by this Agreement are limited to the Development Area and Master Franchisee agrees that it is not hereby granted any rights to franchise, and that it will not operate or grant Franchises for QUIZNO'S Restaurants or Area Directorships for locations outside of the Development Area, nor solicit prospective Franchisees or Area Directors from outside the Development Area.

Before granting any Franchise to a Person that is not an Affiliate of Master Franchisee, Master Franchisee shall, in compliance with the Development Quota, cause an Affiliate to sign a Franchise Agreement and open a QUIZNO'S

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Restaurant within the Development Area that successfully passes Franchisor's operational review, to be used as a prototype Restaurant and training facility (the "Pilot Restaurant"). An Affiliate of Master Franchisee shall operate the Pilot Restaurant or a replacement therefor at all times during the Development Term and any extension thereof.

3.2 TERRITORIAL RIGHTS OF MASTER FRANCHISEE.

Except as hereinafter provided, and provided that Master Franchisee is in full compliance with this Agreement, Franchisor and its Affiliates will not operate or grant Franchises, Area Directorships, or other development rights for QUIZNO'S Restaurants within the Development Area during the Development Term. After the termination of this Agreement or the termination or expiration of the Development Term (unless the Development Term is extended as provided in this Agreement), Franchisor and its Affiliates shall have the right to operate and grant Franchises and Development Rights for QUIZNO'S Restaurants within the Development Area, subject only to the territorial rights (if any) granted to Franchisees and Area Directors.

3.3 DEVELOPMENT OBLIGATIONS.

Master Franchisee agrees to comply with the Development Quota with respect to each Development Period. The determination as to whether Master Franchisee has met its development obligations hereunder shall be made based on the number of Restaurants open and operating at the end of a Development Period. For purposes of the development obligations hereunder, a Restaurant that has been open and in operation and is subsequently permanently closed, rendered inoperable by fire or other casualty or required to be closed due to condemnation or other governmental action, during the last six (6) months of a Development Period, shall be counted as open and operating at the end of such Development Period (but not thereafter); any other Restaurant must be open and operating in compliance with the applicable Franchise Agreement in order to be counted toward the satisfaction of the Development Quota. Master Franchisee agrees that during the Agreement Term, it will at all times faithfully, honestly and diligently perform its obligations hereunder and will continuously exert its best efforts to promote and enhance the development and operation of QUIZNO'S Restaurants within the Development Area.

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3.4 EXTENSION OF DEVELOPMENT TERM.

Upon expiration of the Development Term, if Master Franchisee has substantially complied with all of the terms of this Agreement during the Development Term, including without limitation the Development Quota, subject to the terms of Section 3.4, Master Franchisee shall have the right to extend the Development Term for ten (10) additional years. Master Franchisee shall give Franchisor written notice of its request for an extension of the Development Term not more than twelve (12) months nor less than six (6) months prior to the expiration of the Development Term. Within sixty (60) days following

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Franchisor's receipt of such notice from Master Franchisee, Franchisor and Master Franchisee shall negotiate in good faith concerning a new development quota for the extended Development Term. In connection with the extension of the Development Term, Master Franchisee and all Owners shall execute general releases, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its Affiliates and their respective shareholders, directors, officers, employees, agents, successors and assigns. If Franchisor and Master Franchisee do not execute a binding agreement extending the term of the Development Term prior to the expiration thereof, Master Franchisee's Development Rights pursuant to this Agreement shall be deemed to have expired and Franchisor shall have the right to operate and grant franchises and development rights for QUIZNO'S Restaurants in the Development Area, subject only to territorial rights previously granted to Franchisees and Area Directors.

Upon expiration of the extended Development Term as set forth above, if Master Franchisee has substantially complied with all of the terms of this Agreement during such extended Development Term, including without limitation the Development Quota for the extended Development Term, Master Franchisee shall have the right to extend the Development Term for a second period of ten (10) additional years, subject to the terms and conditions set forth herein with respect to the first extension of the Development Term.

3.5 FRANCHISE AND AREA DIRECTOR AGREEMENTS.

Master Franchisee will enter into a Franchise Agreement or Area Director Agreement directly with each Franchisee and Area Director. Master Franchisee will enforce each Franchise Agreement and Area Director Agreement, and will ensure compliance with all Legal Requirements, including without limitation regulations affecting the sale of Franchises and Area Directorships in the Development Area. Franchisor shall be named as a third party beneficiary of each Franchise Agreement and Area Director Agreement and will have the right, but not the obligation, to assume the Master Franchisee's obligations thereunder in accordance with Section 15.3.

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Master Franchisee will have the sole obligation for approving each Franchisee. Franchisor will have the right to approve any prospective Area Director prior to execution of the Area Director Agreement in accordance with Section 5.2. Master Franchisee shall have the right to establish development goals with respect to any Area Directorship sold in the Development Area, provided that non-performance of any Area Director with respect to such goals will not affect Master Franchisee's obligation to meet Master Franchisee's Development Quota. Master Franchisee shall be responsible for any payments to Area Directors in the Development Area (including commissions on royalties or other payments due under the Area Director Agreement).

3.6 RIGHTS RETAINED BY FRANCHISOR.

Except as expressly limited by Sections 3.2 and 3.3., Franchisor (on behalf of itself, its Affiliates and its designees) retains all rights to

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document develop, manufacture, market, distribute or sell the Products or any other product or service within or outside the Development Area and to engage in any business or activity within or outside the Development Area.

4. GUIDANCE AND ASSISTANCE.

4.1 INITIAL TRAINING.

Franchisor will furnish at its principal office in the United States a training program to the initially appointed senior managers of Master Franchisee at no charge to Master Franchisee. Master Franchisee shall pay charges established by Franchisor for training programs furnished to any individual who replaces a previously trained manager. Master Franchisee agrees to be responsible for all travel and living expenses and compensation for its managers who attend such training programs. Master Franchisee shall attend and successfully complete the initial training prior to opening the Pilot Restaurant or granting Franchises or Area Directorships.

4.2 CONTINUING TRAINING.

Franchisor will periodically conduct additional training programs relating to various aspects of the development and operation of QUIZNO'S Restaurants. Franchisor will have the right to designate one (1) or more senior managers of Master Franchisee who will be required to attend such conferences or training programs, which will be provided at no charge to Master Franchisee except that Master Franchisee agrees to be responsible for all travel and living expenses and compensation of its managers who attend such conferences and training programs.

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4.3 CONTINUING GUIDANCE AND SUPPORT BY FRANCHISOR.

Franchisor shall provide ongoing advice and guidance to Master Franchisee concerning the development, operation and franchising of QUIZNO'S Restaurants. In connection with such assistance, Franchisor shall furnish written and other materials and various of its personnel to communicate the System to Master Franchisee. Franchisor personnel shall be available for periodic consultation in English with personnel of Master Franchisee by telephone, facsimile transmission and correspondence. Franchisor will furnish to Master Franchisee copies (in English) of advertising and marketing materials developed by Franchisor for QUIZNO'S Restaurants and information relating to products, equipment and computer systems and software developed and implemented in QUIZNO'S Restaurants in the United States.

4.4 OPERATING MANUAL.

Franchisor shall loan to Master Franchisee a copy of its operating manual for the development and operation of QUIZNO'S Restaurants used in the United

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document States. Master Franchisee shall submit for review and approval by Franchisor in English any modifications to the System and System Standards (defined below) that Master Franchisee believes to be necessary to comply with the Legal Requirements of the Development Area or for the commercial success of QUIZNO'S Restaurants operated in the Development Area. Franchisor agrees to consider such proposed modifications in good faith and to notify Master Franchisee in writing of Franchisor's acceptance or rejection of such modifications, specifying the reasons for any rejections. Modifications to the System and System Standards shall be reflected in the operating manual for the Development Area (the "Operating Manual"). If necessary, Master Franchisee shall cause (at its expense) the Operating Manual to be translated into the language of the Development Area. The Operating Manual and the copyright therein and in any translations thereof shall be the property of Franchisor and Master Franchisee agrees to execute any and all instruments and documents, render such assistance and take such action as may, in the opinion of Franchisor's counsel, be necessary or advisable to establish, protect and maintain the interests of Franchisor in the Operating Manual and the copyright therein. Except for providing one (1) copy of the Operating Manual to each Franchisee and each Area Director, Master Franchisee agrees that it will not copy or disclose any part of the Operating Manual to any person other than its employees who have a need to know the contents of the Operating Manual.

Master Franchisee, within thirty (30) days of receiving any updated information regarding the Operating Manual, shall in turn update its copy of the Operating Manual as instructed by Franchisor and shall conform its operations with the updated provisions within a reasonable time thereafter. Master Franchisee shall also be responsible for ensuring that each of the Franchisees and Area Directors in the Development Area shall, in turn, update their copy of the Operating Manual as instructed by Franchisor, and shall conform their operations with the updated provisions within a reasonable period of time thereafter. Master Franchisee acknowledges that a master copy of the Operating Manual maintained by Franchisor at its principal office shall be controlling in the event of a dispute relative to the content of any Operating Manual.

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4.5 ASSISTANCE IN OPENING PILOT RESTAURANT.

Franchisor will provide on-site advice, guidance and support for a period of thirty (30 ) days in connection with the opening and initial operations of the Pilot Restaurant.

4.6 PRODUCT AND OPERATIONS DEVELOPMENT.

Master Franchisee will authorize Franchisees to sell new Products and advise Franchisees of modifications or additions to operating procedures for the development and operation of QUIZNO'S Restaurants that Franchisor develops and designates for use by QUIZNO'S Restaurant franchisees. If Franchisor determines it is necessary, Franchisor will provide training to Master Franchisee

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document concerning such new Products and operating procedures at times and places designated by Franchisor. Master Franchisee agrees to disclose to Franchisor all ideas, concepts, methods, techniques, products and services relating to the development and operation of QUIZNO'S Restaurants conceived or developed by Master Franchisee and its Affiliates, Area Directors and Franchisees. Master Franchisee acknowledges and agrees that any such ideas, concepts, methods, techniques, products and services shall be considered works made for hire and shall belong exclusively to Franchisor. If any such materials are determined not to be "works made for hire," such materials are hereby assigned and transferred completely and exclusively to and shall be owned by Franchisor and shall, at Franchisor's discretion, be incorporated into the System for use by Master Franchisee and the Franchisees. Neither Franchisor nor its Affiliates shall have any obligation to make any payment to Master Franchisee or any other person with respect to any such idea, concept, method, technique, product or service.

5. OPERATIONS OBLIGATIONS OF MASTER FRANCHISEE.

5.1 FORM AGREEMENTS.

Franchisor shall furnish to Master Franchisee a form of franchise agreement and a form of area director agreement to be used in the Development Area. Master Franchisee shall submit for Franchisor's review and approval any modifications to such agreements that Master Franchisee believes to be necessary to comply with Legal Requirements or for the commercial success of QUIZNO'S Restaurants in the Development Area. Franchisor agrees to consider such proposed modifications and reject only those which it concludes will be harmful to or inconsistent with, the System or the operation of QUIZNO'S Restaurants, and notify Master Franchisee of Franchisor's acceptance or rejection of such modifications. The modified franchise agreement and area director agreement, developed as hereinabove provided, are referred to respectively herein as the "Franchise Agreement" and the "Area Director Agreement" and together as the "Form Agreements." Master Franchisee acknowledges and agrees Franchisor periodically may require Master Franchisee to modify the Franchise Agreement or the Area Director Agreement. Master Franchisee agrees that it will not make any other material changes to the Form Agreements without the prior written consent of Franchisor. Master Franchisee agrees to (at its expense) translate the Form Agreements into the language of the Development Area. Master Franchisee agrees to submit a copy of such translations to Franchisor for its approval prior to delivering them to prospective Franchisees or Area Directors.

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5.2 APPOINTMENT OF AREA DIRECTORS.

Master Franchisee shall obtain Franchisor's prior written approval before appointing each Area Director. Master Franchisee shall submit to Franchisor in writing such information as Franchisor may reasonably request from time to time concerning each proposed Area Director.

5.3 TRAINING AND SUPPORT.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Master Franchisee agrees to develop a training program and to provide training to Franchisees and Area Directors and their employees in accordance with specifications prescribed by Franchisor. Master Franchisee agrees to diligently and continuously provide support and assistance to Franchisees and Area Directors and to diligently and competently perform all of its obligations under Franchise Agreements and Area Director Agreements. All services and assistance provided to Franchisees and Area Director Agreements in connection with the operation of QUIZNO'S Restaurants and Area Directorships shall be provided by Master Franchisee and such obligation of Master Franchisee shall not be transferred, delegated or subcontracted to any other person (other than Franchisor pursuant to this Agreement).

5.4 SYSTEM STANDARDS.

Master Franchisee acknowledges and agrees that the development and operation of Restaurants in accordance with the mandatory recipes, specifications, standards, operating procedures and rules Franchisor prescribes for the development and operation of QUIZNO'S Restaurants (the "System Standards") is the essence of this Agreement and essential to preserve the goodwill of the Marks and all QUIZNO'S Restaurants. Therefore, Master Franchisee agrees that, at all times during the Agreement Term, Master Franchisee will: (i) comply with all System Standards; (ii) will cause Area Directors to comply with all System Standards; and (iii) will cause Franchisees to develop, maintain and operate Restaurants in compliance with all System Standards. All terms and conditions of this Agreement related to System Standards shall relate to System Standards as they may be periodically modified and supplemented by Franchisor in its discretion during the Agreement Term. Among the aspects of the development and operation of Restaurants that may be regulated by System Standards, and with which Master Franchisee and Franchisees are obligated to comply, are: maintenance of equipment and vehicles (if any); replacement of obsolete or worn-out equipment, and signs; interior and exterior signs, emblems, decals, lettering and logos; selection of Franchisees and Area Directors; types, models, brands and designated and approved suppliers of required and authorized equipment, signs, products, materials and supplies; sales and marketing activities, advertising and promotional activities, customer communication and retention programs, and materials and media required or authorized for use in such activities and programs; use and display of the Marks, and use and display of other trademarks and commercial symbols, including trademarks of approved suppliers; staffing levels and functions of employees; qualifications, uniforms and appearance of employees; initial and ongoing training and testing of employees; minimum hours of operation; goods and services required or authorized to be offered; arrangements with third parties to furnish products or services to customers; participation in market research and testing, and product and service development programs; management; use of approved advertising and marketing materials; bookkeeping, accounting, inventory control, data processing and record keeping systems and forms; formats, content, method and frequency of reports of sales, revenues, financial performance and condition, and other operating and financial information; types, amounts, terms and conditions of required insurance coverage; compliance with applicable laws; obtaining required licenses and permits; adherence to good business practices; observing high standards of honesty, integrity, fair dealing and ethical business conduct; and such other elements and aspects of the development, appearance and operation of,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and conduct of business by, Restaurants as is determined from time to time to be useful or required to preserve or enhance the operation of Restaurants and the image and goodwill of the Marks. Master Franchisee hereby agrees that System Standards prescribed from time to time in the Operating Manuals, or otherwise communicated to Master Franchisee, Area Directors and Franchisees in writing, constitute provisions of this Agreement and the Form Agreements. All references to this Agreement and the Form Agreements shall include all System Standards as periodically modified.

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5.5 COMPLIANCE WITH THE SYSTEM.

Master Franchisee agrees to diligently and continuously monitor compliance with the System, to strictly enforce compliance with the System Standards by all Area Directors and Franchisees and to furnish assistance to Franchisees to correct deficiencies in operation. Master Franchisee also agrees that if it is unable to obtain a Franchisee's or an Area Director's compliance with the System and System Standards, it will terminate the Franchise Agreement or Area Director Agreement, as applicable. Master Franchisee agrees to consult with Franchisor prior to terminating a Franchise Agreement or an Area Director Agreement. Master Franchisee further agrees to enforce all post-termination obligations of Franchisees and Area Directors under their Franchise Agreement and Area Director Agreements.

5.6 MASTER FRANCHISE PREMISES. Master Franchisee shall obtain and at all times during the Agreement Term maintain office facilities in the Development Area for operation of Master Franchisee ("Master Office"). The Master Office shall have a dedicated telephone line, which shall be answered in the name of QUIZNO'S and shall otherwise be equipped and furnished and have signage in a manner consistent with the image and minimum standards of Franchisor.

6.0 OTHER OBLIGATIONS OF MASTER FRANCHISEE.

6.1 CHIEF EXECUTIVE OFFICER.

Concurrently with the execution of this Agreement Master Franchisee agrees to designate a Chief Executive Officer, who shall be an Owner of Master Franchisee and approved by Franchisor, to act as the Chief Executive Officer of Master Franchisee. The Chief Executive Officer shall exert his full-time efforts to the franchising, development and operation of Restaurants and shall not engage in any other business or other activity, directly or indirectly, that requires any significant management responsibility or time commitments or that may otherwise conflict with Master Franchisee's obligations hereunder. The Chief Executive Officer shall attend and complete to Franchisor's satisfaction such training programs as Franchisor shall prescribe (which may be conducted in whole or in part at one (1) or more of the offices of Franchisor in the United States). If the relationship of the Chief Executive Officer with Master Franchisee terminates, or if the proposed Chief Executive Officer fails to

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document satisfactorily complete such training programs, Master Franchisee agrees to promptly designate a replacement Chief Executive Officer approved by Franchisor, who shall satisfactorily complete such training programs. The Chief Executive Officer shall speak, read and write the English language fluently.

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6.2 OTHER MANAGEMENT PERSONNEL OF MASTER FRANCHISEE.

Master Franchisee agrees to hire and maintain the number and level of management personnel required for: (i) the management and supervision of the grant of Franchises and Area Directorships; (ii) the development and operation of Restaurants within the Development Area and the conduct of the Pilot Restaurant in accordance with this Agreement. Master Franchisee shall keep Franchisor advised of the identities of such management personnel. Master Franchisee agrees that such personnel will be properly trained to perform their duties. Franchisor will from time to time make available training programs for such personnel at times and locations in the United States designated by Franchisor. Such management personnel shall speak, read and write the English language fluently.

6.3 INSURANCE.

Master Franchisee agrees to maintain insurance necessary to comply with all Legal Requirements concerning insurance and to maintain general liability insurance against claims for bodily and personal injury, death and property damage caused by or occurring in connection with the conduct of Master Franchisee's duties hereunder (including without limitation operation of the Pilot Restaurant by Master Franchisee's Affiliate). Master Franchisee shall also maintain in force other insurance of the types, in the amounts and with such terms and conditions as Franchisor may from time to time reasonably prescribe in the Operating Manual or otherwise. Such insurance shall be maintained under one (1) or more policies of insurance containing minimum liability and types of coverages appropriate in the Development Area. Each insurance policy shall name Franchisor and its Affiliates that it designates as additional named insureds, shall contain a waiver of all subrogation rights against Franchisor, its Affiliates, and their successors and assigns, and shall provide for thirty (30) days' prior written notice to Franchisor of any material modification, cancellation, or expiration of such policy. Master Franchisee shall furnish to Franchisor annually a copy of the certificates of insurance or other evidence requested by Franchisor that such insurance coverage is in force. The maintenance of sufficient insurance coverage shall be the responsibility of Master Franchisee. Notwithstanding any other provision of this Agreement, Franchisor shall have no obligation to prescribe types or amounts of insurance coverage and shall have no obligation to indemnify Master Franchisee if it does not do so or if the types or amounts of insurance coverage prescribed by Franchisor are insufficient to fully cover a claim made against Master Franchisee.

6.4 RECORDS AND REPORTS.

Master Franchisee agrees to maintain and preserve at its principal office, full, complete and accurate records and reports pertaining to the development and operation of Restaurants and the performance by Master Franchisee of its obligations under this Agreement, including, but not limited to, records and information relating to: franchisee applications, inspection and supervisory reports relating to the operation of Restaurants and Area Directorships, copies of all Franchise Agreements and Area Director Agreements entered into by Master Franchisee, records reflecting the financial condition and performance of Master Franchisee, Area Directors and Franchisees, records of the receipts and expenditures of the Marketing Program (defined below) and such other records and reports as periodically may be prescribed by Franchisor. Franchisor and its agents shall have the right to inspect, audit and make copies or extracts of such records and reports and Master Franchisee agrees to fully cooperate with any such inspection or audit during regular hours. Franchisor shall have the right, at any time, during normal Restaurant hours, to inspect the premises of any Restaurant and the office of any Area Director for the purpose of monitoring compliance with Franchise Agreements and Area Director Agreements and Master Franchisee's compliance with the terms of this Agreement.

In addition to the reports required in connection with the operation and franchising of Restaurant, Master Franchisee shall deliver to Franchisor in the form periodically prescribed by Franchisor the following:

(a) a notice of Restaurant opening within five (5) days following the opening date of that Restaurant;

(b) by the twentieth (20th) day of each month, a report of the Gross Sales for each Restaurant in the prior month, the number of Restaurants opened, closed and under development during the immediately preceding month;

(c) within thirty (30) days of the end of each quarter of Master Franchisee's financial year, a profit and loss account for such quarter and a report disclosing Master Franchisee's net worth as of the end of such quarter, and performance of each Area Director;

(d) within ninety (90) days after the end of Master Franchisee's financial year, a financial year-end balance sheet for Master Franchisee and a profit and loss account for such financial year reflecting all year-end adjustments, and a statement of changes in financial condition on a basis consistent with generally accepted accounting principles of the Development Area (or, at Franchisor's option in accordance with any recognized international accounting principles which may be adopted by appropriate standards-setting bodies during the Agreement Term);

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (e) not less than sixty (60) days prior to the end of each Development Period, a Restaurant development plan for the succeeding Development Period, including capital and operating budgets and plans for sales of Franchises, appointment of Area Directors and development of Restaurants;

(f) within sixty (60) days following the end of each Development Period, an analysis of Master Franchisee's compliance with the development plans for the previous Development Period;

(g) not less than sixty (60) days prior to the end of each financial year of Master Franchisee, a marketing plan and budget describing the proposed marketing activities and expenditures for the Marketing Program (hereinafter defined) for the succeeding financial year;

(h) within sixty (60) days following the end of each financial year of Master Franchisee, a report of the receipts and disbursements of, and advertising, promotion, public relations, market research and other marketing programs and activities undertaken by, the Marketing Program during the preceding year; and

(i) such other data, reports, information, financial statements and supporting records relating to Franchisees, Area Directors and Gross Sales of Restaurants as Franchisor periodically prescribes.

Each such report and financial statement furnished by Master Franchisee shall be verified as correct and signed by Master Franchisee in the manner prescribed by Franchisor. Master Franchisee shall immediately report to Franchisor any events or developments which may have a significant or material adverse impact on the performance of Master Franchisee under this Agreement or the goodwill associated with the Marks and Restaurants.

Master Franchisee shall also require each Franchisee to submit reports required by Franchisor from time to time, including those reports required by the Franchise Agreements.

6.5 GOVERNMENTAL APPROVALS.

Master Franchisee agrees to execute any and all instruments and documents, render such assistance, and otherwise cooperate with Franchisor, in order to obtain all governmental approvals necessary at any time during the Agreement Term, in the opinion of Franchisor's counsel, to comply with the Legal Requirements. At its option, Franchisor shall have the right to submit, or to require Master Franchisee to submit, this Agreement or either of the Form Agreements to any governmental entity or agency ("Agency") for registration or approval in the event Franchisor determines such registrations or approvals are necessary in order to comply with the Legal Requirements. If the Agency requires that any amendments be made to this Agreement or the Franchise Agreement as a condition to such approval or registration and such amendments are acceptable to Franchisor, Franchisor will deliver to Master Franchisee for execution an addendum to this Agreement or either or both of the Form Agreement, or other appropriate documents, to reflect such amendments. If Franchisor determines in

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document good faith that the effect of any amendment required by the Agency as a condition to registration or approval will be materially detrimental to its interests, Franchisor may terminate this Agreement by delivering written notice thereof to Master Franchisee. If any governmental registration or approval is required before the parties may implement this Agreement, and if the Agency has not registered or approved this Agreement or the Franchise Agreement within one hundred eighty (180) days of the date of their submission to the Agency for such approval or registration, Franchisor may terminate this Agreement by delivering written notice thereof to Master Franchisee. In the event Franchisor terminates this Agreement for any of the reasons set forth in the immediately preceding sentence, provided that Master Franchisee has fully cooperated with Franchisor in the registration or approval process and Master Franchisee and its Owners have executed general releases, in form acceptable to Franchisor, releasing Franchisor and its Affiliates and their respective officers, directors, shareholders, employees and agents from any and all liability, Franchisor shall refund all amounts paid by Master Franchisee hereunder, less any expenses incurred by Franchisor in connection with the execution of this Agreement and the attempts to obtain governmental approval thereof.

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6.6 COMPLIANCE WITH LEGAL REQUIREMENTS/GOOD RESTAURANT PRACTICES.

Master Franchisee and its Affiliates shall secure and maintain in force in their names all required licenses, permits, and certificates relating to Master Franchisee's obligations hereunder, including without limitation conduct of the Pilot Restaurant by Master Franchisee's Affiliate. Master Franchisee and its Affiliates shall at all times comply with Legal Requirements. All advertising by Master Franchisee, its Affiliates and Franchisees shall be completely factual and conform to high standards of ethical advertising. Master Franchisee, its Affiliates and Franchisees shall in all dealings with Franchisor, public officials and other third parties adhere to high standards of honesty, integrity, fair dealing and ethical conduct, and will refrain from any practice which may be injurious to the reputation of Franchisor or Master Franchisee and the goodwill associated with the Marks and QUIZNO'S Restaurants. Master Franchisee shall notify Franchisor within five (5) days of the commencement of any action, suit, or proceeding, and of the issuance of any order, writ, injunction, award, or decree of any court, agency, or other governmental instrumentality, which may adversely affect the operation or financial condition of Master Franchisee, a Franchise, an Area Director or a Restaurant.

6.7 SUPPLY ARRANGEMENTS.

The Pilot Restaurant will be built using U.S. equipment suppliers designated by Franchisor. Master Franchisee shall establish and maintain supply arrangements on competitive terms and conditions for products and equipment to be sold by or used in the operation of QUIZNO'S Restaurants, and such arrangements shall be subject to Franchisor's prior written approval. Master Franchisee shall ensure that all such products and equipment comply with System

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7. INITIAL AND CONTINUING FEES.

7.1 INITIAL FEES.

Concurrently with the execution of this Agreement, Master Franchisee shall pay to Franchisor an Initial License Fee in the amount of US $______. Master Franchisee acknowledges and agrees that the Initial License Fee represents payment for the initial grant of the rights to use the Marks and System, for Franchisor's foregone opportunity to use or license those rights and benefits granted to Master Franchisee hereunder, that Franchisor has earned the Initial License Fee upon receipt thereof and that the Initial License Fee is under no circumstances (except as specifically set forth herein) refundable to Master Franchisee after it is paid to Franchisor.

7.2 INITIAL FRANCHISE AND AREA DIRECTOR FEES.

Master Franchisee agrees to pay to Franchisor thirty percent (30%) of all initial franchise fees and all initial area director fees received by Master Franchisee under all Franchise Agreements and Area Director Agreements (including without limitation such agreements with Affiliates of Master Franchisee). Franchisor's portion of such fees shall be payable to Franchisor within five (5) business days of Master Franchisee's receipt of those fees and shall be fully earned by Franchisor upon payment, notwithstanding any subsequent decision by Master Franchisee to refund all or a portion of the initial franchise fee or area director fee.

7.3 CONTINUING FEES.

Master Franchisee agrees to pay to Franchisor a Continuing License Fee, equal to 30% (thirty percent) of all royalties and other recurring fees (but not advertising and marketing fees) received by Master Franchisee from Franchisees and Area Directors (including without limitation Affiliates of Master Franchisee). The Franchise Agreements will provide for payments of royalties and other amounts owed directly to Master Franchisee (on a weekly basis by electronic transfer in the case of royalty and other recurring fees). Although Franchisor may elect to cause Master Franchisee to terminate any Franchisee who fails to pay royalties and other fees when due, Master Franchisee shall be primarily responsible for ensuring payment and compliance with other terms of the Franchise Agreements for any Franchisee located within the Development Area. Master Franchisee shall pay the Continuing License Fee to Franchisor on the tenth (10th) day of each month (unless a holiday, in which case payment will be due the next business day) for royalties and other fees collected the previous month.

7.4 INTEREST ON LATE PAYMENTS.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document All amounts which Master Franchisee owes to Franchisor or its Affiliates under this Agreement or any related agreement shall bear interest after the due date at the rate of one and one-half percent (1.5%) per month, unless such rate is higher than the highest legal rate permitted by applicable law, in which case, the rate payable shall be the highest legal rate permitted by law. Such interest shall be payable in the same currency as the principal debt on which interest accrues. Master Franchisee acknowledges that this Section 7.4 shall not constitute Franchisor's agreement to accept such payments after they are due or a commitment by Franchisor to extend credit to, or otherwise finance Master Franchisee or the Pilot Restaurant. Master Franchisee acknowledges that its failure to pay all such amounts when due shall constitute grounds for termination of this Agreement notwithstanding the provisions of this Section 7.4.

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7.5 WITHHOLDING TAXES.

In the event that any amounts payable by Master Franchisee to Franchisor hereunder are subject to withholding or other taxes that Master Franchisee is required to deduct from such payments, Master Franchisee agrees to promptly deliver to Franchisor receipts of applicable governmental authorities for all such taxes withheld or paid. Master Franchisee shall be responsible for and shall indemnify and hold Franchisor and its Affiliates harmless against any penalties, interest and expenses incurred by or assessed against Franchisor or its Affiliates as a result of Master Franchisee's failure to withhold such taxes or to timely remit them to the appropriate taxing authority. Master Franchisee agrees to fully and promptly cooperate with Franchisor to provide such information and records as Franchisor may request in connection with any application by Franchisor to any taxing authority with respect to tax credits, exemptions or refunds available for any withholding or other taxes paid or payable by Master Franchisee. In the event Franchisor is required to refund to Master Franchisee any amounts paid hereunder, Franchisor shall not be required to refund that portion of those amounts which were withheld by Master Franchisee in order to comply with any applicable tax law unless and until Franchisor receives a refund of such amounts from the applicable government or agency thereof or utilizes a foreign tax credit which is directly attributable to such amounts on its United States federal income tax return which is accepted by the United States Treasury or with respect to which the period within which such credit may be reduced or disallowed has expired.

7.6 CURRENCY OF PAYMENT.

All payments by Master Franchisee to Franchisor under this Agreement shall be made in Dollars unless otherwise specified by Franchisor. All payments hereunder to be calculated in the currency of the Development Area and converted into Dollars for payment to Franchisor shall be converted at the spot currency rate announced by the New York Office of Citibank as of 10:00 a.m. New York time on the business day immediately preceding the date payment is transmitted

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document provided, however, that in the event a payment is transmitted after the date payment is due, the currency exchange rate used shall be the rate as of the date payment was due or the rate as of the date the payment is transmitted, whichever rate produces the larger amount in the currency of payment. All payments made hereunder shall be made in full net of any bank charges by telegraphic or electronic transfer to a bank of Franchisor's choosing located in the United States or elsewhere, or, if Franchisor so elects, shall be deposited in a bank of Franchisor's choosing located within the Development Area.

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7.7 EXCHANGE CONTROLS.

Master Franchisee shall use its best efforts to obtain any consents or authorizations which may be necessary in order to permit timely payments in Dollars of all amounts payable hereunder. If at any time, any legal restriction is imposed upon the purchase of Dollars or the transfer to or credit of a non-resident party with payments in Dollars, Master Franchisee shall notify Franchisor immediately. While such restrictions are in effect, Franchisor may require payment in any currency designated by Franchisor that is available to Master Franchisee or, at Franchisor's option, may require Master Franchisee to deposit all amounts due but unpaid as a result of such a restriction in any type of account, in any bank or institution in the Development Area designated by Franchisor. Franchisor shall be entitled to all interest earned on such deposits. Franchisor may also elect to receive payment in the form of products or services available to Master Franchisee or its Affiliates, the value of which will be based on the actual cost of such products or services to Master Franchisee or its Affiliates. If payment is made in products or services, Master Franchisee agrees to deliver such products or services to Franchisor or its designated agent or shipper within the Development Area.

7.8 STAMP DUTIES.

Master Franchisee shall within the time prescribed by applicable law, submit an executed copy of this Agreement to each governmental agency within the Development Area responsible for the assessment of any stamp duty or comparable duties or taxes for the purposes of assessing or obtaining an opinion as to the stamp duty payable on or in respect of this Agreement and Master Franchisee agrees to pay all stamp duties and comparable duties and taxes (including any penalties for late payment) assessed to be payable on or in respect of this Agreement.

8. MARKETING.

Master Franchisee agrees to (a) establish, maintain and administer a Franchisee funded marketing fund for the Development Area (the "Marketing Fund"); (b) require all Franchisees (including those which are Affiliates of Master Franchisee) to contribute to the Marketing Fund in accordance with the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document terms of their Franchise Agreements; (c) direct the creation and implementation of advertising, marketing and promotional programs for the Development Area; (d) adapt the marketing materials provided to the Marketing Fund by Franchisor for use in the Development Area; and (e) furnish each Franchisee with reasonable quantities of marketing, advertising and promotional materials without charge. Master Franchisee may purchase advertising materials developed by Franchisor from Franchisor's domestic Marketing and Promotion Fund. Master Franchisee agrees to make available to all Franchisees within ninety (90) days after the end of its financial year a report of the receipts and expenditures of and the advertising, promotion, public relations, market research and other marketing programs and activities of the Marketing Fund during the preceding financial year. If Master Franchisee receives any vendor rebates from sales of Products within the Development Area, Master Franchisee shall deposit the full amount of all rebates into the Marketing Fund. Other than vendor rebates disclosed to Franchisor, Master Franchisee will not negotiate for, receive or accept income of any sort in connection with sales from or to Franchisees or Area Directors.

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Franchisor shall make available for sale to Master Franchisee advertising and marketing materials developed for use in the U.S. The purchase price shall be reasonable and related to the materials expected usefulness in the Development Area.

9. CONFIDENTIAL INFORMATION.

Franchisor possesses (and will continue to develop and acquire) certain confidential and proprietary information ("Confidential Information") relating to the development, operation and franchising of QUIZNO'S Restaurants, including: the terms of this Agreement; franchisee selection criteria; plans and specifications for the development of QUIZNO'S Restaurants; recipes; training materials, programs and systems; methods, techniques, formats, specifications, standards, procedures, sales and marketing techniques, computer software programs, statistical data, and knowledge of and experience relating to the development and operation of QUIZNO'S Restaurants; marketing and advertising programs; knowledge of specifications for and suppliers of certain products, materials, supplies, equipment, fixtures, furnishings and services; and knowledge of operating results and financial performance of QUIZNO'S Restaurants. Franchisor will disclose certain Confidential Information to Master Franchisee and to certain employees of Master Franchisee in training programs, the Operating Manual and in guidance furnished to Master Franchisee and its employees during the Agreement Term.

Master Franchisee acknowledges and agrees that neither Master Franchisee nor any employee or Affiliate of Master Franchisee will acquire any interest in the Confidential Information, other than the right to utilize the Confidential Information in performing its obligations hereunder and as disclosed to certain employees of Master Franchisee's Affiliate who are Franchisees during the Agreement Term, and that the use or duplication of any Confidential Information in any other restaurant operation would constitute an unfair method of

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document competition. Master Franchisee further acknowledges and agrees that Confidential Information is proprietary, includes trade secrets of Franchisor, is not generally known or easily accessible and is important to Franchisor and its Affiliates and other master franchisees, area directors and franchisees of Franchisor. Consequently, Franchisor will disclose the Confidential Information to Master Franchisee solely on the condition that Master Franchisee and its Owners agree, and Master Franchisee and Owners do hereby agree, that Master Franchisee and the Restricted Persons during the term of this Agreement and subsequent to its expiration or termination: will not use Confidential Information in any other restaurant operation or capacity; will maintain the absolute confidentiality of Confidential Information; will not make unauthorized copies of any portion of Confidential Information; will adopt and implement all reasonable procedures that Franchisor prescribes from time to time to prevent unauthorized use or disclosure of Confidential Information, including without limitation restrictions on disclosure thereof to Franchisees, Restaurant personnel and others; and will impose all of the aforementioned restrictions and obligations on all Franchisees. Notwithstanding anything to the contrary contained in this Agreement, the restrictions on Master Franchisee's disclosure and use of Confidential Information will not apply to information that is or becomes generally known in the quick service restaurant industry other than through disclosure (whether deliberate or inadvertent) by Master Franchisee, an Area Director or a Franchisee, or to the disclosure of Confidential Information in judicial or administrative proceedings to the extent that Master Franchisee is legally compelled to disclose such information, provided Master Franchisee must have used its best efforts and afforded Franchisor the opportunity to obtain an appropriate protective order or other assurance satisfactory to Franchisor of confidential treatment for the information required to be disclosed.

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10. EXCLUSIVE RELATIONSHIP.

Master Franchisee acknowledges and agrees that Franchisor would be unable to protect the Confidential Information against unauthorized use or disclosure and would be unable to encourage a free exchange of ideas and information among owners of QUIZNO'S Restaurants if master franchisees, area directors, franchisees and their management personnel were permitted to hold Ownership Interests in or perform services for Competitive Business. Master Franchisee further acknowledges that restrictions on the right of Master Franchisee and the Restricted Persons to hold Ownership Interests in or perform services for Competitive Business will not hinder their activities under this Agreement or otherwise. Franchisor has entered into this Agreement with Master Franchisee on the express condition that with respect to the operation of Submarine Sandwich Restaurants and other restaurants engaged in the production and sale of the Products, Master Franchisee and the Restricted Persons will deal exclusively with Franchisor. Master Franchisee therefore agrees that during the Agreement Term, Master Franchisee and Restricted Persons will not have any direct or indirect (through a Restricted Person or otherwise) Ownership Interest in any Competitive Business in the Development Area or elsewhere, perform services as a

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document director, officer, manager, employee, consultant, representative, agent or otherwise for any Competitive Business or directly or indirectly employ or seek to employ any person who is employed by Franchisor, its Affiliates or by any other master franchisee, area director or franchisee of Franchisor, nor induce any such person to leave said employment without the prior written consent of such person's employer.

11. INDEPENDENT CONTRACTORS/INDEMNIFICATION.

11.1 INDEPENDENT CONTRACTORS.

It is understood and agreed by the parties that this Agreement does not create a fiduciary relationship between them, that Franchisor and Master Franchisee are and shall be independent contractors, and that nothing in this Agreement is intended to make either party a general or special agent, joint venturer, partner, or employee of the other for any purpose. Master Franchisee shall conspicuously identify itself in all dealings with others as a subfranchisor of Franchisor and shall conspicuously and prominently place such other notices of independent ownership on such forms, cards, stationery, and other materials as Franchisor may require from time to time.

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11.2 NO LIABILITY FOR ACTS OF OTHER PARTY.

Master Franchisee shall not employ any of the Marks in signing any contract, application for any license or permit, or in a manner that may result in liability of Franchisor or its Affiliates for any indebtedness or obligation of Master Franchisee, nor will Master Franchisee use the Marks in any way not expressly authorized herein. Except as expressly authorized in writing, neither Franchisor nor Master Franchisee shall make any express or implied agreements, warranties, guarantees or representations, or incur any debt in the name of or on behalf of the other, or represent that their relationship is other than Franchisor and subfranchisor, and neither Franchisor nor Master Franchisee shall be obligated by or have any liability under any agreements or representations made by the other that are not expressly authorized in writing, nor shall Franchisor be obligated for any damages to any person or property directly or indirectly arising out of the development or operation of Restaurants including the Pilot Restaurant.

11.3 TAXES.

Franchisor shall have no liability for any sales, value added, use, service, stamp duty, occupation, excise, gross receipts, income, property, payroll or other taxes, whether levied upon this Agreement, Master Franchisee, one (1) or more Restaurants, Franchisees or Area Directors or Master Franchisee's property, or upon Franchisor, in connection with operations conducted by Master Franchisee (except any taxes that Franchisor is required by law to collect from Master Franchisee with respect to purchases from Franchisor

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document or taxes described in Section 7.5). Payment of all such taxes shall be the responsibility of Master Franchisee.

11.4 INDEMNIFICATION.

Master Franchisee agrees to indemnify, defend and hold Franchisor, its Affiliates, and their respective shareholders, directors, officers, employees, agents, and their respective successors and assignees, harmless against and to reimburse them for all claims, causes of action, costs, expenses, loss, liability, damages or obligations arising from or relating to Master Franchisee's obligations pursuant to this Agreement, including without limitation obligations under this Section, any and all taxes described in Section 11.3, the operation of the Pilot Restaurant, the direction and administration of the Marketing Fund, the operation of any Restaurant or Area Directorship, or the transfer of any interest in this Agreement, a Franchise Agreement, an Area Director Agreement, or an Ownership Interest in Master Franchisee, to the extent that such claims, causes of action, costs, expenses, loss, liability, damages or obligations do not arise from the negligence or wrongful conduct of Franchisor. For purposes of this indemnification, "claims" shall mean and include all obligations, actual and consequential damages, and costs incurred in the defense of any claim against Franchisor, including without limitation reasonable accountants', attorneys', attorney assistants', arbitrators' and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses. Franchisor shall have the right to defend any such claim against it in such manner as Franchisor deems appropriate. This indemnity shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.

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12. MARKS.

12.1 GOODWILL AND OWNERSHIP OF THE MARKS.

Master Franchisee acknowledges that Master Franchisee's right to use the Marks is derived solely from this Agreement and is limited to granting Franchises and Area Directorships in the Development Area in accordance with the terms hereof. Any unauthorized use of the Marks by Master Franchisee shall constitute a breach of this Agreement and an infringement of the rights of Franchisor in and to the Marks. Master Franchisee acknowledges and agrees that all usage of the Marks by Master Franchisee, Area Directors and Franchisees and any goodwill established by such use shall inure to the exclusive benefit of Franchisor and that this Agreement does not confer any goodwill or other interests in the Marks upon Master Franchisee, other than the right to grant Franchises and Area Directorships in compliance with this Agreement. All provisions of this Agreement applicable to the Marks shall apply to any other trademarks and commercial symbols hereafter authorized for use by and licensed to Master Franchisee by Franchisor. Master Franchisee agrees that neither Master Franchisee nor its Affiliates will use or attempt to register any other

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document trademarks, service marks or other commercial symbol for use in connection with the development, operation or franchising of QUIZNO'S Restaurants. Master Franchisee covenants that it will not directly or indirectly, either alone or in conjunction with others, challenge or take any action to cause a challenge to the validity or ownership of the Marks or to obstruct the efforts of Franchisor or its Affiliates with respect to the registration thereof.

12.2 LIMITATIONS ON MASTER FRANCHISEE'S USE OF THE MARKS.

Master Franchisee shall not use the Marks as part of any corporate or trade name or with any prefix, suffix, or other modifying words, terms, designs, or symbols, or in any modified form, nor may Master Franchisee use any Mark in connection with the performance or sale of any unauthorized services or products or in any other manner not expressly authorized in writing by Franchisor. All Marks shall be displayed in the manner prescribed by Franchisor.

12.3 NOTIFICATION OF INFRINGEMENT AND CLAIMS.

Master Franchisee shall immediately notify Franchisor of any apparent infringement of or challenge (actual or threatened) to Master Franchisee's or an Area Director's or a Franchisee's use of any Mark, or claim by any person of any rights in any Mark or a confusingly or deceptively similar trademark or service mark. Master Franchisee shall not communicate with any person other than its counsel, Franchisor and Franchisor's counsel with respect to any such infringement, challenge or claim. Franchisor shall have sole discretion to take such action as it deems appropriate in connection with any such infringement, challenge or claim, and the right to control any settlement, litigation, arbitration or administrative proceeding arising therefrom. Master Franchisee agrees to execute any and all instruments and documents, render such assistance, and take such action as may, in the opinion of Franchisor's counsel, be necessary or advisable to protect and maintain the interests of Franchisor in the Marks. Franchisor will reimburse Master Franchisee for the reasonable expenses incurred and paid by Master Franchisee in complying with the requirements imposed by this Section, so long as Master Franchisee has used the Marks in accordance with this Agreement.

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In the event that Franchisor elects not to take action with respect to any alleged infringement or challenge to a Mark, Master Franchisee may take such action and Franchisor shall cooperate with Master Franchisee in doing so, provided that Franchisor shall retain the ultimate authority to control and approve or disapprove the conduct and settlement of any action taken by Master Franchisee with respect to such infringement or challenge.

12.4 DISCONTINUANCE OF USE OF MARKS.

If it becomes advisable at any time in Franchisor's sole judgment for Master Franchisee and one (1) or more Area Directors or Franchisees to modify or discontinue use of any Mark or for Master Franchisee to use one or more

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document additional or substitute trademarks or service marks, Master Franchisee agrees to immediately comply with and require such Area Directors and Franchisees to immediately comply with Franchisor's directions to modify or otherwise discontinue the use of such Mark, or use one or more additional or substitute trademarks, logos or commercial symbols. Franchisor will have no obligation to reimburse Master Franchisee or any Area Directors or Franchisees for any expenditures made by them to modify or discontinue the use of a Mark or to adopt substitutes for discontinued Marks, including, without limitation, any expenditures relating to advertising or promotional materials, and no obligation to reimburse Master Franchisee or Franchisees for any loss of goodwill of their Restaurants related to a discontinued Mark.

12.5 REGISTERED USER AGREEMENTS.

Master Franchisee shall at the request and expense of Franchisor do all acts and execute all documents necessary or desirable in Franchisor's opinion for establishing Master Franchisee as a user of the Marks hereunder and, where required, for the registration of Master Franchisee's permitted use with governmental agencies. Following such request, Master Franchisee shall not be entitled to exercise any of the rights granted by this Agreement until Master Franchisee has executed and delivered such documents to Franchisor. Any registered user agreement shall be in form and substance acceptable to Franchisor.

12.6 MASTER FRANCHISEE'S TRADE NAME.

Master Franchisee acknowledges that Franchisor has a prior and superior claim to the Marks and "QUIZNO'S" trade name. Franchisor grants Master Franchisee the right to use the trade name "QUIZNO'S" in the legal name of the entity used in conducting the Master Franchisee's business provided for in this Agreement. Master Franchisee agrees not to register or attempt to register any trade name using the word "QUIZNO'S" in Master Franchisee's name or in any other person or business entity name without the prior written consent of Franchisor. When this Agreement is terminated, Master Franchisee shall execute any assignment or other document Franchisor requires to transfer to the Franchisor any rights Master Franchisee may possess in a trade name utilizing "QUIZNO'S" or any other Mark owned by the Franchisor.

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13. TRANSFER.

13.1 BY FRANCHISOR.

This Agreement is fully transferable by Franchisor and shall inure to the benefit of any assignee or other legal successor to the interests of Franchisor herein. Master Franchisee acknowledges and agrees that Franchisor may assign or delegate any or all of its rights and obligations under this Agreement to an Affiliate or an unaffiliated third party. In the event Franchisor delegates or assigns any obligations as aforesaid, Franchisor may direct Master Franchisee to

13.2 BY MASTER FRANCHISEE.

Master Franchisee understands and acknowledges that the rights and duties created by this Agreement are personal to Master Franchisee and the Owners and that Franchisor has entered into this Agreement in reliance upon the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of Master Franchisee and the Owners. Therefore, neither this Agreement, a Controlling Interest in Master Franchisee, nor any Area Director Agreement or Franchise Agreement may be transferred, in a single transfer or a series of transfers, without the prior written approval of Franchisor, which may be withheld in Franchisor's sole discretion. Any such transfer without such approval shall constitute a breach hereof and shall convey no rights to or interests in this Agreement, and Area Director Agreement or any Franchise Agreement. Master Franchisee agrees to reimburse Franchisor for all reasonable expenses incurred by Franchisor in evaluating and approving a proposed transfer. As used in this Agreement, the term "transfer" shall include, without limitation, whether voluntary or involuntary, direct or indirect: an assignment, sale, gift or pledge; the grant of a mortgage, charge, lien or security interest including, without limitation, the grant of a collateral assignment; a merger or consolidation, or issuance of additional Ownership Interests or redemption of Ownership Interests; a sale of voting interests or of securities convertible to voting interests, or an agreement granting the right to exercise, or control the exercise, of voting rights of any holder of an Ownership Interest; and a transfer that occurs as a result of divorce, insolvency, corporate or partnership dissolution, or upon death, by will, intestate succession or by declaration of, or transfer to, a trust.

13.3 FRANCHISOR'S RIGHT OF FIRST REFUSAL.

If Master Franchisee or an Owner shall at any time determine to sell or transfer an interest in this Agreement, the assets of Master Franchisee (other than in the ordinary course of business), one (1) or more Area Director Agreements, one (1) or more Franchise Agreements or a Controlling Interest in Master Franchisee, Master Franchisee or the Owners, as applicable, agree to obtain a bona fide, executed written offer and earnest money deposit in the amount of five percent (5%) or more of the offering price from a qualified, responsible and fully disclosed purchaser and a true and complete copy of the offer and any proposed ancillary agreements shall immediately be submitted to Franchisor. The offer must apply only to this Agreement, the assets of Master Franchisee, the Area Director Agreement(s), the Franchise Agreement(s) or an Ownership Interest in Master Franchisee and may not include the purchase of any other property or rights. Franchisor or its designee shall have the right, exercisable by written notice delivered to Master Franchisee or the Owners within thirty (30) days from the date of delivery of an exact copy of such offer to Franchisor, to purchase such interests for the price and on the terms and conditions contained in such offer, provided that Franchisor may substitute cash or marketable securities of equal value for any form of payment proposed in such offer. Franchisor's credit shall be deemed equal to the credit of any proposed purchaser. Franchisor shall have not less than ninety (90) days to prepare for closing. If Franchisor does not exercise its right of first refusal, Master

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Franchisee or the Owners may complete the sale to such purchaser pursuant to and on the exact terms of such offer, subject to Franchisor's approval of the transfer as provided in this Section, provided that if the sale to such purchaser is not completed within one hundred twenty (120) days after delivery of such offer to Franchisor, or there is a material change in the terms of the sale, Franchisor shall have an additional right of first refusal for thirty (30) days on the terms and conditions applicable to the initial right of first refusal, except that Franchisor shall have the option to substitute any of the modified terms of purchase for those contained in the original offer.

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13.4 DEATH OF MASTER FRANCHISEE.

Upon the death of an Owner of Master Franchisee, the executor, administrator, conservator, or other personal representative of such Owner shall, within a reasonable time from the date of death, transfer the deceased Owner's interest in this Agreement, Master Franchisee, or the assets of Master Franchisee, to such deceased Owner's heirs or legatees, provided the transferees are approved by Franchisor, in accordance with this Section. If the Owner's heirs or legatees cannot meet the conditions of this Agreement, the Owner's personal representative shall transfer the Owner's interest to a third party in accordance with the provisions of this Section.

14. TERMINATION OF AGREEMENT.

14.1 BY MASTER FRANCHISEE.

If Master Franchisee is in substantial compliance with this Agreement and Franchisor materially breaches this Agreement, Master Franchisee may terminate this Agreement effective sixty (60) days after delivery of written notice of termination if Master Franchisee gives written notice of such breach to Franchisor and Franchisor does not cure such breach within sixty (60) days after delivery of notice of such breach, or if such breach cannot reasonably be cured within sixty (60) days after delivery of notice of such breach, does not undertake within sixty (60) days after delivery of such notice, and continue until completion, reasonable efforts to cure such breach. Any termination of this Agreement by Master Franchisee other than as provided in Section 14.1 shall be deemed a termination by Master Franchisee without cause.

14.2 BY FRANCHISOR.

Franchisor may at its option terminate the Agreement Term or the Development Term, effective upon the delivery of written notice of termination to Master Franchisee or, if applicable, upon Master Franchisee's failure to cure a breach of this Agreement before the expiration of any period of time within which such breach may be cured in accordance with the provisions set forth below, if: (i) Master Franchisee fails to satisfy the Development Quota for two consecutive Development Periods or an aggregate of four (4) Development Periods; (ii) Franchisor elects to terminate this Agreement as provided in Section 6.5;

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iii) Master Franchisee or an Owner makes an assignment or transfer in violation of this Agreement; (iv) Master Franchisee or an Owner of a Controlling Interest in Master Franchisee is convicted by a trial court of, or pleads guilty to, a crime or offense that may adversely affect the goodwill associated with the Marks or the reputation of QUIZNO'S Restaurants, or engages in conduct that adversely affects the reputation of Franchisor or the goodwill associated with the Marks; (v) Master Franchisee or an Owner applies for trademark or service mark registration of any of the Marks anywhere in the world, or makes any unauthorized use of the Marks or an unauthorized use or disclosure of the Confidential Information; (vi) Master Franchisee becomes insolvent in the sense that Master Franchisee is unable to pay its bills as they become due or the liabilities of Master Franchisee exceed its assets; (vii) Master Franchisee makes an assignment for the benefit of creditors or an admission of its inability to pay its obligations as they become due; (viii) Master Franchisee files a voluntary petition in bankruptcy, files any pleading seeking any reorganization, liquidation or dissolution under any law, admits or fails to contest the material allegations of any such pleading filed against it, or is adjudicated a bankrupt or insolvent; (ix) a receiver, trustee, liquidator or other person acting in a comparable capacity is appointed for a substantial part of the assets of Master Franchisee; (x) the claims of creditors of Master Franchisee or its Owners are abated or subject to a moratorium under any law; (xi) a Restricted Person violates the restrictions set forth in Section 9 or Section 10; (xii) Master Franchisee fails to pay any amount when due hereunder to Franchisor and fails to correct such failure within ten (10) days after written notice thereof; or (xiii) Master Franchisee fails to comply with any other provision of this Agreement and does not correct such failure within sixty (60) days after written notice of such failure or, if or if such breach cannot reasonably be cured within sixty (60) days after delivery of notice of such breach, does not undertake within sixty (60) days after delivery of such notice, and continue until completion, reasonable efforts to cure such breach.

15. RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION.

15.1 MARKS.

Except with respect to any ongoing obligations of Master Franchisee under Section 15.3, Master Franchisee and the Owners agree that after the termination of this Agreement or expiration of the Agreement Term, they: (i) will not directly or indirectly identify Master Franchisee as a current or former Master Franchisee of, or as otherwise associated with, Franchisor; (ii) will not use any Mark, or any trade name, trademark or commercial symbol that is deceptively similar to any Mark, in any manner or for any purpose; (iii) will not use any trade name, trademark or commercial symbol that suggests or indicates a connection or association with Franchisor; (iv) will remove all signs containing any Mark and return to Franchisor or destroy all forms and materials containing any Mark; and (v) will return to Franchisor all copies of the Operating Manual and any other confidential materials which have been loaned or made available by Franchisor pursuant to this Agreement.

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Upon termination of this Agreement or upon expiration of the Agreement Term, for a period of two (2) years commencing on the effective date of such termination or expiration, Master Franchisee and the Restricted Persons agree they will not: (i) have any direct or indirect (through a Restricted Person or otherwise) Ownership Interest in any Competitive Business located or operating within the Development Area, or within any other Development Area in which QUIZNO'S Restaurants are then under development or in operation; (ii) perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for any Competitive Business located or operating within the Development Area or within any other Development Area in which QUIZNO'S Restaurants are then under development or in operation; or (iii) directly or indirectly employ or seek to employ, any person who is employed by Franchisor, its Affiliates or by any other master franchisee, area director or franchisee of Franchisor or its Affiliates, nor induce nor attempt to induce any such person to leave said employment without prior written consent of Franchisor and such person's employer.

15.3 AREA DIRECTOR AND FRANCHISE AGREEMENTS.

Unless Master Franchisee has extended the Development Term pursuant to Section 3.4, upon expiration or termination of the Development Term, Master Franchisee shall no longer have Development Rights hereunder but shall be entitled to collect commissions on royalties from Restaurants open in the Development Area on the date of termination or expiration for the remainder of the term remaining under the applicable Franchise Agreement provided that Master Franchisee continues to provide required services as franchisor therefor.

In addition to, and not in lieu of, the rights of Franchisor and the obligations of Master Franchisee under this Section, if this Agreement terminates or expires (including termination or expiration of the Development Term), Master Franchisee agrees to assign to Franchisor or its designee, at the option of Franchisor: (i) all of its rights and obligations under those Area Director Agreements designated by Franchisor, and (ii) in consideration of the payment provided in this Section, all of its rights and obligations under those Franchise Agreements designated by Franchisor. Franchisor may exercise its right to assignment of any Franchise Agreement at any time after termination of the Agreement Term or the Development Term until the expiration or termination of that Franchise Agreement (including any renewal terms). If Franchisor exercises the option provided for in this Section, it shall have ninety (90) days from the date of the notice exercising such option to designate the Franchise Agreement(s) to be assigned and prepare for closing. The payment to be made for each Franchise Agreement assigned shall be an amount equal to one third (0.3333) of the royalty (but not advertising) fees actually paid by the Franchisee pursuant to that Franchise Agreement during the five (5) year period commencing with the effective date of assignment. Such payments shall be made to Master Franchisee on or before thirty (30) days following the end of each calendar quarter. Franchisor may deduct from the payments due to Master Franchisee pursuant to this Section any amount then due and owing to Franchisor or its Affiliates under this Agreement. If Franchisor terminates the Agreement Term or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Development Term for cause (other than failure to meet the Development Quota) or if Master Franchisee terminates this Agreement without cause, Master Franchisee shall not be entitled to the foregoing payment for any assigned Franchise Agreement. Master Franchisee shall not be entitled to receive, or obligated to make, further payments (except as provided in this Section 15.3) of royalties or other amounts from Franchise Agreements or to Area Director Agreements assigned to Franchisor, provided that such assignment will not limit Master Franchisee's indemnification obligations for claims arising from facts that occur prior to the assignment date. The Form Agreements shall set forth Franchisor's right to assignment as provided in this Section. The Area Director Agreements and Franchise Agreements transferred, as designated by Franchisor, shall be assigned free and clear of any liens, charges and encumbrances.

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15.4 CONTINUING OBLIGATIONS.

All obligations of Franchisor and Master Franchisee which expressly or by their nature survive the termination of this Agreement or the expiration of the Agreement Term shall continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied in full or by their nature expire.

16. ENFORCEMENT.

16.1 INFORMAL DISPUTE RESOLUTION.

Prior to filing any proceeding, except as provided in Section 16.2 concerning temporary restraining orders and injunctive relief, the party intending to file such a proceeding shall be required to notify the other party in writing of the existence and the nature of the dispute. Franchisor and Master Franchisee each agree that within fifteen (15) business days of the other party's receipt of such notice, the Chief Executive, Chief Operating Officer or other senior executive officer of both Franchisor and Master Franchisee shall meet in Denver, Colorado, U.S.A., for a minimum of two (2) eight (8) hour days in order to attempt to resolve the dispute amicably. If such informal dispute resolution attempts prove to be unsuccessful, the notifying party may initiate a proceeding as described in Section 16.2.

16.2 FORMAL DISPUTE RESOLUTION.

If the parties are unable to resolve any dispute informally under Section 16.1, any party may commence a proceeding pursuant to the terms and limitations set forth in this Section 16. All controversies, disputes or claims arising between Franchisor, its Affiliates, and their respective officers, directors, shareholders, partners, agents, employees and attorneys (in their representative capacity) and Master Franchisee (and its Owners and the guarantors of this Agreement) arising out of or related to the relationship of the parties, this Agreement or any provision hereof, any Area Director Agreement or Franchise Agreement or any related agreement, the validity of this Agreement or any

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document provision hereof or any System Standard relating to the establishment or operation of QUIZNO'S Restaurants (collectively, "Claims") shall be commenced in the District Court for the City & County of Denver, Colorado, U.S.A., or the United States District Court for the District of Colorado, U.S.A., or any other state or federal court in the district where Franchisor then has its principal office. The parties have negotiated regarding a forum in which to resolve any disputes that may arise between them and have agreed to select a forum in order to promote stability in their relationship. Therefore, the parties waive any objection they may have to the personal jurisdiction of or venue in such courts. The parties further agree that in connection with any such proceeding, any party shall submit or file any Claim that would constitute a compulsory counterclaim (as defined by Rule 13 of the United States Federal Rules of Civil Procedure or its successor Rule) within the same proceeding as the Claim to which it relates. Any such Claim which is not submitted or filed as described above shall be barred. Notwithstanding anything to the contrary contained in this Section, Master Franchisee and Franchisor each have the right in a proper case to obtain temporary restraining orders and temporary or preliminary injunctive relief from a court of competent jurisdiction. The provisions of this Section are intended to benefit and bind certain third party non-signatories and will continue in full force and effect subsequent to and notwithstanding the expiration of the Agreement Term or the termination of this Agreement.

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Master Franchisee, its Affiliates and the Owners agree not to bring any Claim asserting that any of the Marks are generic or otherwise invalid. Master Franchisee, its Affiliates and the Owners agree that their sole recourse for Claims arising between the parties shall be against Franchisor or its successors and assigns, and further agree that the shareholders, directors, officers, employees and agents of Franchisor and its Affiliates (other than Master Franchisee) shall not be personally liable nor named as a party in any action arising from a Claim. The parties agree that any proceeding will be conducted on an individual, not a class-wide, basis, and that a proceeding involving a Claim may not be consolidated with any other proceeding between Franchisor and any other person or entity. No previous course of dealing shall be admissible to explain, modify or contradict the terms of this Agreement. No implied covenant of good faith and fair dealing shall be used to alter the express terms of this Agreement.

16.3 SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.

All provisions of this Agreement are severable and this Agreement shall be interpreted and enforced as if all completely invalid or unenforceable provisions were not contained herein and partially valid and enforceable provisions shall be enforced to the extent valid and enforceable. To the extent that the exclusive dealing provisions of Section 10 or the post-termination restrictive covenant set forth in Section 15.2 is deemed unenforceable by virtue of its scope in terms of geographic area, activity prohibited or length of time, but may be made enforceable by reductions of any of them, Master Franchisee and Franchisor agree that same shall be enforced to the fullest extent permissible under the laws and public policies applied in the jurisdiction in which

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document enforcement is sought. If any applicable and binding law or rule of any jurisdiction requires a greater prior notice of the termination of this Agreement than is required hereunder or the taking of some other action not required hereunder, or if under any applicable and binding law or rule of any jurisdiction, any provision of this Agreement or any specification, standard or operating procedure prescribed by Franchisor is invalid or unenforceable, the prior notice or other action required by such law or rule shall be substituted for the comparable requirements hereof, and Franchisor shall have the right, in its sole discretion, to modify such invalid or unenforceable provision, specification, standard or operating procedure to the extent required to be valid and enforceable. Such modifications to this Agreement shall be effective only in such jurisdiction and shall be enforced as originally made and entered into in all other jurisdictions.

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16.4 WAIVER OF OBLIGATIONS.

Franchisor and Master Franchisee may by written instrument unilaterally waive any obligation of or restriction upon the other under this Agreement. No acceptance by Franchisor of any payment by Master Franchisee or any other person or entity and no failure, refusal or neglect of Franchisor or Master Franchisee to exercise any right under this Agreement or to insist upon full compliance by the other with its obligations hereunder shall constitute a waiver of any provision of this Agreement. Franchisor makes no warranties or guarantees upon which Master Franchisee may rely, and assumes no liability or obligation to Master Franchisee, by granting any waiver, approval, or consent to Master Franchisee, or by reason of any neglect, delay, or denial of any request therefor. Any waiver granted by Franchisor shall be without prejudice to any other rights Franchisor may have, will be subject to continuing review by Franchisor, and may be revoked, in Franchisor's sole discretion, at any time and for any reason, effective upon delivery to Master Franchisee of ten (10) days' prior written notice. Franchisor and Master Franchisee shall not be deemed to have waived or impaired any right, power or option reserved by this Agreement (including, without limitation, the right to demand exact compliance with every term, condition and covenant herein, or to declare any breach thereof to be a default and to terminate this Agreement prior to the expiration of its term), by virtue of any custom or practice of the parties at variance with the terms hereof; any failure, refusal, or neglect of Franchisor or Master Franchisee to exercise any right under this Agreement or to insist upon exact compliance by the other with its obligations hereunder, including, without limitation, any System Standard; any waiver, forbearance, delay, failure, or omission by Franchisor to exercise any right, power, or option, whether of the same, similar or different nature, with respect to any QUIZNO'S Restaurants or any franchise agreement therefor; or the acceptance by Franchisor of any payment from Master Franchisee after any breach of this Agreement.

16.5 RIGHTS OF PARTIES ARE CUMULATIVE.

The rights of Franchisor and Master Franchisee hereunder are cumulative and no exercise or enforcement by Franchisor or Master Franchisee of any right

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document or remedy hereunder shall preclude the exercise or enforcement by Franchisor or Master Franchisee of any other right or remedy hereunder or which Franchisor or Master Franchisee is entitled by law to enforce.

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16.6 WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.

Franchisor and Master Franchisee hereby waive to the fullest extent permitted by law, any right to or claim for any punitive, exemplary or special damages against the other and agree that in the event of a dispute between them, except as otherwise provided herein, each shall be limited to the recovery of any actual damages sustained by it (provided that this limitation shall not apply to statutory penalties such as those set forth in 15 U.S.C. ' 1117(a)). Franchisor and Master Franchisee irrevocably waive trial by jury in any action, proceeding or counterclaim, whether at law or in equity, brought by either of them. The parties acknowledge that the parties' waiver of jury trial rights provides the parties with the mutual benefit of uniform interpretation of this Agreement and any dispute arising out of this Agreement or out of the parties' relationship created by this Agreement, and further acknowledge the receipt and sufficiency of mutual consideration for such benefit.

16.7 LIMITATION OF CLAIMS.

Except with regard to Master Franchisee's obligations to pay to Franchisor Restaurant Opening Fees, Continuing Fees and other payments due Franchisor and its Affiliates pursuant to this Agreement, any and all Claims arising out of or relating to this Agreement or the relationship of Master Franchisee and Franchisor shall be barred unless a proceeding is commenced within one (1) year from the date Franchisor or Master Franchisee knew or, exercising reasonable diligence should have known, of the facts giving rise to such Claims, or the period of time in which Claims must be brought under applicable law, whichever is less, or such Claim shall be barred. The parties understand that such time limit may be shorter than otherwise allowed by law.

16.8 COSTS AND LEGAL FEES.

If Franchisor or Master Franchisee is required to enforce this Agreement in a proceeding, the party prevailing in such proceeding shall be reimbursed by the other party for its costs and expenses, including without limitation reasonable attorneys' fees (for attorneys and legal assistants), accountants' fees, and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses, whether incurred prior to, in preparation for or in contemplation of the filing of any such proceeding. If Franchisor is required to engage legal counsel in connection with any failure by Master Franchisee to comply with this Agreement, Master Franchisee shall reimburse Franchisor for any of the above-listed costs and expenses incurred by it.

16.9 GOVERNING LAW/CONSENT TO JURISDICTION.

Master Franchisee and Franchisor agree that, except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Section 1051 et seq.) or other federal law, this Agreement and the relationship of the parties shall be governed by the internal laws of the State of Colorado, U.S.A. except that its choice of law and conflict of law rules shall not apply and any franchise registration, disclosure, relationship or similar statute which may be adopted by the State of Colorado shall not apply unless its jurisdictional requirements are met independently without reference to this Section. Franchisor may file an action seeking an order pursuant to Section 16.2 or to enforce any judgment or order in any such court or in any court located in the Development Area. Master Franchisee irrevocably submits to the jurisdiction of such courts and waives any objection it may have to either the jurisdiction or venue of such courts.

16.10 NO RIGHT TO SET-OFF.

Master Franchisee shall not be allowed to set off amounts owed to Franchisor hereunder against any monies owed to or claimed by Master Franchisee, which right of set off is hereby expressly waived by Master Franchisee.

17. REPRESENTATIONS OF MASTER FRANCHISEE.

Master Franchisee represents and warrants that it has induced Franchisor to enter into this Agreement based on the following representations and warranties made to Franchisor. The following representations and warranties shall survive termination of this Agreement.

(a) Master Franchisee understands and acknowledges that Franchisor has made no promise or guarantee, express or implied, that Master Franchisee will be able to comply with any applicable laws and regulations concerning the sale of franchises in the Development Area throughout the entire term hereof, but Master Franchisee agrees to use best efforts to comply with the same.

(b) Franchisor has made no representations or statements of actual, average, projected or forecasted sales, profits or earnings to Master Franchisee upon which Master Franchisee has in any way relied upon in entering into this Agreement, except as may be set forth in Franchisor's Uniform Franchise Offering Circular.

(c) Master Franchisee acknowledges that it has read this Agreement and understands and accepts the terms contained in this Agreement as being reasonably necessary to maintain Franchisor's high standards of quality and service and the uniformity of those standards and thereby to protect and preserve the goodwill of the Marks and the integrity of the System. Master

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Franchisee acknowledges that it has conducted an independent investigation of the business venture contemplated by this Agreement and recognizes that, like any other business, the nature of this business may evolve and change over time, that the investment involves business risks and that the success of the venture is largely dependent upon Master Franchisee's business abilities and efforts. Master Franchisee further represents to Franchisor, as an inducement to its entry into this Agreement, that Master Franchisee has made no misrepresentations in obtaining the license granted pursuant to this Agreement.

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18. MISCELLANEOUS PROVISIONS.

18.1 BINDING EFFECT.

This Agreement is binding upon the parties and their respective executors, administrators, heirs, assigns and successors in interest, and shall not be modified except by written agreement signed by both Master Franchisee and Franchisor.

18.2 CONSTRUCTION.

The preambles and exhibits are a part of this Agreement, which constitutes the entire agreement of the parties, and, except for Area Director Agreements and Franchise Agreements, there are no other oral or written understandings or agreements between Franchisor and Master Franchisee relating to the subject matter of this Agreement. The headings of the several sections and subsections hereof are for convenience only and do not define, limit or construe the contents of such sections or subsections. The term "Master Franchisee" as used herein is applicable to one or more persons, a corporation or a partnership, as the case may be, and the singular usage includes the plural and the masculine and neuter usages include the other and the feminine. If two or more persons are at any time Master Franchisee hereunder, whether or not as partners or joint venturers, their obligations and liabilities to Franchisor shall be joint and several. This Agreement may be executed in multiple copies, each of which shall be deemed an original.

18.3 GOVERNING LANGUAGE.

This Agreement and the Operating Manual originally will be written in the English language, and all questions of interpretation of this Agreement or the Operating Manual shall be resolved by reference to the same as written in English.

18.4 NOTICES, REPORTS AND PAYMENTS.

All written notices, reports and payments permitted or required to be delivered by the provisions of this Agreement or of the Operating Manual shall be deemed so delivered at the time delivered by hand, five (5) business days after being placed in the hands of a commercial courier service for express delivery or ten (10) days after placement with a government mail service by

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Registered or Certified Mail (or the equivalent), Return Receipt Requested, postage prepaid. All such notices, reports and payments shall be addressed to the parties as follows:

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If to Franchisor: The Quizno's Corporation 1415 Larimer Street Denver, Colorado 80202 Attention: Legal Department

If to Master ______Franchisee: ______

A change by any party with respect to the address for delivery of all such notices and reports must be delivered in writing to the other party within ten (10) business days of any such change in address. Any required payment or report not actually received by Franchisor during regular hours on the date due (or postmarked by government postal authorities at least two (2) days prior thereto) will be deemed delinquent. For purposes of this Agreement, the term "business day" shall exclude Saturdays, Sundays and official holidays.

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement in multiple counterparts in ______, ______on the day and year first above written.

THE QUIZNO'S CORPORATION ______Master Franchisee (Print Name)

By:______By:______

Name:______Name:______

Title:______Title:______

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In consideration of, and as a condition to, the grant by Franchisor to Master Franchisee of the master franchise rights set forth in this Agreement, the undersigned Owners (on behalf of themselves and the Restricted Persons) hereby agree to be personally bound by the provisions of this Agreement applicable to them.

OWNERS

______Name: Name:

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EXHIBIT A

TO THE MASTER FRANCHISE AGREEMENT BY AND BETWEEN THE QUIZNO'S CORPORATION AND DATED ______

DEVELOPMENT AREA

The Development Area referred to in Section 2 of the captioned agreement shall consist of .

THE QUIZNO'S CORPORATION ______Master Franchisee

By:______By:______

Title:______Title:______

A - 1

EXHIBIT B TO THE MASTER FRANCHISE AGREEMENT BY AND BETWEEN THE QUIZNO'S CORPORATION AND ______DATED ______

DEVELOPMENT QUOTA

Cumulative Number of QUIZNO'S Restaurants to be Open and in Date Operation in the Development Development Area Development Period Date Development ("Development Period Commences Period Ends Quota") ------

First January 1, December 31,

Second January 1, December 31,

Third January 1, December 31,

Fourth January 1, December 31,

Fifth January 1, December 31,

Sixth January 1, December 31,

Seventh January 1, December 31,

Eighth January 1, December 31,

Ninth January 1, December 31,

Tenth January 1, December 31,

By:______By:______

Name:______Name:______

Title:______Title:______

B - 1

EXHIBIT C

TO THE MASTER FRANCHISE AGREEMENT BY AND BETWEEN THE QUIZNO'S CORPORATION AND ______DATED ______

MARKS

As of the date of this Agreement, Master Franchisee shall be authorized to use the following Marks in connection with the franchising of QUIZNO'S Restaurants pursuant to this Agreement, all of which are registered on the Principal Register of the United States Patent and Trademark Office:

C - 1

TO THE MASTER FRANCHISE AGREEMENT BY AND BETWEEN THE QUIZNO'S CORPORATION AND ______DATED ______

OWNERSHIP INTERESTS

Master Franchisee represents and warrants that it is duly organized and validly existing in good standing under the laws of the jurisdiction of its incorporation or organization, is qualified to do business in all jurisdictions in which its business activities or the nature of properties owned by Master Franchisee requires such qualification, and has the corporate or other authority to execute, deliver and carry out all of the terms of this Agreement.

Master Franchisee further represents and warrants that all Owners and their interests in Master Franchisee are completely and accurately listed on this Exhibit D and agree that Master Franchisee will execute such revised versions of Exhibit D as may be necessary during the term of this Agreement to reflect any changes in the information contained in original Exhibit D.

1. Ownership Structure. If MASTER FRANCHISEE is a company or other entity (including a partnership or an entity having limited liability), MASTER FRANCHISEE and its Owners represent and warrant that the ownership structure of MASTER FRANCHISEE is as follows:

Class of Number of Units Percentage of Ownership of Ownership Total Ownership Name of Owner Interest Interests Interests ------

D - 1

There are no other authorized classes of Ownership Interests of MASTER FRANCHISEE.

OWNERS

______Name: Name:

D - 2

GUARANTY AND ASSUMPTION OF OBLIGATIONS UNDER THE MASTER FRANCHISE AGREEMENT DATED ______, BETWEEN THE QUIZNO'S CORPORATION AND

In consideration of, and as an inducement and a condition to, the execution of that certain MASTER FRANCHISE AGREEMENT of even date herewith (the "Agreement") between THE QUIZNO'S CORPORATION ("Franchisor") and ("Master Franchisee"), each of the undersigned hereby personally and unconditionally: (1) guarantees to Franchisor, and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement, that Master Franchisee shall punctually pay and perform each and every undertaking, agreement and covenant set forth in the Agreement; and (2) agrees to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement, both monetary obligations, including without limitation, the obligations to pay costs and legal fees as provided in the Agreement, and the obligation to take or refrain from taking specific actions or to engage or refrain from engaging in specific activities, including without limitation the provisions of the Agreement relating to competitive activities.

Each of the undersigned waives: (1) acceptance and notice of acceptance by Franchisor of the foregoing undertakings; (2) notice of demand for payment of any indebtedness or nonperformance of any obligations hereby guaranteed; (3) protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed; (4) any right he may have to require that an action be brought against Master Franchisee or any other person as a condition of liability; (5) all rights to payments and claims for reimbursement or subrogation which any of the undersigned may have against Master Franchisee arising as a result of the execution of and performance under this guaranty by the undersigned; and (6) any and all other notices and legal or equitable defenses to which he may be entitled.

Each of the undersigned consents and agrees that: (1) his direct and immediate liability under this guaranty shall be joint and several not only with Master Franchisee, but also among the undersigned; (2) he shall render any payment or performance required under the Agreement upon demand if Master

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Franchisee fails or refuses punctually to do so; (3) such liability shall not be contingent or conditioned upon pursuit by Franchisor of any remedies against Master Franchisee or any other person; (4) such liability shall not be diminished, relieved or otherwise affected by any extension of time, credit or other indulgence which Franchisor may from time to time grant to Master Franchisee or to any other person, including without limitation the acceptance of any partial payment or performance, or the compromise or release of any claims, none of which shall in any way modify or amend this guaranty, which shall be continuing and irrevocable throughout the term of the Agreement and for so long thereafter as there are any monies or obligations owing by Master Franchisee to Franchisor under the Agreement; and (5) the written acknowledgment of Master Franchisee, accepted in writing by Franchisor, or the judgement of any court of competent jurisdiction establishing the amount due from Master Franchisee shall be conclusive and binding on the undersigned as guarantors.

D - 3

If Franchisor is required to assert a claim for amounts owed by Master Franchisee to Franchisor hereunder, or if Franchisor is required to enforce this Guaranty and Assumption of Obligations, Franchisor shall be entitled to reimbursement of its costs and expenses, including but not limited to, reasonable accountants', attorneys' attorney assistants', arbitrators' and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses, whether incurred prior to, in preparation for or in contemplation of the filing of any such proceeding. If Franchisor is required to engage legal counsel in connection with any failure by the undersigned to comply with this guaranty, the undersigned shall reimburse Franchisor for any of the above-listed costs and expenses incurred by it.

This Guaranty and Assumption of Obligations shall be governed by the internal laws of the State of Colorado, U.S.A., except that its choice of law and conflict of law rules shall not apply.

IN WITNESS WHEREOF, each of the undersigned has hereunto affixed his signature on the same day and year as the Agreement was executed.

OWNERS

______Name: Name:

D - 4

All Parties described below as "Borrowers" c/o John H. Gallivan 1415 Larimer Street Denver, CO 80202

Via Facsimile: (720) 359-3395

Re Fixed Rate Commitment Letter: Total Note Amount: $15,555,555.64 (consisting of $14,000,000.00 of Aggregate Loan Amount and $1,555,555.64 of Aggregate Credit Enhancement Amount).

Dear Mr. Gallivan:

AMRESCO Commercial Finance, Inc. ("ACFI" or the "Lender") is pleased to approve your loan application ("Application") for a loan and agrees to lend you the total amount set forth above to the following companies (collectively, "you", "your", or the "Borrower"): The Quizno's Corporation; The Quizno's Operating Company; S & S Company; The Quizno's Realty Company; The Quizno's Acquisition Company; The Quizno's Licensing Company; and Quizno's Kansas, L.L.C. The allocation of the aggregate Loan Amount and the Total Note Amount and corresponding terms will be set forth on Exhibit A attached hereto and made a part hereof:

The following terms and conditions will apply on your loan(s):

1. Note Amount: Your loan(s) will be evidenced by two secured ------promissory notes (collectively, the "Note") in an aggregate amount ("Total Note Amount") of $15,555,555.64 of which $14,000,000.00 will be the principal amount disbursed to you at closing pursuant to your instructions and the terms of this Commitment Letter (excluding your closing costs which are withheld) and $1,555,555.64 will be your aggregate Credit Enhancement Amount.

2. Interest Rate: Prior to an event of default, the interest ------rate on the loan(s) will be equal to the 10-year treasury note rate 10 days prior to the closing date plus 4.25%, which as of September 28, 1999 would equate to an annual interest rate of 10.10%. The loan and enhancement payments herein reflect an assumed interest rate of 10.10%, but are subject to change based upon the 10-year treasury note rate as of the date the interest rate is locked. ACFI will have the unilateral right, at any time, to readjust this rate once within four months from the closing date, at a rate equal to 4.25% plus the then current 10 year treasury note rate. If requested by Lender, Borrower shall execute slip pages to the Note necessary to conform the Note to the interest rate set forth in this section 2

3. Scheduled Monthly Credit Enhancement Obligation Payment: ------You will pay an aggregate amount of $13,092.65 each month while your aggregate Credit Enhancement Amount remains outstanding.

4. Scheduled Monthly Loan Payment: You will pay an aggregate ------amount of $193,337.48 each month while all the loan(s) listed above remain outstanding. This amount will be reduced accordingly for any such loan(s) that mature or are paid off.

5. Payments and Monthly Enhancement Rebates: The first payment

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ------under the loan(s) ("Closing Payment") will be due on the date that such loans close and will be withheld from the loan proceeds to be disbursed to you at the Closing Date. The Closing Payment will equal the sum of (i) interest payable on each Loan Amount from the Closing Date to the first day of the next month, (ii) the Scheduled Monthly Loan Payment for each of your loan(s) and (iii) the Scheduled Monthly Credit Enhancement Obligation payment for each of your loan(s). The Scheduled Monthly Loan Payment for each loan will consist of (i) amortization of the corresponding Note Amount over the stated loan term and (ii) interest on the outstanding Loan Amount corresponding to such loan. The Scheduled Monthly Loan Payment will be the same amount every month. You will make payments of the Scheduled Monthly Loan Payment and Scheduled Monthly Credit Enhancement Obligation Payment no later than the first day of each month (each a "Payment Date") beginning on January 1, 2000 (assuming an October 1999 closing).

If no loan in the pool of loans made by ACFI (of which your loans are a part) is delinquent or in default, you will be entitled to an aggregate monthly enhancement rebate ("Monthly Enhancement Rebate") of $13,092.65, an amount equal to your initial aggregate Scheduled Monthly Credit Enhancement Obligation Payment. If any loans in such loan pool are delinquent or in default, the amount of your Monthly Enhancement Rebate will be reduced and may be eliminated entirely. All calculations of the Monthly Enhancement Rebate will be made by ACFI, its agent or representatives. Your Monthly Enhancement Rebate will be applied to your next Scheduled Monthly Credit Enhancement Obligation Payment which is due. In the event you are entitled to such credit, you will be notified prior to the next Payment Date of the reduced amount due on the next Payment Date. All payments will be made in United States dollars and at the offices of the Lender or such other place or places as the Lender may notify you.

6. Prepayment: Each loan may be prepaid in full (but not ------in part) subject to certain restrictions and payment of a yield maintenance make-whole premium, if due. The yield maintenance make-whole premium shall be in effect for the first seven (7) years of the loan term, after which such premium shall be 1% of the then outstanding loan balance.

7. Use: You will use the Aggregate Loan Amount solely for the ---- business or commercial purpose identified as follows (allocations are estimates):

Refinance Existing Debt $3,515,000 *Escrowed funds for various uses as described below 9,900,000 Closing costs (including 1st month payment) 585,000 ------Total Loan Proceeds $14,000,000

* The escrowed funds will be split into two different uses. 60% of the escrowed amount will be used for any of the specific uses as follows: going-private transaction, tender offers to Quizno's shareholders or other QSR chains, open market purchases of QUIZ stock, acquisition of new stores, upgrades at the corporate and store level, repurchase area directorships. 40% of the escrowed funds can be used for anything that Quizno's wishes to use the funds for with specific exception to working capital, dividends or distributions, or to "cash-out" the two majority equity holders.

Quizno's may use a maximum of $2 million of the escrowed funds for a program that will offer limited financing to franchisees. In this program Quizno's will finance no more that 66.7% of the start-up costs for a franchisee, with the franchisee injecting the additional 33.3% in equity.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Quizno's will be allowed to draw on this escrow account a maximum of $1 million per month. If the total amount in draws in a specific month is higher than $1 million, ACFI must approve the disbursement of funds that month. ACFI will receive monthly reports on the disbursements and uses of funds until the balance of the escrow is $0.

8. Collateral: Your obligations will be secured by a blanket, ------first priority, perfected security interest in all of your present and future assets other than real and personal property acquired in the future subject to a purchase money security agreement, to the extent and in form and substance satisfactory to us and our counsel. These assets must include, but are not limited to all presently owned and future acquired: equipment and personal property relating to the corporate office and each of the units listed on Exhibit A; leasehold mortgages/deeds of trust for at least 50% of the unit locations listed on Exhibit A (if 50% of the leasehold mortgages cannot be obtained ACFI will allow a substitution of other collateral in form and substance satisfactory to ACFI in its sole discretion); all of your general intangibles (as defined in the Uniform Commercial Code), including all trademarks, patents, trade names, trade secrets, service marks, service names, franchise agreements, license agreements, contract rights, and all proceeds and income thereof. Upon your request, Lender shall release its lien on all franchise agreements entered into subsequent to the date that the Borrower achieves $7 million in annual EBITDA and a FCCR of 2.00:1 based on annual audited financial statements.

9. Fixed Charge Coverage Ratios:

a. You are obligated to maintain a Fixed Charge Coverage Ratio (FCCR) of 1.35:1 at the corporate (consolidated) level throughout the life of your loan(s). ACFI will monitor this compliance on an annual basis and sometimes more frequently if conditions warrant.

b. YOU MAY NOT BORROW OR INCUR ADDITIONAL INDEBTEDNESS IF THE PAYMENTS ON SUCH INDEBTEDNESS WOULD CAUSE THE FCCR to GO below 1.50:1 (POST TRANSACTION). Any additional indebtedness may not be secured by any of the collateral referred to above.

10. Closing Documents: At the closing you must execute and deliver ------standard ACFI loan documents, in form and substance satisfactory to us, including the following:

a. Secured Promissory Notes evidencing your obligation to repay such loan(s);

b. Pledge and Security Agreement granting a security interest to the Lender in the collateral referred to above;

c. Leasehold Mortgages/Deeds of Trust and other real property documentation, as applicable;

d. An opinion of your legal counsel in form and substance satisfactory to us and our counsel;

e. UCC-1 Financing Statements and all other documents required to perfect a security interest in the collateral referenced above; and

f. Any and all other documents required by us in connection with your loan.

Execution copies: Execution copies of the Secured Promissory Notes, Pledge ------and Security Agreement, UCC-1 Financing Statements, Leasehold Mortgages/Deeds of Trust and other real property documentation, and/or Affiliate Guarantee(s), as applicable, and a form of the required opinion letter will be provided to you and your counsel following your acceptance of this letter.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 11. Additional Conditions: This offer is subject to the following ------additional conditions:

a. You must sign, date and return the enclosed copy of this letter on or before October 4, 1999.

b. You must provide evidence to Lender that it shall receive at closing a first priority, perfected security interest in the collateral referred to above.

c. Prior to closing, you must execute and deliver into escrow pending the closing, all closing documents referenced above.

d. The closing of this loan must occur on or before October 12, 1999 at such place as Lender may select. If the loan(s) does not close on or before this date, ACFI may change or withdraw its commitment, or change the applicable interest rate at its sole discretion.

e. Lender's counsel must be satisfied with the documentation, proceedings and legal opinions incident to this transaction.

f. There shall have been no material adverse change in your financial condition or prospects since the date of this commitment letter.

g. ACFI must receive each of the following, in form and substance acceptable to ACFI in its sole discretion: (i) a legal review of your loan files; (ii) Borrowing Resolutions from each of the entities listed above as Borrowers; (iii) completed and signed environmental questionnaires for each unit; (iv) landlord estoppels for at least 50% of the locations listed on Exhibit A; (v) resolution of various lease issues as noted on fax dated September 20, 1999; and (vi) the unqualified approval of the Loan by ACFI's warehouse lender.

12. Fees: -----

a. Application Fee: For and in consideration of providing this commitment letter, Borrower has paid Lender a non-refundable application deposit of $70,000 (The "Application Fee") which will be credited against the Loan Fee (as defined below) on the loan closing date. If the loan does not close, Lender shall retain the Application Fee.

b. Loan Fee: For and in consideration for the loan, Borrower shall pay, from the proceeds of the loan at closing, a loan fee ("Loan Fee") of 2.5% of the Aggregate Loan Amount, less the Application Fee. If the loan closes, the Loan Fee shall be used to pay for lending costs and expenses. However, if the loan does not close, Borrower must pay for all costs and expenses incurred in connection with the loan.

If you accept this letter on the terms and conditions provided herein, please sign in the space provided below and return to the Lender at the address noted above on or before October 4, 1999.

Sincerely,

AMRESCO Commercial Finance, Inc.

By: /s/ Ryan Hoppe ------

By the undersigned's signature below, the undersigned accepts the offer for the loan(s) described in this commitment letter and agrees to all of the terms and conditions to such loan(s) described above.

AMRESCO Commercial Finance, Inc.

PROMISSORY NOTE ACLC 1999-2 SBL PROGRAM

$14,222,222.28 October 5, 1999

FOR VALUE RECEIVED, the undersigned The Quizno's Corporation; The Quizno's Operating Company; S & S Company; The Quizno's Realty Company; The Quizno's Acquisition Company; The Quizno's Licensing Company; and Quizno's Kansas, LLC, (collectively the "Borrower") hereby promises to pay to the order of AMRESCO Commercial Finance, Inc., a Nevada corporation (together with its successors and assigns, the "Lender"), the principal sum of Twelve Million Eight Hundred Thousand Dollars and No Cents ($12,800,000.00) (the "Aggregate Loan Amount") and an amount of up to One Million Four Hundred Twenty Two Thousand Two Hundred Twenty Two Dollars and Twenty Eight Cents ($1,422,222.28) (the "Aggregate Credit Enhancement Amount"), and all other amounts owed under the Loan Documents, together with all interest accrued thereon, at the times and place and in the manner specified in the Loan Documents.

This Promissory Note is one of a series of notes (the "Program Notes") issued by certain business owners or landlords of commercial properties (the "Program Borrowers") in connection with loans (the "Program Loans") made or to be made by the Lender to the Program Borrowers as part of the ACLC 1999-2 SBL Program. This Promissory Note evidences the Borrower's obligation, inter, alia, (i) to repay the loan(s) (each of the loans set forth on Schedule I attached hereto and made a part hereof, a "Loan" and, collectively, the "Loans") made by the Lender to the Borrower on the date hereof in an aggregate principal amount equal to the Aggregate Loan Amount, (ii) to guarantee the payment of delinquencies or defaults in respect of Program Loans or any obligations in connection therewith, as determined in Lender's sole discretion ("Program Loan Deficiencies"; each such delinquent or defaulted Program Loan or related obligation, a "Delinquent Program Loan") in an amount up to the Aggregate Credit Enhancement Amount, (iii) to pay, subject to rebate, the Scheduled Monthly Credit Enhancement Obligation Payment (as hereinafter defined) and (iv) to pay interest on the Aggregate Loan Amount. For purposes of this paragraph, a "delinquent" Program Loan is defined as a Program Loan where the loan payments are past due by one or more days. Moreover, a "defaulted" Program Loan is defined as a Program Loan where an Event of Default has occurred and remains uncured (as defined in the Borrower's Pledge and Security Agreement).

1. Definitions. Terms defined in the Pledge and Security Agreement, dated as of the date hereof (the "Security Agreement"), between the Borrower and the Lender which are not otherwise defined herein shall have the meanings ascribed to such terms in the Security Agreement. The following terms shall have the meanings set forth on Schedule II attached hereto and made a part hereof: ACLC 1999-2 SBL Program, ACFI Closing Settlement Statement, Closing Payment, Credit Enhancement Amount, Funding Date, Interest Rate, Loan Amount, Loan Deficiency, Note Amount, Ratable Share, Scheduled Monthly Credit Enhancement Obligation Payment, Scheduled Monthly Loan Payment, State and Stated Maturity Date. All terms defined in the singular will have the same meaning when used in the plural and vice versa.

2. Interest. The Borrower agrees to pay interest on the outstanding Note Amount at the Interest Rate from the date any loan proceeds are advanced (the "Closing Date") until the Loans have been discharged or otherwise paid in full in accordance with the terms hereof. Interest shall be payable in one (1) month installments, on the first day of every calendar month (each such date, a "Payment Date") and, unless otherwise expressly stated, in arrears. Interest on

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Aggregate Loan Amount shall be paid as part of the Scheduled Monthly Loan Payment, and interest on the outstanding Aggregate Credit Enhancement Amount shall be paid, subject to rebate, as the Scheduled Monthly Credit Enhancement Obligation Payment. All computations of interest shall be made by the Lender on the basis of a year of 360 days and shall be allocated in twelve (12) equal monthly installments.

Notwithstanding the foregoing paragraph, upon the occurrence and during the continuation of an Event of Default, the Borrower shall instead pay interest on the outstanding Note Amount at a rate (the "Default Rate") per annum equal to the Interest Rate plus three percent (3.00%), payable upon demand by the Lender. All obligations hereunder which are not paid by the Borrower when due and payable shall bear interest at the Default Rate.

3. Guarantee. As more fully specified herein, the Borrower hereby irrevocably and unconditionally guarantees and promises to pay to the Lender (the "Guarantee") an amount up to the Aggregate Credit Enhancement Amount plus the aggregate Scheduled Monthly Credit Enhancement Obligation Payments for the payment of Program Loan Deficiencies.

4. Required Payments and Rebates.

(a) Closing Payment. On the Closing Date, the Borrower shall pay the Closing Payment to the Lender. The Closing Payment equals the sum of (i) interest payable on each Loan Amount from the Closing Date to the first day of the next calendar month thereafter, (ii) the Scheduled Monthly Loan Payment for each Loan and (iii) the Scheduled Monthly Credit Enhancement Obligation Payment for each Loan.

(b) Scheduled Monthly Loan Payments. The Borrower agrees to pay the Lender an amount equal to the Scheduled Monthly Loan Payment for each Loan (i) on the Closing Date (as part of the Closing Payment) and (ii) on each Payment Date thereafter, commencing on the first day of the third calendar month following the calendar month in which the Closing Date occurs or, if the Closing Date occurs on a Payment Date, on the first day of the second calendar month following the calendar month in which the Closing Date occurs (the "Initial Payment Date"), until the earliest of (A) the acceleration or prepayment of such Loan (subject to the fulfillment of prepayment amounts under Section 5b), (B) the applicable Loan Amount Repayment Date (as defined in Section 4(e), below) or (C) the applicable Stated Maturity Date. The Scheduled Monthly Loan Payment for each Loan equals (1) the monthly installment amount which will fully amortize the Loan Amount and the Credit Enhancement Amount of such Loan (including the applicable interest on such amounts) over the period from the calendar month preceding the Initial Payment Date through the applicable Stated Maturity Date less (2) the Scheduled Monthly Credit Enhancement Obligation Payment for such Loan.

(c) Scheduled Monthly Credit Enhancement Obligation Payments. The Borrower agrees to pay the Lender an amount equal to the Scheduled Monthly Credit Enhancement Obligation Payment for each Loan (i) on the Closing Date (as part of the Closing Payment) and (ii) on each Payment Date, commencing on the Initial Payment Date, until the earliest of (A) the discharge, acceleration or prepayment of such Loan (subject to the fulfillment of prepayment amounts under Section 5b), (B) payment in full of the applicable Credit Enhancement Amount or (C) the applicable Stated Maturity Date. Each Scheduled Monthly Credit Enhancement Obligation Payment shall be subject to the Monthly Enhancement Rebate provided for in Section 4(d), below.

(d) Monthly Enhancement Rebates.

(i) If, on any Payment Date, there are no outstanding Program Loan Deficiencies, the Borrower shall be entitled to a rebate on each Loan (a "Monthly Enhancement Rebate") in an amount equal to the Scheduled Monthly Credit

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Enhancement Obligation Payment for such Loan plus the Borrower's pro rata portion of recoveries of Program Loan Deficiencies with respect to previously paid Scheduled Monthly Credit Enhancement Obligation Payments which have not been previously rebated. On the Initial Payment Date, if there are no outstanding Program Loan Deficiencies, the Borrower shall also be entitled to a rebate of the Scheduled Monthly Credit Enhancement Obligation Payments paid pursuant to clause (iii) of Section 4(a).

(ii) If, on any Payment Date, there are outstanding Program Loan Deficiencies, the amount of each Monthly Enhancement Rebate will be reduced, in whole or in part, by an amount which would equal the Borrower's pro rata portion of such Program Loan Deficiency or Deficiencies multiplied by the applicable Ratable Share, provided, however, that in no event shall the Monthly Enhancement Rebate be reduced by more than the Scheduled Monthly Credit Enhancement Obligation Payment. For the purposes of this subsection (ii), the Borrower's pro rata portion of any Program Loan Deficiency shall be calculated by (A) dividing the Borrower's aggregate Scheduled Monthly Credit Enhancement Obligation Payments by the aggregate Scheduled Monthly Credit Enhancement Obligation Payments of all non-delinquent Program Loans and (B) multiplying such amount by the Program Loan Deficiency or Deficiencies.

(iii) Any payment (excluding prepayments) made under this Promissory Note which is less than (A) the aggregate of (1) the Scheduled Monthly Loan Payment on each Loan and (2) the Scheduled Monthly Credit Enhancement Obligation Payment on each Loan minus (B) the allocated Monthly Enhancement Rebate, if any, shall be applied ratably among the Loans, in accordance with their respective Ratable Shares (see Schedule I), creating a Loan Deficiency on each of the Borrower's Loans. If the Borrower's Loans are subject to any Loan Deficiency, the Borrower will not be entitled to any Monthly Enhancement Rebate on any Loan.

(iv) Each Monthly Enhancement Rebate, if any, will be credited against the payment of the Scheduled Monthly Credit Enhancement Obligation Payment for the applicable Loan due on the immediately succeeding Payment Date.

(e) Discharge; Repayment of the Credit Enhancement Amount.

(i) At any time after the Loan Amount of any Loan has been paid in full by the Borrower pursuant to Section 4(b), above (the "Loan Amount Repayment Date"), the Borrower may elect to have such Loan discharged by making a payment in an amount (the "Discharge Amount") equal to the lesser of (A) the outstanding Credit Enhancement Amount of such Loan and (B) the Program Credit Enhancement Amount (as defined in Section 5, below), if any, as of such date.

(ii) In the event that the Borrower does not elect to discharge any Loan in accordance with paragraph (i), above, on the applicable Loan Amount Repayment Date, the Borrower shall instead repay the outstanding Credit Enhancement Amount of such Loan in monthly installments (each such installment to be in an amount equal to the Scheduled Monthly Loan Payment for such Loan) on each Payment Date, commencing on the first Payment Date following the Loan Amount Repayment Date, until the earliest of (A) payment in full of the outstanding Credit Enhancement Amount, (B) the discharge or acceleration of such Loan (in accordance with Section 4 and 5) or (C) the applicable Stated Maturity Date.

(iii) Upon payment of the Loan Amount and either (A) the Discharge Amount of any Loan or (B) the amount described in Section 4(e)(ii), such Loan and the Borrower's obligations hereunder relating to such Loan shall be terminated.

(f) Stated Maturity Date. Unless earlier repaid, prepaid or accelerated hereunder, the outstanding Loan Amount of each Loan and all accrued and unpaid interest thereon, the outstanding Credit Enhancement Amount of such Loan and all accrued and unpaid Scheduled Monthly Credit Enhancement Obligation Payments shall be due and payable in full on the applicable Stated Maturity Date.

(a) Procedures. Each Loan is subject to prepayment in whole, but not in part. In the event of prepayment, Borrower shall pay the Prepayment Amount as said term is defined below. The Prepayment Amount is due and payable regardless of whether the prepayment by Borrower is made voluntarily or involuntarily, including any prepayment required by the holder's exercise of its rights of acceleration in the Event of Default. In the event that the Borrower elects to prepay any Loan, the Borrower shall deliver written notice (the "Prepayment Notice") of such prepayment election to the Lender not less than thirty (30) days nor more than sixty (60) days from the proposed prepayment date (the "Prepayment Date"). Within twenty (20) days of the Lender's receipt of such Prepayment Notice, the Lender shall deliver a written notice to the Borrower setting forth the estimated total amount of the Prepayment Amount (as defined below) payable on the proposed Prepayment Date, which amount shall be subject to adjustment for Delinquent Program Loans and changes in the Reinvestment Rate.

(b) Prepayment Amount. On the Prepayment Date, the Borrower shall pay the Lender an amount, with respect to the Loan to be prepaid (the "Prepayment Amount"), equal to the sum of (i) the outstanding Loan Amount on the Prepayment Date, (ii) all interest accrued and unpaid on the Loan Amount from the immediately preceding Payment Date through the Prepayment Date, if any, plus an additional month of interest on the Loan Amount, (iii) all accrued and unpaid Scheduled Monthly Credit Enhancement Obligation Payments due to the Prepayment Date, (iv) if any Program Loan Deficiencies exist on the Prepayment Date, the lesser of (A) the outstanding Credit Enhancement Amount and (B) the Program Credit Enhancement Amount (the "Credit Enhancement Prepayment"), and (v) with regard only to the Loan set forth on Schedule I as Loan Number "Consolidated" the Make Whole Premium.

"Discounted Value" means, with respect to each Loan, the amount calculated by discounting all Remaining Scheduled Monthly Loan Payments from their respective scheduled due dates to the Prepayment Date, in accordance with acceptable financial practice and at a discount factor (applied on a monthly basis) equal to the Reinvestment Rate.

"Make Whole Premium" means, with respect to each Loan for the first seven (7) years from the Funding Date, a premium equal to the excess, if any, of the Discounted Value over the outstanding Loan Amount, and anytime thereafter, 1% of the outstanding Loan Amount. The Make Whole Premium shall in no event be less than zero.

"Program Credit Enhancement Amount" means, with respect to each Loan, an amount equal to the product of (i) the ratio of (A) the outstanding Loan Amount plus the outstanding Credit Enhancement Amount on the Prepayment Date of such prepaying Program Loan to (B) the outstanding Loan Amounts plus the outstanding Credit Enhancement Amounts of all Program Loans that are not Delinquent Program Loans, multiplied by (ii) the sum (without duplication) of (A) the Program Prepayment Amounts for all Delinquent Program Loans on the Prepayment Date plus (B) any other outstanding Program Loan Deficiencies on the Prepayment Date.

"Program Prepayment Amount" means, with respect to any Delinquent Program Loan, an amount equal to the sum of (i) the outstanding Loan Amount of such Delinquent Program Loan on the Prepayment Date, (ii) all accrued and unpaid interest on such Delinquent Program Loan to the Prepayment Date, (iii) all accrued and unpaid Scheduled Monthly Credit Enhancement Obligation Payments on such Delinquent Program Loan to the Prepayment Date, and (iv) the Make Whole Premium with respect to such Delinquent Program Loan.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "Reinvestment Rate" means the bond equivalent yield to maturity implied by either (i) the yield reported, as of 10:00 A.M. (New York City time) on the business day next preceding the Prepayment Date, on the display designated as "Page 678" on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded United States Treasury obligations having a maturity equal to the Remaining Average Life, or (ii) if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, the Treasury Constant Maturity Series yields reported (for the latest day for which such yields shall have been so reported as of the business day next preceding the Prepayment Date) in Federal Reserve Statistical Release H. 15 (519) (or any comparable successor publication) for actively traded United States Treasury obligations having a constant maturity equal to the Remaining Average Life. Such implied yield shall be determined, if necessary, by (A) converting United States Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice, and (B) interpolating linearly between reported yields.

"Remaining Average Life" means, with respect to each Loan, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) the outstanding Loan Amount on the Prepayment Date into (ii) the sum of the products obtained by multiplying (A) the principal portion of each Remaining Scheduled Monthly Loan Payment by (B) the number of years (calculated to the nearest one-twelfth year) which will elapse between the Prepayment Date and the Loan Amount Repayment Date.

"Remaining Scheduled Monthly Loan Payments" means, with respect to each Loan, an amount equal to the sum of all Scheduled Monthly Loan Payments that would be due during the period from the Prepayment Date to and including the Loan Amount Repayment Date.

6. Payment Procedures.

(a) Method and Timing. The Borrower shall make each payment due hereunder in one aggregate amount per calendar month, not later than 3:00 p.m. (New York City time) on the day when due, in lawful money of the United States of America (in freely transferable U.S. dollars and in immediately available funds), at such place or places identified by Lender by Electronic Transfer of Funds. BY WRITTEN NOTICE TO THE BORROWER, THE LENDER MAY REQUEST BORROWER TO MAKE SUCH PAYMENTS AT OTHER PLACES AND BY OTHER METHODS AND BORROWER SHALL THEREAFTER MAKE SUCH PAYMENTS IN ACCORDANCE WITH SUCH WRITTEN NOTICE FROM LENDER.

(b) Business Day. Whenever a payment to be made under this Promissory Note shall be due and payable on a Saturday, Sunday or legal holiday under the laws of the State or a date on which banking institutions located in New York, New York are authorized or required to close, such payment shall be made on the next succeeding business day.

(c) Computation of Time Periods. In this Promissory Note, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including", the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including".

(d) Calculations. All calculations of the Monthly Enhancement Rebate, the Make Whole Premium and other amounts due on prepayment or acceleration and the amounts actually received by the Lender with respect to Delinquent Loans will be made by the Lender and audited monthly by an independent third-party selected by the Lender (or its agent or representative). The Borrower agrees that all such calculations will be conclusive and binding, absent manifest error.

(e) Application. The Lender shall apply timely payments made under this Promissory Note in the following order with respect to each Loan: (i) to accrued and unpaid interest on the Loan Amount, (ii) to any late payment charges due pursuant to Section 6(f), below, (iii) to accrued and unpaid Scheduled Monthly Credit Enhancement Obligation Payments, (iv) to the Make Whole Premium, if any,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (v) to the Loan Amount, until the outstanding Loan Amount is zero, and (vi) the balance, if any, to the Credit Enhancement Amount to the extent then due and unpaid. Notwithstanding the foregoing, any payment (excluding prepayments) made under this Promissory Note which is less than (A) the aggregate of (1) the Scheduled Monthly Loan Payment on each Loan and (2) the Scheduled Monthly Credit Enhancement Obligation Payment on each Loan minus (B) the allocated Monthly Enhancement Rebate, if any, shall be applied ratably among the Loans, in accordance with their respective Ratable Shares.

(f) Late Payment Charge: If, on any Payment Date, the Lender has not received the full Scheduled Monthly Loan Payment due on such Payment Date in accordance with Section 6(a), above, the Borrower shall pay to the Lender, promptly on demand, as liquidated damages, a late payment charge of $750 per Loan.

7. Concerning the Guarantee.

(a) Nature of the Guarantee. The Guarantee is absolute, unconditional, irrevocable and continuing in nature. The Guarantee is a guarantee of prompt and punctual payment and performance and is not merely a guarantee of collection. The obligations of the Borrower under this Promissory Note with respect to the Guarantee are direct and primary obligations of the Borrower and are independent of the obligations (the "Program Obligations") of any Program Borrower or any other Person with respect to any Program Note or any document or instrument relating thereto (each a "Program Loan Document" and, collectively, the "Program Loan Documents"), and a separate action or actions may be brought and prosecuted against the Borrower to enforce the Guarantee, irrespective of whether any action is brought against any Program Borrower or any other Person or whether any Program Borrower or any other Person is joined in any such action or actions. The liabilities and obligations of the Borrower under this Promissory Note shall be absolute and unconditional notwithstanding any event or occurrence, including without limitation:

(i) any lack of validity or enforceability of any Program Loan Document;

(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Program Obligations under any Program Document, or any other amendment or waiver of or any consent to departure therefrom including, without limitation, any increase in any Program Loan;

(iii) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the Program Obligations;

(iv) any manner of application of any collateral, or proceeds thereof, to all or any of the Program Obligations, or any manner of sale or other disposition of any collateral or any other assets of the Program Borrowers;

(v) any change, restructuring or termination of the structure or existence of any Program Borrower;

(vi) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against the Lender, whether in connection with the transactions contemplated by this Promissory Note and the other Loan Documents or otherwise;

(vii) any impossibility or impracticality of performance, illegality, force majeure, any act of government, or any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Program Borrower or a guarantor, or any other circumstance or event or happening whatsoever, whether foreseen or unforeseen and whether similar or dissimilar to anything referred to above in this Section 7; or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (viii) any variation in the percentage amount of Aggregate Credit Enhancement among Program Borrowers.

The Guarantee shall continue to be effective or be reinstated (at any time, including, without limitation, after discharge or termination of any Loan or this Promissory Note), as the case may be, if at any time any payment (or part thereof) of any of the Program Obligations is rescinded or must otherwise be returned by the Lender upon the insolvency, bankruptcy or reorganization of any Program Borrower, all as though such payment had not been made.

(b) Relationship to Other Agreements. Nothing herein shall in any way modify or limit the effect of terms or conditions set forth in any other document, instrument or agreement executed by the Borrower or in connection with the Program Obligations, but each and every term and condition hereof shall be in addition thereto.

(c) Consents and Waivers. The Borrower acknowledges that the obligations undertaken herein involve the guarantee of obligations of Persons other than the Borrower and, in full recognition of that fact, consents and agrees that the Lender may, at any time and from time to time, without notice or demand, and without affecting the enforceability or continuing effectiveness hereof: (i) supplement, modify, amend, extend, renew, accelerate or otherwise change the time for payment or the terms of the Program Obligations or any part thereof; (ii) supplement, modify, amend or waive, or enter into or give any agreement, approval or consent with respect to, the Program Obligations or any part thereof, or any of the Program Documents or any additional security or guaranties, or any condition, covenant, default, remedy, right, representation or term thereof or thereunder; (iii) accept new or additional instruments, documents or agreements in exchange for or relative to any of the Program Documents or the Program Obligations or any part thereof; (iv) accept partial payments on the Program Obligations; (v) receive and hold additional security or guaranties for the Program Obligations or any part thereof; (vi) release, reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute, transfer and/or enforce any security or guaranties, and apply any security and direct the order or manner of sale thereof as the Lender in its sole and absolute discretion may determine; (vii) release any Person from any personal liability with respect to the Program Obligations or any part thereof; (viii) settle, release on terms satisfactory to the Lender or by operation of applicable laws or otherwise liquidate or enforce any Program Obligation and any security or guarantee therefor in any manner, consent to the transfer of any security and bid and purchase at any sale; and/or (ix) consent to the merger, change or any other restructuring or termination of the partnership or corporate existence, as the case may be, of the Borrower, any Program Borrower or any other Person, and correspondingly restructure the Program Obligations, and any such merger, change, restructuring or termination shall not affect the liability of the Borrower or the continuing effectiveness hereof, or the enforceability hereof with respect to all or any part of the Program Obligations. In addition to the foregoing, the Borrower consents and agrees that Lender may add or delete Program Borrowers and Program Loans. Borrower waives any defense to enforcement of this guarantee based upon variation of risk in the addition or deletion of Program Borrowers or in adding or deleting Program Loans before or after the date hereof.

The Borrower hereby waives promptness, diligence, notice of acceptance, presentment, demand, notice of dishonor, protest and any other notice with respect to any of the Program Obligations and the Guarantee and any requirement that the Lender or any Program Borrower protect, secure, perfect or insure any lien or any property subject thereto or exhaust any right or take any action against any Program Borrower or any other Person or any collateral. Borrower hereby waives any rights it may now or hereinafter have to an appraisal of any security or collateral for the Program Obligations, including, without limitation, any such rights provided by statute. BORROWER ALSO WAIVES ALL DEFENSES THAT IT MAY BE ENTITLED TO UNDER SURETYSHIP LAW REGARDING THE GUARANTEE

(i) Except as set forth in subsection (ii), below, the Borrower will not exercise any rights which it may acquire by way of subrogation under the Guarantee, by any payment made hereunder or otherwise.

(ii) If the Borrower should make a payment under the Guarantee, the Borrower's sole claim and recourse for repayment of amounts so paid shall be to amounts actually received by the Lender in respect of Program Loan Deficiencies and held by the Lender for credit against either the next Scheduled Monthly Credit Enhancement Obligation Payment or the next Scheduled Monthly Loan Payment due from the Borrower on each Loan; provided, however, that if the Borrower prepays a Loan and pays a Credit Enhancement Prepayment, such Borrower is not entitled to any future recoveries with respect to such Loan. The Lender does not represent or warrant that (A) any such amounts will be recovered on Delinquent Program Loans, (B) amounts recovered on Delinquent Program Loans or other monies will be actually received and held by the Lender for such credit, or (C) to the extent, if any, that such monies are so received and held by the Lender, such monies will be sufficient to reimburse or indemnify the Borrower for all amounts paid under the Guarantee.

(e) Liability. The liability of the Borrower hereunder is joint and several and is independent of any other guaranties at any time in effect with respect to all or any part of the Program Obligations, and the Borrower's liability hereunder may be enforced regardless of the existence of any such guaranties. Any termination by or release of any guarantor in whole or in part shall not affect the continuing liability of the Borrower hereunder, and no notice of any such termination or release shall be required.

(f) Borrower is entering into the Guarantee as a material inducement to Lender to make the Loans and Borrower acknowledges that Lender would not make such Loans absent the Guarantee.

8. Security Arrangements. This Promissory Note is entitled to the benefits of and is secured by the pledge, liens, security title, rights and security interests granted under the Security Agreement and the other Loan Documents, as the same may be amended, supplemented or renewed, from time to time.

9. Remedies. If an Event of Default occurs, the Lender may take (but is not obligated to take) any or all of the following actions: (a) declare the entire Note Amount, all interest, the Make Whole Premium on each Loan and any other amounts payable hereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, (b) proceed to enforce or cause to be enforced any remedies provided under any of the Loan Documents or (c) exercise any other remedies available at law or in equity. The Borrower agrees that upon the occurrence of an Event of Default, the Borrower shall pay all costs and expenses actually incurred by Lender (including, without limitation, reasonable attorney's fees and disbursements) incident to the enforcement, collection, protection or preservation of any right or claim of the Lender under the Loan Documents, including any such fees or costs incurred in connection with any bankruptcy or insolvency proceeding or Borrower.

10. UNDERSTANDINGS WITH RESPECT TO WAIVERS, AGREEMENTS AND CONSENTS: THE BORROWER HEREBY MAKES AND ACKNOWLEDGES THAT IT MAKES ALL OF THE WAIVERS, AGREEMENTS AND CONSENTS ("WAIVERS") SET FORTH IN THIS PROMISSORY NOTE BOTH AS BORROWER HEREUNDER AND AS GUARANTOR WITH RESPECT TO THE GUARANTEE, AND THAT EACH AND ALL SUCH WAIVERS ARE BEING MADE KNOWINGLY, INTENTIONALLY, VOLUNTARILY, WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF SUCH WAIVERS WITH ITS ATTORNEY. THE BORROWER FURTHER ACKNOWLEDGES THAT THE GUARANTEE AND SUCH WAIVERS ARE A MATERIAL INDUCEMENT TO THE LENDER TO MAKE THE LOANS TO THE BORROWER; THAT THE TERMS OF THE LOANS ARE FAVORABLE TO BORROWER AND THAT THE LENDER WOULD NOT HAVE MADE THE LOANS ON SUCH TERMS WITHOUT SUCH

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document GUARANTEE AND WAIVERS; AND THE BORROWER HEREBY MAKES AND ACKNOWLEDGES THAT IT MAKES SUCH WAIVERS WITH RESPECT TO EACH OTHER PROGRAM LOAN. THE BORROWER ACKNOWLEDGES AND AGREES THAT NEITHER THE LENDER, NOR ANY OF ITS AFFILIATES, AGENTS OR REPRESENTATIVES HAS MADE AND NO SUCH PERSON IS MAKING OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE GUARANTEE, INCLUDING ANY REPRESENTATION OR WARRANTY CONCERNING ANY PROGRAM BORROWER'S PERFORMANCE, THE FINANCIAL CONDITION OF ANY PROGRAM BORROWER, OR THE ABILITY OF ANY PROGRAM BORROWER TO PERFORM ITS PROGRAM OBLIGATIONS. THE BORROWER ACKNOWLEDGES THAT IT HAS SUFFICIENT KNOWLEDGE AND EXPERIENCE TO BE CAPABLE OF EVALUATING THE RISKS OF ITS LOAN AND GUARANTEE. IF ANY OF THE WAIVERS HEREIN ARE DETERMINED TO BE UNENFORCEABLE UNDER APPLICABLE LAW, SUCH WAIVERS SHALL BE EFFECTIVE TO THE MAXIMUM EXTENT PERMITTED BY SUCH LAW.

11. WAIVER OF TRIAL BY JURY. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, AND THE LENDER BY ITS ACCEPTANCE OF THIS PROMISSORY NOTE IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS PROMISSORY NOTE.

12. LIMITATION ON INTEREST. NOTWITHSTANDING ANY OTHER PROVISION HEREOF, IN NO EVENT SHALL THE AMOUNT OR RATE OF INTEREST OR OTHER AMOUNTS PAYABLE, CONTRACTED FOR, CHARGED OR RECEIVED UNDER OR IN CONNECTION WITH THIS PROMISSORY NOTE, FROM TIME TO TIME OR FOR WHATEVER REASON, EXCEED THE MAXIMUM RATE OR AMOUNT, IF ANY, SPECIFIED BY APPLICABLE LAW. IF ANY SUCH PAYMENT IS FOUND TO BE USURIOUS, SUCH PORTION OF THE PAYMENT THAT IS CONSIDERED USURIOUS SHALL BE TREATED AS A PRINCIPAL PAYMENT.

13. Miscellaneous.

(a) Amendment. Neither this Promissory Note nor any provision hereof may be amended, altered, modified, changed, waived, discharged or terminated, except by an instrument in writing signed by the Lender and its assigns.

(b) Assignment. This Promissory Note is freely assignable in whole or in part, from time to time, by the Lender and the Lender may grant participation interests herein. Without limiting the foregoing, the Borrower understands and agrees that the Lender intends to and may sell, pledge, grant a security interest in, collaterally assign, transfer, deliver or otherwise dispose of this Promissory Note and Borrower's other Loan Documents (or any interest therein, or its rights and powers thereunder), from time to time, in connection with a Securitization. The Borrower may only assign this Promissory Note and the rights and obligations under this Promissory Note (including the rights to rebates or credits as provided in Section 4(d)) in full but not in part, (i) with the prior written consent of the Lender, (ii) to entities qualified to be Program Borrowers and (iii) in accordance with the Security Agreement and upon payment to Lender of (A) a fee in an amount equal to 1% of the outstanding Aggregate Loan Amount on the date of any such assignment and (B) all expenses incurred by the Lender in connection therewith (including attorneys fees and costs). This Promissory Note shall be binding upon Borrower, its heirs, devises, administrators, executives, personal representatives, successors, receivers, trustees, and permitted assignees, including all successors in interest of the Borrower, and shall inure to the benefit of the Lender, and the successors and assignees of the Lender.

(c) Time of the Essence. For all payments to be made and obligations to be performed under this Promissory Note, time is of the essence.

(d) Severability. Whenever possible this Promissory Note and each provision hereof shall be interpreted in such manner as to be effective, valid and enforceable under applicable law. If and to the extent that any such provision shall be held invalid and unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provisions hereof, and any determination that the application of any provision hereof to any person or under any circumstance is illegal and unenforceable shall not

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document affect the legality, validity and enforceability of such provision as it may be applied to any other person or in any other circumstance.

(e) No Waiver; Remedies Cumulative. No failure to exercise and no delay in exercising on the part of the Lender of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. All rights and remedies provided in this Promissory Note or any other Loan Document or any law shall be available to Lender and shall be cumulative.

(f) Headings Descriptive. The headings of the various sections, subsections and paragraphs of this Promissory Note are for convenience of reference only, do not constitute a part hereof and shall not affect the meaning or construction of any provision hereof.

(g) GOVERNING LAW. THIS PROMISSORY NOTE AND ALL LOAN DOCUMENTS ARE ENTERED INTO IN THE STATE OF IDAHO, AND THE VALIDITY, ENFORCEABILITY, CONSTRUCTION AND INTERPRETATION OF THIS PROMISSORY NOTE SHALL BE CONSTRUED, APPLIED, ENFORCED AND GOVERNED UNDER AND BY THE LAWS OF THE STATE OF IDAHO WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. THE TERM "STATE" AS USED IN THIS PROMISSORY NOTE AND ALL OTHER LOAN DOCUMENTS SHALL MEAN THE STATE OF IDAHO.

(h) Joint and Several Liability. If Borrower consists of more than one Person, the obligations and liabilities of each such Person hereunder shall be joint and several.

14. Loan Pool Flexibility. Lender shall have the right, at its sole and absolute discretion upon written notice to Borrower, to transfer (a "Transfer"), within eighteen (18) months from the effective date of this Promissory Note, all or any of the Loans and all Liens related to such Loans, from the Program to any other loan program formed by Lender. Upon the occurrence of a Transfer, the Loan Documents shall be automatically amended and reclassified to reflect the Transfer. Borrower shall execute all amendments or other documents Lender deems necessary to effectuate a Transfer.

15. Guaranty. Each of the undersigned, if more than one, (each, for purposes of this section only, a "Guarantor") intends to be obligated under this Promissory Note as a primary obligor; however, if any Guarantor is adjudged to be a surety by operation of law or otherwise, such Guarantor agrees that it shall be a guarantor of the Obligations and not an accommodation maker of the Promissory Note and each Guarantor further agrees as follows:

(a) Guaranty of Obligations. The Guarantor, jointly and severally if more than one, irrevocably, absolutely and unconditionally guaranties (the "Guaranty") to the Lender the payment when due of all Obligations, including, without limitation, all amendments, modifications, supplements, renewals or extensions of any of the Loan Documents or Obligations, whether such amendments, modifications, supplements, renewals or extensions are evidenced by new or additional instruments, documents or agreements or change the rate of interest on any Obligation or the security therefor, or otherwise.

(b) Nature of The Guaranty. The Guaranty is a guaranty of prompt and punctual payment and performance and is not merely a Guaranty of collection. The obligation of the Guarantor to make payments to the Lender under this Guaranty are direct and primary obligations. Upon the occurrence and during the continuance of any Event of Default, the Guarantor understands and agrees that the Lender may, but is not required to, enforce this Guaranty independently of any other remedy or security the Lender may have or hold in connection with this Guaranty or the Obligations guarantied hereunder without first or ever proceeding against and/or exhausting any security or remedy against any other person or party or any Collateral. Without limiting the generality of the foregoing, the liability of the Guarantor under this Guaranty shall be absolute and unconditional notwithstanding any event or occurrence, including without

(i) any defect in, or invalidity, illegality or unenforceability of any of the Loan Documents;

(ii) the existence of any claim, defense or set-off which the Borrower or the Guarantor may have at any time against the Lender, whether in connection with the transactions contemplated by this Guaranty or otherwise;

(iii) the existence or absence of any legal action to enforce the Loan Documents or any security therefor, the issuance of any judgment therefor or the execution of any such judgment;

(iv) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, any Loan Document or any other agreement or instrument relating thereto, or any other amendment or waiver of or any consent to departure therefrom including, without limitation, any increase in the Obligation resulting from the extension of additional credit to the Borrower or otherwise;

(v) any taking, exchange, release or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other Guaranty, for all or any of the Obligations;

(vi) any manner of application of any Collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any Collateral or any other assets of the Borrower;

(vii) any change, restructuring, merger, buy-out, sale, or termination of the structure or existence of the Borrower; or

(viii) any impossibility or impracticality of performance, illegality, force majeure, any act of government, or any other circumstance which might otherwise constitute a defense available to, or a discharge, of the Borrower or the Guarantor, or any other circumstance or event or happening whatsoever, whether foreseen or unforeseen, and whether similar or dissimilar to anything referred to above in this Section.

(c) Waiver. Except to the extent required by law and to the extent such requirement cannot be waived, the Guarantor (i) waives notice of acceptance, presentment, demand, notice of dishonor, protest, of this Guaranty and notice of any liability to which it may apply, (ii) waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations under the Promissory Note and any requirement that the Lender or the Borrower protect, secure, perfect or insure any lien or any property subject thereto or exhaust any right or take any action against the Borrower or any other person or any Collateral, and (iii) waives any rights it, the Borrower, any other guarantor or any other person may now or hereafter have to an appraisal of any security or Collateral for the Borrower's Obligations under the Promissory Note, including, without limitation, any such rights provided by statute.

16. Adjustment to Interest Rate. Within four (4) months following the Closing Date, Lender shall have the right, at its sole and absolute discretion upon written notice (the date Lender provides such notice the "Adjustment Date") to Borrower, to adjust the Interest Rate to a interest rate equal to the ten-year treasury note rate at the Adjustment Date plus 4.25% per annum. Borrower shall, within two (2) days of such notice, execute and deliver to Lender an amended and restated fixed rate promissory note (the "Fixed Rate Note") in the form attached hereto as Exhibit A and dated as of the Adjustment

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Date, with the "Aggregate Loan Amount" and "Aggregate Credit Enhancement Amount" for the Fixed Rate Note stated as the then current outstanding "Aggregate Loan Amount" and "Aggregate Credit Enhancement Amount" of this Promissory Note, and the "Interest Rate" for the Fixed Rate Note stated as the ten-year treasury note rate at the Adjustment Date plus 4.25% per annum, plus any change to the Scheduled Monthly Loan Payment in Schedule I thereto necessitated from such adjustment. The maturity date for the Fixed Rate Note shall be the Stated Maturity Date in this Promissory Note. Upon Borrower's execution and delivery to Lender of the Fixed Rate Note, Lender shall mark this Promissory Note "Cancelled" and shall return it to Borrower. Borrower's failure to comply with the obligations contained in this section shall be an "Event of Default" under the Security Agreement.

The remainder of this page intentionally left blank.

THIS DOCUMENT IS EXECUTED UNDER SEAL AND INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT.

Attest: The Quizno's Corporation

By:/s/ Carri L. Bryan By:/s/ Patrick Meyers ------Name:Carri L. Bryan Name: Patrick Meyers Title:Legal Manager Title: Vice President/General Counsel

Attest: The Quizno's Operating Company

By:/s/ Carri L. Bryan By: /s/ Patrick Meyers ------Name:Carri L. Bryan Name: Patrick Meyers Title:Legal Manager Title: Vice President/General Counsel

Attest: S & S Company

By:/s/ Carri L. Bryan By: /s/ Patrick Meyers ------Name:Carri L. Bryan Name: Patrick Meyers Title:Legal Manager Title: Vice President/General Counsel

Attest: The Quizno's Realty Company

By:/s/ Carri L. Bryan By: /s/ Patrick Meyers ------Name:Carri L. Bryan Name: Patrick Meyers Title:Legal Manager Title: Vice President/General Counsel

Attest: The Quizno's Acquisition Company

By:/s/ Carri L. Bryan By: /s/ Patrick Meyers ------Name:Carri L. Bryan Name: Patrick Meyers Title:Legal Manager Title: Vice President/General Counsel

Attest: The Quizno's Licensing Company

By:/s/ Carri L. Bryan By: /s/ Patrick Meyers ------

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Name:Carri L. Bryan Name: Patrick Meyers Title:Legal Manager Title: Vice President/General Counsel

Attest: Quizno's Kansas, LLC

By:/s/ Carri L. Bryan By: /s/ Patrick Meyers ------Name:Carri L. Bryan Name: Patrick Meyers Title:Legal Manager Title: Vice President/General Counsel

Address: 1415 Larimer St., Denver, CO 80202

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street, Denver, CO; that he is the VP/General Counsel of The Quizno's Corporation, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999. /s/ Candace R. Arnold ------Notary Public My commission expires: 6/16/01 ------

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street, Denver, CO; that he is the VP/General Counsel of The Quizno's Operating Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999. /s/ Candace R. Arnold ------Notary Public My commission expires: ------6/16/01

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street, Denver, CO; that he is the VP/General Counsel of S & S Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999. ------/s/ Candace R. Arnold Notary Public My commission expires: ------6/16/01

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street, Denver, CO; that he is the VP/General Counsel of The Quizno's Realty Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999. ------/s/ Candace R. Arnold Notary Public My commission expires: ------6/16/01

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street, Denver, CO; that he is the VP/General Counsel of The Quizno's Acquisition Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999. ------/s/ Candace R. Arnold Notary Public My commission expires: ------

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street, Denver, CO; that he is the VP/General Counsel of The Quizno's Licensing Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999. ------/s/ Candace R. Arnold Notary Public My commission expires: ------6/16/01

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On this 4th day of October, 1999, before me, a Notary Public, personally appeared Patrick Meyers known or identified to me (or proved to me on the oath of ______to be the VP/General Counsel of Quizno's Kansas, LLC, the limited liability company that executed the instrument, or the person who executed the instrument on behalf of said liability company, and acknowledged to me that such limited liability company executed the same.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

/s/ Candace R. Arnold ------Notary Public My commission expires: ------6/16/01

SCHEDULE I

SCHEDULE OF LOANS

*The Maturity Date above shall be increased when the Funding Date occurs one or more months later than the date of this Promissory Note, with the Maturity Date increased one month for each month after the date hereof (for example, a loan that is dated in June, that funds in August, would have each above Maturity Date increased by two months). The Maturity Date above is based on the date of this Promissory Note, which may or may not be the Funding Date.

SCHEDULE II

CERTAIN DEFINITIONS

"ACLC 1999-2 SBL Program" means the series of loans made by the Lender to the Program Borrowers in an aggregate amount not to exceed three hundred million dollars ($300,000,000.00) and to be funded by the Lender no later than December 31, 2001.

"ACFI Closing Settlement Statement" means the document signed by the Borrower prior to closing that outlines the flow of funds for closing, as well

"Closing Payment" means $285, 696.13, but will change if the Funding Date is any day other than the date hereof.

"Credit Enhancement Amount" means, as applicable, each of the credit enhancement amounts set forth on Schedule I attached to the Promissory Note. Among Program Borrowers the percentage of Credit Enhancement to Aggregate Loan Amount may vary and the percentage amount for each Program Borrower is set by Lender in its sole and absolute discretion.

"Funding Date" means the date the loan is actually closed and funds are wired (date of ACFI Closing Settlement Statement).

"Interest Rate" means Ten and Ten Tenths percent (10.10%) per annum, unless changed by written agreement pursuant to the rate lock provision in the commitment letter between Lender and Borrower.

"Loan Amount" means, as applicable, each of the loan amounts set forth on Schedule I attached to the Promissory Note.

"Loan Deficiency" means a delinquency or default with respect to any Loan or related Obligation.

"Note Amount" means the Aggregate Credit Enhancement Amount plus the Aggregate Loan Amount.

"Ratable Share" means, with respect to each Loan, the fraction, expressed as a percentage, corresponding to such Loan on Schedule I attached to the Promissory Note. For a given loan, its Ratable Share will equal the original Loan Amount (of said given loan) divided by the original Aggregate Loan Amount of the Borrower.

"Scheduled Monthly Credit Enhancement Obligation Payment" means, with respect to each Loan, an amount equal to (a) the product of (i) the Interest Rate and (ii) the Credit Enhancement Amount for such Loan divided by (b) twelve (12).

"Scheduled Monthly Loan Payment" means, with respect to each Loan, the Scheduled Monthly Loan Payment corresponding to such Loan on Schedule I attached to the Promissory Note.

"State" means the State of Idaho.

"Stated Maturity Date" means, with respect to each Loan, the Maturity Date corresponding to such Loan listed on Schedule I attached to the Promissory Note.

Warehouse

ALLONGE

Allonge endorsement attached to the Note, in the stated principal amount of $14,222,222.28, executed by The Quizno's Corporation; The Quizno's Operating Company; S & S Company; The Quizno's Realty Company; The Quizno's Acquisition Company; The Quizno's Licensing Company; and Quizno's Kansas, LLC payable to the order of AMRESCO COMMERCIAL FINANCE, INC., a Nevada corporation.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pay to the order of NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as custodian or trustee under the applicable custodian agreement or indenture, and its successors and/or assigns, without recourse or warranty.

AMRESCO COMMERCIAL FINANCE, INC., a Nevada corporation

By:______Name: Dale Conder Title: Vice President

Securitization

ALLONGE

Pay to the order of ACFI FUNDING CORP., a Delaware corporation without recourse or warranty.

AMRESCO COMMERCIAL FINANCE, INC., a Nevada corporation

By:______Name: Dale Conder Title: Vice President

Pay to the order of FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as custodian or trustee under the applicable custodial or trust agreement, without recourse or warranty.

ACFI FUNDING CORP., a Delaware corporation

By:______Name: William C. Cole Title: Vice President

PLEDGE AND SECURITY AGREEMENT ACLC 1999-2 SBL PROGRAM

made by

The Quizno's Corporation; The Quizno's Licensing Company; The Quizno's Acquisition Company; The Quizno's Realty Company; S & S Company; The Quizno's Operating Company; Quizno's Kansas, LLC, collectively as Borrower

in favor of

AMRESCO COMMERCIAL FINANCE, INC., as Secured Party

PLEDGE AND SECURITY AGREEMENT (this "Security Agreement"), dated as of the date set forth on the signature page hereof, by The Quizno's Corporation; The Quizno's Licensing Company; The Quizno's Acquisition Company; The Quizno's Realty Company; S & S Company; The Quizno's Operating Company; Quizno's Kansas, LLC, (collectively the "Borrower"), in favor of AMRESCO COMMERCIAL FINANCE, INC., a Nevada corporation (together with its successors and assigns, the "Secured Party").

Preliminary Statements

A. On the date hereof, the Secured Party will make certain loans (each a "Loan" and, collectively, the "Loans") to the Borrower reflected in a Promissory Note to the Secured Party, dated the date hereof (the "Promissory Note"), in a form prepared by and acceptable to Secured Party, which Promissory Note will evidence the Borrower's obligation, inter, alia, (i) to repay the Loans, (ii) to guarantee the payment of delinquencies or defaults in respect of Program Loans (as defined therein) in an amount up to the Aggregate Credit Enhancement Amount (as defined therein), (iii) to pay rebatable Scheduled Monthly Credit Enhancement Obligation Payments (as defined therein) on each Loan and (iv) to pay interest and other amounts as set forth therein.

B. It is a condition to the making of the Loans, that the Borrower shall have executed and delivered this Security Agreement whereby the Borrower, in order to provide security for the full payment when due of all amounts payable under the Promissory Note, shall pledge and grant to the Secured Party a security interest in the collateral described herein.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document NOW THEREFORE, in consideration of the foregoing and in order to induce the Secured Party to make the Loans available to the Borrower and for other good and valuable consideration, the receipt and sufficiency of which the Borrower hereby acknowledges, the Borrower and the Secured Party agree as follows:

ARTICLE I

DEFINITIONS AND OTHER TERMS

1. Definitions and Other Terms.

1.1. Defined Terms. The following terms shall have the meanings herein specified unless the context otherwise requires. All terms not otherwise defined herein shall have the meaning accorded to such terms in the Promissory Note. All terms defined in the singular will have the same meaning when used in the plural and vice versa.

"Accounts" means "accounts" as such term is defined in the UCC.

"Affiliate" means, with respect to any designated Person, any Person that, directly or indirectly, controls or is controlled by or is under common control with such designated Person and, without limiting the generality of the foregoing, shall include, (a) any Person who is a director or officer of, partner in, trustee of, or blood or legal relative, guardian or representative of the designated Person, or any Person who acts or serves in a similar capacity with respect to the designated Person, (b) any Person of which or whom the designated Person is a director or officer, partner, trustee, or blood or legal relative, guardian or representative, or with respect to which or whom, the designated Person acts or serves in a similar capacity; and (c) any Person, who, directly or indirectly, is the legal or beneficial owner of or controls ten percent (10%) or more of any class of equity securities of the designated Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

"Affiliate Guarantor" has the meaning ascribed to such term in Section 1.2.

"Aggregate Credit Enhancement Amount" has the meaning ascribed to such term in the Promissory Note.

"Applicable Collateral" means, for each Loan, the portion of the Collateral specifically relating to the Store which corresponds to such Loan (as set forth on Schedule 4 attached hereto).

"Business" means all Stores operated by the Borrower.

"Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions in New York City are authorized or obligated by law or executive order to be closed.

"Cash Flow" means, for any period, with respect to any Person, an amount equal to (a) the sum of (i) pre-tax income, (ii) interest expense, (iii) depreciation and amortization, (iv) Discretionary Expenses, (v) Rental Expense and (vi) Non-Recurring Expenses less (b) Non-Recurring Income, all as reflected on such Person's financial statement for such period.

"Chattel Paper" has the meaning ascribed to such term under the UCC.

"Code" means the Internal Revenue Code of 1986 as amended.

"Collateral" has the meaning ascribed to such term in Section 2.

"Consolidated FCCR" means, for any period, the ratio of (a) the Borrower's Cash Flow for such period to (b) the sum of Fixed Charges and Rental Expense of the Borrower for such period.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "Contracts" shall mean all contracts and agreements to which the Borrower now is, or hereafter will be, bound, or a party, beneficiary or assignee (other than rights evidenced by Chattel Paper, Documents or Instruments), including, without limitation, any franchise agreements or license agreements and all other agreements and documents executed and delivered with respect to such contracts, and all revenues, rentals and other sums of money due and to become due thereunder from any of the foregoing.

"Copyrights" shall mean all United States or other registered and unregistered copyrights, all licenses thereto, and all applications therefor, and all reissues, divisions, continuations, renewals, extensions, modifications, supplements thereto or to any part thereof, and the right to sue for past, present and future infringements of the foregoing, and all rights corresponding to the foregoing throughout the world.

"Credit Enhancement Amount" has the meaning ascribed to such term in the Promissory Note.

"Default Rate" has the meaning ascribed to such term in the Promissory Note.

"Deposit Accounts" has the meaning ascribed to such term in the UCC.

"Discretionary Expenses" means, with respect to any Person, the difference between (a) operating expenses for salaries, wages, benefits, and reimbursements and the like incurred by such Person and (b) the reasonable and customary expenses for salaries, wages, benefits, and reimbursements incurred by such Person, as determined by the Secured Party or any appointed servicer. Discretionary Expenses shall in no event be less than zero.

"Distributions" means distributions, all salaries, fees and other compensation, and all reimbursement or indemnification, directly or indirectly, paid or payable to (or for the benefit of) any Affiliate of the Borrower, other than a Person who is an officer of the Borrower and is not otherwise an Affiliate of the Borrower. "Distributions" shall include, but not be limited to, any payment or reimbursement of travel and entertainment expenses, automobile expenses, and premiums or expenses associated with any insurance policy other than those expressly required to be maintained pursuant to Section 3.18 hereof.

"Document" has the meaning ascribed to such term under the UCC.

"EBITDA" means, for any period, with respect to any Person, earnings before interest, taxes, depreciation and amortization as reflected on such Person's audited financial statement for such period.

"ERISA" means the Employee Retirement Income Security Act of 1974 as amended.

"Equipment" means any "equipment", as such term is defined in the UCC, used or bought for use primarily in the Pledged Stores and not included within Inventory, now or hereafter owned or leased by the Borrower and, in any event, shall include, but shall not be limited to, all machinery, tools, computer software, office equipment, furniture, appliances, furnishings, fixtures, vehicles, motor vehicles, petroleum storage tanks and pumps, and any manuals, instructions and similar items which relate to the foregoing, and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all improvements thereon and all attachments, components, parts, equipment and accessories installed thereon or affixed thereto.

"Event of Default" has the meaning ascribed to such term in Section 7.

"Financing Statements" means the UCC financing statements, prepared by Secured Party, and delivered to Borrower and which Borrower must execute and deliver to Secured Party as a condition under the Loan Documents.

"Fixed Charges" means, with respect to any Person, for any period, without duplication, the aggregate of all amounts paid or accrued by such Person during such period with respect to Indebtedness, as determined in accordance with generally accepted accounting principles.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "Franchise Agreement" means any franchise or license agreement or agreements with Borrower as franchisor or licensor, or as franchisee or licensee.

"General Intangibles" shall mean "general intangibles" as such item is defined in the UCC and shall include, but not be limited to, royalties, writings, memoranda, confirmations, passbooks, signature cards, acknowledgements, understandings, contract rights, licenses, excluding liquor licenses, leases, permits, filings, consents, and approvals, and all puts, calls, options, warrants, and securities, and all security interests, Patents, inventions, processes, lists (including customer and suppliers lists), methods, and information (including proprietary information, director and shareholder, sales, business, financial, accounting, forecasts, projections, media, and other information), know-how, software, programs, plans, data, blueprints, designs, drawings, surveys, notices, Copyrights, Trademarks, tradenames, trade secrets, service marks, service names, logos and goodwill, and all recordings and registrations thereof, applications for recording or registration, renewals, modifications, supplements, reissues, continuations, extensions, divisions thereof and rights corresponding thereto, and all manuals, standards, practices, mail, advertisements, files, reports, books, catalogs, records, journals, invoices, and bills, and all rights (including voting rights, rights to receive notice or to consent, rights to payment, interest, dividends, distributions or earnings, rights to sue and enforce), powers (including powers of attorney), privileges, benefits, and remedies relating thereto or arising in connection therewith.

"Goods" has the meaning ascribed to such term in the UCC.

"Indebtedness" means, with respect to any Person, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, (d) all capitalized lease obligations of such Person, (e) all indebtedness of others secured by a Lien on any asset of such Person, whether or not such indebtedness has been assumed by such Person and (f) all indebtedness of others to the extent guaranteed by such Person.

"Instrument" has the meaning ascribed to such term in the UCC (other than Instruments constituting Chattel Paper).

"Insurance and Condemnation Proceeds" means (a) any and all proceeds of any insurance (insuring the Collateral or otherwise required to be maintained hereunder, including return of unearned premium), indemnity, warranty or guaranty payable to the Secured Party or Borrower from time to time, and claims for insurance, indemnity, warranty or guaranty effected or held for the benefit of the Borrower, with respect to any of the Collateral, and (b) any and all payments (in any form whatsoever) made or due and payable to the Borrower from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority).

"Inventory" means all inventory of the Borrower of every type or description, including all "inventory" as such term is defined in the UCC, now owned or hereafter acquired and wherever located, whether raw, in process or finished, and all materials usable in processing the same and all documents of title covering any inventory, including, without limitation, work in process, materials used or consumed in the Pledged Stores, now owned or hereafter acquired or manufactured by the Borrower and held for sale in the ordinary course of its business; all present and future substitutions thereof, parts and accessories thereof and all additions thereto; and all Proceeds thereof and products of such inventory in any form whatsoever.

"Lease Obligations" means with respect to any Person, any obligations of such Person in connection with any leases for personal property (including Equipment) or real property, to the extent such obligations are not included in Indebtedness.

"License" means any license to use the Trademarks in connection with the operation of the Business.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "Lien" means any deed, mortgage, pledge, security interest, hypothecation, collateral assignment, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC).

"Liquor License" means all liquor licenses issued to, or used by, Borrower or any Affiliate of Borrower in connection with the Stores including, but not limited to, all liquor licenses listed on Schedule 5 attached hereto.

"Loan" and "Loans" have the meanings ascribed to such terms in the preliminary statements of this Security Agreement.

"Loan Amount" shall have the meaning ascribed to such term in the Promissory Note.

"Loan Documents" means the Promissory Note, this Security Agreement and any guarantee, mortgage, deed of trust or other instrument, agreement, certificate or other writing, now or hereafter executed and delivered in connection with the Promissory Note or the Obligations.

"Make Whole Premium" means: (a) for a Fixed Rate loan has the meaning ascribed to such term in the Fixed Rate Promissory Note, and (b) for an Adjustable rate loan means the same as "Prepayment Premium" as such term is defined in the Adjustable Promissory Note.

"Non-Recurring Expenses" and "Non-Recurring Income" mean expenses or income, as the case may be, that is extraordinary and generally not reflected in any prior period or reasonably anticipated to be incurred in any subsequent period received.

"Note Amount" has the meaning ascribed to such term in the Promissory Note.

"Obligations" means each and every obligation, covenant, agreement, Indebtedness and liability of the Borrower to the Secured Party evidenced by, arising under or in connection with the Promissory Note (including, without limitation, indebtedness, obligations and liabilities in respect of principal, interest, the Make Whole Premium, the Credit Enhancement Amount and the Scheduled Monthly Credit Enhancement Obligation Payments for each of the Loans), this Security Agreement, or any other Loan Document, and any future advances thereon, renewals, extensions, modifications, amendments, substitutions and consolidations thereof, including the Borrower's obligations to pay (or reimburse the Secured Party for) all costs and expenses (including attorneys fees and disbursements) incurred by the Secured Party in obtaining, maintaining, protecting and preserving its interest in the Collateral or its security interest therein, foreclosing, retaking, holding, preparing for sale or lease, selling or otherwise disposing or realizing on the Collateral and Liquor Licenses (if any) or in exercising its rights hereunder or as a secured party under the UCC, any other applicable law, regulation or rule or this Security Agreement, including interest on such costs and expenses which shall accrue at the rate of eight percent (8%) per annum, and all other indebtedness, obligations and liabilities of any kind of the Borrower to the Secured Party, now or hereafter existing (including future advances whether or not pursuant to commitment), arising directly between the Borrower and the Secured Party relating to the Loan Documents, whether absolute or contingent, joint and/or several, secured or unsecured, due or not due, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, or direct or indirect, including the Borrower's liabilities to the Secured Party as a member of any partnership, syndicate, association or other group, and whether incurred by the Borrower as principal, surety, endorser, guarantor, accommodation party or otherwise.

"Patents" means all United States or other registered and unregistered patents, all licenses thereto, and all applications therefor, and all reissues, divisions, continuations, renewals, extensions, modifications, supplements thereto or to any part thereof, and the right to sue for past, present and future infringements of the foregoing, and all rights corresponding to the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document foregoing throughout the world, including, but not limited to, those patents listed on Schedule 6 attached hereto.

"Permitted Liens" means any and all of the Liens set forth on Exhibit B attached hereto.

"Person" means any individual, corporation, partnership, unincorporated association, firm, trust, joint stock company, joint venture or other entity of whatever nature.

"Pledged Stores" means those Stores listed on Schedule 1 attached hereto.

"Principal Party" shall have the meaning ascribed to such term in Section 7(e).

"Proceeds" shall mean "proceeds" as such term is defined in the UCC or under other relevant law and shall include, but shall not be limited to, (a) any and all proceeds of any insurance (insuring the Collateral or otherwise required to be maintained hereunder, including return of unearned premium), indemnity, warranty or guaranty payable to the Secured Party or Borrower from time to time, and claims for insurance, indemnity, warranty or guaranty effected or held for the benefit of the Borrower, with respect to any of the Collateral and Liquor Licenses (if any), (b) any and all payments (in any form whatsoever) made or due and payable to the Borrower from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral and Liquor Licenses (if any) by any governmental authority (or any person acting under color of governmental authority) and (c) any and all interest, income, dividends, distributions and earnings on the Collateral and Liquor Licenses (if any) or other monies, revenues or other amounts derived from the Collateral and Liquor Licenses (if any), including any such amounts received in connection with any disposition of the Franchise Agreement.

"Program" means the ACLC 1999-2 SBL Program of loans to Program Borrowers.

"Program Borrower" has the meaning ascribed to such term in the Promissory Note. In addition, in the Secured Party's opinion, all Program Borrowers substantially comply in all material respects with the Secured Party's current underwriting guidelines for loans to small business owners, and in no event will loans be made to Program Borrowers where (a) the Pledged Store has less than one year of seasoning, and (b) (i) the most recent annual revenue of the Borrower is less than $500,000 or (ii) the most recent annual Borrower Cash Flow is less than $100,000.

"Program Loan Deficiencies" has the meaning ascribed to such term in the Promissory Note.

"Promissory Note" has the meaning ascribed to such term in the preliminary statements to this Security Agreement.

"Property" means the real property or properties on which the Pledged Stores are located, as more specifically described on Schedule 1 attached hereto.

"Rental Expense" means, with respect to any Person, for any period, the aggregate of all amounts paid or accrued with respect to Lease Obligations during such period, as determined in accordance with generally accepted accounting principles.

"Required Consolidated FCCR" has the meaning ascribed to such term in Section 3.15.

"Scheduled Monthly Credit Enhancement Obligation Payment" shall have the meaning ascribed to such term in the Promissory Note.

"Scheduled Monthly Loan Payment" shall have the meaning ascribed to such term in the Promissory Note.

"Securitization" means the sale, pledge, grant of a security interest, collateral assignment, transfer and delivery or other encumbrance or disposition

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of all or any portion of the Program Loans (or the Secured Party's rights and powers therein) by the Secured Party, from time to time, to one or more of its Affiliates or to other Persons, including the sale of the Program Loans by the Secured Party to one or more Persons who will issue debt instruments or equity certificates backed by such Program Loans and the servicing of such Program Loans by Person appointed as servicer in connection therewith.

"State" shall have the meaning ascribed to such term in the Promissory Note.

"Store" means a business/commercial property owned and/or operated by the Borrower and includes all aspects of the operating unit, and Borrower's chief executive office.

"Trademarks" shall mean all United States or other registered or unregistered trademarks, trade names, service marks and service names, together with the goodwill of the business connected with the use thereof, and symbolized thereby, all licenses thereto (including the License, if applicable) and all applications therefor, and all reissues, divisions, continuations, renewals, extensions, modifications, supplements thereto or to any part thereof, and the right to sue for past, present and future infringements of the foregoing, and all rights corresponding to the foregoing throughout the world, including, but not limited to, those trademarks listed on Schedule 6 attached hereto.

"UCC" means the Uniform Commercial Code (or any comparable law) in effect in any relevant jurisdiction the laws of which govern the perfection of security interests hereunder.

"UCC Search" means the security interest, tax lien, suit and judgment search of the Borrower conducted in the locations set forth on Schedule 2 hereto.

1.2. Certain Calculations. For the purposes of calculating the Borrower's Cash Flow, Discretionary Expenses, Non-Recurring Expenses, Non-Recurring Income, Indebtedness and Lease Obligations, the term "Borrower" shall mean the Borrower and any Affiliate of the Borrower (an "Affiliate Guarantor") that is providing the Secured Party with a guarantee of any of the Borrower's Obligations and the term "financial statement" shall mean a consolidated financial statement of the Borrower and such Affiliate.

1.3. Rules of Construction. When used in this Security Agreement: (a) "or" is not exclusive; (b) a reference to a law includes any amendment or modification of such law; (c) a reference to a Person includes its permitted successors and permitted assigns; and (d) a reference to an agreement, instrument or document shall include such agreement, instrument or document as the same may be amended, modified or supplemented from time to time in accordance with its terms.

ARTICLE II

SECURITY INTERESTS

2. Security Interests.

2.1. Pledge and Grant of Security Interest. As collateral security for the prompt and complete payment and performance when due of all of the Obligations, the Borrower hereby pledges and grants to the Secured Party, a continuing security interest in, and Lien on, all of the Borrower's right, title and interest in and to the following (collectively, the "Collateral"): (a) all Accounts, Goods, Documents, Chattel Paper, Deposit Accounts, Instruments, Inventory, Equipment, General Intangibles, Contracts (including the Franchise Agreement and License, if applicable), certificates of title, fixtures, money, securities, deposits, credits, claims, demands, assets and other personal property, now owned, existing, hereafter acquired, held, used, sold or consumed in connection with or related to the Stores or the Pledged Stores and any other property, rights and interests of the Borrower which at any time relate to, arise out of or in connection with the foregoing or which shall come into the possession or custody or under the control of the Secured Party or any of its agents, representatives, associates or correspondents, in connection with the foregoing; any and all additions and accessions, replacements, substitutions,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and improvements, of or to all the foregoing; and all products, rents, profits, offspring and Proceeds thereof and (b) all Accounts, Goods, Documents, Chattel Paper, Deposit Accounts, Instruments, General Intangibles, Contracts (including the Franchise Agreement and License, if applicable), certificates of title, money, securities, deposits, credits, claims, demands, assets and other personal property of Borrower, whether now owned, existing, hereafter acquired, held, used, sold or consumed, and any other property, rights and interests of the Borrower which at any time relate to, arise out of or in connection with the foregoing or which shall come into the possession or custody or under the control of the Secured Party or any of its agents, representatives, associates or correspondents, in connection with the foregoing; any and all additions and accessions, replacements, substitutions, and improvements, of or to all the foregoing; and all products, rents, profits, offspring and Proceeds thereof. Without limiting the generality of the foregoing, this Security Agreement also secures the payment of all amounts which constitute part of the Obligations and would be owed by the Borrower to the Secured Party but for the fact they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower. Anything in this Security Agreement to the contrary notwithstanding, the security interest created hereby and the definition of the term "Collateral," shall not include any property or assets, tangible or intangible, which Borrower may hereafter acquire and which is not (i) royalties, a Franchise Agreement, a license of Trademarks or similar agreement in which Borrower is the franchisor or licensor (except as provided otherwise by the Loan Documents); (ii) acquired, held, used, sold, or consumed in connection with or related to the Pledged Stores; or (iii) an addition, accession, replacement, substitution, or improvement to the foregoing sub-parts (i) and (ii) or any product, rent, profit, offspring or Proceed thereof; provided that the Lien of Secured Party on personal property (tangible or intangible) acquired by Borrower subsequent to the closing of the Loans (other than such personal property set forth in sub-part (i) above, and any addition, accession, replacement, substitution, or improvement thereto or any product, rent, profit, offspring or Proceed thereof, or personal property used in a Pledged Store other than Borrower's chief executive office) shall be subordinate to any Lien thereon belonging to the Person financing such personal property and such subordination shall be self operative without need for further instruments of subordination.

2.2. Security Interest Absolute. All rights of the Secured Party and the security interests hereunder shall be absolute and unconditional irrespective of:

(a) any change in the time, manner, amount or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Promissory Note or any other Loan Document;

(b) any exchange, release or nonperfection of all or any part of the Collateral or any other collateral, or any release from, amendment to, waiver of or consent to departure from any guaranty, for all or any of the Obligations; or

(c) to the fullest extent permitted by law, any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Borrower or a third party pledgor.

ARTICLE III

REPRESENTATIONS, WARRANTIES AND COVENANTS

3. Representations, Warranties and Covenants. The Borrower hereby represents, warrants and covenants that:

3.1. Organization. The Borrower (unless the Borrower is an individual) is and will continue to be duly formed, validly existing and in good standing under the laws of the state of its organization set forth on Schedule 1 and is duly authorized to do business in, and is in good standing in each jurisdiction where the Business or the Property is located and where such organization, qualification or standing is necessary, required or proper in connection with the Borrower's ownership or use of the Liquor Licenses (if any), or the

3.2. Power and Authority. The Borrower (and, with respect to clause (c), below, in the case of Loan Documents executed by an Affiliate Guarantor, each such Affiliate Guarantor) has all requisite power, authority and the legal right and all necessary permits, consents, licenses and authorizations (a) to own the Collateral, (b) to conduct the Business, (c) to hold the Liquor License (if any), and (d) to execute, deliver and perform its obligations under this Security Agreement, the Promissory Note and the other Loan Documents.

3.3. Execution and Delivery; Enforceability. Upon execution, this Security Agreement, the Promissory Note and the other Loan Documents will be duly executed and delivered by the Borrower (and in the case of Loan Documents executed by an Affiliate Guarantor, by each such Affiliate Guarantor). Upon execution, each of this Security Agreement, the Promissory Note and the other Loan Documents will constitute a legal, valid and binding obligation of the Borrower, enforceable against the Borrower, in accordance with its terms.

3.4. Name; Chief Executive Office; Location.

(a) The Borrower's legal name, federal tax payor identification number, and mailing address are accurately set forth on Schedule 1. The Borrower has not merged, consolidated, acquired all or substantially all of the assets of any other Person, or except as disclosed on Schedule 1, used any other name (whether in connection with the Business, Property or the Collateral or for business, obtaining credit or financing or otherwise) in the last five years.

(b) The Borrower's principal place of business, chief executive office (and, if the Borrower is an individual, residence) is accurately set forth on Schedule 1.

(c) The Borrower operates and shall continue to operate the Pledged Stores from the Property at the address(es) and in the county(ies) and state(s) set forth in Schedule 1. Schedule 1 correctly discloses that the Borrower either (i) is sole record owner of the Property or (ii) leases (or subleases) the Property and the record owner of each Property is the person or entity disclosed on Schedule 1. All personal property of the Borrower owned, acquired, held, used, sold or consumed in the Pledged Stores including Accounts, Goods, Inventory, Equipment, General Intangibles, Contracts, Chattel Paper, Instruments, Documents, Liquor Licenses, certificates of title, fixtures, securities and money, and all writings relating thereto and records thereof, books of record or account, employees, business, offices and operations are located at and conducted out of such Property or at its chief executive office.

(d) The Borrower will neither change its name, federal tax payor identification number, or its chief executive office (or, if an individual, residence), nor the location of its business, property or assets (including the Pledged Stores, the Liquor License (if any), and the Collateral), nor assume a different name, nor conduct its business or affairs under any other name or in any other location, nor merge, consolidate, or change its corporate structure (whether by stock sale, issuance, purchase or otherwise), nor change its use of any item of Collateral, or the Liquor License (if any), without in each instance providing the Secured Party with not less than sixty (60) days prior written notice of the proposed action and specifying within such notice and with reasonable clarity and particularity the timing and nature of such proposed action. Additionally, the Borrower shall provide such other information in connection with the proposed action as the Secured Party may reasonably request and shall have taken all action, reasonably satisfactory to the Secured Party, to maintain the security interest of the Secured Party in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect.

3.5. No Conflict. The Borrower's (and in the case of Loan Documents executed by an Affiliate Guarantor, such Affiliate Guarantor's) execution, delivery and consummation of the transactions contemplated by this Security Agreement, the Promissory Note and other Loan Documents do not and will not (with the passage of time or otherwise) (a) conflict with, violate or constitute a default under any law, rule, regulation, order, decree, contract, agreement (including the Franchise Agreement, if applicable), note, mortgage, bond, indenture, lease, license, or obligation of or applicable to the Borrower (or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document such Affiliate Guarantor), the Liquor License (if any) or the Collateral or (b) grant, create or result in any Lien in favor of any person (other than the Secured Party) on or to the Business or any other property or assets of the Borrower (including the Collateral and the Franchise Agreement, if applicable).

3.6. No Consent Required. Except for the filing of the Financing Statements in the locations set forth on Schedule 2 hereto (and, if applicable, the recording of the mortgage or deed of trust included in the Loan Documents), no consent of any other Person and no authorization, approval or other action by and no notice to or filing with, any court, government, agency or regulatory authority is required (a) for the grant by the Borrower of the pledge and security interest granted hereby or for the execution, delivery or performance of this Security Agreement, the Promissory Note and other Loan Documents or (b) for validity, perfection or maintenance of the pledge, lien and security interest created hereby.

3.7. Affiliates. Schedule 3 contains a complete and accurate list of all Affiliates of the Borrower (including Affiliate Guarantors) who have executed and delivered any note, security agreement, guarantee or other loan document to the Secured Party.

3.8. Title to the Collateral. The Borrower has and, subject to Section 4, will maintain good and marketable title to the Collateral, the Franchise Agreement (if applicable), and the Liquor License (if any) free of all Liens (other than Permitted Liens and the security interest granted to the Secured Party hereunder) and such Collateral, Franchise Agreement (if applicable), and the Liquor License (if any), are sufficient to enable a franchisee to operate the Pledged Stores at the Property in accordance with the Franchise Agreement.

3.9. No Liens. Except as shown on the UCC List attached hereto as Exhibit A, there is no Lien (including any federal or state tax lien), suit (including any action, proceeding, or other litigation pending, or to the Borrower's knowledge, threatened) or judgment (including any award, injunction, order) filed with, registered, indexed or recorded in any public office, court, arbitration panel, administrative agency or regulatory authority (or intended so to be), directly or indirectly, identifying or encumbering or covering or involving the Collateral, the Franchise Agreement (if applicable), or the Liquor License (if any) or which could have a material adverse effect on the Borrower, any Pledged Store or the Borrower's ability to perform its Obligations. All Liens listed on Exhibit A shall be removed upon funding of the Loan unless such lien is specifically identified as a Permitted Lien. Other than the security interest granted to the Secured Party hereunder and the Permitted Liens, and except as provided in Section 4 hereof, the Borrower has not and, without the prior written consent of the Secured Party, will not enter into any agreement or understanding or take, permit or suffer to exist any action (including the filing of a financing statement, agreement, pledge, mortgage, notice or registration) or event (whether by operation of law or otherwise) for the purpose of, or that may have the effect of, directly or indirectly, (a) granting a Lien on (including any state or federal tax lien), pledging, transferring, assigning, selling, disposing of, or encumbering any Collateral, the Franchise Agreement (if applicable), or the Liquor License (if any), any interest therein or rights pertaining thereto or involving the Borrower or the Pledged Stores, or (b) changing, modifying, supplementing, or increasing the amount of credit, loans, indebtedness or value secured by the Permitted Liens, if any, or the amount, property or assets encumbered thereby.

3.10. Maintenance of Collateral and Business. At the Borrower's sole cost and expense, the Borrower shall (a) keep, use, operate and maintain the Collateral, the Pledged Stores, the Business and the Property in accordance with applicable laws, rules, and regulations, and in accordance with the standards established by the franchisor under the Franchise Agreement (if applicable), (b) operate the Pledged Stores at the Property and in accordance with the Franchise Agreement (if applicable) and customary, prudent business practices, and at all times fully comply with terms and provisions of the Franchise Agreement (if applicable), (c) fully comply with all current and future laws and regulations concerning the storage and sale of petroleum products, if applicable, and (d) not do or suffer to be done any act whereby the value of the Collateral, the Property, the Liquor License (if any), or any Pledged Store or any part or interest therein may be lessened in any material respect. The Borrower shall

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document notify the Secured Party promptly of any actual or threatened destruction or material damage or impairment of any Pledged Store, the Collateral, the Property, the Liquor License (if any), or if Borrower receives a notice of violation from any governmental entity or agency.

3.11. Perfected Security Interest. This Security Agreement and the grant and transfer of the Collateral hereunder creates a valid and enforceable security interest in the Collateral. Upon filing of the Financing Statements in the locations set forth on Schedule 2 hereto, such security interest will be perfected and subject to no prior or equal security interest other than and only to the extent of the Permitted Liens and the Liens of any other Person permitted by Section 2.1 of this Security Agreement. The execution and filing of the Financing Statements has been duly authorized by all appropriate action on the part of the Borrower (and any other Person named as debtor therein) and the Borrower (and any other Person named as debtor therein) has duly executed the Financing Statements.

3.12. No Violation; Indemnity. The Borrower has not and shall not acquire, obtain, make, manufacture, produce, operate, hold, possess, maintain, use, sell, transfer, grant, pledge, or dispose of (for purposes of this Section 3.12, collectively "the Borrower's use") any of its Business, securities, property or assets (including any proceeds of the Loans, the Collateral, the Liquor License (if any), and the Property) in violation of any statute, law, rule, ordinance, regulation, policy, procedure, injunction, award, decree, judgment, contract, agreement (including the Franchise Agreement, if applicable), understanding, or right or interest of any other Person (for purposes of this Section 3.12, each such event a "violation"), and to the Borrower's knowledge no such violation has been made by any other Person and no basis for a claim of any such violation exists. The Borrower shall indemnify and hold the Secured Party harmless from and against any such violation, and any other loss, liability, damage, cost or expense whatsoever (including attorneys' fees and disbursements) arising out of or in connection with the Borrower's use of any of its Business, securities, property or assets (including any proceeds of the Loans, the Collateral, the Liquor License (if any), and the Property).

3.13. Franchise Agreement. The Borrower, if a franchisee or a franchisor under a Franchise Agreement, is and will continue to be in good standing under such Franchise Agreement. The Borrower, if a franchisee or franchisor under a Franchise Agreement, has not breached and is not in default under the Franchise Agreement and shall not breach or be in default under the Franchise Agreement and The Borrower has no knowledge of any claim of (or basis for any claim of) any such breach or default, except as stated on Schedule 7 attached hereto. The Borrower, if a franchisee under a Franchise Agreement, shall not terminate or fail to renew the Franchise Agreement; and the Borrower has no knowledge of any claim of (or basis for any claim of) any such termination or nonrenewal. The Borrower agrees to fully comply, at the Borrower's own cost and expense, with the terms of the License and the Franchise Agreement (including any renewal option) and to promptly notify the Secured Party of any adverse development with regard to the Franchise Agreement or the License, including any claim of breach of or default under, or threat of nonrenewal or termination of, or litigation involving the Franchise Agreement or the License.

3.14. Operating Experience. The Borrower has had at least two years experience operating a business or businesses similar to the Business of the Pledged Store. In addition, each Pledged Store has been operating for at least twelve months.

3.15. FCCR. During the term of this Security Agreement, the Borrower shall maintain a Consolidated FCCR of not less than 1.35:1 (the "Required Consolidated FCCR"). All calculations of the Consolidated FCCR shall be based upon the financial information furnished by the Borrower hereunder (see Sections 3.21 and 3.22) for the twelve-month period ending December 31 of each year or more frequently as the Secured Party may from time to time reasonably request.

3.16. Limitation on Indebtedness, Lease Obligations and Distributions. The Borrower shall not, directly or indirectly, incur any Indebtedness, Lease Obligations or make or become obligated to make any Distributions if after giving effect to such incurrence or payments, the Consolidated FCCR would be less than 1.50:1.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3.17. Inspection. The Borrower shall allow the Secured Party, its agents and representatives, from time to time, to inspect the Collateral, the Property, the Liquor License (if any) and the Borrower's books and records pertaining thereto or otherwise to the Business, and the Borrower will assist (and permit abstracts and photocopies of the Borrower's books and records to be taken and retained by) the Secured Party, its agents and representatives in making any such inspection.

3.18. Insurance. At the Borrower's sole cost and expense, the Borrower shall

(a) (i) keep the Collateral (which for purposes of this Section 3.18 includes the Property) insured against loss or damage by fire, theft, collision and other hazards (including flood, if no certification or other evidence satisfactory to the Secured Party is delivered to the Secured Party to the effect that the Property is not located within a federally designated special flood hazard area) as may be required by the Franchise Agreement (if applicable), or the Secured Party and by policies of fire, extended coverage and other insurance with such company or companies, in such amounts (and, with respect to policies required for property, fire and flood insurance in an amount not less than the lesser of (A) the replacement value thereof, and (B) the Loan Amount payable under the Promissory Note), as may be required by the Franchise Agreement (if applicable) and the Secured Party, but in no event less than the minimum amount required to prevent the imposition of any coinsurance requirement on the insured, (ii) maintain liability insurance of not less than one million dollars, (iii) maintain business interruption insurance with scope and coverage reasonably satisfactory to the Secured Party, and (iv) maintain such other insurance (including certain minimum levels of acceptable workers' compensation, property damage, general public liability insurance) as may be required by law or by the Franchise Agreement (if applicable);

(b) cause all insurance policies required hereunder (i) to be maintained by providers either (A) having ratings of not less than B++ from A.M. Best Company Inc. (or comparable ratings from a comparable rating agency) or (B) who, if not so rated, have been approved by the Secured Party and (ii) to contain a standard lender's loss payable endorsement or mortgagee's endorsement providing for payment directly to the Secured Party and/or its designees and to provide for a minimum of thirty (30) days notice to the Secured Party prior to cancellation or modification or nonrenewal;

(c) timely pay all premiums, fees and charges required in connection with all of its insurance policies and otherwise continue to maintain such policies in full force and effect;

(d) promptly deliver the insurance policies, certificates (and renewals) thereof or other evidence of compliance herewith to the Secured Party; and

(e) promptly notify the Secured Party of any loss covered by such insurance policies and allow the Secured Party to join the Borrower in adjusting any loss in excess of $50,000.

3.19. Loan Proceeds. No part of the proceeds of the Loans will be used, directly or indirectly, for the purpose of buying or carrying any "margin stock" within the meaning of Regulation G or U of the Board of Governors of the Federal Reserve System. The Borrower intends to and agrees to use the proceeds of the Loans solely for the lawful, proper business or commercial purpose(s) set forth in its application for the Loans and Secured Party's commitment letter.

3.20. Solvency. The Borrower (and each Affiliate Guarantor) is solvent and, after giving effect to the Obligations, will continue to be solvent.

3.21. Reporting Requirements. The Borrower agrees to provide to the Secured Party within twenty (20) days after June 30 and December 31 of each calendar year during the term of this Security Agreement, a compliance

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document certificate (in the form attached hereto as Exhibit C). The Borrower further agrees to provide to the Secured Party: (a) within seventy-five (75) days after December 31st of each calendar year and as the Secured Party may reasonably request from time to time, consolidated Borrower and individual Pledged Store internally generated financial statements covering the twelve (12) month period then-ended; and (b) copies of such other reports and information as the Secured Party may from time to time request. The financial statements furnished to the Secured Party in connection with the Borrower's application for the Loans and hereunder shall reflect all Indebtedness and Lease Obligations of the Person covered thereby and shall be sufficiently detailed to allow the Secured Party to calculate the Consolidated FCCR.

3.22. Accuracy of Information. All information, reports, statements and financial and other data furnished (or hereafter furnished) by the Borrower to the Secured Party, its agents or representatives hereunder or in connection with the Borrower's application for the Loans and the Obligations, are (and shall be on the date so furnished) true, complete and correct. Borrower hereby authorizes Secured Party to request credit bureau reports while any of the Obligations are outstanding.

3.23. Employee Benefit Plans.

(a) Definitions.

"Employee Benefit Plan" means any group health insurance, group life insurance, medical, ss.401(k), profit sharing, defined benefit, pension, cafeteria, SIMPLE, SEP, Borrower-sponsored IRA or any other employee benefit plan sponsored by the Borrower, including without limitation any program, arrangement or plan within the meaning of Section 3(3) of ERISA.

"Borrower." For purposes of this Section 3.23, the term "Borrower" shall include all employers (whether or not incorporated) which by reason of common control or otherwise are treated together with Borrower as a single employer within the meaning of the Internal Revenue Code ("Code"), including without limitation under Code Sections 414(b), (c), (m), (n) or (o).

(b) Employee Benefit Plans Comply With ERISA and Code. For every Employee Benefit Plan (i) the Employee Benefit Plan is in compliance with ERISA and the Code, (ii) no accumulated funding deficiency within the meaning of ERISA or the Code has been incurred, and (iii) neither Borrower nor any other party has applied for or obtained a waiver from the Internal Revenue Service of any minimum funding requirement. Each Employee Benefit Plan intended to be qualified under the Code has been determined to be qualified by the Internal Revenue Service and nothing has occurred since the date of the last determination which resulted or is likely to result in the revocation of the determination.

(c) No PBGC or Withdrawal Liability. Borrower has not incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC") in connection with any Employee Benefit Plan or ceased operations at any facility or withdrawn from any Employee Benefit Plan in a manner which could give rise to liability under ERISA. For example and without limitation, no Employee Benefit Plan has been a plan for which a "reportable event," within the meaning of Section 4043 of ERISA, has occurred, or to the knowledge of Borrower, has been a plan for which any liability to the PBGC has been or is expected to be incurred. Borrower has not incurred any withdrawal liability (including any contingent or secondary withdrawal liability) within the meaning of ERISA to any Employee Benefit Plan which is a multiemployer plan (as defined by ERISA), and no event has occurred, and there exists no condition or set of circumstances, which presents a material risk of the occurrence of any withdrawal from or the partition, termination, reorganization or insolvency of any multiemployer plan which could result in any liability with respect to a multiemployer plan. Borrower has not been notified by the sponsor of any multiemployer plan that the multiemployer plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and operations have not ceased at any facility which would subject Borrower to the provisions of Section 4062(e) of ERISA. No proceeding has been instituted on behalf of any multiemployer plan against Borrower to

(d) No Tax or Other Liability. Borrower has no liability for any Employee Benefit Plan for any lien, tax, penalty or excise tax under ERISA or the Code. Other than claims for benefits submitted by participants or beneficiaries, no claim, lawsuit or cause of action against or proceeding involving any Employee Benefit Plan is pending or, to Borrower's knowledge, threatened by any party. Except to the extent required under Section 601 et seq. of ERISA and Section 4980B of the Code, Borrower provides no benefits described in Section 3(1) of ERISA to any retired or former employee or is obligated to provide benefits to or on behalf of any employee following the employee's retirement or other termination of service with Borrower.

(e) No Prohibited Transactions. No transaction relating to any Employee Benefit Plan proscribed by Section 406 of ERISA ("Prohibited Transaction") has occurred for which an exemption is not expressly available and applicable under ERISA. Furthermore, to the extent within the knowledge or control of the Borrower, neither the execution and delivery of this Security Agreement, the acquisition of the Promissory Note by Secured Party or its Assigns, nor the consummation of any other transaction contemplated by this Security Agreement constitutes or will constitute a Prohibited Transaction with respect to any Employee Benefit Plan for which an exemption is not expressly available and applicable under ERISA.

(f) All Employee Benefit Plans Funded and Currently In Compliance. Borrower has performed all of Borrower's obligations under all Employee Benefit Plans. Full and timely payment has been made of all amounts which Borrower is required, under applicable law or under any Employee Benefit Plan or any other agreement to which Borrower is a party, to have paid for each Employee Benefit Plan. Borrower has made adequate provision for reserves for all obligations and liabilities under each Employee Benefit Plan that have accrued but are not yet due under the terms of any Employee Benefit Plan or related agreements.

(g) Transaction Will Not Trigger Benefits. The execution and delivery of this Security Agreement, and the consummation of the transactions contemplated by this Security Agreement, will not (i) result in any payment by Borrower (including, without limitation, severance, unemployment compensation, parachute payment, bonus or otherwise) becoming due to any director, employee, or independent contractor of Borrower under any Employee Benefit Plan, agreement or otherwise, (ii) increase any benefits otherwise payable under any Employee Benefit Plan or agreement, or (iii) increase or create any liability referred to in either Section 3.23(b) or 3.23(c) above.

3.24. Taxes. The Borrower and each of its Affiliates and each entity which might have tax liabilities for which the Borrower or any of its Affiliates is or may be liable, has filed all tax returns and paid all taxes required by law to be filed or paid, which have become due pursuant to said returns (or which to the knowledge of the Borrower are due and payable) and on all assessments received by the Borrower, such Affiliate or such entity, as the case may be. No extensions of the time for the assessment of deficiencies have been granted by the Borrower or any of its Affiliates. There are no material Liens on any properties or assets of the Borrower or any of its Affiliates imposed or arising as a result of the delinquent payment or the nonpayment of any tax, assessment, fee or other governmental charge. To the best of Borrower's knowledge, the income tax returns of the Borrower and its Affiliates have been examined and reported upon by the relevant tax authorities, or closed by applicable statutes of limitations, for all fiscal years through the fiscal year ended December 31, 1990, and neither the Borrower nor any of its Affiliates nor any such entity has given or consented to any waiver of the statute of limitations with respect to its tax liabilities for any such year. Adequate provision has also been made for all other taxes (whether past, current or deferred, federal, provincial, local or foreign, due or to come due) on such balance sheet, and the Borrower knows of no transaction or matter which might or could result in additional tax assessments to the Borrower or any of its Affiliates in the ordinary course since the date of such balance sheet. There are no applicable taxes, fees or other governmental charges payable by the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Borrower or any of its Affiliates in connection with the execution and delivery of this Agreement, and the other Loan Documents by the Borrower or any of its Affiliates or the offer, issuance, sale and delivery of the Promissory Note by the Borrower.

3.25. Property Leases. The Borrower, if a tenant or subtenant under a lease or sublease of the Property, shall not terminate any such lease or sublease (other than any lease or sublease of the Property located at 1415 Larimer Street, Denver, Colorado) and the Borrower has no knowledge of any claim of (or basis for any claim of) any such termination. The Borrower agrees to exercise and fully comply with the terms of all renewal options provided for in such lease or sublease, and to promptly notify the Secured Party of any adverse development with regard to the threat of nonrenewal or termination of such lease of sublease.

3.26. Liquor License. Liquor licenses have been issued to Borrower by both the State of Colorado and local licensing authority with respect to Borrower's location(s) set forth on Schedule 5. The Liquor Licenses are and will continue to be in full force and in good standing, and Borrower shall pay any and all fees and costs in connection therewith. Borrower is not in violation of the Liquor Licenses and Borrower shall not fail to renew the Liquor Licenses. Borrower agrees to fully comply, at Borrower's own cost and expense, with the terms and conditions of the Liquor Licenses.

3.27. Release of Franchise Agreements. Upon Secured Party's receipt of written request from Borrower, Secured Party shall release all Liens in those Franchise Agreements entered into subsequent to the date that Borrower achieves Seven Million Dollars ($7,000,000.00) in EBITDA and a Consolidated FCCR of 2.00:1 for the most recent consecutive twelve (12) month period and all Liens in the royalties received from such Franchise Agreements.

ARTICLE IV

SPECIAL PROVISIONS CONCERNING INVENTORY, EQUIPMENT AND REAL PROPERTY

4. Special Provisions Concerning Inventory, Equipment and Real Property. The Borrower shall do nothing to impair the rights of the Secured Party in the Inventory and the Equipment and shall cause the Inventory and the Equipment to at all times be, constitute and remain personal property subject to the security interest granted to the Secured Party. Notwithstanding the preceding sentence, provided the Borrower is not in default under any of its Obligations (and no event which with the passage of time would be an Event of Default has occurred and is continuing), in the ordinary course of the Borrower's Business, (a) the Borrower may sell its Inventory, and (b) subject to sections 3.15 and 3.16 hereto, with the prior consent of the Secured Party, which will not be unreasonably withheld, the Borrower may, from time to time, refinance existing Permitted Liens in accordance with the terms thereof, replace its Equipment, acquire new Equipment and accessions to its Equipment, or acquire fee interest in (or ground lease of) any Property, subject to purchase money security interests; provided that, if the Secured Party has a leasehold mortgage or deed of trust on any lease of such Property, such lease remains in full force and effect, subject to the Secured Party's security interest and any Person with a lien on the fee interest in (or ground lease of) such Property provides the Secured Party with a nondisturbance agreement and such other assurances as the Secured Party shall reasonably request.

ARTICLE V

SPECIAL PROVISIONS CONCERNING INSURANCE AND CONDEMNATION PROCEEDS AND PROCEEDS

5. Special Provisions Concerning Insurance and Condemnation Proceeds and Proceeds.

5.1. Special Provisions Concerning Insurance and Condemnation Proceeds. Unless prohibited under the terms of the Property lease, if applicable, the Borrower hereby directs any and all transferors, distributors or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document payors (including insurance companies with whom the Borrower maintains insurance) to make payment of all Insurance and Condemnation Proceeds directly to the Secured Party and authorizes the Secured Party, in its sole discretion, to apply the same toward repayment of the Loans, whether or not due, or, toward replacement of the Collateral. Notwithstanding the terms of the Property lease, if applicable, the Borrower will use its best efforts and hereby assigns the Insurance and Condemnation Proceeds toward replacement of the Collateral and shall keep any lease or options to extend the lease in effect until the Loans are paid.

5.2. Special Provisions Concerning Proceeds. All Proceeds, whether received by the Secured Party or by the Borrower, or by any other Person will be included in the Collateral subject to the security interest granted to the Secured Party hereunder. Upon and during the continuation of an Event of Default, the Borrower shall (a) identify, earmark, segregate and keep separate all Proceeds received by it, (b) upon the Secured Party's request, promptly account to the Secured Party for all Proceeds, and (c) hold all Proceeds received by the Borrower in trust for the benefit of the Secured Party and shall promptly (and in any event not later than the fifth day after receipt) deliver (or cause to be delivered) the same to the Secured Party and into its possession in the form received by the Borrower and at a time and in a manner satisfactory to the Secured Party.

ARTICLE VI

SPECIAL PROVISION CONCERNING RIGHTS AND DUTIES WHILE IN POSSESSION OF COLLATERAL

6. Special Provision Concerning Rights and Duties While in Possession of Collateral.

6.1. Borrower's Possession. Upon and during the continuance of an Event of Default, to the extent the same shall, from time to time, be in the Borrower's possession, the Borrower will hold all securities, Instruments, Chattel Paper, Documents, certificates and money and other writings evidencing or relating to the Collateral or Liquor License (if any) in trust for the Secured Party and, upon request or as otherwise provided herein, promptly deliver the same to the Secured Party in a form received and at a time and in a manner satisfactory to the Secured Party. With respect to the Collateral in the Borrower's possession the Borrower shall at the Secured Party's request take such action as the Secured Party in its discretion deems necessary or desirable to create, perfect and protect the Secured Party's security interest in any of the Collateral.

6.2. Secured Party's Possession. With respect to all of the Collateral and those Liquor Licenses delivered or transferred to, or otherwise in the custody or control of (including any items in transit to or set apart for) the Secured Party or any of its agents, associates or correspondence in accordance with this Security Agreement, the Borrower agrees that: (a) such Collateral and Liquor Licenses will be, and is deemed to be in the sole possession of the Secured Party; (b) subject to Section 4, the Borrower has no right to withdraw or substitute any such Collateral or Liquor License without the consent of the Secured Party, which consent may be withheld or delayed in the Secured Party's sole discretion; (c) the Borrower shall not take or permit any action, or exercise any voting and other rights, powers and privileges in respect of the Collateral and Liquor Licenses inconsistent with the Secured Party's sole possession thereof; and (d) the Secured Party may in its sole discretion and without notice, without obligation or liability except to account for property actually received by it, and without affecting or discharging the Obligations, (i) further transfer and segregate the Collateral and Liquor Licenses in its possession; (ii) receive Proceeds and hold the same as part of the Collateral and/or apply the same as hereinafter provided; and (iii) exchange any of the Collateral and Liquor Licenses for other property upon reorganization, recapitalization or other readjustment. Following the occurrence of an Event of Default, the Secured Party is authorized (A) to exercise or cause its nominee to exercise all or any rights, powers and privileges (including to vote) on or with respect to the Collateral and Liquor Licenses with the same force and effect as an absolute owner thereof; (B) whether any of the Obligations be due, in its name or in the Borrower's name or otherwise, to

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or settlement the Secured Party deems desirable with respect to, any of the Collateral and Liquor Licenses; and (C) to extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, or release, any of the Collateral. Notwithstanding the rights accorded the Secured Party with respect to the Collateral and Liquor Licenses, and except to the extent provided below or required by the UCC or other applicable law (which requirement cannot be modified, waived or excused), the Secured Party's sole duty with respect to the Collateral and Liquor Licenses in its possession (with respect to custody, preservation, safekeeping or otherwise) will be to deal with it in the same manner that the Secured Party deals with similar property owned and possessed by it. Without limiting the foregoing, the Secured Party, and any of its officers, directors, partners, trustees, owners, employees and agents, to the extent permitted by law (1) will have no duty with respect to the Collateral and Liquor Licenses or the rights granted hereunder; (2) will not be required to sell, invest, substitute, replace or otherwise dispose of the Collateral and Liquor Licenses; (3) will not be required to take any steps necessary to preserve any rights against prior parties to any of the Collateral and Liquor Licenses; (4) will not be liable for (or deemed to have made an election of or exercised any right or remedy on account of) any delay or failure to demand, collect or realize upon any of the Collateral and Liquor Licenses; and (5) will have no obligation or liability in connection with the Collateral and Liquor Licenses or arising under this Security Agreement. The Borrower agrees that such standard of care is reasonable and appropriate under the circumstances.

ARTICLE VII

EVENTS OF DEFAULT

7. Events of Default. The happening of any one or more of the following events shall constitute an "Event of Default" hereunder:

(a) the Borrower shall fail to make any payment under this Security Agreement, the Promissory Note or any Loan Document when the same becomes due and payable and such failure shall continue for five Business Days after the Secured Party provides notice to the Borrower of such failure; or

(b) the Borrower shall default under, fail to perform or observe any covenant or condition of or agreement in, or breach, or make a material inaccuracy in or omission from, any representation or warranty under or in, this Security Agreement, the Promissory Note, any other Loan Document, the Franchise Agreement or the License (if applicable), any financial or other statement delivered to the Secured Party or any agreement, instrument or obligation in connection with any Permitted Lien, and such default, failure, breach, inaccuracy or omission shall continue unremedied for the earliest of (i) fifteen (15) days following the date that notice of such default, failure, breach, inaccuracy or omission is given to the Borrower by the Secured Party, (ii) fifteen (15) days following the date that the Borrower first obtains knowledge of such default, failure, breach, inaccuracy or omission, or (iii) in the case of any Permitted Lien, the occurrence of such event (or, if there exists an applicable cure period, the expiration of such cure period); or

(d) any of the Borrower's Affiliates listed on Schedule 3 shall fail to make any payment when due under, or default under, fail to perform or observe any covenant of or condition or agreement in breach of, or make any material inaccuracy in or omission from any representation and warranty under, any security agreement with the Secured Party or note held by the Secured Party or any other loan document with the Secured Party or in any other agreement, instrument, document or certificate, or financial or other statement delivered to the Secured Party, and such failure, default or breach continues beyond any applicable grace period provided therein; or

(e) the Borrower or any Affiliate Guarantor or any partnership in which the Borrower is a partner (each hereinafter called a "Principal

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Party") shall die, dissolve, merge or consolidate, suspend the transaction of business or incur any material adverse change in its financial condition or prospects; or

(f) the Borrower or any other Principal Party shall be expelled from or suspended by any stock or securities exchange or other exchange, or any proceeding, procedure or remedy supplementary to or in enforcement of judgment (involving an amount in excess of $100,000 in the aggregate which is not insured against) shall be resorted to or commenced against, or with respect to any property of, the Borrower or any other Principal Party; or

(g) the Borrower or any other Principal Party shall make an assignment for the benefit of, or composition with, creditors, or shall be or become insolvent or unable, or generally fail, to pay its debts when due, or shall be or become a party or subject to any bankruptcy, reorganization, insolvency or other similar proceeding, or a receiver or liquidator, custodian or trustee shall be appointed for the Borrower or any other liable party, or a substantial portion of any of the Borrower's or their respective assets and, if any of the foregoing shall occur involuntarily as to the Borrower and any other Principal Party, it shall not be dismissed with prejudice, stayed or discharged within forty-five (45) days; or

(h) the Borrower or any other Principal Party shall take any action to effect, or which indicates its acquiescence in, any of (e), (f) or (g), above; or

(i) the Borrower defaults under any other loan or note to any other lender; or

(j) notwithstanding the foregoing, if a notice of default is given to the Borrower under the lease, (if any) of the Property and such default is not cured within three (3) days from the date of such notice.

ARTICLE VIII

REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT

8. Remedies Upon Occurrence of Event of Default.

8.1. Cumulative Rights and Remedies. Upon the occurrence of an Event of Default, the Secured Party shall have the rights, powers and remedies (a) granted to secured parties under the UCC; (b) granted to the Secured Party under any other applicable statute, law, rule or regulation; and (c) granted to the Secured Party under this Security Agreement, the Promissory Note or any other Loan Document or any other agreement between the Borrower and the Secured Party. In addition, all such rights, powers and remedies shall be cumulative and not alternative. Any single or partial exercise of, or forbearance, failure or delay in exercising any right, power or remedy shall not be, nor shall any such single or partial exercise of, or forbearance, failure or delay be deemed to be a limitation, modification or waiver or any right, power or remedy and shall not preclude the further exercise thereof; and every right power and remedy of the Secured Party shall continue in full force and effect until such right, power and remedy is specifically waived by an instrument in writing executed and delivered with respect to each such waiver by the Secured Party.

8.2. Acceleration of Obligations. Upon the occurrence of an Event of Default, and at any time thereafter if any Event of Default shall then be continuing, the Secured Party may, from time to time in its discretion, by written notice to the Borrower declare the Promissory Note (including any Make Whole Premium required to be paid upon prepayment of any Loan) and any other Obligations to be immediately due and payable whereupon (and, automatically without any notice, demand or other action by the Secured Party, upon the occurrence of any Event of Default set forth in subsections (e) through (h) of Section 7) such principal, interest and other Obligations shall be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower to the maximum extent permitted by law.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 8.3. Additional Rights of the Secured Party. Upon the occurrence of an Event of Default, the Secured Party may, from time to time, in its discretion, and without the Borrower's assent, without advertisements or notices of any kind (except for the notice specified in Section 8.5 below regarding notice required in connection with a public or private sale), or demand of performance or other demand, or obligation or liability (except to account for amounts actually received) to or upon the Borrower or any other person (all such advertisements, notices and demands, obligations and liabilities, if any, hereby being expressly waived and discharged to the extent permitted by law), forthwith, directly or through its agents or representatives, (a) disclose such default and other matters (including the name, address and telephone number of the Borrower) in connection therewith in the Secured Party's reasonable discretion to any other Program Borrower, the Borrower's franchisor or franchisee (if applicable) and other creditors or obligors of the Borrower (and the Borrower understands that the Secured Party intends to make such disclosure, from time to time); (b) to the extent permitted by applicable law enter any premises, with or without the assistance of other persons or legal process; (c) require the Borrower to account for (including accounting for any products and proceeds of any Collateral), segregate, assemble, make available and deliver to the Secured Party, its agents or representatives, the Collateral and the Liquor Licenses (if any); (d) take possession of, operate, render unusable, collect, transfer and receive, recover, appropriate, foreclose, extend payment of, adjust, compromise, settle, release any claims included in, and do all other acts or things necessary or, in the Secured Party's sole discretion appropriate, to protect, maintain, preserve and realize upon, the Liquor License (if any), the Collateral and any products and proceeds thereof, in whole or in part; and (e) exercise all rights, powers and interests with respect to any and all Collateral and Liquor Licenses, and sell, assign, lease, license, pledge, transfer, negotiate (including endorse checks, drafts, orders, or instruments), deliver or otherwise dispose (by contract, option(s) or otherwise) of the Liquor License (if any), or the Collateral or any part thereof. Any such disposition may be in one or more public or private sales, at or upon an exchange, board or system or in the county(ies), in the state(s) set forth on Schedule 1 or elsewhere, at such price, for cash or credit (or for future delivery without credit risk) and upon such other terms and conditions as it deems appropriate, with the right of the Secured Party to the extent permitted by law upon any cash sale or sales, public or private, to purchase the whole or any part of said Collateral and Liquor License, free of any right, claim or equity of redemption of or in the Borrower (such rights, claims and equity or redemption, if any, hereby being expressly waived). Notwithstanding that the Secured Party, whether in its own behalf and/or on behalf of another or others, may continue to hold the Collateral and Liquor License, and regardless of the value thereof, or any delay or failure to dispose thereof, unless and then only to the extent that the Secured Party proposes to retain the Collateral and/or Liquor License in satisfaction of the Obligations by written notice in accordance with the UCC, the Borrower shall be and remain liable for the payment in full of any balance of the Obligations and expenses at any time unpaid. Without limiting the foregoing, upon the Borrower's failure to abide by and comply with its obligations under Section 3 (including Sections 3.9, 3.10 or 3.18) or Section 13 hereof, in addition to its other rights and remedies, the Secured Party may (but is not required to), in its sole discretion and to the extent it deems necessary, advisable or appropriate, take or cause to be taken such actions or things to be done (including the payment or advancement of funds, or requiring advancement of funds to be held by the Secured Party to fund such obligations, including taxes or insurance) as may be required hereby (or necessary or desirable in connection herewith) to correct such failure (including causing the Collateral to be maintained or insurance protection required hereby to be procured and maintained) and any and all costs and expenses incurred (including attorney's fees and disbursements) in connection therewith shall be included in the Borrower's Obligations and shall be immediately due and payable and bear interest at the Default Rate.

8.4. Application of Proceeds. The Secured Party may apply the net proceeds, if any, of any collection, receipt, recovery, appropriation, foreclosure or realization, or from any use, operation, sale, assignment, lease, pledge, transfer, delivery or disposition of all or any of the Collateral and/or the Liquor License (if any), after deducting all reasonable costs and expenses (including attorneys fees, court costs and legal expenses) incurred in connection therewith or with respect to the care, safekeeping, custody, maintenance, protection, administration or otherwise of any and all of said

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Collateral or Liquor License, or in any way relating to the rights of the Secured Party under this Security Agreement, (a) first, to the satisfaction of the Obligations, in whole or in part, in such order as the Secured Party may, in its discretion, elect; (b) second, to the payment, satisfaction or discharge of any of other Indebtedness or obligation as required by any law, rule or regulation; and (c) lastly, the surplus, if any, to the Borrower.

8.5. Required Notice of Sale. In exercising its rights, powers and remedies as secured party, the Secured Party agrees to give the Borrower five (5) days notice of the time and place of any public sale of Collateral or of the time after which any private sale of Collateral may take place, unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Borrower agrees that such period and notice is commercially reasonable under the circumstances.

8.6. Applicable Collateral. In furtherance and not in limitation of the foregoing, in no event shall the designation of all or any portion of the Collateral as "Applicable Collateral" restrict or limit the Secured Party in the exercise of its remedies under this Section 8. Such designation is intended solely for the purposes set forth in Section 14.2. All of the Collateral shall secure all of the Obligations. The Borrower expressly waives any right (a) to limit the Secured Party solely to the Applicable Collateral with respect to any Loan or (b) to require the Secured Party to proceed against the Applicable Collateral with respect to any Loan before proceeding against any other Collateral with respect to such Loan. The Borrower agrees that, upon the occurrence of an Event of Default, the Secured Party may proceed against the Collateral in satisfaction of any Obligation, in such manner and in such order as the Secured Party may determine in its sole and absolute discretion.

8.7. Additional Remedies Concerning Liquor Licenses. In furtherance and not in limitation of the foregoing, upon the occurrence of an Event of Default, Borrower will continue to maintain, in good standing, any and all Liquor Licenses. Borrower will cooperate with any and all requests of Secured Party, its trustees, its receivers, or otherwise with respect to the issuance of any temporary permits or transfer of the Liquor Licenses whatsoever. In this regard, the Borrower hereby consents to the issuance of any and all temporary permits and to the transfer of any and all such Liquor Licenses to the Secured Party, its duly appointed receivers, trustees, or otherwise. Borrower covenants to take no actions inconsistent with the foregoing.

ARTICLE IX

POST-DEFAULT POWER OF ATTORNEY

9. Post-Default Power of Attorney. The Borrower hereby irrevocably constitutes and appoints, effective on and after the occurrence of an Event of Default, the Secured Party acting through any officer or agent thereof, with full power of substitution, as the Borrower's true and lawful attorney-in-fact with full irrevocable power and authority in the Borrower's place and stead and in the Borrower's name or in its own name, from time to time in the Secured Party's discretion, to receive, open and dispose of mail addressed to the Borrower, to take any and all action, (including the authority to act fully and completely with respect to any and all Liquor Licenses), to do all things, to execute, endorse, deliver and file any and all writings, documents, (including documents of conveyance, transfer or otherwise for Liquor Licenses), instruments, notices, statements (including financing statements, and writings to correct any error or ambiguity in any Loan Document), applications and registrations (including registrations and licenses for securities, Copyrights, Patents and Trademarks), checks, drafts, acceptances, money orders, or other evidence of payment or proceeds, which may be or become necessary or desirable in the sole discretion of the Secured Party to accomplish the terms, purposes and intent of this Security Agreement and the other Loan Documents, including the right to appear in and defend any action or proceeding brought with respect to the Collateral or Property, and to bring any action or proceeding, in the name and on behalf of the Borrower, which the Secured Party, in its discretion, deems necessary or desirable to protect its interest in the Collateral, Liquor License (if any) or Property. Any and all acts done under the foregoing authorization are hereby ratified and approved by Borrower. Said attorney or designee shall not be liable for any acts of commission or omission, nor for any

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document error of judgment or mistake of fact or law, unless and then only to the extent that the same constitutes its gross negligence or willful misconduct. This power is coupled with an interest and is irrevocable. THIS POWER DOES NOT AND SHALL NOT BE CONSTRUED TO AUTHORIZE ANY CONFESSION OF JUDGMENT.

ARTICLE X

INDEMNIFICATION

10. Indemnification. The Borrower agrees to indemnify the Secured Party and hold the Secured Party harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Secured Party in any way relating, in any way arising out of or in connection with this Security Agreement, the Loan Documents or the transactions contemplated hereby or thereby. Without limitation of the foregoing, the Borrower will reimburse the Secured Party for all expenses (including expenses for legal services of every kind) of, or incidental to, the negotiation of, entering into and enforcement of any of the provisions hereof and of any of the Obligations, and any actual or attempted sale, lease or other disposition of, and any exchange, enforcement, collection, compromise or settlement of any of the Collateral or the Liquor License (if any), and receipt of the Proceeds thereof, and for the care of the Collateral or the Liquor License (if any) and defending or asserting the rights and claims of the Secured Party in respect thereof, by litigation or otherwise, including expense of insurance, and all such expenses shall be the Borrower's Obligations.

ARTICLE XI

OBLIGATIONS ABSOLUTE

11. Obligations Absolute. The Borrower's Obligations will be absolute, unconditional and irrevocable and will be paid or satisfied strictly in accordance with their respective terms under all circumstances whatsoever, including: (a) the invalidity or unenforceability of all or any of, or any part of, this Security Agreement, the Promissory Note or any other Loan Document, or any consent, waiver, amendment or modification thereof; (b) the existence of any claim, setoff, defense or other right which the Borrower may have at any time against the Secured Party, or any other Person, whether in connection with this Security Agreement, any other Loan Documents, the transactions contemplated hereby, thereby or otherwise all of which the Borrower hereby waives to the maximum extent permitted by law; or (c) the loss, theft, damage, destruction or unavailability of the Collateral or the Liquor License (if any) to the Borrower for any reason whatsoever, it being understood and agreed that the Borrower retains all liability and responsibility with respect to the Collateral and the Liquor License (if any).

ARTICLE XII

ASSIGNMENT AND DISSEMINATION OF INFORMATION

12. Assignment and Dissemination of Information.

12.1. Assignment. This Security Agreement is freely assignable, in whole or in part, by the Secured Party and, to the extent of any such assignment, the Secured Party shall be fully discharged from all responsibility. The Borrower understands and agrees that the Secured Party intends to and may, from time to time, sell, pledge, grant a security interest in and collaterally assign, transfer and deliver or otherwise encumber or dispose of the Promissory Note, this Security Agreement and the other Loan Documents and its rights and powers hereunder and thereunder, in whole or in part, in connection with the Securitization or any other assignment or other disposition of the Promissory Note. The Borrower may not, in whole or in part, directly or indirectly, assign this Security Agreement or any Loan Document or its rights hereunder or thereunder or delegate its duties hereunder without, in each instance, the specific prior written consent of the Secured Party, which consent may be withheld or delayed in the Secured Party's sole discretion, and payment of the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document amounts required under and compliance with Section 13(b) of the Promissory Note. For purposes of this Security Agreement, a change in control of the Borrower (whether by stock sale, issuance or otherwise) shall constitute an assignment hereof.

12.2. Dissemination of Information. If Secured Party determines at any time to sell, transfer or assign the Promissory Note, Security Agreement, or other Loan Documents, and any or all servicing rights with respect thereto, or to otherwise issue a Securitization involving the Loan Documents, Secured Party may forward to each purchaser, transferee, assignee, investor or their perspective successors in such Securitization or any rating agency rating such Securitization and each prospective investor, all documents and information which Secured Party now has or may hereafter acquire relating to the Loan Documents, the Borrower, any Guarantor and the Property, which shall have been furnished by Borrower or any Guarantor, as Secured Party determines necessary or desirable.

ARTICLE XIII

FURTHER ASSURANCE

13. Further Assurance. The Borrower agrees at any time and from time to time, at the Borrower's sole cost and expense, to obtain, procure, execute and deliver, file and affix such further agreements, bills of sale and assignments, instruments, documents, warehouse receipts, bills of lading, vouchers, invoices, notices, statements, writings, (including financing statements, and writings to correct any error or ambiguity in any Loan Document), powers (including stock and bond powers, and powers of attorney), tax stamps and information, and to do or cause to be done all such further acts and things (including the execution, delivery and filing of financing statements on Form UCC-1, payment of filing fees and transfer, gains and recording taxes) as the Secured Party may reasonably request, from time to time, in its discretion. Without limiting the foregoing, the Borrower authorizes the Secured Party to the extent permitted under the UCC to execute and file, or file without the Borrower's signature, any and all financing statements, amendments thereto and continuations thereof as the Secured Party deems necessary or appropriate and the Borrower shall pay and indemnify the Secured Party for and hold the Secured Party harmless from any and all costs and expenses in connection therewith. The Borrower agrees that it will promptly notify the Secured Party of and agree to correct any defect, error or omission in the contents of any of the Loan Documents or in the execution, delivery or acknowledgement thereof. The Borrower further agrees to execute, prior to or within three months following closing, a Form 4506 Request for Copy or Transcript of Tax Form, which form will be provided by Secured Party.

ARTICLE XIV

TERM, PARTIAL RELEASE AND REINSTATEMENT

14. Term, Partial Release and Reinstatement

14.1. Term. This Security Agreement shall be immediately in full force and effect upon the Borrower's execution below, whether or not it is signed by the Secured Party. Upon indefeasible payment in full of the Obligations in accordance with the terms thereof, this Security Agreement and the security interest granted hereunder shall terminate and the Secured Party, at the Borrower's expense, will execute and deliver to the Borrower the proper instruments (including UCC termination statements) acknowledging the termination of such security interest, and will duly assign, transfer and deliver (without recourse, representation or warranty) such Collateral and Liquor Licenses (as applicable) as may be in the Secured Party's possession, and not to be retained, sold, or otherwise applied or released pursuant to this Security Agreement, to the Borrower, except that the Borrower's obligations under Sections 10, 11, 13 and 15 shall survive indefinitely.

14.2. Partial Release. Upon the indefeasible payment in full of any Loan (including, without limitation, any Make Whole Premium or other amounts payable by the Borrower with respect to such Loan) in accordance with the provisions of the Promissory Note, the security interest hereunder with respect

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document to the Applicable Collateral shall terminate, and the Secured Party, at the expense of the Borrower, will execute and deliver to the Borrower the proper instruments (including UCC partial release statements) acknowledging the termination of such security interest, and will duly assign, transfer and deliver (without recourse, representation or warranty) such of the Applicable Collateral as may be in the possession of the Secured Party and has not theretofore been sold or otherwise applied or released pursuant to this Security Agreement, to the Borrower, and shall take such other action as the Borrower may reasonably request to effectuate the foregoing.

14.3. Reinstatement. This Security Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Secured Party in respect of the Obligations is rescinded or must otherwise be restored or returned by the Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Principal Party or upon the appointment of any intervenor or conservator of, or trustee or similar official for, the Borrower, any Principal Party or any substantial part of the Borrower's or any Principal Party's assets, or otherwise, all as though such payments had not been made.

ARTICLE XV

MISCELLANEOUS

15. Miscellaneous.

15.1. FINAL AGREEMENT; AMENDMENTS, CONSENTS, AUTHORIZATIONS. THIS SECURITY AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE BORROWER AND THE SECURED PARTY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE BORROWER AND THE SECURED PARTY. THE BORROWER UNDERSTANDS AND AGREES THAT ORAL AGREEMENTS AND ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE. THE BORROWER ACKNOWLEDGES AND AGREES THERE ARE NO ORAL AGREEMENTS BETWEEN THE BORROWER AND THE SECURED PARTY. This Security Agreement and the Loan Documents represent the entire understanding of the Secured Party and the Borrower with respect to the transactions contemplated hereby and thereby. None of the terms or provisions of this Security Agreement or any other Loan Document may be waived, altered, modified, or amended except in each instance by a specific written instrument duly executed by the Secured Party. Without limiting the foregoing, no action or omission to act shall be deemed to be a consent, authorization, representation or agreement of the Secured Party, under the UCC or otherwise, unless, in each instance, the same is in a specific writing signed by the Secured Party. The inclusion of Proceeds in the Collateral does not and shall not be deemed to authorize the Borrower to sell, exchange or dispose of the Collateral or the Franchise Agreement or otherwise use the Collateral in any manner not otherwise specifically authorized herein.

15.2. Notices. All notices and other communications given pursuant to or in connection with this Security Agreement shall be in duly executed writing delivered to the parties at the addresses set forth below (or such other address as may be provided by one party in a notice to the other party):

If to the Secured Party: If to the Assignee of Secured Party:

AMRESCO COMMERCIAL FINANCE, INC. NORWEST BANK MINNESOTA, N.A. 412 E. Parkcenter Blvd. Sixth & Marquette Suite 300 Suite 300 Minneapolis, MN 55479-0070 Boise, Idaho 83706 Facsimile Number: (612) 667-9825 Facsimile Number: (208)333-2050

If to the Borrower, to the Borrower's chief executive office (or residence), as represented by the Borrower herein.

Notice delivered in accordance with the foregoing shall be effective (a) when delivered, if delivered personally or by receipted-for telex, telecopier, or facsimile transmission, (b) two (2) days after being delivered in the United States (properly addressed and all fees paid) for overnight delivery service to a courier (such as Federal Express) which regularly provides such service and regularly obtains executed receipts evidencing delivery or (c) five

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (5) days after being deposited (properly addressed and stamped for first-class delivery) in a daily serviced United States mail box.

15.3. Reasonableness. If at any time the Borrower believes that the Secured Party has not acted reasonably in granting or withholding any approval or consent under the Promissory Note, this Security Agreement, or any other Loan Document or otherwise with respect to the Obligations, as to which approval or consent either the Secured Party has expressly agreed to act reasonably, or absent such agreement, a court of law having jurisdiction over the subject matter would require the Secured Party to act reasonably, then the Borrower's sole remedy shall be to seek injunctive relief or specific performance and no action for monetary damages or punitive damages shall in any event or under any circumstance be maintained by the Borrower against the Secured Party.

15.4. Recovery of Sums Required To Be Paid. The Secured Party shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Obligations as the same become due, without regard to whether or not the balance of the Obligations shall be due, and without prejudice to the right of the Secured Party thereafter to bring an action of foreclosure, or any other action, for a default or defaults by the Borrower existing at the time such earlier action was commenced.

15.5. WAIVERS. THE BORROWER HEREBY MAKES AND ACKNOWLEDGES THAT IT MAKES ALL OF THE WAIVERS SET FORTH IN THIS SECURITY AGREEMENT, THE PROMISSORY NOTE AND THE OTHER LOAN DOCUMENTS KNOWINGLY, INTENTIONALLY, VOLUNTARILY, WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF SUCH WAIVERS WITH ITS ATTORNEY; THE BORROWER FURTHER ACKNOWLEDGES THAT SUCH WAIVERS ARE A MATERIAL INDUCEMENT TO THE SECURED PARTY TO MAKE THE LOANS TO THE BORROWER AND THAT THE SECURED PARTY WOULD NOT HAVE MADE THE LOANS WITHOUT SUCH WAIVERS; AND THE BORROWER HEREBY MAKES AND ACKNOWLEDGES THAT IT MAKES SUCH WAIVERS WITH RESPECT TO EACH OTHER LOAN IN THE PROGRAM.

15.6. WAIVER OF TRIAL BY JURY. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, AND THE SECURED PARTY BY ITS ACCEPTANCE OF THE PROMISSORY NOTE AND THIS SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THE PROMISSORY NOTE, THIS SECURITY AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR THE OBLIGATIONS.

15.7. Relationship. The relationship of the Secured Party to the Borrower hereunder is strictly and solely that of secured lender on the one hand and borrower and guarantor on the other and nothing contained in the Promissory Note, this Security Agreement or any other Loan Document or otherwise in connection with the Obligations is intended to create, or shall in any event or under any circumstance be construed as creating, a partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the Secured Party and the Borrower other than as secured lender on the one hand and borrower and guarantor on the other.

15.8. Time is of the Essence. For all payments to be made and all obligations to be performed under the Loan Documents, time is of the essence.

15.9. Governing Law; Binding Effect. THIS SECURITY AGREEMENT AND ALL LOAN DOCUMENTS ARE ENTERED INTO IN THE STATE OF IDAHO, SECURED PARTY'S CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS IS LOCATED IN THE STATE OF IDAHO, AND ALL NOTICES AND SUMS PAYABLE UNDER THE LOAN DOCUMENTS RELATING TO THIS SECURITY AGREEMENT WILL BE SENT TO THE SECURED PARTY IN THE STATE OF IDAHO. BORROWER AND SECURED PARTY AGREE THAT THE VALIDITY, ENFORCEABILITY, CONSTRUCTION AND INTERPRETATION OF THIS SECURITY AGREEMENT, AND OF ALL TRANSACTIONS AND DOCUMENTS UNDER OR RELATING TO IT, WILL BE CONSTRUED, APPLIED, ENFORCED AND GOVERNED UNDER THE LAWS OF THE STATE OF IDAHO (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW), PROVIDED HOWEVER, THAT WITH RESPECT TO THE CREATION, ATTACHMENT, PERFECTION, PRIORITY AND ENFORCEMENT OF ANY LIENS CREATED BY THIS SECURITY AGREEMENT, THE LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED SHALL APPLY. This Security Agreement shall be binding upon the Borrower, and the heirs, devisees, administrators, executives, personal representatives, successors, receivers, trustees, and (without limiting Section 12 hereof) assignees, including all successors in interest of the Borrower in and to all or any part of the Collateral and the Liquor Licenses (if any), and

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shall inure to the benefit of the Secured Party, and the successors and assignees of the Secured Party.

15.10. Severability. Whenever possible this Security Agreement, the Promissory Note and each Loan Document and each provision hereof and thereof shall be interpreted in such manner as to be effective, valid and enforceable under applicable law. If and to the extent that any such provision shall be held invalid and unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provisions hereof or thereof, and any determination that the application of any provision hereof or thereof to any person or under any circumstance is illegal and unenforceable shall not affect the legality, validity and enforceability of such provision as it may be applied to any other person or in any other circumstance.

15.11. Headings Descriptive. The headings, titles and captions used herein are for convenience only and shall not affect the construction of this Security Agreement or any term or provision hereof.

15.12. Counterparts. This Security Agreement may be executed in a number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts shall together constitute but one and the same agreement.

15.13. Acknowledgement. Borrower acknowledges that Secured Party's underwriting guidelines and standards are applied on a case by case basis and that waivers may be granted in any particular case (including in the case of a borrower to be included in a pool with Borrower). Borrower further acknowledges that Secured Party's underwriting guidelines or standards may be modified at any time by Secured Party without notice to Borrower.

15.14. Attorneys Fees and Costs. Borrower agrees that upon the occurrence of an Event of Default, the Borrower shall pay all costs and expenses actually incurred by Secured Party (including without limitation attorney's fees and disbursements) incident to the enforcement, collection, protection or preservation of any right or claim of Secured Party under the Loan Documents, including any such fees or costs incurred in connection with any bankruptcy or insolvency proceeding of Borrower.

15.15. Loan Pool Flexibility. Secured Party shall have the right, at its sole and absolute discretion upon written notice to Borrower, to transfer (a "Transfer"), within eighteen (18) months from the effective date of this Security Agreement, all or any of the Loans and all Liens related to such Loans, from the Program to any other loan program formed by Secured Party. Upon the occurrence of a Transfer, the Loan Documents shall be automatically amended and reclassified to reflect the Transfer. Borrower shall execute all amendments or other documents Secured party deems necessary to effectuate a Transfer.

15.16. Public Announcement. Upon the closing of the Loans, Secured Party is authorized in its discretion to issue news releases and at its own expense to publish "tombstone ads" and other announcements in newspapers, trade journals and other appropriate media, containing information about the Loans as may be deemed noteworthy by Secured Party, including without limitation the legal and trade name of Borrower, the amount of the Loan and the name, nature and location of the Collateral.

The remainder of this page intentionally left blank.

IN WITNESS WHEREOF, the Borrower has executed and entered into this Security Agreement and delivered it to the Secured Party on and as of the date

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document set forth below. This document is executed under seal and intended to take effect as a sealed instrument.

Date: October 5, 1999

Attest: The Quizno's Corporation

By/s/ Candace R. Arnold By:/s/ Patrick Meyers ------Name:Candace R. Arnold Name: Patrick Meyers Title: H.R. Coordinator Title: Vice President/General Counsel

Attest: The Quizno's Operating Company By/s/ Candace R. Arnold By:/s/ Patrick Meyers ------Name:Candace R. Arnold Name: Patrick Meyers Title: H.R. Coordinator Title: Vice President/General Counsel

Attest: S & S Company By/s/ Candace R. Arnold By:/s/ Patrick Meyers ------Name:Candace R. Arnold Name: Patrick Meyers Title: H.R. Coordinator Title: Vice President/General Counsel

Attest: The Quizno's Realty Company By/s/ Candace R. Arnold By:/s/ Patrick Meyers ------Name:Candace R. Arnold Name: Patrick Meyers Title: H.R. Coordinator Title: Vice President/General Counsel

Attest: The Quizno's Acquisition Company By/s/ Candace R. Arnold By:/s/ Patrick Meyers ------Name:Candace R. Arnold Name: Patrick Meyers Title: H.R. Coordinator Title: Vice President/General Counsel

Attest: The Quizno's Licensing Company By/s/ Candace R. Arnold By:/s/ Patrick Meyers ------Name:Candace R. Arnold Name: Patrick Meyers Title: H.R. Coordinator Title: Vice President/General Counsel

Attest: Quizno's Kansas, LLC By/s/ Candace R. Arnold By:/s/ Patrick Meyers ------Name:Candace R. Arnold Name: Patrick Meyers Title: H.R. Coordinator Title: Vice President/General Counsel

Address: 1415 Larimer St., Denver, CO 80202

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document resides at 1415 Larimer Street; that he is the Vice President/General Counsel of The Quizno's Corporation, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999.

/s/ Candace R. Arnold ------Notary Public

My commission expires: ------6/16/01

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street; that he is the Vice President/General Counsel of The Quizno's Operating Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999.

/s/ Candace R. Arnold ------Notary Public

My commission expires: ------6/16/01

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street; that he is the Vice President/General Counsel of S&S Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999.

/s/ Candace R. Arnold ------Notary Public

My commission expires:

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street; that he is the Vice President/General Counsel of The Quizno's Realty Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999.

/s/ Candace R. Arnold ------Notary Public

My commission expires: ------6/16/01

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street; that he is the Vice President/General Counsel of The Quizno's Acquisition Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999.

/s/ Candace R. Arnold ------Notary Public

My commission expires: ------6/16/01

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On the 4th day of October, 1999, before me a Notary Public personally appeared Patrick Meyers, to me known to be the person named in and who executed

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the foregoing instrument, who, being duly sworn, did depose and say that he resides at 1415 Larimer Street; that he is the Vice President/General Counsel of The Quizno's Licensing Company, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office this 4th day of October, 1999.

/s/ Candace R. Arnold ------Notary Public

My commission expires: ------6/16/01

STATE OF COLORADO ) ) ss. COUNTY OF Denver )

On this 4th day of October, 1999, before me, a Notary Public, personally appeared Patrick Meyers known or identified to me (or proved to me on the oath of ______to be the Vice President/General Counsel of Quizno's Kansas, LLC, the limited liability company that executed the instrument, or the person who executed the instrument on behalf of said liability company, and acknowledged to me that such limited liability company executed the same.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

/s/ Candace R. Arnold ------Notary Public

My commission expires: ------6/16/01

SECURED PARTY:

AMRESCO COMMERCIAL FINANCE, INC.

By: ______Dale Conder Vice President

(SEAL)

SCHEDULE 1

A. Borrower Information

If an individual, the Borrower's residence address:

Street:

The Borrower's chief executive office: 1415 Larimer Street, Denver, CO 80202

The Borrower's state of organization: Colorado

SCHEDULE 1

B. Pledged Store Information

Legal Name : The Quizno's Corporation (Tax ID 84-1169286) The Quizno's Licensing Company (Tax ID 84-1466476) The Quizno's Acquisition Company (Tax ID 84-1406781) The Quizno's Realty Company (Tax ID 84-1457061) S & S Company (Tax ID 84-1318299) The Quizno's Operating Company (Tax ID 84-1284253) Quizno's Kansas, LLC (Tax ID 91-1921744)

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Corporation

Street Address : 1415 Larimer Street, Denver, CO 80202

Legal Description of Property:

East Denver, Block 45, Lot 20 and 20 feet of Lot 21, City of Denver, Denver County, Colorado.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 4403 S. Tamarac Parkway, Suites 5B, 6A, 6B Denver, CO 80237

Legal Description of Property:

That Lease dated June 1, 1998, and all amendments thereto, between Public Storage, Inc., as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document which covers the following real property/a portion of the following real property located in Denver County, State of Colorado:

That portion of the North one-half of Section 9, Township 5 South, Range 67, West of the Sixth Principal Meridian, City and County of Denver, State of Colorado, described as follows:

Commencing at the North one-quarter corner of said Section 9; thence Westerly along the North Line of said Section 9 a distance of 1,301.91 feet; thence on a deflection angle to the left of 89(Degree)55'24", 60.00 feet to a point of the South Right-of-Way Line on Quincy Avenue as recorded by Ordinance No. 349-1971; thence on a deflection angle to the left of 90(Degree)04'36" and Easterly along said Right-of-Way Line 932.19 feet to a point of curvature of a curve to the right; thence Southeasterly along the arc of said curve to the right having a central angle of 73(Degree)20'16" and a radius of 350.00 feet an arc distance of 448.00 feet to a point on the Westerly Right-of-Way Line of South Tamarac Parkway; thence Southerly along the tangent of the previously described curve and along said Westerly Right-of-Way Line, 10.00 feet; thence on a deflection angle to the right of 02(Degree)40'28" along said Westerly Right-of-Way Line 212.91 feet to the True Point of Beginning; thence continuing Southerly along the previously described course and along said Westerly Right-of-Way Line, 130.00 feet to a point on the Northwesterly Right-of-Way Line of Interstate Highway No. 225, as conveyed to the State Department of Highways in Deed recorded September 25, 1974, in Book 950, page 398, and continuing along said Northwesterly Right-of-Way Line the following four courses: thence on a deflection angle to the right of 87(Degree)19'40", 4.00 feet; thence on a deflection angel to the left of 70(Degree)31'30", 122.00 feet; thence on a deflection angle to the right of 55(Degree)05'30", 268.10 feet to a point of curvature of a curve to the right; thence Southwesterly along the arc of said curve to the right having a central angle of 08(Degree)49'21" and a radius of 1,065.80 feet, an arc distance of 164.11 feet to a point on a non-tangent line, said point also being the Southeast corner of that parcel of land described in Book 1481 at Page 46. thence Northwesterly on a deflection angle to the right (from a prolongation of the tangent of the previously described curve) of 79(Degree)26'41" along the Easterly line of said parcel described in Book 1481 at Page 46, a distance of 247.50 feet; thence on a deflection angle to the right of 33(Degree)49'34", 153.94 feet; thence on a deflection angle to the right of 90(Degree)00'00", 205.39 feet to the point of curvature of a curve to the left; thence along the arc of said curve to the left having a central angle 33(Degree)49'34" and a radius of 215.00 feet, an arc distance of 126.93 feet to a point of tangent; thence Northeasterly along the tangent of said curve 63.93 feet to the point of curvature of a curve to the right; thence along the arc of said curve to the right having a central angle of 19(Degree)50'18" and a radius of 142.96 feet, an arc distance of 49.50 feet to a point of tangent; thence Easterly along the tangent of said curve, 67.27 feet to the True Point of Beginning.

Containing 3.377 acres more or less,

TOGETHER WITH Reciprocal Easement recorded July 20, 1977, in Book 1481 at Page 46 and August 2, 1973 in book 1489 at Page 156, amended November 16, 1984 at Reception Numbers 043458, 043460, 043464, 043468 and amended December 18, 1984 at Reception No. 054392. and TOGETHER WITH access easement recorded April 27, 1977 in Book 1427 at Page 649, amended November 16, 1984 at Reception Numbers 043459, 043461, 043462, 043463, 043465, 043466, 043467 and December 18, 1984 at Reception No. 054393.

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Corporation

Street Address : 10450 West Colfax, Lakewood, CO 80215

Legal Description of Property:

That Lease dated September 19, 1994, and all amendments thereto, between Douglas P. Allen, as Landlord/successor Landlord, and The Quizno's Corporation, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property/a portion of the following real property located in Jefferson County, State of Colorado:

Lot 2, Block 3 except the North 10 feet thereof, Idlewild, County of Jefferson, State of Colorado.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Realty Company

Street Address : 250 W. 14th Street, Denver, CO 80204

Legal Description of Property:

That Lease dated December 29, 1997 , and all amendments thereto, between Forum Building Housing, LP c/o Colorado Coalition for the Homeless, as Landlord/successor Landlord, and The Quizno's Realty Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Denver County, State of Colorado:

The Real Estate commonly known as The Form Building, 250 West 14th Street, Denver, Colorado, County of Denver.

Also known as:

Lots 39 and 40

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 191 Blue River Parkway, Silverthorne, CO 80498

Legal Description of Property:

That Lease dated Septmber 5, 1992, and all amendments thereto, between DMS Partnership., as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Summit County, State of Colorado:

Lot 1, RIVERVIEW SUBDIVISION, FILING NUMBER 1, according to the plat thereof filed under Reception No. 237481, County of Summit, State of Colorado.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Corporation

Street Address : 8081 E. Orchard Road #67, Greenwood Village, CO 80111

Legal Description of Property:

That Lease dated June 22, 1990, and all amendments thereto, between Marilyn Hickey Ministries, Inc., as Landlord/successor Landlord, and The Quizno's Corporation, as Tenant/successor Tenant, doing business as a Quizno's

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document restaurant, which covers the following real property/a portion of the following real property located in Arapahoe County, State of Colorado:

A PARCEL OF LAND BEING ALL OF LOT 9 AND PART OF LOTS 10 AND 11. ALL IN BLOCK 7 OF "A SUBDIVISION OF SECTION 16" (AS RECORDED IN BOOK 2, PAGE 10). TOGETHER WITH A PART OF TRACT 5 OF "A SUBDIVISION OF SECTION 21" (AS RECORDED IN BOOK 1, PAGE 12), TOGETHER WITH THOSE PORTIONS OF EAST ORCHARD ROAD AND SOUTH ULSTER STREET, AS DEDICATED BY SAID SUBDIVISION, ALL BEING IN TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE SIXTH PRINCIPAL MERIDIAN, CITY OF GREENWOOD VILLAGE, COUNTY OF ARAPAHOE, STATE OF COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID LOT 9, BLOCK 7; THENCE NORTH 00(Degree) 03' 01" EAST AND ALONG THE WEST LINE OF SAID LOT 9, A DISTANCE OF 20.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID WEST LINE, A DISTANCE OF 305.32 FEET TO THE NORTHWEST CORNER OF SAID LOT 9; THENCE NORTH 89(Degree) 31' 38" EAST ALONG THE NORTH LINE OF SAID LOT 9, A DISTANCE OF 200.00 FEET; THENCE NORTH 13(Degree) 45' 33" WEST AND RADIALLY TO A CURVE ON THE SOUTHERLY BOUNDARY LINE OF THE SUBDIVISION OF GREENWOOD PLAZA SECOND FILING AMENDED PLAT (AS RECORDED IN BOOK 25, PAGES 70 AND 71), A DISTANCE OF 276.00 FEET TO A POINT ON SAID CURVE; THENCE NORTHEASTERLY ALONG SAID SOUTHERLY BOUNDARY ON A CURVE TO THE LEFT, HAVING A CENTRAL ANGLE OF 100(Degree) 41' 25" AND A RADIUS OF 50.00 FEET, AN ARC DISTANCE OF 87.87 FEET TO A POINT; THENCE NORTH 65(Degree) 33' 02" EAST ALONG SAID SOUTHERLY BOUNDARY ON A LINE RADIAL FROM THE PREVIOUSLY DESCRIBED CURVE, A DISTANCE OF 365.60 FEET TO THE POINT OF INTERSECTION WITH THE SOUTHWESTERLY RIGHT OF WAY LINE OF INTERSTATE HIGHWAY I-25; THENCE SOUTH 24(Degree) 26' 59" EAST ALONG SAID RIGHT OF WAY LINE, A DISTANCE OF 306.79 FEET TO THE INTERSECTION WITH THE WESTERLY RIGHT OF WAY LINE OF SOUTH ULSTER STREET, AS PLATTED BY SAID "A SUBDIVISION OF SECTION 16"; THENCE SOUTH 16(Degree)08' 50" EAST, A DISTANCE OF 214.42 FEET TO THE POINT OF INTERSECTION WITH THE EASTERLY RIGHT OF WAY LINE OF SAID SOUTH ULSTER STREET, SAID POINT ALSO BEING 60.00 FEET EAST OF AND OPPOSITE THE NORTHEAST CORNER OF SAID LOT; THENCE SOUTH 00(Degree) 06' 01" WEST ALONG SAID EASTERLY RIGHT OF WAY LINE, A DISTANCE OF 324.77 FEET TO THE SOUTHWEST CORNER OF LOT 8, BLOCK 6 OF SAID "A SUBDIVISION OF SECTION 16"; THENCE SOUTH 22(Degree) 00' 23" WEST, A DISTANCE OF 99.54 FEET TO A POINT ON THE CENTERLINE OF SOUTH ULSTER STREET, AS PLATTED BY SAID "A SUBDIVISION OF SECTION 21", SAID POINT LAYING 62.00 FEET SOUTH OF THE NORTH QUARTER CORNER OF SAID SECTION 21; THENCE NORTH 80(Degree)40' 40" WEST, A DISTANCE OF 658.48 FEET TO THE TRUE POINT OF BEGINNING

EXCEPTING THEREFROM, THAT PORTION AS CONVEYED TO THE STATE DEPARTMENT OF HIGHWAYS IN DEED RECORDED OCTOBER 17, 1985 IN BOOK 4574 AT PAGE 269, COUNTY OF ARAPAHOE, STATE OF COLORADO.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 2311 30th Street, Unit A, Boulder, CO 80301

Legal Description of Property:

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document That Lease dated September 20, 1991, and all amendments thereto, between Property Colorado SC TWG Corp., as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Boulder County, State of Colorado:

1,400 to 1,600 rentable square feet located on the 1st floor, known as Unit A and being a part of that building located in the Crossroad Commons Shopping Center located in City and County of Boulder, Colorado.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Corporation

Street Address : 1275 Grant Street, Denver, CO 80203

Legal Description of Property:

That Lease dated February 12, 1990, and all amendments thereto, between 1275 Grant Street Partnership, as Landlord/successor Landlord, and The Quizno's Corporation, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property/a portion of the following real property located in Denver County, State of Colorado:

East 65 Feet of Lots 36 through 40, Block 40, H.C. Brown's Second Addition in the City and County of Denver, State of Colorado and more commonly known as 1275 Grant Street, Denver, Colorado.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Legal Description of Property:

That Lease dated July ____, 1993, and all amendments thereto, between Chancery Investment Company, Inc., as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Denver County, State of Colorado:

2,490 rentable square feet located on the 1st floor, known as suite 105 and being a part of that building located at 1660 Lincoln Street, Denver, CO 80264.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 1695 Larimer Street, Denver, CO 80222

Legal Description of Property:

That Lease dated December 15, 1995, and all amendments thereto, between Larimer 98, LLC, as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property/a portion of the following real property located in Denver County, State of Colorado:

The 2,981 rentable square feet of retail space (including a prorata share of the adjacent hallway and restrooms) Commonly referred to as 1695 Larimer Street and located on the ground floor of the Barclay Plaza Office Building, 1675 Larimer Street, Denver, Colorado, whose legal description is:

The northerly 10.201 feet of Lot 26, along with Lots 27 through 32; except the rear 4 feet thereof, Block 37, East Denver Subdivision, City and County of Denver, State of Colorado.

SCHEDULE 1

B. Pledged Store Information

Legal Name : The Quizno's Corporation (Tax ID 84-1169286) The Quizno's Licensing Company (Tax ID 84-1466476)

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Quizno's Acquisition Company (Tax ID 84-1406781) The Quizno's Realty Company (Tax ID 84-1457061) S & S Company (Tax ID 84-1318299) The Quizno's Operating Company (Tax ID 84-1284253) Quizno's Kansas, LLC (Tax ID 91-1921744)

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 14413 West Colfax, Lakewood, CO 80401

Legal Description of Property:

That Lease dated December 16, 1997, and any amendments thereto, between Denver West Village, Inc., as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Jefferson County, State of Colorado:

A TRACT OF LAND SITUATED IN THE NORTHWEST QUARTER OF SECTION 6, TOWNSHIP 4 SOUTH, RANGE 69 WEST, OF THE SIXTH P.M., COUNTY OF JEFFERSON, STATE OF COLORADO, DESCRIBED AS FOLLOWS:

COMMENCING AT THE WEST ONE-QUARTER CORNER OF SAID SECTION 6, THENCE NORTH 00(Degree) 03' 30" EAST, ALONG THE WEST LINE OF THE NORTHWEST QUARTER OF SAID SECTION 6, A DISTANCE OF 533.73 FEET TO A POINT ON THE NORTHERLY RIGHT OF WAY LINE OF OLD GOLDEN ROAD, SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE NORTH 86(Degree) 22' 30" EAST, ALONG SAID NORTHERLY RIGHT OF WAY LINE, A DISTANCE OF 1348.06 FEET TO A POINT ON THE NORTHERLY RIGHT OF WAY LINE OF U.S. HIGHWAY 40 AS DESCRIBED IN PARCEL V, BOOK 415 AT PAGE 47 OF THE JEFFERSON COUNTY RECORDS; THENCE NORTH 45(Degree) 03' 27" EAST, ALONG SAID NORTHERY RIGHT OF WAY LINE, A DISTANCE OF 606.11 FEET; THENCE NORTH 44(Degree) 56' 30" WEST, A DISTANCE OF 310.00 FEET; THENCE NORTH 45(Degree) 03' 30" EAST, A DISTANCE OF 300.00 FEET; THENCE NORTH 44(Degree) 56' 30" WEST, A DISTANCE OF 15.00 FEET; THENCE NORTH 35(Degree) 44' 30" EAST, A DISTANCE OF 211.09 FEET; THENCE NORTH 62(Degree) 31' 30" EAST, A DISTANCE OF 131.97 FEET; THENCE NORTH 27(Degree) 28' 30" WEST, A DISTANCE OF 151.67 FEET; THENCE ALONG THE ARC OF A CURVE TO THE LEFT THROUGH A CENTRAL ANGLE OF 40(Degree) 06' 20", AN ARC DISTANCE OF 337.51 FEET, A RADIUS OF 482.17 FEET AND A CHORD BEARING OF NORTH 64(Degree) 09' 21" EAST WITH A DISTANCE OF 330.66 FEET; THENCE NORTH 44(Degree) 06' 12" EAST, A DISTANCE OF 51.65 FEET TO A POINT ON THE SOUTHWESTERLY LINE OF THAT TRACT OF LAND DESCRIBED IN BOOK 2175 AT PAGE 100; THENCE NORTH 45(Degree) 53' 48" WEST, ALONG SAID SOUTHWESTERLY LINE, A DISTANCE OF 9.17 FEET; THENCE CONTINUING ALONG SAID SOUTHWESTERLY LINE, NORTH 67(Degree) 41' 54" WEST, A DISTANCE OF 76.29 FEET; THENCE SOUTH 44(Degree) 06' 12" WEST, A DISTANCE OF 77.57 FEET; THENCE ALONG THE ARC OF A CURVE TO THE RIGHT THROUGH A CENTRAL ANGLE OF 40(Degree) 29' 24" AN ARC DISTANCE OF 239.30 FEET, A RADIUS OF 338.62 FEET AND A CHORD BEARING OF SOUTH 64(Degree) 20' 54" WEST WITH A DISTANCE OF 234.35 FEET; THENCE SOUTH 84(Degree) 35' 36" WEST, A DISTANCE OF 175.00 FEET; THENCE ALONG THE ARC OF A CURVE TO THE RIGHT THROUGH A CENTRAL ANGLE OF 10(Degree) 17' 06" AN ARC DISTANCE OF 175.92 FEET, A RADIUS OF 980.00 FEET AND A CHORD BEARING OF SOUTH 89(Degree) 44' 09" WEST WITH A DISTANCE OF 175.68 FEET; THENCE NORTH 85(Degree) 07' 18" WEST, A DISTANCE OF 170.92 FEET; THENCE ALONG THE ARC OF A CURVE TO THE LEFT THROUGH A CENTRAL ANGLE OF 13(Degree) 16' 21" AN ARC DISTANCE OF 48.18 FEET, A RADIUS OF 208.00 FEET AND A CHORD BEARING OF SOUTH 88(Degree) 14' 31" WEST WITH A DISTANCE OF 48.08 FEET TO A POINT ON THE SOUTHERLY LINE OF THAT TRACT OF LAND DESCRIBED AT RECEPTION NO. 86033660; THENCE SOUTH 48(Degree) 29' 36" WEST, ALONG SAID SOUTHERLY LINE, A DISTANCE OF 562.06 FEET TO A POINT ON THE SOUTHERLY RIGHT OF WAY LINE OF INTERSTATE HIGHWAY 70 AS DESCRIBED ON BOOK 1770 AT PAGE 187; THENCE SOUTH 44(Degree) 06' 13" WEST, ALONG SAID SOUTHERLY RIGHT OF WAY LINE, A DISTANCE OF 1335.53 FEET TO A POINT ON THE WEST LINE OF THE NORTHWEST QUARTER OF SAID SECTION 6; THENCE SOUTH 00(Degree) 03' 30" WEST, ALONG SAID WEST LINE, A DISTANCE OF 45.80 FEET TO THE POINT OF BEGINNING, CONTAINING 1,411,156 SQUARE FEET OR 32.40 ACRES, MORE OR LESS. TOGETHER WITH BLOCKS 1 AND 2, DENVER WEST BANK/OFFICE/BUSINESS PARK SEGMENT, COUNTY OF JEFFERSON, STATE OF COLORADO.

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 818 17th Street, Denver, CO 80202

Legal Description of Property:

That Lease dated May 12, 1998, and all amendments thereto, between HEP-Denver, Ltd., as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Denver County, State of Colorado:

A certain tract of land situated in the County of Denver, State of Colorado and more particularly described as follows:

Lots 28 to 32, inclusive, Block 129, East Denver, City and County of Denver, State of Colorado.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Corporation

Street Address : 4495 Washington Street, Denver, CO 80216

Legal Description of Property:

That Lease dated March 23, 1995, and all amendments thereto, between A. Gene Byrne and Ethel Irene Byrne, as Landlord/successor Landlord, and The Quizno's Corporation, as Tenant/successor Tenant, doing business as a Quizno's

Lots 19, 20, 21, 22, 23, 24 Block 4 Garden Place City and County of Denver State of Colorado

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 1250 S. Hover Road, Bldg. 8A, Longmont, CO 80501

Legal Description of Property:

That Lease dated January 29, 1992, and all amendments thereto, between CBL Peripheral Properties Limited Partnership, as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Boulder County, State of Colorado:

Lot Eight A (8A) Twin Peaks Mall Subdivision Replat "A", City of Longmont, Boulder County, Colorado, as shown on plat recorded on Film 1355, Reception No. 690304 in the Recorder's Office of Boulder County, Colorado.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 12201 E. Arapahoe Road, #6B, Englewood, CO 80112

Legal Description of Property:

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document That Lease dated October 24, 1997, and all amendments thereto, between Concord/Southfield Center, as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Arapahoe County, State of Colorado:

All of Lots 1 and 2, Block 1, Southfield Park Subdivision, Except that portion conveyed to Arapahoe County in Deed Recorded October 26, 1984, in Book 4292, at Page 458. County of Arapahoe State of Colorado

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 6525 Gunpark Drive, Boulder, CO 80301

Legal Description of Property:

That Lease dated January 31, 1986, and all amendments thereto, between Gunbarrel Square Center, LLC, as Landlord/successor Landlord, and The Quizno's Operating Company, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Boulder County, State of Colorado:

Lot 1, Gunbarrel Square, less Pad 1 and Pad 2, a resubdivision of Tract "L" and Tracts "K" and "M", Gunbarrel Green Second Replat, a Subdivision in the northwest 1/4 of Section 11, Township 1 North, Range 70 West of the 6th P.M., County of Boulder, State of Colorado.

SCHEDULE 1

B. Pledged Store Information

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Corporation

Street Address : 9425 S. University Blvd., Highlands Ranch, CO 80126

Legal Description of Property:

That Lease dated June 30, 1993, and all amendments thereto, between Highlands Ranch Marketplace, LLC, as Landlord/successor Landlord, and The Quizno's Corporation, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Douglas County, State of Colorado:

2003 sq. Ft. Located in the shopping center described as Lots 1-5, Highlands Ranch filing no. 123-A, County of Douglas, State of Colorado.

SCHEDULE 1

B. Pledged Store Information

Trade Name : Quizno's Classic Subs

Franchise owned by (if applicable) : N/A Property : Leased by The Quizno's Operating Company

Street Address : 999 18th Street, Denver, CO 80202

Legal Description of Property:

That Lease dated September 24, 1996, and all amendments thereto, between Denver-Stellar Associates Limited Partnership, as Landlord/successor Landlord, and The Quizno's Corporation, as Tenant/successor Tenant, doing business as a Quizno's restaurant, which covers the following real property located in Denver County, State of Colorado:

PARCEL A

Lots 1 through 32, inclusive, Block 110, TOGETHER WITH, the vacated alley in said Block 110, EAST DENVER, City and County of Denver, State of Colorado.

PARCEL B

Revocable Permit or License in City and County of Denver Ordinance 427, Series of 1978, recorded July 2, 1985 at Reception No. 033657 to encroach with basement wells and vehicular ramps in those parts of 18th Street, 19th Street, Champs Street and Curtis Street bounding Block 110, EAST DENVER, located within the boundaries described as follows:

COMMENCING as the most Westerly corner of Block 110, EAST DENVER; thence Northwesterly and parallel with the Southwesterly line of said Block 110

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document extended Northwesterly 1 foot to the TRUE POINT OF BEGINNING; thence Northeasterly and parallel with the Northwesterly line of said Block 110, 70 feet; thence Northwesterly and parallel with the Southwesterly line of said Block 110 extended Northwesterly 3 feet; thence Northeasterly and parallel with the Northeasterly line of said Block 110, 30 feet; thence Northwesterly and parallel with the Southwesterly line of said Block 110, extended Northwesterly 8 feet; thence Northeasterly and parallel with the Northwesterly line of said Block 110, 290 feet; thence Easterly to a point that is 9 feet Southeasterly from the most Northerly corner of said Block 110 and 10 feet Northeasterly from the Northeasterly line of said Block 110; thence Southeasterly and parallel with the Northeasterly line of said Block 110, 255 feet; thence Southerly to a point 5 feet Southeasterly from the most Easterly corner of said Block 110 and 12 feet Southeasterly from the Southeasterly line of said Block 110; thence Southwesterly and parallel with the Southeasterly line of said Block 110, 385 feet; thence Westerly to a point 9 feet Northwesterly from the most Southerly corner of said Block 110 and 10 feet Southwesterly from the Southwesterly line of said Block 110; thence Northwesterly and parallel with the Southwesterly line of said Block 110, 251 feet; thence Northerly to the TRUE POINT OF BEGINNING.

PARCEL C

Revocable Permit or License in City and County of Denver Ordinance No. 220, Series of 1981, recorded July 11, 1985 at Reception No. 037797, to encroach with concrete planters in the following described areas in the City and County of Denver and State of Colorado, to-wit:

Those parts of Curtis Street, Champs Street and 18th Street described as follows:

Encroachment "A"

That part of Curtis Street adjacent to Block 110, East Denver, described as follows: Beginning at a point on the Northwesterly line of Block 110, East Denver, said point being 27.19 feet Southwesterly of the most Northerly corner thereof; thence on an angle to the right of 133(Degree) 46' 47" a distance of 1.94 feet; thence on an angle to the left of 90(Degree) 06' 36" a distance of 7.15 feet; thence on an angle to the left of 43(Degree) 24' 36" a distance of 3.58 feet; thence on an angle to the left of 45(Degree) 17' 02" a distance of 1.77 feet; thence on an angle to the right of 43(Degree) 24' 37" a distance of 11.14 feet; thence on an angle to the right of 42(Degree) 52' 15" a distance of 1.72 feet; thence on an angle to the left of 43(Degree) 17' 57" a distance of 11.91 feet; thence on an angle to the left of 44(Degree) 00' 31" a distance of 1.63 feet; thence on an angle to the right of 43(Degree) 30' 51: a distance of 11.08 feet; thence on an angle to the right of 45(Degree) 21' 35" a distance of 1.77 feet; thence on an angle to the left of 44(Degree) 49' 34" a distance of 47.05 feet; thence on an angle to the left of 44(Degree) 59' 30" a distance of 8.98 feet to a point on the Northwesterly line of Block 110, East Denver; thence Northeasterly along said Northwesterly line 99.86 feet to the point of beginning.

Encroachment "B"

That part of Curtis Street adjacent to Block 110, East Denver, described as follows: Beginning at a point on the Northwesterly line of Block 110, East Denver, said point being 141.28 feet Southwesterly of the most Northerly corner thereof; thence on an angle to the right of 134(Degree) 37' 42" a distance of 18.33 feet; thence on an angle to the left of 89(Degree) 02' 22" a distance of 0.61 feet; thence on an angle to the left of 46(Degree) 22' 20" a distance of 12.31 feet; thence on an angle to the left of 44(Degree) 15' 58" a distance of 3.48 feet; thence on an angle to the right of 44(Degree) 58' 27" a distance of 17.58 feet to a non-tangent point of curve; thence along a curve to the right having a radius of 8.38 feet and a central angle of 107(Degree) 01' 35" a distance of 15.65 feet to a point on the Northwesterly line of Block 110, East Denver; thence Northeasterly along said Northwesterly line a distance of 11.87 feet to the point of beginning.

That part of the Champs Street adjacent to Block 110, East Denver, described as follows: Beginning at a point on the Southeasterly line of Block 110, East Denver, said point being 16.55 feet Northeasterly from the most Southerly corner thereof; thence on an angle to the right of 90(Degree) 47' 59" a distance of 3.66 feet; thence on an angle to the left of 90(Degree) 45' 52" a distance of 50.21 feet; thence on an angle to the left of 43(Degree) 06' 04" a distance of 6.22 feet to a point on the Southeasterly line of said Block 110; thence Southwesterly along said Southeasterly line 61.56 feet to the point of beginning.

Encroachment "D"

That part of 18th Street adjacent to Block 110, East Denver, described as follows: Beginning at a point on the Southwesterly line of Block 110, East Denver, said point being 12.57 feet Northwesterly from the most Southerly corner thereof; thence on an angle to the left of 89(Degree) 31' 03" a distance of 3.59 feet; thence on an angle to the right of 89(Degree) 36' 12" a distance of 25.53 feet to a non-tangent point of curve; thence along a curve to the left having a radius of 7.26 feet and a central angle of 29(Degree) 35' 19" a distance of 3.75 feet to a point on the Southwesterly line of said Block 110; thence Southeasterly along said Southwesterly line a distance of 24.49 feet to the point of beginning.

SCHEDULE 2

UCC Filing Locations

SCHEDULE 3

List all Borrower's Affiliates who have executed loan documents to the Secured Party.

Name of Affiliate Address Relationship to Borrower

NONE

SCHEDULE 4

Applicable Collateral

Loan Number Store Name Address ------

E. Arapahoe Quizno's 12201 E. Arapahoe Rd., #6B, Englewood, CO 80112 Gunpark Quizno's 6525 Gunpark Drive, Boulder, CO 80301 Blue River Quizno's 191 Blue River Parkway, Silverthorne, CO 80498 E. Orchard Quizno's 8081 E. Orchard Rd., #67, Greenwood Village, CO 80111 Pearl Street Quizno's 2311 30th Street, Unit A, Boulder, CO 80301 S. University Quizno's 9425 S. University Blvd., Highlands Ranch, CO 80126 Grant Street Quizno's 1275 Grant Street, Denver, CO 80203 S. Hover Quizno's 1250 S. Hover Rd., Bldg. 8A, Longmont, CO 80501 Lincoln Street Quizno's 1660 Lincoln Street, Suite 105, Denver, CO 80264 West Colfax Quizno's 10450 West Colfax, Lakewood, CO 80215 N. Washington Quizno's 4495 Washington St., Denver, CO 80216 W. Colfax Quizno's 14413 West Colfax Ave., Lakewood, CO 80401 18th Street Quizno's 999 18th Street, Denver, CO 80202 Larimer Quizno's 1695 Larimer St., Denver, CO 80222 W. 14th Street Quizno's 250 W. 14th Street, Denver, CO 80204 S. Tamarac Quizno's 4403 S. Tamarac Parkway, Suites 5B, 6A, 6B, Denver, CO 80237 17th Street Quizno's 818 17th Street, Denver, CO 80202 Corporate Office N/A 1415 Larimer Street, Denver, CO 80202

SCHEDULE 5

Liquor Licenses [IF NONE, SO STATE]

Type of Permit and Licensee Unit Address License No. Issuing Entity Expiration ------

SCHEDULE 6

Trademarks and Patents

Trademarks - Federal Registration

Registration Date of Application Trademark Number Registration Serial No. ------Smoothy Q 75-705, 786 Smoothie Q (Stylized) 75-705, 785 Quizno's Subs Oven Baked Classics (& Design) 2,228,680 3/2/99 Cheeze Louise (& Design) 2,144,161 3/17/98 Cheeze Louise Home Bake Pizza (& Design) 2,125,221 12/30/97 Quizno's Classic Subs Express 2,086,598 8/5/97 Q Quizno's (& Design) 1,965,096 4/2/96 Quizno's (& Design) 1,716,834 9/15/92 Bain's 1,640,049 4/2/91 Quizno's (Stylized) 1,317,421 1/29/85 Bain's Cafeteria (Stylized) 959,079 5/15/73

Patents - Federal Registration

Registration Date of Application Patent Number Registration Serial No. ------

NONE

SCHEDULE 7

Pending Claims Regarding Franchise Agreements as of October 7, 1999

Pending Claims Related to Franchisee Litigation Past Due Royalties Past Due Royalties ------

Abene Yes No N/A Anderson Yes No N/A Spicer Yes No N/A LDC Partners Yes Yes Greater than $10,000 but less than $20,000 Wagner Yes No N/A Hot Concepts Yes No N/A

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Gateway Bankruptcy Yes Under $10,000 Wheaton No Yes Under $10,000 Orland Park No Yes Greater than $10,000 but less than $20,000 Ralston Plaza No Yes Under $10,000 Madison (Closed) No Yes Under $10,000

Exhibit A

UCC LIST

Quizno's Kansas, LLC

Exhibit B

[Subject to approval of the Secured Party]

Exhibit C

Form of Compliance Certificate

AMRESCO Commercial Finance, Inc. 412 E. Parkcenter Blvd., Suite 300 Boise, Idaho 83706

Re: Pledge and Security Agreement, dated October 5, 1999, by the Borrower in favor of AMRESCO Commercial Finance, Inc. (the "Security Agreement").

The Borrower hereby certifies to the Secured Party (as defined in the Security Agreement) that (i) all representations and warranties made by the Borrower in the Security Agreement, as of the date hereof, are true and correct in all material respects as if made on the date hereof; (ii) the Borrower has performed all of its covenants and other Obligations (as defined in the Security Agreement) required to be performed under the Loan Documents (as defined in the Security Agreement) as of the date hereof; (iii) no Event of Default (as defined in the Security Agreement) has occurred and the Borrower has no reason to believe that an Event of Default will occur any time in the six-month period following the date hereof; (iv) all information provided regarding year-to-date sales of each Pledged Store, as indicated below, is true, complete and correct; and (v) all information, reports, statements and financial and other data furnished by the Borrower to the Secured Party, its agents or representatives in connection with the Borrower's Loans and secured Obligations were, on the date so furnished, and are true, complete and correct.

IN WITNESS WHEREOF, the undersigned has caused this Compliance Certificate to be executed and delivered for and on behalf of the Borrower, this ____ day of ______, ____.

The Quizno's Corporation The Quizno's Licensing Company

By:______By:______Name: Name: Title: Title:

The Quizno's Acquisition Company The Quizno's Realty Company

By:______By:______Name: Name: Title: Title:

S & S Company The Quizno's Operating Company

By:______By:______

Quizno's Kansas, LLC

By:______Name: Title:

Pledged Store Year-To-Date Sales ------

1. The Quizno's Operating Company, a Colorado corporation 2. S&S Company, a Colorado corporation 3. The Quizno's Realty Company, a Colorado corporation 4. The Quizno's Acquisition Company, a Colorado corporation 5. The Quizno's Licensing Company, a Colorado corporation 6. QUIZ-DIA, Inc., a Colorado corporation 7. Quizno's Kansas, LLC, a Colorado limited liability company

Each subsidiary does business only under its corporate name.

We consent to the incorporation by reference in the registration statements of The Quizno's Corporation and Subsidiaries on Forms S-8 (No. 333-45549 and 333-45205), of our report dated December 13, 1999 appearing in this annual report on form 10-KSB of The Quizno's Corporation and Subsidiaries for the year ended September 30, 1999.

/s/ Ehrhardt Keefe Steiner & Hottman PC Ehrhardt Keefe Steiner & Hottman PC

DECEMBER 30, 1999 DENVER, COLORADO

5
9-MOS SEP-30-1999 SEP-30-1999 626,828 0 1,091,231 43,793 0 8,042,743 6,034,512 1,230,461 21,774,774 3,171,290 0 0 313 3,074 2,110,471 21,774,774 6,420,563 6,937,707 1,969,433 16,327,005 902,156 220,536 240,827 2,088,309 721,688 1,366,621 0 0 (2,769,592) (1,527,201) (.50) (.55)